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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   ----------

                                   FORM 10-KSB

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

                  For the fiscal year ended December 31, 2005

[ ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934.

     For the transition period from _________________ to _________________

                        Commission File Number: 000-50265

                                GBC BANCORP, INC.
                 (Name of small business issuer in its charter)

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<S>                                                          <C>
            GEORGIA                                               58-2265327
(State or Other Jurisdiction of                                (I.R.S. Employer
 Incorporation or Organization)                              Identification No.)
</TABLE>

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<S>                                                                <C>
             165 Nash Street                                          30045
         Lawrenceville, Georgia                                    (Zip Code)
(Address of Principal Executive Offices)
</TABLE>

                                 (770) 995-0000
                           (Issuer's Telephone Number,
                              Including Area Code)

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

     Securities registered under Section 12(g) of the Exchange Act: Common
Stock, $1.00 par value per share.

     Check whether the Issuer: (1) filed all reports required to be filed by
Section 13 or 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 requirements for the past 90 days.
Yes [X] No [ ]

     Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B 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]

     Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act) :

     Yes [ ] No [X]

     The Issuer's revenue for the fiscal year ended December 31, 2005, was
approximately $28,175,590.

     The aggregate market value of the voting and nonvoting common equity held
by persons other than directors and executive officers of the Registrant as of
March 15, 2006, was $33,535,500, based on a private sale price of $25.00 per
share.

     There were 1,772,708 shares of the Registrant's common stock outstanding as
of March 15, 2006.

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

                       DOCUMENT INCORPORATED BY REFERENCE

     Portions of the Proxy Statement for the 2006 Annual Meeting of Shareholders
to be filed with the Securities and Exchange Commission within 120 days of the
Registrant's 2005 fiscal year end are incorporated by reference into Part III of
this Report.

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                                TABLE OF CONTENTS

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                                                                            PAGE
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<S>                                                                         <C>
PART I...................................................................     1
   ITEM 1.  DESCRIPTION OF BUSINESS......................................     1
   ITEM 2.  DESCRIPTION OF PROPERTY......................................    10
   ITEM 3.  LEGAL PROCEEDINGS............................................    10
   ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS...........    10

PART II..................................................................    10
   ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.....    10
   ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION....    11
   ITEM 7.  FINANCIAL STATEMENTS.........................................    28
   ITEM 8.  CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING
               AND FINANCIAL DISCLOSURE..................................    28
   ITEM 8A. CONTROLS AND PROCEDURES......................................    29
   ITEM 8B. OTHER INFORMATION............................................    29

PART III.................................................................    29
   ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
               PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE
               EXCHANGE ACT..............................................    29
   ITEM 10. EXECUTIVE COMPENSATION.......................................    29
   ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
               MANAGEMENT AND RELATED STOCKHOLDER MATTERS................    29
   ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...............    30
   ITEM 13. EXHIBITS.....................................................    30
   ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.......................    31
</TABLE>


                                      -i-

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                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

GBC BANCORP

     GBC Bancorp, Inc. ("we" or the "Company") was organized in August 1996 as a
Georgia corporation for the purpose of acquiring all of the common stock of
Gwinnett Banking Company, a Georgia bank that opened for business in October
1997 (the "Bank"). We are a bank holding company within the meaning of the Bank
Holding Company Act of 1956, and the Georgia Bank Holding Company Act. We were
organized to facilitate the Bank's ability to serve its customers' requirements
for financial services. The holding company structure provides flexibility for
expansion of our banking business through the possible acquisition of other
financial institutions and the provision of additional banking-related services
that the traditional commercial bank may not provide under present laws. We have
no present plans to acquire any operating subsidiaries other than the Bank. It
is expected, however, that we may make additional acquisitions in the future if
such acquisitions are deemed to be in the best interest of our shareholders. Any
acquisitions will be subject to certain regulatory approvals and requirements.

GWINNETT BANKING COMPANY

     The Bank is a full service commercial bank with locations at 165 Nash
Street, Lawrenceville, Gwinnett County, Georgia and 11675 Rainwater Drive,
Alpharetta, Fulton County, Georgia. The Bank's primary service area is Gwinnett
County, Georgia. The Bank, however, also serves the adjacent counties, or parts
thereof, of Cobb, DeKalb and Fulton. The principal business of the Bank is to
accept deposits from the public and to make loans and other investments. The
principal source of funds for the Bank's loans and investments are demand, time,
savings, and other deposits (including negotiable orders of withdrawal or NOW
accounts), amortization and prepayments of loans and borrowings. The principal
sources of income for the Bank are interest and fees collected on loans,
interest and dividends collected on other investments and service charges. The
principal expenses of the Bank are interest paid on savings and other deposits
(including NOW accounts), interest paid on other borrowings by the Bank,
employee compensation, office expenses and other overhead expenses.

INDUSTRY AND COMPETITION

     We believe that Gwinnett County has a very active and competitive banking
market. The largest financial institutions serving Gwinnett County are Bank of
America, Wachovia, N.A., SunTrust Bank, and SouthTrust Bank, N.A. The largest
Gwinnett County based banks are The Brand Banking Company, Lawrenceville;
Peoples Bank & Trust, Buford; and First Capital Bank, Norcross. There are
approximately 16 financial institutions that have offices in the immediate
vicinity of the main office of the Bank.

EMPLOYEES

     The Bank had 48 total employees as of March 15, 2006, all of whom were
full-time employees. We do not have any employees who are not also employees of
the Bank.


                                      -1-

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ENVIRONMENTAL LAWS

     Compliance with environmental laws has not had a material impact on the
operations of the Bank or the Company, although the Bank faces potential
liability or losses if its borrowers fail to comply with such laws and the Bank
acquires contaminated properties in foreclosure.

SUPERVISION AND REGULATION

General

     We are subject to state and federal banking laws and regulations that
impose specific requirements or restrictions and provide for general regulatory
oversight over virtually all aspects of our operations. These laws and
regulations generally are intended to protect depositors, not shareholders. This
discussion is only a summary of various statutory and regulatory provisions.
This summary is qualified by reference to the particular statutory and
regulatory provisions. Any change in applicable laws or regulations may have a
material effect on our business and prospects.

     Legislative changes and the policies of various regulatory authorities may
affect our operations. We are unable to predict the nature or the extent of the
effect on our business and earnings that fiscal or monetary policies, economic
control or new federal or state legislation may have in the future.

The Company

     We are a bank holding company registered with the Board of Governors of the
Federal Reserve System and the Georgia Department of Banking and Finance under
the Bank Holding Company Act of 1956, as amended, and the Georgia Bank Holding
Company Act. We are subject to the supervision, examination and reporting
requirements of the Bank Holding Company Act and the regulations of the Federal
Reserve, and the Georgia Bank Holding Company Act and the regulations of the
Georgia Department of Banking and Finance.

     The Bank Holding Company Act requires every bank holding company to obtain
the prior approval of the Federal Reserve before:

     -    it may acquire direct or indirect ownership or control of any voting
          shares of any bank if, after such acquisition, the bank holding
          company will directly or indirectly own or control more than 5% of the
          voting shares of the bank;

     -    it or any of its subsidiaries, other than a bank, may acquire all or
          substantially all of the assets of any bank; or

     -    it may merge or consolidate with any other bank holding company.

     The Bank Holding Company Act further provides that the Federal Reserve may
not approve any transaction that would result in a monopoly or would be in
furtherance of any combination or conspiracy to monopolize or attempt to
monopolize the business of banking in any part of the United States. In
addition, the Federal Reserve will not approve a transaction the effect of which
may be substantially to lessen competition or to tend to create a monopoly, or
that in any other manner would be in restraint of trade. However, such
transactions may be approved in the event the anti-


                                      -2-
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competitive effects of the proposed transaction are clearly outweighed by the
public interest in meeting the convenience and needs of the communities 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 involved and the convenience and needs of the communities to be served.
Consideration of financial resources generally focuses on capital adequacy, and
consideration of convenience and needs issues generally focuses on the parties'
performance under the Community Reinvestment Act of 1977.

     The Bank Holding Company Act generally prohibits a bank holding company
from engaging in activities other than banking or managing or controlling banks
or other permissible subsidiaries. Bank holding companies are also generally
prohibited from acquiring or retaining direct or indirect control of any company
engaged in any activities other than those activities determined by the Federal
Reserve to be so closely related to banking or managing or controlling banks as
to be a proper incident thereto. Activities determined by the Federal Reserve to
fall within this category include acquiring or servicing loans, leasing personal
property, conducting discount securities brokerage activities, performing
certain data processing services, acting as agent or broker in selling certain
types of credit insurance, and performing certain insurance underwriting
activities. The Bank Holding Company Act does not place territorial limitations
on permissible non-banking activities of bank holding companies. The Federal
Reserve has the power to order a bank holding company or its subsidiaries to
terminate any non-banking activity when it has reasonable cause to believe that
continuation of such activity constitutes a serious risk to the safety and
soundness of any bank subsidiary of that bank holding company.

     Although the activities of bank holding companies have traditionally been
limited to the business of banking and activities closely related or incidental
to banking (as discussed above), the Gramm-Leach-Bliley Act of 1999 relaxed the
previous limitations thus permitting bank holding companies to engage in a
broader range of financial activities. Specifically, bank holding companies may
elect to become financial holding companies which may affiliate with securities
firms and insurance companies and engage in other activities that are financial
in nature. Among the activities that are deemed "financial in nature" include:

     -    lending, exchanging, transferring, investing for others or
          safeguarding money or securities;

     -    insuring, guaranteeing, or indemnifying against loss, harm, damage,
          illness, disability, or death, or providing and issuing annuities, and
          acting as principal, agent, or broker with respect thereto;

     -    providing financial, investment, or economic advisory services,
          including advising an investment company;

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

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

     A bank holding company may become a financial holding company under this
statute only if each of its subsidiary banks is well capitalized, is well
managed and has at least a satisfactory rating under the Community Reinvestment
Act. A bank holding company that falls out of compliance with


                                      -3-

<PAGE>

such requirement may be required to cease engaging in certain activities. Any
bank holding company that does not elect to become a financial holding company
remains subject to the current restrictions of the Gramm-Leach-Bliley Act.

     Under this legislation, the Federal Reserve Board serves as the primary
"umbrella" regulator of financial holding companies with supervisory authority
over each parent company and limited authority over its subsidiaries. The
primary regulator of each subsidiary of a financial holding company will depend
on the type of activity conducted by the subsidiary. For example, broker-dealer
subsidiaries will be regulated largely by securities regulators and insurance
subsidiaries will be regulated largely by insurance authorities.

     We have no immediate plans to register as a financial holding company.

The Bank

     The Bank is incorporated under the laws of the State of Georgia and is
subject to examination by the Georgia Department of Banking and Finance. The
Georgia Department of Banking and Finance regulates all areas of the Bank's
commercial banking operations, including, without limitation, loans, deposits,
reserves, mergers, reorganizations, issuance of securities, payment of
dividends, and the establishment of branches. The Bank is also a member of the
Federal Deposit Insurance Corporation (the "FDIC"), and as such, the FDIC, to
the maximum extent provided by law, insures its deposits. The Bank is also
subject to numerous state and federal statutes and regulations that affect its
business, activities, and operations. The FDIC and the Georgia Department of
Banking and Finance regularly examine the operations of the Bank and have the
power to prevent the continuance or development of unsafe or unsound banking
practices or other violations of law.

Payment of Dividends

     We are a legal entity separate and distinct from our banking subsidiary.
Our principal source of cash flow, including cash flow to pay dividends to our
shareholders, is dividends from the Bank. There are statutory and regulatory
limitations on the payment of dividends by the Bank, as well as by us to our
shareholders.

     If, in the opinion of the federal banking regulators, a depository
institution under its jurisdiction is engaged in or is about to engage in an
unsafe or unsound practice (which, depending on the financial condition of the
depository institution, could include the payment of dividends), such authority
may require, after notice and hearing, that such institution cease and desist
from such 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.

     In addition, the Georgia Financial Institutions Code and the regulations of
the Georgia Department of Banking and Finance provide:


                                      -4-

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     -    that dividends of cash or property may be paid only out of the
          retained earnings of the Bank;

     -    that dividends may not be paid if the Bank's paid-in capital and
          retained earnings which are set aside for dividend payment and other
          distributions do not, in combination, equal at least 20% of the Bank's
          capital stock; and

     -    that dividends may not be paid without prior approval of the Georgia
          Department of Banking and Finance if:

          -    the Bank's total classified assets exceed 80% of its equity
               capital;

          -    the aggregate amount of dividends to be declared exceeds 50% of
               the Bank's net profits after taxes but before dividends for the
               previous calendar year; or

          -    the ratio of equity capital to total adjusted assets is less than
               6%.

     Applying these dividend restrictions, and without prior approval of the
Georgia Department of Banking and Finance, as of December 31, 2005, the Bank
could pay a $3,100,000 dividend to us. Our ability to pay dividends may also be
affected or limited by other factors, such as the requirement to maintain
adequate capital above regulatory guidelines.

Transactions with Affiliates and Insiders

     Various legal limitations restrict the Bank from lending or otherwise
supplying funds to us and our non-bank subsidiaries, all of which are deemed to
be "affiliates" of the Bank for the purposes of these restrictions. We are
subject to Section 23A of the Federal Reserve Act. Section 23A defines "covered
transactions," which include extensions of credit, and limits a bank's covered
transactions with any affiliate to 10% of such bank's capital and surplus and
with all affiliates to 20% of such bank's capital and surplus. All covered and
exempt transactions between a bank and its affiliates must be on terms and
conditions consistent with safe and sound banking practices, and banks and their
subsidiaries are prohibited from purchasing low-quality assets from the bank's
affiliates. Finally, Section 23A requires that all of a bank's extensions of
credit to an affiliate be appropriately secured by acceptable collateral,
generally U.S. government or agency securities. We are also subject to Section
23B of the Federal Reserve Act, which generally limits covered and other
transactions between a bank and its affiliates to terms and under circumstances,
including credit standards, that are substantially the same or at least as
favorable to the bank as prevailing at the time for transactions with
unaffiliated companies.

Capital Adequacy

     We are required to comply with the capital adequacy standards established
by the Federal Reserve, and the FDIC in the case of the Bank. There are two
basic measures of capital adequacy for bank holding companies that have been
promulgated by the Federal Reserve: a risk-based measure and a leverage measure.
All applicable capital standards must be satisfied for a bank holding company to
be considered in compliance.

     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-


                                      -5-

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balance sheet exposure, and to minimize disincentives for holding liquid,
low-risk assets. Assets and off-balance-sheet items are assigned to broad risk
categories, each with appropriate 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 8.0%. At least half of total capital must be comprised of Tier 1
Capital, which is common stock, undivided profits, minority interests in the
equity accounts of consolidated subsidiaries and noncumulative perpetual
preferred stock, less goodwill and certain other intangible assets. The
remainder may consist of Tier 2 Capital, which is subordinated debt, other
preferred stock and a limited amount of loan loss reserves. As of December 31,
2005, our total risk-based capital ratio and our Tier 1 risk-based capital ratio
were 10.98% and 9.88%, respectively.

     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 certain other
intangible assets, of 3.0% for bank holding companies that meet specified
criteria. All other bank holding companies generally are required to maintain a
leverage ratio of at least 3.0%, plus an additional cushion of 100 to 200 basis
points. Our leverage ratio as of December 31, 2005, was 9.08%. The guidelines
also provide that bank holding companies experiencing internal growth or making
acquisitions will be expected to maintain strong capital positions substantially
above the minimum supervisory levels without significant reliance on intangible
assets. Furthermore, the Federal Reserve has indicated that it will consider a
"tangible Tier 1 Capital leverage ratio" and other indicia of capital strength
in evaluating proposals for expansion or new activities. The Federal Reserve has
not advised us of any specific minimum leverage ratio or tangible Tier 1
leverage ratio applicable to us.

     The Bank is subject to risk-based and leverage capital requirements adopted
by the FDIC, which are substantially similar to those adopted by the Federal
Reserve for bank holding companies. The Bank was in compliance with applicable
minimum capital requirements as of December 31, 2005. We have not been advised
by any federal banking agency of any specific capital ratio requirement
applicable to the Bank.

