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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

|           |  |                                                                                                                           
|---------- |  | --------------------------------------------------------------------------------------------------------------------------
|(Mark One)
|x          |  | ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934: For the fiscal year ended December 31, 2001
|          
|o          |  | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934: For the transition period from to      

Commission File No. 000-30805

WGNB CORP.
(Exact name of registrant as specified in its charter)

|                                                                                                 |  |                                                                    
|------------------------------------------------------------------------------------------------ |  | -------------------------------------------------------------------
|Georgia
(State of incorporation)                                                                 |  | 58-1640130
(I.R.S. Employer Identification No.)                    
|                                                                                                 |  |                                                                    
|201 Maple Street
P.O. Box 280
Carrollton, Georgia 30117
(Address of principal executive offices) |  | (770) 832-3557
(Registrants telephone number,
including area code)

Securities registered pursuant to Section 12(b) of the Act: N/A

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

Common Stock, $1.25 par value
(Title of Class)

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not 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-K or any
amendment to this Form 10-K. x

The aggregate market value of the Registrants Common Stock held by
non-affiliates of the Registrant as of January 31, 2002 was approximately $
39,926,486, based on a per share price of $25.25 (which is the average of the
ask and bid price reported by the NASDAQ Stock Market) as of such date.
Shares of Common Stock held by each executive officer and director and by each
person who owns 5% or more of the Registrants Common Stock have been excluded
in that such persons may be deemed affiliates of the Registrant. This
determination of affiliate status is not necessarily a conclusive determination
for other purposes.

As of March 4, 2002, there were 3,105,522 shares of the Registrants
Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrants definitive Proxy Statement for the 2002
Annual Meeting of Shareholders are incorporated by reference into Part III of
this Report.



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TABLE OF CONTENTS



|                                                                                                                         |  |  |  |  |  |  |  | 
|------------------------------------------------------------------------------------------------------------------------ |  |  |  |  |  |  |  | 
|Item 1. Business                                                                                                        
|Item 2. Properties                                                                                                      
|Item 3. Legal Proceedings                                                                                               
|Item 4. Submission of Matters to a Vote of Security Holders                                                             
|Item 5. Market for the Common Equity and Related Shareholder Matters                                                    
|Item 6. Selected Financial Data                                                                                         
|Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations                           
|Item 7A. Quantitative and Qualitative Disclosures About Market Risk                                                     
|Item 8. Financial Statements and Supplementary Data                                                                     
|Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                            
|Item 10. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act
|Item 11. Executive Compensation                                                                                         
|Item 12. Security Ownership of Certain Beneficial Owners and Management                                                 
|Item 13. Certain Relationships and Related Transactions                                                                 
|Item 14. Exhibits and Reports on Form 8-K                                                                               
|SIGNATURES                                                                                                              
|Subsidiaries of WGNB Corp.                                                                                              



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WGNB CORP.

2001 Form 10-K Annual Report

TABLE OF CONTENTS

|                        |                                                                                       |             |  |                 |  |    |  | 
|----------------------- | ------------------------------------------------------------------------------------- | ----------- |  | --------------- |  | -- |  | 
|Item Numberin Form 10-K |                                                                                       | Description |  | Page orLocation
|                        |                                                                                       |             |  |                
|Item 1.                 | Business                                                                              |             |  | 1               | 
|                        |                                                                                       |             |  |                 |  |    |  | 
|Item 2.                 | Properties                                                                            |             |  | 16              | 
|                        |                                                                                       |             |  |                 |  |    |  | 
|Item 3.                 | Legal Proceedings                                                                     |             |  | 16              | 
|                        |                                                                                       |             |  |                 |  |    |  | 
|Item 4.                 | Submission of Matters to a Vote of Security Holders                                   |             |  | 16              | 
|                        |                                                                                       |             |  |                 |  |    |  | 
|Item 5.                 | Market for the Common Equity and Related Shareholder Matters                          |             |  | 17              | 
|                        |                                                                                       |             |  |                 |  |    |  | 
|Item 6.                 | Selected
Financial Data                                                               |             |  | 18              | 
|                        |                                                                                       |             |  |                 |  |    |  | 
|Item 7.                 | Managements
Discussion and Analysis of Financial Condition and Results of Operations |             |  | 19              | 
|                        |                                                                                       |             |  |                 |  |    |  | 
|Item 7A.                | Quantitative and Qualitative Disclosures About Market Risk                            |             |  | 31              | 
|                        |                                                                                       |             |  |                 |  |    |  | 
|Item 8.                 | Financial Statements and Supplementary Data                                           |             |  | 31              | 
|                        |                                                                                       |             |  |                 |  |    |  | 
|Item 9.                 | Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure  |             |  | 31              | 
|                        |                                                                                       |             |  |                 |  |    |  | 
|Item 10.                | Directors and Executive Officers of the Registrant                                    |             |  | 31              | 
|                        |                                                                                       |             |  |                 |  |    |  | 
|Item 11.                | Executive Compensation                                                                |             |  | 31              | 
|                        |                                                                                       |             |  |                 |  |    |  | 
|Item 12.                | Security Ownership of Certain Beneficial Owners
and Management                        |             |  | 32              | 
|                        |                                                                                       |             |  |                 |  |    |  | 
|Item 13.                | Certain Relationships and Related Transactions                                        |             |  | 32              | 
|                        |                                                                                       |             |  |                 |  |    |  | 
|Item 14.                | Exhibits, Financial Statement Schedules and Reports on Form 8-K                       |             |  | 32              | 
|                        |                                                                                       |             |  |                 |  |    |  | 
|                        |                                                                                       | Signatures  |  |                 |  | 34 | 





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PART I

CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS

Certain of the statements made in this Report and in documents
incorporated by reference herein, including matters discussed under the caption
Managements Discussion and Analysis of Financial Condition and Results of
Operations, as well as oral statements made by WGNB Corp. (the Company) or
its officers, directors or employees, may constitute forward-looking statements
within the meaning of Section 21E of the Securities Exchange Act of 1934, as
amended (the Exchange Act). Such forward-looking statements are based on
Managements beliefs, current expectations, estimates and projections about the
financial services industry, the economy and about the Company and the Bank in
general. The words expect, anticipate, intend, plan, believe,
seek, estimate and similar expressions are intended to identify such
forward-looking statements; however, this Report also contains other
forward-looking statements in addition to historical information. Such
forward-looking statements are not guarantees of future performance and are
subject to risks, uncertainties and other factors that may cause the actual
results, performance or achievements of the Company to differ materially from
historical results or from any results expressed or implied by such
forward-looking statements. The Company cautions readers that the following
important factors, among others, could cause the Companys actual results to
differ materially from the forward-looking statements contained in this Report:
(i) the effect of changes in laws and regulations, including federal and state
banking laws and regulations, with which the Company or the Bank must comply,
and the associated costs of compliance with such laws and regulations either
currently or in the future as applicable; (ii) the effect of changes in
accounting policies and practices, as may be adopted by the regulatory agencies
as well as by the Financial Accounting Standards Board; (iii) the effect of
changes in the Companys organization, compensation and benefit plans; (iv) the
effect on the Companys competitive position within its market area of the
increasing consolidation within the banking and financial services industries,
including the increased competition from larger regional and out-of-state
banking organizations as well as non-bank providers of various financial
services; (v) the effect of changes in interest rates; and (vi) the effect of
changes in the business cycle and downturns in local, regional or national
economies. The Company cautions that the foregoing list of important factors
is not exclusive.




Item 1. Business

General

WGNB Corp. is a $350 million asset bank holding company headquartered in
Carrollton, Georgia. The Company was organized as a business corporation under
the laws of the State of Georgia in 1984 and is a registered bank holding
company under the federal Bank Holding Company Act of 1956, as amended, and
under the bank holding company laws of the State of Georgia. The Company
conducts operations in western Georgia through its wholly-owned subsidiary,
West Georgia National Bank (the Bank). The Bank was organized in 1946 as a
national banking association under the federal banking laws of the United
States. In 1997, the Company formed a non-bank subsidiary, West Georgia Credit
Services, Inc. (the Finance Company), which conducts business as Mortgage &
Loan Solutions. As of March 4, 2002, the Company had 3,105,522 issued and
outstanding shares of common stock, $1.25 par value per share (the Common
Stock), held by approximately 480 shareholders of record.

The Company conducts all of its business through the Bank and the Finance
Company. The executive offices of the Company and the main office of the Bank
are located at 201 Maple Street, Carrollton, Georgia 30117. The Finance
Company office is located at 4109 Jimmy Lee Smith Parkway, Hiram, Georgia
30141.

The Bank

The Bank is a full service commercial bank offering a variety of services
customary for community banks of similar size which are designed to meet the
banking needs of individuals and small to medium-sized businesses. The Bank
attracts most of its deposits and conducts most of its lending transactions
from and within its primary service area encompassing Carroll County, Georgia
and the western portion of Douglas County, Georgia.

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The Banks main office is located in Carrollton, Georgia. The Bank
operates a total of seven branches and six additional 24-hour ATM sites,
located in Carroll and Douglas Counties in Georgia. In addition, the Bank
operates two other branches in the city of Carrollton, two branches in Villa
Rica and one branch in Bowdon, Georgia.

As a convenience to its customers, the Bank offers at most of its branch
locations Saturday banking hours, drive-thru teller windows and 24-hour
automated teller machines. The Bank is a member of Honor, Cirrus and several
other ATM networks of automated teller machines which permit Bank customers to
perform monetary transactions in most cities throughout the southeast and other
regions. The Bank also offers Internet banking services through its web site
located at www.wgnb.com. Information included on the Banks web site is not a
part of this Report.

Deposit Services.The Bank offers a full range of deposit services
including checking accounts, NOW accounts, savings accounts and other time
deposits of various types, ranging from money market accounts to longer-term
certificates of deposit. The accounts are all offered to the Banks market
area at rates competitive to those offered in the area. All deposits are
insured by the Federal Deposit Insurance Corporation (the FDIC) up to the
maximum allowed by law. In addition, the Bank has implemented service charge
fee schedules competitive with other financial institutions in its market area
covering such matters as maintenance fees on checking accounts, per item
processing fees on checking accounts, returned check charges and the like.

As of December 31, 2001, the Bank had deposits of approximately $281
million, and approximately 25,700 deposit accounts. No material portion of the
Banks deposits have been obtained from one or a few persons or entities
(including federal, state and local governments and agencies), the loss of any
one or more of which would have a materially adverse effect on the Bank.

The following table sets forth the mix of depository accounts at the Bank
as a percentage of total deposits at December 31, 2001.

Deposit Mix

|                               |  |  |                      |   | 
|------------------------------ |  |  | -------------------- | - | 
|                               |  |  | At December 31, 2001
|                               |  |  |                     
|Non-interesting bearing demand |  |  | 11.75                | %
|NOW accounts and money market  |  |  | 39.02                | %
|Savings                        |  |  | 2.94                 | %
|Time
Deposits                  |  |  |                      |  
|Under $100,000                 |  |  | 31.50                | %
|$100,000 and over              |  |  | 14.79                | %
|                               |  |  |                      |  
|                               |  |  | 100.00               | %
|                               |  |  |                      |  

Lending Services.The Banks lending business consists principally of
making consumer loans to individuals and commercial loans to small and
medium-sized businesses and professional concerns. In addition, the Bank makes
secured real estate loans, including residential and commercial construction
loans, and first and second mortgage loans for the acquisition or improvement
of personal residences. As of December 31, 2001, the Bank had approximately
$254 million in total loans outstanding, representing 72% of its total assets
of approximately $350 million. The loan portfolio is made up of both fixed and
adjustable rate loans. Approximately 66% of the Companys total loan portfolio
is fixed rate and 34% is adjustable rate as of December 31, 2001. No material
portion of the Banks loans is concentrated within a single industry or group
of related industries. The Bank is not dependent to any material degree upon
any single borrower or a few principal borrowers. The loss of any individual
borrower or of a few principal borrowers would not be likely to have a material
adverse effect on the operations or earnings of the Bank.

Real Estate Loans.Loans secured by real estate make up the primary
component of the Banks loan portfolio, constituting approximately $208
million, or 82%, of the Banks total loans as of December 31, 2001.

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Approximately 64% of the real estate loans are fixed rate and 36% are
adjustable rate. These loans consist of commercial real estate loans,
construction and development loans, residential real estate loans and home
equity loans. Real estate loans are collateralized by commercial and
residential real estate in the Companys primary and secondary market areas.
The types of real estate that typically constitute collateral include primary
and secondary residences for individuals, including multi-family projects,
places of business, real estate for agricultural uses and undeveloped land.

Commercial Loans. The Bank makes loans for commercial purposes in various
industries resident to its market area. As of December 31, 2001, commercial
loans constituted approximately $26 million, or 10% of the Banks total loans.
Approximately 61% of commercial loans are fixed rate while 39% are adjustable.
The typical commercial loan has a maturity of three years or less. Loans in
this category exclude commercial loans secured by real estate. Commercial
loans secured by real estate are included in the real estate category described
above. The typical commercial loan has collateral such as equipment for
business use and inventory and may include unsecured working capital lines.

Consumer Loans. The Bank makes a variety of loans to individuals for
personal and household purposes, including secured and unsecured installment
and term loans and lines of credit. As of December 31, 2001, the Bank held
approximately $19 million of consumer loans, representing 8% of its total
loans. Consumer loans are primarily fixed rate in nature with 96% of this loan
category carrying fixed rates. These loans are typically collateralized by
personal automobiles, recreational vehicles or household items and may include
unsecured loans to individuals.

Other Lending Activities.The Bank also engages in secondary-market
mortgage activities whereby the Bank originates mortgage loans on behalf of
investor correspondent banks who fund the loans. The investor correspondent
banks underwrite and price the loans and the Bank receives a fee for
originating and packaging the loans. Periodically the Bank receives discount
points depending on the pricing of the loan. No mortgage loans are held by the
Bank for resale nor does the Bank service third party loans.

Risks Associated with Lending Activities.Consumer and non-mortgage loans
to individuals entail greater risk than do residential mortgage loans,
particularly in the case of loans that are unsecured or secured by rapidly
depreciating assets such as automobiles. In such cases, any repossessed
collateral for a defaulted consumer loan may not provide an adequate source of
repayment of the outstanding loan balance as a result of the greater likelihood
of damage, loss or depreciation. In addition, consumer loan collections are
dependent on the borrowers continuing financial stability, and thus are more
likely to be adversely affected by job loss, divorce, illness or personal
bankruptcy. Furthermore, the application of various federal and state laws,
including federal and state bankruptcy and insolvency laws, may limit the
amount that can be recovered on such loans.

Commercial loans and loans secured by commercial and multi-family real
estate properties are generally larger and involve greater degree of credit
risk than one-to four-family residential mortgage loans. Because payments on
these loans are often dependent on the successful operation of the business or
management of the property, repayment of such loans may be subject to adverse
conditions in the economy or real estate markets. It has been the Banks
practice to underwrite such loans based on its analysis of the amount of cash
flow generated by the business and the resulting ability of the borrower to
meet its payment obligations. In addition, the Bank, in general, seeks to
obtain a personal guarantee of the loan by the owner of the business and, under
certain circumstances, seeks additional collateral.

Construction loans are generally considered to involve a higher degree of
credit risk than residential mortgage loans. Risk of loss on a construction
loan is dependent largely upon the accuracy of the initial estimate of the
security propertys value upon completion of construction as compared to the
estimated costs of construction, including interest and fees. In addition, the
Bank assumes certain risks associated with the borrowers ability to complete
construction in a timely and workmanlike manner. If the estimate of value
proves to be inaccurate, or if construction is not performed timely or in a
quality manner, the Bank may be confronted with a project which, when
completed, has a value insufficient to assure full repayment or to advance
funds beyond the amount originally committed to permit completion of the
project.

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Target Concentrations & Loan Portfolio Mix. The Bank has target
concentration and portfolio mix limits written in its loan policy. The goal of
the policy is to avoid concentrations that would result in particular loan or
collateral type, industry or geographic area comprising a large part of the
whole portfolio. The portfolio should be varied enough to obtain a balance of
maximum yield and minimum risk. The loan portfolio mix is reported and
reviewed quarterly by the Board of Directors. Concentration targets are
evaluated periodically to determine changes in risk profiles and market need.
The following represents maximum target concentrations of loans by category as
a percentage of total loans:

|                                               |                           |  |    |    |  
|---------------------------------------------- | ------------------------- |  | -- | -- | -
|Single-payment loans                           |                           |  | 25 | % 
|Unsecured loans                                |                           |  | 6  | % 
|Loans secured by:                              |                           |  |    |   
|                                               | Residential real estate   |  |    | 30 | %
|                                               | Commercial real estate    |  |    | 35 | %
|                                               | Convenience stores assets |  |    | 6  | %
|                                               | Hotels/motels             |  |    | 5  | %
|                                               | Poultry facilities        |  |    | 7  | %
|Acquisition & development/construction loans   |                           |  | 20 | % 
|Commercial and industrial purpose loans        |                           |  | 20 | % 
|Exceptions to primary and secondary trade area |                           |  | 10 | % 

The loan policy includes a provision limiting all types of real estate
loans to 75% of the total loan portfolio. Although, in aggregate, it accounts
for a large portion of the loan portfolio, real estate lending has historically
been the Companys lowest loan loss category.

Legal Lending Limit. The Bank is subject to loans to one borrower
limitations prescribed for national banks by the Office of the Comptroller of
the Currency (see Supervision and Regulation). The legal lending limit to a
single borrower by regulation is defined as 25% of total capital plus reserves.
The Bank, however, has defined an internal exposure limit to one borrower of
10% of total capital plus reserves.

Loan Underwriting Standards. Management recognizes the importance of
character and past performance as consideration in the lending decision
process. In analyzing a credit relationship, primary emphasis is placed on
adequacy of cash flow and the ability of the obligor to service the debt.
Secondary emphasis is placed on the past performance of the borrower, the type
or value of the collateral, the amount of net worth present or any performance
of endorsers or guarantor that has not been proven.

Collateral is not considered a substitute for the borrowers ability to
repay. Collateral serves as a way to control the borrower and provide
additional sources of repayment in the event of default. The quality and
liquidity of the collateral are of paramount importance and must be confirmed
before the loan is made. The Bank has loan to value and margin guidelines that
are varied depending on the type of collateral offered. Loans secured by
liquid assets and securities carry margins of 75% to 100% depending on the
liquidity and price volatility of the asset. In general, loans to value on
various types of real estate range from a high of 85% to a low of 60%.
Installment loans, in general, require a loan to collateral value of at least
80%. In addition, there are limits on terms of repayment of loans for
automobiles and related collateral which are dependent on the age of the asset.
There are certain exceptions to the loan to value guidelines that are
dependent on the overall creditworthiness of the borrower.

Loan Approval. The Banks loan approval policies provide for various
levels of officer lending authority. When the aggregate outstanding loans to a
single borrower exceeds an individual officers lending authority, the loan
request must be considered and approved by an officer with a higher lending
limit or an officers loan committee (the OLC). Individual officers secured
and unsecured lending limits range from $5,000 to $100,000, depending on
seniority. The OLC, which consists of the president, executive vice president,
two senior vice presidents and other lenders, has a lending limit of $300,000
for secured and $100,000 for unsecured loans. Loans between $300,000 and the
Banks legal lending limit must be approved by an executive loan committee,
which is made up of the CEO of the Company, the President of the Bank and six
outside directors.

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Loan Review.The Bank has a comprehensive loan review process involving
an independent loan review officer and lending officers. The loan review
process is designed to promote early identification of credit quality problems.
All loan officers are charged with the responsibility of rating their loans.
The Banks independent loan review officer is charged with the responsibility
of ensuring that all problem loans and all loan or line of credit relationships
in excess of $350,000 are reviewed annually, with random sample checks on
consumer loans and other loans less than $350,000. Additionally, the loan
review officer monitors the loan rating system to ensure proper risk
identification. The Banks risk identification process is also reviewed by its
regulators and its independent auditors.

The Finance Company

The Finance Company was established primarily for the purpose of
diversifying revenue sources for the Company by offering consumer financing not
traditionally offered by banks. The Finance Company makes consumer finance
loans to individuals, which it holds in its own loan portfolio. The consumer
finance loans consist of (a) loans to individuals in original principal amounts
of less than $3,000 that are regulated under the Georgia Industrial Loan Act
(GILA) or (b) loans to individuals in excess of $3,000 that are not regulated
under GILA. As of December 31, 2001, the Finance Company contributed less than
1% of the total consolidated revenues for the Company.

Market Area

The following statistical data is based on information contained in a
report published by the State University of West Georgia Department of
Economics dated October 30, 2001 and information published by the FDIC on its
web site.

The Banks primary market area includes all of Carroll County, Georgia and
the western portion of Douglas County, Georgia. Approximately 97% of the
Banks customers reside in Carroll County, although it attracts some loan
business from neighboring Douglas and Paulding Counties. The Banks secondary
market area includes the Georgia counties of Paulding, Douglas, Heard, and
Haralson, and the Alabama counties of Clebourne and Randolph. Carroll County
is located approximately 45 miles southwest of Atlanta and 90 miles east of
Birmingham, Alabama. Carroll Countys major industries include manufacturing,
wholesale trade, food processing, paper and lumber products, construction and
health services. The State University of West Georgia, which serves more than
8,000 students, and Tanner Medical Center are located in Carrollton, which is
the county seat and the location of the Banks main office.

Carroll Countys population has grown steadily but relatively slowly when
compared to some metro Atlanta counties, reflecting an average annual growth
rate of 2.0% from 1990 to 2000. Its growth rate is also lower than that for
the State of Georgia. Out of 159 Georgia counties, Carroll County ranks 29th
in land area and 23rd in population. The unemployment rate for Carroll County
in June 2001 was 5.9% which was above the State unemployments rate of 3.9%.
Per capita income for 1999 in Carroll County was $20,031, which was 77% of the
average for the state as a whole and 74% of the national average. Carroll
Countys personal income of $1.78 billion in 1999 ranked 25th in Georgias
counties.

Housing activity in 2000 in Carroll County reached record levels. A total
of 1,856 housing units, 1,650 single family and 206 multi-family units were
permitted in 2000. Residential construction helped construction employment
increase by 11.2% in 2000, adding 204 jobs. Despite slower job growth in
Carroll, permit data for the first three quarters of 2001 indicated noteworthy
growth in residential construction. Through August 2001, 978 single-family
permits were issued, compared to 857 for the same period in 2000 with
communities near I-20 reflecting the greatest share of the residential
construction activity in 2001. One of the fastest growing sectors in Carroll
County is wholesale trade where employment increased by 150 jobs in 2000.
Additional gains in distribution employment are anticipated with the addition
of new distribution centers opened by Walmart.com and King Provisions, a
subsidiary of Burger King.

Douglasville, in neighboring Douglas County, has been experiencing a surge
of new retail activity primarily centered near Arbor Place Mall. Douglas
Countys largest employer sector is retail trade. During the
decade of the 1990s, Douglas Countys population increased by 29.6% which
compares to the state growth rate of

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26.4%. Douglas Countys unemployment rate
in August 2001 was 2.6%. Single-family housing activity has been extremely
strong in Douglas in 2001. A total of 845 single family permits were issued in
the first eight months of 2001 compared to 533 in the same period of 2000.

Hiram, in neighboring Paulding County, has similarly experienced a
significant increase in retail activity, particularly at the intersection of
Georgia Highway 92 and U.S. Highway 278 where the Finance Company is located.

Carroll County continues to be the largest deposit base county in its
market area with Douglas County to its east and Paulding County to its north
emerging as deposit growth areas. The compound annual growth rate for deposits
at financial institutions in Carroll County for the years 1993-2001 was 6.1%.
The amount of total deposits in Carroll County was approximately $1.06 billion
at June 30, 2001, compared to total deposits of approximately $710 million at
June 30, 1993. Douglas County had the second largest deposit base in its
market area with $769 million, with Paulding County coming in third with $516
million, at June 30, 2001. The Bank held a market share of 24.4% of total
deposits in Carroll County at June 30, 2001 representing the largest deposit
market share for any financial institution located in Carroll County.

Significant development has taken place in the western Georgia area along
the I-20 West corridor. The development of communities west of metro Atlanta
along I-20 such as Douglasville and westward toward the city of Villa Rica will
have an impact on the Companys primary and secondary market areas. Retail
developments such as Arbor Place Mall and additional retail establishments in
the Chapel Hill area of Douglas County along with large residential
developments such as Chapel Hill Country Club, Bear Creek, New Manchester and
Mirror Lake are anticipated to have a continuing economic impact on the West
Georgia area including North Carroll County.

All of the Companys market area have been effected by the downturn in the
national economy. Even before the September 11th tragedy, evidence suggested
unemployment was on the rise in all counties in the Companys market area.
Retail trade and business expansion is likely to be effected by the downturn.
Inventories of single-family homes are increasing with the upscale home market
experiencing particularly hard times. Retail sales were down in 2001 as
evidenced by a 15% reduction in sales tax collections in Georgia.

The Banks percentage loan growth, a good indicator of business expansion,
slowed in 2001 when compared to 2000. Total loans grew by only 11.1% or $25
million in 2001 compared to 23.6% or $44 million in 2000. The Bank has
recently opened two branches in Douglas County. In September of 2000, the Bank
opened a branch in an area known as Mirror Lake, which is located two miles
north of I-20 between the cities of Douglasville and Villa Rica near western
Douglas County and northern Carroll County. In its 16 months of existence, the
Mirror Lake branch has grown $31 million in loans ($12 million by transfer from
the Banks Villa Rica branch) and $6 million in deposits. The Bank has also
expanded into Douglasville in Douglas County with a branch on Highway 5 near
Douglas Boulevard, a major retail trade area. The Douglasville branch has grown
$10 million in loans and $6 million in deposits since it opened in June of
2001.

The Banks Main Office in Carrollton, Carroll County, grew by $19 million
or 18% in loans and $13 million or 8.9% in deposits in 2000. By contrast, the
Main Office decreased by $2 million in loans and grew by $23 million or 14% in
deposits in 2001. What impact the local economy will have on loan and deposit
production and the collectability of loans is not readily apparent. Should
interest rates remain low or decline further, the Banks interest margin would
be adversely affected.

Competition

The Bank and the Finance Company operate in a competitive environment,
competing for deposits and/or loans with commercial banks, thrifts and other
financial entities. Principal competitors include other community commercial
banks (such as Community First Bank, CB&T of West Georgia, Regions Bank,
Peoples Bank of West Georgia and Hometown Bank of Villa Rica) and larger
institutions with branches in the Banks market area (such as Bank of America,
SunTrust Bank and SouthTrust Bank). Numerous mergers and consolidations
involving banks in the Banks market area have occurred recently, requiring the Bank to
compete with banks with greater resources. Two recent mergers that have
affected the Banks market area are the Community First Bank merger with BB&T

6



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which closed in December, 2001 and the Peoples Bank of West Georgia merger with
United Community Bank which closed in September, 2001. West Georgia National
Bank is now the largest independent bank in Carroll County.

The primary factors in competing for deposits are interest rates,
personalized services, the quality and range of financial services, convenience
of office locations and office hours. Competition for deposits comes primarily
from other commercial banks, savings associations, credit unions, money market
funds and other investment alternatives. The primary factors in competing for
loans are interest rates, loan origination fees, the quality and range of
lending services and personalized services. Competition for loans comes
primarily from other commercial banks, savings associations, mortgage banking
firms, credit unions and other financial intermediaries. Many of the financial
institutions operating in the Banks market area offer services such as trust,
investment and international banking, which the Bank does not offer, and have
greater financial resources or have substantially higher lending limits than do
the Bank or Finance Company.

To compete with other financial services providers, the Bank principally
relies upon local promotional activities, personal relationships established by
officers, directors and employees with its customers, and specialized services
tailored to meet its customers needs. Management believes that the Bank has an
opportunity to establish business ties with customers who have been displaced
by the consolidations and desire to forge banking relationships with locally
owned and managed institutions.

The Bank offers many personalized services and attracts customers by being
responsive and sensitive to the needs of the community. The Bank relies not
only on the goodwill and referrals of satisfied customers, as well as
traditional media advertising to attract new customers, but also on individuals
who develop new relationships to build the customer base of the Bank. To
enhance the Banks image in the community, the Bank supports and participates
in many events. Employees, officers and directors represent the Bank on many
boards and local civic and charitable organizations.

Employees

As of December 31, 2001, the Bank had 133 full time equivalent employees
and the Finance Company had two full time employees none of whom is a party to
a collective bargaining agreement. Certain executive officers of the Bank and
Finance Company also serve as the officers of the Company (which does not have
compensated employees). The Company believes that both the Bank and Finance
Company enjoy satisfactory relations with their respective employees.

Monetary Policies

The operations of the Bank and Finance Company are affected by the credit
policies of monetary authorities, particularly the Board of Governors of the
Federal Reserve System. The instruments of monetary policy employed by the
Federal Reserve System include open market operations in U. S. government
securities, changes in discount rates on member bank borrowings, and changes in
reserve requirements against member bank deposits. In view of changing
conditions in the national economy and in the money markets, as well as the
effect of action by monetary and fiscal authorities, including the Federal
Reserve System, it is difficult to predict how possible future changes in
interest rates, deposit levels or loan demand would affect the business and
earnings of the Bank and Finance Company.

Supervision and Regulation

The Company and its subsidiaries are extensively regulated under federal
and state law. These laws and regulations generally are intended to protect
depositors, not shareholders. The following is a summary description of
certain provisions of certain laws which affect the regulation of bank holding
companies and banks. To the extent that the following summary describes
statutory or regulatory provisions, it is qualified in its entirety by
reference to the particular statutory and regulatory provisions. Any change in
applicable laws or regulations may
have a material effect on the business and prospects of the Company and
its subsidiaries. Beginning with the enactment of the Financial Institutions
Reform, Recovery and Enforcement Act of 1989 (FIRREA) and following

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with the Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA),
numerous additional regulatory requirements have been placed on the banking
industry in the past ten years, and additional changes have been proposed. The
banking industry has also changed significantly as a result of the passage of
the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the
Interstate Banking Act) and the Financial Services Modernization Act of 1999.
The Companys operations may be affected by legislative changes and the
policies of various regulatory authorities and the Company is unable to predict
the nature or the extent of the effect on its business and earnings that fiscal
or monetary policies, economic control or new federal or state legislation may
have in the future.

