##### Table of Contents









SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549




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Form 10-KSB

|   |  |                                                                                       
|-- |  | --------------------------------------------------------------------------------------
|þ  |  | ANNUAL REPORT UNDER SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934    
|  
|   |  | For the fiscal year ended December 31,
    2003                                       
|  
|or
|  
|o  |  | TRANSITION REPORT UNDER SECTION 13 OR
    15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File
Number: 000-33221



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Newnan Coweta Bancshares, Inc.

(Name of Small Business Issuer in Its
Charter)


|                         |  |                                     
|------------------------ |  | ------------------------------------
|Georgia                  |  | 58-2655471                          
|(State of Incorporation) |  | (I.R.S. Employer Identification No.)

145 Millard Farmer Industrial Blvd.

Newnan, Georgia 30263


(Address of principal executive offices)(Zip
Code)


(770) 683-6222

(Issuers telephone number)


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

None


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

Common Stock


(Title of Class)


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

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

Revenues for the
Registrants fiscal year ended December 31, 2003 total
$6,504,295.

The aggregate
market value of the Registrants outstanding Common Stock
held by nonaffiliates of the Registrant on March 15, 2004
was approximately $7,014,446. There were 900,000 shares of
Common Stock outstanding as of March 15, 2004.

Transitional Small
Business Disclosure Format (check
one):     Yes o          No þ

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the
Registrants definitive Proxy Statement for the 2004 Annual
Meeting of Shareholders are incorporated by reference into
Part III of this Report.



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NEWNAN COWETA BANCSHARES, INC.

ANNUAL REPORT ON FORM 10-KSB


FOR THE FISCAL YEAR ENDED DECEMBER 31,
2003


TABLE OF CONTENTS

|                                                |  |                                                                                          |    |        |    |  |  | 
|----------------------------------------------- |  | ---------------------------------------------------------------------------------------- | -- | ------ | -- |  |  | 
|Item                                            |  |                                                                                          |    | Page  
|Number                                          |  |                                                                                          |    | Number
|                                                |  |                                                                                          |    |       
|PART I                                          |  |                                                                                          |    |       
|1.                                              |  | Description of Business                                                                  |    |        | 2  | 
|2.                                              |  | Description of Property                                                                  |    |        | 10 | 
|3.                                              |  | Legal Proceedings                                                                        |    |        | 10 | 
|4.                                              |  | Submission of Matters to a
    Vote of Security Holders                                  |    |        | 10 | 
|PART II                                         |  |                                                                                          |    |       
|5.                                              |  | Market for Common Equity and
    Related Stockholder Matters                             |    |        | 11 | 
|6.                                              |  | Managements Discussion
    and Analysis or Plan of Operation                            |    |        | 12 | 
|7.                                              |  | Financial Statements                                                                     |    |        | 25 | 
|8.                                              |  | Changes in and Disagreements
    with Accountants on Accounting and Financial Disclosure |    |        | 26 | 
|8A.                                             |  | Controls and Procedures                                                                  |    |        | 26 | 
|PART III                                        |  |                                                                                          |    |       
|9.                                              |  | Directors and Executive
    Officers of the Registrant                                   |    |        | 26 | 
|10.                                             |  | Executive Compensation                                                                   |    |        | 26 | 
|11.                                             |  | Security Ownership of
    Certain Beneficial Owners and Management                       |    |        | 27 | 
|12.                                             |  | Certain Relationships and
    Related Transactions                                       |    |        | 27 | 
|13.                                             |  | Exhibits and Reports on
    Form 8-K                                                     |    |        | 27 | 
|14.                                             |  | Principal Accountant Fees
    and Services                                               |    |        | 27 | 
|Signatures                                      |  |                                                                                          | 28 |       
|EX-14 CODE OF ETHICS FOR CEO & CFO             
|EX-21 SUBSIDIARIES OF THE REGISTRANT           
|EX-23 CONSENT OF MCNAIR, MCLEMORE, MIDDLEBROOKS
|EX-31.1 302 CERTIFICATION OF CEO               
|EX-31.2 302 CERTIFICATION OF CFO               
|EX-32.1 906 CERTIFICATION OF CEO               
|EX-32.2 906 CERTIFICATION OF CFO               
|EX-99.1 CONSOLIDATED OF FINANCIAL REPORT       



1



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PART I






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

Overview



| |            
| | -----------
| | The Company

Newnan Coweta Bancshares, Inc. (the
Company) was incorporated under the laws of the
State of Georgia and is a bank holding company registered under
the Bank Holding Company Act of 1956, as amended. Its
wholly-owned subsidiary, Newnan Coweta Bank, a Georgia banking
corporation (the Bank), was incorporated on
December 21, 1999 and commenced business on April 20,
2000. The Bank reorganized into a holding company structure
effective October 1, 2001.

The primary activity of the Company currently is,
and is expected to remain for the foreseeable future, the
ownership and operation of the Bank. As a bank holding company,
the Company is intended to facilitate the Banks ability to
serve its customers requirements for financial services.
The holding company structure also provides flexibility for
expansion through the possible acquisition of other financial
institutions and the provision of additional banking-related
services, as well as certain non-banking services, which a
traditional commercial bank may not provide under present laws.
The holding company structure also affords additional
flexibility in terms of capital formation and financing
opportunities.

While the Company may seek in the future to
acquire additional banks or bank holding companies or to engage
in other activities appropriate for bank holding companies under
appropriate circumstances as permitted by law, the Company
currently has no plans, understandings or agreements concerning
any other activities other than as described below. The results
of operations and financial condition of the Company for the
foreseeable future, therefore, will be determined primarily by
the results of operations and financial condition of the Bank.



| |         
| | --------
| | The Bank

The Banks business consists primarily of
attracting deposits from the general public and, with these and
other funds, originating real estate loans, consumer loans,
business loans, and residential and commercial construction
loans. Funds not invested in the loan portfolio are invested by
the Bank primarily in obligations of the U.S. Government,
various states and their political subdivisions. In addition to
deposits, sources of funds for the Banks loans and other
investments include amortization and prepayment of loans, sales
of loans or participations in loans, and sales of its investment
securities. The principal sources of income for the Bank are
interest and fees collected on loans, fees collected on deposit
accounts and interest and dividends collected on other
investments. The principal expenses of the Bank are interest
paid on deposits, employee compensation and benefits, office
expenses and other overhead expenses.



| |          
| | ---------
| | Employees

As of February 1, 2004, the Company and the
Bank had 28 full-time equivalent employees of whom 27 are
full-time and 2 are part-time. The employees are not represented
by a collective bargaining unit. The Company and the Bank
believe their relationships with their employees to be good.



| |          
| | ---------
| | Customers

It is the opinion of management that there is no
single customer or affiliated group of customers whose deposits,
if withdrawn, would have a material adverse effect on the
business of the Company.



| |            
| | -----------
| | Competition

All phases of the Companys banking
activities are highly competitive. The Company competes actively
with nine commercial banks, as well as finance companies, credit
unions, and other financial institutions located in its service
area, which includes Coweta County, Georgia and its surrounding
areas.

Four major regional banks, with a total of nine
branches, represent approximately 70% of the deposits in the
Coweta County market. These financial institutions have greater
resources and lending limits than the

2



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Bank. There are several credit unions located in
Coweta County. Since credit unions are not subject to income
taxes in the way commercial banks are taxed, credit unions have
an advantage in offering competitive rates to potential
customers. The Bank also faces competition in certain areas of
its business from mortgage banking companies, consumer finance
companies, insurance companies, money market mutual funds and
securities brokerage firms, some of which are not subject to the
same degree of regulation as the Bank.


The Bank competes for deposits principally by
offering depositors a variety of deposit programs with
competitive interest rates, quality service and convenient
locations and hours. The Bank focuses its resources to seek out
and attract small business relationships and take advantage of
the Banks ability to provide flexible service that meets
the needs of this customer class. Management feels this market
niche is the most promising business area for the future growth
of the Bank.

Supervision and Regulation



| |        
| | -------
| | General

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

Beginning with the enactment of the Financial
Institutions Reform, Recovery and Enforcement Act of 1989,
numerous additional regulatory requirements have been placed on
the banking industry during the past ten years. On
November 12, 1999, the President signed into law a
financial services modernization act which effectively repealed
the anti-affiliation provisions of the 1933 Glass-Steagall Act
and the 1956 Bank Holding Company Act. Legislative changes and
the policies of various regulatory authorities may affect our
operations. We are unable to predict the nature or the extent of
the effect on our business and earnings that fiscal or monetary
policies, economic control or new federal or state legislation
may have in the future.



| |            
| | -----------
| | The Company

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

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



| |   |                                                                                                                                                                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | it may acquire direct or indirect ownership or
    control of any voting shares of any bank if, after such
    acquisition, the bank holding company will directly or
    indirectly own or control more than 5% of the voting shares of
    the bank;
|
| |  | it or any of its subsidiaries, other than a bank,
    may acquire all or substantially all of the assets of any
    bank; or                                                                                                                          
|
| |  | it may merge or consolidate with any other bank
    holding company.                                                                                                                                                                                  

The Bank Holding Company Act further provides
that the Federal Reserve may not approve any transaction that
would result in a monopoly or would be in furtherance of any
combination or conspiracy to monopolize or attempt to monopolize
the business of banking in any part of the United States. In
addition, the Federal Reserve will not approve a transaction the
effect of which may be substantially to lessen competition or to
tend to create a monopoly, or that in any other manner would be
in restraint of trade. However, such transactions may be
approved in the event the anti-competitive effects of the
proposed transaction are clearly outweighed by the public
interest in meeting the convenience and needs of the communities
to be served. The Federal Reserve is also required to consider
the financial and managerial resources and future prospects of
the

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bank holding companies and banks involved and the
convenience and needs of the communities to be served.
Consideration of financial resources generally focuses on
capital adequacy, and consideration of convenience and needs
issues generally focuses on the parties performance under
the Community Reinvestment Act of 1977.


The Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 facilitate interstate branching and
permit the establishment of agency relationships across state
lines. The Interstate Banking Act also permits bank holding
companies to acquire banks in any state without regard to
whether the transaction is prohibited under the laws of such
state, subject to certain state provisions, including minimum
age requirements of banks that are the target of the
acquisition. The minimum age of local banks subject to
interstate acquisition is five years.

In response to the Interstate Banking Act, the
Georgia General Assembly adopted the Georgia Interstate Banking
Act, which provides that:



| |   |                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | interstate acquisitions by institutions located
    in Georgia will be permitted in states which also allow
    interstate acquisitions; and               
|
| |  | interstate acquisitions of institutions located
    in Georgia will be permitted by institutions located in states
    which allow interstate acquisitions.

Additionally, in 1996, the Georgia General
Assembly adopted the Georgia Interstate Branching Act, which
permits Georgia-based banks and bank holding companies owning
banks outside of Georgia and all non-Georgia banks and bank
holding companies owning banks in Georgia the right to merge any
bank into an interstate branch network. The Georgia Interstate
Branching Act also allows banks to establish de novo branches on
an unlimited basis throughout Georgia, subject to the prior
approval of the Georgia Department of Banking and Finance.

Except as amended by the Gramm-Leach-Bliley Act
of 1999 discussed below, the Bank Holding Company Act generally
prohibits a bank holding company from engaging in activities
other than banking or managing or controlling banks or other
permissible subsidiaries. Bank holding companies are also
generally prohibited from acquiring or retaining direct or
indirect control of any company engaged in any activities other
than those activities determined by the Federal Reserve to be so
closely related to banking or managing or controlling banks as
to be a proper incident thereto. Activities determined by the
Federal Reserve to fall within this category include acquiring
or servicing loans, leasing personal property, conducting
discount securities brokerage activities, performing certain
data processing services, acting as agent or broker in selling
certain types of credit insurance, and performing certain
insurance underwriting activities. The BHC Act does not place
territorial limitations on permissible non-banking activities of
bank holding companies. The Federal Reserve has the power to
order a bank holding company or its subsidiaries to terminate
any non-banking activity when it has reasonable cause to believe
that continuation of such activity constitutes a serious risk to
the safety and soundness of any bank subsidiary of that bank
holding company.



| |         
| | --------
| | The Bank

The Bank is incorporated under the laws of the
State of Georgia and is subject to examination by the Georgia
Department of Banking and Finance. The Georgia Department
regulates all areas of the Banks commercial banking
operations, including, without limitation, loans, deposits,
reserves, mergers, reorganizations, issuance of securities,
payment of dividends, and the establishment of branches.

