UNITED STATES
                       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 December 31, 2002
                                       OR

[ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
      EXCHANGE ACT OF 1934
      For the transition period from                 to
                                     ---------------    ----------------
                        Commission file number 333-74710

                            Georgia Bancshares, Inc.
             (Exact name of registrant as specified in its charter)

       Georgia                                          58-2646154
-----------------------                      ----------------------------------
(State of Incorporation)                    (I.R.S. Employer Identification No.)

100 Westpark Drive
Peachtree, City, Georgia                                   30269
---------------------------                           ----------------
(Address of principal executive offices)                (Zip Code)

                                  770-631-9488
                                  ------------
                               (Telephone Number)

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

    Securities registered pursuant to Section 12(g) of the Act: Common Stock

     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 past 90 days. Yes X     No
                                                                  ---      ---

     Check if there is no disclosure  of  delinquent  filers in response to Item
405 of Regulation S-B in this form, and no disclosure will be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB. [X]

     The  issuer's  revenue  for the fiscal  year ended  December  31,  2002 was
$9,985,218.

     The aggregate market value of the voting and non-voting  common equity held
by non-affiliates  (shareholders holding less than 5% of an outstanding class of
stock,  excluding  directors  and  executive  officers)  as of March 6, 2003 was
$25,181,560.  This  calculation  was based on the average bid and asked price of
such common equity on March 6, 2003.

     There  were  2,337,573  shares of the  issuer's  common  stock  issued  and
outstanding, as of March 6, 2003.

     Transitional Small Business Disclosure Format.  (Check one): Yes      No X
                                                                     ---     ---

                       DOCUMENTS INCORPORATED BY REFERENCE
     Portions of the issuer's  proxy  statement  for the 2003 annual  meeting of
shareholders  to be held on May 14, 2003 are  incorporated  by reference in Part
III of this Form 10-KSB.





<PAGE>



                                     PART I

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

     This Report contains statements which constitute forward-looking statements
within  the  meaning  of  Section  27A of the  Securities  Act of  1933  and the
Securities  Exchange Act of 1934. These statements are based on many assumptions
and estimates and are not guarantees of future  performance.  Our actual results
may differ materially from those projected in any forward-looking statements, as
they will  depend on many  factors  about which we are  unsure,  including  many
factors which are beyond our control. The words "may," "would," "could," "will,"
"expect," "anticipate,"  "believe," "intend," "plan," and "estimate," as well as
similar  expressions,  are meant to identify  such  forward-looking  statements.
Potential risks and uncertainties include, but are not limited to:

     o   significant  increases  in  competitive  pressure  in the  banking  and
         financial services industries;

     o   changes in the interest rate environment which could reduce anticipated
         or actual margins;

     o   changes  in  political  conditions  or the  legislative  or  regulatory
         environment;

     o   the level of allowance for loan loss;

     o   the rate of delinquencies and amounts of charge-offs;

     o   the rates of loan growth;

     o   adverse  changes in asset  quality and  resulting  credit  risk-related
         losses and expenses;

     o   general  economic  conditions,  either  nationally  or  regionally  and
         especially  in primary  service  area,  becoming  less  favorable  than
         expected  resulting in, among other things,  a deterioration  in credit
         quality;

     o   changes occurring in business conditions and inflation;

     o   changes in technology;

     o   changes in monetary and tax policies;

     o   changes in the securities markets; and

     o   other risks and uncertainties detailed from time to time in our filings
         with the Securities and Exchange Commission.

General

     Georgia  Bancshares,  Inc. was  incorporated  as a Georgia  corporation  on
December 21, 2000 and became the holding  company for The Bank of Georgia on May
18, 2001 following the  consummation  of a statutory  share  exchange.  Our bank
commenced  operations  on February  18, 2000 and  conducts a  community-oriented
commercial and retail banking business, focusing on the needs of individuals and
small- to medium-sized businesses in Peachtree City, the rest of Fayette County,
and portions of Coweta County in Georgia.  On November 12, 2002, we opened a new
office at 100 Westpark Drive,  Peachtree City,  Georgia.  On January 3, 2003, we
designated this office as our corporate  headquarters  and designated our former
main office at 2008 Highway 54 West, Fayetteville,  Georgia, as a branch office.
Our goal is to operate the leading  community bank in our market area. We intend
to achieve this goal by increasing asset size through internal growth and branch
expansion,  providing  personalized  service  with a  community  focus,  hiring,
developing, and retaining high caliber and motivated employees, maintaining high
asset quality,  and offering our customers a variety of competitive products and
services.



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<PAGE>

Deposit Products

     We offer a full range of deposit  products that are typically  available in
most banks and savings and loan associations,  including checking accounts,  NOW
accounts,  savings accounts,  and other time deposits of various types,  ranging
from daily money market  accounts to longer-term  certificates  of deposit.  The
transaction  accounts and time  certificates are offered at rates competitive to
those  offered in our market area.  In  addition,  we offer  retirement  account
services,  such as Individual  Retirement  Accounts (IRAs). All deposit accounts
are insured by the FDIC up to the maximum amount allowed by law.

Other Banking Services

     Other bank services  include drive up teller lanes and ATMs at each office,
telephone  banking,  Visa check cards,  safe deposit  boxes,  travelers  checks,
direct deposit of payroll and social security  checks,  and automatic drafts for
various accounts.  We are also a member of the STAR and CIRRUS ATM networks.  We
believe that by being  associated  with shared  networks of ATMs,  we can better
serve our current  customers and attract new customers who are accustomed to the
convenience of using ATMs. We also offer our own credit and debit cards.

Lending Activities

     General.  We emphasize a range of lending services,  including real estate,
commercial,  and consumer loans to  individuals  and small  businesses  that are
located, or conduct a substantial portion of their business,  in the Fayette and
Coweta  County  areas.  The  characteristics  of  our  loan  portfolio  and  our
underwriting  procedures,  collateral types, risks, approval process and lending
limits are discussed  below. See also  "Management's  Discussion and Analysis of
Financial Condition and Results of Operations - Provision and Allowance for Loan
Losses"  on page 19 and  "Management's  Discussion  and  Analysis  of  Financial
Condition and Results of Operations - Analysis of Financial  Condition -- Loans"
on page 21.

     Real Estate  Construction  and  Development  Loans.  At December  31, 2002,
54.01% of our loan portfolio was composed of personal and commercial real estate
construction  and land  development  loans.  These loans are secured by the real
estate for which construction is planned.

     Real Estate Mortgage Loans. Real estate mortgage loans include  residential
real estate loans and  non-farm  and  non-residential  real estate  loans.  Real
estate mortgage loans are defined as any loan secured by real estate, other than
for construction  purposes,  regardless of the purposes of the loan. These loans
are secured  generally by first or second mortgages on residential or commercial
property.  At December 31, 2002, real estate mortgage loans comprised  36.99% of
our loan portfolio.

     Commercial,  Financial  and  Agricultural  Loans.  At  December  31,  2002,
approximately  6.92% of our loan portfolio  consisted of commercial,  financial,
and  agricultural  loans.  These loans consist of secured and  unsecured  loans,
lines of credit, and working capital loans. We make these loans to various types
of  businesses.  Included  in this  category  are loans to  purchase  equipment,
finance  accounts  receivable or inventory,  and loans made for working  capital
purposes.  Generally, we secure our commercial loans with real estate instead of
other business assets to provide greater security.

     Consumer Loans. At December 31, 2002,  consumer loans made up approximately
1.7% of our loan portfolio. These are loans made to individuals for personal and
household  purposes,  such as secured and unsecured  installment and term loans.
Automobiles  and small  recreational  vehicles are pledged as security for loans
associated with their purchase.

     At  December  31,  2002,  the  remaining  0.38% of our loan  portfolio  was
comprised  of  other  loans  consisting  primarily  of one tax  free  industrial
development loan.

     Underwriting  Procedures,  Collateral,  and  Risk.  We use our  established
credit policies and procedures  when  underwriting  each type of loan.  Although
there are minor  variances  in the  characteristics  and  criteria for each loan
type,  which  variances  may  require  additional  underwriting  procedures,  we
generally evaluate borrowers using the following defined criteria:



                                       3
<PAGE>

     o   Character - We evaluate  whether the borrower has sound  character  and
         integrity by examining the borrower's  history.
     o   Capital - We evaluate the borrower's  overall  financial  strength,  as
         well as the equity investment in the asset being financed.
     o   Collateral - We evaluate  whether the  collateral  is adequate from the
         standpoint of quality, marketability, value and income potential.
     o   Capacity - We evaluate the borrower's ability to service the debt.
     o   Conditions  - We  underwrite  the  credit  in light of the  effects  of
         external factors, such as economic conditions and industry trends.

     It is our practice to obtain collateral for most loans to help mitigate the
risk associated with lending. We generally limit our loan-to-value ratio to 80%.
For example,  we typically  obtain a security  interest in real estate for loans
secured by real estate,  including construction and development loans, and other
commercial loans. For commercial  loans, we typically obtain security  interests
in equipment  and other  company  assets.  For  consumer  loans used to purchase
vehicles, we typically obtain appropriate title documentation. For secured loans
that are not associated with real estate, or for which the mortgaged real estate
does not provide an acceptable  loan-to-value  ratio,  we obtain other available
collateral such as stocks and bonds.

     Each type of loan carries a credit risk,  simply  defined as the  potential
that the  borrower  will not be  willing  or able to repay the debt.  While real
estate loans have various  risks common to all types of loans,  certain types of
real estate loans have specific risk  characteristics that vary according to the
collateral  type securing the loan and the terms and  repayment  sources for the
loan.  Real estate loans are all sensitive to  fluctuations  in the value of the
real estate  securing the loan. In addition,  commercial  real estate loans have
risk that the primary  source of repayment will be  insufficient  to service the
debt.  Construction  and development  real estate loans generally carry a higher
degree of risk than long term financing of existing  properties.  These projects
are usually  dependent on the  completion  of the project on schedule and within
cost  estimates  and on the timely  sale of the  property.  Inferior or improper
construction techniques,  changes in economic conditions during the construction
and marketing  period,  and rising interest rates which may slow the sale of the
property are all risks unique to this type of loan.  Residential mortgage loans,
in contrast to commercial real estate loans, generally have longer terms and may
have fixed or adjustable  interest rates.  Commercial  loans primarily have risk
that the primary source of repayment will be  insufficient  to service the debt.
Often this occurs as the result of changes in local  economic  conditions  or in
the industry in which the borrower operates which impact cash flow or collateral
value.  Consumer  loans,  other than home equity loan  products,  are  generally
considered  to have more  risk than  loans to  individuals  secured  by first or
second  mortgages on real estate due to dependence on the borrower's  employment
status as the sole  source  of  repayment.  By  following  defined  underwriting
criteria as noted above, we can help to reduce these risks. Additionally we help
to reduce the risk that the  underlying  collateral may not be sufficient to pay
the outstanding  balance by using  appraisals or taking other steps to determine
that the value of the  collateral  is adequate,  and lending  amounts based upon
lower  loan-to-value  ratios.  We  control  risks  by  monitoring  and  limiting
concentrations in our loan portfolio of any one type of loan.

     Loan Approval and Review.  Our loan approval  policies  provide for various
levels of officer  lending  authority.  When the amount of aggregate  loans to a
single borrower exceeds that individual  officer's lending  authority,  the loan
request is considered  by an officer with a higher  lending  limit.  Any loan in
excess of this lending limit is approved by the directors' loan committee. We do
not make any loans to any of our directors or executive officers unless the loan
is approved by the board of  directors of the bank and is made on terms not more
favorable to such person than would be available to a person not affiliated with
us.

     Lending Limits.  Our lending activities are subject to a variety of lending
limits  imposed by federal  law.  While  differing  limits apply to certain loan
types or borrowers,  in general we are subject to a loan-to-one-borrower  limit.
These limits increase or decrease as our capital increases or decreases.  Unless
we sell participations in loans to other financial institutions, we are not able
to  meet  all of  the  lending  needs  of  loan  customers  requiring  aggregate
extensions of credit above these lending limits.  Loans above our internal limit
of $2 million but under our legal lending  limit,  which is  approximately  $3.1
million, are presented to our board of directors for board approval.



                                       4
<PAGE>

Competition

     We engage in a general commercial and retail banking business,  emphasizing
the needs of small-  to  medium-sized  businesses,  professional  concerns,  and
individuals.  Our primary service area presently  encompasses Peachtree City, as
well as the rest of Fayette  County,  and  portions of Coweta  County.  Based on
relationships  with our lending  officers,  we have a secondary  lending area in
neighboring Henry and Clayton Counties.

     The  banking  business  is  highly  competitive.   We  compete  with  other
commercial banks, savings and loan associations, credit unions, and money market
mutual funds  operating in the Fayette and Coweta County area and elsewhere.  As
of June 30,  2002,  there  were 33 banking  offices  representing  12  financial
institutions  operating in Fayette County holding over $1.2 billion in deposits.
In Coweta County,  there were 24 offices  representing 8 financial  institutions
holding over $725 million in deposits. We believe that our community bank focus,
with our emphasis on service to small- to medium-sized businesses,  individuals,
and professional concerns, gives us an advantage in these markets. Nevertheless,
a number of these  competitors  are well  established  in the Fayette and Coweta
County  area.  Most of them have  substantially  greater  resources  and lending
limits than we have and offer services, such as extensive and established branch
networks and trust  services  that we do not currently  provide.  As a result of
these  competitive  factors,  we may have to pay  higher  rates of  interest  to
attract deposits.

     At June 30, 2002, our market share of deposits in Fayette County was 10.5%.
Because we did not open our branch office in Newnan until July 9, 2001, relevant
market share data for Coweta County is not available.

Employees

     As of December 31,  2002,  we had 34  full-time  employees  and 3 part-time
employees.  None  of  our  employees  are  covered  by a  collective  bargaining
agreement. We consider our relationship with our employees to be good.



                                       5
<PAGE>



                           SUPERVISION AND REGULATION

     We are subject to extensive  state and federal banking laws and regulations
which impose specific  requirements or restrictions  on, and provide for general
regulatory  oversight of,  virtually all aspects of  operations.  These laws and
regulations are generally intended to protect depositors, not shareholders.  The
following  summary is qualified by reference  to the  statutory  and  regulatory
provisions  discussed.  Changes in  applicable  laws or  regulations  may have a
material effect on our business and prospects. Our operations may be affected by
legislative  changes and the  policies  of various  regulatory  authorities.  We
cannot predict the effect that fiscal or monetary policies, economic control, or
new federal or state  legislation  may have on our  business and earnings in the
future.


USA Patriot Act of 2001

     In October 2001, the USA Patriot Act of 2001 was enacted in response to the
terrorist  attacks in New York,  Pennsylvania and Washington D.C. which occurred
on  September  11,  2001.  The Patriot Act is intended to  strengthen  U.S.  law
enforcement's and the intelligence  communities' abilities to work cohesively to
combat terrorism on a variety of fronts. The potential impact of the Patriot Act
on financial  institutions  is  significant  and wide  ranging.  The Patriot Act
contains  sweeping  anti-money  laundering and financial  transparency  laws and
imposes  various   regulations,   including   standards  for  verifying   client
identification  at  account  opening,  and rules to  promote  cooperation  among
financial  institutions,  regulators and law enforcement entities in identifying
parties that may be involved in terrorism or money laundering.

Gramm-Leach-Bliley Act

     The  Gramm-Leach-Bliley  Act,  previously  known as the Financial  Services
Modernization Act of 1999, was signed into law on November 12, 1999. Among other
things,  the Act repeals the  restrictions on banks  affiliating with securities
firms  contained in sections 20 and 32 of the  Glass-Steagall  Act. The Act also
permits bank holding companies to elect to become financial  holding  companies.
Bank holding  companies  that elect to become  financial  holding  companies can
engage  in a  statutorily  provided  list  of  financial  activities,  including
insurance and securities  underwriting and agency activities,  merchant banking,
and insurance company portfolio investment  activities.  The Act also authorizes
activities that are "complementary" to financial activities.

     The Act is intended, in part, to grant to community banks certain powers as
a matter of right that larger  institutions have accumulated on an ad hoc basis.
Nevertheless,  the  Act  may  have  the  result  of  increasing  the  amount  of
competition that we face from larger  institutions and other types of companies.
In fact, it is not possible to predict the full effect that the Act will have on
us. From time to time other  changes are proposed to laws  affecting the banking
industry,  and these  changes  could have a material  effect on our business and
prospects.

     The  Gramm-Leach-Bliley  Act also contains  provisions  regarding  consumer
privacy.  These  provisions  require  financial  institutions  to disclose their
policy  for  collecting  and  protecting  confidential  information.   Customers
generally may prevent  financial  institutions  from sharing personal  financial
information  with  nonaffiliated  third  parties  except for third  parties that
market an  institution's  own products  and  services.  Additionally,  financial
institutions  generally  may  not  disclose  consumer  account  numbers  to  any
nonaffiliated  third party for use in telemarketing,  direct mail marketing,  or
other marketing to the consumer.

Georgia Bancshares, Inc.

     Because our holding company, Georgia Bancshares, Inc., owns the outstanding
capital stock of our bank, our holding  company is a bank holding  company under
the federal Bank Holding Company Act of 1956 and the Financial Institutions Code
of Georgia.

     The Bank  Holding  Company  Act.  Under the Bank  Holding  Company Act, our
holding  company is subject to periodic  examination by the Federal  Reserve and
required  to  file  periodic  reports  of  its  operations  and  any  additional
information that the Federal Reserve may require.  Our activities at the holding
company level are limited to:

     o   banking and managing or controlling banks;
     o   furnishing services to or performing services for its subsidiaries; and


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<PAGE>

     o   engaging in other activities that the Federal Reserve  determines to be
         so closely  related to banking and managing or controlling  banks as to
         be a proper incident thereto.

     Investments,  Control, and Activities. With certain limited exceptions, the
Bank Holding Company Act requires every bank holding company to obtain the prior
approval of the Federal Reserve before:

     o   acquiring substantially all the assets of any bank;
     o   acquiring direct or indirect  ownership or control of any voting shares
         of any bank if after the  acquisition it would own or control more than
         5% of the  voting  shares  of such  bank  (unless  it  already  owns or
         controls the majority of such shares); or
     o   merging or consolidating with another bank holding company.

         In addition, and subject to certain exceptions, the Bank Holding
Company Act and the Change in Bank Control Act require Federal Reserve approval
prior to any person or company acquiring "control" of a bank holding company.
Control is conclusively presumed to exist if an individual or company acquires
25% or more of any class of voting securities of the bank holding company.
Control is rebuttably presumed to exist if a person acquires 10% or more, but
less than 25%, of any class of voting securities and either Georgia Bancshares,
Inc. has registered securities under Section 12 of the Securities Exchange Act
of 1934, which we have done, or no other person owns a greater percentage of
that class of voting securities immediately after the transaction. The
regulations provide a procedure to challenge the rebuttable control presumption.

         Under the Bank Holding Company Act, a bank holding company is generally
prohibited from engaging in, or acquiring direct or indirect control of more
than 5% of the voting shares of any company engaged in nonbanking activities
unless the Federal Reserve Board, by order or regulation, has found those
activities to be so closely related to banking or managing or controlling banks
as to be a proper incident thereto. Some of the activities that the Federal
Reserve Board has determined by regulation to be proper incidents to the
business of a bank holding company include:

     o   making or servicing loans and certain types of leases;
     o   engaging in certain insurance and discount brokerage activities;
     o   performing certain data processing services;
     o   acting  in  certain  circumstances  as a  fiduciary  or  investment  or
         financial adviser;
     o   owning savings associations; and
     o   making  investments  in  certain   corporations  or  projects  designed
         primarily to promote community welfare.

