SECURITIES AND EXCHANGE COMMISSION
                        Washington, D. C. 20549

                               FORM 10-K

          Annual Report Pursuant to Section 13 or 15(d) of the
                    Securities Exchange Act of 1934

              For the fiscal year ended December 31, 2000
                    Commission file number  2-71249

                                 SOUTH          BANKING          COMPANY
(Exact name of registrant as specified in its charter)
          Georgia                                58-1418696
(State or other jurisdiction of        (I.R.S. Employer Identification
 incorporation or organization)         Number)

 104 North Dixon Street, Alma, Georgia                   31510
(Address of principal executive offices)               (Zip Code)

Registrant's telephone number, including area code:    (912) 632-8631

Securities registered pursuant to Section 12(b) of the Act:  None

Securities registered pursuant to Section 12(g) of the Act:  None

      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 5-K is not contained herein and will  not  be
contained to the best of registrant's knowledge in definitive  proxy  on
information  statements incorporated by reference in Part  III  of  this
Form 10-K or any amendment to this Form 10-K. (X)

      State  the  aggregate  market value of the voting  stock  held  by
nonaffiliates of the registrant:  There is no established market for the
outstanding common stock of the registrant.

       Indicate  the  number  of  shares  outstanding  of  each  of  the
registrant's classes of common stock, as of the most recent  practicable
date.

              Class                        Outstanding at  February  28,
2001
Common stock $1.00 par value per                    399,500
 Share
                   DOCUMENTS INCORPORATED BY REFERENCE

     List hereunder the following documents if incorporated by reference
and the part of the Form 10-K into which the documents are incorporated:
(1)  any  annual  reports to security holders; (2) any prospectus  filed
pursuant to Rule 424(b) or (c) under the Securities Act of 1933.  None


                                 PART 1.


SPECIAL CAUTIONARY NOTICE REGARDING FORWARD LOOKING INFORMATION

      Statements and financial discussion and analysis contained in this
Annual  Report on Form 10-K that are not historical facts  are  forward-
looking  statements made pursuant to the safe harbor provisions  of  the
Private  Securities  Litigation Reform  Act  of  1995.   Forward-looking
statements   describe  the  Company's  future  plans,   strategies   and
expectations, are based on assumptions and involve a number of risks and
uncertainties,  many  of  which are beyond the Company's  control.   The
important  factors that could cause actual results to differ  materially
from the forward-looking statements include, without limitation:

     changes in interest rates and market prices, which could reduce the
     Company's  net  interest  margins,  asset  valuations  and  expense
     expectations;

     changes in the levels of loan prepayments and the resulting effects
     on the value of the Company's loan portfolio;

     changes  in local economic and business conditions which  adversely
     affect  the  Company's  customers and  their  ability  to  transact
     profitable business with the Company, including the ability of  its
     borrowers to repay their loans according to their terms or a change
     in the value of the related collateral;

     increased  competition for deposits and loans  adversely  affecting
     rates and terms;

     the  timing,  impact  and  other  uncertainties  of  the  Company's
     potential  future acquisitions, including the Company's ability  to
     identify  suitable future acquisition candidates,  the  success  or
     failure  in the integration of their operations, and the  Company's
     ability to enter new markets successfully and capitalize on  growth
     opportunities;

     increased  credit  risk  in  the  Company's  assets  and  increased
     operating risk caused by a material change in commercial,  consumer
     and/or  real  estate  loans  as  a percentage  of  the  total  loan
     portfolio;

     the  failure  of  assumptions underlying the establishment  of  and
     provisions made to the allowance for loan losses;

     changes  in the availability of funds resulting in increased  costs
     or reduced liquidity;

     changes  in  the Company's ability to pay dividends on  its  Common
     Stock;

     increased asset levels and changes in the composition of assets and
     the resulting impact on the Company's capital levels and regulatory
     capital ratios;


                                       1
     the  Company's  ability  to  acquire,  operate  and  maintain  cost
     effective  and  efficient  systems without  incurring  unexpectedly
     difficult or expensive but necessary technological changes;

     the  loss  of  senior  management or operating  personnel  and  the
     potential  inability  to  hire qualified  personnel  at  reasonable
     compensation levels;

     changes   in   statutes   and  government  regulations   or   their
     interpretations  applicable  to  bank  holding  companies  and  the
     Company's  present  and  future  banking  and  other  subsidiaries,
     including changes in tax requirements and tax rates;

     all  written or oral forward-looking statements attributable to the
     Company  are  expressly  qualified  in  their  entirety  by   these
     cautionary statements.

Item 1.  Business

      South Banking Company (the "Registrant") is a business corporation
organized  at the direction of Alma Exchange Bank & Trust ("Alma  Bank")
and Citizens State Bank ("Citizens Bank") (collectively, the "Banks") in
1980  under  the Georgia Business Corporation Code.  It  was  formed  to
obtain  all  the issued and outstanding shares of Common  Stock  of  the
Banks.  Pursuant to the terms and provisions of a Plan of Reorganization
and  Agreement of Merger, dated as of January 13, 1981 and  approved  by
the  shareholders  of  the  Banks  on June  24,  1981,  the  Banks  were
reorganized into a holding company structure by merging the  Banks  with
wholly-owned  subsidiaries  of  the Registrant,  which  transaction  was
consummated on July
28,  1981.  In connection with those mergers, the outstanding shares  of
Common  Stock of the Banks were converted into shares of the  Registrant
at  specified  ratios and the Banks became wholly-owned subsidiaries  of
the Registrant.  Pursuant to the terms and provision of an agreement  of
merger  dated  June 12, 1989 between South Banking and  Georgia  Peoples
Bankshares,  Inc.  and approved by shareholders of  Georgia  Peoples  on
February  26,  1990,  Georgia  Peoples Bankshares  and  its  subsidiary,
Peoples  State  Bank,  were  merged  into  South  Banking  Company.   In
connection  with  the merger, the outstanding shares of Georgia  Peoples
Bankshares  were  converted into shares of the Registrant  at  specified
ratios.   During  1993,  South  Banking  Company  formed  Banker's  Data
Services,  Inc.  ("Banker's Data") for the purpose of handling  all  the
computer  functions  of  the banks.  Operations began  in  April,  1994.
South  Banking entered into an agreement in October of 1995  to  acquire
all  the  stock  of  Pineland State Bank ("Pineland  Bank")  in  Metter,
Georgia.  On January 11, 1996, the transaction was completed. On  August
1,  2000,  Pineland  Bank acquired branches from Flag  Inc.  in  Metter,
Georgia, Cobbtown, Georgia, and Statesboro, Georgia.

      During 1998, Alma Bank formed South Financial Products, Inc. (SFP)
as  a vehicle to enter the financial services market and provide service
to  its  customers.   South Financial Products, Inc. offers  a  complete
array  of  investment  options including stocks,  bonds,  mutual  funds,
financial and retirement planning, tax advantaged investments and  asset
allocations.   SFP  offers securities through Unvest, a  North  Carolina
based  independent clearing firm.  SFP is licensed and regulated through
the  National  Association  of Securities Dealers,  the  Securities  and
Exchange Commission and various state and federal banking authorities.

                                      2

The  maturing  of the baby boomer generation is creating  a  market  for
asset management services. The Company expects growth in this department
and  anticipates  that resulting fees will provide a  stable  stream  of
income.

The Banks

      The Banks operate full service banking business in Bacon, Appling,
Candler, Tattnall, Bulloch, and Camden Counties, Georgia, providing such
customary  banking  services as checking and savings  accounts,  various
other  types  of  time  deposits,  safe  deposit  facilities  and  money
transfers.    The   Banks  also  finance  commercial  and   agricultural
transactions,  make  secured and unsecured  loans,  and  provide   other
financial  services  to its customers. The Banks do  not  conduct  trust
activities. On December 31, 1999, Alma Bank and Peoples Bank ranked,  on
the  basis of total deposits, as the 211th and 282nd largest banks among
345 banks in Georgia.  Citizens Bank, one of five banking operations  in
Camden County, ranked the 318th largest bank among 345 banks in Georgia;
and  Pineland  Bank, one of two banking operations in  Metter,  Georgia,
ranked  the  295th largest bank among 345 banks in Georgia, Sheshunoff's
Banks of Georgia (2000 edition).

      The  Banks  make and service both secured and unsecured  loans  to
individuals,  firms,  and corporations.  Commercial  lending  operations
include  various types of credit for the Banks' customers.   The  Banks'
installment loan departments make direct loans to individuals and, to  a
limited  extent,  purchase installment obligations from  retailers  both
with  and  without recourse.  The Banks make a variety  of  residential,
industrial,  commercial, and agricultural loans secured by real  estate,
including  interim  construction financing.  Each bank  has  established
desired mixes of real estate, commercial, agricultural, and consumer
lending depending upon activities within the local area.  The ratios are
established  in accordance with risk diversification goals.   All  banks
are  located  in  small rural areas with low to moderate income  levels.
The  banks  primarily look to real estate lending as a major portion  of
portfolio.  Real estate values have remained fairly stable over the past
few years to give stability to lending activities.  Loan to value ratios
are  maintained in the 60% to 80% level for various real estate lending.
Loan  to  value  ratio of non real estate loans vary from  50%  for  the
inventory or receivables to 90% for vehicles and other consumer lending.
The   economy  of  the  area  remains  fairly  constant  without   great
fluctuation.  The national economy will effect the area primarily in the
timber and other agricultural products; however, the movement is not  as
wide  locally  as national movement indicates.  Citizens Bank,  Pineland
Bank and Peoples Bank act as agents for another bank in offering "Master
Card"  and "VISA" credit cards to its customers and does not assume  the
credit  risk  on  these  transactions.  Alma Bank offers  "Master  Card"
credit cards to its customers.

      At  December  31, 2000, the Banks had correspondent  relationships
with  6  other  commercial  banks.  These  correspondent  banks  provide
certain services to the banks such as processing checks and other items,
buying   and  selling  federal  funds,  handling  money  transfers   and
exchanges,   shipping  coins  and  currency,  providing   security   and
safekeeping  of  funds  or other valuable items and  furnishing  limited
management  information and advice.  As compensation for  the  services,
the   Banks  maintain  certain  balances  with  its  correspondents   in
noninterest bearing accounts.


                                    3

Employees

     On December 31, 2000, the  Registrant and its  subsidiaries had 101
full-time and 11 part-time employees.  The Registrant is not a party  to
any collective bargaining agreement and employee relations are deemed to
be good.

Competition

      The  Banking  business is highly competitive.  The  Banks  compete
primarily  with  other  commercial banks  operating  in  Bacon,  Camden,
Appling,  Tattnall,  Bulloch, and Candler Counties.   In  addition,  the
Banks  compete with other financial institutions, including savings  and
loan  associations, credit unions and finance companies and, to a lesser
extent,  insurance  companies and certain  governmental  agencies.   The
banking industry is also experiencing increased competition for deposits
from less traditional sources such as money-market mutual funds.

Customers

      The majority of the Banks' customers are individuals and small  to
medium-sized  businesses headquartered within  its  service  area.   The
Banks
are  not  dependent upon a single or a very few customers, the  loss  of
which  would  have a material adverse effect on the Banks.  No  customer
accounts  for  more than 5% of the Banks' total deposits  at  any  time.
Management does not believe that the Banks' loan portfolio is  dependent
on  a single customer or group of customers concentrated in a particular
industry  whose loss or insolvency would have a material adverse  effect
on the Banks.

Monetary Policies

      The  results  of  operations of the Banks, and  therefore  of  the
Registrant,  are  affected by credit policies of  monetary  authorities,
particularly the Board of Governors of the Federal Reserve  System  (the
"Board  of  Governors"), even though the Banks are not  members  of  the
Federal Reserve.

      The instruments of monetary policy employed by the Federal Reserve
include  open  market  operations in U.  S.  Government  securities  and
changes in the discount rate on member bank borrowing changes in reserve
requirements  against  member  bank  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 System, no prediction can be made as to possible  future
changes  in interest rates, deposit levels, loan demand or the  business
and earnings of the Banks.

Supervision and Regulations

      The Registrant is a bank holding company within the meaning of the
Bank  Holding  Company  Act  of 1956, as amended  (the  "Act"),  and  is
required
to  register  as  such with the Board of Governors.  The  Registrant  is
required  to file with the Board of Governors an annual report and  such
other information as may be required to keep the Board of Governors

                                     4

informed with respect to the Registrant's compliance with the provisions
of  the  Act.  The Board of Governors may also make examinations of  the
Registrant and its subsidiaries from time to time.

      The  Act  requires every bank holding company to obtain the  prior
approval  of  the Board of Governors before it may acquire substantially
all  the assets of any bank or ownership or control of any voting shares
of  any  bank,  if,  after such acquisition, it would  own  or  control,
directly  or indirectly, more than five percent of the voting shares  of
such bank.  In no case, however, may the Board of Governors approve  the
acquisition  by the Registrant of the voting shares of any bank  located
outside  Georgia, unless such acquisition is specifically authorized  by
the laws of the state in which the bank to be acquired is located.

      In  addition, a bank holding company is generally prohibited  from
engaging in or acquiring direct or indirect control of voting shares  of
any  company  engaged in nonbanking activities.  One  of  the  principal
exceptions to this prohibition is for activities found by the  Board  of
Governors, by order or regulation, to be so closely related to  banking,
managing or controlling banks as to be a proper incident thereto.   Some
of  the  activities  that  the  Board of  Governors  has  determined  by
regulation  to be closely related to banking are:  making  or  servicing
loans  and  certain types of leases; performing certain data  processing
services;  acting as fiduciary, investment or financial advisor;  making
investments  in corporations or projects designed primarily  to  promote
community welfare.

      In  January, 1989, the Board of Governors issued final regulations
which  implement  risk-based rules for assessing bank and  bank  holding
company  capital  adequacy.  The regulations revise  the  definition  of
capital  and establish minimum capital standards in relation  to  assets
and off-balance sheet exposures, as adjusted for credit risk.

Payment of Dividends and Other Restrictions

       South   is  a  legal  entity  separate  and  distinct  from   its
subsidiaries.  There are various legal and regulatory limitations  under
federal  and  state law on the extent to which South's subsidiaries  can
pay dividends or otherwise supply funds to South.

     The principal source of South's cash revenues is dividends from its
subsidiaries.   The prior approval of the FRB or the Georgia  Department
of  Bankers,  as  the  case may be, is required  if  the  total  of  all
dividends  declared  by  any state member bank of  the  Federal  Reserve
System  in any calendar year exceeds the Bank's net profits (as defined)
for  that  year combined with its retained net profits for the preceding
two calendar years, less any required transfers to surplus or a fund for
the  retirement of any preferred stock.  The relevant federal and  state
regulatory agencies also have authority to prohibit a state member  bank
or  bank  holding company, which would include South and  the Subsidiary
Banks  from  engaging in what, in the opinion of such  regulatory  body,
constitutes  an unsafe or unsound practice in conducting  its  business.
The  payment of dividends could, depending upon the financial  condition
of  the  subsidiary, be deemed to constitute such an unsafe  or  unsound
practice.

                                     5

     Under Georgia law, the prior approval of the DBF is required before
any  cash dividends may be paid by a state bank if: (i) total classified
assets  at  the most recent examination of such bank exceed 80%  of  the
equity  capital (as defined, which includes the reserve for loan losses)
of  such  bank;  (ii)  the  aggregate amount of  dividends  declared  or
anticipated to be declared in the calendar year exceeds 50% of  the  net
profits (as defined) for the previous calendar year; or (iii) the  ratio
of equity capital to adjusted total assets is less than 6%.

     In addition, the Banks are subject to limitations under Section 23A
of  the  Federal Reserve Act with respect to extensions  of  credit  to,
investments in, and certain other transactions with South.  Furthermore,
loans  and  extensions of credit are also subject to various  collateral
requirements.

Capital Adequacy

      The FRB has adopted risk-based capital guidelines for bank holding
companies.  The minimum ratio of total capital ("Total Capital") to risk-
weighted  assets  (including certain off-balance sheet  items,  such  as
standby letters of credit) is 8%.  At least half of the Total Capital is
to  be  composed  of  common stock, minority  interests  in  the  equity
accounts of consolidated subsidiaries, noncumulative perpetual preferred
stock  and a limited amount of perpetual preferred stock, less  goodwill
("Tier  I  Capital").  The remainder may consist of  subordinated  debt,
other preferred stock and a limited amount of loan loss reserves.

      In  addition,  the  FRB  has established  minimum  leverage  ratio
guidelines for bank holding companies.  These guidelines provide  for  a
minimum  ratio  of  Tier I Capital to total assets, less  goodwill  (the
"Leverage  Ratio")  of 3% for bank holding companies that  meet  certain
specified  criteria,  including  those  having  the  highest  regulatory
rating.  All  other  bank holding companies generally  are  required  to
maintain  a Leverage Ratio of at least 3% plus an additional cushion  of
100  to 200 basis points.  The guidelines also provide that bank holding
companies  experiencing internal growth or making acquisitions  will  be
expected  to maintain strong capital positions substantially  above  the
minimum  supervisory levels without significant reliance  on  intangible
assets.   Furthermore, the FRB has indicated that  it  will  consider  a
"tangible Tier I capital leverage ratio" (deducting all intangibles) and
other  indications  of  capital strength  in  evaluating  proposals  for
expansion or new activities.

      Effective  December  19, 1992, a new Section  38  to  the  Federal
Deposit   Insurance   Act  implemented  the  prompt  corrective   action
provisions  that  Congress  enacted as a part  of  the  Federal  Deposit
Insurance  Corporation Improvement Act of 1991 (the  "1991  Act").   The
"prompt corrective action" provisions set forth five regulatory zones in
which  all  banks  are placed largely based on their capital  positions.
Regulators are permitted to take increasingly harsh action as  a  Bank's
financial condition  declines.
Regulators  are also empowered to place in receivership or  require  the
sale  of  a bank to another depository institution when a bank's capital
leverage ratio reaches two percent.  Better capitalized institutions are
generally subject to less onerous regulation and supervision than  banks
with less amounts of capital.

                                    6

     The FDIC has adopted regulations implementing the prompt corrective
action provisions of the 1991 Act, which place financial institutions in
the  following five categories based upon capitalization ratios:  (i)  a
"well  capitalized" institution has a total risk-based capital ratio  of
at  least  10%, a Tier I risk-based ratio of at least 6% and a  leverage
ratio of at least 5%; (ii) an "adequately capitalized" institution has a
total risk-based capital ratio of at least 8%, a Tier I risk-based ratio
of  at  least  4%  and  a  leverage ratio  of  at  least  4%,  (iii)  an
"undercapitalized" institution has a total risk-based capital  ratio  of
under  8%, a Tier I risk-based ratio of under 4% or a leverage ratio  of
under  4%;  (iv)  a "significantly undercapitalized" institution  has  a
total risk-based capital ratio of under 6%, a Tier I risk-based ratio of
under  3%  or  a  leverage  ratio of under 3%;  and  (v)  a  "critically
undercapitalized"  institution  has a leverage  ratio  of  2%  or  less.
Institutions  in any of the three undercapitalized categories  would  be
prohibited  from  declaring dividends or making  capital  distributions.
The  FDIC  regulations  also establish procedures for  "downgrading"  an
institution  to  a  lower capital category based on supervisory  factors
other than capital.