     Failure to meet capital guidelines could subject a bank to a variety of
enforcement remedies, including issuance of a capital directive, the termination
of deposit insurance by the FDIC, a prohibition on the taking of brokered
deposits, and certain other restrictions on its business. Substantial additional
restrictions can be imposed upon FDIC-insured depository institutions that fail
to meet applicable capital requirements.

     The federal bank regulators continue to indicate their desire to raise
capital requirements applicable to banking organizations beyond their current
levels. In this regard, the Federal Reserve and the FDIC have recently adopted
regulations requiring regulators to consider interest rate risk in the
evaluation of a bank's capital adequacy. The bank regulatory agencies have
recently established a methodology for evaluating interest rate risk which sets
forth guidelines for banks with excessive interest rate risk exposure to hold
additional amounts of capital against such exposures.

     In addition to the capital standards imposed by federal banking regulators,
the Georgia Department of Banking and Finance imposed a requirement for the Bank
to maintain a primary capital ratio of not less than 8.0% during the first three
years of the Bank's operation. Following the expiration of this initial period,
the Bank became subject to a 6.0% primary capital ratio. Such


                                      -6-

<PAGE>

standard is calculated as the ratio of total equity to total assets, each as
adjusted for unrealized gains and losses on securities and allowance for loan
losses.

Support of Subsidiary Institution

     Under Federal Reserve policy, we are expected to act as a source of
financial strength for, and to commit resources to support, the Bank. This
support may be required at times when, absent such Federal Reserve policy, we
may not be inclined to provide such support. In addition, any capital loans by a
bank holding company to its banking subsidiary are subordinate in right of
payment to deposits and to certain other indebtedness of such bank.

     In the event of a bank holding company's bankruptcy, any commitment by a
bank holding company to a federal bank regulatory agency to maintain the capital
of a banking subsidiary will be assumed by the bankruptcy trustee and entitled
to a priority of payment.

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 risk-based
assessment system assigns an institution to one of three capital categories:
well capitalized, adequately capitalized, and 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 within each capital group. The
supervisory subgroup to which an institution is assigned is based on an
evaluation provided to the FDIC by the institution's primary federal regulator
and information which the FDIC determines to be relevant to the risk posed to
the deposit insurance funds. An institution's insurance assessment rate is then
determined based on the capital category and supervisory category to which it is
assigned. The combination of capital groups and supervisory subgroups results in
nine assessment risk classifications to which different assessment rates are
applied.

     The FDIC may terminate the insurance of the deposits of the Bank upon a
finding that the bank has engaged in unsafe and unsound practices, is in an
unsafe or unsound condition to continue operations, or has violated any
applicable law, regulation, order, or condition the FDIC has imposed.

Safety and Soundness Standards

     The federal bank regulatory agencies have adopted a set of guidelines
prescribing safety and soundness standards. The guidelines establish general
standards relating to internal controls and information systems, internal audit
systems, loan documentation, credit underwriting, interest rate exposure, asset
growth, asset quality, earnings and compensation, fees and benefits. In general,
the guidelines require, among other things, appropriate systems and practices to
identify and manage the risks and exposures specified in the guidelines. The
guidelines prohibit excessive compensation as an unsafe and unsound practice and
describe compensation as excessive when the amounts paid are unreasonable or
disproportionate to the services performed by an executive officer, employee,
director or principal shareholder. In addition, the agencies adopted regulations
that authorize, but do not require, an agency to order an institution that has
been given notice by an agency that it is not satisfying any of such safety and
soundness standards to submit a compliance plan. If an institution


                                      -7-

<PAGE>

fails to submit or implement such a plan, the agency must issue an order
directing action to correct the deficiency and may require other actions of the
types to which an undercapitalized institution is subject under the "prompt
corrective action" provisions described above. If an institution fails to comply
with such an order, the agency may seek to enforce such order in judicial
proceedings and to impose civil money penalties.

Community Reinvestment Act

     The Community Reinvestment Act requires federal bank regulatory agencies to
encourage financial institutions to meet the credit needs of low-and
moderate-income borrowers in their local communities. An institution's size and
business strategy determines the type of examination that it will receive.

     Large, retail-oriented institutions will be examined using a
performance-based lending, investment and service test. Small institutions will
be examined using a streamlined approach. All institutions may opt to be
evaluated under a strategic plan formulated with community input and
pre-approved by the bank regulatory agency.

     Community Reinvestment Act regulations provide for certain disclosure
obligations. Each institution must post a notice advising the public of its
right to comment to the institution and its regulator on the institution's
Community Reinvestment Act performance and to review the institution's Community
Reinvestment Act public file. Each lending institution must maintain for public
inspection a public file that includes a listing of branch locations and
services, a summary of lending activity, a map of its communities and any
written comments from the public on its performance in meeting community credit
needs. The Community Reinvestment Act requires public disclosure of a financial
institution's written Community Reinvestment Act evaluations. This promotes
enforcement of Community Reinvestment Act requirements by providing the public
with the status of a particular institution's community reinvestment record.

     The Gramm-Leach-Bliley Act makes various changes to the Community
Reinvestment Act. Among other changes, Community Reinvestment Act agreements
with private parties must be disclosed and annual Community Reinvestment Act
reports must be made to a bank's primary federal regulator. A bank holding
company will not be permitted to become a financial holding company and no new
activities authorized under this Act may be commenced by a holding company if
any of its bank subsidiaries received less than a "satisfactory" Community
Reinvestment Act rating in its latest Community Reinvestment Act examination.

Financial Privacy

     In accordance with the Gramm-Leach-Bliley Act, federal banking regulators
adopted rules that limit the ability of banks and other financial institutions
to disclose non-public information about consumers to nonaffiliated third
parties. These limitations require disclosure of privacy policies to consumers
and, in some circumstances, allow consumers to prevent disclosure of certain
personal information to a nonaffiliated third party. The privacy provisions of
the Gramm-Leach-Bliley Act affect how consumer information is transmitted
through diversified financial companies and conveyed to outside vendors.


                                      -8-

<PAGE>

Anti-Terrorism Legislation

     In the wake of the tragic events of September 11, 2001, 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 transactions;

     -    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.

     Under the USA Patriot Act, financial institutions had until April 25, 2002,
to establish anti-money laundering programs. The USA Patriot Act sets forth
minimum standards for these programs, including:

     -    the development of internal policies, procedures and controls;

     -    the designation of a compliance officer;

     -    an ongoing employee training program; and

     -    an independent audit function to test the programs.

     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.

     In addition, the USA Patriot Act authorizes the Secretary of the Treasury
to adopt rules increasing the cooperation and information sharing between
financial institutions, regulators and law enforcement authorities regarding
individuals, entities and organizations engaged in, or reasonably suspected
based on credible evidence of engaging in, terrorist acts or money laundering
activities. Any financial institution complying with these rules will not be
deemed to have violated the privacy requirements discussed above.


                                      -9-

<PAGE>

ITEM 2. DESCRIPTION OF PROPERTY

     The Bank leases its main office located at 165 Nash Street, Lawrenceville,
Gwinnett County, Georgia. The Bank also leases its branch banking offices
located at 11675 Rainwater Drive, Suite 150, Alpharetta, Fulton County, Georgia
30004. All leased property is in good order and condition.

ITEM 3. LEGAL PROCEEDINGS

     We are subject to claims and litigation in the ordinary course of business.
We believe that any pending claims and litigation will not have a material
adverse effect on our consolidated position.

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

     None

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     There is currently no public trading market for shares of our common stock
and it is not likely that a public trading market will develop for our common
stock in the future. There are no present plans for our common stock to be
traded on any stock exchange or over-the-counter market.

     As of March 15, 2006, there were approximately 750 holders of our common
stock.

     We have not paid any dividends to date. Under the Georgia Business
Corporation Code, we may from time to time make distributions, including the
payment of dividends, to our shareholders in money, indebtedness or other
property (except our own shares) unless, after giving effect to such
distribution, we would not be able to pay our debts as they become due in the
usual course of business or our total assets would be less than the sum of our
total liabilities plus the amount that would be needed, if we were to be
dissolved at the time of distribution, to satisfy the preferential rights upon
dissolution of shareholders whose preferential rights are superior to those
receiving the distribution.

     Subject to certain conditions imposed by our regulators, we, as the sole
holder of common stock of the Bank, are entitled to such dividends as may be
declared from time to time by the Board of Directors of the Bank out of funds
legally available therefore. Dividends paid may not exceed 50% of net profits
after taxes for the previous fiscal year without prior approval of the Georgia
Department of Banking and Finance. The Bank may not pay cumulative dividends on
its common stock.

     In the absence of other activities conducted by us, our ability to pay
dividends will depend upon the earnings of the Bank. However, we cannot
guarantee the future payment of dividends, either in cash or in stock.


                                      -10-

<PAGE>

                   EQUITY COMPENSATION PLAN INFORMATION TABLE

<TABLE>
<CAPTION>
                                                                                   NUMBER OF SECURITIES
                                                                                 REMAINING AVAILABLE FOR
                                                                                  FUTURE ISSUANCE UNDER
                                NUMBER OF SECURITIES TO     WEIGHTED-AVERAGE       EQUITY COMPENSATION
                                BE ISSUED UPON EXERCISE     EXERCISE PRICE OF        PLANS (EXCLUDING
                                OF OUTSTANDING OPTIONS,   OUTSTANDING OPTIONS,   SECURITIES REFLECTED IN
         PLAN CATEGORY            WARRANTS AND RIGHTS      WARRANTS AND RIGHTS         COLUMN (A))
         -------------          -----------------------   --------------------   -----------------------
                                          (A)                      (B)                     (C)
<S>                             <C>                        <C>                   <C>
Equity compensation
   plans approved by
   security holders..........           363,900                  $13.12                    775
Equity compensation
   plans not approved
   by security holders.......                 0                       0                      0
   Total.....................           363,900                  $13.12                    775
</TABLE>

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

     The following is management's discussion and analysis of certain
significant factors that have affected the financial position and operating
results of GBC Bancorp, Inc. and its bank subsidiary, Gwinnett Banking Company,
during the periods included in the accompanying audited consolidated financial
statements. The purpose of this discussion is to focus on information about our
financial condition and results of operations that are not otherwise apparent
from our audited consolidated financial statements as of and for the year ended
December 31, 2005. Reference should be made to those statements and the selected
financial data presented elsewhere in this Annual Report for an understanding of
the following discussion and analysis.

FORWARD-LOOKING STATEMENTS

     We may from time to time make written or oral forward-looking statements,
including statements contained in our filings with the Securities and Exchange
Commission and reports to shareholders. Statements made in the Annual Report,
other than those concerning historical information, should be considered
forward-looking and subject to various risks and uncertainties. Forward-looking
statements are made based on management's belief as well as assumptions made by,
and information currently available to, management pursuant to "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995. Our actual
results may differ materially from the results anticipated in forward-looking
statements due to a variety of factors, including governmental monetary and
fiscal policies, deposit levels, loan demand, loan collateral values, securities
portfolio values, interest rate risk management, the effects of competition in
the banking business from other commercial banks, thrifts, mortgage banking
firms, consumer finance companies, credit unions, securities brokerage firms,
insurance companies, money market funds and other financial institutions
operating in our market area and elsewhere, including institutions operating
through the Internet, changes in governmental regulation relating to the banking
industry, including regulations relating to branching and acquisitions, failure
of assumptions underlying the establishment of reserves for loan losses,
including the value of collateral underlying delinquent loans and other factors.
We caution


                                      -11-

<PAGE>

that these factors are not exclusive. We do not undertake to update any
forward-looking statement that may be made from time to time by, or on behalf
of, us.

OVERVIEW

     Our 2005 results were highlighted by improved profitability and continued
loan and deposit growth. Our net income increased to approximately $6,201,000,
as compared to approximately $3,323,000 in 2004, primarily due to an increase in
loan interest income associated with a substantial growth in loans, increase in
gain on sale of U.S. Small Business Administration, or "SBA", loans due to
increased SBA volume, with only a slight increase in interest expense even
though deposits grew substantially.

CRITICAL ACCOUNTING POLICIES

     We have adopted various accounting policies that govern the application of
accounting principles generally accepted in the United States in the preparation
of our financial statements. Our significant accounting policies are described
in the footnotes to the audited consolidated financial statements included in
this report.

     Certain accounting policies involve significant judgments and assumptions
by us which have a material impact on the carrying value of certain assets and
liabilities. We consider these accounting policies to be critical accounting
policies. The judgments and assumptions we use are based on historical
experience and other factors, which we believe to be reasonable under the
circumstances. Because of the nature of the judgments and assumptions we make,
actual results could differ from these judgments and estimates which could have
a material impact on our carrying values of assets and liabilities and our
results of operations.

     We believe the allowance for loan losses is a critical accounting policy
that requires the most significant judgments and estimates used in preparation
of our consolidated financial statements. Please see the portion of this
discussion that addresses our allowance for loan losses for a description of our
processes and methodology for determining our allowance for loan losses.

FINANCIAL CONDITION AT DECEMBER 31, 2005 AND 2004

     Following is a summary of our balance sheets for the years indicated:

<TABLE>
<CAPTION>
                                                       DECEMBER 31,
                                                 ----------------------
                                                     2005       2004
                                                   --------   --------
                                                 (DOLLARS IN THOUSANDS)
<S>                                              <C>          <C>
Cash and due from banks ......................     $  3,801   $  5,390
Federal funds sold ...........................       16,656     17,694
Securities ...................................       32,411     31,000
Loans, net ...................................      315,453    248,801
Premises and equipment .......................          293        378
Other assets .................................       11,092     10,672
                                                   --------   --------
                                                   $379,706   $313,935
                                                   ========   ========

Total deposits ...............................     $341,171   $282,336
</TABLE>


                                      -12-

<PAGE>

<TABLE>
<S>                                                <C>        <C>
Securities sold under repurchase agreements ..          830      1,820
Other liabilities ............................        4,712      3,040
Stockholders' equity .........................       32,993     26,739
                                                   --------   --------
                                                   $379,706   $313,935
                                                   ========   ========
</TABLE>

     As of December 31, 2005, we had total assets of approximately $380 million,
an increase of 21% over December 31, 2004 Total interest-earning assets were
approximately $365 million at December 31, 2006, or 96% of total assets, as
compared to 95% of total assets at December 31, 2004. Our primary
interest-earning assets at December 31, 2005, were loans, which made up 86% of
total interest-earning assets, as compared to 84% at December 31, 2004. Our loan
to deposit ratio was 92% at December 31, 2005, as compared to 88% at December
31, 2004. Deposit growth of approximately $59 million along with the decrease in
cash and due from banks and federal funds funded the increase in investments of
$1.4 million and the increase in loans of $67 million.

     Our securities portfolio, consisting of U.S. Agency, State and municipal,
and mortgage-backed securities, amounted to approximately $32 million at
December 31, 2005. Net unrealized losses on securities amounted to approximately
$705,000 at December 31, 2005, as compared to an unrealized gain of
approximately $82,000 at December 31, 2004. Management has not specifically
identified any securities for sale in future periods that, if so designated,
would require a charge to operations if the market value would not be reasonably
expected to recover prior to the time of sale.

     Approximately 79% of our loan portfolio is collateralized by real estate
located in our primary market area of Gwinnett County, Georgia and surrounding
counties. Our real estate construction portfolio consists of loans
collateralized by loans to build one- to four-family residential properties. We
generally require that loans collateralized by real estate not exceed 80%-85% of
the collateral value.

     The remaining approximately 21% of the loan portfolio consists of
commercial, consumer, and other loans. We require collateral commensurate with
the repayment ability and creditworthiness of the borrower.

     The specific economic and credit risks associated with our loan portfolio,
especially the real estate portfolio, include, but are not limited to, a general
downturn in the economy which could affect unemployment rates in our market
area, general real estate market deterioration, interest rate fluctuations,
deteriorated or non-existing collateral, title defects, inaccurate appraisals,
financial deterioration of borrowers, fraud, and any violation of banking
protection laws. Construction lending can also present other specific risks to
the lender such as whether the builders can obtain financing for the
construction, whether the builders can sell the home to a buyer, and whether the
buyer can obtain permanent financing. Currently, real estate values and
employment trends in our market area are stable with no indications of a
significant downturn in the local economy.

