<PAGE>   1
                       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, 1998

                [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
                         OF THE SECURITIES ACT OF 1934.
             For the transition period from _________ to _________

                       Commission File Number: 333-19081

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


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

            165 Nash Street
         Lawrenceville, Georgia                                30246          
-------------------------------------------          --------------------------
(Address of Principal Executive Offices)                    (Zip Code)

                                 (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: None*

         *The Issuer filed a Registration Statement on Form SB-2 (Registration
No. 333-19081) effective pursuant to the Securities Act of 1933, as amended, on
April 16, 1997. Accordingly, the Issuer files this report pursuant to Section
15(d) of the Securities Exchange Act of 1934, as amended, and Rule 15d-1 of the
regulations thereunder.

         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 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.  Yes  [X]  No [ ]

         The Issuer's revenues for the year ended December 31, 1998 were
$2,570,754.

         Aggregate market value of the voting common stock held by persons
other than directors and executive officers of the Registrant computed by
reference to the price at which the common stock was sold, or the average bid
and asked price of such common stock, as of a specific date within the past 60
days: $10.00 based on the average bid and asked price as of March 25, 1999.

         There were 950,080 shares of the Registrant's common stock outstanding
as of March 31, 1999.

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

                      DOCUMENTS INCORPORATED BY REFERENCE

         None.


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                               TABLE OF CONTENTS

<TABLE>
<CAPTION>

                                                                                                                    PAGE

<S>                                                                                                                 <C>
PART I...........................................................................................................     1

Item 1.      Description of Business.............................................................................     1

Item 2.      Description of Property.............................................................................     8

Item 3.      Legal Proceedings...................................................................................     9

Item 4.      Submission of Matters to a Vote of Security Holders.................................................     9

PART II..........................................................................................................     9

Item 5.      Market for Common Equity and Related Stockholder Matters............................................     9

Item 6.      Management's Discussion and Analysis of Financial Condition and Results of
                Operations.......................................................................................    14

Item 7.      Financial Statements and Supplementary Data.........................................................    34

Item 8.      Changes in and Disagreements with Accountants on Accounting and Financial
                Disclosure.......................................................................................    35

PART III.........................................................................................................    35

Item 9.      Directors and Executive Officers; Compliance with Section 16(a) of the
                Exchange Act.....................................................................................    35

Item 10.     Executive Compensation..............................................................................    39

Item 11.     Security Ownership of Certain Beneficial Owners and Management......................................    42

Item 12.     Certain Relationships and Related Transactions......................................................    45

PART IV..........................................................................................................    46

Item 13.     Exhibits and Reports on Form 8-K....................................................................    46
</TABLE>



                                      (i)
<PAGE>   3



                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

THE COMPANY

         GBC Bancorp, Inc., a Georgia corporation (the "Company"), was
organized on August 21, 1996 for the purpose of acquiring all of the common
stock of Gwinnett Banking Company, a Georgia corporation which opened for
business on October 31, 1997 (the "Bank"). The Company is a bank holding
company within the meaning of the Bank Holding Company Act of 1956, as amended
(the "BHC Act"), and the Georgia Bank Holding Company Act (the "Georgia BHC
Act").

         The Company was organized to facilitate the Bank's ability to serve
its customers' requirements for financial services. The holding company
structure provides flexibility for expansion of the Company's banking business
through the possible acquisition of other financial institutions and the
provision of additional banking-related services which the traditional
commercial bank may not provide under present laws. The Company has no present
plans to acquire any operating subsidiaries other than the Bank. It is
expected, however, that the Company may make additional acquisitions in the
future if such acquisitions are deemed to be in the best interest of the
Company and its shareholders. Such acquisitions, if any, will be subject to
certain regulatory approvals and requirements.

THE BANK

         The Bank is a full service commercial bank located at 165 Nash Street,
Lawrenceville, Gwinnett County, Georgia. The Bank's primary service area is
Gwinnett County, Georgia; however, the Bank 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.

COMPETITION

         Management believes that Gwinnett County has a very active and
competitive banking market. The largest financial institutions serving Gwinnett
County are NationsBank, N.A., Wachovia Bank, N.A., SunTrust Bank, Atlanta,
First Union National 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. Based on the Federal Deposit
Insurance Corporation (the "FDIC") Summary of Deposits as of June 30, 1998,
there are 26 commercial banks, two thrift institutions and three credit unions
that operate 139 offices in Gwinnett


<PAGE>   4



County. There are approximately 16 financial institutions that have offices in
the immediate vicinity of the main office of the Bank.

EMPLOYEES

         The Bank has 20 full-time employees. The Company does not expect to
have any employees who are not also employees of the Bank.

SUPERVISION AND REGULATION

         General

         The Company is a bank holding company registered with the Board of
Governors of the Federal Reserve System (the "Federal Reserve") and the Georgia
Department of Banking and Finance (the "Georgia Department") under the BHC Act
and the Georgia BHC Act, respectively. As such, the Company is subject to the
supervision, examination and reporting requirements of the BHC Act and the
regulations of the Federal Reserve, and the Georgia BHC Act and the regulations
of the Georgia Department.

         The BHC Act requires every bank holding company to obtain the prior
approval of the Federal Reserve before: (i) 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; (ii) it or any of its
subsidiaries, other than a bank, may acquire all or substantially all of the
assets of any bank; or (iii) it may merge or consolidate with any other bank
holding company.

         The BHC 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, or 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, unless the
anticompetitive 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 BHC Act, as amended by the interstate banking provisions of the
Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the
"Interstate Banking Act"), which became effective on September 29, 1995,
repealed the prior statutory restrictions on interstate acquisitions of banks
by bank holding companies, such that the Company, and any other bank holding
company located in Georgia, may now acquire a bank located in any other state,
and any



                                     - 2 -
<PAGE>   5



bank holding company located outside of Georgia may lawfully acquire any
Georgia-based bank, regardless of state law to the contrary, in either case
subject to certain deposit-percentage, aging requirements, and other
restrictions. The Interstate Banking Act also generally provides that, as of
June 1, 1997, national and state-chartered banks may now branch interstate
through acquisitions of banks in other states.

         In response to the Interstate Banking Act, the Georgia General
Assembly adopted the Georgia Interstate Banking Act which became effective on
July 1, 1995. The Georgia Interstate Banking Act provides that (i) interstate
acquisitions by institutions located in Georgia will be permitted in states
which also allow national interstate acquisitions, and (ii) interstate
acquisitions of institutions located in Georgia will be permitted by
institutions located in states which allow national interstate acquisitions.

         Additionally, on January 26, 1996, the Georgia General Assembly
adopted the Georgia Interstate Branching Act which permits Georgia-based banks
and bank holding companies owning or acquiring banks outside of Georgia and all
non-Georgia banks and bank holding companies owning or acquiring banks in
Georgia the right to merge any lawfully acquired bank into an interstate branch
network. The Georgia Interstate Branching Act also allows banks to establish de
novo branches on a limited basis beginning July 1, 1996. Beginning July 1,
1998, the number of de novo branches which may be established is no longer
limited.

         The BHC Act generally prohibits a bank holding company from engaging
in activities other than banking or managing or controlling banks or other
permissible subsidiaries and 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. In
determining whether a particular activity is permissible, the Federal Reserve
must consider whether the performance of such an activity reasonably can be
expected to produce benefits to the public, such as greater convenience,
increased competition, or gains in efficiency, that outweigh possible adverse
effects, such as undue concentration of resources, decreased or unfair
competition, conflicts of interest, or unsound banking practices. For example,
factoring accounts receivable, acquiring or servicing loans, leasing personal
property, conducting discount securities brokerage activities, performing
certain data processing services, acting as agent or broker in selling credit
life insurance and certain other types of insurance in connection with credit
transactions, and performing certain insurance underwriting activities all have
been determined by the Federal Reserve to be permissible activities of bank
holding companies. The BHC Act does not place territorial limitations on
permissible non-banking activities of bank holding companies. Despite prior
approval, the Federal Reserve has the power to order a bank holding company or
its subsidiaries to terminate any activity or to terminate its ownership or
control of any subsidiary when it has reasonable cause to believe that
continuation of such activity or such ownership or control constitutes a
serious risk to the financial safety, soundness, or stability of any bank
subsidiary of that bank holding company.



                                      -3-
<PAGE>   6



         The Bank is a member of the FDIC, and as such, its deposits are
insured by the FDIC to the maximum extent provided by law. The Bank is also
subject to numerous state and federal statutes and regulations that affect its
business, activities, and operations, and it is supervised and examined by one
or more state or federal bank regulatory agencies.

         The Bank is subject to regulation, supervision, and examination by the
FDIC and the Georgia Department. The FDIC and the Georgia Department regularly
examine the operations of the Bank and are given authority to approve or
disapprove mergers, consolidations, the establishment of branches, and similar
corporate actions. The FDIC and the Georgia Department also have the power to
prevent the continuance or development of unsafe or unsound banking practices
or other violations of law.

         Certain Conditions

         In connection with their approvals of the formation of the Bank and
the Company, the Georgia Department, the FDIC and the Federal Reserve
conditioned their approvals on the compliance with certain restrictions and
requirements relating to the operations and activities of the Bank and the
Company (collectively, the "Conditions"), including, without limitation, (a) a
requirement for the Bank to maintain minimal capital of $9,000,000, of which
not less than $3,000,000 must be allocated to common capital, not less than
$5,100,000 must be allocated to paid in surplus and not less than $900,000 must
be allocated as an expense fund to cover pre-opening expenses and potential
losses in the Bank's first year of operation; (b) a requirement for the Bank to
maintain a Capital-to-Asset Ratio, as defined by the Georgia Department, at not
less than 8% during the first three years of operation, and further following
this initial three-year period, for the Bank to maintain a Capital-to-Asset
Ratio at levels which are consistent with the published policies of the Georgia
Department; (c) a restriction on the payment of dividends to the Company by the
Bank, and on the payment to officers or employees of the Bank of any incentive
bonuses until such time as all start-up losses of the Bank are recovered and
the Bank has earned a cumulative profit (on both a Bank-only and consolidated
basis) and, further, a requirement for the Bank to obtain the approval of the
Georgia Department and the Federal Reserve prior to the payment of dividends to
the Company; (d) a restriction on the payment by the Bank of any fees to
Directors or committee members of the Bank until the Bank has earned a
cumulative profit (on both a Bank-only and consolidated basis); (e) a
restriction on changes in the position of President, Chief Lending Officer or
Chief Operations Officer of the Bank during the first two years of operation of
the Bank without obtaining the prior approval of the Georgia Department and the
FDIC; (f) a restriction on adding any persons to the Board of Directors of the
Bank or the Company during the first two years after commencing business
without obtaining the prior approval of the Georgia Department; (g) a
restriction on the creation of any plan for the issuance of stock options to
key employees and/or officers of the Company or the Bank without obtaining the
prior approval of the Georgia Department, which shall include any arrangements
for the issuance of stock options included in employment contracts; and (h) a
restriction on the Company from incurring debt without obtaining the prior
approval of the Federal Reserve. Pursuant to the applicable regulatory
approvals, all conditions imposed on the organizers and Directors of the Bank
are imposed on the organizers and



                                      -4-
<PAGE>   7



Directors of the Company. The Boards of Directors of the Bank and the Company
have, in each instance, committed to cause the Bank and the Company to abide by
each of the Conditions imposed through formal Board action.

         Payment of Dividends

         The Company is a legal entity separate and distinct from its banking
subsidiary. The principal source of cash flow of the Company, including cash
flow to pay dividends to its shareholders, is dividends from the Bank. There
are statutory and regulatory limitations on the payment of dividends by the
Bank to the Company (including, but not limited to, the Conditions), as well as
by the Company to its 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 ("FDICIA"), a depository
institution may not pay any dividend if payment would cause it to become
undercapitalized or if it already is undercapitalized. See "--Prompt Corrective
Action." 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.

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

         Capital Adequacy

         The Company and the Bank are required to comply with the capital
adequacy standards established by the Federal Reserve in the case of the
Company, 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-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.



                                      -5-
<PAGE>   8



         The minimum guideline for the ratio (the "Total Risk-Based Capital
Ratio") of total capital ("Total Capital") to risk-weighted assets (including
certain off-balance-sheet items, such as standby letters of credit) is 8%. At
least half of Total Capital must be comprised of 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 ("Tier 1 Capital"). The remainder may consist of subordinated
debt, other preferred stock, and a limited amount of loan loss reserves ("Tier
2 Capital"). At December 31, 1998, the Company's consolidated Total Risk-Based
Capital Ratio and its Tier 1 Risk-Based Capital Ratio (i.e., the ratio of Tier
1 Capital to risk-weighted assets) were 32.5% and 31.25%, respectively.

         In addition, the Federal Reserve has established minimum leverage
ratio guidelines for bank holding companies. These guidelines provide for a
minimum ratio (the "Leverage Ratio") of Tier 1 Capital to average assets, less
goodwill and certain other intangible assets, of 3% for bank holding companies
that meet certain specified criteria, including those having the highest
regulatory rating. All other bank holding companies generally are required to
maintain a Leverage Ratio of at least 3%, plus an additional cushion of 100 to
200 basis points. The Company's Leverage Ratio at December 31, 1998 was 25.77%.
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"
(deducting all intangibles) and other indicia of capital strength in evaluating
proposals for expansion or new activities.

         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, 1998. Neither the
Company nor the Bank has been advised by any federal banking agency of any
specific minimum capital ratio requirement applicable to it.

         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. As described
below, substantial additional restrictions can be imposed upon FDIC-insured
depository institutions that fail to meet applicable capital requirements. See
"--Prompt Corrective Action."

         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, pursuant to
FDICIA, recently adopted final regulations requiring regulators to consider
interest rate risk (when the interest rate sensitivity of an institution's
assets does not match the sensitivity of its liabilities or its off-balance
sheet position) 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.



                                      -6-
<PAGE>   9



         Support of Subsidiary Institution

         Under Federal Reserve policy, the Company is 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,
the Company 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.

         Prompt Corrective Action

         FDICIA establishes a system of prompt corrective action to resolve the
problems of undercapitalized institutions. Under this system, which became
effective in December 1992, the federal banking regulators are required to
establish five capital categories (well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized, and critically
undercapitalized) and to take certain mandatory supervisory actions, and are
authorized to take other discretionary actions, with respect to institutions in
the three undercapitalized categories, the severity of which will depend upon
the capital category in which the institution is placed. Generally, subject to
a narrow exception, FDICIA requires the banking regulator to appoint a receiver
or conservator for an institution that is critically undercapitalized. The
federal banking agencies have specified by regulation the relevant capital
level for each category.

         Under the final agency rules implementing the prompt corrective action
provisions, an institution that (i) has a Total Risk-Based Capital Ratio of 10%
or greater, a Tier 1 Risk-Based Capital Ratio of 6.0% or greater, and a
Leverage Ratio of 5.0% or greater and (ii) is not subject to any written
agreement, order, capital directive, or prompt corrective action directive
issued by the appropriate federal banking agency is deemed to be well
capitalized. An institution with a Total Risk-Based Capital Ratio of 8.0% or
greater, a Tier 1 Risk-Based Capital Ratio of 4.0% or greater, and a Leverage
Ratio of 4.0% or greater is considered to be adequately capitalized. An
institution with a Total Risk-Based Capital Ratio of less than 8.0%, a Tier 1
Risk-Based Capital Ratio of less than 4.0%, or a Leverage Ratio of less than
4.0% is considered to be undercapitalized. An institution with a Total
Risk-Based Capital Ratio of less than 6.0%, a Tier 1 Risk-Based Capital Ratio
of less than 3.0%, or a Leverage Ratio of less than 3.0% is considered to be
significantly undercapitalized, and an institution with a tangible equity
capital to assets ratio equal to or less than 2.0% is deemed to be critically
undercapitalized. For purposes of the regulation, the term "tangible equity"
includes core capital elements counted as Tier 1 Capital for purposes of the
risk-based capital standards, plus the amount of outstanding cumulative
perpetual preferred stock (including related surplus), minus intangible assets
with certain exceptions. A depository institution may be deemed to be in a
capitalization category that is lower than is indicated by its actual capital
position if it receives an unsatisfactory examination rating.