     The Federal  Reserve  Board imposes  certain  capital  requirements  on our
holding company under the Bank Holding Company Act, including a minimum leverage
ratio and a minimum ratio of "qualifying" capital to risk-weighted assets. These
requirements are described below under "Capital Regulations." Subject to capital
requirements  and certain  other  restrictions,  our holding  company is able to
borrow money to make a capital  contribution to our bank, and these loans may be
repaid from dividends paid from our bank to our holding company.  Our ability to
pay dividends will be subject to regulatory  restrictions  as described below in
"The Bank of  Georgia-  Dividends."  Our  holding  company is also able to raise
capital for  contribution  to our bank by issuing  securities  without having to
receive  regulatory  approval,  subject to  compliance  with  federal  and state
securities  laws.  As a bank  holding  company  registered  under the  Financial
Institutions Code of Georgia,  we must provide the Georgia Department of Banking
and Finance with information regarding the financial,  management, and operating
condition of our holding company and bank.

     Source of Strength;  Cross-Guarantee.  In accordance  with Federal  Reserve
Board  policy,  our holding  company is expected to act as a source of financial
strength  to  our  bank  and  to  commit   resources  to  support  our  bank  in
circumstances  in which our holding company might not otherwise do so. Under the
Bank Holding  Company Act, the Federal  Reserve Board may require a bank holding
company to terminate any activity or relinquish control of a nonbank subsidiary,
other than a nonbank  subsidiary  of a bank,  upon the Federal  Reserve  Board's
determination  that such  activity or control  constitutes a serious risk to the
financial soundness or stability of any subsidiary depository institution of the
bank  holding  company.   Further,  federal  bank  regulatory  authorities  have
additional  discretion to require a bank holding company to divest itself of any
bank or nonbank subsidiary if the agency determines that divestiture may aid the
depository institution's financial condition.



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<PAGE>

The Bank of Georgia

     Our  bank,  The  Bank  of  Georgia,   operates  as  a  Georgia  state  bank
incorporated  under the laws of the State of Georgia and subject to  examination
by the  Georgia  Department  of Banking  and  Finance.  Deposits in the bank are
insured by the FDIC up to a maximum  amount,  which is  generally  $100,000  per
depositor subject to aggregation rules.

     The Georgia  Department  of Banking  and  Finance and the FDIC  regulate or
monitor virtually all areas of our bank's operations, including:

     o   security devices and procedures;
     o   adequacy of capitalization and loss reserves;
     o   loans;
     o   investments;
     o   borrowings;
     o   deposits;
     o   mergers;
     o   issuances of securities;
     o   payment of dividends;
     o   interest rates payable on deposits;
     o   interest rates or fees chargeable on loans;
     o   establishment of branches;
     o   corporate reorganizations;
     o   maintenance of books and records; and
     o   adequacy  of  staff  training  to  carry on safe  lending  and  deposit
         gathering practices.

     The Georgia Department of Banking and Finance and the FDIC require banks to
maintain  certain  capital  ratios,   impose  limitations  on  banks'  aggregate
investment in real estate,  bank premises,  and furniture and fixtures,  require
banks to prepare  quarterly  reports on their financial  condition,  and require
banks to conduct annual audits of their financial affairs in compliance with its
minimum standards and procedures.

     Under the FDIC  Improvement  Act,  all insured  institutions  must  undergo
regular on-site  examinations by their appropriate  banking agency.  The cost of
examinations  of  insured  depository  institutions  and any  affiliates  may be
assessed by the appropriate  agency against each  institution or affiliate as it
deems  necessary or  appropriate.  Insured  institutions  are required to submit
annual reports to the FDIC, and their state supervisor when applicable. The FDIC
Improvement  Act  directs  the FDIC to develop a method for  insured  depository
institutions  to provide  supplemental  disclosure of the estimated  fair market
value of assets and liabilities,  to the extent feasible and practicable, in any
balance sheet, financial statement,  report of condition, or any other report of
any insured depository  institution.  The FDIC Improvement Act also requires the
federal banking regulatory agencies to prescribe,  by regulation,  standards for
all insured depository institutions and depository institution holding companies
relating, among other things, to the following:

     o   internal controls;
     o   information systems and audit systems;
     o   loan documentation;
     o   credit underwriting;
     o   interest rate risk exposure; and
     o   asset quality.

     Deposit Insurance.  The FDIC has adopted a risk-based assessment system for
determining an insured depository  institution's  insurance assessment rate. The
system takes into account the risks  attributable  to different  categories  and
concentrations  of assets and liabilities.  An institution is placed into one of
three capital categories: (1) well capitalized;  (2) adequately capitalized;  or
(3)  undercapitalized.  The FDIC also  assigns  an  institution  to one of three
supervisory  subgroups,  based on the FDIC's  determination of the institution's
financial  condition  and  the  risk  posed  to  the  deposit  insurance  funds.
Assessments  range  from 0 to 27 cents per $100 of  deposits,  depending  on the
institution's  capital group and  supervisory  subgroup.  In addition,  the FDIC
imposes assessments to help pay off the $780 million in annual interest payments
on the $8 billion  Financing  Corporation bonds issued in the late 1980s as part
of the government rescue of the thrift industry.



                                       8
<PAGE>

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

     Transactions  With  Affiliates  and  Insiders.  Our bank is  subject to the
provisions of Section 23A of the Federal  Reserve Act, which place limits on the
amount of loans or extensions of credit to, or investments  in, or certain other
transactions  with,  affiliates  and on the amount of advances to third  parties
collateralized by the securities or obligations of affiliates.  The aggregate of
all covered  transactions is limited in amount, as to any one affiliate,  to 10%
of our bank's capital and surplus and, as to all affiliates combined,  to 20% of
our bank's capital and surplus. Furthermore, within the foregoing limitations as
to amount, each covered transaction must meet specified collateral requirements.
Compliance is also required with certain provisions designed to avoid the taking
of low quality assets.

     Our bank is also be subject to the provisions of Section 23B of the Federal
Reserve Act which, among other things, prohibits an institution from engaging in
certain  transactions  with certain  affiliates  unless the  transactions are on
terms  substantially  the same, or at least as favorable to such  institution or
its  subsidiaries,  as those prevailing at the time for comparable  transactions
with  nonaffiliated  companies.  Our bank is subject to certain  restrictions on
extensions  of  credit  to  executive  officers,  directors,  certain  principal
shareholders, and their related interests. Such extensions of credit (1) must be
made on substantially the same terms,  including  interest rates and collateral,
as those prevailing at the time for comparable  transactions  with third parties
and (2) must not involve more than the normal risk of repayment or present other
unfavorable features.

     The Federal Reserve Board has recently issued  Regulation W, which codifies
prior  regulations  under  Sections  23A and 23B of the Federal  Reserve Act and
interpretative  guidance  with respect to affiliate  transactions.  Regulation W
incorporates the exemption from the affiliate  transaction rules but expands the
exemption  to cover the purchase of any type of loan or extension of credit from
an affiliate. In addition, under Regulation W:

     o   a bank and its subsidiaries  may not purchase a low-quality  asset from
         an affiliate;
     o   covered transactions and other specified transactions between a bank or
         its  subsidiaries and an affiliate must be on terms and conditions that
         are consistent with safe and sound banking practices; and
     o   with some exceptions,  each loan or extension of credit by a bank to an
         affiliate  must be secured by  collateral  with a market value  ranging
         from 100% to 130%,  depending on the type of collateral,  of the amount
         of the loan or extension of credit.

     Regulation W generally  excludes all non-bank and  non-savings  association
subsidiaries  of banks from treatment as  affiliates,  except to the extent that
the Federal  Reserve Board decides to treat these  subsidiaries  as  affiliates.
Concurrently  with the adoption of Regulation  W, the Federal  Reserve Board has
proposed a regulation  which would  further limit the amount of loans that could
be  purchased  by a bank from an  affiliate  to not more than 100% of the bank's
capital and surplus. Comments on the proposed rule were due by January 13, 2003.

     Dividends.  Georgia  state law and the  Georgia  Department  of Banking and
Finance limit a state bank's  ability to declare and pay  dividends.  A dividend
may only be paid if: (i) the bank's dividend does not exceed 50% of the previous
calendar year's net profit,  after taxes, but before dividends;  (ii) the bank's
dividend  is paid out of the  retained  earnings  of the bank;  (iii) the bank's
total  classified  assets do not exceed 80% of Tier 1 capital plus the allowance
for loan losses;  and (iv) the ratio of Tier 1 capital to adjusted  total assets
of the bank is greater than or equal to 6%.

     Branching.  Under  current  Georgia law,  our bank may open branch  offices
throughout  Georgia with the prior approval of the Georgia Department of Banking
and Finance. In addition,  with prior regulatory approval,  our bank may acquire
existing branch operations in Georgia.

     Community  Reinvestment Act. The Community  Reinvestment Act requires that,
in  connection  with  examinations  of  financial   institutions   within  their
respective  jurisdictions,  the FDIC shall evaluate the record of each financial
institution  in meeting the credit needs of its local  community,  including low
and  moderate  income  neighborhoods.  These  factors  are  also  considered  in
evaluating mergers, acquisitions, and applications to open a branch or facility.
Failure to adequately meet these criteria could impose  additional  requirements
and  limitations  on the bank.  Under the  Gramm-Leach-Bliley  Act,  banks  with
aggregate  assets of not more than $250  million  will be subject to a Community
Reinvestment  Act examination  only once every 60 months if the bank receives an
outstanding rating,  once every 48 months if it receives a satisfactory  rating,


                                       9
<PAGE>

and as needed if the rating is less than satisfactory.  Additionally,  under the
Gramm-Leach-Bliley  Act,  banks are  required to publicly  disclose the terms of
various Community Reinvestment Act-related agreements.

     Other  Regulations.   Interest  and  certain  other  charges  collected  or
contracted  for by our bank are subject to state usury laws and certain  federal
laws concerning  interest rates.  The bank's loan operations are also subject to
certain federal laws applicable to credit transactions, such as:

     o   the federal Truth-In-Lending Act, governing disclosures of credit terms
         to consumer borrowers;
     o   the  Home  Mortgage   Disclosure  Act  of  1975,   requiring  financial
         institutions  to  provide  information  to enable the public and public
         officials to determine  whether a financial  institution  is fulfilling
         its  obligation  to help meet the  housing  needs of the  community  it
         serves;
     o   the Equal Credit  Opportunity Act,  prohibiting  discrimination  on the
         basis of race, creed, or other prohibited factors in extending credit;
     o   the Fair Credit Reporting Act of 1978,  governing the use and provision
         of information to credit reporting agencies;
     o   the Fair Debt  Collection  Act,  governing the manner in which consumer
         debts may be collected by collection agencies; and
     o   the rules and regulations of the various federal  agencies charged with
         the responsibility of implementing such federal laws.

The deposit operations of our bank also are subject to:

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

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

     Capital  Regulations.  The FDIC and the Georgia  Department  of Banking and
Finance have adopted  risk-based  capital  guidelines for banks and bank holding
companies  that  are  designed  to make  regulatory  capital  requirements  more
sensitive  to   differences  in  risk  profiles  among  banks  and  account  for
off-balance  sheet items.  The guidelines are minimums,  and the regulators have
noted that banks and bank holding companies contemplating  significant expansion
programs  should not allow expansion to diminish their capital ratios and should
maintain  ratios in excess of the  minimums.  We have not  received  any  notice
indicating  that  either  our bank or our  holding  company is subject to higher
capital requirements.  The current guidelines require all bank holding companies
and  federally-regulated  banks to maintain a minimum  risk-based  total capital
ratio  equal to 8%, of which at least 4% must be Tier 1 capital.  Tier 1 capital
includes common shareholders' equity,  qualifying perpetual preferred stock, and
minority interests in equity accounts of consolidated subsidiaries, but excludes
goodwill and most other  intangibles  and excludes  the  allowance  for loan and
lease  losses.  Tier 2 capital  includes the excess of any  preferred  stock not
included in Tier 1 capital,  mandatory  convertible  securities,  hybrid capital
instruments,  subordinated  debt  and  intermediate  term-preferred  stock,  and
general reserves for loan and lease losses up to 1.25% of risk-weighted assets.

     Under these guidelines, banks' and bank holding companies' assets are given
risk-weights of 0%, 20%, 50%, or 100%. In addition,  certain  off-balance  sheet
items are given credit  conversion  factors to convert them to asset  equivalent
amounts to which an appropriate  risk-weight applies.  These computations result
in the total  risk-weighted  assets.  Most loans are  assigned  to the 100% risk
category,  except for first mortgage loans fully secured by residential property
and, under certain circumstances,  residential construction loans, both of which
carry a 50% rating. Most investment securities are assigned to the 20% category,
except for municipal or state revenue bonds, which have a 50% rating, and direct
obligations of or obligations guaranteed by the United States Treasury or United
States Government agencies, which have a 0% rating.

     The federal bank regulatory  authorities  have also  implemented a leverage
ratio,  which is equal to Tier 1 capital as a percentage of average total assets
less intangibles,  to be used as a supplement to the risk-based guidelines.  The
principal  objective  of the  leverage  ratio  is to place a  constraint  on the
maximum  degree to which a bank holding  company may leverage its equity capital
base. The minimum required leverage ratio for top-rated  institutions is 3%, but
most institutions are required to maintain an additional cushion of at least 100
to 200 basis points.



                                       10
<PAGE>

     The FDIC Improvement Act established a new capital-based  regulatory scheme
designed to promote early  intervention  for troubled  banks which  requires the
FDIC  to  choose  the  least  expensive  resolution  of bank  failures.  The new
capital-based  regulatory  framework contains five categories of compliance with
regulatory  capital  requirements,  including  "well  capitalized,"  "adequately
capitalized,"   "undercapitalized,"    "significantly   undercapitalized,"   and
"critically undercapitalized." To quality as a "well capitalized" institution, a
bank must have a leverage ratio of no less than 5%, a Tier 1 risk-based ratio of
no less than 6%, and a total  risk-based  capital ratio of no less than 10%, and
the  bank  must not be  under  any  order  or  directive  from  the  appropriate
regulatory agency to meet and maintain a specific capital level.  Currently,  we
qualify as "well capitalized."

     Under the FDIC Improvement Act regulations, the applicable agency can treat
an institution as if it were in the next lower category if the agency determines
(after  notice and an  opportunity  for hearing) that the  institution  is in an
unsafe or unsound condition or is engaging in an unsafe or unsound practice. The
degree of  regulatory  scrutiny of a financial  institution  increases,  and the
permissible  activities  of the  institution  decreases,  as it  moves  downward
through the  capital  categories.  Institutions  that fall into one of the three
undercapitalized categories may be required to do some or all of the following:

     o   submit a capital restoration plan;
     o   raise additional capital;
     o   restrict their growth, deposit interest rates, and other activities;
     o   improve their management;
     o   eliminate management fees; or
     o   divest themselves of all or a part of their operations.

     These  capital  guidelines  can affect us in several  ways. If we grow at a
rapid pace, our capital may be depleted too quickly, and a capital infusion from
our holding  company  may be  necessary  which  could  impact our ability to pay
dividends.  Our capital levels  currently are adequate;  however,  rapid growth,
poor loan portfolio performance,  poor earnings performance, or a combination of
these factors could change our capital  position in a relatively short period of
time. If we fail to meet these capital requirements,  our bank would be required
to develop and file a plan with its primary federal banking regulator describing
the means and a schedule for  achieving  the minimum  capital  requirements.  In
addition,  our bank would  generally  not  receive  regulatory  approval  of any
application  that  requires the  consideration  of capital  adequacy,  such as a
branch or merger  application,  unless our bank could  demonstrate  a reasonable
plan to meet the capital  requirement  within a reasonable  period of time. Bank
holding companies controlling financial institutions can be called upon to boost
the  institutions'   capital  and  to  partially   guarantee  the  institutions'
performance under their capital restoration plans.

     Enforcement   Powers.   The  Financial   Institution  Reform  Recovery  and
Enforcement  Act expanded and increased civil and criminal  penalties  available
for use by the federal regulatory  agencies against depository  institutions and
certain   "institution-affiliated   parties."   Institution-affiliated   parties
primarily include management,  employees, and agents of a financial institution,
as well as  independent  contractors  and  consultants  such  as  attorneys  and
accountants  and  others  who  participate  in  the  conduct  of  the  financial
institution's affairs. These practices can include the failure of an institution
to timely file required reports or the filing of false or misleading information
or the  submission  of  inaccurate  reports.  Civil  penalties may be as high as
$1,000,000 a day for such  violations.  Criminal  penalties  for some  financial
institution crimes have been increased to 20 years. In addition,  regulators are
provided  with  greater  flexibility  to commence  enforcement  actions  against
institutions and  institution-affiliated  parties.  Possible enforcement actions
include the termination of deposit  insurance.  Furthermore,  banking  agencies'
power to issue  cease-and-desist  orders were  expanded.  Such orders may, among
other things,  require  affirmative  action to correct any harm resulting from a
violation or practice, including restitution,  reimbursement,  indemnifications,
or  guarantees  against  loss.  A financial  institution  may also be ordered to
restrict its growth, dispose of certain assets, rescind agreements or contracts,
or take other actions as determined by the ordering agency to be appropriate.

     Effect of  Governmental  Monetary  Policies.  Our  earnings are affected by
domestic economic  conditions and the monetary and fiscal policies of the United
States government and its agencies. The Federal Reserve Bank's monetary policies
have had,  and are  likely  to  continue  to have,  an  important  impact on the
operating  results of commercial  banks through its power to implement  national
monetary  policy in order,  among other  things,  to curb  inflation or combat a
recession. The monetary policies of the Federal Reserve Board have major effects
upon the levels of bank loans,




                                       11
<PAGE>

investments  and deposits  through its open market  operations  in United States
government  securities,  and  through its  regulation  of the  discount  rate on
borrowings  of member  banks and the reserve  requirements  against  member bank
deposits.  It is not possible to predict the nature or impact of future  changes
in monetary and fiscal policies.

     Proposed  Legislation and Regulatory  Action.  New regulations and statutes
are  regularly  proposed  that contain  wide-ranging  proposals for altering the
structures,  regulations, and competitive relationship of the nation's financial
institutions.  We cannot predict whether or in what form any proposed regulation
or statute  will be adopted or the extent to which our  business may be affected
by any new regulation or statute.


Item 2.    Description of Property
----------------------------------

Properties

     We  opened  a new  office  on  November  12,  2002 at 100  Westpark  Drive,
Peachtree  City,  Georgia.  This new office was designated as our corporate main
office on January 3, 2002. Our telephone  number is (770)  631-9488.  Our former
main office  located at 2008 Highway 54 West,  Fayetteville,  Georgia  30214 now
operates as a full-service branch. In addition, we operate a full-service branch
in Coweta County located at 471 U.S.  Highway 29, Newnan,  Georgia 30263. We own
the  facilities  in  Peachtree  City  and  Newnan  and  lease  the  facility  in
Fayetteville.


Item 3.    Legal Proceedings.
-----------------------------

     On April 19, 2001,  shareholders of the bank approved the reorganization of
the  bank  into  a  holding   company   structure   pursuant  to  that   certain
Reorganization  Agreement and Plan of Share Exchange dated March 10, 2001.  Upon
consummation of the  reorganization on May 18, 2001,  1,664,062 shares of common
stock of the bank were  exchanged  for  1,664,062  shares of common stock of the
company. Pursuant to Section 14-2-1302 of the Georgia Business Corporation Code,
a record  shareholder  of a corporation  is entitled to dissent from, and obtain
payment  of the fair  value of his  shares  in the  event of  certain  corporate
actions, including the consummation of a plan of share exchange. Cede & Co., the
record  holder of the  remaining  originally  issued 54,687 shares of the bank's
common stock,  dissented from the bank's  reorganization  into a holding company
structure.  The bank has an obligation to purchase this dissenting shareholder's
shares for fair value as of May 18, 2001.  The bank has  determined  through the
aid of an  appraiser  that these shares were worth $6.75 per share as of May 18,
2001. The dissenting  shareholder,  however,  claimed that the shares were worth
$16.16 per share.  The numbers of shares and prices per share have been adjusted
to reflect a 5 for 4 stock split  declared by the board of  directors  on August
16, 2001 and  subsequent 5 for 4 stock split  declared by the board of directors
on  September  19,  2002.  To resolve  this matter in  accordance  with  Section
14-2-1330 of the Georgia  Business  Corporation  Code, the bank filed a Petition
for  Determination  of Fair Value of Shares  against  Cede & Co. in the Superior
Court of Fayette  County,  State of  Georgia  on  September  14,  2001.  Fayette
Mortgage Company and Edgar E. Chapman,  Jr. Individual  Retirement  Account have
subsequently  replaced  Cede & Co. as the real  shareholders  in  interest.  The
parties have  concluded  discovery  and are waiting for the case to be scheduled
for the trial.  Following  adjudication by the court, the bank will be obligated
to purchase the dissenting  shareholder's  shares for the judicially  determined
fair market value.

