EXHIBIT 13.1


                            CHEROKEE BANKING COMPANY




                               2004 ANNUAL REPORT






<PAGE>
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

Cherokee  Banking  Company  is  a  bank holding company headquartered in Canton,
Georgia  organized  to  own  all  of  the  common  stock of its bank subsidiary,
Cherokee  Bank,  N.A.  The  principal activity of the bank is to provide banking
services to domestic markets, principally in Cherokee County, Georgia.  The bank
is  primarily regulated by the Office of the Comptroller of the Currency ("OCC")
and undergoes periodic examinations by this regulatory agency.  Our bank holding
company is regulated by the Federal Reserve Bank and also is subject to periodic
examinations.

The  following  discussion  describes  our  results  of  operations  for 2004 as
compared  to  2003  and also analyzes our financial condition as of December 31,
2004  as  compared  to  December 31, 2003.  Like most community banks, we derive
most  of  our income from interest we receive on our loans and investments.  Our
primary  source of funds for making these loans and investments is our deposits,
on  which we pay interest.  Consequently, one of the key measures of our success
is  our  amount  of net interest income, or the difference between the income on
our  interest-earning  assets, such as loans and investments, and the expense on
our  interest-bearing liabilities, such as deposits.  Another key measure is the
spread  between  the yield we earn on these interest-earning assets and the rate
we  pay  on  our  interest-bearing  liabilities.

We  have  included  a  number  of  tables  to assist in our description of these
measures.  For  example,  the "Average Balances" table shows the average balance
during  2004 and 2003 of each category of our assets and liabilities, as well as
the yield we earned or the rate we paid with respect to each category.  A review
of this table shows that our loans typically provide higher interest yields than
do  other  types of interest earning assets, which is why we intend to channel a
substantial  percentage  of  our  earning  assets  into  our  loan  portfolio.
Similarly,  the  "Rate/Volume  Analysis"  table  helps demonstrate the impact of
changing interest rates and changing volume of assets and liabilities during the
years  shown.  We also track the sensitivity of our various categories of assets
and  liabilities  to  changes  in  interest  rates,  and  we  have  included  a
"Sensitivity  Analysis Table" to help explain this.  Finally, we have included a
number of tables that provide detail about our investment securities, our loans,
and  our  deposits.

Of  course,  there  are risks inherent in all loans, so we maintain an allowance
for  loan  losses  to  absorb  possible losses on existing loans that may become
uncollectible.  We establish and maintain this allowance by charging a provision
for  loan  losses  against  our operating earnings.  In the following section we
have  included  a detailed discussion of this process, as well as several tables
describing  our  allowance  for  loan  losses.

In  addition  to  earning  interest on our loans and investments, we earn income
through  fees  and  other  expenses we charge to our customers.  We describe the
various  components  of  this  noninterest  income,  as  well as our noninterest
expense,  in  the  following  discussion.

The  following  discussion and analysis also identifies significant factors that
have  affected  our  financial position and operating results during the periods
included  in  the  accompanying  financial statements.  We encourage you to read
this  discussion  and  analysis in conjunction with the financial statements and
the  related  notes  and the other statistical information also included in this
report.

FORWARD-LOOKING  STATEMENTS

This  report  contains  "forward-looking  statements"  relating  to,  without
limitation,  future economic performance, plans and objectives of management for
future  operations,  and  projections of revenues and other financial items that
are  based  on  the  beliefs  of  management, as well as assumptions made by and
information  currently  available  to  management.  The  words  "may,"  "will,"
"anticipate," "should," "would," "believe," "contemplate," "expect," "estimate,"
"continue,"  and "intend," as well as other similar words and expressions of the
future, are intended to identify forward-looking statements.  Our actual results
may  differ  materially  from  the  results  discussed  in  the  forward-looking
statements,  and  our  operating  performance each quarter is subject to various
risks  and  uncertainties  that  are discussed in detail in our filings with the
Securities  and  Exchange  Commission,  including,  without  limitation:

     -    the  effects  of  future  economic  conditions;
     -    governmental  monetary and fiscal policies, as well as legislative and
          regulatory  changes;
     -    changes  in  interest  rates  and  their  effect  on  the  level  and
          composition  of  deposits,  loan  demand,  and  the  values  of  loan
          collateral,  securities  and  other  interest-sensitive  assets  and
          liabilities;
     -    our  ability  to  control costs, expenses, and loan delinquency rates;
          and


<PAGE>
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
           OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED


-    the  effects  of competition from other commercial banks, thrifts, mortgage
     banking  firms,  consumer  finance  companies,  credit  unions,  securities
     brokerage  firms,  insurance companies, money market and other mutual funds
     and  other  financial  institutions  operating  in  our  market  area  and
     elsewhere,  including  institutions  operating  regionally, nationally, and
     internationally,  together  with such competitors offering banking products
     and  services  by  mail,  telephone,  computer  and  the  Internet.

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  note  1  in  the  footnotes  to  the  consolidated financial
statements  at  December  31,  2004  included  elsewhere  in this annual report.

We  believe  that  the allowance for loan losses is a critical accounting policy
that  requires  the most significant judgments and estimates used in preparation
of  our  consolidated  financial  statements.  Please  refer  to  the portion of
management's  discussion  and  analysis  of  financial  condition and results of
operations that addresses the allowance for loan losses for a description of our
processes  and  methodology  for  determining  the  allowance  for  loan losses.

RESULTS  OF  OPERATIONS

Net  income for 2004 was $559,000 compared to $455,000 in 2003.  Our operational
results depend to a large degree on net interest income, which is the difference
between  the  interest income received on investments (such as loans, investment
securities,  federal  funds  sold,  etc.)  and  the  interest expense on deposit
liabilities  and  other  borrowings  (such  as  Federal Home Loan Bank advances,
federal  funds  purchased  and  advances  on  the line of credit).  Net interest
income  was  $4,622,000  for  the  year  ended  December  31,  2004  compared to
$3,441,000  for  the  year  ended  December  31,  2003.

The provision for loan losses in 2004 was $285,000 compared to $194,000 in 2003.
The provision for loan losses reflects management's estimate of potential losses
inherent  in the loan portfolio and the creation of an allowance for loan losses
adequate  to  absorb  such  losses.

Other  operating  income for the year ended December 31, 2004 totaled $1,017,000
compared  to  $866,000 in 2003.  Other operating income includes service charges
on  deposit  accounts,  mortgage  origination fee income and investment security
gains.  Historically low interest rates during 2004 and 2003 provided us with an
opportunity to derive significant income from the origination of mortgage loans.
Other operating expenses in 2004 were $4,559,000 compared to $3,458,000 in 2003.
The  largest  component  of  other  operating expenses is salaries and benefits,
which  totaled  $2,318,000  for  the  year  ended  December 31, 2004 compared to
$1,838,000  in  2003.

NET  INTEREST  INCOME

As  stated  above,  for the years ended December 31, 2004 and 2003, net interest
income  totaled  $4,622,000  and $3,441,000, respectively.  Interest income from
loans,  including  fees  was  $4,589,000  representing  a yield of 6.37% in 2004
compared to a yield of 6.73%  in 2003.  The decrease in the yield during 2004 is
directly  attributable  to  the  refinancing by customers of existing fixed rate
loans  at  lower  prevailing market rates.  Also, while the prime rate increased
during  2004,  many  of  our variable rate loans are structured with floors well
above  the  prime  rate and, as such, the increase in the prime rate during 2004
did  not  produce an increase in our yield.  Interest expense totaled $1,775,000
for  the  year  ended December 31, 2004 compared to $1,607,000 in 2003.  The net
interest  margin  realized  on  earning assets and the interest rate spread were
3.74%  and 3.51%, respectively, for the year ended December 31, 2004 compared to
an  interest  rate  margin  of  3.57% and interest rate spread of 3.34% in 2003.


<PAGE>
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
           OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED

AVERAGE  BALANCES  AND  INTEREST  RATES

The  table  below  shows  the  average  balance outstanding for each category of
interest  earning  assets and interest-bearing liabilities for 2004 and 2003 and
the average rate of interest earned or paid thereon.  Average balances have been
derived  from  the  daily  balances  throughout  the  period  indicated.

<TABLE>
<CAPTION>
                                                For the Year Ended               For the Year Ended
                                                 December 31, 2004                December 31, 2003
                                         --------------------------------  ------------------------------
                                                        (Amounts presented in thousands)

                                          Average                Yield/     Average               Yield/
                                          Balance   Interest      Rate      Balance    Interest    Rate
                                         ---------  ---------  ----------  ---------  ----------  -------
<S>                                      <C>        <C>        <C>         <C>        <C>         <C>
Assets:
  Interest earning assets:
    Loans (including loan fees)          $ 72,087      4,589        6.37%  $ 49,700   $   3,344     6.73%
    Investment securities                  48,679      1,763        3.62%    43,982       1,662     3.78%
    Interest-bearing deposits                 299          6        2.05%       242           9     3.72%
    Federal funds sold                      2,497         39        1.56%     2,556          33     1.29%
                                         ---------  ---------  ----------  ---------  ----------  -------

Total interest earning assets             123,562      6,397        5.18%    96,480       5,048     5.23%
Other non-interest earnings assets         11,177                             9,230
                                         ---------                         ---------

        Total assets                     $134,739                          $105,710
                                         =========                         =========

Liabilities and shareholders' equity:
  Interest-bearing liabilities:
    Deposits:
      Interest-bearing demand
        and savings                      $ 60,900        495        0.81%  $ 48,941   $     474     0.97%
      Time                                 33,367        938        2.81%    26,386         830     3.15%
      Federal Home Loan Bank
        advances                            8,523        277        3.25%     8,500         276     3.25%
      Other borrowings                        167          8        4.79%       416          10     2.40%
      Federal funds purchased               3,014         57        1.89%       877          17     1.94%
                                         ---------  ---------  ----------  ---------  ----------  -------

Total interest-bearing liabilities        105,971      1,775        1.67%    85,120       1,607     1.89%
Other non-interest bearing liabilities     15,130                            13,208
Shareholders' equity                       13,638                             7,382
                                         ---------                         ---------

      Total liabilities and
        shareholders' equity             $134,739                          $105,710
                                         =========                         =========

Excess of interest-earning assets over
  interest bearing liabilities           $ 17,591                          $ 11,360
                                         =========                         =========

Ratio of interest-earning assets
  to interest-bearing liabilities          116.60%                           113.35%

Net interest income                                    4,622                          $   3,441
                                                    =========                         ==========

Net interest spread                                     3.51%                              3.34%

Net interest margin                                     3.74%                              3.57%
</TABLE>

Non-accrual  loans  are  included  in  average  loan balances during the periods
presented  as  the  balances  were  not  significant.


<PAGE>
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
           OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED

VOLUME/RATE  ANALYSIS

Net  interest  income  can  also  be analyzed in terms of the impact of changing
rates  and  changing  volume.  The following table describes the extent to which
changes  in  interest rates and changes in the volume of interest-earning assets
and  interest-bearing liabilities have affected our interest income and interest
expense  during  the  periods  indicated.

<TABLE>
<CAPTION>
                                               2004 compared to 2003
                                          -------------------------------
                                                Increase (decrease)
                                                 due to change in
                                                                   Net
                                            Rate      Volume     Change
                                          ---------  ---------  ---------
<S>                                       <C>        <C>        <C>
  Interest income on:
    Loans (including loan fees)           $   (188)  $  1,433   $  1,245
    Investment securities                      (72)       173        101
    Interest-bearing deposits                   (5)         2         (3)
    Federal funds sold                           7         (1)         6
                                          ---------  ---------  ---------
        Total interest income                 (258)     1,607      1,349
                                          ---------  ---------  ---------

  Interest expense on:
    Interest-bearing demand and savings        (85)       106         21
    Time deposits                              (96)       204        108
    Federal Home Loan Bank advances              -          1          1
    Other borrowings                             6         (8)        (2)
    Federal funds purchased                     (5)        45         40
                                          ---------  ---------  ---------
        Total interest expense                (180)       348        168
                                          ---------  ---------  ---------

        Net interest income               $    (78)  $  1,259   $  1,181
                                          =========  =========  =========
</TABLE>

INTEREST  RATE  SENSITIVITY  AND  ASSET  LIABILITY  MANAGEMENT

Interest  rate sensitivity measures the timing and magnitude of the repricing of
assets  compared  with  the repricing of liabilities and is an important part of
asset/liability  management  of  a  financial  institution.  The  objective  of
interest  rate  sensitivity  management  is  to  generate  stable  growth in net
interest  income,  and  to  control  the  risks  associated  with  interest rate
movements.  Management  constantly  reviews  interest rate risk exposure and the
expected  interest  rate  environment  so  that  adjustments  in  interest  rate
sensitivity  can be timely made.  Since the assets and liabilities of a bank are
primarily  monetary  in  nature  (payable  in  fixed, determinable amounts), the
performance  of  a  bank  is  affected more by changes in interest rates than by
inflation.  Interest  rates  generally  increase  as  the  rate  of  inflation
increases,  but  the  magnitude  of  the  change  in  rates may not be the same.