      The  downgrading of an institution's category is automatic in  two
situations:  (i) whenever an otherwise well-capitalized  institution  is
subject  to  any written capital order or directive; and (ii)  where  an
undercapitalized  institution fails to submit  or  implement  a  capital
restoration  plan  or  has its plan disapproved.   The  Federal  banking
agencies  may  treat  institutions in the  well-capitalized,  adequately
capitalized and undercapitalized categories as if they were in the  next
lower  level  based on safety and soundness considerations  relating  to
factors other than capital levels.

       All   insured   institutions  regardless  of   their   level   of
capitalization   are  prohibited  by  the  Federal   Deposit   Insurance
Corporation  Improvement Act of 1991 (the "FDIC Act")  from  paying  any
dividend or making any other kind of capital distribution or paying  any
management  fee  to any controlling person if following the  payment  or
distribution  the  institution  would be  undercapitalized.   While  the
prompt  corrective  action  provisions  of  the  FDIC  Act  contain   no
requirements   or   restrictions  aimed   specifically   at   adequately
capitalized  institutions, other provisions of  the  FDIC  Act  and  the
agencies'   regulations  relating  to  deposit  insurance   assessments,
brokered deposits and interbank liabilities treat adequately capitalized
institutions less favorably than those that are well-capitalized.

     Under the FDIC's regulations, all of the Subsidiary Banks are "well
capitalized" institutions.

      The  written  policies of the Georgia Department  of  Banking  and
Finance  (the  "DBF")  require that state  banks  in  Georgia  generally
maintain a minimum ratio of primary capital to total assets of 6.0%.  At
December 31, 2000, the Banks were in compliance with these requirements.
In  addition,  the  DBF  is  likely to compute  capital  obligations  in
accordance with the risk-based capital rules while continuing to require
a minimum absolute level of capital.

                                    7
      It  is not anticipated that such minimum capital requirements will
affect  the  business operations of the Banks.  However, the  Board,  in
connection  with  granting  approval for  bank   holding  companies   to
acquire  other  banks and bank holding companies or to  engage  in  non-
banking activities, requires bank holding companies to maintain tangible
capital  ratios at approximate peer group levels.  This requirement  can
result in
a  bank holding company maintaining more capital than it would otherwise
maintain.  At the present time, South Banking Company's tangible primary
capital ratios are equal or above their peer group level.

     The laws of Georgia require annual registration with the DBF by all
Georgia  bank holding companies.  Such registration includes information
with  respect  to the financial condition, operations and management  of
intercompany  relationships  of  the  bank  holding  company   and   its
subsidiaries and related matters.  The DBF may also require  such  other
information  as  is  necessary  to  keep  informed  as  to  whether  the
provisions  of  Georgia  law  and  the regulations   and  orders  issued
thereunder by the DBF have been in compliance with and the DBF may  make
examinations  of  the  bank  holding company and  each  bank  subsidiary
thereof.

      The banks are also subject to examination by the DBF and the FDIC.
The DBF regulates and monitors all areas of the operations of the banks,
including  reserves, loans, mortgages, issuances of securities,  payment
of  dividends, interest rates, and establishment of branches.   Interest
and certain other charges collected or contracted for by the Banks are
also  subject  to  state usury laws and certain federal laws  concerning
interest rates.  The Banks' deposits are insured by the FDIC up  to  the
maximum permitted by law.

      Legislation has passed that would allow banks to branch  statewide
subject  to  certain restrictions.  This law became  effective  July  1,
1996.

     Georgia banking laws permit bank holding companies to own more than
one  bank,  subject to the prior approval of the Georgia  Department  of
Banking  and  Finance; thereby, in effect, permitting statewide  banking
organizations.   Such  banks  may be acquired  as  subsidiaries  of  the
Registrant or merged into its existing bank subsidiaries.

Support of Subsidiary Banks

      Under  the  FRB policy, South is expected to act as  a  source  of
financial strength to, and to commit resources to support, each  of  the
Subsidiary  Banks.  This support may be required at times  when,  absent
such  FRB policy, South may not be inclined to provide it.  In the event
of  a  bank  holding company's bankruptcy, any commitment  by  the  bank
holding  company  to a Federal bank regulatory agency  to  maintain  the
capital  of a subsidiary bank will be assumed by the bankruptcy  trustee
and entitled to a priority of payment.

      As  a  result  of  the enactment of Section 206 of  the  Financial
Institutions Reform, Recovery and Enforcement Act ("FIRREA")  on  August
9, 1989, a depository institution insured by the FDIC can be held liable
for  any loss incurred by, or reasonably expected to be incurred by, the
FDIC  after  August  9, 1989 in connection with (i)  the  default  of  a
commonly  controlled  FDIC-insured depository institution  or  (ii)  any
assistance  provided by the FDIC to any commonly controlled FDIC-insured
depository

                                    8

institution "in danger of default" is defined generally as the existence
of  certain conditions indicating that a default is likely to  occur  in
the absence of regulator assistance.

FDIC Insurance Assessments

      The  Subsidiary  Banks  are  subject  to  FDIC  deposit  insurance
assessments for the  Bank Insurance  Fund (the "BIF").  Since  1989, the
annual FDIC deposit insurance assessments increased from $.083 per  $100
of  deposits  to  a minimum level of $.23 per $100, an increase  of  177
percent.   The  FDIC implemented a risk-based assessment system  whereby
banks  are  assessed on a sliding scale depending on their placement  in
nine separate supervisory categories, from $.23 per $100 of deposits for
the  healthiest  banks (those with the highest capital, best  management
and  best overall condition) to as much as $.31 per $100 of deposits for
the  less-healthy  institutions, for an average of  $.259  per  $100  of
deposits.

      On  August 8, 1995, the FDIC lowered the BIF premium for "healthy"
banks  83%  from $.23 per $100 in deposits to $.04 per $100 in deposits,
while  retaining  the $.31 level for the riskiest  banks.   The  average
assessment  rate was therefore reduced from $.232 to $.044 per  $100  of
deposits.  The new rate took effect on September 29, 1995.  On  November
14,  1995,  the  FDIC again lowered the BIF premium for "healthy"  banks
from   $.04  per  $100  of  deposits  to  zero  for  the  highest  rated
institutions  (92%  of the industry).  All of the Subsidiary  Banks  are
insured under the BIF fund and it is expected that they will be required
to pay only the legally required annual minimum payments during 2001.

Recent Legislative and Regulatory Action

      On  April  19,  1995,  the four Federal bank  regulatory  agencies
adopted  revisions  to  the  regulations  promulgated  pursuant  to  the
Community  Reinvestment  Act (the "CRA"),  which  are  intended  to  set
distinct  assessment standards for financial institutions.  The  revised
regulations  contain three evaluation tests: (i) a  lending  test  which
will compare the
institution's market share of loans in low- and moderate-income areas to
its market share of loans in its entire service area and the  percentage
of  a  bank's  outstanding  loans to low- and moderate-income  areas  or
individuals; (ii) a services test which will evaluate the provisions  of
services  that promote the availability of credit to low- and  moderate-
income  areas;  and  (iii) an investment test, which  will  evaluate  an
institution's record of investments in organizations designed to  foster
community   development,  small-  and  minority-owned  businesses,   and
affordable housing lending, including state and local government housing
or  revenue bonds.  The regulation is designed to reduce some  paperwork
requirements   of  the  current  regulations  and  provide   regulators,
institutions, and community groups with a more objective and predictable
manner   with  which  to  evaluate  the  CRA  performance  of  financial
institutions.   The rule became effective on January 1, 1996,  at  which
time evaluation under streamlined procedures were scheduled to begin for
institutions with assets of less than $250 million.

      These  regulations have had little or no effect on South  and  the
Subsidiary  Banks.   Congress  and various Federal  agencies  (including
Housing  and  Urban  Development, the Federal Trade Commission  and  the
Department   of   Justice)   (collectively,  the   "Federal   Agencies")
responsible

                                    9

for  implementing the nation's fair lending laws have been  increasingly
concerned   that  prospective  home  buyers  and  other  borrowers   are
experiencing discrimination in their efforts to obtain loans.  In recent
years,  the  Department  of  Justice has filed  suit  against  financial
institutions, which it determined had discriminated, seeking  fines  and
restitution  for  borrowers who allegedly suffered  from  discriminatory
practices.  Most, if not all, of these suits have been settled (some for
substantial sums) without a full adjudication on the merits.

      On  March  8, 1994, the Federal Agencies, in an effort to  clarify
what
constitutes lending discrimination and specify the factors the agencies
will consider in determining if lending discrimination exists, announced
a  joint  policy  statement detailing specific discriminatory  practices
prohibited under the Equal Opportunity Act and the Fair Housing Act.  In
the  policy  statement, three methods of proving lending  discrimination
were  identified:  (i) over evidence of discrimination,  when  a  lender
blatantly  discriminates  on  a  prohibited  basis;  (ii)  evidence   of
disparate  treatment, when a lender treats applicants differently  based
on a prohibited factor even where there is no showing that the treatment
was  motivated  by  prejudice or a conscious intention  to  discriminate
against a person; and (iii) evidence of disparate impact, when a  lender
applies a practice uniformly to all applicants, but the practice  has  a
discriminatory  effect, even where such practices are neutral  on  their
face  and  are applied equally, unless the practice can be justified  on
the basis of business necessity.

      On  September  23,  1994,  President  Clinton  signed  the  Reigle
Community  Development  and  Regulatory Improvement  Act  of  1994  (the
"Regulatory Improvement Act").  The Regulatory Improvement Act  contains
funding  for community development projects through banks and  community
development  financial institutions and also numerous regulatory  relief
provisions  designed  to eliminate certain duplicative  regulations  and
paperwork requirements.  On September 29, 1994, President Clinton signed
the  Reigle-Neal Interstate Banking and Branching Efficiency Act of 1994
(the "Federal Interstate Bill") which amended Federal law to permit bank
holding  companies  to  acquire existing banks in  any  state  effective
September 29, 1995, and to permit any interstate bank holding company to
merge  its  various bank subsidiaries into a single bank with interstate
branches  after  May 31, 1997.  States have the authority  to  authorize
interstate  branching prior to June 1, 1997, or, alternatively,  to  opt
out  of  interstate branching prior to that date.  The Georgia Financial
Institutions  Code was amended in 1994 to permit the  acquisition  of  a
Georgia bank or bank holding company by out-of-state bank holding
companies beginning July 1, 1995.  On September 29, 1995, the interstate
banking  provisions  of  the Georgia Financial  Institutions  Code  were
superseded by the Federal Interstate Bill.

      On  November  12,  1999, the Gramm-Leach-Bliley Act  ("the  Act"),
formerly known as the Financial Modernization Act was enacted.  The  new
statute  is the most sweeping financial services legislation enacted  in
decades.  It  repeals  depression-era laws and eliminates  the  barriers
preventing affiliations among banks, insurance companies, and securities
firms.  Key  provisions  to  the Act are  summarized  in  the  following
paragraphs.

      Repeal  of  the Glass-Stegall Act - At its core, the Act  repeals,
effective  120 days after enactment, the anti-affiliation provisions  in
sections 20 and 32 of the Banking Act of 1933 (also known as the Glass-

                                  10

Stegall  Act) and amends provisions in the Bank Holding Company  Act  of
1956  to  permit financial companies to offer a broad array of  banking,
insurance,  securities,  and other financial  products,  either  through
financial  holding companies ("FHCs") or through operating  subsidiaries
qualifying under the Act.

     In general, Congress decided to preserve the Federal Reserve's role
as  the umbrella supervisor for holding companies.  The Board will work,
however,  within  a  system of functional regulation  designed  to  take
advantage  of  the  traditional  strengths  of  the  federal  and  state
financial  supervisors.   In  addition, the  legislation  establishes  a
mechanism  for  coordination between the Federal  Reserve  and  Treasury
regarding  the  approval of new financial activities  for  both  holding
companies and national bank financial subsidiaries.

       Banking   organizations  are  prohibited  under  the   Act   from
participating  in  new  financial affiliations unless  their  depository
institution   subsidiaries  are  well  capitalized  and  well   managed.
Regulators  are required to address any failure to maintain  safety  and
soundness  standards in a prompt manner.  In addition,  regulators  must
prohibit   holding  companies  from  participating  in   new   financial
affiliations  if,  at the time of certification, any insured  depository
affiliate had received a less than "satisfactory" Community Reinvestment
Act ("CRA") rating at its most recent examination.

      Affiliation  Authority - The Act amends  section  4  of  the  Bank
Holding Company Act ("BHCA") to provide a new framework for engaging  in
new  financial  activities.  Those bank holding companies ("BHCs")  that
qualify  to  engage  in the new financial activities are  designated  as
financial holding companies ("FHCs").  New provisions of the BHCA permit
BHCs that qualify as FHCs to engage in activities, and acquire companies
engaged in activities that are financial in nature or incidental to such
financial  activities.  FHCs are also permitted to engage in  activities
that  are  "complementary"  to financial  activities  if  the  Board  of
Governors of the Federal Reserve Bank ("FRB Board") determines that  the
activity does not pose a substantial risk to the safety or soundness  of
the institution or the financial system in general.

      The FRB Board may act by either regulation or order in determining
what  activities  are financial in nature, incidental  to  financial  in
nature, or complementary.  In doing so, the FRB must notify the Treasury
of  requests to engage in new financial activities and may not determine
that  an activity is financial or incidental to a financial activity  if
Treasury objects.

      Furthermore, Treasury may propose that the Board find a particular
activity financial in nature or incidental to a financial activity.  The
Act  establishes  a  similar procedure with  regard  to  the  Treasury's
(acting  through the Office of the Comptroller of the Currency  ("OCC"))
determination of financial activities and activities that are incidental
to  financial  activities for subsidiaries of national banks.   Congress
intends for the Federal Reserve and Treasury to establish a consultative
process  that will negate the need for either agency to veto a  proposal
of the other agency.

                                   11

      Federal  Home Loan Bank Reform - The Act reforms the Federal  Home
Loan  Bank  System,  including greatly expanding the collateral  that  a
community  bank  can  pledge against FHLB System advances,  thus  giving
smaller  banks  access  to  a substantial new  liquidity  source.   FHLB
members  under $500 million in assets can now pledge small business  and
agricultural loans (or securities representing a whole interest in  such
loans) as collateral for advances.

      Privacy  -  The  Act imposes a number of new restrictions  on  the
ability  of  financial  institutions  -  read  as  any  entity  offering
financial  products,  including banks, insurance  companies,  securities
houses, and credit unions - to share nonpublic personal information with
nonaffiliated third parties.  Specifically, the bill:

  requires financial institutions to establish privacy policies  and
  disclose them annually to all their customers, setting forth  how  the
  institutions  share  nonpublic  personal  financial  information  with
  affiliates and third parties

  directs  regulators to establish regulatory standards that  ensure
  the security and confidentiality of customer information

  permits  customers  to  prohibit  ("opt  out"of  permitting)  such
  institutions   from  disclosing  personal  financial  information   to
  nonaffiliated third parties

  prohibits transfer of credit card or other account numbers to third-
  party marketers

  prohibits  pretext  calling  (that  is,  makes  it  illegal   for
  information brokers to call banks to obtain customer information  with
  the intent to defraud the bank or customer)

  protects  stronger  state  privacy laws,  as  well  as  those  not
  "inconsistent" with these Federal rules

  requires  the Treasury and other Federal regulators to  study  the
  appropriateness  of  sharing  information with  affiliates,  including
  considering  both  negative and positive aspects of such  sharing  for
  consumers.

     The bill also imposes an affirmative obligation on banks to respect
their  customers'  privacy  interests.  Language  protects  a  community
bank's ability to share information with third parties selling financial
products  (for  example,  insurance or securities)  to  bank  customers.
Community  banks  can thus continue such sales practices  without  being
subject   to   the  opt-out  provisions  contained  elsewhere   in   the
legislation.

      Bankruptcy  Legislation - Although proposed bankruptcy legislation
is  not  finalized  and  signed into law,  it  appears  that  the  final
legislation  may assist in reducing the number of voluntary  liquidation
bankruptcies. This legislation may be of long-term benefit to  financial
institutions and other creditors.

                                    12

      Various  legislation, including proposals to substantially  change
the  financial institution regulatory system and to expand  or  contract
the  powers of banking institutions and bank holding companies, is  from
time  to  time  introduced  in Congress.  This  legislation  may  change
banking  statutes and the operating environment of the combined  company
and its subsidiaries in substantial and unpredictable ways.  If enacted,
such  legislation could increase or decrease the cost of doing business,
limit or expand permissible activities or affect the competitive balance
among  banks,  savings associations, credit unions, and other  financial
institutions.  The Registrant cannot accurately predict whether  any  of
this  potential legislation will ultimately be enacted, and, if enacted,
the  ultimate  effect that it, or implementing regulations,  would  have
upon  the financial condition or results of operations of itself or  any
of its subsidiaries.

Omnibus Budget Reconciliation Act of 1993

      The  Omnibus  Budget Reconciliation Act of 1993  (the  "Tax  Act")
continues   the   recent  legislation  affecting  banks  and   financial
institutions.   The  Tax  Act was designed as a deficit  reduction  with
similarities  to  the  1990 Act which was also designed  to  slice  $500
billion from the deficit.

      Generally the Tax Act affects all corporations as to a new 35% tax
rate  for  income  in  excess of $10 million and the  maximum  corporate
capital gains rate was increased to 35%.  The Registrant currently  will
not be affected by the change due to the income level of the Registrant.
Various other provisions would restrict certain deductions and/or change
the treatment of certain transactions.

      Provisions that especially affect financial institutions  included
market  to market Accounting for Securities.  The Tax Act requires  that
securities that are inventory in the hands of a dealer be inventoried at
fair  market value (market to market).  For the purposes of these rules,
"securities"  and a "dealer" are defined more broadly than  under  prior
law.  A "dealer" is any person who either regularly purchases securities
from or sells securities to customers in the ordinary course of business
or regularly offers to enter into, assume, offset, assign or otherwise
terminate positions in securities with customers in the ordinary  course
of  a  trade  or business.  Banks have been determined to qualify  as  a
dealer  under  the  new  definitions.  Unless  securities  are  properly
identified as held for investment, all inventory will be required to  be
market to market.

      A second item affecting financial institutions is the treatment of
tax-free FSLIC Assistance that was credited on or after March 4, 1991 in
connection   with  the  disposition  of  "covered"  assets.    Financial
institutions  are required to treat that assistance as compensation  for
any  losses  claimed  on dispositions or charge-offs  of  these  assets,
effectively denying them any tax loss for those assets.  This  provision
should not have any effect on the Registrant.