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

     No matter was  submitted  to a vote of security  holders  during the fourth
quarter of the fiscal year covered by this report.



                                       12
<PAGE>



                                     PART II

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

     Our common stock has been quoted on the OTC Bulletin Board under the symbol
"GABA" since June 2, 2002. During the last two fiscal years, there was no public
trading market for our common stock. As of January 7, 2003, we had approximately
529 shareholders of record.

     To date, we have not paid cash dividends on our common stock.  We currently
intend to retain  earnings  to support  operations  and  finance  expansion  and
therefore do not anticipate paying cash dividends in the foreseeable future. All
of our  outstanding  shares of common  stock are  entitled  to share  equally in
dividends from funds legally  available  when, and if,  declared by the board of
directors.

            The following table sets forth equity compensation plan information
at December 31, 2002.

<TABLE>
<CAPTION>
                      Equity Compensation Plan Information
-------------------------------- ------------------------------ ----------------------------- ------------------------------
                                                                                                  Number of securities
                                     Number of securities                                        remaining available for
                                         to be issued                 Weighted-average            future issuance under
                                 upon exercise of outstanding        exercise price of          equity compensation plans
                                 options, warrants and rights       outstanding options,          (excluding securities
                                 ----------------------------
Plan Category                                                       warrants and rights          reflected in column(a))
-------------                                                       -------------------          -----------------------
<S>                                         <C>                            <C>                           <C>
Equity compensation
plans approved by                           149,594                        $8.33                         201,042
security holders (1)

Equity compensation
plans not approved                          491,926                        $6.40                               0
by security holders

         Total                              641,520                                                      201,042

<FN>
(1)  The  number of  shares of common  stock  available  under the 2001  Georgia
     Bancshares, Inc. Stock Incentive Plan will automatically increase each time
     we issue additional  shares so that it  continues to equal 15% of our total
     outstanding shares.
</FN>
</TABLE>

Stock Warrants

     Each of our organizers  has received,  for no additional  consideration,  a
warrant  to  purchase  one share of common  stock for  $10.00 per share for each
share  purchased  during  the  initial  public  offering  of  our  wholly  owned
subsidiary,  The Bank of Georgia.  Following the 5 for 4 stock split declared by
our board of directors  on August 16, 2001 and the 5 for 4 stock split  declared
by our board of  directors on September  19, 2002,  the exercise  price has been
adjusted to $6.40 per share.  The warrants are  represented by separate  warrant
agreements.  One-third  of  the  warrants  vest  on  each  of  the  first  three
anniversaries of the date of our bank's incorporation,  and they are exercisable
in whole or in part during the ten year period following that date. The warrants
may not be  assigned,  transferred,  pledged,  or  hypothecated  in any way. The
shares  issued  pursuant to the  exercise  of such  warrants  are  transferable,
subject to compliance with applicable securities laws. If the Georgia Department
of Banking  and Finance or the FDIC  issues a capital  directive  or other order
requiring the bank to obtain additional capital, the warrants will be forfeited,
if not immediately exercised.




                                       13
<PAGE>



Item 6.  Management's Discussion and Analysis or Plan of Operation
------------------------------------------------------------------

Overview

     Georgia  Bancshares,  Inc. is a Georgia  corporation formed on December 21,
2000 to serve as the holding  company for The Bank of Georgia,  a Georgia  state
chartered bank incorporated on September 9, 1999. We commenced operations as The
Bank of Georgia on February 18, 2000.  On April 19,  2001,  shareholders  of The
Bank of Georgia approved the  reorganization  of the bank into a holding company
structure.  Upon  consummation of the  reorganization on May 18, 2001, shares of
the bank's  common  stock were  exchanged  for shares of the  holding  company's
common stock.  On July 9, 2001, we expanded our  operations by opening our first
branch in Newnan, Georgia. In November 2002, we opened an office at 100 Westpark
Drive in Peachtree City,  Georgia.  On January 3, 2003 we designated that office
as our  corporate  main office.  Our former main office at 2008 Highway 54 West,
Fayetteville  remains open as a branch office.  An additional branch office will
be opening in Tyrone,  Georgia in  mid-summer  2003 and we  continue to look for
other potential branch locations.

     We conduct a  community-oriented  commercial  and retail  banking  business
focused on serving the banking needs of  individuals  and small-to  medium-sized
businesses.  From the outset we have  grown  rapidly,  and this trend  continued
during 2002, as we increased from $118.7 million in total assets at December 31,
2001 to $171.6  million in total  assets at December  31,  2002.  We continue to
operate  profitably.  Profits  increased  from  $269,932 for fiscal year 2001 to
$591,933 for fiscal year 2002.

     The  following  table  sets  forth  selected   measures  of  our  financial
performance for the periods indicated:


<TABLE>
<CAPTION>
                                                    Georgia Bancshares, Inc.              Georgia Bancshares, Inc.

                                                           Year Ended                            Year Ended
                                                       December 30, 2002                       December 31, 2001
                                                       -----------------                       -----------------
                                                           (Audited)                               (Audited)

<S>                                                   <C>                                       <C>
         Income Statement
             Total Revenues (1)....                    $     9,985,218                         $       8,004,838
             Net Income............                            591,933                                   269,932

</TABLE>

<TABLE>
<CAPTION>
                                                    Georgia Bancshares, Inc.                Georgia Bancshares, Inc.
                                                      at December 31, 2002                  at December 31, 2001
                                                      --------------------                  --------------------
                                                           (Audited)                              (Audited)
<S>                                                        <C>                                       <C>
         Balance Sheet
             Total Assets..........                        171,618,514                               118,750,378
             Total Loans(2)........                        125,750,137                                81,452,429
             Total Deposits........                        142,558,800                               106,267,507

<FN>
(1) Total revenue equals net interest income plus total non-interest income.
(2) Total loans reported net of loan loss reserve and unearned income.
</FN>
</TABLE>

     The following  discussion  contains our analysis of our financial condition
and results of operations for the years ended December 31, 2002 and December 31,
2001.  Analysis of the results presented should be made with an understanding of
our short history.  The following  discussion should also be read in conjunction
with our financial  statements  and related notes and the other  financial  data
included elsewhere in this prospectus.




                                       14
<PAGE>



Analysis of the Fiscal Years Ended December 31, 2002 and December 31, 2001

Results of Operations

     During 2002, total assets increased $52.9 million, or 44.5%, to $171.6
million when compared to December 31, 2001. The primary reasons for this
increase in assets were increases in loans of $44.3 million and securities
available-for-sale of $12.9 million. Total deposits increased $36.3 million, or
34.2%, from the December 31, 2001 amount of $106.3 million. Shareholders' equity
was $18.3 million at December 31, 2002.

     At December 31, 2001, we had total assets of $118.7 million. Loans net of
loan loss reserve and unearned income totaled $81.5 million. After deductions
for interest expense and provision for loan losses, our net interest income was
$3.1 million for the year ended December 31, 2001. Total deposits were $106.3
million at December 31, 2001. As of December 31, 2001, shareholders' equity was
$10.9 million.

     Net Income. For the year ended December 31, 2002 and December 31, 2001, our
net income was $591,933 and $269,932, respectively.

     Net Interest Income. Our primary source of revenue is net interest income,
which is the difference between the income on interest-earning assets and
expense on interest-bearing liabilities. Our net interest income totaled $4.7
million for the year ended December 31, 2002 as compared to $3.1 million during
the same period of 2001. The net interest margin was 3.18% for the year ended
December 31, 2002 compared to 3.40% for the same period of 2001. Average earning
assets were $138.2 million during 2002 as compared to $88.6 million during 2001.

     Average Balances, Income and Expenses and Rates. The following tables set
forth, for the periods indicated, information related to our average balance
sheet and average yields on assets and average rates paid on liabilities. We
derived these yields or rates by dividing income or expense by the average
balance of the corresponding assets or liabilities. We derived average balances
from the daily balances throughout the periods indicated.



                                       15
<PAGE>




<TABLE>
<CAPTION>
                                   Average Balances, Income and Expenses, and Rates


                                             For the year ended                         For the year ended
                                             December 31, 2002                          December 31, 2001
                                             -----------------                          -----------------

                                      Average       Income/       Yield/        Average         Income/      Yield/
                                      Balance       Expense        Rate         Balance         Expense       Rate
                                      -------       -------        ----         -------         -------       ----
<S>                               <C>             <C>               <C>       <C>            <C>                <C>
Federal funds sold and short
  term investments..............  $   3,579,610   $     59,272      1.66%     $   5,316,241  $    206,136     3.88%
Investment securities...........     30,467,009      1,469,897      4.82%        21,657,261     1,229,581     5.68%
Net loans.......................    106,725,780      8,039,216      7.53%        66,559,667     6,340,391     9.53%
                                    -----------   ------------ ----------   ---------------  ------------     -----
   Total earning assets.........  $ 140,772,339   $  9,568,385      6.79%     $  93,533,169  $  7,776,108     8.31%
                                    ===========      =========      ====         ==========     =========     ====


Interest-bearing deposits.......  $ 129,477,364   $  4,741,038      3.66%     $  78,378,315  $  4,566,184     6.26%
Other borrowings................      4,890,170         95,966      1.96%         2,572,838       115,514     4.48%
                                    -----------   ------------      -----        ----------     ---------     -----
   Total interest-bearing
      Liabilities...............  $ 134,367,534   $  4,837,004      3.59%     $  80,951,153  $  4,681,698     5.78%
                                    ===========     ==========      ====         ==========    ==========     ====

Net interest spread.............                                    3.20%                                     2.53%
Net interest income/margin......                  $  4,731,381      3.19%                    $  3,094,410     3.14%
                                                    ==========      ====                       ==========     ====

</TABLE>


     Analysis of Changes in Net Interest Income. Net interest can also be
analyzed in terms of the impact of changing rates and changing volume. The
following table describes the extent to which changes in interest rates and
changes in volume of earning assets and interest-bearing liabilities have
affected our interest income and interest expenses during the periods indicated.
Information on changes in each category attributable to (i) changes due to
volume (change in volume multiplied by prior period rate); (ii) changes due to
rates (changes in rates multiplied by prior period volume); and (iii) changes in
rate and volume (change in rate multiplied by the change in volume) is provided
in the table. No recognition of exemption from federal, state, or local taxation
has been computed. Although an overall reduction in interest rates has had a
significant impact on net interest income, our rapid growth in a strong local
economic environment has been a more important factor and has resulted in an
increase in net interest income of $1,636,971 for the year ended December 31,
2002 over the year ended December 31, 2001. The change in net interest income
has been affected primarily by increases in volume of both loans and deposits
rather than changes in average rates.
<TABLE>
<CAPTION>
                                           Analysis of Changes in Net Interest Income
                                                 ---------------------------------------------------------------------------------
                                                                     Year ended December 31, 2002 versus 2001
                                                 ---------------------------------------------------------------------------------
                                                               Volume                Rate             Volume/Rate       Net change
                                                               ------                ----             ----------        ----------
<S>                                                       <C>                <C>                  <C>                 <C>
       Federal Funds sold & short term investments.....   $       (67,381)    $     (118,021)     $        38,538     $    (146,864)
       Investment securities...........................           500,394           (186,252)             (73,826)          240,316
       Loans...........................................         3,827,831         (1,331,193)            (797,813)        1,698,825
                                                          ---------------     ----------------    -----------------   --------------
          Total earning assets.........................   $     4,260,844     $   (1,635,466)     $      (833,101)    $   1,792,277
                                                          ===============     ================    =================   ==============

       Interest-bearing deposits.......................   $     2,973,965     $   (1,692,972)     $    (1,106,139)    $     174,854
       Other borrowings................................           104,048            (65,093)             (58,503)          (19,548)
                                                          ---------------     ----------------    -----------------   --------------
          Total interest-bearing liabilities...........   $     3,078,013     $   (1,758,065)     $    (1,164,642)    $     155,306
                                                          ---------------     ----------------    -----------------   --------------

       Net interest income.............................   $     1,182,831     $      122,599    $         331,541     $   1,636,971
                                                          ===============     ================    =================   ==============
</TABLE>

                                       16
<PAGE>


     Interest Rate Sensitivity. A significant portion of our assets and
liabilities are monetary in nature, and consequently they are very sensitive to
changes in interest rates. This interest rate risk is our primary market risk
exposure, and it can have a significant effect on our net interest income and
cash flows. We review our exposure to market risk on a regular basis, and we
manage the pricing and maturity of our assets and liabilities to diminish the
potential adverse impact that changes in interest rates could have on our net
interest income.

     We measure interest rate sensitivity "gap," which is the difference between
the amount of interest-earning assets and interest-bearing liabilities, which
either reprice or mature within a given period of time. The difference, or the
interest rate repricing "gap," provides an indication of the extent to which an
institution's interest rate spread will be affected by changes in interest
rates. A gap is considered positive when the amount of interest-rate sensitive
assets exceeds the amount of interest-rate sensitive liabilities, and it is
considered negative when the amount of interest-rate sensitive liabilities
exceeds the amount of interest-rate sensitive assets. We generally would benefit
from increasing market interest rates when we have an asset-sensitive, or a
positive, interest rate gap, and we would generally benefit from decreasing
market interest rates when we have liability-sensitive, or a negative, interest
rate gap. When measured on a "gap" basis, we are asset-sensitive over the
cumulative one-year time frame as of December 31, 2002. Interest rate cuts by
the Federal Reserve Board during the years 2001 and 2002 contributed to a
narrowed net interest margin. During 2002, our net interest margin improved
marginally from 3.14% at December 31, 2001 to 3.19% at December 31, 2002. We
cannot predict whether the Federal Reserve Board will continue to reduce the
discount rate in the future. Gap analysis is not a precise indicator of our
interest sensitivity position. The analysis presents only a static view of the
timing of maturities and repricing opportunities, without taking into
consideration that changes in interest rates do not affect all assets and
liabilities equally. For example, rates paid on a substantial portion of
interest-bearing checking and savings accounts may change rapidly within a
relatively short time frame, but we believe those rates are significantly less
interest-sensitive than market-based rates such as those paid on certificates of
deposit.

     Net interest income is also affected by other significant factors,
including changes in the volume and mix of interest-earning assets and
interest-bearing liabilities. We perform asset/liability modeling to assess the
impact of varying interest rates and the impact that balance sheet mix
assumptions will have on net interest income. We attempt to manage interest rate
sensitivity by repricing assets or liabilities, selling securities
available-for-sale, replacing an asset or liability at maturity, or adjusting
the interest rate during the life of an asset or liability. Managing the amount
of assets and liabilities that reprice in the same time interval helps us to
hedge risks and minimize the impact on net interest income of rising or falling
interest rates. We evaluate interest sensitivity risk and then formulate
guidelines regarding asset generation and repricing, funding sources and
pricing, and off-balance sheet commitments in order to decrease interest rate
sensitivity risk.

     The following tables summarize the amounts of interest-earning assets and
interest-bearing liabilities outstanding at December 31, 2001 and December 31,
2002 that are expected to mature, prepay, or reprice in each of the future time
periods shown. Except as stated in the following tables, the amount of assets or
liabilities that mature or reprice during a particular period was determined in
accordance with the contractual terms of the asset or liability. Adjustable rate
loans are included in the period in which interest rates are next scheduled to
adjust rather than in the period in which they are due, and fixed rate loans are
included in the periods in which they are anticipated to be repaid based on
scheduled maturities. We included our savings accounts and interest-bearing
demand accounts (NOW and money market deposit accounts), which are generally
subject to immediate withdrawal, in the "Three Months or Less" category,
although historical experience has proven these deposits to be more stable over
the course of a year.


                                       17
<PAGE>




<TABLE>
<CAPTION>
                          Interest Sensitivity Analysis
                                December 31, 2001



                                                                        After three     After one
                                                       Within three     but within      but within      After five
                                                          Months       twelve months    five years        years           Total
                                                       ------------    -------------    -----------     ----------    -------------
<S>                                                   <C>              <C>              <C>             <C>            <C>
Assets
Earning assets:
 Federal funds sold and short term investments...     $  9,261,761     $         -      $   100,000     $         -    $ 9,361,761
 Investment securities ...........................       2,842,596       1,005,230        4,092,020      13,951,545     21,891,391
 Loans ...........................................      35,795,482      30,536,633       15,599,660         478,488     82,410,263
                                                      ------------     -----------      -----------     -----------    -----------
    Total earnings assets.........................    $ 47,899,839      31,541,863       19,791,680     $14,430,033    113,663,415
                                                      ============     ===========      ===========     ===========    ===========

Liabilities
Interest-bearing liabilities
 Money market and NOW.............................    $ 14,115,051     $         -      $         -     $         -    $14,115,051
 Regular savings deposits.........................         752,203               -                -               -        752,203
 Time deposits....................................      17,922,235      39,677,087       25,839,578               -     83,438,900
 Other borrowings.................................               -               -                -               -              -
                                                      ------------     -----------      -----------     -----------    -----------
    Total interest-bearing liabilities............    $ 32,789,489     $39,677,087      $25,839,578     $              $98,306,154
                                                      ============     ===========      ===========     ===========    ===========

Period gap........................................    $ 15,110,350     $(8,135,224)     $(6,047,898)    $14,430,033    $15,357,261
Cumulative gap....................................    $ 15,110,350     $ 6,975,126      $   927,228     $15,357,261    $15,357,261
Ratio of cumulative gap to total earning assets...           31.50%           8.78%             .93%           13.5%
</TABLE>

<TABLE>
<CAPTION>
                                                              December 31, 2002


                                                                        After three     After one
                                                       Within three     but within      but within      After five
                                                          Months       twelve months    five years        years           Total
                                                       ------------    -------------    -----------     ----------    -------------
<S>                                                   <C>              <C>              <C>             <C>            <C>
Assets
Earning assets:
 Federal funds sold and short term investments...     $    432,154    $     99,000      $          -    $         -    $    531,154
 Investment securities...........................        2,992,748         584,358         3,530,001     27,702,140      34,809,247
 Loans...........................................       69,277,429      33,142,353        23,414,542        822,960     126,657,284
                                                      ------------    ------------      ------------    -----------    ------------
    Total earning assets.........................       72,702,331    $ 33,825,711      $ 26,944,543    $28,525,100    $161,997,685
                                                      ============    ============      ============    ===========    ============

Liabilities
Interest-bearing liabilities
 Money market and NOW............................     $ 21,096,480    $          -      $          -    $         -    $ 21,096,480
 Regular savings deposits........................          835,315               -                 -              -         835,315
 Time deposits...................................       16,499,500      63,103,056        35,470,431              -     115,072,987
 Other borrowings................................        9,430,560               -                 -              -       9,430,560
                                                      ------------    ------------      ------------    -----------    ------------
    Total interest-bearing liabilities...........     $ 47,861,855    $ 63,103,056      $ 35,470,431    $              $146,435,342
                                                      ============    ============      ============    ===========    ============

Period gap........................................    $ 24,840,476    $(29,277,345)     $ (8,525,888)   $ 28,525,100   $ 15,562,343
Cumulative gap....................................    $ 24,840,476    $ (4,436,869)     $(12,962,757)   $ 15,562,343   $ 15,562,343
Ratio of cumulative gap to total earning assets...           34.16%         (4.16)%            (9.71)%          9.60%
</TABLE>


                                       18
<PAGE>

     Provision and Allowance for Loan Losses. We have established an allowance
for loan losses through a provision for loan losses charged to expense. The
allowance represents an amount which we believe will be adequate to absorb
probable losses on existing loans that may become uncollectible. Our judgment in
determining the adequacy of the allowance is based on evaluations of the
collectibility of loans, including consideration of such factors as the balance
of impaired loans, changes in the nature and volume of the loan portfolio,
current economic conditions that may affect the borrower's ability to pay,
overall portfolio quality, and a review of specific problem loans. On a
quarterly basis, we perform an analysis of the adequacy of the loan loss
allowance. In addition, we obtain an independent external loan review on a
quarterly basis. Both the internal and external review use an eight point grade
system to rate the loan portfolio. The eight categories we use are 1-Excellent,
2-Superior, 3-Average, 4-Below average, 5-Watch, 6-Substandard, 7-Doubtful,
8-Loss. Each category of the allowance carries a specific allocation ranging
from 1% of the loan balance to 100%. For example, a loan rated substandard will
have a 15% allowance allocation. We adjust the amount of the allowance
periodically based on changing circumstances and the internal and external
reviews. Moreover, each loan is assigned a rating at origination and then
reviewed annually by the loan officer. A majority of the loans are also reviewed
quarterly during the independent external review. Except for the consumer
portfolio, which is rated as a group, loans are rated individually. On a monthly
basis, we also monitor concentrations of credit, particularly in the areas of
acquisition and development and construction lending.

