CHEROKEE BANKING COMPANY


                               2003 ANNUAL REPORT


<PAGE>
<TABLE>
<CAPTION>
                            CHEROKEE BANKING COMPANY
                                  ANNUAL REPORT
                                Table of Contents

                                                                             Page
                                                                             ----
<S>                                                                        <C>
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . .    2
Management's Discussion and Analysis of Financial Condition and
     Results of Operations. . . . . . . . . . . . . . . . . . . . . . . . .    3
Report of Independent Certified Public Accountants. . . . . . . . . . . . .   15
Consolidated Financial Statements.. . . . . . . . . . . . . . . . . . . . .   16
Notes to Consolidated Financial Statements. . . . . . . . . . . . . . . . .   21
Market for Cherokee Banking Company's Common Stock. . . . . . . . . . . . .   37
Corporate and Shareholder Information . . . . . . . . . . . . . . . . . . .   38
</TABLE>


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

                                   SELECTED FINANCIAL DATA

                                         2003           2002          2001          2000
                                     -------------  ------------  ------------  ------------
<S>                                  <C>            <C>           <C>           <C>
FOR THE YEAR
  Net interest income                $  3,440,641   $ 2,996,446   $ 2,230,570   $ 1,117,889
  Provision for loan losses               194,076       206,496   $   216,634   $   179,677
  Noninterest income                      865,593       778,256       605,584       202,599
  Noninterest expense                   3,457,993     2,893,709     2,141,513     1,569,768
  Income taxes (benefit)                  198,916       244,076      (224,619)            -
  Net earnings (loss)                     455,249       430,421       702,626      (428,957)

PER COMMON SHARE *
  Basic earnings (loss)              $       0.56   $      0.53          0.86         (0.53)
  Diluted earnings (loss)                    0.50          0.50          0.86         (0.53)
  Cash dividends declared                       -             -             -             -
  Book value                                 9.41          9.40          8.51          7.82

AT YEAR END
  Loans, net                         $ 56,782,597   $43,482,681   $30,598,815   $19,519,227
  Earnings assets                     106,455,745    87,383,406    60,664,463    38,194,164
  Assets                              117,943,914    96,931,982    66,360,428    42,198,199
  Deposits                             94,635,613    80,256,835    58,762,746    35,518,640
  Stockholders' equity                  7,644,191     7,635,795     6,911,876     6,357,818
  Common shares outstanding               812,515       812,515       812,515       812,515

AVERAGE BALANCES
  Loans                              $ 49,699,865   $39,144,053   $26,715,848   $12,303,562
  Earnings assets                      96,480,304    73,967,853    51,145,828    30,175,477
  Assets                              105,710,204    80,740,156    55,734,056    33,710,058
  Deposits                             87,821,829    66,725,025    50,297,666    29,593,348
  Stockholders' equity                  7,381,674     7,239,154     6,597,548     6,498,822
  Weighted average shares
    outstanding                           812,515       812,515       812,515       812,515

KEY PERFORMANCE RATIOS
  Return on average assets                   0.43%         0.53%         1.26%       (1.27%)
  Return on average
    stockholders' equity                     6.17%         5.95%        10.65%       (6.60%)
  Net interest margin                        3.57%         4.05%         4.36%         3.70%
  Dividend payout ratio                         -             -             -             -
  Average equity to average assets           6.98%         8.97%        11.84%        19.28%

<FN>
*  All per share amounts have been restated to reflect a ten percent stock dividend declared
in 2003.
</TABLE>


                                       -2-
<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,  NA.  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 2003 as
compared  to  2002  and also analyzes our financial condition as of December 31,
2003  as  compared  to  December 31, 2002.  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  2003 and 2002 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


                                       -3-
<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,  2003  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 2003 was $455,000 compared to $430,000 in 2002.  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  $3,441,000  for  the  year  ended  December  31,  2003  compared to
$2,996,000  for  the  year  ended  December  31,  2002.

The provision for loan losses in 2003 was $194,000 compared to $206,000 in 2002.
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, 2003 totaled $866,000
compared  to  $778,000 in 2002.  Other operating income includes service charges
on  deposit  accounts,  mortgage  origination fee income and investment security
gains.  Declining  interest  rates  during  2003  and  2002  provided us with an
opportunity to derive significant income from the origination of mortgage loans.
Other operating expenses in 2003 were $3,458,000 compared to $2,894,000 in 2002.
The  largest  component  of  other  operating expenses is salaries and benefits,
which  totaled  $1,838,000  for  the  year  ended  December 31, 2003 compared to
$1,541,000  in  2002.

NET  INTEREST  INCOME

For  the  years  ended  December  31, 2003 and 2002, net interest income totaled
$3,441,000  and $2,996,000, respectively.  Interest income from loans, including
fees was $3,344,000 representing a yield of 6.73% in 2003 compared to a yield of
7.79%  in  2002.  Decreases  in  the  prime lending rate in 2003 resulted in the
decrease  in  yield  on loans.  Interest expense totaled $1,607,000 for the year
ended December 31, 2003 compared to $1,764,000 in 2002.  The net interest margin
realized  on  earning  assets and the interest rate spread were 3.57% and 3.34%,
respectively,  for the year ended December 31, 2003 compared to an interest rate
margin  of  4.05%  and  interest  rate  spread  of  3.69%  in  2002.


                                       -4-
<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 2003 and 2002 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, 2003              December 31, 2002
                                         ------------------------------  ------------------------------
                                                     (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)          $ 49,700   $   3,344     6.73%  $ 39,144   $   3,051     7.79%
    Investment securities                  43,982       1,662     3.78%    31,968       1,639     5.13%
    Interest bearing deposits                 242           9     3.72%       523          28     5.35%
    Federal funds sold                      2,556          33     1.29%     2,332          42     1.80%
                                         ---------  ----------  -------  ---------  ----------  -------

Total interest earning assets              96,480       5,048     5.23%    73,967       4,760     6.44%
Other non-interest earnings assets          9,230                           6,773
                                         ---------                       ---------

      Total assets                       $105,710                        $ 80,740
                                         =========                       =========

Liabilities and stockholders' equity:
  Interest-bearing liabilities:
    Deposits:
      Interest-bearing demand and
        and savings                      $ 48,941   $     474     0.97%  $ 32,166   $     566     1.76%
      Time                                 26,386         830     3.15%    25,759         992     3.85%
      Federal Home Loan Bank
        advances                            8,500         276     3.25%     6,010         201     3.34%
      Other borrowings                        416          10     2.40%         -           -        -
      Federal funds purchased                 877          17     1.94%       219           5     2.28%
                                         ---------  ----------  -------  ---------  ----------  -------

Total interest-bearing liabilities         85,120       1,607     1.89%    64,154       1,764     2.75%
Other non-interest bearing liabilities     13,208                           9,347
Stockholders' equity                        7,382                           7,239
                                         ---------                       ---------

