<PAGE>
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                    ----------------------------------------

                                  FORM 10-KSB

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                 ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE
                        SECURITIES EXCHANGE ACT OF 1934
                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001

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                          COMMISSION FILE NO. 0-22891

                       GEORGIA-CAROLINA BANCSHARES, INC.

              INCORPORATED UNDER THE LAWS OF THE STATE OF GEORGIA

                (I.R.S. EMPLOYER IDENTIFICATION NO. 58-2326075)

                             2805 WRIGHTSBORO ROAD
                             AUGUSTA, GEORGIA 30909

                           TELEPHONE: (706) 736-2100

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 Securities registered under Section 12(b) of the Securities Exchange Act: None

   Securities registered under Section 12(g) of the Securities Exchange Act:
                         Common Stock, $0.001 Par Value

   --------------------------------------------------------------------------

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes [X]       No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment of
this Form 10-KSB. [X]

Revenue for the fiscal year ended December 31, 2001: $20,708,000

The aggregate market value of the registrant's common stock held by
nonaffiliates of the registrant (719,962 shares), on March 22, 2002 was
$8,639,544 based on the closing price of the registrant's common stock as
reported on the Over-the-Counter Bulletin Board on March 22, 2002. For purposes
of this response, officers, directors and holders of 5% or more of the
registrant's common stock are considered affiliates of the registrant at that
date.

As of March 22, 2002, 1,127,214 shares of the registrant's common stock were
outstanding.

                      DOCUMENTS INCORPORATED BY REFERENCE

Portions of registrant's definitive proxy statement to be delivered to
shareholders in connection with the 2002 Annual Meeting of Shareholders
scheduled to be held May 15, 2002 are incorporated by reference in response to
Part III of this Report.

Transitional Small Business Disclosure Format (check one)

Yes [ ]       No [X]


<PAGE>


                                     PART I

         SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION
                              REFORM ACT OF 1995

Certain statements in this Annual Report on Form 10-KSB contain
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995, which statements generally can be identified by
the use of forward-looking terminology, such as "may," "will," "expect,"
"estimate," "anticipate," "believe," "target," "plan," "project," or "continue"
or the negatives thereof or other variations thereon or similar terminology,
and are made on the basis of management's plans and current analyses of the
Company, its business and the industry as a whole. These forward-looking
statements are subject to risks and uncertainties, including, but not limited
to, economic conditions, competition, interest rate sensitivity and exposure to
regulatory and legislative changes. The above factors, in some cases, have
affected, and in the future could affect, the Company's financial performance
and could cause actual results for fiscal 2002 and beyond to differ materially
from those expressed or implied in such forward-looking statements. The Company
does not undertake to publicly update or revise its forward-looking statements
even if experience or future changes make it clear that any projected results
expressed or implied therein will not be realized.

ITEM 1.       DESCRIPTION OF BUSINESS.

GENERAL

Georgia-Carolina Bancshares, Inc. (the "Company") was incorporated under the
laws of the State of Georgia on January 31, 1997, to operate as a bank holding
company pursuant to the federal Bank Holding Company Act of 1956, as amended.

The Company is a one-bank holding company and owns 100% of the issued and
outstanding stock of First Bank of Georgia (the "Bank"), a state-chartered
commercial bank that operates two offices in Thomson, Georgia and three offices
in Augusta, Georgia. The Bank opened the Daniel Village Office in Augusta in
March 1999 and opened the West Town Office in Martinez, Georgia in October 1999.
In January 2001 the Bank opened the Medical Center Office on Walton Way in
Augusta. The Bank has completed construction on a site on Fury's Ferry Road in
Columbia County for an additional office. This branch is expected to open in the
second quarter of 2002.

The Bank began operations in January 1989 as an independent, locally owned
commercial bank conducting business in McDuffie County, Georgia. The Bank's
deposits are insured by the Federal Deposit Insurance Corporation (the "FDIC").
The Bank operates as a locally-owned bank that targets the banking needs of
individuals and small to medium-sized businesses by emphasizing personal
service.

The Bank offers a full range of deposit and lending services and is a member of
an electronic banking network, which enables its customers to use the automated
teller machines of other financial institutions. In addition, the Bank offers
commercial and business credit services, as well as various consumer credit
services, including home mortgage loans, automobile loans, lines of credit,
home equity loans, home improvement loans and credit card accounts.

The Company was organized in 1997 at the direction of the Board of Directors of
the Bank based on a plan of reorganization developed by the Board to
substantially strengthen the Bank's competitive position. On April 28, 1997,
the shareholders of the Bank, at the Bank's Annual Meeting of Shareholders,
duly approved and authorized the reorganization, in which the Bank would become
a wholly owned subsidiary of the Company. After final regulatory approvals, the
reorganization was completed on June 6, 1997.


                                       2
<PAGE>


In September 1999, the Bank established a mortgage division of the Bank which
operates as First Bank Mortgage (the "Mortgage Division"). This division
originates mortgage loans and offers a variety of other mortgage products. In
2000, the Bank significantly expanded the Mortgage Division by acquiring
certain mortgage banking offices from another financial institution. The
acquisition of these offices consisted of the hiring of executives and staff
employees, the assumption of leases, the purchase of fixed assets for
approximately $200,000, and the purchase of an approximately $15,000,000 loan
portfolio. As of December 31, 2001, First Bank Mortgage had locations in
Augusta, Georgia and Jacksonville, Florida. The Warner Robins, Georgia location
was sold in June 2001, and the Rincon and Savannah, Georgia locations were
closed during the fourth quarter of 2001. Substantially all of the residential
mortgage loans originated by the Mortgage Division are sold in the secondary
market. The Mortgage Division also originates and holds short-term residential
development and construction loans.

MARKET AREA AND COMPETITION

The primary service area (the "PSA") of the Bank includes the counties of
McDuffie, Richmond, and Columbia, Georgia, and the communities of Thomson and
Augusta, Georgia which are approximately 30 miles apart. The Bank encounters
competition in its PSA and in surrounding areas from other commercial banks.
These competitors offer a full range of banking services and compete for all
types of services, especially deposits. In addition, in certain aspects of its
banking business, the Bank also competes with credit unions, small loan
companies, consumer finance companies, brokerage houses, insurance companies,
money market funds, and other financial service companies which attract
customers that have traditionally been served by banks.

The extent to which other types of financial service companies compete with
commercial banks has increased significantly over the past several years as a
result of federal and state legislation which has permitted these organizations
to compete for customers and offer products that have historically been offered
by banks. The impact of this legislation and other subsequent legislation on
the financial services industry cannot be predicted. See " - Supervision and
Regulation."

DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY; INTEREST RATES
AND INTEREST DIFFERENTIAL

The following table presents the average balance sheet of the Bank for the
years ended December 31, 2001, 2000 and 1999. Also presented is the Bank's
actual interest income and expense from each asset and liability, the average
yield of each interest-earning asset and the average cost of each
interest-bearing liability. This table includes all major categories of
interest-earning assets and interest-bearing liabilities:


                                       3
<PAGE>


                            AVERAGE BALANCE SHEETS
                         (DOLLAR AMOUNTS IN THOUSANDS)


<TABLE>
<CAPTION>
                                                                                  December 31,
                                         -----------------------------------------------------------------------------------------
                                                     2001                            2000                           1999
                                         ------------------------------   --------------------------    --------------------------
                                                     Interest    Average            Interest   Average            Interest  Average
                                          Average     Income/    Yield /  Average    Income/   Yield /  Average    Income/  Yield /
                                          Balance     Expense     Rate    Balance    Expense    Rate    Balance    Expense   Rate
                                         ---------    -------     ----    --------    ------    ----    --------    ------    ----
<S>                                      <C>          <C>         <C>     <C>         <C>       <C>     <C>         <C>       <C>
ASSETS
INTEREST-EARNING ASSETS
  Loans, net of unearned income          $ 130,153    $10,464     8.04%   $ 68,102    $6,203    9.11%   $ 30,602    $2,818    9.21%
  Investment securities                     17,939      1,106     6.17%     12,720       842    6.62%     13,024       809    6.21%
  Federal funds sold                           453         18     3.97%      2,817       167    5.93%      5,305       284    5.35%
                                         ---------    -------             --------    ------            --------    ------
     TOTAL INTEREST-EARNING ASSETS         148,545     11,588     7.80%     83,639     7,212    8.62%     48,931     3,911    7.99%

NON-INTEREST EARNING ASSETS
  Cash and due from banks                    3,417                           2,893                         1,478
  Bank premises and fixed assets             6,106                           4,794                         3,477
  Accrued interest receivable                  757                             617                           404
  Other assets                               1,252                           1,187                         1,409
  Allowance for loan losses                 (1,491)                         (1,144)                         (922)
                                         ---------                        --------                      --------
     TOTAL ASSETS                        $ 158,586                        $ 91,986                      $ 54,777
                                         =========                        ========                      ========

LIABILITIES AND SHAREHOLDERS'
   EQUITY
INTEREST-BEARING DEPOSITS
  NOW accounts                           $   9,379    $   173     1.85%   $  8,232    $  166    2.02%   $  7,035    $  127    1.80%
  Savings accounts                           7,593        251     3.31%      4,223       148    3.50%      2,407        60    2.49%
  Money market accounts                      9,821        305     3.11%      9,189       378    4.11%      7,208       273    3.79%
  Time accounts                             75,225      4,550     6.05%     38,291     2,370    6.19%     22,431     1,191    5.31%
                                         ---------    -------             --------    ------            --------    ------
     TOTAL INTEREST-BEARING DEPOSITS       102,018      5,279     5.18%     59,935     3,062    5.11%     39,081     1,651    4.22%

OTHER INTEREST-BEARING
   LIABILITIES
  Borrowed funds                            25,786        986     3.82%     11,515       603    5.24%        153         6    3.97%
                                         ---------    -------             --------    ------            --------    ------
     TOTAL INTEREST-BEARING LIABILITIES    127,804      6,265     4.90%     71,450     3,665    5.13%     39,234     1,657    4.22%

NONINTEREST-BEARING LIABILITIES
AND SHAREHOLDERS' EQUITY
  Demand deposits                           15,770                           8,538                         5,030
  Other liabilities                          2,903                           1,307                           470
  Shareholders' equity                      12,109                          10,691                        10,043
                                         ---------                        --------                      --------
     TOTAL LIABILITIES AND
       SHAREHOLDERS'
       EQUITY                            $ 158,586                        $ 91,986                      $ 54,777
                                         =========                        ========                      ========

Interest rate spread                                              2.90%                         3.49%                         3.77%
Net interest income                                   $ 5,323                         $3,547                        $2,254
Net interest margin                                               3.58%                         4.24%                         4.62%
Average interest-earning assets to
 average total assets                                            93.67%                        90.93%                        89.33%
Average loans to average deposits                               110.50%                        99.46%                        69.37%
</TABLE>


                                       4
<PAGE>


RATE/VOLUME ANALYSIS OF NET INTEREST INCOME

The effect on interest income, interest expense and net interest income in the
periods indicated, of changes in average balance and rate from the
corresponding prior period is shown below. The effect of a change in average
balance has been determined by applying the average rate in the earlier period
to the change in average balance in the later period, as compared with the
earlier period. Changes resulting from average balance/rate variances are
included in changes resulting from rate. The balance of the change in interest
income or expense and net interest income has been attributed to a change in
average rate. Nonaccruing loans have been included in the category "Net loans
and loans held for sale."


<TABLE>
<CAPTION>
                                                                   Year Ended December 31, 2001
                                                                          Compared with
                                                                   Year Ended December 31, 2000
                                                                         (In thousands)
                                                          -------------------------------------------
                                                                  Increase (Decrease) Due to
                                                          -------------------------------------------
                                                          Volume             Rate             Total
                                                          -------           -------           -------
<S>                                                       <C>               <C>               <C>
Interest earned on:
  Tax-exempt securities ........................          $   (24)          $    (1)          $   (25)
  Taxable securities ...........................              360               (71)              289
  Federal funds sold ...........................             (150)                1              (149)
  Net loans and loans held for sale ............            5,653            (1,392)            4,261
                                                          -------           -------           -------
Total interest income ..........................            5,839            (1,463)            4,376
                                                          -------           -------           -------

Interest paid on:
  NOW deposits .................................               24               (17)                7
  Money market deposits ........................               25               (98)              (73)
  Savings deposits .............................              117               (14)              103
  Time deposits ................................            2,345              (165)            2,180
  Borrowed funds ...............................              748              (365)              383
                                                          -------           -------           -------
Total interest expense .........................            3,259              (659)            2,600
                                                          -------           -------           -------
Increase (decrease) in net interest income .....          $ 2,580           $  (804)          $ 1,776
                                                          =======           =======           =======
</TABLE>


                                       5
<PAGE>


<TABLE>
<CAPTION>
                                                                  Year Ended December 31, 2000
                                                                        Compared with
                                                                  Year Ended December 31, 1999
                                                                        (In thousands)
                                                          -----------------------------------------
                                                                  Increase (Decrease) Due to
                                                          -----------------------------------------
                                                           Volume           Rate            Total
                                                          -------           -----           -------
<S>                                                       <C>               <C>             <C>
Interest earned on:
  Tax-exempt securities ........................          $   (15)          $   3           $   (12)
  Taxable securities ...........................               11              34                45
  Federal funds sold ...........................              (98)            (19)             (117)
  Net loans and loans held for sale ............            3,445             (60)            3,385
                                                          -------           -----           -------

Total interest income ..........................            3,343             (42)            3,301
                                                          -------           -----           -------

Interest paid on:
  NOW deposits .................................               23              16                39
  Money market deposits ........................              109              (4)              105
  Savings deposits .............................               42              46                88
  Time deposits ................................              798             381             1,179
  Borrowed funds ...............................              597              --               597
                                                          -------           -----           -------

Total interest expense .........................            1,569             439             2,008
                                                          -------           -----           -------

Increase (decrease) in net interest income .....          $ 1,774           $(481)          $ 1,293
                                                          =======           =====           =======
</TABLE>


DEPOSITS

The Bank offers a wide range of commercial and consumer interest bearing and
non-interest bearing deposit accounts, including checking accounts, money
market accounts, negotiable order of withdrawal ("NOW") accounts, individual
retirement accounts, certificates of deposit and regular savings accounts. The
sources of deposits are residents, businesses and employees of businesses
within the Bank's market area, obtained through the personal solicitation of
the Bank's officers and directors, direct mail solicitation and advertisements
published in the local media. The Bank pays competitive interest rates on time
and savings deposits. In addition, the Bank has implemented a service charge
fee schedule competitive with other financial institutions in the Bank's market
area, covering such matters as maintenance fees on checking accounts, per item
processing fees on checking accounts, returned check charges and similar items.


                                       6
<PAGE>


The following table details, for the periods indicated, the average amount of
and average rate paid on each of the following deposit categories (dollar
amounts in thousands):


<TABLE>
<CAPTION>
                                Year Ended December 31,  Year Ended December 31, Year Ended December 31,
                                        2001                    2000                    1999
                                   ----------------        ----------------        ----------------
                                   Average    Average      Average    Average      Average    Average
                                   Amount   Rate Paid      Amount    Rate Paid     Amount    Rate Paid
                                   ------      ----        ------      ----        ------      ----
<S>                               <C>         <C>         <C>         <C>         <C>         <C>
Deposit Category
Non-interest bearing .......      $15,770        --       $ 8,538        --       $ 5,030        --
  demand deposits
NOW and money market .......       19,200      2.90%       17,421      3.12%       14,243      2.81%
  deposits
Savings deposits ...........        7,593      3.31%        4,223      3.50%        2,407      2.49%
Time deposits ..............       75,225      6.05%       38,291      6.19%       22,431      5.31%
</TABLE>

The maturities of certificates of deposit and individual retirement accounts of
$100,000 or more as of December 31, 2001 were as follows (in thousands):


<TABLE>
<S>                                                   <C>
Three months or less .....................            $14,938
Over three months through six months .....             10,400
Over six months through twelve months ....             14,403
Over twelve months .......................              3,107
                                                      -------
         Total ...........................            $42,848
                                                      =======
</TABLE>

Borrowed funds consist of short-term borrowings, including federal funds
purchased, retail and other repurchase agreements and a line of credit with the
Federal Home Loan Bank. The average balance of borrowed funds was approximately
$25.8 million for the year ended December 31, 2001, compared to $11.5 million
for the year ended December 31, 2000. This significant increase in borrowed
funds is a result of the Bank's loan growth in new market areas and the Bank's
utilization of borrowed funds to fund loans held-for-sale and construction
lending by the Mortgage Division.

The most significant borrowed funds category for the Bank is the warehouse line
of credit from the Federal Home Loan Bank. At December 31, 2001, the
outstanding balance on the warehouse line of credit was $33,555,000 at a
weighted average interest rate of 2.07%. At December 31, 2000, the outstanding
balance on the line of credit was $6,998,000 at a weighted average interest
rate of 6.60%. The average balance outstanding on the warehouse line of credit
was $19,316,000 for the year ended December 31, 2001 with a weighted average
interest rate of 3.66%. The average balance outstanding on the warehouse line
of credit was $6,745,000 for the year ended December 31, 2000 with a weighted
average interest rate of 5.90%. The maximum amount outstanding on the warehouse
line of credit at any month end during 2001 was $33,555,000, and was
$14,433,000 at any month end during 2000. The warehouse line of credit is
secured by the mortgage loans held-for-sale originated with the borrowed funds.
The interest rate on the warehouse line of credit for 2000 and 2001 was the
Federal Home Loan Bank daily overnight rate plus 25 basis points.

LOAN PORTFOLIO

The Bank engages in a full complement of lending activities, including
commercial, consumer/installment and real estate loans. As of December 31,
2001, the Bank's loan portfolio consisted of 23.3% commercial loans, 17.6% real
estate construction loans, 46.6% real estate mortgage loans and 12.5%
consumer/installment loans.