     Recognized losses are charged to the allowance for loan losses, while
subsequent recoveries are added to the allowance. A loan is impaired when it is
probable that we 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 expected payments,
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, 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.

     In addition, regulatory agencies, as an integral part of their examination
process, periodically review our allowance for loan losses, and they may require
us to record additions to the allowance based on their review of information
available to them at the time of their examinations.

     We calculate the allowance for loan losses based on our gross loans. Banks
generally use their historical loss ratios as a benchmark for maintaining an
adequate loan loss reserve. Because our bank did not have a historical loss
ratio when we opened in February 2000, we initially established an allowance of
one percent. Since that time we have periodically increased the allowance, based
upon our evaluation of the factors previously discussed and our analysis of
local and national economic trends. We also believe that the size of our loan
portfolio is a component of overall risk. At December 31, 2002, our allowance
for possible loan losses was $1,899,306, or 1.48% of outstanding loans, compared
to an allowance for possible loan losses of $1,114,411, or 1.35% of outstanding
loans, at December 31, 2001. During 2003, we plan to maintain our allowance at
the same level as on December 31, 2002. We will continue to monitor and evaluate
the risk in our loan portfolio throughout the year and we will adjust our
philosophy and allowance targets if needed.

     We discontinue accrual of interest on a loan when we conclude it is
doubtful that we will be able to collect interest from the borrower. We reach
this conclusion by taking into account factors such as the borrower's financial
condition, economic and business conditions, and the results of our previous
collection efforts. Generally, we will place a delinquent loan in non-accrual
status when the loan becomes 90 days or more past due. When we place a loan in
non-accrual status, we will reverse all interest which has been accrued on the
loan but remains unpaid, and we will deduct this interest from earnings as a
reduction of reported interest income. We will not accrue any additional
interest on the loan balance until we conclude the collection of both principal
and interest is reasonably certain. At December 31, 2002 and December 31, 2001,
there were no loans which were 90 days or more past due, and we did not have any
restructured loans. At December 31, 2002, there was one loan with a balance of
$13,856.79 on non-accrual status due to the bankruptcy of the borrower.

     We do not include loans that are current as to principal and interest in
our non-performing assets categories. However, we will still classify a current
loan as a potential problem loan if we develop serious doubts about the
borrower's future performance under the terms of the loan contract. We consider
the level of potential problem loans in our determination of the adequacy of the
allowance for loan losses. At December 31, 2001, we did not have any loans we
considered to be potential problem loans. At December 31, 2002, we had loans
with balances totaling $2,168,275.77 which we considered to be potential problem
loans. These loans were current as to collection of principal and interest as of
December 31, 2002.



                                       19
<PAGE>

     The following table sets forth certain information with respect to our
allowance for loan losses and the composition of charge-offs and recoveries for
the years ended December 31, 2001 and December 31, 2002.
<TABLE>
<CAPTION>

                                         Allowance for Loan Losses
                                          (Dollars in Thousands)

                                                          December 31, 2001        December 31, 2002
                                                        ---------------------    --------------------

<S>                                                          <C>                    <C>
   Average loans outstanding..........................       $     67,560           $     108,146
                                                             ============           =============
   Gross loans outstanding at period end..............       $     82,678           $     127,764
                                                             ============           =============
   Total non-performing loans.........................                  0                       0

   Beginning balance of allowance.....................       $        455           $       1,114
   Loans charged off:.................................
   Real Estate........................................                 (0)                    (54)
   Commercial.........................................                 (0)                    (56)
   Consumer...........................................                 (1)                     (1)
                                                             -------------          --------------
   Total loans charged off:...........................       $         (1)          $        (111)
   Recoveries:
         Real Estate..................................       $          0           $           0
         Commercial...................................                  0                       0
         Consumer.....................................                  0                       1
        Total recoveries..............................                  0                       0
                                                             ------------           -------------
   Net loans charged off..............................                  0                       0

   Provision for loan losses..........................                660                     885
                                                             ------------           -------------
   Balance at period end..............................       $      1,114           $       1,889
                                                             ============           =============

   Allowance as a percent of total loans..............               1.35%                   1.48%
   Non-performing loans as a
   percentage of total loans..........................                  0%                    .01%
                                                             ============           =============
   Non-performing loans as a
   percentage of allowance............................                  0%                    .79%
   Ratio of net charge-offs to average gross loans
   outstanding during the period......................                  0%                    .10%
                                                             ============           =============
</TABLE>





                                       20
<PAGE>



     The following table sets forth certain information with respect to our
allowance for loan losses by loan category and the percentage of loans in each
category to total loans for the periods indicated. We believe that the allowance
can be allocated by category only on an approximate basis. The allocation of the
allowance to each category is not necessarily indicative of further losses and
does not restrict the use of the allowance to absorb losses in any category.

                  Allocation of the Allowance for Loan Losses
                             (Dollars in Thousands)

                                     As of                       As of
                               December 31, 2001           December 31, 2002
                            ------------------------     -----------------------

Real estate ............    $      389        34.9%   $        697       36.8%
Construction............           594        53.3%          1,017       53.8%
Commercial..............            89         8.0%            130        6.9%
Consumer................            27         2.4%             30        1.6%
Credit Cards............             5         0.4%              8         .5%
Consumer................            11         1.0%              7         .4%
                               -------         ----      ---------  ---------
Total allowance for
     loan losses........    $    1,114       100.0%   $      1,889      100.0%

Non-interest Income and Expense

     Non-interest Income. Non-interest income was $416,833 for the year ended
December 31, 2002 compared to $228,730 for the year ended December 31, 2001.
Service fees on deposit accounts, the largest component of non-interest income,
increased to $168,293 in 2002 from $107,606 in 2001. Other operating income
increased to $68,400 in 2002 from $38,612 in 2001. The growth in service charge
and other income is attributable to the growth in the number of deposit accounts
serviced by The Bank of Georgia and an increase in fee-related transactions by
bank customers. Net gains on the sale of investment securities and other
investments totaled $180,140 during 2002, an increase from $82,512 in 2001.

     Non-interest Expense. Total non-interest expense was $3.4 million for the
year ended December 31, 2002 compared to $2.4 million for the year ended
December 31, 2001. This increase was primarily due to the growth we realized
during 2002 and costs associated with our branch building program. Salary and
employee benefit expense totaled $2.0 million in 2002, an increase of 52.2% over
the $1.3 million we recorded in 2001. The increase in salary and employee
benefit expense is due to the fact that the Newnan office was open for twelve
months in 2002, as compared to six months in 2001, the hiring of staff for the
office we opened in November 2002, the hiring of additional staff that was
necessitated by internal growth, and salary increases granted during the normal
course of business. Depreciation expense was $155,393 in 2002 as compared to
$111,437 in 2001, data processing expense increased to $324,563 in 2002 from
$194,887 during 2001, and other operating expenses were $337,597 in 2002 and
$252,093 in 2001.

Analysis of Financial Condition

     At December 31, 2002, total consolidated assets were $171.6 million. Our
primary assets were net loans of $125.8 million, securities available for sale
of $34.8 million, and cash and deposits due from correspondent banks of $4.9
million. Our liabilities at December 31, 2002 were $153.4 million, consisting
primarily of deposits of $142.6 million, federal funds purchased of $4.2
million, securities sold under agreements to repurchase of $3.2 million, and
Federal Home Loan Bank of Atlanta advances of $2 million. At December 31, 2002,
total shareholders' equity totaled $18.3 million.

     At December 31, 2001, total consolidated assets were $118.8 million. Our
primary assets were net loans of $81.5 million, securities available for sale of
$21.9 million, and federal funds sold of $8.6 million. Our liabilities at
December 31, 2001 were $107.9 million, consisting primarily of deposits of
$106.3 million. At December 31, 2001, total shareholders' equity totaled $10.9
million.

     Loans. Loans are our largest category of earning assets and typically
provide higher yields than our other types of earning assets. At December 31,
2002, net loans (gross loans less the allowance for loan losses and unearned
fees) totaled $125.8 million, or 77.8% of earning assets, which totaled $161.7
million. Earning assets consisted of loans of $125.8 million, or 77.8%,
investment securities available for sale of $34.8 million, or 21.5%, interest
bearing deposits with other banks of $.5 million, or .3%, and other investments
(consisting of stock in Community Financial Services, Inc. (the holding


                                       21
<PAGE>

company for The Bankers Bank), and Federal Home Loan Bank of Atlanta stock) of
$.7 million, or .4%. Average gross loans totaled $108.1 million during 2002
with a yield of 7.43%.

     At December 31, 2001, net loans totaled $81.5 million, or 71.8% of earning
assets, which totaled $113.5 million. Earning assets consisted of loans of $81.5
million, or 71.8%, investment securities available for sale of $21.9 million, or
26.9%, interest bearing deposits with other banks of $.8 million, or .7%, and
other investments (consisting of stock in Community Financial Services, Inc. and
Federal Home Loan Bank of Atlanta stock) of $.8 million or, .7%. Average gross
loans totaled $67.6 million during 2001 with a yield of 9.42%.

     Associated with loan yields are inherent credit and liquidity risks, which
we attempt to control and counterbalance. The interest rates we charge on loans
vary with the degree of risk and the maturity and amount of the loan.
Competitive pressures, money market rates, availability of funds, and government
regulations also influence interest rates.

     Real estate mortgage loans and construction and development loans
constitute the principal components of our loan portfolio. For the year ended
December 31, 2002, gross loans totaled $127.8 million with residential and
non-residential/non-farm mortgage loans totaling $47.3 million and representing
37.0% of our portfolio, construction and development loans totaling $69 million
and representing 54.0% of our portfolio, and non-real estate loans totaling
$11.5 million and accounting for 9.0% of our loan portfolio. Real estate
mortgage loans and construction and development loans constitute the principal
components of our loan portfolio.

     For the year ended December 31, 2001, gross loans totaled $82.7 million
with residential and non-residential/non-farm mortgage loans totaling $29.8
million and representing 36.0% of our portfolio, construction and development
loans totaling $44.2 million and representing 53.4% of our portfolio, and
non-real estate loans totaling $8.7 million and accounting for 10.6% of our loan
portfolio.

     In the context of this discussion, a "real estate mortgage loan" is defined
as any loan, other than loans for construction purposes, secured by real estate,
regardless of the purpose of the loan. Most of our real estate loans are secured
by residential or commercial property. We do not generally make traditional long
term residential mortgages, but we do make traditional second mortgage
residential real estate loans and home equity lines of credit. We follow the
common practice of financial institutions in our area of obtaining a security
interest in real estate whenever possible, in addition to any other available
collateral. This collateral is taken to reinforce the likelihood of the ultimate
repayment of the loan and tends to increase the magnitude of the real estate
loan portfolio component. Generally, we limit our loan-to-value ratio to 80%.
Due to the short time our portfolio has existed, the current mix may not be
indicative of the ongoing portfolio mix. We attempt to maintain a relatively
diversified loan portfolio to help reduce the risk inherent in concentrations of
collateral.

     We have been able to rapidly grow our loan portfolio since we commenced
operations by refinancing loans with borrowers from other financial institutions
and by originating new loans from individuals and businesses in the community.
Our directors and officers have utilized banking relationships established
during their previous employment with other financial institutions in our market
area to generate loan business. A majority of our initial loans consisted of
refinancing of seasoned credit or the continuation of business from borrowers
who had preexisting banking relationships with our directors and officers. Our
loan growth resulting from refinancing of seasoned credit has slowed as our
business has continued to mature. In 2002, we added additional seasoned loan
personnel to augment our loan origination efforts and in the future we believe
that most of our loans will originate from new business from existing and new
customers. We also continue to seek new ways to tap into new markets both from
new product lines in our current markets and from new geographic areas.



                                       22
<PAGE>



     The following table shows the composition of our loan portfolio by category
at December 31, 2002 and December 31, 2001.

<TABLE>
<CAPTION>
                          Composition of Loan Portfolio

                                                  December 31, 2002                   December 31, 2001
                                                                Percent                                 Percent
                                                  Amount        of Total            Amount              Of Total
                                                  ------        --------            ------              --------
         Real estate - construction
<S>                                         <C>                   <C>          <C>                        <C>
         and land development..........  $     69,000,000        54.01%     $     44,196,856             53.45%
         Real estate - residential.....         7,808,000         6.11%            7,602,383              9.20%
         Real estate - non-farm and
         non-residential...............        39,454,000        30.88%           22,164,622              26.8%
         Commercial, financial and
         agricultural..................         8,841,000         6.92%            6,601,411              7.99%
         Consumer......................         2,175,000         1.70%            2,110,993              2.55%
         All other loans                          486,343         0.38%                2,479              0.01%
                                           --------------       -------         ------------             ------
         Loans, gross..................  $    127,764,343        100.0%     $     82,678,744             100.0%
                                                                =======                                  ======
         Deferred loan fees                      (124,900)                          (111,904)
         Allowance for possible
         losses........................        (1,889,306)                        (1,114,411)
                                           --------------                       ------------
         Loans, net....................  $    125,750,137                   $     81,452,429
                                           ==============                       ============
</TABLE>

     The following table sets forth the maturity distribution, classified
according to sensitivity to changes in interest rates, for selected components
of our loan portfolio as of December 31, 2002. The information in this table is
based on the contractual maturities of the individual loans, including loans,
which may be subject to renewal at their contractual maturity. Renewal of these
loans is subject to review and credit approval, as well as modification of terms
upon their maturity. Actual repayments of loans may differ from maturities
reflected above because borrowers may have the right to prepay obligations with
or without prepayment penalties.

<TABLE>
<CAPTION>
                        Loan Maturity Schedule and Sensitivity to Changes in Interest Rates


December 31, 2002
-----------------
                                                               After one but
                                        One year or less     within five years  After five years   Total
                                     --------------------------------------------------------------------------------
<S>                                      <C>                     <C>                 <C>             <C>
Real estate- construction and land     $     60,099,374       $     7,627,748     $   1,272,878  $       69,000,000
development.........................
Real estate-residential                       4,070,130             2,856,530           881,340           7,808,000
Real estate-non-farm and
non-residential.....................         12,867,472            17,273,987         9,312,541          39,454,000
Commercial, financial and
agricultural........................          5,910,654             2,679,983           250,363           8,841,000
Consumer............................            633,369             1,541,631                 0           2,175,000
All other loans.....................            486,343                     0                 0             486,343
                                     ------------------       ---------------   ---------------  ------------------
     Total..........................   $     84,067,342       $    31,979,879     $  11,717,122  $      127,764,343
                                       ================       ===============     =============  ==================
Fixed Interest Rate.................   $     29,459,170       $    21,983,429     $     796,242  $       52,238,841
Variable Interest Rate..............         74,179,344             1,346,158                 0          75,525,502
                                     ------------------       ---------------     -------------  ------------------
     Total..........................   $    103,638,514       $    23,329,587     $     796,242  $      127,764,343
                                       ================       ===============     =============  ==================
</TABLE>

     Investment Securities. At December 31, 2002, our investment securities
portfolio had a book value of $34.3 million, and a market value of $34.8
million, for an unrealized net gain of $539,015. At December 31, 2002,
securities maturing in less than one year had a book value of $250,245. The
average outstanding book value of securities during 2002 was $30.1 million.



                                       23
<PAGE>

     At December 31, 2001, our investment securities portfolio had a book value
of $21.9 million and a market value of $21.8 million, for an unrealized net loss
of $14,720. At December 31, 2001, there were no securities maturing in less than
one year. The average outstanding book value of securities during 2001 was $21.2
million.

     We primarily invest in mortgage backed securities. Cash flows from mortgage
backed security payments are used to fund loans when loan demand is high. When
loan demand is down we funnel these cash flows into purchases of other mortgage
backed securities. We also invest a portion of our investable funds in United
States agency securities or tax free municipals.

     The following table summarizes the carrying value of investment securities
as of the indicated dates and the weighted-average yields of those securities at
December 31, 2002 and December 31, 2001.

<TABLE>
<CAPTION>
                                                                                      (Dollars in thousands)

                                                                         ----------------------------------------------
                                                                           December 31, 2002         December 31, 2001
                                                                         ----------------------------------------------

<S>                                                                          <C>                      <C>
Securities of U.S. Government Agencies and Corporations................      $       6,010            $    6,079
Obligations of state and local governments.............................              4,942                 4,613
Mortgage-backed securities.............................................             23,319                11,214
                                                                             -------------            ----------

   Total Securities....................................................      $      34,270            $   21,906
                                                                             =============            ==========
</TABLE>


<TABLE>
<CAPTION>
                                   Investment Securities Portfolio Maturity Schedule
                                                 (Dollars in thousands)
December 31, 2002                                                                    Available-for-Sale
                                                                           Carrying
                                                                           Amount                       Yield  (1)
                                                                         ------------                 -------------
<S>                                                                      <C>                                <C>
Securities of U.S. Government agencies and corporations due:
   Within one year.....................................................  $     250                          4.64%
   After one year but within five years................................      2,631                          3.60%
   After five years but within ten years...............................      1,503                          4.74%
   After ten years.....................................................      1,626                          4.24%
                                                                         ---------                      ---------

Obligations of states and local governments due:
   Within one year.....................................................  $       0                          0.00%
   After one year but within five years................................        436                          5.34%
   After five years but within ten years...............................        480                          4.17%
   After ten years.....................................................      4,026                          5.19%
                                                                         ---------                      ---------

Mortgage-backed securities.............................................
   Within one year.....................................................  $       0                             0%
   After one year but within five years................................        220                          4.84%
   After five years but within ten years...............................      9,236                          4.58%
   After ten years.....................................................     13,862                          5.26%
                                                                         ---------                      ---------
Total  ................................................................  $  34,270
                                                                         =========

<FN>
(1) For tax-exempt securities, the tax equivalent yield has been calculated
using an incremental rate of 34%.
</FN>
</TABLE>



                                       24
<PAGE>



<TABLE>
<CAPTION>
                                   Investment Securities Portfolio Maturity Schedule
                                                 (Dollars in thousands)
December 31, 2001                                                                    Available-for-Sale
                                                                           Carrying
                                                                           Amount                  Yield  (1)
                                                                         ------------            -------------
<S>                                                                      <C>                          <C>
Securities of U.S. Government agencies and corporations due:
   Within one year.....................................................  $           0                0.00%
   After one year but within five years................................          3,779                4.44%
   After five years but within ten years...............................            500                4.00%
   After ten years.....................................................          1,795                5.76%
                                                                         -------------             -------

Obligations of states and local governments due:
   Within one year.....................................................  $           0                0.00%
   After one year but within five years................................            440                5.05%
   After five years but within ten years...............................              0                0.00%
   After ten years.....................................................          4,163                6.46%
                                                                         -------------             -------

Mortgage-backed securities.............................................
   Within one
year.....................................................                $           0                0.00%
   After one year but within five years................................              0                0.00%
   After five years but within ten years...............................          1,829                5.66%
   After ten years.....................................................          9,400                6.19%
                                                                         -------------             -------
Total  ................................................................  $      21,906
                                                                         =============

<FN>
(1) For tax-exempt securities, the tax equivalent yield has been calculated
using an incremental rate of 34%.
</FN>
</TABLE>

Average Daily Deposits

     The following tables summarize our average daily deposits at the dates
indicated. These totals include certificates of deposit $100,000 and over which
at December 31, 2002 totaled $55.9 million. Of this total, scheduled maturities
within three months were $2.3 million; within three to six months were $12.1
million; within six to 12 months were $6.0 million; and for maturities greater
than 12 months were $16.2 million.