                                      -7-
<PAGE>   10



         An institution that is categorized as undercapitalized, significantly
undercapitalized, or critically undercapitalized is required to submit an
acceptable capital restoration plan to its appropriate federal banking agency.
Under FDICIA, a bank holding company must guarantee that a subsidiary
depository institution will meet its capital restoration plan, subject to
certain limitations. The obligation of a controlling bank holding company under
FDICIA to fund a capital restoration plan is limited to the lesser of 5% of an
undercapitalized subsidiary's assets or the amount required to meet regulatory
capital requirements. An undercapitalized institution is also generally
prohibited from increasing its average total assets, making acquisitions,
establishing any branches, or engaging in any new line of business, except in
accordance with an accepted capital restoration plan or with the approval of
the applicable agency. In addition, the appropriate federal banking regulator
is given authority with respect to any undercapitalized depository institution
to take any of the actions it is required to or may take with respect to a
significantly undercapitalized institution as described below if it determines
"that those actions are necessary to carry out the purpose" of FDICIA.

         For those institutions that are significantly undercapitalized or
undercapitalized and either fail to submit an acceptable capital restoration
plan or fail to implement an approved capital restoration plan, the appropriate
federal banking agency must require the institution to take one or more of the
following actions: (i) sell enough shares, including voting shares, to become
adequately capitalized; (ii) merge with (or be sold to) another institution (or
holding company), but only if grounds exist for appointing a conservator or
receiver; (iii) restrict certain transactions with banking affiliates as if the
"sister bank" exception to the requirements of Section 23A of the Federal
Reserve Act did not exist; (iv) otherwise restrict transactions with bank or
non-bank affiliates; (v) restrict interest rates that the institution pays on
deposits to "prevailing rates" in the institution's "region"; (vi) restrict
asset growth or reduce total assets; (vii) alter, reduce, or terminate
activities; (viii) hold a new election of directors; (ix) dismiss any director
or senior executive officer who held office for more than 180 days immediately
before the institution became undercapitalized, provided that in requiring
dismissal of a director or senior executive officer, the regulator must comply
with certain procedural requirements, including the opportunity for an appeal
in which the director or officer will have the burden of proving his or her
value to the institution; (x) employ "qualified" senior executive officers;
(xi) cease accepting deposits from correspondent depository institutions; (xii)
divest certain nondepository affiliates which pose a danger to the institution;
or (xiii) be divested by a parent holding company. In addition, without the
prior approval of the appropriate federal banking regulator, a significantly
undercapitalized institution may not pay any bonus to any senior executive
officer or increase the rate of compensation for such an officer, without
regulatory approval.

         At December 31, 1998, the Bank had the requisite capital levels to
qualify as "well capitalized."

         FDIC Insurance Assessments

         Pursuant to FDICIA, the FDIC 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, which originally went



                                      -8-
<PAGE>   11



into effect on January 1, 1994, assigns an institution to one of three capital
categories: (i) well capitalized; (ii) adequately capitalized; and (iii)
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. An institution is also assigned by the FDIC to one
of three supervisory subgroups within each capital group. The supervisory
subgroup to which an institution is assigned is based on a supervisory
evaluation provided to the FDIC by the institution's primary federal regulator
and information which the FDIC determines to be relevant to the institution's
financial condition and the risk posed to the deposit insurance funds (which
may include, if applicable, information provided by the institution's state
supervisor). An institution's insurance assessment rate is then determined
based on the capital category and supervisory category to which it is assigned.
Under the final risk-based assessment system, there are nine assessment risk
classifications (i.e., combinations of capital groups and supervisory
subgroups) to which different assessment rates are applied. Assessment rates
for members of both the Bank Insurance Fund ("BIF") and the Savings Association
Insurance Fund ("SAIF") for the first half of 1995, as they had been during
1994, ranged from 23 basis points (0.23% of deposits) for an institution in the
highest category (i.e., "well capitalized" and "healthy") to 31 basis points
(0.31% of deposits) for an institution in the lowest category (i.e.,
"undercapitalized" and "substantial supervisory concern"). These rates were
established for both funds to achieve a designated ratio of reserves to insured
deposits (i.e., 1.25%) within a specified period of time.

         Once the designated ratio for the BIF was reached in May 1995, the
FDIC reduced the assessment rate applicable to BIF deposits in two stages, so
that, beginning in 1996, the deposit insurance premiums for 92% of all BIF
members in the highest capital and supervisory categories were set at $2,000
per year, regardless of deposit size. The FDIC elected to retain the existing
assessment rate range of 23 to 31 basis points for SAIF members for the
foreseeable future given the undercapitalized nature of that insurance fund.

         Recognizing that the disparity between the SAIF and BIF premium rates
had adverse consequences for the SAIF insured institutions and other banks
with SAIF assessed deposits, including reduced earnings and an impaired ability
to raise funds in capital markets and to attract deposits, in July 1995, the
FDIC, the Treasury Department, and the Office of Thrift Supervision released
statements outlining a proposed plan to recapitalize the SAIF, the principal
feature of which was a special one-time assessment on depository institutions
holding SAIF-insured deposits, which was intended to recapitalize the SAIF at a
reserve ratio of 1.25%. This proposal contemplated elimination of the disparity
between the assessment rates on BIF and SAIF deposits following
recapitalization of the SAIF.

         A variation of this proposal designated the Deposit Insurance Funds
Act of 1996 ("DIFA") was enacted by Congress as part of the omnibus budget
legislation and signed into law on September 30, 1996. As directed by DIFA, the
FDIC implemented a special one-time assessment of approximately 65.7 basis
points (0.657%) on a depository institution's SAIF-insured deposits held



                                      -9-
<PAGE>   12



as of March 31, 1995 (or approximately 52.6 basis points on SAIF deposits
acquired by banks in certain qualifying transactions). In addition, the FDIC
has implemented a revision in the SAIF assessment rate schedule which effected,
as of October 1, 1996 (i) a widening in the assessment rate spread among
institutions in the different capital and risk assessment categories, (ii) an
overall reduction of the assessment rate range assessable on SAIF deposits of
from 0 to 27 basis points, and (iii) a special interim assessment rate range
for the last quarter of 1996 of from 18 to 27 basis points on institutions
subject to Financing Corporation ("FICO") assessments. Effective January 1,
1997, assessments to help pay off the $780 million in annual interest payments
on the $8 billion FICO bonds issued in the late 1980's as part of the
government rescue of the thrift industry were imposed on both BIF- and
SAIF-insured deposits in annual amounts presently estimated at 1.29 basis
points and 6.44 basis points, respectively. Beginning in January, 2000, BIF-
and SAIF-insured institutions will share the FICO interest costs at equal rates
currently estimated at 2.43 basis points.

         Under the FDIA, insurance of deposits may be terminated by the FDIC
upon a finding that the institution has engaged in unsafe and unsound
practices, is in an unsafe or unsound condition to continue operations, or has
violated any applicable law, regulation, rule, order, or condition imposed by
the FDIC.

         Safety and Soundness Standards

         The FDIA, as amended by the FDICIA and the Riegle Community
Development and Regulatory Improvement Act of 1994, requires the federal bank
regulatory agencies to prescribe standards, by regulations or guidelines,
relating to internal controls, information systems and internal audit systems,
loan documentation, credit underwriting, interest rate risk exposure, asset
growth, asset quality, earnings, stock valuation and compensation, fees and
benefits, and such other operational and managerial standards as the agencies
deem appropriate. The federal bank regulatory agencies have adopted, effective
August 9, 1995, a set of guidelines prescribing safety and soundness standards
pursuant to FDICIA, as amended. 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,
after being so notified, an institution fails to submit an acceptable
compliance plan or fails in any material respect to implement an acceptable
compliance plan, the agency must issue an order directing action to correct the
deficiency and may issue an order directing other actions of the types to which
an undercapitalized institution is subject under the "prompt corrective action"
provisions of FDICIA. See "--Prompt Corrective Action." If an institution fails
to comply



                                     -10-
<PAGE>   13



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 of 1977 ("CRA") requires the federal
bank regulatory agencies to encourage financial institutions to meet the credit
needs of low- and moderate-income borrowers in their local communities. In May
1995, the federal bank regulatory agencies published final amended regulations
promulgated pursuant to the CRA. The final regulations eliminate the 12
assessment factors under the former regulation and replace them with
performance tests. Institutions are no longer required to prepare CRA
Statements or extensively document director participation, marketing efforts or
the ascertainment of community credit needs. Under the final rule, 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
have the option of being evaluated under a strategic plan formulated with
community input and pre-approved by the bank regulatory agency.

         CRA regulations provide for certain disclosure obligations. In
accordance with the CRA, each institution must post a CRA notice advising the
public of the right to comment to the institution and its regulator on the
institution's CRA performance and to review the institution's CRA 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. Public disclosure of written
CRA evaluations of financial institutions made by regulatory agencies is
required by the CRA. This promotes enforcement of CRA requirements by providing
the public with the status of a particular institution's community reinvestment
record.

PROPOSED LEGISLATION AND REGULATORY ACTION

         New regulations and statutes are regularly proposed that contain
wide-ranging proposals for altering the structure, regulations and competitive
relationships of the nation's financial institutions. It cannot be predicted
whether or in what form any proposed regulation or statute will be adopted or
the extent to which the business of the Bank may be affected by such regulation
or statute.

ITEM 2.  DESCRIPTION OF PROPERTY

         On March 17, 1998, the Bank entered into a month-to-month lease
agreement with GBC Properties, LLC ("GBC LLC") to lease the real estate for the
Bank located at 165 Nash Street, Lawrenceville, Gwinnett County, Georgia for a
rental of $1.00 per month until the permanent banking facility described below
for the Bank was constructed. In addition, the temporary modular office and the
temporary operation and administrative offices of the Bank were leased on a
short-term basis from independent third parties for $6,727 per month. Upon
completion of the construction of the permanent banking facility, the temporary
modular office was removed and the temporary operation and administrative
offices were vacated.

         On March 17, 1998, the Bank entered into a lease agreement (the "Lease
Agreement") with GBC LLC to lease permanent office space for the Bank located
at 165 Nash Street, Lawrenceville, Gwinnett County, Georgia (the "Permanent
Premises") for five years, beginning on the completion of the construction of
the Permanent Premises, with two five-year renewal options.



                                     -11-
<PAGE>   14



Pursuant to the Lease Agreement, the initial annual rental for the 15,922
square feet of office space is $238,830 or $15.00 per square foot. The rental
for the renewal will be increased based on the increase in the Consumer Price
Index. The term of the Lease Agreement commenced on November 1, 1998.

         The Bank obtained two appraisals for the fair rental value of the
Permanent Premises. One appraisal, dated December 9, 1996, provided a range of
market rental for the Permanent Premises. The mid-point of such range was
$16.00 per square foot. The other appraisal, dated October 8, 1996, determined
that the fair market rental value of the Permanent Premises was $15.66 per
square foot.

         The owner of the property and the building where the Permanent
Premises are located is GBC LLC. Most of the members of GBC LLC are directors
and officers of the Company and the Bank. See "Item 12. Certain Relationships
and Related Transactions."

         The Permanent Premises include a full-service teller line and drive-in
and walk-up windows. The Bank also offers safe deposit boxes.

         The Company does not invest in real estate, interests in real estate,
real estate mortgages, or securities of or interests in persons primarily
engaged in real estate activities.

ITEM 3.  LEGAL PROCEEDINGS

None.

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

         On November 3, 1998, the Company held its annual shareholders' meeting
at which the shareholders approved a proposal to elect the following directors
of the Company to serve until the next annual meeting: James B. Ballard, Jerry
M. Boles, W. H. Britt, Richard F. Combs, William G. Hayes, Larry D. Key,
Douglas A. Langley, Norris J. Nash, Joseph J. Powell and William S. Stanton.
This proposal was approved with 693,236 shares or 73% voting for the proposal,
and 256,844 shares or 27% withholding authority.


                                    PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         There is currently no market for shares of the Company's common stock
(the "Common Stock") and it is not likely that an active trading market will
develop for the shares in the future. There are no present plans for the
Company's Common Stock to be traded on any stock exchange or over-the-counter
market. As of December 31, 1998, there were no private trades of shares of the
Company's Common Stock.



                                     -12-
<PAGE>   15



         As of December 31, 1998, the Company had approximately 400 holders of
its Common Stock.

         The Company has not paid any dividends to date. Under the Georgia
Business Corporation Code, the Company may from time to time make
distributions, including the payment of dividends, to its shareholders in
money, indebtedness or other property (except its own shares) unless, after
giving effect to such distribution, the Company would not be able to pay its
debts as they become due in the usual course of business or the Company's total
assets would be less than the sum of its total liabilities plus the amount that
would be needed, if the Company 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. The Company may also distribute its shares pro rata and without
consideration to its shareholders or to the shareholders of one or more classes
or series, which constitutes a share dividend.

         Subject to the Conditions, the Company, as the sole holder of common
stock of the Bank, is entitled to such dividends as may be declared from time
to time by the Board of Directors out of funds legally available therefor.
Dividends paid may not exceed 50% of net profits after taxes for the previous
fiscal year without prior approval of the Department of Banking. The Bank may
not pay cumulative dividends on its common stock.

         In the absence of other activities conducted by the Company, its
ability to pay dividends will depend upon the earnings of the Bank and
fulfillment of the Conditions. However, the Company cannot assure the future
payment of dividends, either in cash or in stock.

                                     -13-
<PAGE>   16


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

The following is a discussion of the financial condition of GBC Bancorp., Inc.
(GBC) and its bank subsidiary, Gwinnett Banking Company at December 31, 1998
and 1997 and the results of operations for the years then ended. The purpose of
this discussion is to focus on information about GBC's financial condition and
results of operations which are not otherwise apparent from the audited
consolidated financial statements. Reference should be made to those statements
and the selected financial data presented elsewhere in this report for an
understanding of the following discussion and analysis.

FORWARD-LOOKING STATEMENTS

GBC may from time to time make written or oral forward-looking statements,
including statements contained in GBC's filings with the Securities and
Exchange Commission and its reports to stockholders. Statements made in the
Annual Report, other than those concerning historical information, should be
considered forward-looking and subject to various risks and uncertainties. Such
forward-looking statements are made based upon 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. GBC's 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 GBC's 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. GBC cautions that such factors
are not exclusive. GBC does not undertake to update any forward-looking
statement that may be made from time to time by, or on behalf of, GBC.

OVERVIEW

The year 1998 marked the first full year of banking operations for GBC. GBC
commenced banking operations on October 31, 1997. GBC's 1998 results were
highlighted by significant loan and deposit growth that would be expected for a
de novo bank. This growth should provide a base for future profitability and a
recovery of GBC's accumulated deficit.

                                      -14-
<PAGE>   17


FINANCIAL CONDITION AT DECEMBER 31, 1998 AND 1997

Following is a summary of GBC's balance sheets for the periods indicated:

<TABLE>
<CAPTION>

                                                       December 31,
                                                   1998           1997
                                                 (Dollars in Thousands)

<S>                                             <C>            <C>
Cash and due from banks                         $  1,600       $    959
Federal funds sold                                 2,740          9,700
Securities                                         4,009             --
Loans, net                                        24,067          1,841
Premises and equipment                               612            139
Other assets                                         297            211
                                                --------       --------

                                                $ 33,325       $ 12,850
                                                ========       ========

Total deposits                                  $ 25,008       $  4,272
Other liabilities                                    263             28
Stockholders' equity                               8,054          8,550
                                                --------       --------

                                                $ 33,325       $ 12,850
                                                ========       ========
</TABLE>


FINANCIAL CONDITION AT DECEMBER 31, 1998 AND 1997

As of December 31, 1998, GBC had total assets of $33.3 million, almost tripling
its asset size as of December 31, 1997. The completion of GBC's stock offering
in 1997, which raised $9.5 million, has provided a strong capital base to
support this growth. Total interest-earning assets were $30.8 million at
December 31, 1998 or 92.47% of total assets as compared to 89.81% at December
31, 1997. GBC's primary interest-earning assets at December 31, 1998 were
loans, which made up 78.10% of total interest-earning assets as compared to
15.95% at December 31, 1997. GBC's loan to deposit ratio was 97.73% at December
31, 1998 as compared to 43.79% at December 31, 1997. This ratio is not
considered excessive for a de novo bank. In the future, as deposits continue to
grow, this ratio will decrease to within GBC's guidelines of 80%. Deposit
growth of $20.7 million has been used primarily to fund loan growth of $22.6
million.

GBC's investment portfolio, consisting of U.S. Agency securities, amounted to
$4.0 million at December 31, 1998. Unrealized gains on securities amounted to
$11,559 at December 31, 1998. Management has not specifically identified any
securities for sale in future periods which, if so designated, would require a
charge to operations if the market value would not be reasonably expected to
recover prior to the time of sale.