                                       7
<PAGE>


Commercial lending is directed principally towards businesses whose demands for
funds fall within the Bank's legal lending limits and which are potential
deposit customers of the Bank. This category of loans includes loans made to
individual, partnership or corporate borrowers, and obtained for a variety of
business purposes. These loans include short-term lines of credit, short to
medium-term plant and equipment loans, loans for general working capital and
letters of credit.

The Bank's consumer loans consist primarily of installment loans to individuals
for personal, family or household purposes, including automobile loans to
individuals and pre-approved lines of credit.

The Bank's real estate mortgage loans include commercial mortgage lending and
residential mortgage lending. The Bank's commercial mortgage loans are
generally secured by office buildings, retail establishments and other types of
property. The Bank's residential mortgage loans are primarily single-family
residence loans secured by the residential property.

The Bank's real estate construction loans consist of residential and commercial
construction loans as well as land development loans. These loans are primarily
construction and development loans to builders in the Augusta, Georgia area.

While risk of loss in the Bank's loan portfolio is primarily tied to the credit
quality of the various borrowers, risk of loss may also increase due to factors
beyond the Bank's control, such as local, regional and/or national economic
downturns. General conditions in the real estate market may also impact the
relative risk in the Bank's real estate portfolio.

The Bank may originate loans and participate the loan with other banks with
respect to loans which exceed the Bank's lending limits or established credit
criteria. In addition, the Bank may participate in loans originated by other
banks. Management of the Bank does not believe that loan participations will
necessarily pose any greater risk of loss than loans which the Bank originates.

The following table presents the categories of loans contained in the Bank's
loan portfolio as of the end of the five most recent fiscal years and the total
amount of all loans for such periods:


<TABLE>
<CAPTION>
                                                                               December 31,
                                                  -----------------------------------------------------------------------------
                                                    2001              2000             1999             1998             1997
                                                  ---------         --------         --------         --------         --------
                                                                               (In thousands)
<S>                                               <C>               <C>              <C>              <C>              <C>
      Type of Loan
Commercial, financial and agricultural ...        $  26,863         $ 24,582         $ 10,468         $  3,969         $  3,722
Real estate - construction ...............           20,312           17,648            5,458            5,614            4,893
Real estate - mortgage ...................           53,730           21,850           16,033           10,084            8,441
Installment and consumer .................           14,435            9,247            4,159            3,212            2,676
                                                  ---------         --------         --------         --------         --------
     Subtotal ............................          115,340           73,327           36,118           22,879           19,732

Less:
Unearned income and deferred loan fees ...             (114)            (146)             (25)              (4)              (8)
Allowance for possible loan losses .......           (2,187)          (1,194)          (1,000)            (835)            (752)
                                                  ---------         --------         --------         --------         --------

Total (net of allowance) .................        $ 113,039         $ 71,987         $ 35,093         $ 22,040         $ 18,972
                                                  =========         ========         ========         ========         ========
</TABLE>

In addition to the above, at December 31, 2001, the Bank also had $58,736,000
of single family residential mortgage loans held-for-sale that were originated
by the Bank's Mortgage Division.


                                       8
<PAGE>


The table below presents an analysis of maturities of certain categories of
loans as of December 31, 2001:


<TABLE>
<CAPTION>
                                                       Due in 1      Due in 1 to    Due After
Type of Loan                                         Year or Less      5 Years       5 Years         Total
------------                                         ------------    ----------      -------         -----
                                                                       (In thousands)
<S>                                                  <C>             <C>            <C>           <C>
Commercial, financial and agricultural .........        $10,628        $14,621        $1,614        $26,863
Real estate-construction .......................         20,209             81            22         20,312
                                                        -------        -------        ------        -------

     Total .....................................        $30,837        $14,702        $1,636        $47,175
                                                        =======        =======        ======        =======
</TABLE>

The following is a presentation of an analysis of sensitivities of certain
loans (those presented in the maturity table above) to changes in interest
rates as of December 31, 2001 (in thousands):

<TABLE>
         <S>                                                                        <C>
          Loans due after 1 year with predetermined interest rates..........        $6,146
          Loans due after 1 year with floating interest rates...............        $10,192
</TABLE>

The following table presents information regarding non-accrual, and past due
loans at the dates indicated:


<TABLE>
<CAPTION>
                                                                       December 31,
                                           -------------------------------------------------------------------
                                           2001           2000             1999            1998           1997
                                           ----           ----             ----            ----           ----
<S>                                      <C>             <C>             <C>               <C>             <C>
Loans accounted for on a
   non-accrual basis
      Number ....................              24              10                 9               3              5
      Amount ....................        $302,000        $161,000        $1,140,000        $220,000        $43,000

Accruing loans which are
   contractually past due 90 days
   or more as to principal and
   interest payments
      Number ....................               3              10                 1               2             --
      Amount ....................        $160,000        $ 98,000        $    5,000        $  1,000        $    --
</TABLE>

The Bank does not have any loans which are "troubled debt restructurings" as
defined in SFAS No. 15.

Accrual of interest is discontinued when a loan becomes 90 days past due as to
principal and interest or, when in management's judgment, the interest will not
be collectible in the normal course of business. Additional interest income of
$30,500 in 2001 would have been recorded if all loans accounted for on a
nonaccrual basis had been current in accordance with their original terms. No
interest income has been recognized in 2001 on loans that have been accounted
for on a nonaccrual basis.

At December 31, 2001, there were no loans classified for regulatory purposes as
doubtful, substandard or special mention that have not been disclosed above
which (i) represent or result from trends or uncertainties which management
reasonably expects will materially impact future operating results, liquidity
or capital resources, or (ii) represent material credits about which management
is aware of any information which causes management to have serious doubts as
to the ability of such borrowers to comply with the loan repayment terms.


                                       9
<PAGE>
SUMMARY OF LOAN LOSS EXPERIENCE

An analysis of the Bank's loss experience is furnished in the following table
for the periods indicated.

<TABLE>
<CAPTION>
                                                                  Years Ended December 31,
                                          -----------------------------------------------------------------------
                                              2001           2000          1999          1998          1997
                                              ----           ----          ----          ----          ----
                                                              (Dollar amounts in thousands)
<S>                                           <C>            <C>             <C>           <C>           <C>
Allowance, beginning of year ............     $1,194         $1,000          $835          $752          $889
Charge-offs:
   Commercial, financial and                      13            195             -             -            91
   agricultural..........................
Installment and consumer ................        103             26            15            34           141
Credit Cards.............................          8             -              6             3            10
                                          -----------------------------------------------------------------------
                                                 124           221             21            37           242
                                          -----------------------------------------------------------------------
Recoveries:
   Commercial, financial and                       4             1              2            22             8
   agricultural..........................
Installment and consumer ................          6            52             68            98            80
Credit Cards.............................          1             1              1             -             1
                                          -----------------------------------------------------------------------
                                                  11            54             71           120            88
                                          -----------------------------------------------------------------------
Net (charge-offs) recoveries.............       (113)         (167)            50            83          (153)
                                          -----------------------------------------------------------------------

Provision charged to operations..........      1,106           361            115             -            16
                                          -----------------------------------------------------------------------

Allowance, end of year ..................     $2,187        $1,194         $1,000          $835          $752
                                          =======================================================================

Ratio of net (charge-offs) recoveries
   during the period to average loans
   outstanding during the period.........       (.08)%        (.25) %         .16%          .39%         (.80)%
                                          =======================================================================
</TABLE>

LOAN LOSS ALLOWANCE

In the normal course of business, the Bank has recognized and will continue to
recognize losses resulting from the inability of certain borrowers to repay
loans and the insufficient realizable value of collateral securing such loans.

Accordingly, management has established an allowance for loan losses, which
totaled approximately $2.2 million at December 31, 2001, which is allocated
according to the following table, along with the percentage of loans in each
category to total loans:


                                       10
<PAGE>

<TABLE>
<CAPTION>
                            2001               2000                1999                1998               1997
                            ----               ----                ----                ----               ----
                      Amount   Percent   Amount    Percent   Amount    Percent   Amount   Percent   Amount   Percent
                      ------   -------   ------    -------   ------    -------   ------   -------   ------   -------
                                                       (Dollar amounts in thousands)
<S>                   <C>      <C>        <C>       <C>        <C>      <C>         <C>    <C>       <C>      <C>
Commercial,
  financial and
   agricultural . .
.. .                   $   320     23.3%   $   181     33.5%    $   99     29.0%     $ 194    17.4%   $    6      15.3%
Real estate -
   construction. . .      589     17.6%       356     24.1%        44     15.1%        90    24.5%        -      24.8%
Real estate -
   mortgage. . . .
.. .                       782     46.6%       368     29.8%       522     44.4%       239    44.1%      323      46.3%
Consumer and
   installment. . .

.. .                       180     12.5%        75     12.6%        85     11.5%       106    14.0%      105      13.6%
Unallocated. . . ..       316       --        214       --        250       --        206      --       318        --
                      -------  -------    -------   ------     ------   ------      -----   -----    ------   -------

Total                 $ 2,187       --    $ 1,194       --     $1,000       --      $ 835      --    $  752        --
                      -------  -------    -------   ------     ------   ------      -----   -----    ------   -------
</TABLE>

In evaluating the Bank's allowance for loan losses, management has taken into
consideration concentrations within the loan portfolio, past loan loss
experience, growth of the portfolio, current economic conditions and the
appraised value of collateral securing loans. Although management believes the
allowance for loan losses is adequate, their evaluation is dependent upon future
events. Management's evaluation of losses is a continuing process which may
necessitate adjustments to the allowance in future periods.

The Bank's commercial loans represent approximately 23.3% of outstanding loans.
Commercial loans are generally considered by management as having greater risk
than other categories of loans in the Bank's loan portfolio. However, the Bank
generally originates commercial loans on a secured basis, and at December 31,
2001, over 90% of the Bank's commercial loans were secured. Management believes
that the secured condition of a substantial portion of the commercial loan
portfolio greatly reduces the risk of loss inherently present in commercial
loans.

The Bank's consumer and installment loan portfolio is also well secured. At
December 31, 2001 the majority of the Bank's consumer loans were secured by
collateral primarily consisting of automobiles, boats and other personal
property. Management believes that these loans inherently possess less risk than
other categories of loans.

Real estate mortgage loans constitute approximately 46.6% of outstanding loans.
These loans include both commercial and residential mortgage loans. Management
believes the risk of loss for commercial real estate loans is generally higher
than residential loans. Management continuously monitors the performance of the
commercial real estate portfolio and collateral values. Residential mortgages
are generally secured by the underlying residence. Management of the Bank
believes that these loans are well secured.

Real estate construction loans represent approximately 17.6% of the Bank's
outstanding loans at December 31, 2001. This category of the loan portfolio
consists of construction and development loans for real estate located in the
Bank's market areas in Georgia and commercial and residential construction and
development loans. Management of the Bank closely monitors the performance of
these loans and periodically inspects properties and development progress.
Management considers these factors in estimating and evaluating the allowance
for loan losses.


                                       11
<PAGE>

The Bank's loans held for sale consist of single family residential mortgage
loans originated by the Bank's Mortgage Division. These loans are generally
originated with an investor purchase commitment and are sold shortly after
origination by the Bank. As such, the Bank does not provide for an allowance for
loan losses on loans held for sale.

The Bank's Board of Directors monitors the loan portfolio monthly to enable the
Board to evaluate the adequacy of the allowance for loan losses. The Board
reviews the loans as rated for performance classification and the resulting
allowance resulting from the classifications. The provision for loan losses
charged to operations is based on this determined allowance. In addition, the
Board considers such factors as delinquent loans, collateral values and economic
conditions in their evaluation of the adequacy of the allowance for loan losses.

INVESTMENTS

As of December 31, 2001, investment securities comprised approximately 10.3% of
the Bank's assets, with loans comprising approximately 83.4% of the Bank's
assets. The Bank invests primarily in obligations of the United States or
agencies of the United States, mortgage-backed securities and obligations, other
taxable securities and in certain obligations of states and municipalities. The
Bank also enters into federal funds transactions with its principal
correspondent banks. The Bank may act as a net seller or net purchaser of such
funds.

The following table presents, for the dates indicated, the estimated fair market
value of the Bank's investment securities available-for-sale. The Bank has
classified all investment securities as available-for-sale.

<TABLE>
<CAPTION>
                                                                        December 31,
                                                          -----------------------------------------
                                                            2001            2000             1999
                                                          -------          -------          -------
                                                                       (In thousands)
<S> ............................................              <C>              <C>              <C>
Obligations of the U.S. Treasury and other
   U.S government agencies .....................          $ 8,376          $11,150          $11,073
Mortgage-backed securities .....................            9,014            2,616              420
Obligations of States and political subdivisions               --               --              806
Corporate Obligations ..........................            2,119               --               --
                                                          -------          -------          -------
                                                          $19,509          $13,766          $12,299
Federal Home Loan Bank stock ...................            1,606              554              137
                                                          -------          -------          -------

Total ..........................................          $21,115          $ 4,320          $12,436
                                                          =======          =======          =======
</TABLE>


                                       12
<PAGE>
The following tables present the contractual maturities and weighted average
yields of the Bank's investments as of December 31, 2001:

<TABLE>
<CAPTION>
                                                                    Maturities of Investment Securities
                                                         --------------------------------------------------------
                                                            Within        After One      After Five       After
                                                                           Through        Through
                                                           One Year      Five Years      Ten Years      Ten Years
                                                           --------      ----------      ---------      ---------
                                                                               (In thousands)
<S> ............................................          <C>             <C>             <C>             <C>
Obligations of the U.S. Treasury and
   other U.S. government agencies ..............          $  518          $2,956          $4,902              --
Mortgage-backed securities .....................              --           3,263              --           5,751
Obligations of States and political subdivisions              --              --              --              --
Federal Home Loan Bank stock ...................              --              --              --           1,606
Corporate Obligations ..........................              --           2,119              --              --
                                                          ------          ------          ------          ------
         Total .................................          $  518          $8,338          $4,902          $7,357
                                                          ======          ======          ======          ======
</TABLE>

<TABLE>
<CAPTION>
                                                                          Weighted Average Yields
                                                         ---------------------------------------------------------
                                                                          After One     After Five
                                                            Within        Through        Through          After
                                                           One Year      Five Years      Ten Years      Ten Years
                                                         ------------   ------------   ------------    -----------
<S>                                                      <C>            <C>            <C>             <C>
Obligations of the U.S. Treasury and
   other U.S. government agencies....................            6.28%          5.36%          6.22%             -%
Mortgage-backed securities...........................               -           5.56              -           5.85
Obligations of States and political subdivisions.....               -              -              -              -
Federal Home Loan Bank stock.........................               -              -              -           6.75
Corporate Obligations................................               -           6.09              -              -
                                                         ------------   ------------   ------------    -----------
         Total weighted average yield................            6.28%          5.63%          6.22%          6.05%
                                                         ============   ============   ============    ===========
</TABLE>

With the exception of the U.S. Treasury notes and U.S. government agencies
securities shown above, the Bank did not have investments with a single issuer
exceeding, in the aggregate, 10% of the Bank's shareholders' equity.

RETURN ON EQUITY AND ASSETS

The following table presents certain profitability, return and capital ratios
for the Company as of the end of the past three fiscal years.

<TABLE>
<CAPTION>
                                                                                         December 31,
                                                                            ----------------------------------------
                                                                               2001           2000         1999
                                                                            ------------   -----------  ------------
<S>                                                                             <C>           <C>           <C>
Return on Assets.........................................................       1.06%         0.14%         0.12%
Return on Equity.........................................................      13.83%         1.19%         0.78%
Dividend Payout..........................................................           -             -             -
Equity to Assets.........................................................       7.64%        11.60%        14.91%
</TABLE>


ASSET/LIABILITY MANAGEMENT

It is the objective of the Bank 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. An assets and
liabilities management committee is responsible for monitoring policies and
procedures that are designed to ensure acceptable composition of the
asset/liability mix, stability and leverage of all sources of funds while
adhering to prudent banking practices. It is the overall philosophy of
management


                                       13
<PAGE>
to support asset growth primarily through growth of core deposits, which include
deposits of all categories made by individuals, partnerships and corporations.
Management of the Bank seeks to invest the largest portion of the Bank's assets
in commercial, consumer and real estate loans.

The Bank's asset/liability mix is monitored on a daily basis with a monthly
report reflecting interest-sensitive assets and interest-sensitive liabilities
being prepared and presented to the Bank's Board of Directors. The objective of
this policy is to control interest-sensitive assets and liabilities so as to
minimize the impact of substantial movements in interest rates on the Bank's
earnings.

CORRESPONDENT BANKING

Correspondent banking involves the provision of services by one bank to another
bank which cannot provide that service for itself from an economic or practical
standpoint. The Bank purchases correspondent services offered by larger banks,
including check collections, purchase of federal funds, security safekeeping,
investment services, coin and currency supplies, over line and liquidity loan
participations and sales of loans to or participations with correspondent banks.

The Bank sells loan participations to correspondent banks. Management of the
Bank has established correspondent relationships with The Bankers Bank, the
Federal Home Loan Bank of Atlanta, Regions Bank and SunTrust Bank. As
compensation for services provided by a correspondent, the Bank maintains
certain balances with such correspondent in non-interest bearing accounts.

DATA PROCESSING

The Bank has entered into a data processing servicing agreement with The
Intercept Group, Inc. This servicing agreement provides for the Bank to receive
a full range of data processing services, including an automated general ledger,
deposit accounting, commercial, real estate and installment lending data
processing, central information file and ATM processing.