The Company

The Company is a bank holding company within the meaning of the Bank
Holding Company Act of 1956, as amended (the BHCA). Under the BHCA, the
Company is subject to periodic examination by the Federal Reserve and is
required to file periodic reports of its operations and such additional
information as the Federal Reserve may require. The Companys and the Banks
activities are limited to banking, managing or controlling banks, furnishing
services to or performing services for its subsidiaries or engaging in any
other activity that the Federal Reserve determines to be so closely related to
banking or managing or controlling banks as to be a proper incident thereto.

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



| |  |  | to acquire the ownership or control of more than 5% of
any class of voting stock of any bank not already controlled by
it;
| | - |  | --------------------------------------------------------------------------------------------------------------------------
|
| |  |  | for it or any subsidiary (other than a bank) to acquire
all or substantially all of the assets of a bank; and             
|
| |  |  | to merge or consolidate with any other bank holding
company.                                                              

In addition, and subject to certain exceptions, the BHCA and the Change in
Bank Control Act, together with regulations thereunder, require Federal Reserve
approval (or, depending on the circumstances, no notice of disapproval) prior
to any person or company acquiring control of a bank holding company, such as
the 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 the
Company has registered securities under Section 12 of the Exchange Act or no
other person will own a greater percentage of that class of voting securities
immediately after the transaction. The regulations provide a procedure for
challenge of the rebuttable control presumption.

The BHCA further provides that the Federal Reserve may not approve any
transaction that would result in a monopoly, or the effect of which may be
substantially to lessen competition in any section of the country, or that in
any other manner would be in restraint of trade, unless the transactions
anticompetitive effects are clearly outweighed by the public interest. The
Federal Reserve is also required to consider the financial and managerial
resources and future prospects of the bank holding companies and banks
concerned and the convenience and needs of the community to be served.

Bank holding companies generally are also prohibited under the BHCA from
engaging in non-banking activities or from acquiring direct or indirect control
of any company engaged in non-banking activities. However, the Federal Reserve
may permit bank holding companies to engage in certain types of non-banking
activities determined by the Federal Reserve to be closely related to banking
or managing or controlling banks. Activities determined by the Federal Reserve
to fall under this category include:



| |  |  | making or servicing loans and certain leases;
| | - |  | ---------------------------------------------
|
| |  |  | providing certain data processing services;  

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| |  |  | acting as a fiduciary or investment or financial advisor,
| | - |  | ---------------------------------------------------------
|
| |  |  | providing discount brokerage services;                   
|
| |  |  | underwriting bank eligible securities; and               
|
| |  |  | making investments designed to promote community welfare.

Subsidiary banks of a bank holding company are subject to certain
restrictions on extensions of credit to the bank holding company or its
subsidiaries, on investments in their securities and on the use of their
securities as collateral for loans to any borrower. These regulations and
restrictions may limit the Companys ability to obtain funds from the Bank for
its cash needs, including funds for the payment of dividends, interest and
operating expenses. Further, federal law prohibits a bank holding company and
its subsidiaries from engaging in certain tie-in arrangements in connection
with any extension of credit, lease or sale of property, or the furnishing of
services. For example, the Bank may not generally require a customer to obtain
other services from it or the Company, and may not require that a customer
promise not to obtain other services from a competitor as a condition to an
extension of credit to the customer.

Financial Services Modernization Act.On November 12, 1999, the President
signed into law the Gramm-Leach-Bliley Act of 1999, known as the Financial
Services Modernization Act of 1999, which repeals many of the restrictions on
the activities of banks and bank holding companies. The law establishes two
new structures  financial holding companies and
financial subsidiaries  that enable qualifying bank holding companies and banks to provide a wide
variety of financial services that formerly could be performed only by
insurance companies and securities firms. The law also permits bank
affiliations with insurance and securities firms. At this time, the Company
does not intend to seek qualification to enter into these additional financial
services areas.

Source of Strength; Cross-Guarantee.Under Federal Reserve policy, a bank
holding company is expected to act as a source of financial strength to its
bank subsidiaries and to commit resources to support these subsidiaries. This
support may be required at times when, absent such policy, the bank holding
company might not otherwise provide such support. Under these provisions, a
bank holding company may be required to loan money to its subsidiary banks in
the form of capital notes or other instruments which qualify for capital under
regulatory rules. Under the BHCA, the Federal Reserve 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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. The Bank
may be required to indemnify, or cross-guarantee, the FDIC against losses it
incurs with respect to any other bank controlled by the Company, which in
effect makes the Companys equity investments in healthy bank subsidiaries
available to the FDIC to assist any failing or failed bank subsidiary of the
Company.

State Regulation.Activities of the Company are subject to certain
provisions of The Financial Institutions Code of Georgia and regulations issued
pursuant to such code. These provisions are administered by The Georgia
Department of Banking & Finance, which has concurrent jurisdiction with the
Federal Reserve over the activities of the Company. The laws and regulations
administered by The Georgia Department of Banking & Finance are generally
consistent with, or supplemental to, those federal laws and regulations
discussed herein.

The Bank

As a national bank, the Bank is subject to the supervision and examination
by the Office of the Comptroller of the Currency (the OCC). Deposits in the
Bank are insured by the FDIC up to a maximum amount (generally $100,000 per
depositor, subject to aggregation rules). The OCC and the FDIC regulate or
monitor all areas of the Banks commercial banking operations, including
security devices and procedures, adequacy of capitalization and loan loss
reserves, loans, investments, borrowings, deposits, mergers, consolidations,
reorganizations, issuance of

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securities, payment of dividends, interest rates,
establishment of branches, and other aspects of its operations. The OCC
requires the Bank to maintain certain capital ratios and imposes limitations on
the Banks aggregate investment in real estate, bank premises and furniture and
fixtures. The Bank is currently required by the OCC to prepare quarterly
reports on the Banks financial condition and to conduct an annual audit of its
financial affairs in compliance with minimum standards and procedures
prescribed by the OCC.

Under FDICIA, all insured institutions must undergo periodic on-site
examination 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 the appropriate agency (and state supervisor when applicable).
FDICIA also directs the FDIC to develop with other appropriate agencies 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 other report of any insured depository institution. FDICIA 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: (i) internal controls,
information systems and audit systems; (ii) loan documentation; (iii) credit
underwriting; (iv) interest rate risk exposure; and (v) asset quality.

Community Reinvestment Act. The Community Reinvestment Act requires that,
in connection with examinations of financial institutions within their
respective jurisdictions, the Federal Reserve, the FDIC or any other
appropriate federal agency, 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 pose additional requirements
and limitations on the bank. The Bank was examined for CRA compliance in
March, 1997 and received a CRA rating of outstanding.

Other Regulations.Interest and certain other charges collected or
contracted for by the Bank are subject to Georgia 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 the
federal Truth-In-Lending Act governing disclosures of credit terms to consumer
borrowers, the Home Mortgage Disclosure Act of 1975 requiring financial
institutions to provide information to enable the public and public officials
to determine whether a financial institution is fulfilling its obligation to
help meet the housing needs of the community it serves, the Equal Credit
Opportunity Act prohibiting discrimination on the basis of race, creed or other
prohibited factors in extending credit, the Fair Credit Reporting Act of 1978
governing the use and provision of information to credit reporting agencies,
the Fair Debt Collection Act governing the manner in which consumer debts may
be collected by collection agencies, and the rules and regulations of the
various federal agencies charged with the responsibility of implementing such
federal laws. The deposit operations of the Bank also are subject to the Right
to Financial Privacy Act, which imposes a duty to maintain confidentiality of
consumer financial records and prescribes procedures for complying with
administrative subpoenas of financial records, and the Electronic Funds
Transfer Act and Regulation E issued by the Federal Reserve to implement that
act, which 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. The Banks commercial
transactions are also subject to the provisions of Georgia law governing such
transactions as they appear in non-banking commercial activities. These laws
include the Uniform Commercial Code and other provisions of The Georgia Code
Annotated.

Deposit Insurance

The deposits of the Bank are currently insured to a maximum of $100,000
per depositor, subject to aggregation rules. The FDIC establishes rates for
the payment of premiums by federally insured banks and thrifts for deposit
insurance. Since 1993, insured depository institutions like the Bank have paid
for deposit insurance under a risk-based premium system. Insurance of
deposits may be terminated by the FDIC upon a finding that the institution has
engaged in unsafe and unsound practices, is in an unsafe or unsound condition
to continue operations, or has violated any applicable law, regulation, rule,
order, or condition imposed by the FDIC.

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Dividends

The Company is a legal entity separate and distinct from the Bank. The
principal source of cash flow for the Company is dividends from the Bank. The
amount of dividends that may be paid by the Bank to the Company depends on the
Banks earnings and capital position and is limited by various statutory and
regulatory limitations. In addition, the Federal Reserve has stated that bank
holding companies should refrain from or limit dividend increases or reduce or
eliminate dividends under circumstances in which the bank holding company fails
to meet minimum capital requirements or in which its earnings are impaired.

As a national bank, the Bank may not pay dividends from its
paid-in-capital. All dividends must be paid out of undivided profits then on
hand, after deducting expenses, including reserves for losses and bad debts.
In addition, a national bank is prohibited from declaring a dividend on its
shares of common stock until its surplus equals its stated capital, unless
there has been transferred to surplus no less than one-tenth of the banks net
profits of the preceding two consecutive half-year periods (in the case of an
annual dividend). The approval of the OCC is required if the total of all
dividends declared by a national bank in any calendar year exceeds the total of
its net profits for that year combined with its retained net profits for the
preceding two years, less any required transfers to surplus. Under FDICIA, the
Bank may not pay a dividend if, after paying the dividend, the Bank would be
undercapitalized. SeeCapital Adequacy.

As discussed below, additional capital requirements imposed by the OCC may
limit the Banks ability to pay dividends to the Company. The Bank paid
dividends in the amount of $1,954,304 to the Company during 2001. Under the OCC
guidelines, at December 31, 2001, the Bank was permitted to pay the Company
dividends of up to $4,941,000.

In addition to the availability of funds from the Bank, the future
dividend policy of the Company is subject to the discretion of the Board of
Directors and will depend upon a number of factors, including future earnings,
financial condition, cash needs and general business conditions. If dividends
should be declared in the future, the amount of such dividends presently cannot
be estimated and it cannot be known whether such dividends would continue for
future periods.

Capital Adequacy

Federal bank regulatory authorities 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 bank holding
companies;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------
|
| |  |  | account for off-balance sheet exposure; and                                                                                
|
| |  |  | minimize disincentives for holding liquid assets.                                                                          

The resulting capital ratios represent qualifying capital as a percentage
of total risk-weighted assets and off-balance sheet items. The guidelines are
minimums, and the federal 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 well in
excess of the minimums.

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. The degree of
regulatory scrutiny of a financial institution will increase, and the
permissible activities of the institution will decrease, as it moves downward
through the capital categories. Bank holding companies controlling financial
institutions can be called upon to boost the institutions capital and to
partially guarantee the institutions performance under their capital
restoration plans. Tier 1 capital includes shareholders equity, qualifying
perpetual preferred stock and minority interests in equity accounts of
consolidated subsidiaries, but excludes goodwill and most other intangible
assets and excludes the allowance for loan and lease losses. Tier 2 capital
includes the excess

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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 the guidelines, banks and bank holding companies assets are given
risk-weights of 0%, 20%, 50% and 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 will apply. 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.

Failure to meet capital guidelines could subject a bank to a variety of
enforcement remedies, including the termination of deposit insurance by the
FDIC, and to certain restrictions on its business.

The Federal Reserve also has implemented a leverage ratio, which is Tier 1
capital as a percentage of average total assets less intangible assets, 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 Federal Reserve
has established a minimum 3% leverage ratio of Tier 1 capital to total assets
for the most highly rated bank holding companies and insured banks. All other
bank holding companies and insured banks will be required to maintain a
leverage ratio of 3% plus an additional cushion of at least 100 to 200 basis
points. The tangible Tier 1 Leverage ratio is the ratio of a banking
organizations Tier 1 capital, less all intangibles, to total assets, less all
intangibles.

FDICIA established a capital-based regulatory plan designed to promote
early intervention for troubled banks and requires the FDIC to choose the least
expensive resolution of bank failures. The 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 qualify 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%. The bank must also not be under any order
or directive from the appropriate regulatory agency to meet and maintain a
specific capital level.

Under FDICIA, regulators must take prompt corrective action against
depository institutions that do not meet minimum capital requirements. FDICIA
and the related regulations establish five capital categories as shown in the
following table:

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|                                   |  |               |    |               |  |          |    |   |  |  |    |     
|---------------------------------- |  | ------------- | -- | ------------- |  | -------- | -- | - |  |  | -- | ----
|                                   |  | Total Risk-   |    | Tier I Risk-  |  | Tier I  
|Classification                     |  | Based Capital |    | Based Capital |  | Leverage
|                                   |  |               |    |               |  |         
|Well Capitalized (1)               |  |               | 10 | %             |  |          | 6  | % |  |  | 5  | %   
|Adequately Capitalized (1)         |  |               | 8  | %             |  |          | 4  | % |  |  | 4  | %(2)
|Undercapitalized (3)               |  |               | <8 | %             |  |          | <4 | % |  |  | <4 | %   
|Significantly Undercapitalized (3) |  |               | <6 | %             |  |          | <3 | % |  |  | <3 | %   
|Critically Undercapitalized (3)    |  |               |   |               |  |          |   |   |  |  | <2 | %   



---

|(1) |  | An institution must meet all three minimums.                                                                                      
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | 3% for composite 1-rated institutions, subject to appropriate federal banking agency
guidelines.                                  
|   
|(3) |  | An institution is classified as undercapitalized if it is below the specified capital
level for any of the three capital measures.

A depository institution may be deemed to be in a capitalization category
that is lower than is indicated by its actual capital position if it receives a
less than satisfactory examination rating in any one of four categories. As a
depository institution moves downward through the capitalization categories,
the degree of regulatory scrutiny will increase and the permitted activities of
the institution will decrease. Action may be taken by a depository
institutions primary federal regulator against an institution that falls into
one of the three undercapitalized categories, including the requirement of
filing a capital plan with the institutions primary federal regulator,
prohibition on the payment of dividends and management fees, restrictions on
executive compensation, and increased supervisory monitoring. Other
restrictions may be imposed on the institution either by its primary federal
regulator or by the FDIC, including requirements to raise additional capital,
sell assets, or sell the institution.

As of the date of this Report, the Company and the Bank are both
considered to be well capitalized according to their regulatory capital
requirements. See Footnote 9 of the Notes to Financial Statements for
additional details.

Interstate Banking and Branching Restrictions

Pursuant to the Riegle-Neal Interstate Banking and Branching Efficiency
Act of 1994 (the Riegle-Neal Act), effective September 29, 1995, an
adequately capitalized and adequately managed bank holding company may acquire
a bank across state lines, without regard to whether such acquisition is
permissible under state law. A bank holding company is considered to be
adequately capitalized if it meets all applicable federal regulatory capital
standards.

While the Riegle-Neal Act precludes a state from entirely insulating its
banks from acquisition by an out-of-state holding company, a state may still
provide that a bank may not be acquired by an out-of-state company unless the
bank has been in existence for a specified number of years, not to exceed five
years. Additionally, the Federal Reserve may not approve an interstate
acquisition which would result in the acquirers controlling more than 10% of
the total amount of deposits of insured depository institutions in the United
States with 30% or more of the deposits in the home state of the target bank.
A state may waive the 30% limit based on criteria that does not discriminate
against out-of-state institutions. The limitations do not apply to the initial
entry into a state by a bank holding company unless the state has a deposit
concentration cap that applies on a nondiscriminatory basis to in-state or out-
of-state bank holding companies making an initial acquisition.

The Riegle-Neal Act also provides that, beginning on June 1, 1997, banks
with different home states may merge, unless a particular state opts out of the
statute. Consistent with the Riegle-Neal Act, Georgia adopted legislation in
1996 which has permitted interstate bank mergers since June 1, 1997.

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In addition, beginning June 1, 1997, the Riegle-Neal Act has permitted
national and state banks to establish de novo branches in another state if
there is a law in that state which applies equally to all banks and expressly
permits all out-of-state banks to establish de novo branches. However, in
1996, Georgia adopted legislation which opts out of this provision. The
Georgia legislation provides that, with the prior approval of the Georgia
Department of Banking and Finance, after July 1, 1996, a bank may establish
three new or additional de novo branch banks anywhere in Georgia and, beginning
July 1, 1998, a bank may establish new or additional branch banks anywhere in
the state with prior regulatory approval.

Privacy

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

Anti-Terrorism Legislation

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



| |  |  | to conduct enhanced scrutiny of account relationships
to guard against money laundering and report any suspicious
transaction;                                                                             
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | to ascertain the identity of the nominal and beneficial
owners of, and the source of funds deposited into, each account
as needed to guard against money laundering and report any
suspicious transactions;
|
| |  |  | to ascertain for any foreign bank, the shares of which
are not publicly traded, the identity of the owners of the
foreign bank, and the nature and extent of the ownership interest
of each such owner; and
|
| |  |  | to ascertain whether any foreign bank provides
correspondent accounts to other foreign banks and, if so, the
identity of those foreign banks and related due diligence
information.                        

Under the USA PATRIOT Act, financial institutions have 180 days from
enactment (or until April 25, 2002) to establish anti-money laundering
programs. The USA PATRIOT Act sets forth minimum standards for these
programs, including:



| |  |  | the development of internal policies, procedures, and controls;
| | - |  | ---------------------------------------------------------------
|
| |  |  | the designation of a compliance officer;                       
|
| |  |  | an ongoing employee training program; and                      
|
| |  |  | an independent audit function to test the programs.            

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Before the 180-day grace period expires, the Secretary of the Treasury
will prescribe regulations that consider the extent to which these new
requirements are commensurate with the size, location, and activities of
financial institutions subject to the Act.

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

Proposed Legislation and Regulatory Action

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

Effect of Governmental Monetary Polices

The earnings of the Company are affected by domestic economic conditions
and the monetary and fiscal policies of the United States government and its
agencies. The Federal Reserve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 to curb
inflation or combat a recession. The monetary policies of the Federal Reserve
have major effects upon the levels of bank loans, 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.

The Finance Company

The small balance loans made by the Finance Company are governed by GILA,
which governs loans of $3,000 or less and requires that lenders subject to GILA
not lend funds for a term of more than 36 months and 15 days. GILA provides
for a maximum rate of interest and specifies permitted additional fees which
can be charged for a loan, including loan fees, maintenance fees and late fees.
The Finance Company is also authorized to collect the actual and reasonable
expense of repossessing, storing, and selling any collateral pledged as
security. In general, charges, interest and fees cannot exceed the 5% per
month limit established by the criminal usury provisions of Georgia law.

GILA requires that each office in which a small loan business is conducted
be licensed by the State of Georgia. The granting of a license depends on a
finding of public convenience and advantage for the proposed office, and upon a
finding of the financial responsibility, character and fitness of the
applicant. Pursuant to regulations under GILA, the Finance Company is required
to demonstrate that it has a minimum net worth of $25,000 to begin business.
As a condition to obtaining such license, the applicant must consent to state
regulation and examination and to the making of periodic reports to the Georgia
Industrial Loan Department. Licenses are revocable for cause, and their
continuance depends upon compliance with the law and regulations under which
they are issued. As of the date of this Report, the Finance Company is in good
standing with the State of Georgia.

The activities of the Finance Company are subject to provisions of the
Georgia Residential Mortgage Act and regulations issued pursuant thereto. In
addition, all of its lending operations are carried on under the provisions of
the Federal Consumer Credit Protection Act and the Fair Credit Reporting Act.
On all loans made by the Finance Company, the finance charge, the annual
percentage rate, the total of payments and other disclosures required by the
Truth-in-Lending Act are disclosed to the borrower.

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Item 2. Properties

The Company and the Banks main office is located at 201 Maple Street in
Carrollton, Georgia near the citys downtown square at the intersection of
Georgia Highway 16 and U.S. Highway 27. The Bank has two other locations
within the city limits of Carrollton. The First Tuesday Mall office is located
at 1004 Bankhead Highway and the Motor office is located at 314 Newnan Street.
In addition, the Bank has two other locations in Carroll County, one located at
725 Bankhead Highway, Villa Rica, Georgia and another located at 205 East
College Street, Bowdon, Georgia. All locations are typical of branch banking
facilities located throughout the United States. All except the Motor office
are full service locations. The Motor office provides primarily teller and ATM
transactions and does not originate loans. The Bank received approval on May
18, 2000 to open a branch in western Douglas County in an area known as Mirror
Lake. The Mirror Lake office opened in September, 2000. This office is
currently a modular branch which will serve as a temporary site until a
permanent structure is built. The Bank owns a 1.5 acre parcel in the Mirror
Lake area on which it plans to construct its permanent facility. The Bank also
received approval on April 5, 2001 to open a branch in Douglas County at 9557
Highway 5 in Douglasville. The Douglasville office opened in June, 2001.

The Banks main office, operations center and related parking are located
on approximately 2.5 acres. The main office is a two-story building with a
total of approximately 19,100 square feet housing its lobby, retail offices,
administrative and executive offices. The operations center is a two-story
building with a total of approximately 12,200 square feet housing a computer
room, administrative offices and storage facilities. The branch offices (with
the exception of the Motor office and the Mirror Lake office which are
approximately 700 and 1200 square feet, respectively) are typical of other
banking facilities and are approximately 5,000 square feet in size. Each
branch location has an ATM machine that is either walk-up or drive-up. The
Motor office, Mirror Lake, and Douglasville offices are leased facilities. All
of the other office facilities are owned. The Bank also operates six
additional ATM machines on leased properties located throughout the Carrollton
and Villa Rica area.

The Finance Company is located in Hiram, Georgia in a leased location at
4109 Jimmy Lee Smith Parkway. The office (approximately 1,800 square feet) is
located at the intersection of U.S. Highway 278 and Georgia Highway 92 in a
shopping center anchored by a Kmart and a Kroger. The intersection has retail
space on all corners, which include retail anchors such as Walmart, Home Depot
and Publix. The office is typical of finance companies containing
administrative offices.




Item 3. Legal Proceedings

While the Company and its subsidiaries are from time to time party to
various legal proceedings arising from the ordinary course of business,
management believes that there are no proceedings of material risk threatened
or pending.




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

No matters were submitted to a vote of shareholders of the Company during
the fourth quarter of the fiscal year covered by this Report.

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PART II




Item 5. Market for the Common Equity and Related Shareholder Matters

Market Information

Approximately 480 shareholders of record held the Common Stock as of
February 5, 2002. Until January 17, 2002, the date the Common Stock commenced
trading on the NASDAQ SmallCap Market System, the Common Stock was traded in
the over-the-counter market and was quoted on the OTC Bulletin Board under
trading symbol WGNB. Set forth below are the high and low bid prices (which
reflect prices between dealers and do not include retail markup, markdown or
commission and may not represent actual transactions) for each full quarterly
period during 2000 and 2001, as reported by the National Quotation Bureau and
with a limited volume of trading.

Price Range
Per Share

|      |  |                |  |      |       |                         |  |   |       |  |  |   |        |  |  | 
|----- |  | -------------- |  | ---- | ----- | ----------------------- |  | - | ----- |  |  | - | ------ |  |  | 
|      |  | Low            |  | High |       | DividendsPaid Per Share
|      |  |                |  |      |       |                        
|2000: |  |                |  |      |       |                         |  |   |       |  |  |   |        |  |  | 
|      |  | First Quarter  |  | $    | 20.00 |                         |  | $ | 26.00 |  |  | $ | 0.1100 | 
|      |  | Second Quarter |  |      | 22.50 |                         |  |   | 26.00 |  |  |   | 0.1125 | 
|      |  | Third Quarter  |  |      | 23.00 |                         |  |   | 26.00 |  |  |   | 0.1250 | 
|      |  | Fourth Quarter |  |      | 17.63 |                         |  |   | 24.50 |  |  |   | 0.1275 | 
|2001: |  |                |  |      |       |                         |  |   |       |  |  |   |        |  |  | 
|      |  | First Quarter  |  | $    | 17.63 |                         |  | $ | 23.00 |  |  | $ | 0.1325 | 
|      |  | Second Quarter |  |      | 16.00 |                         |  |   | 28.00 |  |  |   | 0.1350 | 
|      |  | Third Quarter  |  |      | 18.50 |                         |  |   | 28.00 |  |  |   | 0.1400 | 
|      |  | Fourth Quarter |  |      | 16.00 |                         |  |   | 26.00 |  |  |   | 0.1425 | 

Recent Sales of Unregistered Securities

The Company issued the following securities during the year ended December
31, 2001 without registering the securities under the Securities Act:

Directors may elect to receive compensation for their services to the
Company and the Bank in shares of Common Stock or cash. During 2001, certain
directors of the Bank received 1,106 shares in payment of deferred director
compensation for an aggregate consideration owed to them by the Bank of
$25,438. The sale of the shares was exempt from registration under the
Securities Act, pursuant to Section 4(2) thereof, as a transaction not
involving a public offering.

Options to purchase 14,490 shares of Common Stock were granted in 2001 to
six individuals pursuant to the Companys Incentive Stock Option Plan having a
weighted average exercise price of $22.50. These options may be exercised
anytime beginning five years from the date of grant and ending ten years from
the date of grant at which point they expire. A total of 6,260 options were
exercised in 2001 at a weighted average exercise price of $7.59. The Company
believes that the grant of options and the exercise thereof was exempt from
registration under Section 4(2) of the Securities Act.

Dividends

The declaration of future dividends is within the discretion of the Board
of Directors and will depend, among other things, upon business conditions,
earnings, the financial condition of the Bank and the Company, and regulatory
requirements. See Supervision and Regulation  Dividends.

17



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Item 6. Selected Financial Data

The selected consolidated financial data of the Company for and as of the
end of each of the periods indicated in the five-year period ended December 31,
2001 have been derived from the audited consolidated financial statements of
the Company. The selected consolidated financial data should be read in
conjunction with the consolidated financial statements of the Company,
including the notes to those consolidated financial statements contained
elsewhere in this report.

|                        |                                                     |  |                                       |           |      |  |      |           |      |  |      |           |   |  |   |           |   |  |   |           |  
|----------------------- | --------------------------------------------------- |  | ------------------------------------- | --------- | ---- |  | ---- | --------- | ---- |  | ---- | --------- | - |  | - | --------- | - |  | - | --------- | -
|                        |                                                     |  | Year Ended December 31,              
|                        |                                                     |  |                                      
|                        |                                                     |  | 2001                                  |           | 2000 |  | 1999 |           | 1998 |  | 1997
|                        |                                                     |  |                                       |           |      |  |      |           |      |  |     
|                        |                                                     |  | (In thousands, except per share data)
|For the Year:           |                                                     |  |                                       |           |      |  |      |           |      |  |      |           |   |  |   |           |   |  |   |          
|                        | Total Interest Income                               |  | $                                     | 26,548    |      |  | $    | 24,049    |      |  | $    | 19,883    |   |  | $ | 18,922    |   |  | $ | 16,680    |  
|                        | Total Interest Expense                              |  |                                       | 12,069    |      |  |      | 10,356    |      |  |      | 7,968     |   |  |   | 7,804     |   |  |   | 6,660     |  
|                        | Net Interest Income                                 |  |                                       | 14,479    |      |  |      | 13,692    |      |  |      | 11,916    |   |  |   | 11,118    |   |  |   | 10,020    |  
|                        | Provision for Loan Losses                           |  |                                       | 910       |      |  |      | 509       |      |  |      | 303       |   |  |   | 495       |   |  |   | 477       |  
|                        | Net Interest Income After Provision for Loan
Losses |  |                                       | 13,569    |      |  |      | 13,184    |      |  |      | 11,612    |   |  |   | 10,623    |   |  |   | 9,543     |  
|                        | Total Other Income                                  |  |                                       | 4,550     |      |  |      | 2,991     |      |  |      | 1,931     |   |  |   | 1,808     |   |  |   | 1,526     |  
|                        | Total Other Expense                                 |  |                                       | 10,859    |      |  |      | 9,283     |      |  |      | 7,993     |   |  |   | 7,198     |   |  |   | 6,571     |  
|                        | Earnings Before Income Taxes                        |  |                                       | 7,260     |      |  |      | 6,892     |      |  |      | 5,551     |   |  |   | 5,233     |   |  |   | 4,498     |  
|                        | Income Taxes                                        |  |                                       | 2,471     |      |  |      | 2,487     |      |  |      | 1,995     |   |  |   | 1,835     |   |  |   | 1,271     |  
|                        | Net earnings                                        |  |                                       | 4,789     |      |  |      | 4,404     |      |  |      | 3,556     |   |  |   | 3,398     |   |  |   | 3,227     |  
|Per Share Data:         |                                                     |  |                                       |           |      |  |      |           |      |  |      |           |   |  |   |           |   |  |   |          
|                        | Net earnings                                        |  |                                       | 1.55      |      |  |      | 1.42      |      |  |      | 1.14      |   |  |   | 1.08      |   |  |   | 1.02      |  
|                        | Diluted net earnings                                |  |                                       | 1.52      |      |  |      | 1.41      |      |  |      | 1.13      |   |  |   | 1.07      |   |  |   | 1.01      |  
|                        | Cash dividends declared                             |  |                                       | .55       |      |  |      | .48       |      |  |      | .42       |   |  |   | .37       |   |  |   | .29       |  
|                        | Book value                                          |  |                                       | 9.42      |      |  |      | 8.30      |      |  |      | 7.08      |   |  |   | 6.98      |   |  |   | 6.33      |  
|                        | Tangible book value                                 |  |                                       | 9.42      |      |  |      | 8.30      |      |  |      | 7.08      |   |  |   | 6.98      |   |  |   | 6.33      |  
|At Year End:            |                                                     |  |                                       |           |      |  |      |           |      |  |      |           |   |  |   |           |   |  |   |          
|                        | Total loans                                         |  |                                       | 253,805   |      |  |      | 228,467   |      |  |      | 184,795   |   |  |   | 161,916   |   |  |   | 149,488   |  
|                        | Earning assets                                      |  |                                       | 331,690   |      |  |      | 272,512   |      |  |      | 233,950   |   |  |   | 208,044   |   |  |   | 185,698   |  
|                        | Assets                                              |  |                                       | 350,222   |      |  |      | 289,112   |      |  |      | 254,035   |   |  |   | 224,185   |   |  |   | 198,358   |  
|                        | Total deposits                                      |  |                                       | 280,531   |      |  |      | 233,811   |      |  |      | 214,805   |   |  |   | 192,922   |   |  |   | 174,548   |  
|                        | Stockholders equity                                |  |                                       | 29,204    |      |  |      | 25,687    |      |  |      | 21,923    |   |  |   | 21,911    |   |  |   | 20,088    |  
|                        | Common shares outstanding                           |  |                                       | 3,100,355 |      |  |      | 3,095,455 |      |  |      | 3,105,394 |   |  |   | 3,138,030 |   |  |   | 3,170,948 |  
|Average Balances:       |                                                     |  |                                       |           |      |  |      |           |      |  |      |           |   |  |   |           |   |  |   |          
|                        | Loans                                               |  |                                       | 248,863   |      |  |      | 210,127   |      |  |      | 172,628   |   |  |   | 158,809   |   |  |   | 141,734   |  
|                        | Earning assets                                      |  |                                       | 310,027   |      |  |      | 259,736   |      |  |      | 223,091   |   |  |   | 201,851   |   |  |   | 177,926   |  
|                        | Assets                                              |  |                                       | 326,653   |      |  |      | 276,719   |      |  |      | 240,154   |   |  |   | 216,812   |   |  |   | 191,114   |  
|                        | Deposits                                            |  |                                       | 263,668   |      |  |      | 224,220   |      |  |      | 206,497   |   |  |   | 185,805   |   |  |   | 169,312   |  
|                        | Stockholders equity                                |  |                                       | 27,986    |      |  |      | 23,700    |      |  |      | 21,850    |   |  |   | 21,138    |   |  |   | 18,991    |  
|                        | Weighted average shares outstanding                 |  |                                       | 3,098,067 |      |  |      | 3,098,419 |      |  |      | 3,113,014 |   |  |   | 3,154,660 |   |  |   | 3,171,402 |  
|Key Performance Ratios: |                                                     |  |                                       |           |      |  |      |           |      |  |      |           |   |  |   |           |   |  |   |          
|                        | Return on average assets                            |  |                                       | 1.47      | %    |  |      | 1.59      | %    |  |      | 1.48      | % |  |   | 1.57      | % |  |   | 1.69      | %
|                        | Return on average equity                            |  |                                       | 17.11     | %    |  |      | 18.58     | %    |  |      | 16.27     | % |  |   | 16.08     | % |  |   | 16.99     | %
|                        | Net interest margin, taxable equivalent             |  |                                       | 4.84      | %    |  |      | 5.44      | %    |  |      | 5.49      | % |  |   | 5.63      | % |  |   | 5.75      | %
|                        | Dividend payout ratio                               |  |                                       | 35.48     | %    |  |      | 33.80     | %    |  |      | 36.33     | % |  |   | 34.34     | % |  |   | 28.75     | %
|                        | Average equity to average assets                    |  |                                       | 8.57      | %    |  |      | 8.56      | %    |  |      | 9.10      | % |  |   | 9.75      | % |  |   | 9.94      | %
|                        | Average loans to average deposits                   |  |                                       | 94.39     | %    |  |      | 93.71     | %    |  |      | 83.60     | % |  |   | 85.47     | % |  |   | 83.71     | %
|                        | Overhead ratio                                      |  |                                       | 57.07     | %    |  |      | 55.64     | %    |  |      | 57.72     | % |  |   | 55.69     | % |  |   | 56.91     | %

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Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations

The purpose of the following discussion is to address information relating
to the financial condition and results of operations of the Company that may
not be readily apparent from a review of the consolidated financial statements
and notes thereto, which begin on page F-1 of this Report. This discussion
should be read in conjunction with information provided in the Companys
consolidated financial statements and accompanying footnotes.