On July 25, 2001 the Bank became a member of
the Federal Reserve System. Consequently, most aspects of the
Banks operations are regulated and examined by both the
Georgia Department of Banking and Finance and the Federal
Reserve, including reserves, loans, investments, borrowings,
deposits, mergers, issuance of securities, payments of
dividends, establishment of branches, consolidation or corporate
reorganization and maintenance of books and records.



| |                                   
| | ----------------------------------
| | Gramm-Leach-Bliley Act of
    1999

On November 12, 1999, President Clinton
signed into law the Gramm-Leach-Bliley Act of 1999, which breaks
down many of the barriers to affiliations among banks and
securities firms, insurance companies, and

4



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##### Table of Contents



other financial service providers. This new law
provides financial organizations with the flexibility to
structure new affiliations through a holding company structure
or a financial subsidiary. As a result, the number and type of
entities competing with us in our markets could increase. It is
too early to determine what effect, if any, this new law will
have on us.


The Gramm-Leach-Bliley Act also covers various
topics such as insurance, unitary thrifts, privacy protection
provisions for customers of financial institutions, the Federal
Home Loan Bank systems modernization, automatic
teller machine reform, the Community Reinvestment Act and
certain changes related to the securities industry.

The legislation amends the Bank Holding Company
Act to clarify that a bank holding company may hold shares of
any company that the Federal Reserve has determined to be
engaged in activities that were sufficiently closely related to
banking. This act also amends the Bank Holding Company Act to
establish a new type of bank holding company  the
financial holding company. Financial holding
companies have the authority to engage in financial activities
in which other bank holding companies may not engage. Financial
holding companies may also affiliate with companies that are
engaged in financial activities. These financial activities
include activities that are:



| |   |                                                                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | financial in nature;                                                                                                                                                         
|
| |  | incidental to an activity that is financial in
    nature; or                                                                                                                
|
| |  | complimentary to a financial activity and does
    not pose a substantial risk to the safety and soundness of
    depository institutions or the financial system in general.

The Federal Reserve and the Secretary of the
Treasury may determine which activities meet these standards.
However, the Gramm-Leach-Bliley Act explicitly lists certain
activities as being financial in nature. For example, some of
these activities are:



| |   |                                                                                                                                                                                                                                                                                   
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | lending, exchanging, transferring or investing
    for others;                                                                                                                                                                                                                    
|
| |  | safeguarding money or securities;                                                                                                                                                                                                                                                 
|
| |  | insuring, guaranteeing, or indemnifying against
    loss, harm, damage, illness, disability or death, or providing
    and issuing annuities, and acting as principal, agent, or broker
    for these purposes in any state;                                                      
|
| |  | providing financial, investment or economic
    advice;                                                                                                                                                                                                                           
|
| |  | issuing or selling interests in pools of assets
    that a bank could hold directly;                                                                                                                                                                                              
|
| |  | underwriting, dealing in or making markets in
    securities; and                                                                                                                                                                                                                 
|
| |  | engaging within the United States in any activity
    that a bank holding company could engage in outside of the
    United States, if the Federal Reserve has found that the
    activity was usual in connection with banking or other financial
    operations internationally.

The Gramm-Leach-Bliley Act also directs the
Federal Reserve to adopt a regulation or order defining certain
additional activities as financial in nature, to the extent that
they are consistent with that act. These include:



| |   |                                                                                                                                   
| | - | ----------------------------------------------------------------------------------------------------------------------------------
| |  | lending, exchanging, transferring or investing
    for others or safeguarding financial assets other than money or
    securities;
|
| |  | providing any device or other instrumentality for
    transferring financial assets; and                                          
|
| |  | arranging, effecting or facilitating financial
    transactions for third parties.                                                

Not all bank holding companies may become
financial holding companies. A bank holding company must meet
three requirements before becoming a financial holding company:



| |   |                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------
| |  | all of the bank holding companys depository
    institution subsidiaries must be well capitalized;
|
| |  | all of the bank holding companys depository
    institution subsidiaries must be well managed; and

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| |   |                                                                                                                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the bank holding company must file with the
    Federal Reserve a declaration of its election to become a
    financial holding company, including a certification that its
    depository institution subsidiaries meet the prior two criteria.

With few exceptions, in order to exercise the
powers granted to it under the Gramm-Leach-Bliley Act, a
financial holding company or insured depository institution also
must meet the Community Reinvestment Acts requirements. If
any insured depository institution did not receive a Community
Reinvestment Act rating of at least satisfactory at
its most recent examination, the regulatory agencies are to
prevent the insured depository institution or financial holding
company from exercising the new powers, either directly or
through a subsidiary.



| |                     
| | --------------------
| | Payment of Dividends

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

If, in the opinion of the federal banking
regulators, a depository institution under its jurisdiction is
engaged in or is about to engage in an unsafe or unsound
practice (which, depending on the financial condition of the
depository institution, could include the payment of dividends),
such authority may require, after notice and hearing, that such
institution cease and desist from such practice. The federal
banking agencies have indicated that paying dividends that
deplete a depository institutions capital base to an
inadequate level would be an unsafe and unsound banking
practice. Under the Federal Deposit Insurance Corporation
Improvement Act of 1991 (FDICIA), a depository
institution may not pay any dividend if payment would cause it
to become undercapitalized or if it already is undercapitalized.
See Prompt Corrective Action herein. Moreover, the
federal agencies have issued policy statements that provide that
bank holding companies and insured banks should generally only
pay dividends out of current operating earnings.

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



| |   |                                                                                                                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | that dividends of cash or property may be paid
    only out of the retained earnings of the Bank;                                                                                                                                          
|
| |  | that dividends may not be paid if the Banks
    paid-in capital and retained earnings which are set aside for
    dividend payment and other distributions do not, in combination,
    equal at least 20% of the Banks capital stock; and
|
| |  | that dividends may not be paid without prior
    approval of the Georgia Department of Banking and Finance if:                                                                                                                             



| |   |                                                                                                                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the Banks total classified assets exceed
    80% of its equity capital;                                                                                                                                                                    
|
| |  | the aggregate amount of dividends to be declared
    exceeds 50% of the Banks net profits after taxes but
    before dividends for the previous calendar year; or the ratio of
    equity capital to total adjusted assets is less than 6%.

Applying these dividend restrictions, and without
prior approval of the Georgia Department of Banking and Finance,
as of December 31, 2003, the Bank could pay $429,000 in
dividends to us. Our ability to pay dividends may also be
affected or limited by other factors, such as the requirement to
maintain adequate capital above regulatory guidelines.



| |                 
| | ----------------
| | Capital Adequacy

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

The risk-based capital standards are designed to
make regulatory capital requirements more sensitive to
differences in risk profiles among banks and bank holding
companies, to account for off-balance sheet

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exposure, and to minimize disincentives for
holding liquid, low-risk assets. Assets and off-balance-sheet
items are assigned to broad risk categories, each with
appropriate weights. The resulting capital ratios represent
capital as a percentage of total risk-weighted assets and
off-balance sheet items.


The minimum guideline for the ratio of total
capital to risk-weighted assets is 8.0%. At least half of total
capital must be comprised of Tier 1 Capital, which is
common stock, undivided profits, minority interests in the
equity accounts of consolidated subsidiaries and non-cumulative
perpetual preferred stock, less goodwill and certain other
intangible assets. The remainder may consist of Tier 2
Capital, which is subordinated debt, other preferred stock and a
limited amount of loan loss reserves. As of December 31,
2003, the Companys total risk-based capital ratio and its
Tier 1 risk-based capital ratio were 11.19% and 9.98%,
respectively.

In addition, the Federal Reserve has established
minimum leverage ratio guidelines for bank holding
companies. These guidelines provide for a minimum ratio of
Tier 1 Capital to average assets, less goodwill and certain
other intangible assets, of 3.0% for bank holding companies that
meet specified criteria. All other bank holding companies
generally are required to maintain a leverage ratio of at least
3%, plus an additional cushion of 100 to 200 basis points.
The Banks leverage ratio as of December 31, 2003 was
8.32%. The guidelines also provide that bank holding companies
experiencing internal growth or making acquisitions will be
expected to maintain strong capital positions substantially
above the minimum supervisory levels without significant
reliance on intangible assets. Furthermore, the Federal Reserve
has indicated that it will consider a tangible Tier 1
Capital leverage ratio and other indicia of capital
strength in evaluating proposals for expansion or new
activities. The Federal Reserve has not advised the Company of
any specific minimum leverage ratio or tangible Tier 1
leverage ratio applicable to it.

The Bank also is subject to risk-based and
leverage capital requirements adopted by the Federal Reserve,
which are substantially similar to those adopted by the Federal
Reserve for bank holding companies. The Bank was in compliance
with applicable minimum capital requirements as of
December 31, 2003. We have not been advised by any federal
banking agency of any specific capital ratio requirement
applicable to the Bank.

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

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

In addition to the capital standards imposed by
federal banking regulators, the Georgia Department of Banking
and Finance imposed a requirement for the Bank to maintain a
leverage ratio of not less than 8.0% during the first three
years of the Banks operation. Following the expiration of
this initial period, the Bank became subject to a 6.0% primary
capital ratio. Such standard is calculated as the ratio of total
equity to total assets, each as adjusted for unrealized gains
and losses on securities and allowance for loan losses.



| |                                      
| | -------------------------------------
| | Support of Subsidiary
    Institution

Under Federal Reserve policy, the Company is
expected to act as a source of financial strength for, and to
commit resources to support, the Bank. This support may be
required at times when, absent such Federal Reserve policy, we
may not be inclined to provide such support. In addition, any
capital loans by a bank holding company to its banking
subsidiary are subordinate in right of payment to deposits and
to certain other indebtedness of such bank. In the event of a
bank holding companys bankruptcy, any commitment by a bank
holding company to a federal bank regulatory agency to maintain
the capital of a banking subsidiary will be assumed by the
bankruptcy trustee and entitled to a priority of payment.

7



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| |                         
| | ------------------------
| | Prompt Corrective Action

The Federal Deposit Insurance Corporation
Improvement Act of 1991 was enacted in large measure to improve
the supervision and examination of insured depository
institutions in an effort to reduce the number of bank failures
and the resulting demands on the deposit insurance system. This
law establishes a system of prompt corrective action to resolve
the problems of undercapitalized institutions. Under this
system, the federal banking regulators have established five
capital categories (well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized and critically
undercapitalized) and are required to take certain mandatory
supervisory actions, and are authorized to take other
discretionary actions, with respect to institutions in the three
undercapitalized categories. The severity of such actions
depends upon the capital category in which the institution is
placed. Generally, subject to a narrow exception, the banking
regulator is required to appoint a receiver or conservator for
an institution that is critically undercapitalized. The federal
banking agencies have specified by regulation the relevant
capital level for each category.

Under the regulations, an FDIC-insured bank will
be:



| |   |                                                                                                                                                                                                                                                                                                                                                                        
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | well capitalized if it has a total
    risk-based capital ratio of 10.0% or greater, a tier 1
    risk-based capital ratio of 6.0% or greater and a leverage ratio
    of 5.0% or greater and is not subject to any order or written
    directive by the appropriate regulatory authority to meet and
    maintain a specific capital level for any capital measure;
|
| |  | adequately capitalized if it has a
    total risk-based capital ratio of 8.0% or greater, a tier 1
    risk-based capital ratio of 4.0% or greater and a leverage ratio
    of 4.0% or greater (3.0% in certain circumstances) and is not
    well capitalized;                                                                                                    
|
| |  | undercapitalized if it has a total
    risk-based capital ratio of less than 8.0%, a tier 1 risk-based
    capital ratio of less than 4.0% or a leverage ratio of less than
    4.0% (3.0% in certain circumstances);                                                                                                                                                
|
| |  | significantly undercapitalized if it
    has a total risk-based capital ratio of less than 6.0%, a tier 1
    risk-based capital ratio of less than 3.0% or a leverage ratio
    of less than 3.0%; and                                                                                                                                                              
|
| |  | critically undercapitalized if its
    tangible equity is equal to or less than 2.0% of average
    quarterly tangible assets.                                                                                                                                                                                                                                       

A depository institution may be deemed to be in a
capitalization category that is lower than is indicated by its
actual capital position if it receives an unsatisfactory
examination rating 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.