      Total liabilities and
        stockholders' equity             $105,710                        $ 80,740
                                         =========                       =========

Excess of interest-earning assets over
  interest bearing liabilities           $ 11,360                        $  8,889
                                         =========                       =========

Ratio of interest-earning assets
  to interest-bearing liabilities          113.35%                         115.30%

Net interest income                                 $   3,441                       $   2,996
                                                    ==========                      ==========

Net interest spread                                      3.34%                           3.69%

Net interest margin                                      3.57%                           4.05%
<FN>

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


                                       -5-
<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>
                                              2003 compared to 2002
                                        -------------------------------
                                               Increase (decrease)
                                                due to change in

                                                                 Net
                                           Rate      Volume    Change
                                        ----------  --------  ---------
<S>                                     <C>         <C>       <C>

Interest income on:
  Loans (including loan fees)           $    (453)  $   746   $    293
  Investment securities                      (498)      521         23
  Interest-bearing deposits                    (7)      (12)       (19)
  Federal funds sold                          (13)        4         (9)
                                        ----------  --------  ---------
      Total interest income                  (971)    1,259        288
                                        ----------  --------  ---------

Interest expense on:
  Interest-bearing demand and savings        (316)      224        (92)
  Time deposits                              (185)       23       (162)
  Federal Home Loan Bank advances              (5)       80         75
  Other borrowings                              -        10         10
  Federal funds purchased                      (1)       13         12
                                        ----------  --------  ---------
      Total interest expense                 (507)      350       (157)
                                        ----------  --------  ---------

      Net interest income               $    (464)  $   909   $    445
                                        ==========  ========  =========
</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, 2003, 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.


                                       -6-
<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, 2003, 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, 2003
                                                       (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                  $      -   $           -   $ 20,883   $27,888   $ 48,771
   Interest bearing deposits                     -             100          -         -        100
   Loans                                    44,351           4,305      7,941       988     57,585
                                          ---------  --------------  ---------  --------  --------

Total interest-bearing assets               44,351           4,405     28,824    28,876    106,456
                                          ---------  --------------  ---------  --------  --------

Interest-bearing liabilities:
   Deposits:
      Savings and demand                    54,833               -          -         -     54,833
      Time deposits                          8,661           8,547      9,252         -     26,460
   Federal Home Loan Bank advances               -               -      3,000     5,500      8,500
   Federal funds purchased                   5,864               -          -         -      5,864
   Other borrowings                              -               -        300       700      1,000
                                          ---------  --------------  ---------  --------  --------

Total interest-bearing liabilities          69,358           8,547     12,552     6,200     96,657
                                          ---------  --------------  ---------  --------  --------

Interest sensitive difference per period   (25,007)         (4,142)    16,272    22,676   $  9,799
                                                                                          ========
Cumulative interest sensitivity
   difference                             $(25,007)  $     (29,149)  $(12,877)  $ 9,799
                                          =========  ==============  =========  ========

Cumulative diifference to total assets     (21.20%)        (24.71%)   (10.92%)     8.31%
                                          =========  ==============  =========  ========
</TABLE>


                                       -7-
<PAGE>
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
           OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED

At  December  31, 2003, the difference between the bank's liabilities and assets
repricing  or  maturing  within  one  year was $29,149,000.  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 $194,000 for the year
ended  December 31, 2003 as compared to $206,000 for the year ended December 31,
2002.  The  loan  portfolio  increased by approximately $13.5 million during the
year  ended December 31, 2003.  The allowance for loan losses was 1.39% of gross
loans  at  December  31, 2003 compared to 1.45% at December 31, 2002.  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  income  and,  possibly,  our  capital.


                                       -8-
<PAGE>
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
           OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED

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

<TABLE>
<CAPTION>
                                          December 31,
                                   -------------------------
                                    2003     2002     2001
                                   ------  --------  -------
<S>                                <C>     <C>       <C>
Balance at beginning of year       $ 640   $   428   $  247
  Charge-offs:
   Commercial                          -         -        -
   Real estate - construction         19         -        -
   Real estate - mortgage              -         -        -
   Consumer                           26        90       37
                                   ------  --------  -------

       Total charge-offs              45        90       37

   Recoveries:
   Commercial                          -         -        -
   Real estate - construction          -         -        -
   Real estate - mortgage              7         -        -
   Consumer                            6        96        2
                                   ------  --------  -------

      Total recoveries                13        96        2
                                   ------  --------  -------

  Net charge-offs (recoveries)        32        (6)      35
  Additions charged to operations    194       206      216
                                   ------  --------  -------

  Balance at end of year           $ 802   $   640   $  428
                                   ======  ========  =======

  Ratio of net charge-offs during
    period to average loans
    outstanding during the period   .064%   (.014%)    .116%
</TABLE>

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,  2003  and  2002  (amounts  are  presented  in thousands):

<TABLE>
<CAPTION>
                                           December 31,
                                         ----------------
                                          2003     2002
                                         ------  --------

<S>                                      <C>     <C>
Other real estate and repossessions      $    -  $      -
Accruing loans 90 days or more past due       -         -
Non-accrual loans                             -       108
Interest on non-accrual loans which
   would have been reported                   -         -
</TABLE>


                                       -9-
<PAGE>
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
           OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED

NONINTEREST  INCOME  AND  EXPENSE

Noninterest  income  for  the  year  ended December 31, 2003 totaled $866,000 as
compared  to  $778,000  for  the year ended December 31, 2002.  This increase in
noninterest income was primarily due to an increase in mortgage origination fees
and  an  increase  in  service  charges on deposit accounts.  Service charges on
deposit accounts grew as the number of accounts increased in 2003 as compared to
2002.

Total noninterest expense for the year ended December 31, 2003 was $3,458,000 as
compared  to $2,894,000 for the same period in 2002.  Salaries and benefits, the
largest  component of noninterest expense, totaled $1,838,000 for the year ended
December  31,  2003,  compared  to  $1,541,000  for  the same period a year ago.
Salary and benefits expense primarily increased due to the increase in full time
equivalent  employees from 33 at December 31, 2002 to 37 at December 31, 2003 as
well as other annual salary increases.  Other operating expenses were $1,266,000
for  the  year  ended  December  31, 2003 as compared to $1,058,000 for the year
ended  December 31, 2002.  The increase in noninterest expenses is due primarily
to  the  continued  growth  of  the  bank.

INCOME  TAXES

For  the  year  ended  December  31,  2003,  we recognized income tax expense of
$199,000  compared to $244,000 in 2002.  Our effective tax rate in 2003 and 2002
was  approximately  30%  and  36%,  respectively.