Net  interest  income  is  the  primary  component  of  net income for financial
institutions.  Net  interest  income  is affected by the timing and magnitude of
repricing  of as well as the mix of interest sensitive and noninterest sensitive
assets and liabilities.  "Gap" is a static measurement of the difference between
the  contractual  maturities or repricing dates of interest sensitive assets and
interest  sensitive  liabilities  within the following twelve months.  Gap is an
attempt  to  predict  the  behavior of the bank's net interest income in general
terms  during periods of movement in interest rates.  In general, if the bank is
asset  sensitive,  more of its interest sensitive assets are expected to reprice
within  twelve  months  than  its  interest  sensitive liabilities over the same
period.  In a rising interest rate environment, assets repricing more quickly is
expected  to  enhance  net  interest income.  Alternatively, decreasing interest
rates would be expected to have the opposite effect on net interest income since
assets  would  theoretically  be  repricing at lower interest rates more quickly
than  interest  sensitive  liabilities.  Although  it  can  be used as a general
predictor,  Gap  as  a  predictor  of  movements  in  net  interest  income  has
limitations  due  to the static nature of its definition and due to its inherent
assumption  that  all  assets  will  reprice  immediately  and  fully  at  the
contractually  designated  time.  At December 31, 2004, the bank, as measured by
Gap,  is  in  a  liability  sensitive  position.  Management  has  several tools
available  to  it  to  evaluate and affect interest rate risk, including deposit
pricing  policies  and  changes  in  the  mix  of  various  types  of assets and
liabilities.


<PAGE>
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
           OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED

We also measure the actual effects that repricing opportunities have on earnings
through  simulation  modeling,  referred to as earnings at risk.  For short-term
interest  rate  risk,  the  bank's  model  simulates the impact of balance sheet
strategies  on  net  interest income, pre-tax income, and net income.  The model
includes  interest  rate ramps to test the impact of rising and falling interest
rates  on  projected  earnings.  Rates  are  ramped  over  a one-year period and
include a level rate scenario as the benchmark with rising and falling 200 basis
point  scenarios  for  comparison.  The bank determines the assumptions that are
used  in  the  model.

In  addition  to measuring the effect changes in rates will have on earnings, we
also  measure  the  effect of interest rate changes on the economic value of the
bank.  Economic  Value of Equity is measured by calculating the present value of
future  cash  flows  for  financial instruments on the balance sheet.  The model
utilizes  rate  shocks of rising and falling 200 basis points to compare against
the  level  benchmark  for best and worst case scenarios.  All rates are shocked
instantaneously  for  the  200  basis  point  movements.  The  purpose  of  this
measurement  is  to determine the long-term effect interest rate changes have on
the  economic  value  of  the  balance  sheet.

The  following  table  summarizes  the  amounts  of  interest-earning assets and
interest-bearing liabilities outstanding at December 31, 2004, that are expected
to  mature, prepay, or reprice in each of the future time periods shown.  Except
as  stated  below,  the  amount  of assets or liabilities that mature or reprice
during  a  particular  period  was determined in accordance with the contractual
terms  of  the  asset  or  liability.  Adjustable rate loans are included in the
period  in  which interest rates are next scheduled to adjust rather than in the
period  in  which  they  are  due,  and  fixed  rate  loans  and mortgage-backed
securities  are  included  in  the  periods  in which they are anticipated to be
repaid  based  on  scheduled  maturities.  The  bank's  savings  accounts  and
interest-bearing  demand accounts (NOW and money market deposit accounts), which
are generally subject to immediate withdrawal, are included in the "Three Months
or  Less"  category, although historical experience has proven these deposits to
be  more  stable  over  the  course  of  a  year.

<TABLE>
<CAPTION>
                                                             At December 31, 2004
                                                            (dollars in thousands)

                                            Three
                                            Months     Four Months     1 to 5     Over 5
                                           or Less     to 12 Months     Years     Years     Total
                                          ----------  --------------  ---------  --------  --------
<S>                                       <C>         <C>             <C>        <C>       <C>
Interest-earning assets:
   Investment securities                  $       -   $           -   $ 16,351   $32,533   $ 48,884
   Interest-bearing deposits                      -             595        495         -      1,090
   Loans                                     58,620           4,257     19,376     2,761     85,014
                                          ----------  --------------  ---------  --------  --------

Total interest-bearing assets                58,620           4,852     36,222    35,294    134,988
                                          ----------  --------------  ---------  --------  --------

Interest-bearing liabilities:
   Deposits:
      Savings and demand                     59,665               -          -         -     59,665
      Time deposits                          11,605          18,375     10,203         -     40,183
   Federal Home Loan Bank advances                -               -      3,000     5,500      8,500
   Federal funds purchased                    8,858               -          -         -      8,858
                                          ----------  --------------  ---------  --------  --------

Total interest-bearing liabilities           80,128          18,375     13,203     5,500    117,206
                                          ----------  --------------  ---------  --------  --------

Interest sensitive difference per period    (21,508)        (13,523)    23,019    29,794   $ 17,782
                                                                                           ========
Cumulative interest sensitivity
   difference                             $ (21,508)        (35,031)   (12,012)   17,782
                                          ==========  ==============  =========  ========

Cumulative difference to total assets       (14.58%)        (23.75%)    (8.14%)    12.05%
                                          ==========  ==============  =========  ========
</TABLE>


<PAGE>
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
           OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED

At  December  31, 2004, the difference between the bank's liabilities and assets
repricing  or  maturing  within  one  year was $35,031,000.  Due to an excess of
liabilities repricing or maturing within one year, an increase in interest rates
would  cause  the  bank's  net  interest  income  to  decline.

Certain  shortcomings  are  inherent  in the method of analysis presented in the
foregoing  table.  For example, although certain assets and liabilities may have
similar  maturities  or periods of repricing, they may reflect changes in market
interest  rates  differently.  Additionally,  certain  assets,  such  as
adjustable-rate  mortgages,  have  features  that  restrict  changes in interest
rates, both on a short-term basis and over the life of the asset.  Other factors
which  may  affect the assumptions made in the table include changes in interest
rates,  pre-payment rates, early withdrawal levels, and the ability of borrowers
to  service  their  debt.

PROVISION  AND  ALLOWANCE  FOR  LOAN  LOSSES

The  provision  for  loan  losses  is  the  charge  to  operating  earnings that
management believes is necessary to maintain the allowance for loan losses at an
adequate  level.  The  provision  charged  to  expense was $285,000 for the year
ended  December 31, 2004 as compared to $194,000 for the year ended December 31,
2003.  The  loan  portfolio  increased by approximately $27.4 million during the
year ended December 31, 2004 compared to an increase of $13.5 million during the
year  ended December 31, 2003.  The allowance for loan losses was 1.26% of gross
loans  at  December  31, 2004 compared to 1.39% at December 31, 2003.  There are
risks  inherent  in making all loans, including risks with respect to the period
of time over which loans may be repaid, risks resulting from changes in economic
and  industry  conditions,  risks inherent in dealing with individual borrowers,
and,  in  the  case of a collateralized loan, risks resulting from uncertainties
about  the  future  value  of  the  collateral.  We  anticipate  maintaining  an
allowance  for  loan losses based on, among other things, historical experience,
an  evaluation  of economic conditions, and regular reviews of delinquencies and
loan  portfolio  quality.  Our  judgment  about the adequacy of the allowance is
based  upon  a number of assumptions about future events, which we believe to be
reasonable,  but which may not prove to be accurate.  Thus, there is a risk that
charge-offs in future periods could exceed the allowance for loan losses or that
substantial  additional  increases  in  the  allowance  for loan losses could be
required.  Additions to the allowance for loan losses would result in a decrease
of  our  net  earnings  and,  possibly,  our  capital.

The  following  table  summarizes  information concerning the allowance for loan
losses:

<TABLE>
<CAPTION>
                                                     December 31,
                                                  ------------------
                                                   2004      2003
                                                  -------  ---------
<S>                                               <C>      <C>
Balance at beginning of year                      $  802   $    640
  Charge-offs:
     Commercial                                        5          -
     Real estate - construction                        -         19
     Real estate - mortgage                            -          -
     Consumer                                          7         26
                                                  -------  ---------

        Total charge-offs                             12         45

     Recoveries:
     Commercial                                        -          -
     Real estate - construction                        -          -
     Real estate - mortgage                            -          7
     Consumer                                          -          6
                                                  -------  ---------

        Total recoveries                               -         13
                                                  -------  ---------

  Net charge-offs                                     12         32
  Additions charged to operations                    285        194
                                                  -------  ---------

  Balance at end of year                          $1,075   $    802
                                                  =======  =========

  Ratio of net charge-offs during period to
     average loans outstanding during the period    .017%      .064%
</TABLE>


<PAGE>
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
           OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED

The following table summarizes other real estate and repossessions, past due and
non-accrual loans, and income that would have been reported on non-accrual loans
as  of  December  31,  2004  and  2003  (amounts  are  presented  in thousands):

<TABLE>
<CAPTION>
                                           December 31,
                                         ----------------
                                          2004     2003
                                         ------  --------
<S>                                      <C>     <C>
Other real estate and repossessions      $    -  $      -
Accruing loans 90 days or more past due       -         -
Non-accrual loans                            16         -
Interest on non-accrual loans which
   would have been reported                   -         -
</TABLE>

NONINTEREST  INCOME  AND  EXPENSE

Noninterest  income  for  the year ended December 31, 2004 totaled $1,017,000 as
compared  to  $866,000  for  the year ended December 31, 2003.  This increase in
noninterest  income  was  primarily  due  to  an  increase in service charges on
deposit  accounts.  Service  charges  on  deposit accounts grew as the number of
accounts  increased  in  2004  as  compared  to  2003.

Total noninterest expense for the year ended December 31, 2004 was $4,559,000 as
compared  to $3,458,000 for the same period in 2003.  Salaries and benefits, the
largest  component of noninterest expense, totaled $2,318,000 for the year ended
December  31,  2004,  compared  to  $1,838,000  for  the same period a year ago.
Salary and benefits expense primarily increased due to the increase in full time
equivalent  employees from 37 at December 31, 2003 to 41 at December 31, 2004 as
well as other annual salary increases.  Other operating expenses were $1,742,000
for  the  year  ended  December  31, 2004 as compared to $1,266,000 for the year
ended  December 31, 2003.  The increase in noninterest expenses is due primarily
to  the  continued  growth  of  the  bank.

INCOME  TAXES

For  the  year  ended  December  31,  2004,  we recognized income tax expense of
$237,000  compared to $199,000 in 2003.  Our effective tax rate in 2004 and 2003
was  approximately  30%.

FINANCIAL CONDITION

Total  assets  increased  $29,565,000, or 25% from December 31, 2003 to December
31, 2004.  The primary source of growth in assets was net loans, which increased
$27,157,000  or  48%,  during  the year ended December 31, 2004.  Total deposits
increased  $20,659,000,  or  22%  during  2004.

INTEREST  EARNING  ASSETS

LOANS

Gross loans totaled $85,014,000 at December 31, 2004, an increase of $27,430,000
or  48%  since  December  31,  2003.  The  largest  increase  in  loans  was  in
commercial, financial and agricultural loans, which increased $11,980,000 or 40%
to  $41,998,000  at December 31, 2004.  Real estate construction loans increased
$9,522,000  during  2004.  Balances within the major loans receivable categories
as  of  December  31,  2004  and  December  31,  2003  are  as  follows:

<TABLE>
<CAPTION>
                                               2004              2003
                                        -----------------  -----------------
<S>                                     <C>          <C>   <C>          <C>
Commercial, financial and agricultural  $41,997,789   49%  $30,017,333   52%
Real estate - mortgage                   14,210,709   17%    8,423,916   15%
Real estate - construction               25,676,400   30%   16,154,111   28%
Consumer                                  3,129,361    4%    2,989,302    5%
                                        -----------  ----  -----------  ----

                                        $85,014,259  100%  $57,584,662  100%
                                        ===========  ====  ===========  ====
</TABLE>


<PAGE>
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
           OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED

As  of  December  31, 2004, maturities of loans in the indicated classifications
were  as  follows:

<TABLE>
<CAPTION>
                             Real Estate
               Commercial   Construction      Total
               -----------  -------------  -----------
<S>            <C>          <C>            <C>
Maturity

Within 1 year  $ 9,471,660  $  21,635,323  $31,106,983
1 to 5 years    27,710,952      4,041,077   31,752,029
Over 5 years     4,815,177              -    4,815,177
               -----------  -------------  -----------

  Totals       $41,997,789  $  25,676,400  $67,674,189
               ===========  =============  ===========
</TABLE>

As  of  December  31,  2004,  the  interest  terms  of  loans  in  the indicated
classification  for  the  indicated  maturity  ranges  are  as  follows:

<TABLE>
<CAPTION>
                            Fixed Interest   Variable Interest
                                 Rates             Rates            Total
                            ---------------  ------------------  -----------
<S>                         <C>              <C>                 <C>
Commercial
  1 to 5 years              $    12,303,019  $       15,407,933  $27,710,952
  Over 5 years                      752,646           4,062,532    4,815,178

Real estate - construction
  1 to 5 years                            -           4,041,077    4,041,077
  Over 5 years                            -                   -            -
                            ---------------  ------------------  -----------

                            $    13,055,665  $       23,511,542  $36,567,207
                            ===============  ==================  ===========
</TABLE>

INVESTMENT  SECURITIES

Investment  securities  available-for-sale  decreased slightly to $47,865,000 at
December  31,  2004  from  $48,096,000  at December 31, 2003.  All of the bank's
marketable  investment  securities  were  designated  as  available-for-sale  at
December  31,  2004  and  2003.

