<PAGE>   1

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

                                   FORM 10-KSB

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

                 ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000

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

                           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

 ------------------------------------------------------------------------------
 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. [ ]

Revenue for the fiscal year ended December 31, 2000: $9,668,000.

The aggregate market value of the registrant's common stock held by
nonaffiliates of the registrant (593,900 shares), on March 30, 2001 was
$6,124,594 based on the closing price of the registrant's common stock as
reported on the Over-the-Counter Bulletin Board on March 30, 2001. 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 30, 2001, 935,750 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 2001 Annual Meeting of Shareholders
scheduled to be held May 17, 2001 are incorporated by reference in response to
Part II of this Report.

Transitional Small Business Disclosure Format (check one)
Yes [ ] No [X]



<PAGE>   2

                                     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 2001 and beyond to differ materially from those
expressed or implied in such forward-looking statements. The Company does not
undertake to publically 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 two 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 December 2000 the Bank completed construction of the Medical Center Office on
Walton Way in Augusta which opened for business in January 2001. The Bank has
purchased a site on Fury's Ferry Road in Columbia County for an additional
office. Construction is expected to begin in the second half of 2001.

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.

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


                                        2
<PAGE>   3
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. First Bank
Mortgage has locations in Augusta, Warner Robins, Rincon and Savannah, Georgia.
In addition, the Mortgage Division opened a Jacksonville, Florida office in
January 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.

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.

In February 1997, while Bank management and the Board of Directors of the Bank
were pursuing the organization of the Company, the Bank was contacted by certain
businessmen located in and around Augusta, Georgia who were interested in
chartering a new bank to serve the markets of Augusta and neighboring Columbia
County as a subsidiary of the Company. In October 1997, the Company and the
businessmen reached an agreement, subsequently approved by the Company's
shareholders and subject to certain other conditions, whereby the Company agreed
to register certain shares of its common stock for sale to the public and to use
the proceeds of such sale to expand the Bank, through the establishment of
offices, into Augusta and Columbia County. In March 1999, the Company completed
a best efforts public offering of its common stock as a result of which the
Company sold 296,370 shares of common stock and received proceeds of
approximately $4,000,995.

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, 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>   4

                             AVERAGE BALANCE SHEETS
                          (DOLLAR AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                           December 31,
                                              -----------------------------------------------------------------------
                                                             2000                                  1999
                                              ---------------------------------     ---------------------------------
                                                           Interest     Average                  Interest     Average
                                              Average      Income/      Yield/      Average      Income/      Yield/
                                              Balance      Expense       Rate       Balance      Expense       Rate
                                              --------     --------     -------     --------     --------     -------

<S>                                           <C>          <C>          <C>         <C>          <C>          <C>
ASSETS
INTEREST-EARNING ASSETS
  Loans, net of unearned income               $ 68,102      $6,203        9.11%     $ 30,602      $2,818        9.21%
  Investment securities                         12,720         842        6.62%       13,024         809        6.21%
  Interest-bearing deposits in banks                --          --          --            --          --          --
  Federal funds sold                             2,817         167        5.93%        5,305         284        5.35%
                                              --------      ------                  --------      ------
     TOTAL INTEREST-EARNING ASSETS              83,639       7,212        8.62%       48,931       3,911        7.99%
                                                                                                              ------

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

LIABILITIES AND SHAREHOLDERS'
 EQUITY
INTEREST-BEARING DEPOSITS
  NOW accounts                                $  8,232      $  166        2.02%     $  7,035      $  127        1.80%
  Savings accounts                               4,223         148        3.50%        2,407          60        2.49%
  Money market accounts                          9,189         378        4.11%        7,208         273        3.79%
  Time accounts                                 38,291       2,370        6.19%       22,431       1,191        5.31%
                                              --------      ------                  --------      ------
     TOTAL INTEREST-BEARING DEPOSITS            59,935       3,062        5.11%       39,081       1,651        4.22%

OTHER INTEREST-BEARING
 LIABILITIES
  Funds purchased                               11,515         603        5.24%          153           6        3.97%
                                              --------      ------                  --------      ------
     TOTAL INTEREST-BEARING LIABILITIES         71,450       3,665        5.13%       39,234       1,657        4.22%

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

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


                                        4
<PAGE>   5

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.

<TABLE>
<CAPTION>
                                                           Year Ended December 31, 2000
                                                                   Compared with
                                                           Year Ended December 31, 1999
                                                           (Dollar amounts 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
  Funds purchased                                            597            --            597
                                                          ------        ------         ------

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

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


                                        5
<PAGE>   6

<TABLE>
<CAPTION>
                                                           Year Ended December 31, 1999
                                                                  Compared with
                                                           Year Ended December 31, 1998
                                                           (Dollar amounts in thousands)
                                                       -------------------------------------
                                                       Increase (Decrease) Due to
                                                       --------------------------
                                                          Volume         Rate         Total
                                                          ------        ------        ------
<S>                                                       <C>           <C>           <C>
Interest earned on:
  Tax-exempt securities                                   $  (13)       $   (1)       $  (14)
  Taxable securities                                         (69)           (5)          (74)
  Federal funds sold                                         140           (25)          115
  Net loans                                                  806          (220)          586
  Interest-bearing deposits in banks                          (7)           --            (7)
                                                          ------        ------        ------

Total interest income                                        857          (251)          606
                                                          ------        ------        ------

Interest paid on:
  NOW deposits                                                (4)          (13)          (17)
  Money market deposits                                      151            21           172
  Savings deposits                                            11            (1)           10
  Time deposits                                              197          (111)           86
  Funds purchased                                              6            --             6
                                                          ------        ------        ------

Total interest expense                                       361          (104)          257
                                                          ------        ------        ------

Increase (decrease) in net interest income                $  496        $ (147)       $  349
                                                          ======        ======        ======
</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>   7

The following table details, for the periods indicated, the average amount of
and average rate paid on each of the following deposit categories:

<TABLE>
<CAPTION>
                                             Year Ended December 31, 2000       Year Ended December 31, 1999
                                           ---------------------------------  ---------------------------------
                                             (Dollar amounts in thousands)      (Dollar amounts in thousands)
                                           Average Amount  Average Rate Paid  Average Amount  Average Rate Paid
                                           --------------  -----------------  --------------  -----------------

<S>                                        <C>             <C>                <C>             <C>
Deposit Category

Non-interest bearing demand deposits          $  8,538              --           $  5,030              --

NOW and money market deposits                   17,421            3.12%            14,243            2.81%

Savings deposits                                 4,223            3.50%             2,407            2.49%

Time deposits                                   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, 2000 were as follows:

<TABLE>
<CAPTION>
                                                              (In thousands)
         <S>                                                     <C>
         Three months or less                                    $  1,600
         Over three months through twelve months                    6,651
         Over twelve months                                         2,445
                                                                 --------
                                               Total             $ 10,696
                                                                 ========
</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
$11.5 million for the year ended December 31, 2000 and was approximately
$153,000 for the year ended December 31, 1999. This significant increase in
borrowed funds is a result of the Bank's loan growth in new market areas and the
Banks 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 line-of-credit
from the Federal Home Loan Bank. At December 31, 2000 the outstanding balance on
the line was $6,998,000 at a weighted average interest rate of 6.60%. The
average balance outstanding on the 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 line at any month end during 2000 was
$14,433,000. The line is secured by the mortgage loans held-for-sale originated
with the borrowed funds. The interest rate on the line is 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. The Bank concentrates
its lending efforts in the areas of consumer/installment and real estate loans,
particularly home mortgage lending. As of December 31, 2000, the Bank's loan
portfolio consisted of 33.5% commercial loans, 24.1% real estate construction
loans, 29.8% real estate mortgage loans and 13% consumer/installment loans.

                                        7
<PAGE>   8
 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, Savannah, Rincon
and Warner Robins, 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 December 31, 2000 and 1999 and the total amount of all
loans for such periods:

<TABLE>
<CAPTION>
                                                                  December 31,
                                                             ----------------------
                                                               2000          1999
                                                             --------      --------
                                                          (Dollar amounts in thousands)

<S>                                                          <C>           <C>
Type of Loan
  Commercial, financial and agricultural                     $ 24,582      $ 10,468
  Real estate - construction                                   17,648         5,458
  Real estate - mortgage                                       21,850        16,033
  Installment and consumer                                      9,247         4,159
                                                             --------      --------

                          Subtotal                             73,327        36,118

Less:
  Unearned income and deferred loan fees                         (146)          (25)
  Allowance for possible loan losses                           (1,194)       (1,000)
                                                             --------      --------

                         Total (net of allowance)            $ 71,987      $ 35,093
                                                             ========      ========
</TABLE>


                                        8
<PAGE>   9

In addition to the above, at December 31, 2000, the Bank also had $17,610,000 of
single family residential mortgage loans held-for-sale that were originated by
the Bank's Mortgage Division.

