EXHIBIT 13.1

                       2001 ANNUAL REPORT TO SHAREHOLDERS


                            CHEROKEE BANKING COMPANY

                               2001 ANNUAL REPORT


<PAGE>
<TABLE>
<CAPTION>
                                    TABLE OF CONTENTS


                                                                                       PAGE
                                                                                       ----
<S>                                                                                    <C>
Report of Independent Certified Public Accountant . . . . . . . . . . . . . . . . . .     1

Consolidated Balance Sheets as of December 31, 2001 and 2000. . . . . . . . . . . . .     2

Consolidated Statements of Operations for the Years Ended December 31, 2001 and 2000.     3

Consolidated Statements of Changes in Shareholders' Equity for the Years Ended
December 31, 2001 and 2000. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     4

Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2001
and 2000. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     5

Consolidated Statements of Cash Flows for the Years Ended December 31, 2001 and 2000.     6

Notes to Consolidated Financial Statements. . . . . . . . . . . . . . . . . . . . . .     7

Management's Discussion and Analysis of Financial Condition and Results of Operations    20

Market for Cherokee Banking Company's Common Stock; Payment of Dividends. . . . . . .    29
</TABLE>


<PAGE>
                    [Letterhead of 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,  2001  and 2000, and the related
statements  of operations, 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, 2001 and 2000 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
March 1, 2002


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

                          CONSOLIDATED BALANCE SHEETS

                           DECEMBER 31, 2001 AND 2000

                                     Assets
                                     ------

                                                                    2001         2000
                                                                ------------  -----------
<S>                                                             <C>           <C>
Cash and due from banks, including reserve requirements
  of $374,000 and $299,000                                      $ 1,611,623    1,178,636
Federal funds sold                                                        -    2,100,000
                                                                ------------  -----------

        Cash and cash equivalents                                 1,611,623    3,278,636

Interest-bearing deposits                                           997,000    1,779,000
Investment securities available-for-sale                         28,763,398   14,559,837
Other investments                                                   305,250      236,100
Loans, net                                                       30,598,815   19,519,227
Premises and equipment, net                                       2,981,469    2,467,641
Accrued interest receivable and other assets                      1,102,873      357,758
                                                                ------------  -----------

                                                                $66,360,428   42,198,199
                                                                ============  ===========

                      Liabilities and Shareholders' Equity
                      ------------------------------------
Deposits:
  Demand                                                        $ 5,620,933    3,746,675
  Money market and NOW accounts                                  27,993,680   15,785,979
  Savings                                                         1,541,472      640,343
  Time                                                           19,208,488   11,310,052
  Time over $100,000                                              4,398,173    4,035,591
                                                                ------------  -----------

      Total deposits                                             58,762,746   35,518,640

Federal funds purchased                                             222,000            -
Accrued interest payable and other liabilities                      463,806      321,741
                                                                ------------  -----------

      Total liabilities                                          59,448,552   35,840,381
                                                                ------------  -----------

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;
    738,658 issued and outstanding                                7,330,505    7,330,505
  Accumulated deficit                                              (310,814)  (1,013,440)
  Accumulated other comprehensive income (loss)                    (107,815)      40,753
                                                                ------------  -----------

      Total shareholders' equity                                  6,911,876    6,357,818
                                                                ------------  -----------

                                                                $66,360,428   42,198,199
                                                                ============  ===========
</TABLE>

See  accompanying  notes  to  consolidated  financial  statements.


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

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                 FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000

                                                                   2001              2000
                                                              ---------------  ----------------
<S>                                                           <C>              <C>
Interest income:
  Interest and fees on loans                                  $     2,543,428        1,245,544
  Interest on investment securities                                 1,140,899          787,259
  Interest on federal funds sold                                      237,415          335,544
  Interest on interest bearing deposits                                70,242           84,136
                                                              ---------------  ----------------

        Total interest income                                       3,991,984        2,452,483
                                                              ---------------  ----------------

Interest expense:
  Interest on money market and NOW accounts                           588,287          465,712
  Interest on savings and time deposits                             1,173,127          868,882
                                                              ---------------  ----------------

        Total interest expense                                      1,761,414        1,334,594
                                                              ---------------  ----------------

        Net interest income                                         2,230,570        1,117,889

Provision for loan losses                                             216,634          179,677
                                                              ---------------  ----------------

        Net interest income after provision for loan losses         2,013,936          938,212
                                                              ---------------  ----------------

Other income:
  Service charges on deposit accounts                                 304,493           86,407
  Other income                                                        228,777          103,759
  Investment security gains                                            72,314           12,433
                                                              ---------------  ----------------

        Total other income                                            605,584          202,599
                                                              ---------------  ----------------

Other expenses:
  Salaries and employee benefits                                    1,136,136          819,197
  Occupancy and equipment                                             239,561          208,659
  Other operating                                                     765,816          541,912
                                                              ---------------  ----------------

        Total other expenses                                        2,141,513        1,569,768
                                                              ---------------  ----------------

        Earnings (loss) before income taxes                           478,007         (428,957)

Income tax benefit                                                    224,619                -
                                                              ---------------  ----------------

        Net earnings (loss)                                   $       702,626         (428,957)
                                                              ===============  ================

        Net earnings (loss) per share - basic and diluted     $           .95  $          (.58)
                                                              ===============  ================
</TABLE>

See  accompanying  notes  to  consolidated  financial  statements.


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

                  CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

                        FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000

                                                                        Accumulated
                                        Common Stock                       Other
                                    -------------------  Accumulated   Comprehensive
                                    Shares     Amount      Deficit     Income  (Loss)    Total
                                    -------  ----------  ------------  --------------  ----------
<S>                                 <C>      <C>         <C>           <C>             <C>
Balance, December 31, 1999          738,658  $7,330,505     (584,483)        (32,881)  6,713,141

Change in unrealized gain/loss on
  investment securities available
  for sale, net of tax                    -           -            -          73,634      73,634

Net loss                                  -           -     (428,957)              -    (428,957)
                                    -------  ----------  ------------  --------------  ----------

Balance, December 31, 2000          738,658   7,330,505   (1,013,440)         40,753   6,357,818

Change in unrealized gain/loss on
  investment securities available
  for sale, net of tax                    -           -            -        (148,568)   (148,568)

Net earnings                              -           -      702,626               -     702,626
                                    -------  ----------  ------------  --------------  ----------

Balance, December 31, 2001          738,658  $7,330,505     (310,814)       (107,815)  6,911,876
                                    =======  ==========  ============  ==============  ==========
</TABLE>

See accompanying notes to consolidated financial statements.


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

                    CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

                     FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000

                                                                     2001       2000
                                                                  ----------  ---------
<S>                                                               <C>         <C>
Net earnings (loss)                                               $ 702,626   (428,957)
                                                                  ----------  ---------

Other comprehensive income (loss), net of tax:
  Unrealized gains (losses) on investment securities available-
    for-sale, net of income taxes of $63,518 and $49,855           (103,733)    81,342

  Reclassification adjustment for gains on sale of investment
    securities available-for-sale, net of income taxes of
        $27,479 and $4,725                                          (44,835)    (7,708)
                                                                  ----------  ---------

      Total other comprehensive income (loss)                      (148,568)    73,634
                                                                  ----------  ---------

      Comprehensive income (loss)                                 $ 554,058   (355,323)
                                                                  ==========  =========
</TABLE>

See accompanying notes to consolidated financial statements.