EARNINGS OVERVIEW

For the Years Ended December 31, 2001, 2000 and 1999

The Company reported earnings of $4.8 million in 2001, $4.4 million in
2000 and $3.6 million in 1999, representing an increase of 8.7% between fiscal
years 2000 and 2001 and an increase of 23.8% between fiscal years 1999 and
2000. The increases over the three fiscal years are primarily attributable to
the Banks continued loan growth, higher non-interest income and only minimal
increases in non-interest expense. Net earnings per share on a fully diluted
basis was $1.52 for 2001, $1.41 for 2000 and $1.13 for 1999, representing an
increase of 7.8% between fiscal years 2000 and 2001 and 24.8% between fiscal
years 1999 and 2000. Return on average assets and return on average
shareholders equity for 2001 was 1.47% and 17.11%, respectively, compared with
1.59% and 18.58%, respectively, for 2000, and 1.48% and 16.27%, respectively,
for 1999.

Net Interest Income

The Companys operational results primarily depend on the earnings of the
Bank. The Banks earnings depend, to a large degree, on net interest income.
Net interest income is defined as the difference between the interest income
received from its investments (such as loans, investment securities, federal
funds sold, etc.) and the interest expense on deposits and other borrowings.
The following discussion and analysis of net interest margin assumes and is
stated on a tax equivalent basis. That is, non-taxable interest is restated at
its taxable equivalent rate.

The banking industry uses two key ratios to measure the relative
profitability of net interest income. The net interest rate spread measures the
difference between the average yield on interest earning assets and the average
rate paid on interest bearing liabilities. The interest rate spread eliminates
the impact of non-interest bearing deposits and gives a direct perspective on
the effect of market interest rate movements. The other commonly used measure
is net interest margin. The net interest margin is defined as net interest
income as a percent of average total interest earning assets and takes into
account the positive impact of investing non-interest-bearing deposits.

Net interest income increased by $787 thousand (or 5.7%) in 2001 from
2000, and by $1.8 million (or 14.9%) in 2000 from 1999. Net interest income at
December 31, 2001, was $14.5 million compared to $13.7 million in 2000 and
$11.9 million in 1999. The net interest margin on interest earning assets was
4.84% in 2001, 5.44% in 2000 and 5.49% in 1999. The decrease in the margin
between 2000 and 2001 is primarily due to the rapid decline in the prime and
discount rates during 2001 as assets repriced more quickly than funding
sources. Those benchmark rates declined 475 basis points in ten months.

The Banks balance sheet has traditionally been slightly liability
sensitive. That is, its liabilities re-price faster than its assets, because
of its high percentage of transaction accounts. Therefore, in a rising rate
environment the Banks interest margin tends to narrow whereas in a falling
rate environment the Banks interest margin tends to widen. However, when
rates fall rapidly and drastically, the Banks cost of funds hit a floor. For
instance, if the Bank was paying 2.5% on a NOW checking account, 3.0% on a
savings account and 3.5% on a money market account and rates decrease 475 basis
points, the NOW, savings and money market rate can only fall a fraction of that
amount. Additionally, a large percentage of time deposits are unable to decline
quickly because the greatest share mature in one year or longer.

The net result is that the Banks interest margin narrows since the yield
on earning assets has further to fall than the cost of funds. The Banks
Management, through its asset liability management process, attempts to manage

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its interest sensitivity position. However, no balance sheet management
technique can completely shield the Banks margin from a precipitous interest
rate move.

The cost of interest-bearing liabilities was 4.59% for 2001, 4.80% for
2000 and 4.29% for 1999, representing a decrease of 21 basis points between
fiscal 2000 and 2001, and an increase of 51 basis points between fiscal 1999
and 2000. If one considers the yield on interest-bearing assets of 8.74% for
2001, 9.42% for 2000 and 9.07% for 1999, the impact of decreasing rates on
asset yields has been more pronounced than costs. Yields between 2000 and 2001
have decreased 68 basis points as opposed to an increase of 35 basis points
between 1999 and 2000. Comparing net interest margins of 4.84% for 2001,
5.44% for 2000 and 5.49%, one can clearly identify the impact on net interest
margin as rates declined 475 basis points over the last ten months of 2001.

The following table shows, for the past three years, the relationship
between interest income and interest expense and the average daily balances of
interest-earning assets and interest-bearing liabilities:

Table 1
Average Consolidated Balance Sheets and Net Interest Analysis

|                                                                    |                                    |                    |                                            |         |                                  |         |          |        |        |        |                 |      |          |      |         |         |                 |         |          |        |        |        |        |      |       |       |         |         |         |         |        |       |        |        |      |      |       |      |  
|------------------------------------------------------------------- | ---------------------------------- | ------------------ | ------------------------------------------ | ------- | -------------------------------- | ------- | -------- | ------ | ------ | ------ | --------------- | ---- | -------- | ---- | ------- | ------- | --------------- | ------- | -------- | ------ | ------ | ------ | ------ | ---- | ----- | ----- | ------- | ------- | ------- | ------- | ------ | ----- | ------ | ------ | ---- | ---- | ----- | ---- | -
|                                                                    |                                    |                    |                                            |         | For the Years Ended December 31,
|                                                                    |                                    |                    |                                            |         | (in thousands)                  
|                                                                    |                                    |                    |                                            |         | 2001                             |         | 2000     |        | 1999   |        |                 |      |          |      |         |         |                
|                                                                    |                                    |                    |                                            |         |                                  |         |          |        |        |        |                 |      |          |      |         |         |                
|                                                                    |                                    |                    |                                            |         |                                  |         |          |        |        |        |                 |      | Yield/   |      |         |         |                 |         |          |        |        |        | Yield/ |      |       |       |         |         |         |         |        |       | Yield/
|                                                                    |                                    |                    |                                            |         | Average Balance                  |         | Interest |        | Rate   |        | Average Balance |      | Interest |      | Rate    |         | Average Balance |         | Interest |        | Rate  
|                                                                    |                                    |                    |                                            |         |                                  |         |          |        |        |        |                 |      |          |      |         |         |                 |         |          |        |       
|Assets:                                                             |                                    |                    |                                            |         |                                  |         |          |        |        |        |                 |      |          |      |         |         |                 |         |          |        |        |        |        |      |       |       |         |         |         |         |        |       |        |        |      |     
|Interest earnings assets:                                           |                                    |                    |                                            |         |                                  |         |          |        |        |        |                 |      |          |      |         |         |                 |         |          |        |        |        |        |      |       |       |         |         |         |         |        |       |        |        |      |     
|                                                                    | Investments:                       |                    |                                            |         |                                  |         |          |        |        |        |                 |      |          |      |         |         |                 |         |          |        |        |        |        |      |       |       |         |         |         |         |        |       |        |        |      |      |      
|                                                                    |                                    | Federal funds sold |                                            | $       | 13,349                           |         |          |        | 490    |        |                 |      | 3.67     | %    |         | $       | 4,669           |         |          |        | 353    |        |        |      | 7.56  | %     |         | $       | 6,087   |         |        |       | 316    |        |      |      | 5.19  | %   
|                                                                    |                                    | Taxable            |                                            |         | 30,326                           |         |          |        | 1,923  |        |                 |      | 6.34     | %    |         |         | 31,323          |         |          |        | 2,006  |        |        |      | 6.41  | %     |         |         | 33,116  |         |        |       | 1,956  |        |      |      | 5.91  | %   
|                                                                    |                                    | Tax exempt         |                                            |         | 17,489                           |         |          |        | 1,389  |        |                 |      | 7.94     | %    |         |         | 13,617          |         |          |        | 1,057  |        |        |      | 7.77  | %     |         |         | 11,261  |         |        |       | 853    |        |      |      | 7.57  | %   
|                                                                    |                                    |                    |                                            |         |                                  |         |          |        |        |        |                 |      |          |      |         |         |                 |         |          |        |        |        |        |      |       |       |         |         |         |         |        |       |        |        |      |     
|                                                                    |                                    |                    | Total Investments                          |         |                                  | 61,164  |          |        |        | 3,802  |                 |      |          | 6.22 | %       |         |                 | 49,609  |          |        |        | 3,416  |        |      |       | 6.89  | %       |         |         | 50,464  |        |       |        | 3,125  |      |      |       | 6.19 | %
|                                                                    | Loans (including loan fees):       |                    |                                            |         |                                  |         |          |        |        |        |                 |      |          |      |         |         |                 |         |          |        |        |        |        |      |       |       |         |         |         |         |        |       |        |        |      |      |      
|                                                                    |                                    | Taxable            |                                            |         | 247,155                          |         |          |        | 23,096 |        |                 |      | 9.34     | %    |         |         | 208,380         |         |          |        | 20,867 |        |        |      | 10.01 | %     |         |         | 171,185 |         |        |       | 16,951 |        |      |      | 9.90  | %   
|                                                                    |                                    | Tax Exempt         |                                            |         | 1,708                            |         |          |        | 185    |        |                 |      | 10.83    | %    |         |         | 1,747           |         |          |        | 190    |        |        |      | 10.89 | %     |         |         | 1,443   |         |        |       | 148    |        |      |      | 10.26 | %   
|                                                                    |                                    |                    |                                            |         |                                  |         |          |        |        |        |                 |      |          |      |         |         |                 |         |          |        |        |        |        |      |       |       |         |         |         |         |        |       |        |        |      |     
|                                                                    |                                    |                    | Total Loans                                |         |                                  | 248,863 |          |        |        | 23,281 |                 |      |          | 9.35 | %       |         |                 | 210,127 |          |        |        | 21,057 |        |      |       | 10.02 | %       |         |         | 172,628 |        |       |        | 17,099 |      |      |       | 9.91 | %
|                                                                    |                                    |                    |                                            |         |                                  |         |          |        |        |        |                 |      |          |      |         |         |                 |         |          |        |        |        |        |      |       |       |         |         |         |         |        |       |        |        |      |     
|Total interest earning assets                                       |                                    |                    | 310,027                                    |         |                                  |         | 27,083   |        |        |        | 8.74            | %    |          |      | 259,736 |         |                 |         | 24,473   |        |        |        | 9.42   | %    |       |       | 223,092 |         |         |         | 20,224 |       |        |        | 9.07 | %   
|Other non-interest earnings assets                                  |                                    |                    | 16,626                                     |         |                                  |         |          |        |        |        |                 |      |          |      | 16,983  |         |                 |         |          |        |        |        |        |      |       |       | 17,062  |         |         |         |        |       |        |        |      |     
|                                                                    |                                    |                    |                                            |         |                                  |         |          |        |        |        |                 |      |          |      |         |         |                 |         |          |        |        |        |        |      |       |       |         |         |         |         |        |       |        |        |      |     
|Total assets                                                        |                                    | $                  | 326,653                                    |         |                                  |         |          |        |        |        |                 |      |          | $    | 276,719 |         |                 |         |          |        |        |        |        |      |       | $     | 240,154 |         |         |         |        |       |        |        |      |     
|                                                                    |                                    |                    |                                            |         |                                  |         |          |        |        |        |                 |      |          |      |         |         |                 |         |          |        |        |        |        |      |       |       |         |         |         |         |        |       |        |        |      |     
|Liabilities and shareholders equity:                               |                                    |                    |                                            |         |                                  |         |          |        |        |        |                 |      |          |      |         |         |                 |         |          |        |        |        |        |      |       |       |         |         |         |         |        |       |        |        |      |     
|Interest-bearing liabilities:                                       |                                    |                    |                                            |         |                                  |         |          |        |        |        |                 |      |          |      |         |         |                 |         |          |        |        |        |        |      |       |       |         |         |         |         |        |       |        |        |      |     
|                                                                    | Deposits:                          |                    |                                            |         |                                  |         |          |        |        |        |                 |      |          |      |         |         |                 |         |          |        |        |        |        |      |       |       |         |         |         |         |        |       |        |        |      |      |      
|                                                                    |                                    | Demand             |                                            | $       | 94,952                           |         |          |        | 2,399  |        |                 |      | 2.53     | %    |         | $       | 79,323          |         |          |        | 2,513  |        |        |      | 3.17  | %     |         | $       | 72,318  |         |        |       | 2,068  |        |      |      | 2.86  | %   
|                                                                    |                                    | Savings            |                                            |         | 11,955                           |         |          |        | 228    |        |                 |      | 1.90     | %    |         |         | 11,924          |         |          |        | 238    |        |        |      | 2.00  | %     |         |         | 11,913  |         |        |       | 236    |        |      |      | 1.98  | %   
|                                                                    |                                    | Time               |                                            |         | 123,513                          |         |          |        | 7,489  |        |                 |      | 6.06     | %    |         |         | 101,559         |         |          |        | 6,200  |        |        |      | 6.11  | %     |         |         | 93,068  |         |        |       | 5,230  |        |      |      | 5.62  | %   
|                                                                    | FHLB advances
& other borrowings   |                    |                                            | 32,288  |                                  |         |          | 1,953  |        |        |                 | 6.05 | %        |      |         | 22,772  |                 |         |          | 1,404  |        |        |        | 6.17 | %     |       |         | 8,323   |         |         |        | 434   |        |        |      | 5.21 | %    
|                                                                    |                                    |                    |                                            |         |                                  |         |          |        |        |        |                 |      |          |      |         |         |                 |         |          |        |        |        |        |      |       |       |         |         |         |         |        |       |        |        |      |     
|                                                                    | Total interest-bearing liabilities |                    |                                            | 262,708 |                                  |         |          | 12,069 |        |        |                 | 4.59 | %        |      |         | 215,578 |                 |         |          | 10,355 |        |        |        | 4.80 | %     |       |         | 185,622 |         |         |        | 7,968 |        |        |      | 4.29 | %    
|Non-interest bearing deposits                                       |                                    |                    | 33,248                                     |         |                                  |         |          |        |        |        |                 |      |          |      | 31,415  |         |                 |         |          |        |        |        |        |      |       |       | 29,199  |         |         |         |        |       |        |        |      |     
|Other liabilities                                                   |                                    |                    | 2,711                                      |         |                                  |         |          |        |        |        |                 |      |          |      | 6,026   |         |                 |         |          |        |        |        |        |      |       |       | 3,483   |         |         |         |        |       |        |        |      |     
|Shareholders equity                                                |                                    |                    | 27,986                                     |         |                                  |         |          |        |        |        |                 |      |          |      | 23,700  |         |                 |         |          |        |        |        |        |      |       |       | 21,850  |         |         |         |        |       |        |        |      |     
|                                                                    |                                    |                    |                                            |         |                                  |         |          |        |        |        |                 |      |          |      |         |         |                 |         |          |        |        |        |        |      |       |       |         |         |         |         |        |       |        |        |      |     
|                                                                    |                                    |                    | Total liabilities and
Shareholders equity |         | $                                | 326,653 |          |        |        |        |                 |      |          |      |         |         | $               | 276,719 |          |        |        |        |        |      |       |       |         |         | $       | 240,154 |        |       |        |        |      |      |       |      |  
|                                                                    |                                    |                    |                                            |         |                                  |         |          |        |        |        |                 |      |          |      |         |         |                 |         |          |        |        |        |        |      |       |       |         |         |         |         |        |       |        |        |      |     
|Excess of interest-earning assets
over interest-bearing liabilities |                                    | $                  | 47,319                                     |         |                                  |         |          |        |        |        |                 |      |          | $    | 44,158  |         |                 |         |          |        |        |        |        |      |       | $     | 37,470  |         |         |         |        |       |        |        |      |     
|                                                                    |                                    |                    |                                            |         |                                  |         |          |        |        |        |                 |      |          |      |         |         |                 |         |          |        |        |        |        |      |       |       |         |         |         |         |        |       |        |        |      |     
|Ratio of interest-earning assets to
Interest-bearing liabilities    |                                    |                    | 118.01                                     | %       |                                  |         |          |        |        |        |                 |      |          |      | 120.48  | %       |                 |         |          |        |        |        |        |      |       |       | 120.19  | %       |         |         |        |       |        |        |      |     
|Net interest income tax equivalent                                  |                                    |                    |                                            |         |                                  |         | 15,014   |        |        |        |                 |      |          |      |         |         |                 |         | 14,118   |        |        |        |        |      |       |       |         |         |         |         | 12,256 |       |        |        |      |     
|Net interest spread                                                 |                                    |                    |                                            |         |                                  |         |          |        |        |        | 4.15            | %    |          |      |         |         |                 |         |          |        |        |        | 4.62   | %    |       |       |         |         |         |         |        |       |        |        | 4.78 | %   
|Net interest yield on interest earning assets                       |                                    |                    |                                            |         |                                  |         |          |        |        |        | 4.84            | %    |          |      |         |         |                 |         |          |        |        |        | 5.44   | %    |       |       |         |         |         |         |        |       |        |        | 5.49 | %   
|Taxable Adjustments:                                                |                                    |                    |                                            |         |                                  |         |          |        |        |        |                 |      |          |      |         |         |                 |         |          |        |        |        |        |      |       |       |         |         |         |         |        |       |        |        |      |     
|                                                                    | Investments                        |                    |                                            |         |                                  |         |          | (472   | )      |        |                 |      |          |      |         |         |                 |         |          | (360   | )      |        |        |      |       |       |         |         |         |         |        | (290  | )      |        |      |      |      
|                                                                    | Loans                              |                    |                                            |         |                                  |         |          | (63    | )      |        |                 |      |          |      |         |         |                 |         |          | (66    | )      |        |        |      |       |       |         |         |         |         |        | (50   | )      |        |      |      |      
|                                                                    |                                    |                    |                                            |         |                                  |         |          |        |        |        |                 |      |          |      |         |         |                 |         |          |        |        |        |        |      |       |       |         |         |         |         |        |       |        |        |      |     
|Net interest income                                                 |                                    |                    |                                            |         |                                  | $       | 14,479   |        |        |        |                 |      |          |      |         |         |                 | $       | 13,692   |        |        |        |        |      |       |       |         |         |         | $       | 11,916 |       |        |        |      |     
|                                                                    |                                    |                    |                                            |         |                                  |         |          |        |        |        |                 |      |          |      |         |         |                 |         |          |        |        |        |        |      |       |       |         |         |         |         |        |       |        |        |      |     

Non-accrual loans and the interest income that was recorded on these
loans, are included in the yield calculation for loans in all periods reported.
Tax-exempt interest income is calculated on a tax equivalent basis.

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The following table shows the relative impact on net interest income of
changes in the annual average daily outstanding balances (volume) of
interest-earning assets and interest-bearing liabilities and the rates earned
(rate) by the Company on such assets and liabilities. Variances resulting from
a combination of changes in rate and volume are allocated in proportion to the
absolute dollar amounts of the change in each category.

Table 2

Changes in Interest Income and Expense on a Tax Equivalent Basis

|                                           |                         |                                  |                        |                       |     |                                        |       |                |      |       |        |        |      |       |       |       |     |       |       |     |     |     |       |       |     |       |       | 
|------------------------------------------ | ----------------------- | -------------------------------- | ---------------------- | --------------------- | --- | -------------------------------------- | ----- | -------------- | ---- | ----- | ------ | ------ | ---- | ----- | ----- | ----- | --- | ----- | ----- | --- | --- | --- | ----- | ----- | --- | ----- | ----- | 
|                                           |                         |                                  |                        |                       |     | (in thousands)                        
|                                           |                         |                                  |                        |                       |     | Increase (decrease) due to changes in:
|                                           |                         |                                  |                        |                       |     |                                       
|                                           |                         |                                  |                        |                       |     | 2001 over 2000                         |       | 2000 over 1999
|                                           |                         |                                  |                        |                       |     |                                        |       |               
|                                           |                         |                                  |                        |                       |     | Volume                                 |       | Rate           |      | Total |        | Volume |      | Rate  |       | Total
|                                           |                         |                                  |                        |                       |     |                                       
|Interest income on:                        |                         |                                  |                        |                       |     |                                        |       |                |      |       |        |        |      |       |       |       |     |       |       |     |     |     |       |      
|                                           | Federal funds sold      |                                  | $                      | 318                   |     |                                        |       | (181           | )    |       |        | 137    |      |       | $     | (107  | )   |       |       | 144 |     |     |       | 37    |    
|                                           | Taxable investments     |                                  |                        | (63                   | )   |                                        |       | (20            | )    |       |        | (83    | )    |       |       | (115  | )   |       |       | 166 |     |     |       | 51    |    
|                                           | Non-taxable investments |                                  |                        | 308                   |     |                                        |       | 24             |      |       |        | 332    |      |       |       | 183   |     |       |       | 22  |     |     |       | 205   |    
|                                           | Taxable loans           |                                  |                        | 3,623                 |     |                                        |       | (1,394         | )    |       |        | 2,229  |      |       |       | 3,725 |     |       |       | 191 |     |     |       | 3,916 |    
|                                           | Non-taxable loans       |                                  |                        | (4                    | )   |                                        |       | (1             | )    |       |        | (5     | )    |       |       | 33    |     |       |       | 9   |     |     |       | 42    |    
|                                           |                         |                                  |                        |                       |     |                                        |       |                |      |       |        |        |      |       |       |       |     |       |       |     |     |     |       |      
|                                           |                         |                                  |                        | Total Interest Income |     |                                        | 4,182 |                |      |       | (1,572 | )      |      |       | 2,610 |       |     |       | 3,719 |     |     |     | 532   |       |     |       | 4,251 | 
|                                           |                         |                                  |                        |                       |     |                                        |       |                |      |       |        |        |      |       |       |       |     |       |       |     |     |     |       |      
|Interest expense on:                       |                         |                                  |                        |                       |     |                                        |       |                |      |       |        |        |      |       |       |       |     |       |       |     |     |     |       |      
|                                           |                         | Deposits:                        |                        |                       |     |                                        |       |                |      |       |        |        |      |       |       |       |     |       |       |     |     |     |       |       |     |      
|                                           |                         | Demand                           |                        |                       | 395 |                                        |       |                | (509 | )     |        |        | (114 | )     |       |       | 222 |       |       |     | 223 |     |       |       | 445 |      
|                                           |                         |                                  | Savings                |                       |     | 1                                      |       |                |      | (11   | )      |        |      | (10   | )     |       |     | 0     |       |     |     | 2   |       |       |     | 2     |      
|                                           |                         |                                  | Time                   |                       |     | 1,331                                  |       |                |      | (42   | )      |        |      | 1,289 |       |       |     | 518   |       |     |     | 452 |       |       |     | 971   |      
|                                           |                         | FHLB advances & other borrowings |                        |                       | 575 |                                        |       |                | (26  | )     |        |        | 549  |       |       |       | 892 |       |       |     | 80  |     |       |       | 971 |      
|                                           |                         |                                  |                        |                       |     |                                        |       |                |      |       |        |        |      |       |       |       |     |       |       |     |     |     |       |      
|                                           |                         |                                  | Total Interest Expense |                       |     | 2,302                                  |       |                |      | (588  | )      |        |      | 1,714 |       |       |     | 1,632 |       |     |     | 757 |       |       |     | 2,389 |      
|                                           |                         |                                  |                        |                       |     |                                        |       |                |      |       |        |        |      |       |       |       |     |       |       |     |     |     |       |      
|Increase (decrease) in net interest income |                         | $                                | 1,880                  |                       |     |                                        | (984  | )              |      |       | 896    |        |      | $     | 2,087 |       |     |       | (225  | )   |     |     | 1,862 |      
|                                           |                         |                                  |                        |                       |     |                                        |       |                |      |       |        |        |      |       |       |       |     |       |       |     |     |     |       |      

Other Income and Expense

Other income in 2001 was $4.6 million, compared to $3.0 million in 2000
and $1.9 million in 1999. This represents an increase of $1.6 million or 52.2%
from fiscal 2000 to fiscal 2001 and an increase of $1.1 million or 54.9% from
fiscal 1999 to fiscal 2000. The continuing increases in all comparative years
are primarily due to an increase in the volume of service charges on deposit
accounts and more specifically attributable to insufficient funds charges on
deposit accounts. Additionally, the increase from 2000 to 2001 was
attributable to an increase in mortgage origination fees due resulting from low
mortgage rates in 2001.

Other expenses increased by $1.6 million or 17.0% in 2001 over 2000
principally due to employee costs increasing $1.09 million or 20.0%. This
increase is attributable to the following factors: (i) increased number of
employees due to additional branches; (ii) increased commissions to mortgage
loan originators due to the increase of refinance activity; (iii) increased
costs of health insurance; and (iv) annual raises and increased profit sharing
bonuses. While the Company only had five more full time equivalent employees
at the end of 2001 than it did at the end of 2000, they were employed the
entire year. The Bank opened and staffed the Douglasville office, which
accounted for nearly all the new hires in 2001.

Expenses related to occupancy and other operating expenses increased $492
thousand or 12.7% from 2000 to 2001. This increase was due to increased
occupancy and operating costs associated with the Mirror Lake and Douglasville
offices and to increased costs associated with the insufficient funds program.

Other expenses increased by $1.3 million or 16.1% in 2000 over 1999
principally due to the increase in employee costs of approximately $870
thousand related to an increase in both the number and pay rate of employees.
The Company added personnel when it opened the Mirror Lake office, expanding
its lending, finance and collection
departments. Other operating expense also increased in fiscal 2000 over 1999
by $358 thousand. This increase was the result of increased professional fees
and other expense attributable to becoming an Exchange Act filer during 2000
and expenses related to the Companys insufficient funds program.

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Income taxes, expressed as a percentage of earnings before income taxes,
declined to 34% in 2001, from 36% in 2000 and 36% in 1999. The decline in
marginal rate is primarily attributable to tax credits purchased by the bank in
2001.

BALANCE SHEET OVERVIEW

For the Years Ended December 31, 2001 and 2000

General

During 2001, average total assets increased $49.9 million (18.0%), average
deposits increased $39.4 million (17.6%) and average loans increased $38.7
million (18.4%) from those recorded in 2000. During 2000, average total assets
increased $36.6 million (15.2%), average deposits increased $17.7 million
(8.8%) and average loans increased $37.5 million (21.7%) from those recorded in
1999. The growth figures discussed above are attributable to the expansion of
metro Atlanta westward towards the Companys market area over the past several
years and the resulting development of the Banks market area including
Carroll, Douglas and Paulding Counties, Georgia.