     The third item affecting financial institutions is the amortization
of  intangible assets effective for purchase after the enactment (August
10,   1993).   Taxpayers  are  required  to  amortize  most  intangibles
(including goodwill, core deposits, going concern value and covenant not
to  compete)  used  in  a  trade or business  over  a  15  year  period.
Exception

                                   13

to  this rule includes mortgage service rights.  The provision will have
significant  impact  on  any future purchases the  holding  company  may
decide to undertake.

      Some  of  the other provisions such as eliminating deductions  for
lobbying  expense  and club dues will impact the taxes  payable  by  the
Registrant.

Recent and Proposed Changes in Accounting Rules

       In   June,   1997,  the  FASB  issued  SFAS  No.  130,  Reporting
Comprehensive  Income.   The  statement  is  effective  for  annual  and
quarterly financial statements for fiscal years beginning after December
15,  1997,  with  earlier application permitted.  For the  Company,  the
statement  became  effective in the first quarter of 1998  and  required
reclassification  of  earlier  financial  statements   for   comparative
purposes.   SFAS  No.  130  requires that  changes  in  the  amounts  of
comprehensive  income  items be shown in a primary financial  statement.
Comprehensive  income  is defined by the statement  as  "the  change  in
equity  (net  assets)  of a business enterprise  during  a  period  from
transactions  and other events and circumstances from nonowner  sources.
It includes all changes in equity during a period except those resulting
from  investments  by owners and distributions to  owners."   While  the
adoption  of this statement changed the look of the Company's  financial
statements, it did not have a material effect on the Company.

     Also, in June 1997, the FASB issued SFAS No. 131, Disclosures about
Segments  of  an Enterprise and Related Information.  The  statement  is
effective  for  financial statements for fiscal  years  beginning  after
December  15,  1997, with earlier application permitted.  SFAS  No.  131
changes  the  way public companies report information about segments  of
their business in their annual financial statements and requires them to
report selected segment information in their quarterly reports issued to
shareholders.   A  company is required to report on  operating  segments
based  on  the management approach.  An operating segment is defined  as
any  component of an enterprise that engages in business activities from
which
it  may  earn  revenues and incur expenses.  The management approach  is
based  on  the  way  that management organizes the segments  within  the
enterprise  for  making  operating decisions and assessing  performance.
The  adoption  of this standard did not have a material  effect  on  the
Company.

      In  February  1998,  the  FASB issued  SFAS  No.  132,  Employers'
Disclosures  about  Pensions  and Other  Postretirement  Benefits.   The
statement  is  effective for fiscal years beginning after  December  15,
1997.  SFAS  No.  132  provides  additional  information  to  facilitate
financial  analysis  and  eliminates certain disclosures  which  are  no
longer useful.  To the extent practical, the statement also standardizes
disclosures for retiree benefits.  The adoption of this standard did not
have a material effect on the Company.

      In  June  1998, the Financial Accounting Standards Board  ("FASB")
issued  SFAS No. 133 "Accounting for Derivative Instruments and  Hedging
Activities."   This  Statement  establishes  accounting  and   reporting
standards  for  derivative  instruments,  including  certain  derivative
instruments embedded in other contracts, and for hedging activities.  It

                                 14

requires that an entity recognize all derivatives as either assets or
liabilities  in  the statement of financial position and  measure  those
instruments at fair value.  The accounting for changes in the fair value
of  a  derivative depends on the intended use of the derivative and  the
resulting designation.

      In  June  of  1999, the FASB issued SFAS No. 137, "Accounting  for
Derivative  Instruments  and  Hedging  Activities  -  Deferral  of   the
Effective Date of FASB Statement No. 133."  This statement deferred  the
effective date of SFAS No. 133 to fiscal years beginning after June  15,
2000,  with  early application encouraged.  South is in the  process  of
determining the impact, if any, the implementation of SFAS No.  133  and
SFAS No. 137 will have on its results of operations.

      In  October  1998,  the FASB issued SFAS No. 134,  Accounting  for
Mortgage-Backed Securities Retained after the Securitization of Mortgage
Loans Held for Sale by Mortgage Banking Enterprise, an amendment to SFAS
No.  65.   This  statement  is effective for the  first  fiscal  quarter
beginning after December 15, 1998, (or January 1, 1999 for the Company).
The  statement requires that after the securitization of mortgage  loans
held for sale, any retained mortgage-backed securities be classified  in
accordance  with SFAS No. 115, based on the entity's ability and  intent
to  sell  or hold those investments.  Prior to this statement,  mortgage
banking  entities were required to classify these securities as  trading
only.   The adoption of this standard did not have a material effect  on
the Company.

Industry Developments

      Certain  recently-enacted and proposed legislation could  have  an
effect  on both the costs of doing business and the competitive  factors
facing the financial institution's industry.  Because of the uncertainty
of   the   final  terms  and  likelihood  of  passage  of  the  proposed
legislation, the Company is unable to assess the impact of any  proposed
legislation on its financial condition or operations at this time.

                                 15

Selected Statistical Information

      The  tables and schedules on the following pages set forth certain
significant  statistical data with respect to:  (i) the distribution  of
assets, liabilities and shareholders' equity and the interest rates  and
interest   differentials  experienced  by,  the   Registrant   and   its
subsidiaries;  (ii) the investment portfolio of the Registrant  and  its
subsidiaries;   (iii)  the  loan portfolio of  the  Registrant  and  its
subsidiaries,  including types of loans, maturities and  sensitivity  to
changes  in interest rates and information on nonperforming loans;  (iv)
summary of the loan loss experience and reserves for loan losses of  the
Registrant and its subsidiaries; (v) types of deposits of the Registrant
and  its subsidiaries; and (vi) the return on assets and equity for  the
Registrant and its subsidiaries.

I.  DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY;
    INTEREST RATES AND INTEREST DIFFERENTIALS

A.   The condensed average balance sheets for the periods indicated are
    presented below.
                               Year Ended    Year Ended    Year Ended
                                December 31,   December 31,  December  31,
2000                           1999              1998
ASSETS                                       (In Thousands)
Cash and due from banks        $    6,283     $    7,836              $    5,736
Cash in bank - interest bearing       822          1,355         1,411
Taxable investment securities      16,884         15,905        15,285
Nontaxable investment securities    1,613          1,825         1,945
Others                              1,487          1,435           932
Federal funds sold and securities
 purchased under agreements to
 resell                             9,945          8,757        11,354
Loans - net                       148,195        121,166       111,239
Other assets                       10,762          8,031         8,625

Total Assets                   $  195,991     $  166,310    $  156,527

LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits: Demand - non-interest
           bearing             $   22,444     $   20,341    $   20,209
     Demand - interest bearing     24,959         23,777        22,732
     Savings                       11,122         10,674         9,048
     Time                         114,026         92,406        86,113
Total Deposits                 $  172,551     $  147,198    $  138,102
Federal funds purchased                114            55             -
Other borrowed funds                 4,518         3,087         3,380
Other liabilities                    1,768           962         1,694

Total Liabilities               $  178,951    $  151,302    $  143,176
Shareholders' equity                17,040        15,008        13,351

Total Liabilities and
 Shareholders' Equity           $  195,991    $  166,310    $  156,527


B.  Interest  Rates.  The tables below show for the periods indicated
    the  average  amount  outstanding  for   major   categories    of
    interest

                                    16

    earning   assets  and  interest  bearing  liabilities;  the  average
    interest  rates  earned  or paid; the interest  income  and  expense
    earned  or paid thereon; net interest earnings and the net yield  on
    inteest-earning assets.
                                     Year Ended December 31, 2000
                               Average        Yield/
                               Balance        Interest       Rate
ASSETS                                        (In Thousands)
Cash in banks - interest
 bearing                        $      822    $       53          6.44%
Loans                             148,195        16,604         11.20
Taxable investments                 16,884         1,021          6.05
Non-taxable investments              1,613            79          4.90
Other                                1,487            73          4.91
Federal funds sold and
 securities purchased
 under agreements to resell          9,945           623          6.26
Total Interest-Bearing
 Assets                         $  178,946    $   18,453         10.31%

LIABILITIES
Demand - interest bearing       $   24,959    $      648          2.59%
Savings deposits                    11,122           359          3.23
Other time deposits                114,026         7,115          6.24
Other borrowing                      4,518           448          9.91
Federal funds purchased                114             8          7.02
Total Interest-Bearing
 Liabilities                    $  154,739    $    8,578          5.54%

Net interest earnings                         $    9,875
Net yield on interest earning assets                              4.77%

                                     Year Ended December 31, 1999
                               Average        Yield/
                               Balance        Interest       Rate
ASSETS                                            (In    Thousands)
Cash in banks - interest bearing$    1,355     $      78          5.75%
Loans                              121,166        12,859         10.61
Taxable investments                 15,905           936          5.88
Non-taxable investments              1,825            87          4.77
Other                                1,435            96          6.68
Federal funds sold and
 securities purchased under
 agreements to resell                8,757           462          5.28
Total Interest-Bearing
 Assets                         $  150,443     $  14,518          9.65%

LIABILITIES
Demand - interest bearing       $   23,777     $     633          2.66%
Savings deposits                    10,674           352          3.30
Other time deposits                 92,406         5,037          5.45
Other borrowing                      3,087           236          7.65
Federal funds purchased                 55             3          5.45
Total Interest-Bearing
 Liabilities                    $  129,999     $   6,261          4.82%

Net interest earnings                          $   8,257
Net yield on interest earning assets                              4.83%

                                     17

                                      Year Ended December 31, 1998
                               Average        Yield/
                               Balance        Interest       Rate
ASSETS                                        (In Thousands)
Cash in banks - interest
 bearing                       $     1,411    $       82          5.81     %
Loans                              111,239        12,152         10.92
Taxable investments                 15,285           936          6.12
Non-taxable investments              1,945            92          4.73
Other                                  932            57          6.11
Federal funds sold and
 securities purchased
 under agreements to resell         11,354           601          5.29
Total Interest-Bearing
 Assets                        $   142,166   $    13,920          9.79%

LIABILITIES
Demand  -  interest bearing      $    22,732   $        678           2.98
%
Savings deposits                     9,048           288          3.18
Other time deposits                 86,113         5,164          5.99
Other borrowing                      3,380           262          7.75
Federal funds purchased                  -             -             -
Total Interest-Bearing
 Liabilities                   $   121,273   $     6,392          5.27%

Net interest earnings                        $     7,528
Net yield on interest earning assets                              4.52%

(1)    Note:   Loan  fees  are   included  for   rate   calculation
purposes.  Loan fees included in interest amounted to approximately
$999,520  in  2000,  $892,522 in 1999 and $810,462  in  1998.   Non
accrual loans have been included in the average balances.

C.    Interest  Differentials.  The following tables set forth  for  the
periods  indicated  a  summary of the changes  in  interest  earned  and
interest paid resulting from changes in volume and changes in rates.


2000 Compared to 1999
                                    Increase (Decrease) Due to (1)
                               Volume         Rate          Change
Interest earned on:                       (In Thousands)
Cash in banks - interest
 bearing                       $(       31)  $        6    $(       25)
Loans                                2,867          878          3,745
Taxable investments                     57             28             85
Nontaxable investments         (       10 )           2     (        8)
Other                                   3     (      26               )(
23                                      )
Federal funds sold and
 securities purchased under
 agreement to resell                    63           98            161

Total Interest-Earning Assets  $     2,949   $      986    $     3,935


                                   18


2000 Compared to 1999 (Con't)

                                     Increase (Decrease) Due to (1)
                                Volume        Rate          Change
                                            (In Thousands)
Interest paid on:
 NOW deposits                   $       31   $(      16              )15
 Savings deposits                       14    (       7        )      7
     Other    time    deposits                    1,178              900
2,078
 Other borrowing                       109          103           212
     Federal    funds    purchased                    3                2
5

Total Interest-Bearing
 Liabilities                    $    1,335   $      982    $     2,317

Net Interest Earnings           $    1,614                  $         4$
1,618

(1)  (1)    The change in interest due to volume has been determined  by
applying  the  rate  from  the earlier year to  the  change  in  average
balances  outstanding from one year to the next.  The change in interest
due  to rate has been determined by applying the change in rate from one
year to the next to average balances outstanding in the later year.

1999 Compared to 1998
                                      Increase (Decrease) Due to (1)
                                Volume        Rate          Change
Interest earned on:                       (In Thousands)
Cash in banks - interest
 bearing                       $(       3)  $(        1)   $(        4)
Loans                                1,084   (      377)           707
Taxable investments             (       38)          38              -
Nontaxable investments         (         7            )                2
(        5                               )
Other                                   24           14             38
Federal funds sold and
 securities purchased under
 agreement to resell           (       137)  (        2)    (      139)

Total Interest-Earning Assets $        923  $(      326               )$
597


Interest paid on:
 NOW deposits                  $        31  $(       76              )$(
45                                       )
 Savings deposits                       52          12              64
 Other time deposits                  372    (      499)    (      127)
  Other borrowing              (        23)   (        3)    (        26
)
   Federal  funds  purchased                  3                        -
3

Total Interest-Bearing
 Liabilities                  $        435  $(      566              )$(
131                                      )

Net Interest Earnings         $        488  $       240    $       728

(1)  The  change  in  interest due to volume has  been  determined  by
applying  the  rate  from the earlier year to the  change  in  average
balances  outstanding  from  one year to  the  next.   The  change  in
interest due to

                                    19

rate has been determined by applying the change in rate from one year to
the next to average balances outstanding in the later year.

1998 compared to 1997
                                    Increase (Decrease) Due to (1)
                               Volume        Rate          Change
Interest earned on:                       (In Thousands)
Cash in banks - interest
  bearing                       $         -  $(       10)   $(        10
)
Loans                                1,624   (      242)         1,382
Taxable investments                    255   (      260)    (        5)
Nontaxable investments                   5   (        3)             2
Other                                    5           10             15
Federal funds sold and
 securities purchased under
 agreement to resell                   230   (       22)           208

Total Interest-Earning Assets  $     2,119  $(      527)   $     1,592

Interest paid on:
 NOW deposits                  $        55  $(       97)   $(       42)
      Savings     deposits                           22                8
30
     Other    time    deposits                      793              297
1,090
 Other borrowing               (       20)  (       23)     (       43)
 Federal funds purchased       (       30)            -     (       30)

Total Interest-Bearing
 Liabilities                   $       820  $       185    $     1,005

Net Interest Earnings          $     1,299  $(      712)   $       587

(1)   The  change  in  interest due to volume  has  been  determined  by
applying  the  rate  from  the earlier year to  the  change  in  average
balances          outstanding from one year to the next.  The change  in
interest due       to rate has been determined by applying the change in
rate  from one      year to the next to average balances outstanding  in
the later year.


II.  INVESTMENT PORTFOLIO

A.   Types of Investments  The carrying amounts of investment securities
at the dates indicated are summarized as follows:

                               Year Ended    Year Ended   Year Ended
                               December 31,  December 31, December 31,
                               2000          1999         1998
                                             (In Thousands)
U. S. Treasury and other
 U. S. government agencies
 and corporations              $    18,449   $    16,292   $    14,750
State and political
 subdivisions (domestic)             1,529         1,714         1,959
Mortgage backed securities             399          502            732
Equities                              465           545            300

Totals                         $    20,842   $    19,053   $    17,741

                                    20

B.  Maturities  The amounts of investment securities in each category as
of December 31, 2000 are shown in the following table according to
maturity classifications (1) one year or less, (2) after one year
through five years, (3) after five years through ten years, (4) after
ten years.

                  U. S. Treasury
                  and Other U. S.
                  Government        State
                  Agencies and      and Political     Mortgage Backed
                  Corporations      Subdivisions      Securities
                            Average          Average
                            Yield            Yield             Average
                 Amount     (1)     Amount   (1)(2)   Amount   Yield
                                       (In Thousands)
Maturity:
One year or less  $  2,391    5.64%  $  400     6.47% $  113     6.02%
After one year
 through five years 15,808    6.12      506    7.58        -        -
After five years
 through ten years     250   7.05       158    8.15        -       -
After ten years          -      -      464    8.55       285     8.13

Totals              $  18,449     6.07%  $  1,528      7.64%   $     398
7.53                     %


(1)   Yields  were  computed  using  coupon  interest,  adding  discount
accretion  or  subtracting premium amortization, as  appropriate,  on  a
ratable  basis  over  the life of each security.  The  weighted  average
yield  for each maturity range was computed using the acquisition  price
of each security in that range.

(2)  Yields on securities of state and political subdivisions are stated
on a tax equivalent basis, using a tax rate of 34%.

III.  Loan Portfolio

   A.   Types of Loans  The amount of loans outstanding at the indicated
dates are shown in the following table according to type of loan.

                               Year Ended    Year Ended     Year Ended
                                December 31,   December 31,  December 31
,
                                   2000             1999               1998
(In Thousands)
Commercial, financial and
 agricultural                   $   42,973    $   34,607    $   29,889
Real estate - mortgage              81,314        62,829        58,005
Real estate - construction           7,646        13,413         7,909
Installments                       31,294         21,433        19,157
                                $  163,227    $  132,282    $  114,960
Less - Unearned income                 253           216           154
       Reserve for possible
        losses                       2,728         2,169         1,971

Total Loans                     $  160,246    $  129,897    $  112,835
                                      21

B.   Maturities and Sensitivity to Changes in Interest Rates  The amount
of  total  loans by category outstanding as of December 31, 2000  which,
based  on remaining repayments of principal, are due in (1) one year  or
less,  (2) more than one year but less than five and (3) more than  five
years are shown in the following table.  The amounts due after one  year
are  classified  according to the sensitivity  to  changes  in  interest
rates.


                                  Maturity Classification
                                 Over One
                   One Year      Through       Over
                   or Less       Five Years    Five Years    Total
Types of Loans                       (In Thousands)
Commercial,
 financial and
 agricultural       $   34,507    $    7,233     $   2,240    $ 43,980
Real estate
 mortgage               50,280        17,963        11,555       79,798
Real estate
 construction            5,663           393         1,590        7,646
Installment             14,824        13,203         2,340       30,367

Total loans due
 after one year
 with:
 Predetermined
  interest rate                       28,746
 Floating interest
  rate                                27,471


C.   Nonperforming  Loans  The following table presents,  at  the  dates
indicated,  the  aggregate  amounts  of  nonperforming  loans  for   the
categories indicated.