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

                              CONSOLIDATED STATEMENTS OF CASH FLOWS

                         FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000

                                                                         2001           2000
                                                                     -------------  ------------
<S>                                                                  <C>            <C>
Cash flows from operating activities:
  Net earnings (loss)                                                $    702,626      (428,957)
  Adjustments to reconcile net earnings (loss) to net cash
    used by operating activities:
      Depreciation, amortization and accretion                             81,910        92,439
      Provision for loan losses                                           216,634       179,677
      Deferred income tax benefit                                        (228,054)            -
      Gain on sales, paydowns, and calls on securities                    (72,314)      (12,433)
      Change in:
        Accrued interest receivable and other assets                     (130,862)     (231,471)
        Accrued interest payable and other liabilities                    233,126       189,821
                                                                     -------------  ------------

                Net cash provided (used) by operating activities          803,066      (210,924)
                                                                     -------------  ------------

Cash flows from investing activities:
  Proceeds from sales of investment securites available-for-sale        8,085,455             -
  Proceeds from calls and maturities of investment
    securities available-for-sale                                      15,133,124       801,219
  Purchases of investment securities available-for-sale               (37,519,822)   (8,339,906)
  Change in interest-bearing deposits                                     782,000    (1,579,000)
  Purchases of other investments                                          (69,150)      (56,100)
  Net change in loans                                                 (11,303,456)  (14,274,489)
  Purchase of premises and equipment                                     (665,371)   (1,311,677)
  Purchase of cash surrender value of life insurance                     (378,965)            -
                                                                     -------------  ------------

                Net cash used by investing activities                 (25,936,185)  (24,759,953)
                                                                     -------------  ------------

Cash flows from financing activities:
  Net change in deposits                                               23,244,106    23,522,571
  Net change in federal funds purchased                                   222,000             -
                                                                     -------------  ------------

                Net cash provided by financing activities              23,466,106    23,522,571
                                                                     -------------  ------------

Net change in cash and cash equivalents                                (1,667,013)   (1,448,306)
Cash and cash equivalents at beginning of period                        3,278,636     4,726,942
                                                                     -------------  ------------

Cash and cash equivalents at end of period                           $  1,611,623     3,278,636
                                                                     =============  ============

Supplemental schedule of noncash investing and
  financing activities:
    Change in unrealized gain /loss on investment
      securities available for sale, net of tax                      $   (148,568)       73,634

Supplemental disclosures of cash flow information:
  Cash paid during the year for interest                             $  1,633,967     1,146,507
</TABLE>

See accompanying notes to consolidated financial statements.


                                      -6-
<PAGE>
                            CHEROKEE BANKING COMPANY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(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 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 generally accepted
     accounting  principles  (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.

     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,  2001  and 2000, 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.

     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.


                                      -7-
<PAGE>
                            CHEROKEE BANKING COMPANY

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
     Loans  and  Allowance  for  Loan  Losses,  continued
     ----------------------------------------------------
     A  loan  is  considered  impaired  when,  based  on current information and
     events,  it  is  probable that all amounts due according to the 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  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:

             Buildings  and  improvements     10  -  25  years
             Furniture  and  equipment         3  -  10  years

     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.


                                      -8-
<PAGE>
                            CHEROKEE BANKING COMPANY

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
     Net  Earnings  (Loss)  Per  Share
     ---------------------------------
     Basic earnings (loss) per share are based on the weighted average number of
     common  shares outstanding during the period while the effects of potential
     common  shares  outstanding  during  the  period  are  included  in diluted
     earnings (loss) per share. The presentation of earnings (loss) per share is
     required  on  the  face of the statement of operations with and without the
     dilutive  effects of potential common stock issuances from instruments such
     as  options,  convertible  securities  and  warrants.  Additionally,  the
     reconciliation  of  the  amounts  used  in  the  computation of both "basic
     earnings  (loss)  per  share"  and  "diluted  earnings (loss) per share" is
     required.

     For 2000, the potential effect of outstanding options and warrants would be
     anti-dilutive,  and  therefore  is not presented. Anti-dilutive options and
     warrants  totaled  223,400  at  December  31, 2000. For 2001, the potential
     outstanding  options  and  warrants  had  no  effect on earnings per share.

     For  2001  and 2000, net earnings (loss) per share is based on the weighted
     average  number  of  shares  outstanding  of  738,658.

     Recent  Accounting  Pronouncements
     ----------------------------------
     In September 2000, the Financial Accounting Standards Board ("FASB") issued
     Statement  of  Financial  Accounting  Standards  No.  140,  "Accounting for
     Transfers  and  Servicing  of  Financial  Assets  and  Extinguishments  of
     Liabilities--a  Replacement  of  FASB Statement No. 125" ("SFAS 140"). SFAS
     140  revises  the  criteria  for  accounting  for securitizations and other
     transfers  of  financial  assets  and  collateral.  In  addition,  SFAS 140
     requires  certain  additional  disclosures.  Except  for the new disclosure
     provisions, which were effective for the year ended December 31, 2000, SFAS
     140  was  effective  for  the  transfer of financial assets occurring after
     March  31,  2001. The provisions of SFAS 140 did not have a material effect
     on  the  Company's  financial  statements.

     In  July  2001, the FASB issued Statement of Financial Accounting Standards
     No.  141,  "Business  Combinations" ("SFAS 141") and No. 142, "Goodwill and
     Other  Intangible  Assets"  ("SFAS  142").  These  standards  change  the
     accounting  for  business  combinations by, among other things, prohibiting
     the  prospective  use  of  pooling-of-interests  accounting  and  requiring
     companies to stop amortizing goodwill and certain intangible assets with an
     indefinite useful life created by business combinations accounted for using
     the  purchase method of accounting. Instead, goodwill and intangible assets
     deemed  to  have  an  indefinite  useful  life will be subject to an annual
     review for impairment. The new standards generally will be effective in the
     first  quarter  of  2002. The provisions of these statements did not have a
     material  effect  on  the  Company's  financial  statements.

(2)  INVESTMENT SECURITIES
     At  December  31,  2001  and 2000, investment securities available for sale
     consisted  of  the  following:

<TABLE>
<CAPTION>
                                                 December 31, 2001
                                   -----------------------------------------------
                                                  Gross       Gross     Estimated
                                    Amortized   Unrealized  Unrealized     Fair
                                      Cost        Gains       Losses      Value
                                   -----------  ----------  ----------  ----------
<S>                                <C>          <C>         <C>         <C>
U.S. Treasury and U.S. Government
  agency obligations               $ 8,468,790      26,624      30,065   8,465,349
Mortgage-backed securities          20,468,503     106,043     276,497  20,298,049
                                   -----------  ----------  ----------  ----------

                                   $28,937,293     132,667     306,562  28,763,398
                                   ===========  ==========  ==========  ==========
</TABLE>


                                      -9-
<PAGE>
                            CHEROKEE BANKING COMPANY
                            ------------------------

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
              -----------------------------------------------------

(2)  INVESTMENT SECURITIES, CONTINUED

<TABLE>
<CAPTION>
                                                 December 31, 2000
                                   -----------------------------------------------
                                                  Gross       Gross     Estimated
                                    Amortized   Unrealized  Unrealized     Fair
                                      Cost        Gains       Losses      Value
                                   -----------  ----------  ----------  ----------
<S>                                <C>          <C>         <C>         <C>
U.S. Treasury and U.S. government
    agency obligations             $11,421,898      67,425       3,687  11,485,636
Mortgage-backed securities           3,072,209      21,470      19,478   3,074,201
                                   -----------  ----------  ----------  ----------