An FDIC-insured bank is generally prohibited from
making any capital distribution, including dividend payments, or
paying any management fee to its holding company if the bank
would thereafter be undercapitalized.
Undercapitalized banks are subject to growth
limitations and are required to submit a capital restoration
plan. The federal regulators may not accept a capital plan
without determining, among other things, that the plan is based
on realistic assumptions and is likely to succeed in restoring
the banks capital. In addition, for a capital restoration
plan to be acceptable, the banks parent holding company
must guarantee that the institution will comply with such
capital restoration plan. The aggregate liability of the parent
company is limited to the lesser of an amount equal to 5.0% of
the banks total assets at the time it became
undercapitalized and the amount necessary to bring
the institution into compliance with all applicable capital
standards. If a bank fails to submit an acceptable plan, it is
treated as if it is significantly undercapitalized.
Significantly undercapitalized institutions may be
subject to a number of requirements and restrictions, including
orders to sell sufficient voting stock to become
adequately capitalized, requirements to reduce total
assets, and cessation of receipt of deposits from correspondent
banks. Critically undercapitalized institutions are
subject to the appointment of a receiver or conservator. A bank
that is not well capitalized is subject to certain
limitations relating to so-called brokered deposits.

As of December 31, 2003, the Bank had the
requisite capital levels to qualify as well
capitalized.

8



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##### Table of Contents





| |                           
| | --------------------------
| | FDIC Insurance Assessments

The Federal Deposit Insurance Corporation has
adopted a risk-based assessment system for insured depository
institutions that takes into account the risks attributable to
different categories and concentrations of assets and
liabilities. The risk-based assessment system assigns an
institution to one of three capital categories: well
capitalized, adequately capitalized and undercapitalized. These
three categories are substantially similar to the prompt
corrective action categories described above, with the
undercapitalized category including institutions
that are undercapitalized, significantly undercapitalized and
critically undercapitalized for prompt corrective action
purposes. The FDIC also assigns an institution to one of three
supervisory subgroups within each capital group. The supervisory
subgroup to which an institution is assigned is based on an
evaluation provided to the FDIC by the institutions
primary federal regulator and information which the FDIC
determines to be relevant to the risk posed to the deposit
insurance funds. An institutions insurance assessment rate
is then determined based on the capital category and supervisory
category to which it is assigned. The combination of capital
groups and supervisory subgroups results in nine assessment risk
classifications to which different assessment rates are applied.

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



| |                                   
| | ----------------------------------
| | Safety and Soundness
    Standards

The federal bank regulatory agencies have adopted
a set of guidelines prescribing safety and soundness standards.
The guidelines establish general standards relating to internal
controls and information systems, internal audit systems, loan
documentation, credit underwriting, interest rate exposure,
asset growth, asset quality, earnings and compensation, fees and
benefits. In general, the guidelines require, among other
things, appropriate systems and practices to identify and manage
the risks and exposures specified in the guidelines. The
guidelines prohibit excessive compensation as an unsafe and
unsound practice and describe compensation as excessive when the
amounts paid are unreasonable or disproportionate to the
services performed by an executive officer, employee, director,
or principal shareholder. In addition, the agencies adopted
regulations that authorize, but do not require, an agency to
order an institution that has been given notice by an agency
that it is not satisfying any of such safety and soundness
standards to submit a compliance plan. If an institution fails
to submit or implement such a plan, the agency must issue an
order directing action to correct the deficiency and may require
other actions of the types to which an undercapitalized
institution is subject under the prompt corrective
action provisions described above. If an institution fails
to comply with such an order, the agency may seek to enforce
such order in judicial proceedings and to impose civil money
penalties.



| |                           
| | --------------------------
| | Community Reinvestment Act

The Community Reinvestment Act requires federal
bank regulatory agencies to encourage financial institutions to
meet the credit needs of low- and moderate-income borrowers in
their local communities. An institutions size and business
strategy determines the type of examination that it will
receive. Large, retail-oriented institutions will be examined
using a performance-based lending, investment and service test.
Small institutions will be examined using a streamlined
approach. All institutions may opt to be evaluated under a
strategic plan formulated with community input and pre-approved
by the bank regulatory agency.

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

The recently enacted Gramm-Leach-Bliley Act makes
various changes to the CRA. Among other changes, CRA agreements
with private parties must be disclosed and annual CRA reports
must be made to a

9



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##### Table of Contents



banks primary federal regulator. A bank
holding company will not be permitted to become a financial
holding company and no new activities authorized under this Act
may be commenced by a holding company if any of its bank
subsidiaries received less than a satisfactory CRA
rating in its latest CRA examination.




| |                                                               
| | --------------------------------------------------------------
| | Recent Significant Changes in Banking Laws
    and Regulations

International Money Laundering Abatement and
Anti-Terrorist Financing Act of 2001.On October 26, 2001, the USA PATRIOT Act was enacted. It
includes the International Money Laundering Abatement and
Anti-Terrorist Financing Act of 2001 and strong measures to
prevent, detect and prosecute terrorism and international money
laundering. As required by the IMLAFA, the federal banking
agencies, in cooperation with the U.S. Treasury Department,
established rules that generally apply to insured depository
institutions and U.S. branches and agencies of foreign
banks.

Among other things, the new rules require that
financial institutions implement reasonable procedures to
(1) verify the identity of any person opening an account;
(2) maintain records of the information used to verify the
persons identity; and (3) determine whether the
person appears on any list of known or suspected terrorists or
terrorist organizations. The rules also prohibit banks from
establishing correspondent accounts with foreign shell banks
with no physical presence and encourage cooperation among
financial institutions, their regulators and law enforcement to
share information regarding individuals, entities and
organizations engaged in terrorist acts or money laundering
activities. The rules also limit a financial institutions
liability for submitting a report of suspicious activity and for
voluntarily disclosing a possible violation of law to law
enforcement.

Sarbanes-Oxley Act of
2002.On July 30, 2002, the
Sarbanes-Oxley Act of 2002 was enacted to address corporate and
accounting fraud. The act established a new accounting oversight
board that enforces auditing standards and restricts the scope
of services that accounting firms may provide to their public
company audit clients. Among other things, it also
(i) requires chief executive officers and chief financial
officers to certify to the accuracy of periodic reports filed
with the Securities and Exchange Commission (the
SEC); (ii) imposes new disclosure requirements
regarding internal controls, off-balance-sheet transactions, and
pro forma (non-GAAP) disclosures; (iii) accelerates the
time frame for reporting of insider transactions and periodic
disclosures by certain public companies; and (iv) requires
companies to disclose whether or not they have adopted a code of
ethics for senior financial officers and whether the audit
committee includes at least one audit committee financial
expert.

The Sarbanes-Oxley Act requires the SEC, based on
certain enumerated factors, to regularly and systematically
review corporate filings. To deter wrongdoing, the act
(i) subjects bonuses issued to top executives to
disgorgement if a restatement of a companys financial
statements was due to corporate misconduct; (ii) prohibits
an officer or director from misleading or coercing an auditor;
(iii) prohibits insider trades during pension fund
blackout periods; (iv) imposes new criminal
penalties for fraud and other wrongful acts; and
(v) extends the period during which certain securities
fraud lawsuits can be brought against a company or its officers.






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

As of December 31, 2003, the principal
offices of the Company and the Bank were located at
145 Millard Farmer Industrial Blvd., Newnan, Georgia 30263.
This property is owned by the Bank. Property for the Downtown
Branch located at 60 Salbide Avenue, Newnan, Georgia 30263
is leased by the Bank with a purchase option.






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

The Bank may, periodically, be involved as a
plaintiff or defendant in various legal actions in the ordinary
course of its business. Management believes that such claims
against the Bank are without merit or that the ultimate
liability, if any, resulting from them will not materially
affect the Banks financial condition. At December 31,
2003, management was not aware of any legal actions against the
Bank.






|        |                                                        
|------- | -------------------------------------------------------
|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
Companys fiscal year ended December 31, 2003.

10



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##### Table of Contents






PART II






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

Market Information

Morgan Keegan is the market maker for the
Companys stock which trades on the pink sheets under the
symbol NWCB. Subsequent to the initial offering, shares have
been traded infrequently; therefore, information available as to
prices at which common stock has traded is limited. Management
has reviewed the limited information available as to the ranges
at which the Companys common stock has been sold. The data
contained in the table below was compiled from information
furnished to management from The Seawell Group, an office of
Morgan Keegan. The following table sets forth the estimated
price range for sales of common stock for each quarter of the
last two years. The following data regarding the Companys
common stock is provided for information purposes only and
should not be viewed as indicative of the actual or market value
of the common stock

|               |  |                 |       |     |  |   |       | 
|-------------- |  | --------------- | ----- | --- |  | - | ----- | 
|               |  |                
|               |  | Estimated Price
|               |  | Range Per Share
|               |  |                
|               |  | High            |       | Low
|               |  |                 |       |    
|2003:          |  |                 |       |     |  |   |       | 
|First Quarter  |  | $               | 11.50 |     |  | $ | 12.00 | 
|Second Quarter |  | $               | 12.00 |     |  | $ | 12.00 | 
|Third Quarter  |  | $               | 12.50 |     |  | $ | 12.50 | 
|Fourth Quarter |  | $               | 12.00 |     |  | $ | 11.00 | 
|2002:          |  |                 |       |     |  |   |       | 
|First Quarter  |  | $               | 12.00 |     |  | $ | 12.00 | 
|Second Quarter |  | $               | 12.00 |     |  | $ | 12.00 | 
|Third Quarter  |  | $               | 12.50 |     |  | $ | 10.50 | 
|Fourth Quarter |  | $               | 12.00 |     |  | $ | 11.50 | 

Holders

There were approximately 665 holders of record of
the common stock as of December 31, 2003.

Dividends

The Bank is subject to restrictions on the
payment of dividends under Georgia law and the regulations of
the DBF. The Company is also subject to limits on payment of
dividends by the rules, regulations and policies of federal
banking authorities. The primary source of funds available for
the payment of cash dividends by the Company are dividends from
the Bank. There are various statutory and regulatory limitations
on the payment of dividends by the Bank, as well as by the
Company to its shareholders. No assurance can be given that any
dividends will be declared by the Company in the future, or if
declared, what amounts would be declared or whether such
dividends would continue. The Company has not paid any cash
dividends to date.

11



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##### Table of Contents



Securities Authorized for Issuance under
Equity Compensation Plans

The following table sets forth information
relating to the Companys equity compensation plans as of
December 31, 2003:

Equity Compensation Plan Information


|                                                               |       |                   |        |                  |  |                      |       |       |  |  |         |         | 
|-------------------------------------------------------------- | ----- | ----------------- | ------ | ---------------- |  | -------------------- | ----- | ----- |  |  | ------- | ------- | 
|                                                               |       |                   |        |                  |  | Number of           
|                                                               |       |                   |        |                  |  | Securities          
|                                                               |       | Number of         |        | Weighted-        |  | Remaining Available 
|                                                               |       | Securities to be  |        | Average Exercise |  | for Future Issuance 
|                                                               |       | Issued upon       |        | Price of         |  | Under Equity        
|                                                               |       | Exercise of       |        | Outstanding      |  | Compensation Plans  
|                                                               |       | Outstanding       |        | Options,         |  | (Excluding          
|                                                               |       | Options, Warrants |        | Warrants and     |  | Securities Reflected
|                                                               |       | and Rights (a)    |        | Rights (b)       |  | in Column (a)) (c)  
|                                                               |       |                   |        |                  |  |                     
|Equity compensation plans approved by security
    holders     |       |                   | 45,000 |                  |  | $                    | 10.00 |       |  |  | 105,000 |        
|Equity compensation plans not approved by
    security holders |       |                   | 40,000 |                  |  | $                    | 10.00 |       |  |  | -0-     |        
|                                                               |       |                   |        |                  |  |                      |       |       |  |  |         |        
|                                                               | Total |                   |        | 85,000           |  |                      | $     | 10.00 |  |  |         | 105,000 | 
|                                                               |       |                   |        |                  |  |                      |       |       |  |  |         |        

Recent Sales of Unregistered
Securities

The Company has sold no unregistered securities
within the past three years.