The table below presents an analysis of maturities of certain categories of
loans as of December 31, 2000:

<TABLE>
<CAPTION>
                                              Due in 1    Due in 1 to     Due After
Type of Loan                                Year or Less    5 Years       5 Years        Total
------------                                ------------  -----------     ---------     --------
                                                        (Dollar amounts in thousands)

<S>                                         <C>           <C>             <C>           <C>
Commercial, financial and agricultural        $  7,208      $ 11,272      $  6,102      $ 24,582
Real estate-construction                        17,558            90            --        17,648
                                              --------      --------      --------      --------

                        Total                 $ 24,766      $ 11,362      $  6,102      $ 42,230
                                              ========      ========      ========      ========
</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, 2000:

<TABLE>
          <S>                                                              <C>
          Loans due after 1 year with predetermined interest rates         $15,542

          Loans due after 1 year with floating interest rates              $ 1,922
</TABLE>

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. At December 31, 2000, the Bank
had ten loans aggregating $161,000 accounted for on a nonaccrual basis, and ten
loans aggregating $98,000 that were past due 90 days or more as to principal or
interest and were still accruing. At December 31, 1999, the Bank had nine loans
aggregating $1,140,000 accounted for on a nonaccrual basis, and there was one
loan aggregating $5,075 that was past due 90 days or more as to principal or
interest and was still accruing. Additional interest income of $19,900 in 2000
and $15,583 in 1999 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 2000 or 1999 on loans that have been
accounted for on a nonaccrual basis.

At December 31, 2000 and 1999, 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>   10

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>
                                                              Summary of Loan Loss Experience
                                                              -------------------------------
                                                                       December 31,
                                                                    2000          1999
                                                                  --------      --------
                                                                      (In thousands)

<S>                                                               <C>           <C>
Allowance for loan losses, beginning of year                      $  1,000      $    835

Charge-offs:
 Commercial, financial and agricultural
      (primarily single payment)                                      (195)           --
  Installment and consumer                                             (26)          (15)
  Credit cards                                                          --            (6)
                                                                  --------      --------
                                                                      (221)          (21)
                                                                  --------      --------
Recoveries:
  Commercial, financial and agricultural (primarily
   single payment)                                                       1             2
  Installment and consumer                                              52            68
  Credit cards                                                           1             1
                                                                  --------      --------
                                                                        54            71
                                                                  --------      --------

Net (charge-offs) recovery                                            (167)           50
                                                                  --------      --------
Provision charged to operations                                        361           115
                                                                  --------      --------

Allowance for loan losses, end of year                            $  1,194      $  1,000
                                                                  ========      ========

Ratio of net charge-offs (recoveries) during the period
 to average loans outstanding during the period                      (0.25)%       (0.16)%
</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.


                                       10
<PAGE>   11

Accordingly, management has established an allowance for loan losses, which
totaled approximately $1.2 million at December 31, 2000, which is allocated
according to the following table:

<TABLE>
<CAPTION>
                                              Allowance for Loan Losses
                                              -------------------------
                                                       Percent of Loans
                                                       In Each Category
                                                Amount  To Total Loans
                                                ------  --------------
                                           (Dollar amounts in thousands)

<S>                                             <C>          <C>
Commercial, financial and agricultural          $  181          34%
Real estate - construction                         356          24
Real estate - mortgage                             368          30
Installment and consumer                            75          12
Unallocated                                        214          --
                                                ------       -----

                   Total                        $1,194       100.0%
                                                ======       =====
</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 33.5% 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,
2000, over 90% of the Bank's commercial loans were made on a secured basis.
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 installment and consumer loan portfolio is also well secured. At
December 31, 2000 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 29.8% of outstanding loans. These loans
include both commercial and residential mortgage loans. The remaining portion of
this category consists of commercial real estate 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 24.1% of the
Bank's outstanding loans at December 31, 2000. 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.

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


                                       11
<PAGE>   12

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, 2000, investment securities comprised approximately 12.3% of
the Bank's assets, with loans comprising approximately 76.9% 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,
                                                             ----------------------
                                                               2000          1999
                                                             --------      --------
                                                          (Dollar amounts in thousands)

<S>                                                          <C>           <C>
Obligations of the U.S. Treasury and
     other U.S. government agencies                          $ 11,150      $ 11,073
Mortgage-backed securities                                      2,616           420
Obligations of States and political subdivisions                   --           806
                                                             --------      --------
                                                               13,766        12,299
Federal Home Loan Bank stock                                      554           137
                                                             --------      --------

              Total                                          $ 14,320      $ 12,436
                                                             ========      ========
</TABLE>


                                       12
<PAGE>   13

The following tables present the contractual maturities and weighted average
yields of the Bank's investments:

<TABLE>
<CAPTION>
                                                          Maturities of Investment Securities
                                                      -------------------------------------------
                                                                            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                     $ --      $5,375      $5,774      $   --
Mortgage-backed securities                                --         287       1,371         960
Obligations of States and political subdivisions          --          --          --          --
Federal Home Loan Bank stock                              --          --          --         554
                                                        ----      ------      ------      ------
              Total                                     $ --      $5,662      $7,145      $1,514
                                                        ====      ======      ======      ======
</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                         --%       6.10%       6.39%        - %
Mortgage-backed securities                                  --        5.47        7.01        5.04
Obligations of States and political subdivisions            --          --          --          --
Federal Home Loan Bank stock                                --          --          --        7.50
                                                          ----        ----        ----        ----
              Total weighted average yield                  --%       6.06%       6.51%       7.29%
                                                          ====        ====        ====        ====
</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 at or as of the end of the past two fiscal years.

<TABLE>
<CAPTION>
                                  December 31,
                               ------------------
Ratio                           2000        1999
-----                          ------      ------

<S>                            <C>         <C>
Return on Assets                  .14%        .13%
Return on Equity                 1.19%        .78%
Dividend Payout                     -%          -%
Equity to Assets                 11.6%      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 to support asset growth primarily through growth of core deposits,
which include deposits of all categories made by


                                       13
<PAGE>   14

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, which is located at 1043 Washington Road, in Thomson,
Georgia, 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 December 2000, the Bank completed
construction of the Medical Center Office on Walton Way in Augusta which opened
for business in January 2001. 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 expected to begin in the second half of 2001.


                                       14
<PAGE>   15

EMPLOYEES

The Bank employs 102 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 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>   16

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 State of Georgia has adopted an interstate banking statute
allowing banks to branch interstate through mergers, consolidations and
acquisitions. The State of Georgia has adopted an interstate banking statute
authorizing bank holding companies located throughout the United States to
acquire banks and bank holding companies located in Georgia under certain
circumstances. Establishment of de novo bank branches in Georgia by out-of-state
financial institutions is not permitted under Georgia law.

A bank holding company which has not elected to become a financial holding
company ("FHC") 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, non-FHC 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.

The Company is also regulated by the Georgia Banking Department under the
Financial Institutions Code of Georgia, which requires a Georgia bank holding
company to obtain the prior approval of the Georgia Banking Department before
(i) acquiring 5% or more of the voting shares of any bank; or (ii) all or
substantially all of the assets of a bank; or (iii) before merging or
consolidating with any other bank holding company; or (iv) taking any action
that causes any company to become a subsidiary of a bank holding company; or (v)
taking any action that causes a bank to become a subsidiary of a bank holding
company. A Georgia bank holding company is generally prohibited from acquiring
ownership or control of 5% or more


                                       16
<PAGE>   17

of the voting shares of any bank unless the bank being acquired has been in
existence and continuously operating as a bank for a period of five years or
more prior to the date of acquisition is either (i) a "bank" for purposes of the
federal Bank Holding Company Act of 1956 or (ii) a "savings and loan," a "state
savings and loan," a "savings bank," or a "federal savings bank" whose deposits
are insured by the federal deposit insurance program.