                               Year Ended    Year Ended    Year Ended
                                December 31,  December 31,  December 31     ,
                               2000          1999          1998
                                             (In Thousands)
Loans accounted for on a
 non-accrual basis              $      876    $      422   $       557

Loans contractually past
 due ninety days or more
 as to interest or principal
 payments                              734           419           492

Loans, the terms of which
 have been renegotiated to
 provide a reduction or
 deferral of interest or
 principal because of a
 deterioration in the financial
 position of the borrower                8            29            37

                                     22

C. Nonperforming Loans - (con't)

                                Year  Ended      Year  Ended     Year
Ended
                               December 31,   December 31,  December 31,
                               2000           1999          1998
                                              (In Thousands)
Loans now current about which
 there are serious doubts as
 to the ability of the borrower
 to comply with present loan
 repayment terms                         -             -             -

      Loans  are  placed on non-accrual basis when loans  are  past  due
ninety  days or more.  Management can elect not to place loans  on  non-
accrual  status if net realizable value of collateral is  sufficient  to
cover the balance and accrued interest.

D.    Commitments and Lines of Credit  The banks provide commitments and
lines  of  credit to their most worthy customers only.  Commitments  are
for  short terms, usually not exceeding 30 days, and are provided for  a
fee  of  1%  of the amount committed.  Lines of credit are  for  periods
extending up to one year.  No fee is usually charged with respect to the
unused  portion  of  a  line of credit.  Interest rates  on  loans  made
pursuant to commitments or under lines of credit are determined  at  the
time that the commitment is made or line is established.

                                     23

E. Rate Sensitivity Analysis

                         SOUTH BANKING COMPANY
                           DECEMBER 31, 2000


+-----------------------Interest Sensitive--------------------+
                             0 -        91 -       1 to 3
                             90 Day     365 Days   Years
                                   (Thousands of Dollars)
Earning Assets:
 Loans                      $  79,809  $  16,883  $  33,668
 Investment securities            399      2,791     12,984
 Interest bearing deposits        349        377          -
 Federal funds sold and
  securities purchased under
  agreement to resell          14,693          -          -

Total Earning Assets        $  95,250  $  20,051  $  46,652

Supporting Sources of Funds
 Savings                    $  11,326  $       -  $       -
 Money market and NOW          27,405          -          -
 Other time deposits           23,306     58,527      9,331
 CD's - $100,000 or more        7,172     27,005      3,392
 Other borrowings               6,236      1,027          -
 Federal funds purchased            -          -          -

Total Interest Bearing
Deposits                    $  75,445  $  86,559  $  12,723

Demand deposits and other funds
 supporting earning assets -
 non interest earning       $       -  $       -  $       -
Total Supporting Sources
of Funds                    $  75,445  $  86,559  $  12,723

Interest Sensitive - interest
 earning assets less interest
 bearing liabilities        $  19,805  $( 66,508)  $  33,929

Cumulative interest rate
 sensitivity gap            $  19,805  $( 46,703)  $( 12,774)

Interest rate sensitivity gap
ratio                            1.26       .23       3.66

Cumulative interest rate sensitivity
 gap ratio                       1.26        .71        .93



+-----------------------Interest Sensitive--------------------+
                             3 to 5    5 Years +
                             Years     Over      Total
                                   (Thousands of Dollars)
Earning Assets:
 Loans                     $   14,881 $   17,987  $ 163,228
 Investment securities          3,330        872    20,376
 Interest bearing deposits         99          -        825
 Federal funds sold and
  securities purchased under
  agreement to resell               -          -     14,693

Total Earning Assets        $  18,310  $  18,859  $ 199,122

Supporting Sources of Funds
 Savings                    $       -  $       - $   11,326
 Money market and NOW               -          -     27,405
 Other time deposits              532        384     92,080
 CD's - $100,000 or more            -          -     37,569
 Other borrowings                   -          -      7,263
 Federal funds purchased            -          -         -

Total Interest Bearing
Deposits                    $     532  $     384  $ 175,643

Demand deposits and other funds
 supporting earning assets -
 non interest earning       $       -  $       -  $  24,299

Total Supporting Sources of
Funds                       $     532  $     384  $ 199,942

Interest Sensitive - interest
 earning assets less interest
 bearing liabilities        $  17,778 $  18,475  $(    820)

Cumulative interest rate
 sensitivity gap            $   5,004 $  23,479   $(    820          )

Interest rate sensitivity gap
ratio                           34.42          -        1.0

Cumulative interest rate sensitivity
 gap ratio                       1.02       1.14        1.0


  The rate sensitivity analysis table is designed to demonstrate South's
sensitivity to changes in interest rates by setting forth in comparative
form the repricing maturities of South's assets and liabilities for  the
period shown. A ratio of greater than 1.0 times interest earnings assets
to  interest bearing liabilities indicates that an increase in  interest
rates will generally result in an increase in net income for South and a
decrease  in interest rates will result in a decrease in net income.   A
ratio  of  less  than  1.0  times earnings  assets  to  interest-bearing
liabilities  indicates that a decrease in interest rates will  generally
result in a increase in net income for South and an increase in interest
rates will result in an decrease in net income.

                                     24

IV.  Summary of Loan Loss Experience

      The  following table summarizes loan balances at the end  of  each
period  and average balances during the year for each category;  changes
in  the reverse for possible loan losses arising from loans charged  off
and recoveries on loans previously charged off; additions to the reserve
which  have  been  charged to operating expense; and the  ratio  of  net
charge-offs during the period to average loans.

                              Year Ended    Year Ended      Year Ended
                              December 31, December 31,     December 31,
                              2000         1999             1998
                                           (In Thousands)
A.  Average amount of loans
     outstanding              $   148,195   $   121,166     $   111,239
B.  Balance of reserve for
     possible loan losses at
     beginning of period      $     2,169   $     1,971     $     1,822
C.  Loans charged off:
     Commercial, financial
      and agricultural        $       274   $       149     $        10
     Real estate - mortgage           127            67                    75
     Installments                     263           217             172

                              $       664   $       433     $       257
D.  Recoveries of loans
     previously charged off:
     Commercial, financial
      and agricultural        $        83   $         2     $        20
     Real estate                       29            31              2
     Installment                       99            95             98

                              $       211   $       128    $       120
E.  Net loans charged off
     during period            $       453   $       305    $       137
    Additions to reserve
     charged to operating
     expense during period (1)$       424   $       503    $       286
    Addition from bank
     acquisition                      588             -              -
                              $     1,012   $       503    $       286
F.  Balance of reserve for
     possible loan losses at
     end of period            $     2,728   $     2,169    $     1,971
G.  Ratio of net loans charged
     off during the period to
     average loans outstanding        .31           .25            .12

                                       25

(1)      Although the provisions exceeded the minimum provision required
    by  regulatory authorities, the Board of Directors believe that  the
    provision has not been in excess of the amount required to maintain the
    reserve at a sufficient level to cover potential losses.  The amount
    charged to operations and the related balance in the reserve for loan
    losses is based upon periodic evaluations by management of the  loan
    portfolio. These evaluations consider several factors including, but not
    limited to, general economic conditions, loan portfolio composition,
    prior  loan  loss experience and management's estimation  of  future
    potential losses.

(2)     Management's  review  of  the loan portfolio  did  not  allocate
    reserves  by  category  due  to  the portfolio's  small  size.   The
    reserves  were  allocated on the basis of a  review  of  the  entire
    portfolio.   The portfolio does not contain excessive concentrations
    in  any  industry  or  loan  category that  might  expose  South  to
    significant risk.

V.  Deposits

A.    Average  deposits, classified as demand deposits, savings deposits
   and time certificates of deposit for the periods indicated are presented
   below:

                               Year Ended    Year Ended    Year Ended
                               December 31,  December 31, December 31,
                               2000          1999          1998
                                           (In Thousands)
     Demand deposits            $   22,444   $    20,341   $    20,209
     NOW deposits                   24,959        23,777        22,732
     Savings deposits               11,122        10,674         9,048
     Time certificates of
      deposits                     114,026        92,406        86,113

     Total Deposits             $  172,551   $   147,198   $   138,102


     B.   The  amounts of time certificates of deposit issued in amounts
     of  $100,000  or  more as of December 31, 2000 are shown  below  by
     category,  which is based on time remaining until maturity  of  (1)
     three  months or less, (2) over three through six months, (3)  over
     six through twelve months and (4) over twelve months.

     Three months or less                                   $    7,183
     Over three through twelve months                           26,995
     Over twelve months                                          3,392

     Total                                                  $   37,570

                                    26

VI.  Return on Assets and Shareholders' Equity

         The  following  rate of return information  for  the  periods
     indicated is presented below:

                               Year Ended    Year Ended     Year Ended
                               December 31,  December 31,   December 31,
                               2000          1999           1998
Return on assets (1)                 1.35%         1.28%         1.23%
Return on equity (2)                 15.53        14.18         14.45
Dividend payout ratio (3)            10.57        12.20          12.20
Equity to assets ratio (4)           8.69          9.02           9.02

(1)  Net income divided by average total assets.
(2)  Net income divided by average equity.
(3)  Dividends declared per share divided by net income per share.
(4)  Average equity divided by average total assets.

Item 2.  Properties

      Alma  Bank's main banking office and the Registrant's principal
executive  offices  are  located at 104  North  Dixon  Street,  Alma,
Georgia 31510.  The building, containing approximately 13,040  square
feet  of usable office and banking space, and the land, approximately
1.2  acres,  are  owned by Alma Bank. Alma Bank also has  a  separate
drive-in  banking facility located at 505 South Pierce Street,  Alma,
Georgia.   The  building, containing 510 square feet,  in  which  the
branch  is located and the land, approximately .4 acres, on which  it
is located are owned by Alma Bank.

      Citizens Bank's main banking office is located at 205 East King
Street,   Kingsland,   Georgia  31548.   The   building,   containing
approximately  6,600 square feet of usable office and banking  space,
and the land, approximately 2 acres, are owned by Citizens Bank.

      Peoples Bank's main banking office is located at Comas  and  E.
Parker  Streets,  Baxley,  Georgia 31513.  The  building,  containing
approximately  7,800 square feet of usable office and banking  space,
and the land, approximately 2.5 acres, are owned by the Peoples Bank.
The Bank does not have branches.

      Pineland  Bank's main banking office is located  at  257  North
Broad  Street,  Metter,  Georgia  30439.   The  building,  containing
approximately 10,000 square feet of usable office and banking  space,
and the land, approximately 1 acre, are owned by the Pineland Bank.

      Pineland Bank also has three branches and an operation  center.
The  branch in Metter, Georgia is a limited service drive-in facility
containing  approximately 500 square feet and  is  situated  on  land
covered  by a long term lease.  Pineland Bank acquired the  operation
center  which  contains approximately 12,853 square feet  of  useable
space  and is situated on .17 acres of land from Flag, Inc., in  year
2000. This facility is partially rented with Pineland using the down-

                                  27

stairs.   A  building  acquired in the Flag  acquisition  houses  the
branch  in  Cobbtown,  Georgia.  This facility consists  of  a  3,396
square  foot  building  on  a  90 x  120  ft.  lot.   A  building  in
Statesboro,  Georgia is leased to accommodate a small  branch.   This
lease is renewed on an annual basis.

Item 3. Legal Proceedings

      Neither the Registrant or its subsidiaries are parties to,  nor
is  any of their property the subject of, any material pending  legal
proceedings,  other than ordinary routine proceedings  incidental  to
the business of the Banks, nor to the knowledge of the management  of
the  Registrant are any such proceedings contemplated  or  threatened
against it or its subsidiaries.

Item 4.  Submission of Matters to a vote of Security Holders

     None applicable.

Part II.

Item  5.   Market  for  the  Registrant's Common  Stock  and  Related
Security          Holder Matters

      There is no public market for the common stock of South or  the
Banks.   The last known selling price of South's common stock,  based
on  information available to South's management, was $12.00 per share
on  August  4,  2000.   As  of March 1, 2001,  the  Company  had  471
shareholders with 399,500 shares outstanding.

     For the years ended December 31, 2000, 1999 and 1998, South paid
cash  dividends of $279,628 or $.70 per share, $259,675 or  $.65  per
share,  and $259,675 or $.65 per share, respectively.  These  dollars
equate to  dividend payout ratios (dividends declared divided by  net
income)  of  10.57%,  12.20%  and 13.46%  in  2000,  1999  and  1998,
respectively.   Certain  other information concerning  dividends  and
historical trading prices is set forth below:

                     QUARTERLY COMMON STOCK DATA

      Set  forth below is information concerning high and  low  sales
prices  by quarter for each of the last two fiscal years and dividend
information  for  the  last two fiscal years.  The  Company's  common
stock  is  not traded on any established pubic trading  market.   The
Company   acts  as  its  own  transfer  agent,  and  the  information
concerning sales prices set forth below is derived from the Company's
stock  transfer  records.  As of December 31, 2000,  there  were  471
shareholders of record.
                                                  SALES   PRICES   BY
QUARTER
                                                 High        Low
     Fiscal Year 2000
     First Quarter                                $12.00      $12.00
     Second Quarter                                    -           -
     Third Quarter                                 12.00       12.00
     Fourth Quarter                                    -           -
                                    28

                                                SALES PRICES BY QUARTER
                                                  High          Low
     Fiscal Year 1999
     First Quarter                                $12.00        $12.00
     Second Quarter                                12.00         12.00
     Third Quarter                                 12.00         12.00
     Fourth Quarter                                12.00         12.00

                                               DIVIDENDS PAID PER SHARE
     Fiscal Year                                  2000          1999
     March 31                                     $  .00           .00
     June 30                                         .00           .00
     September 30                                    .00           .00
     December 31                                     .70           .65

Item 6.  Selected Financial Data

                                  Years Ended December 31,
                  2000      1999         1998      1997      1996
                                      (In Thousands)
Total Assets       $ 220,450 $ 173,807   $ 164,890 $ 149,895 $132,291

Operations:
 Interest income   $  18,454 $  14,518   $  13,920 $  12,328 $ 11,107
 Interest expense      8,578     6,261       6,392     5,387    4,823
Net Interest
 Income            $   9,876 $   8,257   $   7,528 $   6,941 $  6,284
Provision for
 loan losses             424       503         286       179      202
Net interest
 income after
 provision for
 loan losses       $   9,452 $   7,754   $   7,242 $   6,762 $  6,082
Other income       $   2,718 $   2,298   $   1,905 $   1,569 $  1,596
Other expenses     $   8,302 $   6,906   $   6,387 $   6,017 $  5,586
Income before
 income taxes      $   3,868 $   3,146   $   2,760 $   2,314 $  2,092
Federal income
 taxes                 1,222     1,017         831       768      662
Net income before
 extraordinary
 items             $   2,646 $   2,129   $   1,929 $   1,546 $  1,430
Extraordinary
 items             $       - $       -   $       - $       - $      -
Net income         $   2,646 $   2,129   $   1,929 $   1,546 $  1,430

Per Share Data:
 Income after
  extraordinary
  items            $    6.62 $    5.33   $    4.83 $    3.86 $   3.54
 Net income        $    6.62 $    5.33   $    4.83 $    3.86 $   3.54
 Dividends
  declared         $     .70 $     .65   $     .65 $     .60 $    .55
 Book value        $   45.73 $   39.57   $   35.56 $   31.28 $  27.72

                                    29

Item 6.  Selected Financial Data (con't)

Years Ended December 31,
                  2000       1999       1998      1997      1996
                                     (In Thousands)
Profitability Ratios
 Net income to
 average total
   assets                 1.35%        1.28           %       1.23         %
1.13                       %      1.14%
Net income to average
 stockholders'
 equity              15.52%      14.18%  $   14.45 $   13.06 $  13.29
Net interest
 margin                4.77%      4.83%  $    4.52 $    5.18 $   4.86


Item  7.  Management's Discussion and Analysis of Financial Condition  and
Results of Operations

      The  purpose of this discussion is to focus on information  about
South  Banking Company's financial condition and results of  operations
which  is  not  otherwise  apparent  from  the  consolidated  financial
statement included in this report.  Reference should be made  to  those
statements, selected statistical information and the selected financial
data  presented  elsewhere in this report for an understanding  of  the
following discussion and analysis.

Financial Condition and Liquidity

Financial Condition

      South  functions  as  a financial institution  and  as  such  its
financial  condition  should be examined in  terms  of  trends  in  its
sources  and  uses  of funds.  A comparison of daily  average  balances
indicate how South has managed its sources and uses of funds.  Included
in  the  selected  statistical information,  the  comparison  of  daily
average  balance  in the business portion of the filing  indicated  how
South  has managed its sources and uses of funds.  South used its funds
primarily to support its lending activities.

      South's  total assets increased to $220,450,038 at year end  2000
from  $173,807,421  at  year end 1999.  This  increase  of  $46,642,617
includes   $21,016,182  of  assets  acquired   in   the   Flag   branch
acquisitions. The internal generated growth of $25,626,435 represents a
14.7%  increase  in  2000  compared to 5.4%  increase  in  1999.   This
increase is attributable to
normal  growth  within  the  banking  area  with  limited  entry   into
competitive  situations  for  large deposits.   Due  to  the  increased
competition in certain markets, the net interest margins have declined.
The  net  interest margin is not anticipated to change much in 2001  as
the  effect  of the new competition and stock market has  leveled  off.
However,  continued  decreases  in the  prime  rate  could  impact  the
margins.   The interest rate sensitivity analysis, which is a  part  of
this  report,  gives some indication of the repricing opportunities  of
South.  The gap ratios for

                                   30

the  first twelve months are outside the limits established by the Bank
as  ideal,  however, the current interest rates are  not  favorable  to
customers  purchasing  certificates in excess of  twelve  months.  Loan
demand  continues  to  be strong with loans increasing  $12,536,784  in
2000.   The  banks  continue to look for good quality  loans  as  loans
represent  the highest yielding asset on the Bank's books.   The  rural
economy  of the Banks' market area has been stable prior to 1998.   The
Banks  have noticed some decline began in 1999 and 2000 in the  overall
economy,  and  especially in the agricultural  and  timber  industries.
While  the  Banks are not heavy into these industries, the  decline  in
these  areas  have impacted the overall economy. Classified  loans  for
regulatory  purposes remain at low levels and, despite the  problem  in
the  local economies, do not represent any trend or uncertainties which
management  reasonably expects will materially impact future  operating
results, liquidity of capital resources, or represents material credits
about  which management is aware that causes management to have serious
doubts  as  to  the ability of such borrowers to comply with  the  loan
payment terms.

      South's  investment portfolio, including certificates of deposits
in  other banks, increased from $19,922,578 to $21,667,660.  The  small
increase  of  $1,745,082 from operations is an indication of  the  loan
demand  of the banks and the desire of the banks to utilize the  assets
of  South in the highest yielding manner available to the banks without
creating  liquidity  problems. South has  maintained  adequate  federal
funds  sold and investments available for sale to sufficiently maintain
adequate  liquidity.  South's securities are primarily  short  term  of
three  years or less in maturity, enabling South to better monitor  the
rate  sensitivity of these assets.  Unrealized gain and losses on  this
portfolio is not material to the statement as South maintains a  slight
unrealized loss of $131,541.

      As  the primary source of funds, aggregate deposits increased  by
$21,505,401  in 2000 compared to $6,810,030 in 1999. This represents  a
14.07%  increase  for the year compared to a 4.66%  increase  in  1999.
This  illustrates  the  efforts of the  banks  to  maintain  good  core
deposits.  However, most of the growth was from the higher paying  time
certificates.  One of the markets experienced new competition  in  1998
which continues to have some impact on time certificate rates.