FINANCIAL CONDITION

Total  assets  increased  $21,012,000, or 22% from December 31, 2003 to December
31, 2002.  The primary source of growth in assets was net loans, which increased
$13,300,000  or  31%,  during  the  year  ended  December  31, 2003.  Investment
securities  available-for-sale  increased  $13,223,000 from December 31, 2002 to
$48,096,000  at December 31, 2003.  Total deposits increased $14,379,000, or 18%
during  2003.

INTEREST  EARNING  ASSETS

LOANS

Gross loans totaled $57,585,000 at December 31, 2003, an increase of $13,462,000
or  30%  since  December  31,  2002.  The  largest increase in loans was in real
estate-construction  loans,  which increased $6,882,000 or 74% to $16,154,000 at
December 31, 2003.  Commercial loans increased $6,154,000 during 2003.  Balances
within  the  major  loans  receivable  categories  as  of  December 31, 2003 and
December  31,  2002  are  as  follows:

<TABLE>
<CAPTION>
                                               2003              2002
                                        -----------------  -----------------
<S>                                     <C>          <C>   <C>          <C>
Commercial, financial and agricultural  $30,017,333   52%  $23,862,595   54%
Real estate - mortgage                    8,423,916   15%    7,453,721   17%
Real estate - construction               16,154,111   28%    9,272,306   21%
Consumer                                  2,989,302    5%    3,534,217    8%
                                        -----------  ----  -----------  ----

                                        $57,584,662  100%  $44,122,839  100%
                                        ===========  ====  ===========  ====
</TABLE>


                                      -10-
<PAGE>
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
           OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED

As  of  December  31, 2003, 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  $ 9,057,565  $  13,760,255  $22,817,820
1 to 5 years    17,485,650      2,254,006   19,739,656
Over 5 years     3,474,118        139,850    3,613,968
               -----------  -------------  -----------
  Totals       $30,017,333  $  16,154,111  $46,171,444
               ===========  =============  ===========
</TABLE>

As  of  December  31,  2003,  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
                            ---------------  ------------------  -----------

Commercial
<S>                         <C>              <C>                 <C>
   1 to 5 years             $     4,354,424  $       13,131,226  $17,485,650
   Over 5 years                     764,752           2,709,366    3,474,118

Real estate - construction
   1 to 5 years                     143,788           2,110,218    2,254,006
   Over 5 years                           -             139,850      139,850
                            ---------------  ------------------  -----------

                            $     5,262,964  $       18,090,660  $23,353,624
                            ===============  ==================  ===========
</TABLE>

INVESTMENT  SECURITIES

Investment  securities  available-for-sale  increased to $48,096,000 at December
31, 2003 from $34,873,000 at December 31, 2002.  This increase was the result of
an  increase  in  deposits  being  invested  in  securities.  All  of the bank's
marketable  investment  securities  were  designated  as  available-for-sale  at
December  31,  2003  and  2002.

The  following  table  presents the investments by category at December 31, 2003
and  2002:

<TABLE>
<CAPTION>
                                      2003                      2002
                            ------------------------  ------------------------
                             Amortized    Estimated    Amortized    Estimated
                               Cost      Fair Value      Cost      Fair Value
                            -----------  -----------  -----------  -----------
<S>                         <C>          <C>          <C>          <C>

United States treasury and
 government agencies        $ 5,647,195  $ 5,566,393  $ 1,049,287  $ 1,055,625
                            -----------  -----------  -----------  -----------
Mortgage-backed              42,869,781   42,529,340   33,524,441   33,817,592
                            -----------  -----------  -----------  -----------

                            $48,516,976  $48,095,733  $34,573,728  $34,873,217
                            ===========  ===========  ===========  ===========
</TABLE>


                                      -11-
<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>
                                 US treasury
                                     and       Weighted    Mortgage    Weighted
                                  Government    Average     Backed      Average
                                   Agencies     Yields    Securities    Yields
                                 ------------  ---------  -----------  ---------
<S>                              <C>           <C>        <C>          <C>
Maturities at December 31, 2003

After 1 through 5 years          $  3,495,937      3.48%  $ 1,277,328      4.51%
After 5 through 10 years            2,151,258      3.31%   15,096,881      4.56%
After 10 years                              -         -    26,495,572      4.50%
                                 ------------  ---------  -----------  ---------

Totals                           $  5,647,195      3.42%  $42,869,781      4.52%
                                 ============  =========  ===========  =========
</TABLE>

DEPOSITS

At  December  31,  2003,  total  deposits  increased by $14,379,000, or 18% from
December  31, 2002.  Noninterest-bearing demand deposits decreased $6,612,000 or
33%  and  interest-bearing  deposits  increased  $20,991,000  or  35%.

Balances  within  the  major  deposit  categories  as  of  December 31, 2003 and
December  31,  2002  are  as  follows:

<TABLE>
<CAPTION>
                                        2003         2002
                                     -----------  -----------
<S>                                  <C>          <C>
Noninterest-bearing demand deposits  $13,342,450  $19,954,811
Interest-bearing demand deposits      52,394,310   32,028,352
Savings deposits                       2,438,973    2,144,761
Time deposits                         20,108,509   20,099,856
Time deposits over $100,000            6,351,371    6,029,055
                                     -----------  -----------

                                     $94,635,613  $80,256,835
                                     ===========  ===========
</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,
                                      --------------------------------------
                                              2003                2002
                                      --------------------------------------
                                        (Amounts are presented in thousands)

                                        Amount     Rate     Amount     Rate

<S>                                   <C>        <C>      <C>        <C>
Noninterest-bearing demand            $  12,495       -   $   8,800       -
Interest-bearing demand and savings      48,941    0.97%     32,166    1.76%
Time deposits                            26,386    3.15%     25,759    3.85%
                                      ---------           ---------

                                      $  87,822           $  66,725
                                      =========           =========
</TABLE>


                                      -12-
<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,  2003,  are  summarized  as  follows  (Amounts  are  presented  in
thousands):

<TABLE>
<CAPTION>
<S>                             <C>
Within 3 months                 $     2,110
After 3 through 6 months                603
After 6 through 12 months               800
After 12 months                       2,838
                                -----------

     Total                      $     6,351
                                ===========
</TABLE>

CAPITAL  RESOURCES

Total  shareholders'  equity  increased  from $7,636,000 at December 31, 2002 to
$7,644,000 at December 31, 2003.  This increase was attributable to net earnings
of $455,000 for the period offset by a decrease of $447,000 in the fair value of
securities  available-for-sale,  net  of  tax.

Bank  holding companies, such as us, 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,  2003:

     Tier 1 capital (to risk-weighted assets)       11.0%
     Total capital (to risk-weighted assets)        12.1%
     Tier 1 capital (to total average assets)        7.2%

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 $9,400,000, with
$3,536,000  available  at  December  31,  2003.