                                   $14,494,107      88,895      23,165  14,559,837
                                   ===========  ==========  ==========  ==========
</TABLE>

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

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

U.S. Treasuries and U.S.
  government agencies:
    1 to 5 years                       $ 5,468,790   5,474,724
    5 to 10 years                        3,000,000   2,990,625
Mortgage backed securities              20,468,503  20,298,049
                                       -----------  ----------

                                       $28,937,293  28,763,398
                                       ===========  ==========
</TABLE>

     For  the  year  ended  December 31, 2001, proceeds from sales of investment
     securities available-for-sale totaled approximately $8,085,000. The Company
     recognized gross gains of $99,346 on those sales during 2001. There were no
     sales  of  securities  available-for-sale in 2000. The Company recognized a
     gross  loss  of $27,032 and a gross gain of $12,433 on the call and paydown
     of  securities  during  2001  and  2000,  respectively.

     At  December  31,  2001  and  2000  securities  with  a  carrying  value of
     approximately  $6,816,000  and  $4,496,000  were  pledged  to secure public
     deposits  and  for  other  purposes  as  required  by  law.

(3)  LOANS
     Major  classifications of loans at December 31, 2001 and 2000 are presented
     below:

<TABLE>
<CAPTION>
                                           2001         2000
                                        -----------  ----------
<S>                                     <C>          <C>
Commercial, financial and agricultural  $16,294,606  10,734,166
Real estate - mortgage                    6,435,719   4,513,258
Real estate - construction                4,214,108   1,535,236
Consumer                                  4,082,555   2,983,518
                                        -----------  ----------

                                         31,026,988  19,766,178

Less: Allowance for loan losses             428,173     246,951
                                        -----------  ----------

                                        $30,598,815  19,519,227
                                        ===========  ==========
</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.


                                      -10-
<PAGE>
                            CHEROKEE BANKING COMPANY
                            ------------------------

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(3)  LOANS,  CONTINUED
     Activity  in the allowance for loan losses is summarized as follows for the
     years  ended  December  31,  2001  and  2000:

<TABLE>
<CAPTION>
                                    2001       2000
                                  ---------  --------
<S>                               <C>        <C>
Balance at beginning of year      $246,951    68,663
Provisions charged to operations   216,634   179,677
Loan charge-offs                   (37,395)   (1,389)
Loan recoveries                      1,983         -
                                  ---------  --------

Balance at end of year            $428,173   246,951
                                  =========  ========
</TABLE>

(4)  PREMISES  AND  EQUIPMENT
     Major classifications of premises and equipment as of December 31, 2001 and
     2000  are  summarized  as  follows:

<TABLE>
<CAPTION>
                                   2001       2000
                                ----------  ---------
<S>                             <C>         <C>
Land & land improvements        $1,086,143    486,762
Buildings                        1,585,447  1,566,289
Furniture and equipment            622,648    575,816
                                ----------  ---------

                                 3,294,238  2,628,867
Less: Accumulated depreciation     312,769    161,226
                                ----------  ---------

                                $2,981,469  2,467,641
                                ==========  =========
</TABLE>

     Depreciation  expense amounted to $151,543 and $134,347 for the years ended
     December  31,  2001  and  2000,  respectively.

(5)  DEPOSITS
     At  December  31,  2001,  contractual  maturities  of  time  deposits  are
     summarized  as  follows:

<TABLE>
<CAPTION>
<S>                             <C>
2002                            $18,741,514
2003                              1,419,460
2004                                553,789
2005                                964,294
2006                              1,927,604
                                -----------

                                $23,606,661
                                ===========
</TABLE>

(6)  INCOME TAXES
     The  components of income tax expense (benefit) for the year ended December
     31,  2001  are  as  follows:

<TABLE>
<CAPTION>
<S>                                     <C>
Currently payable                       $ 211,192
Deferred expense                          185,808
Benefit of operating loss carryforward   (207,757)
Change in valuation allowance            (413,862)
                                        ----------

                                        $(224,619)
                                        ==========
</TABLE>

     The  difference  between  income  tax  expense  and  the amount computed by
     applying  the  statutory  federal  income  tax  rate to the earnings before
     income  taxes for the year ended December 31, 2001 relates primarily to the
     change in the valuation allowance. No income tax benefit was recognized for
     the year ended December 31, 2000 due to the valuation allowance relating to
     the  net  deferred  tax  asset.


                                      -11-
<PAGE>
                            CHEROKEE BANKING COMPANY

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(6)  INCOME TAXES, CONTINUED

     The  following  summarizes the components of deferred taxes at December 31,
     2001  and  2000.

<TABLE>
<CAPTION>
                                                          2001       2000
                                                        ---------  --------
<S>                                                     <C>        <C>
  Deferred income tax assets:
    Allowance for loan losses                           $ 144,563   82,628
    Pre-opening expenses                                   50,510   70,061
    Operating loss and state tax credit carryforwards      54,363  268,767
    Unrealized loss on available-for-sale securities       66,080        -
    Other                                                   3,436        -
                                                        ---------  --------

    Total gross deferred income tax assets                318,952  421,456
  Less valuation allowance                                      -  413,862
                                                        ---------  --------

    Gross deferred tax assets                             318,952    7,594
                                                        ---------  --------

  Deferred income tax liabilities:
    Premises and equipment                                 24,817    7,594
    Unrealized gain of available-for-sale securities            -   24,978
                                                        ---------  --------

    Gross deferred tax liabilities                         24,817   32,572
                                                        ---------  --------

  Net deferred tax asset (liability)                    $ 294,135  (24,978)
                                                        =========  ========
</TABLE>

     At  December  31, 2001 and 2000, the Company had federal net operating loss
     carryforwards  for  tax  purposes  of  approximately  $82,000 and $630,000,
     respectively,  and  state  net operating loss carryforwards of $579,000 and
     $746,000,  respectively.  These net operating loss carryforwards will begin
     to  expire  in 2015 if not previously utilized. The ultimate realization of
     deferred  tax  assets  is  dependent  upon the generation of future taxable
     income  during  the  periods  in  which  those temporary differences become
     deductible.  As of December 31, 2001, based upon the projections for future
     taxable  income  over  the  periods  which  the  deferred  tax  assets  are
     deductible,  management  believes  it  is  more  likely  than  not that the
     benefits  of  these  deductible  differences  will  be  realized.

(7)  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  sheet.  The contractual amounts of those instruments
     reflect  the  extent  of  involvement the Bank has in particular classes of
     financial  instruments.