Total assets at December 31, 2001, were $350 million, representing a $61
million (21.1%) increase from December 31, 2000. Total deposits increased
$46.7 million (20.0%) from 2000 to 2001 while total loans increased $25.3
million (11.1%) during 2001. A little less than half of the increase in
deposits came as a result of an increase of $21.0 million (23.8%) in
interest-bearing demand accounts from 2000 to 2001 while time deposits accounts
increased $22.9 million (21.4%) in 2001. As the local and regional economy
softened, loan demand fell off in the last half of 2001. By June 30, 2001, the
bank had grown $28.3 million in loans however the actual growth for the year
was $25.3 million. Deposit growth, on the other hand, remained strong
throughout 2001 as customers sought to move funds from the stock market back to
the Bank as a flight to safety. Approximately fifty percent of the loan growth
experienced by the Company was funded with FHLB advances. The remainder was
funded principally with increases in deposit accounts.

Total assets at December 31, 2000, were $289 million, representing a $35.1
million (13.8%) increase from December 31, 1999. Total deposits increased
$19.0 million (8.8%) from 1999 to 2000 while total loans increased $43.6
million (23.6%) during 2000. Approximately one half of the increase in
deposits came as a result of an increase of $9.9 million in interest-bearing
demand accounts from 1999 to 2000 while time deposits accounts increased $8.7
million in 2000. As the local economy remained strong, loan demand remained
good in 2000. Consequently, the Bank showed increases in each loan
classification at year-end with particular increases in residential
construction and commercial real estate loans. The loan growth experienced by
the Company was funded principally with increases in deposit accounts, use of
existing funds and advances from the Federal Home Loan Bank which increased by
$10 million.

Investments

The Companys available-for-sale investment portfolio of $54.9 million at
its carrying value as of December 31, 2001 consisted primarily of debt
securities, which provide the Company with a source of liquidity and a
relatively stable source of income. This represented an increase of $15.0
million (37.4%) over the $40 million held at December 31, 2000. The Company
believes the investment portfolio provides a balance to interest rate and
credit risk in other categories of the balance sheet while providing a vehicle
for the investment of available funds and supplying securities to pledge as
required collateral for certain public deposits. Investment securities
available-for-sale are stated at fair value. These securities may be sold,
retained until maturity, or pledged as collateral for liquidity and borrowing
in response to changing interest rates, changes in prepayment risk and other
factors as part of the Companys overall asset liability management strategy.

Investment securities held-to-maturity are stated at amortized cost and
totaled $2.0 million at December 31, 2001, an increase of $1.0 million when
compared to the prior year. The Company has the intent and ability to hold
these securities until maturity, and they are also available to be pledged as
collateral for liquidity and borrowing needs if and when such needs may occur.

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The following table shows the carrying value of the Companys securities,
by security type, as of December 31, 2001 and 2000:

Table 3

Investment Portfolio

|                                      |                          |      |                |        |  |   |        |        | 
|------------------------------------- | ------------------------ | ---- | -------------- | ------ |  | - | ------ | ------ | 
|                                      |                          |      | (in thousands)
|Available for Sale                    |                          | 2001 |                | 2000  
|                                      |                          |      |                |       
|United States treasuries and agencies |                          | $    | 3,899          |        |  | $ | 12,605 |       
|State, county and municipal           |                          |      | 23,476         |        |  |   | 13,740 |       
|Mortgage-backed securities            |                          |      | 26,508         |        |  |   | 13,614 |       
|Corporate bonds                       |                          |      | 1,051          |        |  |   |       |       
|                                      |                          |      |                |        |  |   |        |       
|                                      | Total available for sale |      | $              | 54,934 |  |   | $      | 39,959 | 
|                                      |                          |      |                |        |  |   |        |       
|Held to Maturity                      |                          |      |                |        |  |   |        |       
|Trust Preferred Securities            |                          | $    | 2,000          |        |  | $ | 1,000  |       
|                                      |                          |      |                |        |  |   |        |       
|                                      | Total held to maturity   |      | $              | 2,000  |  |   | $      | 1,000  | 
|                                      |                          |      |                |        |  |   |        |       

The following table presents the expected maturity of the amortized cost
of securities by maturity date and average yields based on amortized cost (for
all obligations on a fully taxable basis, assuming a 34% marginal tax rate) at
December 31, 2001. The composition and maturity/re-pricing distribution of the
securities portfolio is subject to change depending on rate sensitivity,
capital and liquidity needs.

Table 4

Expected Maturity of Securities

|                    |  |               |       |      |  |            |      |      |  |            |        |      |  |       |      |      |  |       |        |      |  |      |      |   |  |   |       |  |  |  |      |   |  |   |       |  |  |  |      |  
|------------------- |  | ------------- | ----- | ---- |  | ---------- | ---- | ---- |  | ---------- | ------ | ---- |  | ----- | ---- | ---- |  | ----- | ------ | ---- |  | ---- | ---- | - |  | - | ----- |  |  |  | ---- | - |  | - | ----- |  |  |  | ---- | -
|(in thousands)     
|Maturities at       |  |               |       |      |  |            |      |      |  |            |        |      |  |       |      |      |  |       |        |      |  |      |      |   |  |   |       |  |  |  |      |   |  |   |       |  |  |  |      |  
|December            |  | United States |       | Wtd. |  | State      |      | Wtd. |  | Mortgage-  |        | Wtd. |  | Corp- |      | Wtd. |  |       |        |      |  | Wtd.
|                    |  | Treasuries &  |       | Avg. |  | County and |      | Avg. |  | Backed     |        | Avg. |  | orate |      | Avg. |  | Trust |        | Avg.
|31, 2001            |  | Agencies      |       | Yld. |  | Municipal  |      | Yld. |  | Securities |        | Yld. |  | Bonds |      | Yld  |  | Pfd   |        | Yld.
|                    |  |               |       |      |  |            |      |      |  |            |        |      |  |       |      |      |  |       |        |     
|Within 1 year       |  | $             | 22    |      |  |            | 7.05 | %    |  | $          |       |      |  |       |     |      |  | $     | 264    |      |  |      | 6.02 | % |  | $ |      |  |  |  |     |   |  | $ |      |  |  |  |     |  
|After 1 thru 5 yrs  |  |               | 1,605 |      |  |            | 4.76 | %    |  |            | 1,360  |      |  |       | 8.17 | %    |  |       | 1,151  |      |  |      | 6.65 | % |  |   | 542   |  |  |  | 4.81 | % |  |   |      |  |  |  |     |  
|After 5 thru 10 yrs |  |               | 2,023 |      |  |            | 3.01 | %    |  |            | 2,914  |      |  |       | 6.61 | %    |  |       | 3,578  |      |  |      | 5.26 | % |  |   | 516   |  |  |  | 7.00 | % |  |   |      |  |  |  |     |  
|After 10 yrs        |  |               | 204   |      |  |            | 5.91 | %    |  |            | 18,785 |      |  |       | 7.73 | %    |  |       | 21,367 |      |  |      | 5.95 | % |  |   |      |  |  |  |     |   |  |   | 2,000 |  |  |  | 9.75 | %
|                    |  |               |       |      |  |            |      |      |  |            |        |      |  |       |      |      |  |       |        |      |  |      |      |   |  |   |       |  |  |  |      |   |  |   |       |  |  |  |      |  
|Totals              |  | $             | 3,854 |      |  |            | 3.92 | %    |  | $          | 23,059 |      |  |       | 7.61 | %    |  | $     | 26,360 |      |  |      | 5.89 | % |  | $ | 1,058 |  |  |  | 5.88 | % |  | $ | 2,000 |  |  |  | 9.75 | %
|                    |  |               |       |      |  |            |      |      |  |            |        |      |  |       |      |      |  |       |        |      |  |      |      |   |  |   |       |  |  |  |      |   |  |   |       |  |  |  |      |  

Mortgage backed securities are included in the maturities categories in
which they are anticipated to be repaid based on scheduled maturities. The
actual cash flow of mortgage backed securities differs with this assumption.
Additionally, some agency securities in the portfolio have call features. The
above analysis assumes that callable agencies will mature on their final
maturity date. The actual cash flow of agency securities may differ from this
assumption. Yields on tax-exempt securities are calculated on a tax equivalent
basis.

Loans

Loan concentrations are defined as aggregate credits extended to a number
of borrowers engaged in similar activities or resident in the same geographic
region, which would cause them to be similarly affected by economic or other
conditions. The Bank, on a routine basis, evaluates these concentrations for
purposes of policing its concentrations and making necessary adjustments in its
lending practices to reflect current economic conditions, loan to deposit
ratios, and industry trends.

The primary types of loans in the Banks portfolio are residential
mortgages and home equity loans, commercial real estate loans, commercial
loans, and consumer installment loans. Generally, the Bank underwrites
loans based upon the borrowers debt service capacity or cash flow, a
consideration of past performance on loans from other creditors as well as an
evaluation of the collateral securing the loan. With some exceptions, the
Banks general policy is to require conservative underwriting policies,
primarily in the analysis of borrowers debt service

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coverage capabilities for
commercial and commercial real estate loans, while emphasizing lower gross debt
ratios for consumer loans and lower loan-to-value ratios for all types of real
estate loans. Given the localized nature of the Banks lending activities, the
primary risk factor affecting the portfolio as a whole is the health of the
local economy in the west Georgia area and its effects on the value of local
real estate and the incomes of local professionals and business firms.

Loans to directors, executive officers and principal stockholders of the
Company and to directors and officers of the Bank are subject to limitations of
the Federal Reserve, the principal effect of which is to require that
extensions of credit by the Bank to executive officers, directors, and ten
percent shareholders satisfy certain standards. The Bank routinely makes loans
in the ordinary course of business to certain directors and executive officers
of the Company and the Bank, their associates, and members of their immediate
families. In accordance with Federal Reserve guidelines, these loans are made
on substantially the same terms, including interest rates and collateral, as
those prevailing for comparable transactions with others and do not involve
more than normal risk of collectibility or present other unfavorable features.
As of December 31, 2001, loans and commitments outstanding to directors and
executive officers of the Company and the Bank, their associates and members of
their immediate families totaled $5.4 million (net of participations sold to
other banks on a non-recourse basis), which represented approximately 2.1% of
total loans as of that date. As of December 31, 2001, none of these loans
outstanding from the Bank to related parties were on non-accrual, past due,
restructured or considered by management to be a potential problem loan.

The following table presents loans by type on the dates indicated:

Table 5

Loan Portfolio

|                                     |                           |            |         |                |         |      |         |        |         |   |         |        |         | 
|------------------------------------ | ------------------------- | ---------- | ------- | -------------- | ------- | ---- | ------- | ------ | ------- | - | ------- | ------ | ------- | 
|                                     |                           |            |         | (in thousands)
|                                     |                           |            |         | December 31,  
|                                     |                           |            |         |               
|                                     |                           |            |         | 2001           |         | 2000 |         | 1999  
|                                     |                           |            |         |                |         |      |         |       
|Commercial, financial & agricultural |                           | $          | 26,162  |                |         | $    | 26,547  |        |         | $ | 24,144  |       
|Real estate  construction           |                           |            | 60,785  |                |         |      | 46,052  |        |         |   | 34,769  |       
|Real estate  mortgage               |                           |            | 147,705 |                |         |      | 135,750 |        |         |   | 108,137 |       
|Consumer loans                       |                           |            | 19,153  |                |         |      | 20,118  |        |         |   | 17,745  |       
|                                     |                           |            |         |                |         |      |         |        |         |   |         |       
|                                     |                           |            | 253,805 |                |         |      | 228,467 |        |         |   | 184,795 |       
|Less: Unearned interest and fees     |                           |            | (525    | )              |         |      | (561    | )      |         |   | (467    | )     
|                                     | Allowance for loan losses |            |         | (3,720         | )       |      |         | (2,920 | )       |   |         | (2,281 | )      
|                                     |                           |            |         |                |         |      |         |        |         |   |         |       
|                                     |                           | Loans, net |         | $              | 249,560 |      |         | $      | 224,986 |   |         | $      | 182,047 | 
|                                     |                           |            |         |                |         |      |         |        |         |   |         |       

The following table sets forth the maturity distribution (based upon
contractual dates) and interest rate sensitivity of commercial, financial and
agricultural loans, real estate construction and mortgage loans and consumer
loans as of December 31, 2001:

Table 6

Loan Portfolio Maturity

|                                     |       |   |                |         |      |  |        |      |      |  |        |        |      |  |       |      |      |  |        |        |  |  |      |      |   |  |         |         |  |  |      |      |  
|------------------------------------ | ----- | - | -------------- | ------- | ---- |  | ------ | ---- | ---- |  | ------ | ------ | ---- |  | ----- | ---- | ---- |  | ------ | ------ |  |  | ---- | ---- | - |  | ------- | ------- |  |  | ---- | ---- | -
|                                     |       |   | (in thousands)
|                                     |       |   |                |         |      |  |        |      |      |  | Over   |        |      |  |       |      |      |  |        |        |  |  |      |      |   |  |         |         |  |  |     
|                                     |       |   | One            |         | Wtd. |  | One to |      | Wtd. |  | Over   |        | Wtd. |  |       |      |      |  | Wtd.  
|                                     |       |   | Year           |         | Avg. |  | Five   |      | Avg. |  | Five   |        | Avg. |  |       |      |      |  | Avg.  
|                                     |       |   | or Less        |         | Yld. |  | Years  |      | Yld. |  | Years  |        | Yld. |  | Total |      | Yld.
|                                     |       |   |                |         |      |  |        |      |      |  |        |        |      |  |       |      |     
|Commercial, financial & agricultural |       | $ | 10,109         |         |      |  | 7.56   | %    |      |  | 13,782 |        |      |  | 7.24  | %    |      |  | 2,271  |        |  |  | 4.99 | %    |   |  | 26,162  |         |  |  | 7.16 | %   
|Real estate  construction           |       |   | 47,495         |         |      |  | 7.01   | %    |      |  | 8,076  |        |      |  | 6.51  | %    |      |  | 5,214  |        |  |  | 7.99 | %    |   |  | 60,785  |         |  |  | 7.03 | %   
|Real estate  mortgage               |       |   | 45,336         |         |      |  | 7.77   | %    |      |  | 65,571 |        |      |  | 7.81  | %    |      |  | 36,798 |        |  |  | 7.55 | %    |   |  | 147,705 |         |  |  | 7.74 | %   
|Consumer                             |       |   | 11,149         |         |      |  | 9.16   | %    |      |  | 7,948  |        |      |  | 9.54  | %    |      |  | 56     |        |  |  | 7.73 | %    |   |  | 19,153  |         |  |  | 9.31 | %   
|                                     |       |   |                |         |      |  |        |      |      |  |        |        |      |  |       |      |      |  |        |        |  |  |      |      |   |  |         |         |  |  |      |     
|                                     | Total |   | $              | 114,089 |      |  |        | 7.57 | %    |  |        | 95,377 |      |  |       | 7.78 | %    |  |        | 44,339 |  |  |      | 7.47 | % |  |         | 253,805 |  |  |      | 7.63 | %
|                                     |       |   |                |         |      |  |        |      |      |  |        |        |      |  |       |      |      |  |        |        |  |  |      |      |   |  |         |         |  |  |      |     

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Variable/Fixed Rate Mix

|                                       |       |   |                |        |     |  |          |      |     |   |        |         |  |  |      |      |  
|-------------------------------------- | ----- | - | -------------- | ------ | --- |  | -------- | ---- | --- | - | ------ | ------- |  |  | ---- | ---- | -
|                                       |       |   | (in thousands)
|                                       |       |   | Variable       |        | Wtd |  | Fixed    |      | Wtd
|                                       |       |   | Interest       |        | Avg |  | Interest |      | Avg
|                                       |       |   | Rates          |        | Yld |  | Rates    |      | Yld
|                                       |       |   |                |        |     |  |          |      |    
|Commercial, financial and agricultural |       | $ | 10,259         |        |     |  | 5.25     | %    |     | $ | 15,903 |         |  |  | 8.39 | %   
|Real estate  construction             |       |   | 14,492         |        |     |  | 5.98     | %    |     |   | 46,293 |         |  |  | 7.36 | %   
|Real estate  mortgage                 |       |   | 61,160         |        |     |  | 6.91     | %    |     |   | 86,545 |         |  |  | 8.33 | %   
|Consumer                               |       |   | 797            |        |     |  | 7.85     | %    |     |   | 18,356 |         |  |  | 9.38 | %   
|                                       |       |   |                |        |     |  |          |      |     |   |        |         |  |  |      |     
|                                       | Total |   | $              | 86,708 |     |  |          | 6.57 | %   |   | $      | 167,097 |  |  |      | 8.18 | %
|                                       |       |   |                |        |     |  |          |      |     |   |        |         |  |  |      |     

Provision and Allowance for Possible Loan and Lease Losses

The provision for loan losses for the Company in 2001 was $911 thousand
compared to $509 thousand in 2000 and $303 thousand in 1999. The increase in
the provision for loan losses was primarily attributable to the growth in the
portfolio as well as the Companys uncertainty of the effect of a slowing
economy on its borrowers ability to repay. The Companys methodology for
measuring the adequacy of the allowance for loan loss indicates sufficient
reserve for expected losses in the portfolio. The provision for loan losses
continues to reflect managements estimate of potential loan losses inherent in
the portfolio and the creation of an allowance for loan losses adequate to
absorb such losses. The allowance for loan losses represented 1.47%, 1.28% and
1.23% of total loans outstanding at December 31, 2001, 2000 and 1999,
respectively. Total charge-offs were $200 thousand, $77 thousand and $130
thousand compared to recoveries of $89 thousand, $207 thousand and $89 thousand
during 2001, 2000 and 1999, respectively.

The Company has an independent loan review function. All loans are placed
in loan grade categories, which are consistent with those used by the Banks
regulators. All loans are constantly monitored by the loan officer and the
loan review function for consistency and accuracy. Through this grading
process, the Bank assures the timely recognition of credit risks. In general,
as credit risk increases, the level of the allowance for loan and lease loss
will also increase.

A formal allowance for loss adequacy test is performed at each month end.
Specific amounts of loss are estimated on problem loans and historical loss
percentages are applied to the balance of the portfolio using certain portfolio
stratifications. Additionally, the evaluation takes into consideration such
factors as changes in the nature and volume of the loan portfolio, current
economic conditions, regulatory examination results, and the existence of loan
concentrations.

Managements judgment in determining the adequacy of the allowance is
based on evaluations of the collectability of loans. These evaluations take
into consideration such factors as changes in the nature and volume of the loan
portfolio, current economic conditions that may affect the borrowers ability
to pay, overall portfolio quality, and review of specific problem loans. In
determining the adequacy of the allowance for loan losses, management uses a
loan grading system that rates loans in eight different categories. Grades
five though six, which represent criticized or classified loans, are assigned
allocations of loss based on managements estimate of potential loss that is
generally based on historical losses and/or collateral deficiencies. Loans
graded one through four are stratified by type and allocated loss ranges based
on historical loss experience for the strata. The combination of these results
are compared monthly to the recorded allowance for loan losses and material
differences are adjusted by increasing or decreasing the provision for loan
losses. Management uses an internal loan reviewer who is independent of the
lending function to challenge and corroborate the loan grading system and
provide additional analysis in determining the adequacy of the allowance for
loan losses and the future provisions for estimated loan losses.

Management believes that the allowance for loan losses is adequate. While
management uses available information to recognize losses on loans, future
additions to the allowance may be necessary based on changes in economic
conditions. In addition, regulators, as an integral part of their examination
process, periodically review the Companys allowance for loan losses. Such
regulators may require the Company to recognize additions to the allowance
based on their judgments of information available to them at the time of their
examination. Management

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of the Company realizes the importance of maintaining an adequate allowance for
loan losses. Through a professional loan review function and effective loan
officer identification program, management is recognizing weaknesses in the
loan portfolio in a timely manner. Early identification of deteriorating
credit attributes allows management to take a proactive role in documenting an
established plan to enhance the Companys position and minimize the potential
for loss.

Through the problem loan identification program outlined above, management
is able to identify those loans that exhibit weakness and classify them on a
classified and criticized loan list. The Companys migration analysis assigns
historical loss amounts to pools of loans according to classifications of risk
ratings to calculate a general allowance to the overall portfolio. In cases
where significant weaknesses exist in a specific loan, a specific reserve is
assigned to such loans in addition to the general allowance. The Company also
evaluates the risks associated with concentrations in credit. If it is
necessary to assign an allowance related to concentrations of credit, the
Company adds a specific reserve related to such risks.

The following table presents a summary of changes in the allowance for
loan losses for the years indicated:

Table 7

Allowance for Loan Losses

|                                                                                     |                                        |                   |       |                |     |      |       |      |     |   |       |    |     | 
|------------------------------------------------------------------------------------ | -------------------------------------- | ----------------- | ----- | -------------- | --- | ---- | ----- | ---- | --- | - | ----- | -- | --- | 
|                                                                                     |                                        |                   |       | (in thousands)
|                                                                                     |                                        |                   |       | December 31,  
|                                                                                     |                                        |                   |       |               
|                                                                                     |                                        |                   |       | 2001           |     | 2000 |       | 1999
|                                                                                     |                                        |                   |       |                |     |      |       |     
|Balance at beginning of year                                                         |                                        | $                 | 2,920 |                |     | $    | 2,281 |      |     | $ | 2,019 |   
|Charge-offs:                                                                         |                                        |                   |       |                |     |      |       |      |     |   |       |   
|                                                                                     | Commercial, financial and agricultural |                   |       | 118            |     |      |       | 12   |     |   |       | 32 |    
|                                                                                     | Real estate  construction             |                   |       |               |     |      |       |     |     |   |       |   |    
|                                                                                     | Real estate  mortgage                 |                   |       | 3              |     |      |       | 3    |     |   |       | 18 |    
|                                                                                     | Consumer loans                         |                   |       | 79             |     |      |       | 62   |     |   |       | 80 |    
|                                                                                     |                                        |                   |       |                |     |      |       |      |     |   |       |   
|                                                                                     |                                        | Total charge-offs |       |                | 200 |      |       |      | 77  |   |       |    | 130 | 
|                                                                                     |                                        |                   |       |                |     |      |       |      |     |   |       |   
|Recoveries:                                                                          |                                        |                   |       |                |     |      |       |      |     |   |       |   
|                                                                                     | Commercial, financial and agricultural |                   |       | 30             |     |      |       | 56   |     |   |       | 14 |    
|                                                                                     | Real estate  construction             |                   |       |               |     |      |       |     |     |   |       |   |    
|                                                                                     | Real estate  mortgage                 |                   |       | 13             |     |      |       | 56   |     |   |       | 6  |    
|                                                                                     | Consumer loans                         |                   |       | 46             |     |      |       | 96   |     |   |       | 69 |    
|                                                                                     |                                        |                   |       |                |     |      |       |      |     |   |       |   
|                                                                                     |                                        | Total recoveries  |       |                | 89  |      |       |      | 208 |   |       |    | 89  | 
|                                                                                     |                                        |                   |       |                |     |      |       |      |     |   |       |   
|Net recoveries (charge-offs)                                                         |                                        |                   | (111  | )              |     |      | 131   |      |     |   | (41   | ) 
|Provision for loan losses                                                            |                                        |                   | 911   |                |     |      | 508   |      |     |   | 303   |   
|                                                                                     |                                        |                   |       |                |     |      |       |      |     |   |       |   
|Balance at end of year                                                               |                                        | $                 | 3,720 |                |     | $    | 2,920 |      |     | $ | 2,281 |   
|                                                                                     |                                        |                   |       |                |     |      |       |      |     |   |       |   
|Ratio of net charge-offs (recoveries)
during the period
to average loans outstanding |                                        |                   | .04   | %              |     |      | (.06  | )%   |     |   | .02   | % 
|Ratio of allowance to average total loans                                            |                                        |                   | 1.49  | %              |     |      | 1.39  | %    |     |   | 1.32  | % 

Non-Performing Assets and Past Due Loans

Non-performing assets at December 31, 2001, were $3.9 million or 1.55% of
total loans and other real estate owned compared to $1.4 million or .62% of
total loans and other real estate owned at December 31, 2000 and $418 thousand
or .23% of total loans and other real estate owned at December 31, 1999. While
levels of non-performing loans remain relatively low, the percentage of
non-performing assets to total loans has increased. The increase of
non-performing loans from 2000 to 2001 was attributable to the increase in loan
portfolio size, foreclosure on construction related loans and an increase of
non-accrual loans.

The following table summarizes past due and non-accrual loans, other real
estate and repossessions, and income that would have been reported on
non-accrual loans as of December 31, 2001, 2000 and 1999.

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Table 8

Non-Performing Assets

|                                          |       |   |                |       |      |   |      |       |  |   |     |     | 
|----------------------------------------- | ----- | - | -------------- | ----- | ---- | - | ---- | ----- |  | - | --- | --- | 
|                                          |       |   | (in thousands)
|                                          |       |   | December 31,  
|                                          |       |   |               
|                                          |       |   | 2001           |       | 2000 |   | 1999
|                                          |       |   |                |       |      |   |     
|Other real estate and repossessions       |       | $ | 357            |       |      | $ | 702  |       |  | $ |    |    
|Non-accrual loans                         |       |   | 1,620          |       |      |   | 504  |       |  |   | 370 |    
|Loans 90 days past due still accruing     |       |   | 1,885          |       |      |   | 205  |       |  |   | 48  |    
|                                          |       |   |                |       |      |   |      |       |  |   |     |    
|                                          | Total |   | $              | 3,862 |      |   | $    | 1,411 |  |   | $   | 418 | 
|                                          |       |   |                |       |      |   |      |       |  |   |     |    
|Non-performing assets as % of total loans |       |   | 1.55           | %     |      |   | .63  | %     |  |   | .23 | %  

While there may be additional loans in the portfolio that may become
classified as conditions indicate, management is not aware of any potential
problem loans that are not disclosed in the table above. As a result of
managements ongoing review of the loan portfolio, loans are classified as
non-accrual generally when they are past due in principal or interest payments
for more than 90 days or it is otherwise not reasonable to expect collection of
principal and interest under the original terms. Exceptions are allowed for 90
day past due loans when such loans are well secured and in process of
collection. Generally, payments received on non-accrual loans are applied
directly to principal. The Company has adopted the principals of Statement of
Financial Accounting Standards (SFAS) 114 and 118 relating to accounting for
impaired loans.

The Banks loan review function continually monitors selected accruing
loans for which general economic conditions or changes within a particular
industry that could cause the borrowers financial difficulties. The loan review
function also identifies loans with high degrees of credit or other risks. The
focus of loan review and management is to maintain a low level of
non-performing assets and return current non-performing assets to earning
status. Management is unaware of any known trends, events or uncertainties
that will have or that are reasonably likely to have a material effect on the
Companys liquidity, capital resources or operations.

Deposits

Time deposits of $100 thousand and greater totaled $41.5 million at
December 31, 2001, compared with $31.2 million at year-end 2000 and $31.2
million at year-end 1999. The following table sets forth the scheduled
maturities of time deposits of $100 thousand and greater at December 31, 2001.

Table 9

Deposits

|                          |       |   |        |        | 
|------------------------- | ----- | - | ------ | ------ | 
|(in thousands)           
|Within 3 months           |       | $ | 10,846 |       
|After 3 through 6 months  |       |   | 10,745 |       
|After 6 through 12 months |       |   | 11,892 |       
|After 12 months           |       |   | 8,011  |       
|                          |       |   |        |       
|                          | Total |   | $      | 41,494 | 
|                          |       |   |        |       

Liquidity

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

The Bank maintains relationships with correspondent banks including the
Federal Home Loan Bank (the FHLB) that can provide funds to it on short
notice, if needed. The Bank has arrangements with a correspondent and
commercial banks for short term unsecured advances up to $11.0 million. As of
December 31, 2001, the Bank had not drawn on the available facilities. In
addition, the Bank has a line of credit with the FHLB in the amount of $43.1
million of which the Bank had drawn $35 million at December 31, 2001. The
Company has a line of credit

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arrangement with a financial institution in the
amount of $1.75 million, of which $1.3 million was outstanding at
December 31, 2001 which was used by the Company to lend to the Finance Company
to fund its loan volume. The lines of credit have varying terms and maturities
that are further discussed in the notes to the financial statements.

The Companys cash flows are composed of three classifications: cash
flows from operating activities, cash flows from investing activities, and cash
flows from financing activities. Cash and cash equivalents increased $19.1
million for a total $31.0 million at December 31, 2001 compared with $11.9
million at December 31, 2000. The increase was primarily attributable to net
cash provided by financing activities of $54.4 million made up of $46.7 million
of increased deposits and $10.0 million of borrowing proceeds. Cash inflows
from operations totaled $6.4 million in 2001, while outflows from investing
activities totaled $41.8 million, most of which was net loan increases during
2001 of $25.5 million and net cash flows invested in securities of $14.4
million.

Cash inflows from operations totaled $4.9 million in 2000, while inflows
from financing activities totaled $28.9 million, most of which was net deposit
increases during 2000 of $19.0 million and FHLB advances of $15 million.
Included in financing activities were line of credit repayments of $5.3 million
and $1.4 million of dividends paid to shareholders.

Investing activities used $41.9 million of cash and cash equivalents,
principally composed of net advances of loans to customers of $44.2 million
during 2000. The Bank purchased property and equipment for operations and
future expansion amounting to $788 thousand.

Capital Resources

Total shareholders equity as of December 31, 2001 was $29.2 million, an
increase of $3.5 million in 2001 This compared to shareholders equity of $25.7
million and $22.0 million as of December 31, 2000 and 1999, an increase of
$3.7 million.