     We attempt to reduce these economic and credit risks not only by adhering
to loan to value guidelines, but also by investigating the creditworthiness of
the borrower and monitoring the borrower's financial position. Also, we
establish and periodically review our lending policies and procedures as well as
having independent loan review. State banking regulations limit exposure by
prohibiting secured loan relationships that exceed 25% of the Bank's statutory
capital and unsecured loan relationships that exceed 15% of the Bank's statutory
capital.


                                      -13-
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

     The purpose of liquidity management is to ensure that there are sufficient
cash flows to satisfy demands for credit, deposit withdrawals, and our other
needs. Traditional sources of liquidity include asset maturities and growth in
core deposits. A company may achieve its desired liquidity objectives from the
management of assets and liabilities and through funds provided by operations.
Funds invested in short-term marketable instruments and the continuous maturing
of other earning assets are sources of liquidity from the asset perspective. The
liability base provides sources of liquidity through deposit growth, the
maturity structure of liabilities, and accessibility to market sources of funds.

     Scheduled loan payments are a relatively stable source of funds, but loan
payoffs and deposit flows fluctuate significantly, being influenced by interest
rates and general economic conditions and competition. We attempt to price
deposits to meet asset/liability objectives consistent with local market
conditions.

     Our liquidity and capital resources are monitored on a periodic basis by
management and State and Federal regulatory authorities. We monitor our
liquidity requirements under two categories, operational needs and emergency
needs. The operational needs category establishes the cash requirements to
sufficiently fund our deposit reserve requirements and pay operating expenses.
The emergency needs category establishes sufficient cash requirements to fund
the volatility of deposits. As determined under these categories, our liquidity
was considered satisfactory.

     At December 31, 2005, our capital ratios were considered adequate based on
regulatory minimum capital requirements. Our stockholders' equity increased by
approximately $6,254,000 due to net income in 2005 of approximately $6,201,000
and proceeds from the exercise of stock options of $541,000. These increases
partially offset by a decrease in other comprehensive income related to our
securities of approximately $488,000. For regulatory purposes, the net
unrealized gains on securities available-for-sale are excluded in the
computation of the capital ratios.

     In the future, the primary source of funds available to us will be the
payment of dividends by the Bank. Banking regulations limit the amount of the
dividends that may be paid without prior approval of the Bank's regulatory
agency. Currently, the Bank could pay us a $3,100,000 dividend without
regulatory approval.

     The minimum capital requirements to be considered well capitalized under
prompt corrective action provisions and the actual capital ratios for the
holding company and the Bank as of December 31, 2004, are as follows:

<TABLE>
<CAPTION>
                                       ACTUAL           REGULATORY
                                --------------------     MINIMUM
                                CONSOLIDATED    BANK   REQUIREMENT
                                ------------   -----   -----------
<S>                             <C>            <C>     <C>
Leverage capital ratios .....       9.08        8.77%      5.00%
Risk-based capital ratios:
   Core capital .............       9.88%       9.55%      6.00
   Total capital ............      10.98%      10.65%     10.00
</TABLE>


                                      -14-

<PAGE>

     At December 31, 2005, we had no material commitments for capital
expenditures.

     These ratios may decline as asset growth continues, but are expected to
exceed regulatory minimum requirements. Anticipated future earnings and
additional proceeds received from our stock options will assist in keeping these
ratios at satisfactory levels.

     We believe that our liquidity and capital resources will be adequate and
will meet our foreseeable short and long-term needs. We anticipate that we will
have sufficient funds available to meet current loan commitments and to fund or
refinance, on a timely basis, our other material commitments and liabilities.

     Management is not aware of any known trends, events or uncertainties, other
than those discussed above, that will have or that are reasonably likely to have
a material effect on our liquidity, capital resources or operations. Management
is also not aware of any current recommendations by the regulatory authorities
that, if they were implemented, would have such an effect.

Off-Balance Sheet Arrangements

     We are party to financial instruments with off-balance sheet risk in the
normal course of business to meet the financing needs of our customers. These
financial instruments include commitments to extend credit and standby letters
of credit. Such commitments involve, to varying degrees, elements of credit risk
and interest rate risk in excess of the amount recognized in the balance sheets.

     Our 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.
We use the same credit policies in making commitments and conditional
obligations as we do for on-balance sheet instruments. A summary of our
commitments is as follows:

<TABLE>
<CAPTION>
                                          DECEMBER 31,
                                  ---------------------------
                                      2005           2004
                                  ------------   ------------
<S>                               <C>            <C>
Letters of credit .............   $  4,606,625   $  4,607,425
Commitments to extend credit ..    115,581,935     98,888,244
                                  ------------   ------------
   Total ......................   $120,188,560   $103,495,669
                                  ============   ============
</TABLE>

     Letters of credit are conditional commitments that we issue to guarantee
the performance of a customer to a third party. Those letters of credit are
primarily issued to support public and private borrowing arrangements. The
credit risk involved in issuing letters of credit is essentially the same as
that involved in extending loans to customers. Collateral is required in
instances which we deem necessary. At December 31, 2005, we had arrangements
with four commercial banks for additional short-term advances of $25,200,000.

     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. Because
these commitments generally have fixed expiration dates and many will expire
without being drawn on, the total commitment amounts do not necessarily
represent future cash requirements. The amount of collateral obtained, if we
deem it necessary in connection with the extension of credit, is based on our
credit evaluation of the


                                      -15-

<PAGE>

borrower. If needed, we have the ability on a short-term basis to borrow funds
and purchase Federal funds from other financial institutions.

Effects of Inflation

     The impact of inflation on banks differs from its impact on non-financial
institutions. Banks, as financial intermediaries, have assets that are primarily
monetary in nature and that tend to fluctuate in concert with inflation. A bank
can reduce the impact of inflation if it can manage its rate sensitivity gap.
This gap represents the difference between rate sensitive assets and rate
sensitive liabilities. We, through our asset/liability committee, attempt to
structure the assets and liabilities and manage the rate sensitivity gap,
thereby seeking to minimize the potential effects of inflation. For information
on the management of our interest rate sensitive assets and liabilities, see
"Asset/Liability Management".

     We do not engage in any transactions or have relationships or other
arrangements with an unconsolidated entity. These include special purpose and
similar entities or other off-balance sheet arrangements. We also do not trade
in energy, weather or other commodity-based contracts.

Related Party Transactions

     We lease our main office banking facilities under a noncancelable operating
lease agreement from GBC Properties, LLC, a limited liability company formed by
our organizers. The lease term is for 15 years with the monthly rental payment
adjusting every fifth year for changes in the Consumer Price Index. The lease
agreement requires us to pay normal operating and occupancy expenses of the
facilities.

RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004

     The following is a summary of our operations for the years indicated.

<TABLE>
<CAPTION>
                                  DECEMBER 31,
                               -----------------
                                 2005      2004
                               -------   -------
                                  (DOLLARS IN
                                   THOUSANDS)
<S>                            <C>       <C>
Interest income ............   $25,192   $16,849
Interest expense ...........     9,324     5,625
                               -------   -------
Net interest income ........    15,868    11,224
Provision for loan losses ..       853       798
Other income ...............     2,983     1,815
Other expenses .............     8,356     7,209
                               -------   -------
Pretax income ..............     9,642     5,032
                               -------   -------
Income taxes ...............     3,441     1,709
                               -------   -------
   Net income ..............   $ 6,201   $ 3,323
                               =======   =======
</TABLE>


                                      -16-
<PAGE>

Net Interest Income

     Our results of operations are determined by our ability to manage interest
income and expense effectively, to minimize loan and investment losses, to
generate non-interest income, and to control operating expenses. Because
interest rates are determined by market forces and economic conditions beyond
our control, our ability to generate net interest income depends on our ability
to obtain an adequate net interest spread between the rate we pay on
interest-bearing liabilities and the rate we earn on interest-earning assets.

     Our net yield on average interest-earning assets was 4.75% in 2005, as
compared to 4.17% in 2004. Average loans increased by approximately $57 million,
which accounted for the most significant change in the approximately $64 million
increase in total average interest-earning assets. Average interest-bearing
liabilities increased by approximately $55 million, with average
interest-bearing demand and time deposits accounting for the vast majority of
this increase. The rate earned on average interest-earning assets increased to
7.57% in 2005 from 6.26% in 2004. The rate paid on average interest-bearing
liabilities increased to 3.30% in 2005 from 2.47% in 2004. The increase in net
yield was due primarily to the rising rate environment experienced during 2005.
As our rates continue to increase on average interest-earning assets, we expect
to see our net yield continue to increase.

Provision for Loan Losses

     The provision for loan losses was $853,000 in 2005, as compared to $798,000
in 2004. The increase in the amounts provided were due primarily to the change
in the inherent risk in the loan portfolio. We had $926,000 in net charge-offs
in 2005, as compared to $52,000 in net charge-offs in 2004. As of December 31,
2005, we had $1,961,000 of nonperforming loans or assets, as compared to
$2,145,000 at December 31, 2004. Through our eighth full year of operations, we
have incurred no significant loan losses. Based on our evaluation of the loan
portfolio, we believe the allowance for loan losses to be adequate to absorb
losses on existing loans that may become uncollectible. Our evaluation considers
significant factors relative to the credit risk and loss exposure in the loan
portfolio, including past due and classified loans, past experience, underlying
collateral values, and current economic conditions that may affect the
borrower's ability to repay. The allowance for loan losses is evaluated by
segmenting the loan portfolio into unclassified and classified loans. The
unclassified loans are further segmented by loan type with an allowance
percentage applied to each type in order to establish a general allowance for
loan losses. The allowance percentage determined is based on our experience
specifically and the historical experience of the banking industry generally.
The classified loans, including impaired loans, are analyzed individually in
order to establish a specific allowance for losses. The allowance for loan
losses as a percentage of total loans at December 31, 2005 was 1.16%, as
compared to 1.49% at December 31, 2004. The increase in this percentage is
primarily the result of having more of our own historical experience on which to
base our evaluation of the adequacy of the allowance for loan losses.

Other Income

     Other income consists of service charges on deposit accounts, mortgage loan
origination fees, gain on sale of SBA loans and other miscellaneous revenue and
fees. Other income of approximately $2,983,000 increased by approximately
$1,168,000 in 2005 from approximately $1,815,000 in 2004. This net increase is
due to a increase in service charges on deposit accounts of approximately
$8,000, a decrease in mortgage loan origination fees of approximately $1,000, an
increase in gains on sale of


                                      -17-

<PAGE>

SBA loans of approximately $723,000, an increase in SBA servicing fees of
$384,000 a decrease in income recognized on life insurance policies of
approximately $2,000, and a increase in other miscellaneous revenues and fees of
approximately $56,000.

Other Expenses

     Other expenses were approximately $8,356,000 in 2005, as compared to
approximately $7,209,000 in 2004, an increase of approximately $1,147,000.
Salaries and employee benefits increased by approximately $669,000 due to the
annual salary increase to all employees and the increase in commissions paid on
SBA premiums. Equipment and occupancy expenses decreased by approximately
$26,000, due primarily to decreased property taxes and decrease in depreciation.
Other operating expenses increased by approximately $504,000, due primarily to a
$34,000 increase in data processing costs, $248,000 increase in director fees,
$46,000 increase in broker fees, $65,000 increase in professional fees, $58,000
increase in business license, $35,000 increase in contributions and a $18,000
increase in other operating costs. The overall increase in other expenses is
primarily attributable to the growth of the Bank.

Income Tax

     We have reported income tax expense for 2005 of $3,441,000, as compared to
$1,709,000 in 2003. Our effective income tax rate was 36% in 2005 and 34% in
2004.

Asset/Liability Management

     Our objective is to manage assets and liabilities to provide a
satisfactory, consistent level of profitability within the framework of
established cash, loan, investment, borrowing and capital policies. Specific
officers are charged with the responsibility for monitoring policies and
procedures that are designed to ensure acceptable composition of the
asset/liability mix. Our management's overall philosophy is to support asset
growth primarily through growth on core deposits of all categories made by local
individuals, partnerships and corporations.

     Our asset/liability mix is monitored on a regular basis with a report
reflecting the interest rate-sensitive assets and interest rate-sensitive
liabilities being prepared and presented to the Bank's Board of Directors on a
monthly basis. The objective of this policy is to monitor interest
rate-sensitive assets and liabilities so as to minimize the impact of earnings
of substantial movements in interest rates. An asset or liability is considered
to be interest rate-sensitive if it will reprice or mature within the time
period analyzed. The interest rate-sensitivity gap is the difference between the
interest-earning assets and interest-bearing liabilities scheduled to mature or
reprice within such time period. A gap is considered positive when the amount of
interest rate-sensitive assets exceeds the amount of interest rate-sensitive
liabilities. A gap is considered negative when the amount of interest
rate-sensitive liabilities exceeds the interest rate-sensitive assets. During a
period of rising interest rates, a negative gap would tend to affect net
interest income adversely, while a positive gap would tend to result in an
increase in net interest income. Conversely, during a period of falling interest
rates, a negative gap would tend to result in an increase in net interest
income, while a positive gap would tend to affect net interest income adversely.
If our assets and liabilities were equally flexible and moved concurrently, the
impact of any increase or decrease in interest rates on net interest income
would be minimal.


                                      -18-

<PAGE>

     A simple interest rate "gap" analysis by itself may not be an accurate
indicator of how net interest income will be affected by changes in interest
rates. Accordingly, we also evaluate how the repayment of particular assets and
liabilities is impacted by changes in interest rates. Income associated with
interest-earning assets and costs associated with interest-bearing liabilities
may not be affected uniformly by changes in interest rates. In addition, the
magnitude and duration of changes in interest rates may have a significant
impact on net interest income. For example, although certain assets and
liabilities may have similar maturities or periods of repricing, they may react
in different degrees to changes in market interest rates. Interest rates on
certain types of assets and liabilities fluctuate in advance of changes in
general market rates, while interest rates on other types may lag behind changes
in general market rates. In addition, certain assets, such as adjustable rate
mortgage loans, have features (generally referred to as interest rate caps and
floors), which limit changes in interest rates. Prepayment and early withdrawal
levels also could deviate significantly from those assumed in calculating the
interest rate gap. The ability of many borrowers to service their debt also may
decrease during periods of rising interest rates.

     Changes in interest rates also affect our liquidity position. We currently
price deposits in response to market rates and it is management's intention to
continue this policy. If deposits are not priced in response to market rates, a
loss of deposits could occur that would negatively affect our liquidity
position.

     At December 31, 2005, our cumulative one year interest rate-sensitivity gap
ratio was 1.05. Our targeted ratio is .80 to 1.20 in this time horizon. This
indicates that our interest-earning assets will reprice during this period at a
rate faster than our interest-bearing liabilities.

     The following table sets forth the distribution of the repricing of our
interest-earning assets and interest-bearing liabilities as of December 31,
2005, the interest rate-sensitivity gap, the cumulative interest
rate-sensitivity gap, the interest rate-sensitivity gap ratio and the cumulative
interest rate-sensitivity gap ratio. The table also sets forth the time periods
in which interest-earning assets and interest-bearing 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 as the repricing of various categories of assets and
liabilities is subject to competitive pressures and the needs of our customers.
In addition, various assets and liabilities indicated as repricing within the
same period may in fact, reprice at different times within such period and at
different rates.