     The  Bank's  exposure to credit loss in the event of non-performance by the
     other  party  to  the financial instrument for commitments to extend credit
     and  standby  letters of credit is represented by the contractual amount of
     those  instruments.  The  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>
                                                   2001       2000
                                                ----------  ---------
<S>                                             <C>         <C>

  Financial instruments whose contract amounts
    represent credit risk:
      Commitments to extend credit              $5,565,000  3,954,000
      Standby letters of credit                     10,000     10,000
</TABLE>


                                      -12-
<PAGE>
                            CHEROKEE BANKING COMPANY

                    NOTES TO FINANCIAL STATEMENTS, CONTINUED

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

     Standby letters of credit are conditional commitments issued by the Bank to
     guarantee  the performance of a customer to a third party. Those guarantees
     are primarily issued to businesses within the Bank's trade area. The credit
     risk  involved in issuing letters of credit is essentially the same as that
     involved  in  extending  loan  facilities to customers. The Bank holds real
     estate  and  assignments of deposit accounts as collateral supporting those
     commitments  for  which  collateral  is  deemed  necessary.  The  extent of
     collateral held for these commitments at December 31, 2001 and 2000 varies.

(8)  EMPLOYEE  AND  DIRECTOR  BENEFIT  PLANS
     Stock  Option  Plan
     -------------------
     The  Company  sponsors an employee stock option plan for the benefit of key
     officers and employees. A total of 77,842 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  183,550  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.

     SFAS  No.  123,  "Accounting  for  Stock-Based  Compensation"  requires the
     Company to calculate the compensation expense that would be recorded if the
     Company  were  to  include  the  fair  value  of options issued in employee
     compensation.  This  compensation  expense  is  to  be included in proforma
     disclosures  of  net earnings (loss) and net earnings (loss) per share. Had
     compensation  cost been recognized based upon the fair value of the options
     at  the  grant  dates,  the  Company's net earnings (loss) and net earnings
     (loss)  per share would have been the pro forma amounts indicated below for
     the  years ended December 31, 2001 and 2000. For presentation purposes, the
     Company  has  included  all  proforma  expense  as  if  the  options vested
     immediately.

<TABLE>
<CAPTION>
                                 BASIC      DILUTED
                      NET       EARNINGS    EARNINGS
                    EARNINGS     (LOSS)      (LOSS)
                     (LOSS)    PER SHARE   PER SHARE
                   ----------  ----------  ----------
<S>                <C>         <C>         <C>
2001  As reported  $ 702,626         .95         .95
      Pro forma      702,626         .95         .95

2000  As reported  $(428,957)       (.58)       (.58)
      Pro forma     (463,227)       (.63)       (.63)
</TABLE>


                                      -13-
<PAGE>
                            CHEROKEE BANKING COMPANY

                    NOTES TO FINANCIAL STATEMENTS, CONTINUED

(8)  EMPLOYEE  AND  DIRECTOR  BENEFIT  PLANS,  CONTINUED
     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 5.00% for
     December  31, 2000, and an expected life of 10 years. There were no options
     granted  during  2001.

     A summary of activity in the directors' warrants and stock option plans for
     the  years  ended  December  31,  2001  and  2000  are  presented  below:

<TABLE>
<CAPTION>
                                          2001                     2000
                                ------------------------  ------------------------
                                             Weighted                 Weighted
                                          Average Price            Averaged Price
                                 Shares     Per Share     Shares      Per Share
                                --------  --------------  -------  ---------------
<S>                             <C>       <C>             <C>      <C>
Outstanding, beginning of year  223,400   $        10.02  213,550  $         10.00
Granted during the year               -                -    9,850  $         10.50
Canceled during the year         (4,100)  $        10.50        -                -
                                --------  --------------  -------  ---------------

Outstanding, end of year        219,300   $        10.01  223,400  $         10.02
                                ========  ==============  =======  ===============

Exercisable at year end         135,517   $        10.00   67,183  $         10.00
                                ========  ==============  =======  ===============
</TABLE>

     The  weighted average grant-date fair value of options granted was $3.48 in
     2000.  Warrants  and  options have a weighted average remaining contractual
     life  of  approximately seven years and exercise prices ranging from $10.00
     to  $10.50  as  of  December  31,  2001.

     Life  Insurance  Policies
     -------------------------
     During  2001,  the  Company  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  $379,000  were  purchased on
     certain  executive  officers.  For  the  year  ended December 31, 2001, the
     Company  incurred  no  expenses  in  connection  with  this  plan.

(9)  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.

(10) 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,  2001,  there  were  $1,725,968  of  related  party deposits.
     Following  is  a  summary  of  related  party  loans:

<TABLE>
<CAPTION>
<S>                                       <C>
Balance at December 31, 2001              $ 2,265,001
New Loans/Advances                          4,176,698
Less: Repayments                           (3,345,344)
                                          ------------

Balance at December 31, 2000              $ 3,096,355
                                          ============
</TABLE>


                                      -14-
<PAGE>
                            CHEROKEE BANKING COMPANY

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(11) 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,
     2001  and  2000  are  as  follows:

<TABLE>
<CAPTION>
                          2001     2000
                        --------  ------
<S>                     <C>       <C>
Supplies                $ 44,485  38,440
Other outside services    61,273  34,707
Advertising               45,249  71,007
Public relations          35,914  32,721
Bookkeeping              110,951  23,839
Data processing           67,870  78,994
</TABLE>

(12) 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 1 Capital (as defined in
     the  regulations)  to  risk-weighted  assets  (as  defined),  and of Tier 1
     Capital  (as  defined) to average assets (as defined). Management believes,
     as  of  December  31,  2001, that the Company and the Bank meet all capital
     adequacy  requirements  to  which  they  are  subject.

     As  of  December  31,  2001,  the most recent notification from the Federal
     Deposit  Insurance  Corporation  categorized  the  Bank as well capitalized
     under  the  regulatory  framework  for  prompt  corrective  action.  To  be
     categorized  as  well  capitalized,  the  Bank  must maintain minimum total
     risk-based,  Tier  1  risk-based and Tier 1 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.


                                      -15-
<PAGE>
                            CHEROKEE BANKING COMPANY

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(12) REGULATORY  MATTERS,  CONTINUED
     The  Company's  and Bank's actual capital amounts (in thousands) and ratios
     are  presented  in  the  table  below.

<TABLE>
<CAPTION>
                                                                        To Be Well
                                                                     Capitalized Under
                                                    For Capital      Prompt Corrective
                                     Actual      Adequacy Purposes   Action Provisions
                                ---------------  ------------------  -----------------
                                Amount   Ratio    Amount    Ratio    Amount    Ratio
                                -------  ------  --------  --------  -------  --------
<S>                             <C>      <C>     <C>       <C>       <C>      <C>
As of December 31, 2001:
    Total Capital
    (to Risk Weighted Assets):
      Consolidated              $ 7,448   18.3%  $  3,250      8.0%       N/A      N/A
      Bank                      $ 6,135   15.2%  $  3,229      8.0%  $  4,036    10.0%
    Tier 1 Capital
    (to Risk Weighted Assets):
      Consolidated              $ 7,020   17.3%  $  1,625      4.0%       N/A      N/A
      Bank                      $ 5,707   14.1%  $  1,615      4.0%  $  2,422     6.0%
    Tier 1 Capital
    (to Average Assets):
      Consolidated              $ 7,020   12.3%  $  2,281      4.0%       N/A      N/A
      Bank                      $ 5,707   10.2%  $  2,229      4.0%  $  2,787     5.0%

  As of December 31, 2000:
    Total Capital
    (to Risk Weighted Assets):
      Consolidated              $ 6,564   25.5%  $  2,059      8.0%       N/A      N/A
      Bank                      $ 5,299   20.8%  $  2,038      8.0%  $  2,548    10.0%
    Tier 1 Capital
    (to Risk Weighted Assets):
      Consolidated              $ 6,317   24.6%  $  1,029      4.0%       N/A      N/A
      Bank                      $ 5,053   19.8%  $  1,019      4.0%  $  1,529     6.0%
    Tier 1 Capital
    (to Average Assets):
      Consolidated              $ 6,317   14.1%  $  1,794      4.0%       N/A      N/A
      Bank                      $ 5,053   11.6%  $  1,734      4.0%  $  2,171     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. The Bank is currently not
      allowed to pay dividends to the Company until it becomes cumulatively
                                  profitable.