Liquidity

      The  primary function of asset/liability management is to  assure
adequate liquidity and maintain an appropriate balance between interest
sensitive  earning assets and interest bearing liabilities.   Liquidity
management  involves the ability to meet the cash flow requirements  of
customers  who may  be either  depositors desiring to  withdraw   funds
or
borrowers  requiring assurance that sufficient funds will be  available
to meet their credit needs.  Interest rate sensitivity management seeks
to  avoid  fluctuating net interest margins and to  enhance  consistent
growth  of  net  interest income through periods of  changing  interest
rates.

                                   31

     Interest rate sensitivity varies with different types of interest-
earning  assets  and interest bearing liabilities.   Overnight  federal
funds  on  which rates change daily and loans which are tied  to  prime
differ  considerably from long-term investment and  fixed  rate  loans.
Similarly,  time deposits over $100,000 and money market  accounts  are
much  more  interest  sensitive  than passbook  savings  and  long-term
capital notes. The shorter-term interest rate sensitivities are key  to
measuring  the  interest sensitivity gap, or excess  interest-sensitive
earning  assets  over interest-bearing liabilities.  An  interest  rate
sensitivity table is included elsewhere in this document, and it  shows
the  interest  sensitivity  gaps for different  time  intervals  as  of
December  31,  2000. The first 30 days there is an excess of  interest-
bearing  assets over interest-bearing liabilities. South  becomes  more
sensitive to interest rate fluctuations on a short time period.   While
the  cumulative  gap  declines with each time interval,  South  remains
within a manageable position.

     Marketable  investment securities, particularly those  of  shorter
maturities, and federal funds sold are the principal sources  of  asset
liquidity.   Securities  maturing in  one  year  or  less  amounted  to
$2,905,273  and federal funds sold net of federal funds purchased  with
daily  maturities amounted to $14,693,000 at year end 2000, an increase
from  prior  years  as deposit growth exceeded loan  demand.   Maturing
loans and certificates of deposits in other banks are other sources  of
liquidity.

      The overall liquidity of South has been enhanced by a significant
aggregate  amount of core deposits.  These core deposits have  remained
constant during this period.  South has utilized less stable short-term
funding  sources  to enhance liquidity such as large denomination  time
deposits  and  money  market certificates within its  current  customer
base, but has not attempted to acquire these type of accounts from non-
core  deposit customers.  South has utilized its core deposit  base  to
help insure it maintains adequate liquidity.

      Historically,  the  trend in cash flows  as  represented  in  the
statement  of  cash flows shows a steady increase in cash generated  by
operations  from the last three years.  This is a result of  increasing
net  income  for  each year.  While income is not  predictable,  it  is
anticipated  that  liquidity  will  continue  to  be  enhanced  by  the
operations of the bank.  Operations activity, however, generate only  a
small  portion of the cash flow activities of the bank.   Primary  cash
flow  comes from investing activities such as sales and/or maturity  of
investment securities and in the financing activity through an increase
in  deposits.   The primary use of cash flow includes the  purchase  of
securities  and making new loans as investing activities.  The  history
of  the  bank's  cash  flow  indicates a nonrepeating  source  such  as
proceeds from borrowings utilized as sources of cash for the purpose of
acquisition  or  expansion.  South's overall cash  flows  indicate  the
relative  stability and manageable growth of the bank's assets.   South
utilized  deposit  growth  as its primary source  of  funds  to  handle
growth.   South's  liquidity  is maintained  at  levels  determined  by
management to be sufficient to handle the cash needs that

                                    32

might  arise  at  any given date.  Outside sources are maintained,  but
South  looks to these sources only on a very short term basis.  South's
long  term  liquidity  plans  include  utilizing  internally  generated
deposits as its primary source of cash flows and utilizing the shifting
of the make up of assets to handle short term demands on cash.

Capital Resources

      In January 1989, the Federal Reserve Board released new standards
for  measuring capital adequacy for U. S. banking organizations.  These
standards  are  based  on the original risk-based capital  requirements
first  proposed  in  early  1986 by U.  S.  bank  regulators  and  then
developed  jointly  by authorities from the twelve  leading  industrial
countries.    As  a  result, the standards are  designed  to  not  only
provide   more   risk-responsive  capital  guidelines   for   financial
institutions in the U. S., but also incorporate a consistent  framework
for  use by financial institutions operating in the major international
financial markets.

     In general, the standards require banks and bank holding companies
to  maintain capital based on "risk-adjusted" assets so that categories
of assets with potentially higher credit risk will require more capital
backing  than  assets  with lower risk.  In addition,  banks  and  bank
holding  companies are required to maintain capital to  support,  on  a
risk-adjusted basis, certain off-balance sheet activities such as  loan
commitments and interest rate swaps.

      The  Federal  Reserve Board standards classify capital  into  two
tiers,  referred to as Tier 1 and Tier 2.  Tier 1 capital  consists  of
common  shareholders' equity, noncumulative and cumulative (BHCs  only)
perpetual preferred stock and minority interest less goodwill.  Tier  2
capital  consists  of  allowance for loan and lease  losses,  perpetual
preferred  stock (not included in Tier 1), hybrid capital  instruments,
term  subordinated  debt  and intermediate-term  preferred  stock.   By
December  31, 1992, all banks were required to meet a minimum ratio  of
8%  of  qualifying total capital to risk-adjusted total assets with  at
least  4% Tier 1 capital.  Capital that qualifies as Tier 2 capital  is
limited to 100% of Tier 1 capital.

Loans and Asset Quality

      Management  of  the Company believes that the loan  portfolio  is
adequately  diversified.  Commercial loans are spread through  numerous
types  of businesses with no particular industry concentrations.  Loans
to  individuals are made primarily to finance consumer goods purchased.
At  December 31, 2000, total loans, net of unearned discounts, were 81%
of  total  earning assets.  Loans secured by real estate accounted  for
54%  of  total  loans  as  of December 31, 2000.   Most  of  the  loans
classified  as  real estate-mortgage are commercial  loans  where  real
estate provides additional collateral.  The Banks do not participate in
the secondary loan market.
                                    33

     Nonperforming assets include nonaccrual loans, accruing loans past
due 90 days or more and other real estate, which includes foreclosures,
deeds in lieu of foreclosure and in-substance foreclosures.

       A   loan  is  generally  classified  as  nonaccrual  when   full
collectibility of principal or interest is doubtful or a  loan  becomes
90  days  past  due  as  to  principal or interest,  unless  management
determines that the estimated net realizable value of the collateral is
sufficient  to cover the principal balance and accrued interest.   When
interest accruals are discontinued, unpaid interest credited to  income
in  the  current year is reversed and unpaid interest accrued in  prior
years  is charged to the allowance for loan losses. Nonperforming loans
are  returned to performing status when the loan is brought current and
has  performed in accordance with contract terms for a period of  time.
A summary of South's loan loss experience is included elsewhere in this
report.

Distribution of Nonperforming Assets
                                           2000      1999    1998
                                                 (In Thousands)
Nonaccrual loans                           $   876   $   442   $   557
Past due 90 days still accruing                734       419       492
Other real estate (ORE)                        725       168       163

                                           $ 2,335   $ 1,029   $ 1,212
Nonperforming loans to year
 end loans                                     .99         %       .65
%                                    .91         %
Nonperforming assets to year
 end loan and ORE                              1.42%     .78         %
1.05                                   %

      The  ratio of nonperforming assets has increased each  year  from
1994 to 1997.  However in 1998 and 1999, a slight decrease occurred  as
90  days  past  dues declined. During 2000, the economy in  the  banks'
market  area declined with certain loans deteriorating to nonperforming
status. Management continues to work on nonperforming assets to  reduce
this ratio.

Asset-Liability Management and Market Risk Sensitivity

      Market  risk is the risk of loss from adverse changes  in  market
prices  and  rates.  The Company's market risk arises principally  from
interest  rate  risk  inherent in its lending,  deposit  and  borrowing
activities.  Management actively monitors and manages its inherent rate
risk  exposure.  Although the Company manages other risks, as in credit
quality   and  liquidity  risk,  in  the  normal  course  of  business,
management  considers  interest rate risk to be  its  most  significant
market risk and could potentially  have the largest material effect  on
the  Company's  financial condition and results of  operations.   Other
types of market risks, such as foreign currency exchange rate risk  and
commodity  price  risk,  do  not arise in  the  normal  course  of  the
Company's business activities.
                                    34

      The  Company's  profitability  is  affected  by  fluctuations  in
interest rates.  Management's goal is to maintain a reasonable  balance
between exposure to interest rate fluctuations and earnings.  A  sudden
and  substantial  increase in interest rates may adversely  impact  the
Company's  earnings to the extent that the interest rates on  interest-
earning  assets and interest-bearing liabilities do not change  at  the
same  speed,  to  the  same extent or on the same basis.   The  Company
monitors  the  impact of changes in interest rates on its net  interest
income using several tools.

     The Banks' goal is to minimize interest rate risk between interest
bearing  assets  and  liabilities at various  maturities   through  its
Asset-
Liability Management (ALM).  ALM involves managing the mix and  pricing
of  assets and liabilities in the face of uncertain interest rates  and
an  uncertain economic outlook.  It seeks to achieve steady  growth  of
net interest income with an acceptable amount of interest rate risk and
sufficient   liquidity.    The  process  provides   a   framework   for
determining,  in  conjunction with the profit planning  process,  which
elements  of  the Company's profitability factors can be controlled  by
management.   Understanding the current position  and  implications  of
past  decisions  is  necessary in providing direction  for  the  future
financial  management  of  the Company.  The  Company  uses  an  asset-
liability  model  to  determine the appropriate  strategy  for  current
conditions.

      Interest  sensitivity management is part of  the  asset-liability
management  process.  Interest sensitivity gap (GAP) is the  difference
between total rate sensitive assets and rate sensitive liabilities in a
given  time  period.   The Company's rate sensitive  assets  are  those
repricing  within one year and those maturing within  one  year.   Rate
sensitive  liabilities include insured money market  accounts,  savings
accounts,  interest-bearing  transaction accounts,  time  deposits  and
borrowings.    The   profitability  of  the   Company   is   influenced
significantly  by  management's  ability  to  manage  the  relationship
between  rate sensitive assets and liabilities.  At December 31,  2000,
approximately  58% of the Company's earnings assets could  be  repriced
within  one  year compared to approximately 92% of its interest-bearing
liabilities.  This compares to 64% and 93% in 1999.

      The  Company's current GAP analysis reflects that in  periods  of
increasing  interest rates, rate sensitive assets will  reprice  slower
than rate sensitive liabilities.  The Company's GAP analysis also shows
that  at the interest repricing of one year, the Company's net interest
margin  would be adversely impacted.  This analysis, however, does  not
take  into  account the dynamics of the marketplace.  GAP is  a  static
measurement  that  assumes if the prime rate  increases  by  100  basis
points,  all  assets  and  liabilities that are  due  to  reprice  will
increase  by  100 basis points at the next opportunity.   However,  the
Company  is actually able to experience a benefit from rising rates  in
the  short term  because deposit rates do not follow the national money
market.  They are controlled by the local market.  Loans do follow  the
money market; so when rates increase they reprice immediately, but  the
Company is able to manage the deposit side.  The Company generally does
not  raise deposit rates as fast or as much.  The Company also has  the
ability to manage its funding costs by choosing alternative sources  of
funds.

                                    35

      The  Company's current GAP position would also be interpreted  to
mean  that  in  periods of declining interest rates, the Company's  net
interest margin would benefit.  However, competitive pressures  in  the
local market may not allow the Company to lower rates on deposits,  but
force the Company to lower rates on loans.

      Computation of prospective effects of hypothetical interest  rate
changes are based on numerous assumptions including relative levels  of
market  interest rates, loan prepayments and deposit decay  rates,  and
should  not  be relied upon as indicative of actual results.   Further,
the  computations  do  not contemplate any actions  the  Company  could
undertake in response to changes in interest rates.

      The  rate  sensitivity  analysis as  presented  in  the  selected
statistical information shows the Company's financial instruments  that
are  sensitive  to changes in interest rates, categorized  by  expected
maturity.   Market risk sensitive instruments are generally defined  as
on and off balance sheet derivatives and other financial instruments.

Notes to Market Risk Sensitivity Table:

            Expected maturities are contractual maturities adjusted for
     prepayments of principal when possible.  The Company uses  certain
     assumptions to estimate expected maturities.

    For  loans, the Company has used contractual maturities due to  the
     fact  that the Company has no historical information on prepayment
     speeds.   Since  most of these loans are consumer  and  commercial
     loans,  and  since the Company's customer base is community-based,
     the Company feels its prepayment rates are insignificant.

    For  mortgage-backed securities, expected maturities are based upon
     contractual  maturity,  projected  repayments  and  prepayment  of
     principal.  The prepayment experience herein is based on  industry
     averages as provided by the Company's investment trustee.

    Loans receivable includes non-performing loans.

    Interest-bearing  liabilities are included in the period  in  which
     the  balances  are  expected  to  be  withdrawn  as  a  result  of
     contractual  maturities.  For accounts with no stated  maturities,
     the balances are included in the 0 to 90 day category.

    The   interest  rate  sensitivity  gap  represents  the  difference
     between  total  interest-earning assets and total interest-bearing
     liabilities.

      An important aspect of achieving satisfactory net interest income
is  the  composition  and  maturities  of  rate  sensitive  assets  and
liabilities.  The  table generally reflects that in periods  of  rising
interest  rates,  rate sensitive liabilities will reprice  faster  than
rate  sensitive assets, thus having a negative effect on  net  interest
income.  It must be
understood,  however, that such an analysis is only a snapshot  picture
and

                                    36

does  not  reflect  the  dynamics  of  the  market  place.   Therefore,
management reviews simulated earnings statements on a monthly basis  to
more  accurately  anticipate its sensitivity  to  changes  in  interest
rates.

Results of Operations

                          2000 Compared to 1999

      Net  interest income remains an effective measurement of how well
management  has  balanced South's interest rate  sensitive  assets  and
liabilities.   Net  interest  income  increased  by  $1,619,133.    The
increase   of  25.8%,  which  included  the  results  of   the   branch
acquisitions,  compared  to  a 9.68% increase  in  1999.   The  primary
determinants  of  the increase were loans and time deposits.   As  loan
demand  increases,  funds  are channeled into  higher  yielding  loans.
Management  continues  its  policy  of  not  soliciting  high  interest
deposits and was able to maintain stable cost of funds.  The growth  of
assets and liabilities was primarily the reason for the increase as net
interest  yield decreased slightly to 4.77% from 4.83%.  With  the  low
interest  rate  currently in the market and South's current  rate  gap,
South  will continue its efforts to channel funds into higher  yielding
assets.  Due to the rate sensitivity gap, South will attempt to improve
its current position with a controlled attempt to lengthen its maturity
of  interest rate sensitive liabilities although this remains difficult
without rate adjustments upward.

      Interest and fees on loans increased $3,744,981 or 29.13% in 2000
from  1999 due to rate increases of 59 basis points and loan growth  of
23.8% in 2000.  Interest on investment securities increased $53,083  or
4.8%  in  2000  from  1999 due to a slight increase  in  the  yield  in
investments  as  rates  have  increased slightly.  Interest  income  on
federal  funds  sold increased $160,488 or 34.7% due to higher  average
balances invested and higher rates.

      Total  interest expense increased 37% or $2,316,587 from 1999  to
2000.   The  largest  component of total interest expense  is  interest
expense  on deposits, which increased $2,109,540 or 35.1% from 1999  to
2000  due to a rate increase and growth in deposits.  The average  rate
paid  on  deposits was 5.54%, 4.82% and 5.27% in 2000, 1999  and  1998,
respectively.

      The  allowance  for  possible loan losses is established  through
charges  to  expense in the form of a provision for loan  losses.   The
provision for loan losses was $424,000 and $503,000, respectively,  for
the  years  ended  December 31, 2000 and 1999.  The provision  in  2000
reflects replenishing the allowance for loan losses to cover net charge-
offs  of  $452,964,  plus  providing for the increase  in  total  loans
outstanding.  The allowance for loan losses to total loans  outstanding
is  1.67%  at December 31, 2000.  Net charge-offs to average loans  are
 .31% for 2000 as compared to 0.25% for 1999.

      The allowance for loan losses is based on an in-depth analysis of
the  loan  portfolio.  Specifically included in that analysis  are  the
following types of loans:  loans determined to be of a material amount,
loans  commented  on by regulatory authorities, loans commented  on  by
internal and external auditors, loans past due more than 60 days, and

                                    37

loans  on  a nonaccrual status.  The allowance for loan losses  is  not
allocated  to  specific credit risk, but rather  to  the  overall  loan
portfolio  as  the  individual banks are relatively small  and  can  be
looked  at  as  a  whole.  The overall loan portfolio remains  of  good
quality,  however,  some deterioration has been noted  in  the  economy
which  reflects on the loan portfolio.  The Banks have made  provisions
where necessary to reflect the overall quality of loans.

Non-Interest Income

      Non-interest income for 2000 increased by $420,249 or 15.5%  over
1999,  as  compared to an increase in 1999 of $392,788  or  20.6%  over
1998.  These  increases generally resulted from increased  activity  in
data processing, financial services and service charges on deposits.  A
significant  contributor to non-interest income is service  charges  on
deposit  accounts which increased 24.2%.  Management views deposit  fee
income as critical influence on profitability.  Periodic monitoring  of
competitive  fee schedules and examination of alternative opportunities
ensure  that the Company realizes the maximum contribution  to  profits
from this area.  The addition of the branch acquisition contributed  to
the increase in fees.

Non-Interest Expense

      Non-interest expenses totaled $8,301,997 in 2000 as  compared  to
$6,905,856  in 1999.  This represented an 20.2% increase from  1999  to
2000,  and  a  8%  increase from 1998 to 1999.  The  overall  increases
during  the year were attributable to growth in all geographic markets,
and includes operations of branches acquired during the year.  Salaries
and other personnel expenses, which comprised 51% of total non-interest
expenses  for 2000, were up $535,840 or 14.5% over 1999 due  to  normal
salary  increases, benefit cost increases, and increased personnel  due
to  two  new  branches.   During  1999 and  1998,  salaries  and  other
personnel  expenses accounted for 54% and 51% of total other  operating
expenses, respectively.

      Combined  net  occupancy  and furniture  and  equipment  expenses
increased  $298,051,  or 25.4% from 1999 to 2000,  as  compared  to  an
increase of $26,489, or 2.3% in 1999.

Income Taxes

      Income  tax  expense totaled $1,221,738 in 2000  as  compared  to
$1,017,056  in  1999.  The changes in net income tax  expense  for  the
years  were due to changes in taxable income for each respective  year.
Taxable  income  is  affected  by net  income,  income  on  tax  exempt
investment  securities and loans, and the provision  for  loan  losses.
For  tax purposes, the Bank can only recognize actual loan losses.  The
Company  works  actively with outside tax consultants to  minimize  tax
expenses.