FACILITIES

The Company's main office is located at 2805 Wrightsboro Road at Daniel Village
in Augusta, Georgia. The Daniel Village Office is approximately 3,300 square
feet in size and located on approximately .90 acres of land. The Company also
operates out of an office located at 110 East Hill Street in Thomson, Georgia.
This property consists of a two-story building with approximately 8,700 square
feet of finished space on the first and second floors and approximately 1,300
square feet of unfinished space on the second floor. The building is constructed
on 3.4 acres of land owned by the Bank. In addition, the Bank operates a branch
office in Thomson, Georgia, which is located at 1043 Washington Road,
approximately two miles north of the East Hill Street office. The Thomson branch
is approximately 2,600 square feet in size and is located on 1.25 acres of land.

In October 1999, the Bank opened the West Town Office at 3820 Washington Road in
the business district of Martinez, Georgia, which is located in Columbia County.
The West Town Office is approximately 4,200 square feet in size and located on
approximately 1.0 acre of land. In January 2001, the Bank opened the Medical
Center Office on Walton Way in Augusta. The Medical Center Office is
approximately 4,200 square feet in size and located on approximately 0.8 acres
of land. The Bank has also purchased a site located on Fury's Ferry Road in
Columbia County for an additional branch office. The property was purchased for
$375,000. Construction on the Fury's Ferry Road office is in progress and the
new branch is expected to open in the second quarter of 2002. In November 2001,
the Bank purchased a site located on Wheeler Road in Augusta for a purchase
price of $706,000. In January 2002, the Bank purchased a site located in Evans,
Georgia for a purchase price of $401,000. The Bank


                                       14
<PAGE>
has purchased these two sites in anticipation of building full service banking
facilities in the next few years.

EMPLOYEES

At December 31, 2001, the Bank employed 125 persons on a full-time or part-time
basis, including 24 officers. The Bank will hire additional persons as needed on
a full-time or part-time basis, including additional tellers and customer
service representatives.

MONETARY POLICIES

The results of operations of the Bank are affected by credit policies of
monetary authorities, particularly the Federal Reserve Board. The instruments of
monetary policy employed by the Federal Reserve Board include open market
operations in U.S. Government securities, changes in the discount rate on member
bank borrowings, changes in reserve requirements against member bank deposits
and limitations on interest rates which member banks may pay on time and savings
deposits. In view of changing conditions in the national economy and in the
money markets, as well as the effect of action by monetary and fiscal
authorities, including the Federal Reserve Board, no prediction can be made as
to possible future changes in interest rates, deposit levels, loan demand or the
business and earnings of the Bank.

SUPERVISION AND REGULATION

General

The Company and the Bank operate in a highly regulated environment, and their
business activities are governed by statute, regulation and administrative
policies. The business activities of the Company and the Bank are closely
supervised by a number of regulatory agencies, including the Federal Reserve
Board, the Georgia Department of Banking and Finance (the "Georgia Banking
Department") and the FDIC. In addition, the Company is subject to certain
periodic reporting and disclosure requirements of the Securities and Exchange
Commission.

The Company is regulated by the Federal Reserve Board under the federal Bank
Holding Company Act of 1956, as amended, which requires every bank holding
company to obtain the prior approval of the Federal Reserve Board before
acquiring more than 5% of the voting shares of any bank or all or substantially
all of the assets of a bank, and before merging or consolidating with another
bank holding company. The Federal Reserve Board (pursuant to regulation and
published policy statements) has maintained that a bank holding company must
serve as a source of financial strength to its subsidiary banks. In adhering to
the Federal Reserve Board policy, the Company may be required to provide
financial support to a subsidiary bank at a time when, absent such Federal
Reserve Board policy, the Company may not deem it advisable to provide such
assistance.

Under the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994,
restrictions on interstate acquisition of banks by bank holding companies were
repealed, such that the Company, or any other bank holding company located in
Georgia, may acquire a bank located in any other state, and a bank holding
company located outside Georgia may acquire any Georgia-based bank, in either
case subject to certain deposit percentage and other restrictions. The
legislation also provides that, unless an individual state has elected to
prohibit out-of-state banks from operating interstate branches within its
territory, adequately capitalized and managed bank holding companies will be
able to consolidate their multistate bank operations into a single bank
subsidiary and to branch interstate through acquisitions.


                                       15
<PAGE>
De novo branching by an out-of-state bank is permitted only if it is expressly
permitted by the laws of the host state. The authority of a bank to establish
and operate branches within a state remains subject to applicable state
branching laws. The legislature of the State of Georgia has enacted an
interstate banking statute which allows bank holding companies located
throughout the United States to acquire banks and bank holding companies located
in Georgia under certain conditions. Such legislation has had the effect of
increasing competition among financial institutions in the Bank's market area
and in the State of Georgia generally.

Georgia banks are permitted by statute to branch statewide. Such branch banking,
however, is subject to prior approval by the Georgia Banking Department and the
FDIC. Any approval by the Georgia Banking Department and the FDIC would take
into consideration several factors, including the Bank's level of capital, the
prospects and economics of the proposed branch office, the overall financial
condition and safety and soundness of the applicant bank, and other
considerations deemed relevant by the Georgia Banking Department and the FDIC
for purposes of determining whether approval should be granted to open a branch
office.

A bank holding company which has not elected to become a financial holding
company under the Gramm-Leach-Bliley Act, as discussed below, will generally be
prohibited from acquiring control of any company which is not a bank and from
engaging in any business other than the business of banking or managing and
controlling banks. However, bank holding companies may still engage in certain
activities which have been identified by the Federal Reserve Board to be so
closely related to banking as to be a proper incident thereto and thus
permissible for bank holding companies.

The list of permissible nonbanking activities includes the following activities:
extending credit and servicing loans; acting as investment or financial advisor
to any person, with certain limitations; leasing personal and real property or
acting as a broker with respect thereto; providing management and employee
benefits consulting advice and career counseling services to nonaffiliated banks
and nonbank depository institutions; operating certain nonbank depository
institutions; performing certain trust company functions; providing certain
agency transactional services, including securities brokerage services, riskless
principal transactions, private placement services, and acting as a futures
commission merchant; providing data processing and data transmission services;
acting as an insurance agent or underwriter with respect to limited types of
insurance; performing real estate appraisals; arranging commercial real estate
equity financing; providing check-guaranty, collection agency and credit bureau
services; engaging in asset management, servicing and collection activities;
providing real estate settlement services; acquiring certain debt which is in
default; underwriting and dealing in obligations of the United States, the
states and their political subdivisions; engaging as a principal in foreign
exchange trading and dealing in precious metals; providing other support
services such as courier services and the printing and selling of checks; and
investing in programs designed to promote community welfare.

In determining whether an activity is so closely related to banking as to be
permissible for bank holding companies, the Federal Reserve Board is required to
consider whether the performance of such activities by a bank holding company or
its subsidiaries can reasonably be expected to produce benefits to the public,
such as greater convenience, increased competition and gains in efficiency, that
outweigh such possible adverse effects as undue concentration of resources,
decreased or unfair competition, conflicts of interest, and unsound banking
practices. Generally, bank holding companies must obtain approval of the Federal
Reserve Board to engage in any activity not previously approved by the Federal
Reserve Board or to modify in any material respect an activity for which Federal
Reserve Board approval had been obtained.

Georgia law requires every bank holding company to obtain the prior approval of
the Georgia Banking Department before acquiring more than 5% of the voting
shares of any Georgia bank or all or


                                       16
<PAGE>
substantially all of the assets of a Georgia bank, or before merging or
consolidating with any Georgia bank holding company. A bank holding company is
generally prohibited from acquiring ownership or control of 5% or more of the
voting shares of any Georgia bank unless the Georgia bank to be acquired has
been in existence and continuously operating, on the date of the acquisition,
for a period of five years or more.

Georgia law contains provisions that limit interest rates that may be charged by
banks and other lenders on certain types of loans. Numerous exceptions exist to
the general interest limitations imposed by Georgia law. The relative importance
of these interest limitation laws to the financial operations of the Bank will
vary from time to time, depending upon a number of factors, including conditions
in the money markets, the cost and availability of funds and prevailing interest
rates.

Pursuant to Georgia law, no person or group of persons may, directly or
indirectly or acting by or through one or more persons, purchase or acquire a
controlling interest in any financial institution which would result in the
change in control of that financial institution unless the Georgia Banking
Department first shall have approved such proposed acquisition. A person or
group will be deemed to have acquired "control" of a bank if the person or group
directly or indirectly, or acting through one or more other persons, has the
power to direct the management or policies of the financial institution or to
vote greater than 25% of any class of voting securities of the financial
institution.

Gramm-Leach-Bliley

The Gramm-Leach-Bliley Act, also known as the Financial Services Modernization
Act of 1999 ("GLBA"), enacted in 1999, enables bank holding companies to acquire
insurance companies and securities firms and effectively repeals depression-era
laws, which prohibited the affiliation of banks and these other financial
services entities under a single holding company. Bank holding companies, and
other types of financial services entities, may elect to become financial
holding companies under the new law, which will enable them to offer virtually
any type of financial service, or services incident to financial services,
including banking, securities underwriting, merchant banking and insurance (both
underwriting and agency services). The new financial services authorized by the
GLBA also may be engaged in by a "financial subsidiary" of a national or state
bank, with the exception of insurance or annuity underwriting, insurance company
portfolio investments, real estate investment and development, and merchant
banking, all of which must be conducted under the financial holding company.

To become a financial holding company, a bank holding company must provide
notice to the Federal Reserve Board of its desire to become a financial holding
company, and certify to the Federal Reserve Board that each of its bank
subsidiaries is "well-capitalized," "well-managed" and has at least a
"satisfactory" rating under the Community Reinvestment Act.

The GLBA establishes a system of functional regulation, under which the Federal
Reserve Board will regulate the banking activities of financial holding
companies and other federal banking regulators will regulate banks' financial
subsidiaries. The SEC will regulate securities activities of financial holding
companies and state insurance regulators will regulate their insurance
activities. The GLBA also provides new protections against the transfer and use
by financial institutions of consumers' non-public, personal information.

The implementation of the act increases competition in the financial services
sector by allowing many different entities, including banks and bank holding
companies, to affiliate and/or to merge with other financial services entities
and cross-sell their financial products in order to better serve their current
and prospective customers. At this time, the Company does not intend to seek
qualification as a financial holding company or to enter into these additional
financial services areas.


                                       17
<PAGE>
Dividends

The Company is a legal entity separate and distinct from the Bank. The principal
source of cash flow for the Company is dividends from the Bank. There are
various statutory and regulatory limitations on the payment of dividends by the
Bank, as well as dividends paid by the Company to its shareholders.

The payment of dividends by the Company and the Bank may be affected or limited
by regulatory requirements and policies, such as the maintenance of adequate
capital. If, in the opinion of the applicable regulatory authority, a bank under
its jurisdiction is engaged in or is about to engage in an unsafe or unsound
practice (which could include the payment of dividends depending on the
institution's financial condition), such authority may require, after notice and
hearing, that the bank cease and desist from such practice. The FDIC and the
Federal Reserve Board have issued policy statements that provide, generally,
that insured banks and bank holing companies should only pay dividends out of
current operating earnings. The Federal Reserve has issued a policy statement to
the same effect for bank holding companies. In addition, all insured depository
institutions are subject to the capital-based limitations required by the
Federal Deposit Insurance Corporation Improvement Act of 1991, as discussed
below.

Under Georgia law, the Bank must obtain approval of the Georgia Banking
Department before they may pay cash dividends out of retained earnings if (1)
the total classified assets at the most recent examination of such bank exceed
80% of the equity capital, (2) the aggregate amount of dividends declared or
anticipated to be declared in the calendar year exceeds 50% of the net profits,
after taxes but before dividends, for the previous calendar year, or (3) the
ratio of equity capital to adjusted assets is less than 6%.

Capital Adequacy Requirements

Both the Company and the Bank are subject to regulatory capital requirements
imposed by the Federal Reserve Board and the FDIC. The Federal Reserve Board and
the FDIC have issued risk-based capital guidelines for bank holding companies
and banks which make regulatory capital requirements more sensitive to
differences in risk profiles of various banking organizations. The capital
adequacy guidelines issued by the Federal Reserve Board are applied to bank
holding companies, on a consolidated basis with the banks owned by the holding
company, as well as to state member banks. The FDIC's risk capital guidelines
apply directly to national banks regardless of whether they are a subsidiary of
a bank holding company. Both agencies' requirements (which are substantially
similar), provide that banking organizations must have capital equivalent to at
least 8% of risk-weighted assets. The risk weights assigned to assets are based
primarily on credit risks. Depending upon the risk level of a particular asset,
it is assigned to a risk category. For example, securities with an unconditional
guarantee by the United States government are assigned to the lowest risk
category, while a risk weight of 50% is assigned to loans secured by
owner-occupied one to four family residential mortgages provided that certain
conditions are met. The aggregate amount of assets assigned to each risk
category is multiplied by the risk weight assigned to that category to determine
the weighted values, which are added together to determine total risk-weighted
assets.

The Federal Reserve Board and the FDIC have also implemented minimum capital
leverage ratios to be used in tandem with the risk-based guidelines in assessing
the overall capital adequacy of banks and bank holding companies. Under these
rules, banking institutions must maintain a ratio of at least 3% "Tier 1"
capital to total weighted risk assets (net of goodwill, certain intangible
assets, and certain deferred tax assets). Tier 1 capital includes common
shareholders equity, noncumulative perpetual preferred stock and related
surplus, and minority interests in the equity accounts of consolidated
subsidiaries.


                                       18
<PAGE>
Both the risk-based capital guidelines and the leverage ratio are minimum
requirements. They are applicable to all banking institutions unless the
applicable regulating authority determines that different minimum capital ratios
are appropriate for a particular institution based upon its circumstances.
Institutions operating at or near these ratios are expected to have
well-diversified risks, excellent control systems, high asset quality, high
liquidity, good earnings, and in general must be considered strong banking
organizations, rated composite 1 under the CAMELS rating system of banks or the
BOPEC rating system of bank holding companies.

The Federal Reserve Board requires bank holding companies without a BOPEC-1
rating to maintain a ratio of at least 4% Tier 1 capital to total assets;
furthermore, banking organizations with supervisory, financial, operational, or
managerial weaknesses, as well as organizations that are anticipating or
experiencing significant growth, are expected to maintain capital ratios well
above the 3% and 4% minimum levels.

The FDIC has also adopted a rule substantially similar to that issued by the
Federal Reserve Board, that establishes a minimum leverage ratio of 3% and
provides that FDIC-regulated banks with anything less than a CAMELS-1 rating
must maintain a ratio of at least 4%. In addition, the FDIC rule specifies that
a depository institution operating with less than the applicable minimum
leverage capital requirement will be deemed to be operating in an unsafe and
unsound manner unless the institution is in compliance with a plan, submitted to
and approved by the FDIC, to increase the ratio to an appropriate level.
Finally, the FDIC requires any insured depository institution with a leverage
ratio of less than 2% to enter into and be in compliance with a written
agreement between it and the FDIC (or the primary regulator, with the FDIC as a
party to the agreement). Such an agreement should contemplate immediate efforts
to acquire the capital required to increase the ratio to an appropriate level.
Institutions that fail to enter into or maintain compliance with such an
agreement will be subject to enforcement action by the FDIC.

The risk-based capital guidelines of the Federal Reserve Board and the FDIC
explicitly include provisions regarding a bank's exposure to declines in the
economic value of its capital due to changes in interest rates to ensure that
the guidelines take adequate account of interest rate risk. Interest rate risk
is the adverse effect that changes in market interest rates may have on a bank's
financial condition and is inherent to the business of banking. The exposure of
a bank's economic value generally represents the change in the present value of
its assets, less the change in the value of its liabilities, plus the change in
the value of its interest rate off-balance sheet contracts. Concurrently, the
agencies issued a joint policy statement to bankers, effective June 26, 1996, to
provide guidance on sound practices for managing interest rate risk. In the
policy statement, the agencies emphasize the necessity of adequate oversight by
a bank's Board of Directors and senior management and of a comprehensive risk
management process. The policy statement also describes the critical factors
affecting the agencies' evaluations of a bank's interest rate risk when making a
determination of capital adequacy. The agencies' risk assessment approach used
to evaluate a bank's capital adequacy for interest rate risk relies on a
combination of quantitative and qualitative factors. Banks that are found to
have high levels of exposure and/or weak management practices will be directed
by the agencies to take corrective action.

The Federal Reserve Board and the FDIC have added a provision to the risk-based
capital guidelines that supplements and modifies the usual risk-based capital
calculations to ensure that institutions with significant exposure to market
risk maintain adequate capital to support that exposure. Market risk is the
potential loss to an institution resulting from changes in market prices. The
modifications are intended to address two types of market risk: general market
risk, which includes changes in general interest rates, equity prices, exchange
rates, or commodity prices, and specific market risk, which includes particular
risks faced by the individual institution, such as event and default risks. The
provision defines a new category of capital, Tier 3, which includes certain
types of subordinated debt. The provision automatically applies only to those
institutions whose trading activity, on a worldwide consolidated basis,


                                       19
<PAGE>
equals either (i) 10% or more of total assets or (ii) $1 billion or more,
although the agencies may apply the provision's requirements to any institution
for which application of the new standard is deemed necessary or appropriate for
safe banking practices. For institutions to which the modifications apply, Tier
3 capital may not be included in the calculation rendering the 8% credit risk
ratio; the sum of Tier 2 and Tier 3 capital may not exceed 100% of Tier 1
capital; and Tier 3 capital is used in both the numerator and denominator of the
normal risk-based capital ratio calculation to account for the estimated maximum
amount that the value of all positions in the institution's trading account, as
well as all foreign exchange and commodity positions, could decline within
certain parameters set forth in a model defined by the statute. Furthermore,
covered institutions must "backtest," comparing the actual net trading profit or
loss for each of its most recent 250 days against the corresponding measures
generated by the statutory model. Once per quarter, the institution must
identify the number of times the actual net trading loss exceeded the
corresponding measure and must then apply a statutory multiplication factor
based on that number for the next quarter's capital charge for market risk.