The  following  table  presents the investments by category at December 31, 2004
and  2003:

<TABLE>
<CAPTION>
                                      2004                      2003
                            ------------------------  ------------------------
                             Amortized    Estimated    Amortized    Estimated
                               Cost      Fair Value      Cost      Fair Value
                            -----------  -----------  -----------  -----------
<S>                         <C>          <C>          <C>          <C>
U.S. Government and
  federal agencies          $17,942,139  $17,793,753  $ 5,647,195  $ 5,566,393
Mortgage-backed securities   30,616,058   30,071,359   42,869,781   42,529,340
                            -----------  -----------  -----------  -----------

                            $48,558,197  $47,865,112  $48,516,976  $48,095,733
                            ===========  ===========  ===========  ===========
</TABLE>


<PAGE>
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
           OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED

The following table presents the maturities of investment securities at carrying
value  and  the  weighted average yields for each range of maturities presented:

<TABLE>
<CAPTION>
                                     U.S.
                                  Government   Weighted    Mortgage    Weighted
                                 and Federal    Average     Backed      Average
                                   Agencies     Yields    Securities    Yields
                                 ------------  ---------  -----------  ---------
<S>                              <C>           <C>        <C>          <C>
Maturities at December 31, 2004

After 1 through 5 years          $ 15,815,332      3.16%  $   535,661      4.00%
After 5 through 10 years            1,978,421      3.53%   13,099,497      4.22%
After 10 years                              -         -    16,436,201      4.20%
                                 ------------  ---------  -----------  ---------

Totals                           $ 17,793,753      3.20%  $30,071,359      4.20%
                                 ============  =========  ===========  =========
</TABLE>

DEPOSITS

At  December  31,  2004,  total  deposits  increased by $20,659,000, or 22% from
December  31, 2003.  Noninterest-bearing demand deposits increased $2,103,000 or
16%  and  interest-bearing  deposits  increased  $18,556,000  or  23%.

Balances  within  the  major  deposit  categories  as  of  December 31, 2004 and
December  31,  2003  are  as  follows:

<TABLE>
<CAPTION>
                                          2004         2003
                                      ------------  -----------
<S>                                   <C>           <C>
Non-interest bearing demand deposits  $ 15,445,889  $13,342,450
Interest-bearing demand deposits        55,158,217   52,394,310
Savings deposits                         4,506,941    2,438,973
Time deposits                           25,754,392   20,108,509
Time deposits over $100,000             14,428,709    6,351,371
                                      ------------  -----------

                                      $115,294,148  $94,635,613
                                      ============  ===========
</TABLE>

The  average balance of deposits and the average rates paid on such deposits are
summarized  for  the  periods  indicated  in  the  following  table:

<TABLE>
<CAPTION>
                                                      December 31,
                                     ---------------------------------------------
                                              2004                   2003
                                     ---------------------------------------------
                                         (Amounts are presented in thousands)

                                       Amount       Rate        Amount      Rate
<S>                                  <C>          <C>        <C>           <C>
Non-interest bearing demand          $    16,013         -   $     12,495       -
Interest-bearing demand and savings       60,900      0.81%        48,941    0.97%
Time deposits                             33,367      2.81%        26,386    3.15%
                                     -----------             ------------

                                     $   110,280             $     87,822
                                     ===========             ============
</TABLE>


<PAGE>
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
           OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED

Maturities  of  time  certificates of deposit of $100,000 or more outstanding at
December  31,  2004,  are  summarized  as  follows  (Amounts  are  presented  in
thousands):

<TABLE>
<CAPTION>
<S>                        <C>
Within 3 months            $ 6,048
After 3 through 6 months     2,383
After 6 through 12 months    2,736
After 12 months              3,262
                           -------

     Total                 $14,429
                           =======
</TABLE>

CAPITAL  RESOURCES

Total  shareholders'  equity  increased  from $7,644,000 at December 31, 2003 to
$14,013,000  at  December  31, 2004.  This increase of $6,369,000 was due to net
earnings  of $559,000 for the period and proceeds from our common stock offering
of  $6,020,000,  net  of  stock  issue  costs  of $41,000, partially offset by a
decrease  of $169,000 in the fair value of securities available-for-sale, net of
tax.  The  proceeds  from  the  offering  will  primarily  be  used  to  provide
additional  working  capital  for  the  Bank.

Bank  holding  companies,  such  as  ours,  and  their  banking subsidiaries are
required  by  banking  regulators  to  meet  certain  minimum  levels of capital
adequacy,  which  are  expressed  in  the  form  of  certain ratios.  Capital is
separated  into  Tier  1  capital  (essentially common shareholders' equity less
intangible assets) and Tier 2 capital (essentially the allowance for loan losses
limited  to  1.25%  of  risk-weighted  assets).  The first two ratios, which are
based  on  the  degree  of  credit  risk in our assets, provide the weighting of
assets  based  on assigned risk factors and include off-balance sheet items such
as loan commitments and stand-by letters of credit.  The ratio of Tier 1 capital
to  risk-weighted  assets  must  be at least 4.0% and the ratio of total capital
(Tier  1  capital  plus Tier 2 capital) to risk-weighted assets must be at least
8.0%.  The capital leverage ratio supplements the risk-based capital guidelines.

Banks  and  bank  holding  companies are required to maintain a minimum ratio of
Tier  1  capital  to  adjusted  quarterly  average  total  assets  of  3.0%.

The  following table summarizes the bank's risk-based capital ratios at December
31,  2004:

<TABLE>
<CAPTION>
<S>                                       <C>
Tier 1 capital (to risk-weighted assets)  12.56%
Total capital (to risk-weighted assets)   13.61%
Tier 1 capital (to total average assets)   8.89%
</TABLE>

LIQUIDITY

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

Management is not aware of any significant concentrations of loans to classes of
borrowers or industries that would be affected similarly by economic conditions.
Although  the Bank's loan portfolio is diversified, a substantial portion of its
borrowers'  ability  to  honor  the  terms  of  their  loans is dependent on the
economic  conditions  in  Cherokee  County  and  surrounding  areas.

The Bank maintains relationships with correspondent banks that can provide funds
to  it  on  short  notice, if needed.  Presently, the Bank has arrangements with
commercial  banks  for  short  term  unsecured  advances up to $14,400,000, with
$5,542,000  available  at  December  31,  2004.

Cash  and  cash  equivalents  as  of  December  31, 2004 increased $442,000 from
December  31, 2003.  Cash provided by operating activities totaled $1,231,000 in
2004,  while  inflows  from financing activities totaled $28,631,000, which were
attributable to net increases in deposits, federal funds purchased, and proceeds
from  the  issuance  of  common  stock.


<PAGE>
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
           OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED

During 2004, investing activities used $29,421,000 of cash and cash equivalents.
Investing  activities  included  net  loans  made  to customers of approximately
$27,442,000,  purchases  of  investment  securities  available-for-sale  of
$24,676,000  and  purchases  of  premises  and  equipment of $560,000, partially
offset  by  maturities  and sales of investment securities available-for-sale of
approximately  $24,590,000.

OFF  BALANCE  SHEET  ARRANGEMENTS

We  are  a  party  to  financial  instruments with off-balance-sheet risk in the
normal  course  of business to meet the financing needs of our customers.  These
financial  instruments  consist  of  commitments  to  extend  credit and standby
letters  of  credit.  Commitments  to  extend credit are agreements to lend to a
customer  as  long  as there is no violation of any condition established in the
contract.  Standby  letters of credit are written conditional commitments issued
by  the Bank to guarantee the performance of a customer to a third party.  Those
guarantees  are  primarily  issued  to  support  public  and  private  borrowing
arrangements.  Most letters of credit extend for less than one year.  The credit
risk  involved  in  issuing  letters  of  credit is essentially the same as that
involved  in extending loan facilities to customers.  Commitments generally have
fixed expiration dates or other termination clauses and may require payment of a
fee.  A commitment involves, to varying degrees, elements of credit and interest
rate  risk  in  excess  of  the  amount  recognized  in the balance sheets.  Our
exposure  to  credit  loss in the event of non-performance by the other party to
the  instrument  is  represented  by  the  contractual  notional  amount  of the
instrument.

Since  certain  commitments are expected to expire without being drawn upon, the
total  commitment amounts do not necessarily represent future cash requirements.
We  use the same credit policies in making commitments to extend credit as we do
for  on-balance-sheet  instruments.  Collateral  held  for commitments to extend
credit  varies  but may include accounts receivable, inventory, property, plant,
equipment,  and  income-producing  commercial  properties.

The following table summarizes our off-balance-sheet financial instruments whose
contract  amounts  represent  credit  risk  as  of  December  31,  2004:

<TABLE>
<CAPTION>
<S>                           <C>
Commitments to extend credit  $19,923,000
Standby letters of credit     $   443,000
</TABLE>

INFLATION

Inflation  impacts the growth in total assets in the banking industry and causes
a  need  to  increase equity capital at higher than normal rates to meet capital
adequacy  requirements.  We  cope  with  the  effects  of  inflation through the
management  of interest rate sensitivity gap position, by periodically reviewing
and  adjusting  its  pricing  of  services to consider current costs and through
managing  our  level  of  net  income  relative  to  our dividend payout policy.

SELECTED  RATIOS

The  following  table  sets  out  certain  ratios  of  the Company for the years
indicated.

<TABLE>
<CAPTION>
                                   2004   2003
                                  ------  -----
<S>                               <C>     <C>
Net income to:
  Average stockholders' equity     4.10%  6.17%
  Average assets                    .41%   .43%
Dividends to net income               -      -
Average equity to average assets  10.12%  6.98%
</TABLE>


<PAGE>
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
           OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED

RECENT  ACCOUNTING  PRONOUNCEMENTS

In  December  2004,  the  Financial  Accounting Standards Board ("FASB") adopted
Statement  of  Financial  Accounting  Standards  No. 123(R), Share-Based Payment
("SFAS  No.  123(R)"),  which  revises and amends SFAS No. 123.  SFAS No. 123(R)
requires  all  share-based payments to employees, including stock options, to be
recognized  in  the  financial  statements  based  on  their  fair  values. Upon
adoption,  pro  forma  disclosure  is  no  longer  an  alternative  to financial
statement  recognition.  SFAS  No.  123(R) will be effective for the Company for
financial  statements  beginning  after December 15, 2005.  The Company is still
evaluating  the  transition provisions allowed by SFAS No. 123(R) and expects to
adopt  its  provisions  in  the  first quarter of 2006.  The Company has not yet
determined  the  financial  statement  impact  of  the  pronouncement.

In  March  2004,  The  Emerging Issues Task Force ("EITF") issued EITF 03-1, The
Meaning  of  Other-Than-Temporary  Impairment  and  its  Application  to Certain
Investments  ("EITF  03-1").  EITF 03-1 provides guidance for evaluating whether
an  investment  is other-than-temporarily impaired.  The disclosure guidance was
effective  for  other-than-temporary  impairment  evaluations  made in reporting
periods  beginning  after  June 15, 2004,whereas the recognition and measurement
guidance  has been deferred.  The disclosures required by EITF 03-1 are included
in  Note  2  to  the  consolidated  financial  statements.  The  Company did not
recognize  an  impairment  loss  on  any  investment  in  2004  or  2003.

Other  accounting  standards  that have been issued or proposed by the Financial
Accounting  Standards  Board  and  other  standard  setting entities that do not
require  adoption until a future date are not expected to have a material impact
on  our  consolidated  financial  statements  upon  adoption.


<PAGE>
                                 [LOGO OMITTED]
                            Porter Keadle Moore, LLP
                            ------------------------


             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors
Cherokee Banking Company
Canton, Georgia

We have audited the accompanying consolidated balance sheets of Cherokee Banking
Company  and  subsidiary  as  of  December  31,  2004  and 2003, and the related
statements  of  earnings,  changes in shareholders' equity, comprehensive income
and  cash  flows  for  the  years then ended. These financial statements are the
responsibility  of the Company's management. Our responsibility is to express an
opinion  on  these  financial  statements  based  on  our  audits.

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

In  our opinion, the consolidated financial statements referred to above present
fairly,  in  all  material  respects, the financial position of Cherokee Banking
Company and subsidiary as of December 31, 2004 and 2003 and the results of their
operations  and  their  cash  flows  for the years then ended in conformity with
accounting  principles  generally  accepted  in  the  United  States of America.