GBC has 61% of its loan portfolio collateralized by real estate located in
GBC's primary market area of Gwinnett County and surrounding counties. GBC's
real estate construction portfolio consists of loans collateralized by loans to
build one- to four-family residential properties. GBC generally requires that
loans collateralized by real estate not exceed 80%-85% of the collateral value.

                                      -15-
<PAGE>   18


GBC's remaining 39% of its loan portfolio consists of commercial, consumer, and
other loans. GBC requires collateral commensurate with the repayment ability
and creditworthiness of the borrower.

The specific economic and credit risks associated with GBC's 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 GBC's
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 GBC's market area are stable with no
indications of a significant downturn in the general economy. Additionally, GBC
has risk associated with its loan portfolio as it relates to the Year 2000
issue. (See Year 2000 Disclosures.)

GBC attempts to reduce these economic and credit risks not only by adherence to
loan to value guidelines, but also by investigating the creditworthiness of the
borrower and monitoring the borrower's financial position. Also, GBC
establishes and periodically reviews its 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.

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 other needs of
GBC. 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. GBC attempts to price
its deposits to meet its asset/liability objectives consistent with local
market conditions.

The liquidity and capital resources of the Bank are monitored on a periodic
basis by State and Federal regulatory authorities. As determined under
guidelines established by those regulatory authorities and internal policy, the
Bank's liquidity was considered satisfactory.

At December 31, 1998, GBC had loan commitments outstanding of $16.1 million.
Because these commitments generally have fixed expiration dates and many will
expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. If needed, the Bank has the
ability on a short-term basis to borrow and

                                      -16-
<PAGE>   19


purchase Federal funds from other financial institutions. At December 31,
1998, the Bank has arrangements with three commercial banks for additional
short-term advances of $4,500,000.

At December 31, 1998, GBC's and the Bank's capital ratios were considered
adequate based on regulatory minimum capital requirements. GBC's stockholders'
equity decreased due to a net loss in 1998 of $508,000.

In the future, the primary source of funds available to GBC will be the payment
of dividends by its subsidiary Bank. Banking regulations limit the amount of
the dividends that may be paid without prior approval of the Bank's regulatory
agency. Currently, no dividends can be paid by the Bank to GBC without
regulatory approval.

The minimum capital requirements to be considered well capitalized under prompt
corrective action provisions and the actual capital ratios for GBC and the Bank
as of December 31, 1998 are as follows:

<TABLE>
<CAPTION>
                                                                             Actual                        
                                                                 ---------------------------------
                                                                                       Regulatory
                                                                  GBC        Bank     Requirements
                                                                 -----       -----    ------------

          <S>                                                    <C>         <C>      <C>
          Leverage capital ratio                                 25.77%      24.73%       5.00%
          Risk-based capital ratios:
             Core capital                                        31.25       29.99        6.00
             Total capital                                       32.50       31.24       10.00
</TABLE>

At December 31, 1998, GBC had no material commitments for capital expenditures.

These ratios will decline as asset growth continues, but will still remain in
excess of the regulatory minimum requirements.

Management believes that its liquidity and capital resources are adequate and
will meet its foreseeable short and long-term needs. Management anticipates
that it will have sufficient funds available to meet current loan commitments
and to fund or refinance, on a timely basis, its other material commitments and
liabilities.

Except for expected continued growth common to a de novo bank, and
uncertainties related to the Year 2000 issue (see Year 2000 Disclosures),
management is not aware of any other known trends, events or uncertainties that
will have or that are reasonably likely to have a material effect on its
liquidity, capital resources or operations. Management is also not aware of any
current recommendations by the regulatory authorities which, if they were
implemented, would have such an effect.



                                      -17-
<PAGE>   20


Effects of Inflation

The impact of inflation on banks differs from its impact on non-financial
institutions. Banks, as financial intermediaries, have assets which are
primarily monetary in nature and which 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. GBC, through its asset-liability
committee, attempts 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 GBC's interest rate sensitive
assets and liabilities, see the "Asset/Liability Management" section.

RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997

Following is a summary of GBC's operations for the periods indicated.

<TABLE>
<CAPTION>

                                                             Years Ended December 31,
                                                              1998            1997
                                                             (Dollars in Thousands)

<S>                                                          <C>              <C>
Interest income                                              $ 2,484          $ 199

Interest expense                                                 636             54

Net interest income                                            1,848            145

Provision for loan losses                                        344             29

Other income                                                      86             33

Other expenses                                                 2,098            837

Pretax loss                                                     (508)          (688)

Income taxes                                                      --             --

Net loss                                                        (508)          (688)
</TABLE>

GBC commenced its operations on October 31, 1997. Prior to the commencement,
GBC was engaged in activities involving the formation of GBC, selling its
common stock, and obtaining necessary approvals. GBC incurred operating losses
totaling $723,000 during its organizational period ($239,000 in 1996 and
$484,000 in 1997).

GBC incurred total organizational and stock issue costs of $197,000 of which
$173,000 were capitalized to be amortized over a period of sixty months (see
Non-interest Expense), and $24,000 was recorded as a reduction in capital
surplus. Through the end of 1997, GBC incurred additional operating losses of
$204,000.


                                      -18-
<PAGE>   21


Net Interest Income

GBC's results of operations are determined by its ability to effectively manage
interest income and expense, to minimize loan and investment losses, to
generate non-interest income, and to control operating expenses. Since interest
rates are determined by market forces and economic conditions beyond the
control of GBC, GBC's ability to generate net interest income is dependent upon
its ability to obtain an adequate net interest spread between the rate paid on
interest-bearing liabilities and the rate earned on interest-earning assets.

The net yield on average interest-earning assets was 7.76% in 1998 as compared
to 5.74% in 1997. Average loans increased by $13.5 million which accounted for
the majority of a $21.7 million increase in total average interest-earning
assets. Average interest-bearing liabilities increased by $12.5 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 10.43% in 1998 from 6.18% in 1997. The rate paid on average
interest-bearing liabilities was 4.98% in 1998 and 3.49% in 1997.

Provision for Loan Losses

The provision for loan losses was $344,000 in 1998 as compared to $29,000 in
1997. The amount provided was due primarily to the growth of the portfolio.
Based upon management's evaluation of the loan portfolio, management believes
the reserve for loan losses to be adequate to absorb possible losses on
existing loans that may become uncollectible. This evaluation considers past
due and classified loans, underlying collateral values, and current economic
conditions which may affect the borrower's ability to repay. As of December 31,
1998, and 1997, GBC has no nonperforming loans or assets. The allowance for
loan losses as a percentage of total loans at December 31, 1998 and 1997 was
1.52% and 1.53%, respectively.

Other Income

Other operating income consists of service charges on deposit accounts and
other miscellaneous revenues and fees. Other operating income was $86,000 in
1998 as compared to $33,000 in 1997. The increases are due to GBC being open
for an entire year versus only two months in 1997.

Non-interest Expense

Other operating expense for 1998 consists of salaries and employee benefits
($1,123,000), equipment and occupancy expenses ($371,000), and other operating
expenses ($437,000). The increases over 1997 ($488,000 for salaries and
employee benefits, $287,000 for equipment and occupancy, and $320,000 for other
operating expenses) are due primarily to GBC being open for an entire year
versus only two months in 1997. GBC also adopted SOP 98-5 which required the
write-off of $167,000 of organization costs.



                                      -19-
<PAGE>   22


Income Tax

GBC had no income tax expense due to pre-tax operating losses of $508,000 and
$688,000 in 1998 and 1997, respectively.

Asset/Liability Management

It is GBC's objective 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. Certain
officers are charged with the responsibility for monitoring policies and
procedures that are designed to ensure acceptable composition of the
asset/liability mix. It is the overall philosophy of management to support
asset growth primarily through growth of core deposits of all categories made
by local individuals, partnerships, and corporations.

GBC's 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 Board of Directors of the Bank
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
substantial movements in interest rates on earnings. An asset or liability is
considered to be interest rate-sensitive if it will reprice or mature within
the time period analyzed, usually one year or less. 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 adversely affect net interest income, 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 adversely affect net interest income. If GBC's 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.

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, GBC also evaluates 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 debts also may decrease during periods of rising
interest rates.


                                      -20-
<PAGE>   23


Changes in interest rates also affect GBC's liquidity position. GBC currently
prices 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 which would negatively affect GBC's liquidity
position.

At December 31, 1998, GBC's cumulative one year interest rate-sensitivity gap
ratio was 123%. GBC's targeted ratio is 80% to 120% in this time horizon. This
indicates that GBC's interest-bearing assets will reprice during this period at
a rate faster than GBC's interest-earning liabilities. GBC was slightly outside
its targeted parameters, due primarily to the high percentage of the loan
portfolio consisting of construction loans with interest rates based on prime.
As the loan portfolio grows, the percentage of commercial loans will increase
and bring the GAP ratio within GBC's targeted ratio.

The following table sets forth the distribution of the repricing of GBC's
interest-earning assets and interest-bearing liabilities as of December 31,
1998, 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 earning assets and liabilities will mature or may reprice
in accordance with their contractual terms. However, the table does not
necessarily indicate the impact of general interest rate movements on the net
interest margin since the repricing of various categories of assets and
liabilities is subject to competitive pressures and the needs of GBC's
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.


                                      -21-
<PAGE>   24


<TABLE>
<CAPTION>

                                                           After         After
                                                           Three          One
                                                          Months        Year but
                                              Within       but           Within       After
                                               Three      Within          Five         Five
                                              Months     One Year         Years       Years        Total
                                                               (Dollars in Thousands)

<S>                                          <C>         <C>            <C>          <C>          <C>
Interest-earning assets:
     Federal funds sold                      $ 2,740      $    --       $     --     $     --     $  2,740
     Securities                                   --           --          4,009           --        4,009
     Loans                                    19,475        1,718          2,350          897       24,440
                                             -------      -------       --------     --------     --------

                                              22,215        1,718          6,359          897       31,189
                                             -------      -------       --------     --------     --------

Interest-bearing liabilities:
     Interest-bearing demand
          deposits                             6,809           --             --           --        6,809
     Savings                                   3,474           --             --           --        3,474
     Certificates, less than
                     $100,000                  1,043        2,644            182           --        3,869
     Certificates, $100,000
          and over                             3,393        2,151             --           --        5,544
                                             -------      -------       --------     --------     --------

                                              14,719        4,795            182           --       19,696
                                             -------      -------       --------     --------     --------

Interest rate sensitivity
     gap                                     $ 7,496      $(3,077)      $  6,177     $    897     $ 11,493
                                             =======      =======       ========     ========     ========
Cumulative interest rate
     sensitivity gap                         $ 7,496      $ 4,419       $ 10,596     $ 11,493
                                             =======      =======       ========     ========     
Interest rate sensitivity
     gap ratio                                  1.51          .36          34.94           -- 
                                             =======      =======       ========     ========     
Cumulative interest rate
     sensitivity gap ratio                      1.51         1.23           1.54         1.58
                                             =======      =======       ========     ========     
</TABLE>


Year 2000 Disclosures

The Year 2000 issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Systems that do not
properly recognize the Year 2000 could generate erroneous data or cause systems
to fail. GBC is heavily dependent on computer processing and telecommunication
systems in the daily conduct of business activities. In addition, GBC must rely
on intermediaries, vendors, and customers to appropriately modify their systems
in order that all may continue normal operations and operate without
significant disruption.

To address the Year 2000 problems, GBC formed a Year 2000 committee made up of
key employees headed up by the Chief Operations Officer. This committee has
been charged with the responsibility of assessing problems, overseeing
corrective actions, as well as testing the Year 2000 readiness of all
equipment, software, and applications.


                                      -22-
<PAGE>   25


Under the directions of the committee, GBC has conducted a comprehensive review
of its computer systems, programs, applications, and other electronic
components. The systems and components which were identified as mission
critical are being currently tested to insure Year 2000 compliance and will
continue to be tested throughout the remainder of 1999. In addition, GBC has
developed a contingency plan to insure Year 2000 risks are minimal. Based on
these reviews and tests, management does not believe the cost of Year 2000
compliance will be material to GBC's financial statements. Management also
believes that GBC is in substantial compliance with regulatory timetable
requirements regarding the Year 2000 issue.

Another area of Year 2000 concern is customer awareness and preparedness. In
particular, loan customers who are not Year 2000 compliant could experience
business interruptions which could affect their ability to repay debts owed to
the Bank. GBC has communicated with its customers in an effort to insure
awareness and understand the potential impact on their business. Loan customers
considered to have Year 2000 exposure are being required to complete a
questionnaire in order to assess their Year 2000 readiness and GBC's exposure.

GBC realizes that due to many factors, consumers may withdraw extra amounts of
money which could result in a liquidity issue for GBC. Additional liquidity has
been established to accommodate this issue. Cash balances will be closely
monitored throughout 1999, with extra emphasis placed during the fourth
quarter, to insure adequate liquidity.

The foregoing are forward-looking statements reflecting management's current
assessment and estimates with respect to GBC's Year 2000 compliance efforts and
the impact of Year 2000 issues on GBC's business and operations. Various
factors could cause actual plans and results to differ materially from those
contemplated by such assessments, estimates and forward-looking statements,
many of which are beyond the control of GBC. Some of these factors include, but
are not limited to representations by GBC's vendors and counterparties,
technological advances, economic considerations, and consumer perceptions.
GBC's Year 2000 compliance program is an ongoing process involving continual
evaluation and may be subject to change in response to new developments.


                                      -23-
<PAGE>   26


              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
assets, liabilities and stockholders' equity of GBC, the interest rates
experienced by GBC; the investment portfolio of GBC; the loan portfolio of GBC,
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 reserves for loan losses of GBC; types of deposits of GBC and
the return on equity and assets for GBC.



                                      -24-





<PAGE>   27


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

AVERAGE BALANCES

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

<TABLE>
<CAPTION>

                                                                         From October 31, 1997,
                                                                          Date of Commencement
                                                        Year Ended             of Operations,
                                                     December 31, 1998    to December 31, 1997
                                                             (Dollars in Thousands)

<S>                                                  <C>                 <C>
                   ASSETS

Cash and due from banks                                  $  1,041              $    64
Taxable securities                                          3,323                   --
Securities valuation account                                    3                   --
Federal funds sold                                          6,762                1,953
Loans (2)                                                  13,744                  222
Reserve for loan losses                                      (194)                  (1)
Other assets                                                  535                   43
                                                         --------              -------
                                                         $ 25,214              $ 2,281
                                                         ========              =======

Total interest-earning assets                            $ 23,829              $ 2,175
                                                         ========              =======

     LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits:
     Noninterest-bearing demand                          $  4,031              $   235
     Interest-bearing demand                                4,581                  211
     Savings                                                1,847                    7
     Time                                                   6,351                   58
                                                         --------              -------
              Total deposits                             $ 16,810              $   511

     Other liabilities                                        111                    2
                                                         --------              -------
              Total liabilities                            16,921                  513
                                                         --------              -------
     Stockholders' equity                                   8,293                1,768
                                                         --------              -------
                                                         $ 25,214              $ 2,281
                                                         ========              =======

     Total interest-bearing liabilities                  $ 12,779              $   276
                                                         ========              =======
</TABLE>

(1)      For each category, average balances were determined using the daily
         average balances during the year for 1998 and for the period from
         October 31, 1997, date of commencement of operations, to December 31,
         1997, for 1997.

(2)      There were no nonaccrual loans included in average loans for 1998 or
         1997.


                                      -25-
<PAGE>   28


INTEREST INCOME AND INTEREST EXPENSE

The following tables set forth the amount of GBC's 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. These rates do not include the time period
prior to the commencement of its banking operations.

<TABLE>
<CAPTION>

                                                                       Years Ended December 31,
                                                                    1998                     1997
                                                                          Average                  Average
                                                          Interest         Rate     Interest        Rate
                                                                         (Dollars in Thousands)

<S>                                                       <C>             <C>       <C>            <C>
     INTEREST INCOME:
Interest and fees on loans (1)                             $ 1,908        13.89%       $ 27        12.33%
Interest on taxable securities                                 206         6.20          --           --
Interest on Federal funds sold                                 370         5.47         107         5.48
Interest earned during the period
   prior to commencement of
   banking operations                                           --           --          65           --
                                                           -------                    -----             
Total interest income                                      $ 2,484        10.43         199         6.18
                                                           -------                    -----             

     INTEREST EXPENSE:
     Interest on interest-bearing
       demand deposits                                     $   171         3.74       $   6         2.85
     Interest on savings deposits (2)                           92         5.00          --         5.06
     Interest on time deposits                                 373         5.87           3         5.63
     Interest incurred during the period
        prior to commencement of
        banking operations                                      --           --          45           --
                                                           -------                    -----             
     Total interest expense                                    636         4.98          54         3.49
                                                           -------                    -----             

NET INTEREST INCOME                                        $ 1.848                    $ 145
                                                           =======                    =====

     Net interest spread                                                   5.45%                    2.69%
                                                                           ====                    =====
     Net yield on average interest-earning assets                          7.76%                    5.74%
                                                                           ====                    =====
</TABLE>


(1)      Interest and fees on loans includes $571,000 and $14,000 of loan fee
         income for the years ended December 31, 1998 and 1997, respectively.
         There was no interest income recognized on nonaccrual loans during
         1998 or 1997.