Prompt Corrective Action

The Federal Deposit Insurance Corporation Improvement Act of 1991 (the
"FDICIA"), provides for a number of reforms relating to the safety and soundness
of the deposit insurance system, supervision of domestic and foreign depository
institutions and improvement of accounting standards. One element of the FDICIA
provides for the development of a regulatory monitoring system requiring prompt
action on the part of banking regulators with regard to certain classes of
undercapitalized institutions. While the FDICIA does not change any of the
minimum capital requirements, it directs each of the federal banking agencies to
issue regulations putting the monitoring plan into effect. The FDICIA creates
five "capital categories" ("well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized" and "critically
undercapitalized") which are defined in the FDICIA and are used to determine the
severity of corrective action the appropriate regulator may take in the event an
institution reaches a given level of undercapitalization. For example, an
institution which becomes "undercapitalized" must submit a capital restoration
plan to the appropriate regulator outlining the steps it will take to become
adequately capitalized. Upon approving the plan, the regulator will monitor the
institution's compliance. Before a capital restoration plan will be approved,
any entity controlling a bank (i.e., a holding company) must guarantee
compliance with the plan until the institution has been adequately capitalized
for four consecutive calendar quarters. The liability of the holding company is
limited to the lesser of five percent of the institution's total assets or the
amount which is necessary to bring the institution into compliance with all
capital standards. In addition, "undercapitalized" institutions will be
restricted from paying management fees, dividends and other capital
distributions, will be subject to certain asset growth restrictions and will be
required to obtain prior approval from the appropriate regulator to open new
branches or expand into new lines of business.

As an institution's capital levels decline, the extent of action to be taken by
the appropriate regulator increases, restricting the types of transactions in
which the institution may engage and ultimately providing for the appointment of
a receiver for certain institutions deemed to be critically undercapitalized.

The OCC, the Federal Reserve Board and the FDIC have established regulations
which, among other things, prescribe the capital thresholds for each of the five
capital categories established by the Act. The following table reflects the
capital thresholds:


                                       20
<PAGE>

<TABLE>
<CAPTION>
                                           Total Risk-Based     Tier 1 Risk-Based    Tier 1
                                           Capital Ratio        Capital Ratio        Leverage Ratio
                                           -------------        -------------        --------------
       <S>                                 <C>                  <C>                  <C>
       Well capitalized(1)                 > 10%                >  6%                 >   5%
                                           -                    -                     -
       Adequately Capitalized(1)           >  8%                >  4%                 >   4%(2)
                                           -                    -                     -
       Undercapitalized(4)                 <  8%                <  4%                 <   4%(3)
       Significantly Undercapitalized(4)   <  6%                <  3%                 <   3%
       Critically Undercapitalized         -                    -                     <   2%(5)
                                                                                      -
</TABLE>

---------------------------

(1)      An institution must meet all three minimums.

(2)      > $3% for composite 1-rated institutions, subject to appropriate
         - federal banking agency guidelines.

(3)      < 3% for composite 1-rated institutions, subject to appropriate federal
         banking agency guidelines.

(4)      An institution falls into this category if it is below the specified
         capital level for any of the three capital measures. ---

(5)      Ratio of tangible equity to total assets.

In addition, the Federal Reserve Board and the FDIC have adopted regulations,
pursuant to the FDICIA, defining operational and managerial standards relating
to internal controls, loan documentation, credit underwriting, interest rate
exposure, asset growth, and compensation, fees and benefits. Both the capital
standards and the safety and soundness standards which the FDICIA seeks to
implement are designed to bolster and protect the deposit insurance fund.

Reporting Requirements

As a bank holding company, the Company is required to file with the Federal
Reserve Board an annual report of its operations at the end of each fiscal year
and such additional information as the Federal Reserve Board may require
pursuant to the Act. The Federal Reserve Board may also make examinations of the
Company and each of its subsidiaries.

The scope of regulation and permissible activities of the Company and the Bank
is subject to change by future federal and state legislation. In addition,
regulators sometimes require higher capital levels on a case-by-case basis based
on such factors as the risk characteristics or management of a particular
institution. The Company and the Bank are not aware of any attributes of their
operating plan that would cause regulators to impose higher requirements.

ITEM 2.       DESCRIPTION OF PROPERTY.

The Company's main office is located at 2805 Wrightsboro Road at Daniel Village
in Augusta, Georgia. The Daniel Village Office is approximately 3,300 square
feet in size and located on approximately .90 acres of land. The Company also
operates out of an office located at 110 East Hill Street in Thomson, Georgia.
The property consists of a two-story building with approximately 8,700 square
feet of finished space on the first and second floors and approximately 1,300
square feet of unfinished space on the second floor. The building is constructed
on 3.4 acres of land owned by the Bank. In addition, the Bank operates a branch
office in Thomson, Georgia, which is located at 1043 Washington Road,
approximately two miles north of the East Hill Street office. The Thomson branch
is approximately 2,600 square feet in size and is located on 1.25 acres of land.


                                       21
<PAGE>
In October 1999, the Bank opened the West Town Office at 3820 Washington Road in
the business district of Martinez, Georgia, which is located in Columbia County.
The West Town Office is approximately 4,200 square feet in size and located on
approximately 1.0 acre of land. In January 2001, the Bank opened the Medical
Center Office on Walton Way in Augusta. The Medical Center Office is
approximately 4,200 square feet in size and located on approximately 0.8 acres
of land. The Bank has also purchased a site located on Fury's Ferry Road in
Columbia County for an additional branch office. The property was purchased for
$375,000. The Fury's Ferry Road office is expected to open in the second quarter
of 2002. In November 2001, the Bank purchased a site located on Wheeler Road in
Augusta for a purchase price of $706,000. In January 2002, the Bank purchased a
site located in Evans, Georgia for a purchase price of $401,000. The Bank has
purchased these two sites in anticipation of building full service banking
facilities in the next few years.

ITEM 3.       LEGAL PROCEEDINGS.

There are no material pending legal proceedings to which the Company or the Bank
is a party or of which any of their properties are subject; nor are there
material proceedings known to the Company or the Bank to be contemplated by any
governmental authority; nor are there material proceedings known to the Company
or the Bank, pending or contemplated, in which any director, officer or
affiliate or any principal security holder of the Company or the Bank, or any
associate of any of the foregoing is a party or has an interest adverse to the
Company or the Bank.

ITEM 4.       SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

No matter was submitted during the fourth quarter ended December 31, 2001 to a
vote of security holders of the Company.


                                       22
<PAGE>
                                     PART II

ITEM 5.       MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

     A.  MARKET INFORMATION

         The Company's common stock began trading on the Over-The-Counter
         Bulletin Board under the symbol "GECR" in May 1999. Prior to this time,
         there was no established public market for the Company's common stock.
         The market for the Company's common stock must be characterized as a
         limited market due to its relatively low trading volume and analyst
         coverage. The following table sets forth for the periods indicated the
         quarterly high and low bid quotation per share as reported by the
         Over-The-Counter Bulletin Board. These quotations also reflect
         inter-dealer prices without retail mark-ups, mark-downs, or commissions
         and may not necessarily represent actual transactions. The share prices
         below reflect the payment of a 20% stock dividend (which was effected
         in the form of a 6-for-5 stock split) on December 1, 2001.

<TABLE>
<CAPTION>
                                                                         High              Low
                                                                    ---------------    -------------
                    <S>                                             <C>                <C>
                    Fiscal year ended December 31, 2001
                         First Quarter..........................        $ 9.53            $ 8.59
                         Second Quarter.........................        $10.83            $ 8.08
                         Third Quarter..........................        $11.66            $ 9.13
                         Fourth Quarter.........................        $11.66            $ 9.03
                    Fiscal year ended December 31, 2000
                         First Quarter..........................         $10.73           $10.00
                         Second Quarter.........................         $10.00           $ 8.96
                         Third Quarter..........................         $10.42           $ 7.29
                         Fourth Quarter.........................         $10.42           $ 9.17
</TABLE>

     B.  HOLDERS OF COMMON STOCK

         As of March 22, 2002, the number of holders of record of the Company's
         common stock was 634.

     C.  DIVIDENDS

         No cash dividends were paid by the Company during the years ended
         December 31, 2001 or 2000. On December 1, 2001, the Company paid a 20%
         stock dividend (which was effected in the form of a 6-for-5 stock
         split) to shareholders of record as of November 15, 2001.

         Future dividends will be determined by the Board of Directors of the
         Company in light of circumstances existing from time to time, including
         the Company's growth, financial condition and results of operations,
         the continued existence of the restrictions described below on the
         Bank's ability to pay dividends and other factors that the Board of
         Directors of the Company considers relevant. In addition, the Board of
         Directors of the Company may determine, from time to time, that it is
         prudent to pay special nonrecurring cash dividends in addition to or in
         lieu of regular cash dividends. Such special dividends will depend upon
         the financial performance of the Company and will take into account its
         capital position. No special dividend is presently contemplated.


                                       23
<PAGE>
         Because the Company's principal operations are conducted through the
         Bank, the Company generates cash to pay dividends primarily through
         dividends paid to it by the Bank. Accordingly, any dividends paid by
         the Company will depend on the Bank's earnings, capital requirements,
         financial condition and other factors. Pursuant to the Georgia code,
         the Bank may pay dividends only when and if the Bank is not insolvent.
         In addition, dividends may not be declared or paid at any time when the
         Bank does not have combined paid-in capital and appropriated retained
         earnings equal to at least 20% of the Bank's capital stock. Moreover,
         dividends may not be paid by the Bank without the prior approval of the
         Georgia Banking Department, if the dividends are in excess of specified
         amounts fixed by the Georgia Banking Department.

     D.  RECENT SALES OF UNREGISTERED SECURITIES

         On October 1, 2001, the Company issued an aggregate of 860 shares to
         eleven outside directors of the Company and the Bank in connection with
         the Director Stock Purchase Plan (the "Plan") which was adopted by the
         Board of Directors in June 2001. The Plan provides that outside
         directors of the Company and the Bank may elect to purchase
         unregistered shares of the Company's common stock in lieu of receiving
         director fees earned in each calendar quarter. The purchase price for
         shares acquired under the Plan is $2.00 less than the closing market
         price of the Company's common stock as reported in the NASDAQ
         Over-the-Counter National Market Issues section of the Wall Street
         Journal on the last day of each calendar quarter. All shares purchased
         under the Plan are held in a stock account for the participating
         director with the Secretary of the Company serving as Trustee of the
         account. Pursuant to the plan, any cash dividend payable on the
         Company's common stock will be automatically reinvested on shares
         credited to a director's account. An outside director may join the Plan
         at any time during the last seven days of each calendar quarter.

         The issuances of securities pursuant to the Plan described above were
         made in reliance on the exemption from registration provided in Section
         4(2) of the Securities Act of 1933, as amended, as transactions by an
         issuer not involving a public offering. All of the securities were
         acquired by the recipients thereof for investment with no view toward
         the resale or distribution thereof. Each of the purchasers has a
         pre-existing relationship with the Company and the offers and sales
         were made without any public solicitation. No underwriter was involved
         in the transaction and no commissions were paid.

ITEM 6.       MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

The following discussion provides information about the major components of the
results of operations and financial condition, liquidity and capital resources
of the Company and Bank and should be read in conjunction with the "Business"
section and Consolidated Financial Statements included elsewhere in this Report.

THE COMPANY

Certain financial information for the Company and Bank consolidated, and solely
the Bank as of and for the years ended December 31, 2001, 2000 or 1999 is
presented below:


                                       24
<PAGE>

<TABLE>
<CAPTION>
                                    2001                         2000                           1999
                      -----------------------------   -----------------------------  -----------------------------
                       Total Assets    Net Income     Total Assets    Net Income     Total Assets    Net Income
                      --------------------------------------------------------------------------------------------
                                                            (In thousands)
<S>                        <C>             <C>             <C>               <C>           <C>               <C>
Consolidated               $ 205,865       $ 1,675         $ 116,509         $ 127         $ 72,719          $ 71

Bank only                  $ 205,797       $ 1,748         $ 116,485         $ 157         $ 72,708          $ 95
</TABLE>

During 2001, the Company funded operational costs through internally generated
funds. The Company incurred approximately $116,000 in operational costs for the
year ended December 31, 2001. The Company recorded an income tax benefit of
$43,000, resulting in a net loss of $73,000 for 2001. The Company received
revenue in the form of dividends from the Bank in 2001 in the amount of $10,000.

The Company has entered into an agreement with The Bankers Bank that provides
the Company with a line of credit of up to $3 million which bears interest at
the prime rate minus 50 basis points and matures in 2003. As of December 31,
2001, the outstanding balance under the line of credit was $1 million. The
arrangement requires the Company and the Bank to comply with certain financial
and other covenants. At December 31, 2001, the Company and the Bank were in
compliance with all applicable covenants. The $1 million drawn by the Company
was invested in the Bank as additional paid in capital during 2001.

THE BANK

RESULTS OF OPERATIONS

2001 Compared to 2000

For the year ended December 31, 2001, the Bank experienced an increase in both
total assets and net income. Total assets increased 76.7% to $205,797,000 at
December 31, 2001 from $116,485,000 at December 31, 2000. Net income increased
1,013.4% to $1,748,000 from $157,000 for the year ended December 31, 2000.
Average total assets were $158,586,000 for 2001 compared to $91,986,000 for
2000, an increase of $66,600,000, or 72.4%. This increase in average assets is
primarily the result of an increase in loans outstanding, which increased
$62,051,000, or 91.1%, from $68,102,000 for 2000 to $130,153,000 for 2001. This
increase in loans is a direct result of the Bank's expansion to new market areas
through the opening of an additional full service banking location during 2001
and the continued growth of the Mortgage Division. Net loans held for investment
increased from $71,987,000 at December 31, 2000 to $113,039,000 at December 31,
2001, a change of $41,052,000, or 57.0%. Commercial loans increased $2,281,000,
or 9.3%, from 2000. Real estate mortgage loans increased $31,880,000, or 145.9%,
from 2000, and real estate construction loans increased $2,644,000, or 15.1%,
from 2000. Installment and consumer loans increased $5,188,000, or 56.1%, from
2000. These increases in each loan category are the result of the Bank's
continuing efforts to obtain these types of lending opportunities, and the
opening of an additional office location of the Bank. Loans held for sale by the
Bank increased from $17,610,000 in 2000 to $58,736,000 in 2001.

The allowance for loan losses was $2,187,000 at December 31, 2001 and was
$1,194,000 at December 31, 2000. This represents an increase of $993,000 or
83.2%. The increase in the allowance is based on management's rating and
assessment of the loan portfolio and the credit risk inherent in the portfolio,
and reflects the growth in the Bank's loan portfolio. The Bank's ratio of
allowance for loan losses to gross loans was 1.26% at December 31, 2001 compared
to 1.32% at December 31, 2000. Substantially all loans held for sale originated
by the Bank consist of well-secured single family residence mortgage loans which
are originated with a sales commitment and sold in the secondary market shortly
after origination, thus greatly reducing the Bank's credit risk. The Bank's
ratio of allowance for loan


                                       25
<PAGE>
losses to gross loans, excluding loans held for sale, was 1.90% at December 31,
2001, compared to 1.63% at December 31, 2000.

The asset growth of the Bank during 2001 was funded through deposit account
growth resulting from the Bank's expansion to new market areas, short-term
borrowings from correspondent banks, and from a line-of-credit established with
the Federal Home Loan Bank. Total deposit accounts at December 31, 2001 were
$149,623,000, an increase of $64,135,000, or 75.0%, from $85,488,000 at December
31, 2000. Total other borrowings by the Bank were $38,374,000 at December 31,
2001, an increase of $18,580,000, or 93.9%, from the balance of $19,794,000 at
December 31, 2000.

The Bank's loan to deposit ratio was 116.3% at December 31, 2001 and 106.2% at
December 31, 2000.

Interest income was $11,588,000 for the year ended 2001, compared to $7,212,000
for 2000. This represents an increase of $4,376,000, or 60.7%. This increase was
primarily attributable to an increase in interest income from loans of
$5,653,000 in 2001. The volume increase was a result of the Bank's increase in
loans due to the expansion of the Bank's market area through the opening of an
additional location, loan growth in existing locations, and continued growth of
the Bank's Mortgage Division. Growth in the Bank's Mortgage Division was also
due to a declining interest rate environment for residential mortgage loans
resulting in a greater number of refinancing transactions. Interest expense
increased $2,600,000, or 70.9%, from $3,665,000 for 2000 to $6,265,000 for 2001.
This increase resulted primarily from the effects of increases in all types of
deposit accounts, and in funds purchased. In addition, the increase in volume
was partially offset by a decrease in rates paid for time deposits. The increase
in deposit accounts was a result of the expansion of the Bank's market area
through the opening of an additional location and growth in existing locations.
The Bank focuses on obtaining growth in deposit accounts to effectively fund the
Bank's loan growth. The increase in funds purchased by the Bank reflects this
growth in the Bank's loan portfolio. Non-interest bearing deposits increased
$5,704,000 from 2000 to 2001. Net interest income for the year ended December
31, 2001 was $5,323,000, representing an increase of $1,776,000, or 50.0%, from
$3,547,000 for the year ended December 31, 2000.

Noninterest income increased from $2,456,000 in 2000 to $9,120,000 in 2001, an
increase of $6,664,000 or 271.3%. This increase is primarily due to the increase
in the gain on sale of mortgage loans for 2001. This increase is a direct result
of the Bank's continued development and expansion of the Mortgage Division
during 2001, and increased loan fees from refinancing transactions.