Cash  and  cash  equivalents  as  of December 31, 2003 decreased $7,212,000 from
December  31,  2002.  Cash  provided by operating activities totaled $212,000 in
2003,  while  inflows  from financing activities totaled $21,243,000, which were
attributable  to  net  increases  in  deposits  and  federal  funds  purchased.

During 2003, investing activities used $28,666,000 of cash and cash equivalents.
Investing  activities  included  net  loans  made  to customers of approximately
$13,556,000,  purchases  of  investment  securities  available-for-sale  of
$36,517,000  and  purchases  of


                                      -13-
<PAGE>
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
           OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED

premises  and  equipment of $1,378,000, partially offset by maturities and sales
of  investment  securities  available-for-sale  of  approximately  $22,524,000.

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,  2003:

     Commitments  to  extend  credit     $  19,301,000
     Standby  letters  of  credit        $     166,000

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>
                                            2003        2002
                                            -----       -----
<S>                                         <C>         <C>
     Net income to:
        Average stockholders' equity        6.17%       5.95%
        Average assets                       .43%        .53%
     Dividends to net income                   -           -
     Average equity to average assets       6.98%       8.97%
</TABLE>

RECENT  ACCOUNTING  PRONOUNCEMENTS

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.


                                      -14-
<PAGE>
                            Porter Keadle Moore, LLP

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


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, 2003 and 2002, 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 auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation.  We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Cherokee Banking
Company and subsidiary as of December 31, 2003 and 2002 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 27, 2004



                          Certified Public Accountants
--------------------------------------------------------------------------------
Suite 1800  235 Peachtree Street NE   Atlanta, Georgia 30303  Phone 404-588-4200
                         Fax 404-588-4222   www.pkm.com
                                      -15-
<PAGE>
<TABLE>
<CAPTION>
                                 CHEROKEE BANKING COMPANY

                               CONSOLIDATED BALANCE SHEETS

                                DECEMBER 31, 2003 AND 2002

                                                                    2003          2002
                                                                -------------  ----------
<S>                                                             <C>            <C>
                                Assets
                                ------
Cash and due from banks, including reserve requirements
   of $1,665,000 and $934,000                                   $  4,371,985    4,169,641
Federal funds sold                                                         -    7,414,000
                                                                -------------  ----------

       Cash and cash equivalents                                   4,371,985   11,583,641

Interest-bearing deposits                                            100,000      298,000
Investment securities available-for-sale                          48,095,733   34,873,217
Other investments                                                    675,350      675,350
Loans, net                                                        56,782,597   43,482,681
Premises and equipment, net                                        4,909,085    3,741,026
Accrued interest receivable and other assets                       3,009,164    2,278,067
                                                                -------------  ----------

                                                                $117,943,914   96,931,982
                                                                =============  ==========

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

Deposits:
   Demand                                                       $ 13,342,450   19,954,811
   Money market and NOW accounts                                  52,394,310   32,028,352
   Savings                                                         2,438,973    2,144,761
   Time                                                           20,108,509   20,099,856
   Time over $100,000                                              6,351,371    6,029,055
                                                                -------------  ----------

       Total deposits                                             94,635,613   80,256,835

Advances from Federal Home Loan Bank                               8,500,000    8,500,000
Federal funds purchased                                            5,864,000            -
Other borrowings                                                   1,000,000            -
Accrued interest payable and other liabilities                       300,110      539,352
                                                                -------------  ----------

       Total liabilities                                         110,299,723   89,296,187
                                                                -------------  ----------

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;
     812,515 shares issued and outstanding                         7,749,680    7,330,505
   Retained earnings                                                 155,681      119,607
   Accumulated other comprehensive (loss) income                    (261,170)     185,683
                                                                -------------  ----------

       Total shareholders' equity                                  7,644,191    7,635,795
                                                                -------------  ----------

                                                                $117,943,914   96,931,982
                                                                =============  ==========
</TABLE>


See accompanying notes to consolidated financial statements.
                                      -16-
<PAGE>
<TABLE>
<CAPTION>
                            CHEROKEE BANKING COMPANY

                       CONSOLIDATED STATEMENTS OF EARNINGS

                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002

                                                              2003       2002
                                                           ----------  ---------
<S>                                                        <C>         <C>

Interest income:
  Interest and fees on loans                               $3,343,771  3,050,818
  Interest and dividends on investment securities           1,662,352  1,638,800
  Interest on federal funds sold                               32,646     41,769
  Interest on interest bearing deposits                         9,258     28,744
                                                           ----------  ---------

      Total interest income                                 5,048,027  4,760,131
                                                           ----------  ---------

Interest expense:
  Interest on money market and NOW accounts                   459,829    538,987
  Interest on savings and time deposits                       843,828  1,019,106
  Interest on other borrowings                                303,729    205,592
                                                           ----------  ---------

      Total interest expense                                1,607,386  1,763,685
                                                           ----------  ---------

      Net interest income                                   3,440,641  2,996,446

Provision for loan losses                                     194,076    206,496
                                                           ----------  ---------

      Net interest income after provision for loan losses   3,246,565  2,789,950
                                                           ----------  ---------

Other income:
  Service charges on deposit accounts                         432,269    366,631
  Mortgage origination fees                                   242,939    161,485
  Investment security gains, net                               34,616    159,319
  Other income                                                155,769     90,821
                                                           ----------  ---------

      Total other income                                      865,593    778,256
                                                           ----------  ---------

Other expenses:
  Salaries and employee benefits                            1,838,193  1,540,910
  Occupancy and equipment                                     354,278    294,429
  Other operating                                           1,265,522  1,058,370
                                                           ----------  ---------

      Total other expenses                                  3,457,993  2,893,709
                                                           ----------  ---------

      Earnings before income taxes                            654,165    674,497

Income tax expense                                            198,916    244,076
                                                           ----------  ---------

      Net earnings                                         $  455,249    430,421
                                                           ==========  =========

      Basic earnings per share                             $      .56        .53
                                                           ==========  =========

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


See accompanying notes to consolidated financial statements.
                                      -17-
<PAGE>
<TABLE>
<CAPTION>
                                      CHEROKEE BANKING COMPANY

                     CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

                           FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002


                                                            Retained      Accumulated
                                        Common Stock        Earnings         Other
                                     -------------------  (Accumulated   Comprehensive
                                     Shares     Amount      Deficit)     Income (Loss)     Total
                                     -------  ----------  -------------  --------------  ----------
<S>                                  <C>      <C>         <C>            <C>             <C>
Balance, December 31, 2001           738,658  $7,330,505      (310,814)       (107,815)  6,911,876

Change in unrealized gain/loss on
   investment securities available-
   for-sale, net of tax                    -           -             -         293,498     293,498

Net earnings                               -           -       430,421               -     430,421
                                     -------  ----------  -------------  --------------  ----------