                                    38

Results of Operations

                        1999 Compared to 1998

      Net  interest income remains an effective measurement of how well
management  has  balanced South's interest rate  sensitive  assets  and
liabilities.  Net interest income increased by $728,607.  The  increase
of   9.68%  compared  to  a  8.45%  increase  in  1998.   The   primary
determinants  of  the increase were loans and time deposits.   As  loan
demand  increased,  funds were channeled into  higher  yielding  loans.
Management  continues  its  policy  of  not  soliciting  high  interest
deposits and was able to maintain stable cost of funds.  The growth  of
assets and liabilities was only part of the reason for the increase  as
net  interest  yield  increased to 4.83%  from  4.52%.   With  the  low
interest  rates  in  the market and South's interest  rate  gap,  South
continued  its  efforts to channel funds into higher  yielding  assets.
Due to the rate sensitivity gap, South attempted to improve its current
position with a controlled attempt to lengthen its maturity of interest
rate  sensitive  liabilities although this is  difficult  without  rate
adjustments upward.

      Interest and fees on loans increased $706,985 or 5.82% from  1998
to  1999  due to loan growth of 15.1% in 1999.  Interest on  investment
securities  decreased  $29,504 or 2.5% from  1998  to  1999  due  to  a
reduction in the yield in investments as rates have increased slightly.
Interest  income on federal funds sold decreased $113,905 or 18.9%  due
to higher average balances invested.

      Total  interest expense decreased 20% or $131,134  from  1998  to
1999.  The  largest  component of total interest  expense  is  interest
expense on deposits, which decreased $117,482 or 1.9% from 1998 to 1999
due  to  a  rate decrease that offset growth in deposits.  The  average
rate  paid  on  deposits was 4.82%, 5.27% and 5.10% in 1999,  1998  and
1997, respectively.

      The  allowance  for  possible loan losses is established  through
charges  to  expense in the form of a provision for loan  losses.   The
provision for loan losses was $503,000 and $286,000, respectively,  for
the  years  ended  December 31, 1999 and 1998.  The provision  in  1999
reflects replenishing the allowance for loan losses to cover net charge-
offs of $432,472, plus providing for the 15.10% increase in total loans
outstanding.  The allowance for loan losses to total loans  outstanding
is  1.64%  at December 31, 1999.  Net charge-offs to average loans  are
 .25% for 1999 as compared to 0.12% for 1998.

      The allowance for loan losses is based on an in-depth analysis of
the  loan  portfolio.  Specifically included in that analysis  are  the
following types of loans:  loans determined to be of a material amount,
loans  commented  on by regulatory authorities, loans commented  on  by
internal  and external auditors, loans past due more than 60 days,  and
loans  on  a nonaccrual status.  The allowance for loan losses  is  not
allocated  to  specific credit risk, but rather  to  the  overall  loan
portfolio  as  the  individual banks are relatively small  and  can  be
looked  at  as  a  whole.  The overall loan portfolio remains  of  good
quality,  however,  some deterioration was noted in the  economy  which
reflects  on the loan portfolio.  The Banks have made provisions  where
necessary to reflect the overall quality of loans.

                                    39

Non-Interest Income

      Non-interest income for 1999 increased by $392,788 or 20.6%  over
1998,  as  compared to an increase in 1998 of $335,546  or  21.4%  over
1997.  These  increases generally resulted from increased  activity  in
data processing, financial services and service charges on deposits.  A
significant  contributor to non-interest income is service  charges  on
deposit  accounts which increased 24.2%.  Management views deposit  fee
income as critical influence on profitability.  Periodic monitoring  of
competitive  fee schedules and examination of alternative opportunities
ensure  that the Company realizes the maximum contribution  to  profits
from this area.


Non-Interest Expense

      Non-interest expenses totaled $6,905,856 in 1999 as  compared  to
$6,386,678 in 1998.  This represented an 8% increase from 1998 to 1999,
and a 6% increase from 1997 to 1998.   The overall increases during the
year  were  due to growth in all geographic markets, which is evidenced
by  the growth in deposits of 4.7% from 1998 to 1999 and 11% from  1997
to  1998. Salaries and other personnel expenses, which comprised 54% of
total  non-interest expenses for 1999, were up $410,409 or  12.5%  over
1998  due  to  normal  salary increases, benefit  cost  increases,  and
increased  personnel due to the one new branch.  During 1998 and  1997,
salaries  and  other personnel expenses accounted for 51%  and  50%  of
total other operating expenses, respectively.

      Combined  net  occupancy  and furniture  and  equipment  expenses
increased  $26,489,  or  2.3% from 1998 to  1999,  as  compared  to  an
increase of $102,423, or 9.8%, in 1998.

Income Taxes

      Income  tax  expense totaled $1,017,056 in 1999  as  compared  to
$830,744 in 1998.  The changes in net income tax expense for the  years
were  due  to  changes  in  taxable income for  each  respective  year.
Taxable  income  is  affected  by net  income,  income  on  tax  exempt
investment  securities and loans, and the provision  for  loan  losses.
For  tax purposes, the Bank can only recognize actual loan losses.  The
Company  works  actively with outside tax consultants to  minimize  tax
expenses.

Results of Operations

                        1998 Compared to 1997

      Net  interest income remains an effective measurement of how well
management  has  balanced South's interest rate  sensitive  assets  and
liabilities.  Net interest income increased by $586,672.  The  increase
of   8.45%  compared  to  a  10.46%  increase  in  1997.   The  primary
determinants  of  the increase were loans and time deposits.   As  loan
demand  increased,  funds were channeled into  higher  yielding  loans.
Management  continues  its  policy  of  not  soliciting  high  interest
deposits and was able to

                                    40

maintain stable cost of funds. The growth of assets and liabilities was
necessary to maintain the level of net interest income as net  interest
yield  decreased  to  4.52% from 5.18%.  With  the  low  interest  rate
currently  in the market and South's current interest rate  gap,  South
will continue its efforts to channel funds into higher yielding assets.
Due  to  the  rate sensitivity gap, South will attempt to  improve  its
current position with a controlled attempt to lengthen its maturity  of
interest rate sensitive liabilities although this is difficult  without
rate adjustments upward.

      Interest  and fees on loans increased $1,382,418 or  12.83%  from
1997  to  1998  due  to  a loan growth of 7.9% in  1998.   Interest  on
investment securities decreased $14,505 or 1% from 1997 to 1998 due  to
a  reduction  in  the yield in investments as rates  have  declined  in
securities.   Interest income on federal funds sold increased  $208,034
or 53% due to higher average balances invested.

      Total interest expense increased 18.6% or $1,005,298 from 1997 to
1998.  The  largest  component of total interest  expense  is  interest
expense  on  deposits, which increased $1,077,074 or 21% from  1997  to
1998  due  to  a  10%  growth in deposits.  The average  rate  paid  on
deposits   was  5.27%,  5.10%  and  4.98%  in  1998,  1997  and   1996,
respectively.

      The  allowance  for  possible loan losses is established  through
charges  to  expense in the form of a provision for loan  losses.   The
provision for loan losses was $286,000 and $334,531, respectively,  for
the  years  ended  December 31, 1998 and 1997.  The provision  in  1998
reflects replenishing the allowance for loan losses to cover net charge-
offs  of $137,066, plus providing for the 7.9% increase in total  loans
outstanding.  The allowance for loan losses to total loans  outstanding
is  1.71%  at December 31, 1998. Net charge-offs to average  loans  are
0.12% for 1998 as compared to 0.14% for 1997.

      The allowance for loan losses is based on an in-depth analysis of
the  loan  portfolio.  Specifically included in that analysis  are  the
following types of loans:  loans determined to be of a material amount,
loans  commented  on by regulatory authorities, loans commented  on  by
internal  and external auditors, loans past due more than 60 days,  and
loans  on  a nonaccrual status.  The allowance for loan losses  is  not
allocated  to  specific credit risk, but rather  to  the  overall  loan
portfolio  as  the  individual banks are relatively small  and  can  be
looked  at  as  a  whole.  The overall loan portfolio remains  of  good
quality,  however,  some deterioration has been noted  in  the  economy
which  reflects on the loan portfolio.  The Banks have made  provisions
where necessary to reflect the overall quality of loans.

Non-Interest Income

      Non-interest  income for 1998 increased by $335,546  or  4%  over
1997,  as compared to a decrease in 1997 of $26,778 or 1.6% over  1996.
These increases generally resulted from increased SBA loan activity.

                                   41

      A  significant  contributor  to non-interest  income  is  service
charges  on  deposit accounts which decreased 2.3%.   Management  views
deposit  fee income as a critical influence on profitability.  Periodic
monitoring  of competitive fee schedules and examination of alternative
opportunities ensure that the Company realizes the maximum contribution
to profits from this area.

Non-Interest Expense

      Non-interest expenses totaled $6,386,678 in 1998 as  compared  to
$6,017,178 in 1997.  This represented a 6% increase from 1997 to  1998,
and  a  7.7% increase from 1996 to 1997.  The overall increases  during
the  year  were  due  to  growth in all geographic  markets,  which  is
evidenced  by the growth in deposits of 11% from 1997 to  1998  and  9%
from  1996  to  1997.  Salaries  and other  personnel  expenses,  which
comprised 51% of total non-interest expenses for 1998, were up $219,187
or  7% over 1997 due to normal salary increases and increased personnel
due  to  the one new branch.  During 1997 and 1996, salaries and  other
personnel  expenses accounted for 50% and 48% of total other  operating
expenses, respectively.

      Combined  net  occupancy  and furniture  and  equipment  expenses
increased  $102,423,  or  9.8% from 1997 to 1998,  as  compared  to  an
increase of $117,214, or 12%, in 1997.  The increase in 1998 is due  to
the opening of one new branch.

Income Taxes

      Income  tax  expense  totaled $830,744 in  1998  as  compared  to
$767,811 in 1997.  The changes in net income tax expense for the  years
were  due  to  changes  in  taxable income for  each  respective  year.
Taxable  income  is  affected  by net  income,  income  on  tax  exempt
investment  securities and loans, and the provision  for  loan  losses.
For  tax purposes, the Bank can only recognize actual loan losses.  The
Company  works  actively with outside tax consultants to  minimize  tax
expenses.

Regulatory Matters

      During  the  year  2000,  federal and state  regulatory  agencies
completed  asset  quality  examinations at  South's  subsidiary  banks.
South's level and classification of identified potential problem  loans
was   not   revised  significantly  as  a  result  of  this  regulatory
examination process.

      Examination  procedures  require  individual  judgments  about  a
borrower's ability to repay loans, sufficiency of collateral values and
the  effects of changing economic circumstances.  These procedures  are
similar to those employed by South in determining the adequacy  of  the
allowance for loan losses and in classifying loans.  Judgments made  by
regulatory examiners may differ from those made by management.

                                   42

      Management  and the boards of directors of South  and  affiliates
evaluate  existing  practices and procedures on an ongoing  basis.   In
addition,  regulators often make recommendations during the  course  of
their  examinations  that relate to the operations  of  South  and  its
affiliates.   As  a matter of practice, management and  the  boards  of
directors  of  South and its subsidiaries consider such recommendations
promptly.

Impact of Inflation and Changing Prices

      The  majority of assets and liability of a financial  institution
are  monetary in nature; therefore, differ greatly from most commercial
and  industrial  companies that have significant investments  in  fixed
assets  or  inventories.   However, inflation does  have  an  important
impact  on the growth of total assets in the banking industry  and  the
resulting  need to increase equity capital at higher than normal  rates
in  order  to  maintain  an  appropriate  equity-to-assets  ratio.   An
important  effect  of this has been the reduction of  asset  growth  to
maintain  appropriate levels.  Another significant effect of  inflation
is  on  other  expenses, which tend to rise during periods  of  general
inflation.

      Management  believes  the most significant  impact  on  financial
results  is South's ability to react to changes in interest rates.   As
discussed   previously,  management  is  attempting  to   maintain   an
essentially  balanced  position between interest sensitive  assets  and
liabilities   in   order  to  protect  against   wide   interest   rate
fluctuations.

Item 8.  Financial Statements and Supplementary Data

      The following consolidated financial statements of the Registrant
and  its  subsidiaries are included on pages F-2 through F-40  of  this
Annual report on Form 10-K.

     Consolidated Balance Sheets - December 31, 2000 and 1999

     Consolidated Statements of Income and Other Comprehensive Income -
Years ended December 31, 2000, 1999 and 1998

     Consolidated Statements of Changes in Stockholders' Equity - Years
ended December 31, 2000, 1999 and 1998

     Consolidated Statements of Cash Flow - Years ended December 31, 2000,
     1999 and 1998

     Notes to Consolidated Financial Statements

Item 9.  Disagreement on Accounting and Financial Disclosures

     Not applicable.

                                    43
Part III.

Item 10. Directors and Executive Officers of the Registrant

      The  Directors and Executive Officers of the Registrant and  their
respective ages, positions with the Registrant, principal occupation and
Common  Stock of the Registrant beneficially owned as of March  1,  2000
are as follows:
                                                Director
                                              (Officer) of   # of shares
                           Position with        Registrator Owned
                           Registrant          of one of     Beneficiary
                           & Principal         the Banks    (Percent of
Name (Age)                 Occupation          Since        Class)
Paul T. Bennett (45)       President,          1978(1)(2)        19,000
                            Treasurer and             (3)      (  4.75%)
                            Director; Vice            (4)
                            Chairman and Director,
                            Citizens Bank; Vice
                            Chairman and Director,
                            Peoples State Bank &
                            Trust, Baxley, Georgia;
                            President Peoples Bank,
                            Lyons, Georgia; Director
                                          and President
                            Banker's Data Services;
                            Director, Alma Exchange
                            Bank and Trust;
                            Director, Chairman and
                            President Pineland
                            State Bank

Olivia Bennett (81)        Executive Vice      1969(1)(2)       188,959
                            President, Secretary      (3)     (  47.30%)
                            and Director; Chairman
                            and Director, Alma
                            Bank; Director,
                            Banker's Data Services;
                            Chairman of Board,
                            President, Citizens Bank;
                            Director, Peoples Bank

Lawrence Bennett (53)      President and       1987(1)(2)        13,698
                            Director, Alma            (4)       (  3.43    %)
                            Bank; Director,
                            Banker's Data Services;
                            Director, Peoples
                            Bank, Baxley; Director
                            Peoples Bank, Lyons
                           Director, Pineland State
                           Bank

                                   44

Item 10. Directors and Executive Officers of the Registrant (Con't)

                                                Director
                                              (Officer) of   # of shares
                           Position with        Registrator Owned
                           Registrant          of one of     Beneficiary
                           & Principal         the Banks    (Percent of
Name (Age)                 Occupation          Since        Class)
Charles Stuckey (53)      Director; Executive     1990(3)           992
                           Vice President,                       (   .2    %)
                           Peoples Bank; Director,
                           Banker's Data Services

James W. Whiddon (56)      Director; Executive     1989(2)          279
                            Vice President and                  (    .1    %)
                            Director, Citizens
                            Bank; Director,
                            Banker's Data Services

Kenneth F. Wade (58)       Director; Executive     1980(1)        4,934
                            Vice President, Director            (  1.23    %)
                            and Cashier, Alma Bank;
                            Director, Banker's
                            Data Services

John Rogers (53)           Director, Executive     1996(4)          100
                            Vice President, Pineland            (     -    %)
                            State Bank; Director;
                            Banker's Data Services

(1) Director of Alma Bank
(2) Director of Citizens Bank
(3) Director of Peoples Bank
(4) Director of Pineland State Bank


      Included  in  shares owned by Olivia Bennett are  175,501  shares
owned by Estate of Valene Bennett of which she is the Executrix.

       None  of  the  directors  are  a  director  of  a  publicly-held
corporation  which is required to file reports with the Securities  and
Exchange Commission.

      Each of the Directors and Executive Officers have been engaged in
his  or  her  present  principal occupation for at  least  five  years.
Olivia  Bennett is the mother of Paul T. Bennett and Lawrence  Bennett.
There  are no other family relationships between any other Director  or
Executive  Officer.  Directors serve until the next annual  meeting  of
shareholders  or  until  their successors are  elected  and  qualified.
Officers serve at the pleasure of the Board of Directors.

                                     45

Item 11.  Management Renumeration and Transactions

     The following information is given as to the cash and cash equivalent
forms of renumeration received by South's CEO.

                                                Long-Term Compensation
                   Annual Compensation          Awards           Payouts
(A)        (B)   (C)      (D)       (E)         (F)       (G)      (H)
(I)

                                                                 Other
All
Name and                         Annual    Restricted                 Other
Principal                        Compen-     Stock  Options/ LTIP    Compen-
Position           Year          Salary   Bonus    sation (2)  Award   SARS
#     Payouts sation
Paul T.
Bennett
CEO     2000   182,848       -    31,440         -       -        -     -
CEO     1999   164,348       -    28,910         -       -        -     -
CEO      1998   140,956       -    26,200         -       -         -      -
1997    125,138       -   20,235           -           -         -         -
1996   109,480      - 22,940         -         -       -       -
Olivia
Bennett
Secretary2000  215,099       -    20,915         -       -        -     -
        1999   205,366       -    20,345         -       -        -     -
        1998   195,935       -    22,010         -       -        -    -
        1997   182,936       -    15,135         -       -        -    -
1996   168,748      -  15,295        -         -       -

(1)   Does  not include fees and dues for clubs and fraternal and  civic
organizations paid by the Banks to certain officers for business related
purposes.  Also, does not include any amounts for use of an automobile.

(2)   Other  compensation consists of director fees from registrant  and
subsidiary banks.

Transactions with Management

Item 12.  Security Ownership of Certain Beneficial Owners and Management

     The following table sets forth, as of March 1, 2001, the beneficial
ownership  of Common Stock of Registrant by the Only "person"  (as  that
term is defined by the Securities and Exchange Commission), who owns  of
record  or is known by the Registrant to own beneficially 5% or more  of
the  outstanding  shares of Common Stock of the Registrant  and  by  all
Executive Officers and Directors of the Registrant as a group.

                                   46

                                             Number of     Percent of
                                              Shares Owned  Outstanding
Name                                          Beneficially Shares
Estate of Valene Bennett
Route 4
Alma, Georgia 31510                                175,501       43.93%

Olivia Bennett
Route 4
Alma, Georgia 31510                                 13,458        3.37%

ll Executive Officers and Directors
 as a group (7 persons)                            227,962        57.1%

Item 13.  Certain Relationships and Related Transactions

      The  Banks  have  had, and expect to have in the future,  banking
transactions  in  the ordinary course of business  with  Directors  and
Officers  of  the  Banks and their associates, including  corporations,
partnerships  and  other  organizations in  which  such  Directors  and
Officers  have an interest, on substantially the same terms  (including
interest  rates  and collateral) as those prevailing at  the  time  for
comparable transactions with unrelated parties.  Such transactions have
not  involved more than the normal risk of collectibility or  presented
other unfavorable features.