<TABLE>
<CAPTION>
                                                     AFTER THREE    AFTER ONE
                                           WITHIN     MONTHS BUT    YEAR BUT
                                            THREE     WITHIN ONE     WITHIN     AFTER FIVE
                                           MONTHS        YEAR      FIVE YEARS      YEARS       TOTAL
                                          --------   -----------   ----------   ----------   --------
                                                             (DOLLARS IN THOUSANDS)
<S>                                       <C>        <C>           <C>          <C>          <C>
Interest-earning assets:
   Federal funds sold .................   $ 16,656    $       0     $     0       $     0    $ 16,656
   Securities .........................          0            0      14,847        17,564      32,411
   Loans ..............................    275,488       14,810      27,690         1,167     319,155
                                          --------    ---------     -------       -------    --------
      Total ...........................    292,144       14,810      42,537        18,731     368,222
                                          --------    ---------     -------       -------    --------
Interest-bearing liabilities:
   Interest-bearing demand deposits ...     61,191            0           0             0      61,191
   Savings ............................      2,879            0           0             0       2,879
   Certificates, less than $100,000 ...     38,863      119,240       7,806             0     165,909
</TABLE>


                                      -19-

<PAGE>

<TABLE>
<S>                                         <C>        <C>           <C>          <C>          <C>
   Certificates, $100,000 and over .....      17,790       51,444      12,448             0      81,682
   Repurchase agreements ...............         829            0           0             0         829
                                            --------    ---------     -------       -------    --------
      Total ............................     121,552      170,684      20,254             0     312,490
                                            --------    ---------     -------       -------    --------
   Interest rate sensitivity gap .......    $170,592    $(155,874)    $22,283       $18,731    $ 55,732
                                            ========    =========     =======       =======    ========
   Cumulative interest rate sensitivity
      gap ..............................    $170,592    $  14,718     $37,001       $55,732
                                            ========    =========     =======       =======
   Interest rate sensitivity gap ratio..        2.40          .09        2.10            .0
   Cumulative interest rate sensitivity
      gap ratio ........................        2.40         1.05        1.12          1.18
</TABLE>

SELECTED FINANCIAL INFORMATION AND STATISTICAL DATA

     The tables and schedules on the following pages set forth certain
significant financial information and statistical data with respect to: the
distribution of our assets, liabilities and stockholders' equity, the interest
rates we experience; our investment portfolio; our loan portfolio, including
types of loans, maturities, and sensitivities of loans to changes in interest
rates and information on nonperforming loans; summary of the loan loss
experience and allowance for loan losses; types of deposits and the return on
equity and assets.


                                      -20-

<PAGE>

         DISTRIBUTION OF ASSETS, LIABILITIES, AND STOCKHOLDERS' EQUITY:
                    INTEREST RATES AND INTEREST DIFFERENTIALS

AVERAGE BALANCES

     The condensed average balance sheet for the years indicated is presented
below. (1)

<TABLE>
<CAPTION>
                                             DECEMBER 31,
                                        ----------------------
                                            2005       2004
                                          --------   --------
                                        (DOLLARS IN THOUSANDS)
<S>                                     <C>          <C>
Cash and due from banks .............     $  4,497   $  4,049
Securities ..........................       31,497     26,572
Securities valuation account ........         (202)        27
Federal funds sold ..................        9,826      8,373
Loans (2) ...........................      291,716    234,025
Allowance for loan losses ...........       (3,427)    (3,389)
Other assets ........................       11,524      9,697
                                          --------   --------
      Total .........................     $345,431   $279,354
                                          ========   ========
Total interest-earning assets .......     $332,837   $268,970
                                          ========   ========
Deposits:
   Noninterest-bearing demand .......     $ 29,051   $ 25,060
   Interest-bearing demand ..........       41,475     36,156
   Savings ..........................        5,904      8,668
   Time .............................      232,931    182,009
                                          --------   --------
      Total deposits ................     $309,361   $251,893
Repurchase agreements ...............        2,190        910
Other liabilities ...................        4,877      2,707
                                          --------   --------
      Total liabilities .............      316,428    255,510
Stockholders' equity ................       29,003     23,844
                                          --------   --------
      Total .........................     $345,431   $279,351
                                          ========   ========
Total interest-bearing liabilities ..     $282,500   $227,743
                                          ========   ========
</TABLE>

(1)  For each category, average balances were determined using the daily average
     balances during the year.

(2)  The average balance of nonaccrual loans included in average loans for 2005
     and 2004 was $2,167,000 and $1,602,000, respectively.

INTEREST INCOME AND INTEREST EXPENSE

     The following tables set forth the amount of our interest income and
interest expense for each category of interest-earning assets and
interest-bearing liabilities and the average interest rate for total
interest-earning assets and total interest-bearing liabilities, net interest
spread and net yield on average interest-earning assets.


                                      -21-
<PAGE>

<TABLE>
<CAPTION>
                                                                  YEARS ENDED DECEMBER 31,
                                                     --------------------------------------------------
                                                               2005                      2004
                                                     -----------------------   ------------------------
                                                     INTEREST   AVERAGE RATE    INTEREST   AVERAGE RATE
                                                     --------   ------------   ---------   ------------
<S>                                                  <C>        <C>            <C>         <C>
INTEREST INCOME:
   Interest and fees on loans (1).................    $23,527       8.07%        $15,633       6.68%
   Interest on securities.........................      1,354       4.30           1,103       4.15
   Interest on federal funds sold.................        311       3.17             113       1.35
                                                      -------                    -------
   Total interest income..........................     25,192       7.57          16,849       6.26
                                                      -------                    -------
INTEREST EXPENSE:
   Interest on interest-bearing demand deposits...      1,082       2.61             536       1.48
   Interest on savings deposits...................        138       2.34             130       1.50
   Interest on time deposits......................      8,046       3.45           4,944       2.72
   Interest on repurchase agreements..............         58       2.60              15       1.65
                                                      -------                    -------
   Total interest expense.........................      9,324       3.30           5,625       2.47
                                                      -------                    -------
Net interest income...............................    $15,868                    $11,224
                                                      =======                    =======
   Net interest spread............................                  4.27%                      3.79%
   Net yield on average interest-earning assets...                  4.77%                      4.17%
</TABLE>

(1)  Interest and fees on loans includes $3,189,000 and $2,590,000 of loan fee
     income for the years ended December 31, 2005 and 2004, respectively. There
     was no interest income recognized on nonaccrual loans during 2005 or 2004.

RATE AND VOLUME ANALYSIS

     The following table describes the extent to which changes in interest rates
and changes in volume of interest-earning assets and interest-bearing
liabilities have affected our interest income and expense during the year
indicated. For each category of interest-earning assets and interest-bearing
liabilities, information is provided on changes attributable to:

     -    change in volume (change in volume multiplied by old rate);

     -    change in rate (change in rate multiplied by old volume); and

     -    a combination of change in rate and change in volume.


                                      -22-

<PAGE>

<TABLE>
<CAPTION>
                                                 YEARS ENDED DECEMBER 31,
                                                       2005 VS. 2004
                                                      CHANGES DUE TO:
                                                --------------------------
                                                 RATE    VOLUME   TOTAL(1)
                                                ------   ------   --------
                                                  (DOLLARS IN THOUSANDS)
<S>                                             <C>      <C>      <C>
Increase (decrease) in:
   Income from interest-earning assets:
   Interest and fees on loans ...............   $3,606   $4,288     $7,894
   Interest on securities ...................       48      203        251
   Interest on federal funds sold ...........      175       23        198
                                                ------   ------     ------
      Total interest income .................    3,830    4,513      8,343
                                                ------   ------     ------
   Expense from interest-bearing liabilities:
   Interest on demand deposits and savings ..      525       30        555
   Interest on time deposits ................     1504    1,597       3101
   Interest on repurchase agreements ........       13       30         43
                                                ------   ------     ------
      Total interest expense ................    2,042    1,657      3,699
                                                ------   ------     ------
         Net interest income ................   $1,856   $2,788     $4,644
                                                ======   ======     ======
</TABLE>

(1)  The changes in interest income and interest expense attributable to both
     volume and rate have been allocated proportionately on a consistent basis
     to the change due to volume and the change due to rate.

                              INVESTMENT PORTFOLIO

TYPES OF INVESTMENTS

     The carrying amounts of securities at the dates indicated, which are all
classified as available-for-sale, are summarized as follows:

<TABLE>
<CAPTION>
                                    DECEMBER 31,
                                 -----------------
                                   2005      2004
                                 -------   -------
                                    (DOLLARS IN
                                     THOUSANDS)
<S>                              <C>       <C>
Mortgage-backed securities ...   $ 4,735   $ 4,673
U.S. Government agencies .....    22,206    20,715
State, County, & Municipals ..     5,470     5,612
                                 -------   -------
   Total .....................   $32,411   $31,000
                                 =======   =======
</TABLE>

MATURITIES

     The amounts of securities, including the weighted average yield in each
category as of December 31, 2005, are shown in the following table according to
contractual maturity classifications one year or less, after one through five
years, after five through ten years and after ten years.


                                      -23-

<PAGE>

<TABLE>
<CAPTION>
                                 AFTER ONE THROUGH     AFTER FIVE THROUGH
                                     FIVE YEARS            TEN YEARS
                                -------------------   -------------------
                                 AMOUNT   YIELD (1)    AMOUNT   YIELD (1)
                                -------   ---------   -------   ---------
                                          (DOLLARS IN THOUSANDS)
<S>                             <C>       <C>         <C>       <C>
Mortgage-backed securities ..   $ 3,527     4.43%     $ 1,207     5.35%
U.S. Government agencies ....     9,599     3.89%      12,607     4.76%
State, County, & Municipal ..     1,721     4.79%       3,749     5.04%
                                -------     ----      -------     ----
   Total ....................   $14,847     4.12%     $17,563     4.86%
                                =======     ====      =======     ====
</TABLE>

<TABLE>
<CAPTION>
                                  AFTER TEN YEARS            TOTAL
                                -------------------   -------------------
                                 AMOUNT   YIELD (1)    AMOUNT   YIELD (1)
                                -------   ---------   -------   ---------
                                          (DOLLARS IN THOUSANDS)
<S>                             <C>       <C>         <C>       <C>
Mortgage-backed securities ..      $0         0%      $ 4,735     4.67%
U.S. Government agencies ....       0         0%       22,206     4.38%
State, County, & Municipal ..       0         0%        5,470     4.97%
                                  ---       ---       -------     ----
   Total ....................      $0         0%      $32,411     4.52%
                                  ===       ===       =======     ====
</TABLE>

(1)  Yields were computed using coupon interest, adding discount accretion or
     subtracting premium amortization, as appropriate, on a ratable basis over
     the life of each security. The weighted average yield for each maturity
     range was computed using the carrying value of each security in that range.
     Maturities are based on call dates.

                                 LOAN PORTFOLIO

TYPES OF LOANS

     The amount of loans outstanding at the indicated dates is shown in the
following table according to the type of loan.

<TABLE>
<CAPTION>
                                                   DECEMBER 31,
                                                -------------------
                                                  2005       2004
                                                --------   --------
                                                    (DOLLARS IN
                                                     THOUSANDS)
<S>                                             <C>        <C>
Commercial ..................................   $ 58,087   $ 49,989
Construction loans secured by real estate ...    166,912    137,329
Commercial loans secured by real estate .....     86,246     57,786
Consumer installment loans and other ........      7,910      7,472
                                                --------   --------
   Total ....................................    319,155    252,576
Less allowance for loan losses ..............     (3,702)    (3,775)
                                                --------   --------
   Net loans ................................   $315,453   $248,801
                                                ========   ========
</TABLE>

MATURITIES AND SENSITIVITIES OF LOANS TO CHANGES IN INTEREST RATES

     Total loans as of December 31, 2005, are shown in the following table
according to contractual maturity classifications one year or less, after one
year through five years, and after five years.


                                      -24-
<PAGE>

<TABLE>
<CAPTION>
                                           (DOLLARS IN THOUSANDS)
                                           ----------------------
<S>                                        <C>
Commercial
   One year or less ....................          $ 51,419
   After one through five years ........             5,553
   After five years ....................             1,115
                                                  --------
      Total commercial .................            58,087
                                                  --------
Construction and other real estate loans
   One year or less ....................           229,389
   After one through five years ........            22,140
   After five years ....................             1,629
                                                  --------
      Total construction ...............           253,158
                                                  --------
Other
   One year or less ....................             6,332
   After one through five years ........             1,453
   After five years ....................               125
                                                  --------
      Total other ......................             7,910
                                                  --------
         Total .........................          $319,155
                                                  ========
</TABLE>

     The following table summarizes loans at December 31, 2005, with the due
dates after one year that have predetermined and floating or adjustable interest
rates.

<TABLE>
<CAPTION>
                                           (DOLLARS IN THOUSANDS)
                                           ----------------------
<S>                                        <C>
Predetermined interest rates ...........           $28,858
Floating or adjustable interest rates ..            49,495
                                                   -------
   Total ...............................           $78,353
                                                   =======
</TABLE>

RISK ELEMENTS

     Information with respect to nonaccrual, past due, and restructured loans at
December 31, 2005 and 2004 is as follows:

<TABLE>
<CAPTION>
                                                                              DECEMBER 31,
                                                                            ---------------
                                                                             2005     2004
                                                                            ------   ------
<S>                                                                         <C>      <C>
                                                                              (DOLLARS IN
                                                                               THOUSANDS)
Nonaccrual loans ........................................................   $1,961   $2,145
Loans contractually past due ninety days or more as to interest
   or principal payments and still accruing .............................      367       34
Restructured loans ......................................................      279        0
Potential problem loans .................................................        0        0
Interest income that would have been recorded on nonaccrual
   and restructured loans under original terms ..........................       70       64
Interest income that was recorded on nonaccrual and restructured loans ..       17        0
</TABLE>

     Potential problem loans are defined as loans about which we have serious
doubts as to the ability of the borrower to comply with the present loan
repayment terms and which may cause the loan to be placed on nonaccrual status,
to become past due more than 90 days, or to be restructured.

     It is our policy to discontinue the accrual of interest income when, in the
opinion of management, collection of interest becomes doubtful. This status is
accorded interest when (1) there is a significant deterioration in the financial
condition of the borrower and full repayment of principal


                                      -25-

<PAGE>

and interest is not expected and (2) the principal or interest is more than 90
days past due, unless the loan is both well-secured and in the process of
collection.

     Loans classified for regulatory purposes as loss, doubtful, substandard, or
special mention that have not been included in the table above do not represent
or result from trends or uncertainties that management reasonably expects will
materially impact future operating results, liquidity, or capital resources.
These classified loans do not represent material credits about which management
is aware of any information that causes management to have serious doubts as to
the ability of such borrowers to comply with the loan repayment terms.

                         SUMMARY OF LOAN LOSS EXPERIENCE

     The following table summarizes average loan balances for the year
determined using the daily average balances during the year; changes in the
allowance for loan losses arising from loans charged off and recoveries on loans
previously charged off; additions to the allowance which have been charged to
operating expense; and the ratio of net charge-offs during the year to average
loans.

<TABLE>
<CAPTION>
                                                                                  DECEMBER 31,
                                                                             ----------------------
                                                                                2005        2004
                                                                             ---------   ----------
<S>                                                                          <C>         <C>
                                                                             (DOLLARS IN THOUSANDS)
Average amount of loans outstanding ......................................    $312,085   $234,025
                                                                              ========   ========
Balance of allowance for loan losses at beginning of period ..............    $  3,775   $  3,029
                                                                              --------   --------
Loans charged off:
   Commercial and financial ..............................................         594         28
   Real estate mortgage ..................................................           0         24
   Installment ...........................................................         332         12
                                                                              --------   --------
      Total ..............................................................         926         64
                                                                              --------   --------
Loans recovered:
   Commercial and financial ..............................................           0         12
   Real estate mortgage ..................................................           0          0
   Installment ...........................................................           0          0
                                                                              --------   --------
Net charge-offs ..........................................................         927         52
                                                                              --------   --------
Additions to allowance charged to operating expense during year ..........         853        798
                                                                              --------   --------
Balance of allowance for loan losses at end of year ......................    $  3,702   $  3,775
                                                                              ========   ========
Ratio of net loans charged off during year to average loans outstanding ..         .30%       .02%
                                                                              ========   ========
</TABLE>

ALLOWANCE FOR LOAN LOSSES

     The allowance for loan losses is maintained at a level that is deemed
appropriate by management to adequately cover all known and inherent risks in
the loan portfolio. Our evaluation of the loan portfolio includes a periodic
review of loan loss experience, current economic conditions that may affect the
borrower's ability to pay and the underlying collateral value of the loans.