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
                                     =======  ==========  =============  ==============  ==========
</TABLE>


See accompanying notes to consolidated financial statements.
                                      -18-
<PAGE>
<TABLE>
<CAPTION>
                               CHEROKEE BANKING COMPANY

                    CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

                    FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002

                                                                    2003        2002
                                                                 -----------  --------
<S>                                                              <C>          <C>
Net earnings                                                     $  455,249   430,421
                                                                 -----------  --------

Other comprehensive (loss) income, net of tax:
  Unrealized (losses) gains on investment securities available-
    for-sale, net of income taxes of $260,736 and $240,427         (425,391)  392,276

  Reclassification adjustment for gains on sale of investment
    securities available-for-sale, net of income taxes of
         $13,154 and $60,541                                        (21,462)  (98,778)
                                                                 -----------  --------

      Total other comprehensive (loss) income                      (446,853)  293,498
                                                                 -----------  --------

      Comprehensive income                                       $    8,396   723,919
                                                                 ===========  ========
</TABLE>


See accompanying notes to consolidated financial statements.
                                      -19-
<PAGE>
<TABLE>
<CAPTION>
                                     CHEROKEE BANKING COMPANY

                              CONSOLIDATED STATEMENTS OF CASH FLOWS

                          FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002

                                                                          2003           2002
                                                                      -------------  ------------
<S>                                                                   <C>            <C>
Cash flows from operating activities:
  Net earnings                                                        $    455,249       430,421
  Adjustments to reconcile net earnings to net cash
    provided by operating activities:
      Depreciation, amortization and accretion                             293,570       188,770
      Provision for loan losses                                            194,076       206,496
          Deferred income tax (benefit) expense                            (36,232)       14,139
      Investment security gains, net                                       (34,616)     (159,319)
      Change in:
        Accrued interest receivable and other assets                      (420,985)      (10,532)
        Accrued interest payable and other liabilities                    (239,243)     (104,339)
                                                                      -------------  ------------

                Net cash provided by operating activities                  211,819       565,636
                                                                      -------------  ------------

Cash flows from investing activities:
    Proceeds from sales of investment securities available-for-sale      4,124,494    14,339,843
  Proceeds from calls and maturities of investment
    securities available-for-sale                                       18,399,582    11,706,528
  Purchases of investment securities available-for-sale                (36,516,588)  (31,530,323)
  Change in interest-bearing deposits                                      198,000       699,000
  Purchases of other investments                                                 -      (370,100)
  Proceeds from sale of other real estate                                   62,000             -
  Net change in loans                                                  (13,555,992)  (13,090,361)
  Purchase of premises and equipment                                    (1,377,749)     (941,493)
  Purchase of cash surrender value of life insurance                             -    (1,178,801)
                                                                      -------------  ------------

                Net cash used by investing activities                  (28,666,253)  (20,365,707)
                                                                      -------------  ------------

Cash flows from financing activities:
  Net change in deposits                                                14,378,778    21,494,089
Net change in federal funds purchased                                    5,864,000      (222,000)
  Proceeds from other borrowings                                         1,000,000             -
  Proceeds from Federal Home Loan Bank advances                                  -     8,500,000
                                                                      -------------  ------------

                Net cash provided by financing activities               21,242,778    29,772,089
                                                                      -------------  ------------

Net change in cash and cash equivalents                                 (7,211,656)    9,972,018

Cash and cash equivalents at beginning of year                          11,583,641     1,611,623
                                                                      -------------  ------------

Cash and cash equivalents at end of year                              $  4,371,985    11,583,641
                                                                      =============  ============

Supplemental schedule of noncash investing and
  financing activities consisting of change in unrealized
  gain /loss on investment securities available-for-sale, net of tax  $   (446,853)      293,498

Supplemental disclosures of cash flow information:
  Cash paid during the year for interest                              $  1,662,925     1,995,329
  Cash paid during the year for income taxes                          $    297,973       139,000
</TABLE>


See accompanying notes to consolidated financial statements.
                                      -20-
<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, 2003 and 2002, 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.

          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.


                                           -21-
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

          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.

          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, or 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.  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.

          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. Leasehold improvements
          are  amortized  on  the  straight-line  method over the shorter of the
          estimated useful lives of the improvements or the terms of the related
          leases.  Costs  incurred  for  maintenance  and  repairs  are expensed
          currently.

          Depreciation expense is computed over the following estimated useful
          lives:

          Land improvements              15 years
          Buildings and improvements     10 - 40 years
          Furniture and equipment         3 - 10 years


                                           -22-
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

          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.

          NET 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 period are included in diluted
          earnings  per  share.

          The  reconciliation  of  the  amounts  used in the computation of both
          basic  earnings  per share and diluted earnings per share for 2003 and
          2002  is  presented  as  follows:

<TABLE>
<CAPTION>
                                                        YEARS ENDED DECEMBER 31,
                                                      ---------------------------
                                                          2003          2002
                                                      ------------  -------------
<S>                                                   <C>           <C>
Net earnings                                          $    455,249  $     430,421
                                                      ============  =============

Weighted average number of common shares outstanding       812,515        812,515
Effect of dilutive options and warrants                     96,546         45,354
                                                      ------------  -------------

Weighted average number of common shares outstanding
   used to calculate diluted earnings per share            909,061        857,869
                                                      ============  =============

Basic earnings per share                              $        .56  $         .53
                                                      ============  =============

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

          STOCK-BASED COMPENSATION PLANS

          The  Company  sponsors  stock-based  compensation  plans,  which  are
          described  more  fully in Note 9. 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 income, 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,  2003  and  2002.


                                           -23-
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

          STOCK-BASED COMPENSATION PLANS (CONTINUED)

<TABLE>
<CAPTION>
                                                   YEARS ENDED DECEMBER 31,
                                                 ---------------------------
                                                     2003          2002
                                                 ------------  -------------
<S>                                              <C>           <C>
Net earnings, as reported                        $    455,249  $     430,421
Deduct: Total stock-based employee compensation
     expense determined under fair value based
     method for all awards, net of tax                 28,445        198,528
                                                 ------------  -------------
Pro forma net earnings                           $    426,804  $     231,893
                                                 ============  =============
Basic earnings per share:
  As reported                                    $       0.56  $        0.53
                                                 ============  =============
  Pro forma                                      $       0.53  $        0.29
                                                 ============  =============
Diluted earnings per share:
  As reported                                    $       0.50  $        0.50
                                                 ============  =============
  Pro forma                                      $       0.47  $        0.27
                                                 ============  =============
</TABLE>

          RECENT ACCOUNTING PRONOUNCEMENTS

          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 either
          not  directly  applicable  at  the present time or are not expected to
          have to have a material impact on the Company's consolidated financial
          statements  upon  adoption.