Item 14.  Exhibits, Financial Statement Schedule and Reports on Form 8-K
Item 14(a)  1. and 3. and Item 14(d)

     (a)  The following documents are filed as part of this report:

          1.  Financial Statements

          (a)   South Banking Company and Subsidiaries:
           (i  )    Consolidated Balance Sheets - December  31,  2000  and
1999
             (ii)    Consolidated   Statements   of   Income   and   Other
Comprehensive Income - Years ended December 31,
                  2000, 1999 and 1998
            (iii)  Consolidated  Statements  of  Stockholders'  Equity   -
Years ended December 31, 2000, 1999 and 1998
           (iv  )  Consolidated  Statements of Cash  Flow  -  Years  ended
December 31, 2000, 1999 and 1998
          (b)   South Banking Company (Parent Corporation Only):
          (i  )  Balance Sheets - December 31, 2000 and 1999
           (ii  )  Statements of Income and Other Comprehensive  Income  -
Periods ended December 31, 2000, 1999 and 1998
           (iii)  Statements  of  Stockholders'  Equity  -  Periods  ended
December 31, 2000, 1999 and 1998
           (iv  )  Statements  of  Cash Flow - Years  ended  December  31,
2000, 1999, and 1998

                                     47

Item 14.  Exhibits, Financial Statement Schedule and Reports on  Form  8-K
          (Con't)

          3.  Exhibits required by Item 7 of regulation S-K:

          (3)   Articles of Incorporation and By-Laws (included as
           Exhibits  3(a)  and  (b), respectively, to  Appendix  II  to
           Registrant's Registration Statement on Form S-14, File No. 2-
           71249, previously filed with the Commission and incorporated
           herein by reference).

          (13)  2001  Annual  Report to Shareholders of  South  Banking
          Company  (not deemed filed except to the extent that sections
          thereof  are  specifically incorporated into this  report  on
          Form 10-K by reference).

          (22)  List of the Registrant's subsidiaries:

          (1)   Alma Exchange Bank & Trust
          (2)   Citizens State Bank
          (3)   Peoples State Bank & Trust
          (4)   Bankers' Data Services, Inc.
          (5)   Pineland State Bank
          (6)   South Financial Products, Inc.

     All of the Registrant's subsidiaries were incorporated under the
laws  of the State of Georgia and are doing business in Georgia under
the above names.

          (b)   The  registrant has not filed a Form 8-K  during  the
          last quarter of the period.

          (c)  The response to this Item 14(c) is included in item 14(a).

          (d)  Financial Statements Schedules - None.

                                  48

                            POWER OF ATTORNEY

      Know all men by these present, that each person whose signature
appears below constitutes and appoints Paul T. Bennett, his attorney-
in-fact, to sign any amendments to this Report, and to file the same,
with  exhibits thereto, and other documents in connection  therewith.
The   Securities  and  Exchange  Commission  hereby   ratifying   and
confirming  all  that  said attorney-in-fact, or  his  substitute  or
substitutes, may do or cause to be done by virtue hereof.

      Pursuant  to  the requirements of Section 13 or  15(d)  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.


Date:      March 30, 2001
                                      Paul T. Bennett
                                      Principal Executive,
                                      Financial and Accounting
                                      Officer and Director

Date:      March 30, 2001
                                      Olivia Bennett
                                      Executive Vice President
                                      And Director

Date:                    March               30,               2001
Charles Stuckey                       Director

Date:      March 30, 2001
                                      James W. Whiddon              Director

Date:      March 30, 2001
                                      Kenneth F. Wade
                                      Director

Date:      March 30, 2001
                                      Lawrence Bennett              Director

Date:      March 30, 2001
                                      John Rogers                   Director

                                     49

                              SIGNATURES

      Pursuant  to  the requirements of Section 13 or  15(d)  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.

                                           SOUTH BANKING COMPANY


Date:      March 30, 2001               By:
                                              Paul    T.    Bennett
President, Treasurer
                                          and Director

                                     50

                       SUPPLEMENTAL INFORMATION

      The following supplemental information has not been sent to the
Registrant's shareholders, but will be sent subsequent to the  filing
of this Annual Report on Form 10-K:

     (1)  2000 annual report to shareholders.

     (2)  Proxy statement for 2000 annual meeting of shareholders.

      The  foregoing   materials will be furnished to the  Commission
when they are sent to the shareholders since the Registrant does  not
have  securities registered pursuant to Section 12 of the  Securities
Exchange Act of 1934.  The foregoing materials shall not be deemed to
be   "filed"  with  the  Commission  or  otherwise  subject  to   the
liabilities of Section 18 of that Act.
                                    51

                          SOUTH BANKING COMPANY

                              ALMA, GEORGIA

                          FINANCIAL STATEMENTS

                            DECEMBER 31, 2000

                                   F1


               REPORT OF INDEPENDENT ACCOUNTANTS



Board of Directors
South Banking Company
Alma, Georgia 31510


      We  have  audited the accompanying consolidated balance sheets  of
South Banking Company and Subsidiaries as of December 31, 2000 and  1999
and the related consolidated statements of income, stockholders' equity,
and  cash flows for each of the three years in the period ended December
31, 2000. These consolidated financial statements are the responsibility
of  the  Company's  management.  Our responsibility  is  to  express  an
opinion on these consolidated financial statements based on our audits.

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

      In our opinion, the  consolidated financial statements referred to
above  present  fairly,  in  all  material  respects,  the  consolidated
financial position of South Banking Company and Subsidiaries at December
31,  2000  and  1999  and the consolidated results  of  its  operations,
stockholders' equity, and cash flows for each of the three years in  the
period  ended  December 31, 2000, in conformity with generally  accepted
accounting principles.

                                          Respectfully submitted,



                                          H. H. BURNET & COMPANY, P.C.
Waycross, Georgia
February 12, 2001


                                   F2

                         SOUTH BANKING COMPANY
                             ALMA, GEORGIA
                      CONSOLIDATED BALANCE SHEETS


                                           December 31,   December 31,
                                                  2000           1999

                                 ASSETS

Cash and due from banks                    $  8,911,914   $ 11,695,998
Deposits in other banks -
 interest bearing                          $    825,279   $    869,000
Investment securities
 Available for sale                        $ 20,695,055   $ 18,306,239
 Held to maturity - market value
  of $151,512 in 2000 and
  $749,139 in 1999                         $    147,326   $    747,339

Georgia  Bankers stock                      $    547,283   $     547,283
Federal Home Loan Bank stock               $    426,100   $    426,100
Federal funds sold                         $ 14,693,000   $  3,180,000
Loans                                                       $163,227,679
$132,282,615
Less: Unearned discount                     (   253,273)   (   216,397)
Reserve for loan losses                     ( 2,728,219              ) (
2,168,877                                             )
                                           $160,246,187   $129,897,341
Bank premises and equipment                $  6,111,361   $  4,097,405
Goodwill                                   $  1,916,358   $    208,562
Other assets                               $  5,930,175   $  3,832,154
Total Assets                               $220,450,038   $173,807,421

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

                                   F3

                         SOUTH BANKING COMPANY
                            ALMA, GEORGIA
                  CONSOLIDATED BALANCE SHEETS (Con't)



                                           December 31,   December 31,
                                           2000           1999


                  LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities
Deposits:  Demand - non-interest
                     bearing              $ 24,298,756   $ 21,462,802
            Demand  -  interest bearing        27,404,525     23,089,387
Savings                                     11,326,824     10,520,013
           Time                            129,649,110     97,727,773

                                          $192,679,215   $152,799,975
Borrowing                                    6,223,363      2,669,743
Accrued expenses and other
 liabilities                                2,236,900      1,294,354
Federal funds purchased                              -      1,140,000
N/P - Federal Home Loan Bank                 1,040,000         93,333
Total Liabilities                         $202,179,478   $157,997,405
Stockholders' Equity
Common stock $1 par value; shares
 authorized - 1,000,000,  shares
 issued and outstanding -
 2000 and 1999 - 399,500
 and 399,500, respectively                $    399,500   $    399,500
Surplus                                      3,070,831      3,070,831
Undivided profits                           14,887,046     12,520,614
Accumulated other comprehensive income     (     86,817)   (   180,929)
Total Stockholders' Equity                $ 18,270,560   $ 15,810,016
Total Liabilities and
 Stockholders' Equity                     $220,450,038   $173,807,421


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


                                   F4

                         SOUTH BANKING COMPANY
                            ALMA, GEORGIA
                   CONSOLIDATED STATEMENTS OF INCOME
                        AND COMPREHENSIVE INCOME


                           Year Ended     Year Ended     Year Ended
                            December 31,   December 31,   December 31,
                           2000           1999           1998
Interest Income
Interest and other
 fees on loans              $ 16,603,948   $ 12,858,967   $ 12,151,982
Interest on deposits -
 interest bearing                 53,224         78,124         82,264
Interest on federal
 funds sold                      622,780        462,292        601,351
Interest on investment
 securities:
 U. S. Treasury                   77,571        144,635        208,785
 U. S. Government agencies       910,190        753,245        668,239
 Mortgage backed securities       33,411         37,875         58,537
 State and municipal
  subdivisions                    79,343         86,777         91,698
 Other securities                 73,017         95,849         57,435
Total Interest Income       $ 18,453,484   $ 14,517,764   $ 13,920,291
Interest Expense
Interest on deposits        $  8,121,657   $  6,012,117   $  6,129,599
Interest - other borrowing       456,150        249,103        262,755
Total Interest Expense      $  8,577,807   $  6,261,220   $  6,392,354
Net interest income         $  9,875,677   $  8,256,544   $  7,527,937
Provision for loan losses        424,000        503,000        286,000
Net interest income after
 provision for loan losses  $  9,451,677   $  7,753,544   $  7,241,937
Other Operating Income
Service charge on deposits $  1,576,094    $  1,446,630   $  1,164,506
Commission on insurance           89,036         68,614         93,217
Other income                     591,926        399,993        450,789
Securities gains (losses)              7            236          2,288
Data processing fees             459,036        382,396        195,701
Loss on sale of fixed
 assets                            2,019              -    (    1,420)
Total Other Operating
 Income                     $  2,718,118   $  2,297,869   $  1,905,081


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


                                   F5

                            SOUTH BANKING COMPANY
                             ALMA, GEORGIA
                   CONSOLIDATED STATEMENTS OF INCOME
                    AND COMPREHENSIVE INCOME (Con't)


                           Year Ended     Year Ended     Year Ended
                            December 31,   December 31,   December 31,
                           2000           1999           1998
Other Operating Expenses
Salaries                    $  3,354,689   $  2,866,950   $  2,643,285
Profit sharing and other
 personnel expenses              875,460        827,359        640,615
Occupancy expense of bank
 premises                        475,452        408,211        393,219
Furniture and equipment
 expense                         996,773        765,963        754,466
Stationery and supplies          254,881        167,909        194,675
Data processing                 310,141         240,633        179,560
Director fees                    174,260        170,260        156,950
Other real estate expenses        13,006         21,112         13,991
Other expenses                 1,847,335      1,437,459      1,409,917
Total Other Operating
 Expenses                   $  8,301,997   $  6,905,856   $  6,386,678
Income before income taxes  $  3,867,798   $  3,145,557   $  2,760,340
Applicable income taxes       1,221,738       1,017,056        830,744
Net Income                  $  2,646,060   $  2,128,501   $  1,929,596
Other Comprehensive Income
 before tax
Unrealized gain on
  securities                 $    151,160                  $(   402,268)
$     61,798
Other Comprehensive Income
  before tax                 $    151,160                  $(   402,268)
$     61,798
Income tax expenses related
 to items of other
  comprehensive income             57,048                   (   136,771)
21,011
Other comprehensive income,
  net of tax                 $     94,112                  $(   265,497)
$     40,787
Comprehensive Income        $  2,740,172   $  1,863,004   $  1,970,383

Per share data based on
 weighted outstanding shares:
   Weighted average
   outstanding                   399,500        399,500        399,500

Net Income                  $       6.62   $       5.33   $       4.83

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

                                   F6

                          SOUTH BANKING COMPANY
                              ALMA, GEORGIA
             CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY







     Common                           Undivided                              '
     Stock               Surplus      Profits
Balance,
 December 31, 1997       $   399,500   $ 3,070,831   $ 8,981,846
 Net income                        -             -     1,929,596
 Cash dividends                    -             -    (  259,654)
 Unrealized gain
  (loss) on securities
  available for sale               -             -             -

Balance,
 December 31, 1998       $   399,500   $ 3,070,831    $10,651,788
 Net income                        -             -     2,128,501
 Cash dividends                    -             -    (  259,675)
 Unrealized gain
  (loss) on securities
  available for sale               -             -             -

Balance,
 December 31, 1999        $   399,500   $ 3,070,831    $12,520,614
 Net income                        -             -      2,646,060
 Cash dividends                    -             -     (  279,628)
 Unrealized gain
  (loss) on securities
  available for sale               -             -             -
 Redemption of shares             -              -                           -

Balance,
 December 31, 2000       $   399,500   $ 3,070,831   $14,887,046
                          SOUTH BANKING COMPANY
                              ALMA, GEORGIA
             CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY




                          Accumulated
                          Other        Total
     Comprehen-         Stockholders             '
     sive Income       Equity
Balance,
 December 31, 1997       $    43,781   $12,495,958
 Net income                        -     1,929,596
 Cash dividends                    -    (  259,654)
 Unrealized gain
  (loss) on securities
  available for sale          40,787        40,787

Balance,
 December 31, 1998       $    84,568   $ 14,206,687
 Net income                      -       2,128,501
 Cash dividends                    -    (   259,675)
 Unrealized gain
  (loss) on securities
  available for sale      (  265,497)    (  265,497)

Balance,
 December 31, 1999       $(  180,929)   $15,810,016
 Net income                        -     2,646,060
 Cash dividends                    -    (  279,628)
 Unrealized gain
  (loss) on securities
  available for sale          94,112        94,112
 Redemption of shares             -              -

Balance,
 December 31, 2000      $(   86,817)   $18,270,560


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

                                   F7

                          SOUTH BANKING COMPANY
                             ALMA, GEORGIA
                 CONSOLIDATED STATEMENTS OF CASH FLOWS



                                Year  Ended    Year Ended     Year Ended
December  31,                                December 31,  December  31,
2000                                                                1999
1998
Cash Flows From Operating
 Activities:
 Net income                 $  2,646,060   $  2,128,501   $  1,929,596
 Add expenses not
  requiring cash:
  Provision for depreciation
   and amortization              930,972        668,207        643,978
  Provision for loan losses      424,000        503,000        286,000
  Provision for loss on ORE        3,408          5,000          8,000
  Bond portfolio losses
   (gains)                              -                   (       202)
(       247                            )
 (Gain) loss on sale of
   premises & equipment       (     2,019              )    (     6,080)
-
 (Gain) loss on sale of
   other  real estate owned         23,040                        34,444
(    11,336                            )
 Increase (decrease) in
   taxes  payable              (   236,230              )        290,973
74,038
 Increase (decrease) in
   interest payable               568,654                   (    39,109)
171,545
 Increase (decrease) in
   other liabilities              324,957     (   348,857             )(
153,424                               )
 (Increase) decrease in
   interest receivable        (   460,066              )         167,420
(    60,192                            )
 Decrease (increase) in
   prepaid expenses           (    80,167              )          17,824
(     4,947                            )
 (Increase) decrease in
   other assets                (   284,686)    (  101,191             )(
33,042                                 )
 Recognition of unearned
   loan  income                          -                        61,852
8,202
 Net Cash Provided By
  Operating Activities      $  3,857,923   $  3,381,782   $  2,858,171
Cash Flows From Investing
 Activities:
 Proceeds from maturities
  of securities held to
  maturity                  $    600,000   $          -   $  1,360,102
 Purchase of securities
   held to maturity                     -                              -
(   502,131                            )
 Proceeds from maturity of
  securities available for
  sale                         2,101,866      6,371,028      8,074,011
 Net loans to customers    ( 13,197,595)    (17,816,584)   ( 8,810,806)
The   accompanying  notes  are  an  integral  part  of  these   financial
statements.

                                   F8

                          SOUTH BANKING COMPANY
                             ALMA, GEORGIA
             CONSOLIDATED STATEMENTS OF CASH FLOWS (Con't)



                            Year Ended     Year Ended     Year Ended
                            December 31,   December 31,   December 31,
                            2000           1999           1998
Cash Flows From Investing
 Activities: (con't)
 Purchase of securities
   available for sale       $( 4,339,254)                  $( 7,849,323)
$( 9,351,464                           )
 Purchase of premises and
   equipment                 ( 1,645,225)                   (   696,558)
(   576,788                            )
 Proceeds from sale of
  premises and equipment          29,970         11,538         29,394
 Proceeds from sale of
  other real estate owned        885,084        163,262        198,212
  Purchase of Bank stock                -    (   250,000)   (    300,000
)
  Purchase of FHLB stock                 -    (    29,900              )
(    51,700)
  Purchase of Bank Branches   ( 4,193,634              )               -
-

Net Cash Provided By
  Investing Activities       $(19,758,788              )   $(20,096,537)
$( 9,931,170                           )
Cash Flows From Financing
 Activities:
 Net increase (decrease) in
  demand deposits, NOW and
   money markets             $  1,686,060                  $( 3,360,349)
$  4,074,732
 Net increase in savings
  and time deposits           19,819,341     10,170,379      9,313,121
 Proceeds from borrowing       4,756,750         38,812        460,000
  Payments on borrowing       (   256,463              )    (   578,499)
(   504,559                            )
  Dividends paid              (   279,628              )    (   259,675)
(   259,654                            )
 Payments to retire stock              -              -               -
 Increase in federal funds
   Purchased                  ( 1,140,000              )       1,140,000
(   150,000                            )
Net Cash Provided By
 Financing Activities       $ 24,586,060   $  7,150,668   $ 12,933,640
Net increase (decrease) in
 Cash and Cash Equivalents  $  8,685,195   $( 9,564,087)  $  5,860,641
Cash and Cash Equivalents
 at Beginning of Year         15,744,998    25,309,085      19,448,444

Cash and Cash Equivalents
 at End of Year             $ 24,430,193   $ 15,744,998   $ 25,309,085



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


                                   F9

                        SOUTH BANKING COMPANY
                            ALMA, GEORGIA
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          DECEMBER 31, 2000




Note 1.  Significant Accounting Policies

               The accounting and reporting policies of South Banking
         Company,  Inc.  and its subsidiaries conform with  generally
         accepted accounting principles and with practices within the
         banking industry.

         (a)  Basis of Presentation

               During 1996, Pineland State Bank was acquired by South
         Banking  Company.  The transaction was accounted  for  using
         the  purchase  method.   During 2000,  Pineland  State  Bank
         acquired, in its immediate vicinity, three branches of Flag,
         Inc.    The transaction was accounted for using the purchase
         method.