The Bank is also subject to the Georgia banking and usury laws restricting the
amount of interest which it may charge in making loans or other extensions of
credit. In addition, the Bank, as a subsidiary of the Company, is subject to
restrictions under federal law in dealing with the Company and other affiliates,
if any. These restrictions apply to extensions of credit to an affiliate,
investments in the securities of an affiliate, and the purchase of assets from
an affiliate.

Gramm-Leach-Bliley

The Gramm-Leach-Bliley Act, enacted on November 12, 1999, eliminates the
barriers erected by the 1933 Glass-Steagall Act and amends the Bank Holding
Company Act of 1956 and the Securities Exchange Act of 1934, among other
statutes. The Gramm-Leach-Bliley Act allows for the affiliation of banking,
securities and insurance activities in new financial services organizations. A
dominant theme of the Gramm-Leach- Bliley Act is the functional regulation of
financial services, with the primary regulator of the Company being the agency
which traditionally regulates the activity in which the Company wishes to
engage.

The Gramm-Leach-Bliley Act permits the Company to engage in activities that are
"financial in nature." Such activities include security and insurance
underwriting, investment banking, and limited merchant banking investing in
commercial and industrial companies. To be eligible for such activities, the
Company must qualify as a FHC and file a declaration as a FHC with the Federal
Reserve. To qualify as a FHC, the Company must be "well-capitalized," "well
managed" and have at least a satisfactory rating under the Community
Reinvestment Act. Further, the Company, if it elects FHC status, can pursue
additional activities which are incidental or complementary in nature to a
financial activity, or which the Federal Reserve subsequently determines to be
financial in nature. The Gramm-Leach-Bliley Act also allows the Bank, with OCC
approval, to control or hold an interest in a "financial subsidiary" which may
engage in, among other things, the activities specified in the
Gramm-Leach-Bliley Act as being financial in nature. However, a financial
subsidiary is not permitted to engage in activities such as insurance
underwriting or annuity issuance, real estate development, investment
activities, or merchant banking activities. In addition, any financial
subsidiary of the Bank would generally be treated as an affiliate of the Bank,
rather than as a subsidiary, for purposes of affiliate transaction restrictions
of the Federal Reserve Act.

It is expected that the Gramm-Leach-Bliley Act will facilitate further
consolidation in the financial services industry on both a national and
international basis, and will cause existing bank holding companies to
restructure their existing activities in order to take advantage of the new
powers granted and comply with their attendant requirements and conditions.

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


                                       17
<PAGE>   18

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.

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


                                       18
<PAGE>   19

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, 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 FDICA
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


                                       19
<PAGE>   20

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 FDIC has 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:

<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 FDICA, 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-


                                       20
<PAGE>   21

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, which is located at 1043 Washington Road, in Thomson, Georgia,
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 December 2000, the Bank completed
construction of the Medical Center Office on Walton Way in Augusta which opened
for business in January 2001. 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 expected to begin in the second half of 2001.

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, 2000 to a
vote of security holders of the Company.


                                       21
<PAGE>   22

                                     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.

<TABLE>
<CAPTION>
                                                                   HIGH          LOW
                                                                   ----          ---
             <S>                                                  <C>           <C>
             Fiscal year ended December 31, 1999
                  Second Quarter .........................        $13.50        $11.75
                  Third Quarter ..........................        $13.50        $11.75
                  Fourth Quarter .........................        $13.50        $11.75
             Fiscal year ended December 31, 2000
                  First Quarter ..........................        $12.87        $12.00
                  Second Quarter .........................        $12.00        $10.75
                  Third Quarter ..........................        $12.50        $ 8.75
                  Fourth Quarter .........................        $12.50        $11.00
</TABLE>

     B.  HOLDERS OF COMMON STOCK

         As of March 30, 2001, the number of holders of record of the Company's
         common stock was 737.

     C.  DIVIDENDS

         No dividends have been paid by the Company during the years ended
         December 31, 2000 or 1999.

         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.


                                       22
<PAGE>   23

         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 December 27, 2000, the Company issued 4,000 shares of its common
         stock to Mills Family, L.P. as a result of the exercise of certain
         non-qualified options. The Company received $40,000 in consideration of
         this issuance. The issuance of the common stock was made in reliance
         upon the exception from registration provided by 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
         recipient thereof for investment and with no view toward the resale or
         distribution thereof. The purchaser had a preexisting relationship with
         the Company and its founders, the offer and sale was made without any
         public solicitation, and the stock certificate bears a restrictive
         legend. 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"
and "Financial Statements" sections 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, 2000 and 1999 is presented
below:

<TABLE>
<CAPTION>
                                              2000                           1999
                                  -------------------------       -----------------------
                                     Total            Net           Total           Net
                                    Assets          Income         Assets          Income
                                  ----------        ------        ---------        ------
                                                (Dollar amounts in thousands)
      <S>                         <C>               <C>           <C>              <C>
      Consolidated                $  116,509        $  127        $  72,719        $  71

      Bank only                   $  116,485        $  157        $  72,708        $  95
</TABLE>

During 2000, the Company funded operational costs through internally generated
funds. The Company incurred approximately $41,000 in operational costs for the
year ended December 31, 2000. The Company recorded an income tax benefit of
$11,000, resulting in a net loss of $30,000 for 2000. The Company did not
receive any revenue in dividends from the Bank in 2000.


                                       23
<PAGE>   24

During 1999, the Company completed an "any and all" best efforts public offering
of its common stock. The Company sold 296,370 shares and received gross proceeds
of $4,000,995. After offering expenses the Company retained approximately $3.8
million of the proceeds and contributed approximately $3.6 million of this to
the Bank as additional capital.

THE BANK

RESULTS OF OPERATIONS

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 and were $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 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 and was
$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 and was 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 and are
originated with a sales commitment and are sold in the secondary market shortly
after origination. As such, the Bank believes that credit risk associated with
these loans is minimal. The Bank's ratio of allowance for loan losses to gross
loans, excluding loans held for sale, was 1.63% at December 31, 2000.

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.


                                       24
<PAGE>   25

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.

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.

1999 Compared to 1998

For the year ended December 31, 1999, assets increased and earnings decreased.
Total assets increased 59.0% to $72,708,000 at December 31, 1999, from
$45,797,000 at December 31, 1998. Average total assets were $54,777,000 for 1999
and were $43,531,000 for 1998, an increase of $11,246,000 or 25.8%. This
increase in assets is reflected in increases in federal funds sold, net loans
and bank premises and equipment. Bank premises and equipment increased
$1,589,000, or 64.7%, from $2,457,000 at December 31, 1998 to $4,046,000 at
December 31, 1999. This increase resulted from the Bank opening two new
locations in Augusta, Georgia and Martinez, Georgia during 1999. Net loans
increased $22,040,000 in 1998 to $35,093,000 in 1999, a change of $13,053,000 or
59.2%. The increase was a direct result of the Bank's expansion to new market
areas through the opening of two new locations during 1999. Commercial loans
increased $6,499,000, or 163.7%, from 1998. Real estate mortgage loans increased
$5,949,000, or 59.0%, from 1998. These increases were the result of the Bank's
continuing efforts to obtain these types of lending opportunities.

The allowance for loan losses was $1,000,000 at December 31, 1999 and was
$835,000 at December 31, 1998. This represents an increase of $165,000 or 19.8%.
The increase in the allowance was 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 2.77% at December 31, 1999 and was 3.65% at December
31, 1998.


                                       25
<PAGE>   26

The asset growth of the Bank during 1999 was funded through additional capital
provided by the Company, and through deposit account growth resulting from the
Bank's expansion to new market areas. Total deposit accounts at December 31,
1999 were $58,844,000, an increase of $21,108,000, or 56%, from $37,736,000 at
December 31, 1998.

The Bank's loan to deposit ratio was 58.9% at December 31, 1999 and 62.3% at
December 31, 1998.

Interest income was $3,911,000 for the year ended December 31, 1999, compared to
$3,305,000 for 1998. This represents an increase of $606,000, or 18.3%. This
increase was primarily attributable to a net volume increase in interest income
from loans of $586,000. Interest expense increased $257,000, or 18.4%, from
$1,400,000 for 1998 to $1,657,000 for 1999. This increase resulted primarily
from the effects of volume and rate increases in money market accounts and time
deposits. Non-interest bearing deposits increased $4,037,000 from 1998 to 1999.
Net interest income for the year ended December 31, 1999 was $2,254,000,
representing an increase of $349,000, or 18.3%, from $1,905,000 for the year
ended December 31, 1998.