Noninterest expense increased from $5,428,000 in 2000 to $10,678,000 in 2001, an
increase of $5,250,000 or 96.7%. The increase primarily resulted from increased
personnel and occupancy costs resulting from the opening of an additional
banking location and the significant expansion of the Mortgage Division in 2001.

Net income increased $1,591,000 or 1,013.4% from $157,000 in 2000 to $1,748,000
in 2001 as a result of each of the above matters.

2000 Compared to 1999

For the year ended December 31, 2000, the Bank experienced an increase in both
total assets and net income. Total assets increased 60.2% to $116,485,000 at
December 31, 2000 from $72,708,000 at December 31, 1999. Net income increased
65.3% to $157,000 from $95,000 for the year ended December 31, 2000. Average
total assets were $91,986,000 for 2000 compared to $54,770,000 for 1999, an
increase of $37,209,000 or 67.9%. This increase in average assets is primarily
the result of an increase in loans outstanding which increased $37,500,000, or
122.5%, from $30,602,000 for 1999 to $68,102,000


                                       26
<PAGE>
for 2000. This increase in loans is a direct result of the Bank's expansion to
new market areas through the opening of two new full service banking locations
during 1999. Fiscal 2000 was the first full year of operations for these two new
locations. The increase in loans also resulted from the Bank's significant
expansion of the Mortgage Division during 2000. Net loans held for investment
increased from $35,093,000 at December 31, 1999 to $71,987,000 at December 31,
2000, a change of $36,894,000, or 105.1%. Commercial loans increased
$14,114,000, or 134.8%, from 1999. Real estate mortgage loans increased
$5,817,000, or 36.3%, from 1999, and real estate construction loans increased
$12,190,000, or 223.3%, from 1999. Installment and consumer loans increased
$5,088,000, or 122.3%, from 1999. These increases in each loan category are the
result of the Bank's continuing efforts to obtain these types of lending
opportunities, and the opening of additional office locations of the Bank. Loans
held for sale by the Bank increased from $0 in 1999 to $17,610,000 in 2000. The
increase is a direct result of the Bank's development of and expansion of the
Mortgage Division.

The allowance for loan losses was $1,194,000 at December 31, 2000 compared to
$1,000,000 at December 31, 1999. This represents an increase of $194,000 or
19.4%. The increase in the allowance is based on management's rating and
assessment of the loan portfolio and the credit risk inherent in the portfolio,
and reflects the growth in the Bank's portfolio. The Bank's ratio of allowance
for loan losses to gross loans was 1.32% at December 31, 2000 compared to 2.77%
at December 31, 1999. Substantially all loans held for sale originated by the
Bank consist of well-secured single family residence mortgage loans which are
originated with a sales commitment and sold in the secondary market shortly
after origination, thus greatly reducing the Bank's credit risk.

The asset growth of the Bank during 2000 was funded through deposit account
growth resulting from the Bank's expansion to new market areas, through
short-term borrowings from correspondent banks, and from a line-of-credit
established with the Federal Home Loan Bank. Total deposit accounts at December
31, 2000 were $85,488,000, an increase of $26,644,000, or 45.3%, from
$58,844,000 at December 31, 1999. Total other borrowings by the Bank were
$19,794,000 at December 31, 2000, an increase of $16,762,000, or 552.8%, from
the balance of $3,032,000 at December 31, 1999.

The Bank's loan to deposit ratio was 106.2% at December 31, 2000 and 58.9% at
December 31, 1999.

Interest income was $7,212,000 for the year ended 2000, compared to $3,911,000
for 1999. This represents an increase of $3,301,000, or 84.4%. This increase was
primarily attributable to a net volume increase in interest income from loans of
$3,445,000 in 2000. The volume increase was a result of the Bank's increases in
loans due to the expansion of the Bank's market area and the opening of
additional locations and due to the development and expansion of the Bank's
Mortgage Division. Interest expense increased $2,008,000, or 121.2%, from
$1,657,000 for 1999 to $3,665,000 for 2000. This increase resulted primarily
from the effects of volume increases in all types of deposit accounts, and in
funds purchased. In addition, a rate increase for time deposits also increased
the Bank's interest cost. The increase in deposit accounts was a result of the
expansion of the Bank's market areas and the opening of additional locations.
The Bank focuses on obtaining growth in deposit accounts to effectively fund the
Bank's loan growth. The increase in funds purchased by the Bank reflects this
growth in the Bank's loan portfolio. Non-interest bearing deposits increased
$10,534,000 from 1999 to 2000. Net interest income for the year ended December
31, 2000 was $3,547,000, representing an increase of $1,293,000, or 57%, from
$2,254,000 for the year ended December 31, 1999.

Noninterest income increased from $372,000 in 1999 to $2,456,000 in 2000, an
increase of $2,084,000 or 560.2%. This increase is primarily due to the increase
in the gain on sale of mortgage loans for 2000. This increase is a direct result
of the Bank's development and expansion of the Mortgage Division during 2000.


                                       27
<PAGE>
Noninterest expense increased from $2,400,000 in 1999 to $5,428,000 in 2000, an
increase of $3,028,000 or 126.2%. The increase primarily resulted from increased
personnel and occupancy costs resulting from the year 2000 being the first full
year of operations for the Bank's two Augusta area locations and the significant
expansion of the Mortgage Division in 2000.

Net income increased $62,000 or 65.3% from $95,000 in 1999 to $157,000 in 2000
as a result of each of the above matters.

LIQUIDITY AND INTEREST RATE SENSITIVITY

Deposit levels and the associated timing and quantity of funds flowing into and
out of a bank inherently involve a degree of uncertainty. In order to insure
that a bank is capable of meeting depositors' demands for funds, the Bank must
maintain adequate liquidity. Liquid assets consisting primarily of cash and
deposits due from other banks, federal funds sold and investment securities
maturing within one year provide the source of such funds. Insufficient
liquidity may force a bank to engage in emergency measures to secure necessary
funding. Because such measures may be quite costly, earnings will also suffer if
excess liquidity is maintained. The Bank monitors its liquidity on a monthly
basis and seeks to maintain it at an optimal level.

As of December 31, 2001, the Bank's liquidity ratio was 22.8% as compared to
31.5% at December 31, 2000. In addition to the liquid assets described above,
the Bank has a reserve funding source in the form of federal funds lines of
credit with The Bankers Bank and SunTrust Bank. Management is not aware of any
demands, commitments or uncertainties which could materially affect the Bank's
liquidity position. However, should an unforeseen demand for funds arise, the
Bank held readily marketable investment securities on December 31, 2001 with a
market value of $21.1 million in its available-for-sale portfolio which would
provide an additional source of liquidity.

Gap management is a conservative asset/liability strategy designed to maximize
earnings over a complete interest rate cycle while reducing or minimizing the
Bank's exposure to interest rate risk. Various assets and liabilities are termed
to be "rate sensitive" when the interest rate can be replaced. By definition,
the "gap" is the difference between rate sensitive assets and rate sensitive
liabilities in a given time horizon. At December 31, 2001, the Bank was slightly
asset sensitive through three months, and liability sensitive through one year.

The following is an analysis of rate sensitive assets and liabilities as of
December 31, 2001 (dollar amounts in thousands):


                                       28
<PAGE>

<TABLE>
<CAPTION>
                                                                   3 - 12                             5 years
                                                0- 3 mos.            mos.          1 - 5 years        or more             Total
                                                --------            -----          -----------        -------             -----
<S> .........................................   <C>               <C>              <C>                <C>               <C>
Taxable securities ..........................   $     --          $    518          $ 8,338           $ 2,259           $ 21,115
Tax-exempt securities .......................         --                --               --                --                 --
Federal funds sold ..........................        402                --               --                --                402
Loans .......................................    103,581             7,445           54,155             8,781            173,962
                                                                  --------          -------           -------           --------
         Total rate sensitive assets ........    103,983             7,963           62,493            21,040            195,479

NOW and money market deposits ...............     24,244                --               --                --             24,244
Savings deposits ............................     11,586                --               --                --             11,586
Time deposits ...............................     29,250            52,347            9,884               339             91,820
                                                --------          --------         --------          --------           --------
         Total rate sensitive deposits ......     65,080            52,347            9,884               339            127,650

Borrowed funds ..............................     38,343                --               30                --             38,373
                                                --------          --------         --------          --------           --------
         Total rate sensitive liabilities ...    103,423            52,347            9,914               339            166,023
                                                --------          --------         --------          --------           --------

Excess of rate sensitive assets less rate
               sensitive liabilities ........        530           (44,384)          52,579            20,701             29,426
Cumulative ratio of rate sensitive assets
                to liabilities ..............        101%               72%             105%              118%                --
Cumulative gap ..............................        530           (43,854)           8,725            29,426                 --
</TABLE>

CAPITAL RESOURCES

The equity capital of the Company totaled $13,200,000 at December 31, 2001. The
Company was formed in 1997 as a holding company of the subsidiary bank. In
effecting the transaction of establishing the holding company, the Company
acquired 100% of the issued and outstanding shares of stock of the Bank and in
exchange issued each stockholder a pro rata number of shares of stock of the
Company so each stockholder's ownership of the Company was consistent with the
previous ownership of the Bank. The transaction was accounted for in accordance
with generally accepted accounting principles in a manner similar to a pooling
of interests in which all prior periods presented in the Company's consolidated
financial statements have been restated to give effect to the transaction as if
it occurred at the beginning of the earliest period presented.

The equity capital of the Bank totaled $14,124,000 at December 31, 2001, an
increase of $2,997,000 or 27% from equity capital of $11,127,000 at December 31,
2000. The increase in equity capital was attributable to the Bank's net income
of approximately $1.75 million, a increase of $250,000 in the Bank's
comprehensive income on available-for-sale securities, which under Statement of
Financial Accounting Standard No. 115, is recognized in the available-for-sale
portion of the bond portfolio by making adjustments to the equity capital
account, and $1 million in additional capital infused from the Company.

Management believes that the Bank's capitalization is adequate to sustain growth
experienced in 2001. The following table sets forth the capital ratios for the
Company and the Bank as of December 31, 2001:


                                       29

<PAGE>

<TABLE>
<CAPTION>
                                                                                         Minimum
                                                           December 31, 2001     Regulatory Requirement
                                                           -----------------     -----------------------
<S>                                                        <C>                   <C>
Bank
Tier 1 Capital ratio............................                   9.06%                    4.0%
Total risk-based capital ratio..................                  10.32%                    8.0%
Leverage ratio..................................                   7.54%                    4.0%

Company - Consolidated

Tier 1 Capital ratio............................                   8.47%                    4.0%
Total risk-based capital ratio..................                   9.72%                    8.0%
Leverage ratio..................................                   7.04%                    4.0%
</TABLE>

The above ratios indicate that the capital positions of the Company and the Bank
are sound and that the Company is well positioned for future growth.

There are no commitments of capital resources known to management which would
have a material impact on the Bank's capital position.

ITEM 7.       FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The following financial statements are filed with this report:

         Report of Independent Certified Public Accountants

         Consolidated Statements of Financial Condition as of
            December 31, 2001 and 2000

         Consolidated Statements of Income for the years ended
            December 31, 2001, 2000 and 1999

         Consolidated Statements of Comprehensive Income (Loss)
            for the years ended December 31, 2001, 2000 and 1999

         Consolidated Statements of Shareholders' Equity for
            the years ended December 31, 2001, 2000 and 1999

         Consolidated Statements of Cash Flows for the years ended
            December 31, 2001, 2000 and 1999

         Notes to Consolidated Financial Statements


                                       30
<PAGE>
               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

The Board of Directors
GEORGIA-CAROLINA BANCSHARES, INC.
Augusta, Georgia

We have audited the accompanying consolidated statements of financial condition
of GEORGIA-CAROLINA BANCSHARES, INC. as of December 31, 2001 and 2000, and the
related consolidated statements of income, comprehensive income (loss),
shareholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 2001. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits 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 Georgia-Carolina
Bancshares, Inc. as of December 31, 2001 and 2000, and the results of their
operations and cash flows for each of the years in the three-year period ended
December 31, 2001, in conformity with accounting principles generally accepted
in the United States of America.

/s/ Cherry, Bekaert & Holland LLP

Augusta, Georgia
January 31, 2002


                                       31
<PAGE>
                        GEORGIA-CAROLINA BANCSHARES, INC.
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                           DECEMBER 31, 2001 AND 2000
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)


<TABLE>
<CAPTION>
                                                                           2001                      2000
                                                                         ---------                ---------
<S>                                                                      <C>                      <C>
                                     ASSETS

Cash and due from banks                                                  $   3,316                $   5,522
Federal funds sold                                                             402                       --
Securities available-for-sale                                               21,115                   14,320
Loans, net of allowance for loan losses                                    113,039                   71,987
Loans held for sale                                                         58,736                   17,610
Bank premises and fixed assets                                               6,991                    5,549
Accrued interest receivable                                                  1,092                      596
Foreclosed real estate, net of allowance                                       383                      483
Deferred tax asset, net                                                        401                      202
Other assets                                                                   390                      240
                                                                         ---------                ---------

          TOTAL ASSETS                                                   $ 205,865                $ 116,509
                                                                         =========                =========

                      LIABILITIES AND SHAREHOLDERS' EQUITY

DEPOSITS:
     Non-interest bearing                                                $  21,973                $  16,269
     Interest-bearing:
          NOW accounts                                                      11,426                   10,342
          Savings                                                           11,586                    5,045
          Money market accounts                                             12,818                    9,223
          Time deposits of $100,000, and over                               42,848                   10,696
          Other time deposits                                               48,972                   33,913
                                                                         ---------                ---------
               Total deposits                                              149,623                   85,488
Other liabilities, borrowings and retail agreements                         43,042                   19,794
                                                                         ---------                ---------
               TOTAL LIABILITIES                                           192,665                  105,282
                                                                         ---------                ---------

Commitments and contingent liabilities

SHAREHOLDERS' EQUITY

     Preferred stock, par value $.001; 1,000,000
       shares authorized; none issued                                           --                       --
     Common stock, par value $.001; 9,000,000
       shares authorized; 1,127,214 and 935,750
       shares issued and outstanding                                             1                        1
     Additional paid-in capital                                             10,267                   10,228
     Retained earnings                                                       2,766                    1,091
     Accumulated other comprehensive income (loss)                             166                      (93)
                                                                         ---------                ---------
               Total shareholders' equity                                   13,200                   11,227
                                                                         ---------                ---------

               TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                $ 205,865                $ 116,509
                                                                         =========                =========
</TABLE>




The accompanying notes are an integral part of these financial statements.


                                       32
<PAGE>
                        GEORGIA-CAROLINA BANCSHARES, INC.
                        CONSOLIDATED STATEMENTS OF INCOME
                  YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>

                                                                          2001           2000          1999
                                                                         -------        ------        ------
<S>                                                                      <C>            <C>           <C>
INTEREST INCOME
     Interest and fees on loans                                          $10,464        $6,203        $2,818
     Interest on taxable securities                                        1,106           817           772
     Interest on nontaxable securities                                        --            25            37
     Interest on Federal funds sold                                           18           167           284
                                                                         -------        ------        ------
          TOTAL INTEREST INCOME                                           11,588         7,212         3,911
                                                                         -------        ------        ------

INTEREST EXPENSE
     Interest on time deposits of $100,000 or more                         1,783           596           282
     Interest on other deposits                                            3,496         2,466         1,369
     Interest on funds purchased and other borrowings                        986           603             6
                                                                         -------        ------        ------
          TOTAL INTEREST EXPENSE                                           6,265         3,665         1,657
                                                                         -------        ------        ------

          NET INTEREST INCOME                                              5,323         3,547         2,254

PROVISION FOR LOAN LOSSES                                                  1,106           361           115
                                                                         -------        ------        ------

          NET INTEREST INCOME AFTER PROVISION
            FOR LOAN LOSSES                                                4,217         3,186         2,139
                                                                         -------        ------        ------

NONINTEREST INCOME
     Service charges on deposits                                             480           330           303
     Gain on sale of mortgage loans, and other income                      8,640         2,126            69
                                                                         -------        ------        ------
                                                                           9,120         2,456           372
                                                                         -------        ------        ------

NONINTEREST EXPENSE
     Salaries and employee benefits                                        7,246         3,404         1,238
     Occupancy expenses                                                      926           595           304
     Other expenses                                                        2,622         1,470           886
                                                                         -------        ------        ------
                                                                          10,794         5,469         2,428
                                                                         -------        ------        ------

INCOME BEFORE INCOME TAXES                                                 2,543           173            83

INCOME TAX EXPENSE                                                           868            46            12
                                                                         -------        ------        ------

          NET INCOME                                                     $ 1,675        $  127        $   71
                                                                         =======        ======        ======

EARNINGS PER SHARE:
     Basic                                                               $  1.49        $  .14        $  .08
                                                                         =======        ======        ======
     Diluted                                                             $  1.40        $  .13        $  .08
                                                                         =======        ======        ======
</TABLE>


The accompanying notes are an integral part of these financial statements.


                                       33
<PAGE>


                        GEORGIA-CAROLINA BANCSHARES, INC.
             CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
                  YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>

                                                                 2001             2000            1999
                                                                ------            ----            -----
<S>                                                             <C>               <C>             <C>
Net income                                                      $1,675            $127            $  71

Unrealized holding gains (losses) arising during
   period less reclassification adjustment for gains
   and losses included in net income, net of tax                   259             217             (442)
                                                                ------            ----            -----

Comprehensive income (loss)                                     $1,934            $344            $(371)
                                                                ======            ====            =====
</TABLE>



The accompanying notes are an integral part of these financial statements.