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

The following is a discussion of our financial
condition and the financial condition of our bank subsidiary,
Newnan Coweta Bank, at December 31, 2003 and 2002 and the
results of operations for the years then ended. The purpose of
this discussion is to focus on information about our financial
condition and results of operations that are not otherwise
apparent from our audited financial statements.

Forward-Looking Statements

We may from time to time make written or oral
forward-looking statements, including statements contained in
our filings with the Securities and Exchange Commission and
reports to stockholders. Statements made in this Annual Report
on Form 10-KSB, other than those concerning historical
information, should be considered forward-looking and subject to
various risks and uncertainties. Such forward-looking statements
are made based upon managements belief as well as
assumptions made by, and information currently available to,
management pursuant to safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Our actual
results may differ materially from the results anticipated in
forward-looking statements due to a variety of factors,
including governmental monetary and fiscal policies, deposit
levels, loan demand, loan collateral values, securities
portfolio values, interest rate risk management, the effects of
competition in the banking business from other commercial banks,
thrifts, mortgage banking firms, consumer finance companies,
credit unions, securities brokerage firms, insurance companies,
money market funds and other financial institutions operating in
our market area and elsewhere, including institutions operating
through the Internet, changes in governmental regulation
relating to the banking industry, including regulations relating
to branching and acquisitions, failure of assumptions underlying
the establishment of reserves for loan losses, including the
value of collateral underlying delinquent loans and other
factors. We caution that such factors are not exclusive. We do
not undertake to update any forward-looking statement that may
be made from time to time by us, or on our behalf.

Critical Accounting Policies

We have adopted various accounting policies which
govern the application of accounting principles generally
accepted in the United States of America in the preparation of
our financial statements. Our significant accounting policies
are described in the footnotes to consolidated financial
statements at December 31, 2003 which are included in this
Annual Report on Form 10-KSB.

12



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##### Table of Contents



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

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

Overview

The year 2003 was highlighted by significant loan
and deposit growth. Our primary market area of Coweta County,
Georgia continues to grow, and we are strategically positioned
to take advantage of the growth. The areas growth should
provide a base for continued profitability.

Off-Balance Sheet Arrangements

Off-balance sheet arrangements are generally
contractual arrangements involving an entity that is not
consolidated with the Company under which the Company has or in
the future may have (i) any obligation under a direct or
indirect guarantee or similar arrangement; (ii) a retained
or contingent interest in assets transferred to an
unconsolidated entity or similar arrangement;
(iii) derivative arrangements, to the extent that their
fair value is not fully reflected as a liability or an asset in
the Companys financial statements or (iv) any other
obligation, including contingent obligations, that are not fully
reflected in the Companys financial statements.

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

The Companys exposure to credit loss in the
event of nonperformance by the other party to the financial
instrument for commitments to extend credit and standby letters
of credit is represented by the contractual amount of those
instruments. The Company uses the same credit policies in making
commitments and conditional obligations as it does for
on-balance sheet instruments. For a summary of the
Companys off-balance sheet arrangements, see Note 10,
Commitments and Contingencies, to consolidated
financial statements attached hereto.

13



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##### Table of Contents



Financial Condition at December 31, 2003
and 2002

The following is a summary of our balance sheets
for the periods indicated:

|                                   |  |                        |         |      |  |   |        | 
|---------------------------------- |  | ---------------------- | ------- | ---- |  | - | ------ | 
|                                   |  |                       
|                                   |  | December 31,          
|                                   |  |                       
|                                   |  | 2003                   |         | 2002
|                                   |  |                        |         |     
|                                   |  |                       
|                                   |  | (Dollars in thousands)
|Cash and due from banks            |  | $                      | 1,800   |      |  | $ | 1,964  | 
|Interest-bearing deposits in banks |  |                        |        |      |  |   | 1,090  | 
|Federal funds sold                 |  |                        | 5,223   |      |  |   |       | 
|Securities                         |  |                        | 5,482   |      |  |   | 9,562  | 
|Loans, net                         |  |                        | 96,748  |      |  |   | 69,731 | 
|Premises and equipment             |  |                        | 3,219   |      |  |   | 2,672  | 
|Other assets                       |  |                        | 1,174   |      |  |   | 913    | 
|                                   |  |                        |         |      |  |   |        | 
|                                   |  | $                      | 113,646 |      |  | $ | 85,932 | 
|                                   |  |                        |         |      |  |   |        | 
|Total deposits                     |  | $                      | 102,973 |      |  | $ | 75,477 | 
|Federal funds purchased            |  |                        |        |      |  |   | 397    | 
|Other borrowings                   |  |                        |        |      |  |   |       | 
|Other liabilities                  |  |                        | 571     |      |  |   | 758    | 
|Stockholders equity               |  |                        | 10,102  |      |  |   | 9,300  | 
|                                   |  |                        |         |      |  |   |        | 
|                                   |  | $                      | 113,646 |      |  | $ | 85,932 | 
|                                   |  |                        |         |      |  |   |        | 

As of December 31, 2003, we had total assets
of $113.6 million, an increase of 32% over
December 31, 2002. Total interest-earning assets were
$107.4 million at December 31, 2003, or 94% of total
assets, which was the same as the percentage as at
December 31, 2002. Our primary interest-earning assets at
December 31, 2003 were loans, which made up 90% of total
interest-earning assets as compared to 87% at December 31,
2002. Our loan to deposit ratio was 94% at December 31,
2003, as compared to 93% at December 31, 2002. Deposit
growth of $27.4 million has been used primarily to fund
loan growth of $27 million.

Our securities portfolio, consisting of
U.S. Agency securities and mortgage-backed securities,
totaled $5.5 million at December 31, 2003, compared to
$9.6 million at December 31, 2002.

At December 31, 2003, 80% of our loan
portfolio was collateralized, primarily by real estate located
in our market area of Coweta County and surrounding counties. A
breakdown of our real estate loan portfolio as at
December 31, 2003 is as follows: Our construction and land
development loans, which comprise 28% of the real estate loan
portfolio, consisted of loans primarily collateralized by one-
to four-family residential properties. Real estate loans secured
by one- to four-family residential properties comprised 9% of
the real estate loan portfolio, and nonresidential real estate
loans consisting primarily of small business commercial
properties totaled 62% of the real estate loan portfolio. We
generally require that loans collateralized by real estate not
exceed 80% of the collateral value.

The remaining 20% of the loan portfolio consists
of commercial, consumer and other loans. We require collateral
commensurate with the repayment ability and creditworthiness of
the borrower.

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

14



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##### Table of Contents



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

Liquidity and Capital Resources

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

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

Our liquidity and capital resources are monitored
on a periodic basis by management, State and Federal regulatory
authorities. As determined under guidelines established by
regulatory authorities and internal policy, our liquidity was
considered satisfactory at December 31, 2003.

At December 31, 2003, we had loan
commitments outstanding of $13.6 million. Because these
commitments generally have fixed expiration dates and many will
expire without being drawn upon, the total commitment amounts do
not necessarily represent future cash requirements. If needed,
we have the ability on a short-term basis to borrow and purchase
federal funds from other financial institutions. At
December 31, 2003, we had arrangements with two commercial
banks for additional short-term advances of $4.4 million.

At December 31, 2003, our capital ratios
were considered adequate based on regulatory minimum capital
requirements. Stockholders equity increased in 2003 due to
net income of $858,000, which was offset by a decrease in
accumulated other comprehensive income in the amount of $56,000,
net of the related tax effect. Other comprehensive income
consists of unrealized gains and losses on securities available
for sale. For regulatory purposes, the net unrealized gains and
losses on securities available-for-sale are excluded in the
computation of regulatory capital ratios.

The primary source of funds available to our
holding company is the payment of dividends by our subsidiary
bank. Banking regulations limit the amount of the dividends that
may be paid without prior approval of the banks regulatory
agency. At December 31, 2003, the bank can pay
approximately $429,000 dividends without regulatory approval.

The minimum capital requirements to be considered
well capitalized under prompt corrective action provisions and
the actual capital ratios for our holding company and subsidiary
bank as of December 31, 2003 are as follows:

|                           |               |                  |      |             |   |              |      |       |   |  |      |       |  
|-------------------------- | ------------- | ---------------- | ---- | ----------- | - | ------------ | ---- | ----- | - |  | ---- | ----- | -
|                           |               |                 
|                           |               | Actual          
|                           |               |                 
|                           |               | Newnan Coweta    |      | Newnan      |   | Regulatory  
|                           |               | Bancshares, Inc. |      | Coweta Bank |   | Requirements
|                           |               |                  |      |             |   |             
|Leverage capital ratio     |               |                  | 8.32 | %           |   |              | 8.31 | %     |   |  | 5.00 | %    
|Risk-based capital ratios: |               |                  |      |             |   |              |      |       |   |  |      |      
|                           | Core capital  |                  |      | 9.98        | % |              |      | 9.97  | % |  |      | 6.00  | %
|                           | Total capital |                  |      | 11.19       | % |              |      | 11.18 | % |  |      | 10.00 | %

These ratios may decline as asset growth
continues, but are expected to exceed the regulatory minimum
requirements. Anticipated future earnings will assist in keeping
these ratios at satisfactory levels.

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

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

Effects of Inflation

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

Results of Operations for the Years Ended
December 31, 2003 and 2002

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

|                          |  |              |       |      |  |   |       | 
|------------------------- |  | ------------ | ----- | ---- |  | - | ----- | 
|                          |  |             
|                          |  | Years Ended 
|                          |  | December 31,
|                          |  |             
|                          |  | 2003         |       | 2002
|                          |  |              |       |     
|                          |  |             
|                          |  | (Dollars in 
|                          |  | thousands)  
|Interest income           |  | $            | 6,061 |      |  | $ | 4,686 | 
|Interest expense          |  |              | 2,202 |      |  |   | 1,842 | 
|                          |  |              |       |      |  |   |       | 
|Net interest income       |  |              | 3,859 |      |  |   | 2,844 | 
|Provision for loan losses |  |              | 366   |      |  |   | 311   | 
|Other income              |  |              | 443   |      |  |   | 225   | 
|Other expenses            |  |              | 2,574 |      |  |   | 1,938 | 
|                          |  |              |       |      |  |   |       | 
|Pretax income             |  |              | 1,362 |      |  |   | 820   | 
|Income taxes              |  |              | 504   |      |  |   | 125   | 
|                          |  |              |       |      |  |   |       | 
|Net income                |  | $            | 858   |      |  | $ | 695   | 
|                          |  |              |       |      |  |   |       | 

Net Interest Income

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

The net yield on average interest-earning assets
was 4.02% in 2003, as compared to 4.06% in 2002. Average loans
increased by $24.2 million, which was the primary change in
average interest-earning assets that increased overall by
$25.7 million. The rate earned on average interest-earning
assets decreased to 6.32% in 2003 from 6.69% in 2002. Average
interest-bearing liabilities increased by $23.8 million,
with average time deposits accounting for the majority of this
increase. The rate paid on average interest-bearing liabilities
decreased to 2.64% in 2003, as compared to 3.10% in 2002.