Noninterest income increased from $312,000 in 1998 to $372,000 in 1999, an
increase of $60,000 or 19%. This increase was primarily due to an increase in
service charges resulting from deposit account growth.

Noninterest expense increased from $1,931,000 in 1998 to $2,400,000 in 1999, an
increase of $469,000 or 24.3%. The increase primarily resulted from increased
personnel and occupancy costs resulting from the opening of two new locations
during 1999.

Net income declined $106,000 or 53% from $201,000 in 1998 to $95,000 in 1999
principally as a result of the increase in noninterest expense discussed above.

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, 2000, the Bank's liquidity ratio was 31.5% as compared to
47.2% at December 31, 1999. 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, 2000 with a
market value of $14.3 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"


                                       26
<PAGE>   27

is the difference between rate sensitive assets and rate sensitive liabilities
in a given time horizon. At December 31, 2000, 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, 2000 (in thousands):

<TABLE>
<CAPTION>
                                                                                                      5 years
                                                             0-3 mos.    3-12 mos.     1-5 years      or more         Total
                                                            ---------    ---------     ---------      --------      --------
<S>                                                         <C>          <C>           <C>            <C>           <C>
Taxable securities                                          $    --      $     --       $  5,662       $ 8,658      $ 14,320
Tax-exempt securities                                            --            --             --            --            --
Federal funds sold                                               --            --             --            --            --
Loans                                                        53,719         2,006         26,207         8,859        90,791
                                                            -------      --------       --------       -------      --------
              Total rate sensitive assets                    53,719         2,006         31,869        17,517       105,111

NOW and money market deposits                                19,565            --             --            --        19,565
Savings deposits                                              5,045            --             --            --         5,045
Time deposits                                                 6,773        28,212          9,615             9        44,609
                                                            -------      --------       --------       -------      --------
              Total rate sensitive deposits                  31,383        28,212          9,615             9        69,219

Borrowed funds                                               18,512            --             --            --        18,512
                                                            -------      --------       --------       -------      --------
              Total rate sensitive liabilities               49,895        28,212          9,615             9        87,731

Excess of rate sensitive assets less rate
     sensitive liabilities                                    3,824       (26,206)        22,254        17,508        17,380
Cumulative ratio of rate sensitive assets
     to liabilities                                             108%           71%            99%          120%           --
Cumulative gap                                                3,824       (22,382)          (128)       17,380            --
</TABLE>

CAPITAL RESOURCES

The equity capital of the Company totaled $11,227,000 at December 31, 2000. The
Company was formed in 1997 as a holding company of the subsidiary bank. In
effecting the transaction of establishing the holding company, as previously
described in reports filed with the Commission, 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 as each
stockholder's ownership of the Company was consistent with the previous
ownership of the Bank. The transaction has been 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 $11,127,000 at December 31, 2000, an
increase of $375,000 or 3.5% from equity capital of $10,752,000 at December 31,
1999. The increase in equity capital was attributable to the Bank's net income
of $157,000, and a decrease of $217,000 in the Bank's unrealized loss 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.


                                       27
<PAGE>   28

Management believes that the Bank's capitalization is adequate to sustain growth
experienced in 2000. The following table sets forth the applicable required
capital ratios for the Company and the Bank and the actual capital ratios for
the Bank as of December 31, 2000:

<TABLE>
<CAPTION>
                               Leverage Ratio             Tier I Capital           Risk-Based Capital
                            --------------------       ---------------------     ---------------------
                            Regulatory                 Regulatory                Regulatory
                             Minimum      Actual        Minimum       Actual      Minimum       Actual
                            ----------    ------       ----------     ------     ----------     ------

<S>                         <C>           <C>          <C>            <C>        <C>            <C>
                              4.0%        12.7%          4.0%         10.51%        8.0%        13.95%
</TABLE>

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

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, 2000 and 1999

         Consolidated Statements of Income for the years ended
            December 31, 2000, 1999 and 1998

         Consolidated Statements of Comprehensive Income (Loss)
            for the years ended December 31, 2000, 1999 and 1998

         Consolidated Statements of Shareholders' Equity for
            the years ended December 31, 2000, 1999 and 1998

         Consolidated Statements of Cash Flows for the years ended
            December 31, 2000, 1999 and 1998

         Notes to Consolidated Financial Statements


                                       28

<PAGE>   29

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

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

We have audited the accompanying consolidated statements of financial condition
of GEORGIA- CAROLINA BANCSHARES, INC. as of December 31, 2000 and 1999, 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, 2000. 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 generally accepted auditing
standards. 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, 2000 and 1999, and the results of their
operations and cash flows for each of the years in the three-year period ended
December 31, 2000, in conformity with generally accepted accounting principles.



/s/ CHERRY, BEKAERT & HOLLAND, L.L.P.

Augusta, Georgia
January 19, 2001


                                       29
<PAGE>   30

                        GEORGIA-CAROLINA BANCSHARES, INC.

                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

                           DECEMBER 31, 2000 AND 1999
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)




<TABLE>
<CAPTION>
                                                       ASSETS
                                                                                          2000               1999
                                                                                        ----------         ---------
<S>                                                                                     <C>                <C>
Cash and due from banks                                                                 $    5,522         $   3,271
Federal funds sold                                                                              --            17,010
Securities available-for-sale                                                               14,320            12,436
Loans, net of allowance for loan losses                                                     71,987            35,093
Loans held for sale                                                                         17,610                --
Bank premises and fixed assets                                                               5,549             4,046
Accrued interest receivable                                                                    596               408
Foreclosed real estate, net of allowance                                                       483                --
Deferred tax asset, net                                                                        202               367
Other assets                                                                                   240                88
                                                                                        ----------         ---------

              TOTAL ASSETS                                                              $  116,509         $  72,719
                                                                                        ==========         =========

                                       LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
     Non-interest bearing                                                               $   16,269         $   5,735
     Interest-bearing:
         NOW accounts                                                                       10,342             7,893
         Savings                                                                             5,045             2,593
         Money market accounts                                                               9,223            10,645
         Time deposits of $100,000, and over                                                10,696             8,850
         Other time deposits                                                                33,913            23,128
                                                                                        ----------         ---------
              Total deposits                                                                85,488            58,844
Other liabilities, borrowings and retail agreements                                         19,794             3,032
                                                                                        ----------         ---------
              Total liabilities                                                            105,282            61,876
                                                                                        ----------         ---------

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;
      935,750 and 931,750 shares issued and outstanding                                          1                 1
     Additional paid-in capital                                                             10,228            10,188
     Retained earnings                                                                       1,091               964
     Accumulated other comprehensive income (loss)                                             (93)             (310)
                                                                                        ----------         ---------
              Total shareholders' equity                                                    11,227            10,843
                                                                                        ----------         ---------

              TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                $  116,509         $  72,719
                                                                                        ==========         =========
</TABLE>

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


                                       30
<PAGE>   31

                        GEORGIA-CAROLINA BANCSHARES, INC.

                        CONSOLIDATED STATEMENTS OF INCOME

                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                                 2000          1999          1998
                                                                                ------        ------        ------
<S>                                                                             <C>           <C>           <C>
INTEREST INCOME
     Interest and fees on loans                                                 $6,203        $2,818        $2,232
     Interest on taxable securities                                                817           772           846
     Interest on nontaxable securities                                              25            37            51
     Interest on Federal funds sold                                                167           284           169
     Interest on deposits in other banks                                            --            --             7
                                                                                ------        ------        ------
              TOTAL INTEREST INCOME                                              7,212         3,911         3,305
                                                                                ------        ------        ------

INTEREST EXPENSE
     Interest on time deposits of $100,000, or more                                596           282           244
     Interest on other deposits                                                  2,466         1,369         1,156
     Interest on funds purchased and other borrowings                              603             6            --
                                                                                ------        ------        ------
              TOTAL INTEREST EXPENSE                                             3,665         1,657         1,400
                                                                                ------        ------        ------

              NET INTEREST INCOME                                                3,547         2,254         1,905

PROVISION FOR LOAN LOSSES                                                          361           115            --
                                                                                ------        ------        ------

              NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES                3,186         2,139         1,905
                                                                                ------        ------        ------

NONINTEREST INCOME
     Service charges on deposits                                                   330           303           260
     Gain on sale of mortgage loans, and other income                            2,126            69            64
     Net realized gain (loss), sales of available-for-sale securities               --            --           (12)
                                                                                ------        ------        ------
                                                                                 2,456           372           312
                                                                                ------        ------        ------

NONINTEREST EXPENSE
     Salaries and employee benefits                                              3,404         1,238         1,021
     Occupancy expenses                                                            595           304           195
     Securities offering expenses                                                   --            --           219
     Other expenses                                                              1,470           886           727
                                                                                ------        ------        ------
                                                                                 5,469         2,428         2,162
                                                                                ------        ------        ------

INCOME BEFORE INCOME TAXES                                                         173            83            55

INCOME TAX EXPENSE                                                                  46            12             7
                                                                                ------        ------        ------

              NET INCOME                                                        $  127        $   71        $   48
                                                                                ======        ======        ======

EARNINGS PER SHARE:
     Net income, basic                                                          $  .14        $  .08        $  .08
                                                                                ======        ======        ======
     Net income, diluted                                                        $  .13        $  .08        $  .07
                                                                                ======        ======        ======
</TABLE>

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


                                       31
<PAGE>   32

                        GEORGIA-CAROLINA BANCSHARES, INC.

             CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)


<TABLE>
<CAPTION>
                                                                              2000          1999           1998
                                                                              -----        ------         -----
<S>                                                                           <C>          <C>            <C>
Net income                                                                    $ 127        $   71         $  48

Unrealized holding gains (losses) arising during period
 less reclassification adjustment for gains and losses included
 in net income, net of tax                                                      217          (442)          156
                                                                              -----        ------         -----

Comprehensive income (loss)                                                   $ 344        $ (371)        $ 204
                                                                              =====        ======         =====
</TABLE>

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


                                       32
<PAGE>   33

                        GEORGIA-CAROLINA BANCSHARES, INC.

                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                                           Accumulated
                                                 Common Stock     Additional                  Other          Total
                                              -------------------   Paid-in     Retained  Comprehensive  Shareholders'
                                               Shares   Par Value   Capital     Earnings      Income         Equity
                                              -------   --------- ----------    --------  -------------  -------------
<S>                                           <C>       <C>       <C>           <C>       <C>            <C>
BALANCE, DECEMBER 31, 1997                    635,380      $ 1      $ 6,354      $   908       $  15        $  7,278

Net income                                         --       --           --           48          --              48

Change in unrealized gain (loss)
 on securities available-for-sale,
 net of deferred taxes                             --       --           --           --         117             117

Cash dividend of $.10 per
 share                                             --       --           --          (63)         --             (63)
                                              -------      ---      -------      -------       -----        --------

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

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


                                       33
<PAGE>   34

                        GEORGIA-CAROLINA BANCSHARES, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                                     2000             1999             1998
                                                                                   --------         --------         -------
<S>                                                                                <C>              <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES
     Net income                                                                    $    127         $     71         $    48
     Adjustments to reconcile net income to net cash
      provided by operating activities:
         Depreciation and amortization                                                  278              174             102
         Provision for loan losses                                                      361              115              --
         Net realized (gain) loss on available-for-sale securities                       --               --              12
         Deferred income tax                                                             40                7              --
         Other gains and losses, net                                                     --              (10)             21
         Net decrease (increase) in accrued interest receivable                        (188)             (29)              2
         Net (decrease) increase in accrued interest payable                            652              114              98
         Net change in other assets and liabilities                                     (60)             111            (131)
                                                                                   --------         --------         -------
              NET CASH PROVIDED BY OPERATING ACTIVITIES                               1,210              553             152
                                                                                   --------         --------         -------

CASH FLOWS FROM INVESTING ACTIVITIES
     Net decrease in interest-bearing deposits with banks                                --               --             100
     Net (increase) decrease in federal funds sold                                   17,010          (12,270)           (990)
     Net (increase) decrease in loans                                               (55,348)         (13,168)         (3,068)
     Purchases of available-for-sale securities                                      (2,746)              (5)         (9,895)
     Proceeds from sales of available-for-sale securities                             1,055              307           3,464
     Proceeds from maturities of available-for-sale securities                          136              800           6,166
     Proceeds from sale of foreclosed real estate                                        --              263              32
     Net purchases of premises and equipment                                         (1,781)          (1,763)         (1,113)
                                                                                   --------         --------         -------
              NET CASH USED IN INVESTING ACTIVITIES                                 (41,674)         (25,836)         (5,304)
                                                                                   --------         --------         -------

CASH FLOWS FROM FINANCING ACTIVITIES
     Net increase in deposits and funds purchased                                    42,675           23,590           4,799
     Proceeds from issuance of common stock, net of offering costs                       --            3,834              --
     Proceeds from stock options exercised                                               40               --              --
     Dividends paid                                                                      --               --             (63)
                                                                                   --------         --------         -------
              NET CASH PROVIDED BY FINANCING ACTIVITIES                              42,715           27,424           4,736
                                                                                   --------         --------         -------

              NET INCREASE (DECREASE) IN CASH AND DUE FROM BANKS                      2,251            2,141            (416)

CASH AND DUE FROM BANKS AT BEGINNING OF YEAR                                          3,271            1,130           1,546
                                                                                   --------         --------         -------

CASH AND DUE FROM BANKS AT END OF YEAR                                             $  5,522         $  3,271         $ 1,130
                                                                                   ========         ========         =======
</TABLE>

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


                                       34
<PAGE>   35

                        GEORGIA-CAROLINA BANCSHARES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2000 AND 1999

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 has locations in Augusta, Warner Robins and Savannah,
Georgia. 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.

During February 1998, the Company commenced a process for the public offering of
shares of its common stock, ultimately filing for registration of the stock with
the Securities and Exchange Commission (SEC). The Company subsequently withdrew
the registration and charged $219,000 of stock issuance costs to expense in
1998.

At the end of 1998, the Company filed with the 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 intercompany
transactions and accounts are eliminated in consolidation. The accounting and
reporting policies of the Bank conform to generally accepted accounting
principles and general practices within the banking industry.

ESTIMATES - The preparation of financial statements in conformity with generally
accepted accounting principles 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.


                                       35
<PAGE>   36

                        GEORGIA-CAROLINA BANCSHARES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2000 AND 1999

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 at a net amount as a separate
     component of shareholders' equity.

     Securities to be 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 available-for-sale 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 nonaccrual 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.


                                       36
<PAGE>   37

                        GEORGIA-CAROLINA BANCSHARES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2000 AND 1999

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. During 1998, the Company adopted
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


                                       37
<PAGE>   38

                        GEORGIA-CAROLINA BANCSHARES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2000 AND 1999

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

future cash flows. 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. The components of other
comprehensive income and related tax effects for each of the years ended
December 31 are as follows:

<TABLE>
<CAPTION>
                                                      2000           1999           1998
                                                     ------         ------         ------
                                                                 (In thousands)
<S>                                                  <C>            <C>            <C>
Unrealized holding gains (losses) on
 available-for-sale securities                       $  333         $ (669)        $  177
Tax effect                                             (116)           227            (60)
                                                     ------         ------         ------

Net of tax amount                                    $  217         $ (442)        $  117
                                                     ======         ======         ======
</TABLE>

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


                                       38
<PAGE>   39

                        GEORGIA-CAROLINA BANCSHARES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2000 AND 1999

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

subsequent amendments to the Statement will be adopted by the Company for the
year ending December 31, 2001. Management of the Company does not expect the
adoption of this Statement to have a significant impact on the Company's
financial reporting or operations.

NOTE 2 - INVESTMENT SECURITIES

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

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

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

<TABLE>
<CAPTION>
                                                                                  1999
                                                          ------------------------------------------------------
                                                                           Gross         Gross
                                                          Amortized     Unrealized    Unrealized         Market
                                                            Cost           Gains         Losses           Value
                                                          ---------     ----------    ----------        --------
                                                                          (In thousands)
<S>                                                       <C>           <C>           <C>               <C>
Available-for-sale securities:
  U.S. Government and agency securities                    $ 11,534        $  --         $ (461)        $ 11,073
  State, county and municipal securities                        805            2             (1)             806
  Mortgage-backed securities                                    430            1            (11)             420
  Federal Home Loan Bank stock                                  137           --             --              137
                                                           --------        -----         ------         --------

                                                           $ 12,906        $   3         $ (473)        $ 12,436
                                                           ========        =====         ======         ========
</TABLE>

The amortized cost and fair value of securities as of December 31, 2000, 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.