                                      -16-
<PAGE>
                            CHEROKEE BANKING COMPANY

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(13) CHEROKEE BANKING COMPANY (PARENT COMPANY ONLY) FINANCIAL INFORMATION

<TABLE>
<CAPTION>
                                             Balance Sheets

                                        December 31, 2001 and 2000

                                                  Assets
                                                  ------

                                                                                      2001         2000
                                                                                   -----------  ----------
<S>                                                                                <C>          <C>
Cash and interest bearing deposits                                                 $1,282,362   1,305,298
Investment in Bank                                                                  5,598,878   5,052,520
Other assets                                                                           34,071           -
                                                                                   -----------  ----------

                                                                                   $6,915,311   6,357,818
                                                                                   ===========  ==========

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

Other liabilities                                                                  $    3,435           -
Shareholders' equity                                                                6,911,876   6,357,818
                                                                                   -----------  ----------

                                                                                   $6,915,311   6,357,818
                                                                                   ===========  ==========

                                           Statements of Operations

                                For the Years Ended December 31, 2001 and 2000

                                                                                      2001         2000
                                                                                   -----------  ----------

Interest income                                                                    $   45,031      21,549
Other operating expense                                                                67,960      53,629
                                                                                   -----------  ----------

Loss before equity in undistributed earnings (loss) of Bank and income taxes          (22,929)    (32,080)

Income tax benefit                                                                     30,635           -

Equity in undistributed earnings (loss) of Bank                                       694,920    (396,877)
                                                                                   -----------  ----------

Net earnings (loss)                                                                $  702,626    (428,957)
                                                                                   ===========  ==========

                                         Statements of Cash Flows

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

Cash flows from operating activities:
  Net earnings (loss)                                                              $  702,626    (428,957)
  Adjustments to reconcile net earnings (loss) to net cash
   provided (used) by operating activities:
     Equity in undistributed (earnings) loss of Bank                                 (694,920)    396,877
     Change in other                                                                  (30,642)       (955)
                                                                                   -----------  ----------

           Net cash used by operating activities                                      (22,936)    (33,035)
                                                                                   -----------  ----------

Net change in cash                                                                    (22,936)    (33,035)

Cash at beginning of period                                                         1,305,298   1,338,333
                                                                                   -----------  ----------

Cash at end of period                                                              $1,282,362   1,305,298
                                                                                   ===========  ==========
</TABLE>


                                      -17-
<PAGE>
                            CHEROKEE BANKING COMPANY

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

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

          Cash  and  Cash  Equivalents
          ----------------------------
          For  cash,  due from banks and federal funds sold, the carrying amount
          is  a  reasonable  estimate  of  fair  value.

          Interest-Bearing  Deposits
          --------------------------
          For  interest-bearing  deposits,  the  carrying  value is a reasonable
          estimate  of  fair  value.

          Investment  Securities  Available-for-Sale
          ------------------------------------------
          Fair  values for investment securities available-for-sale are based on
          quoted  market  prices.

          Other  Investments
          ------------------
          For  other investments, the carrying value is a reasonable estimate of
          fair  value.

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

          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.

          Federal  Funds  Purchased
          -------------------------
          For  Federal  Funds  purchased,  the  carrying  amount is a reasonable
          estimate  of  fair  value.

          Commitments  to  Extend  Credit  and  Standby  Letters  of  Credit
          ------------------------------------------------------------------
          Because commitments to extend credit and standby letters of credit are
          made using variable rates, the contract value is a reasonable estimate
          of  fair  value.

          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.


                                      -18-
<PAGE>
                            CHEROKEE BANKING COMPANY

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(14) FAIR  VALUE  OF  FINANCIAL  INSTRUMENTS,  CONTINUED
     The  carrying  amount  and estimated fair values of the Company's financial
     instruments  at  December  31,  2001  and  2000  are as follows (amounts in
     thousands):

<TABLE>
<CAPTION>
                                                     2001                  2000
                                             ---------------------  --------------------
                                             Carrying   Estimated   Carrying  Estimated
                                              Amount    Fair Value   Amount   Fair Value
                                             ---------  ----------  --------  ----------
<S>                                          <C>        <C>         <C>       <C>
Assets:
  Cash and cash equivalents                  $   1,612       1,612     3,279       3,279
  Interest-bearing deposits with other banks       997         997     1,779       1,779
  Investment securities available-for-sale      28,763      28,763    14,560      14,560
  Other investments                                305         305       236         236
  Loans, net                                    30,599      30,811    19,519      21,338
  Cash surrender value of life insurance           379         379         -           -

Liabilities:
  Deposits                                   $  58,763      59,231    35,519      35,440
  Federal funds purchased                          222         222         -           -

Unrecognized financial instruments:
  Commitments to extend credit               $       -       5,565         -       3,954
  Standby letters of credit                          -          10         -          10
</TABLE>


                                      -19-
<PAGE>
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

     Cherokee  Banking  Company  (the "Company") opened for business through its
banking  subsidiary,  Cherokee  Bank (the "Bank") on July 26, 1999, and prior to
that  date  activities  of  the  entity  were devoted solely to securing banking
facilities,  raising  capital  and  procuring  management  and  other personnel.

     The  following  discussion  focuses on significant changes in the financial
condition  and  results  of operations of the Company during the two years ended
December  31,  2001.  This  discussion  and  the financial information contained
herein  are  presented  to assist the reader in understanding and evaluating the
financial  condition, results of operations, and future prospects of the Company
and  should  be read as a supplement to and in conjunction with the Consolidated
Financial  Statements  and  Related  Notes.

FINANCIAL  CONDITION  -  2001  VS.  2000

     During  2001, average total assets increased $22,024,000 (65%)in comparison
with  2000.  Average  deposits increased $20,704,000 (70%) in 2001 over 2000 and
average  loans  increased  $14,412,000 (117%). Total assets at December 31, 2001
were  $66,360,000  representing  a  $24,162,000 (57%) increase from December 31,
2000.  Deposits  increased  $18,244,000  (51%) from December 31, 2000. Net loans
increased  $11,080,000  (57%)  from  December  31,  2000.

     All  loans  were  performing  at  December  31,  2001.

     At  December  31,  2001  and  2000,  the Bank had no outstanding derivative
financial  instruments  such  as  swaps,  options, futures or forward contracts.

     The  Bank was most recently examined by its primary regulatory authority as
of  June  30,  2001.  There  were no recommendations by the regulatory authority
that,  in  management's  opinion,  will  have  material  effects  on  the Bank's
liquidity,  capital  resources  or  operations.

RESULTS  OF  OPERATIONS  -  2001  VS.  2000

     The  Bank's  operational  results  depend to a large degree on net interest
income,  which  is  the difference between the interest income received from its
investments (such as loans, investment securities, federal funds sold, etc.) and
the  interest  expense,  which  is  paid  on  deposit  liabilities.