     As of December 31, 2005 and 2004, the allocation of our allowance for loan
losses does not specifically correspond to the categories of loans listed below.
Based on our best estimate, the allocation of the allowance for loan losses to
types of loans, as of the indicated dates, is as follows:


                                      -26-

<PAGE>

<TABLE>
<CAPTION>
                                                              DECEMBER 31,
                                               -----------------------------------------
                                                       2005                  2004
                                               -------------------   -------------------
                                                        PERCENT OF            PERCENT OF
                                                         LOANS IN              LOANS IN
                                                           EACH                  EACH
                                                         CATEGORY              CATEGORY
                                                         TO TOTAL              TO TOTAL
                                               AMOUNT      LOANS     AMOUNT      LOANS
                                               ------   ----------   ------   ----------
<S>                                            <C>      <C>          <C>      <C>
                                                         (DOLLARS IN THOUSANDS)
Commercial .................................   $  674       18%      $1,030       27%
Construction loans secured by real estate ..    1,936       53        1,373       36
Commercial loans secured by real estate ....    1,000       27        1,297       34
Consumer installment loans and other .......       92        2           75        3
                                               ------      ---       ------      ---
                                               $3,702      100%      $3,775      100%
                                               ======      ===       ======      ===
</TABLE>

                                    DEPOSITS

     Average amount of deposits and average rates paid thereon, classified as to
noninterest-bearing demand deposits, interest-bearing demand deposits, savings
deposits, and time deposits is presented below. (1)

<TABLE>
<CAPTION>
                                                    YEARS ENDED DECEMBER 31,
                                         ---------------------------------------------
                                                  2005                    2004
                                         ---------------------   ---------------------
                                          AMOUNT    PERCENTAGE    AMOUNT    PERCENTAGE
                                         --------   ----------   --------   ----------
<S>                                      <C>        <C>          <C>        <C>
                                                     (Dollars in Thousands)
Noninterest-bearing demand deposits ..   $ 29,051       .00%       23,440       .00%
Interest-bearing demand deposits .....     41,475      2.61        36,156      1.48
Savings deposits .....................      5,904      2.34         8,668      1.50
Time deposits ........................    232,931      3.45       182,009      2.72
                                         --------                --------
   Total .............................   $309,361                $250,273
                                         ========                ========
</TABLE>

(1)  Average balances were determined using the daily average balances.

     The amounts of time certificates of deposit issued in amounts of $100,000
or more as of December 31, 2005, are shown below by category, which is based on
time remaining until maturity of three months or less, over three through six
months, over six through twelve months, and over twelve months.

<TABLE>
<CAPTION>
                                           (DOLLARS IN THOUSANDS)
                                           ----------------------
<S>                                        <C>
Three months or less ...................           $17,790
Over three months through six months ...            17,829
Over six months through twelve months ..            33,699
Over twelve months .....................            12,447
                                                   -------
   Total ...............................           $81,765
                                                   =======
</TABLE>


                                      -27-

<PAGE>

                           RETURN ON ASSETS AND EQUITY

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

<TABLE>
<CAPTION>
                                YEARS ENDED DECEMBER 31,
                                ------------------------
                                       2005    2004
                                      -----   -----
<S>                             <C>           <C>
Return on assets (1).........          1.80%   1.19%
Return on equity (2).........         21.38   13.94
Dividend payout ratio (3)....            --      --
Equity to assets ratio (4)...          8.40    8.54
</TABLE>

(1)  Net income divided by average total assets.

(2)  Net income divided by average equity.

(3)  Dividends declared per share of common stock divided by net income per
     share.

(4)  Average common equity divided by average total assets.

ITEM 7. FINANCIAL STATEMENTS

     Our financial statements, the Notes to the financial statements and the
Independent Auditors' Report of Mauldin & Jenkins, LLC, independent certified
public accountants, required by this Item 7 commence on page F-1 and are
incorporated herein by this reference. The Financial Statements filed as part of
this Annual Report on Form 10-KSB are listed in the Index to Financial
Statements below:

                          INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                        PAGE NO.
                                                                        --------
<S>                                                                     <C>
Independent Auditor's Report.........................................      F-1
Consolidated Balance Sheets as of December 31, 2005
   and December 31, 2004.............................................      F-2
Consolidated Statements of Income for the
   Years Ended December 31, 2005 and December 31, 2004...............      F-3
Consolidated Statements of Comprehensive Income for the
   Years Ended December 31, 2005 and December 31, 2004...............      F-4
Consolidated Statements of Shareholders' Equity for the
   Years Ended December 31, 2005 and December 31, 2004...............      F-5
Consolidated Statements of Cash Flows for the
   Years Ended December 31, 2005 and December 31, 2004...............      F-6
Notes to Consolidated Financial Statements...........................      F-7
</TABLE>

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

     None


                                      -28-

<PAGE>

ITEM 8A. CONTROLS AND PROCEDURES

     As of the end of the period covered by this report, we carried out an
evaluation, under the supervision and with the participation of our Chief
Executive Officer and the Chief Financial Officer, of the effectiveness of the
design and operation of our disclosure controls and procedures in accordance
with Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). Based on this evaluation, our Chief Executive and Chief
Financial Officer concluded that our disclosure controls and procedures are
effective for gathering, analyzing and disclosing the information that we are
required to disclose in the reports we file under the Exchange Act, within the
time periods specified in the SEC's rules and forms. Our Chief Executive Officer
and Chief Financial Officer also concluded that our disclosure controls and
procedures are effective in timely alerting them to material information
relating to our company that is required to be included in our periodic SEC
filings. We are in the process of further reviewing and documenting our
disclosure controls and procedures, including our internal controls and
procedures for financial reporting, and may from time to time make changes
designed to enhance their effectiveness and to ensure that our systems evolve
with our business.

     There have been no significant changes in our internal control over
financial reporting that occurred during the last fiscal quarter of 2006 that
have materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting.

ITEM 8B. OTHER INFORMATION

     None

                                    PART III

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

     The information set forth under the captions "Election of Directors" and
"Executive Officers" in the Proxy Statement used in connection with our 2006
Annual Shareholders' meeting is incorporated herein by reference.

ITEM 10. EXECUTIVE COMPENSATION

     The information set forth under the caption "Executive Compensation" in the
Proxy Statement used in connection with our 2006 Annual Shareholders' meeting is
incorporated herein by reference.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
     RELATED STOCKHOLDER MATTERS

     The information set forth under the captions "Security Ownership of
Principal Shareholders and Management" and "Equity Compensation Plan
Information" in the Proxy Statement used in connection with our 2006 Annual
Shareholders' meeting is incorporated herein by reference.


                                      -29-

<PAGE>

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information set forth under the caption "Certain Relationships and
Related Transactions" in the Proxy Statement used in connection with our 2006
Annual Shareholders' meeting is incorporated herein by reference.

ITEM 13. EXHIBITS

(a)  Exhibits required by Item 601 of Regulation S-B.

<TABLE>
<CAPTION>
EXHIBIT
 NUMBER                                 DESCRIPTION
-------                                 -----------
<S>       <C>
   3.1    Articles of Incorporation of the Company, as amended (filed as Exhibit
          3.1 to the Registration Statement on Form SB-2, as amended
          (Registration No. 333-19081)).

   3.2    Amended and Restated Bylaws (filed as Exhibit 3.2 to Annual Report on
          Form 10-KSB for the year ended December 31, 1999, Registration No.
          333-52494).

   4.1    Specimen Common Stock Certificate (filed as Exhibit 4.2 to the
          Registration Statement on Form SB-2, as amended (Registration No.
          333-19081)).

  10.1    1998 Stock Option Plan (filed as Exhibit 99 to the Registration
          Statement on Form S-8 Registration Statement filed July 25, 2002
          (Registration No. 333-97087)).

  10.2    Amendment to 1998 Stock Option Plan (filed as Appendix A to the
          Company's definitive proxy statement filed on April 30, 2004).

  10.3    Director Deferred Stock Unit Plan (filed as Exhibit 10.2 to the Annual
          Report on Form 10-KSB for the year ended December 31, 2002).

  10.4    Real Estate Commercial Lease Contract dated as of January 1, 2000, by
          and between GBC Properties, LLC and Gwinnett Banking Company (filed as
          Exhibit 10.4 to the Annual Report on Form 10-KSB for the year ended
          December 31, 1999).

  10.5    Real Estate Commercial Lease Contract dated as of July 26, 2000, by
          and between Northwinds Center, L.P. and Gwinnett Banking Company
          (filed as Exhibit 10.4 to the Annual Report on Form 10-KSB for the
          year ended December 31, 2000).

  14.1    Code of Ethics (filed as Exhibit 14.1 to the Annual Report on Form
          10-KSB for the year ended December 31, 2003).

  21.1    Subsidiaries of the Company.

  31.1    Certification of Chief Executive Officer Pursuant to Section 302 of
          the Sarbanes-Oxley Act of 2002.
</TABLE>


                                      -30-

<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
 NUMBER                                 DESCRIPTION
-------                                 -----------
<S>       <C>
  31.2    Certification of Chief Financial Officer Pursuant to Section 302 of
          the Sarbanes-Oxley Act of 2002.

  32.1    Certification of Chief Executive Officer and Chief Financial Officer
          Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
</TABLE>

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

     The information set forth under the caption "Independent Auditors" in the
Proxy Statement used in connection with our 2006 Annual Shareholders' meeting is
incorporated herein by reference.


                                      -31-
<PAGE>

                                   SIGNATURES

     In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                        GBC BANCORP, INC.


Date: March 20, 2006                    By: /s/ Larry D. Key
                                            ------------------------------------
                                            Larry D. Key, President and
                                            Chief Executive Officer

     In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the Registrant in the capacities on March 20,
2006.

<TABLE>
<CAPTION>
              SIGNATURE                                   TITLE
              ---------                                   -----
<S>                                     <C>


/s/ Larry D. Key                        President, Chief Executive Officer and
-------------------------------------   Chairman of the Company and the Bank
Larry D. Key


/s/ John T. Hopkins III                 Executive Vice President, Chief
-------------------------------------   Financial Officer, Secretary and
John T. Hopkins III                     Treasurer of the Company and the Bank


/s/ James B. Ballard                    Director of the Company and the Bank
-------------------------------------
James B. Ballard


/s/ Jerry M. Boles                      Director of the Company and the Bank
-------------------------------------
Jerry M. Boles


/s/ W. H. Britt                         Director of the Company and the Bank
-------------------------------------
W. H. Britt


/s/ Richard F. Combs                    Director of the Company and the Bank
-------------------------------------
Richard F. Combs


/s/ William G. Hayes                    Director of the Company and the Bank
-------------------------------------
William G. Hayes


/s/ Douglas A. Langley                  Director of the Company and the Bank
-------------------------------------
Douglas A. Langley


/s/ Norris J. Nash                      Director of the Company and the Bank
-------------------------------------
Norris J. Nash


/s/ J. Joseph Powell                    Director of the Company and the Bank
-------------------------------------
J. Joseph Powell


/s/ William S. Stanton, Jr.             Director of the Company and the Bank
-------------------------------------
William S. Stanton, Jr.
</TABLE>


                                      -32-

<PAGE>

                                GBC BANCORP, INC.
                                 AND SUBSIDIARY

                          CONSOLIDATED FINANCIAL REPORT

                                DECEMBER 31, 2005

<PAGE>

                                GBC BANCORP, INC.
                                 AND SUBSIDIARY

                          CONSOLIDATED FINANCIAL REPORT
                                DECEMBER 31, 2005

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                            PAGE
                                                                           -----
<S>                                                                        <C>
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.................       1

FINANCIAL STATEMENTS

   CONSOLIDATED BALANCE SHEETS..........................................       2
   CONSOLIDATED STATEMENTS OF INCOME....................................       3
   CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME......................       4
   CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY......................       5
   CONSOLIDATED STATEMENTS OF CASH FLOWS................................       6
   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS...........................    7-24
</TABLE>

<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

TO THE BOARD OF DIRECTORS
GBC BANCORP, INC.
LAWRENCEVILLE, GEORGIA

          We have audited the accompanying consolidated balance sheets of GBC
BANCORP, INC. AND SUBSIDIARY as of December 31, 2005 and 2004, and the related
consolidated statements of income, comprehensive income, stockholders' equity,
and cash flows for each of the two years in the period ended December 31, 2005.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

          We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). 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 GBC
Bancorp, Inc. and subsidiary as of December 31, 2005 and 2004, and the results
of their operations and their cash flows for each of the two years in the period
ended December 31, 2005, in conformity with accounting principles generally
accepted in the United States of America.


                                        /s/ MAULDIN & JENKINS, LLC

Atlanta, Georgia
January 13, 2006


                                        1
<PAGE>

                                GBC BANCORP, INC.
                                 AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 2005 AND 2004

<TABLE>
<CAPTION>
                                                                         2005           2004
                                                                     ------------   ------------
<S>                                                                  <C>            <C>
                              ASSETS

Cash and due from banks                                              $  3,800,741   $  5,390,288
Federal funds sold                                                     16,656,000     17,694,000
Securities available-for-sale                                          32,410,839     31,000,002
Loans, net of unearned income                                         319,154,751    252,576,451
Less allowance for loan losses                                          3,701,532      3,775,167
                                                                     ------------   ------------
      Loans, net                                                      315,453,219    248,801,284

Premises and equipment, net                                               292,640        377,698
Cash surrender value of life insurance                                  5,719,750      5,531,553
Other real estate owned                                                        --      1,194,430
Other assets                                                            5,372,422      3,945,566
                                                                     ------------   ------------
      TOTAL ASSETS                                                   $379,705,611   $313,934,821
                                                                     ============   ============

               LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits
   Noninterest-bearing                                               $ 29,509,478   $ 23,566,177
   Interest-bearing                                                   311,661,255    258,769,949
                                                                     ------------   ------------
      Total deposits                                                  341,170,733    282,336,126
   Securities sold under repurchase agreements                            829,341      1,819,469
   Other liabilities                                                    4,712,304      3,040,151
                                                                     ------------   ------------
      TOTAL LIABILITIES                                               346,712,378    287,195,746
                                                                     ------------   ------------

Commitments and contingencies

Stockholders' equity
   Common stock, par value $1; 3,000,000 shares authorized;
      1,772,708 and 1,726,608 issued and outstanding, respectively      1,772,708      1,726,608
   Capital surplus                                                     18,709,280     18,214,005
   Retained earnings                                                   12,948,574      6,747,782
   Accumulated other comprehensive income                                (437,329)        50,680
                                                                     ------------   ------------
      TOTAL STOCKHOLDERS' EQUITY                                       32,993,233     26,739,075
                                                                     ------------   ------------
      TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                     $379,705,611   $313,934,821
                                                                     ============   ============
</TABLE>

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                        2

<PAGE>

                                GBC BANCORP, INC.
                                 AND SUBSIDIARY

                        CONSOLIDATED STATEMENTS OF INCOME
                     YEARS ENDED DECEMBER 31, 2005 AND 2004

<TABLE>
<CAPTION>
                                                                  2,005         2,004
                                                               -----------   -----------
<S>                                                            <C>           <C>
INTEREST INCOME
   Loans, including fees                                       $23,527,440   $15,632,590
   Securities:
      Taxable                                                    1,160,012       908,496
      Nontaxable                                                   193,726       194,575
   Federal funds sold                                              311,222       113,090
                                                               -----------   -----------
         TOTAL INTEREST INCOME                                  25,192,400    16,848,751
                                                               -----------   -----------

INTEREST EXPENSE
   Deposits                                                      9,266,347     5,610,440
   Securities sold under repurchase agreements                      57,968        14,733
                                                               -----------   -----------
         TOTAL INTEREST EXPENSE                                  9,324,315     5,625,173
                                                               -----------   -----------

         NET INTEREST INCOME                                    15,868,085    11,223,578
PROVISION FOR LOAN LOSSES                                          852,823       797,824
                                                               -----------   -----------
         NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES    15,015,262    10,425,754
                                                               -----------   -----------

OTHER INCOME
   Service charges on deposit accounts                             191,894       183,843
   Loss on sale of securities available-for-sale                        --        20,254
   Gain on sale of loans                                         1,905,834     1,182,888
   Other operating income                                          885,462       428,457
                                                               -----------   -----------
         TOTAL OTHER INCOME                                      2,983,190     1,815,442
                                                               -----------   -----------

OTHER EXPENSES
   Salaries and employee benefits                                5,360,730     4,691,778
   Equipment and occupancy expenses                                834,755       860,683
   Other operating expenses                                      2,160,673     1,656,960
                                                               -----------   -----------
         TOTAL OTHER EXPENSES                                    8,356,158     7,209,421
                                                               -----------   -----------

         INCOME BEFORE INCOME TAXES                              9,642,294     5,031,775

INCOME TAX EXPENSE                                               3,441,501     1,708,624
                                                               -----------   -----------
         NET INCOME                                            $ 6,200,793   $ 3,323,151
                                                               ===========   ===========
BASIC EARNINGS PER SHARE                                       $      3.54   $      1.93
                                                               ===========   ===========
DILUTED EARNINGS PER SHARE                                     $      3.17   $      1.84
                                                               ===========   ===========
</TABLE>