                                       39
<PAGE>   40

                        GEORGIA-CAROLINA BANCSHARES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2000 AND 1999

NOTE 2 - INVESTMENT SECURITIES (CONTINUED)

<TABLE>
<CAPTION>
                                                                                                      Securities
                                                                                                  Available-for-Sale
                                                                                              --------------------------
                                                                                             Amortized            Fair
                                                                                                Cost              Value
                                                                                             ---------          --------
                                                                                                    (In thousands)
         <S>                                                                                 <C>                <C>
         One year or less                                                                     $     --          $     --
         After one year through five years                                                       5,416             5,375
         After five years through ten years                                                      5,869             5,774
         After ten years                                                                           554               554
         Mortgage-backed securities                                                              2,621             2,617
                                                                                              --------          --------

                                                                                              $ 14,460          $ 14,320
                                                                                              ========          ========
</TABLE>

Securities with a carrying amount of approximately $3.9 million and $5.9 million
at December 31, 2000 and 1999, respectively, were pledged to secure public
deposits and for other purposes.

Net realized gains (losses) on sales of securities available-for-sale were: (In
thousands)

<TABLE>
                           <S>                                         <C>
                           2000                                        $  --
                           1999                                           --
                           1998                                          (12)
</TABLE>

NOTE 3 - LOANS

The composition of loans is summarized as follows:

<TABLE>
<CAPTION>
                                                                                                      December 31
                                                                                              ---------           ---------
                                                                                                 2000                1999
                                                                                              ---------           ---------
                                                                                                     (In thousands)
         <S>                                                                                  <C>                 <C>
         Commercial and industrial                                                            $  24,582           $  10,468
         Real estate - construction                                                              17,648               5,458
         Real estate - mortgage                                                                  21,850              16,033
         Consumer                                                                                 9,247               4,159
                                                                                              ---------           ---------
                                                                                                 73,327              36,118
         Unearned income                                                                           (146)                (25)
                                                                                              ---------           ---------
                                                                                                 73,181              36,093
         Allowance for loan losses                                                               (1,194)             (1,000)
                                                                                              ---------           ---------

             Loans, net                                                                       $  71,987           $  35,093
                                                                                              =========           =========
</TABLE>


                                       40
<PAGE>   41

                        GEORGIA-CAROLINA BANCSHARES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2000 AND 1999

NOTE 3 - LOANS (CONTINUED)

Changes in the allowance for loan losses were as follows:

<TABLE>
<CAPTION>
                                                                                            December 31
                                                                            --------------------------------------------
                                                                              2000               1999              1998
                                                                            --------           --------           ------
                                                                                            (In thousands)
         <S>                                                                <C>                <C>                <C>
         Balance, beginning of year                                         $  1,000           $    835           $  752
         Provision charged to operations                                         361                115               --
         Recoveries                                                               53                 71              120
         Loans charged off                                                      (220)               (21)             (37)
                                                                            --------           --------           ------

                  Balance, end of year                                      $  1,194           $  1,000           $  835
                                                                            ========           ========           ======
</TABLE>

Loans for which the accrual of interest had been discontinued or reduced
amounted to approximately $161,000 and $1,140,000 at December 31, 2000 and 1999,
respectively. There was no significant reduction in interest income associated
with nonaccrual and renegotiated loans. There were no loans identified as
impaired under SFAS 114 at December 31, 2000 or 1999.

At December 31, 2000, executive officers and directors, and companies in which
they have a beneficial ownership, were indebted to the Bank in the aggregate
amount of $759,000. 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 2000 and 1999:

<TABLE>
<CAPTION>
                                                                                               2000            1999
                                                                                              ------          ------
                                                                                                  (In thousands)
         <S>                                                                                  <C>             <C>
         Balance, beginning of year                                                           $  681          $  459
             Advances                                                                            137             402
             Repayments                                                                           59             180
                                                                                              ------          ------

         Balance, end of year                                                                 $  759          $  681
                                                                                              ======          ======
</TABLE>

NOTE 4 - FORECLOSED REAL ESTATE

A summary of foreclosed real estate is as follows:

<TABLE>
<CAPTION>
                                                                                          December 31
                                                                            -------------------------------------
                                                                             2000            1999           1998
                                                                            ------          -----          ------
                                                                                        (In thousands)
         <S>                                                                <C>             <C>            <C>
         Carrying amount of property                                        $  483          $  --          $  283

         Less, valuation allowance                                              --             --              30
                                                                            ------          -----          ------

                                                                            $  483          $  --          $  253
                                                                            ======          =====          ======
</TABLE>

The provision charged to income, net of recoveries and charge offs, amounted to
approximately $0 and $13,000 for the years ended December 31, 1999 and 1998,
respectively. There was no provision charged to income for the year ended
December 31, 2000.


                                       41
<PAGE>   42

                        GEORGIA-CAROLINA BANCSHARES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2000 AND 1999

NOTE 5 - BANK PREMISES AND EQUIPMENT

Bank premises and equipment consists of the following:

<TABLE>
<CAPTION>
                                                                                                      December 31
                                                                                              ---------------------------
                                                                                                2000               1999
                                                                                              --------           --------
                                                                                                    (In thousands)
         <S>                                                                                  <C>                <C>
         Land                                                                                 $  2,214           $  1,292
         Building and improvements                                                               2,555              2,518
         Equipment, furniture & fixtures                                                         1,905              1,518
         Construction in progress                                                                  409                 --
                                                                                              --------           --------
                  Total cost                                                                     7,083              5,328
         Less accumulated depreciation                                                          (1,534)            (1,282)
                                                                                              --------           --------

                  Premises and equipment, net                                                 $  5,549           $  4,046
                                                                                              ========           ========
</TABLE>

NOTE 6 - DEPOSITS

At December 31, 2000, the scheduled maturities of time deposit liabilities were
as follows:

<TABLE>
<CAPTION>
                                                                             (In thousands)
         <S>                                                            <C>
         2001                                                              $  35,007
         2002                                                                  8,863
         2003                                                                    535
         2004                                                                     84
         2005 and thereafter                                                     120
                                                                           ---------

                                                                           $  44,609
                                                                           =========
</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 - 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 contribution for the three years ended December 31, 2000, was
approximately $15,000 per year.

NOTE 8 - SHAREHOLDERS' EQUITY AND REGULATORY MATTERS

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.
Approximately $78,000 is available to be paid as dividends at December 31, 2000,
without prior regulatory approval.


                                       42
<PAGE>   43

                        GEORGIA-CAROLINA BANCSHARES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2000 AND 1999

NOTE 8 - SHAREHOLDERS' EQUITY AND REGULATORY MATTERS (CONTINUED)

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.

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, 2000, the Bank
meets all capital adequacy requirements to which it is subject.

As of December 31, 2000, 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-
                                                                    Required            Capitalized Under
                                                                   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)              $  12,325    13.95%    $  7,069     8.0%      $  8,836      10.0%
 Tier I capital
   (To Risk Weighted Assets)                 11,219    10.51%       4,270     4.0%         5,338       6.0%
 Tier I capital
   (To Average Assets)                       11,219    12.70%       3,534     4.0%         5,301       5.0%
</TABLE>

As of December 31, 1999, the Bank's actual regulatory capital ratios were as
follows:

<TABLE>
         <S>                                                     <C>
         Total capital (to Risk Weighted Assets)                 26.1%
         Tier I capital (to Risk Weighted Assets)                24.8%
         Tier I capital (to Average Assets)                      16.5%
</TABLE>

At December 31, 2000 and 1999, the capital ratios for the Company and Bank
consolidated were materially consistent with those presented above.


                                       43
<PAGE>   44

                        GEORGIA-CAROLINA BANCSHARES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2000 AND 1999

NOTE 8 - SHAREHOLDERS' EQUITY AND REGULATORY MATTERS (CONTINUED)

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 100,000 shares.

The Plan provides for the grant of both incentive and nonqualified stock options
on the Company's common stock. 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.

As permitted by (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 Statement 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:

<TABLE>
         <S>                                                        <C>
         Dividend yield                                              1.0%
         Volatility                                                 10.0%
         Risk-free rate                                              7.5%
</TABLE>

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

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>
                                                              2000            1999         1998
                                                             ------          ------       ------
         <S>                                                 <C>             <C>          <C>
         Pro forma net income                                $  119          $   67       $   46
         Pro forma earnings per share                        $  .13          $  .08       $  .07
</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, 2000, 1999 and 1998 follows. Exercise price per
share information is based on weighted averages.