     For  the twelve months ended December 31, 2001, the Bank's yield on earning
assets  was  7.81%  while  the  cost of funding sources was 3.98%. While the net
interest  spread  is  3.85%,  net interest margin, which considers the effect of
non-interest  bearing deposits, was 4.36%, a 66 basis point increase as compared
to  the  same  period  in the prior year. Net interest margin is higher than the
prior  year  due to interest earning assets increasing at a higher rate than the
increase  in  the  cost of interest bearing deposits. Net interest income in the
aggregate  increased for the twelve months ended December 31, 2001 over the same
period  for  2000  primarily  due  to  the volume of earning assets and interest
bearing  liabilities.

     The  provision for loan losses in 2001 was $217,000 compared to $180,000 in
2000.  The  increase in the provision for loan losses was primarily attributable
to  the  volume  of  loan  growth  during  2001.  The  provision for loan losses
continues  to  reflect 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. The allowance for loan losses at December 31, 2001 and 2000
totaled  $428,000  and  $247,000,  respectively,  representing  1.38% and 1.25%,
respectively,  of  total  loans.  Net  charge-offs  were $35,412 during 2001. An
external  independent  loan  review  function is utilized by the Bank. Loans are
regularly monitored by the loan review process to ensure early identification of
repayment problems so that adequate allowances can be made through the provision
for  loan  losses.  Management  believes  that  these  levels  of  allowance are
appropriate  based  on  the  Bank's  loan  portfolio  and  the  current economic
conditions.


                                      -20-
<PAGE>
RESULTS  OF  OPERATIONS  -  2001  VS.  2000,  CONTINUED

     Other  operating  income  for  the  twelve  months  ended December 31, 2001
totaled  $606,000, representing a $403,000 increase from December 31, 2000. This
increase  was associated with an increase in service charges on deposit accounts
of  approximately  $218,000  related to an increase in the number of accounts, a
$126,000  increase  in  mortgage  referral  fees,  and  a  $60,000  increase  in
investment  security  gains. Other operating expenses in 2001 were $2,142,000, a
$572,000  increase  compared  with  2000  levels,  primarily  due  to additional
personnel  and  occupancy  expense.

INVESTMENTS

     The  investment  portfolio  consists  of debt securities, which provide the
Bank  with  a  source  of liquidity and a long-term, relatively stable source of
income.  Additionally,  the  investment portfolio provides a balance to interest
rate  and credit risk in other categories of the balance sheet while providing a
vehicle  for  the  investment  of  available  funds,  furnishing  liquidity, and
supplying  securities  to  pledge  as  required collateral for certain deposits.

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  meet  liquidity  needs. It is the policy of the Bank to monitor its
liquidity  to meet regulatory requirements and their local funding requirements.

     The  Bank maintains relationships with correspondent banks that can provide
funds  to  it on short notice, if needed. Presently, the Bank has an arrangement
with  The  Bankers  Bank  for  a  short  term  unsecured  advance.

     Cash and cash equivalents decreased $1,667,000 from December 31, 2000. Cash
inflows  from financing activities totaled $23,466,000 attributable primarily to
net  deposit  increases  during  2001.

     During  2001,  cash provided by operating activities totaled $803,000 while
investing  activities  used  $25,936,000,  of  which  security purchases, net of
sales,  calls,  and  paydowns  of  investment  securities  totaled  $14,301,000.
Additionally, $11,303,000 represented new loans to customers, net of repayments.

CAPITAL  RESOURCES

     The  Bank  continues  to  maintain  adequate  capital ratios. The following
tables  present  the  Bank's  regulatory  capital position at December 31, 2001.

<TABLE>
<CAPTION>
                                              Risk-Based Capital Ratios
                                              --------------------------
                                               as of December 31, 2001
                                              --------------------------
<S>                                           <C>
    Tier 1 Capital                                      14.1%
    Tier 1 Capital minimum requirement                   4.0%
                                                       ------
    Excess                                              10.1%
                                                       ======
    Total Capital                                       15.2%
    Total Capital minimum requirement                    8.0%
                                                       ------
    Excess                                               7.2%
                                                       ======
    Tier 1 Capital to adjusted total assets
     ("Leverage Ratio")                                 10.2%
    Minimum leverage requirement                         4.0%
                                                       ------

    Excess                                               6.2%
                                                       ======
</TABLE>


                                      -21-
<PAGE>
ASSET/LIABILITY  MANAGEMENT

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

     The  asset/liability  mix  is  monitored  on  a  regular  basis.  A  report
reflecting  the  interest sensitive assets and interest sensitive liabilities is
prepared  and  presented  to  the  Board  of  Directors  on  a  quarterly basis.

     One  method  to  measure  a  bank's  interest  rate exposure is through its
repricing gap. The gap is calculated by taking all assets that reprice or mature
within a given time frame and subtracting all liabilities that reprice or mature
within  that same time frame. The difference between these two amounts is called
the  "gap", the amount of either liabilities or assets that will reprice without
a  corresponding  asset  or  liability  repricing.

     A negative gap (more liabilities repricing than assets) generally indicates
that  the Company's net interest income will decrease if interest rates rise and
will  increase  if  interest rates fall. A positive gap generally indicates that
the  Company's net interest income will decrease if rates fall and will increase
if  rates  rise.

     The  following  table summarizes the amounts of interest-earning assets and
interest-bearing  liabilities outstanding at December 31, 2001 that are expected
to mature, prepay or reprice in each of the future time periods shown. Except as
stated  below, the amount of assets or liabilities that mature or reprice during
a  particular  period was determined in accordance with the contractual terms of
the  asset  or  liability.  Adjustable  rate loans are included in the period in
which  interest  rates are next scheduled to adjust rather than in the period in
which  they  are  due,  and  fixed rate loans and mortgage-backed securities are
included  in  the  periods  in  which they are anticipated to be repaid based on
scheduled  maturities.  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.


                                      -22-
<PAGE>
<TABLE>
<CAPTION>
ASSET/LIABILITY  MANAGEMENT,  CONTINUED


                                At December 31, 2001
                              Maturing or Repricing in
                              ------------------------
                               (dollars in thousands)

                                       Three       Four
                                     Months or   Months to  1 to 5   Over 5
                                       Less      12 Months   Years   Years    Total
                                    -----------  --------  --------  -------  -----
<S>                                 <C>          <C>       <C>       <C>      <C>
Interest-earning assets:
  Investment securities             $        -         -     7,334   21,429   28,763
  Interest bearing deposits                200         -       598      199      997
  Loans                                  7,906     6,305    13,989    2,827   31,027
                                    -----------  --------  --------  -------  ------

Total interest-bearing assets       $    8,106     6,305    21,921   24,455   60,787
                                    -----------  --------  --------  -------  ------

Interest-bearing liabilities:
  Deposits:
    Savings and demand              $   29,535         -         -        -   29,535
    Time deposits                        9,642     9,134     4,830        -   23,606
Federal Funds Purchased                    222         -         -        -      222
                                    -----------  --------  --------  -------  ------

Total interest-bearing liabilities  $   39,399     9,134     4,830        -   53,363
                                    -----------  --------  --------  -------  ------

Interest sensitive difference
  per period                        $  (31,293)   (2,829)   17,091   24,455    7,424
                                    ===========  ========  ========  =======  ======
Cumulative interest sensitivity
  difference                        $  (31,293)  (34,122)  (17,031)   7,424
                                    ===========  ========  ========  =======
Cumulative difference to total
   assets                              (47.16)%  (51.42)%  (25.66)%   11.19%
                                    ===========  ========  ========  =======
</TABLE>

     At  December 31, 2001, the difference between the Company's liabilities and
assets  repricing  or maturing within one year was $34,122,000. Due to an excess
of  liabilities  repricing or maturing within one year, a rise in interest rates
would  most  likely  cause  the  Company'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.