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                        3
<PAGE>

                                GBC BANCORP, INC.
                                 AND SUBSIDIARY

                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                     YEARS ENDED DECEMBER 31, 2005 AND 2004

<TABLE>
<CAPTION>
                                                                    2005         2004
                                                                 ----------   ----------
<S>                                                              <C>          <C>
NET INCOME                                                       $6,200,793   $3,323,151

OTHER COMPREHENSIVE INCOME (LOSS):
   Unrealized holding gains (losses) on securities
      available-for-sale arising during period, net of
      tax (benefits) of $(299,103) and $(20,715), respectively     (488,010)     (33,797)
   Reclassification adjustment for losses realized in net
      income, net of tax benefits of $7,696                              --      (12,558)
                                                                 ----------   ----------
   OTHER COMPREHENSIVE INCOME (LOSS)                               (488,010)     (46,355)
                                                                 ----------   ----------
COMPREHENSIVE INCOME                                             $5,712,783   $3,276,796
                                                                 ==========   ==========
</TABLE>

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                        4

<PAGE>

                                GBC BANCORP, INC.
                                 AND SUBSIDIARY

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                     YEARS ENDED DECEMBER 31, 2005 AND 2004

<TABLE>
<CAPTION>
                                                                                    ACCUMULATED
                                   COMMON STOCK                                        OTHER           TOTAL
                              ----------------------     CAPITAL       RETAINED    COMPREHENSIVE   STOCKHOLDERS'
                                SHARES     PAR VALUE     SURPLUS       EARNINGS    INCOME (LOSS)       EQUITY
                              ---------   ----------   -----------   -----------   -------------   -------------
<S>                           <C>         <C>          <C>           <C>           <C>             <C>
BALANCE, DECEMBER 31, 2003    1,712,408    1,712,408    18,083,005     3,424,631        97,035       23,317,078
   Net income                        --           --            --     3,323,151            --        3,323,151
   Stock options exercised       14,200       14,200       131,000            --            --          145,200
   Other comprehensive loss          --           --            --            --       (46,355)         (46,354)
                              ---------   ----------   -----------   -----------     ---------      -----------
BALANCE, DECEMBER 31, 2004    1,726,608   $1,726,608   $18,214,005   $ 6,747,782     $  50,680      $26,739,075
   Net income                                                          6,200,793                      6,200,793
   Stock options exercised       46,100       46,100       495,275                                      541,375
   Other comprehensive loss                                                           (488,010)        (488,010)
                              ---------   ----------   -----------   -----------     ---------      -----------
BALANCE, DECEMBER 31, 2005    1,772,708   $1,772,708   $18,709,280   $12,948,575     $(437,330)     $32,993,233
                              =========   ==========   ===========   ===========     =========      ===========
</TABLE>

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                        5

<PAGE>

                                GBC BANCORP, INC.
                                 AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     YEARS ENDED DECEMBER 31, 2005 AND 2004

<TABLE>
<CAPTION>
                                                                   2005           2004
                                                               ------------   ------------
<S>                                                            <C>            <C>
OPERATING ACTIVITIES
   Net income                                                  $  6,200,793   $  3,323,151
   Adjustments to reconcile net income to net cash
      provided by operating activities:
      Depreciation                                                  144,483        189,869
      Deferred income taxes                                        (272,736)      (623,674)
      Gain on sale of other real estate                             (49,068)        24,190
      Gain on sale of loans                                      (1,905,834     (1,182,888)
      Loans originated for sale                                 (16,202,000)   (13,231,732)
      Proceeds from sale of loans                                18,107,834     14,414,620
      Loss on sale of securities available-for-sale                      --        (20,254)
      Provision for loan losses                                     852,823        797,824
      Increase  in interest receivable                             (891,621)      (505,665)
      Increase (Decrease) in interest payable                       444,301         41,924
      Increase in income taxes payable                               98,124         20,690
      Net other operating activities                              1,166,332      1,133,538
                                                               ------------   ------------
         Net cash provided by operating activities                7,693,431      4,381,593
                                                               ------------   ------------

INVESTING ACTIVITIES
   Purchases of securities available-for-sale                    (4,025,198)   (15,887,002)
   Proceeds from maturities of securities available-for-sale      1,827,248      5,709,976
   Proceeds from sale of securities available-for-sale                   --      1,623,736
   Net (increase) decrease in federal funds sold                  1,038,000    (16,158,000)
   Net increase in loans                                        (68,056,370)   (38,685,591)
   Purchase of premises and equipment                               (59,425)       (71,950)
   Proceeds from sale of other real estate                        1,795,110         67,001
   Purchase of life insurance policies                             (188,197)      (859,937)
                                                               ------------   ------------
         Net cash used in investing activities                  (67,668,832)   (64,261,767)
                                                               ------------   ------------

FINANCING ACTIVITIES
   Net increase in deposits                                      58,834,607     60,285,085
   Net increase in securities sold under repurchase
      agreements                                                   (990,128)     1,466,670
   Net Proceeds from exercise of stock options                      541,375        145,200
   Proceeds from the issuance of common stock                            --             --
                                                               ------------   ------------
         Net cash provided by financing activities               58,385,854     61,896,955
                                                               ------------   ------------
Net increase (decrease) in cash and due from banks               (1,589,547)     2,016,781
Cash and due from banks at beginning of year                      5,390,288      3,373,507
                                                               ------------   ------------
Cash and due from banks at end of year                         $  3,800,741   $  5,390,288
                                                               ============   ============
SUPPLEMENTAL DISCLOSURES
   Cash paid for:
         Interest                                              $  8,880,114   $  5,583,249
         Income taxes                                          $  3,616,113   $  2,316,608

NONCASH TRANSACTION
   Principal balances of loans transferred to other real
      estate owned                                             $    507,864   $  1,194,430
</TABLE>

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                        6
<PAGE>

                                GBC BANCORP, INC.
                                 AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     NATURE OF OPERATIONS

     GBC Bancorp, Inc. (the "Company") is a bank holding company whose principal
     activity is the ownership and management of its wholly-owned subsidiary,
     Gwinnett Banking Company (the "Bank"). The Bank is a commercial bank
     located in Lawrenceville, Gwinnett County, Georgia with a branch in
     Alpharetta, Fulton County, Georgia. The Bank provides a full range of
     banking services in its primary market area of Gwinnett County and
     surrounding counties.

     BASIS OF PRESENTATION AND ACCOUNTING ESTIMATES

     The consolidated financial statements include the accounts of the Company
     and its subsidiary. Significant intercompany transactions and balances have
     been eliminated in consolidation.

     In preparing the consolidated financial statements in accordance with
     accounting principles generally accepted in the United States of America,
     management is required to make estimates and assumptions that affect the
     reported amounts of assets and liabilities and the disclosure of contingent
     assets and liabilities as of the balance sheet date and the reported
     amounts of revenues and expenses during the reporting period. Actual
     results could differ from those estimates.

     Material estimates that are particularly susceptible to significant change
     relate to the determination of the allowance for loan losses, the valuation
     of foreclosed real estate, and contingent assets and liabilities. The
     determination of the adequacy of the allowance for loan losses is based on
     estimates that are susceptible to significant changes in the economic
     environment and market conditions. In connection with the determination of
     the estimated losses on loans and the valuation of foreclosed real estate,
     management obtains independent appraisals for significant collateral.

     CASH, DUE FROM BANKS AND CASH FLOWS

     For purposes of reporting cash flows, cash and due from banks include cash
     on hand, cash items in process of collection and amounts due from banks.
     Cash flows from loans, federal funds sold, deposits, and securities sold
     under repurchase agreements are reported net.

     The Bank is required to maintain reserve balances in cash or on deposit
     with the Federal Reserve Bank, based on a percentage of deposits. The total
     of those reserve balances was approximately $449,000 and $183,000 at
     December 31, 2005 and 2004, respectively.

     SECURITIES SOLD UNDER REPURCHASE AGREEMENTS

     Securities sold under repurchase agreements are generally accounted for as
     collateralized financing transactions. They are recorded at the amount the
     security was sold plus accrued interest. The Company monitors its exposure
     with respect to securities sold under repurchase agreements, and request
     for the return of excess securities held by the counterparty is made when
     deemed necessary.


                                       7

<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     SECURITIES

     Debt securities that management has the positive intent and ability to hold
     to maturity are classified as held to maturity and recorded at amortized
     cost. Securities not classified as held to maturity are classified as
     available for sale and recorded at fair value with unrealized gains and
     losses excluded from earnings and reported in accumulated other
     comprehensive income, net of the related deferred tax effect.

     The amortization of premiums and accretion of discounts are recognized in
     interest income using the interest method over the life of the securities.
     Realized gains and losses, determined on the basis of the cost of specific
     securities sold, are included in earnings on the settlement date. Declines
     in the fair value of securities below their cost that are deemed to be
     other than temporary are reflected in earnings as realized losses. In
     estimating other-than-temporary impairment losses, management considers (1)
     the length of time and the extent to which the fair value has been less
     than cost, (2) the financial condition and near-term prospects of the
     issuer, and (3) the intent and ability of the Company to retain its
     investment in the issuer for a period of time sufficient to allow for any
     anticipated recovery in fair value.

     LOANS

     Loans are reported at their outstanding principal balances less deferred
     fees and the allowance for loan losses. Interest income is accrued on the
     outstanding principal balance.

     The accrual of interest on loans is discontinued when, in management's
     opinion, the borrower may be unable to meet payments as they become due,
     unless the loan is well-secured. All interest accrued but not collected for
     loans that are placed on nonaccrual or charged off is reversed against
     interest income, unless management believes that the accrued interest is
     recoverable through the liquidation of collateral. Interest income on
     nonaccrual loans is recognized on the cash-basis or cost-recovery method,
     until the loans are returned to accrual status. Loans are returned to
     accrual status when all the principal and interest amounts are brought
     current and future payments are reasonably assured.

     A loan is considered impaired when it is probable, based on current
     information and events, the Company will be unable to collect all principal
     and interest payments due in accordance with the contractual terms of the
     loan agreement. Impaired loans are measured by either the present value of
     expected future cash flows discounted at the loan's effective interest
     rate, the loan's obtainable market price, or the fair value of the
     collateral if the loan is collateral dependent. The amount of impairment,
     if any, and any subsequent changes are included in the allowance for loan
     losses. Interest on accruing impaired loans is recognized as long as such
     loans do not meet the criteria for nonaccrual status.

     ALLOWANCE FOR LOAN LOSSES

     The allowance for loan losses is established through a provision for loan
     losses charged to expense. Loan losses are charged against the allowance
     when management believes the collectibility of the principal is unlikely.
     Subsequent recoveries, if any, are credited to the allowance.


                                       8

<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     ALLOWANCE FOR LOAN LOSSES (CONTINUED)

     The allowance is an amount that management believes will be adequate to
     absorb estimated losses relating to specifically identified loans, as well
     as probable credit losses inherent in the balance of the loan portfolio,
     based on an evaluation of the collectibility of existing loans and prior
     loss experience. This evaluation also takes into consideration such factors
     as changes in the nature and volume of the loan portfolio, overall
     portfolio quality, review of specific problem loans, concentrations and
     current economic conditions that may affect the borrower's ability to pay.
     This evaluation does not include the effects of expected losses on specific
     loans or groups of loans that are related to future events or expected
     changes in economic conditions. While management uses the best information
     available to make its evaluation, future adjustments to the allowance may
     be necessary if there are significant changes in economic conditions. In
     addition, regulatory agencies, as an integral part of their examination
     process, periodically review the Bank's allowance for loan losses, and may
     require the Bank to make additions to the allowance based on their judgment
     about information available to them at the time of their examinations.

     The allowance consists of specific, general and unallocated components. The
     specific component relates to loans that are classified as either doubtful,
     substandard or special mention. For such loans that are also classified as
     impaired, an allowance is established when the discounted cash flows (or
     collateral value or observable market price) of the impaired loan is lower
     than the carrying value of that loan. The general component covers
     non-classified loans and is based on historical loss experience adjusted
     for qualitative factors. An unallocated component is maintained to cover
     uncertainties that could affect management's estimate of probable losses.
     The unallocated component of the allowance reflects the margin of
     imprecision inherent in the underlying assumptions used in the
     methodologies for estimating specific and general losses in the portfolio.

     PREMISES AND EQUIPMENT

     Premises and equipment are carried at cost less accumulated depreciation.
     Depreciation is computed by the straight-line method over the estimated
     useful lives of the assets.

     OTHER REAL ESTATE OWNED

     Other real estate owned represents properties acquired through or in lieu
     of foreclosure and is initially recorded at the lower of cost or fair value
     less estimated costs to sell. Any write-down to fair value at the time of
     transfer to other real estate owned is charged to the allowance for loan
     losses. Costs of improvements are capitalized, whereas costs relating to
     holding other real estate owned and subsequent adjustments to the value are
     expensed. There was no other real estate owned at December 31, 2005 and the
     carrying amount of other real estate owned at December 31, 2004 was
     $1,194,430.

     GAIN ON SALE OF LOANS

     The Company originates and sells participations in certain loans. Gains are
     recognized at the time the sale is consummated. The amount of gain
     recognized on the sale of a specific loan is equal to the percentage
     resulting from determining the fair value of the portion of the loan sold
     relative to the fair value of the entire loan. Losses are recognized at the
     time the loan is identified as held for sale and the loan's carrying value
     exceeds its fair value.


                                       9

<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     INCOME TAXES

     Deferred income tax assets and liabilities are determined using the balance
     sheet method. Under this method, the net deferred tax asset or liability is
     determined based on the tax effects of the temporary differences between
     the book and tax bases of the various balance sheet assets and liabilities
     and gives current recognition to changes in tax rates and laws.

     STOCK-BASED COMPENSATION

     Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for
     Stock-Based Compensation, encourages all entities to adopt a fair value
     based method of accounting for employee stock compensation plans whereby
     compensation cost is measured at the grant date based on the value of the
     award and is recognized over the service period, which is usually the
     vesting period. However, it also allows an entity to continue to measure
     compensation cost for those plans using the intrinsic value based method of
     accounting prescribed by Accounting Principles Board Opinion No. 25,
     Accounting for Stock Issued to Employees, whereby compensation cost is the
     excess, if any, of the quoted market price of the stock at the grant date
     over the amount an employee must pay to acquire the stock. The Company has
     elected to continue with the accounting methodology of Opinion No. 25. No
     stock-based employee compensation cost is reflected in net income, as all
     options granted under the plans had an exercise price equal to the market
     value of the underlying stock on the date of grant.

     The following table illustrates the effect on net income and earnings per
     share if the Company had applied the fair value recognition provisions of
     FASB Statement No. 123 to stock-based employee compensation.

<TABLE>
<CAPTION>
                                                       YEARS ENDED DECEMBER 31,
                                                       ------------------------
                                                          2005          2004
                                                        ----------   ----------
<S>                                                    <C>           <C>
Net income, as reported                                 $6,200,792   $3,323,151
Deduct: Total stock-based employee compensation
   expense determined under fair value based
   method for all awards, net of related tax effects            --     (389,457)
                                                        ----------   ----------
Pro forma net income                                    $6,200,792   $2,933,694
                                                        ==========   ==========
Earnings per share:
   Basic - as reported                                  $     3.54   $     1.93
                                                        ==========   ==========
   Basic - pro forma                                    $     3.54   $     1.71
                                                        ==========   ==========
   Diluted - as reported                                $     3.17   $     1.84
                                                        ==========   ==========
   Diluted - pro forma                                  $     3.17   $     1.62
                                                        ==========   ==========
</TABLE>

     EARNINGS PER SHARE

     Basic earnings per share are computed by dividing net income by the
     weighted average number of shares of common stock outstanding. Diluted
     earnings per share are computed by dividing net income by the sum of the
     weighted-average number of shares of common stock outstanding and potential
     common shares. Potential common shares consist of stock options.


                                       10

<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     COMPREHENSIVE INCOME

     Accounting principles generally require that recognized revenue, expenses,
     gains and losses be included in net income. Although certain changes in
     assets and liabilities, such as unrealized gains and losses on available
     for sale securities, are reported as a separate component of the equity
     section of the balance sheet, such items, along with net income, are
     components of comprehensive income.