(2)      Interest expense on savings deposits in 1997 was less than $400.



                                      -26-
<PAGE>   29


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 GBC's 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 (1) change in volume (change
in volume multiplied by old rate); (2) change in rate (change in rate
multiplied by old volume); and (3) a combination of change in rate and change
in volume. 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.

<TABLE>
<CAPTION>
                                                                       Year Ended December 31,
                                                                            1998 vs. 1997
                                                                           Changes Due To:          
                                                                                            Increase
                                                                  Rate       Volume        (Decrease)
                                                                        (Dollars in Thousands)
<S>                                                               <C>        <C>            <C>
Increase (decrease) in:
     Income from interest-earning assets:
     Interest and fees on loans                                   $ 4        $ 1,877        $ 1,881
     Interest on taxable securities                                --            206            206
     Interest on Federal funds sold                                --            263            263
                                                                  ---        -------        -------
     Total interest income                                          4          2,346          2,350
                                                                  ---        -------        -------

     Expense from interest-bearing liabilities:
     Interest on interest-bearing
              demand deposits                                       2            163            165
     Interest on savings deposits                                  --             92             92
     Interest on time deposits                                     --            370            370
                                                                  ---        -------        -------
              Total interest expense                                2            625            627
                                                                  ---        -------        -------
              Net interest income                                 $ 2        $ 1,721        $ 1,723
                                                                  ===        =======        =======
</TABLE>

Interest income earned of $65,000 and interest expense incurred of $45,000
prior to the commencement of banking operations in 1997 have been excluded from
the above table.



                                      -27-
<PAGE>   30


                              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,
                                                         1998          1997
                                                      (Dollars in Thousands)

     <S>                                               <C>             <C>
     U.S. Government agencies                          $ 4,009         $ --
                                                       =======         ====
</TABLE>

MATURITIES

The amounts of securities in each category as of December 31, 1998 are shown in
the following table according to contractual maturity classifications (1) one
year or less, (2) after one year through five years, (3) after five years
through ten years and (4) after ten years.


<TABLE>
<CAPTION>

                                                                         After one year          After five years
                                                 One year or less      through five years      through ten years
                                                Amount   Yield (1)    Amount     Yield (1)    Amount      Yield (1)

<S>                                             <C>      <C>         <C>         <C>          <C>         <C>
U.S. Government
  agencies                                       $ --       --       $ 4,009      6.13%        $ --          --
                                                 ====                =======                   ====


                                                 After ten years            Total
                                                Amount   Yield (1)    Amount     Yield (1)
U.S. Government
  agencies                                       $ --       --       $ 4,009      6.13%      
                                                 ====                =======                 
</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.


                                      -28-
<PAGE>   31


                                 LOAN PORTFOLIO

TYPES OF LOANS

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

<TABLE>
<CAPTION>

                                                                                   December 31,
                                                                              1998              1997
                                                                             (Dollars in Thousands)  

         <S>                                                                <C>               <C>
         Commercial                                                         $  7,275          $   164
         Construction loans secured by real estate                            13,307              764
         Commercial loans secured by real estate                               1,496              525
         Consumer installment loans and other                                  2,362              417
                                                                            --------          -------
                                                                              24,440            1,870
         Less allowance for loan losses                                         (373)             (29)
                                                                            --------          -------
                       Net loans                                            $ 24,067          $ 1,841
                                                                            ========          =======
</TABLE>

MATURITIES AND SENSITIVITIES OF LOANS TO CHANGES IN INTEREST RATES

Total loans as of December 31, 1998 are shown in the following table according
to contractual maturity classifications (1) one year or less, (2) after one
year through five years, and (3) after five years.

<TABLE>
<CAPTION>

                                                                           (Dollars in Thousands)

         <S>                                                                       <C>
         Commercial
              One year or less                                                     $  4,665
              After one year through five years                                       2,318
              After five years                                                          292
                                                                                   --------
                                                                                      7,275

         Construction
              One year or less                                                     $ 13,099
              After one year through five years                                         208
              After five years                                                           --
                                                                                   --------
                                                                                     13,307

         Other
              One year or less                                                     $  2,027
              After one year through five years                                       1,384
              After five years                                                          447
                                                                                   --------
                                                                                      3,858
                                                                                   --------
                                                                                   $ 24,440
                                                                                   ========
</TABLE>


                                      -29-
<PAGE>   32


The following table summarizes loans at December 31, 1998 with the due dates
after one year which have predetermined and floating or adjustable interest
rates.

<TABLE>
<CAPTION>

                                                                           (Dollars in Thousands)
         <S>                                                                       <C>
         Predetermined interest rates                                              $ 2,651
         Floating or adjustable interest rates                                       1,998
                                                                                   -------
                                                                                   $ 4,649
                                                                                   =======
</TABLE>

RISK ELEMENTS

Information with respect to nonaccrual, past due, and restructured loans at
December 31, 1998 and 1997 is as follows:

<TABLE>
<CAPTION>

                                                                                December 31,
                                                                              1998        1997
                                                                            (Dollars in Thousands)

         <S>                                                                  <C>         <C>
         Nonaccrual loans                                                      $ 0         $ 0
         Loans contractually past due ninety
              days or more as to interest or
              principal payments and still accruing                              0           0
         Restructured loans                                                      0           0
         Loans, now current about which there are
              serious doubts as to the ability of the
              borrower to comply with loan repayment terms                       0           0
         Interest income that would have been recorded
              on nonaccrual and restructured loans under
              original terms                                                     0           0
         Interest income that was recorded on
              nonaccrual and restructured loans                                  0           0
</TABLE>


It is the policy of the Bank to discontinue the accrual of interest income
when, in the opinion of management, collection of such interest becomes
doubtful. This status is accorded such interest when (1) there is a significant
deterioration in the financial condition of the borrower and full repayment of
principal and interest is not expected and (2) the principal or interest is
more than ninety 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 which 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 which causes management to have serious doubts as
to the ability of such borrowers to comply with the loan repayment terms.


                                      -30-



<PAGE>   33


                        SUMMARY OF LOAN LOSS EXPERIENCE

The following table summarizes average loan balances for the year determined
using the daily average balances during the period of banking operations;
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 period to average loans.

<TABLE>
<CAPTION>

                                                                             Years Ended December 31,
                                                                                 1998           1997
                                                                              (Dollars in Thousands)

                  <S>                                                        <C>               <C>
                  Average amount of loans outstanding                        $ 13,744          $ 222
                                                                             ========          =====

                  Balance of allowance for loan losses
                       at beginning of period                                $     29          $  --
                                                                             --------          -----

                  Loans charged off
                       Commercial and financial                                    --             --
                  Real estate mortgage                                             --             --
                       Instalment                                                  --             --
                                                                             --------          -----
                                                                                   --             --
                                                                             --------          -----

                  Loans recovered
                       Commercial and financial                                    --             --
                       Real estate mortgage                                        --             --
                       Instalment                                                  --             --
                                                                             --------          -----
                                                                                   --             --
                                                                             --------          -----

                  Net charge-offs                                                  --             --
                                                                             --------          -----

                  Additions to allowance charged to operating
                       expense during period                                      344             29
                                                                             --------          -----

                  Balance of allowance for loan losses
                       at end of period                                      $    373          $  29
                                                                             ========          =====

                  Ratio of net loans charged off during the
                  period to average loans outstanding                             --%            --%
                                                                             ========          =====
</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. Management's evaluation of the loan portfolio includes a
periodic review of loan loss experience, current economic conditions which may
affect the borrower's ability to pay and the underlying collateral value of the
loans.


                                      -31-



<PAGE>   34


As of December 31, 1998 and 1997, management had made no allocations of its
allowance for loan losses to specific categories of loans. Based on
management's best estimate, the allocation of the allowance for loan losses to
types of loans, as of the indicated dates, is as follows:


<TABLE>
<CAPTION>

                                                          December 31, 1998                 December 31, 1997
                                                                  Percent of loans in               Percent of loans in
                                                                     each category                     each category
                                                        Amount       to total loans     Amount         to total loans
                                                                      (Dollars in Thousands)

<S>                                                     <C>       <C>                   <C>         <C>
Commercial                                               $  56             30%           $  3                 9%
Construction loans secured by real estate                  243             54              10                41
Commercial loans secured by real estate                     37              6               8                28
Consumer installment
     loans and other                                        37             10               8                22
                                                         -----           ----            ----               ---
                                                         $ 373            100%           $ 29               100%
                                                         =====           ====            ====               ===
</TABLE>


                                      -32-
<PAGE>   35


                                    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, for the period of banking operations is presented
below.(1)


<TABLE>
<CAPTION>
                                                                 Years Ended December 31,
                                                            1998                        1997
                                                   Amount          Percent     Amount          Percent
                                                                 (Dollars in Thousands)

<S>                                               <C>              <C>         <C>             <C>
Noninterest-bearing demand deposits               $  4,031            --%       $ 235             --%
Interest-bearing demand deposits                     4,581          3.74          211           2.85
Savings deposits                                     1,847          5.00            7           5.06
Time deposits                                        6,351          5.87           58           5.63
                                                  --------                      -----               
                                                  $ 16,810                      $ 511
                                                  ========                      =====
</TABLE>

(1)      Average balances were determined using the daily average balances
         during the year for 1998 and for the period from October 31, 1997,
         date of commencement of operations, to December 31, 1997 for 1997.

The amounts of time certificates of deposit issued in amounts of $100,000 or
more as of December 31, 1998 are shown below by category, which is based on
time remaining until maturity of (1) three months or less, (2) over three
through six months, (3) over six through twelve months, and (4) over twelve
months.

<TABLE>
<CAPTION>
                                                                 (Dollars in Thousands)

     <S>                                                                    <C>
     Three months or less                                                   $ 3,393
     Over three months through six months                                       605
     Over six through twelve months                                           1,546
     Over twelve months                                                          --
                                                                            -------
              Total                                                         $ 5,544
                                                                            =======
</TABLE>


                   RETURN ON ASSETS AND STOCKHOLDERS' EQUITY

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

<TABLE>
<CAPTION>
                                                         Years Ended December 31,
                                                         1998                1997

     <S>                                                <C>                 <C>
     Return on assets (1)                               (2.01)%             (5.12)%
     Return on equity (2)                               (6.12)              (6.61)
     Dividend payout ratio (3)                             --                  --
     Equity to assets ratio (4)                         32.89               77.51
</TABLE>

(1)      Net loss divided by average total assets.
(2)      Net loss divided by average equity.
(3)      Dividends declared per share of common stock divided by net loss per 
         share.
(4)      Average common equity divided by average total assets.

                                      -33-
<PAGE>   36
ITEM 7. FINANCIAL STATEMENTS

                               GBC BANCORP, INC.
                                 AND SUBSIDIARY

                          CONSOLIDATED FINANCIAL REPORT
                                DECEMBER 31, 1998

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

                                TABLE OF CONTENTS


<TABLE>
<CAPTION>
                                                                                                                        PAGE
<S>                                                                                                                     <C>
INDEPENDENT AUDITOR'S REPORT...............................................................................................1

FINANCIAL STATEMENTS

     CONSOLIDATED BALANCE SHEETS...........................................................................................2
     CONSOLIDATED STATEMENTS OF OPERATIONS.................................................................................3
     CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS.........................................................................4
     CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT).............................................................5
     CONSOLIDATED STATEMENTS OF CASH FLOWS.................................................................................6
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.........................................................................7-27
</TABLE>

                                      -34-
<PAGE>   37


                          INDEPENDENT AUDITOR'S REPORT

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


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, 1998 and 1997, and the related
consolidated statements of operations, comprehensive loss, stockholders' equity
(deficit), and cash flows for the years then ended. 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 generally accepted auditing
standards. 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, 1998 and 1997, and the results of their
operations and their cash flows for the years then ended, in conformity with
generally accepted accounting principles.


         As described in Note 1 to the consolidated financial statements, the
Company changed its method of accounting for organization costs.

                                        /s/ Mauldin S. Jenkins LLC

Atlanta, Georgia
February 18, 1999


<PAGE>   38

                                GBC BANCORP, INC.
                                 AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 1998 AND 1997

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

<TABLE>
<CAPTION>
                                  ASSETS                         1998             1997
                                                              -----------      -----------
<S>                                                           <C>              <C>
Cash and due from banks                                       $ 1,600,046      $   959,117
Federal funds sold                                              2,740,000        9,700,000
Securities available-for-sale                                   4,008,520                0

Loans                                                          24,439,863        1,870,469
Less allowance for loan losses                                    372,683           28,696
                                                              -----------      -----------
          Loans, net                                           24,067,180        1,841,773

Equipment                                                         612,166          139,093
Other assets                                                      296,928          209,932
                                                              -----------      -----------

          TOTAL ASSETS                                        $33,324,840      $12,849,915
                                                              ===========      ===========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits
    Noninterest-bearing demand                                $ 5,311,665      $ 1,065,570
    Interest-bearing demand                                     6,808,561        1,829,901
    Savings                                                     3,473,772          108,496
    Time, $100,000 and over                                     5,544,381          900,000
    Other time                                                  3,869,148          367,675
                                                              -----------      -----------
           Total deposits                                      25,007,527        4,271,642
    Other liabilities                                             263,047           27,798
                                                              -----------      -----------
          TOTAL LIABILITIES                                    25,270,574        4,299,440
                                                              -----------      -----------

Commitments and contingent liabilities

Stockholders' equity
Common stock, par value $1; 3,000,000 shares authorized;
    950,080 issued and outstanding                                950,080          950,080
Capital surplus                                                 8,526,827        8,526,827
Accumulated deficit                                            (1,434,200)        (926,432)
Accumulated other comprehensive income                             11,559                0
                                                              -----------      -----------

          TOTAL STOCKHOLDERS' EQUITY                            8,054,266        8,550,475
                                                              -----------      -----------

          TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY          $33,324,840      $12,849,915
                                                              ===========      ===========
</TABLE>

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.




                                       2
<PAGE>   39


                                GBC BANCORP, INC.
                                 AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                     YEARS ENDED DECEMBER 31, 1998 AND 1997

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

<TABLE>
<CAPTION>
                                                                 1998            1997
                                                              ----------      ----------
<S>                                                           <C>             <C>
INTEREST INCOME
    Loans                                                     $1,908,548      $   27,325
    Taxable securities                                           206,090               0
    Federal funds sold                                           369,851         172,037
                                                              ----------      ----------
          TOTAL INTEREST INCOME                                2,484,489         199,362
                                                              ----------      ----------
INTEREST EXPENSE
    Deposits                                                     636,249           9,623
    Other borrowings                                                   0          45,120
                                                              ----------      ----------
          TOTAL INTEREST EXPENSE                                 636,249          54,743
                                                              ----------      ----------

          NET INTEREST INCOME                                  1,848,240         144,619
PROVISION FOR LOAN LOSSES                                        343,987          28,696
                                                              ----------      ----------
          NET INTEREST INCOME AFTER PROVISION FOR
              LOAN LOSSES                                      1,504,253         115,923
                                                              ----------      ----------

OTHER INCOME
    Service charges on deposit accounts                           25,630           1,174
    Other operating income                                        60,645          31,750
                                                              ----------      ----------
          TOTAL OTHER INCOME                                      86,275          32,924
                                                              ----------      ----------

OTHER EXPENSES
    Salaries and employee benefits                             1,123,194         635,466
    Equipment and occupancy expenses                             371,546          84,402
    Other operating expenses                                     436,672         116,873
                                                              ----------      ----------
          TOTAL OTHER EXPENSES                                 1,931,412         836,741
                                                              ----------      ----------

          LOSS BEFORE INCOME TAXES AND CUMULATIVE
            EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE          (340,884)       (687,894)

INCOME TAX EXPENSE                                                     0               0
                                                              ----------      ----------

          Loss before cumulative effect of a
            CHANGE IN ACCOUNTING PRINCIPLE                      (340,884)       (687,894)

CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE           (166,884)              0
                                                              ----------      ----------

                    NET LOSS                                   $(507,768)      $(687,894)
                                                              ==========      ==========

BASIC AND DILUTED LOSSES PER COMMON SHARE BEFORE
   CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE      $    (0.36)      $   (4.26)

CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE              (0.17)           0.00
                                                              ----------      ----------

BASIC AND DILUTED LOSSES PER COMMON SHARE                     $    (0.53)     $    (4.26)
                                                              ==========      ==========
</TABLE>

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.