NOTE 2.   INVESTMENT SECURITIES

          At  December  31,  2003  and  2002,  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, 2003:
  U.S. TREASURY AND U.S.
     GOVERNMENT AGENCY OBLIGATIONS  $ 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
                                    ===========  ===========  ===========  ===========

  December 31, 2002:
  U.S. Treasury and U.S.
     Government agency obligations  $ 1,049,287  $     6,338  $         -  $ 1,055,625
  Mortgage-backed securities         33,524,441      374,653       81,502   33,817,592
                                    -----------  -----------  -----------  -----------
                                    $34,573,728  $   380,991  $    81,502  $34,873,217
                                    ===========  ===========  ===========  ===========
</TABLE>


                                           -24-
<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, 2003 are
          summarized  as  follows:

<TABLE>
<CAPTION>
                     Less than 12 Months       12 Months or More             Total
                 ------------------------  -----------------------  ------------------------
                    Fair      Unrealized      Fair     Unrealized      Fair      Unrealized
                    Value       Losses        Value      Losses        Value       Losses
                 ---------------------------------------------------------------------------
<S>              <C>          <C>          <C>         <C>          <C>          <C>
U.S. Treasuries  $ 2,901,394  $    91,728  $        -  $         -  $ 2,901,394  $    91,728
 and agencies
Mortgage-backed   28,107,836      537,559   1,531,121       12,306   29,638,957      549,865
 securities      -----------  -----------  ----------  -----------  -----------  -----------

                 $31,009,230  $   629,287  $1,531,121  $    12,306  $32,540,351  $   641,593
                 ===========  ===========  ==========  ===========  ===========  ===========
</TABLE>

          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, 2003 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. Treasuries and U.S.
   Government agencies:
   1 to 5 years             $ 3,495,937  $     3,469,218
   5 to 10 years              2,151,258        2,097,175
Mortgage-backed securities   42,869,781       42,529,340
                            -----------  ---------------
                            $48,516,976  $    48,095,733
                            ===========  ===============
</TABLE>

          For the years ended December 31, 2003 and 2002, proceeds from sales of
          investment  securities  available-  for-sale  totaled  approximately
          $4,124,000 and $14,340,000, respectively. The Company recognized gross
          gains  of  $35,197  and  $159,632 on those sales during 2003 and 2002,
          respectively.  The Company recognized gross losses of $581 and $313 on
          those  sales  during  2003  and  2002,  respectively.

          At  December  31,  2003  and 2002, securities with a carrying value of
          approximately  $43,000,000 and $22,166,000, respectively, were pledged
          to  secure  advances  from the Federal Home Loan Bank ("FHLB"), public
          deposits  and  for  other  purposes  as  required  by  law.


                                           -25-
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3.   LOANS

          Major  classifications  of  loans  at  December  31, 2003 and 2002 are
          presented  below:

<TABLE>
<CAPTION>
                                               2003         2002
                                            -----------  -----------

<S>                                         <C>          <C>
Commercial, and financial and agricultural  $30,017,333  $23,862,595
Real estate - mortgage                        8,423,916    7,453,721
Real estate - construction                   16,154,111    9,272,306
Consumer                                      2,989,302    3,534,217
                                            -----------  -----------
                                             57,584,662   44,122,839
Less:  Allowance for loan losses                802,065      640,158
                                            -----------  -----------
                                            $56,782,597  $43,482,681
                                            ===========  ===========
</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.

          Management  has  identified  no  material amounts of impaired loans as
          defined  by  SFAS No. 114, Accounting by Creditors for Impairment of a
          Loan,  as of and for the years ended December 31, 2003 and 2002. There
          were no loans on nonaccrual status or past due ninety days or more and
          still  accruing  interest  as  of  December  31,  2003  and  2002.

          Activity in the allowance for loan losses is summarized as follows for
          the  years  ended  December  31,  2003  and  2002:

<TABLE>
<CAPTION>
                                      2003       2002
                                    ---------  ---------

<S>                                 <C>        <C>
BALANCE, BEGINNING OF YEAR          $640,158   $428,173
  Provisions charged to operations   194,076    206,496
  Loan charge-offs                   (44,749)   (90,381)
  Loan recoveries                     12,580     95,870
                                    ---------  ---------
BALANCE, END OF YEAR                $802,065   $640,158
                                    =========  =========
</TABLE>

NOTE 4.   PREMISES AND EQUIPMENT

          Major  classifications  of  premises  and equipment as of December 31,
          2003  and  2002  are  summarized  as  follows:

<TABLE>
<CAPTION>
                                    2003        2002
                                 ----------  ----------
<S>                              <C>         <C>
Land and land improvements       $1,100,641  $1,086,143
Buildings and improvements        2,279,889   2,264,436
Furniture and equipment             996,481     885,151
Construction in process           1,236,468           -
                                 ----------  ----------
                                  5,613,479   4,235,730
Less:  Accumulated depreciation     704,394     494,704
                                 ----------  ----------
                                 $4,909,085  $3,741,026
                                 ==========  ==========
</TABLE>

          Depreciation  expense  amounted to $209,690 and $181,935 for the years
          ended  December  31,  2003  and  2002,  respectively.


                                           -26-
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5.   DEPOSITS

          At  December  31,  2003,  contractual  maturities of time deposits are
          summarized  as  follows:

<TABLE>
<CAPTION>
<S>                  <C>
2004                 $17,294,921
2005                   3,411,386
2006                   2,412,324
2007                   2,368,308
2008                     972,941
                     -----------
                     $26,459,880
                     ===========
</TABLE>

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, 2003 and 2002 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%             September4,2005
   2012       5,500,000       3.38%              January31,2004
             ----------
             $8,500,000
             ==========
</TABLE>

          These  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.

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 accrues interest at the prime interest rate minus 25 basis points
          with  interest payable quarterly and a maturity of August 1, 2015. The
          facility  is  collateralized  by  the  stock  of the Bank. The line of
          credit  also  includes  certain  covenants  including  requirements to
          maintain defined levels of tangible net worth, net income and capital.
          Additionally,  the  note  includes  limitations  on  the  Company's
          leveraging  and dividend payments. As of December 31, 2003, management
          believes  the  Company  is  in  compliance  with  stated  covenants.