     RECENT ACCOUNTING STANDARDS

     In December 2004, the Financial Accounting Standards Board (FASB) issued
     Statement No. 123R, Share-Based Payment, a revision of FASB Statement No.
     123, Accounting for Stock-Based Compensation. This Statement supersedes APB
     Opinion No. 25, Accounting for Stock Issued to Employees, and its related
     implementation guidance. This Statement establishes standards for the
     accounting for transactions in which an entity exchanges its equity
     instruments for goods or services. It also addresses transactions in which
     an entity incurs liabilities in exchange for goods or services that are
     based on the fair value of the entity's equity instruments or that may be
     settled by the issuance of those equity instruments. This Statement focuses
     primarily on accounting for transactions in which an entity obtains
     employee services in share-based payment transactions such as the issuance
     of stock options in exchange for employee services. This Statement requires
     a public entity to measure the cost of employee services received in
     exchange for an award of equity instruments based on the grant-date fair
     value of the award (with limited exceptions). That cost will be recognized
     over the period during which an employee is required to provide service in
     exchange for the award - the requisite service period (usually the vesting
     period). The Company has elected to continue with the accounting
     methodology of Opinion No. 25 until adoption of this standard is required.
     The effects of this change are reflected, on a proforma basis above under
     the caption "Stock Based compensation."

NOTE 2. SECURITIES

     The amortized cost and fair value of securities available for sale are
     summarized as follows:

<TABLE>
<CAPTION>
                                              GROSS        GROSS
                              AMORTIZED    UNREALIZED   UNREALIZED       FAIR
                                 COST         GAINS       LOSSES        VALUE
                             -----------   ----------   ----------   -----------
<S>                          <C>            <C>         <C>          <C>
DECEMBER 31, 2005:
U.S. TREASURY AND U.S.
   GOVERNMENT AGENCIES       $22,756,153    $     --    $(549,979)   $22,206,174
STATE AND MUNICIPAL            5,549,634       4,589      (84,114)     5,470,109
MORTGAGE-BACKED SECURITIES     4,810,422       6,102      (81,968)     4,734,556
                             -----------    --------    ---------    -----------
                             $33,116,209    $ 10,691    $(716,061)   $32,410,839
                             ===========    ========    =========    ===========

December 31, 2004:
U.S. Treasury and U.S.
   Government agencies       $20,705,016    $ 94,883    $ (85,161)   $20,714,738
State and municipal            5,569,806      64,529      (22,178)     5,612,157
Mortgage-backed securities     4,643,439      36,469       (6,801)     4,673,107
                             -----------    --------    ---------    -----------
                             $30,918,261    $195,881    $(114,140)   $31,000,002
                             ===========    ========    =========    ===========
</TABLE>


                                       11
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2. SECURITIES (CONTINUED)

     Securities with a carrying value of $4,367,774 and $3,657,364 at December
     31, 2005 and 2004, respectively, were pledged to secure public deposits and
     for other purposes required or permitted by law.

     Gains and losses on sales of securities available for sale consist of the
     following:

<TABLE>
<CAPTION>
                      DECEMBER 31,
                     --------------
                     2005     2004
                     ----   -------
<S>                  <C>    <C>
Gross Gains           $--   $20,254
Gross losses           --        --
                      ---   -------
Net realized gains    $--   $20,254
                      ===   =======
</TABLE>

     The amortized cost and fair value of securities as of December 31, 2005 by
     contractual maturity are shown below. Actual maturities may differ from
     contractual maturities because the mortgages underlying the securities may
     be called or repaid without penalty; therefore, these securities are not
     included in the maturity categories in the following summary.

<TABLE>
<CAPTION>
                              AMORTIZED        FAIR
                                 COST         VALUE
                             -----------   -----------
<S>                          <C>           <C>
Due from one to five years   $10,403,611   $10,149,182
Due from five to ten years    17,446,135    17,071,397
Due after ten years              456,041       455,704
Mortgage-backed securities     4,810,422     4,734,556
                             -----------   -----------
                             $33,116,209   $32,410,839
                             ===========   ===========
</TABLE>

     The following table shows the gross unrealized losses and fair value of
     securities, aggregated by category and length of time that securities have
     been in a continuous unrealized loss position at December 31, 2005 and
     2004.

<TABLE>
<CAPTION>
                                           LESS THAN TWELVE MONTHS      OVER TWELVE MONTHS
                                          ------------------------   ------------------------
                                             GROSS                      GROSS
                                          UNREALIZED       FAIR      UNREALIZED       FAIR
                                            LOSSES        VALUE        LOSSES        VALUE
                                          ----------   -----------   ----------   -----------
<S>                                       <C>          <C>           <C>          <C>
DECEMBER 31, 2005:
   U.S. GOVERNMENT AND FEDERAL AGENCIES   $(210,118)   $11,471,764   $(339,861)   $10,734,410
   STATE AND MUNICIPAL SECURITIES           (42,142)     3,264,548     (41,972)     1,133,031
   MORTGAGE-BACKED SECURITIES               (53,568)     3,731,337     (28,400)       566,981
                                          ---------    -----------   ---------    -----------
      TOTAL SECURITIES                    $(305,828)   $18,467,649   $(410,233)   $12,434,422
                                          =========    ===========   =========    ===========
December 31, 2004:
   U.S. Government and federal agencies   $ (64,370)   $11,980,018   $ (20,791)   $   972,900
   State and municipal securities            (7,029)       515,474     (15,149)       920,478
   Mortgage-backed securities                (6,801)       784,092          --             --
                                          ---------    -----------   ---------    -----------
      Total securities                    $ (78,200)   $13,279,584   $ (35,940)   $ 1,893,378
                                          =========    ===========   =========    ===========
</TABLE>


                                       12

<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2. SECURITIES (CONTINUED)

     Management evaluates securities for other-than-temporary impairment at
     least on a quarterly basis, and more frequently when economic or market
     concerns warrant such evaluation. The unrealized losses in the portfolio
     are believed to be temporary due to all securities meeting the criteria of
     acceptable investment grade and all being backed by government agencies or
     municipalities. In the event that these securities are held to maturity, no
     losses should be realized. At December 31, 2005, two debt securities had
     unrealized losses with aggregate depreciation of 5.15% and 5.24% from the
     Company's amortized cost basis. The market value of these two securities
     totaled $1,422,050.

NOTE 3. LOANS

     The composition of loans is summarized as follows:

<TABLE>
<CAPTION>
                                                    DECEMBER 31,
                                            ---------------------------
                                                2005           2004
                                            ------------   ------------
<S>                                         <C>            <C>
Commercial                                  $ 58,086,912   $ 49,989,542
Commercial loans secured by real estate       86,246,284     57,785,798
Construction loans secured by real estate    167,197,192    137,698,199
Consumer installment and other                 7,909,665      7,472,078
                                            ------------   ------------
                                             319,440,053    252,945,617
Deferred fees                                   (285,306)      (369,166)
Allowance for loan losses                     (3,701,532)    (3,775,167)
                                            ------------   ------------
Loans, net                                  $315,453,215   $248,801,284
                                            ============   ============
</TABLE>

     Changes in the allowance for loan losses are as follows:

<TABLE>
<CAPTION>
                                                YEARS ENDED DECEMBER 31,
                                                ------------------------
                                                    2005         2004
                                                 ----------   ----------
<S>                                             <C>           <C>
Balance, beginning of year                       $3,775,167   $3,029,508
   Provision for loan losses                        852,823      797,824
   Loans charged off                               (926,470)     (64,513)
   Recoveries of loans previously charged off            12       12,348
                                                 ----------   ----------
Balance, end of year                             $3,701,532   $3,775,167
                                                 ==========   ==========
</TABLE>

     The total recorded investment in impaired loans, consisting solely of loans
     on nonaccrual status, was $1,961,144 and $2,144,603 at December 31, 2005
     and 2004, respectively. There were no impaired loans that had related
     allowances for loan losses determined in accordance with SFAS No. 114,
     Accounting by Creditors for Impairment of a Loan, at December 31, 2005 and
     2004. The average recorded investment in impaired loans for 2005 and 2004
     was $2,162,953 and $1,602,000, respectively. Interest income recognized on
     impaired loans for cash payments received was not material for the years
     ended 2005 and 2004. The reduction in interest income as a result of
     impaired loans was $69,542 and $63,747 for the years ended December 31,
     2005 and 2004. Total loans past due ninety days or more and still accruing
     totaled $366,941 and $34,000 at December 31, 2005 and 2004, respectively.


                                       13

<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3. LOANS (CONTINUED)

     In the ordinary course of business, the Company has granted loans to
     certain related parties, including directors, executive officers, and their
     affiliates. The interest rates on these loans were substantially the same
     as rates prevailing at the time of the transaction and repayment terms are
     customary for the type of loan. Changes in related party loans for the year
     ended December 31, 2005 are as follows:

<TABLE>
<S>                          <C>
Balance, beginning of year   $10,004,315
   Advances                   13,974,228
   Repayments                 (6,009,988)
                             -----------
Balance, end of year         $17,968,555
                             ===========
</TABLE>

NOTE 4. PREMISES AND EQUIPMENT

     Premises and equipment are summarized as follows:

<TABLE>
<CAPTION>
                                  DECEMBER 31,
                           -------------------------
                               2005          2004
                           -----------   -----------
<S>                         <C>          <C>
Equipment                  $ 1,660,578   $ 1,610,399
Leasehold improvements         331,586       322,342
                           -----------   -----------
                             1,992,164     1,932,741
Accumulated depreciation    (1,699,524)   (1,555,043)
                           -----------   -----------
                           $   292,640   $   377,698
                           ===========   ===========
</TABLE>

NOTE 5. DEPOSITS

     The aggregate amount of time deposits in denominations of $100,000 or more
     at December 31, 2005 and 2004 was $81,764,858 and $79,855,295,
     respectively. The Company had brokered and bulletin board certificates of
     deposit at December 31, 2005 and 2004 of $132,078,142 and $111,548,301,
     respectively. The scheduled maturities of time deposits at December 31,
     2005 are as follows:

<TABLE>
<S>    <C>
2006   $227,337,868
2007     12,544,452
2008      1,923,989
2009      4,005,923
2010      1,779,479
       ------------
       $247,591,711
       ============
</TABLE>

NOTE 6. SECURITIES SOLD UNDER REPURCHASE AGREEMENTS

     Securities sold under repurchase agreements, which are secured borrowings,
     generally mature within one to four days from the transaction date.
     Securities sold under repurchase agreements are reflected at the amount of
     cash received in connection with the transactions. The Company may be
     required to provide additional collateral based on the fair value of the
     underlying securities. The Company monitors the fair value of the
     underlying securities on a daily basis. Securities sold under repurchase
     agreements at December 31, 2005 and 2004 were $829,341 and $1,819,469,
     respectively.


                                       14
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7. DEFERRED COMPENSATION PLANS

     The Company has a deferred compensation plan providing for death and
     retirement benefits for its executive officers. The estimated amounts to be
     paid under the compensation plan are being funded through the purchase of
     life insurance policies on the executive officers. The balance of the
     policy cash surrender values at December 31, 2005 and 2004 is $5,719,750
     and $5,531,553, respectively. Income recognized on the policies amounted to
     $188,197 and $189,937 for the years ended December 31, 2005 and 2004,
     respectively. Deferred compensation expense recognized for the years ended
     December 31, 2005 and 2004 amounted to $639,031 and $560,090, respectively.
     Accrued deferred compensation of $1,540,773 and $901,742 is included in
     other liabilities as of December 31, 2005 and 2004, respectively.

     Effective January 1, 2001, the Company established a "Deferred Stock Unit"
     plan in which members of the Board of Directors and Executive Officers may
     choose to receive "deferred fee units" as consideration for their
     directors' fees in lieu of cash. The deferred fee units assigned to the
     members equal the number of shares of common stock that could be purchased
     at the fair market value with the amount of fees deferred. When a member
     terminates service as a director or there is a change in control of the
     Company, the units will be settled in cash at the fair market value of the
     Company's common stock. The member may receive a lump sum cash payment for
     the value of the units or defer cash payments for a period of up to ten
     years. At December 31, 2005 and 2004, 45,044 and 36,605 units,
     respectively, have been assigned to the members under this plan. The fair
     market value of the units included in other liabilities amounted to
     $1,125,383 and $628,900 at December 31, 2005 and 2004, respectively. The
     units are not considered to be potential common shares.

NOTE 8. INCOME TAXES

     Income tax expense consists of the following:

<TABLE>
<CAPTION>
                        YEARS ENDED DECEMBER 31,
                        ------------------------
                            2005         2004
                         ----------   ----------
<S>                     <C>           <C>
Current                  $3,714,237   $2,332,298
Deferred                   (272,736)    (623,674)
                         ----------   ----------
   Income tax expense    $3,441,501   $1,708,624
                         ==========   ==========
</TABLE>

     The Company's income tax expense differs from the amounts computed by
     applying the federal income tax statutory rates to income before income
     taxes. A reconciliation of the differences is as follows:

<TABLE>
<CAPTION>
                                         YEARS ENDED DECEMBER 31,
                                         ------------------------
                                             2005         2004
                                          ----------   ----------
<S>                                      <C>           <C>
Income taxes at statutory federal rate    $3,278,381   $1,710,803
Tax-exempt income                           (129,662)    (130,550)
State income taxes, net                      276,368      121,862
Other                                         16,414        6,509
                                          ----------   ----------
Income tax expense                        $3,441,501   $1,708,624
                                          ==========   ==========
</TABLE>


                                       15

<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8. INCOME TAXES (CONTINUED)

     The components of deferred income taxes are as follows:

<TABLE>
<CAPTION>
                                           DECEMBER 31,
                                     -----------------------
                                        2005         2004
                                     ----------   ----------
<S>                                  <C>          <C>
Deferred tax assets:
   Loan loss reserves                $1,270,217   $1,392,563
   Loan fees                            107,663      139,308
   Depreciation                          15,748       17,516
   Deferred compensation              1,006,096      577,600
                                     ----------   ----------
                                      2,399,724    2,126,987
                                     ----------   ----------
Deferred tax assets (liabilities),
   securities available for sale        268,041      (31,061)
                                     ----------   ----------
Net deferred tax assets              $2,667,765   $2,095,926
                                     ==========   ==========
</TABLE>

NOTE 9. RELATED PARTY TRANSACTIONS AND LEASES

     The Company leases its main office banking facilities under a noncancelable
     operating lease agreement from GBC Properties, LLC, a partnership formed by
     the organizers of the Company. The lease term is for fifteen years with the
     monthly rental payment adjusting every fifth year for changes in the
     Consumer Price Index. The Company also leases its branch facilities under a
     noncancelable operating lease from a third party. The initial lease term is
     for five years with the monthly rental payment increasing every year by 3%.
     The lease also includes two five-year extension terms. Both lease
     agreements require the Company to pay normal operating and occupancy
     expenses of the facilities. The total minimum rental commitments under the
     leases at December 31, 2005 are due as follows:

<TABLE>
<S>                                       <C>
During the next five years                $1,990,680
During the remaining term of the leases    1,704,084
                                          ----------
                                          $3,694,764
                                          ==========
</TABLE>

     Total rental expense is summarized as follows:

<TABLE>
<CAPTION>
                          YEARS ENDED
                          DECEMBER 31,
                      -------------------
                        2005       2004
                      --------   --------
<S>                   <C>        <C>
GBC Properties, LLC   $286,596   $286,596
Other third parties    115,098    115,042
                      --------   --------
                      $401,694   $401,638
                      ========   ========
</TABLE>


                                       16

<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10. STOCK-BASED COMPENSATION

     The Company has reserved 428,000 shares of common stock for issuance to
     employees and directors under an incentive stock option plan. The options
     granted are exercisable at a price equal to fair value on the date of grant
     and expire ten years from the grant date.