                                       34
<PAGE>
                        GEORGIA-CAROLINA BANCSHARES, INC.
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                  YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)


<TABLE>
<CAPTION>

                                                                                                     Accumulated
                                        Common          Common         Additional                        Other           Total
                                        Stock           Stock            Paid-in       Retained      Comprehensive    Shareholders'
                                        Shares         Par Value         Capital       Earnings          Income          Equity
                                       ---------       ---------       ---------       ---------     -------------    -------------
<S>                                    <C>             <C>             <C>             <C>           <C>              <C>
BALANCE, DECEMBER 31, 1998               635,380       $       1       $   6,354       $     893       $     132        $   7,380

Net income                                    --              --              --              71              --               71

Change in unrealized gain
(loss) on securities available-
for-sale, net of deferred taxes               --              --              --              --            (442)            (442)

Proceeds from issuance of
296,370 shares of common
stock, net of offering costs             296,370              --           3,834              --              --            3,834
                                       ---------       ---------       ---------       ---------       ---------        ---------

BALANCE, DECEMBER 31, 1999               931,750               1          10,188             964            (310)          10,843

Net income                                    --              --              --             127              --              127

Change in unrealized gain
(loss) on securities available-
for-sale, net of deferred taxes               --              --              --              --             217              217

Proceeds from exercise of
stock options                              4,000              --              40              --              --               40
                                       ---------       ---------       ---------       ---------       ---------        ---------

BALANCE, DECEMBER 31, 2000               935,750               1          10,228           1,091             (93)          11,227

Net income                                    --              --              --           1,675              --            1,675

Change in unrealized gain
(loss) on securities available-
for-sale, net of deferred taxes               --              --              --              --             259              259

Stock split effected in the form
of a stock dividend                      187,387              --              --              --              --

Issuance of stock for
compensation                               4,077              --              39              --              --               39
                                       ---------       ---------       ---------       ---------       ---------        ---------

BALANCE, DECEMBER 31, 2001             1,127,214       $       1       $  10,267       $   2,766       $     166        $  13,200
                                       =========       =========       =========       =========       =========        =========
</TABLE>




The accompanying notes are an integral part of these financial statements.


                                       35
<PAGE>
                        GEORGIA-CAROLINA BANCSHARES, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                  YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>

                                                                     2001                      2000               1999
                                                                   --------                  --------           --------
<S>                                                                <C>                       <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES
     Net income                                                    $  1,675                  $    127           $     71
     Adjustments to reconcile net income to net cash
        provided by operating activities:
          Depreciation and amortization                                 388                       278                174
          Provision for loan losses                                   1,106                       361                115
          Stock compensation                                             39                        --                 --
          Deferred income tax                                          (332)                       40                  7
          Other gains and losses, net                                    --                        --                (10)
          Decrease (increase) in accrued interest receivable           (496)                     (188)               (29)
          (Decrease) increase in accrued interest
             payable                                                  1,151                       652                114
          Net change in other assets and liabilities                  1,287                       (60)               111
                                                                   --------                  --------           --------
            NET CASH PROVIDED BY OPERATING ACTIVITIES                 4,818                     1,210                553
                                                                   --------                  --------           --------

CASH FLOWS FROM INVESTING ACTIVITIES
     (Increase) decrease in Federal funds sold                         (402)                   17,010            (12,270)
     Loan originations and collections, net                         (83,295)                  (55,348)           (13,168)
     Purchases of available-for-sale securities                     (16,540)                   (2,746)                (5)
     Proceeds from maturities, sales, and calls of
       available-for-sale securities                                 10,137                     1,191              1,107
     Proceeds from sale of foreclosed real estate                       100                        --               263
     Additions to premises and equipment                             (1,819)                    1,781)           (1,763)
                                                                   --------                  --------           --------
               NET CASH USED IN INVESTING ACTIVITIES                (91,819)                  (41,674)           (25,836)
                                                                   --------                  --------           --------

CASH FLOWS FROM FINANCING ACTIVITIES
     Net increase in deposits and funds purchased                    84,795                    42,675             23,590
     Proceeds from issuance of common stock, net
        of offering costs                                                --                        --              3,834
     Proceeds from stock options exercised                               --                        40                 --
                                                                   --------                  --------           --------
               NET CASH PROVIDED BY FINANCING  ACTIVITIES            84,795                    42,715             27,424
                                                                   --------                  --------           --------

               NET INCREASE (DECREASE) IN CASH AND  DUE
                 FROM BANKS                                          (2,206)                    2,251              2,141

CASH AND DUE FROM BANKS AT BEGINNING OF YEAR                          5,522                     3,271              1,130
                                                                   --------                  --------           --------

CASH AND DUE FROM BANKS AT END OF YEAR                             $  3,316                  $  5,522           $  3,271
                                                                   ========                  ========           ========
</TABLE>






The accompanying notes are an integral part of these financial statements.


                                       36
<PAGE>


                        GEORGIA-CAROLINA BANCSHARES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000


NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

NATURE OF BUSINESS

Georgia-Carolina Bancshares, Inc. (the "Company") is a one-bank holding company.
Substantially all of its business is conducted by its wholly-owned subsidiary
First Bank of Georgia (the "Bank"). The Bank has locations in Thomson and
Augusta, Georgia. Most of the Bank's loans and loan commitments have been
granted to customers in the Columbia, Richmond, and McDuffie County, Georgia
areas. Many of the Bank's loan customers are also depositors of the Bank. During
2000, the Bank established a mortgage division that operates as First Bank
Mortgage. This division currently has locations in Augusta, Georgia and
Jacksonville, Florida. The division originates residential real estate mortgage
loans and provides financing to residential construction and development
companies. Substantially all residential mortgage loans originated by the
division are sold in the secondary market.

The Bank is subject to the regulations of Federal and state banking agencies and
is periodically examined by them.

At the end of 1998, the Company filed with the Securities and Exchange
Commission (SEC) for the registration and sale of 740,741 shares of the
Company's common stock. The registration was declared effective by the SEC early
in 1999, at which time the Company completed an "any and all" best efforts
public offering issuing 296,370 shares of common stock. Gross proceeds from the
offering were $4,000,995, with $167,866 of issuance costs charged against these
proceeds.

SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION - The consolidated financial statements include the
accounts of the Company and its subsidiary Bank. Significant inter-company
transactions and accounts are eliminated in consolidation. The accounting and
reporting policies of the Bank conform to accounting principles generally
accepted in the United States of America and general practices within the
banking industry.

ESTIMATES - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.

CASH AND DUE FROM BANKS - For purposes of reporting cash flows, cash and due
from banks includes cash on hand and amounts due from banks (including cash
items in process of clearing). The Bank maintains due from accounts with banks
primarily located in Georgia. Balances generally exceed insured amounts.


                                       37
<PAGE>
                        GEORGIA-CAROLINA BANCSHARES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2001 AND 2000


NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

INVESTMENT SECURITIES - The Bank's investments in securities are classified and
accounted for as follows:

Securities available-for-sale - Securities classified as available-for-sale are
identified when acquired as being available-for-sale to meet liquidity needs or
other purposes. They are carried at fair value with unrealized gains and losses,
net of taxes, reported in other comprehensive income.

Securities held-to-maturity - Securities classified as held-to-maturity are
those debt securities the Bank has both the intent and ability to hold to
maturity regardless of changes in market conditions, liquidity needs or changes
in general economic conditions. These securities are carried at cost adjusted
for amortization of premium and accretion of discount, computed by the interest
method over their contractual lives.

The Bank has not classified any securities as trading.

Gains and losses on the sale of securities are determined using the
specific-identification method.

LOANS AND ALLOWANCE FOR LOAN LOSSES - Loans are stated at principal amounts
outstanding less unearned income and the allowance for loan losses. Interest
income on loans is credited to income based on the principal amount outstanding
at the respective rate of interest, except for unearned interest on discounted
loans which is recognized as income over the term of the loan using a method
that approximates a level yield.

Loans originated and intended for sale in the secondary market are stated at the
lower of cost or estimated fair value in the aggregate. Net unrealized losses,
if any, are recognized through a valuation allowance by charges to income. As
the mortgage loans originated are individually pre-approved by the secondary
market investors, the Bank is subject to minimal interest rate and credit risk
on these loans as the Bank only holds the loans temporarily as funding is
completed.

Accrual of interest income is discontinued when a loan becomes 90 days past due
as to principal and interest or when, in management's judgment, the interest
will not be collectible in the normal course of business. Accrual of interest on
such loans is resumed when, in management's judgment, the collection of interest
and principal becomes probable. When a loan is placed on non-accrual status, all
interest previously accrued but not collected is reversed against current
interest income. Interest income is subsequently recognized only to the extent
cash payments are received.

The accrual of interest on impaired loans is discontinued when, in management's
judgment, the borrower may be unable to meet payments as due. Management applies
this criteria to all loans identified for evaluation except for smaller-balance
homogeneous residential mortgage and consumer installment loans that are
collectively evaluated for impairment. A loan is impaired when, based on current
information and events, it is probable that the Bank will be unable to collect
all amounts due according to the contractual terms of the loan agreement.
Management of the Bank evaluates the borrower's ability to pay, the value of any
collateral, and other factors in determining when a loan is impaired. Management
does not consider a loan to be impaired during a period of delay in payment if
it is expected that the Bank will collect all amounts due including interest
accrued at the contractual interest rate for the period of the delay.


                                       38
<PAGE>


                        GEORGIA-CAROLINA BANCSHARES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2001 AND 2000


NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Interest payments on impaired loans are applied to the remaining principal
balance until the balance is fully recovered. Once principal is recovered, cash
payments received are recorded as recoveries to the extent of any principal
previously charged-off, and then as interest income.

Loan origination fees, net of certain direct origination costs, are deferred and
recognized as an adjustment of the related loan yield over the life of the loan.
Loan origination fees and direct loan origination costs on loans held for sale
are deferred and recognized at the time the loan is sold.

The allowance for loan losses is established through a provision for loan losses
charged to expense. Loans, including impaired loans, are charged against the
allowance for loan losses when management believes that collectibility of the
principal is unlikely. The allowance is an amount that management believes will
be adequate to absorb estimated losses on existing loans that may become
uncollectible, based on evaluation of the collectibility of certain specific
loans and prior loss experience. This evaluation also takes into consideration
such factors as changes in the nature and volume of the loan portfolio, overall
portfolio quality, review of specific problem loans and current economic
conditions that may affect the borrower's ability to pay. While management uses
the best information available to make its evaluation, future adjustments to the
allowance may be necessary if there are significant changes in economic
conditions.

FORECLOSED REAL ESTATE - Foreclosed real estate represents properties acquired
through foreclosure or other proceedings. The property is held for sale and is
recorded at the lower of the recorded amount of the loan or fair value of the
property less estimated costs of disposal. Any write-down to fair value at the
time of foreclosure is charged to the allowance for loan losses. Property is
evaluated regularly to ensure the carrying amount is supported by its current
fair value. Foreclosed real estate is reported net of allowance for losses in
the consolidated financial statements.

BANK PREMISES AND EQUIPMENT - Premises and equipment are stated at cost less
accumulated depreciation, computed by straight-line and declining balance
methods over the estimated useful lives of the assets.

INCOME TAXES - Provisions for income taxes are based on amounts reported in the
statements of income after exclusion of nontaxable income, such as interest on
state and municipal securities, and include deferred taxes on temporary
differences in the recognition of income and expense for tax and financial
statement purposes. Deferred taxes are computed on the liability method.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion or all of the deferred
tax assets will not be realized.

EARNINGS PER SHARE - Earnings per share are calculated on the basis of the
weighted average number of shares outstanding in accordance with Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings per Share". This
Statement establishes standards for computing and presenting earnings per share
and applies to entities with publicly held common stock or potential common
stock. The Company's outstanding stock options are the primary cause of the
Company's diluted earnings per share.

FAIR VALUE OF FINANCIAL INSTRUMENTS - The following methods and assumptions are
used by the Bank in estimating fair values of financial instruments. In cases
where quoted market prices of financial instruments are not available, fair
values are based on estimates using present value or other valuation techniques.
Those techniques are significantly affected by the assumptions used, including
the discount rate and estimates of future cash flows.


                                       39
<PAGE>


                        GEORGIA-CAROLINA BANCSHARES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2001 AND 2000


NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

In that regard, the derived fair value estimates cannot be substantiated by
comparison to independent markets and, in many cases, could not be realized in
immediate settlement of the instrument. Accordingly, the aggregate fair value
amounts presented are not intended to and do not represent the underlying value
of the Bank.

Cash and due from banks, Federal funds sold and interest-bearing deposits in
banks - Due to the short-term nature of these instruments, their estimated fair
values approximate their carrying amounts.

Available-for-sale and held-to-maturity securities - Estimated fair values are
based on quoted market prices when available. Where quoted market prices are not
available, quoted market prices of comparable instruments or discounted cash
flow methods are used to estimate fair value.

Loans - Fair values for loans are estimated by discounted cash flows using
interest rates currently being offered by the Bank for loans with similar terms
and similar credit quality.

Deposit liabilities, other borrowings and retail agreements - Due to the
short-term nature of demand and savings accounts and retail agreements, the
estimated fair value of these instruments approximates their carrying amounts.
In addition, due to the short-term nature of borrowings from other institutions,
the estimated fair value of these instruments approximates their carrying
amounts. Fair values for certificates of deposit are estimated by discounted
cash flows using interest rates currently being offered by the Bank on
certificates.

Commitments to extend credit and standby letters of credit are not recorded
until such commitments are funded. The values of these commitments are the fees
charged to enter into such agreements. These commitments do not represent a
significant value to the Bank until such commitments are funded. The Bank has
determined that such instruments do not have a distinguishable fair value and no
fair value has been assigned to these instruments.

COMPREHENSIVE INCOME - Accounting principles generally require that recognized
revenue, expenses, gains and losses be included in net income, although certain
changes in assets and liabilities, such as unrealized gains and losses on
available-for-sale securities, are reported as a separate component of the
equity section of the statement of financial condition. Such items, along with
net income, are components of comprehensive income.

NEW ACCOUNTING PRONOUNCEMENTS - In June 1998, the Financial Accounting Standards
Board (FASB) issued SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities", which established accounting and reporting standards for
derivative instruments and hedging activities. This Statement and subsequent
amendments to the Statement were adopted by the Company for the year ended
December 31, 2001. The adoption of this Statement did not have a significant
impact on the Company's financial reporting or operations.


                                       40
<PAGE>


                        GEORGIA-CAROLINA BANCSHARES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2001 AND 2000

NOTE 2 - INVESTMENT SECURITIES

The amortized cost and fair values of securities owned as of December 31, are
shown below:

<TABLE>
<CAPTION>

                                                                             2001
                                                 -------------------------------------------------------------
                                                                   Gross            Gross
                                                 Amortized       Unrealized       Unrealized
                                                    Cost            Gains           Losses           Fair Value
                                                 ---------        ---------       ---------          ---------
                                                                       (In thousands)
<S>                                              <C>              <C>             <C>                <C>
Available-for-sale securities:
  U.S. Government and agency securities          $   8,239        $     146       $      (9)         $   8,376
  Mortgage-backed securities                         8,961               82             (29)             9,014
  Corporate obligations                              2,057               62              --              2,119
  Federal Home Loan Bank stock                       1,606               --              --              1,606
                                                 ---------        ---------       ---------          ---------
                                                 $  20,863        $     290       $     (38)         $  21,115
                                                 =========        =========       =========          =========


<CAPTION>


                                                                              2000
                                                 -------------------------------------------------------------
                                                                   Gross            Gross
                                                 Amortized       Unrealized       Unrealized
                                                    Cost            Gains           Losses         Fair Value
                                                 ---------        ---------       ---------        ---------
                                                                       (In thousands)
<S>                                              <C>             <C>              <C>              <C>
Available-for-sale securities:
  U.S. Government and agency securities          $  11,285        $      --       $    (135)       $  11,150
  Mortgage-backed securities                         2,621               --              (5)           2,616
  Federal Home Loan Bank stock                         554               --              --              554
                                                 ---------        ---------       ---------        ---------

                                                 $  14,460        $      --       $    (140)       $  14,320
                                                 =========        =========       =========        =========
</TABLE>


The amortized cost and fair value of securities as of December 31, 2001, by
contractual maturity, are as follows. Actual maturities may differ from
contractual maturities in mortgage-backed securities because the mortgages
underlying the securities may be called or prepaid without penalty, therefore
these securities are not included in the maturity categories in the following
maturity summary.


                                       41
<PAGE>
                        GEORGIA-CAROLINA BANCSHARES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2001 AND 2000


NOTE 2 - INVESTMENT SECURITIES (CONTINUED)

<TABLE>
<CAPTION>

                                                               Securities
                                                           Available-for-Sale
                                                        --------------------------
                                                        Amortized         Fair
                                                           Cost           Value
                                                        -----------     ----------
                                                              (In thousands)
                                                        --------------------------
       <S>                                              <C>             <C>
       One year or less                                 $       500     $      518
       After one year through five years                      4,976          5,075
       After five years through ten years                     4,820          4,902
       After ten years                                        1,606          1,606
       Mortgage backed securities                             8,961          9,014
                                                        -----------     ----------

                                                        $    20,863     $   21,115
                                                        ===========     ==========
</TABLE>


Securities with a carrying amount of approximately $15.9 million and $3.9
million at December 31, 2001 and 2000, respectively, were pledged to secure
public deposits and for other purposes.

There were no material net realized gains (losses) on sales of securities during
2001, 2000, or 1999.