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Provision for Loan Losses

The provision for loan losses was $366,000 in
2003, as compared to $311,000 in 2002. The increase is due to
maintaining our allowance for loan losses at a level based upon
the application of our monthly calculation of the allowance for
loan loss methodology. The allowance for loan loss methodology
is calculated by segmenting the loan portfolio into risk
classifications. Our assignment of risk classifications to
individual loans considers significant factors relative to the
credit risk and loss exposure in the loan portfolio, including
past due and classified loans, historical experience, underlying
collateral values, and current economic conditions that may
affect the borrowers ability to repay. An allowance
percentage is applied to each risk classification category to
establish a general allowance for loan losses. The allowance
percentage determined for each risk classification is based upon
our experience specifically and the historical experience of the
banking industry generally. Based upon our evaluation of the
loan portfolio through our allowance for loan loss methodology,
we believe the allowance for loan losses to be adequate to
absorb losses on existing loans that may become uncollectible.
In addition, classified loans, including impaired loans, are
analyzed individually in order to establish a specific allowance
for loan losses. The total of these allowances are recorded as
the allowance for loan losses on a monthly basis. The allowance
for loan losses as a percentage of total loans was 1.24% as of
December 31, 2003, compared to 1.21% at December 31,
2002.

Other Income

Other operating income consists of service
charges on deposit accounts and other miscellaneous revenues and
fees. Other operating income was $443,000 in 2003, as compared
to $225,000 in 2002, resulting in an increase of $218,000. The
increase is primarily due to mortgage origination fees generated
from the mortgage origination department which was established
during 2003, and increase in service charges on deposit accounts
related to overall deposit growth. Gains on sales of securities
were $5,000 during 2003 and $-0- during 2002.

Other Expenses

Other expenses were $2,574,000 in 2003, as
compared to $1,938,000 in 2002, or an increase of $636,000.
Salaries and employees benefits increased by $369,000 due
to an increase in the number of full time equivalent employees
to 28 at December 31, 2003 from 21 at December 31,
2002, and due to other annual salary increases. Equipment and
occupancy expenses increased by $33,000 due to increased
depreciation and occupancy costs of our new branch office
located in downtown Newnan, Georgia, which was completed in
November, 2003. Other operating expenses increased by $236,000,
due primarily to increased data processing costs of $92,000 and
increased directors fees of $75,000. The increases in all
other operating expenses were directly related to the overall
growth of the Bank.

Income Taxes

Income tax expense was $504,000 for the year
ended December 31, 2003, which resulted in an effective tax
rate of 37% as compared to $125,000 for the year ended
December 31, 2002.

Asset/Liability Management

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

Our asset/liability mix is monitored on a regular
basis. The objective of our policy is to monitor interest
rate-sensitive assets and liabilities so as to minimize the
impact of substantial movements in interest rates on earnings.
An asset or liability is considered to be interest
rate-sensitive if it will re-price or mature within the time
period analyzed, usually one year or less. The interest
rate-sensitivity gap is the difference between the
interest-earning assets and interest-bearing liabilities
scheduled to mature or re-price within such time period. A gap
is considered positive when the amount of interest
rate-sensitive assets exceeds the amount of interest
rate-sensitive liabilities. A gap is considered negative when
the amount of interest rate-sensitive liabilities exceeds the
interest rate-sensitive assets. During a period of rising
interest rates, a negative gap would tend to

17



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affect net interest income adversely, while a
positive gap would tend to result in an increase in net interest
income. Conversely, during a period of falling interest rates, a
negative gap would tend to result in an increase in net interest
income, while a positive gap would tend to affect net interest
income adversely. If our assets and liabilities were equally
flexible and moved concurrently, the impact of any increase or
decrease in interest rates on net interest income would be
minimal.


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

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

At December 31, 2003, our cumulative
one-year interest rate-sensitivity gap ratio was 110%. Our
targeted ratio is 80% to 120% in this time horizon. This
indicates that our interest-bearing assets will re-price during
this period at a rate faster than our interest-earning
liabilities.

The following table sets forth the distribution
of the re-pricing of our interest-earning assets and
interest-bearing liabilities as of December 31, 2003, the
interest rate-sensitivity gap, the cumulative interest
rate-sensitivity gap, the interest rate-sensitivity gap ratio
and the cumulative interest rate-sensitivity gap ratio. The
table also sets forth the time periods in which interest-earning
assets and interest-bearing liabilities will mature or may
re-price in accordance with their contractual terms. However,
the table does not necessarily indicate the impact of general
interest rate movements on the net interest margin as the
re-pricing of various categories of assets and liabilities is
subject to competitive pressures and the needs of our customers.
In addition, various

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assets and liabilities indicated as re-pricing
within the same period may in fact re-price at different times
within such period and at different rates.


|                                               |                                              |                        |        |          |  |          |         |        |  |       |        |        |  |   |       |    |  |   |         |        | 
|---------------------------------------------- | -------------------------------------------- | ---------------------- | ------ | -------- |  | -------- | ------- | ------ |  | ----- | ------ | ------ |  | - | ----- | -- |  | - | ------- | ------ | 
|                                               |                                              |                        |        | After    |  | After    |         |        |  |      
|                                               |                                              |                        |        | Three    |  | One      |         |        |  |      
|                                               |                                              |                        |        | Months   |  | Year but |         |        |  |      
|                                               |                                              | Within                 |        | but      |  | Within   |         | After  |  |      
|                                               |                                              | Three                  |        | Within   |  | Five     |         | Five   |  |      
|                                               |                                              | Months                 |        | One Year |  | Years    |         | Years  |  | Total
|                                               |                                              |                        |        |          |  |          |         |        |  |      
|                                               |                                              |                       
|                                               |                                              | (Dollars in thousands)
|Interest-earning assets:                       |                                              |                        |        |          |  |          |         |        |  |       |        |        |  |   |       |    |  |   |         |       
|                                               | FHLB & FRB Stock                             |                        | $      | 452      |  |          | $       |       |  |       | $      |       |  |   | $     |   |  |   | $       | 452    | 
|                                               | Federal Funds Sold                           |                        |        | 5,223    |  |          |         |       |  |       |        |       |  |   |       |   |  |   |         | 5,223  | 
|                                               | Securities                                   |                        |        | 1,211    |  |          |         | 2,003  |  |       |        | 2,256  |  |   |       | 11 |  |   |         | 5,481  | 
|                                               | Loans                                        |                        |        | 75,431   |  |          |         | 7,259  |  |       |        | 15,400 |  |   |       | 13 |  |   |         | 98,103 | 
|                                               |                                              |                        |        |          |  |          |         |        |  |       |        |        |  |   |       |    |  |   |         |       
|                                               |                                              | $                      | 82,317 |          |  | $        | 9,262   |        |  | $     | 17,656 |        |  | $ | 24    |    |  | $ | 109,259 |       
|                                               |                                              |                        |        |          |  |          |         |        |  |       |        |        |  |   |       |    |  |   |         |       
|Interest-bearing liabilities:                  |                                              |                        |        |          |  |          |         |        |  |       |        |        |  |   |       |    |  |   |         |       
|                                               | Interest-bearing demand deposits and savings |                        | $      | 33,007   |  |          | $       |       |  |       | $      |       |  |   | $     |   |  |   | $       | 33,007 | 
|                                               | Time deposits                                |                        |        | 13,462   |  |          |         | 36,141 |  |       |        | 20,363 |  |   |       |   |  |   |         | 69,966 | 
|                                               | Federal funds purchased                      |                        |        |         |  |          |         |       |  |       |        |       |  |   |       |   |  |   |         |       | 
|                                               |                                              |                        |        |          |  |          |         |        |  |       |        |        |  |   |       |    |  |   |         |       
|                                               |                                              | $                      | 46,469 |          |  | $        | 36,141  |        |  | $     | 20,363 |        |  | $ |      |    |  | $ | 102,973 |       
|Interest rate sensitivity gap                  |                                              | $                      | 35,848 |          |  | $        | (26,879 | )      |  | $     | (2,707 | )      |  | $ | 24    |    |  | $ | 6,286   |       
|                                               |                                              |                        |        |          |  |          |         |        |  |       |        |        |  |   |       |    |  |   |         |       
|Cumulative interest rate sensitivity gap       |                                              | $                      | 35,848 |          |  | $        | 8,969   |        |  | $     | 6,262  |        |  | $ | 6,286 |    |  |   |         |       
|                                               |                                              |                        |        |          |  |          |         |        |  |       |        |        |  |   |       |    |  |   |         |       
|Interest rate sensitivity gap ratio            |                                              |                        | 1.77   |          |  |          | 0.26    |        |  |       | 0.87   |        |  |   |      |    |  |   |         |       
|                                               |                                              |                        |        |          |  |          |         |        |  |       |        |        |  |   |       |    |  |   |         |       
|Cumulative interest rate sensitivity gap ratio |                                              |                        | 1.77   |          |  |          | 1.10    |        |  |       | 1.06   |        |  |   | 1.08  |    |  |   |         |       
|                                               |                                              |                        |        |          |  |          |         |        |  |       |        |        |  |   |       |    |  |   |         |       

SELECTED FINANCIAL INFORMATION AND STATISTICAL
DATA

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

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Distribution of Assets, Liabilities, and
Stockholders Equity:

Interest Rates and Interest
Differentials


|                                             |                |                        |         |         |  |         |       |             |  |         |      |         |  |   |        |        |  |   |       |       |  |  |      |   | 
|-------------------------------------------- | -------------- | ---------------------- | ------- | ------- |  | ------- | ----- | ----------- |  | ------- | ---- | ------- |  | - | ------ | ------ |  | - | ----- | ----- |  |  | ---- | - | 
|                                             |                |                        |         |        
|                                             |                | 2003                   |         | 2002   
|                                             |                |                        |         |        
|                                             |                | Average                |         | Income/ |  | Yields/ |       | Average     |  | Income/ |      | Yields/
|                                             |                | Balances(1)            |         | Expense |  | Rates   |       | Balances(1) |  | Expense |      | Rates  
|                                             |                |                        |         |         |  |         |       |             |  |         |      |        
|                                             |                |                       
|                                             |                | (Dollars in thousands)
|Cash and due from banks                      |                | $                      | 1,910   |         |  | $       |      |             |  |         |     | %       |  | $ | 1,477  |        |  | $ |      |       |  |  |     | %
|Taxable securities                           |                |                        | 6,817   |         |  |         | 255   |             |  |         | 3.74 |         |  |   | 8,382  |        |  |   | 382   |       |  |  | 4.56 |  
|Unrealized gains on securities               |                |                        | 149     |         |  |         |      |             |  |         |     |         |  |   | 97     |        |  |   |      |       |  |  |     |  
|Federal funds sold                           |                |                        | 6,272   |         |  |         | 67    |             |  |         | 1.06 |         |  |   | 3,158  |        |  |   | 51    |       |  |  | 1.61 |  
|Loans(2)(3)                                  |                |                        | 82,704  |         |  |         | 5,739 |             |  |         | 6.94 |         |  |   | 58,455 |        |  |   | 4,253 |       |  |  | 7.28 |  
|Allowance for loan losses                    |                |                        | (995    | )       |  |         |      |             |  |         |     |         |  |   | (728   | )      |  |   |      |       |  |  |     |  
|Other assets                                 |                |                        | 3,493   |         |  |         |      |             |  |         |     |         |  |   | 3,069  |        |  |   |      |       |  |  |     |  
|                                             |                |                        |         |         |  |         |       |             |  |         |      |         |  |   |        |        |  |   |       |       |  |  |      |  
|                                             |                | $                      | 100,350 |         |  |         |       |             |  |         |      |         |  | $ | 73,910 |        |  |   |       |       |  |  |      |  
|                                             |                |                        |         |         |  |         |       |             |  |         |      |         |  |   |        |        |  |   |       |       |  |  |      |  
|Total interest-earning assets                |                | $                      | 95,942  |         |  | $       | 6,061 |             |  |         | 6.32 | %       |  | $ | 70,092 |        |  | $ | 4,686 |       |  |  | 6.69 | %
|                                             |                |                        |         |         |  |         |       |             |  |         |      |         |  |   |        |        |  |   |       |       |  |  |      |  
|Noninterest-bearing demand                   |                | $                      | 6,697   |         |  | $       |      |             |  |         |     | %       |  | $ | 5,110  |        |  | $ |      |       |  |  |     | %
|Interest-bearing demand and savings          |                |                        | 19,662  |         |  |         | 253   |             |  |         | 1.29 |         |  |   | 18,984 |        |  |   | 345   |       |  |  | 1.82 |  
|Time deposits                                |                |                        | 63,576  |         |  |         | 1,948 |             |  |         | 3.06 |         |  |   | 40,365 |        |  |   | 1,496 |       |  |  | 3.71 |  
|                                             |                |                        |         |         |  |         |       |             |  |         |      |         |  |   |        |        |  |   |       |       |  |  |      |  
|                                             | Total deposits |                        | $       | 89,935  |  |         | $     | 2,201       |  |         |      |         |  |   | $      | 64,459 |  |   | $     | 1,841 |  |  |      |   | 
|Other borrowings                             |                |                        | 34      |         |  |         | 1     |             |  |         | 2.94 |         |  |   | 34     |        |  |   | 1     |       |  |  | 2.94 |  
|Other liabilities                            |                |                        | 682     |         |  |         |      |             |  |         |     |         |  |   | 480    |        |  |   |      |       |  |  |     |  
|Stockholders equity(4)                      |                |                        | 9,699   |         |  |         |      |             |  |         |     |         |  |   | 8,937  |        |  |   |      |       |  |  |     |  
|                                             |                |                        |         |         |  |         |       |             |  |         |      |         |  |   |        |        |  |   |       |       |  |  |      |  
|                                             |                | $                      | 100,350 |         |  |         |       |             |  |         |      |         |  | $ | 73,910 |        |  |   |       |       |  |  |      |  
|                                             |                |                        |         |         |  |         |       |             |  |         |      |         |  |   |        |        |  |   |       |       |  |  |      |  
|Total interest-bearing liabilities           |                | $                      | 83,272  |         |  | $       | 2,202 |             |  |         | 2.64 | %       |  | $ | 59,383 |        |  | $ | 1,842 |       |  |  | 3.10 | %
|                                             |                |                        |         |         |  |         |       |             |  |         |      |         |  |   |        |        |  |   |       |       |  |  |      |  
|Net interest income                          |                |                        |         |         |  | $       | 3,859 |             |  |         |      |         |  |   |        |        |  | $ | 2,844 |       |  |  |      |  
|                                             |                |                        |         |         |  |         |       |             |  |         |      |         |  |   |        |        |  |   |       |       |  |  |      |  
|Net interest spread                          |                |                        |         |         |  |         |       |             |  |         | 3.68 | %       |  |   |        |        |  |   |       |       |  |  | 3.59 | %
|                                             |                |                        |         |         |  |         |       |             |  |         |      |         |  |   |        |        |  |   |       |       |  |  |      |  
|Net yield on average interest-earning assets |                |                        |         |         |  |         |       |             |  |         | 4.02 | %       |  |   |        |        |  |   |       |       |  |  | 4.06 | %
|                                             |                |                        |         |         |  |         |       |             |  |         |      |         |  |   |        |        |  |   |       |       |  |  |      |  