     Other pertinent information related to the options is as follows:

<TABLE>
<CAPTION>
                                              YEARS ENDED DECEMBER 31,
                                     -----------------------------------------
                                             2005                  2004
                                     -------------------   -------------------
                                               WEIGHTED-             Weighted-
                                                AVERAGE               average
                                                EXERCISE              Exercise
                                      NUMBER     PRICE      Number     Price
                                     -------   ---------   -------   ---------
<S>                                  <C>       <C>         <C>       <C>
Under option, beginning of year      410,000     $12.97    336,800     $11.80
   Granted                                --         --     87,400      17.00
   Exercised                         (46,100)     11.74    (14,200)     10.23
   Terminated                             --         --         --         --
                                     -------     ------    -------     ------
Under option, end of year            363,900     $12.85    410,000     $12.97
                                     =======     ======    =======     ======
Exercisable, end of year             363,900     $12.85    410,000     $12.97
                                     =======     ======    =======     ======
Weighted average fair value of
   options granted during the year               $   --                $ 7.19
</TABLE>

     Information pertaining to options outstanding at December 31, 2005 is as
     follows:

<TABLE>
<CAPTION>
                           OPTIONS OUTSTANDING              OPTIONS EXERCISABLE
                  -------------------------------------   -----------------------
                                 WEIGHTED-
                                  AVERAGE     WEIGHTED-                 WEIGHTED-
                                 REMAINING     AVERAGE                   AVERAGE
    RANGE OF         NUMBER     CONTRACTUAL    EXERCISE      NUMBER      EXERCISE
EXERCISE PRICES   OUTSTANDING       LIFE        PRICE     EXERCISABLE     PRICE
---------------   -----------   -----------   ---------   -----------   ---------
<S>               <C>           <C>           <C>         <C>           <C>
$10.00 - $17.00     363,900         5.89        $12.85      363,900       $12.85
</TABLE>

     No options were granted in 2005. The fair value of each option grant is
     estimated on the date of grant using the Black-Scholes option-pricing model
     with the following weighted-average assumptions:

<TABLE>
<CAPTION>
                           YEAR ENDED
                          DECEMBER 31,
                              2004
                          ------------
<S>                       <C>
Dividend yield                   0
Expected life                   10
Expected volatility          15.88%
Risk-free interest rate       5.00%
</TABLE>


                                       17
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11. EARNINGS PER SHARE

     Presented below is a summary of the components used to calculate basic and
     diluted earnings per share.

<TABLE>
<CAPTION>
                                             YEARS ENDED DECEMBER 31,
                                             ------------------------
                                                 2005         2004
                                              ----------   ----------
<S>                                          <C>           <C>
Basic Earnings Per Share:
Weighted average common shares outstanding     1,753,453    1,720,330
                                              ==========   ==========
Net income                                    $6,200,792   $3,323,151
                                              ==========   ==========
Basic earnings per share                      $     3.54   $     1.93
                                              ==========   ==========
</TABLE>

<TABLE>
<CAPTION>
                                                   YEARS ENDED DECEMBER 31,
                                                   ------------------------
                                                       2005         2004
                                                    ----------   ----------
<S>                                                <C>           <C>
Diluted Earnings Per Share:
   Weighted average common shares outstanding        1,753,453    1,720,330
   Net effect of the assumed exercise of stock
      options based on the treasury stock method
      using average market prices for the year         200,224       89,338
                                                    ----------   ----------
   Total weighted average common shares and
      common stock equivalents outstanding           1,953,677    1,809,668
                                                    ==========   ==========
   Net income                                       $6,200,792   $3,323,151
                                                    ==========   ==========
   Diluted earnings per share                       $     3.17   $     1.84
                                                    ==========   ==========
</TABLE>

NOTE 12. COMMITMENTS AND CONTINGENCIES

     LOAN COMMITMENTS

     The Company 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. They involve, to varying degrees, elements
     of credit risk and interest rate risk in excess of the amount recognized in
     the balance sheets. The majority of all commitments to extend credit and
     standby letters of credit are variable rate instruments.

     The Company's 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 Company uses the same credit policies in making
     commitments as they do for on-balance sheet instruments. A summary of the
     Company's commitments is as follows:

<TABLE>
<CAPTION>
                                              DECEMBER 31,
                                      ---------------------------
                                          2005           2004
                                      ------------   ------------
<S>                                   <C>            <C>
Financial standby letters of credit   $  4,606,625   $  4,607,425
Commitments to extend credit           115,581,935     98,888,244
                                      ------------   ------------
                                      $120,188,560   $103,495,669
                                      ============   ============
</TABLE>


                                       18

<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12. COMMITMENTS AND CONTINGENCIES (CONTINUED)

     LOAN COMMITMENTS (CONTINUED)

     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 are
     expected to expire without being drawn upon, the total commitment amounts
     do not necessarily represent future cash requirements. The amount of
     collateral obtained, if deemed necessary by the Company upon extension of
     credit, is based on management's credit evaluation of the party. Collateral
     held varies, but may include accounts receivable, inventory, property and
     equipment, residential real estate and income-producing commercial
     properties.

     Standby letters of credit are conditional commitments issued by the Company
     to guarantee the performance of a customer to a third party. Those
     guarantees are primarily issued to support public and private borrowing
     arrangements. The credit risk involved in issuing letters of credit is
     essentially the same as that involved in extending loans to customers.
     Collateral held varies as specified above and is required in instances
     which the Company deems necessary.

     CONTINGENCIES

     In the normal course of business, the Company is involved in various legal
     proceedings. In the opinion of management, any liability resulting from
     such proceedings would not have a material effect on the Company's
     financial statements.

NOTE 13. CONCENTRATIONS OF CREDIT

     The Company originates primarily commercial, residential, and consumer
     loans to customers in Gwinnett County and surrounding counties. The ability
     of the majority of the Company's customers to honor their contractual loan
     obligations is dependent on the economy in these areas.

     Eighty percent of the Company's loan portfolio is concentrated in loans
     secured by real estate, of which a substantial portion is secured by real
     estate in the Company's primary market area. Accordingly, the ultimate
     collectibility of the loan portfolio is susceptible to changes in market
     conditions in the Company's primary market area. The other significant
     concentrations of credit by type of loan are set forth in Note 3.

     The Company does not generally extend credit to any single borrower or
     group of related borrowers in excess of 25% of statutory capital, or
     approximately $6,000,000.

NOTE 14. REGULATORY MATTERS

     The Bank is subject to certain restrictions on the amount of dividends that
     may be declared without prior regulatory approval. At December 31, 2005,
     approximately $3,100,000 of dividends could be declared without regulatory
     approval.


                                       19
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14. REGULATORY MATTERS (CONTINUED)

     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 consolidated financial statements.
     Under capital adequacy guidelines and the regulatory framework for prompt
     corrective action, the Company and Bank must meet specific capital
     guidelines that involve quantitative measures of the Company and Bank's
     assets, liabilities, and certain off-balance sheet items as calculated
     under regulatory accounting practices. 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 of
     Total and Tier I capital to risk-weighted assets, as defined and of Tier I
     capital to average assets. Management believes, as of December 31, 2005 and
     2004, the Company and the Bank met all capital adequacy requirements to
     which they are subject.

     As of December 31, 2005, the most recent notification from the Federal
     Deposit Insurance Corporation 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 I risk-based, and Tier I leverage ratios as set forth in
     the following table. There are no conditions or events since that
     notification that management believes have changed the Bank's category.
     Prompt corrective provisions are not applicable to bank holding companies.

     The Company and the Bank's actual capital amounts and ratios are presented
     in the following table:

<TABLE>
<CAPTION>
                                                                                 TO BE WELL
                                                              FOR CAPITAL     CAPITALIZED UNDER
                                                                ADEQUACY      PROMPT CORRECTIVE
                                               ACTUAL           PURPOSES      ACTION PROVISIONS
                                          ---------------   ---------------   -----------------
                                           AMOUNT   RATIO    AMOUNT   RATIO     AMOUNT   RATIO
                                          -------   -----   -------   -----    -------   -----
                                                          (DOLLARS IN THOUSANDS)
<S>                                       <C>       <C>     <C>       <C>     <C>        <C>
DECEMBER 31, 2005:
TOTAL CAPITAL TO RISK WEIGHTED ASSETS:
   CONSOLIDATED                           $37,132   10.98%  $27,055     8%     $    NA     NA
   BANK                                   $35,996   10.65%  $27,055     8%     $33,819     10%
TIER I CAPITAL TO RISK WEIGHTED ASSETS:
   CONSOLIDATED                           $33,430    9.88%  $13,527     4%     $    NA     NA
   BANK                                   $32,294    9.55%  $13,527     4%     $20,291      6%
TIER I CAPITAL TO AVERAGE ASSETS:
   CONSOLIDATED                           $33,430    9.08%  $14,734     4%     $    NA     NA
   BANK                                   $32,294    8.77%  $14,734     4%     $18,418      5%

December 31, 2004:
Total Capital to Risk Weighted Assets:
   Consolidated                           $30,052   11.18%  $21,498     8%     $   N/A    N/A
   Bank                                   $29,373   10.93%  $21,498     8%     $26,872     10%
Tier I Capital to Risk Weighted Assets:
   Consolidated                           $26,688    9.93%  $10,749     4%     $   N/A    N/A
   Bank                                   $26,009    9.68%  $10,749     4%     $16,123      6%
Tier I Capital to Average Assets:
   Consolidated                           $26,688    8.75%  $12,196     4%     $   N/A    N/A
   Bank                                   $26,009    8.53%  $12,196     4%     $15,245      5%
</TABLE>


                                       20

<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15. FAIR VALUE OF FINANCIAL INSTRUMENTS

     The fair value of a financial instrument is the current amount that would
     be exchanged between willing parties, other than in a forced liquidation.
     Fair value is best determined based upon quoted market prices. However, in
     many instances, there are no quoted market prices for the Company's various
     financial instruments. In cases where quoted market prices are not
     available, fair value is based on discounted cash flows or other valuation
     techniques. These techniques are significantly affected by the assumptions
     used, including the discount rate and estimates of future cash flows.
     Accordingly, the fair value estimates may not be realized in an immediate
     settlement of the instrument. SFAS No. 107, Disclosures about Fair Values
     of Financial Instruments, excludes certain financial instruments and all
     nonfinancial instruments from its disclosure requirements. Accordingly, the
     aggregate fair value amounts presented may not necessarily represent the
     underlying fair value of the Company.

     CASH, DUE FROM BANKS AND FEDERAL FUNDS SOLD: The carrying amounts of cash,
     due from banks, and federal funds sold approximate fair values.

     SECURITIES: Fair values for securities are based on available quoted market
     prices.

     LOANS: The carrying amount of variable-rate loans that reprice frequently
     and have no significant change in credit risk approximates fair value. The
     fair value of fixed rate loans is estimated based on discounted contractual
     cash flows using interest rates currently being offered for loans with
     similar terms to borrowers with similar credit quality. The fair value for
     impaired loans is estimated based on discounted contractual cash flows or
     underlying collateral values, where applicable.

     DEPOSITS: The carrying amount of demand deposits, savings deposits, and
     variable-rate certificates of deposit approximates fair value. The fair
     value of fixed-rate certificates of deposit is estimated based on
     discounted contractual cash flows using interest rates currently being
     offered for certificates of similar maturities.

     SECURITIES SOLD UNDER REPURCHASE AGREEMENTS: The carrying amounts of
     securities sold under repurchase agreements approximate fair value.

     ACCRUED INTEREST: The carrying amount of accrued interest approximates
     their fair values.

     OFF-BALANCE SHEET INSTRUMENTS: The carrying amount of commitments to extend
     credit and standby letters of credit approximates fair value. The carrying
     amount of the off-balance sheet financial instruments is based on fees
     charged to enter into such agreements. Since the majority of the Company's
     off-balance sheet instruments consist of nonfee-producing, variable-rate
     commitments, the Company has determined they do not have a distinguishable
     fair value.


                                       21
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

     The carrying amounts and estimated fair values of the Company's financial
     instruments were as follows:

<TABLE>
<CAPTION>
                                        DECEMBER 31, 2005             December 31, 2004
                                   ---------------------------   ---------------------------
                                     CARRYING         FAIR         Carrying         Fair
                                      AMOUNT          VALUE         Amount          Value
                                   ------------   ------------   ------------   ------------
<S>                                <C>            <C>            <C>            <C>
FINANCIAL ASSETS:
   Cash, due from banks,
      and federal funds sold       $ 20,456,741   $ 20,456,741   $ 23,084,288   $ 23,084,288
   Securities available for sale     32,410,839     32,410,839     31,000,002     31,000,002
   Loans                            319,154,750    318,040,000    252,576,451    251,712,000
   Reserve for loan losses           (3,701,532)            --     (3,775,167)            --
                                   ------------   ------------   ------------   ------------
   Loans, net                       315,453,218    318,040,000    248,801,284    251,712,000
                                   ------------   ------------   ------------   ------------
   Accrued interest receivable        2,484,779      2,484,779      1,593,159      1,593,159

FINANCIAL LIABILITIES:
   Deposits                         341,170,733    340,346,000    282,336,126    282,829,000
   Accrued interest payable             870,833        870,833        426,632        426,632
   Securities sold under
      repurchase agreements             829,341        829,341      1,819,469      1,819,469
</TABLE>

NOTE 16. SUPPLEMENTAL FINANCIAL DATA

     Components of other operating income and expenses in excess of 1% of total
     revenue are as follows:

<TABLE>
<CAPTION>
                                       YEARS ENDED DECEMBER 31,
                                       ------------------------
                                            2005       2004
                                          --------   --------
<S>                                    <C>           <C>
Other operating income:
   Mortgage origination fees              $169,418   $168,683
   Income on life insurance policies       188,197    189,937

Other operating expenses:
   Professional and consulting             290,043    227,775
   Directors fees                          448,188    200,000
   Data processing                         232,451    198,845
</TABLE>


                                       22

<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 17. PARENT COMPANY FINANCIAL INFORMATION

     The following information presents the condensed balance sheets, statements
     of income and cash flows of GBC Bancorp, Inc., as of and for the years
     ended December 31, 2005 and 2004.

                            CONDENSED BALANCE SHEETS

<TABLE>
<CAPTION>
                                       2005          2004
                                   -----------   -----------
<S>                                <C>           <C>
ASSETS
   Cash                            $ 1,085,790   $   647,817
   Investment in subsidiary         31,856,545    26,059,778
   Other assets                         50,898        31,480
                                   -----------   -----------
   Total assets                    $32,993,233   $26,739,075
                                   ===========   ===========
      TOTAL STOCKHOLDERS' EQUITY   $32,993,233   $26,739,075
                                   ===========   ===========
</TABLE>

                         CONDENSED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                2005         2004
                                             ----------   ----------
<S>                                          <C>          <C>
EXPENSES, OTHER                              $  134,882   $   83,419
                                             ----------   ----------
   LOSS BEFORE INCOME TAX
      BENEFIT AND EQUITY IN
      UNDISTRIBUTED EARNINGS OF SUBSIDIARY     (134,882)     (83,419)
INCOME TAX BENEFIT                              (50,898)     (31,480)
                                             ----------   ----------
   LOSS BEFORE EQUITY IN UNDISTRIBUTED
      EARNINGS OF SUBSIDIARY                    (83,984)     (51,939)
EQUITY IN UNDISTRIBUTED EARNINGS
   OF SUBSIDIARY                              6,284,776    3,375,090
                                             ----------   ----------
   NET INCOME                                $6,200,792   $3,323,151
                                             ==========   ==========
</TABLE>


                                       23

<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 17. PARENT COMPANY FINANCIAL INFORMATION (CONTINUED)

                       CONDENSED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                           2005          2004
                                                       -----------   -----------
<S>                                                    <C>           <C>
OPERATING ACTIVITIES
   Net income                                          $ 6,200,792   $ 3,323,151
   Adjustments to reconcile net income to net
      cash used in operating activities:
      Equity in undistributed earnings of subsidiary    (6,284,776)   (3,375,090)
      Net other operating activities                       (19,418)       (2,090)
                                                       -----------   -----------
      Net cash used in operating activities               (103,402)      (54,029)
                                                       -----------   -----------

FINANCING ACTIVITIES
   Proceeds from exercise of stock options                 541,375       145,200
                                                       -----------   -----------
      Net cash provided by financing activities            541,375       145,200
                                                       -----------   -----------
Net increase in cash                                       437,973        91,171
Cash at beginning of year                                  647,817       556,646
                                                       -----------   -----------
Cash at end of year                                    $ 1,085,790   $   647,817
                                                       ===========   ===========
</TABLE>


                                       24