     At December 31, 2002, total deposits had increased by $36.3 million, or
34.2%, from December 31, 2001. Expressed in percentages, noninterest-bearing
deposits increased 16.8% and interest-bearing deposits increased 35.6%. For the
same period, average non-interest-bearing deposits increased 53.5% and average
interest-bearing deposits increased 294.9%.

<TABLE>
<CAPTION>
                                                       Deposits
                                                (Dollars in thousands)

                                                     December 31, 2002                    December 31, 2001
                                                     -----------------                    -----------------
                                               Average          Average Rate       Average              Average Rate
                                               Amount               Paid            Amount                   Paid
<S>                                          <C>                      <C>        <C>                            <C>
Noninterest-bearing demand
    deposits........................         $    9,144               0%         $    5,645                     0%
Interest-bearing demand deposits....              6,617             .74%              4,734                  1.35%
Money market savings account........             12,611            2.18%              4,982                  3.54%
Other savings account...............                774            1.24%                404                  1.59%
Certificates of deposits............            100,331            4.47%             68,256                  6.33%
                                             ----------                          ----------
Total deposits......................         $  129,477                          $   84,021
                                             ==========                          ==========
</TABLE>



                                       25
<PAGE>


Return on Equity and Assets

     The following table shows the return on average assets (net income divided
by average total assets), return on average equity (net income divided by
average daily equity), and equity to assets ratio (average equity divided by
average total assets) for the periods indicated. Since our inception, we have
not paid cash dividends.

                                           December 31, 2002   December 31, 2001
                                           -----------------   -----------------
Return on average assets................         .40%                 .27%
Return on average equity................        4.07%                2.47%
Equity to assets ratio..................        9.81%               11.05%

Capital

     Total shareholders' equity increased from $10.9 million at December 31,
2001 to $18.3 million at December 31, 2002. This increase is primarily
attributable to net proceeds from a secondary stock offering of $6,459,454, net
income of $591,933, and an increase in net unrealized gains on securities
available for sale of $365,465. In addition, we declared a 5 for 4 stock in
October 2002.

     We are subject to various regulatory capital requirements administered by
our federal bank regulators. 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 our
financial statements. Under these capital guidelines, we must maintain a minimum
total risk-based capital ratio of 8%, with at least 4% being Tier 1 capital. Our
Tier 1 capital consists of common shareholders' equity, although Tier 1 capital
could also include other components, such as qualifying perpetual preferred
stock and minority interests in equity accounts of consolidated subsidiaries. We
are also required to maintain a minimum Tier 1 leverage ratio (Tier 1 capital to
total average assets) of at least 4%. To be considered "well-capitalized," we
must maintain total risk-based capital of at least 10%, Tier 1 capital of at
least 6%, and a leverage ratio of at least 5%.

     We were considered to be "well capitalized" at the for regulatory purposes
at December 31, 2002, as our Tier 1 capital ratio was 12.05%, our total
risk-based capital ratio was 13.38%, and our Tier 1 leverage ratio was 12.13%.
We were also considered to be "well capitalized" at December 31, 2001, as our
Tier 1 capital ratio was 11.00%, our total risk-based capital ratio was 12.69%,
and our Tier 1 leverage ratio was 11.51%.

Liquidity Management

     Liquidity is the ability to meet current and future obligations through
liquidation or maturity of existing assets or the acquisition of additional
liabilities. We manage both assets and liabilities to achieve appropriate levels
of liquidity. Cash and federal funds sold are our primary sources of asset
liquidity. These funds provide a cushion against short-term fluctuations in cash
flow from both deposits and loans. Securities available-for-sale, which totaled
$34.8 million at December 31, 2002, serve as a ready source of secondary
liquidity. However, the availability of this source of funds is influenced by
market conditions and the liquidation of securities may not always be the most
desirable course of action.

     Individual and commercial deposits are our primary source of funds for
banking activities. We obtain deposits from customers by offering competitive
deposit rates and by offering deposit products that we believe are desired by
our local market. We also access other deposits markets, including "brokered" or
out of market deposits, when the local market does not provide sufficient funds
to meet our loan demand and when interest rates on those deposits satisfy our
asset-liability requirements.

     Our bank is a member of the Federal Home Loan Bank of Atlanta, and we are
eligible to receive advances from the Federal Home Loan Bank, subject to its
approval. Our bank has received and has repaid such advances in past. It is our
practice to use such advances to meet short-term liquidity needs when
appropriate, and to consider the use of longer term advances to fund loans.

     We also have arrangements with commercial banks for short-term unsecured
"federal funds" advances of up to $5.5 million. At December 31, 2002, we had
outstanding borrowings of $4.2 against these lines with $1.3 million unused. We
believe that our liquidity sources are adequate to meet our operating needs.



                                       26
<PAGE>



Impact of Inflation and Changing Prices

     The financial statements and related financial data presented in this
prospectus have been prepared in accordance with generally accepted accounting
principles which require the measurement of financial position and operating
results in terms of historical dollars, without considering changes in relative
purchasing power over time due to inflation. Unlike most industrial companies,
virtually all of the assets and liabilities of a financial institution are
monetary in nature. As a result, interest rates generally have a more
significant impact on a financial institution's performance than does the effect
of inflation.

     While the effect of inflation on a bank is normally not as significant as
its influence on those businesses that have large investments in plant and
inventories, it does have an effect. Interest rates generally increase as the
rate of inflation increases, but the magnitude of the change in rates may not be
the same. While interest rates have traditionally moved with inflation, the
effect on income is diminished because both interest earned on assets and
interest paid on liabilities vary directly with each other unless we are in a
highly liability-sensitive position. Also, general increases in the price of
goods and services will result in increased operating expenses.


Item 7.  Financial Statements
-----------------------------
     Our consolidated financial statements, including our consolidated balance
sheet as of December 31, 2002 and 2001, and consolidated statements of income,
changes in stockholders' equity, and cash flows for the years ended December 31,
2002, together with the report of Abbott, Jordan & Koon, LLC dated February 11,
2003, and the notes containing certain supporting information are attached
hereto as pages F-1 - F-22.






                                       27
<PAGE>














                     GEORGIA BANCSHARES, INC. AND SUBSIDIARY

                        CONSOLIDATED FINANCIAL STATEMENTS



                     Years Ended December 31, 2002 and 2001






<PAGE>




                     GEORGIA BANCSHARES, INC. AND SUBSIDIARY
                        CONSOLIDATED FINANCIAL STATEMENTS
                     Years Ended December 31, 2002 and 2001





                                TABLE OF CONTENTS


                                                                          Page

Independent auditors' report...............................................F-1

Consolidated statements of financial condition.............................F-2

Consolidated statements of income..........................................F-3

Consolidated statements of changes in stockholders' equity.................F-4

Consolidated statements of cash flows......................................F-6

Notes to consolidated financial statements.................................F-7


<PAGE>




                          INDEPENDENT AUDITORS' REPORT



The Board of Directors and Stockholders
Georgia Bancshares, Inc.
Peachtree City, Georgia  30269


     We have audited the accompanying consolidated statements of financial
condition of Georgia Bancshares, Inc. and subsidiary as of December 31, 2002 and
2001, and the related consolidated statements of income, changes in
stockholders' equity, and cash flows for the years then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

     We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated 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 provides 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 Georgia
Bancshares, Inc. and subsidiary as of December 31, 2002 and 2001, and the
results of its operations and its cash flows for the years then ended in
conformity with accounting principles generally accepted in the United States of
America.



/s/ Abbott, Jordan & Koon, LLC

Abbott, Jordan & Koon, LLC
Manchester, Georgia
February 11, 2003



                                       F-1
<PAGE>



<TABLE>
<CAPTION>
                     GEORGIA BANCSHARES, INC. AND SUBSIDIARY
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                           December 31, 2002 and 2001

                                     ASSETS
                                     ------
                                                                                           2002                  2001
                                                                                    ----------------      ----------------
<S>                                                                                 <C>                   <C>
Cash and due from banks                                                             $      4,797,860      $      2,398,135
Interest bearing deposits in other banks                                                     531,154               797,761
Federal funds sold                                                                                               8,564,000
Investment securities:
  Securities available-for-sale, at fair value                                            34,809,311            21,891,389
Other investments                                                                            651,166               778,915
Loans, net                                                                               125,750,137            81,452,429
Bank premises and equipment, net                                                           3,828,707             1,893,109
Accrued interest receivable                                                                  896,150               665,572
Deferred income taxes                                                                        275,186               280,442
Other assets                                                                                  78,843                28,626
                                                                                    ----------------      ----------------

      Total assets                                                                  $    171,618,514      $    118,750,378
                                                                                    ================      ================

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:
  Deposits:
    Non-interest bearing deposits                                                   $      9,310,602      $      7,971,383
    NOW                                                                                    8,165,462             7,546,335
    Savings                                                                                  835,315               752,203
    Money market                                                                           9,275,526             6,568,716
    Time, $100,000 and over                                                               55,901,433            36,527,065
    Other time                                                                            59,070,462            46,901,805
                                                                                    ----------------      ----------------
      Total deposits                                                                     142,558,800           106,267,507

  Note payable                                                                                                     400,000
  Federal Home Loan Bank advances                                                          2,000,000
  Federal funds purchased                                                                  4,200,000
  Securities sold under agreements to repurchase                                           3,230,560
  Stock purchase obligation                                                                  369,250               369,250
  Income taxes payable                                                                       184,510               139,232
  Accrued interest payable                                                                   400,842               692,430
  Other liabilities                                                                          408,975                31,662
                                                                                    ----------------      ----------------

      Total liabilities                                                                  153,352,937           107,900,081
                                                                                    ----------------      ----------------

Stockholders' equity:
  Common stock, par value $.0064(2002) and $.008 (2001);
    10,000,000 shares authorized; 2,337,573 issued and
    outstanding (2002) and 1,331,250 issued and outstanding (2001)                            14,961                10,650
  Additional paid-in capital                                                              17,199,823            10,744,640
  Retained earnings                                                                          696,815               104,882
  Accumulated other comprehensive income                                                     355,750      (          9,715)
  Cost of 111 shares (2002) and 16 shares (2001) of common stock
    held by the Company                                                             (          1,772)     (            160)
                                                                                    ----------------      ----------------

      Total stockholders' equity                                                          18,265,577            10,850,297
                                                                                    ----------------      ----------------

      Total liabilities and stockholders' equity                                    $    171,618,514      $    118,750,378
                                                                                    ================      ================
</TABLE>



                                       F-2
<PAGE>



<TABLE>
<CAPTION>
                     GEORGIA BANCSHARES, INC. AND SUBSIDIARY
                        CONSOLIDATED STATEMENTS OF INCOME
                     Years Ended December 31, 2002 and 2001



                                                                                           2002                  2001
                                                                                    ----------------      ----------------
<S>                                                                                 <C>                   <C>
Interest income:
  Interest and fees on loans                                                        $      8,039,216      $      6,340,391
  Interest and dividends on investments:
    Investment securities available-for-sale                                               1,454,668             1,205,738
    Other investments                                                                         15,229                23,843
  Interest on federal funds sold                                                              48,710               174,616
  Other interest income                                                                       10,562                31,520
                                                                                    ----------------      ----------------
      Total interest income                                                                9,568,385             7,776,108
                                                                                    ----------------      ----------------

Interest expense:
  Interest on deposits                                                                     4,741,038             4,566,184
  Interest on advances from Federal Home Loan Bank                                            13,824               105,258
  Interest on other borrowed funds                                                            82,142                10,256
                                                                                    ----------------      ----------------
      Total interest expense                                                               4,837,004             4,681,698
                                                                                    ----------------      ----------------

      Net interest income                                                                  4,731,381             3,094,410

Provision for possible loan losses                                                           885,000               660,000
                                                                                    ----------------      ----------------

      Net interest income after provision for possible loan losses                         3,846,381             2,434,410
                                                                                    ----------------      ----------------

Other income:
  Service charges on deposit accounts                                                        168,293               107,606
  Other operating income                                                                      68,400                38,612
  Investment security transactions, net                                                      124,139                82,512
  Other investment transactions, net                                                          56,001
                                                                                    ----------------      ----------------
      Total other income                                                                     416,833               228,730
                                                                                    ----------------      ----------------

Other expenses:
  Salaries and employee benefits                                                           1,986,738             1,305,532
  Occupancy and equipment expense                                                            332,776               235,775
  Legal and accounting                                                                       151,264               111,212
  Office supplies, telephone and postage                                                     185,654               139,555
  Data processing expenses                                                                   324,563               194,887
  Consultant and other outside services                                                       66,491                64,548
  Marketing expense                                                                           59,698                55,506
  Other operating expense                                                                    337,597               252,093
                                                                                    ----------------      ----------------
      Total other expense                                                                  3,444,781             2,359,108
                                                                                    ----------------      ----------------

      Income before income taxes                                                             818,433               304,032

Income tax expense                                                                           226,500                34,100
                                                                                    ----------------      ----------------

      Net income                                                                    $        591,933      $        269,932
                                                                                    ================      ================
</TABLE>


                                       F-3
<PAGE>



<TABLE>
<CAPTION>
                     GEORGIA BANCSHARES, INC. AND SUBSIDIARY
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                     Years Ended December 31, 2002 and 2001



                                                                                                                      Accumulated
                                Total                       Common Stock             Additional  Reserve               Other
                                                          -----------------
                                Stockholders' Comprehen-                     Treasury Paid-In     for      Retained
                                Comprehensive   sive
                                   Equity      Income     Shares   Par Value  Stock   Capital    Expenses  Earnings Income (Deficit)
                                ------------- ----------  ------   --------- -------- -------    --------  -------- ---------------

<S>                             <C>           <C>         <C>       <C>       <C>     <C>        <C>       <C>        <C>
Balances, December 31, 2000     $10,971,738              1,100,000 $5,500,000        $4,695,788 $ 750,000  $  13,702  $   12,248

Comprehensive income:
  Net income                        269,932   $  269,932                                                     269,932
                                              ----------
  Other comprehensive
    income, net of tax:
    Unrealized gains (losses)
      on securities
      available-for-sale:
    Unrealized holding gains
      (losses) arising
      during the period, net
      of applicable deferred
      income tax of $17,805                   (   34,563)
    Less, reclassifications
      adjustment, from
      unrealized gains and
      losses from prior periods,
      periods, realized during
      current period, net
      of applicable deferred
      income tax of $6,492                        12,600
                                              ----------

      Other comprehensive
        income (loss) net of
        tax benefit              (   21,963)  (   21,963)                                                              (  21,963)
                                              ----------

        Total comprehensive
          income                              $  247,969
                                              ==========

  Stock purchase obligation      (  369,250)             (  35,000)(      350)       (  349,650)           (  19,250)

  Formation of Holding
  Company and capitalization                                       (5,489,000)        5,648,502            ( 159,502)

  Purchase of treasury stock
    (16 shares)                  (      160)                                  $( 160)

  Transfer                                                                              750,000  (750,000)

  Stock split                                              266,250
                                 ----------              --------- ---------- ------ ---------- ---------  ----------  ---------

  Balances, December 31, 2001    10,850,297              1,331,250    10,650  ( 160) 10,744,640         0     104,882  (   9,715)

</TABLE>





                                       F-4
<PAGE>



<TABLE>
<CAPTION>

                     GEORGIA BANCSHARES, INC. AND SUBSIDIARY
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                     Years Ended December 31, 2002 and 2001
                                   (Continued)



                                Total                       Common Stock             Additional  Reserve               Other
                                                          -----------------
                                Stockholders' Comprehen-                     Treasury Paid-In     for      Retained
                                Comprehensive   sive
                                   Equity      Income     Shares   Par Value  Stock   Capital    Expenses  Earnings Income (Deficit)
                                ------------- ----------  ------   --------- -------- -------    --------  -------- ---------------

<S>                             <C>           <C>         <C>       <C>       <C>     <C>        <C>       <C>        <C>

Balances, December 31, 2001     10,850,297               1,331,250    10,650 (   160)  10,744,640       0   104,882      $(   9,715)

Comprehensive income:
  Net income                       591,933    $  591,933                                                    591,933
                                              ----------
  Other comprehensive
   income, net of tax:
    Unrealized gains
     (losses) on securities
     available-for-sale:
    Unrealized holding
     gains (losses) arising
     during the period, net
     of applicable deferred
     income tax of $200,621                      389,441
    Less, reclassifications
     adjustment, from
     unrealized gains and
     losses from prior periods,
     realized during current
     period, net of applicable
     deferred income tax
     benefit of $12,351                       (   23,976)
                                              ----------

      Other comprehensive
       income (loss) net of
       tax benefit                 365,465       365,465                                                                    365,465
                                              ----------

       Total comprehensive
        income                                $  957,398
                                              ==========



Net proceeds of secondary
 stock offering                  6,459,454                 538,897     4,311             6,455,143

Sale of treasury stock                 200                                      160             40

Purchase of treasury stock
 (111 shares)                   (    1,772)                                  (1,772)

Stock split                                                467,426
                                 ----------              --------- ---------- -------  ----------- ------    ----------   ---------

Balances, December 31, 2002     $18,265,577              2,337,573 $   14,961 $(1,772) $17,199,823 $    0    $  696,815   $ 355,750
                                 ==========              ========= ========== =======  =========== ======    ==========   =========

</TABLE>


                                       F-5
<PAGE>



<TABLE>
<CAPTION>
                     GEORGIA BANCSHARES, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     Years Ended December 31, 2002 and 2001

                                                                                                 2002             2001
                                                                                          ----------------  ---------------
<S>                                                                                       <C>               <C>
Cash flows from operating activities:
  Net income                                                                              $       591,933   $      269,932
  Adjustments to reconcile net income to net cash provided by (used in)
  operating activities:
    Premium amortization net of discount accretion                                                143,726           63,395
    (Gain) loss from sales of investment securities, net                                  (       124,139)  (       82,512)
    (Gain) loss from sale of other investments                                            (        56,001)
    Depreciation                                                                                  155,393          111,437
    Deferred income taxes                                                                 (       183,014)  (      185,131)
    Changes in operating assets and liabilities:
      (Increase) decrease in accrued interest receivable                                  (       230,578)  (      221,014)
      (Increase) decrease in other assets                                                 (        50,217)  (       23,824)
      Increase (decrease) in income taxes payable                                                  45,278           60,246
      Increase (decrease) in accrued interest payable                                     (       291,588)         503,961
      Increase (decrease) in other liabilities                                                    377,313           17,228
                                                                                          ---------------   --------------
        Net cash provided by (used in) operating activities                                       378,106          513,718
                                                                                          ---------------   --------------