---



|    |                                                                                                                                                                                                                                             
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Average balances were determined using the daily
    average balances.                                                                                                                                                                      
|   
|(2) | Includes non-accrual loans with average balances
    of $2,136 and $9,638 for the years ended December 31, 2003
    and 2002, respectively.                                                                                                 
|   
|(3) | Interest and fees on loans includes $527,000 and
    $457,000 of loan fee income for the years ended
    December 31, 2003 and 2002, respectively. There was no
    interest income recognized on non-accrual loans during 2003 or
    2002.
|   
|(4) | Average unrealized gains on securities
    available-for-sale are included in stockholders equity,
    net of tax.                                                                                                                         

Rate and Volume Analysis

The following table describes the extent to which
changes in interest rates and changes in volume of
interest-earning assets and interest-bearing liabilities have
affected our interest income and expense during the year
indicated. For each category of interest-earning assets and
interest-bearing liabilities, information is provided on changes
attributable to (1) change in volume (change in volume
multiplied by old rate); (2) change in rate (change in rate
multiplied by old volume); and (3) a combination of change
in rate and change in volume. The changes in interest income and
interest expense attributable to both volume and rate

20



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have been allocated proportionately on a
consistent basis to the change due to volume and the change due
to rate.


|                        |                                                              |                         |   |        |      |     |   |       |       |  |   |       |       | 
|----------------------- | ------------------------------------------------------------ | ----------------------- | - | ------ | ---- | --- | - | ----- | ----- |  | - | ----- | ----- | 
|                        |                                                              |                        
|                        |                                                              | Year Ended December 31,
|                        |                                                              | 2003 vs. 2002          
|                        |                                                              | Changes Due To:        
|                        |                                                              |                        
|                        |                                                              | Rate                    |   | Volume |      | Net
|                        |                                                              |                         |   |        |      |    
|                        |                                                              |                        
|                        |                                                              | (Dollars in thousands) 
|Increase (decrease) in: |                                                              |                         |   |        |      |     |   |       |       |  |   |      
|                        | Income from interest-earning assets:                         |                         |   |        |      |     |   |       |       |  |   |       |      
|                        | Interest and fees on loans                                   |                         | $ | (197   | )    |     | $ | 1,683 |       |  | $ | 1,486 |      
|                        | Interest on taxable securities                               |                         |   | (69    | )    |     |   | (58   | )     |  |   | (127  | )    
|                        | Interest on federal funds sold                               |                         |   | (17    | )    |     |   | 33    |       |  |   | 16    |      
|                        |                                                              |                         |   |        |      |     |   |       |       |  |   |      
|                        |                                                              | Total interest income   |   |        | (283 | )   |   |       | 1,658 |  |   |       | 1,375 | 
|                        |                                                              |                         |   |        |      |     |   |       |       |  |   |      
|                        | Expense from interest-bearing liabilities:                   |                         |   |        |      |     |   |       |       |  |   |       |      
|                        | Interest on interest-bearing demand deposits and
    savings |                         |   | (101   | )    |     |   | 9     |       |  |   | (92   | )    
|                        | Interest on time deposits                                    |                         |   | (258   | )    |     |   | 710   |       |  |   | 452   |      
|                        | Interest on other borrowings                                 |                         |   |       |      |     |   |      |       |  |   |      |      
|                        |                                                              |                         |   |        |      |     |   |       |       |  |   |      
|                        |                                                              | Total interest expense  |   |        | (359 | )   |   |       | 719   |  |   |       | 360   | 
|                        |                                                              |                         |   |        |      |     |   |       |       |  |   |      
|                        |                                                              | Net interest income     |   | $      | 76   |     |   | $     | 939   |  |   | $     | 1,015 | 
|                        |                                                              |                         |   |        |      |     |   |       |       |  |   |      

Investment Portfolio

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

|                           |  |              |       |      |  |   |       | 
|-------------------------- |  | ------------ | ----- | ---- |  | - | ----- | 
|                           |  |             
|                           |  | December 31,
|                           |  |             
|                           |  | 2003         |       | 2002
|                           |  |              |       |     
|                           |  |             
|                           |  | (Dollars in 
|                           |  | thousands)  
|U.S. Government agencies   |  | $            | 4,863 |      |  | $ | 7,006 | 
|Mortgage backed securities |  |              | 619   |      |  |   | 2,556 | 
|                           |  |              |       |      |  |   |       | 
|                           |  | $            | 5,482 |      |  | $ | 9,562 | 
|                           |  |              |       |      |  |   |       | 

Maturities

The amounts of debt securities in each category
as of December 31, 2003 are shown in the following table
according to contractual maturity classifications (1) one
year or less, (2) after one through five years, (3) after
five through ten years and (4) after ten years.

|                           |  |                  |       |                   |  |                    |      |          |  |        |       |          |  |  |      |   |  |   |   |  |  |  |   |  
|-------------------------- |  | ---------------- | ----- | ----------------- |  | ------------------ | ---- | -------- |  | ------ | ----- | -------- |  |  | ---- | - |  | - | - |  |  |  | - | -
|                           |  |                  |       |                   |  |                    |      |         
|                           |  |                  |       | After One Through |  | After Five Through
|                           |  | One Year or Less |       | Five Years        |  | Ten Years         
|                           |  |                  |       |                   |  |                   
|                           |  | Amount           |       | Yield(1)          |  | Amount             |      | Yield(1) |  | Amount |       | Yield(1)
|                           |  |                  |       |                   |  |                    |      |          |  |        |       |         
|U.S. Government agencies   |  | $                | 2,696 |                   |  |                    | 2.87 | %        |  | $      | 2,167 |          |  |  | 4.07 | % |  | $ |  |  |  |  |  | %
|Mortgage backed securities |  |                  |      |                   |  |                    |     |          |  |        | 619   |          |  |  | 4.30 | % |  |   |  |  |  |  |  |  
|                           |  |                  |       |                   |  |                    |      |          |  |        |       |          |  |  |      |   |  |   |   |  |  |  |   |  
|                           |  | $                | 2,696 |                   |  |                    | 2.87 | %        |  | $      | 2,785 |          |  |  | 4.12 | % |  | $ |  |  |  |  |  | %
|                           |  |                  |       |                   |  |                    |      |          |  |        |       |          |  |  |      |   |  |   |   |  |  |  |   |  

|                           |  |                 |   |          |  |        |   |          |  |   |       |  |  |  |      |  
|-------------------------- |  | --------------- | - | -------- |  | ------ | - | -------- |  | - | ----- |  |  |  | ---- | -
|                           |  |                 |   |         
|                           |  | After Ten Years |   | Total   
|                           |  |                 |   |         
|                           |  | Amount          |   | Yield(1) |  | Amount |   | Yield(1)
|                           |  |                 |   |          |  |        |   |         
|U.S. Government agencies   |  | $               |  |          |  |        |  | %        |  | $ | 4,863 |  |  |  | 3.36 | %
|Mortgage backed securities |  |                 |  |          |  |        |   |          |  |   | 619   |  |  |  | 4.30 | %
|                           |  |                 |   |          |  |        |   |          |  |   |       |  |  |  |      |  
|                           |  | $               |  |          |  |        |   | %        |  | $ | 5,481 |  |  |  | 3.47 | %
|                           |  |                 |   |          |  |        |   |          |  |   |       |  |  |  |      |  

21



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---



|    |                                                                                                                                                                                                               
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The weighted average yields were computed using
    coupon interest, adding discount accretion or subtracting
    premium amortization, as appropriate, on a ratable basis over
    the life of each security.

Loan Portfolio



| |               
| | --------------
| | Types of Loans

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

|                               |  |                        |        |      |  |   |        |  
|------------------------------ |  | ---------------------- | ------ | ---- |  | - | ------ | -
|                               |  |                       
|                               |  | December 31,          
|                               |  |                       
|                               |  | 2003                   |        | 2002
|                               |  |                        |        |     
|                               |  |                       
|                               |  | (Dollars in thousands)
|Commercial                     |  | $                      | 17,214 |      |  | $ | 9,051  |  
|Real estate construction       |  |                        | 20,680 |      |  |   | 17,572 |  
|Real estate mortgage           |  |                        | 57,177 |      |  |   | 41,164 |  
|Consumer installment and other |  |                        | 3,026  |      |  |   | 2,884  |  
|                               |  |                        |        |      |  |   |        |  
|                               |  |                        | 98,097 |      |  |   | 70,671 |  
|Deferred loan fees             |  |                        | (131   | )    |  |   | (86    | )
|Allowance for loan losses      |  |                        | (1,218 | )    |  |   | (854   | )
|                               |  |                        |        |      |  |   |        |  
|Net loans                      |  | $                      | 96,748 |      |  | $ | 69,731 |  
|                               |  |                        |        |      |  |   |        |  

Maturities and Sensitivities of Loans to
Changes in Interest Rates

Total loans as of December 31, 2003 are
shown in the following table according to contractual maturity
classifications (1) one year or less, (2) after one
through five years, and (3) after five years.