The OCC has established certain minimum risk-based capital standards that
apply to national banks, and the Company is subject to certain capital
requirements imposed by the Federal Reserve. At December 31, 2001, the Bank
exceeded all applicable regulatory capital requirements for classification as a
well capitalized bank, and the Company satisfied all applicable regulatory
requirements imposed on it by the Federal Reserve. The following tables
present the Companys regulatory capital position at December 31, 2001:

Table 10

Capital Ratios

|                                         |  |                                |    |  
|---------------------------------------- |  | ------------------------------ | -- | -
|                                         |  | Actual as of December 31, 2001
|                                         |  |                               
|Tier 1 Capital (to risk weighted assets) |  |                                | 11 | %
|Tier 1 Capital minimum requirement       |  |                                | 4  | %
|                                         |  |                                |    |  
|Excess                                   |  |                                | 7  | %
|                                         |  |                                |    |  
|Total Capital (to risk weighted assets)  |  |                                | 12 | %
|Total Capital minimum requirement        |  |                                | 8  | %
|                                         |  |                                |    |  
|Excess                                   |  |                                | 4  | %
|                                         |  |                                |    |  

Leverage Ratio

|                                                    |  |                         |   |  
|--------------------------------------------------- |  | ----------------------- | - | -
|                                                    |  | As of December 31, 2001
|                                                    |  |                        
|Tier 1 Capital to average assets
(Leverage Ratio) |  |                         | 8 | %
|Minimum leverage requirement                        |  |                         | 4 | %
|                                                    |  |                         |   |  
|Excess                                              |  |                         | 4 | %
|                                                    |  |                         |   |  

For a more complete discussion of the actual and required ratios of the
Company and its subsidiaries, see Note 9 to the consolidated financial
statements. Average equity to average assets was 8.57% in 2001 and 8.56% in
2000. The ratio of dividends declared to net earnings was 35.5 % during 2001,
compared with 33.8% in 2000.

28



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##### Table of Contents



Asset/Liability Management

It is the Companys objective to manage assets and liabilities to provide
a satisfactory, consistent level of profitability within the framework of
established cash, loan, investment, borrowing and capital policies. Certain
officers are charged with the responsibility for monitoring policies and
procedures that are designed to ensure acceptable composition of the
asset/liability mix. It is the overall philosophy of management to support
asset growth primarily through growth of deposits and borrowing strategies,
which minimize the Companys exposure to interest rate risk. The objective of
the policy is to control interest sensitive assets and liabilities so as to
minimize the impact of substantial movements in interest rates on earnings.

The asset/liability mix is monitored on a regular basis. A report
reflecting the interest sensitive assets and interest sensitive liabilities is
prepared and presented to management and the asset/liability management
committee on at least a quarterly basis. One method to measure a banks
interest rate exposure is through its repricing gap. The gap is calculated by
taking all assets that reprice or mature within a given timeframe and
subtracting all liabilities that reprice or mature within that timeframe. The
difference between these two amounts is called the gap, the amount of either
liabilities or assets that will reprice without a corresponding asset or
liability repricing. A negative gap (more liabilities repricing than assets)
generally indicates that the banks net interest income will decrease if
interest rates rise and will increase if interest rates fall. A positive gap
generally indicates that the banks net interest income will decrease if rates
fall and will increase if rates rise.

The Company has adopted the objective of achieving and maintaining a
one-year cumulative gap, as a percent of total assets, of between plus 20% and
minus 20%. On a consolidated basis, the Companys one-year cumulative gap was
a negative 11.92% of total assets at December 31, 2001. This position
indicated that the Company was exposed to the potential for decreased earnings
if interest rates were to continue to decline in the next twelve months.

Due to inherent limitations in traditional gap analysis, the Company also
employs more sophisticated modeling techniques to monitor potential changes in
net interest income, net income and the market value of portfolio equity under
various interest rate scenarios. Market risk is the risk of loss from adverse
changes in market prices and rates, arising primarily from interest rate risk
in the Companys loan and investment portfolios, which can significantly impact
the Companys profitability. Net interest income can be adversely impacted
where assets and liabilities do not react the same to changes in interest
rates. At year-end 2001, the estimated impact of an immediate increase in
interest rates of 200 basis points would have resulted in a decrease in net
interest income over a 12-month period of 2.2%, with a comparable decrease in
interest rates resulting in an increase in net interest income of 2.1%.
Management finds the above methodologies meaningful for evaluating market risk
sensitivity; however, other factors can affect net interest income, such as
levels of non-earning assets and changes in portfolio composition.

The following table summarizes the amounts of interest-earning assets and
interest-bearing liabilities outstanding at December 31, 2001 that are expected
to mature, prepay or reprice in each of the future time periods shown. Except
as stated below, the amount of assets or liabilities that mature or reprice
during a particular period was determined in accordance with the contractual
terms of the asset or liability. Adjustable rate loans are included in the
period in which interest rates are next scheduled to adjust rather than in the
period in which they are due, and fixed rate loans and mortgage-backed
securities are included in the periods in which they are anticipated to be
repaid based on scheduled maturities, although the cash flows received often
differ from scheduled maturities. The Companys savings accounts and
interest-bearing demand accounts (NOW and money market deposit accounts), which
are generally subject to immediate withdrawal, are included in the One Year or
Less category, although historical experience has proven these deposits to be
less interest rate sensitive over the course of a year.

29



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##### Table of Contents



Table 11

Interest Rate Gap Sensitivity

|                                           |                                               |               |               |         |                          |        |           |        |            |        |        |        |       |   |        |        |   |   |  |         |         |        | 
|------------------------------------------ | --------------------------------------------- | ------------- | ------------- | ------- | ------------------------ | ------ | --------- | ------ | ---------- | ------ | ------ | ------ | ----- | - | ------ | ------ | - | - |  | ------- | ------- | ------ | 
|                                           |                                               |               |               |         | At December 31, 2001    
|                                           |                                               |               |               |         | Maturing or Repricing in
|                                           |                                               |               |               |         |                         
|                                           |                                               |               |               |         | (in thousands)          
|                                           |                                               |               |               |         |                          |        |           |        | Over 1     |        | Over 3 |        |       |   |        |        |   |   | 
|                                           |                                               |               |               |         | One Year                 |        | Year Thru |        | Years thru |        | Over 5 |        |       |   |       
|                                           |                                               |               |               |         | or Less                  |        | 3 Years   |        | 5 Years    |        | Years  |        | Total
|                                           |                                               |               |               |         |                          |        |           |        |            |        |        |        |      
|Interest-earning assets:                   |                                               |               |               |         |                          |        |           |        |            |        |        |        |       |   |        |        |   |   |  |        
|                                           | Interest-bearing deposits with
Other banks    |               |               | 244     |                          |        |           |       |            |        |        |       |       |   |        |       |   |   |  | 244     |        
|                                           | Federal funds sold                            |               |               | 19,684  |                          |        |           |       |            |        |        |       |       |   |        |       |   |   |  | 19,684  |        
|                                           | Investment securities                         |               |               | 13,218  |                          |        |           | 12,143 |            |        |        | 8,915  |       |   |        | 22,055 |   |   |  | 56,331  |        
|                                           | Loans: Fixed rate                             |               |               | 93,094  |                          |        |           | 42,727 |            |        |        | 17,016 |       |   |        | 14,260 |   |   |  | 167,097 |        
|                                           |                                               |               | Variable rate |         |                          | 51,533 |           |        |            | 35,175 |        |        |       |  |        |        |   |  |  |         |         | 86,708 | 
|                                           |                                               |               |               |         |                          |        |           |        |            |        |        |        |       |   |        |        |   |   |  |        
|                                           | Total interest-earning assets                 |               |               | 177,773 |                          |        |           | 90,045 |            |        |        | 25,931 |       |   |        | 36,315 |   |   |  | 330,064 |        
|Interest-bearing liabilities:              |                                               |               |               |         |                          |        |           |        |            |        |        |        |       |   |        |        |   |   |  |        
|                                           | Deposits:                                     |               |               |         |                          |        |           |        |            |        |        |        |       |   |        |        |   |   |  |         |        
|                                           |                                               | Demand        |               |         | 109,465                  |        |           |        |           |        |        |        |      |   |        |        |  |   |  |         | 109,465 |       
|                                           |                                               | Savings       |               |         | 8,236                    |        |           |        |           |        |        |        |      |   |        |        |  |   |  |         | 8,236   |       
|                                           |                                               | Time deposits |               |         | 100,552                  |        |           |        | 19,610     |        |        |        | 9,696 |   |        |        |  |   |  |         | 129,858 |       
|                                           | FHLB advances                                 |               |               |         |                          |        |           | 5,000  |            |        |        | 15,000 |       |   |        | 15,000 |   |   |  | 35,000  |         |        | 
|                                           | Line of Credit                                |               |               | 1,282   |                          |        |           |       |            |        |        |       |       |   |        |       |   |   |  | 1,282   |        
|                                           | Total
interest-bearing liabilities per period |               |               | 219,535 |                          |        |           | 24,610 |            |        |        | 24,696 |       |   |        | 15,000 |   |   |  | 283,841 |        
|                                           |                                               |               |               |         |                          |        |           |        |            |        |        |        |       |   |        |        |   |   |  |        
|                                           |                                               |               |               | (61,762 | )                        |        |           | 65,435 |            |        |        | 1,235  |       |   |        | 21,315 |   |   |  | 46,223  |        
|                                           |                                               |               |               |         |                          |        |           |        |            |        |        |        |       |   |        |        |   |   |  |        
|Cumulative interest sensitivity
Difference |                                               |               | (41,762       | )       |                          |        | 23,673    |        |            |        | 24,908 |        |       |   | 46,223 |        |   |   |  |        
|                                           |                                               |               |               |         |                          |        |           |        |            |        |        |        |       |   |        |        |   |   |  |        
|Cumulative difference to total
Assets      |                                               |               | (11.92        | )%      |                          |        | 6.76      | %      |            |        | 7.11   | %      |       |   | 13.20  | %      |   |   |  |        
|                                           |                                               |               |               |         |                          |        |           |        |            |        |        |        |       |   |        |        |   |   |  |        

At December 31, 2001, the difference between the Companys liabilities and
assets repricing or maturing within one year was $41 million. The above chart
indicates an excess of liabilities repricing or maturing within one year, thus
a rise in interest rates would cause the Companys net interest income to
decline. However, certain shortcomings are inherent in the method of analysis
presented in the foregoing table. For example, although certain assets and
liabilities may have similar maturities or periods to repricing, they may react
in different degrees or at different points in time to changes in market
interest rates. Such is the case in analyzing NOW accounts, which are disclosed
in the one year or less category. Those liabilities do not necessarily reprice
as quickly or to the same degree as rates in general. Additionally, certain
assets, such as adjustable-rate mortgages, have features that restrict changes
in interest rates, both on a short-term basis and over the life of the asset.
Changes in interest rates, prepayment rates, early withdrawal levels and the
ability of borrowers to service their debt, among other factors, may change
significantly from the assumptions made in the table.

Impact of Inflation, Changing Prices and Monetary Policies

The primary effect of inflation on the Companys operations is reflected
in increased operating costs. Unlike industrial companies, virtually all of
the assets and liabilities of a financial institution are monetary in nature.
As a result, changes in interest rates have a more significant effect on the
performance of a financial institution than do the effects of changes in the
general rate of inflation and changes in prices. Interest rates do not
necessarily move in the same direction or in the same magnitude as the prices
of goods and services. Interest rates are highly sensitive to many factors
which are beyond the control of the Company, including the influence of
domestic and foreign economic conditions and the monetary and fiscal policies
of the United States government and federal agencies, particularly the Federal
Reserve. The Federal Reserve implements a national monetary policy such as
seeking to curb inflation and combat recession by its open market operations in
United States government securities, control of the discount rate applicable to
borrowing by banks, and establishment of reserve requirements against bank
deposits. The actions of the Federal Reserve in these areas influence the
growth of bank loans, investments and deposits, and affect the interest rates
charged on loans and paid on deposits. The nature, timing
and impact of any

30



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##### Table of Contents



future changes in federal monetary and fiscal policies on the
Company and its results of operations are not predictable.




Item 7A.Quantitative and Qualitative Disclosures About Market Risk

For information regarding the market risk of the Companys financial
instruments, see Managements Discussion and Analysis of Financial Condition
and Results of Operation  Asset/Liability Management. The Companys
principal market risk exposure is to interest rates.




Item 8. Financial Statements and Supplementary Data

The consolidated financial statements of the Company, including notes
thereto, and the report of independent auditors are included in this Report
beginning at page F-1 and are incorporated herein by reference.

Presented below is a summary of the unaudited consolidated quarterly
financial data for the years ended December 31, 2001 and 2000.

Quarterly Financial Information(Unaudited  in thousands, except per share data)

|                                                    |  |       |           |        |  |       |           |          |  |       |           |        |  |       |           |        |  |      |           |          |  |  |           |  |  |  |           |  |  |  |           | 
|--------------------------------------------------- |  | ----- | --------- | ------ |  | ----- | --------- | -------- |  | ----- | --------- | ------ |  | ----- | --------- | ------ |  | ---- | --------- | -------- |  |  | --------- |  |  |  | --------- |  |  |  | --------- | 
|                                                    |  |       |           |        |  | 2001  |           | Quarters |  |       |           |        |  |       |           |        |  | 2000 |           | Quarters |  |  |           | 
|                                                    |  |      
|                                                    |  | First |           | Second |  | Third |           | Fourth   |  | First |           | Second |  | Third |           | Fourth
|                                                    |  |      
|Interest income                                     |  |       | 6,545     |        |  |       | 6,832     |          |  |       | 6,707     |        |  |       | 6,464     |        |  |      | 5,462     |          |  |  | 5,752     |  |  |  | 6,286     |  |  |  | 6,549     | 
|Net interest income                                 |  |       | 3,549     |        |  |       | 3,720     |          |  |       | 3,563     |        |  |       | 3,647     |        |  |      | 2,263     |          |  |  | 3,316     |  |  |  | 3,530     |  |  |  | 4,583     | 
|Provision for loan losses                           |  |       | 227       |        |  |       | 228       |          |  |       | 228       |        |  |       | 228       |        |  |      | 50        |          |  |  | 50        |  |  |  | 150       |  |  |  | 259       | 
|Income before income taxes                          |  |       | 1,824     |        |  |       | 1,927     |          |  |       | 1,743     |        |  |       | 1,766     |        |  |      | 1,538     |          |  |  | 1,694     |  |  |  | 1,871     |  |  |  | 1,789     | 
|Net income                                          |  |       | 1,189     |        |  |       | 1,254     |          |  |       | 1,151     |        |  |       | 1,195     |        |  |      | 997       |          |  |  | 1,103     |  |  |  | 1,171     |  |  |  | 1,133     | 
|Earnings per share  basic                          |  |       | 0.38      |        |  |       | 0.41      |          |  |       | 0.37      |        |  |       | 0.39      |        |  |      | 0.32      |          |  |  | 0.36      |  |  |  | 0.38      |  |  |  | 0.36      | 
|Earnings per share  diluted                        |  |       | 0.38      |        |  |       | 0.40      |          |  |       | 0.36      |        |  |       | 0.38      |        |  |      | 0.32      |          |  |  | 0.35      |  |  |  | 0.38      |  |  |  | 0.36      | 
|Weighted average common
shares outstanding  basic  |  |       | 3,095,729 |        |  |       | 3,098,114 |          |  |       | 3,098,563 |        |  |       | 3,099,646 |        |  |      | 3,104,726 |          |  |  | 3,099,653 |  |  |  | 3,094,775 |  |  |  | 3,095,375 | 
|Weighted average common
shares outstanding -diluted |  |       | 3,128,682 |        |  |       | 3,131,067 |          |  |       | 3,313,516 |        |  |       | 3,145,632 |        |  |      | 3,136,821 |          |  |  | 3,131,748 |  |  |  | 3,126,870 |  |  |  | 3,127,470 | 




Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable.

PART III




Item 10. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act

The information appearing under the headings Nomination and Election of
Directors and Compliance With Section 16(a) of the Securities Exchange Act of
1934 and the subheading Information as to Nominees, Other Directors and
Executive Officers in the Proxy Statement (the 2002 Proxy Statement)
relating to the 2002 annual meeting of shareholders of the Company, currently
scheduled to be held on March 12, 2002, is incorporated herein by reference.




Item 11. Executive Compensation

The information appearing under the heading Compensation of Executive
Officers and Non-Employee Directors in the 2002 Proxy Statement is
incorporated herein by reference.

31



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##### Table of Contents






Item 12. Security Ownership of Certain Beneficial Owners and Management

The information appearing under the heading Security Ownership of Certain
Beneficial Owners and Management in the 2002 Proxy Statement is incorporated
herein by reference.




Item 13. Certain Relationships and Related Transactions

The information appearing under the caption Certain Relationships and
Transactions in the 2002 Proxy Statement is incorporated herein by reference.




Item 14. Exhibits and Reports on Form 8-K

|       |  |                                                                |  |                                                                                                                
|------ |  | -------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------
|(a)(1) |  | Financial Statements                                          
|       |  |                                                                |  |                                                                                                                
|       |  | The following financial statements are filed with this Report:
|       |  |                                                                |  |                                                                                                                
|       |  |                                                                |  | Independent Auditors Report of Porter Keadle Moore, LLP                                                       
|       |  |                                                                |  |                                                                                                                
|       |  |                                                                |  | Consolidated Balance Sheets as of December 31, 2001 and 2000                                                   
|       |  |                                                                |  |                                                                                                                
|       |  |                                                                |  | Consolidated Statements of Earnings for the Years Ended December 31, 2001, 2000 and 1999                       
|       |  |                                                                |  |                                                                                                                
|       |  |                                                                |  | Consolidated Statements of Changes in Stockholders Equity for the Years
Ended December 31, 2001, 2000 and 1999
|       |  |                                                                |  |                                                                                                                
|       |  |                                                                |  | Consolidated Statements of Cash Flows for the Years Ended December 31,
2001, 2000 and 1999                     
|       |  |                                                                |  |                                                                                                                
|(2)    |  | Financial Statement Schedules                                 

Financial statement schedules have been omitted because they are not
applicable or the required information has been incorporated in the
consolidated financial statements and related notes.

|     |  |   |  |                                                                                                                                                                                       
|---- |  | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(3)  |  |   |  | The following exhibits are filed with this Report:                                                                                                                                    
|     |  |   |  |                                                                                                                                                                                       
|3.1  |  |   |  | Amended and Restated Articles of Incorporation (Incorporated by reference
to Exhibit 3.1 to the Companys Registration Statement on Form 10-SB filed
June 14, 2000 (the Form 10-SB))
|     |  |   |  |                                                                                                                                                                                       
|3.2  |  |   |  | Amended and Restated Bylaws (Incorporated by reference to Exhibit 3.2 to
the Form 10-SB)                                                                                              
|     |  |   |  |                                                                                                                                                                                       
|4.1  |  |   |  | See exhibits 3.1 and 3.2 for provisions of Companys Articles of
Incorporation and Bylaws Defining the Rights of Shareholders.                                                        
|     |  |   |  |                                                                                                                                                                                       
|4.2  |  |   |  | Specimen certificate representing shares of Common Stock (Incorporated by
reference to Exhibit 4.2 to the Form 10-SB)                                                                 
|     |  |   |  |                                                                                                                                                                                       
|4.3  |  |   |  | Rights Agreement dated as of February 12, 1997 between the Company and
SunTrust Bank, Atlanta (Incorporated by reference to Exhibit 4.3 to the
Form 10-SB)                            
|     |  |   |  |                                                                                                                                                                                       
|10.1 |  | * |  | Employment Agreement dated as of September 10, 1996 between the Company and L. Leighton Alston (Incorporated by
reference to Exhibit 10.1 to the Form 10-SB)                          
|     |  |   |  |                                                                                                                                                                                       
|10.2 |  | * |  | Incentive Stock Option Plan (Incorporated by reference to Exhibit 10.2 to the Form 10-SB)                                                                                             
|     |  |   |  |                                                                                                                                                                                       
|10.3 |  | * |  | Bonus and Stock Option Agreement dated as of May 11, 1993 between the Company and L. Leighton Alston
(Incorporated by
reference to
Exhibit 10.3 to the
Form 10-SB)                    
|     |  |   |  |                                                                                                                                                                                       
|10.4 |  | * |  | First Amendment to Bonus and Stock Option Agreement dated as of June 14, 1994 between the Company and L. Leighton
Alston (Incorporated by reference to Exhibit 10.4 to the Form 10-SB)

32



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|      |  |   |  |                                                                                                                                                                                                                
|----- |  | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.5  |  | * |  | Bonus and Stock Option Agreement dated as of June 14, 1994 between the Company and Richard A. Duncan (Incorporated
by reference to Exhibit 10.5 to the Form 10-SB)                                             
|      |  |   |  |                                                                                                                                                                                                                
|10.6  |  | * |  | Bonus and Stock Option Agreement dated as of September 23, 1998 between the Company and H.B. Lipham, III
(Incorporated by reference to Exhibit 10.6 to the Form 10-SB)                                         
|      |  |   |  |                                                                                                                                                                                                                
|10.7  |  | * |  | Bonus and Stock Option Agreement dated as of September 23, 1998 between the Company and W. Galen Hobbs, Jr.
(Incorporated by reference to Exhibit 10.7 to the Form 10-SB)                                      
|      |  |   |  |                                                                                                                                                                                                                
|10.8  |  | * |  | Bonus and Stock Option Agreement dated as of September 23, 1998 between the Company and Steven J. Haack
(Incorporated by reference to Exhibit 10.8 to the Form 10-SB)                                          
|      |  |   |  |                                                                                                                                                                                                                
|10.9  |  | * |  | Bonus and Stock Option Agreement dated as of November 29, 1995 between the Company and H. James Crowe (Incorporated
by reference to Exhibit 10.9 to the Form 10-SB)                                            
|      |  |   |  |                                                                                                                                                                                                                
|10.10 |  | * |  | Form of Election for Payment of Director Meeting Fees (Incorporated by reference to Exhibit 10.10 to the Form 10-SB)                                                                                           
|      |  |   |  |                                                                                                                                                                                                                
|10.11 |  | * |  | Employment
Agreement dated August 30, 2000 between the Company and Richard
A. Duncan (Incorporated by reference to Exhibit 10.11 to the
Companys
Form 10-KSB filed February 21, 2001 (the 2000 Form
10-KSB))
|      |  |   |  |                                                                                                                                                                                                                
|10.12 |  | * |  | Employment
Agreement dated August 30, 2000 between the Company and H. James
Crowe (Incorporated by reference to Exhibit 10.12 to the 2000 Form
10-KSB)                                                         
|      |  |   |  |                                                                                                                                                                                                                
|10.13 |  | * |  | Employment
Agreement dated August 31, 2000 between the Company and Steven
J. Haack (Incorporated by reference to Exhibit 10.13 to the 2000 Form
10-KSB)                                                        
|      |  |   |  |                                                                                                                                                                                                                
|10.14 |  | * |  | Employment
Agreement dated August 31, 2000 between the Company and H.B.
Lipham, III (Incorporated by reference to Exhibit 10.14 to the 2000 Form
10-KSB)                                                       
|      |  |   |  |                                                                                                                                                                                                                
|10.15 |  | * |  | Employment
Agreement dated August 31, 2000 between the Company and W. Galen
Hobbs, Jr. (Incorporated by reference to Exhibit 10.15 to the 2000 Form
10-KSB)                                                    
|      |  |   |  |                                                                                                                                                                                                                
|21    |  |   |  | Subsidiaries of WGNB Corp.                                                                                                                                                                                     



---

|*   |  | Indicates management contract or compensatory plan or arrangement.
|--- |  | ------------------------------------------------------------------
|    |  |                                                                   
|(b) |  | Reports on Form 8-K                                               



No reports on Form 8-K were filed during the quarter ended December 31, 2001.

33



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SIGNATURES

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

|                    |  |                                             |                        
|------------------- |  | ------------------------------------------- | -----------------------
|                    |  | WGNB CORP.                                 
|                   
|                    |  |                                             |                        
|                   
|                    |  | By:                                         | /s/  L. Leighton
Alston
|                    |  | L. Leighton Alston, Chief Executive Officer
|                   
|Date: March 6, 2002 |  |                                             |                        

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints L. Leighton Alston and Steven J. Haack, or
either of them, his attorney-in-fact, each with the power of substitution, for
him in any and all capacities, to sign any amendments to this Report, and to
file the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in-fact, or his substitute or
substitutes, may do or cause to be done by virtue hereof.

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

|                                                                                                                         |  |                      
|------------------------------------------------------------------------------------------------------------------------ |  | ---------------------
|/s/  L. Leighton AlstonL. Leighton Alston, President, Chief
Executive Officer and Director
[Principal Executive Officer] |  | Date: March 6, 2002  
|                                                                                                                        
|                                                                                                                         |  |                      
|                                                                                                                        
|/s/  Steven J. HaackSteven J. Haack, Secretary and Treasurer
[Principal Financial and Accounting Officer]                |  | Date: March 6, 2002  
|                                                                                                                        
|                                                                                                                         |  |                      
|                                                                                                                        
|/s/  Joe Whit WalkerJoe Whit Walker, Chairman of the Board                                                               |  | Date: March 6, 2002  
|                                                                                                                        
|                                                                                                                         |  |                      
|                                                                                                                        
|Grady W. Cole, Director                                                                                                  |  | Date: March ___, 2002
|                                                                                                                        
|                                                                                                                         |  |                      
|                                                                                                                        
|/s/  Richard A. DuncanRichard A. Duncan, Director                                                                        |  | Date: March 6, 2002  
|                                                                                                                        
|                                                                                                                         |  |                      
|                                                                                                                        
|/s/  W.T.
Green, Jr.W.T. Green, Jr., Director                                                                            |  | Date: March 6, 2002  
|                                                                                                                        
|                                                                                                                         |  |                      
|                                                                                                                        
|/s/  L.G. JoynerL.G. (Jack) Joyner, Director                                                                             |  | Date: March 6, 2002  

34



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|                                                                     |  |                      
|-------------------------------------------------------------------- |  | ---------------------
|                                                                    
|/s/  R. David PerryR. David Perry, Director                          |  | Date: March 6, 2002  
|                                                                    
|                                                                     |  |                      
|                                                                    
|L. Richard Plunkett, Director                                        |  | Date: March ___, 2002
|                                                                    
|                                                                     |  |                      
|                                                                    
|/s/  Thomas
E. Reeve,  III  M.D.Thomas E. Reeve, III, M.D., Director |  | Date: March 6, 2002  
|                                                                    
|                                                                     |  |                      
|                                                                    
|/s/  Thomas T. RichardsThomas T. Richards, Director                  |  | Date: March 8, 2002  
|                                                                    
|                                                                     |  |                      
|                                                                    
|Oscar W. Roberts, III, Director                                      |  | Date: March __, 2002 
|                                                                    
|                                                                     |  |                      
|                                                                    
|/s/  Frank T. Thomasson, IIIFrank T. Thomasson, III, Director        |  | Date: March 8, 2002  
|                                                                    
|                                                                     |  |                      
|                                                                    
|/s/  J. Thomas VanceJ. Thomas Vance, Director                        |  | Date: March 8, 2002  
|                                                                    
|                                                                     |  |                      
|                                                                    
|/s/  Charles M. Willis, Sr.Charles M. Willis, Sr., Director          |  | Date: March 6, 2002  

35



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##### Table of Contents



WGNB CORP.

Consolidated Financial Statements

December 31, 2001 and 2000

(with Independent Accountants Report thereon)





---



##### Table of Contents



REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders
WGNB Corp. and Subsidiaries

We have audited the accompanying consolidated balance sheets of WGNB Corp. and
subsidiaries as of December 31, 2001 and 2000, and the related consolidated
statements of earnings, comprehensive income, changes in stockholders equity
and cash flows for each of the three years ended December 31, 2001. These
financial statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of WGNB Corp. and
subsidiaries as of December 31, 2001 and 2000, and the results of their
operations and their cash flows for each of the three years ended December 31,
2001, in conformity with auditing standards generally accepted in the United
States of America.

/s/ Porter Keadle Moore, LLP

Atlanta, Georgia
January 11, 2002





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##### Table of Contents



WGNB CORP.

Consolidated Balance Sheets

December 31, 2001 and 2000

|                                                                              |                                                                                                                    |   |                            |             |   |             |             |            |   |             |  | 
|----------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------ | - | -------------------------- | ----------- | - | ----------- | ----------- | ---------- | - | ----------- |  | 
|                                                                              |                                                                                                                    |   |                            |             |   | 2001        |             | 2000      
|                                                                              |                                                                                                                    |   |                            |             |   |             |             |           
|Assets                                                                        |                                                                                                                    |   |                            |             |   |             |             |           
|Cash and due from banks, including reserve requirements
of $100,000 each year |                                                                                                                    | $ | 11,314,895                 |             |   |             | 11,827,664  |           
|Federal funds sold                                                            |                                                                                                                    |   | 19,684,000                 |             |   |             | 110,000     |           
|                                                                              |                                                                                                                    |   |                            |             |   |             |             |           
|                                                                              |                                                                                                                    |   | Cash and cash equivalents  |             | $ | 30,998,895  |             |            |   | 11,937,664  | 
|Securities available for sale                                                 |                                                                                                                    |   | 54,934,146                 |             |   |             | 39,959,015  |           
|Securities held to maturity                                                   |                                                                                                                    |   | 2,000,000                  |             |   |             | 1,000,000   |           
|Loans, net                                                                    |                                                                                                                    |   | 249,560,369                |             |   |             | 224,985,971 |           
|Premises and equipment, net                                                   |                                                                                                                    |   | 6,306,346                  |             |   |             | 5,693,348   |           
|Accrued interest receivable                                                   |                                                                                                                    |   | 1,936,980                  |             |   |             | 1,987,596   |           
|Other assets                                                                  |                                                                                                                    |   | 4,485,301                  |             |   |             | 3,548,845   |           
|                                                                              |                                                                                                                    |   |                            |             |   |             |             |           
|                                                                              |                                                                                                                    | $ | 350,222,037                |             |   |             | 289,112,439 |           
|                                                                              |                                                                                                                    |   |                            |             |   |             |             |           
|Liabilities and Stockholders Equity                                          |                                                                                                                    |   |                            |             |   |             |             |           
|Deposits:                                                                     |                                                                                                                    |   |                            |             |   |             |             |           
|                                                                              | Demand                                                                                                             |   | $                          | 32,972,953  |   |             |             | 30,872,988 |  
|                                                                              | Interest bearing demand                                                                                            |   |                            | 109,464,714 |   |             |             | 88,422,636 |  
|                                                                              | Savings                                                                                                            |   |                            | 8,235,588   |   |             |             | 7,577,186  |  
|                                                                              | Time                                                                                                               |   |                            | 88,363,915  |   |             |             | 75,723,544 |  
|                                                                              | Time, over $100,000                                                                                                |   |                            | 41,493,958  |   |             |             | 31,214,509 |  
|                                                                              |                                                                                                                    |   |                            |             |   |             |             |           
|                                                                              |                                                                                                                    |   | Total deposits             |             |   | 280,531,128 |             |            |   | 233,810,863 | 
|Federal Home Loan Bank advances                                               |                                                                                                                    |   | 35,000,000                 |             |   |             | 25,000,000  |           
|Other borrowings                                                              |                                                                                                                    |   | 1,282,000                  |             |   |             | 1,300,000   |           
|Federal funds purchased                                                       |                                                                                                                    |   |                           |             |   |             | 600,000     |           
|Accrued interest payable                                                      |                                                                                                                    |   | 1,895,387                  |             |   |             | 1,835,061   |           
|Other liabilities                                                             |                                                                                                                    |   | 2,309,195                  |             |   |             | 879,502     |           
|                                                                              |                                                                                                                    |   |                            |             |   |             |             |           
|                                                                              |                                                                                                                    |   | Total liabilities          |             |   | 321,017,710 |             |            |   | 263,425,426 | 
|                                                                              |                                                                                                                    |   |                            |             |   |             |             |           
|Commitments                                                                   |                                                                                                                    |   |                            |             |   |             |             |           
|Stockholders equity:                                                         |                                                                                                                    |   |                            |             |   |             |             |           
|                                                                              | Common stock, $1.25 par value, 10,000,000 shares authorized;
3,100,355 and 3,095,455 shares issued and outstanding |   |                            | 3,875,444   |   |             |             | 3,869,319  |  
|                                                                              | Additional paid-in capital                                                                                         |   |                            | 829,324     |   |             |             | 817,864    |  
|                                                                              | Retained earnings                                                                                                  |   |                            | 24,111,323  |   |             |             | 21,027,693 |  
|                                                                              | Accumulated comprehensive loss                                                                                     |   |                            | 388,236     |   |             |             | (27,863    | )
|                                                                              |                                                                                                                    |   |                            |             |   |             |             |           
|                                                                              |                                                                                                                    |   | Total stockholders equity |             |   | 29,204,327  |             |            |   | 25,687,013  | 
|                                                                              |                                                                                                                    |   |                            |             |   |             |             |           
|                                                                              |                                                                                                                    | $ | 350,222,037                |             |   |             | 289,112,439 |           
|                                                                              |                                                                                                                    |   |                            |             |   |             |             |           

See accompanying notes to consolidated financial statements.