                                       3
<PAGE>   40


                                GBC BANCORP, INC.
                                 AND SUBSIDIARY

                  CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
                     YEARS ENDED DECEMBER 31, 1998 AND 1997

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

<TABLE>
<CAPTION>
                                                             1998            1997
                                                          ---------       ---------
<S>                                                       <C>             <C>
NET LOSS                                                  $(507,768)      $(687,894)

OTHER COMPREHENSIVE INCOME:

        Unrealized holding gains on securities
            available-for-sale arising during period         11,559              --
                                                          ---------       ---------

COMPREHENSIVE LOSS                                        $(496,209)      $(687,894)
                                                          =========       =========
</TABLE>


SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.



                                       4
<PAGE>   41


                                GBC BANCORP, INC.
                                 AND SUBSIDIARY

            CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                     YEARS ENDED DECEMBER 31, 1998 AND 1997

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

<TABLE>
<CAPTION>
                                                                                                   ACCUMULATED
                                       COMMON STOCK                                                   OTHER            TOTAL
                                  ------------------------        CAPITAL         ACCUMULATED     COMPREHENSIVE     STOCKHOLDERS'
                                  SHARES         PAR VALUE        SURPLUS           DEFICIT          INCOME       EQUITY (DEFICIT)
                                  ------         ---------        -------           -------          ------       ----------------
<S>                               <C>            <C>             <C>              <C>             <C>             <C>
BALANCE, DECEMBER 31, 1996             80         $    80        $      720       $  (238,538)      $     0         $ (237,738)
    Net loss                            0               0                 0          (687,894)            0           (687,894)
    Issuance of common stock      950,000         950,000         8,550,000                 0             0          9,500,000
    Stock issue costs                   0               0           (23,893)                0             0            (23,893)
                                  -------         -------        ----------       -----------       -------         ----------
BALANCE, DECEMBER 31, 1997        950,080         950,080         8,526,827          (926,432)            0          8,550,475
    Net loss                            0               0                 0          (507,768)            0           (507,768)
    Other comprehensive income          0               0                 0                 0        11,559             11,559
                                  -------         -------        ----------       -----------       -------         ----------
BALANCE, DECEMBER 31, 1998        950,080         $950,080       $8,526,827       $(1,434,200)      $11,559         $8,054,266
                                  =======         =======        ==========       ===========       =======         ==========
</TABLE>

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.



                                       5
<PAGE>   42

                                GBC BANCORP, INC.
                                 AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     YEARS ENDED DECEMBER 31, 1998 AND 1997

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

<TABLE>
<CAPTION>
                                                                       1998               1997
                                                                   ------------       ------------
<S>                                                                <C>                <C>
OPERATING ACTIVITIES
    Net loss                                                       $   (507,768)      $   (687,894)
    Adjustments to reconcile net loss to net cash
        provided by (used in) operating activities:
        Depreciation                                                    117,320              5,226
        Write-off/amortization of organization costs                    166,884              6,313
        Provision for loan losses                                       343,987             28,696
        Increase in interest receivable                                (240,513)           (17,677)
        Increase in interest payable                                    196,546              4,953
        Other operating activities                                       25,336             (2,526)
                                                                   ------------       ------------

              Net cash provided by (used in)
                  operating activities                                  101,792           (662,909)
                                                                   ------------       ------------

INVESTING ACTIVITIES
    Purchases of securities available-for-sale                       (4,496,563)                --
    Proceeds from maturities of securities available-for-sale           499,602                 --
    Net (increase) decrease in Federal funds sold                     6,960,000         (9,700,000)
    Net increase in loans                                           (22,569,394)        (1,870,469)
    Purchase of equipment                                              (590,393)          (112,534)
    Increase in organization costs                                           --            (56,540)
                                                                   ------------       ------------

            Net cash used in investing activities                   (20,196,748)       (11,739,543)
                                                                   ------------       ------------

FINANCING ACTIVITIES
    Net increase in deposits                                         20,735,885          4,271,642
    Repayment of other borrowings                                            --           (386,980)
    Net proceeds from sale of common stock                                   --          9,476,107
                                                                   ------------       ------------

            Net cash provided by financing activities                20,735,885         13,360,769
                                                                   ------------       ------------

Net increase in cash and due from banks                                 640,929            958,317

Cash and due from banks at beginning of year                            959,117                800
                                                                   ------------       ------------

Cash and due from banks at end of year                             $  1,600,046       $    959,117
                                                                   ============       ============

SUPPLEMENTAL DISCLOSURE
    Cash paid for interest                                         $    439,703       $     49,790

NONCASH TRANSACTION
    Unrealized gains on securities available-for-sale              $    (11,559)      $         --
</TABLE>


SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.



                                       6
<PAGE>   43


                                GBC BANCORP, INC.
                                 AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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



NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         NATURE OF BUSINESS

         GBC Bancorp, Inc. (the "Company") is a bank holding company whose
         business is conducted by its wholly-owned subsidiary, Gwinnett Banking
         Company (the "Bank"). The Bank is a commercial bank located in
         Lawrenceville, Gwinnett County, Georgia. The Bank provides a full range
         of banking services in its primary market area of Gwinnett County and
         surrounding counties. The Bank commenced its operations on October 31,
         1997.

         BASIS OF PRESENTATION

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

         The preparation of financial statements in conformity with generally
         accepted accounting principles requires management to make estimates
         and assumptions that affect the reported amounts of assets and
         liabilities and disclosures of contingent assets and liabilities at the
         date of the consolidated financial statements and the reported amounts
         of revenues and expenses during the reporting period. Actual results
         could differ from those estimates.

         CASH AND DUE FROM BANKS

         Cash on hand, cash items in process of collection, and amounts due from
         banks are included in cash and due from banks.

         The Company maintains amounts due from banks which, at times, may
         exceed Federally insured limits. The Company has not experienced any
         losses in such accounts.



                                       7
<PAGE>   44


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         SECURITIES

         Securities are classified based on management's intention on the date
         of purchase. Securities which management has the intent and ability to
         hold to maturity would be classified as held-to-maturity and reported
         at amortized cost. All other securities are classified as
         available-for-sale and carried at fair value with net unrealized gains
         and losses included in stockholders' equity.

         Interest and dividends on securities, including amortization of
         premiums and accretion of discounts, are included in interest income.
         Realized gains and losses from the sale of securities are determined
         using the specific identification method.

         LOANS

         Loans are carried at their principal amounts outstanding less deferred
         fees and the allowance for loan losses. Interest income on loans is
         credited to income based on the principal amount outstanding.

         Loan origination fees and costs incurred for loans are deferred and
         recognized as interest income over the estimated life of the loan.

         The allowance for loan losses is maintained at a level that management
         believes to be adequate to absorb potential losses in the loan
         portfolio. Management's determination of the adequacy of the allowance
         is based on an evaluation of the portfolio, current economic
         conditions, volume, growth, composition of the loan portfolio, and
         other risks inherent in the portfolio. This evaluation is inherently
         subjective as it requires material estimates that are susceptible to
         significant change including the amounts and timing of future cash
         flows expected to be received on impaired loans. In addition,
         regulatory agencies, as an integral part of their examination process,
         will periodically review the Company's allowance for loan losses, and
         may require the Company to record additions to the allowance based on
         their judgment about information available to them at the time of their
         examinations.

         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. When accrual of interest is discontinued, all unpaid accrued
         interest is reversed. Interest income is subsequently recognized only
         to the extent cash payments are received.



                                       8
<PAGE>   45

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         LOANS (CONTINUED)

         A loan is impaired when it is probable the Company will be unable to
         collect all principal and interest payments due in accordance with the
         terms of the loan agreement. Individually identified impaired loans are
         measured based on the present value of payments expected to be
         received, using the contractual loan rate as the discount rate.
         Alternatively, measurement may be based on observable market prices or,
         for loans that are solely dependent on the collateral for repayment,
         measurement may be based on the fair value of the collateral. If the
         recorded investment in the impaired loan exceeds the measure of fair
         value, a valuation allowance is established as a component of the
         allowance for loan losses. Changes to the valuation allowance are
         recorded as a component of the provision for loan losses.

         EQUIPMENT

         Equipment is stated at cost less accumulated depreciation. Depreciation
         is computed principally by the straight-line method over the estimated
         useful lives of the assets.

         INCOME TAXES

         Income tax expense consists of current and deferred taxes. Current
         income tax provisions approximate taxes to be paid or refunded for the
         applicable year. 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 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.

         Recognition of deferred tax balance sheet amounts is based on
         management's belief that it is more likely than not that the tax
         benefit associated with certain temporary differences, tax operating
         loss carryforwards and tax credits will be realized. A valuation
         allowance is recorded for those deferred tax items for which it is more
         likely than not that realization will not occur in the near term.

         The Company and the Bank file a consolidated income tax return. Each
         entity provides for income taxes based on its contribution to income
         taxes (benefits) of the consolidated group.



                                       9
<PAGE>   46

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         LOSSES PER COMMON SHARE

         Basic losses per common share are computed by dividing net loss by the
         weighted average number of shares of common stock outstanding. Diluted
         losses per share are computed by dividing net loss 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.

         CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE

         In April of 1998, the Accounting Standards Executive Committee issued
         Statement of Position ("SOP") 98-5, "Reporting on the Costs of Start Up
         Activities". SOP 98-5 requires that costs of start-up activities and
         organization costs be expensed as incurred. SOP 98-5 becomes effective
         for financial statements for fiscal years beginning after December 15,
         1998. However, early adoption is encouraged for fiscal years in which
         financial statements have not been issued. During 1998, the Company
         wrote off $166,884 of unamortized organization costs upon adoption of
         SOP 98-5. Prior to the adoption of SOP 98-5, the Company was amortizing
         these costs over a five year period.

         COMPREHENSIVE INCOME

         In 1998, the Company adopted Statement of Financial Standards ("SFAS")
         No. 130, "Reporting Comprehensive Income". This statement establishes
         standards for reporting and display of comprehensive income and its
         components in the financial statements. This statement requires that
         all items that are required to be recognized under accounting standards
         as components of comprehensive income be reported in a financial
         statement that is displayed in equal prominence with the other
         financial statements. The Company has elected to report comprehensive
         income in a separate financial statement titled "Consolidated
         Statements of Comprehensive Loss". SFAS No. 130 describes comprehensive
         income as the total of all components of comprehensive income including
         net loss. This statement uses other comprehensive income to refer to
         revenues, expenses, gains and losses that under generally accepted
         accounting principles are included in comprehensive income but excluded
         from net income. Currently, the Company's other comprehensive income
         consists of items previously reported directly in equity under SFAS No.
         115, "Accounting for Certain Investments in Debt and Equity
         Securities". The adoption of this statement did not affect the
         Company's financial position, results of operations or cash flows.



                                       10
<PAGE>   47

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         RECENT ACCOUNTING PRONOUNCEMENTS

         In June 1998, Financial Accounting Standards Board issued SFAS No. 133,
         "Accounting for Derivative Instruments and Hedging Activities". This
         statement is required to be adopted for fiscal years beginning after
         June 15, 1999. However, the statement permits early adoption as of the
         beginning of any fiscal quarter after its issuance. The Company expects
         to adopt this statement effective January 1, 2000. SFAS No. 133
         requires the Company to recognize all derivatives as either assets or
         liabilities in the balance sheet at fair value. For derivatives that
         are not designated as hedges, the gain or loss must be recognized in
         earnings in the period of change. For derivatives that are designated
         as hedges, changes in the fair value of the hedged assets, liabilities,
         or firm commitments must be recognized in earnings or recognized in
         other comprehensive income until the hedged item is recognized in
         earnings, depending on the nature of the hedge. The ineffective portion
         of a derivative's change in fair value must be recognized in earnings
         immediately. Management does not believe the adoption of SFAS No. 133
         will have a significant effect on the Company's earnings or financial
         position.


NOTE 2.  SECURITIES

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


<TABLE>
<CAPTION>
                                                                 GROSS           GROSS
                                             AMORTIZED        UNREALIZED       UNREALIZED            FAIR
                                                COST             GAINS           LOSSES             VALUE
                                           ---------------   --------------   --------------    ---------------
         <S>                                 <C>              <C>              <C>                 <C>
         SECURITIES AVAILABLE-FOR-SALE
            DECEMBER 31, 1998:
            U. S. GOVERNMENT AND
               AGENCY SECURITIES             $3,996,961         $11,559            $--             $4,008,520
                                             ==========         =======            ===             ==========
</TABLE>

         There were no sales of securities during 1998.



                                       11
<PAGE>   48

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


NOTE 2.  SECURITIES (CONTINUED)

         The amortized cost and fair value of securities as of December 31, 1998
         by contractual maturity are shown below.

<TABLE>
<CAPTION>
                                                                              SECURITIES AVAILABLE-FOR-SALE
                                                                              -----------------------------
                                                                               AMORTIZED            FAIR
                                                                                  COST             VALUE
                                                                               ----------        ----------
         <S>                                                                   <C>               <C>
         Due from one year to five years                                       $3,996,961        $4,008,520
                                                                               ==========        ==========
</TABLE>

         Securities with a carrying value of $500,000 at December 31, 1998 were
         pledged to secure public deposits and for other purposes.


NOTE 3.  LOANS AND ALLOWANCE FOR LOAN LOSSES

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                            1998               1997
                                                        -----------        ----------
         <S>                                            <C>                <C>
         Commercial                                     $ 7,275,141        $  164,450
         Commercial loans secured by real estate          1,606,074           525,150
         Construction loans secured by real estate       13,307,286           806,590
         Consumer instalment and other                    2,361,648           416,876
                                                        -----------        ----------
                                                         24,550,149         1,913,066
         Deferred fees                                     (110,286)          (42,597)
         Allowance for loan losses                         (372,683)          (28,696)
                                                        -----------        ----------
         Loans, net                                     $24,067,180        $1,841,773
                                                        ===========        ==========
</TABLE>



                                       12
<PAGE>   49

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


NOTE 3.  LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)

         Changes in the allowance for loan losses are as follows:

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                                 ------------
                                                              1998          1997
                                                            --------      -------
         <S>                                                <C>           <C>
         BALANCE, BEGINNING OF YEAR                         $ 28,696      $    --
            Provision for loan losses                        343,987       28,696
            Loans charged off                                     --           --
            Recoveries of loans previously charged off            --           --
                                                            --------      -------
         BALANCE, END OF YEAR                               $372,683      $28,696
                                                            ========      =======
</TABLE>

         Management has identified no amounts of impaired loans as defined by
         SFAS No. 114, ("Accounting by Creditors for Impairment of a Loan").

         The Company has granted loans to certain directors, executive officers,
         and their related entities. 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
         involved. Changes in related party loans for the year ended December
         31, 1998 are as follows:

<TABLE>
         <S>                                          <C>
         BALANCE, BEGINNING OF YEAR                   $       --
            Advances                                   2,412,501
            Repayments                                  (126,859)
                                                      ----------
         BALANCE, END OF YEAR                         $2,285,642
                                                      ==========
</TABLE>


NOTE 4.  EQUIPMENT

         Equipment is summarized as follows:

<TABLE>
<CAPTION>
                                                      DECEMBER 31,
                                                      ------------
                                                   1998           1997
                                                 --------       --------
         <S>                                     <C>            <C>
         Equipment                               $734,712       $144,319
         Accumulated depreciation                (122,546)        (5,226)
                                                 --------       --------
                                                 $612,166       $139,093
                                                 ========       ========
                                                                        
</TABLE>



                                       13
<PAGE>   50

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


NOTE 5.  DEPOSITS

         At December 31, 1998, scheduled maturities of time deposits are as
         follows:

<TABLE>
         <S>                                   <C>
         1999                                  $9,231,237
         2000                                      38,521
         2001                                          --
         2002                                      25,000
         2003                                     118,771
                                               ----------
                                               $9,413,529
                                               ==========
</TABLE>

         At December 31, 1998, the Company had related party deposits of
         $2,549,876.