|             |                              |                        |        |        | 
|------------ | ---------------------------- | ---------------------- | ------ | ------ | 
|             |                              | (Dollars in thousands)
|             |                              |                       
|Commercial   |                              |                        |        |       
|             | One year or less             |                        | $      | 10,248 | 
|             | After one through five years |                        |        | 6,966  | 
|             | After five years             |                        |        | -0-    | 
|             |                              |                        |        |       
|             |                              | $                      | 17,214 |       
|             |                              |                        |        |       
|Construction |                              |                        |        |       
|             | One year or less             |                        | $      | 19,226 | 
|             | After one through five years |                        |        | 1,454  | 
|             | After five years             |                        |        | -0-    | 
|             |                              |                        |        |       
|             |                              | $                      | 20,680 |       
|             |                              |                        |        |       
|Other        |                              |                        |        |       
|             | One year or less             |                        | $      | 24,822 | 
|             | After one through five years |                        |        | 31,801 | 
|             | After five years             |                        |        | 3,580  | 
|             |                              |                        |        |       
|             |                              | $                      | 60,203 |       
|             |                              |                        |        |       
|             |                              | $                      | 98,097 |       
|             |                              |                        |        |       

22



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##### Table of Contents



The following table summarizes loans at
December 31, 2003 with the due dates after one year that
have predetermined and floating or adjustable interest rates.

|                                      |  |                        |        | 
|------------------------------------- |  | ---------------------- | ------ | 
|                                      |  | (Dollars in thousands)
|                                      |  |                       
|Predetermined interest rates          |  | $                      | 15,977 | 
|Floating or adjustable interest rates |  |                        | 27,205 | 
|                                      |  |                        |        | 
|                                      |  | $                      | 43,182 | 
|                                      |  |                        |        | 

Risk Elements

Information with respect to non-accrual, past
due, restructured and other problem loans at December 31,
2003 and 2002 is as follows:

|                                                                                                                                       |  |              |   |      |  |   |   | 
|-------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | - | ---- |  | - | - | 
|                                                                                                                                       |  |             
|                                                                                                                                       |  | December 31,
|                                                                                                                                       |  |             
|                                                                                                                                       |  | 2003         |   | 2002
|                                                                                                                                       |  |              |   |     
|                                                                                                                                       |  |             
|                                                                                                                                       |  | (Dollars in 
|                                                                                                                                       |  | thousands)  
|Non-accrual loans                                                                                                                      |  | $            | 0 |      |  | $ | 0 | 
|Loans contractually past due ninety days or more
    as to interest or principal payments and still accruing                           |  |              | 0 |      |  |   | 0 | 
|Restructured loans                                                                                                                     |  |              | 0 |      |  |   | 0 | 
|Loans, now current, about which there are serious
    doubts as to the ability of the borrower to comply with loan
    repayment terms |  |              | 0 |      |  |   | 0 | 
|Interest income that would have been recorded on
    non-accrual and restructured loans under original terms                           |  |              | 0 |      |  |   | 0 | 
|Interest income that was recorded on non-accrual
    and restructured loans                                                            |  |              | 0 |      |  |   | 0 | 

It is our policy to discontinue the accrual of
interest income when, in our opinion, collection of interest
becomes doubtful. We will generally discontinue the accrual of
interest income when (1) there is a significant
deterioration in the financial condition of the borrower and
full repayment of principal and interest is not expected and
(2) the principal or interest is more than ninety days past
due, unless the loan is both well-secured and in the process of
collection.

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

Summary of Loan Loss Experience

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

|                                                              |                      |                        |        |      |  |   |        |    | 
|------------------------------------------------------------- | -------------------- | ---------------------- | ------ | ---- |  | - | ------ | -- | 
|                                                              |                      |                       
|                                                              |                      | December 31,          
|                                                              |                      |                       
|                                                              |                      | 2003                   |        | 2002
|                                                              |                      |                        |        |     
|                                                              |                      |                       
|                                                              |                      | (Dollars in thousands)
|Average amount of loans outstanding                           |                      | $                      | 82,704 |      |  | $ | 58,455 |   
|                                                              |                      |                        |        |      |  |   |        |   
|Balance of allowance for loan losses at beginning
    of year |                      | $                      | 854    |      |  | $ | 612    |   
|                                                              |                      |                        |        |      |  |   |        |   
|Loans charged off Commercial                                  |                      |                        | 0      |      |  |   | 51     |   
|                                                              | Real estate mortgage |                        |        | 2    |  |   |        | 3  | 
|                                                              | Installment          |                        |        | 5    |  |   |        | 40 | 
|                                                              |                      |                        |        |      |  |   |        |   
|                                                              |                      |                        | 7      |      |  |   | 94     |   
|                                                              |                      |                        |        |      |  |   |        |   

23



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|                                                                                |                      |                        |       |      |  |   |     |    | 
|------------------------------------------------------------------------------- | -------------------- | ---------------------- | ----- | ---- |  | - | --- | -- | 
|                                                                                |                      |                       
|                                                                                |                      | December 31,          
|                                                                                |                      |                       
|                                                                                |                      | 2003                   |       | 2002
|                                                                                |                      |                        |       |     
|                                                                                |                      |                       
|                                                                                |                      | (Dollars in thousands)
|Loans recovered                                                                 |                      |                        |       |      |  |   |     |   
|                                                                                | Commercial           |                        |       | 0    |  |   |     | 21 | 
|                                                                                | Real estate mortgage |                        |       | 2    |  |   |     |   | 
|                                                                                | Installment          |                        |       | 3    |  |   |     | 4  | 
|                                                                                |                      |                        |       |      |  |   |     |   
|                                                                                |                      |                        | 5     |      |  |   | 25  |   
|                                                                                |                      |                        |       |      |  |   |     |   
|Net charge-offs                                                                 |                      |                        | 2     |      |  |   | 69  |   
|                                                                                |                      |                        |       |      |  |   |     |   
|Additions to allowance charged to operating
    expense during year             |                      |                        | 366   |      |  |   | 311 |   
|                                                                                |                      |                        |       |      |  |   |     |   
|Balance of allowance for loan losses at end of
    year                         |                      | $                      | 1,218 |      |  | $ | 854 |   
|                                                                                |                      |                        |       |      |  |   |     |   
|Ratio of net loans charged off during the year to
    average loans outstanding |                      |                        | .0012 | %    |  |   | .12 | % 
|                                                                                |                      |                        |       |      |  |   |     |   

Allowance for Loan Losses

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

Based on our best estimate, the allocation of the
allowance for loan losses to types of loans, as of the indicated
dates, is as follows:

|                               |  |                        |       |                   |  |        |     |         |  |   |     |  |  |  |     |  
|------------------------------ |  | ---------------------- | ----- | ----------------- |  | ------ | --- | ------- |  | - | --- |  |  |  | --- | -
|                               |  |                        |       |                  
|                               |  | December 31, 2003      |       | December 31, 2002
|                               |  | Percent of Loans in    |       | Percent of Loans 
|                               |  | Each Category to       |       | in Each Category 
|                               |  | Total Loans            |       | to Total Loans   
|                               |  |                        |       |                  
|                               |  | Amount                 |       | Percent           |  | Amount |     | Percent
|                               |  |                        |       |                   |  |        |     |        
|                               |  |                       
|                               |  | (Dollars in thousands)
|Commercial                     |  | $                      | 212   |                   |  |        | 17  | %       |  | $ | 111 |  |  |  | 13  | %
|Real estate  construction     |  |                        | 272   |                   |  |        | 22  |         |  |   | 214 |  |  |  | 25  |  
|Real estate  mortgage         |  |                        | 697   |                   |  |        | 57  |         |  |   | 495 |  |  |  | 58  |  
|Consumer installment and other |  |                        | 37    |                   |  |        | 4   |         |  |   | 34  |  |  |  | 4   |  
|                               |  |                        |       |                   |  |        |     |         |  |   |     |  |  |  |     |  
|                               |  | $                      | 1,218 |                   |  |        | 100 | %       |  | $ | 854 |  |  |  | 100 | %
|                               |  |                        |       |                   |  |        |     |         |  |   |     |  |  |  |     |  

Deposits

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

|                                    |  |                          |        |         |  |        |      |         |  |   |        |  |  |  |      |  
|----------------------------------- |  | ------------------------ | ------ | ------- |  | ------ | ---- | ------- |  | - | ------ |  |  |  | ---- | -
|                                    |  |                         
|                                    |  | Years Ended December 31,
|                                    |  |                         
|                                    |  |                          |        |        
|                                    |  | 2003                     |        | 2002   
|                                    |  |                          |        |        
|                                    |  | Amount                   |        | Percent |  | Amount |      | Percent
|                                    |  |                          |        |         |  |        |      |        
|                                    |  |                         
|                                    |  | (Dollars in thousands)  
|Non-interest-bearing demand         |  | $                        | 6,697  |         |  |        |     | %       |  | $ | 5,110  |  |  |  |     | %
|Interest-bearing demand and savings |  |                          | 19,662 |         |  |        | 1.29 |         |  |   | 18,984 |  |  |  | 1.82 |  
|Time deposits                       |  |                          | 63,576 |         |  |        | 3.06 |         |  |   | 40,365 |  |  |  | 3.71 |  
|                                    |  |                          |        |         |  |        |      |         |  |   |        |  |  |  |      |  
|                                    |  | $                        | 89,935 |         |  |        |      |         |  | $ | 64,459 |  |  |  |      |  
|                                    |  |                          |        |         |  |        |      |         |  |   |        |  |  |  |      |  

24



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---



|    |                                                                                       
|--- | --------------------------------------------------------------------------------------
|(1) | Average balances were determined using the daily
    average balances during the year.

The amounts of time certificates of deposit
issued in amounts of $100,000 or more as of December 31,
2003 are shown below by category, which is based on time
remaining until maturity of (1) three months or less,
(2) over three months through twelve months, and
(3) over twelve months.

|                                        |       |                        |        |        | 
|--------------------------------------- | ----- | ---------------------- | ------ | ------ | 
|                                        |       | (Dollars in thousands)
|                                        |       |                       
|Three months or less                    |       | $                      | 5,143  |       
|Over three months through twelve months |       |                        | 13,862 |       
|Over twelve months                      |       |                        | 5,056  |       
|                                        |       |                        |        |       
|                                        | Total |                        | $      | 24,061 | 
|                                        |       |                        |        |       

Return on Assets and Stockholders
Equity

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

|                          |  |              |      |      |  |  |       |  
|------------------------- |  | ------------ | ---- | ---- |  |  | ----- | -
|                          |  |             
|                          |  | Year Ended  
|                          |  | December 31,
|                          |  |             
|                          |  | 2003         |      | 2002
|                          |  |              |      |     
|Return on assets(1)       |  |              | .86  | %    |  |  | .94   | %
|Return on equity(2)       |  |              | 8.85 | %    |  |  | 7.78  | %
|Dividend payout ratio(3)  |  |              |     |      |  |  |      |  
|Equity to assets ratio(4) |  |              | 9.67 | %    |  |  | 12.09 | %



---



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

Contractual Obligations

The Company and the Bank have various contractual
obligations that they must fund as part of their normal
operations. The following table discloses aggregate information
about their contractual obligations and the periods in which
payments are due. The amounts and time periods are measured from
December 31, 2003.

|                                                                                    |  |                        |     |           |  |           |   |           |  |         |    |  |  |  |    |  |  |  |   | 
|----------------------------------------------------------------------------------- |  | ---------------------- | --- | --------- |  | --------- | - | --------- |  | ------- | -- |  |  |  | -- |  |  |  | - | 
|                                                                                    |  |                       
|                                                                                    |  | Payments Due by Period
|                                                                                    |  |                       
|                                                                                    |  |                        |     | Less Than |  |           |   | More Than
|                                                                                    |  | Total                  |     | 1 Year    |  | 1-3 Years |   | 3-5 Years |  | 5 Years
|                                                                                    |  |                        |     |           |  |           |   |           |  |        
|                                                                                    |  |                       
|                                                                                    |  | (In thousands)        
|Long-Term Debt                                                                      |  |                        | 0   |           |  |           | 0 |           |  |         | 0  |  |  |  | 0  |  |  |  | 0 | 
|Capital Lease Obligations                                                           |  |                        | 0   |           |  |           | 0 |           |  |         | 0  |  |  |  | 0  |  |  |  | 0 | 
|Operating Lease Obligations                                                         |  |                        | 106 |           |  |           | 0 |           |  |         | 85 |  |  |  | 21 |  |  |  | 0 | 
|Other Long-Term Liabilities Reflected on the
    Companys Balance Sheet under GAAP |  |                        | 0   |           |  |           | 0 |           |  |         | 0  |  |  |  | 0  |  |  |  | 0 | 
|Total                                                                               |  |                        | 106 |           |  |           | 0 |           |  |         | 85 |  |  |  | 21 |  |  |  | 0 | 






|        |                     
|------- | --------------------
|Item 7. | Financial Statements

The following consolidated financial statements
of the Company and its subsidiary, together with the Report of
Independent Certified Public Accountants thereon, are included
as Exhibit 99.1 hereto and are incorporated herein by
reference.