Cash flows from investing activities:
  Net (increase) decrease in interest bearing deposits in other banks                             266,607   (      580,874)
  Net (increase) decrease in federal funds sold                                                 8,564,000   (    5,044,000)
  Purchases of available-for-sale securities                                              (    32,205,615)  (   24,812,719)
  Proceeds from sales and paydowns of available-for-sale securities                            19,040,351       10,172,336
  Proceeds from maturities of available-for-sale securities                                       781,490        4,949,884
  Purchases of other investments                                                                            (      441,000)
  Proceeds from sale of other investments                                                         183,750
  Net increase in loans                                                                   (    44,297,708)  (   35,383,704)
  Purchase of premises and equipment                                                      (     2,090,991)  (      731,686)
                                                                                          ---------------   --------------
        Net cash provided by (used in) investing activities                               (    49,758,116)  (   51,871,763)
                                                                                          ---------------   --------------

Cash flows from financing activities:
  Net increase in deposits                                                                     36,291,293       52,995,759
  Payments on note payable                                                                (       400,000)
  Proceeds from Federal Home Loan Bank advances                                                10,800,000
  Payments on Federal Home Loan Bank advances                                             (     8,800,000)  (    2,500,000)
  Net increase in federal funds purchased                                                       4,200,000
  Net increase in securities sold under agreements to repurchase                                3,230,560
  Proceeds from other borrowings                                                                                   400,000
  Proceeds from issuance of stock                                                               6,548,711
  Cost of issuance of stock                                                               (        89,257)
  Proceeds from sale of treasury stock                                                                200
  Purchase of treasury stock                                                              (         1,772)  (          160)
                                                                                          ---------------   --------------
        Net cash provided by (used in) financing activities                                    51,779,735       50,895,599
                                                                                          ---------------   --------------

        Net increase (decrease) in cash and cash equivalents                                    2,399,725   (      462,446)

Cash and cash equivalents at beginning of year                                                  2,398,135        2,860,581
                                                                                          ---------------   --------------

        Cash and cash equivalents at end of year                                          $     4,797,860   $    2,398,135
                                                                                          ===============   ==============

Supplemental disclosures:
      Cash paid during the year for interest                                              $     5,209,448   $    4,177,737
                                                                                          ===============   ==============
      Cash paid during the year for income taxes                                          $       359,232   $      160,738
                                                                                          ===============   ==============
      Loans transferred to foreclosed real estate during the year                         $             0   $            0
                                                                                          ===============   ==============
      Proceeds from sales of foreclosed real estate financed through loans                $             0   $            0
                                                                                          ===============   ==============
      Stockholders' equity transferred to stock purchase obligation                       $             0   $      369,250
                                                                                          ===============   ==============
</TABLE>



                                       F-6
<PAGE>



                     GEORGIA BANCSHARES, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     The accounting and reporting policies of Georgia  Bancshares,  Inc. and its
     subsidiary  conform to  generally  accepted  accounting  principles  and to
     general  practices  within  the  banking  industry.   The  following  is  a
     description of the more significant of those policies:

         Nature of Operations - Georgia Bancshares, Inc. (the Company) is a bank
         --------------------
         holding  company  whose   principal   activity  is  the  ownership  and
         management  of its  wholly-owned  subsidiary  The Bank of Georgia  (the
         Bank).  The Bank provides a variety of banking  services to individuals
         and businesses in Fayette and Coweta Counties and the surrounding area.
         Its primary deposit  products are demand  deposits and  certificates of
         deposit,  and its primary lending  products are commercial real estate,
         residential construction,  acquisition, development and consumer loans.
         As a state  bank,  the Bank is subject  to  regulation  by the  Georgia
         Department  of  Banking & Finance  and the  Federal  Deposit  Insurance
         Corporation.

         Principles of  Consolidation - The  consolidated  financial  statements
         ----------------------------
         include the accounts of Georgia  Bancshares,  Inc. (parent company) and
         its  wholly-owned   subsidiary,   The  Bank  of  Georgia  (bank).   All
         significant   inter-company   accounts  and   transactions   have  been
         eliminated in consolidation.

         Use  of  Estimates  -  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 disclosure of contingent  assets
         and  liabilities  at the  date  of the  financial  statements  and  the
         reported amounts of revenues and expenses during the reporting  period.
         Actual results could differ from those estimates.

         Material  estimates  that are  particularly  susceptible to significant
         change relate to the determination of the allowance for losses on loans
         and  the  valuation  of  real  estate   acquired  in  connection   with
         foreclosures  or in  satisfaction  of  loans.  In  connection  with the
         determination of the allowances for losses on loans and foreclosed real
         estate,  management  obtains  independent  appraisals  for  significant
         properties.

         A majority of the Bank's loan  portfolio  consists of real estate loans
         in Fayette and Coweta Counties.  The ultimate  collectibility  of these
         loans and the recovery of the carrying amount of foreclosed real estate
         are susceptible to changes in local market conditions.

         While  management  uses available  information  to recognize  losses on
         loans and foreclosed real estate, future additions to the allowance may
         be  necessary  based  on  changes  in  local  economic  conditions.  In
         addition, regulatory agencies, as an integral part of their examination
         process,  periodically review the Bank's allowances for losses on loans
         and  foreclosed  real  estate.  Such  agencies  may require the Bank to
         recognize  additions to the allowance  based on their  judgments  about
         information available to them at the time of their examination. Because
         of these  factors,  it is reasonably  possible that the  allowances for
         losses on loans and foreclosed real estate may change materially in the
         near  term.  However,  the  amount  of the  change  that is  reasonably
         possible cannot be estimated.

         Investment Securities
         ---------------------

         Trading Securities:  Securities that are held for short-term resale are
         classified  as trading  account  securities  and recorded at their fair
         values.  Realized and  unrealized  gains and losses on trading  account
         securities are included in other income.

         Securities   Held-to-Maturity:   Securities  that  management  has  the
         positive  intent and ability to hold to maturity  are reported at cost,
         adjusted for  amortization  of premiums and accretion of discounts that
         are  recognized  in interest  income using  methods  approximating  the
         interest method over the period to maturity.



                                       F-7
<PAGE>


                     GEORGIA BANCSHARES, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)



         Securities Available-for-Sale: Available-for-sale securities consist of
         investment  securities  not  classified  as trading  securities  nor as
         held-to-maturity securities.  Securities available-for-sale are carried
         at fair value with  unrealized  gains and losses net of deferred  taxes
         reported in other  comprehensive  income.  Realized  gains  (losses) on
         securities  available-for-sale  are included in other income  (expense)
         and, when applicable,  are reported as a  reclassification  adjustment,
         net of tax,  in other  comprehensive  income.  Gains and  losses on the
         sales of securities  are determined  using the  specific-identification
         method. The amortization of premiums and the accretion of discounts are
         recognized in interest income using methods  approximating the interest
         method.

         Declines  in  the  fair  value  of  individual   held-to-maturity   and
         available-for-sale  securities  below  their  cost that are other  than
         temporary  result in write-downs of the individual  securities to their
         fair  value.  The  related  write-downs  are  included  in  earnings as
         realized losses.

         Loans - Loans  are  stated  at  unpaid  principal  balances,  less  the
         -----
         allowance for possible loan losses and net deferred loan fees.

         Loan  origination  and  commitment  fees,  as  well as  certain  direct
         origination  costs,  are deferred and  amortized as a yield  adjustment
         over  the  lives  of the  related  loans  using  the  interest  method.
         Amortization  of  deferred  loan  fees is  discontinued  when a loan is
         placed on nonaccrual status.

         Interest is accrued daily on the outstanding loan balances.  Accrual of
         interest is discontinued on an impaired loan when management  believes,
         after  considering  collection  efforts  and  other  factors,  that the
         borrower's  financial  condition is such that collection of interest is
         doubtful.  Interest income on impaired loans is subsequently recognized
         only to the extent cash payments are received.

         Allowance for Loan Losses - The allowance for loan losses is maintained
         -------------------------
         at a level  which,  in  management's  judgment,  is  adequate to absorb
         credit  losses  inherent  in the  loan  portfolio.  The  amount  of the
         allowance is based on management's  evaluation of the collectibility of
         the loan  portfolio,  including  the  nature of the  portfolio,  credit
         concentrations, trends in historical loss experience, specific impaired
         loans,  economic  conditions and other risks inherent in the portfolio.
         Allowances  for  impaired  loans  are  generally  determined  based  on
         collateral  values  or the  present  value  of  estimated  cash  flows.
         Although  management uses available  information to recognize losses on
         loans,   because  of  uncertainties   associated  with  local  economic
         conditions, collateral values, and future cash flows on impaired loans,
         it is  reasonably  possible  that a material  change could occur in the
         allowance for loan losses in the near term. However,  the amount of the
         change that is reasonably  possible cannot be estimated.  The allowance
         is  increased  by a  provision  for loan  losses,  which is  charged to
         expense, and reduced by charge-offs, net of recoveries.  Changes in the
         allowance  relating  to  impaired  loans are charged or credited to the
         provision for loan losses.

         Bank Premises and Equipment - Land is carried at cost.  Other  premises
         ---------------------------
         and  equipment  are  carried at cost net of  accumulated  depreciation.
         Depreciation is computed  principally on the straight-line  method over
         the  estimated   useful  lives  of  the  assets.   Costs  incurred  for
         maintenance  and repairs are  expensed  currently.  Gains and losses on
         dispositions are included in current operations.

         Other Real Estate Owned - Real estate properties acquired through or in
         -----------------------
         lieu of loan  foreclosure  are  initially  recorded at the lower of the
         Bank's carrying amount of fair value less estimated selling cost at the
         date of foreclosure. Any write-downs based on the asset's fair value at
         the date of  acquisition  are charged to the allowance for loan losses.
         After  foreclosure,  these assets are carried at the lower of their new
         cost  basis  or fair  value  less  cost to sell.  Costs of  significant
         property  improvements  are  capitalized,  whereas  costs  relating  to
         holding  property are expensed.  The portion of interest costs relating
         to   development  of  real  estate  is   capitalized.   Valuations  are
         periodically  performed by management,  and any subsequent  write-downs
         are recorded as a charge to  operations,  if  necessary,  to reduce the
         carrying  value of a  property  to the lower of its cost or fair  value
         less cost to sell.

                                       F-8
<PAGE>


                     GEORGIA BANCSHARES, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


         Cash and Cash  Equivalents  - For the  purpose of  presentation  in the
         --------------------------
         Statements of Cash Flows,  cash and cash equivalents are defined as all
         cash and amounts due from depository institutions.

         Income  Taxes - Income  taxes are  provided  for the tax effects of the
         -------------
         transactions  reported in the financial statements and consist of taxes
         currently due plus  deferred  taxes  related  primarily to  differences
         between the basis of available-for-sale securities,  allowance for loan
         losses  and  accumulated  depreciation.  The  deferred  tax  assets and
         liabilities  represent  the  future tax  return  consequences  of those
         differences, which will either be taxable or deductible when the assets
         and  liabilities  are  recovered  or settled.  Deferred  tax assets and
         liabilities are reflected at income tax rates  applicable to the period
         in which the  deferred  tax assets or  liabilities  are  expected to be
         realized  or  settled.  As  changes  in tax laws or rates are  enacted,
         deferred tax assets and liabilities are adjusted  through the provision
         for income  taxes.  The Company files  consolidated  income tax returns
         with its subsidiary.

         Advertising Costs - All advertising costs are expensed as incurred.
         -----------------

         Off-Balance-Sheet  Financial  Instruments  - In the ordinary  course of
         -----------------------------------------
         business  the  Bank  has  entered  into   off-balance-sheet   financial
         instruments  consisting  of  commitments  to extend  credit and standby
         letters of credit.  Such  financial  instruments  are  recorded  in the
         financial statements when they become payable.

         Reclassifications  - Certain amounts in 2001 have been  reclassified to
         -----------------
         conform to the 2002 presentation.

2. INVESTMENT SECURITIES

     Investment  securities  have  been  classified  according  to  management's
     intent.

     Securities available-for-sale consist of the following:
<TABLE>
<CAPTION>
                                                                                   Gross             Gross
                                                               Amortized        Unrealized        Unrealized          Fair
                                                                 Cost              Gains            Losses            Value
                                                            ---------------  ----------------  ---------------  ----------------
<S>                                                         <C>              <C>               <C>              <C>
         As of December 31, 2002:
           U.S. Government and federal agencies             $     6,009,922  $         66,437  $         3,876  $      6,072,483
           State and local governments                            4,941,756            80,489           20,280         5,001,965
           Mortgage-backed securities                            23,318,618           426,620           10,375        23,734,863
                                                            ---------------  ----------------  ---------------  ----------------

                                                            $    34,270,296  $        573,546  $        34,531  $     34,809,311
                                                            ===============  ================  ===============  ================
         As of December 31, 2001:
           U.S. Government and federal agencies             $     6,078,934  $         23,601  $        34,477  $      6,068,058
           State and local governments                            4,612,641             9,106           59,629         4,562,118
           Mortgage-backed securities                            11,214,534            78,690           32,011        11,261,213
                                                            ---------------  ----------------  ---------------  ----------------
                                                            $    21,906,109  $        111,397  $       126,117  $     21,891,389
                                                            ===============  ================  ===============  ================
</TABLE>

     The  maturities  of securities  available-for-sale  as of December 31, 2002
     were as follows:


                                                 Amortized          Fair
                                                   Cost             Value
                                             ---------------  ----------------
         Due in one year or less             $       250,245  $        253,200
         Due from one to five years                5,407,751         5,489,758
         Due from five to ten years               11,043,329        11,200,996
         Due after ten years                      17,568,971        17,865,357
                                             ---------------  ----------------
                                             $    34,270,296  $     34,809,311
                                             ===============  ================



                                       F-9
<PAGE>



                     GEORGIA BANCSHARES, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


     The  amortized  cost  and  fair  value of  mortgage-backed  securities  are
     presented in the available-for-sale category by contractual maturity in the
     preceding   table.   Expected   maturities  will  differ  from  contractual
     maturities  because  borrowers  may  have  the  right  to  call  or  prepay
     obligations without call or prepayment penalties.

     During  2002  , the  Bank  sold  securities  available-for-sale  for  total
     proceeds of approximately  $12,908,000 resulting in gross realized gains of
     $187,113  and gross  realized  losses of $62,974 and  received  paydowns on
     mortgage-backed securities of approximately $6,132,000.  Securities with an
     amortized cost of  $14,807,158  and a fair value of $15,133,785 at December
     31, 2002 were pledged to secure certain deposits.

     During 2001, the Bank sold securities available-for-sale for total proceeds
     of approximately $5,431,000 resulting in gross realized gains of $6,813 and
     gross realized  losses of $2,345 and received  paydowns on  mortgage-backed
     securities of approximately  $4,741,000.  Securities with an amortized cost
     of  $4,135,514  and a fair value of  $4,168,724  at December  31, 2001 were
     pledged to secure certain deposits.

     There were no securities  transferred between  classifications  during 2002
     and 2001.

3. OTHER INVESTMENTS

     Other  investments  consist of nonmarketable  equity securities that do not
     have a readily  determinable  fair value.  These  securities are carried at
     their acquisition cost and are accounted for by the cost method.

     Other investments at December 31, 2002 and 2001 consists of the following:

<TABLE>
<CAPTION>
                                                                                                     2002          2001
                                                                                               -------------   -------------
<S>                                                                                            <C>             <C>
         NBOG Bancorporation, Inc.                                                             $     306,000   $     306,000
         Community Financial Services, Inc. (a banker's bank)                                         85,166         212,915
             FHLB stock                                                                              260,000         260,000
                                                                                               -------------   -------------

                                                                                               $     651,166   $     778,915
                                                                                               =============   =============
</TABLE>

     The Bank sold other investments for total proceeds of $183,750 resulting in
     gross realized gains of $56,001 during 2002.

     No securities classified as other investments were sold during 2001.

4.   LOANS

     Loans  outstanding  at  December  31, 2002 and 2001 by  classification  are
     summarized as follows:

<TABLE>
<CAPTION>
                                                                                                     2002             2001
                                                                                               --------------   --------------
<S>                                                                                            <C>              <C>
         Loans secured by real estate:
           Construction and land development                                                   $   69,000,000   $   44,196,856
           Residential                                                                              7,808,000        7,602,383
           Nonfarm, nonresidential                                                                 39,454,000       22,164,622
         Commercial, financial and agricultural                                                     8,841,000        6,601,411
         Consumer                                                                                   2,175,000        2,110,993
         All other loans                                                                              486,343            2,479
                                                                                               --------------   --------------
                                                                                                  127,764,343       82,678,744
         Deferred loan fees                                                                    (      124,900)  (      111,904)
         Allowance for loan losses                                                             (    1,889,306)  (    1,114,411)
                                                                                               ---------------  --------------
               Loans, net                                                                      $  125,750,137   $   81,452,429
                                                                                               ==============   ==============
</TABLE>



                                      F-10
<PAGE>

                     GEORGIA BANCSHARES, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


     Changes in the allowance for loan losses are summarized as follows:
<TABLE>
<CAPTION>
                                                                                                     2002             2001
                                                                                               ---------------  ---------------

<S>                                                                                            <C>              <C>
         Balance, beginning of year                                                            $    1,114,411   $       455,000
         Provision charged to operations                                                              885,000           660,000
         Recoveries of loans previously charged off                                                     1,682                 0
         Loans charged off                                                                     (      111,787)  (           589)
                                                                                               --------------   ---------------

         Balance, end of year                                                                  $    1,889,306   $     1,114,411
                                                                                               ==============   ===============
</TABLE>

     For federal  income tax  purposes,  the balance of the  allowance  for loan
     losses  was   $348,282   and  $276,461  at  December  31,  2002  and  2001,
     respectively.

     The  Bank has  entered  into  transactions  with  its  executive  officers,
     principal  shareholders,   directors,  and  their  related  interest.  Such
     transactions  were made in the ordinary course of business on substantially
     the same terms and conditions,  including interest rates and collateral, as
     those  prevailing at the same time for comparable  transactions  with other
     customers,  and did not, in the opinion of  management,  involve  more than
     normal credit risk or present other unfavorable features.  The activity for
     loans to such related  parties at December 31, 2002 and 2001 is  summarized
     as follows:

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

<S>                                                                                            <C>              <C>
         Balance at beginning of year                                                          $    3,399,024   $     3,412,694
         New loans                                                                                    152,150         6,284,028
         Repayments                                                                            (    1,905,222)  (     6,297,698)
                                                                                               ---------------  ---------------

         Balance at end of year                                                                $    1,645,952   $     3,399,024
                                                                                               ==============   ===============
</TABLE>

     During  2002 and 2001 and at  December  31,  2002 and  2001,  there  was no
     recorded investment in impaired loans.

     At  December  31,  2002 and 2001,  the Bank did not have any loans that had
     been  restructured,  and the Bank is not  committed to lend any  additional
     funds to debtors whose loans have been modified.

5. BANK PREMISES AND EQUIPMENT

     Premises and equipment at December 31, 2002 and 2001 are summarized as
follows:

<TABLE>
<CAPTION>
                                                                                                                   Estimated
                                                                                                                     Useful
                                                                                   2002              2001          Life (Yrs)
                                                                             ----------------  ---------------  ----------------

<S>                                                                                  <C>              <C>           <C>
         Land                                                                $       774,635   $      773,269
         Leasehold improvements                                                      301,881          301,881       10-20 yrs
         Furniture and equipment                                                   1,228,238          694,593        3-8 yrs
         Building and improvements                                                 1,798,807          173,918      15-25 yrs
         Land improvements                                                            59,312                        5-15 yrs
         Construction in progress                                                                     128,221
                                                                             ---------------   --------------
                                                                                   4,162,873        2,071,882
         Less, accumulated depreciation                                      (       334,166)  (      178,773)
                                                                             ---------------   --------------

                                                                             $     3,828,707   $    1,893,109
                                                                             ===============   ==============
</TABLE>

     Depreciation  expense  amounted to $155,393  and $111,437 in 2002 and 2001,
     respectively.