                                                    /s/ Porter Keadle Moore, LLP

Atlanta, Georgia
February 4, 2005


                          Certified Public Accountants
--------------------------------------------------------------------------------
      Suite 1800 - 235 Peachtree Street NE - Atlanta, Georgia 30303 - Phone
                 404-588-4200 - Fax 404-588-4222 - www.pkm.com


<PAGE>
<TABLE>
<CAPTION>
                                        CHEROKEE BANKING COMPANY

                                      CONSOLIDATED BALANCE SHEETS
                                       DECEMBER 31, 2004 AND 2003


                                  Assets                                       2004           2003
                                  ------                                   -------------  -------------
<S>                                                                        <C>            <C>
Cash and due from banks, including reserve requirements
    of $1,425,000 and $1,665,000                                           $  4,813,723   $  4,371,985

Interest-bearing deposits at other financial institutions                     1,090,000        100,000
Investment securities available-for-sale                                     47,865,112     48,095,733
Other investments                                                             1,018,750        675,350
Loans, net                                                                   83,939,597     56,782,597
Premises and equipment, net                                                   5,159,501      4,909,085
Accrued interest receivable and other assets                                  3,622,675      3,009,164
                                                                           -------------  -------------

          Total assets                                                     $147,509,358   $117,943,914
                                                                           =============  =============

                  Liabilities and Shareholders' Equity
                  ------------------------------------

Deposits:
    Demand                                                                 $ 15,445,889   $ 13,342,450
    Money market and NOW accounts                                            55,158,217     52,394,310
    Savings                                                                   4,506,941      2,438,973
    Time                                                                     25,754,392     20,108,509
    Time over $100,000                                                       14,428,709      6,351,371
                                                                           -------------  -------------
           Total deposits                                                   115,294,148     94,635,613

Advances from Federal Home Loan Bank                                          8,500,000      8,500,000
Federal funds purchased                                                       8,858,000      5,864,000
Other borrowings                                                                      -      1,000,000
Accrued interest payable and other liabilities                                  844,016        300,110
                                                                           -------------  -------------

          Total liabilities                                                 133,496,164    110,299,723
                                                                           -------------  -------------

Commitments

Shareholders' equity:
    Preferred stock, no par value, 2,000,000 shares authorized,
        no shares issued and outstanding                                              -              -
    Common stock, no par value, 10,000,000 shares authorized,
        1,242,515 and 812,515 shares issued and outstanding, respectively    13,728,330      7,749,680
    Retained earnings                                                           714,576        155,681
    Accumulated other comprehensive loss                                       (429,712)      (261,170)
                                                                           -------------  -------------

          Total shareholders' equity                                         14,013,194      7,644,191
                                                                           -------------  -------------

          Total liabilities and shareholders' equity                       $147,509,358   $117,943,914
                                                                           =============  =============
</TABLE>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                        2
<PAGE>
<TABLE>
<CAPTION>
                                     CHEROKEE BANKING COMPANY

                               CONSOLIDATED STATEMENTS OF EARNINGS
                          FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003


                                                                              2004        2003
                                                                           ----------  ----------
<S>                                                                        <C>         <C>
Interest income:
    Interest and fees on loans                                             $4,589,113  $3,343,771
    Interest and dividends on investment securities                         1,763,432   1,662,352
    Interest on federal funds sold                                             38,547      32,646
    Interest on interest-bearing deposits at other financial institutions       6,121       9,258
                                                                           ----------  ----------

          Total interest income                                             6,397,213   5,048,027
                                                                           ----------  ----------

Interest expense:
    Interest on money market and NOW accounts                                 478,691     459,829
    Interest on savings and time deposits                                     953,921     843,828
    Interest on other borrowings                                              342,251     303,729
                                                                           ----------  ----------

          Total interest expense                                            1,774,863   1,607,386
                                                                           ----------  ----------

          Net interest income                                               4,622,350   3,440,641

Provision for loan losses                                                     284,949     194,076
                                                                           ----------  ----------

          Net interest income after provision for loan losses               4,337,401   3,246,565
                                                                           ----------  ----------

Other income:
    Service charges on deposit accounts                                       560,314     432,269
    Mortgage origination fees                                                 233,259     242,939
    Investment security gains, net                                              4,462      34,616
    Other income                                                              219,211     155,769
                                                                           ----------  ----------

          Total other income                                                1,017,246     865,593
                                                                           ----------  ----------

Other expenses:
    Salaries and employee benefits                                          2,318,022   1,838,193
    Occupancy and equipment                                                   498,681     354,278
    Other operating                                                         1,741,979   1,265,522
                                                                           ----------  ----------

          Total other expenses                                              4,558,682   3,457,993
                                                                           ----------  ----------

          Earnings before income taxes                                        795,965     654,165

Income tax expense                                                            237,070     198,916
                                                                           ----------  ----------

          Net earnings                                                     $  558,895  $  455,249
                                                                           ==========  ==========

Basic earnings per share                                                   $     0.48  $     0.56
                                                                           ==========  ==========

Diluted earnings per share                                                 $     0.44  $     0.50
                                                                           ==========  ==========
</TABLE>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                        3
<PAGE>
<TABLE>
<CAPTION>
                                        CHEROKEE BANKING COMPANY

                            CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                             FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

                                                                                    2004        2003
                                                                                 ----------  ----------
<S>                                                                              <C>         <C>
Net earnings                                                                     $ 558,895   $ 455,249
                                                                                 ----------  ----------

Other comprehensive loss, net of tax:
    Unrealized losses on investment securities available-
        for-sale, net of income taxes of $101,604 and $260,736                    (165,776)   (425,391)

    Reclassification adjustments for gains on sale of investment securities
        available-for-sale, net of income taxes of $1,696 and $13,154               (2,766)    (21,462)
                                                                                 ----------  ----------

Other comprehensive loss                                                          (168,542)   (446,853)
                                                                                 ----------  ----------

Comprehensive income                                                             $ 390,353   $   8,396
                                                                                 ==========  ==========
</TABLE>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                        4
<PAGE>
<TABLE>
<CAPTION>
                                           CHEROKEE BANKING COMPANY

                          CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                                FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

                                                                               ACCUMULATED
                                             COMMON STOCK                         OTHER            TOTAL
                                         ----------------------   RETAINED    COMPREHENSIVE    SHAREHOLDERS'
                                          SHARES      AMOUNT      EARNINGS    INCOME (LOSS)       EQUITY
                                         ---------  -----------  ----------  ---------------  ---------------
<S>                                      <C>        <C>          <C>         <C>              <C>
BALANCE, DECEMBER 31, 2002                 738,658  $ 7,330,505  $ 119,607   $      185,683   $    7,635,795
    Net earnings                                 -            -    455,249                -          455,249
    Stock dividend                          73,857      419,175   (419,175)               -                -
    Change in unrealized gain/loss on
      investment securities available-
      for-sale, net of tax                       -            -          -         (446,853)        (446,853)
                                         ---------  -----------  ----------  ---------------  ---------------
BALANCE, DECEMBER 31, 2003                 812,515    7,749,680    155,681         (261,170)       7,644,191
    Net earnings                                 -            -    558,895                -          558,895
    Issuance of common stock, net
     of stock issuance costs of $41,350    430,000    5,978,650          -                -        5,978,650
    Change in unrealized gain/loss on
      investment securities available-
      for-sale, net of tax                       -            -          -         (168,542)        (168,542)
                                         ---------  -----------  ----------  ---------------  ---------------
BALANCE, DECEMBER 31, 2004               1,242,515  $13,728,330  $ 714,576   $     (429,712)  $   14,013,194
                                         =========  ===========  ==========  ===============  ===============
</TABLE>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                        5
<PAGE>
<TABLE>
<CAPTION>
                                     CHEROKEE BANKING COMPANY

                              CONSOLIDATED STATEMENTS OF CASH FLOWS
                          FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

                                                                         2004           2003
                                                                     -------------  -------------
<S>                                                                  <C>            <C>
Cash flows from operating activities:
    Net earnings                                                     $    558,895   $    455,249
    Adjustments to reconcile net earnings to net cash
        provided by operating activities:
        Depreciation, amortization and accretion                          358,193        293,570
        Provision for loan losses                                         284,949        194,076
        Deferred income tax benefit                                      (139,291)       (36,232)
        Investment security gains, net                                     (4,462)       (34,616)
        Change in:
              Accrued interest receivable and other assets               (370,921)      (420,985)
              Accrued interest payable and other liabilities              543,906       (239,243)
                                                                     -------------  -------------

              Net cash provided by operating activities                 1,231,269        211,819
                                                                     -------------  -------------

Cash flows from investing activities:
    Proceeds from sales of investment securities available-for-sale    15,710,937      4,124,494
    Proceeds from calls and maturities of investment securities
       available-for-sale                                               8,879,284     18,399,582
    Purchases of investment securities available-for-sale             (24,676,077)   (36,516,588)
    Change in interest-bearing deposits                                  (990,000)       198,000
    Purchases of other investments                                       (343,400)             -
    Proceeds from sale of other real estate                                     -         62,000
    Net change in loans                                               (27,441,949)   (13,555,992)
    Purchase of premises and equipment                                   (559,511)    (1,377,749)
                                                                     -------------  -------------

            Net cash used in investing activities                     (29,420,716)   (28,666,253)
                                                                     -------------  -------------

Cash flows from financing activities:
    Net change in deposits                                             20,658,535     14,378,778
    Net change in federal funds purchased                               2,994,000      5,864,000
    Proceeds from other borrowings                                              -      1,000,000
    Repayment of other borrowings                                      (1,000,000)             -
    Proceeds from issuance of common stock                              6,020,000              -
    Stock issuance costs                                                  (41,350)             -
                                                                     -------------  -------------

            Net cash provided by financing activities                  28,631,185     21,242,778
                                                                     -------------  -------------

Net change in in cash and cash equivalents                                441,738     (7,211,656)

Cash and cash equivalents at beginning of year                          4,371,985     11,583,641
                                                                     -------------  -------------

Cash and cash equivalents at end of year                             $  4,813,723   $  4,371,985
                                                                     =============  =============

    Supplemental schedule of noncash investing and financing
       activities consisting of change in unrealized gain/loss on
       investment securities available-for-sale, net of tax          $   (168,542)  $   (446,853)

    Supplemental disclosures of cash flow information:
       Cash paid during the year for interest                        $  1,550,504   $  1,662,925
       Cash paid during the year for income taxes                    $    396,186   $    297,973
</TABLE>


SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                        6
<PAGE>


                            CHEROKEE BANKING COMPANY

                        CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 2004 AND 2003




<PAGE>
                            CHEROKEE BANKING COMPANY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

          BASIS OF PRESENTATION

          The consolidated financial statements include the accounts of Cherokee
          Banking  Company  (the  "Company")  and  its  wholly owned subsidiary,
          Cherokee  Bank,  N.A.  (the  "Bank").  All  significant  intercompany
          accounts  and  transactions  have  been  eliminated  in consolidation.

          The  Company  was  incorporated  for  the  purpose  of becoming a bank
          holding  company.  The  Bank  commenced business on July 26, 1999 upon
          receipt  of  its banking charter from the Office of the Comptroller of
          the  Currency  ("OCC"). The Bank is primarily regulated by the OCC and
          undergoes periodic examinations by this regulatory agency. The Company
          is  regulated  by  the Federal Reserve and also is subject to periodic
          examinations.  The  Bank  provides  a  full  range  of  commercial and
          consumer  banking  services  throughout  the  city  of  Canton and the
          Cherokee  County  area  in  Georgia.

          The  accounting  principles  followed by the Company and the Bank, and
          the  methods  of  applying  these  principles, conform with accounting
          principles generally accepted in the United States of America ("GAAP")
          and  with  general  practices  in  the  banking industry. In preparing
          financial  statements  in conformity with GAAP, management is required
          to  make estimates and assumptions that affect the reported amounts in
          the  financial  statements.  Actual results could differ significantly
          from  these  estimates.  Material  estimates  common  to  the  banking
          industry  that  are  particularly susceptible to significant change in
          the  near  term  include, but are not limited to, the determination of
          the  allowance  for loan losses, the valuation of real estate acquired
          in  connection  with or in lieu of foreclosure on loans, and valuation
          allowances  associated  with  the  realization of deferred tax assets,
          which  are  based  on  future  taxable  income.

          CASH AND CASH EQUIVALENTS

          Cash  and  cash  equivalents  include  amounts  due  from  banks,
          interest-bearing  demand  deposits  with banks and federal funds sold.
          Generally,  federal  funds  are  sold  for  one-day  periods.

          INVESTMENT SECURITIES

          The  Company  classifies  its  securities  in one of three categories:
          trading,  available-for-sale,  or held-to-maturity. Trading securities
          are bought and held principally for the purpose of selling them in the
          near  term. Held-to-maturity securities are those securities for which
          the  Company  has  the  ability and intent to hold until maturity. All
          securities  not included in trading or held-to-maturity are classified
          as  available-for-sale.  At December 31, 2004 and 2003, all investment
          securities  were  classified  as  available-for-sale.

          Trading  and available-for-sale securities are recorded at fair value.
          Held-to-maturity  securities  are  recorded  at cost, adjusted for the
          amortization or accretion of premiums or discounts. Unrealized holding
          gains  and losses on trading securities of which the Company currently
          has none would be recognized in earnings. Unrealized holding gains and
          losses,  net  of  the  related  tax  effect,  on  securities
          available-for-sale  are  excluded  from earnings and are reported as a
          separate  component  of shareholders' equity until realized. Transfers
          of  securities  between  categories  are recorded at fair value at the
          date  of  transfer.

          A  decline  in  the  market  value  of  any  available-for-sale  or
          held-to-maturity  security  below  cost  that  is  deemed  other  than
          temporary  is charged to earnings and establishes a new cost basis for
          the  security.


                                        7
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

          INVESTMENT SECURITIES (CONTINUED)

          Premiums  and discounts are amortized or accreted over the life of the
          related  securities  as  adjustments  to the yield. Realized gains and
          losses  for  securities  classified  as  available-for-sale  and
          held-to-maturity  are  included  in earnings and are derived using the
          specific  identification method for determining the cost of securities
          sold. In estimating other-than-temporary impairment losses, management
          considers  (1)  the  length  of  time and the extent to which the fair
          value  has  been  less  than  cost,  (2)  the  financial condition and
          near-term  prospects  of the issuer, and (3) the intent and ability of
          the  Company  to  retain  its investment in the issuer for a period of
          time  sufficient  to  allow  for  any anticipated recovery in the fair
          value.

          OTHER  INVESTMENTS

          Other  investments  include  equity  securities  with  no  readily
          determinable  fair  value.  These  investments  are  carried  at cost.