NOTE 3 - LOANS

The composition of loans is summarized as follows:

<TABLE>
<CAPTION>

                                           December 31,
                                    ----------------------------
                                       2001               2000
                                    ---------           --------
                                           (In thousands)
                                    ----------------------------
<S>                                 <C>                 <C>
Commercial and industrial           $  26,863           $ 24,582
Real estate - construction             20,312             17,648
Real estate - mortgage                 53,730             21,850
Consumer                               14,435              9,247
                                    ---------           --------
                                      115,340             73,327
Unearned income                          (114)              (146)
                                    ---------           --------
                                      115,226             73,181
Allowance for loan losses              (2,187)            (1,194)
                                    ---------           --------

     Loans, net                     $ 113,039           $ 71,987
                                    =========           ========
</TABLE>


                                       42
<PAGE>


                        GEORGIA-CAROLINA BANCSHARES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2001 AND 2000


NOTE 3 - LOANS (CONTINUED)

Changes in the allowance for loan losses were as follows:

<TABLE>
<CAPTION>
                                                                    December 31,
                                               -------------------------------------------------------------
                                                 2001                       2000                      1999
                                               ---------                 ---------                 ---------
                                                                      (In thousands)
                                               -------------------------------------------------------------
<S>                                            <C>                       <C>                       <C>
Balance, beginning of year                     $   1,194                 $   1,000                 $     835
Provision charged to operations                    1,106                       361                       115
Recoveries                                            11                        53                        71
Loans charged off                                   (124)                     (220)                      (21)
                                               ---------                 ---------                 ---------

        Balance, end of year                   $   2,187                 $   1,194                 $   1,000
                                               =========                 =========                 =========
</TABLE>

Loans for which the accrual of interest had been discontinued or reduced
amounted to approximately $302,000 and $161,000 at December 31, 2001 and 2000,
respectively. There was no significant reduction in interest income associated
with non-accrual and renegotiated loans. There were no loans identified as
impaired under SFAS 114 at December 31, 2001 or 2000.

At December 31, 2001, executive officers and directors, and companies in which
they have a beneficial ownership, were indebted to the Bank in the aggregate
amount of $490,000. The interest rates on these loans were substantially the
same as rates prevailing at the time of the transactions, and repayment terms
are customary for the type of loan involved. Following is a summary of
transactions for 2001 and 2000:

<TABLE>
<CAPTION>

                                                      December 31,
                                            ------------------------------
                                              2001                   2000
                                            -------                -------
                                                    (In thousands)
                                            ------------------------------
<S>                                         <C>                    <C>
Balance, beginning of year                  $   759                $   681
Advances                                        152                    137
Repayments                                      421                     59
                                            -------                -------

        Balance, end of year                $   490                $   759
                                            =======                =======
</TABLE>

NOTE 4 - FORECLOSED REAL ESTATE

A summary of foreclosed real estate is as follows:

<TABLE>
<CAPTION>

                                                                   December 31,
                                              -----------------------------------------------------
                                               2001                    2000                   1999
                                              -------                -------                -------
                                                                 (In thousands)
                                              -----------------------------------------------------
<S>                                           <C>                    <C>                    <C>
Carrying amount of property                   $   383                $   483                $    --
Less: valuation allowance                          --                     --                     --
                                              -------                -------                -------

                                              $   383                $   483                $    --
                                              =======                =======                =======
</TABLE>

The provision charged to income, net of recoveries and charge offs, amounted to
approximately $0 for years ended December 31, 2001 and 2000, and approximately
$13,000 for the year ended December 31, 1999.


                                       43
<PAGE>


                        GEORGIA-CAROLINA BANCSHARES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2001 AND 2000

NOTE 5 - BANK PREMISES AND EQUIPMENT

Bank premises and equipment consists of the following:

<TABLE>
<CAPTION>

                                                                                           December 31,
                                                                             --------------------------------------
                                                                                   2001                   2000
                                                                             ------------------    ----------------
                                                                                          (In thousands)
                                                                             --------------------------------------

     <S>                                                                     <C>                    <C>
     Land                                                                    $         2,898        $         2,214
     Building and improvements                                                         3,241                  2,555
     Equipment, furniture & fixtures                                                   2,333                  1,905
     Construction in progress                                                            361                    409
                                                                             ---------------        ---------------
            Total cost                                                                 8,833                  7,083
     Less accumulated depreciation                                                    (1,842)                (1,534)
                                                                             ---------------        ---------------

            Premises and equipment, net                                      $         6,991        $         5,549
                                                                             ===============        ===============
</TABLE>

NOTE 6 - DEPOSITS

At December 31, 2001, the scheduled maturities of time deposit liabilities were
as follows:

<TABLE>
<CAPTION>
                                              (In thousands)
                                              ------------
     <S>                                      <C>
     2002                                           81,623
     2003                                            9,319
     2004                                              564
     2005                                              139
     2006 and thereafter                               175
                                              ------------

                                              $     91,820
                                              ============
</TABLE>

To manage the Bank's funding capabilities the Bank may also enter into retail
deposit agreements with customers and may obtain short-term funding from other
institutions. Retail deposit agreements with customers are generally secured by
investment securities owned by the Bank. Retail agreements are established at
prevailing market rates. Short-term funding from other institutions is generally
overnight funding at current market rates.

NOTE 7 - LINE OF CREDIT

In addition to funding sources obtained by the Bank, the Company has obtained a
line of credit arrangement. The arrangement provides the ability to draw $3
million at current market rates and matures in 2003. The balance drawn by the
Company at December 31, 2001 was $1 million. The arrangement provides for the
Company to comply with certain financial and other covenants. At December 31,
2001 the Company and Bank were in compliance with all defined covenants.

NOTE 8 - EMPLOYEE BENEFIT PLAN

The Bank has a 401(k) salary-deferred plan covering substantially all employees.
At the discretion of the Bank's Board of Directors, the Bank may match a
percentage of the annual amounts deferred by employees. Matching amounts are
funded by the Bank as accrued. Total deferred and matching amounts are limited
to amounts that can be deducted for Federal income tax purposes. The Bank's
matching contributions were approximately $58,000, $15,000 and $15,000,
respectively, for each of the years in the three year period ended December 31,
2001.


                                       44
<PAGE>

                        GEORGIA-CAROLINA BANCSHARES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2001 AND 2000

NOTE 9 - SHAREHOLDERS' EQUITY AND REGULATORY REQUIREMENTS

The primary source of funds available to the Company is the payment of dividends
by the subsidiary Bank. Banking regulations limit the amount of dividends that
may be paid by the Bank without prior approval of regulatory agencies.

The Bank is subject to various regulatory capital requirements administered by
state and 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
Bank's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet specific
capital guidelines that involve quantitative measures of the Bank's assets,
liabilities, and certain off-balance-sheet items as calculated under regulatory
accounting practices. The Bank's capital amounts and classification are also
subject to qualitative judgments by the regulators about components, risk
weightings, and other factors. Prompt corrective action provisions are not
applicable to bank holding companies.

Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the table
below) of total and Tier I capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier I capital (as defined) to average
assets (as defined). Management believes that as of December 31, 2001, the Bank
met all capital adequacy requirements to which it is subject.

As of December 31, 2001, the most recent notification from the regulatory
agencies categorized the Bank as well-capitalized under the regulatory framework
for prompt corrective action. To be categorized as well-capitalized the Bank
must maintain minimum total risk-based, Tier I risk-based, and Tier I leverage
ratios as set forth in the table below. There are no conditions or events since
that notification that management believes have changed the Bank's category.

The Bank's actual capital amounts and ratios are also presented in the table.


<TABLE>
<CAPTION>

                                                                                                  Required to be
                                                                                               Well-Capitalized Under
                                                                  Required For Capital            Prompt Corrective
                                             Actual                 Adequacy Purposes             Action Provisions
                                     ------------------------    -------------------------    ------------------------
                                       Amount       Ratio          Amount        Ratio           Amount       Ratio
                                     ------------ -----------    ------------ ------------    ------------- ----------
                                                            (In thousands, except percentages)
                                     ---------------------------------------------------------------------------------
<S>                                  <C>          <C>            <C>               <C>        <C>            <C>
AS OF DECEMBER 31, 2001
Total capital (to Risk Weighted Assets)
Bank                                 $ 15,886      10.32%        $  12,318         8.0%        $  15,398      10.0%
Consolidated                         $ 14,962       9.72%        $  12,318         8.0%        $      --        --

Tier 1 capital (to Risk Weighted Assets)
Bank                                 $ 13,958       9.06%        $   6,159         4.0%        $    9,239      6.0%
Consolidated                         $ 13,034       8.47%        $   6,159         4.0%        $       --       --

Tier 1 capital (to Risk Average Assets)
Bank                                 $ 13,958       7.54%        $   7,409         4.0%        $    9,260      5.0%
Consolidated                         $ 13,034       7.04%        $   7,409         4.0%        $       --       --
</TABLE>


                                       45
<PAGE>


                        GEORGIA-CAROLINA BANCSHARES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2001 AND 2000

NOTE 9 - SHAREHOLDERS' EQUITY AND REGULATORY REQUIREMENTS (CONTINUED)

<TABLE>
<CAPTION>
                                                                                                   Required to be
                                                                                               Well-Capitalized Under
                                                                   Required For Capital           Prompt Corrective
                                             Actual                 Adequacy Purposes              Action Provisions
                                     ------------------------    -------------------------    ------------------------
                                       Amount       Ratio          Amount        Ratio           Amount       Ratio
                                     ------------ -----------    ------------ ------------    ------------- ----------
                                                            (In thousands, except percentages)
                                     ---------------------------------------------------------------------------------
<S>                                  <C>          <C>            <C>               <C>        <C>            <C>
AS OF DECEMBER 31, 2000
Total capital (to Risk Weighted Assets)
Bank                                 $ 12,325      13.95%        $   7,069         8.0%       $    8,836       10.0%

Tier 1 capital (to Risk Weighted Assets)
Bank                                 $ 11,219      10.51%        $   4,270         4.0%       $    5,338        6.0%

Tier 1 capital (to Average Assets)
Bank                                 $ 11,219      12.70%        $   3,534         4.0%       $    5,301        5.0%
</TABLE>

At December 31, 2000, the capital ratios for the Company and Bank consolidated
were materially consistent with those presented above.

In 2001 the Company paid a six-for-five split of the common stock in the form of
a 20% stock dividend. As a result, approximately $187 ($0.001 par for each share
issued pursuant to the split) was transferred from retained earnings to the
common stock. Cash was paid in lieu of fractional shares.

During 1997 the Company adopted the 1997 Stock Option Plan (the "Plan") for
eligible directors, officers and key employees of the Company and subsidiary
bank. Options are granted to purchase common shares at prices not less than the
fair market value of the stock at the date of grant as established by the Board
of Directors. The maximum number of shares which may be reserved and made
available-for-sale under the Plan is 120,000 shares, as adjusted for the
Company's six-for-five split of the common stock.

The Plan provides for the grant of both incentive and nonqualified stock options
on the Company's common stock. The Stock Option Committee of the Board of
Directors of the Company establishes to whom options shall be granted and
determines exercise prices, vesting requirements and the number of shares
covered by each option, subject to the approval of the Company's Board of
Directors.

As permitted by Statement of Financial Accounting Standards (SFAS) No. 123,
"Accounting for Stock Based Compensation", the Company has elected to account
for the Plan in accordance with Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees".

Presentation of pro forma information regarding net income and earnings per
share is required by SFAS No. 123, and has been determined as if the Company had
accounted for the Plan under the fair value method of that Statement. The fair
value for these options was estimated, for each of the years presented, at the
date of grant using an option pricing model which included the following
assumptions:
                      Dividend yield                        1.0%
                      Volatility                           10.0%
                      Risk-free rate                        6.5%

In addition, the model assumed that each option was exercised during the first
year of vesting.


                                       46
<PAGE>


                        GEORGIA-CAROLINA BANCSHARES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2001 AND 2000


NOTE 9 - SHAREHOLDERS' EQUITY AND REGULATORY REQUIREMENTS (CONTINUED)

For purposes of pro forma disclosures, the estimated fair value of options is
amortized to expense over the option's vesting period. The Company's pro forma
information follows (in thousands except for earnings per share information):

<TABLE>
<CAPTION>
                                                   2001                     2000                  1999
                                                 ---------               ---------             ---------
<S>                                              <C>                     <C>                   <C>
Pro forma net income                             $   1,557               $     119             $      67
Pro forma basic earnings per share               $    1.39               $    0.13             $    0.08
</TABLE>

Option valuation models require the input of highly subjective assumptions
including the expected stock price volatility. Changes in the subjective input
assumptions can materially affect the fair value estimate. In management's
opinion, the model does not necessarily provide a reliable single measure of the
fair value of options.

Vesting requirements are determined by the Board of Directors at the time
options are granted, and generally provide for vesting over a five-year period.
The Plan provides that vesting periods may not exceed ten years.

A summary of the Company's stock option activity, and related information, for
the years ended December 31, 2001, 2000 and 1999 follows. Exercise price per
share information is based on weighted averages.

<TABLE>
<CAPTION>
                                     2001                            2000                           1999
                            -------------------------        ------------------------        -----------------------
                                  Exercise Price                  Exercise Price                 Exercise Price
                                               Per                             Per                             Per
                              Options          Share          Options          Share         Options           Share
                            ---------         -------        ---------        -------        -------          ------

<S>                           <C>             <C>             <C>             <C>             <C>             <C>
Outstanding -
  beginning, of year          47,891          $10.68          31,091          $11.13          10,200          $10.08
Granted                       18,648            9.85          16,800            9.91          30,491           11.25

Expired                           --              --              --              --           9,600           10.38
                              ------          ------          ------          ------          ------          ------

Outstanding -
  end of year                 66,539          $10.45          47,891          $10.68          31,091          $11.13
                              ======          ======          ======          ======          ======          ======
</TABLE>

Stock options exercisable and the weighted-average exercise price at December
31, 2001, 2000 and 1999 follows:

<TABLE>
<CAPTION>
                                            2001                2000                1999
                                         ----------          -----------         -----------
<S>                                      <C>                 <C>                 <C>
Options                                      30,646               13,053               6,953
Weighted-average exercise price          $    10.92          $     12.94         $     13.34
</TABLE>

The estimated weighted-average fair value of options granted during the years
ended December 31 are as follows (per option):

<TABLE>
                               <S>            <C>
                               2001           $1.46
                               1999           $0.81
                               1998           $1.03
</TABLE>


                                       47
<PAGE>
                        GEORGIA-CAROLINA BANCSHARES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2001 AND 2000


NOTE 9 - SHAREHOLDERS' EQUITY AND REGULATORY REQUIREMENTS (CONTINUED)

At December 31, 2001, options outstanding have exercise prices that range from
$9.58 per share to $11.25 per share. The weighted-average remaining contractual
life of options outstanding at December 31, 2000 was 56 months.

At December 31, 2001, options to purchase 8,000 shares of the Company's common
stock were outstanding from a plan originated prior to the 1997 Stock Option
Plan. The options are non-transferable and have exercise prices between ten and
twelve dollars per share and expire during the years 2002 to 2003. 4,000 options
were exercised during the year ended December 31, 2000. No additional shares are
available to be granted under this plan. None of the options outstanding under
this plan are owned by employees or directors of the Company.

Following is a reconciliation of the income amounts and common stock amounts
utilized in computing the Company's earnings per share for each of the following
years ended December 31. Share amounts are weighted average amounts.

<TABLE>
<CAPTION>
                                                                                    2001
                                                        ----------------------------------------------------------------
                                                              Income                 Shares
                                                            (Numerator)           (Denominator)            Per Share
                                                         -------------------    -------------------    ------------------
                                                                      (Dollars in thousands, except per share)
                                                         ----------------------------------------------------------------
<S>                                                      <C>                       <C>                        <C>
BASIC EPS
Income available to common stockholders                  $     1,675               1,125,519                  $      1.49

EFFECT OF STOCK OPTIONS OUTSTANDING                               --                  68,565                         0.09
                                                         -----------             -----------                  -----------

DILUTED EPS
Income available to common stockholders
   plus conversions                                      $     1,675               1,194,084                  $      1.40
                                                         ===========             ===========                  ===========

<CAPTION>

                                                                           2000
                                              ----------------------------------------------------------------
                                                   Income                 Shares
                                                 (Numerator)           (Denominator)            Per Share
                                              -------------------    -------------------    ------------------
                                                         (Dollars in thousands, except per share)
                                              ----------------------------------------------------------------
<S>                                              <C>                 <C>                      <C>
BASIC EPS
Income available to common stockholders          $      127                931,783                $     0.14

EFFECT OF STOCK OPTIONS OUTSTANDING                      --                 45,254                $     0.01
                                                 ----------             ----------                ----------

DILUTED EPS
Income available to common stockholders
   plus conversions                              $      127                977,037                $     0.13
                                                 ==========             ==========                ==========

</TABLE>


                                       48
<PAGE>
                        GEORGIA-CAROLINA BANCSHARES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2001 AND 2000


NOTE 9 - SHAREHOLDERS' EQUITY AND REGULATORY REQUIREMENTS (CONTINUED)

<TABLE>
<CAPTION>
                                                                                   1999
                                                      ----------------------------------------------------------------
                                                            Income                 Shares
                                                         (Numerator)           (Denominator)            Per Share
                                                      -------------------    -------------------    ------------------
                                                                 (Dollars in thousands, except per share)
                                                      ----------------------------------------------------------------
<S>                                                   <C>                    <C>                    <C>
BASIC EPS
Income available to common stockholders                    $      71                 877,498               $    0.08

EFFECT OF STOCK OPTIONS OUTSTANDING                               --                  34,997               $    0.08
                                                           ---------               ---------               ---------

DILUTED EPS
Income available to common stockholders
   plus conversions                                        $      71                 912,495               $      --
                                                           =========               =========               =========
</TABLE>


NOTE 10 - INCOME TAXES

The total income taxes in the statements of income for the years ended December
31, were as follows:

<TABLE>
<CAPTION>
                                        2001                   2000             1999
                                     ----------             ----------        ----------
<S>                                  <C>                    <C>               <C>
Current tax                          $    1,237             $        6        $        5
Deferred tax (benefit)                     (369)                    40                 7
                                     ----------             ----------        ----------

                                     $      868             $       46        $       12
                                     ==========             ==========        ==========
</TABLE>

The Bank's provision for income taxes differs from the amounts computed by
applying the Federal and state income tax statutory rates to income before
income taxes. A reconciliation of the differences is as follows:

<TABLE>
<CAPTION>
                                                       2001                    2000                     1999
                                                      -------                 -------                 -------
<S>                                                   <C>                     <C>                     <C>
Statutory rates                                          38.0%                   38.0%                   38.0%
   Tax exempt income                                       --                    (5.5)                  (17.0)
   Nondeductible interest                                  --                     0.7                     2.1
   Other, including effect of graduated
     rate brackets                                       (4.0)                   (6.5)                   (9.2)
                                                      -------                 -------                 -------

                                                         34.0%                   26.7%                   13.9%
                                                      =======                 =======                 =======
</TABLE>


                                       49
<PAGE>
                        GEORGIA-CAROLINA BANCSHARES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2001 AND 2000

NOTE 10 - INCOME TAXES (CONTINUED)

The primary components of deferred income taxes at December 31, were as follows:

<TABLE>
<CAPTION>
                                                                          2001                         2000
                                                                       ----------                    ----------
                                                                                  (In thousands)
                                                                       ----------------------------------------
<S>                                                                    <C>                           <C>
Deferred tax assets
   Allowance for loan losses                                           $      523                    $      149
   Unrealized loss on securities available-for-sale                            --                            53
                                                                       ----------                    ----------
      Deferred income tax assets                                              523                           202
                                                                       ----------                    ----------

Deferred tax liabilities
   Depreciation                                                                37                            --
   Unrealized loss on securities available-for-sale                            85                            --
                                                                       ----------                    ----------
      Deferred income tax liabilities                                         122                            --
                                                                       ----------                    ----------

      Net deferred income tax assets                                   $      401                    $      202
                                                                       ==========                    ==========
</TABLE>

Realization of deferred tax assets is dependent upon sufficient future taxable
income during the period that deductible temporary differences are expected to
be available to reduce taxable income.