                                       44
<PAGE>   45

                        GEORGIA-CAROLINA BANCSHARES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2000 AND 1999

NOTE 8 - SHAREHOLDERS' EQUITY AND REGULATORY MATTERS (CONTINUED)

<TABLE>
<CAPTION>
                                                              2000                      1999                     1998
                                                     -----------------------  -----------------------   ----------------------
                                                              Exercise Price           Exercise Price           Exercise Price
                                                    Options     per Share     Options     per Share     Options    per Share
                                                    -------   --------------  -------  --------------   ------- --------------
<S>                                                 <C>       <C>             <C>      <C>              <C>     <C>
Outstanding - beginning of year                      25,909      $  13.36       8,500      $  12.10      8,500      $  12.10
Granted                                              14,000         11.89      25,409         13.50         --            --
Expired                                                  --            --       8,000         12.45         --            --
                                                     ------                    ------                    -----

Outstanding - end of year                            39,909         12.81      25,909         13.36      8,500         12.10
                                                     ======                    ======                    =====
</TABLE>

Stock options exercisable and the weighted-average exercise price at December
31, 2000, 1999 and 1998 follows:

<TABLE>
<CAPTION>
                                                          2000               1999               1998
                                                       ---------           --------           -------
         <S>                                           <C>                 <C>                <C>
         Options                                          13,053              6,953             3,000
         Weighted-average exercise price               $   12.94           $  13.34           $ 12.10
</TABLE>

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

<TABLE>
         <S>                                   <C>
         2000                                  $  0.81
         1999                                  $  1.03
         1998                                     None
</TABLE>

At December 31, 2000, options outstanding have exercise prices that range from
$11.50 per share to $13.50 per share. The weighted-average remaining contractual
life of options outstanding at December 31, 2000 was 52 months.

At December 31, 2000, options to purchase 12,000 shares of the Company's common
stock were outstanding from a plan originated prior to the 1997 Plan. The
options are nontransferrable and have exercise prices between ten and twelve
dollars per share and expire during the years 2000 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.


                                       45
<PAGE>   46

                        GEORGIA-CAROLINA BANCSHARES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2000 AND 1999

NOTE 8 - SHAREHOLDERS' EQUITY AND REGULATORY MATTERS (CONTINUED)

<TABLE>
<CAPTION>
                                                                                           2000
                                                                  ---------------------------------------------------
                                                                     Income               Shares            Per-Share
                                                                  (Numerator)         (Denominator)           Amount
                                                                  -----------         -------------         ---------
                                                                   (Dollars in thousands, except per-share amounts)
         <S>                                                        <C>                   <C>                 <C>
         BASIC EPS
         Income available to common stockholders                    $  127                931,783             $  .14
                                                                                                              ======

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

         DILUTED EPS
         Income available to common stockholders
          plus conversions                                          $  127                977,037             $  .13
                                                                    ======                =======             ======
</TABLE>

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

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

     DILUTED EPS
     Income available to common stockholders
      plus conversions                                               $  71                912,495             $ 0.08
                                                                     =====                =======             ======
</TABLE>

<TABLE>
<CAPTION>
                                                                                          1998
                                                                  ---------------------------------------------------
                                                                     Income               Shares            Per-Share
                                                                  (Numerator)         (Denominator)           Amount
                                                                  -----------         -------------         ---------
                                                                   (Dollars in thousands, except per-share amounts)
         <S>                                                        <C>                   <C>                 <C>
     BASIC EPS
     Income available to common stockholders                         $  48               635,380              $ 0.08
                                                                                                              ======

     EFFECT OF STOCK OPTIONS OUTSTANDING                                --                24,500
                                                                     -----               -------

     DILUTED EPS
     Income available to common stockholders
      plus conversions                                               $  48                659,880             $ 0.07
                                                                     =====                =======             ======
</TABLE>


                                       46
<PAGE>   47

                        GEORGIA-CAROLINA BANCSHARES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2000 AND 1999

NOTE 9 - INCOME TAXES

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

<TABLE>
<CAPTION>
                                                                             2000           1999           1998
                                                                            -----          -----          -----
                                                                                      (In thousands)
         <S>                                                                <C>            <C>            <C>
         Current tax                                                        $   6          $   5          $  100
         Deferred tax (benefit)                                                40              7             (93)
                                                                            -----          -----          ------

                                                                            $  46          $  12          $    7
                                                                            =====          =====          ======
</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>
                                                                              2000               1999             1998
                                                                            --------            -----            -----
         <S>                                                                <C>                 <C>              <C>
         Statutory rates                                                        38.0%            38.0%            38.0%
              Tax exempt income                                                 (5.5)           (17.0)           (14.0)
              Nondeductible interest                                              .7              2.1              1.4
              Other, including effect of graduated
               rate brackets                                                    (6.5)            (9.2)           (12.2)
                                                                            --------            -----            -----

                                                                                26.7%            13.9%            13.2%
                                                                            ========            =====            =====
</TABLE>

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

<TABLE>
<CAPTION>
                                                                                               2000            1999
                                                                                              ------          ------
                                                                                                  (In thousands)
         <S>                                                                                  <C>             <C>
         Deferred tax assets
              Allowance for loan losses                                                       $  149          $  198
              Foreclosed real estate allowance                                                    --              --
              Unrealized loss on securities available-for-sale                                    53             159
              Other                                                                               --              10
                                                                                              ------          ------
                  Deferred income tax assets                                                     202             367
                                                                                              ------          ------

         Deferred tax liabilities                                                                 --              --
                                                                                              ------          ------

                  Net deferred income tax asset                                               $  202          $  367
                                                                                              ======          ======
</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 10 - 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


                                       47
<PAGE>   48

                        GEORGIA-CAROLINA BANCSHARES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2000 AND 1999

NOTE 10 - COMMITMENTS AND CONTINGENCIES (CONTINUED)

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>
                                                                                                 2000              1999
                                                                                              ---------          --------
                                                                                                     (In thousands)
         <S>                                                                                  <C>                <C>
         Commitments to extend credit                                                         $  16,564          $  5,123
         Standby letters of credit                                                                   32               104
                                                                                              ---------          --------

                                                                                              $  16,596          $  5,227
                                                                                              =========          ========
</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.

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 11 - SUPPLEMENTAL CONSOLIDATED CASH FLOW INFORMATION

<TABLE>
<CAPTION>
                                                                        2000               1999              1998
                                                                      --------           --------          --------
                                                                         (In thousands)
         <S>                                                          <C>                <C>               <C>
         Income taxes paid                                            $     85           $      5          $     65
         Interest paid                                                $  3,014           $  1,543          $  1,239
</TABLE>

NOTE 12 - 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, are as follows at
December 31, 2000 and 1999 (in millions):


                                       48
<PAGE>   49

                        GEORGIA-CAROLINA BANCSHARES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2000 AND 1999

NOTE 12 - FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

<TABLE>
<CAPTION>
                                                                                 2000                         1999
                                                                        ----------------------      ----------------------
                                                                        Carrying         Fair       Carrying         Fair
                                                                          Amount        Value         Amount        Value
                                                                        --------       -------      --------       -------
         <S>                                                            <C>            <C>          <C>            <C>
         Loans and loans held for sale, net                              $  89.6       $  88.4       $  35.1       $  34.7
                                                                         =======       =======       =======       =======

         Certificates of deposit                                         $  44.6       $  44.5       $  32.0       $  31.8
                                                                         =======       =======       =======       =======
</TABLE>

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

NOTE 13 - OTHER EXPENSES

Other noninterest expenses are as follows:

<TABLE>
<CAPTION>
                                                                                           December 31,
                                                                            ----------------------------------------
                                                                              2000             1999            1998
                                                                            --------          ------          ------
                                                                                          (In thousands)
         <S>                                                                <C>               <C>             <C>
         Data processing                                                    $    236          $  167          $  129
         Legal and accounting                                                     87              81              75
         Printing and supplies                                                   154             107              58
         Advertising                                                             105              64              51
         Telephone                                                                95              42              21
         Outside services                                                         96              39              40
         Other                                                                   697             386             353
                                                                            --------          ------          ------

                                                                            $  1,470          $  886          $  727
                                                                            ========          ======          ======
</TABLE>