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##### Table of Contents



WGNB CORP.

Consolidated Statements of Earnings

For the Years Ended December 31, 2001, 2000 and 1999

|                                                    |                                       |                             |                              |            |           |            |            |            |           |            |            |            |           |            | 
|--------------------------------------------------- | ------------------------------------- | --------------------------- | ---------------------------- | ---------- | --------- | ---------- | ---------- | ---------- | --------- | ---------- | ---------- | ---------- | --------- | ---------- | 
|                                                    |                                       |                             |                              |            | 2001      |            | 2000       |            | 1999     
|                                                    |                                       |                             |                              |            |           |            |            |            |          
|Interest income:                                    |                                       |                             |                              |            |           |            |            |            |           |            |            |           
|                                                    | Interest and fees on loans            |                             | $                            | 23,218,171 |           |            |            | 20,991,521 |           |            |            | 17,048,668 |          
|                                                    | Interest on federal funds sold        |                             |                              | 490,114    |           |            |            | 352,887    |           |            |            | 316,157    |          
|                                                    | Interest on investment securities:    |                             |                              |            |           |            |            |            |           |            |            |            |          
|                                                    |                                       | U.S. Government agencies    |                              |            | 1,661,092 |            |            |            | 1,813,713 |            |            |            | 1,825,952 |           
|                                                    |                                       | State, county and municipal |                              |            | 916,520   |            |            |            | 697,902   |            |            |            | 563,100   |           
|                                                    |                                       | Other                       |                              |            | 262,426   |            |            |            | 192,829   |            |            |            | 129,458   |           
|                                                    |                                       |                             |                              |            |           |            |            |            |           |            |            |           
|                                                    |                                       |                             | Total interest income        |            |           | 26,548,323 |            |            |           | 24,048,852 |            |            |           | 19,883,335 | 
|                                                    |                                       |                             |                              |            |           |            |            |            |           |            |            |           
|Interest expense:                                   |                                       |                             |                              |            |           |            |            |            |           |            |            |           
|                                                    | Interest on deposits:                 |                             |                              |            |           |            |            |            |           |            |            |            |          
|                                                    |                                       | Demand                      |                              |            | 2,398,878 |            |            |            | 2,513,082 |            |            |            | 2,068,119 |           
|                                                    |                                       | Savings                     |                              |            | 227,721   |            |            |            | 237,909   |            |            |            | 235,894   |           
|                                                    |                                       | Time                        |                              |            | 7,488,778 |            |            |            | 6,200,949 |            |            |            | 5,230,259 |           
|                                                    | Interest on FHLB and other borrowings |                             |                              | 1,953,643  |           |            |            | 1,404,606  |           |            |            | 433,300    |          
|                                                    |                                       |                             |                              |            |           |            |            |            |           |            |            |           
|                                                    |                                       |                             | Total interest expense       |            |           | 12,069,020 |            |            |           | 10,356,546 |            |            |           | 7,967,572  | 
|                                                    |                                       |                             |                              |            |           |            |            |            |           |            |            |           
|                                                    |                                       |                             | Net interest income          |            |           | 14,479,303 |            |            |           | 13,692,306 |            |            |           | 11,915,763 | 
|Provision for loan losses                           |                                       |                             | 910,500                      |            |           |            | 508,700    |            |           |            | 303,462    |           
|                                                    |                                       |                             |                              |            |           |            |            |            |           |            |            |           
|Net interest income after provision for loan losses |                                       |                             | 13,568,803                   |            |           |            | 13,183,606 |            |           |            | 11,612,301 |           
|                                                    |                                       |                             |                              |            |           |            |            |            |           |            |            |           
|Other income:                                       |                                       |                             |                              |            |           |            |            |            |           |            |            |           
|                                                    | Service charges on deposit accounts   |                             |                              | 2,921,445  |           |            |            | 2,158,729  |           |            |            | 1,433,757  |          
|                                                    | Mortgage origination fees             |                             |                              | 823,363    |           |            |            | 245,833    |           |            |            | 299,037    |          
|                                                    | Miscellaneous                         |                             |                              | 805,566    |           |            |            | 586,140    |           |            |            | 198,159    |          
|                                                    |                                       |                             |                              |            |           |            |            |            |           |            |            |           
|                                                    |                                       |                             | Total other income           |            |           | 4,550,374  |            |            |           | 2,990,702  |            |            |           | 1,930,953  | 
|                                                    |                                       |                             |                              |            |           |            |            |            |           |            |            |           
|Other expenses:                                     |                                       |                             |                              |            |           |            |            |            |           |            |            |           
|                                                    | Salaries and employee benefits        |                             |                              | 6,504,486  |           |            |            | 5,419,337  |           |            |            | 4,549,682  |          
|                                                    | Occupancy                             |                             |                              | 1,555,737  |           |            |            | 1,407,503  |           |            |            | 1,345,174  |          
|                                                    | Other operating                       |                             |                              | 2,799,169  |           |            |            | 2,455,885  |           |            |            | 2,097,760  |          
|                                                    |                                       |                             |                              |            |           |            |            |            |           |            |            |           
|                                                    |                                       |                             | Total other expenses         |            |           | 10,859,392 |            |            |           | 9,282,725  |            |            |           | 7,992,616  | 
|                                                    |                                       |                             |                              |            |           |            |            |            |           |            |            |           
|                                                    |                                       |                             | Earnings before income taxes |            |           | 7,259,785  |            |            |           | 6,891,583  |            |            |           | 5,550,638  | 
|Income taxes                                        |                                       |                             | 2,470,664                    |            |           |            | 2,487,406  |            |           |            | 1,994,966  |           
|                                                    |                                       |                             |                              |            |           |            |            |            |           |            |            |           
|                                                    |                                       |                             | Net earnings                 |            | $         | 4,789,121  |            |            |           | 4,404,177  |            |            |           | 3,555,672  | 
|                                                    |                                       |                             |                              |            |           |            |            |            |           |            |            |           
|Net earnings per share                              |                                       | $                           | 1.55                         |            |           |            | 1.42       |            |           |            | 1.14       |           
|                                                    |                                       |                             |                              |            |           |            |            |            |           |            |            |           
|Diluted net earnings per share                      |                                       | $                           | 1.52                         |            |           |            | 1.41       |            |           |            | 1.13       |           
|                                                    |                                       |                             |                              |            |           |            |            |            |           |            |            |           

See accompanying notes to consolidated financial statements.

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##### Table of Contents



WGNB CORP.

Consolidated Statements of Comprehensive Income

For the Years Ended December 31, 2001, 2000 and 1999

|                                        |                                                                        |                                                     |                                                      |  |          |         |           |  |           |        |            |   |            |         |  
|--------------------------------------- | ---------------------------------------------------------------------- | --------------------------------------------------- | ---------------------------------------------------- |  | -------- | ------- | --------- |  | --------- | ------ | ---------- | - | ---------- | ------- | -
|                                        |                                                                        |                                                     |                                                      |  | 2001     |         | 2000      |  | 1999     
|                                        |                                                                        |                                                     |                                                      |  |          |         |           |  |          
|Net earnings                            |                                                                        | $                                                   | 4,789,121                                            |  |          |         | 4,404,177 |  |           |        | 3,555,672  |  
|                                        |                                                                        |                                                     |                                                      |  |          |         |           |  |           |        |            |  
|Other comprehensive income, net of tax: |                                                                        |                                                     |                                                      |  |          |         |           |  |           |        |            |  
|                                        | Unrealized gains (losses) on investment
securities available for sale: |                                                     |                                                      |  |          |         |           |  |           |        |            |   |           
|                                        |                                                                        | Unrealized gains (losses) arising during the period |                                                      |  | 692,076  |         |           |  | 1,630,351 |        |            |   | (2,218,700 | )      
|                                        |                                                                        | Associated (taxes) benefit                          |                                                      |  | (262,712 | )       |           |  | (618,881  | )      |            |   | 845,482    |        
|                                        |                                                                        |                                                     | Reclassification adjustment for (gain) loss realized |  |          | (21,381 | )         |  |           | 8,833  |            |   |            | (13,857 | )
|                                        |                                                                        |                                                     | Associated taxes (benefit)                           |  |          | 8,116   |           |  |           | (3,353 | )          |   |            | 5,260   |  
|                                        |                                                                        |                                                     |                                                      |  |          |         |           |  |           |        |            |  
|Other comprehensive income (loss)       |                                                                        |                                                     | 416,099                                              |  |          |         | 1,016,950 |  |           |        | (1,381,815 | )
|                                        |                                                                        |                                                     |                                                      |  |          |         |           |  |           |        |            |  
|Comprehensive income                    |                                                                        | $                                                   | 5,205,220                                            |  |          |         | 5,421,127 |  |           |        | 2,173,857  |  
|                                        |                                                                        |                                                     |                                                      |  |          |         |           |  |           |        |            |  

See accompanying notes to consolidated financial statements.

F-4-



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##### Table of Contents



WGNB CORP.

Consolidated Statements of Changes in Stockholders Equity

For the Years Ended December 31, 2001, 2000 and 1999

|                                                                                 |  |              |           |            |  |          |           |               |  |             |           |       |  |  |            |   |  |  |            |   |  |  |            |  
|-------------------------------------------------------------------------------- |  | ------------ | --------- | ---------- |  | -------- | --------- | ------------- |  | ----------- | --------- | ----- |  |  | ---------- | - |  |  | ---------- | - |  |  | ---------- | -
|                                                                                 |  | Common Stock |           | Additional |  |          |           |               |  | Accumulated |           |       |  | 
|                                                                                 |  |              |           | Paid-in    |  | Retained |           | Comprehensive
|                                                                                 |  | Shares       |           | Amount     |  | Capital  |           | Earnings      |  | Income      |           | Total
|                                                                                 |  |              |           |            |  |          |           |               |  |             |           |      
|Balance, December 31, 1998                                                       |  |              | 3,138,030 |            |  | $        | 3,922,538 |               |  |             | 1,818,189 |       |  |  | 15,833,121 |   |  |  | 337,002    |   |  |  | 21,910,850 |  
|Cash dividend ($.42 per share)                                                   |  |              |          |            |  |          |          |               |  |             |          |       |  |  | (1,293,818 | ) |  |  |           |   |  |  | (1,293,818 | )
|Retirement of common stock                                                       |  |              | (39,076   | )          |  |          | (48,845   | )             |  |             | (806,992  | )     |  |  |           |   |  |  |           |   |  |  | (855,837   | )
|Exercise of stock options                                                        |  |              | 5,164     |            |  |          | 6,455     |               |  |             | 24,910    |       |  |  |           |   |  |  |           |   |  |  | 31,365     |  
|Issuance of common stock in lieu of directors fees                              |  |              | 1,276     |            |  |          | 1,595     |               |  |             | 24,563    |       |  |  |           |   |  |  |           |   |  |  | 26,158     |  
|Change in unrealized holding losses on
securities available for sale, net of tax |  |              |          |            |  |          |          |               |  |             |          |       |  |  |           |   |  |  | (1,381,815 | ) |  |  | (1,381,815 | )
|Net earnings                                                                     |  |              |          |            |  |          |          |               |  |             |          |       |  |  | 3,555,672  |   |  |  |           |   |  |  | 3,555,672  |  
|                                                                                 |  |              |           |            |  |          |           |               |  |             |           |       |  |  |            |   |  |  |            |   |  |  |            |  
|Balance, December 31, 1999                                                       |  |              | 3,105,394 |            |  |          | 3,881,743 |               |  |             | 1,060,670 |       |  |  | 18,094,975 |   |  |  | (1,044,813 | ) |  |  | 21,992,575 |  
|Cash dividend ($.48 per share)                                                   |  |              |          |            |  |          |          |               |  |             |          |       |  |  | (1,471,459 | ) |  |  |           |   |  |  | (1,471,459 | )
|Retirement of common stock                                                       |  |              | (11,966   | )          |  |          | (14,958   | )             |  |             | (272,080  | )     |  |  |           |   |  |  |           |   |  |  | (287,038   | )
|Exercise of stock options                                                        |  |              | 972       |            |  |          | 1,215     |               |  |             | 5,800     |       |  |  |           |   |  |  |           |   |  |  | 7,015      |  
|Issuance of common stock in lieu of directors fees                              |  |              | 1,055     |            |  |          | 1,319     |               |  |             | 23,474    |       |  |  |           |   |  |  |           |   |  |  | 24,793     |  
|Change in unrealized holding gains on
securities available for sale, net of tax  |  |              |          |            |  |          |          |               |  |             |          |       |  |  |           |   |  |  | 1,016,950  |   |  |  | 1,016,950  |  
|Net earnings                                                                     |  |              |          |            |  |          |          |               |  |             |          |       |  |  | 4,404,177  |   |  |  |           |   |  |  | 4,404,177  |  
|                                                                                 |  |              |           |            |  |          |           |               |  |             |           |       |  |  |            |   |  |  |            |   |  |  |            |  
|Balance, December 31, 2000                                                       |  |              | 3,095,455 |            |  |          | 3,869,319 |               |  |             | 817,864   |       |  |  | 21,027,693 |   |  |  | (27,863    | ) |  |  | 25,687,013 |  
|Cash dividend ($.55 per share)                                                   |  |              |          |            |  |          |          |               |  |             |          |       |  |  | (1,705,491 | ) |  |  |           |   |  |  | (1,705,491 | )
|Retirement of common stock                                                       |  |              | (2,466    | )          |  |          | (3,083    | )             |  |             | (52,282   | )     |  |  |           |   |  |  |           |   |  |  | (55,365    | )
|Exercise of stock options                                                        |  |              | 6,260     |            |  |          | 7,825     |               |  |             | 39,687    |       |  |  |           |   |  |  |           |   |  |  | 47,512     |  
|Issuance of common stock in lieu of directors fees                              |  |              | 1,106     |            |  |          | 1,383     |               |  |             | 24,055    |       |  |  |           |   |  |  |           |   |  |  | 25,438     |  
|Change in unrealized holding gain on
securities available for sale, net of tax   |  |              |          |            |  |          |          |               |  |             |          |       |  |  |           |   |  |  | 416,099    |   |  |  | 416,099    |  
|Net earnings                                                                     |  |              |          |            |  |          |          |               |  |             |          |       |  |  | 4,789,121  |   |  |  |           |   |  |  | 4,789,121  |  
|                                                                                 |  |              |           |            |  |          |           |               |  |             |           |       |  |  |            |   |  |  |            |   |  |  |            |  
|Balance, December 31, 2001                                                       |  |              | 3,100,355 |            |  | $        | 3,875,444 |               |  |             | 829,324   |       |  |  | 24,111,323 |   |  |  | 388,236    |   |  |  | 29,204,327 |  
|                                                                                 |  |              |           |            |  |          |           |               |  |             |           |       |  |  |            |   |  |  |            |   |  |  |            |  

See accompanying notes to consolidated financial statements.

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##### Table of Contents



WGNB CORP.

Consolidated Statements of Cash Flows

For the Years Ended December 31, 2001, 2000 and 1999

|                                               |                                                                                     |                                                      |                   |                                           |          |            |             |             |          |          |             |             |         |          |             |  
|---------------------------------------------- | ----------------------------------------------------------------------------------- | ---------------------------------------------------- | ----------------- | ----------------------------------------- | -------- | ---------- | ----------- | ----------- | -------- | -------- | ----------- | ----------- | ------- | -------- | ----------- | -
|                                               |                                                                                     |                                                      |                   |                                           |          | 2001       |             | 2000        |          | 1999    
|                                               |                                                                                     |                                                      |                   |                                           |          |            |             |             |          |         
|Cash flows from operating activities:          |                                                                                     |                                                      |                   |                                           |          |            |             |             |          |          |             |            
|                                               | Net earnings                                                                        |                                                      | $                 | 4,789,121                                 |          |            |             | 4,404,177   |          |          |             | 3,555,672   |        
|                                               | Adjustments to reconcile net earnings to net cash
provided by operating activities: |                                                      |                   |                                           |          |            |             |             |          |          |             |             |        
|                                               |                                                                                     | Depreciation, amortization and accretion             |                   |                                           | 778,023  |            |             |             | 681,502  |          |             |             | 698,061 |         
|                                               |                                                                                     | Provision for loan losses                            |                   |                                           | 910,500  |            |             |             | 508,700  |          |             |             | 303,462 |         
|                                               |                                                                                     | Change in deferred income taxes                      |                   |                                           | (341,386 | )          |             |             | (221,275 | )        |             |             | 26,197  |         
|                                               |                                                                                     | (Gain) loss on sale of securities available for sale |                   |                                           | (21,381  | )          |             |             | 8,833    |          |             |             | (13,857 | )       
|                                               |                                                                                     | (Gain) loss on sale of premises and equipment        |                   |                                           | (3,481   | )          |             |             | (11,647  | )        |             |             | 29,556  |         
|                                               |                                                                                     | (Gain) loss on sale of other real estate             |                   |                                           | (15,286  | )          |             |             | (22,374  | )        |             |             | 5,979   |         
|                                               |                                                                                     | Change in:                                           |                   |                                           |          |            |             |             |          |          |             |             |         |         
|                                               |                                                                                     |                                                      | Other assets      |                                           |          | (1,111,019 | )           |             |          | (724,670 | )           |             |         | (379,817 | )          
|                                               |                                                                                     |                                                      | Other liabilities |                                           |          | 1,461,519  |             |             |          | 292,712  |             |             |         | 164,912  |            
|                                               |                                                                                     |                                                      |                   |                                           |          |            |             |             |          |          |             |            
|                                               |                                                                                     |                                                      |                   | Net cash provided by operating activities |          |            | 6,446,610   |             |          |          | 4,915,958   |             |         |          | 4,390,165   |  
|                                               |                                                                                     |                                                      |                   |                                           |          |            |             |             |          |          |             |            
|Cash flows from investing activities:          |                                                                                     |                                                      |                   |                                           |          |            |             |             |          |          |             |            
|                                               | Proceeds from sales of securities available for sale                                |                                                      |                   | 1,080,000                                 |          |            |             | 560,520     |          |          |             | 2,608,723   |        
|                                               | Proceeds from maturities of securities available for sale                           |                                                      |                   | 17,210,115                                |          |            |             | 4,624,929   |          |          |             | 9,704,609   |        
|                                               | Purchases of securities available for sale                                          |                                                      |                   | (32,675,694                               | )        |            |             | (2,286,470  | )        |          |             | (14,391,531 | )      
|                                               | Purchase of securities held to maturity                                             |                                                      |                   | (1,000,000                                | )        |            |             |            |          |          |             | (1,000,000  | )      
|                                               | Net change in loans                                                                 |                                                      |                   | (25,484,898                               | )        |            |             | (44,159,879 | )        |          |             | (23,145,057 | )      
|                                               | Proceeds from sales of premises and equipment                                       |                                                      |                   | 11,342                                    |          |            |             | 29,350      |          |          |             | 85,777      |        
|                                               | Purchases of premises and equipment                                                 |                                                      |                   | (1,321,684                                | )        |            |             | (788,315    | )        |          |             | (1,447,146  | )      
|                                               | Capital expenditures for other real estate                                          |                                                      |                   | (136,702                                  | )        |            |             |            |          |          |             |            |        
|                                               | Proceeds from sales of other real estate                                            |                                                      |                   | 489,283                                   |          |            |             | 103,273     |          |          |             | 186,927     |        
|                                               |                                                                                     |                                                      |                   |                                           |          |            |             |             |          |          |             |            
|                                               |                                                                                     |                                                      |                   | Net cash used by investing activities     |          |            | (41,828,238 | )           |          |          | (41,916,592 | )           |         |          | (27,397,698 | )
|                                               |                                                                                     |                                                      |                   |                                           |          |            |             |             |          |          |             |            
|Cash flows from financing activities:          |                                                                                     |                                                      |                   |                                           |          |            |             |             |          |          |             |            
|                                               | Net change in deposits                                                              |                                                      |                   | 46,720,265                                |          |            |             | 19,005,461  |          |          |             | 21,883,186  |        
|                                               | Federal Home Loan Bank advances                                                     |                                                      |                   | 10,000,000                                |          |            |             | 15,000,000  |          |          |             | 10,000,000  |        
|                                               | Repayment of Federal Home Loan Bank advances                                        |                                                      |                   |                                          |          |            |             | (5,000,000  | )        |          |             | (2,000,000  | )      
|                                               | Proceeds from other borrowings                                                      |                                                      |                   | 372,000                                   |          |            |             | 1,220,000   |          |          |             | 25,000      |        
|                                               | Repayment of other borrowings                                                       |                                                      |                   | (390,000                                  | )        |            |             | (270,000    | )        |          |             | (275,000    | )      
|                                               | Change in federal funds purchased                                                   |                                                      |                   | (600,000                                  | )        |            |             | 600,000     |          |          |             |            |        
|                                               | Dividends paid                                                                      |                                                      |                   | (1,651,553                                | )        |            |             | (1,402,784  | )        |          |             | (1,297,189  | )      
|                                               | Exercise of stock options                                                           |                                                      |                   | 47,512                                    |          |            |             | 7,015       |          |          |             | 31,365      |        
|                                               | Retirement of common stock                                                          |                                                      |                   | (55,365                                   | )        |            |             | (287,038    | )        |          |             | (855,837    | )      
|                                               |                                                                                     |                                                      |                   |                                           |          |            |             |             |          |          |             |            
|                                               |                                                                                     |                                                      |                   | Net cash provided by financing activities |          |            | 54,442,859  |             |          |          | 28,872,654  |             |         |          | 27,511,525  |  
|                                               |                                                                                     |                                                      |                   |                                           |          |            |             |             |          |          |             |            
|Change in cash and cash equivalents            |                                                                                     |                                                      | 19,061,231        |                                           |          |            | (8,127,980  | )           |          |          | 4,503,992   |            
|Cash and cash equivalents at beginning of year |                                                                                     |                                                      | 11,937,664        |                                           |          |            | 20,065,644  |             |          |          | 15,561,652  |            
|                                               |                                                                                     |                                                      |                   |                                           |          |            |             |             |          |          |             |            
|Cash and cash equivalents at end of year       |                                                                                     | $                                                    | 30,998,895        |                                           |          |            | 11,937,664  |             |          |          | 20,065,644  |            
|                                               |                                                                                     |                                                      |                   |                                           |          |            |             |             |          |          |             |            

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##### Table of Contents



WGNB CORP.

Consolidated Statements of Cash Flows, continued

For the Years Ended December 31, 2001, 2000 and 1999

|                                                  |                                              |                                                                                  |  |      |            |      |  |      |           |   |  |  |            |  
|------------------------------------------------- | -------------------------------------------- | -------------------------------------------------------------------------------- |  | ---- | ---------- | ---- |  | ---- | --------- | - |  |  | ---------- | -
|                                                  |                                              |                                                                                  |  | 2001 |            | 2000 |  | 1999
|                                                  |                                              |                                                                                  |  |      |            |      |  |     
|Supplemental disclosure of cash flow information: |                                              |                                                                                  |  |      |            |      |  |      |           |   |  | 
|                                                  | Cash paid during the year for:               |                                                                                  |  |      |            |      |  |      |           |   |  |  |           
|                                                  |                                              | Interest                                                                         |  | $    | 11,932,926 |      |  |      | 9,619,586 |   |  |  | 8,048,453  |  
|                                                  |                                              | Income taxes                                                                     |  | $    | 2,154,962  |      |  |      | 2,616,628 |   |  |  | 1,871,000  |  
|                                                  | Non-cash investing and financing activities: |                                                                                  |  |      |            |      |  |      |           |   |  |  |           
|                                                  |                                              | Transfer of loans to other real estate                                           |  | $    |           |      |  |      | 712,061   |   |  |  | 249,688    |  
|                                                  |                                              | Change in unrealized gains (losses) on
securities available for sale, net of tax |  | $    | 416,099    |      |  |      | 1,016,950 |   |  |  | (1,381,815 | )
|                                                  |                                              | Change in dividends payable                                                      |  | $    | (53,938    | )    |  |      | (68,675   | ) |  |  | (3,371     | )
|                                                  |                                              | Issuance of common stock to directors in
lieu directors fees                    |  | $    | 25,438     |      |  |      | 24,793    |   |  |  | 26,158     |  

See accompanying notes to consolidated financial statements.

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##### Table of Contents



WGNB CORP.

Notes to Consolidated Financial Statements

|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) |  | Summary of Significant Accounting Policies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |  | The following is a summary of the significant policies and procedures.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   
|    |  | Basis of Presentation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |  | The consolidated financial statements of WGNB Corp. (the Company) include
the financial statements of its wholly owned subsidiaries West Georgia
National Bank (the Bank) and West Georgia Credit Services, Inc. (WGCS).
All significant intercompany accounts and transactions have been eliminated
in consolidation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   
|    |  | The Bank commenced business in 1946 upon receipt of its banking charter
from the Office of the Comptroller of the Currency (the OCC). The Bank is
primarily regulated by the OCC and undergoes periodic examinations by this
regulatory agency. The Company is regulated by the Federal Reserve and is
also subject to periodic examinations. The Bank provides a full range of
commercial and consumer banking services principally in Carroll County,
Georgia.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|    |  | WGCS, which also operates under the name Mortgage & Loan Solutions,
commenced operations in 1997 serving Paulding, Douglas and Carroll
counties. The Company established WGCS in order to diversify revenue
sources by offering consumer financing not traditionally offered at banks.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   
|    |  | The accounting and reporting policies of the Company, and the methods of
applying these principles, conform with generally accepted accounting
principles and with general practices within the banking industry. In
preparing the financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the balance sheet and income and expenses for
the year. Actual results could differ significantly from those estimates.
Material estimates common to the banking industry that are particularly
susceptible to significant change in an operating cycle of one year
include, but are not limited to, the determination of the allowance for
loan losses, the valuation of any real estate acquired in connection with
foreclosures or in satisfaction of loans and valuation allowances
associated with the realization of deferred tax assets which are based on
future taxable income.
|   
|    |  | Cash and Cash Equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |  | For purposes of reporting cash flows, cash and cash equivalents include
cash and due from banks and federal funds sold.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   
|    |  | Investment Securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |  | The Company classifies its securities in one of three categories: trading,
available for sale, or held to maturity. Trading securities are bought and
held principally for the purpose of selling them in the near term. Held to
maturity securities are those securities for which the Company has the
ability and intent to hold the security until maturity. All other
securities not included in trading or held to maturity are classified as
available for sale.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   
|    |  | Trading and available for sale securities are recorded at fair value. Held
to maturity securities are recorded at amortized cost, adjusted for the
amortization of premiums and accretion of discounts. Unrealized holding
gains and losses, net of the related tax effect, on securities available
for sale are excluded from earnings and are reported as a separate
component of accumulated comprehensive income in stockholders equity until
realized. Transfers of securities between categories are recorded at fair
value at the date of transfer.                                                                                                                                                                                                                                                                                                                                                                                                                            
|   
|    |  | A decline in the market value of any available for sale investment below
cost that is deemed other than temporary is charged to earnings and
establishes a new cost basis for the security.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   
|    |  | Premiums and discounts are amortized or accreted over the life of the
related security as an adjustment to the yield. Realized gains and losses
for securities classified as available for sale are included in earnings
and are derived using the specific identification method for determining
the cost of securities sold.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

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##### Table of Contents



WGNB CORP.