          LOANS  AND  ALLOWANCE  FOR  LOAN  LOSSES

          Interest on loans is calculated by using the simple interest method on
          daily  balances  of  the  principal  amount  outstanding.

          Nonrefundable  loan fees and certain direct loan origination costs are
          accounted  for  over  the life of the related loan as an adjustment to
          the  yield.

          A  loan  is considered impaired when, based on current information and
          events,  it  is probable that all amounts due according to contractual
          terms  of the loan agreement will not be collected. Impaired loans are
          measured  based  on  the  present  value of expected future cash flows
          discounted  at  the  loan's  effective  interest  rate,  at the loan's
          observable market price, or at the fair value of the collateral of the
          loan  if  the  loan  is  collateral  dependent. Accrual of interest is
          discontinued  on  a  loan  when management believes, after considering
          economic  and  business  conditions  and  collection efforts, that the
          borrower's  financial condition is such that collection of interest is
          doubtful.

          The  allowance  for loan losses is established through a provision for
          loan  losses  charged  to  expense.  Loans  are  charged  against  the
          allowance  for  loan  losses  when  management  believes  that  the
          collectibility  of the principal is unlikely. The allowance represents
          an  amount which, in management's judgment, will be adequate to absorb
          probable  losses  on  existing  loans  that  may become uncollectible.

          Management's  judgment in determining the adequacy of the allowance is
          based on evaluations of the collectibility of loans. These evaluations
          take  into  consideration  such  factors  as changes in the nature and
          volume  of  the  loan  portfolio, current economic conditions that may
          affect  the  borrower's  ability to pay, overall portfolio quality and
          review  of  specific problem loans. In determining the adequacy of the
          allowance  for loan losses, management uses a loan grading system that
          rates  loans  in  eight  different  categories.  Grades  are  assigned
          allocations of loss based on peer group loss experience and regulatory
          guidelines.  The  combination of these results are compared monthly to
          the  recorded  allowance  for loan losses and material differences are
          adjusted  by  increasing  or decreasing the provision for loan losses.
          Management uses an external independent loan reviewer to challenge and
          corroborate  its  loan  gradings  and  provide  additional  analysis,
          including  peer  group comparisons, in determining the adequacy of the
          allowance  for  loan losses and necessary provisions to the allowance.

          Management  believes  that  the allowance for loan losses is adequate.
          While  management  uses  available  information to recognize losses on
          loans,  future  additions  to  the allowance may be necessary based on
          changes  in  economic  conditions.  In  addition,  various  regulatory
          agencies,  as  an  integral  part  of  their  examination  process,
          periodically  review  the  Bank's  allowance  for  loan  losses.  Such
          agencies  may require the Bank to recognize additions to the allowance
          based  on  judgments  different  than  those  of  management.


                                        8
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

          PREMISES AND EQUIPMENT

          Premises  and  equipment  are  stated  at  cost  less  accumulated
          depreciation.  Depreciation is provided using the straight-line method
          over  the  estimated  useful  lives  of the assets. Costs incurred for
          maintenance  and  repairs  are  expensed  currently.

          Depreciation  expense  is computed over the following estimated useful
          lives:

<TABLE>
<CAPTION>
<S>                             <C>
Land improvements               15 years
Buildings and improvements      10 - 40 years
Furniture and equipment          3 - 10 years
</TABLE>

          INCOME TAXES

          Deferred  tax assets and liabilities are recognized for the future tax
          consequences  attributable  to  differences  between  the  financial
          statement  carrying  amounts  of  existing  assets and liabilities and
          their  respective  tax  bases  and  operating  loss  and  tax  credit
          carryforwards.  Deferred tax assets and liabilities are measured using
          enacted  tax rates expected to apply to taxable income in the years in
          which  those  temporary  differences  are  expected to be recovered or
          settled. The effect on deferred tax assets and liabilities of a change
          in  tax  rates is recognized in income in the period that includes the
          enactment  date.

          In  the  event  the future tax consequences of differences between the
          financial  reporting  bases  and  the  tax  bases  of  the  assets and
          liabilities  results  in  deferred  tax  assets,  an evaluation of the
          probability  of being able to realize the future benefits indicated by
          such  asset  is  required.  A  valuation allowance is provided for the
          portion of the deferred tax asset when it is more likely than not that
          some portion or all of the deferred tax asset will not be realized. In
          assessing  the  realizability  of  the deferred tax assets, management
          considers  the  scheduled  reversals  of  deferred  tax  liabilities,
          projected  future  taxable  income,  and  tax  planning  strategies.

          EARNINGS  PER  SHARE

          Basic  earnings  per share are based on the weighted average number of
          common  shares  outstanding  during  the  period  while the effects of
          potential  shares  outstanding during the year are included in diluted
          earnings  per  share.


                                        9
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

          EARNINGS PER SHARE (CONTINUED)

          The  reconciliation  of  the  amounts  used in the computation of both
          basic  earnings  per share and diluted earnings per share for 2004 and
          2003  is  presented  as  follows:

<TABLE>
<CAPTION>
                                                        YEARS ENDED DECEMBER 31,
                                                      ---------------------------
                                                          2004          2003
                                                      ------------  -------------
<S>                                                   <C>           <C>
Net earnings                                          $    558,895  $     455,249
                                                      ============  =============

Weighted average number of common shares outstanding     1,166,811        812,515
Effect of dilutive options and warrants                    106,498         96,546
                                                      ------------  -------------

Weighted average number of common shares outstanding
   used to calculate diluted earnings per share          1,273,309        909,061
                                                      ============  =============

Basic earnings per share                              $        .48  $         .56
                                                      ============  =============

Diluted earnings per share                            $        .44  $         .50
                                                      ============  =============
</TABLE>

          STOCK-BASED  COMPENSATION  PLANS

          The  Company  sponsors  stock-based  compensation  plans,  which  are
          described  more fully in Note 10. The Company accounts for these plans
          under  the  recognition  and  measurement  principles  of  Accounting
          Principles  Board  Opinion  No.  25,  Accounting  for  Stock Issued to
          Employees,  and  related  Interpretations.  No  stock-based  employee
          compensation cost is reflected in net earnings, as all options granted
          under  those  plans had an exercise price equal to the market value of
          the  underlying common stock on the date of grant. The following table
          illustrates  the  effect on net earnings and earnings per share if the
          Company had applied the fair value recognition provisions of Statement
          of  Financial Accounting Standards No. 123, Accounting for Stock-Based
          Compensation, to stock-based compensation for the years ended December
          31,  2004  and  2003.

<TABLE>
<CAPTION>
                                                   YEARS ENDED DECEMBER 31,
                                                 ---------------------------
                                                     2004          2003
                                                 ------------  -------------
<S>                                              <C>           <C>
Net earnings, as reported                        $    558,895  $     455,249
Deduct: Total stock-based employee compensation
    expense determined under fair value based
    method for all awards, net of tax                  31,290         19,343
                                                 ------------  -------------
Pro forma net earnings                           $    527,605        435,906
                                                 ============  =============
Basic earnings per share:
  As reported                                    $        .48  $        0.56
                                                 ============  =============
  Pro forma                                      $        .45  $        0.54
                                                 ============  =============
Diluted earnings per share:
  As reported                                    $        .44  $        0.50
                                                 ============  =============
  Pro forma                                      $        .41  $        0.48
                                                 ============  =============
</TABLE>


                                       10
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

          RECENT  ACCOUNTING  PRONOUNCEMENTS

          In  December  2004,  the Financial Accounting Standards Board ("FASB")
          published FASB Statement No. 123 (revised 2004), "Share-Based Payment"
          ("FAS  123(R)"  or  the  "Statement").  FAS  123(R)  requires that the
          compensation  cost  relating  to  share-based  payment  transactions,
          including grants of employee stock options, be recognized in financial
          statements.  That cost will be measured based on the fair value of the
          equity or liability instruments issued. FAS 123(R) covers a wide range
          of  share-based  compensation  arrangements  including  stock options,
          restricted  share  plans, performance-based awards, share appreciation
          rights, and employee share purchase plans. FAS 123(R) is a replacement
          of  FASB  Statement  No. 123, Accounting for Stock-Based Compensation,
          and  supersedes  APB  Opinion  No.  25, Accounting for Stock Issued to
          Employees,  and  its  related  interpretive  guidance  (APB  25).

          The effect of the Statement will be to require entities to measure the
          cost of employee services received in exchange for stock options based
          on  the  grant-date fair value of the award, and to recognize the cost
          over  the  period the employee is required to provide services for the
          award.  FAS  123(R)  permits  entities to use any option-pricing model
          that meets the fair value objective in the Statement. The Company will
          be  required  to  apply  FAS  123(R)  as of the beginning of its first
          interim  period that begins after December 15, 2005, which will be the
          year  ending  December  31,  2006. The Company is still evaluating the
          transition  provisions allowed by SFAS No. 123(R) and expects to adopt
          its  provisions  in the first quarter of 2006. The Company has not yet
          determined  the  financial  statement  impact  of  the  pronouncement.

          In  March  2004, the Emerging Issues Task Force ("EITF") released EITF
          Issue  03-01,  The  Meaning of Other-Than-Temporary Impairment and its
          Application  to  Certain  Investments. The Issue provides guidance for
          determining  whether  an investment is other-than-temporarily impaired
          and  requires  certain  disclosures with respect to these investments.
          The  recognition  and  measurement  guidance  for other-than-temporary
          impairment  has  been  delayed  by the issuance of FASB Staff Position
          EITF  03-1-1  on  September 30, 2004. The disclosures required by EITF
          03-1  are included in Note 2 to the consolidated financial statements.
          The  Company did not recognize an impairment loss on any investment in
          2004  or  2003.

          Other  accounting  standards  that have been issued or proposed by the
          FASB  and other standard setting entities that do not require adoption
          until  a future date are not expected to have a material impact on the
          Company's  consolidated  financial  statements  upon  adoption.

NOTE 2.   INVESTMENT SECURITIES

          At  December  31,  2004  and  2003,  investment  securities
          available-for-sale  consisted  of  the  following:

<TABLE>
<CAPTION>
                                            GROSS        GROSS      ESTIMATED
                             AMORTIZED   UNREALIZED   UNREALIZED      FAIR
                               COST         GAINS       LOSSES        VALUE
                            -----------  -----------  -----------  -----------
<S>                         <C>          <C>          <C>          <C>
DECEMBER 31, 2004:
U.S. GOVERNMENT AND
   FEDERAL AGENCIES         $17,942,139  $     5,244  $   153,630  $17,793,753
MORTGAGE-BACKED SECURITIES   30,616,058        4,614      549,313   30,071,359
                            -----------  -----------  -----------  -----------
                            $48,558,197  $     9,858  $   702,943  $47,865,112
                            ===========  ===========  ===========  ===========
December 31, 2003:
U.S. Government and
   federal agencies         $ 5,647,195  $    10,926  $    91,728  $ 5,566,393
Mortgage-backed securities   42,869,781      209,424      549,865   42,529,340
                            -----------  -----------  -----------  -----------
                            $48,516,976  $   220,350  $   641,593  $48,095,733
                            ===========  ===========  ===========  ===========
</TABLE>


                                       11
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2.   INVESTMENT SECURITIES (CONTINUED)

          Unrealized  losses  and  fair value, aggregated by investment category
          and  length  of  time  that  individual  securities  have  been  in  a
          continuous  unrealized loss position, as of December 31, 2004 and 2003
          are  summarized  as  follows:

<TABLE>
<CAPTION>
                              LESS THAN TWELVE MONTHS       OVER TWELVE MONTHS
                            ---------------------------  ------------------------
                                              GROSS                      GROSS
                                FAIR       UNREALIZED       FAIR      UNREALIZED
                               VALUE         LOSSES         VALUE       LOSSES
                            ------------  -------------  -----------  -----------
<S>                         <C>           <C>            <C>          <C>
DECEMBER 31, 2004:
U.S. Government and
   federal agencies         $ 13,808,441  $     153,630  $         -  $         -
Mortgage-backed securities    15,640,728        244,268   12,462,411      305,045
                            ------------  -------------  -----------  -----------
                            $ 29,449,169  $     397,898  $12,462,411  $   305,045
                            ============  =============  ===========  ===========

                              Less Than Twelve Months       Over Twelve Months
                            ---------------------------  ------------------------
                                              Gross                      Gross
                                Fair       Unrealized       Fair      Unrealized
                               Value         Losses         Value       Losses
                            ------------  -------------  -----------  -----------
December 31, 2003:
U.S. Government and
   federal agencies         $  2,901,394  $      91,728  $         -  $         -
Mortgage-backed securities    28,107,836        537,559    1,531,121       12,306
                            ------------  -------------  -----------  -----------
                            $ 31,009,230  $     629,287  $ 1,531,121  $    12,306
                            ============  =============  ===========  ===========
</TABLE>

          At  December  31,  2004, unrealized losses in the investment portfolio
          related  to  debt  securities.  The  unrealized  losses  on  the  debt
          securities  arose due to changing interest rates and market conditions
          and  are  considered  to be temporary because of acceptable investment
          grades  where  the  repayment  sources  of  principal and interest are
          largely  backed  by  the  U.S. Government. At December 31, 2004, there
          were  40  out  of 46 securities issued by U.S. Government agencies and
          Government  sponsored  corporations,  including  mortgage-backed
          securities,  that  contained  unrealized  losses.