                                       49
<PAGE>   50

                       GEORGIA-CAROLINA BANCSHARES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2000 AND 1999

NOTE 14 - CONDENSED FINANCIAL INFORMATION ON GEORGIA-CAROLINA BANCSHARES, INC.
          (PARENT COMPANY ONLY)

                             CONDENSED BALANCE SHEET
                           DECEMBER 31, 2000 AND 1999
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                                 2000              1999
                                                                                              ---------          --------
         <S>                                                                                  <C>                <C>
         ASSETS
             Cash                                                                             $      76          $      78
             Investment in subsidiary                                                            11,127             10,752
             Other assets                                                                            24                  4
             Deferred tax benefit                                                                    --                  9
                                                                                              ---------          ---------

                  TOTAL ASSETS                                                                $  11,227          $  10,843
                                                                                              =========          =========

         LIABILITIES
             Accrued expenses and other liabilities                                           $      --          $      --

         SHAREHOLDERS' EQUITY                                                                    11,227             10,843
                                                                                              ---------          ---------

                  TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                  $  11,227          $  10,843
                                                                                              =========          =========
</TABLE>

                          CONDENSED STATEMENT OF INCOME
                     YEARS ENDED DECEMBER 31, 2000 AND 1999
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                               2000             1999
                                                                                              ------           ------
         <S>                                                                                  <C>                <C>
         INCOME, DIVIDENDS FROM SUBSIDIARY                                                    $   --           $   --

         EXPENSES
             Other                                                                                41               28
                                                                                              ------           ------
                  LOSS BEFORE INCOME TAX BENEFITS AND EQUITY IN
                   UNDISTRIBUTED EARNINGS OF SUBSIDIARY                                          (41)             (28)

         INCOME TAX BENEFITS                                                                      11                4
                                                                                              ------           ------

                  LOSS BEFORE EQUITY IN UNDISTRIBUTED EARNINGS OF
                   SUBSIDIARY                                                                    (30)             (24)

                  EQUITY IN UNDISTRIBUTED EARNINGS OF SUBSIDIARY                                 157               95
                                                                                              ------           ------

                  NET INCOME                                                                  $  127           $   71
                                                                                              ======           ======
</TABLE>


                                       50
<PAGE>   51

                        GEORGIA-CAROLINA BANCSHARES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2000 AND 1999

NOTE 14 - CONDENSED FINANCIAL INFORMATION ON GEORGIA-CAROLINA BANCSHARES, INC.
          (PARENT COMPANY ONLY) (CONTINUED)

                        CONDENSED STATEMENT OF CASH FLOWS
                     YEARS ENDED DECEMBER 31, 2000 AND 1999
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                                2000              1999
                                                                                              -------           -------
         <S>                                                                                  <C>               <C>
         CASH FLOWS FROM OPERATING ACTIVITIES
             Net income                                                                       $   127           $    71
             Adjustments to reconcile net income to net cash provided
              by operating activities
                  Equity in undistributed earnings of subsidiary                                 (157)              (95)
                  Other assets                                                                    (12)              (76)
                  Other liabilities                                                                --              (219)
                                                                                              -------           -------
                      Total adjustments                                                          (169)             (238)
                                                                                              -------           -------

                      NET CASH USED IN OPERATING ACTIVITIES                                       (42)             (167)
                                                                                              -------           -------

         CASH FLOWS FROM INVESTING ACTIVITIES
             Cash used in additional investment in subsidiary bank                                 --            (3,590)
                                                                                              -------           -------

                      NET CASH USED IN INVESTING ACTIVITIES                                        --            (3,590)
                                                                                              -------           -------

         CASH FLOWS FROM FINANCING ACTIVITIES
             Proceeds from issuance of common stock, and exercise of stock
              options                                                                              40             3,834
                                                                                              -------           -------

                      NET CASH PROVIDED BY FINANCING ACTIVITIES                                    40             3,834
                                                                                              -------           -------

         NET CHANGE IN CASH                                                                        (2)               77

         CASH AT BEGINNING OF YEAR                                                                 78                 1
                                                                                              -------           -------

         CASH AT END OF YEAR                                                                  $    76           $    78
                                                                                              =======           =======
</TABLE>


                                       51
<PAGE>   52

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, pursuant to
General Instruction E(3) of Form 10-KSB, 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 17, 2001. 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:


                                       52
<PAGE>   53
<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
                                       dated September 18, 2000

                   3.2        --       By-Laws of the Company (incorporated herein by with the Commission).
                                       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        --       Agreement dated October 6, 1997 among Ray Brown, RDB Limited
                                       Partnership, Arthur J.  Gay, Jr., J.  Randal Hall, George H. Inman, John W.
                                       Lee, A. Montague Miller and Julian W. Osbon as the Augusta Group and
                                       Pinnacle Bancshares, Inc.  (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).
</TABLE>


                                       53
<PAGE>   54

<TABLE>
                <S>           <C>      <C>
                10.2.1        --       Amended and Restated Agreement among Ray Brown, RDB Limited
                                       Partnership, Arthur J. Gay, Jr.,  J. Randal Hall, George H. Inman, John W.
                                       Lee, A. Montague Miller and Julian W. Osbon as the Augusta Group and the
                                       Company, 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).

                10.2.2        --       Amendment No. 1 to Amended and Restated Agreement among Ray Brown,
                                       RDB Limited Partnership, Arthur J. Gay, Jr., J. Randal Hall, George H.
                                       Inman, John W. Lee, A. Montague Miller and Julian W. Osbon as the
                                       Augusta Group and the Company, 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).

                  10.3        --       Severance Agreement dated March 27, 1997 between the Company,
                                       McDuffie Bank & Trust and J. Harold Ward, Jr. (incorporated herein by
                                       reference to Exhibit 10.2 in McDuffie Bank & Trust's Annual Report on
                                       Form 10-KSB for the year ended December 31, 1996, which is included in
                                       Exhibit 13.1 to the Company's Registration Statement on Form 8-A,
                                       previously filed with the Commission).
</TABLE>

         (B)      REPORTS ON FORM 8-K

                  No reports on Form 8-K were filed during the quarter ended
                  December 31, 2000.


                                       54
<PAGE>   55

                                   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 30, 2001                     Patrick G. Blanchard
                                          President and Chief Executive Officer
                                          (principal executive officer)



                                       By: /s/ J. Harold Ward, Jr.
                                          --------------------------------------
Date:  March 30, 2001                     J. Harold Ward, Jr.
                                          Sr. Vice President and 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 30, 2001               --------------------------------     March __, 2001
Patrick G. Blanchard                                               Hugh L. Hamilton, Jr.


/s/ Larry DeMeyers
--------------------------------      March 30, 2001               --------------------------------     March __, 2001
Larry DeMeyers                                                     William G. Hatcher


/s/ Philip G. Farr                                                 /s/ George O. Hughes
--------------------------------      March 30, 2001               --------------------------------     March 30, 2001
Philip G. Farr                                                     George O. Hughes


                                                                   /s/ George H. Irman
--------------------------------      March __, 2001               --------------------------------     March 30, 2001
Samuel A. Fowler                                                   George H. Inman


                                                                   /s/ David W. Joesbury
--------------------------------      March __, 2001               --------------------------------     March 30, 2001
Arthur J. Gay, Jr.                                                 David W. Joesbury



/s/ Joseph D. Greene                                               /s/ James L. Lemley, M.D.
--------------------------------      March 30, 2001               --------------------------------     March 30, 2001
Joseph D. Greene                                                   James L. Lemley, M.D.
</TABLE>

                       (SIGNATURES CONTINUED ON NEXT PAGE)


                                       55
<PAGE>   56

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


/s/ J. Randall Hall                                                /s/ Julian W. Osbon
--------------------------------      March 30, 2001               --------------------------------     March 30, 2001
J. Randall Hall                                                    Julian W. Osbon


/s/ John W. Lee
--------------------------------      March 30, 2001               --------------------------------     March __, 2001
John W. Lee                                                        Bennye M. Young


/s/ Robert N. Wilson, Jr.
--------------------------------      March 30, 2001
Robert N. Wilson, Jr.
</TABLE>


                                       56
<PAGE>   57

<TABLE>
<CAPTION>
EXHIBIT
NUMBER            DESCRIPTION OF EXHIBIT
-------           ----------------------
<S>               <C>
 3.1.1            Articles of Amendment dated September 18, 2000
</TABLE>