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. The Company copes with the effects of inflation
through  the  management  of  its  interest  rate  sensitivity  gap position, by
periodically reviewing and adjusting its pricing of services to consider current
costs,  and  through  managing  its level of net income relative to its dividend
payout  policy.


                                      -23-
<PAGE>
TABLE  1
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 2001 and 2000, and
the  average  rate  of  interest  earned  or  paid  thereon.

<TABLE>
<CAPTION>
                                                For the Year Ended               For the Year Ended
                                                 December 31, 2001                December 31, 2000
                                        ---------------------------------  --------------------------------
                                         (Amounts presented in thousands)  (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)         $   26,715        2,544     9.52%     12,303        1,246    10.13%
    Interest bearing deposits                1,104           70     6.34%      1,181           84     7.11%
    Investment securities                   17,125        1,141     6.66%     11,424          787     6.89%
    Federal funds sold                       6,201          237     3.82%      5,267          335     6.36%
                                        -----------  ----------  --------  ----------  ----------
  Total interest earning assets             51,145        3,992     7.81%     30,175        2,452     8.13%
  Other non-interest earnings assets         4,589                             3,535
                                        -----------                        ----------

        Total assets                    $   55,734                            33,710
                                        ===========                        ==========

Liabilities and stockholders' equity:
  Interest-bearing liabilities:
    Deposits:
      Interest-bearing demand and
        savings                         $   23,104          617     2.67%     12,511          479     3.83%
      Time                                  21,315        1,144     5.37%     13,276          856     6.45%
                                        -----------  ----------  --------  ----------  ----------
  Total interest-bearing liabilities        44,419        1,761     3.96%     25,787        1,335     5.18%
  Other non-interest bearing
    liabilities                              6,401                             4,115
  Stockholders' equity                       4,914                             3,808
                                        -----------                        ----------

        Total liabilities and
            stockholders' equity        $   55,734                            33,710
                                        ===========                        ==========

Excess of interest-earning assets
   over interest bearing liabilities    $    6,726                             4,388
                                        ===========                        ==========

Ratio of interest-earning assets
   to interest-bearing liabilities          115.14%                           117.02%

Net interest income                                       2,231                             1,117

Net interest spread                                                 3.85%                             2.95%

Net interest yield on interest
   earning assets                                                   4.36%                             3.70%
</TABLE>

Non-accrual  loans and the interest income which was recorded on these loans, if
any,  are  included  in the yield calculation for loans in all periods reported.


                                      -24-
<PAGE>
<TABLE>
<CAPTION>
TABLE 2

VOLUME/RATE ANALYSIS
                                                 2001 COMPARED TO 2000
                                        INCREASE (DECREASE) DUE TO CHANGES IN
                                        ------------------------------------
                                           VOLUME       RATE     NET CHANGE
                                        ------------  ---------  -----------
<S>                                     <C>           <C>        <C>
Interest income on:
  Loans (including loan fees)           $     1,473       (175)       1,298
  Investment securities                         395        (41)         354
  Interest-bearing deposits                      (5)        (9)         (14)
  Federal funds sold                             29       (127)         (98)
                                        ------------  ---------  -----------
                                              1,892       (352)       1,540
                                        ------------  ---------  -----------
Interest expense on:
  Interest-bearing demand and savings         2,632     (2,494)         138
  Time                                          617       (329)         288
                                        ------------  ---------  -----------
                                              3,249     (2,823)         426
                                        ------------  ---------  -----------

                                        $    (1,357)     2,471        1,114
                                        ============  =========  ===========
</TABLE>

TABLE 3
INVESTMENT PORTFOLIO

The following table presents the investment securities available-for-sale by
category at December 31, 2001 and 2000:

<TABLE>
<CAPTION>
                                                     (Amounts are presented in thousands)
                                                         2001                    2000
                                               -----------------------  ----------------------
                                                Amortized   Estimated    Amortized  Estimated
                                                   Cost     Fair Value     Cost     Fair Value
                                               -----------  ----------  ----------  ----------
<S>                                            <C>          <C>         <C>         <C>
United States treasury and agency obligations  $     8,469       8,465      11,422      11,486
Mortgage-backed                                     20,468      20,298       3,072       3,074
                                               -----------  ----------  ----------  ----------

                                               $    28,937      28,763      14,494      14,560
                                               ===========  ==========  ==========  ==========
</TABLE>

The  following  table  presents  the  maturities of all investment securities at
carrying  value  and  the  weighted  average yields for each range of maturities
presented.  (Amounts  are  presented  in  thousands)

<TABLE>
<CAPTION>
                          United States   Mortgage-   Weighted
Maturities at              Treasury and     Backed     Average
December 31, 2001            Agencies     Securities   Yields
------------------------  --------------  ----------  ---------
<S>                       <C>             <C>         <C>
Within one year           $            -           -         -
After 1 through 5 years            5,475       1,859      5.27%
After 5 through 10 years           2,994       2,972      5.42%
After 10 years                         -      15,637      5.54%
                          --------------  ----------
          Totals          $        8,469      20,468
                          ==============  ==========
</TABLE>

Mortgage  backed  securities  are included in the maturities categories in which
they  are  anticipated  to  be  repaid  based  on  scheduled  maturities.


                                      -25-
<PAGE>
TABLE  4
LOAN PORTFOLIO

The following table presents loans by type at the end of each of the last two
years.

<TABLE>
<CAPTION>
                                        December 31,
                                      ---------------
                                       2001     2000
                                      -------  ------
                          (Amounts are presented in thousands)
<S>                                   <C>      <C>

Commercial                            $16,295  10,734
Real estate                            10,650   6,048
Consumer                                4,082   2,984
                                      -------  ------

                                       31,027  19,766

Less:  Allowance for loan losses          428     247
                                      -------  ------

        Loans, net                    $30,599  19,519
                                      =======  ======
</TABLE>

As  of  December  31, 2001, maturities of loans in the indicated classifications
were  as  follows  (amounts  are  presented  in  thousands):

<TABLE>
<CAPTION>
    Maturity       Commercial  Real Estate   Total
    -------------  ----------  ----------  -----------
<S>                <C>         <C>         <C>
    Within 1 year  $    4,230       6,420       10,650
    1 to 5 years        8,393       3,511       11,904
    Over 5 years        3,672         719        4,391
                   ----------  ----------  -----------

         Totals    $   16,295      10,650       26,945
                   ==========  ==========  ===========
</TABLE>

As  of  December  31,  2001,  the  interest  terms  of  loans  in  the indicated
classification  for  the  indicated  maturity ranges are as follows (amounts are
presented  in  thousands):

<TABLE>
<CAPTION>
                     Fixed     Variable
                   Interest    Interest
                     Rates      Rates    Total
                  -----------  --------  -----
<S>               <C>          <C>       <C>
Commercial
    1 to 5 years  $     8,260       133  8,393
    Over 5 years        3,672         -  3,672