          At  December  31,  2003, unrealized losses in the investment portfolio
          related  to  debt  securities.  The  unrealized  losses  on  the  debt
          securities  arose due to changing interest rates and market conditions
          and  are  considered  to be temporary because of acceptable investment
          grades  where  the  repayment  sources  of  principal and interest are
          largely  backed  by  the  U.S. Government. At December 31, 2003, there
          were  29  out  of 62 securities issued by U.S. Government agencies and
          Government  sponsored  corporations,  including  mortgage-backed
          securities,  that  contained  unrealized  losses.

          The  amortized  cost and estimated fair value of investment securities
          available for sale as of December 31, 2004 by contractual maturity are
          shown  below.  Expected  maturities  will  differ  from  contractual
          maturities  because  borrowers  have  the  right  to  call  or  repay
          obligations  with  or  without  call  or  prepayment  penalties.

<TABLE>
<CAPTION>
                             AMORTIZED   ESTIMATED FAIR
                               COST           VALUE
                            -----------  ---------------
<S>                         <C>          <C>
U.S. Government and
   federal agencies:
   1 to 5 years             $15,950,402  $    15,815,332
   5 to 10 years              1,991,737        1,978,421
Mortgage-backed securities   30,616,058       30,071,359
                            -----------  ---------------
                            $48,558,197  $    47,865,112
                            ===========  ===============
</TABLE>


                                       12
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2.   INVESTMENT SECURITIES (CONTINUED)

          For the years ended December 31, 2004 and 2003, proceeds from sales of
          investment  securities  available-  for-sale  totaled  approximately
          $15,711,000 and $4,124,000, respectively. The Company recognized gross
          gains  of  $110,222  and  $35,197 on those sales during 2004 and 2003,
          respectively. The Company recognized gross losses of $105,760 and $581
          on  those  sales  during  2004  and  2003,  respectively.

          At  December  31,  2004  and 2003, securities with a carrying value of
          approximately  $32,439,000 and $43,000,000, respectively, were pledged
          to  secure  public  deposits,  Federal Home Loan Bank advances and for
          other  purposes  as  required  by  law.

NOTE 3.   LOANS

          Major classifications of loans at December 31, 2004 and 2003 are
          presented  below:

<TABLE>
<CAPTION>
                                           2004         2003
                                        -----------  -----------
<S>                                     <C>          <C>
Commercial, financial and agricultural  $41,997,789  $30,017,333
Real estate - mortgage                   14,210,709    8,423,916
Real estate - construction               25,676,400   16,154,111
Consumer                                  3,129,361    2,989,302
                                        -----------  -----------
                                         85,014,259   57,584,662
Less:  Allowance for loan losses          1,074,662      802,065
                                        -----------  -----------
                                        $83,939,597  $56,782,597
                                        ===========  ===========
</TABLE>

          The  Bank  grants  loans and extensions of credit to individuals and a
          variety  of  businesses  and corporations located in its general trade
          area  of Cherokee County, Georgia and adjoining counties. Although the
          Bank  has  a  diversified loan portfolio, a substantial portion of the
          loan  portfolio  is  collateralized  by  improved  and unimproved real
          estate  and  is  dependent  upon  the  real  estate  market.

          Activity in the allowance for loan losses is summarized as follows for
          the  years  ended  December  31,  2004  and  2003:

<TABLE>
<CAPTION>
                                       2004        2003
                                    -----------  ---------
<S>                                 <C>          <C>
BALANCE, BEGINNING OF YEAR          $  802,065   $640,158
  Provisions charged to operations     284,949    194,076
  Loan charge-offs                     (12,352)   (44,749)
  Loan recoveries                            -     12,580
                                    -----------  ---------
BALANCE, END OF YEAR                $1,074,662   $802,065
                                    ===========  =========
</TABLE>


                                       13
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4.   PREMISES AND EQUIPMENT

          Major  classifications  of  premises  and equipment as of December 31,
          2004  and  2003  are  summarized  as  follows:

<TABLE>
<CAPTION>
                                    2004        2003
                                 ----------  ----------
<S>                              <C>         <C>
Land and land improvements       $1,104,141  $1,100,641
Buildings and improvements        3,667,589   2,279,889
Furniture and equipment           1,398,048     996,481
Construction in process                   -   1,236,468
                                 ----------  ----------
                                  6,169,778   5,613,479
Less:  Accumulated depreciation   1,010,277     704,394
                                 ----------  ----------
                                 $5,159,501  $4,909,085
                                 ==========  ==========
</TABLE>

          Depreciation  expense  amounted to $312,712 and $209,690 for the years
          ended  December  31,  2004  and  2003,  respectively.


NOTE 5.   DEPOSITS

          At  December  31,  2004,  contractual  maturities of time deposits are
          summarized  as  follows:

<TABLE>
<CAPTION>
<S>       <C>
2005      $29,980,939
2006        6,285,365
2007        2,535,547
2008          994,475
2009          386,775
          -----------
          $40,183,101
          ===========
</TABLE>

          At  December  31,  2004,  the  Bank held $4,611,000 in certificates of
          deposit  obtained  through  the  efforts  of  third party brokers. The
          weighted  average  cost  of  these  deposits  was  1.92%.

NOTE 6.   ADVANCES FROM FEDERAL HOME LOAN BANK

          Advances  from  Federal  Home Loan Bank ("FHLB") are collateralized by
          FHLB  stock  and  certain  investment  securities.  Advances from FHLB
          outstanding  at December 31, 2004 and 2003 mature and bear interest as
          follows:

<TABLE>
<CAPTION>
Maturing In    Amount    Interest Rate   Early Conversion Option Date
-----------  ----------  --------------  ----------------------------
<S>          <C>         <C>             <C>
       2007  $3,000,000           2.88%         September 4, 2005
       2012   5,500,000           3.38%         January 31, 2004
             ----------
             $8,500,000
             ==========
</TABLE>

          The  advances  from  FHLB  contain  provisions  that give the FHLB the
          option  on  the  dates noted above to convert the fixed interest rates
          noted  above  into  floating  interest  rates based on the three month
          LIBOR  rate.  The advances from FHLB are secured by certain qualifying
          loans  of  approximately  $12,472,000,  investment  securities  of
          $1,998,000  and  FHLB  stock  of  $618,000 as of December 31, 2004. At
          December  31,  2003, investment securities of approximately $7,888,000
          were  pledged  to  secure  advances  from  the  FHLB.


                                       14
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7.   OTHER BORROWINGS

          During  2003, the Company entered into a line of credit agreement with
          a  correspondent  bank  totaling  $1,000,000. Under the agreement, the
          line accrued interest at the prime interest rate minus 25 basis points
          with  interest payable quarterly and a maturity of August 1, 2015. The
          facility  was  collateralized  by  the  stock of the Bank. The line of
          credit  also  included  certain  covenants  including  requirements to
          maintain defined levels of tangible net worth, net income and capital.
          Additionally,  the  note  included  limitations  on  the  Company's
          leveraging  and  dividend payments. The outstanding balance was repaid
          and  the  line  was  closed  in  March  2004.

          The  Bank  also  had  lines  of  credit  for  overnight  borrowing  of
          $14,400,000  and  $7,400,000  at  December  31,  2004  and  2003,
          respectively.  At December 31, 2004 and 2003, the Bank had outstanding
          borrowings  on  the  lines  totaling  $8,858,000  and  $5,864,000,
          respectively.

NOTE 8.   INCOME TAXES

          The  components of income tax expense for the years ended December 31,
          2004  and  2003  are  as  follows:

<TABLE>
<CAPTION>
             2004       2003
          ----------  ---------
<S>       <C>         <C>
Current   $ 376,361   $235,148
Deferred   (139,291)   (36,232)
          ----------  ---------
          $ 237,070   $198,916
          ==========  =========
</TABLE>

          The  differences between income tax expense and the amount computed by
          applying  the  statutory  federal  income  tax rate to earnings before
          taxes  for  the years ended December 31, 2004 and 2003 are as follows:

<TABLE>
<CAPTION>
                                                         2004       2003
                                                       ---------  ---------
<S>                                                    <C>        <C>
Pretax income at statutory rate                        $270,628   $222,416
Add (deduct):
   State income taxes, net of federal effect              4,164      9,733
   Increase in cash surrender value of life insurance   (32,780)   (21,572)
   Other                                                 (4,942)   (11,661)
                                                       ---------  ---------
                                                       $237,070   $198,916
                                                       =========  =========
</TABLE>

          The following summarizes the components of the net deferred tax asset,
          included  in  other  assets  at  December  31,  2004  and  2003:

<TABLE>
<CAPTION>
                                                      2004      2003
                                                    --------  --------
<S>                                                 <C>       <C>
Deferred income tax assets:
  Allowance for loan losses                         $397,362  $291,098
  Pre-opening expenses                                     -    11,405
  Unrealized loss on available-for-sale securities   263,372   160,072
  Deferred compensation                              131,318    34,698
                                                    --------  --------
          Gross deferred tax assets                  792,052   497,273
                                                    --------  --------

Deferred income tax liabilities:
  Premises and equipment                             139,241    87,053
                                                    --------  --------
          Gross deferred tax liabilities             139,241    87,053
                                                    --------  --------

          Net deferred tax asset                    $652,811  $410,220
                                                    ========  ========
</TABLE>


                                       15
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9.   COMMITMENTS

          The  Bank  is  a party to financial instruments with off-balance sheet
          risk  in  the normal course of business to meet the financing needs of
          its  customers.  These  financial  instruments  include commitments to
          extend  credit  and  standby  letters  of  credit.  Those  instruments
          involve,  to varying degrees, elements of credit risk in excess of the
          amount  recognized in the consolidated balance sheets. The contractual
          amounts  of  those  instruments  reflect the extent of involvement the
          Bank  has  in  particular  classes  of  financial  instruments.

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

          Standby  letters  of  credit are conditional commitments issued by the
          Bank  to  guarantee  the  performance  of a customer to a third party.
          Those  guarantees are primarily issued to businesses within the Bank's
          trade  area.  The credit risk involved in issuing letters of credit is
          essentially  the same as that involved in extending loan facilities to
          customers.  The  Bank  holds  real  estate  and assignments of deposit
          accounts  as  collateral  supporting  those  commitments  for  which
          collateral  is  deemed  necessary.  The  extent of collateral held for
          these  commitments  at  December  31,  2004  and  2003  varies.

          The  Bank'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 Bank uses the same credit policies in
          making  commitments  and  conditional  obligations  as  it  does  for
          on-balance  sheet  instruments.  In  most  cases,  the  Bank  requires
          collateral  to  support  financial  instruments  with  credit  risk.

<TABLE>
<CAPTION>
                                                 2004         2003
                                              -----------  -----------
<S>                                           <C>          <C>
Financial instruments whose contract amounts
  represent credit risk:
    Commitments to extend credit              $19,923,000  $19,301,000
    Standby letters of credit                     443,000      166,000
</TABLE>


                                       16
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10.  EMPLOYEE AND DIRECTOR BENEFIT PLANS

          DEFINED  CONTRIBUTION  PLAN

          The  Company  sponsors a defined contribution profit-sharing plan that
          is  qualified pursuant to section 401(k) of the Internal Revenue Code.
          The  plan allows eligible employees to defer a portion of their income
          by  making  contributions  into  the  plan on a pretax basis. The plan
          provides  a  matching contribution based on a percentage of the amount
          contributed  by the employee. The plan also provides that the Board of
          Directors  may  make discretionary profit-sharing contributions to the
          plan.  During  the years ended December 31, 2004 and 2003, the Company
          contributed  approximately  $39,900 and $30,200, respectively, to this
          plan  under  its  matching  provisions.

          STOCK OPTION PLAN AND WARRANTS

          The  Company sponsors an employee stock option plan for the benefit of
          key  officers  and  employees. A total of 130,941 shares were reserved
          for  possible issuance under the plan. The options generally vest over
          a  five-year  period  and  expire  after  ten  years.

          In  connection  with  the  Company's  formation  and initial offering,
          warrants  for  201,850  shares  were  issued  to  the  organizers. The
          warrants  allow each holder to purchase one additional share of common
          stock for each share purchased in connection with the initial offering
          and were issued as of the date of issuance of the common stock sold in
          the  offering.  The  warrants  will be exercisable for a period of ten
          years  following  issuance,  but  generally no later than three months
          after ceasing to serve as a director, at the initial offering price of
          $10  per  share.

          A  summary  of  activity  in  the directors' warrants and stock option
          plans  for  the  years  ended December 31, 2004 and 2003 are presented
          below:

<TABLE>
<CAPTION>
                                       2004                2003
                                -------------------  -------------------
                                         WEIGHTED-            WEIGHTED-
                                          AVERAGE              AVERAGE
                                          EXERCISE             EXERCISE
                                NUMBER     PRICE     NUMBER     PRICE
                                -------  ----------  -------  ----------
<S>                             <C>      <C>         <C>      <C>
Outstanding, beginning of year  272,151  $     9.54  246,730  $     9.11
Granted during the year          35,671       15.41   25,421       13.64
                                -------  ----------  -------  ----------
Outstanding, end of year        307,822  $    10.22  272,151  $     9.54
                                =======  ==========  =======  ==========

Exercisable, end of year        248,349  $     9.20  234,300  $     9.10
                                =======  ==========  =======  ==========
</TABLE>

          A  summary of options and warrants outstanding as of December 31, 2004
          is  presented  below:

<TABLE>
<CAPTION>
                               Weighted                Options      Weighted
Options          Range of      Average               and Warrants   Average
and Warrants    Price per       Price       Years     Currently      Price
Outstanding       Share       Per Share   Remaining  Exercisable   Per Share
------------  --------------  ----------  ---------  ------------  ----------
<S>           <C>             <C>         <C>        <C>           <C>
     246,730  $  9.09 - 9.55  $     9.11          4       243,265  $     9.11
      61,092   13.64 - 15.49       14.67          9         5,084       13.64
------------  --------------  ----------  ---------  ------------  ----------

     307,822  $ 9.09 - 15.49  $    10.22          5       248,349  $     9.20
============  ==============  ==========  =========  ============  ==========
</TABLE>

          The  fair value of each option is estimated on the date of grant using
          the  Minimum  Value  pricing  model  with  the  following assumptions:
          dividend  yield  of 0%; risk free interest rates ranging from 4.09% to
          4.42%  for  2004 and 3.00% for 2003, and an expected life of 10 years.
          The  weighted-average  fair  value of options granted in 2004 and 2003
          was  $5.05  and  $3.79,  respectively.