NOTE 8.   INCOME TAXES

          The  components of income tax expense for the years ended December 31,
          2003  and  2002  are  as  follows:

<TABLE>
<CAPTION>
                                          2003       2002
                                        ---------  ---------
<S>                                     <C>        <C>
Current                                 $235,148   $229,937
Deferred                                 (36,232)    45,395
Benefit of operating loss carryforward         -    (31,256)
                                        ---------  ---------
                                        $198,916   $244,076
                                        =========  =========
</TABLE>


                                      -27-
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8.   INCOME TAXES (CONTINUED)

          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, 2003 and 2002 are as follows:

<TABLE>
<CAPTION>
                                                         2003       2002
                                                       ---------  ---------
<S>                                                    <C>        <C>
Pretax income at statutory rate                        $222,416   $229,329
Add (deduct):
   State income taxes, net of federal effect              9,733     26,980
   Increase in cash surrender value of life insurance   (21,572)   (10,132)
   Other                                                (11,661)    (2,101)
                                                       ---------  ---------
                                                       $198,916   $244,076
                                                       =========  =========
</TABLE>

          The  following summarizes the components of deferred taxes at December
          31,  2003  and  2002:

<TABLE>
<CAPTION>
                                                       2003      2002
                                                     --------  --------
<S>                                                  <C>       <C>
Deferred income tax assets:
  Allowance for loan losses                          $291,098  $222,949
  Pre-opening expenses                                 11,405    30,957
  Operating loss and state tax credit carryforwards         -    13,191
  Unrealized loss on available-for-sale securities    160,072         -
  Other                                                34,698     7,440
                                                     --------  --------
                   Gross deferred tax assets          497,273   274,537
                                                     --------  --------

Deferred income tax liabilities:
  Premises and equipment                               87,053    60,621
  Unrealized gain of available-for-sale securities          -   113,805
                                                     --------  --------
                   Gross deferred tax liabilities      87,053   174,426
                                                     --------  --------

                   Net deferred tax asset            $410,220  $100,111
                                                     ========  ========
</TABLE>

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.


                                      -28-
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9.   COMMITMENTS (CONTINUED)

          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,  2003  and  2002  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>
                                                 2003         2002
                                              -----------  ----------
<S>                                           <C>          <C>
Financial instruments whose contract amounts
   represent credit risk:
      Commitments to extend credit            $19,301,000  $7,538,000
      Standby letters of credit                   166,000     176,000
                                              -----------  ----------
                                              $19,610,000  $7,714,000
                                              ===========  ==========
</TABLE>

          The Bank also has obtained lines of credit available with
          correspondent  banks  to purchase federal funds. At December 31, 2003,
          unused  lines  of  credit  totaled  $536,000.


NOTE 10.  EMPLOYEE AND DIRECTOR BENEFIT PLANS

          DEFINED CONTRIBUTION PLAN

          The Company sponsors a defined contribution profit-sharing and pension
          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, 2003 and 2002, the
          Company  contributed  approximately $30,000 and $23,000, 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 85,262 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  183,500  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.


                                      -29-
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10.  EMPLOYEE AND DIRECTOR BENEFIT PLANS (CONTINUED)

          STOCK OPTION PLAN AND WARRANTS (CONTINUED)

          A  summary  of  activity  in  the directors' warrants and stock option
          plans  for  the  years  ended December 31, 2003 and 2002 are presented
          below:

<TABLE>
<CAPTION>
                                      2003                 2002
                                -------------------  -------------------
                                          WEIGHTED             WEIGHTED
                                          AVERAGE              AVERAGE
                                          EXERCISE             EXERCISE
                                NUMBER     PRICE     NUMBER     PRICE
                                -------  ----------  -------  ----------
<S>                             <C>      <C>         <C>      <C>
Outstanding, beginning of year  246,730  $     9.11  246,730  $     9.11
Granted during the year          25,421       13.64        -           -
                                -------  ----------  -------  ----------
Outstanding, end of year        272,151  $     9.54  246,730  $     9.11
                                =======  ==========  =======  ==========

Exercisable, end of year        234,300  $     9.10  225,335  $     9.46
                                =======  ==========  =======  ==========
</TABLE>

          The  fair value of each option is estimated on the date of grant using
          the  Minimum  Value  pricing model with the following weighted average
          assumptions:  dividend  yield  of 0%; risk free interest rate of 3.00%
          for  2003,  and  an  expected  life of 10 years. There were no options
          granted  during  2002.  The  weighted-average  fair  value  of options
          granted  in  2003  was  $3.79.  Warrants  and  options have a weighted
          average  remaining  contractual  life  of approximately five years and
          exercise  prices ranging from $9.09 to $13.64 as of December 31, 2003.

          LIFE  INSURANCE  POLICIES

          The Company has adopted a defined contribution post retirement benefit
          plan  to  provide  retirement  benefits  to  certain  of the Company's
          executive  officers and to provide death benefits for their designated
          beneficiaries.  Under  this  plan,  single-premium,  split-dollar,
          whole-life  insurance contracts totaling approximately $2,105,000 have
          been  purchased  on  certain  executive  officers. For the years ended
          December  31,  2003 and 2002, the Company incurred expenses of $85,000
          and  $13,000  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.


                                      -30-
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12.  RELATED PARTY TRANSACTIONS

          The  Bank  conducts  transactions  with  its  directors  and 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, 2003 and 2002, there
          were  $3,252,388  and  $1,725,968,  respectively,  of  related  party
          deposits.  Following  is  a  summary  of  related  party  loans:

<TABLE>
<CAPTION>
<S>                                     <C>
     Balance at December 31, 2002       $     3,185,384
     New Loans/Advances                         671,929
     Less:  Repayments                          (60,567)
                                        ----------------
     Balance at December 31, 2003       $     3,796,746
                                        ================
</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,  2003  and  2002  are  as  follows:

<TABLE>
<CAPTION>
                                      2003        2002
                                  ----------  ----------
<S>                               <C>         <C>
     Supplies                     $   65,835  $   58,457
     Other outside services           87,690      73,739
     Advertising                      59,836      90,793
     Bookkeeping                     156,227     141,376
     Data processing                 152,036      97,154
</TABLE>

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, 2003 and 2002, the Company and
          Bank  met all capital adequacy requirements to which they are subject.


                                      -31-
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14.  REGULATORY MATTERS (CONTINUED)

          As  of  December  31, 2003 and 2002, the most recent notification from
          the Federal Deposit Insurance Corporation categorized the Bank as well
          capitalized  under  the  regulatory  framework  for  prompt corrective
          action.  To be categorized as well capitalized, the Bank must maintain
          minimum  Total  risk-based,  Tier  I  risk-based,  and Tier I leverage
          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.

<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, 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%

December 31, 2002:
  Total Capital to Risk Weighted Assets:
     Consolidated                           $ 8,068   13.8%  $ 4,674      8.0%  $      N/A         N/A
     Bank                                   $ 7,480   12.9%  $ 4,654      8.0%  $    5,818       10.0%
  Tier I Capital to Risk Weighted Assets:
     Consolidated                           $ 7,450   12.7%  $ 2,337      4.0%  $      N/A         N/A
     Bank                                   $ 6,840   11.8%  $ 2,327      4.0%  $    3,491        6.0%
  Tier I Capital to Average Assets:
     Consolidated                           $ 7,450   7.5%   $ 3,265      4.0%  $      N/A         N/A
     Bank                                   $ 6,840   8.0%   $ 3,230      4.0%  $    4,037        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,  2003,  the  Bank  could  pay dividends of approximately
          $227,000  without  prior  approval.