NOTE 6.  INCOME TAXES

         Income tax expense consists of the following:

<TABLE>
<CAPTION>
                                                   DECEMBER 31,
                                                   ------------
                                               1998            1997
                                            ---------       ---------

         <S>                                <C>             <C>
         Current                            $ (65,289)      $ (60,233)
         Deferred                            (107,012)       (173,651)
         Change in valuation allowance        172,301         233,884
                                            ---------       ---------
         Income tax expense                 $      --       $      --
                                            =========       =========
</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>
                                                                 DECEMBER 31,
                                             ---------------------------------------------------
                                                       1998                        1997
                                             ----------------------       ----------------------
                                               AMOUNT       PERCENT         AMOUNT       PERCENT
                                             ---------      -------       ---------      -------
         <S>                                 <C>            <C>           <C>            <C>
         Income taxes at statutory rate      $(172,641)      (34)%        $(233,884)      (34)%
         Change in valuation allowance         172,301        34            233,884        34
         Other                                     340        --                 --        --
                                             ---------       ---          ---------       ---
         Income tax expense                  $      --        --%          $     --        --%
                                             =========       ===          =========       ===
</TABLE>



                                       14
<PAGE>   51

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


NOTE 6.  INCOME TAXES (CONTINUED)

         The components of deferred income taxes are as follows:

<TABLE>
<CAPTION>
                                                            DECEMBER 31,
                                                     -------------------------
                                                        1998            1997
                                                     ---------       ---------
         <S>                                         <C>             <C>
         Deferred tax assets:
           Loan loss reserves                        $  88,310       $      --
           Loan fees                                    37,497       $  14,483
           Preopening and organization expenses        245,344         252,222
           Net operating loss carryforward             125,522          60,233
           Other                                           102             342
                                                     ---------       ---------
                                                       496,775         327,280

         Valuation allowance                          (483,358)       (314,987)
                                                     ---------       ---------
                                                        13,417          12,293
                                                     ---------       ---------

         Deferred tax liabilities:
           Depreciation                                  9,487             852
           Loan loss reserves                               --          11,441
           Securities available-for-sale                 3,930              --
                                                     ---------       ---------
                                                        13,417          12,293
                                                     ---------       ---------

         Net deferred taxes                          $      --       $      --
                                                     =========       =========
</TABLE>

         At December 31, 1998, the Company has available net operating loss
         carryforwards of $369,182 for Federal income tax purposes. If unused,
         the carryforwards will expire beginning in 2007.


NOTE 7.  RELATED PARTY TRANSACTIONS AND LEASES

         To facilitate the formation of the Company and the Bank, the organizers
         formed Gwinnett Banking Company Joint Venture (the Joint Venture). The
         Joint Venture established a line of credit with an independent bank for
         the purpose of paying organization and preopening expenses for the
         Company and the Bank, and the expenses of the Company's common stock
         offering. The liability of the Joint Venture was repaid in 1997 from
         proceeds of the Company's common stock offering. The Joint Venture was
         liquidated upon completion of the stock offering.



                                       15
<PAGE>   52

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


NOTE 7.  RELATED PARTY TRANSACTIONS AND LEASES (CONTINUED)

         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 lease agreement also
         requires the Company to pay normal operating and occupancy expenses of
         the facilities. The total minimum rental commitment under this lease at
         December 31, 1998 is due as follows:

<TABLE>
         <S>                                                         <C>
         During the next five years                                  $1,194,150
         During the remaining term of the lease                       2,328,593
                                                                     ----------
                                                                     $3,522,743
                                                                     ==========
</TABLE>

         Total rental expense is summarized as follows:

<TABLE>
<CAPTION>
                                                      DECEMBER 31,
                                                 ----------------------
                                                   1998          1997
                                                 --------      --------

         <S>                                     <C>           <C>
         GBC Properties, LLC                     $ 59,708      $     --
         Other third parties                       58,293        43,902
                                                 --------      --------
                                                 $118,001      $ 43,902
                                                 ========      ========
</TABLE>



                                       16
<PAGE>   53

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


NOTE 8.  STOCK OPTIONS

         The Company has reserved 180,000 shares of common stock for issuance to
         key employees and directors under an incentive stock option plan. These
         options granted in 1998 are exercisable at a price of $10 and expire
         ten years from the grant date.

         Other pertinent information related to the options is as follows:

<TABLE>
<CAPTION>
                                                                            DECEMBER 31,
                                                          -----------------------------------------------
                                                                 1998                         1997
                                                          --------------------      ---------------------
                                                                      WEIGHTED-                 WEIGHTED-
                                                                      AVERAGE                    AVERAGE
                                                                      EXERCISE                  EXERCISE
                                                          NUMBER       PRICE        NUMBER       PRICE
                                                          ------       -----        ------       -----
         <S>                                              <C>         <C>           <C>         <C>
         Under option, beginning of year                      --      $   --            --         $--
            Granted                                       60,000       10.00            --          --
            Exercised                                         --          --            --          --
            Terminated                                        --          --            --          --
                                                          ------                     -----
         Under option and exercisable, end of year        60,000       10.00            --          --
                                                          ======                     =====

         Weighted average remaining contractual life          10                        --
                                                          ======                     =====

         Weighted average fair value of
            options granted during the year               $ 3.97                     $  --
                                                          ======                     =====
</TABLE>

         As permitted by SFAS No. 123, ("Accounting for Stock-Based
         Compensation"), the Company recognizes compensation cost for
         stock-based employee compensation awards in accordance with APB Opinion
         No. 25, ("Accounting for Stock Issued to Employees"). As allowed by APB
         Opinion No. 25, the Company recognized no compensation cost for
         stock-based employee compensation awards for the year ended December
         31, 1998. If the Company had recognized compensation cost in accordance
         with SFAS No. 123, net loss and losses per share would have been
         increased as follows:



                                       17
<PAGE>   54

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


NOTE 8.  STOCK OPTIONS (CONTINUED)

<TABLE>
<CAPTION>
                                                          DECEMBER 31, 1998
                                                      ---------------------------
                                                                     BASIC AND
                                                                   DILUTED LOSSES
                                                       NET LOSS      PER SHARE
         <S>                                          <C>          <C>
         As reported                                  $(507,768)      $(0.53)
         Stock-based compensation,
            net of related tax effect                  (157,145)       (0.16)
                                                      ---------       ------
         As adjusted                                  $(664,913)      $(0.69)
                                                      =========       ======
</TABLE>

         The fair value of the options granted during the year was based upon
         the Black-Scholes method of valuing options using the following
         weighted-average assumptions:

<TABLE>
         <S>                                                                   <C>
         Risk-free interest rate                                                  5.12%
         Expected life of the options                                          10 Years
         Expected dividends (as a percent of the fair value of the stock)            0%
         Volatility                                                                  0%
</TABLE>

NOTE 9.  LOSSES PER COMMON SHARE

         The following is a reconciliation of net loss and weighted-average
         shares outstanding used in determining basic and diluted losses per
         common share:

<TABLE>
<CAPTION>
                                                                   YEAR ENDED DECEMBER 31, 1998
                                                                   ----------------------------
                                                              NET        WEIGHTED-AVERAGE    PER SHARE
                                                              LOSS            SHARES          AMOUNT
                                                              ----            ------          ------
         <S>                                               <C>               <C>              <C>
         BASIC LOSSES PER COMMON SHARE                     $(507,768)        958,080          $(0.53)
                                                                                              ======
         EFFECT OF DILUTIVE SECURITIES
            Stock options                                         --              --              --
                                                           ---------         -------
         DILUTED LOSSES PER COMMON SHARE                   $(507,768)        958,080          $(0.53)
                                                           =========         =======          ======
</TABLE>



                                       18
<PAGE>   55

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


NOTE 9.  LOSSES PER COMMON SHARE (CONTINUED)

         Because the exercise price of the stock options approximate the fair
         value of the Company's common stock, the stock options have no dilutive
         effect.

         For the year ended December 31, 1997, the weighted-average shares
         outstanding was 161,450. The Company had no dilutive securities in
         1997.


NOTE 10. COMMITMENTS AND CONTINGENT LIABILITIES

         In the normal course of business, the Company has entered into
         off-balance-sheet financial instruments which are not reflected in the
         financial statements. These financial instruments include commitments
         to extend credit and standby letters of credit. Such financial
         instruments are included in the financial statements when funds are
         disbursed or the instruments become payable. These instruments involve,
         to varying degrees, elements of credit risk in excess of the amount
         recognized in the balance sheet.

         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. A summary of the Company's commitments is
         as follows:

<TABLE>
<CAPTION>
                                                                   DECEMBER 31,
                                                           ----------------------------
                                                               1998             1997
                                                           -----------      -----------
         <S>                                               <C>              <C>
         Letters of credit                                 $    26,605      $        --
         Commitments to extend credit                       16,080,774        3,366,000
                                                           -----------      -----------
                                                           $16,107,379      $ 3,366,000
                                                           ===========      ===========
</TABLE>



                                       19
<PAGE>   56

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


NOTE 10. COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)

         Commitments to extend credit 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 credit risk involved in issuing these financial
         instruments is essentially the same as that involved in extending loans
         to customers. The Company evaluates each customer's creditworthiness on
         a case-by-case basis. The amount of collateral obtained, if deemed
         necessary by the Company upon extension of credit, is based on
         management's credit evaluation of the customer. Collateral held varies
         but may include real estate and improvements, marketable securities,
         accounts receivable, inventory, equipment, and personal property.

         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.

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

         YEAR 2000 DISCLOSURES

         The Year 2000 issue is the result of computer programs being written
         using two digits rather than four to define the applicable year.
         Systems that do not properly recognize the year "2000" could generate
         erroneous data or cause systems to fail. The Company is heavily
         dependent on computer processing and telecommunication systems in the
         daily conduct of business activities. In addition, the Company must
         rely on intermediaries, vendors and customers to appropriately modify
         their systems in order that all may continue normal operations and
         operate without significant disruptions. The Company has conducted a
         review of its computer systems to identify the systems that could be
         affected by the Year 2000 issue. The Company presently believes that
         the Year 2000 issue will not pose significant operational problems for
         the Company or have a material adverse effect on future operating
         results. However, absolute assurance cannot be given that; (1) failure
         of any of the Company's systems will not have a material impact on
         operations, or (2) failure of any other companies' systems with whom
         the Company conducts business will not have a material impact on
         operations.


                                       20
<PAGE>   57

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


NOTE 11. 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.

         Sixty-one percent 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, as a matter of policy, does not generally extend credit to
         any single borrower or group of related borrowers in excess of 25% of
         the lesser of statutory capital or net assets as defined, or
         approximately $2,025,000.


NOTE 12. 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,
         1998, no dividends could be declared without regulatory approval.

         The Company and the Bank are subject to various regulatory capital
         requirements administered by the federal banking agencies. Failure to
         meet minimum capital requirements can initiate certain mandatory, and
         possibly additional discretionary actions by regulators that, if
         undertaken, could have a direct material effect on the financial
         statements. Under capital adequacy guidelines and the regulatory
         framework for prompt corrective action, the Company and Bank must meet
         specific capital guidelines that involve quantitative measures of the
         assets, liabilities, and certain off-balance-sheet items as calculated
         under regulatory accounting practices. The Company and Bank's 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 and of
         Tier I capital to average assets. Management believes, as of December
         31, 1998, the Company and the Bank meet all capital adequacy
         requirements to which they are subject.



                                       21
<PAGE>   58

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


NOTE 12. REGULATORY MATTERS (CONTINUED)

         As of December 31, 1998, the most recent notification from the FDIC
         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.

<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, 1998:
         TOTAL CAPITAL (TO RISK WEIGHTED
         ASSETS):
            CONSOLIDATED                          $8,365      32.50%       $2,060      8%       $2,574        10%
            BANK                                  $8,040      31.24%       $2,060      8%       $2,574        10%
         TIER I CAPITAL (TO RISK WEIGHTED
         ASSETS):
            CONSOLIDATED                          $8,043      31.25%       $1,030      4%       $1,545         6%
            BANK                                  $7,718      29.99%       $1,030      4%       $1,545         6%
         TIER I CAPITAL (TO AVERAGE ASSETS):
            CONSOLIDATED                          $8,043      25.77%       $1,249      4%       $1,561         5%
            BANK                                  $7,718      24.73%       $1,249      4%       $1,561         5%

         DECEMBER 31, 1997:
         Total Capital (to Risk Weighted
         Assets):
            Consolidated                          $8,413     201.41%       $  335      8%       $  418        10%
            Bank                                  $8,052     192.77%       $  335      8%       $  418        10%
         Tier I Capital (to Risk Weighted
         Assets):
            Consolidated                          $8,384     200.72%       $  168      4%       $  251         6%
            Bank                                  $8,023     192.08%       $  168      4%       $  251         6%
         Tier I Capital (to Average Assets):
            Consolidated                          $8,384     109.11%       $  308      4%       $  385         5%
            Bank                                  $8,023     104.41%       $  308      4%       $  385         5%
</TABLE>



                                       22
<PAGE>   59

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


NOTE 13. FAIR VALUE OF FINANCIAL INSTRUMENTS

         The following methods and assumptions were used by the Company in
         estimating its fair value disclosures for financial instruments. In
         cases where quoted market prices are not available, fair values are
         based on estimates using discounted cash flow models. Those models are
         significantly affected by the assumptions used, including the discount
         rates and estimates of future cash flows. In that regard, the derived
         fair value estimates cannot be substantiated by comparison to
         independent markets and, in many cases, could not be realized in
         immediate settlement of the instrument. The use of different
         methodologies may have a material effect on the estimated fair value
         amounts. Also, the fair value estimates presented herein are based on
         pertinent information available to management as of December 31, 1998
         and 1997. Such amounts have not been revalued for purposes of these
         financial statements since those dates and, therefore, current
         estimates of fair value may differ significantly from the amounts
         presented herein.

         CASH, DUE FROM BANKS, AND FEDERAL FUNDS SOLD:

         The carrying amounts of cash, due from banks, and Federal funds sold
         approximate their fair value.

         AVAILABLE-FOR-SALE SECURITIES:

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

         LOANS:

         For variable-rate loans that reprice frequently and have no significant
         change in credit risk, fair values are based on carrying values. For
         other loans, the fair values are estimated using discounted cash flow
         models, using current market interest rates offered for loans with
         similar terms to borrowers of similar credit quality. Fair values for
         impaired loans are estimated using discounted cash flow models or based
         on the fair value of the underlying collateral.

         DEPOSITS:

         The carrying amounts of demand deposits, savings deposits, and
         variable-rate certificates of deposit approximate their fair values.
         Fair values for fixed-rate certificates of deposit are estimated using
         discounted cash flow models, using current market interest rates
         offered on certificates with similar remaining maturities.



                                       23
<PAGE>   60

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


NOTE 13. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

         ACCRUED INTEREST:

         The carrying amounts of accrued interest approximate their fair values.

         OFF-BALANCE SHEET INSTRUMENTS:

         The fair values of the Company's off-balance sheet financial
         instruments are based on fees charged to enter into similar agreements.
         However, commitments to extend credit and standby letters of credit do
         not represent a significant value to the Company until such commitments
         are funded. The Company has determined that these instruments do not
         have a distinguishable fair value and no fair value has been assigned.