                                       17
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10.  EMPLOYEE AND DIRECTOR BENEFIT PLANS (CONTINUED)

          POST RETIREMENT BENEFITS

          The Company has adopted a defined contribution post retirement benefit
          plan  to  provide  retirement  benefits  to  certain  of the Company's
          executive  officers  and  directors  and to provide death benefits for
          their  designated  beneficiaries.  Under  this  plan,  single-premium,
          split-dollar,  whole-life  insurance  contracts totaling approximately
          $2,288,000  have  been  purchased  on  certain  executive officers and
          directors. For the years ended December 31, 2004 and 2003, the Company
          incurred  expenses  of  $231,000  and  $85,000 in connection with this
          plan.

NOTE  11.  SHAREHOLDERS'  EQUITY

          Shares  of  preferred  stock may be issued from time to time in one or
          more  series as established by resolution of the Board of Directors of
          the  Company,  up  to  a  maximum of 2,000,000 shares. Each resolution
          shall include the number of shares issued, preferences, special rights
          and  limitations  as  determined  by  the  Board.

          In October 2003, the Company declared a ten percent stock dividend. As
          a  result  of this stock dividend, the Company issued 73,857 shares of
          common  stock.  Upon  issuance  of  these  new  shares,  the  Company
          reclassified  its retained earnings of $419,175 into common stock. All
          references  to  the  number  of  common  shares,  including  per share
          amounts,  have  been  restated  to  reflect  this  stock  dividend.

          The  Company  closed  its intrastate offering of common stock on March
          23, 2004, having sold 430,000 shares for total proceeds of $6,020,000.
          The  proceeds  of  the  offering  will  primarily  be  used to provide
          additional  working  capital  for  the  Bank.

NOTE  12.  RELATED  PARTY  TRANSACTIONS

          The  Bank  conducts  transactions  with  its  directors  and executive
          officers,  including  companies  in  which  they  have  a  beneficial
          interest, in the normal course of business. It is the Bank's policy to
          comply  with  federal  regulations  that require that loan and deposit
          transactions  with  directors  and  executive  officers  be  made  on
          substantially  the same terms as those prevailing at the time made for
          comparable  loans  and  deposits  to other persons. As of December 31,
          2004  and 2003, there were $4,117,746 and $3,252,388, respectively, of
          related party deposits. Following is a summary of related party loans:

<TABLE>
<CAPTION>
<S>                           <C>
Balance at December 31, 2003  $ 3,796,746
New Loans/Advances              3,885,108
Less:  Repayments              (2,089,603)
                              ------------
Balance at December 31, 2004  $ 5,592,251
                              ============
</TABLE>

NOTE  13.  MISCELLANEOUS  OPERATING  EXPENSES

          Components  of  other  operating expenses which are greater than 1% of
interest income and other operating income for the years ended December 31, 2004
and  2003  are  as  follows:

<TABLE>
<CAPTION>
                          2004      2003
                        --------  --------
<S>                     <C>       <C>
Supplies                $ 65,147  $ 65,835
Other outside services   159,236    87,690
Advertising               72,466    59,836
Bookkeeping              160,740   156,227
Data processing          193,693   152,036
BOLI fees                230,524    85,414
</TABLE>


                                       18
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14.  REGULATORY MATTERS

          The  Company  and  the  Bank are subject to various regulatory capital
          requirements  administered by the federal banking agencies. Failure to
          meet  minimum capital requirements can initiate certain mandatory, and
          possibly  additional  discretionary  actions  by  regulators  that, if
          undertaken,  could  have  a  direct  material  effect on the financial
          statements.  Under  certain  adequacy  guidelines  and  the regulatory
          framework  for  prompt  corrective action, specific capital guidelines
          that  involve  quantitative  measures  of the assets, liabilities, and
          certain  off-balance  sheet  items  as  calculated  under  regulatory
          accounting  practices  must  be  met.  The  capital  amounts  and
          classifications  are  also  subject  to  qualitative  judgments by the
          regulators  about  components,  risk  weightings,  and  other factors.

          Quantitative  measures  established  by  regulation  to ensure capital
          adequacy  require the Company and the Bank to maintain minimum amounts
          and  ratios (set forth in the table below) of Total and Tier I capital
          (as  defined in the regulations) to risk-weighted assets (as defined),
          and  of  Tier  I  Capital (as defined) to average assets (as defined).
          Management believes, as of December 31, 2004 and 2003, the Company and
          Bank  met all capital adequacy requirements to which they are subject.

          As  of  December  31, 2004 and 2003, the most recent notification from
          the Federal Deposit Insurance Corporation categorized the Bank as well
          capitalized  under  the  regulatory  framework  for  prompt corrective
          action.  To be categorized as well capitalized, the Bank must maintain
          minimum  Total  risk-based,  Tier  I  risk-based,  and Tier I leverage
          ratios  as  set  forth  in the table below. There are no conditions or
          events  since  that notification that management believes have changed
          the  Bank's  category.


                                       19
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14.  REGULATORY MATTERS (CONTINUED)

<TABLE>
<CAPTION>
                                                                                    TO BE WELL
                                                              FOR CAPITAL        CAPITALIZED UNDER
                                                                ADEQUACY         PROMPT CORRECTIVE
                                                ACTUAL          PURPOSES         ACTION PROVISIONS
                                           ---------------  ----------------  ----------------------
                                           AMOUNT   RATIO   AMOUNT    RATIO     AMOUNT      RATIO
                                           -------  ------  -------  -------  ----------  ----------
                                                           (DOLLARS IN THOUSANDS)
                                           ---------------------------------------------------------
<S>                                        <C>      <C>     <C>      <C>      <C>         <C>
DECEMBER 31, 2004:
  TOTAL CAPITAL TO RISK WEIGHTED ASSETS:
     CONSOLIDATED                          $15,518   15.0%  $ 8,260     8.0%  $      N/A        N/A
     BANK                                  $14,047   13.6%  $ 8,260     8.0%  $   10,325       10.0%
  TIER I CAPITAL TO RISK WEIGHTED ASSETS:
     CONSOLIDATED                          $14,443   14.0%  $ 4,130     4.0%  $      N/A        N/A
     BANK                                  $12,972   12.6%  $ 4,130     4.0%  $    6,195        6.0%
  TIER I CAPITAL TO AVERAGE ASSETS:
     CONSOLIDATED                          $14,443    9.9%  $ 5,840     4.0%  $      N/A        N/A
     BANK                                  $12,972    8.9%  $ 5,840     4.0%  $    7,300        5.0%

December 31, 2003:
  Total Capital to Risk Weighted Assets:
     Consolidated                          $ 8,707   11.4%  $ 6,086     8.0%  $      N/A        N/A
     Bank                                  $ 9,163   12.1%  $ 6,083     8.0%  $    7,604       10.0%
  Tier I Capital to Risk Weighted Assets:
     Consolidated                          $ 7,905   10.4%  $ 3,043     4.0%  $      N/A        N/A
     Bank                                  $ 8,361   11.0%  $ 3,042     4.0%  $    4,562        6.0%
  Tier I Capital to Average Assets:
     Consolidated                          $ 7,905    6.8%  $ 4,630     4.0%  $      N/A        N/A
     Bank                                  $ 8,361    7.2%  $ 4,628     4.0%  $    5,785        5.0%
</TABLE>

          Dividends  paid  by the Bank are the primary source of funds available
          to the Company. Banking regulations limit the amount of dividends that
          may  be  paid without prior approval of the regulatory authorities. At
          December  31,  2004,  the  Bank  could  pay dividends of approximately
          $566,000  without  prior  approval.


                                       20
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE  15.  PARENT  COMPANY  FINANCIAL  INFORMATION

<TABLE>
<CAPTION>
                                 BALANCE SHEETS

                           DECEMBER 31, 2004 AND 2003

                                         2004         2003
                                      -----------  ----------
                         Assets
                         ------
<S>                                   <C>          <C>
Cash and cash equivalents             $ 1,484,759  $  583,664
Investment in Bank                     12,542,679   8,100,323
Other assets                                6,308       6,308
                                      -----------  ----------

                                      $14,033,746  $8,690,295
                                      ===========  ==========

         Liabilities and Shareholders' Equity
         ------------------------------------

Other borrowings                      $         -  $1,000,000
Other liabilities                          20,552      46,104
Shareholders' equity                   14,013,194   7,644,191
                                      -----------  ----------

                                      $14,033,746  $8,690,295
                                      ===========  ==========
</TABLE>

<TABLE>
<CAPTION>
                             STATEMENTS OF EARNINGS

                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

                                                            2004        2003
                                                          ---------  ----------

<S>                                                       <C>        <C>
Interest income                                           $ 33,932   $  26,701
Other operating expense                                    117,434     132,510
                                                          ---------  ----------

    Loss  before income taxes and equity
       in undistributed earnings of Bank                   (83,502)   (105,809)

Income tax benefit                                          31,499      39,895
                                                          ---------  ----------

    Loss before equity in undistributed earnings of Bank   (52,003)    (65,914)

Equity in undistributed earnings of Bank                   610,898     521,163
                                                          ---------  ----------

    Net earnings                                          $558,895   $ 455,249
                                                          =========  ==========
</TABLE>


                                       21
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE  15.  PARENT  COMPANY  FINANCIAL  INFORMATION  (CONTINUED)

<TABLE>
<CAPTION>
                              STATEMENTS OF CASH FLOWS

                   FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

                                                              2004          2003
                                                          ------------  ------------
<S>                                                       <C>           <C>
OPERATING ACTIVITIES
  Net earnings                                            $   558,895   $   455,249
  Adjustments to reconcile net earnings to net
    cash (used) provided by operating activities:
    Equity in undistributed earnings of Bank                 (610,898)     (521,163)
    Change in other assets and liabilities                    (25,552)      102,571
                                                          ------------  ------------

        NET CASH (USED) PROVIDED BY OPERATING ACTIVITIES      (77,555)       36,657
                                                          ------------  ------------


INVESTING ACTIVITIES
  Investment in Bank                                       (4,000,000)   (1,000,000)
                                                          ------------  ------------

FINANCING ACTIVITIES
  Proceeds from other borrowings                                    -     1,000,000
  Repayment of other borrowings                            (1,000,000)            -
  Proceeds from issuance of common stock                    6,020,000             -
  Stock issuance costs                                        (41,350)            -
                                                          ------------  ------------

        NET CASH PROVIDED BY FINANCING ACTIVITIES           4,978,650     1,000,000
                                                          ------------  ------------

Net change in cash and cash equivalents                       901,095        36,657

Cash and cash equivalents at beginning of year                583,664       547,007
                                                          ------------  ------------

Cash and cash equivalents at end of year                  $ 1,484,759   $   583,664
                                                          ============  ============
</TABLE>

NOTE 16.  FAIR  VALUE  OF  FINANCIAL  INSTRUMENTS

          The  Company  is  required  to  disclose  fair value information about
          financial  instruments,  whether  or not recognized on the face of the
          balance sheet, for which it is practicable to estimate that value. The
          assumptions  used in the estimation of the fair value of the Company's
          financial  instruments are detailed below. Where quoted prices are not
          available,  fair  values  are based on estimates using discounted cash
          flows and other valuation techniques. The use of discounted cash flows
          can  be  significantly affected by the assumptions used, including the
          discount  rate  and  estimates  of  future  cash  flows. The following
          disclosures  should  not  be considered a surrogate of the liquidation
          value  of  the  Company  or  its  subsidiary,  but rather a good-faith
          estimate of the increase or decrease in value of financial instruments
          held  by  the  Company  since  purchase,  origination  or  issuance.

          CASH  AND CASH EQUIVALENTS: For cash, due from banks and federal funds
          sold,  the  carrying  amount  is  a reasonable estimate of fair value.


                                       22
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 16.  FAIR  VALUE  OF  FINANCIAL  INSTRUMENTS  (CONTINUED)

          INTEREST-BEARING DEPOSITS: For interest-bearing deposits, the carrying
          value  is  a  reasonable  estimate  of  fair  value.

          INVESTMENT  SECURITIES  AVAILABLE-FOR-SALE:  Fair values of investment
          securities  available-for-sale  are  based  on  quoted  market prices.

          OTHER  INVESTMENTS:  For  other  investments,  the carrying value is a
          reasonable  estimate  of  fair  value.

          LOANS:  The fair value of fixed-rate loans is estimated by discounting
          the  future  cash flows using the current rates at which similar loans
          would  be  made to borrowers with similar credit ratings. For variable
          rate  loans,  the  carrying  amount  is  a reasonable estimate of fair
          value.