Notes to Consolidated Financial Statements, continued

|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) |  | Summary of Significant Accounting Policies, continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|    |  | Loans and Allowance for Loan Losses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |  | Loans are stated at the principal amount outstanding, net of unearned
interest and the allowance for loan losses. Interest income on loans is
recognized in a manner that results in a level yield on the principal
amount outstanding. Nonrefundable loan fees are deferred, net of certain
direct origination costs, and amortized into income over the life of the
related loan.                                                                                                                                                                                                                                                                                        
|   
|    |  | Accrual of interest is discontinued on a loan when management believes,
after considering economic and business conditions and collection efforts,
that the borrowers financial condition is such that collection of interest
is doubtful.                                                                                                                                                                                                                                                                                                                                                                                                                                
|   
|    |  | The allowance for loan losses is established through a provision for loan
losses charged to expense. Loans are charged against the allowance for loan
losses when management believes that the collectibility of the principal is
unlikely. The allowance represents an amount which, in managements
judgment, will be adequate to absorb probable losses on existing loans that
may become uncollectible.                                                                                                                                                                                                                                                                
|   
|    |  | Managements judgment in determining the adequacy of the allowance is based
on evaluations of the collectibility of loans. These evaluations take into
consideration such factors as changes in the nature and volume of the loan
portfolio, current economic conditions that may affect the borrowers
ability to pay, overall portfolio quality, and review of specific problem
loans.                                                                                                                                                                                                                                                                                   
|   
|    |  | Management believes that the allowance for loan losses is adequate. While
management uses available information to recognize losses on loans, future
additions to the allowance may be necessary based on changes in economic
conditions. In addition, various regulatory agencies, as an integral part
of their examination process, periodically review the Companys allowance
for loan losses. Such agencies may require the Company to recognize
additions to the allowance based on their judgments of information
available to them at the time of their examination.                                                                                               
|   
|    |  | Premises and Equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |  | Premises and equipment are carried at cost less accumulated depreciation.
Depreciation is computed using the straight-line method over the estimated
useful lives of the related assets. When assets are retired or otherwise
disposed, the cost and related accumulated depreciation are removed from
the accounts, and any resulting gain or loss is reflected in earnings for
the period. The cost of maintenance and repairs that do not improve or
extend the useful life of the respective asset is charged to income as
incurred, whereas significant renewals and improvements are capitalized.
The range of estimated useful lives for premises and equipment are:



|                          |  |               |  | 
|------------------------- |  | ------------- |  | 
|Building and improvements |  | 15  39 years
|Furniture and equipment   |  | 3  10 years 



| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Other Real Estate                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | Properties acquired through foreclosure are carried at the lower of cost
(defined as fair value at foreclosure) or fair value less estimated costs
to dispose. Accounting literature defines fair value as the amount that is
expected to be received in a current sale between a willing buyer and
seller other than in a forced or liquidation sale. Fair values at
foreclosure are based on appraisals. Losses arising from the acquisition of
foreclosed properties are charged against the allowance for loan losses.
Subsequent write-downs are provided by a charge to income through the
allowance for losses on other real estate in the period in which the need
arises.

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##### Table of Contents



WGNB CORP.

Notes to Consolidated Financial Statements, continued

|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) |  | Summary of Significant Accounting Policies, continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   
|    |  | Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |  | The Company accounts for income taxes under the liability method.
Accordingly, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit carryforwards.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred
tax assets and liabilities of a change in tax rates is recognized in income
in the period that includes the enactment date.
|   
|    |  | In the event the future tax consequences of differences between the
financial reporting bases and the tax bases of the assets and liabilities
results in deferred tax assets, an evaluation of the probability of being
able to realize the future benefits indicated by such asset is required. A
valuation allowance is provided for the portion of the deferred tax asset
when it is more likely than not that some portion or all of the deferred
tax asset will not be realized. In assessing the realizability of the
deferred tax assets, management considers the scheduled reversals of
deferred tax liabilities, projected future taxable income, and tax planning
strategies.                                    
|   
|    |  | Derivative Instruments and Hedging Activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |  | The Company recognizes the fair value of derivatives as assets or
liabilities in the financial statements. Changes in the fair value of a
derivative depends on the intended use of the derivative instrument at
inception. The change in fair value of instruments used as fair value
hedges is accounted for in the earnings of the period simultaneous with
accounting for the fair value change of the item being hedged. The change
in fair value of the effective portion of cash flow hedges is accounted for
in comprehensive income rather than earnings. The change in fair value of
derivative instruments that are not intended as a hedge is accounted for in
the earnings of the period of the change.        
|   
|    |  | As of December 31, 2001, the Company held an interest rate swap, which was
entered into as a means of managing its interest rate risk and accounts for
the hedge instrument as fair value hedges. At December 31, 2001, the
Company had an interest rate swap contract with a notional outstanding of
$20,000,000. Under the interest swap contract, the Company receives a fixed
rate of 3.45% and pays at a rate of 90 day LIBOR which was 1.89% at
December 31, 2001. The Company did not have any derivatives instruments as
of December 31, 2000.                                                                                                                                                                      
|   
|    |  | Net Earnings Per Share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |  | Earnings per common share are based on the weighted average number of
common shares outstanding during the period. The effects of potential
common shares outstanding during the period are included in diluted
earnings per share. Stock options, which are described in note 10, are
granted to key management personnel. During 2000, the Company completed a
two for one stock split. Earnings per share and the related average shares
outstanding for each reporting period have been restated to reflect the
effects of the stock split.                                                                                                                                                                             



|                                     |  |              |           |        |  |        |           |           |  |  |      |  
|------------------------------------ |  | ------------ | --------- | ------ |  | ------ | --------- | --------- |  |  | ---- | -
|                                     |  |              |           |        |  | Common |           | Per Share
|For the Year Ended December 31, 2001 |  | Net Earnings |           | Shares |  | Amount
|                                     |  |              |           |        |  |       
|Earnings per common share            |  | $            | 4,789,121 |        |  |        | 3,098,067 |           |  |  | 1.55 |  
|Effect of dilutive stock options     |  |              |          |        |  |        | 45,986    |           |  |  | (.03 | )
|                                     |  |              |           |        |  |        |           |           |  |  |      |  
|Diluted earnings per common share    |  | $            | 4,789,121 |        |  |        | 3,144,053 |           |  |  | 1.52 |  
|                                     |  |              |           |        |  |        |           |           |  |  |      |  

|                                     |  |              |           |        |  |        |           |           |  |  |      |  
|------------------------------------ |  | ------------ | --------- | ------ |  | ------ | --------- | --------- |  |  | ---- | -
|                                     |  |              |           |        |  | Common |           | Per Share
|For the Year Ended December 31, 2000 |  | Net Earnings |           | Shares |  | Amount
|                                     |  |              |           |        |  |       
|Earnings per common share            |  | $            | 4,404,177 |        |  |        | 3,098,419 |           |  |  | 1.42 |  
|Effect of dilutive stock options     |  |              |          |        |  |        | 35,424    |           |  |  | (.01 | )
|                                     |  |              |           |        |  |        |           |           |  |  |      |  
|Diluted earnings per common share    |  | $            | 4,404,177 |        |  |        | 3,133,843 |           |  |  | 1.41 |  
|                                     |  |              |           |        |  |        |           |           |  |  |      |  

F-10-



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##### Table of Contents



WGNB CORP.

Notes to Consolidated Financial Statements, continued

|    |  |                                                      
|--- |  | -----------------------------------------------------
|(1) |  | Summary of Significant Accounting Policies, continued
|   
|    |  | Net Earnings Per Share, continued                    



|                                     |  |              |           |        |  |        |           |           |  |  |      |  
|------------------------------------ |  | ------------ | --------- | ------ |  | ------ | --------- | --------- |  |  | ---- | -
|                                     |  |              |           |        |  | Common |           | Per Share
|For the Year Ended December 31, 1999 |  | Net Earnings |           | Shares |  | Amount
|                                     |  |              |           |        |  |       
|Earnings per common share            |  | $            | 3,555,672 |        |  |        | 3,121,816 |           |  |  | 1.14 |  
|Effect of dilutive stock options     |  |              |          |        |  |        | 34,380    |           |  |  | (.01 | )
|                                     |  |              |           |        |  |        |           |           |  |  |      |  
|Diluted earnings per common share    |  | $            | 3,555,672 |        |  |        | 3,156,196 |           |  |  | 1.13 |  
|                                     |  |              |           |        |  |        |           |           |  |  |      |  



|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |  | New Accounting Standards                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |  | Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |  | In September 2000, the FASB issued Statement of Financial Accounting
Standards No. 140, Accounting for transfers and Servicing of Financial
Assets and Extinguishments of Liabilitiesa Replacement of FASB Statement
No. 125 (SFAS 140). FAS 140 revises the criteria for accounting for
securitizations and other transfers of financial assets and collateral. In
addition, SFAS 140 requires certain additional disclosures. Except for the
new disclosure provisions, which were effective for the year ended December
31, 2000, SFAS 140 was effective for the transfer of financial assets
occurring after March 31, 2001. The provisions of SFAS 140 did not have a
significant effect on the consolidated financial statements.                                                                                                                                     
|   
|    |  | Accounting for Business Combinations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |  | In July 2001, the FASB issued Statements of Financial Accounting Standards
No. 141, Business Combinations (FAS 141) and No. 142, Goodwill and
Other Intangible Assets (FAS 142). These standards change the accounting
for business combinations by, among other things, prohibiting the
prospective use of pooling-of-interests accounting and requiring companies
to stop amortizing goodwill and certain intangible assets with an
indefinite useful life created by business combinations accounted for using
the purchase method of accounting. Instead, goodwill and intangible assets
deemed to have an indefinite useful life will be subject to an annual
review for impairment. The new standards generally will be effective in the
first quarter of 2002. The provisions of these statements did not have an
effect on the consolidated financial statements.
|   
|    |  | Reclassifications                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |  | Certain reclassifications have been made in the prior years consolidated
financial statements to conform to the presentation used in 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   
|(2) |  | Investment Securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |  | Investment securities available for sale and held to maturity at December
31, 2001 and 2000 are summarized as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           



|                             |  |                   |            |            |  |            |         |       |  |           |         |  |  |  |            | 
|---------------------------- |  | ----------------- | ---------- | ---------- |  | ---------- | ------- | ----- |  | --------- | ------- |  |  |  | ---------- | 
|Available for Sale           |  | December 31, 2001
|                             |  |                  
|                             |  |                   |            |            |  | Gross      |         | Gross |  | Estimated
|                             |  | Amortized         |            | Unrealized |  | Unrealized |         | Fair 
|                             |  | Cost              |            | Gains      |  | Losses     |         | Value
|                             |  |                   |            |            |  |            |         |      
|U.S. Government agencies     |  | $                 | 3,854,196  |            |  |            | 45,942  |       |  |           | 843     |  |  |  | 3,899,295  | 
|Mortgage-backed securities   |  |                   | 26,360,027 |            |  |            | 232,317 |       |  |           | 84,840  |  |  |  | 26,507,504 | 
|State, county and municipals |  |                   | 23,058,952 |            |  |            | 521,350 |       |  |           | 104,439 |  |  |  | 23,475,863 | 
|Corporate bonds              |  |                   | 1,057,820  |            |  |            | 2,517   |       |  |           | 8,853   |  |  |  | 1,051,484  | 
|                             |  |                   |            |            |  |            |         |       |  |           |         |  |  |  |            | 
|                             |  | $                 | 54,330,995 |            |  |            | 802,126 |       |  |           | 198,975 |  |  |  | 54,934,146 | 
|                             |  |                   |            |            |  |            |         |       |  |           |         |  |  |  |            | 

F-11-



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##### Table of Contents



WGNB CORP.

Notes to Consolidated Financial Statements, continued

|    |  |                                 
|--- |  | --------------------------------
|(2) |  | Investment Securities, continued



|                             |  |                   |            |            |  |            |         |       |  |           |         |  |  |  |            | 
|---------------------------- |  | ----------------- | ---------- | ---------- |  | ---------- | ------- | ----- |  | --------- | ------- |  |  |  | ---------- | 
|                             |  | December 31, 2000
|                             |  |                  
|                             |  |                   |            |            |  | Gross      |         | Gross |  | Estimated
|                             |  | Amortized         |            | Unrealized |  | Unrealized |         | Fair 
|                             |  | Cost              |            | Gains      |  | Losses     |         | Value
|                             |  |                   |            |            |  |            |         |      
|U.S. Government agencies     |  | $                 | 12,717,922 |            |  |            | 2,440   |       |  |           | 115,408 |  |  |  | 12,604,954 | 
|Mortgage-backed securities   |  |                   | 13,742,126 |            |  |            | 35,575  |       |  |           | 163,222 |  |  |  | 13,614,479 | 
|State, county and municipals |  |                   | 13,541,184 |            |  |            | 270,927 |       |  |           | 72,529  |  |  |  | 13,739,582 | 
|                             |  |                   |            |            |  |            |         |       |  |           |         |  |  |  |            | 
|                             |  | $                 | 40,001,232 |            |  |            | 308,942 |       |  |           | 351,159 |  |  |  | 39,959,015 | 
|                             |  |                   |            |            |  |            |         |       |  |           |         |  |  |  |            | 



|                           |  |                   |           |            |  |            |        |       |  |           |        |  |  |  |           | 
|-------------------------- |  | ----------------- | --------- | ---------- |  | ---------- | ------ | ----- |  | --------- | ------ |  |  |  | --------- | 
|Held to Maturity           |  | December 31, 2001
|                           |  |                  
|                           |  |                   |           |            |  | Gross      |        | Gross |  | Estimated
|                           |  | Amortized         |           | Unrealized |  | Unrealized |        | Fair 
|                           |  | Cost              |           | Gains      |  | Losses     |        | Value
|                           |  |                   |           |            |  |            |        |      
|Trust preferred securities |  | $                 | 2,000,000 |            |  |            | 75,000 |       |  |           | 40,400 |  |  |  | 2,034,600 | 
|                           |  |                   |           |            |  |            |        |       |  |           |        |  |  |  |           | 

|                           |  |                   |           |            |  |            |   |       |  |           |         |  |  |  |         | 
|-------------------------- |  | ----------------- | --------- | ---------- |  | ---------- | - | ----- |  | --------- | ------- |  |  |  | ------- | 
|                           |  | December 31, 2000
|                           |  |                  
|                           |  |                   |           |            |  | Gross      |   | Gross |  | Estimated
|                           |  | Amortized         |           | Unrealized |  | Unrealized |   | Fair 
|                           |  | Cost              |           | Gains      |  | Losses     |   | Value
|                           |  |                   |           |            |  |            |   |      
|Trust preferred securities |  | $                 | 1,000,000 |            |  |            |  |       |  |           | 280,000 |  |  |  | 720,000 | 
|                           |  |                   |           |            |  |            |   |       |  |           |         |  |  |  |         | 

| |  |                                                                                                                                                                                                                                                                                                                                                              
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The amortized cost and estimated fair value of investment securities
available for sale and held to maturity at December 31, 2001, by
contractual maturity, are shown below. Expected maturities will differ from
contractual maturities because borrowers have the right to call or prepay
certain obligations with or without call or prepayment penalties.

|                                                                            |  |               |            |                     |  |  |            | 
|--------------------------------------------------------------------------- |  | ------------- | ---------- | ------------------- |  |  | ---------- | 
|Available for Sale                                                          |  |               |            |                    
|                                                                            | 
|                                                                            |  | AmortizedCost |            | EstimatedFair Value
|                                                                            |  |               |            |                    
|U.S. Government agencies, state, county
and municipals and corporate bonds: |  |               |            |                     |  |  |           
|Within 1 year                                                               |  | $             | 118,752    |                     |  |  | 119,430    | 
|1 to 5 years                                                                |  |               | 3,757,867  |                     |  |  | 3,812,771  | 
|5 to 10 years                                                               |  |               | 4,727,683  |                     |  |  | 4,759,115  | 
|After 10 years                                                              |  |               | 19,366,666 |                     |  |  | 19,735,326 | 
|Mortgage-backed securities                                                  |  |               | 26,360,027 |                     |  |  | 26,507,504 | 
|                                                                            |  |               |            |                     |  |  |            | 
|                                                                            |  | $             | 54,330,995 |                     |  |  | 54,934,146 | 
|                                                                            |  |               |            |                     |  |  |            | 
|Held to maturity                                                            |  |               |            |                     |  |  |            | 
|                                                                            |  |               |            |                     |  |  |            | 
|                                                                            | 
|Trust preferred securities:                                                 |  |               |            |                     |  |  |           
|After 10 years                                                              |  | $             | 2,000,000  |                     |  |  | 2,034,600  | 
|                                                                            |  |               |            |                     |  |  |            | 

| |  |                                                                                                                                                                                        
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Proceeds from sales of securities available for sale during 2001, 2000 and
1999 were $1,080,000, $560,520 and $2,608,723, respectively, with the
following gains and losses recognized:

|             |  |      |        |      |  |      |       |  |  |  |        | 
|------------ |  | ---- | ------ | ---- |  | ---- | ----- |  |  |  | ------ | 
|             |  | 2001 |        | 2000 |  | 1999
|             |  |      |        |      |  |     
|Gross gains  |  | $    | 21,831 |      |  |      |      |  |  |  | 13,857 | 
|Gross losses |  | $    |       |      |  |      | 8,833 |  |  |  |       | 

F-12-



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##### Table of Contents



WGNB CORP.

Notes to Consolidated Financial Statements, continued

|    |  |                                                                                                                                                                                                                         
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) |  | Investment Securities, continued                                                                                                                                                                                        
|    |  | Investment securities with a fair value of approximately $52,755,000 and
$38,860,000 as of December 31, 2001 and 2000, respectively, were pledged to
secure public deposits, as required by law, and for other purposes.
|   
|(3) |  | Loans                                                                                                                                                                                                                   
|    |  | Major classifications of loans at December 31, 2001 and 2000 are summarized
as follows:                                                                                                                                 



|                                       |  |      |             |      |  |  |             | 
|-------------------------------------- |  | ---- | ----------- | ---- |  |  | ----------- | 
|                                       |  | 2001 |             | 2000
|                                       |  |      |             |     
|Commercial, financial and agricultural |  | $    | 26,162,290  |      |  |  | 26,546,593  | 
|Real estate  mortgage                 |  |      | 147,704,252 |      |  |  | 135,750,184 | 
|Real estate  construction             |  |      | 60,784,686  |      |  |  | 46,051,798  | 
|Consumer                               |  |      | 19,153,301  |      |  |  | 20,118,006  | 
|                                       |  |      |             |      |  |  |             | 
|                                       |  |      | 253,804,529 |      |  |  | 228,466,581 | 
|Less:     Unearned interest            |  |      | 523,954     |      |  |  | 560,798     | 
|Allowance for loan losses              |  |      | 3,720,206   |      |  |  | 2,919,812   | 
|                                       |  |      |             |      |  |  |             | 
|                                       |  | $    | 249,560,369 |      |  |  | 224,985,971 | 
|                                       |  |      |             |      |  |  |             | 

| |  |                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The Bank and WGCS grant loans and extensions of credit to individuals and a
variety of businesses and corporations primarily located in its general
trade area of Carroll, Paulding and Douglas counties, Georgia. Although the
Bank has a diversified loan portfolio, a substantial portion of the loan
portfolio is collateralized by improved and unimproved real estate and is
dependent upon the real estate market.
|
| |  | Changes in the allowance for loan losses for the years ended December 31,
2001, 2000 and 1999 are as follows:                                                                                                                                                                                                                                                                                                            



|                           |  |      |           |      |  |      |           |   |  |  |           |  
|-------------------------- |  | ---- | --------- | ---- |  | ---- | --------- | - |  |  | --------- | -
|                           |  | 2001 |           | 2000 |  | 1999
|                           |  |      |           |      |  |     
|Balance, beginning of year |  | $    | 2,919,812 |      |  |      | 2,281,298 |   |  |  | 2,018,852 |  
|Provision for loan losses  |  |      | 910,500   |      |  |      | 508,700   |   |  |  | 303,462   |  
|Loans charged off          |  |      | (199,720  | )    |  |      | (76,737   | ) |  |  | (129,946  | )
|Recoveries                 |  |      | 89,614    |      |  |      | 206,551   |   |  |  | 88,930    |  
|                           |  |      |           |      |  |      |           |   |  |  |           |  
|Balance, end of year       |  | $    | 3,720,206 |      |  |      | 2,919,812 |   |  |  | 2,281,298 |  
|                           |  |      |           |      |  |      |           |   |  |  |           |  

|    |  |                                                                                                         
|--- |  | --------------------------------------------------------------------------------------------------------
|(4) |  | Premises and Equipment                                                                                  
|    |  | Major classifications of premises and equipment at December 31, 2001 and
2000 are summarized as follows:



|                               |  |      |            |      |  |  |            |  
|------------------------------ |  | ---- | ---------- | ---- |  |  | ---------- | -
|                               |  | 2001 |            | 2000
|                               |  |      |            |     
|Land                           |  | $    | 1,134,599  |      |  |  | 1,134,599  |  
|Buildings and improvements     |  |      | 5,869,136  |      |  |  | 5,247,696  |  
|Furniture and equipment        |  |      | 5,545,112  |      |  |  | 4,889,762  |  
|                               |  |      |            |      |  |  |            |  
|                               |  |      | 12,548,847 |      |  |  | 11,272,057 |  
|Less: Accumulated depreciation |  |      | (6,242,501 | )    |  |  | (5,578,709 | )
|                               |  |      |            |      |  |  |            |  
|                               |  | $    | 6,306,346  |      |  |  | 5,693,348  |  
|                               |  |      |            |      |  |  |            |  



| |  |                                                                                                       
| |  | ------------------------------------------------------------------------------------------------------
| |  | Depreciation expense amounted to $700,825, $655,487 and $588,456 in 2001,
2000 and 1999, respectively.

F-13-



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##### Table of Contents



WGNB CORP.

Notes to Consolidated Financial Statements, continued

|    |  |                                                                               
|--- |  | ------------------------------------------------------------------------------
|(5) |  | Time Deposits                                                                 
|    |  | At December 31, 2001 the scheduled maturities of time deposits are as follows:



|                    |  |   |             | 
|------------------- |  | - | ----------- | 
|2002                |  | $ | 99,925,976  | 
|2003                |  |   | 14,498,594  | 
|2004                |  |   | 5,110,651   | 
|2005                |  |   | 4,782,885   | 
|2006 and thereafter |  |   | 5,539,767   | 
|                    |  |   |             | 
|                    |  | $ | 129,857,873 | 
|                    |  |   |             | 



|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(6) |  | Lines of Credit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |  | The Bank has lines of credit for overnight borrowings of $11,000,000 and
$10,500,000 at December 31, 2001 and 2000, respectively. The Bank also has
a line of credit with the Federal Home Loan Bank of Atlanta (FHLB) totaling
$43,140,000 and $42,680,000 at December 31, 2001 and 2000, respectively.
Advances on the FHLB line of credit are subject to available collateral of
the Bank. At December 31, 2001, the Bank had advances outstanding from the
FHLB amounting to $35,000,000. The following advances require quarterly
interest payments:



|            |  |       |          |      |         |          |   |           |               |          |               |                        |                             |                            |                  |  |  |  |  |  | 
|----------- |  | ----- | -------- | ---- | ------- | -------- | - | --------- | ------------- | -------- | ------------- | ---------------------- | --------------------------- | -------------------------- | ---------------- |  |  |  |  |  | 
|            |  |       | Interest |      | Current |          |   |           |               |          |               |                        |                             |                            | Early Conversion
|Advance     |  | Basis |          | Rate |         | Maturity |   | Call Date |               | Option  
|            |  |       |          |      |         |          |   |           |               |         
|$10,000,000 |  | Fixed |          |      | 5.49    | %        |   | May 2011  |               | May 2006 |               | May 2006,3 month LIBOR
|$5,000,000  |  |       | Fixed    |      |         | 6.14     | % |           | December 2004 |          | December 2001 |                        | December 2001,3 month LIBOR
|$5,000,000  |  |       | Fixed    |      |         | 7.07     | % |           | May 2005      |          | May 2002      |                        | May 2002,3 month LIBOR     
|$10,000,000 |  | Fixed |          |      | 6.16    | %        |   | July 2005 |               |          |              |                        |                             | October 2000,3 month LIBOR
|$5,000,000  |  |       | Fixed    |      |         | 5.44     | % |           | February 2008 |          | February 2003 |                        | February 2003,3 month LIBOR

| |  |                                                                                                                                                            
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | At December 31, 2000, the Bank had advances outstanding from the FHLB
amounting to $25,000,000. The following advances require quarterly interest
payments:

|            |  |       |          |      |         |          |   |           |               |        |               |  |                             |                            |                  |  |  |  |  |  | 
|----------- |  | ----- | -------- | ---- | ------- | -------- | - | --------- | ------------- | ------ | ------------- |  | --------------------------- | -------------------------- | ---------------- |  |  |  |  |  | 
|            |  |       | Interest |      | Current |          |   |           |               |        |               |  |                             |                            | Early Conversion
|Advance     |  | Basis |          | Rate |         | Maturity |   | Call Date |               | Option
|            |  |       |          |      |         |          |   |           |               |       
|$5,000,000  |  |       | Fixed    |      |         | 6.14     | % |           | December 2004 |        | December 2001 |  | December 2001,3 month LIBOR
|$5,000,000  |  |       | Fixed    |      |         | 7.07     | % |           | May 2005      |        | May 2002      |  | May 2002,3 month LIBOR     
|$10,000,000 |  | Fixed |          |      | 6.16    | %        |   | July 2005 |               |        |              |  |                             | October 2000,3 month LIBOR
|$5,000,000  |  |       | Fixed    |      |         | 5.44     | % |           | February 2008 |        | February 2003 |  | February 2003,3 month LIBOR

| |  |                                                                                                                                                                                                                                                                  
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The early conversion option allows the FHLB to convert the advances to a
variable interest rate upon notification to the Bank. The FHLB advances
are secured by the Banks stock in the FHLB, its 1-4 family first mortgage
loans and qualified commercial loans.

F-14-



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##### Table of Contents



WGNB CORP.

Notes to Consolidated Financial Statements, continued

|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(6) |  | Lines of Credit, continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |  | Additionally, during 1999 the Company entered into a $1,750,000 line
of credit arrangement with a financial institution that matures March 31,
2002. At December 31, 2001 and 2000, the Company had outstanding advances
of $1,282,000 and $1,300,000, respectively. The facility requires interest
payments quarterly with annual interest calculated at the prime rate minus
1.25%                                                                                                                                                     
|   
|(7) |  | Commitments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |  | The Company is a party to financial instruments with off-balance-sheet risk
in the normal course of business to meet the financing needs of its
customers. These financial instruments include commitments to extend credit
and standby letters of credit. Those instruments involve, to varying
degrees, elements of credit risk in excess of the amount recognized in the
balance sheet. The contractual amounts of those instruments reflect the
extent of involvement the Company has in particular classes of financial
instruments.
|   
|    |  | The Companys exposure to credit loss in the event of non-performance by
the other party to the financial instrument for commitments to extend
credit and standby letters of credit is represented by the contractual
amount of those instruments. The Company uses the same credit policies in
making commitments and conditional obligations as it does for
on-balance-sheet instruments.                                                                                                                                              
|   
|    |  | In most cases, the Company requires collateral to support financial
instruments with credit risk.                                                                                                                                                                                                                                                                                                                                                                                                                                        



|                                                                    |                              |  |                    |            |      |  |  |            | 
|------------------------------------------------------------------- | ---------------------------- |  | ------------------ | ---------- | ---- |  |  | ---------- | 
|                                                                    |                              |  | Approximate       
|                                                                    |                              |  | Contractual Amount
|                                                                    |                              |  |                   
|                                                                    |                              |  | 2001               |            | 2000
|                                                                    |                              |  |                    |            |     
|Financial instruments whose contract amounts
represent credit risk: |                              |  |                    |            |      |  |  |           
|                                                                    | Commitments to extend credit |  | $                  | 39,167,000 |      |  |  | 38,888,000 | 
|                                                                    | Standby letters of credit    |  |                    | 597,000    |      |  |  | 474,000    | 



|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |  | Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since many of the commitments may
expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. The Company evaluates each
customers creditworthiness on a case-by-case basis. The amount of
collateral obtained, if deemed necessary by the Company, upon extension of
credit is based on managements credit evaluation. Collateral held varies,
but may include unimproved and improved real estate, certificates of
deposit or personal property.                                                                                  
|   
|    |  | Standby letters of credit are conditional commitments issued by the Company
to guarantee the performance of a customer to a third party. The credit
risk involved in issuing letters of credit is essentially the same as that
involved in extending loan facilities to customers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   
|(8) |  | Stock Repurchase Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |  | In 1996, the Board of Directors approved a Stock Repurchase Plan of up to
$2,000,000 of the Companys common stock currently outstanding. During
2001, the Board of Directors approved an additional $1,000,000 to be used
for the Stock Repurchase Plan. The Company redeemed 2,466 shares of common
stock for $55,365 dring 2001. At December 31, 2001, the Company had
$1,543,712 remaining to reacquire shares under the Stock Repurchase Plan.                                                                                                                                                                                                                                                                                                                                                                                                              
|   
|(9) |  | Regulatory Matters                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |  | The Company and the Bank are subject to various regulatory capital
requirements administered by the federal banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory and possibly
additional discretionary actions by regulators that, if undertaken, could
have a direct material effect on the Companys and the Banks financial
statements. Under certain adequacy guidelines and the regulatory framework
for prompt corrective action, the Company and the Bank must meet specific
capital guidelines that involve quantitative measures of the assets,
liabilities, and certain off-balance-sheet items as calculated under
regulatory accounting practices. The capital amounts and classification are
also subject to qualitative judgments by the regulators about components,
risk weightings, and other factors.

F-15-



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##### Table of Contents



WGNB CORP.