                                           -32-
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 15.     PARENT COMPANY FINANCIAL INFORMATION

<TABLE>
<CAPTION>
                         BALANCE SHEETS
                   DECEMBER 31, 2003 AND 2002

                                          2003        2002
                                       ----------  ----------
                            Assets
                            ------
<S>                                    <C>         <C>
Cash and cash equivalents              $  583,664  $  547,007
Investment in Bank                      8,100,323   7,026,013
Other assets                                6,308      62,775
                                       ----------  ----------

                                       $8,690,295  $7,635,795
                                       ==========  ==========

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


Other borrowings                       $1,000,000  $        -
Other liabilities                          46,104
Shareholders' equity                    7,644,191   7,635,795
                                       ----------  ----------

                                       $8,690,295  $7,635,795
                                       ==========  ==========
</TABLE>

<TABLE>
<CAPTION>
                  STATEMENTS OF EARNINGS
      FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002

                                               2003       2002
                                            ----------  ---------
<S>                                         <C>         <C>
Interest income                             $  26,701   $ 48,801
Other operating expense                       132,510     73,414
                                            ----------  ---------

  Loss  before equity in undistributed
         earnings of Bank and income taxes   (105,809)   (24,613)

Income tax benefit                             39,895     21,398

Equity in undistributed earnings of Bank      521,163    433,636
                                            ----------  ---------

  Net earnings                              $ 455,249   $430,421
                                            ==========  =========
</TABLE>


                                      -33-
<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, 2003 AND 2002

                                                              2003         2002
                                                          ------------  -----------
<S>                                                       <C>           <C>
OPERATING ACTIVITIES
  Net earnings                                            $   455,249   $  430,421
  Adjustments to reconcile net earnings to net
    cash provided (used) by operating activities:
    Equity in undistributed earnings of Bank                 (521,163)    (433,636)
    Change in other assets and liabilities                    102,571      (32,140)
                                                          ------------  -----------

        NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES       36,657      (35,355)
                                                          ------------  -----------


INVESTING ACTIVITIES
  Investment in Bank                                       (1,000,000)    (700,000)
                                                          ------------  -----------

FINANCING ACTIVITIES
  Proceeds from other borrowings                            1,000,000            -
                                                          ------------  -----------

Net change in cash and cash equivalents                        36,657     (735,355)

Cash and cash equivalents at beginning of year                547,007    1,282,362
                                                          ------------  -----------

Cash and cash equivalents at end of year                  $   583,664   $  547,007
                                                          ============  ===========
</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 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.

          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.


                                      -34-
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 16.  FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

          OTHER  INVESTMENTS:  For  other  investments,  the carrying value 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.

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

          DEPOSITS:  The  fair  value  of  demand deposits, 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.


                                      -35-
<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, 2003 and 2002 are as follows
          (amounts  in  thousands):

<TABLE>
<CAPTION>
                                      2003                    2002
                              ----------------------  ----------------------
                              CARRYING    ESTIMATED   CARRYING    ESTIMATED
                               AMOUNT    FAIR VALUE    AMOUNT    FAIR VALUE
                              ---------  -----------  ---------  -----------
<S>                           <C>        <C>          <C>        <C>
Assets:
   Cash and cash equivalents  $   4,372  $     4,372  $  11,584  $    11,584
   Interest-bearing deposits        100          100        298          298
   Investment securities
      available-for-sale         48,096       48,096     34,873       34,873
   Other investments                675          675        675          675
   Loans, net                    56,783       58,220     43,483       43,730
   Cash surrender value of
      life insurance              2,105        2,105      1,558        1,558

Liabilities:
   Deposits                      94,636       94,528     80,257       81,475
   Federal funds purchased        5,864        5,864          -            -
   Advances from Federal
      Home Loan Bank              8,500        7,933      8,500        9,382
   Other borrowings               1,000        1,000          -            -
</TABLE>

NOTE  17.  SUBSEQUENT  EVENT

          Subsequent  to  December  31,  2003, the Company completed the sale of
          $6,020,000  in  common  stock  through an intrastate offering to raise
          additional  working capital for the Bank. As a result of the offering,
          430,000  shares  were issued at a price of $14.00 per share. No shares
          had  been  issued  through  the  offering  as  of  December  31, 2003.


                                      -36-
<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 2003 and 2002, as
reported  by  NASDAQ:

<TABLE>
<CAPTION>
                             2003            2002
                        --------------  --------------
APPLICABLE PERIOD        HIGH    LOW     HIGH    LOW
-----------------       ------  ------  ------  ------
<S>                     <C>     <C>     <C>     <C>
First Quarter           $15.25  $13.00  $13.00  $10.00
Second Quarter          $16.00  $13.90  $13.00  $13.00
Third Quarter           $23.00  $16.00  $13.15  $11.00
Fourth Quarter          $21.00  $16.36  $15.25  $13.10
</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, 2004, the
NASDAQ  OTC  Bulletin  Board  indicated  that  reported  trading  volume for the
Company's  common  stock  was  9,815 shares during 2003.  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 a lack of 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
542  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 FOLLOWING THE PAYMENT OR
DISTRIBUTION  THE  INSTITUTION  WOULD  BE  UNDERCAPITALIZED.  MOREOVER,  FEDERAL
AGENCIES  HAVING  REGULATORY  AUTHORITY OVER THE COMPANY OR THE BANK HAVE ISSUED
POLICY  STATEMENTS  THAT  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.


                                      -37-
<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; Senior Vice
President, 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, 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, Cherokee Banking Company; Senior Vice
President,
Chief Financial Officer and Chief Operations Officer, Cherokee Bank; Mayor, Ball
Ground, Georgia

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

EDWIN I. SWORDS, III, Dentist, Swords and Phelps



Shareholders  may  obtain,  without charge, a copy of Cherokee Banking Company's
Annual  Report  filed with the Securities and Exchange Commission on Form 10-KSB
for the period ended December 31, 2003.  Written requests should be addressed to
Dennis  W.  Burnette,  1275  Riverstone  Parkway,  Canton,  Georgia  30114.


                                      -38-
<PAGE>
                             SHAREHOLDER INFORMATION



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


REGULATORY AND SECURITIES COUNSEL
Powell, Goldstein, Frazer & Murphy
Sixteenth Floor
191 Peachtree Street, NE
Atlanta, GA  30303


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


ANNUAL SHAREHOLDERS MEETING
May 24, 2004, 5:00 p.m.

Cherokee Bank
1275 Riverstone Pkwy.
Canton, GA  30114


                              WWW.CHEROKEEBANK.COM

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<PAGE>