                                      F-11
<PAGE>



                     GEORGIA BANCSHARES, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


6.   DEPOSITS

     At December 31, 2002,  scheduled maturities of certificates of deposits are
     as follows:

         2003                                          $   79,602,557
         2004                                              30,183,074
         2005                                               3,408,817
         2006                                                 388,004
         2007 and thereafter                                1,389,443
                                                       --------------
                                                       $  114,971,895
                                                       ==============

     The Bank held  related  party  deposits  of  approximately  $4,449,624  and
     $9,916,645 at December 31, 2002 and 2001, respectively.

7.   BROKERED DEPOSITS

     Deposits  that were  received by the Bank through third party brokers as of
     December 31, 2002 and 2001 were $28,190,987 and $21,117,194,  respectively.
     Original  maturities  range from one year to four  years.  Rates range from
     2.05  to 7.20  percent.  At  December  31,  2002  and  2001,  respectively,
     $20,841,000  and  $15,456,000  of these  brokered  deposits  were  with one
     broker.

8.   NOTE PAYABLE

     At December 31, 2001, the note payable consisted of a note from the Bankers
     Bank in the  principal  amount of $400,000.  The interest  rate is variable
     based upon the Wall Street  Journal prime rate.  Scheduled  payments  based
     upon the initial rate of 5% are twenty-four consecutive monthly payments of
     interest only, beginning December 20, 2001, fifty-nine  consecutive monthly
     payments  of  principal  and  interest  in the  initial  amount  of  $4,243
     beginning  December 29, 2003 and a single payment of interest and principal
     of $230,407 due  November 20, 2008.  The note is secured by shares of stock
     in the Bank of Georgia. This note was paid off during 2002.

9.   FEDERAL HOME LOAN BANK ADVANCES

     The  Federal  Home  Loan  Bank  advances  are   collateralized  by  certain
     qualifying  investments  equal to at least 100% of the  balance of advances
     outstanding.  The interest  rate is a floating  rate,  adjusted  daily.  At
     December 31, 2002 the interest  rate was 1.3%.  The advance is due December
     2, 2003.

10.  INCOME TAXES

     The  consolidated  provision for income taxes for 2002 and 2001 consists of
     the following:

                                                 2002                 2001
                                           ---------------       --------------
         Income tax expense:
           Current tax expense:
             Federal                       $       384,603       $      219,232
             State                                  19,907                    0
           Deferred tax (benefit):
             Federal                       (       172,603)      (      182,732)
             State                         (         5,407)      (        2,400)
                                           ---------------       --------------
                                           $       226,500       $       34,100
                                           ===============       ==============



                                      F-12
<PAGE>



                     GEORGIA BANCSHARES, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


     The  provision  for federal  income  taxes  differs  from that  computed by
     applying  federal  statutory  rates to income  before  federal  income  tax
     expenses for the years ended  December  31, 2002 and 2001,  as indicated in
     the following analysis:

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

<S>                                                                                     <C>                  <C>
         Expected tax provision at statutory rates                                      $        278,267     $      101,822
         Effect of tax-exempt income                                                    (         64,312)     (      77,418)
         Effect of non-deductible expenses                                                        14,675             15,329
         Other, net                                                                     (          2,130)     (       5,633)
                                                                                        ----------------     --------------

                                                                                        $        226,500      $      34,100
                                                                                        ================      =============
</TABLE>

     Deferred  tax  liabilities   have  been  provided  for  taxable   temporary
     differences related to accumulated  depreciation and to unrealized gains in
     available-for-sale  securities.  Deferred tax assets have been provided for
     deductible temporary  differences related to the allowance for loan losses,
     unrealized losses on available-for-sale  securities, and to amortization of
     organizational  expenses.  The net deferred tax assets in the  accompanying
     statement of financial condition include the following components:
<TABLE>
<CAPTION>
                                                                                              2002                2001
                                                                                        ----------------    ---------------

<S>                                                                                     <C>                  <C>
         Deferred tax liabilities                                                       $(       310,379)   $(       69,162)
         Deferred tax assets                                                                     589,240            353,279
         Deferred tax asset valuation allowance                                         (          3,675)    (        3,675)
                                                                                        ----------------    ---------------

         Net deferred tax assets (liabilities)                                          $        275,186    $       280,442
                                                                                        ================    ===============
</TABLE>

11. EMPLOYEE BENEFIT PLANS

     The Bank has  adopted a defined  contribution  plan dated  January 1, 2000,
     which  covers  substantially  all  employees of the Bank subject to certain
     minimum age and service  requirements.  The plan permits eligible employees
     to make before-tax  contributions  to the plan through  payroll  deductions
     subject to the limits imposed under Federal tax law. The Bank may also make
     matching  contributions  to  the  plan  equal  to  the  percentage  of  the
     participants  contribution  during a particular  year.  The Bank's level of
     participation in the plan is determined annually by the Board of Directors.
     For the years  ended  December  31, 2002 and 2001,  respectively,  the Bank
     contributed  $35,048  and  $12,076  to the  plan.  The  plan  permits  each
     participant  to direct  the  investment  of the  assets  in his  individual
     account.  Contributions  by the  participant  are always  100%  vested.  In
     general,  participants may withdraw benefits upon termination of employment
     after attaining normal  retirement age and upon termination of the plan. In
     addition,  participants may withdraw their  contributions if they terminate
     employment before attaining normal retirement age, attain normal retirement
     age but continue to work, become disabled, or incur a financial hardship.

12. STOCKHOLDERS' EQUITY

     On August 16, 2001 the Board of Directors  declared a  five-for-four  stock
     split effective August 31, 2001.

     On September 19, 2002 the Board of Directors declared a five-for-four stock
     split for  shareholders  of  record on  September  25,  2002 to be  payable
     October 15, 2002.



                                      F-13
<PAGE>



                     GEORGIA BANCSHARES, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


13. STOCK WARRANTS

     Georgia Bancshares,  Inc. has granted options to purchase 641,520 shares of
     common stock to its founding directors and key employees. The general terms
     of the stock option plan include  vesting  periods ranging from one to four
     years. The options were granted at exercise prices equal to the fair market
     value of a share of common stock on the grant dates and range from $6.40 to
     $10.00. The options expire ten years from the date of the grant.

<TABLE>
<CAPTION>
                                                                        Year Ended                           Year Ended
                                                                     December 31, 2002                    December 31, 2001
                                                               ------------------------------       -------------------------------
                                                                                Weighted-Average                    Weighted-Average
                                                                  Number        Exercise Price         Number       Exercise Price
                                                               ------------     -----------------   -------------   ----------------

<S>                                                                <C>            <C>                    <C>           <C>
         Under option, beginning of year                           498,208      $     8.06             348,168        $   10.00
         Granted                                                    58,585           12.50              50,400            10.55
         Exercised                                            (     41,667)           8.00
         Terminated                                           (      1,910)          10.91
                                                              ------------      ----------          ----------

           Under option, prior to five-for-four stock split        513,216            8.59             398,568            10.07

         Effect of five-for-four stock split                       128,304      (     1.74)             99,640        (    2.01)
                                                              ------------                          ----------
               Under option, end of year                           641,520            6.85             498,208             8.06
                                                              ============                          ==========

         Weighted average remaining contractual life                                                    8 yrs             9 yrs
                                                                                                    =========         =========

         Weighted average fair value of options granted
           during the year, adjusted for stock split                                                $   10.00        $     8.44
                                                                                                    =========        ==========
</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").  The Company  recognized no compensation  cost
     for stock-based  employee  compensation awards for the years ended December
     31,  2002 and 2001.  If the  Company had  recognized  compensation  cost in
     accordance  with SFAS No.  123,  net income and income per share would have
     been decreased as follows:

<TABLE>
<CAPTION>
                                                                                     Net                              Diluted
                                                                                   Income           Basic EPS           EPS
                                                                                -------------    -------------     -------------

<S>                                                                             <C>              <C>               <C>
         Year ended December 31, 2002:
           As reported                                                          $    591,933     $       .273      $       .211
           Stock-based compensation, net of related tax effect                  (    146,667)    (       .068)     (       .053)
                                                                                ------------     ------------      ------------
               As adjusted                                                      $    445,266     $       .205      $       .158
                                                                                ============     ============      ============

         Year ended December 31, 2001:
           As reported                                                          $    269,932     $       .162      $       .118
           Stock-based compensation, net of related tax effect                  (    207,954)    (       .125)     (       .091)
                                                                                ------------     ------------      ------------
               As adjusted                                                      $     61,978     $       .037      $       .027
                                                                                ============     ============      ============
</TABLE>




                                      F-14
<PAGE>




                     GEORGIA BANCSHARES, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


     The fair value of the options  granted  during 2002 and 2001 was based upon
     the   Black-Scholes   method  of  valuing   options   using  the  following
     weighted-average assumptions:

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

<S>                                                                                             <C>                   <C>
         Risk-free interest rate                                                                3.00%                 3.00%
         Expected life of the options                                                       10 Years               10 Years
         Expected dividends (as a percent of the fair value of the stock)                          0%                    0%
         Volatility                                                                                1%                    0%
</TABLE>

14. LEASING ARRANGEMENTS

     The Bank operates one office from a facility located on land that is leased
     under an operating lease.  There are options to renew the lease for various
     terms.  The first  renewal  term began on January 1, 2002 and the fifth and
     final  renewal  term will end on December  31,  2023.  The rental rate will
     change at the  beginning  of each renewal  option and will remain  constant
     during each renewal term.

     The Bank also leased  temporary  office  space under  month-to-month  lease
     agreements during the years ended December 31, 2002 and December 31, 2001.

     Rental  expense on these  leases  amounted  to $36,994  and $32,250 for the
     years 2002 and 2001, respectively.

15. CONCENTRATIONS OF CREDIT RISK

     The  Bank  makes   commercial  real  estate,   commercial   business,   and
     single-family  residential  loans to  customers in the local market area. A
     substantial  portion of its borrowers'  ability to repay their  obligations
     depends  on  the  local  economy.  Additionally,  there  is  a  significant
     concentration   of  credit  risk  involving  loans  for  the   acquisition,
     development and construction of real property.

     At December  31, 2002 and 2001,  the  institution  had  correspondent  bank
     balances and deposits in other financial  institutions  totaling a recorded
     balance of $4,760,883 and $11,254,915, respectively. The correspondent bank
     balances,  at  December  31,  2002,  include  amounts  in excess of federal
     deposit  insurance  limits totaling  $1,541,728.  At December 31, 2001, the
     correspondent  bank balances  include  federal funds sold of $8,564,000 and
     due from accounts in excess of federal  deposit  insurance  limits totaling
     $8,832,975.

16. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK

     In the normal course of business, the Bank has outstanding  commitments and
     contingent  liabilities,  such as  commitments to extend credit and standby
     letters of credit,  which are not  included in the  accompanying  financial
     statements.   The  Bank's   exposure   to  credit  loss  in  the  event  of
     nonperformance  by  the  other  party  to  the  financial  instruments  for
     commitments  to extend credit and standby  letters of credit is represented
     by the contractual notional amount of those instruments.  The Bank uses the
     same credit policies in making  commitments and conditional  obligations as
     it does for  instruments  that are  included  in the  consolidated  balance
     sheet.

     At December 31, 2002 and 2001,  respectively,  the Bank had  commitments to
     extend  credit  totaling  approximately  $25,956,000  and  $26,762,007  and
     commitments  under  letters  of  credit  totaling  $612,421  and  $400,087.
     Management  does not  anticipate  any  material  loss as a result  of these
     transactions.  The Bank uses the same credit policies in making commitments
     and conditional obligations as it does for on-balance-sheet instruments.



                                      F-15
<PAGE>




                     GEORGIA BANCSHARES, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


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

     Standby letters of credit are conditional commitments issued by the Bank to
     guarantee the  performance of a customer to a third party.  Standby letters
     of  credit  generally  have  fixed  expiration  dates or other  termination
     clauses  and may  require  payment of a fee.  The credit  risk  involved in
     issuing  letters  of credit is  essentially  the same as that  involved  in
     extending  loan  facilities to  customers.  The Bank's policy for obtaining
     collateral,  and the nature of such collateral,  is essentially the same as
     that involved in making commitments to extend credit.

     The Bank has not been required to perform on any financial guarantees since
     inception. The Bank did not incur any losses on its commitments in 2002 and
     2001.

17. COMMITMENTS AND CONTINGENT LIABILITIES

     The Bank has lines of credit with other banks.  The lines total  $5,500,000
     and  $4,050,000  at  December  21,  2002 and 2001,  respectively,  and have
     interest  rates based on the lending  bank's daily  federal fund rate.  The
     lines are due on demand and are  normally  renewed  for a one year  period.
     They are  uncollateralized.  At December  31,  2002,  the Bank had borrowed
     $4,200,000  against  these  lines.  At December  31,  2001,  the lines were
     unused.

     The Bank  also has a line of  credit  with the  Federal  Home  Loan Bank of
     Atlanta to loan up to ten percent of the Bank's total assets.  As described
     in Note 9, at December 31, 2002, the Bank had borrowed  $2,000,000  against
     this line. Eligible securities are pledged to secure these advances.

     On April 19, 2001,  shareholders of the Bank approved the reorganization of
     the  bank  into a  holding  company  structure  pursuant  to  that  certain
     Reorganization  Agreement and Plan of Share  Exchange dated March 10, 2001.
     Upon consummation of the  reorganization on May 18, 2001,  1,065,000 shares
     of common stock of the Bank were  exchanged for 1,065,000  shares of common
     stock of the Company.  The record holder of the remaining originally issued
     35,000  shares  of the  Bank's  common  stock,  dissented  from the  Bank's
     reorganization into a holding company structure. The Bank has an obligation
     to purchase this dissenting  shareholder's  shares for fair market value as
     of May 18,  2001.  In an effort to resolve this  matter,  on September  14,
     2001, the Bank filed a Petition for  Determination  of Fair Value of Shares
     against the shareholder in the Superior Court of Fayette  County,  State of
     Georgia.  The Bank,  through the aid of an appraiser,  has determined  that
     these shares were worth $10.55 per share as of May 18, 2001.  Based on this
     appraisal,  the Bank has  recorded a liability of $369,250 for these shares
     as "Stock Purchase  Obligation" on the consolidated  statement of financial
     condition. The dissenting shareholder, however, claims that the shares were
     worth  $25.25 per share.  The Bank  initiated  this action to resolve  this
     dispute.

     On  December  12,  2002 the Bank  entered  into an  agreement  to  purchase
     property from a limited  liability company comprised of members of The Bank
     of Georgia's  board of  directors.  The  purchase  price of the property is
     $348,750 and the purchase is contingent upon certain special  stipulations.
     The sale is scheduled to be completed by March 14, 2003.

     The Bank is subject to other claims and lawsuits  which arise  primarily in
     the ordinary  course of business.  It is the opinion of management that the
     disposition  or ultimate  resolution  of such claims and lawsuits  will not
     have a material adverse effect on the financial position of the Bank.



                                      F-16
<PAGE>



                     GEORGIA BANCSHARES, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


18. REGULATORY MATTERS

     The  Company  and the  Bank  are  subject  to  various  regulatory  capital
     requirements administered by the federal banking agencies.  Failure to meet
     the minimum  capital  requirements  can  initiate  certain  mandatory,  and
     possible   additional   discretionary   actions  by  regulators,   that  if
     undertaken,   could  have  a  direct   material  affect  on  the  financial
     statements.  Under  the  regulatory  capital  adequacy  guidelines  and the
     regulatory framework for prompt corrective action, the Company and the Bank
     must meet specific capital guidelines  involving  quantitative  measures of
     the assets, liabilities,  and certain off-balance-sheet items as calculated
     under   regulatory   accounting   practices.   The   capital   amounts  and
     classification are also subject to qualitative judgements by the regulators
     about  components,  risk weightings,  and other factors.  Prompt corrective
     action provisions are not applicable to bank holding companies.

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

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

     The actual and required  capital amounts and ratios as of December 31, 2002
     and 2001, are as follows (dollars in thousands):

<TABLE>
<CAPTION>
                                                                                     For Capital          To Be Well Capitalized
                                                                                      Adequacy            Under Prompt Corrective
                                                             Actual                   Purposes               Action Provisions
                                                      ----------------------  -------------------------   -----------------------
                                                       Amount        Ratio       Amount        Ratio        Amount       Ratio
                                                      ---------  -----------  -----------   -----------   -----------  ----------
<S>                                                   <C>             <C>      <C>                  <C>   <C>               <C>
         As of December 31, 2002:
           Total Risk-Based Capital to Risk-Weighted
           Assets:
             Consolidated                             $   19,754      13.38%   $  11,811            8%            NA          NA
             Bank                                     $   15,798      10.72%   $  11,787            8%    $   14,733         10%
           Tier I Capital to Risk-Weighted Assets:
             Consolidated                             $   17,912      12.13%   $   5,906            4%            NA          NA
             Bank                                     $   13,956       9.45%   $   5,905            4%    $    8,858          6%
           Tier I Capital to Average Assets:
             Consolidated                             $   17,912      12.05%   $   5,943            4%            NA          NA
             Bank                                     $   13,956       9.41%   $   5,930            4%    $    7,412          5%
         As of December 31, 2001:
           Total Risk-Based Capital to Risk-Weighted
           Assets:
             Consolidated                             $   11,974      12.69%   $   7,549            8%            NA          NA
             Bank                                     $   12,011      12.78%   $   7,521            8%    $    9,402         10%
           Tier I Capital to Risk-Weighted Assets:
             Consolidated                             $   10,860      11.51%   $   3,775            4%            NA          NA
             Bank                                     $   10,897      11.59%   $   3,761            4%    $    5,641          6%
           Tier I Capital to Average Assets:
             Consolidated                             $   10,860      11.00%   $   3,948            4%            NA          NA
             Bank                                     $   10,897      11.04%   $   3,947            4%    $    4,934          5%
</TABLE>


     Banking  regulations limit the amount of dividends that may be paid without
     prior approval of the regulatory authorities.  These restrictions are based
     on the  level  of  regulatory  classified  assets,  the  prior  year's  net
     earnings, and the ratio of equity capital to total assets.



                                      F-17
<PAGE>





                     GEORGIA BANCSHARES, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


19. EARNINGS PER SHARE

     The Company calculated  earnings per share in accordance with SFAS No. 128,
     "Earnings Per Share." SFAS No. 128 specifies the computation,  presentation
     and disclosure  requirements for earnings per share (EPS) for entities with
     publicly  held  common  stock or  potential  common  stock such as options,
     warrants,  convertible  securities or contingent  stock agreements if those
     securities trade in a public market.

     This standard specifies computation and presentation  requirements for both
     basic EPS and, for entities with complex capital  structures,  diluted EPS.
     Basic  earnings  per share  are  computed  by  dividing  net  income by the
     weighted average common shares  outstanding.  Diluted earnings per share is
     similar to the  computation  of basic  earnings  per share  except that the
     denominator is increased to include the number of additional  common shares
     that would have been  outstanding if the dilutive  potential  common shares
     had been  issued.  The  dilutive  effect of options  outstanding  under the
     Company's  stock option plan is reflected in diluted  earnings per share by
     application of the treasury stock method. All share and per share data have
     been restated to reflect stock splits.