Real estate
    1 to 5 years  $       136     3,375  3,511
    Over 5 years          719         -    719
</TABLE>


                                      -26-
<PAGE>
TABLE  4
LOAN  PORTFOLIO,  CONTINUED

The  following  summarizes past due and non-accrual loans, other real estate and
repossessions,  and income that would have been reported on non-accrual loans as
of  December  31,  2001  and  2000  (amounts  are  presented  in  thousands):

<TABLE>
<CAPTION>
                                         December 31,
                                         -----------
                                         2001   2000
                                         -----  ----
<S>                                      <C>    <C>
Other real estate and repossessions      $   -     -
Accruing loans 90 days or more past due      -     -
Non-accrual loans                            4     -
Interest on non-accrual loans which
  would have been reported                   -     -
</TABLE>

A  loan  is  placed  on  non-accrual status when, in management's judgement, the
collection  of  interest  appears  doubtful. As a result of management's ongoing
review of the loan portfolio, loans are classified as non-accrual generally when
they  are past due in principal or interest payments for more than 90 days or it
is otherwise not reasonable to expect collection of principal and interest under
the  original  terms. Exceptions are allowed for 90 day past due loans when such
loans  are  well  secured  and  in  process  of  collection. Generally, payments
received  on  non-accrual  loans  are  applied  directly  to  principal.

TABLE 5
ALLOWANCE FOR LOAN LOSSES

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

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

                                                 2001           2000
                                            --------------  -------------
<S>                                         <C>             <C>
Balance at beginning of year                $         247             69
Charge-offs
Commercial                                              -              -
Real estate                                             -              -
Consumer                                               37              1
                                            --------------  -------------

Total chargeoffs                                       37              1
                                            --------------  -------------

Recoveries:
Commercial                                              -              -
Real estate                                             -              -
Consumer                                                2              -
                                            --------------  -------------

Total recoveries                                        2              -
                                            --------------  -------------

Net charge-offs                                        35              1

Additions charged to operations                       216            179
                                            --------------  -------------

Balance at end of year                                428            247
                                            ==============  =============

Ratio of net charge-offs during the period
to average loans outstanding during
the period                                           .116%          .008%
                                            ==============  =============
</TABLE>


                                      -27-
<PAGE>
TABLE 5
ALLOWANCE  FOR  LOAN  LOSSES,  CONTINUED
The  Bank  utilizes  an  external  independent  loan  review function. All loans
$50,000  or  more  are  reviewed  annually  and placed into various loan grading
categories  which  assist  in developing lists of potential problem loans. These
loans  are  constantly  monitored  by  the  loan review function to ensure early
identification  of  deterioration.  Currently,  the Bank has adopted a policy of
maintaining  a reserve equal to 1.25% of total loans. In addition, any adversely
rated  loans  will  receive  allocations  consistent with recommended regulatory
percentages.  As  the  loan portfolio matures, a more comprehensive methodology,
which  considers  risk  by  loan  types,  will  be  employed.

TABLE 6
DEPOSITS

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
                         (Amounts are presented in thousands)
                                2001              2000
                          -----------------  --------------
                          Amount     Rate    Amount   Rate
                          -------  --------  -------  -----
<S>                       <C>      <C>       <C>      <C>
Demand deposits:
 Non-interest bearing     $ 5,878        -   $ 3,806     -
 Interest-bearing demand
      and savings          23,104     2.67%   12,511  3.83%
 Time deposits             21,315     5.37%   13,276  6.45%
                          -------           --------

       Totals             $50,297           $ 29,593
                          =======           ========
</TABLE>

Maturities of time certificates of deposit of $100,000 or more outstanding at
December 31, 2000 are summarized as follows (amounts are presented in
thousands):

<TABLE>
<CAPTION>
<S>                            <C>
    Within 3 months            $2,701
    After 3 through 6 months      425
    After 6 through 12 months     622
    After 12 months               650
                               ------

      Total                    $4,398
                               ======
</TABLE>

TABLE 7
SELECTED RATIOS

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

<TABLE>
<CAPTION>
                            2001     2000
                           ------  --------
<S>                        <C>     <C>
Net earnings (loss) to:
    Average stockholders'  14.30%  (11.27)%
equity
    Average assets          1.26%   (1.27)%

Dividends to net income        -         -
Average equity to average   8.82%    11.30%
 assets
</TABLE>


                                      -28-
<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 2001 and
2000:

<TABLE>
<CAPTION>
                     2001           2000
                     ----           ----
APPLICABLE       HIGH    LOW    HIGH    LOW
--------------  ------  -----  ------  ------
PERIOD
------
<S>             <C>     <C>    <C>     <C>
First Quarter   $11.50  $9.75    N/A*    N/A*
Second Quarter  $12.00  $6.00  $11.00  $10.00
Third Quarter   $12.00  $9.00  $11.50  $10.00
Fourth Quarter  $12.00  $9.75  $11.50  $10.00

<FN>
*     Quotations for the Company's common stock prior to
      February 29, 2000 were not available.
</TABLE>

The  quotations  above  reflect  interdealer  prices,  without  retail mark-ups,
mark-downs  or  commission  and  may  not  represent actual transactions.  While
Nasdaq  records  available to the public indicate that for the second quarter of
2001  the Company's stock price hit a low of $6.00 per share, the primary market
maker in the Company's common stock has stated that the $6.00 quotation was made
in  error.  The  Company  has not attempted to verify the accuracy of the market
maker's statement.  However, the Company believes that the $6.00 stock quotation
was  not  consistent,  in  the  aggregate,  with  the  Company's trading history
reported  by  Nasdaq  and  appears  to  be  an  anomaly.

     The  development of an active secondary market requires the existence of an
adequate  number  of  willing  buyers  and  sellers.  As of January 1, 2002, the
Nasdaq  OTC  Bulletin  Board  indicated  that  reported  trading  volume for the
Company's  common  stock  was 14,800 shares during 2001.  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  552  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 future
expansion  if  deemed  desirable.  As  a result, the Bank has no current plan 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 Bank.


                                      -29-
<PAGE>
EXECUTIVE OFFICERS OF CHEROKEE BANKING COMPANY

DENNIS W. BURNETTE, President and Chief Executive Officer

A. R. ("RICK") ROBERTS, III, Secretary

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 Chairperson, Chemistry Teacher,
Etowah High School

J. CALVIN HILL, JR., President, Gila Distributing-GA, Inc.; President, Gila
Properties, Inc.

ROGER M. JOHNSON, Attorney; Partner, Bray & Johnson

J. DAVID KELLER, President, Full Line Distributors, Inc.

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

A. R. (RICK) ROBERTS, III, Secretary, Cherokee Banking Company;
Chief Financial Officer and Chief Operations Officer, Cherokee Bank; Mayor, Ball
Ground

DONALD F. STEVENS, Retired Captain, Delta Air Lines, Inc.

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


SHAREHOLDERS MAY OBTAIN, WITHOUT CHARGE, A COPY OF CHEROKEE BANKING COMPANY'S
2001 ANNUAL REPORT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FORM
10-KSB.  WRITTEN REQUESTS SHOULD BE ADDRESSED TO DENNIS W. BURNETTE, PRESIDENT,
CHEROKEE BANKING COMPANY, 1275 RIVERSTONE PARKWAY, CANTON, GEORGIA 30114.


                                      -30-
<PAGE>