NOTE 11 - COMMITMENTS AND CONTINGENCIES

In the ordinary course of business, the Bank may enter into off-balance sheet
financial instruments which are not reflected in the financial statements. These
instruments include commitments to extend credit and standby letters of credit.
Such financial instruments are recorded in the financial statements when funds
are disbursed or the instruments become payable.

The Bank uses the same credit policies for these off-balance-sheet financial
instruments as it does for other instruments that are recorded in the financial
statements.

Following is an analysis of significant off-balance sheet financial instruments:

<TABLE>
<CAPTION>
                                                        2001                  2000
                                                -------------------   -------------------
                                                             (In thousands)
                                                ----------------------------------------
<S>                                             <C>                           <C>
Commitments to extend credit                    $   28,309                    $   16,564
Standby letters of credit                              606                            32
                                                ----------                    ----------

                                                $   28,915                    $   16,596
                                                ==========                    ==========
</TABLE>

Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of the commitment amounts expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. In managing the Bank's credit and market
risk exposure, the Bank may participate these commitments with other
institutions when funded. The credit risk involved in issuing these financial
instruments is essentially the same as that involved in extending loans to
customers. The amount of collateral obtained, if deemed necessary by the Bank,
upon extension of credit, is based on management's credit evaluation of the
customer. Collateral held varies but may include real estate and improvements,
marketable securities, accounts receivable, inventory, equipment and personal
property.


                                       50
<PAGE>

                        GEORGIA-CAROLINA BANCSHARES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2001 AND 2000


NOTE 11 - COMMITMENTS AND CONTINGENCIES (CONTINUED)

The nature of the business of the Bank is such that it ordinarily results in a
certain amount of litigation. In the opinion of management, there are no present
matters in which the outcome will have a material adverse effect on the
financial statements.

NOTE 12 - SUPPLEMENTAL CONSOLIDATED CASH FLOW INFORMATION

<TABLE>
<CAPTION>
                                                             2001                   2000                  1999
                                                      -------------------    -------------------    ------------------
                                                                          (Dollars in thousands)
                                                      ----------------------------------------------------------------
<S>                                                   <C>                    <C>                    <C>
Income taxes paid                                        $   --                    $   85                    $    5

Interest paid                                            $5,444                    $3,014                    $1,543
</TABLE>

NOTE 13 - FAIR VALUE OF FINANCIAL INSTRUMENTS

The estimated fair values of the Bank's financial instruments, for those
instruments for which the Bank's management believes estimated fair value does
not by nature approximate the instruments' carrying amount, were as follows at
December 31, 2001 and 2000 (in millions):

<TABLE>
<CAPTION>


                                                           2001                        2000
                                                  ------------------------    ------------------------
                                                   Carrying       Fair           Carrying      Fair
                                                    Amount        Value           Amount       Value
                                                  ----------- ------------    ------------- ----------
<S>                                               <C>         <C>             <C>           <C>
Loans and loans held for sale, net                $ 173.9       $ 174.1         $  89.6        $  88.4

Certificates of deposit                           $  91.8       $  91.6         $  44.6        $  44.5

</TABLE>

Estimated fair value information of investment securities is presented in Note 2
of the financial statements.

NOTE 14 - OTHER EXPENSES

Other non-interest expenses were as follows:

<TABLE>
<CAPTION>

                                                                               December 31,
                                                      ----------------------------------------------------------------
                                                             2001                   2000                  1999
                                                      -------------------    -------------------    ------------------
                                                                          (Dollars in thousands)
                                                      ----------------------------------------------------------------
<S>                                                   <C>                    <C>                    <C>
Data processing                                                 $    362              $     236              $    167
Legal and accounting                                                 140                     87                    81
Printing and supplies                                                360                    154                   107
Advertising                                                          275                    105                    64
Telephone                                                            167                     95                    42
Outside services                                                     338                     96                    39
Other                                                                980                    697                   386
                                                      -------------------    -------------------    ------------------

                                                               $   2,622             $    1,470              $    886
                                                      ===================    ===================    ==================
</TABLE>


                                       51
<PAGE>


                        GEORGIA-CAROLINA BANCSHARES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2001 AND 2000


NOTE 15 - COMPREHENSIVE INCOME

The components of other comprehensive income and related tax effects for each of
the years ended December 31, were as follows (in thousands):

<TABLE>
<CAPTION>
                                                                               December 31,
                                                      ----------------------------------------------------------------
                                                             2001                   2000                  1999
                                                      -------------------    -------------------    ------------------
<S>                                                   <C>                    <C>                    <C>
Unrealized holding gains (losses) on
   available-for-sale securities                        $   392                   $   333                   $  (669)
Tax effect                                                 (133)                     (116)                      227
                                                        -------                   -------                   -------

Net of tax amount                                       $   259                   $   217                   $  (442)
                                                        =======                   =======                   =======
</TABLE>


                                       52
<PAGE>

                        GEORGIA-CAROLINA BANCSHARES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2001 AND 2000

NOTE 16 - CONDENSED FINANCIAL INFORMATION ON GEORGIA-CAROLINA BANCSHARES, INC.
          (PARENT COMPANY ONLY)

                             CONDENSED BALANCE SHEET
                           DECEMBER 31, 2001 AND 2000
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                                    2001               2000
                                                                                                 ---------          ---------
<S>                                                                                              <C>                <C>
ASSETS
  Cash                                                                                           $       9          $      76
  Investment in subsidiary                                                                          14,124             11,127
  Other assets                                                                                          53                 24
  Deferred tax benefit                                                                                  14                 --
                                                                                                 ---------          ---------

       TOTAL ASSETS                                                                              $  14,200          $  11,227
                                                                                                 =========          =========

LIABILITIES
  Notes payable                                                                                  $   1,000          $      --

SHAREHOLDERS' EQUITY                                                                                13,200             11,227
                                                                                                 ---------          ---------

       TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                                $  14,200          $  11,227
                                                                                                 =========          =========
</TABLE>

                          CONDENSED STATEMENT OF INCOME
                     YEARS ENDED DECEMBER 31, 2001 AND 2000
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                                   2001              2000
                                                                                                 --------           ------
<S>                                                                                              <C>                <C>
INCOME, DIVIDENDS FROM SUBSIDIARY                                                                $     10           $   --
EXPENSES
  Salaries                                                                                             39               41
  Other                                                                                                87               --
                                                                                                 --------           ------
    LOSS BEFORE INCOME TAX BENEFITS AND EQUITY
       IN UNDISTRIBUTED EARNINGS OF SUBSIDIARY
                                                                                                     (116)             (41)

INCOME TAX BENEFITS                                                                                    43               11
                                                                                                 --------           ------

    LOSS BEFORE EQUITY IN UNDISTRIBUTED
       EARNINGS OF SUBSIDIARY                                                                         (73)             (30)

     EQUITY IN UNDISTRIBUTED EARNINGS OF
       SUBSIDIARY                                                                                   1,748              157
                                                                                                 --------           ------

     NET INCOME                                                                                  $  1,675           $  127
                                                                                                 ========           ======
</TABLE>


                                       53
<PAGE>

                        GEORGIA-CAROLINA BANCSHARES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2001 AND 2000

NOTE 16 - CONDENSED FINANCIAL INFORMATION ON GEORGIA-CAROLINA BANCSHARES, INC.
          (PARENT COMPANY ONLY) (CONTINUED)

                        CONDENSED STATEMENT OF CASH FLOWS
                     YEARS ENDED DECEMBER 31, 2001 AND 2000
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                                    2001               2000
                                                                                                 ---------           -------
<S>                                                                                              <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income                                                                                     $   1,675           $   127
  Adjustments to reconcile net income to net cash
    provided by operating activities
      Stock compensation                                                                                39                --
      Equity in undistributed earnings of subsidiary                                                (1,748)             (157)
      Other assets                                                                                     (43)              (12)
                                                                                                 ---------           -------

         TOTAL ADJUSTMENTS                                                                          (1,752)             (169)
                                                                                                 ---------           -------

         NET CASH USED IN OPERATING ACTIVITIES                                                         (77)              (42)
                                                                                                 ---------           -------

CASH FLOWS FROM INVESTING ACTIVITIES
  Cash used in additional investment in subsidiary
    bank
                                                                                                    (1,000)               --
  Other                                                                                                 10                --
                                                                                                 ---------           -------

         NET CASH USED IN INVESTING ACTIVITIES                                                        (990)               --
                                                                                                 ---------           -------

CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from borrowed funds                                                                       1,000                --
  Proceeds from issuance of common stock, and
     exercise of stock options
                                                                                                        --                40
                                                                                                 ---------           -------

         NET CASH PROVIDED BY FINANCING
            ACTIVITIES                                                                               1,000                40
                                                                                                 ---------           -------

NET CHANGE IN CASH                                                                                     (67)               (2)

CASH AT BEGINNING OF YEAR                                                                               76                78
                                                                                                 ---------           -------

CASH AT END OF YEAR                                                                              $       9           $    76
                                                                                                 =========           =======
</TABLE>


                                       54
<PAGE>

ITEM 8.           CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
                  AND FINANCIAL DISCLOSURE.

There has been no occurrence requiring a response to this item.

                                    PART III

Certain information required by Part III of this Form 10-KSB is incorporated by
reference from the Company's definitive proxy statement (the "Proxy Statement")
to be filed pursuant to Regulation 14A for the Company's Annual Meeting of
Shareholders to be held on May 15, 2002. The Company will, within 120 days of
the end of its fiscal year, file with the Securities and Exchange Commission a
definitive proxy statement pursuant to Regulation 14A.

ITEM 9.           DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
                  COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.

The information responsive to this item is incorporated by reference from the
section entitled "Election of Directors" contained in the Proxy Statement.

ITEM 10.          EXECUTIVE COMPENSATION.

The information responsive to this item is incorporated by reference from the
section entitled "Executive Compensation" contained in the Proxy Statement.

ITEM 11.          SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                  MANAGEMENT.

The information responsive to this item is incorporated by reference from the
section entitled "Security Ownership of Certain Beneficial Owners and
Management" contained in the Proxy Statement.

ITEM 12.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The information responsive to this item is incorporated by reference from the
section entitled "Certain Transactions" contained in the Proxy Statement.

ITEM 13.          EXHIBITS, LIST AND REPORTS ON FORM 8-K.

         (A)      EXHIBITS

                  The following exhibits are filed with this report:


                                       55
<PAGE>

<TABLE>
<CAPTION>
Exhibit
Number                Description of Exhibit
------                ----------------------
<S>        <C>        <C>

 3.1       -          Articles of Incorporation of the Company (incorporated herein by reference to
                      the exhibit of the same number in the Company's Registration Statement on Form
                      SB-2 under the Securities Act of 1933, as amended, Registration No. 333-69763,
                      previously filed with the Commission).

 3.1.1     -          Articles of Amendment to the Articles of Incorporation of the Company
                      (incorporated herein by reference to the exhibit of the same number in the
                      Company's Annual Report on Form 10-KSB for the year ended December 31, 2000,
                      previously filed with the Commission).

 3.2       -          By-Laws of the Company (incorporated herein by reference to the exhibit of the
                      same number in the Company's Registration Statement on Form SB-2 under the
                      Securities Act of 1933, as amended (Registration No. 333-69763)).

 4.1       -          Specimen Common Stock Certificate (incorporated by reference to the exhibit of
                      the same number in the Company's Registration Statement on Form 8-A, under the
                      Securities Exchange Act of 1934, as amended, previously filed with the
                      Commission).

10.1       -          Employment Agreement dated October 6, 1997 between the Company and Patrick G.
                      Blanchard (incorporated herein by reference to the exhibit of the same number in
                      the Company's Quarterly Report on Form 10-QSB for the quarter ended September
                      30, 1997, previously filed with the Commission).

10.1.1     -          Amendment No. 1 to Employment Agreement dated October 6, 1997 between First Bank
                      of Georgia, the Company and Patrick G. Blanchard, dated September 30, 1998
                      (incorporated herein by reference to the exhibit of the same number in the
                      Company's Registration Statement on Form SB-2, as amended, Registration No.
                      333-69763, previously filed with the Commission).

10.1.2     -          Amendment No. 2 to Employment Agreement dated October 6, 1997 between First Bank
                      of Georgia, the Company and Patrick G. Blanchard, dated December 23, 1998
                      (incorporated herein by reference to the exhibit of the same number in the
                      Company's Registration Statement on Form SB-2, as amended, Registration No.
                      333-69763, previously filed with the Commission).

10.2       -          1997 Stock Option Plan.

10.3       -          Directors Stock Purchase Plan.
</TABLE>


                                       56
<PAGE>

         (B)      REPORTS ON FORM 8-K

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


                                       57
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of Section 13 of the Securities Exchange Act of
1934, the Registrant has duly caused this Report to be signed on its behalf by
the undersigned, thereunto duly authorized.

                                  GEORGIA-CAROLINA BANCSHARES, INC.



                                    By: /s/ Patrick G. Blanchard
                                       ----------------------------------------
Date: March 20, 2002                   Patrick G. Blanchard
                                       President and Chief Executive Officer
                                       (principal executive officer)



                                    By: /s/ James M. Thomas
                                       ----------------------------------------
Date: March 20, 2002                   James M. Thomas
                                       Chief Financial Officer
                                       (principal financial and accounting
                                       officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
DIRECTORS                                  DATE                 DIRECTORS                                   DATE
<S>                                        <C>                  <C>                                         <C>



/s/ Patrick G. Blanchard                   March 20, 2002       /s/ Hugh L. Hamilton, Jr.                   March 20, 2002
----------------------------------                              ----------------------------------
Patrick G. Blanchard                                            Hugh L. Hamilton, Jr.



/s/ Larry DeMeyers                         March 20, 2002       /s/ William G. Hatcher                      March 20, 2002
----------------------------------                              ----------------------------------
Larry DeMeyers                                                  William G. Hatcher



/s/ Philip G. Farr                         March 20, 2002       /s/ George O. Hughes                        March 20, 2002
----------------------------------                              ----------------------------------
Philip G. Farr                                                  George O. Hughes



/s/ Samuel A. Fowler, Jr.                  March 20, 2002       /s/ George H. Inman                         March 20, 2002
----------------------------------                              ----------------------------------
Samuel A. Fowler, Jr.                                           George H. Inman



/s/ Arthur J. Gay, Jr.                     March 20, 2002       /s/ David W. Joesbury                       March 20, 2002
----------------------------------                              ----------------------------------
Arthur J. Gay, Jr.                                              David W. Joesbury



/s/  Joseph D. Greene                      March 20, 2002       /s/ James L. Lemley, M.D.                   March 20, 2002
----------------------------------                              ----------------------------------
Joseph D. Greene                                                James L. Lemley, M.D.
</TABLE>

                       (SIGNATURES CONTINUED ON NEXT PAGE)


<PAGE>

<TABLE>
<S>                                        <C>                  <C>                                         <C>



/s/ J. Randall Hall                        March 20, 2002       /s/ Julian W. Osbon                         March 20, 2002
----------------------------------                              ----------------------------------
J. Randall Hall                                                 Julian W. Osbon



/s/ John W. Lee                            March 20, 2002       /s/ Bennye M. Young                         March 20, 2002
----------------------------------                              ----------------------------------
John W. Lee                                                     Bennye M. Young



/s/ Robert N. Wilson, Jr.                  March 20, 2002
----------------------------------
Robert N. Wilson, Jr.
</TABLE>


<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                              DESCRIPTION OF EXHIBIT
-------                -------------------------------------------------
<S>                    <C>
10.2                   1997 Stock Option Plan
10.3                   2001 Directors Stock Purchase Plan
</TABLE>