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

<TABLE>
<CAPTION>
                                                     DECEMBER 31, 1998                DECEMBER 31, 1997
                                                     -----------------                -----------------
                                               CARRYING          FAIR            CARRYING          FAIR
                                                AMOUNT           VALUE            AMOUNT           VALUE
                                                ------           -----            ------           -----
         <S>                                 <C>              <C>              <C>              <C>
         FINANCIAL ASSETS:
            Cash, due from banks,
               and Federal funds sold        $ 4,340,046      $ 4,340,046      $10,659,117      $10,659,117
            Securities available-for-sale      4,008,520        4,008,520               --               --
            Loans                             24,067,180       24,540,036        1,841,773        1,884,653
            Accrued interest receivable          258,190          258,190           17,677           17,677

         FINANCIAL LIABILITIES:
            Deposits                          25,007,527       25,084,466        4,271,642        4,267,973
            Accrued interest payable             201,499          201,499            4,953            4,953
</TABLE>



                                       24
<PAGE>   61

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


NOTE 14. SUPPLEMENTAL FINANCIAL DATA

         Components of other operating income and expenses in excess of 1% of
         total revenue for the year ended December 31, 1998 are as follows:

<TABLE>
         <S>                                                <C>
         Other operating income:
            Mortgage origination fees                       $ 39,793
         Other operating expenses:
            Telephone                                         31,202
            Office supplies                                   49,385
            Professional and consulting                      107,274
            Data processing                                   67,152
</TABLE>

NOTE 15. PARENT COMPANY FINANCIAL INFORMATION

         The following information presents the condensed balance sheets,
         statements of operations and cash flows of GBC Bancorp, Inc., as of and
         for the years ended December 31, 1998 and 1997:

                            CONDENSED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                     1998            1997
                                                                 ----------      ----------
         <S>                                                     <C>             <C>
         ASSETS
            Cash                                                 $  329,372      $  361,121
            Investment in subsidiary                              7,729,894       8,116,840
            Other assets                                                 --          72,514
                                                                 ----------      ----------

               Total assets                                      $8,059,266      $8,550,475
                                                                 ==========      ==========

         LIABILITIES                                             $    5,000      $       --
         STOCKHOLDERS' EQUITY                                     8,054,266       8,550,475
                                                                 ----------      ----------

                 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY      $8,059,266      $8,550,475
                                                                 ==========      ==========
</TABLE>



                                       25
<PAGE>   62

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


NOTE 15. PARENT COMPANY FINANCIAL INFORMATION (CONTINUED)

                       CONDENSED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                1998            1997
                                                              ---------       ---------
         <S>                                                  <C>             <C>
         EXPENSES
            Salaries and employee benefits                    $      --       $  21,804
            Write-off/amortization of organization costs         72,514           3,148
            Other expenses                                       36,749          18,320
                                                              ---------       ---------
                TOTAL EXPENSES                                  109,263          43,272
                                                              ---------       ---------

                LOSS BEFORE EQUITY IN LOSS OF SUBSIDIARY       (109,263)        (43,272)

         EQUITY IN LOSS OF SUBSIDIARY                          (398,505)       (644,622)
                                                              ---------       ---------

                 NET LOSS                                     $(507,768)      $(687,894)
                                                              =========       =========
</TABLE>



                                       26
<PAGE>   63

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


NOTE 15. PARENT COMPANY FINANCIAL INFORMATION (CONTINUED)

                       CONDENSED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                               1998               1997
                                                                            ---------         -----------
         <S>                                                                <C>               <C>
         OPERATING ACTIVITIES
            Net loss                                                        $(507,768)        $  (687,894)
            Adjustments to reconcile net loss to net
               cash provided by (used in) operating activities:
               Write-off/amortization of organization costs                    72,514               3,148
               Loss of subsidiary                                             398,505             644,622
               Other operating activities                                       5,000             311,318
                                                                            ---------         -----------

                   Net cash provided by (used in) operating activities        (31,749)            271,194
                                                                            ---------         -----------

         INVESTING ACTIVITIES
            Investment in subsidiary                                               --          (9,000,000)
                                                                            ---------         -----------

                 Net cash used in investing activities                             --          (9,000,000)
                                                                            ---------         -----------

         FINANCING ACTIVITIES
            Net repayment of other borrowings                                      --            (386,980)
            Net proceeds from sale of common stock                                 --           9,476,107
                                                                            ---------         -----------

                   Net cash provided by financing activities                       --           9,089,127
                                                                            ---------         -----------

         Net increase (decrease) in cash                                      (31,749)            360,321

         Cash at beginning of year                                            361,121                 800
                                                                            ---------         -----------

         Cash at end of year                                                $ 329,372         $   361,121
                                                                            =========         ===========
</TABLE>



                                       27
<PAGE>   64
ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND 
FINANCIAL DISCLOSURE

None.


                                    PART III

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

         The following table sets forth the current members of the Board of
Directors of the Company and the Bank, and senior and executive officers for
the Company and the Bank (a) their names, addresses and ages at December 31,
1998, (b) the positions they hold in the Company and the Bank, if any, and (c)
the year first elected as a Director.


<TABLE>
<CAPTION>
                                                                                        YEAR FIRST
                                                                                        ELECTED AS
          NAME                    AGE          POSITION                                 A DIRECTOR
------------------------          ---          --------                                 ----------
                                               HELD
                                               ----

<S>                               <C>          <C>                                      <C>
Larry D. Key                      53           President, Chief                            1996   
                                               Executive Officer
                                               and Chairman of
                                               the Company and
                                               the Bank
John T. Hopkins III               57           Executive Vice                            
                                               President, Chief
                                               Financial Officer,
                                               Secretary and
                                               Treasurer of the
                                               Company and the
                                               Bank
Michael A. Roy                    54           Executive Vice
                                               President and
                                               Chief Credit
                                               Officer of the Bank
Paul C. Birkhead                  54           Senior Vice                               
                                               President  and
                                               Commercial Loan
                                               Officer of the Bank
</TABLE>



                                      -35-
<PAGE>   65



<TABLE>
<CAPTION>
                                                                                    YEAR FIRST
                                                                                    ELECTED AS
          NAME                    AGE          POSITION                             A DIRECTOR
------------------------          ---          --------                             ----------
                                               HELD
                                               ----

<S>                               <C>          <C>                                  <C>
Michael L. Couch                  38           Senior Vice
                                               President
Marcia N. Watkins                 53           Senior Vice                               
                                               President and
                                               Chief Operations
                                               Officer of the Bank
James B. Ballard                  54           Director of the                         1996
                                               Company and the
                                               Bank
Jerry M. Boles                    58           Director of the                         1996
                                               Company and the
                                               Bank
W. H. Britt                       60           Director of the                         1996
                                               Company and the
                                               Bank
Richard F. Combs                  51           Director of the                         1997
                                               Company and the
                                               Bank
William G. Hayes                  60           Director of the                         1997
                                               Company and the
                                               Bank
Douglas A. Langley                41           Director of the                         1997
                                               Company and the
                                               Bank
Norris J. Nash                    71           Director of the                         1996
                                               Company and the
                                               Bank
J. Joseph Powell                  55           Director of the                         1997
                                               Company and the
                                               Bank
</TABLE>



                                      -36-
<PAGE>   66



<TABLE>
<CAPTION>
                                                                                        YEAR FIRST
                                                                                        ELECTED AS
          NAME                    AGE          POSITION                                 A DIRECTOR
------------------------          ---          --------                                 ----------
                                               HELD
                                               ----

<S>                               <C>          <C>                                      <C>
William S. Stanton,               44           Director of the                             1996
Jr.                                            Company and the
                                               Bank
</TABLE>

BIOGRAPHIES


         JAMES B. BALLARD has been a member of the Board of Directors of the
Company since 1996. Mr. Ballard was the Chief Executive Officer, founder, and a
member of the board of directors from 1972 until January 1996 of Spartan
Constructors, Inc., an industrial contractor serving the continental United
States as well as the international market. Mr. Ballard currently serves as
President and Chief Executive Officer of The Spartan Group, an industrial
contractor serving the continental United State.

         PAUL C. BIRKHEAD was Executive Vice President and Senior Lending
Officer of Commercial Bank of Georgia from 1988 when Commercial Bank opened
until July 1995 when he resigned to participate in current organizing group of
the Company. Mr. Birkhead was Group Vice President of Commercial Lending of
Heritage Bank from 1984 until November 1987, when Heritage merged with Bank
South, N.A. Mr. Birkhead was Vice President of Commercial Lending for Bank
South, N.A. until he resigned in January 1988 to join the organizing group of
Commercial Bank of Georgia.

         JERRY M. BOLES has been a member of the Board of Directors of the
Company since 1996. Mr. Boles has been in the wholesale automotive after-market
for 35 years. Mr. Boles is owner and President of Boles Parts Supply, Inc.,
which was founded in 1964, with headquarters in Atlanta, Georgia and
distribution warehouses in Oklahoma City, Oklahoma; Tappahannock, Virginia and
Dahlonega, Georgia.,

         W. H. BRITT has been a member of the Board of Directors of the Company
since 1996. Mr. Britt has been an active businessman in the Gwinnett County
area, since 1975. He is the founder and owner of H & H Truck and Tractor, Inc.,
an equipment sales company, and W. H. Britt and Associates, Inc., a real estate
brokerage and development company. Mr. Britt was an organizer of Gwinnett
County Bank (Heritage Bank) in 1972 and served as a director until 1987 when
the bank was sold.

         RICHARD F. COMBS has been a member of the Board of Directors of the
Company since 1997. Mr. Combs is the Founder and President of Pureflow
Ultraviolet, Inc., a company specializing in ultraviolet disinfecting
equipment, parts and services to industrial clients since 1978.



                                      -37-
<PAGE>   67



         MICHAEL L. COUCH has served as Senior Vice President of the Bank since
February 1998. Prior to February 1998, Mr. Couch served as Senior Vice
President of Construction Lending for Colonial Bank. Colonial Bank acquired
Commercial Bank of Georgia in 1996. Mr. Couch served as Senior Vice President
of Commercial Bank of Georgia from 1988 until the merger with Colonial Bank in
1996.

         WILLIAM G. HAYES has been a member of the Board of Directors of the
Company since 1997. Mr. Hayes is President and Chairman of Hayes, James and
Associates, an engineering and survey company based in Lawrenceville, Georgia.
Mr. Hayes was a director of the First National Bank of Gwinnett from 1984 to
1986.

         JOHN T. HOPKINS III was the Chief Financial Officer and Executive Vice
President of Commercial Bank of Georgia until he resigned in July 1996 to
participate in the Company's organizing group. Mr. Hopkins was Chief Financial
Officer and Chief Operating Officer of Paragon Mortgage from 1993 to 1995. He
was Chief Financial Officer of West Corp. which operated commercial, electrical
and mechanical contracting companies from 1989 to 1993. From 1985 to 1989, he
was Internal Auditor and Chief Financial Officer of Heritage Bank and Corporate
Accountant of Williams Service Group. Prior to 1985, Mr. Hopkins was a partner
with H. H. Brunet and Company, Certified Public Accountants, specializing in
the financial services industry.

         LARRY D. KEY has been a member of the Board of Directors of the
Company since 1996. Mr. Key was the Executive Vice President and Chief Lending
Officer of Commercial Bank of Georgia from the merger of Commercial Bank of
Georgia and Commercial Bank of Gwinnett in March 1995 until he resigned in July
1996 to participate in the organizing group of the Company and the Bank. Mr.
Key served as President and Chief Executive Officer of the former Commercial
Bank of Georgia from 1994 until merger. He served as Executive Vice President
and Chief Credit Officer of the former Commercial Bank of Georgia from 1992
until 1994. Mr. Key was senior Vice President from the opening of the former
Commercial Bank of Georgia in 1988 until 1992. He was Group Vice President and
an advisory director of Heritage Bank from 1984 until 1987. Mr. Key managed
Moores Building Center, Inc. in Dahlonega, Georgia from 1987 to 1988. Mr. Key
served as a director of Commercial Bancorp of Georgia, Inc. and Commercial Bank
of Georgia from their initial organization in 1988 until July 1996.

         DOUGLAS A. LANGLEY has been a member of the Board of Directors of the
Company since 1997. Mr. Langley has been a managing partner of Ashworth and
Associates, a CPA firm in Tucker and Lawrenceville, Georgia, since 1977.

         NORRIS J. NASH has been a member of the Board of Directors of the
Company since 1996. Mr. Nash is the President of Metropolitan Land Development
and Investment Corporation and Gwinnett-DeKalb, Inc. He has been a real estate
developer since 1962. Mr. Nash has served as director of the former Gwinnett
County Bank, and on the Advisory Board of Wachovia Bank of Georgia, N.A. Mr.
Nash was a member of the House of Representatives for Gwinnett County, District
22, Post #1 from 1967 to 1969.



                                      -38-
<PAGE>   68



         J. JOSEPH POWELL has been a member of the Board of Directors of the
Company since 1997. Mr. Powell has been President of Joe Powell and Associates,
Inc. since 1971 representing Liebert Corporation, provider of mechanical
equipment for computer operations.

         MICHAEL A. ROY has served as an Assistant Director and a Field Manager
with the Office of Thrift Supervision in Atlanta, Georgia, from 1988 through
1997 when he resigned to join the Bank. Prior to that time, he was Vice
President and Senior Lender at Capital-Union Savings, FA in Baton Rouge,
Louisiana for three years and was Executive Vice President and Director at
Citizens Savings and Loan Association in Baton Rouge, Louisiana for eight
years.

         WILLIAM S. STANTON, JR. has been a member of the Board of Directors of
the Company since 1996. Mr. Stanton is President of Print Direction, Inc. and
Atlanta Screen Print, Inc. Mr. Stanton has served as President of Print
Direction since its inception in 1984 and Atlanta Screen Print since 1988. He
was an Account Representative with Xerox Corporation from 1977 to 1981.

         MARCIA N. WATKINS served as Senior Vice President and Chief Operations
Officer of Commercial Bank of Georgia from its inception in February 1988 to
June 1996. Ms. Watkins was one of the original seven employees involved in the
opening of Gwinnett County Bank, a/k/a Heritage Bank, in February 1971. Ms.
Watkins served as Senior Operations Officer of Heritage Trust from February
1986 to February 1988. Ms. Watkins held various positions with the Heritage
Bank, including Vice President and Cashier between 1971 and 1986.

         The Company is not subject to filings required by Section 16 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Company
is filing this Annual Report on Form 10-KSB pursuant to Section 15(d) of the
Exchange Act.

ITEM 10. EXECUTIVE COMPENSATION

         The following table provides information with respect to the annual
compensation for services in all capacities to the Company from the Company's
organization on August 21, 1996 through the fiscal year ended December 31, 1998
for the Chief Executive Officer. No other officer of the Company earned more
than $100,000 in 1998.



                                      -39-
<PAGE>   69



                           SUMMARY COMPENSATION TABLE


<TABLE>
<CAPTION>
                                                                     ANNUAL                   LONG-TERM
                                                                COMPENSATION (1)            COMPENSATION
                                                             -----------------------        ------------
                                                                                               AWARDS
                                                                                               ------
                NAME AND                                                                  SECURITIES UNDER-
           PRINCIPAL POSITION                  YEAR            SALARY          BONUS         LYING OPTIONS
--------------------------------------       --------        ---------         -----      -----------------
<S>                                          <C>             <C>               <C>        <C>
Larry D. Key                                   1998          $ 130,000            --             6,000
President, Chief Executive Officer             1997          $ 130,000            --                --
and Chairman                                   1996          $  46,945            --                --
</TABLE>



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

(1)      In accordance with the rules of the Securities and Exchange 
         Commission, the compensation set forth in the table does not include
         medical, group life insurance or other benefits which are available to
         all salaried employees of the Company and certain perquisites and
         other benefits, securities or property which do not exceed the lesser
         of $50,000 or 10% of the Chief Executive Officer's salary and bonus
         shown in the table.

STOCK OPTIONS GRANTS AND YEAR END VALUES

                       OPTION GRANTS IN LAST FISCAL YEAR





<TABLE>
<CAPTION>
                                                                             INDIVIDUAL GRANTS
                                                        -----------------------------------------------------------
                             NUMBER OF                  PERCENT OF TOTAL
                             SECURITIES UNDER-          OPTIONS GRANTED               EXERCISE OF
                             LYING OPTIONS              TO EMPLOYEES IN               BASE PRICE         EXPIRATION
NAME                         GRANTED(1)                 FISCAL YEAR                   PER SHARE          DATE
----                         -----------------          ----------------              -----------        ----------

<S>                          <C>                        <C>                           <C>                <C>
Larry D. Key                 6,000                      10%                           $ 10.00            12/14/2008
</TABLE>


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

(1)      Options granted to Mr. Key were incentive options and were granted at
         an exercise price of not less than fair market value on the date of
         grant, as determined by the Board of Directors. The options granted to
         Mr. Key are fully vested and expire 10 years after the date of grant.

         No options were exercised by Mr. Key in 1998.



                                      -40-
<PAGE>   70



                       AGGREGATES/YEAR-END OPTION VALUES


<TABLE>
<CAPTION>
                                      NUMBER OF SECURITIES              VALUE OF UNEXERCISABLE
                                      UNDERLYING UNEXERCISED              IN-THE-MONEY OPTIONS
               NAME                   OPTIONS AT YEAR-END(1)                   AT YEAR-END(1)
------------------------------        ----------------------            ----------------------

<S>                                   <C>                               <C>
Larry D. Key                                 6,000                                  --
</TABLE>


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

(1)      There was no public trading market for the common stock as of December
         31, 1998. Accordingly, these values have been calculated by
         determining the difference between the estimated fair market value of
         our common stock underlying the option as of December 31, 1998 ($10.00
         per share) and the exercise price per share payable upon exercise of
         such options ($10.00 per share). In determining the fair market value
         of our common stock, the Board of Directors considered various
         factors, including our financial condition and business prospects, our
         operating results and the absence of a market for our common stock.
         All options granted to Mr. Key are currently exercisable.