Independent Auditors Report on the
consolidated financial statements

Consolidated Balance Sheets as of
December 31, 2003 and 2002

Consolidated Statements of Income for the years
ended December 31, 2003 and 2002

25



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##### Table of Contents



Consolidated Statements of Comprehensive Income
for the years ended December 31, 2003 and 2002

Consolidated Statements of Stockholders
Equity for the years ended December 31, 2003 and 2002

Consolidated Statements of Cash Flows for the
years ended December 31, 2003 and 2002

Notes to Consolidated Financial Statements






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

Effective as of April 14, 2003, the
Companys Audit Committee dismissed Mauldin &
Jenkins, LLC as its auditor and engaged McNair, McLemore,
Middlebrooks & Company, LLP, as its new independent
auditor for the fiscal year ending December 31, 2003. The
purpose of this action was to allow the Company to engage
Mauldin & Jenkins, LLC for non-audit services that are
not permitted by the Companys outside auditor under new
rules promulgated by the Securities and Exchange Commission.

The reports of Mauldin & Jenkins, LLC on
the Companys financial statements for the past two fiscal
years did not contain an adverse opinion or a disclaimer of
opinion and were not qualified or modified as to uncertainty,
audit scope, or accounting principles.

There were no disagreements with
Mauldin & Jenkins, LLC during the Companys two
most recent fiscal years on any matters of accounting principles
or practices, financial statement disclosure, or auditing scope
and procedures which, if not resolved to the satisfaction of
Mauldin & Jenkins, LLC, would have caused
Mauldin & Jenkins, LLC to make reference to any such
matters in their reports. During the fiscal years ended
December 31, 2002 and December 31, 2003, there were no
reportable events to describe as specified in
Item 304(a)(1)(iv)(B) of Regulation S-B.

A copy of the letter from Mauldin &
Jenkins, LLC, dated April 14, 2003, stating whether it
agrees with the above statements, is filed as Exhibit 16.1
to the Current Report on Form 8-K/ A filed by the Company
on April 17, 2003, and is incorporated herein by reference.

On April 14, 2003, the Companys Audit
Committee engaged McNair, McLemore, Middlebrooks &
Company, LLP, as the Companys independent auditors for the
fiscal year ending December 31, 2003, to audit the
Companys financial statements. During the Companys
two most recent fiscal years, the Company did not consult
McNair, McLemore, Middlebrooks & Company, LLP, on any
matter requiring disclosure under Item 304(a)(2) of
Regulation S-B.






|         |                        
|-------- | -----------------------
|Item 8A. | Controls and Procedures

The Companys Chief Executive Officer and
Chief Financial Officer have evaluated the Companys
disclosure controls and procedures as of the end of the fiscal
year covered by this Report on Form 10-KSB and have
concluded that the Companys disclosure controls and
procedures are effective. During the fourth quarter of 2003,
there were no changes in the Companys internal control
over financial reporting that have materially affected, or that
are reasonably likely to materially affect, the Companys
internal control over financial reporting.




PART III





|        |                                                       
|------- | ------------------------------------------------------
|Item 9. | Directors and Executive Officers of the
    Registrant

The information appearing under the heading
Election of Directors, Corporate Governance
and Board Matters, Executive Officers,
Section 16(a) Beneficial Ownership Reporting
Compliance in the Proxy Statement (the 2004 Proxy
Statement) relating to the annual meeting of shareholders
of the Company, expected to be held June 2, 2004, is
incorporated herein by reference. The Company has adopted a code
of ethics that applies to the Companys chief executive
officer and senior financial officers, a copy of which is
attached to this Form 10-KSB as Exhibit 14.

26



---



##### Table of Contents








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

The information appearing under the heading
Compensation of Executive Officers and Directors in
the 2004 Proxy Statement is incorporated herein by reference.






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

The information appearing under the heading
Ownership of Common Stock in the 2004 Proxy
Statement is incorporated herein by reference.






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

The information appearing under the caption
Related Party Transactions in the 2004 Proxy
Statement is incorporated herein by reference.






|         |                                     
|-------- | ------------------------------------
|Item 13. | Exhibits and Reports on
    Form 8-K

(a) The following exhibits are filed as a
part of or incorporated by reference in this report:

|        |    |             |  |                                                                                                                                                                                                                                                                                                       
|------- | -- | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|No.     |    | Description
|        |    |            
|        | 2  | .1          |  | Reorganization Agreement dated April 12,
    2001 by and among the Registrant, Newnan Coweta Bank and Newnan
    Interim Corporation (filed as Exhibit 2.1 to the
    Registrants Form 8-K12g3 previously filed with the
    Commission on October 11, 2001 and incorporated herein by
    reference)
|        | 3  | .1          |  | Articles of Incorporation of the Company (filed
    as Exhibit 3.1 to the Registrants Form 8-K12g3
    previously filed with the Commission on October 11, 2001
    and incorporated herein by reference)                                                                                            
|        | 3  | .2          |  | Bylaws of the Company, as amended (filed as
    Exhibit 3.2 to the Registrants Form 8-K12g3
    previously filed with the Commission on October 11, 2001
    and incorporated herein by reference)                                                                                                   
|        | 10 | .1          |  | 2001 Incentive Stock Option Plan (filed as
    Exhibit 10.1 of Registrants Form 10-KSB
    previously filed with the Commission on March 29, 2002 and
    incorporated herein by reference)*                                                                                                         
|        | 10 | .2          |  | Employment Agreement of James B. Kimsey (filed as
    Exhibit 6.2 to the Registrants Form 10-SB
    previously filed with the Commission on April 30, 2001 and
    incorporated herein by reference)*                                                                                                
|        | 14 |             |  | Code of Ethics for CEO and Senior Financial
    Officers                                                                                                                                                                                                                                              
|        | 16 |             |  | Letter on changes in certifying accountant (filed
    as Exhibit 16.1 to the Registrants Current Report on
    Form 8-K/A previously filed with the Commission on
    April 17, 2003 and incorporated herein by reference)                                                                           
|        | 21 |             |  | Subsidiaries of the Registrant                                                                                                                                                                                                                                                                        
|        | 23 |             |  | Consent of McNair, McLemore,
    Middlebrooks & Co, LLP.                                                                                                                                                                                                                                              
|        | 31 | .1          |  | Certificate of CEO pursuant to Section 302
    of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                     
|        | 31 | .2          |  | Certificate of CFO pursuant to Section 302
    of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                     
|        | 32 | .1          |  | Certificate of CEO pursuant to Section 906
    of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                     
|        | 32 | .2          |  | Certificate of CFO pursuant to Section 906
    of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                     
|        | 99 | .1          |  | Consolidated Financial Statements                                                                                                                                                                                                                                                                     



---



|  |                                                                       
|- | ----------------------------------------------------------------------
|* | Denotes a management contract or compensatory
    plan or arrangement.

(b) There were no reports on
Form 8-K filed by the Company during the fourth quarter of
2003.






|         |                                           
|-------- | ------------------------------------------
|Item 14. | Principal Accountant Fees and
    Services

The information appearing under the heading
Independent Public Accountants in the 2004 Proxy
Statement is incorporated herein by reference.

27



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##### Table of Contents






SIGNATURES

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



| |                               
| | ------------------------------
| | NEWNAN COWETA BANCSHARES, INC.
| | (Registrant)                  



| |     |                    
| | --- | -------------------
| | By: | /s/ JAMES B. KIMSEY

| |                                          
| | -----------------------------------------
| |                                          
| | James B. Kimsey                          
| | President and Chief Executive
    Officer

Date: March 17, 2004

In accordance with 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.

|                                                 |  |                                                                                            |  |                |  | 
|------------------------------------------------ |  | ------------------------------------------------------------------------------------------ |  | -------------- |  | 
|                                                 |  |                                                                                            |  |               
|Signature                                        |  | Title                                                                                      |  | Date          
|                                                 |  |                                                                                            |  |               
|                                                
|/s/ JAMES B. KIMSEYJames B. Kimsey               |  | President, Chief Executive Officer and Director
    (Principal Executive Officer)          |  | March 17, 2004
|                                                
|/s/ ANN B. BLEDSOEAnn B. Bledsoe                 |  | Chief Financial Officer (Principal Financial
    Officer and Principal Accounting Officer) |  | March 17, 2004
|                                                
|/s/ ROBERT E. CORDLERobert E. Cordle             |  | Director                                                                                   |  | March 17, 2004
|                                                
|/s/ JOE S. CRAIN, JR.Joe S. Crain, Jr.           |  | Director                                                                                   |  | March 17, 2004
|                                                
|/s/ DOUGLAS T. DAVISTONDouglas T. Daviston       |  | Director                                                                                   |  | March 17, 2004
|                                                
|/s/ OTIS F. JONESOtis F. Jones                   |  | Director                                                                                   |  | March 17, 2004
|                                                
|/s/ DAVID LAGUARDIADavid LaGuardia               |  | Director                                                                                   |  | March 17, 2004
|                                                
|/s/ BOB B. MANN, JR.Bob B. Mann, Jr.             |  | Director                                                                                   |  | March 17, 2004
|                                                
|/s/ THEO D. MANNTheo D. Mann                     |  | Director                                                                                   |  | March 17, 2004
|                                                
|/s/ DENNIS H. MCDOWELL, IIDennis H. McDowell, II |  | Director                                                                                   |  | March 17, 2004

28



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##### Table of Contents



|                                                       |  |                                  |  |                |  | 
|------------------------------------------------------ |  | -------------------------------- |  | -------------- |  | 
|                                                       |  |                                  |  |               
|Signature                                              |  | Title                            |  | Date          
|                                                       |  |                                  |  |               
|                                                      
|/s/ J. WALKER MOODYJ. Walker Moody                     |  | Director                         |  | March 17, 2004
|                                                      
|/s/ JAMES VAN S. MOTTOLAJames Van S. Mottola           |  | Director & Chairman of the Board |  | March 17, 2004
|                                                      
|/s/ MELVIN SAMUELSMelvin Samuels                       |  | Director                         |  | March 17, 2004
|                                                      
|/s/ DONALD L. SPRAYBERRY, JR.Donald L. Sprayberry, Jr. |  | Director                         |  | March 17, 2004
|                                                      
|/s/ JENNIFER J. THOMASSONJennifer J. Thomasson         |  | Director                         |  | March 17, 2004
|                                                      
|/s/ WOODIE T. WOODWoodie T. Wood                       |  | Director                         |  | March 17, 2004

29



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##### Table of Contents



EXHIBIT INDEX

|        |    |             |  |                                                                                  
|------- | -- | ----------- |  | ---------------------------------------------------------------------------------
|Exhibit |    |            
|No.     |    | Description
|        |    |            
|        | 14 |             |  | Code of Ethics for CEO and Senior Financial
    Officers                         
|        | 21 |             |  | Subsidiaries of the Registrant                                                   
|        | 23 |             |  | Consent of McNair, McLemore,
    Middlebrooks & Co, LLP.                         
|        | 31 | .1          |  | Certificate of CEO pursuant to Section 302
    of the Sarbanes-Oxley Act of 2002.
|        | 31 | .2          |  | Certificate of CFO pursuant to Section 302
    of the Sarbanes-Oxley Act of 2002.
|        | 32 | .1          |  | Certificate of CEO pursuant to Section 906
    of the Sarbanes-Oxley Act of 2002.
|        | 32 | .2          |  | Certificate of CFO pursuant to Section 906
    of the Sarbanes-Oxley Act of 2002.
|        | 99 | .1          |  | Consolidated Financial Report