     The following is a reconciliation of the numerators and denominators of the
     basic and diluted EPS computations:

<TABLE>
<CAPTION>
                      Year Ended                           Income                    Shares                      Per Share
                   December 31, 2002                     (Numerator)              (Denominator)                   Amount
              ---------------------------            ------------------      ----------------------       ----------------------

<S>                                                  <C>                                  <C>             <C>
              Basic EPS                              $          591,933                   2,169,196       $                0.273
              Effect of diluted securities:
                Stock options and warrants                            0                     642,083                        0.062
                                                     ------------------      ----------------------       ----------------------

              Diluted EPS                            $          591,933                   2,811,279       $                0.211
                                                     ==================      ======================       ======================
</TABLE>

<TABLE>
<CAPTION>
                      Year Ended                           Income                    Shares                      Per Share
                   December 31, 2001                     (Numerator)              (Denominator)                   Amount
              ---------------------------            ------------------      ----------------------       ----------------------

<S>                                                  <C>                                  <C>             <C>
              Basic EPS                              $          269,932                   1,664,056       $                0.162
              Effect of diluted securities:
                Stock options and warrants                            0                     622,760                        0.044
                                                     ------------------      ----------------------       ----------------------

              Diluted EPS                            $          269,932                   2,286,816       $                0.118
                                                     ==================      ======================       ======================
</TABLE>



20. FAIR VALUES OF FINANCIAL INSTRUMENTS

     Statement of Financial Accounting Standards No. 107, Disclosures about Fair
     Value  of  Financial   Instruments,   requires  disclosure  of  fair  value
     information about financial  instruments,  whether or not recognized in the
     statement of financial  condition.  In cases where quoted market prices are
     not  available,  fair values are based on estimates  using present value or
     other valuation techniques.  Those techniques are significantly affected by
     the assumptions  used,  including the discount rate 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 instruments. Statement
     No.  107  excludes  certain  financial  instruments  and  all  nonfinancial
     instruments from its disclosure  requirements.  Accordingly,  the aggregate
     fair value amounts  presented do not represent the underlying  value of the
     Company.



                                      F-18
<PAGE>






                     GEORGIA BANCSHARES, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


     The  following  methods  and  assumptions  were  used  by  the  Company  in
     estimating its fair value disclosures for financial instruments:


     Cash and due from banks,  interest  bearing  deposits in other  banks,  and
     ---------------------------------------------------------------------------
     federal  funds sold:  The carrying  amounts  reported in the  statements of
     -------------------
     financial condition approximate these assets' fair values.


     Time  deposits:  Fair  values  for  time  deposits  are  estimated  using a
     --------------
     discounted  cash flow analysis that applies  interest rates currently being
     offered on certificates to a schedule of aggregated  contractual maturities
     on such time deposits.


     Investment securities  (including trading account securities):  Fair values
     ------------------------------------------------------------ for investment
     securities are based on quoted market prices,  where  available.  If quoted
     market  prices are not  available,  fair values are based on quoted  market
     prices of comparable  instruments.  The fair value of other  investments is
     considered  acquisition  cost  since  these  investments  are  not  readily
     marketable.


     Loans:  For  variable-rate  loans  that  reprice  frequently  and  with  no
     -----
     significant  change in  credit  risk,  fair  values  are based on  carrying
     amounts.  The  fair  values  for  other  loans  (for  example,  fixed  rate
     commercial  real estate and rental  property  mortgage loans and commercial
     and industrial  loans) are estimated  using  discounted cash flow analysis,
     based on interest  rates  currently  being  offered for loans with  similar
     terms to borrowers of similar  credit  quality.  Loan fair value  estimates
     include  judgments  regarding  future  expected  loss  experience  and risk
     characteristics.  Fair  values  for  impaired  loans  are  estimated  using
     discounted  cash flow  analysis  or  underlying  collateral  values,  where
     applicable. The carrying amount of accrued interest receivable approximates
     its fair value.


     Deposits: The fair values disclosed for demand deposits are, by definition,
     --------
     equal to the amount payable on demand at the reporting date (that is, their
     carrying  amounts).  The  carrying  amounts  of  variable-rate,  fixed-term
     money-market  accounts and certificates of deposit  approximate  their fair
     values.  Fair values for fixed-rate  certificates  of deposit are estimated
     using a  discounted  cash flow  calculation  that  applies  interest  rates
     currently  offered on  certificates  to a schedule of  aggregated  expected
     monthly  maturities  on time  deposits.  The  carrying  amount  of  accrued
     interest payable approximates fair value.


     Short-term borrowings and notes payable: The carrying amounts of short-term
     ---------------------------------------
     borrowings and notes payable approximate their fair values.




                                      F-19
<PAGE>





                     GEORGIA BANCSHARES, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


     Loan commitments:  Loan commitments do not represent a significant value to
     ----------------
     the Company.  Therefore,  the Company has determined that these instruments
     do not  have a  distinguishable  fair  value  and no fair  value  has  been
     assigned.

     The estimated  fair values of the Company's  financial  instruments  are as
     follows:

<TABLE>
<CAPTION>
                                                                     December 31, 2002                  December 31, 2001
                                                                      (in thousands)                     (in thousands)
                                                              -------------------------------    -------------------------------


                                                                 Carrying           Fair            Carrying           Fair
                                                                  Amount            Value            Amount            Value
                                                              -------------     -------------    -------------     -------------
<S>                                                           <C>               <C>              <C>               <C>
         Financial assets:
           Cash and due from banks                            $       4,798     $       4,798    $       2,398     $       2,398
           Interest bearing deposits in other banks                     531               531              798               798
           Federal funds sold                                             0                 0            8,564             8,564
           Investment securities                                     34,809            34,809           21,891            21,891
           Other securities                                             651               651              779               779
           Loans - Net                                              125,750           125,892           81,452            81,898
           Accrued interest receivable                                  896               896              666               666


         Financial liabilities:
           Deposits                                                 142,559           142,425          106,268           106,447
           Note payable                                                   0                 0              400               400
           Federal Home Loan Bank advances                            2,000             2,000                0                 0
           Accrued interest payable                                     401               401              692               692
           Federal funds purchased                                    4,200             4,200                0                 0
           Securities sold under agreements to  repurchase            3,231             3,231                0                 0
</TABLE>



     The carrying  amounts in the preceding  table are included in the statement
     of  financial  condition  under the  applicable  captions.  The contract or
     notional   amounts   of   the   Company's   financial    instruments   with
     off-balance-sheet  risk are disclosed in Note 16. No derivatives  were held
     by the Company for trading purposes.




                                      F-20
<PAGE>




                     GEORGIA BANCSHARES, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


21. PARENT COMPANY FINANCIAL INFORMATION

     The following  information presents the condensed balance sheet,  statement
     of operations,  and statement of cash flows of Georgia Bancshares,  Inc. as
     of and for the year ended December 31, 2002 and 2001:

<TABLE>
<CAPTION>
                            CONDENSED BALANCE SHEETS
                                     Assets
                                     ------
                                                                                               2002                  2001
                                                                                        ------------------    ------------------

<S>                                                                                     <C>                   <C>
         Cash                                                                           $       3,656,625     $          16,767
         Investment in subsidiary                                                              14,311,452            10,886,356
         Other investments                                                                        306,000               306,000
         Other assets                                                                                                    41,272
                                                                                        ------------------    -----------------

               Total assets                                                             $      18,274,077     $      11,250,395
                                                                                        =================     =================
                      Liabilities and Stockholders' Equity
                      ------------------------------------

         Note payable                                                                   $               0     $         400,000
         Other liabilities                                                                          8,500                    99
                                                                                        -----------------     -----------------
               Total liabilities                                                                    8,500               400,099
         Stockholders' equity                                                                  18,265,577            10,850,296
                                                                                        -----------------     -----------------

               Total liabilities and stockholders' equity                               $      18,274,077     $      11,250,395
                                                                                        =================     =================

</TABLE>


<TABLE>
<CAPTION>
                         CONDENSED STATEMENTS OF INCOME
                                                                                               2002                  2001
                                                                                        ------------------    ------------------
         Income:
<S>                                                                                     <C>                   <C>
           Dividend received from bank subsidiary                                       $          100,000
           Interest income                                                                          80,856
                                                                                        ------------------
               Total income                                                                        180,856
                                                                                        ------------------

         Expenses:
           Legal and professional                                                                   13,059    $          53,580
           Other expenses                                                                           26,995               11,719
                                                                                        ------------------    -----------------
               Total expenses                                                                       40,054               65,299
                                                                                        ------------------    -----------------

               Income (loss) before income taxes (benefits) and equity in
                 undistributed net income of subsidiaries                                          140,802    (          65,299)

               Income taxes (benefits)                                                               8,500    (          29,400)
                                                                                        ------------------    -----------------

               Income (loss) before equity in undistributed net income of
                 subsidiaries                                                                      132,302    (          35,899)

               Equity in undistributed net income of subsidiaries                                  459,631              140,781
                                                                                        ------------------    -----------------

               Net income                                                               $         591,933     $         104,882
                                                                                        =================     =================
</TABLE>



                                      F-21
<PAGE>



<TABLE>
<CAPTION>
                       CONDENSED STATEMENTS OF CASH FLOWS


                                                                                               2002                  2001
                                                                                        ------------------    ------------------
<S>                                                                                     <C>                   <C>
         Cash flows from operating activities:
           Net income                                                                   $         591,933     $         104,882
           Adjustments to reconcile net income to net cash used in
           operating activities:
             Equity in undistributed net income of subsidiary                           (         459,631)    (         140,781)
             Payments to subsidiary                                                     (       2,600,000)                    0
             Other operating activities                                                            49,674     (          41,174)
                                                                                        -----------------     -----------------

               Net cash provided by (used in) operating activities                      (       2,418,024)    (          77,073)
                                                                                        -----------------     -----------------

         Cash flows from investing activities:
           Purchase of other investments                                                                      (         306,000)
           Payments on other borrowings                                                 (         400,000)                    0
                                                                                        -----------------     -----------------

                 Net cash provided by (used in) investing activities                    (         400,000)    (         306,000)
                                                                                        -----------------     -----------------

         Cash flows from financing activities:
           Proceeds from other borrowing                                                                                400,000
           Proceeds of stock offering                                                           6,548,711                     0
           Cost of stock offering                                                       (          89,257)                    0
           Proceeds from sale of treasury stock                                                       200                     0
           Purchase of treasury stock                                                   (           1,772)    (             160)
                                                                                        -----------------     -----------------

               Net cash provided by (used in) financing activities                              6,457,882               399,840
                                                                                        -----------------     -----------------

         Net increase in cash                                                                   3,639,858                16,767
         Cash at beginning of year                                                                 16,767                     0
                                                                                        -----------------     -----------------

         Cash at end of year                                                            $       3,656,625     $          16,767
                                                                                        =================     =================

</TABLE>





                                      F-22
<PAGE>


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

     None.

                                    PART III

     Some information required by Part III is omitted from this annual report
because we will file a definitive proxy statement pursuant to Regulation 14A of
the Securities Exchange Act of 1934 not later than 120 days after the end of the
financial year covered by this annual report, and this information is
incorporated herein by reference into this annual report.

Item 9.    Directors, Executive Officers, Promoters and Control Persons;
------------------------------------------------------------------------
Compliance with Section 16(a) of the Exchange Act
-------------------------------------------------

     The information required by this item is incorporated herein by reference
from our proxy statement for the annual meeting of shareholders to be held on
May 14, 2003.


Item 10.   Executive Compensation
---------------------------------

     The information required by this item is incorporated herein by reference
from our proxy statement for the annual meeting of shareholders to be held on
May 14, 2003.


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

     The information required by this item is incorporated herein by reference
from our proxy statement for the annual meeting of shareholders to be held on
May 14, 2003.


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

     The information required by this item is incorporated herein by reference
from our proxy statement for the annual meeting of shareholders to be held on
May 14, 2003.


Item 13.   Exhibits, List and Reports on Form 8-K
-------------------------------------------------

(a)   The following documents are filed as part of this report:

3.1   Articles of Incorporation of the Company (incorporated  by reference to
      Exhibit 3.1 of the Company's Registration Statement on Form SB-2, File
      No. 333-74710).

3.2   Bylaws of the Company  (incorporated  by reference to Exhibit 3.2 of the
      Company's Registration Statement on Form SB-2, File No. 333-74710).

4.1   See Exhibits 3.1 and 3.2 for provisions in Georgia Bancshares' Articles
      of Incorporation and Bylaws defining the rights of holders of the
      common stock.

4.2   Form of certificate of common stock (incorporated  by reference to
      Exhibit 4.2 of the Company's Registration Statement on Form SB-2, File
      No. 333-74710).

4.3   Georgia Bancshares, Inc. 2001 Stock Incentive Plan (incorporated by
      reference to Exhibit 10.1 of the Company's Registration Statement on
      Form SB-2; File No. 333-74710).

4.4   Form of Warrant Agreement (incorporated by reference to Exhibit 10.2 of
      the Company's Registration Statement on Form SB-2; File No. 333-74710).



                                       28
<PAGE>

4.5   Form of First Amendment to Warrant Agreement (incorporated by reference
      to Exhibit 10.3 of the Company's Registration Statement on Form SB-2;
      File No. 333-74710).

4.6   Form of Second Amendment to Warrant Agreement (incorporated by reference
      to Exhibit 10.4 of the Company's Registration Statement on Form SB-2;
      File No. 333-74710).

4.7   Form of Third Amendment to Warrant Agreement.

5.1   Opinion  Regarding  Legality  (incorporated by reference to Exhibit 5.1
      of the  Registration  Statement on Form SB-2, File No. 333-74710).

10.1  Real Estate Agreement dated June 1, 1999 between The Bank of Georgia and
      Charles B. Miles & S. Reid Hutchings (incorporated by reference to
      Exhibit 10.5 of the Company's Registration Statement on Form SB-2; File
      No. 333-74710).

21    Subsidiaries

24    Power of Attorney (contained on signature page hereof)


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

(b)   Reports on Form 8-K
      -------------------

         The  following  reports were filed on Form 8-K during the quarter ended
December 31, 2002.

         The Company  filed a Form 8-K on November 13, 2002 to disclose that the
Chief Executive Officer, Ira P. Shepherd,  III, and the Chief Financial Officer,
Clyde A. McArthur,  each furnished to the Securities and Exchange Commission the
certification  required pursuant to 18 U.S.C.  Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.


Item 14.  Controls and Procedures
---------------------------------

         Within 90 days  prior to the date of this  report,  we  carried  out an
evaluation,  under the supervision and with the  participation  of our principal
executive officer and principal  financial officer,  of the effectiveness of the
design and operation of our disclosure  controls and  procedures.  Based on this
evaluation,  our principal  executive  officer and principal  financial  officer
concluded  that our  disclosure  controls and procedures are effective in timely
alerting  them to material  information  required to be included in our periodic
SEC reports.  The design of any system of controls is based in part upon certain
assumptions about the likelihood of future events, and there can be no assurance
that any design will succeed in achieving  its stated goals under all  potential
future conditions, regardless of how remote.

         In addition, we reviewed our internal controls,  and there have been no
significant  changes in our  internal  controls or in other  factors  that could
significantly  affect  those  controls  subsequent  to the  date of  their  last
evaluation.




                                       29
<PAGE>


                                   SIGNATURES

         In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                            GEORGIA BANCSHARES, INC..


Date:   March 20, 2003             By:  /s/ Ira P. Shephard
     ---------------------------     -------------------------------------------
                                     Ira P. Shepherd, III
                                     President and Chief Executive Officer

         KNOW  ALL MEN BY THESE  PRESENTS,  that  each  person  whose  signature
appears below constitutes and appoints Ira P. Shepherd, III, his true and lawful
attorney-in-fact  and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all  amendments to this Annual Report on Form 10-KSB,  and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange  Commission,  granting unto  attorney-in-fact  and agent
full  power  and  authority  to do and  perform  each and  every  act and  thing
requisite  or necessary  to be done in and about the  premises,  as fully to all
intents and  purposes as he might or could do in person,  hereby  ratifying  and
confirming  all  that   attorney-in-fact   and  agent,   or  his  substitute  or
substitutes, may lawfully do or cause to be done by virtue hereof.

         In accordance with the Securities Exchange Act of 1934, this report has
been signed below by the  following  persons on behalf of the  registrant in the
capacities and on the dates indicated.

Signatures                              Title                        Date
----------                              -----                        ----

/s/ Ira P. Shepherd, III
------------------------
Ira P. Shepherd, III         President, Chief Executive          March 20, 2003
                             Officer (principal executive
                             officer),  and Director
/s/ Clyde A. McArthur
------------------------
Clyde A. McArthur            Chief  Financial  Officer           March 20, 2003
                             (principal accounting
                             and financial officer)

/s/ Arlie C. Aukerman
------------------------
Arlie C. Aukerman            Director                            March 20, 2003


/s/ Joseph S. Black
------------------------
Joseph S. Black              Vice Chairman, Director             March 20, 2003


/s/ Rick A. Duncan
------------------------
Rick A. Duncan               Director, Executive                 March 20, 2003
                             Vice President

/s/ Dale K. Geeslin
------------------------
Dale K. Geeslin              Secretary, Director                 March 20, 2003


/s/ Malcolm R. Godwin
------------------------
Malcolm R. Godwin            Director, Executive Vice            March 20, 2003
                             President

                                       30
<PAGE>


/s/ W. Robert Hancock
------------------------
W. Robert Hancock            Director                            March 20, 2003


/s/ Vincent M. Rossetti
------------------------
Vincent M. Rossetti          Director                            March 20, 2003


/s/ Donnie H. Russell
------------------------
Donnie H. Russell            Director                            March 20, 2003


/s/ Thomas G. Sellmer
------------------------
Thomas G. Sellmer            Director                            March 20, 2003


/s/ Enrico A. Stanziale
------------------------
Enrico A. Stanziale          Chairman, Director                  March 20, 2003


/s/ James H. Webb, Jr.
------------------------
James H. Webb, Jr.           Director                            March 20, 2003






                                       31
<PAGE>


                                  EXHIBIT INDEX


3.1   Articles of Incorporation of the Company (incorporated  by reference to
      Exhibit 3.1 of the Company's Registration Statement on Form SB-2, File
      No. 333-74710).

3.2   Bylaws of the Company  (incorporated  by reference to Exhibit 3.2 of the
      Company's  Registration  Statement on Form SB-2, File No. 333-74710).

4.1   See Exhibits 3.1 and 3.2 for provisions in Georgia Bancshares' Articles
      of Incorporation and Bylaws defining the rights of holders of the
      common stock.

4.2   Form of  certificate  of common stock  (incorporated  by reference to
      Exhibit 4.2 of the Company's  Registration  Statement on Form SB-2,
      File No. 333-74710).

4.3   Georgia Bancshares, Inc. 2001 Stock Incentive Plan (incorporated by
      reference to Exhibit 10.1 of the Company's Registration Statement on
      Form SB-2; File No. 333-74710).

4.4   Form of Warrant Agreement (incorporated by reference to Exhibit 10.2 of
      the Company's Registration Statement on Form SB-2; File No. 333-74710).

4.5   Form of First Amendment to Warrant Agreement (incorporated by reference
      to Exhibit 10.3 of the Company's Registration Statement on Form SB-2;
      File No. 333-74710).

4.6   Form of Second Amendment to Warrant Agreement (incorporated by reference
      to Exhibit 10.4 of the Company's Registration Statement on Form SB-2;
      File No. 333-74710).

4.7   Form of Third Amendment to Warrant Agreement.

5.1   Opinion  Regarding  Legality  (incorporated by reference to Exhibit 5.1
      of the  Registration  Statement on Form SB-2, File No. 333-74710).

10.1  Real Estate  Agreement  dated June 1, 1999 between The Bank of Georgia
      and Charles B. Miles & S. Reid Hutchings  (incorporated by reference to
      Exhibit 10.5 of the Company's Registration Statement on Form SB-2; File
      No. 333-74710).

21    Subsidiaries

24    Power of Attorney (contained on signature page hereof)


                                       32
<PAGE>