EMPLOYEE BENEFIT PLANS

         1998 Stock Option Plan. On December 15, 1998, the Board of Directors
adopted the 1998 Option Plan of GBC Bancorp, Inc. (the "1998 Option Plan"). The
1998 Option Plan will be submitted to the shareholders for approval at the next
annual meeting of the shareholders. Under the 1998 Option Plan, the Board of
Directors, or the Compensation Committee of the Board of Directors, has the
flexibility to determine the type and amount of awards to be granted to
eligible participants. The 1998 Option Plan is intended to secure for the
Company and its shareholders the benefits arising from ownership of the Common
Stock by individuals employed or retained by the Company or the Bank who will
be responsible for the future growth of the enterprise. The 1998 Option Plan is
designed to help attract and retain superior personnel for positions of
substantial responsibility with the Company and the Bank (including advisory
relationships where appropriate), and to provide individuals with an additional
incentive to contribute to the Company's success.

         The Board or the Compensation Committee may make the following types
of grants under the 1998 Option Plan, each of which will be an "Award": (i)
incentive stock options ("ISOs") and (ii) nonqualified stock options ("NSOs").
The officers, key employees, employee directors, consultants and other
independent contractors or agents of the Company or the Bank who are
responsible for or contribute to the management growth or profitability of the
Company's business will be eligible for selection by the Board of Directors or
the Compensation Committee to participate in the 1998 Option Plan, provided,
however, that ISOs may be granted only to a person employed by the Bank or
Company.

         The Georgia Department has placed certain restrictions on the award of
options under the 1998 Option Plan. In particular, any option granted under the
1998 Option Plan may be subject to



                                      -41-
<PAGE>   71



accelerated exercise or forfeiture if the Bank's Tier 1 leverage capital falls
below certain minimum regulatory requirements. Additionally, since the Georgia
Department must grant prior approval to any shareholder (including the
shareholder's spouse and children) before a shareholder may own more than
twenty percent (20%) of the Company's outstanding stock, the exercise of
options may be limited by the Georgia Department. These restrictions may be
lifted in the future by the Georgia Department.

         The Company has authorized and reserved for issuance an aggregate of
180,000 shares of our common stock under the 1998 Option Plan. The shares of
common stock issuable under the 1998 Option Plan are authorized but unissued
shares. If any of the Awards granted under the 1998 Option Plan expire,
terminate or are forfeited for any reason before they have been exercised,
vested or issued in full, the unused shares subject to those expired,
terminated or forfeited Awards will again be available for purposes of the 1998
Option Plan. The 1998 Option Plan will continue in effect until December 14,
2008 unless sooner terminated under the general provisions of the 1998 Option
Plan.

         The 1998 Option Plan is administered by the Board of Directors or upon
its delegation to the Compensation Committee of the Board of Directors, by the
Compensation Committee, consisting of not less than two directors who are
"non-employee directors" (within the meaning of SEC Rule 16b-3 promulgated
pursuant to the Securities Exchange Act of 1934, as amended). Subject to the
foregoing limitations, as applicable, the Board of Directors may from time to
time remove members from the Compensation Committee, fill all vacancies on the
Compensation Committee, however caused, and may select one of the members of
the Compensation Committee as its chairman. The Compensation Committee may hold
meetings at such times and places as they may determine, will keep minutes of
their meetings, and may adopt, amend and revoke rules and procedures in
accordance with the terms of the 1998 Option Plan.

COMPENSATION OF DIRECTORS

         The Conditions provide that the directors and committee members of the
Bank will not receive any fees, bonuses, or other payments until the Bank earns
a cumulative profit. On December 15, 1998, the Company granted nonqualified
stock options to members of the Board of Directors of the Company to purchase
an aggregate of 43,000 shares at an exercise price of $10.00 per share.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth the beneficial ownership of the Common
Stock as of March 31, 1999, by each director and the Chief Executive Officer of
the Company, and all directors and the Chief Executive Officer of the Company
as a group. No person known by the Company beneficially owns more than 5% of
the Common Stock of the Company. The information in this table was based in
part on information supplied by the named individuals.



                                      -42-
<PAGE>   72




<TABLE>
<CAPTION>
                                                  NUMBER OF SHARES
                                                  OF COMMON STOCK
                                                  BENEFICIALLY                      PERCENTAGE
NAME AND ADDRESS OF BENEFICIAL OWNER              OWNED(1)                          OWNERSHIP
------------------------------------              ----------------------            ---------

<S>                                               <C>                               <C>
Larry D. Key (2)
3300 Jim Moore Road
Dacula, Georgia 30019                                    23,173                       2.29%

James B. Ballard (3)
2400 Bagley Road
Cumming, Georgia 30040                                   48,406                       4.79%

Jerry M. Boles (4)
Boles Parts Supply, Inc.
1057 Boulevard, S.E.
Atlanta, Georgia 30312                                   31,700                       3.14%

W. H. Britt (5)
W. H. Britt & Associates, Inc.
535 Grayson Parkway
Grayson, Georgia 30221                                   20,337                       2.01%

Richard F. Combs (6)
Pureflow Ultraviolet, Inc.
1750 Spectrum Drive
Lawrenceville, Georgia  30043                            24,761                       2.45%

William G. Hayes (7)
Hayes, James & Associates
3005 Breckenridge Boulevard, Suite 200
Duluth, Georgia  30096                                    6,000                          *

Douglas A. Langley (8)
Ashworth & Associates
270 Constitution Boulevard
Lawrenceville, Georgia  30045                            24,900                       2.47%

Norris J. Nash (9)
Gwinnett DeKalb Realty, Inc.
4830 Lawrenceville Highway
Lilburn, Georgia  30047                                  29,385                       2.91%
</TABLE>



                                      -43-

<PAGE>   73




<TABLE>
<CAPTION>
                                                  NUMBER OF SHARES
                                                  OF COMMON STOCK
                                                  BENEFICIALLY                      PERCENTAGE
NAME AND ADDRESS OF BENEFICIAL OWNER              OWNED(1)                          OWNERSHIP
------------------------------------              ----------------------            ---------

<S>                                               <C>                               <C>
J. Joseph Powell (10)
Joe Powell & Associates
500 Miller Court
Norcross, Georgia  30071                                  28,900                       2.86%

William S. Stanton, Jr. (11)
Print Direction, Inc.
1455 Oakbrook Drive
Norcross, Georgia  30093                                  45,110                       4.47%
                                                         -------                      -----
ALL DIRECTORS AND OFFICER AS A GROUP (15                 331,948                      32.86%
PERSONS)                                                 =======                      =====
</TABLE>


----------------
*        Represents less than one percent (1%) of the shares outstanding.
(1)      On a fully-diluted basis, except as otherwise indicated, the persons
         named in the table have sole voting and investment power with respect
         to all shares shown as beneficially owned by them. The information
         shown above is based upon information furnished by the named persons
         and based upon "beneficial ownership" concepts set forth in rules
         promulgated under the Exchange Act. Under such rules, a person is
         deemed to be a "beneficial owner" of a security if that person has or
         shares "voting power," which includes the power to vote or to direct
         the voting of such security, or "investment power," which includes the
         power to dispose or to direct the disposition of such security. A
         person is also deemed to be a beneficial owner of any security of
         which that person has the right to acquire beneficial ownership within
         60 days.
(2)      Includes 663 shares owned by Mr. Key's wife and options to purchase 
         6,000 shares of the Company's common stock.
(3)      Includes 5,000 shares owned by Mr. Ballard's son, 5,000 shares owned
         by a company that Mr. Ballard controls, and options to purchase 6,700
         shares of the Company's common stock.
(4)      Includes options to purchase 6,700 shares of the Company's common 
         stock 
(5)      Includes 1,500 shares owned by Mr. Britt's children and
         options to purchase 5,000 shares of the Company's common stock.
(6)      Includes 1,000 shares owned by Mr. Combs' wife, and options to 
         purchase 3,400 shares of the Company's common stock.
(7)      Includes 2,500 shares owned by a company that Mr. Hayes controls, and
         options to purchase 1,000 shares of the Company's common stock.



                                      -44-
<PAGE>   74



(8)      Includes 1,000 shares owned by Mr. Langley's wife, 20,000 shares held
         by the Ashworth & Associates, P.C. Profit Sharing Plan in which Mr.
         Langley is the Trustee, and options to purchase 3,900 shares of the
         Company's common stock.
(9)      Includes 2,500 shares owned by a company that Mr. Nash controls, and
         options to purchase 6,700 shares of the Company's common stock.
(10)     Includes 1,000 shares owned by Mr. Powell's son, and options to 
         purchase 3,900 shares of the Company's common stock.
(11)     Includes 15,400 shares owned by a company that Mr. Stanton controls
         and options to purchase 5,700 shares of the Company's common stock.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         It is possible that the Company and the Bank will have banking and
other business transactions in the ordinary course of business with directors
and officers of the Company and the Bank, including members of their families
or corporations, partnerships or other organizations in which such directors
and officers have a controlling interest. If such transactions occur, they will
be on substantially the same terms (including price, interest rate and
collateral) as those prevailing at the time for comparable transactions with
unrelated parties, and any banking transactions will not be expected to involve
more than the normal risk of collectibility or present other unfavorable
features to the Company and the Bank.

         Columbus Bank and Trust Company, The Bankers Bank, Regions Bank and
SunTrust Bank, Atlanta operate as correspondent banks for the Bank
(collectively, the "Correspondents"). The Correspondents provide bank services
such as check clearing, international services, wire transfers and various
additional services for the Bank. The Correspondents also serve the Bank
through purchasing and selling federal funds, purchasing other investments, and
providing short-term lines of credit for the purpose of borrowing and
purchasing federal funds from other institutions.

         All of the relationships established with the Correspondents were at
arms-length. There is no affiliation between the Bank and any of its officers
and directors and any of the Correspondents.

         On March 17, 1998, the Bank entered into a Lease Agreement with GBC
LLC to lease the Permanent Premises. Most of the members of GBC LLC are
directors and officers of the Company and the Bank. The Permanent Premises
lease rate is market rental value established by two MAI appraisals and,
therefore, management believes is as favorable as rates that would be obtained
from an unaffiliated third party. In addition, for the period during which
Permanent Premises were being constructed, the Bank leased a temporary modular
office and a temporary operations and administrative office from independent
third parties and real estate for the banking facility from GBC LLC.



                                      -45-
<PAGE>   75



                                    PART IV

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(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              Bylaws of the Company (filed as Exhibit 3.2 to the
                           Registration Statement on Form SB-2, as amended
                           (Registration No. 333-19081)).
          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              Escrow Agreement between the Registrant and Columbus 
                           Bank and Trust Company (filed as Exhibit 10.1 to the
                           Registration Statement on Form SB-2, as amended
                           (Registration No. 333-19081)).
         10.2              Line of Credit Promissory Note in the amount of
                           $500,000 having Registrant as Maker and Gwinnett
                           Banking Company GBC LLC as Holder (filed as Exhibit
                           10.2 to the Registration Statement on Form SB-2, as
                           amended (Registration No. 333-19081)).
         10.3              Provesa, Inc. Data Processing Agreement (filed as Exhibit 
                           10.3 to the Registration Statement on Form SB-2, as
                           amended (Registration No. 333- 19081)).
         10.4              Real Estate Commercial Lease Contract dated as of
                           March 17, 1998, by and between GBC Properties, LLC
                           and Gwinnett Banking Company (filed as Exhibit 10.4
                           to the Form 10-KSB for the year ended December 31,
                           1997).
         10.5              1998 Stock Option Plan of GBC Bancorp, Inc.
         21.1              Subsidiaries of the Registrant (filed as Exhibit
                           21.1 to the Registration Statement on Form SB-2, as
                           amended (Registration No. 333-19081)).
         27                Financial Data Schedule.
         99.1              Proxy Materials and Proxy for 1998 Annual Shareholders 
                           Meeting
</TABLE>

(b)      Reports on Form 8-K filed in the fourth quarter of 1997:  None.



                                     - 46 -
<PAGE>   76



                 SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH
                 REPORTS FILED PURSUANT TO SECTION 15(D) OF THE
                     EXCHANGE ACT BY NON-REPORTING ISSUERS

         The Registrant has not sent to its security holders any annual report
covering the Registrant's last fiscal year.

The proxy statement, form of proxy or other proxy soliciting material with
respect to the 1998 annual or other meeting of shareholders is filed herewith
as Exhibit 99.1.

         If such report or proxy material is furnished to security holders
subsequent to the filing of this Form 10-KSB, the Registrant shall furnish
copies of such material to the Securities and Exchange Commission when it is
sent to security holders.



                                      -47-

<PAGE>   77



                                   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.


                                          By: /s/ Larry D. Key
                                              ---------------------------------
                                              Larry D. Key, President and Chief
                                              Executive Officer

                                          Date: March 30, 1999



                                     
<PAGE>   78




         In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the Registrant in the capacities and on
the date indicated.


<TABLE>
<CAPTION>
           Signature                               Title                          Date     
-------------------------------         ---------------------------         ---------------

<S>                                     <C>                                 <C>
/s/ Larry D. Key                        President, Chief Executive          March 30, 1999
-------------------------------         Officer and Chairman of the
Larry D. Key                            Company and the Bank

/s/ John T. Hopkins III                 Executive Vice President,           March 30, 1999
-------------------------------         Chief Financial Officer,
John T. Hopkins III                     Secretary and Treasurer of
                                        the Company and the Bank

/s/ James B. Ballard                    Director of the Company and         March 30, 1999
-------------------------------         the Bank
James B. Ballard                        

/s/ Jerry M. Boles                      Director of the Company and         March 30, 1999
-------------------------------         the Bank
Jerry M. Boles                        

/s/ W. H. Britt                         Director of the Company and         March 30, 1999
-------------------------------         the Bank
W. H. Britt                             

/s/ Richard F. Combs                    Director of the Company and         March 30, 1999
-------------------------------         the Bank
Richard F. Combs                      

/s/ William G. Hayes                    Director of the Company and         March 30, 1999
-------------------------------         the Bank
William G. Hayes                       

/s/ Douglas A. Langley                  Director of the Company and         March 30, 1999
-------------------------------         the Bank
Douglas A. Langley                      

/s/ Norris J. Nash                      Director of the Company and         March 30, 1999
-------------------------------         the Bank
Norris J. Nash                         

/s/ J. Joseph Powell                    Director of the Company and         March 30, 1999
-------------------------------         the Bank
J. Joseph Powell                       

/s/ William S. Stanton, Jr.             Director of the Company and         March 30, 1999
-------------------------------         the Bank
William S. Stanton, Jr.                
</TABLE>



                                     
<PAGE>   79


                                 EXHIBIT INDEX

<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              Bylaws of the Company (filed as Exhibit 3.2 to the
                           Registration Statement on Form SB-2, as amended
                           (Registration No. 333-19081)).
          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              Escrow Agreement between the Registrant and Columbus
                           Bank and Trust Company (filed as Exhibit 10.1 to the
                           Registration Statement on Form SB-2, as amended
                           (Registration No. 333-19081)).
         10.2              Line of Credit Promissory Note in the amount of
                           $500,000 having Registrant as Maker and Gwinnett
                           Banking Company GBC LLC as Holder (filed as Exhibit
                           10.2 to the Registration Statement on Form SB-2, as
                           amended (Registration No. 333-19081)).
         10.3              Provesa, Inc. Data Processing Agreement (filed as 
                           Exhibit 10.3 to the Registration Statement on Form
                           SB-2, as amended (Registration No. 333- 19081)).
         10.4              Real Estate Commercial Lease Contract dated as of
                           March 17, 1998, by and between GBC Properties, LLC
                           and Gwinnett Banking Company (filed as Exhibit 10.4
                           to the Form 10-KSB for the year ended December 31,
                           1997).
         10.5              1998 Stock Option Plan of GBC Bancorp, Inc.
         21.1              Subsidiaries of the Registrant (filed as Exhibit
                           21.1 to the Registration Statement on Form SB-2, as
                           amended (Registration No. 333-19081)).
         27                Financial Data Schedule.
         99.1              Proxy Materials and Proxy for 1998 Annual Shareholders
                           Meeting
</TABLE>



                                     - 30 -