Notes to Consolidated Financial Statements, continued

|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(9) |  | Regulatory Matters, continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |  | Quantitative measures established by regulation to ensure capital adequacy
require the Company and the Bank to maintain minimum amounts and ratios of
total and Tier I capital to risk-weighted assets and of Tier I capital to
average assets. Management believes, as of December 31, 2001, that the
Company and the Bank meet all capital adequacy requirements to which it is
subject.                                                                                                                                                                                                                                                                                                       
|   
|    |  | As of December 31, 2001 the most recent notification from the Federal
Deposit Insurance Corporation categorized the Bank as well capitalized
under the regulatory framework for prompt corrective action. To be
categorized as well capitalized the Bank must maintain minimum total
risk-based, Tier I risk-based and Tier I leverage ratios as set forth in
the table. There are no conditions or events since that notification that
management believes have changed the institutions category. Presented
below are the Banks actual capital amounts and ratios. Detail disclosures
related to the Company have been excluded as they do not materially deviate
from the disclosure herein.



|                                         |  |            |        |                   |  |                   |    |            |  |             |          |                         |  |            |    |   |  |                        |         |  |  |  |      |  
|---------------------------------------- |  | ---------- | ------ | ----------------- |  | ----------------- | -- | ---------- |  | ----------- | -------- | ----------------------- |  | ---------- | -- | - |  | ---------------------- | ------- |  |  |  | ---- | -
|                                         |  |            |        |                   |  |                   |    |            |  |             |          |                         |  |            |    |   |  | To Be Well Capitalized
|                                         |  |            |        |                   |  |                   |    |            |  | For Capital |          | Under Prompt Corrective
|                                         |  | Actual     |        | Adequacy Purposes |  | Action Provisions
|                                         |  |            |        |                   |  |                  
|                                         |  | Amount     |        | Ratio             |  | Amount            |    | Ratio      |  | Amount      |          | Ratio                  
|                                         |  |            |        |                   |  |                   |    |            |  |             |          |                        
|                                         |  | (in 000's) |        |                   |  |                   |    | (in 000's) |  |             |          |                         |  | (in 000's) |    |   |  |                       
|As of December 31, 2001:                 |  |            |        |                   |  |                   |    |            |  |             |          |                         |  |            |    |   |  |                        |         |  |  |  |      |  
|Total Capital (to Risk
Weighted Assets)  |  | $          | 31,493 |                   |  |                   | 12 | %          |  |             | >20,578  |                         |  |            | >8 | % |  |                        | >25,723 |  |  |  | >10  | %
|                                        
|                                        
|                                        
|                                        
|                                        
|Tier I Capital
(to Risk Weighted Assets) |  | $          | 28,338 |                   |  |                   | 11 | %          |  |             | >10,289  |                         |  |            | >4 | % |  |                        | >15,434 |  |  |  | >  6 | %
|                                        
|                                        
|                                        
|                                        
|                                        
|Tier I Capital
(to Average Assets)       |  | $          | 28,338 |                   |  |                   | 8  | %          |  |             | >13,963  |                         |  |            | >4 | % |  |                        | >17,453 |  |  |  | >  5 | %
|                                        
|                                        
|                                        
|                                        
|                                        
|As of December 31, 2000:                 |  |            |        |                   |  |                   |    |            |  |             |          |                         |  |            |    |   |  |                        |         |  |  |  |      |  
|                                        
|                                        
|                                        
|                                        
|                                        
|Total Capital (to Risk
Weighted Assets)  |  | $          | 28,352 |                   |  |                   | 13 | %          |  |             | >17,839  |                         |  |            | >8 | % |  |                        | >22,298 |  |  |  | >10  | %
|                                        
|                                        
|                                        
|                                        
|                                        
|Tier I Capital
(to Risk Weighted Assets) |  | $          | 25,452 |                   |  |                   | 11 | %          |  |             | >  8,919 |                         |  |            | >4 | % |  |                        | >13,379 |  |  |  | >  6 | %
|                                        
|                                        
|                                        
|                                        
|                                        
|Tier I Capital
(to Average Assets)       |  | $          | 25,452 |                   |  |                   | 9  | %          |  |             | >11,525  |                         |  |            | >4 | % |  |                        | >14,406 |  |  |  | >  5 | %

|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |  | Dividends paid by the Bank are the primary source of funds available to the
Company. Banking regulations limit the amount of dividends that may be paid
without prior approval of the regulatory authorities. These restrictions
are based on the level of regulatory classified assets, the prior years
net earnings, and the ratio of equity capital to total assets. At December
31, 2001 the Bank could pay approximately $4,941,000 in dividends without
obtaining prior regulatory approval.                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    
|(10) |  | Incentive Stock Option Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|     |  | The Company has an incentive stock option plan accounted for under APB 25
and related Interpretations. Under the January 11, 1994 Incentive Stock
Option Plan the Company may grant options to certain key officers to
acquire shares of common stock of the Company at the then fair value, with
the number of shares to be determined annually by agreed upon formulas. A
total of 160,000 shares of common stock were reserved for possible issuance
under this plan. Options were to be granted commencing March 8, 1994 and
are to continue through the year 2004. The options may not be exercised
prior to five years from the date of grant and are exercisable no later
than ten years from that date. Additionally, 4,448 options were issued to
an officer of the Bank which were not covered by the aforementioned plan
but subject to the same conditions. No compensation cost has been
recognized for the stock options.

F-16-



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##### Table of Contents



WGNB CORP.

Notes to Consolidated Financial Statements, continued

|     |  |                                                                                                                                                                                                                                       
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(10) |  | Incentive Stock Option Plan, continued                                                                                                                                                                                                
|     |  | Had compensation cost for the plan been determined based upon the fair
value of the options at the grant dates, the Companys net earnings and net
earnings per share would have been reduced to the proforma amounts
indicated below:



|                           |  |             |  |   |           |      |  |      |           |      |  |  |           |  |  | 
|-------------------------- |  | ----------- |  | - | --------- | ---- |  | ---- | --------- | ---- |  |  | --------- |  |  | 
|                           |  |             |  |   |           | 2001 |  | 2000 |           | 1999
|                           |  |             |  |   |           |      |  |      |           |     
|Net earnings               |  | As reported |  | $ | 4,789,121 |      |  |      | 4,404,177 |      |  |  | 3,555,672 | 
|                           |  | Proforma    |  | $ | 4,733,730 |      |  |      | 4,373,964 |      |  |  | 3,485,786 | 
|Net earnings per share     |  | As reported |  | $ | 1.55      |      |  |      | 1.42      |      |  |  | 1.14      | 
|                           |  | Proforma    |  | $ | 1.53      |      |  |      | 1.41      |      |  |  | 1.12      | 
|Diluted earnings per share |  | As reported |  | $ | 1.52      |      |  |      | 1.41      |      |  |  | 1.13      | 
|                           |  | Proforma    |  | $ | 1.51      |      |  |      | 1.40      |      |  |  | 1.10      | 

| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The fair value of each option is estimated on the date of grant using the
Minimum Value Model with the following weighted average assumptions used
for grants in 2001, 2000 and 1999, respectively: dividend yield of 2.43%,
2.00% and 1.70% risk free interest rates of 5.08%, 5.00% and 6.00%,
respectively, and an expected life of 10 years. For disclosure purposes,
the Company immediately recognized the expense associated with the option
grants assuming that all awards will vest.
|
| |  | A summary status of the Companys stock option plan as of December 31,
2001, 2000 and 1999, and changes during the years ending on those dates, is
presented below:                                                                                                                                                                                                                                                                                                                           



|                                                               |  |        |        |       |  |           |       |       |  |        |        |           |  |   |       |  |  |           |        |   |  |   |       | 
|-------------------------------------------------------------- |  | ------ | ------ | ----- |  | --------- | ----- | ----- |  | ------ | ------ | --------- |  | - | ----- |  |  | --------- | ------ | - |  | - | ----- | 
|                                                               |  | 2001   |        | 2000  |  | 1999     
|                                                               |  |        |        |       |  |          
|                                                               |  |        |        |       |  | Wtd. Avg. |       |       |  |        |        | Wtd. Avg. |  |   |       |  |  | Wtd. Avg.
|                                                               |  |        |        |       |  | Exercise  |       |       |  |        |        | Exercise  |  |   |       |  |  | Exercise 
|                                                               |  | Shares |        | Price |  | Shares    |       | Price |  | Shares |        | Price    
|                                                               |  |        |        |       |  |           |       |       |  |        |        |          
|Outstanding, beginning of year                                 |  |        | 88,049 |       |  | $         | 12.04 |       |  |        | 81,221 |           |  | $ | 10.90 |  |  |           | 74,916 |   |  | $ | 9.17  | 
|Awarded during the year                                        |  |        | 14,490 |       |  | $         | 22.50 |       |  |        | 7,800  |           |  | $ | 21.50 |  |  |           | 11,469 |   |  | $ | 20.00 | 
|Exercised during the year                                      |  |        | (6,260 | )     |  | $         | 7.59  |       |  |        | (972   | )         |  | $ | 7.22  |  |  |           | (5,164 | ) |  | $ | 6.07  | 
|                                                               |  |        |        |       |  |           |       |       |  |        |        |           |  |   |       |  |  |           |        |   |  |   |       | 
|Outstanding, end of year                                       |  |        | 96,279 |       |  | $         | 13.75 |       |  |        | 88,049 |           |  | $ | 12.04 |  |  |           | 81,221 |   |  | $ | 10.90 | 
|                                                               |  |        |        |       |  |           |       |       |  |        |        |           |  |   |       |  |  |           |        |   |  |   |       | 
|Options exercisable at year end                                |  |        | 23,220 |       |  |           |       |       |  |        | 13,104 |           |  |   |       |  |  |           | 6,344  |   |  |   |       | 
|                                                               |  |        |        |       |  |           |       |       |  |        |        |           |  |   |       |  |  |           |        |   |  |   |       | 
|Weighted average fair value of
options granted during the year |  |        |        |       |  | $         | 6.02  |       |  |        |        |           |  | $ | 6.10  |  |  |           |        |   |  | $ | 9.68  | 
|                                                               |  |        |        |       |  |           |       |       |  |        |        |           |  |   |       |  |  |           |        |   |  |   |       | 



| |  |                                                                                   
| |  | ----------------------------------------------------------------------------------
| |  | The following information applies to all options outstanding at December 31, 2001:



|                                                    |  |                 |      | 
|--------------------------------------------------- |  | --------------- | ---- | 
|Range of exercise prices                            |  | $7.25 to $22.50
|Weighted average remaining contractual life (years) |  |                 | 6.01 | 



|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(11) |  | Defined Contribution Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|     |  | The Company began a qualified retirement plan pursuant to Internal Revenue
Code Section 401(k) in 1996 covering substantially all employees subject to
certain minimum age and service requirements. Contribution to the plan by
employees is voluntary. During 2001, 2000 and 1999, the Company matched
100% of the participants contributions up to 6% of the participants
salaries. The Company also made discretionary contributions to the plan in
2001, 2000 and 1999 of 5% of participants salaries. Contributions to the
plan charged to expense during 2001, 2000 and 1999 were $365,993, $303,996
and $261,763, respectively.

F-17-



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##### Table of Contents



WGNB CORP.

Notes to Consolidated Financial Statements, continued

|     |  |                                                                                                                                                                 
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
|(12) |  | Income Taxes                                                                                                                                                    
|     |  | The components of the provision for income taxes in the consolidated
statements of earnings for the years ended December 31, 2001, 2000 and 1999
are as follows:



|          |  |  |  |      |           |      |  |      |           |   |  | 
|--------- |  |  |  | ---- | --------- | ---- |  | ---- | --------- | - |  | 
|          |  |  |  | 2001 |           | 2000 |  | 1999
|          |  |  |  |      |           |      |  |     
|Current:  |  |  |  |      |           |      |  |      |           |   |  | 
|Federal   |  |  |  | $    | 2,518,696 |      |  |      | 2,356,552 |   |  | 
|State     |  |  |  |      | 293,354   |      |  |      | 352,129   |   |  | 
|Deferred: |  |  |  |      |           |      |  |      |           |   |  | 
|Federal   |  |  |  |      | (305,772  | )    |  |      | (208,558  | ) |  | 
|State     |  |  |  |      | (35,614   | )    |  |      | (12,717   | ) |  | 
|          |  |  |  |      |           |      |  |      |           |   |  | 
|Total     |  |  |  | $    | 2,470,664 |      |  |      | 2,487,406 |   |  | 
|          |  |  |  |      |           |      |  |      |           |   |  | 



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



|                                   |  |      |           |      |  |      |           |   |  |  |           |  
|---------------------------------- |  | ---- | --------- | ---- |  | ---- | --------- | - |  |  | --------- | -
|                                   |  | 2001 |           | 2000 |  | 1999
|                                   |  |      |           |      |  |     
|Pretax income at statutory rates   |  | $    | 2,468,327 |      |  |      | 2,343,138 |   |  |  | 1,887,217 |  
|Add (deduct):                      |  |      |           |      |  |      |           |   |  |  |           |  
|Tax-exempt interest income         |  |      | (268,094  | )    |  |      | (234,594  | ) |  |  | (199,106  | )
|State taxes, net of federal effect |  |      | 223,384   |      |  |      | 205,023   |   |  |  | 155,524   |  
|Non-deductible interest expense    |  |      | 39,909    |      |  |      | 33,905    |   |  |  | 25,796    |  
|Other                              |  |      | 7,138     |      |  |      | 139,934   |   |  |  | 125,535   |  
|                                   |  |      |           |      |  |      |           |   |  |  |           |  
|                                   |  | $    | 2,470,664 |      |  |      | 2,487,406 |   |  |  | 1,994,966 |  
|                                   |  |      |           |      |  |      |           |   |  |  |           |  



| |  |                                                                                                                                      
| |  | -------------------------------------------------------------------------------------------------------------------------------------
| |  | The following summarizes the net deferred tax asset, which is included as a
component of other assets, at December 31, 2001 and 2000.



|                                                       |  |      |           |      |  |  |          |  
|------------------------------------------------------ |  | ---- | --------- | ---- |  |  | -------- | -
|                                                       |  | 2001 |           | 2000
|                                                       |  |      |           |     
|Deferred income tax assets:                            |  |      |           |      |  |  |          |  
|Allowance for loan losses                              |  | $    | 1,198,007 |      |  |  | 856,367  |  
|Net unrealized losses on securities available for sale |  |      |          |      |  |  | 14,354   |  
|Other                                                  |  |      | 41,070    |      |  |  | 34,275   |  
|                                                       |  |      |           |      |  |  |          |  
|Total gross deferred income tax assets                 |  |      | 1,239,077 |      |  |  | 904,996  |  
|                                                       |  |      |           |      |  |  |          |  
|Deferred income tax liabilities:                       |  |      |           |      |  |  |          |  
|Premises and equipment                                 |  |      | (284,757  | )    |  |  | (277,702 | )
|Net unrealized gain on securities available for sale   |  |      | (214,915  | )    |  |  |         |  
|Other                                                  |  |      | (2,044    | )    |  |  | (2,050   | )
|                                                       |  |      |           |      |  |  |          |  
|Total gross deferred income tax liabilities            |  |      | (501,716  | )    |  |  | (279,752 | )
|                                                       |  |      |           |      |  |  |          |  
|Net deferred income tax asset                          |  | $    | 737,361   |      |  |  | 625,244  |  
|                                                       |  |      |           |      |  |  |          |  

F-18-



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##### Table of Contents



WGNB CORP.

Notes to Consolidated Financial Statements, continued

|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(13) |  | Related Party Transactions                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|     |  | The Bank conducts transactions with directors and executive officers,
including companies in which they have beneficial interests, in the normal
course of business. It is the Banks policy to comply with federal
regulations that require that loan transactions with directors and
executive officers be made on substantially the same terms as those
prevailing at the time made for comparable loans to other persons. The
following summary reflects activity for related party loans for 2001:



|                  |  |   |            |  
|----------------- |  | - | ---------- | -
|Beginning balance |  | $ | 4,256,249  |  
|New loans         |  |   | 6,156,985  |  
|Repayments        |  |   | (5,045,934 | )
|                  |  |   |            |  
|Ending balance    |  | $ | 5,367,300  |  
|                  |  |   |            |  



|     |  |                                                                                                                                 
|---- |  | --------------------------------------------------------------------------------------------------------------------------------
|     |  | At December 31, 2001, deposits from directors, executive officers, and
their related interests totaled approximately $6,482,000.
|    
|(14) |  | Other Operating Expenses                                                                                                        
|     |  | Components of other operating expenses which exceed 1% of total interest
income and other income are as follows:                

|                  |  |      |         |      |  |      |         |  |  |  |         | 
|----------------- |  | ---- | ------- | ---- |  | ---- | ------- |  |  |  | ------- | 
|                  |  | 2001 |         | 2000 |  | 1999
|                  |  |      |         |      |  |     
|Professional fees |  | $    | 355,018 |      |  |      | 313,023 |  |  |  | 223,413 | 
|                  |  |      |         |      |  |      |         |  |  |  |         | 



|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(15) |  | Fair Value of Financial Instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|     |  | The Company is required to disclose fair value information about financial
instruments, whether or not recognized on the face of the balance sheet,
for which it is practicable to estimate that value. The assumptions used in
the estimation of the fair value of the Companys financial instruments are
detailed below. Where quoted prices are not available, fair values are
based on estimates using discounted cash flows and other valuation
techniques. The use of discounted cash flows can be significantly affected
by the assumptions used, including the discount rate and estimates of
future cash flows. The following disclosures should not be considered a
surrogate of the liquidation value of the Company or its subsidiaries, but
rather a good-faith estimate of the increase or decrease in value of
financial instruments held by the Company since purchase, origination, or
issuance.
|    
|     |  | Cash and Cash Equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|     |  | For cash, due from banks and federal funds sold, the carrying amount is a
reasonable estimate of fair value.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    
|     |  | Investment Securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|     |  | The fair values for investment securities are based on quoted market
prices.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    
|     |  | Loans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|     |  | The fair value of fixed rate loans is estimated by discounting the future
cash flows using the current rates at which similar loans would be made
to borrowers with similar credit ratings. For variable rate loans, the
carrying amount is a reasonable estimate of fair value.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    
|     |  | Deposits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|     |  | The fair value of demand deposits, savings accounts, NOW and certain
money market deposits is the amount payable on demand at the reporting
date. The fair value of fixed maturity certificates of deposit is
estimated by discounting the future cash flows using the rates currently
offered for deposits of similar remaining maturities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    
|     |  | Federal Home Loan Bank Advances                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|     |  | The fair value of advances outstanding is based on the quoted value
provided by the FHLB.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    
|     |  | Other Borrowings                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|     |  | Because other borrowings are based on variable rates, the carrying value
is a reasonable estimate of fair value.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

F-19-



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##### Table of Contents



WGNB CORP.

Notes to Consolidated Financial Statements, continued

|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(15) |  | Fair Value of Financial Instruments, continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    
|     |  | Commitments to Extend Credit, Standby Letters of Credit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|     |  | Because commitments to extend credit and standby letters of credit are
made using variable rates or for a short term, the contract value is a
reasonable estimate of fair value.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    
|     |  | Derivative Instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|     |  | Fair value is estimated as the amount the Company would receive or pay to
terminate the contract as of the reporting date. At December 31, 2001,
the fair value of the contract outstanding was $0. There were no
contracts outstanding at December 31, 2000.                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    
|     |  | Limitations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|     |  | Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial
instrument. These estimates do not reflect any premium or discount that
could result from offering for sale at one time the Companys entire
holdings of a particular financial instrument. Because no market exists
for a significant portion of the Companys financial instruments, fair
value estimates are based on many judgements. These estimates are
subjective in nature and involve uncertainties and matters of significant
judgement and therefore cannot be determined with precision. Changes in
assumptions could significantly affect the estimates.
|    
|     |  | Fair value estimates are based on existing on and off-balance-sheet
financial instruments without attempting to estimate the value of
anticipated future business and the value of assets and liabilities that
are not considered financial instruments. Significant assets and
liabilities that are not considered financial instruments include
deferred income taxes and premises and equipment. In addition, the tax
ramifications related to the realization of the unrealized gains and
losses can have a significant effect on fair value estimates and have not
been considered in the estimates.                                                                                                
|    
|     |  | The carrying amount and estimated fair values of the Companys financial
instruments at December 31, 2001 and 2000 are as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

|             |                                 |  |          |             |            |  |          |             |            |  |  |             |  |  |  |             | 
|------------ | ------------------------------- |  | -------- | ----------- | ---------- |  | -------- | ----------- | ---------- |  |  | ----------- |  |  |  | ----------- | 
|             |                                 |  | 2001     |             | 2000      
|             |                                 |  |          |             |           
|             |                                 |  | Carrying |             | Estimated  |  | Carrying |             | Estimated 
|             |                                 |  | Amount   |             | Fair Value |  | Amount   |             | Fair Value
|             |                                 |  |          |             |            |  |          |             |           
|Assets:      |                                 |  |          |             |            |  |          |             |            |  |  |             |  |  |  |            
|             | Cash and cash equivalents       |  | $        | 30,998,895  |            |  |          | 30,998,895  |            |  |  | 11,937,664  |  |  |  | 11,937,664  | 
|             | Securities available for sale   |  | $        | 54,934,146  |            |  |          | 54,934,146  |            |  |  | 39,959,015  |  |  |  | 39,959,015  | 
|             | Securities held to maturity     |  | $        | 2,000,000   |            |  |          | 2,034,600   |            |  |  | 1,000,000   |  |  |  | 720,000     | 
|             | Loans                           |  | $        | 249,560,369 |            |  |          | 251,334,812 |            |  |  | 224,985,971 |  |  |  | 223,119,016 | 
|Liabilities: |                                 |  |          |             |            |  |          |             |            |  |  |             |  |  |  |            
|             | Deposits                        |  | $        | 280,531,128 |            |  |          | 283,125,277 |            |  |  | 233,810,863 |  |  |  | 233,972,561 | 
|             | Federal Home Loan Bank advances |  | $        | 35,000,000  |            |  |          | 36,990,382  |            |  |  | 25,000,000  |  |  |  | 25,628,417  | 
|             | Other borrowings                |  | $        | 1,282,000   |            |  |          | 1,282,000   |            |  |  | 1,300,000   |  |  |  | 1,300,000   | 
|             | Federal funds purchased         |  | $        |            |            |  |          |            |            |  |  | 600,000     |  |  |  | 600,000     | 

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##### Table of Contents



WGNB CORP.

Notes to Consolidated Financial Statements, continued

|     |  |                                                       
|---- |  | ------------------------------------------------------
|(16) |  | WGNB Corp. (Parent Company Only) Financial Information

Balance Sheets

December 31, 2001 and 2000

|                                     |                      |   |            |            |  |      |            |            |  | 
|------------------------------------ | -------------------- | - | ---------- | ---------- |  | ---- | ---------- | ---------- |  | 
|                                     |                      |   |            | 2001       |  | 2000
|                                     |                      |   |            |            |  |     
|Assets                              
|Cash                                 |                      | $ | 708,569    |            |  |      | 463,095    |           
|Investment in Bank                   |                      |   | 28,726,314 |            |  |      | 25,424,161 |           
|Investment in WGCS                   |                      |   | 270,638    |            |  |      | 246,899    |           
|Funds due from WGCS                  |                      |   | 1,282,000  |            |  |      | 1,300,000  |           
|Other assets                         |                      |   | 19,238     |            |  |      | 7,333      |           
|                                     |                      |   |            |            |  |      |            |           
|                                     |                      | $ | 31,006,759 |            |  |      | 27,441,488 |           
|                                     |                      |   |            |            |  |      |            |           
|Liabilities and Stockholders Equity
|Dividends payable                    |                      | $ | 459,901    |            |  |      | 405,963    |           
|Line of credit                       |                      |   | 1,282,000  |            |  |      | 1,300,000  |           
|Other liabilities                    |                      |   | 60,531     |            |  |      | 48,512     |           
|                                     |                      |   |            |            |  |      |            |           
|                                     | Total liabilities    |   |            | 1,802,432  |  |      |            | 1,754,475  | 
|                                     | Stockholders equity |   |            | 29,204,327 |  |      |            | 25,687,013 | 
|                                     |                      |   |            |            |  |      |            |           
|                                     |                      | $ | 31,006,759 |            |  |      | 27,441,488 |           
|                                     |                      |   |            |            |  |      |            |           

Statements of Earnings

For the Years Ended December 31, 2001, 2000 and 1999

|                                                                 |  |      |           |      |  |      |           |   |  |  |           |  
|---------------------------------------------------------------- |  | ---- | --------- | ---- |  | ---- | --------- | - |  |  | --------- | -
|                                                                 |  | 2001 |           | 2000 |  | 1999
|                                                                 |  |      |           |      |  |     
|Dividends from Bank                                              |  | $    | 1,954,115 |      |  |      | 1,721,185 |   |  |  | 2,143,871 |  
|Other income                                                     |  |      | 82,338    |      |  |      | 41,617    |   |  |  | 33,747    |  
|Other expense                                                    |  |      | (157,314  | )    |  |      | (125,655  | ) |  |  | (34,532   | )
|                                                                 |  |      |           |      |  |      |           |   |  |  |           |  
|Earnings before equity in undistributed
earnings of subsidiaries |  |      | 1,879,139 |      |  |      | 1,637,147 |   |  |  | 2,143,086 |  
|Equity in undistributed earnings (loss) of WGCS                  |  |      | 23,739    |      |  |      | (89,272   | ) |  |  | (155,568  | )
|Equity in undistributed earnings of Bank                         |  |      | 2,886,243 |      |  |      | 2,856,302 |   |  |  | 1,568,154 |  
|                                                                 |  |      |           |      |  |      |           |   |  |  |           |  
|Net earnings                                                     |  | $    | 4,789,121 |      |  |      | 4,404,177 |   |  |  | 3,555,672 |  
|                                                                 |  |      |           |      |  |      |           |   |  |  |           |  

F-21-



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##### Table of Contents



WGNB CORP.

Notes to Consolidated Financial Statements, continued

|     |  |                                                                  
|---- |  | -----------------------------------------------------------------
|(16) |  | WGNB Corp. (Parent Company Only) Financial Information, continued

Statements of Cash Flows

For the Years Ended December 31, 2001, 2000 and 1999

|                                                                                              |  |      |            |      |  |      |            |   |  |  |            |  
|--------------------------------------------------------------------------------------------- |  | ---- | ---------- | ---- |  | ---- | ---------- | - |  |  | ---------- | -
|                                                                                              |  | 2001 |            | 2000 |  | 1999
|                                                                                              |  |      |            |      |  |     
|Cash flows from operating activities:                                                         |  |      |            |      |  |      |            |   |  |  |            |  
|Net earnings                                                                                  |  | $    | 4,789,121  |      |  |      | 4,404,177  |   |  |  | 3,555,672  |  
|Adjustments to reconcile net earnings to net
cash provided by operating    activities:        |  |      |            |      |  |      |            |   |  |  |            |  
|Equity in undistributed earnings of Bank                                                      |  |      | (2,886,243 | )    |  |      | (2,856,302 | ) |  |  | (1,568,154 | )
|Equity in undistributed earnings of WGCS                                                      |  |      | (23,739    | )    |  |      | 89,272     |   |  |  | 155,568    |  
|Change in other assets                                                                        |  |      | (11,904    | )    |  |      | 703        |   |  |  | 1,431      |  
|Change in other liabilities                                                                   |  |      | 37,645     |      |  |      | 73,305     |   |  |  | 25,937     |  
|                                                                                              |  |      |            |      |  |      |            |   |  |  |            |  
|Net cash provided by operating activities                                                     |  |      | 1,904,880  |      |  |      | 1,711,155  |   |  |  | 2,170,454  |  
|                                                                                              |  |      |            |      |  |      |            |   |  |  |            |  
|Cash flows from investing activities:                                                         |  |      |            |      |  |      |            |   |  |  |            |  
|Investment in WGCS                                                                            |  |      |           |      |  |      |           |   |  |  | (100,053   | )
|Purchase of premises and equipment                                                            |  |      |           |      |  |      |           |   |  |  | (3,000     | )
|                                                                                              |  |      |            |      |  |      |            |   |  |  |            |  
|Net cash used by investing activities                                                         |  |      |           |      |  |      |           |   |  |  | (103,053   | )
|                                                                                              |  |      |            |      |  |      |            |   |  |  |            |  
|Cash flows from financing activities:                                                         |  |      |            |      |  |      |            |   |  |  |            |  
|Proceeds from borrowings                                                                      |  |      | 372,000    |      |  |      | 1,220,000  |   |  |  | 25,000     |  
|Payments on borrowings                                                                        |  |      | (390,000   | )    |  |      | (270,000   | ) |  |  | (275,000   | )
|Loan to WGCS                                                                                  |  |      | (372,000   | )    |  |      | (1,220,000 | ) |  |  | (25,000    | )
|Payments received from WGCS                                                                   |  |      | 390,000    |      |  |      | 270,000    |   |  |  | 275,000    |  
|Dividends paid                                                                                |  |      | (1,651,553 | )    |  |      | (1,402,784 | ) |  |  | (1,297,189 | )
|Exercise of stock options                                                                     |  |      | 47,512     |      |  |      | 7,015      |   |  |  | 31,365     |  
|Retirement of common stock                                                                    |  |      | (55,365    | )    |  |      | (287,038   | ) |  |  | (855,837   | )
|                                                                                              |  |      |            |      |  |      |            |   |  |  |            |  
|Net cash used by financing activities                                                         |  |      | (1,659,406 | )    |  |      | (1,682,807 | ) |  |  | (2,121,661 | )
|                                                                                              |  |      |            |      |  |      |            |   |  |  |            |  
|Increase (decrease) in cash                                                                   |  |      | 245,474    |      |  |      | 28,348     |   |  |  | (54,260    | )
|Cash at beginning of year                                                                     |  |      | 463,095    |      |  |      | 434,747    |   |  |  | 489,007    |  
|                                                                                              |  |      |            |      |  |      |            |   |  |  |            |  
|Cash at end of year                                                                           |  | $    | 708,569    |      |  |      | 463,095    |   |  |  | 434,747    |  
|                                                                                              |  |      |            |      |  |      |            |   |  |  |            |  
|Supplemental disclosure of non-cash financing activities:                                     |  |      |            |      |  |      |            |   |  |  |            |  
|Change in dividends payable                                                                   |  | $    | (53,938    | )    |  |      | (68,675    | ) |  |  | (3,371     | )
|Changes in unrealized gains (losses) on securities
available for sale, net of    tax, of Bank |  | $    | 416,099    |      |  |      | 1,016,950  |   |  |  | (1,381,815 | )
|Transfer of tax benefit from WGNB to WGCS                                                     |  | $    |           |      |  |      |           |   |  |  | 96,765     |  
|Issuance of common stock to directors in lieu directors fees                                 |  | $    | 25,438     |      |  |      | 24,793     |   |  |  | 26,158     |  

F-22-