          CASH  SURRENDER  VALUE  OF LIFE INSURANCE: For cash surrender value of
          life  insurance,  the  carrying value is a reasonable estimate of fair
          value.

          DEPOSITS:  The  fair  value  of  demand deposits, NOW and money market
          accounts,  and savings accounts is the amount payable on demand at the
          reporting  date.  The  fair  value  of  fixed maturity certificates of
          deposit  is  estimated  by discounting the future cash flows using the
          rates  currently offered for deposits of similar remaining maturities.

          ADVANCES  FROM  THE  FEDERAL  HOME  LOAN  BANK:  The fair value of the
          Federal  Home  Loan  Bank  fixed  rate  borrowings are estimated using
          discounted  cash  flows,  based  on  the current incremental borrowing
          rates  for  similar  types  of  borrowing  arrangements.

          FEDERAL  FUNDS  PURCHASED:  For  federal funds purchased, the carrying
          amount  is  a  reasonable  estimate  of  fair  value.

          OTHER  BORROWINGS: The note bears interest on a floating basis and, as
          such,  the  carrying  amount  approximates  fair  value.

          COMMITMENTS  TO  EXTEND  CREDIT AND STANDBY LETTERS OF CREDIT: Because
          commitments  to  extend  credit  and  standby  letters  of  credit are
          generally  short-term  and  at  variable rates, the contract value and
          estimated fair value associated with these instruments are immaterial.

          LIMITATIONS:  Fair  value  estimates  are  made at a specific point in
          time,  based  on relevant market information and information about the
          financial  instrument.  These  estimates do not reflect any premium or
          discount  that  could  result  from  offering for sale at one time the
          Company's  entire  holdings  of  a  particular  financial  instrument.
          Because  no  market  exists for a significant portion of the Company's
          financial  instruments,  fair  value  estimates  are  based  on  many
          judgments.  These  estimates  are  subjective  in  nature  and involve
          uncertainties and matters of significant judgment and therefore cannot
          be  determined  with  precision.  Changes  in  assumptions  could
          significantly  affect  the  estimates.

          Fair  value  estimates  are based on existing on and off-balance sheet
          financial  instruments  without  attempting  to  estimate the value of
          anticipated  future  business  and the value of assets and liabilities
          that  are not considered financial instruments. Significant assets and
          liabilities  that  are  not  considered  financial instruments include
          deferred income taxes and premises and equipment. In addition, the tax
          ramifications  related  to the realization of the unrealized gains and
          losses  can have a significant effect on fair value estimates and have
          not  been  considered  in  the  estimates.


                                       23
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE  16.  FAIR  VALUE  OF  FINANCIAL  INSTRUMENTS  (CONTINUED)

          The  carrying  amount  and  estimated  fair  values  of  the Company's
financial  instruments  at December 31, 2004 and 2003 are as follows (amounts in
thousands):

<TABLE>
<CAPTION>
                                        2004                  2003
                              ----------------------  ----------------------
                              CARRYING    ESTIMATED   CARRYING    ESTIMATED
                               AMOUNT    FAIR VALUE    AMOUNT    FAIR VALUE
                              ---------  -----------  ---------  -----------
<S>                           <C>        <C>          <C>        <C>
Assets:
   Cash and cash equivalents  $   4,814  $     4,814  $   4,372  $     4,372
   Interest-bearing deposits      1,090        1,090        100          100
   Investment securities
      available-for-sale         47,865       47,865     48,096       48,096
   Other investments              1,019        1,019        675          675
   Loans, net                    83,940       83,471     56,783       58,220
   Cash surrender value of
      life insurance              2,288        2,288      2,105        2,105

Liabilities:
   Deposits                     115,294      115,883     94,636       94,528
   Federal funds purchased        8,858        8,858      5,864        5,864
   Advances from Federal
      Home Loan Bank              8,500        7,982      8,500        7,933
   Other borrowings                   -            -      1,000        1,000
</TABLE>


                                       24
<PAGE>
<TABLE>
<CAPTION>
                                   CHEROKEE BANKING COMPANY

                                   SELECTED FINANCIAL DATA

                                         2004           2003           2002          2001
                                     -------------  -------------  ------------  ------------
<S>                                  <C>            <C>            <C>           <C>
FOR THE YEAR
  Net interest income                $  4,622,350   $  3,440,641   $ 2,996,446   $ 2,230,570
  Provision for loan losses               284,949        194,076       206,496   $   216,634
  Noninterest income                    1,017,246        865,593       778,256       605,584
  Noninterest expense                   4,558,682      3,457,993     2,893,709     2,141,513
  Income taxes (benefit)                  237,070        198,916       244,076      (224,619)
  Net earnings                            558,895        455,249       430,421       702,626

PER COMMON SHARE
  Basic earnings                     $       0.48   $       0.56   $      0.53   $      0.86
  Diluted earnings                           0.44           0.50          0.50          0.86
  Cash dividends declared                       -              -             -             -
  Book value                                11.28           9.41          9.40          8.51

AT YEAR END
  Loans, net                         $ 83,939,597   $ 56,782,597   $43,482,681   $30,598,815
  Earnings assets                     134,988,121    106,455,745    87,383,406    60,664,463
  Assets                              147,509,358    117,943,914    96,931,982    66,360,428
  Deposits                            115,294,148     94,635,613    80,256,835    58,762,746
  Shareholders' equity                 14,013,194      7,644,191     7,635,795     6,911,876
  Common shares outstanding             1,242,515        812,515       812,515       812,515

AVERAGE BALANCES
  Loans                              $ 72,086,944   $ 49,699,865   $39,144,053   $26,715,848
  Earnings assets                     123,561,974     96,480,304    73,967,853    51,145,828
  Assets                              134,738,619    105,710,204    80,740,156    55,734,056
  Deposits                            110,280,329     87,821,829    66,725,025    50,297,666
  Shareholders' equity                 13,637,546      7,381,674     7,239,154     6,597,548
  Weighted average common shares
    outstanding                         1,166,811        812,515       812,515       812,515

KEY PERFORMANCE RATIOS
  Return on average assets                   0.41%          0.43%         0.53%         1.26%
  Return on average
    shareholders' equity                     4.10%          6.17%         5.95%        10.65%
  Net interest margin                        3.74%          3.57%         4.05%         4.36%
  Dividend payout ratio                         -              -             -             -
  Average equity to average assets          10.12%          6.98%         8.97%        11.84%
</TABLE>


<PAGE>
               MARKET FOR CHEROKEE BANKING COMPANY'S COMMON STOCK;
                              PAYMENT OF DIVIDENDS

The Company's common stock, no par value, is reported on the NASDAQ OTC Bulletin
Board  under the symbol "CHKJ."  The following table is the high and low closing
stock  price information for the Company's common stock during 2004 and 2003, as
reported  by  NASDAQ:

<TABLE>
<CAPTION>
                        2004            2003
                   --------------  --------------
APPLICABLE PERIOD   HIGH    LOW     HIGH    LOW
-----------------  ------  ------  ------  ------
<S>                <C>     <C>     <C>     <C>
First Quarter      $19.00  $14.10  $15.25  $13.00
Second Quarter     $15.50  $14.30  $16.00  $13.90
Third Quarter      $15.50  $14.75  $23.00  $16.00
Fourth Quarter     $16.00  $14.75  $21.00  $16.36
</TABLE>

The  quotations  above  reflect  interdealer  prices,  without  retail mark-ups,
mark-downs  or  commission  and  may  not  represent  actual  transactions.

The  development  of  an  active  secondary  market requires the existence of an
adequate  number  of  willing  buyers  and  sellers.  As of January 1, 2005, the
NASDAQ  OTC  Bulletin  Board  indicated  that  reported  trading  volume for the
Company's  common  stock was 158,902 shares during 2004.  Although this reported
volume  may  not  reflect  total  volume  during the indicated period due to the
possible  existence  of  unreported private sales and purchases among investors,
the  reported volume would indicate minimal activity in the secondary market for
the  Company's  common  stock.  The lack of activity in the secondary market for
the  Company's  common  stock  may  materially impact a shareholder's ability to
promptly  sell  Company  common  stock  at  a  price  acceptable  to the selling
shareholder.  According to the Company's transfer agent, there are approximately
856  shareholders  of  record.

THE  COMPANY  IS  A  LEGAL  ENTITY  SEPARATE  AND  DISTINCT  FROM THE BANK.  THE
PRINCIPAL  SOURCES  OF  THE  COMPANY'S  CASH  FLOW,  INCLUDING  CASH FLOW TO PAY
DIVIDENDS  TO  ITS  SHAREHOLDERS,  ARE  DIVIDENDS THAT THE BANK PAYS TO ITS SOLE
SHAREHOLDER,  THE  COMPANY.  STATUTORY  AND  REGULATORY LIMITATIONS APPLY TO THE
BANK'S  PAYMENT  OF DIVIDENDS TO THE COMPANY AS WELL AS TO THE COMPANY'S PAYMENT
OF  DIVIDENDS  TO ITS SHAREHOLDERS.  FOR EXAMPLE, ALL FDIC-INSURED INSTITUTIONS,
REGARDLESS  OF  THEIR  LEVEL  OF  CAPITALIZATION, ARE PROHIBITED FROM PAYING ANY
DIVIDEND  OR  MAKING  ANY OTHER KIND OF DISTRIBUTION IF THE INSTITUTION WOULD BE
UNDERCAPITALIZED  FOLLOWING  THE  PAYMENT  OR  DISTRIBUTION.  MOREOVER,  FEDERAL
AGENCIES  HAVING  REGULATORY  AUTHORITY OVER THE COMPANY OR THE BANK HAVE ISSUED
POLICY  STATEMENTS  WHICH  PROVIDE THAT BANK HOLDING COMPANIES AND INSURED BANKS
SHOULD  GENERALLY  ONLY  PAY  DIVIDENDS  OUT  OF  CURRENT  OPERATING  EARNINGS.

It  is  the  current  policy  of  the Bank to retain earnings to permit possible
future expansion.  As a result, the Company has no current plans to initiate the
payment  of  cash  dividends,  and its future dividend policy will depend on the
Bank's  earnings,  capital  requirements,  financial condition and other factors
considered  relevant  by  the  Board  of  Directors of the Company and the Bank.


<PAGE>
                      CORPORATE AND SHAREHOLDER INFORMATION


EXECUTIVE  OFFICERS  OF  CHEROKEE  BANKING  COMPANY

     DENNIS  W.  BURNETTE
          President  and Chief Executive Officer of Cherokee Banking Company and
          Cherokee  Bank

     A.  R.  ("RICK")  ROBERTS,  III
          Secretary  of  Cherokee  Banking  Company
          Chief  Financial Officer and Chief Operations Officer of Cherokee Bank

     JOHN  S.  MOREAU
          Senior  Vice  President  and  Chief  Lending  Officer of Cherokee Bank

DIRECTORS  OF  CHEROKEE  BANKING  COMPANY

     DENNIS  W.  BURNETTE
          President  and Chief Executive Officer of Cherokee Banking Company and
          Cherokee  Bank

     DR.  WILLIAM  L.  EARLY,  MD
          Physician;  Founder,  President  and Managing Partner, Etowah Regional
          Medical  Services,  Inc.

     DR.  ALBERT  L.  EVANS,  JR.
          Science  Division  Chairman,  Chemistry  Teacher,  Etowah  High School

     J.  CALVIN  HILL,  JR.
          President,  Gila  Distributing-GA,  Inc.;  President, Gila Properties,
          Inc.  State  House  Representative  (District  16)

     ROGER  M.  JOHNSON
          Attorney;  Partner,  Bray  &  Johnson  (Attorneys  at  Law);  Partner,
          Johnson-Kent,  LLC; President and Owner, North Street Properties, Inc.

     J.  DAVID  KELLER
          Partner,  Denney-Keller  Investments,  LLC

     WANDA  P.  ROACH
          Real  Estate  Agent,  Century  21-Max  Stancil  Realty

     A.  R.  (RICK)  ROBERTS,  III
          Secretary  of  Cherokee  Banking  Company
          Chief  Financial Officer and Chief Operations Officer of Cherokee Bank

     DONALD  F.  STEVENS
          Chairman  of  the  Board  of Directors of Cherokee Banking Company and
          Cherokee  Bank

     EDWIN  I.  SWORDS,  III
          Dentist,  Swords  and  Phelps


<PAGE>
Shareholders  may  obtain,  without charge, a copy of Cherokee Banking Company's
2004  Annual  Report  filed  with the Securities and Exchange Commission on Form
10-KSB  for  the  period  ended  December  31, 2004.  Written requests should be
addressed to Dennis W. Burnette, 1275 Riverstone Parkway, Canton, Georgia 30114.


                             SHAREHOLDER INFORMATION


STOCK TRANSFER AGENT
SunTrust, Atlanta
P.O. Box 4625
Atlanta, GA 30302


REGULATORY AND SECURITIES COUNSEL
Powell Goldstein LLP
One Atlantic Center - 14th Floor
1201 West Peachtree Street, NW
Atlanta, GA 30309


INDEPENDENT AUDITORS
Porter Keadle Moore, LLP
235 Peachtree Street, NE
Suite 1800
Atlanta, GA 30303


ANNUAL SHAREHOLDERS MEETING
April 25, 2005, 5:00 p.m.


Cherokee Bank
1275 Riverstone Pkwy.
Canton, GA 30114
www.cherokeebank.com
--------------------