         (b)  Principles of Consolidation

               The  consolidated  financial  statements  include  the
         accounts of South Banking Company, Alma, Georgia (The  Bank)
         and  its wholly owned bank subsidiaries, Alma Exchange Bank,
         Alma, Georgia; Peoples State Bank, Baxley, Georgia; Citizens
         State Bank, Kingsland, Georgia; Pineland State Bank, Metter,
         Georgia; and its wholly owned computer center, Bankers' Data
         Services, Inc., Alma, Georgia.  All significant intercompany
         transactions   and   balances  have   been   eliminated   in
         consolidation.

         (c)  Nature of Operations:

             The  Banks  provide  a variety of  banking  services  to
         individuals  and  businesses through its  offices  in  Alma,
         Georgia;   Kingsland,  Georgia;  Baxley,  Georgia;   Metter,
         Georgia;  Cobbtown, Georgia; and Statesboro,  Georgia.   Its
         primary  source  of  revenue is loans to customers  who  are
         primarily low to middle income individuals and small to  mid
         size businesses.

         (d)  Use of 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.


                                   F10

                        SOUTH BANKING COMPANY
                            ALMA, GEORGIA
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          DECEMBER 31, 2000


Note 1.  Significant Accounting Policies (Con't)

         (d)  Use of Estimates (Con't)

              Material estimates that are particularly susceptible to
         significant  change  relate  to  the  determination  of  the
         allowance   or  losses  on  loans  and  the   valuation   of
         fore-
         closed real estate.  In connection with the determination of
         the  estimated losses on loans and foreclosed  real  estate,
         management  obtains independent appraisals  for  significant
         properties.

                While   management  uses  available  information   to
         recognize  losses  on  loans  and  foreclosed  real  estate,
         further  reductions  in the carrying amounts  of  loans  and
         foreclosed assets may be necessary based on changes in local
         economic  conditions.  In addition, regulatory agencies,  as
         an  integral part of their examination process, periodically
         review  the  estimated losses on loans and  foreclosed  real
         estate.   Such  agencies may require the Bank  to  recognize
         additional losses based on their judgments about information
         available to them at the time of their examination.  Because
         of  these  factors,  it  is  reasonably  possible  that  the
         estimated  losses on loans and foreclosed  real  estate  may
         change materially in the near term.  However, the amount  of
         the change that is reasonably possible cannot be estimated.

         (e)  Securities:

                The Bank's investments in securities are classified in two
            categories and accounted for as follows.

            Securities  to  be  Held to Maturity.  Bonds,  notes  and
            debentures for which the Bank has the positive intent and
            ability  to  hold  to  maturity  are  reported  at  cost,
            adjusted  for  amortization of premiums and accretion  of
            discounts  which are recognized in interest income  using
            the interest method over the period to maturity.

            Securities Available for Sale.  Securities available  for
            sale  consist  of bonds, notes, debentures,  and  certain
            equity securities not classified as trading securities or
            as securities to be held to maturity.

               Declines  in fair value of individual held-to-maturity
         and  available-for-sale securities below their cost that are
         other  than  temporary have resulted in write-downs  of  the
         individual  securities  to their fair  value.   The  related
         write-downs  have  been  included in  earnings  as  realized
         losses.


                                   F11

                          SOUTH BANKING COMPANY
                             ALMA, GEORGIA
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          DECEMBER 31, 2000


Note 1.  Significant Accounting Policies (Con't)

        (e)  Securities (Con't)

              Unrealized  holding gains and losses, net  of  tax,  on
         securities  available for sale are reported as a net  amount
         in  a  separate  component  of  shareholders'  equity  until
         realized.

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

         Federal Home Loan Bank Stock

                Individual  banks  within the  holding  company  have
     joined  the  Federal  Home  Loan Bank  ("FHLB")  of  Atlanta  to
     increase the Bank's available liquidity.  As a FHLB member,  the
     Banks are required to acquire and retain shares of capital stock
     in FHLB of Atlanta in an amount equal to the greater of (1) 1.0%
     of the aggregate outstanding principal amount of the residential
     mortgage   loans,   home   purchase   contracts,   and   similar
     obligations,  or  (2) 0.3% of total assets at the  beginning  of
     each   year.   The  Bank is in compliance with this  requirement
     with  an  investment in FHLB stock of $426,100 and  $426,100  at
     December  31,  2000  and 1999, respectively.   No  ready  market
     exists  for  this  stock  and it has  no  quoted  market  value.
     However, redemption of this stock has historically been  at  par
     value.

         (f)   Loans Receivable:

         Loans and Interest Income

                Loans  are  carried at principal amounts  outstanding
         reduced by unearned discounts.  Interest income on all loans
         is recorded on an accrual basis.  The accrual of interest is
         generally  discontinued on loans which become 90  days  past
         due as to principal or interest.  The accrual of interest on
         some loans, however, may  continue even  though they  are 90
         days past due, if the loans are well secured, in the process
         of  collection, and management deems inappropriate.  If non-
         accrual  loans decrease their past due status to 60 days  or
         less,  they  are  reviewed  individually  by  management  to
         determine if they should be returned to accrual status.

         Impaired Loans

               The Bank accounts for its impaired loans in accordance
         with SFAS No. 114, Accounting by Creditors for Impairment of
         a   Loan,  which  requires  that  all  creditors  value  all
         specifically

                                   F12

                          SOUTH BANKING COMPANY
                             ALMA, GEORGIA
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          DECEMBER 31, 2000


Note 1.  Significant Accounting Policies (Con't)

         Impaired Loans (Con't)

         reviewed  nonhomogeneous loans for which it is probable  that
         the  creditor  will   be unable to collect  all  amounts  due
         according  to the terms of the loan agreement at  the  loan's
         fair  value.  Fair  value may be determined  based  upon  the
         present  value of expected cash flows, market  price  of  the
         loan,  if  available, or value of the underlying  collateral.
         Expected  cash  flows are required to be  discounted  at  the
         loan's effective interest rate.  SFAS No. 114 was amended  by
         SFAS  No.  118 to allow a creditor to  use existing   methods
         for   recognizing interest in- come on impaired loans and  by
         requiring   additional  disclosures  about  how  a   creditor
         recognizes interest income related to impaired loans.

                The Bank determines which loans are impaired through a
         loan review process.   When the ultimate collectibility of an
         impaired  loan's principal is in doubt, wholly or  partially,
         all  cash receipts are applied to principal. When this  doubt
         no  longer  exists,  cash  receipts  are  applied  under  the
         contractual  terms of the loan agreement first  to  principal
         and  then  to  interest income.  Once the recorded  principal
         balance  has  been reduced to zero, future cash receipts  are
         applied  to interest income, to the extent that any  interest
         has  been  foregone. Further cash receipts  are  recorded  as
         recoveries  or any amounts previously charged off.  SFAS  No.
         114 specifically states that it need not be applied to "large
         groups   of  smaller-balance  homogeneous  loans   that   are
         collectively  evaluated for impairment".  Thus,  the  Company
         determined that the statement does not apply to its  consumer
         loan,  credit card, or residential mortgage loan  portfolios,
         except  that  it  may choose to apply it to certain  specific
         larger  loans  determined by management.   In  effect,  these
         portfolios  are  covered adequately in the  Company's  normal
         formula for determining loan loss reserves.

         Loan Fees and Costs

                Nonrefundable fees and certain direct costs associated
         with  originating   or  acquiring loans   are  recognized  as
         yield  adjustment over the contractual life  of  the  related
         loans,  or if the related loan is held for resale, until  the
         loan  is  sold.  Recognition of deferred fees  and  costs  is
         discontinued  on  non-accrual  loans  until  they  return  to
         accrual   status   or  are  charged-off.    Commitment   fees
         associated with lending are deferred  and  if the  commitment
         is  exercised,  the  fee  is


                                   F13


                          SOUTH BANKING COMPANY
                             ALMA, GEORGIA
                    NOTES TO FINANCIAL STATEMENTS
                          DECEMBER 31, 2000


Note 1.  Significant Accounting Policies (Con't)


         Impaired Loans (Con't)

         recognized  over  the life of the related  loan  as  a  yield
         adjustment.   If  the  commitment  expires  unexercised,  the
         amount is recognized upon expiration of the commitment.

         (g)  Allowances for Loan Losses:

              The  allowance for loan losses is maintained at a  level
         which, in management's judgment, is adequate to absorb credit
         losses  inherent in the loan portfolio.  The  amount  of  the
         allowance  is  based  on  management's  evaluation   of   the
         collectibility of the loan portfolio, including the nature of
         the  portfolio, credit concentrations, trends  in  historical
         loss    experience,   specific   impaired   loans,   economic
         conditions,  and  other  risks  inherent  in  the  portfolio.
         Allowances for impaired loans are generally determined  based
         on  collateral values or the present value of estimated  cash
         flows.   Although  management uses available  information  to
         recognize   losses   on  loans,  because   of   uncertainties
         associated with local economic conditions, collateral values,
         and  future  cash flows on impaired loans, it  is  reasonably
         possible  that a material change could occur in the allowance
         for loan losses in the near term.  However, the amount of the
         change that is reasonably possible cannot be estimated.   The
         allowance is increased by a provision for loan losses,  which
         is  charged  to  expense and reduced by charge-offs,  net  of
         recoveries.   Changes in the allowance relating  to  impaired
         loans  are  charged  or credited to the  provision  for  loan
         losses.

         (h)  Premises and Equipment:

              Land  is  carried at cost.  Other premises and equipment
         are   carried   at  cost  net  of  accumulated  depreciation.
         Depreciation  is  computed using the  straight-line  and  the
         declining  balance methods based principally on the estimated
         useful  lives  of  the assets.  Maintenance and  repairs  are
         expensed  as  incurred while major additions and improvements
         are  capitalized.   Gains  and  losses  on  dispositions  are
         included in current operations.

              (i)  Other Real Estate (ORE)

              Real  estate acquired in satisfaction of a loan and  in-
         substance  foreclosures are reported in  other  assets.   In-
         substance  foreclosures are properties in which  a   borrower
         with

                                   F14


                          SOUTH BANKING COMPANY
                              ALMA, GEORGIA
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            DECEMBER 31, 2000


Note 1.  Significant Accounting Policies (Con't)

         (i) Other Real Estate (ORE) (Con't)

         little  or no equity in the collateral, effectively  abandons
         control  of  the  property  or has no  economic  interest  to
         continue  involvement  in  the  property.     The  borrower's
         ability   to  rebuild  equity  based  on  current   financial
         conditions also is considered doubtful.  Properties  acquired
         by  foreclosure or deed in lieu of foreclosure and properties
         classified  as in-substance  foreclosures are transferred  to
         ORE   and recorded at the lower of cost or fair market  value
         based   on   appraised  value  at  the   date   actually   or
         constructively  received.    Loan  losses  arising  from  the
         acquisition   of  such  property  are  charged  against   the
         allowance  for loan losses.  Losses on ORE due to  subsequent
         valuation  adjustments are recorded on  a  specific  property
         basis.

         (j)  Income Taxes

              Income  taxes  are provided for the tax effects  of  the
         transactions reported in the financial statements and consist
         of  taxes currently due plus deferred taxes related primarily
         to  differences between the basis of the allowance  for  loan
         losses and accumulated depreciation.  The deferred tax assets
         and  liabilities represent the future tax return consequences
         of  those  differences,  which  will  either  be  taxable  or
         deductible  when the assets and liabilities are recovered  or
         settled. Deferred tax assets and liabilities are reflected at
         income  tax  rates  applicable to the  period  in  which  the
         deferred  tax  assets  or  liabilities  are  expected  to  be
         realized  or  settled.  As changes in tax laws or  rates  are
         enacted,  deferred  tax assets and liabilities  are  adjusted
         through  the  provision for income taxes. The  Bank  files  a
         consolidated federal income tax return with its subsidiaries.
         Each  subsidiary  provides for income  taxes  on  a  separate
         return  basis  and  remits  to  the  parent  company  amounts
         determined to be currently payable.

         (k)  Intangibles

               The  intangibles (Goodwill) recorded by the Company  in
         the   acquisition  of  Pineland  State  Bank  and  subsequent
         branches are being amortized on a straight line basis over an
         eight year period.

         (l)  Earnings Per Share

              Earnings  per  share are based on the  weighted  average
         number of shares outstanding.

                                   F15

                          SOUTH BANKING COMPANY
                              ALMA, GEORGIA
               NOTES TO CONCOLIDATED FINANCIAL STATEMENTS
                            DECEMBER 31,2000


Note 1.  Significant Accounting Policies  (Con't)

        (m)  Comprehensive Income

           Comprehensive  income includes net  income  and  all  other
        changes in equity during a period except those resulting  from
        investments  by  owners and distributions  to  owners.   Other
        comprehensive income includes revenues, expenses,  gains,  and
        losses  that  under  generally accepted accounting  principles
        are  included  in comprehensive income but excluded  from  net
        income.

           Comprehensive  income and accumulated  other  comprehensive
        income  are reported net of related income taxes.  Accumulated
        other  comprehensive income for the Bank  consists  solely  of
        unrealized  holding  gains  or  losses  on  available-for-sale
        securities.   In  accordance with SFAS No.  130,  the  Company
        elected  to  disclose changes in comprehensive income  in  its
        Consolidated Statements of Income and Comprehensive Income.

         (n)  Cash Flow Information

             For purposes of the statements of cash flows, the Company
         considers  cash,  federal funds sold and due  from  banks  as
         cash  and cash equivalents.  Cash paid during the years ended
         December   31,   2000,  1999  and  1998  for   interest   was
         $8,117,741, $6,300,329, and $6,220,809, respectively.   Total
         income   tax  payments  during  2000,  1999  and  1998   were
         $1,552,939, $1,025,000, and $879,500, respectively.

Note 2.  Investment Securities

              The  amortized  cost  and  estimated  market  values  of
         investments in debt securities are as follows:


Gross        Gross
                       Amortized   Unrealized   Unrealized    Fair
                     Cost        Gains        Losses       Value
Securities available
 for sale -
December 31, 2000:
 U.S. Government
  and agency
  securities        $18,538,619   $   13,424  $   102,839  $18,449,204
 State and municipal
  securities          1,349,710       31,796            -    1,381,506
 Mortgage backed
  securities            394,373        5,187          975      398,585
 Equity securities      550,000            -       84,240      465,760

 Totals             $20,832,702   $   50,407  $   188,054  $20,695,055

                                   F16


                          SOUTH BANKING COMPANY
                              ALMA, GEORGIA
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            DECEMBER 31, 2000


Note 2.  Investment Securities (Con't)


                                   Gross       Gross
                        Amortized    Unrealized  Unrealized   Fair
                        Cost         Gains       Losses        Value


December 31, 1999:

 U.S. Government
  and agency
  securities         $15,997,526  $        -  $   305,658  $15,691,868
 State and municipal
  securities          1,550,551       20,427        3,926    1,567,052
 Mortgage backed
  securities            495,913        8,975        2,673      502,215
 Equity  securities     550,000            -        4,896      545,104

 Totals             $18,593,990   $   29,402  $   317,153  $18,306,239


Securities to be
 Held to Maturity-
December 31, 2000:

 U.S. Government
  and agency
  securities        $         -   $        -  $         -  $         -
 State and municipal
  securities            147,326        4,186            -      151,512
 Mortgage backed
  Securities                  -            -            -            -

 Totals             $   147,326   $    4,186  $         -  $   151,512


December 31, 1999

 U.S. Government
  and agency
  securities        $   600,223   $      493  $       841  $   599,875
 State and municipal
  securities            147,116        2,148            -      149,264
 Mortgage backed
  securities                  -            -            -            -

 Totals             $   747,339   $    2,641  $       841  $   749,139



                                   F17


                          SOUTH BANKING COMPANY
                              ALMA, GEORGIA
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            DECEMBER 31, 2000



Note 2.  Investment Securities (Con't)

               Gross  realized gains on sales and losses of available-
         for-sale  securities were $-0- and $-0- in 2000, respectively
         and  $-0- and $-0-, respectively for 1999 and $-0- and  $-0-,
         respectively in 1998.

               Assets, principally securities carried at approximately
         $12,406,833 at December 31, 2000 and $13,588,845 at  December
         31,  1999,  were  pledged to secure public deposits  and  for
         other purposes required or permitted by law.

              The scheduled contractual maturities of securities to be
         held  to   maturity  and  securities  available for  sale  at
         December 31, 2000 were as follows:


                             Securities      to     be            Securities
Held to Maturity       Available for Sale
                       Amortized              Amortized
                       Cost        Fair Value  Cost         Fair Value
     Due in one year
      or less          $        -  $        -  $ 2,914,804  $ 2,905,273
     Due from one year
      to five years       100,000     100,719   16,288,466   16,214,013
     Due from five
      years to ten years        -           -      400,000      408,488
     Due after ten
      years                47,326      50,793      679,432      701,521

                       $  147,326  $  151,512  $20,282,702  $20,229,295


                   The  market  value  of State  and  Other  Political
         Subdivision Obligations is established with the assistance of
         an  outside bond department and is based on available  market
         data  which  often reflects transactions of relatively  small
         size  and  is not necessarily indicative of prices  at  which
         large  amounts of particular issues could readily be sold  or
         purchased.

                                  Expected maturities will differ from
         contractual maturities because issuers may have the right  to
         call on prepay obligations with or without call on prepayment
         penalties.

Note 3.  Loans

         The composition of the bank's portfolio was as follows:


                                   F18


                          SOUTH BANKING COMPANY
                              ALMA, GEORGIA
               NOTES TO CONS0LIDATED FINANCIAL STATEMENTS
                            DECEMBER 31, 2000


Note 3.  Loans (Con't)

                                             2000         1999
                                                   (In Thousands)
         Commercial, financial and
           agricultural                       $     42,973   $      34,607
Real estate - mortgage                            81,314        62,829
          Real  estate  - construction                7,646         13,413
Installment and consumer                          31,294        21,433
            Total  Loans                      $    163,227               $
132,282                                    Less: Unearned  discount      (
253           )                         (           216                  )
Reserve for loan losses                      (     2,728              )  (
2,169    )
         Loans, net                         $    160,246  $    129,897
               Non-accrual loans (principally collateralized  by  real
         estate)  amounted  to approximately $876,000,   $442,000  and
         $557,000  at December 31, 2000, 1999, and 1998, respectively.
         Impaired  loans were $-0- and $-0- at December 31,  2000  and
         1999.

               The Company and its subsidiaries have granted loans  to
         the  officers and directors of the Company, its subsidiaries,
         and  to  their associates.  Related party loans are  made  on
         substantially  the same terms, including interest  rates  and
         collateral,  as  those prevailing at the time for  comparable
         transactions   with  unrelated  persons  and do  not  involve
         more
         than  normal  risk  of collectibility.  The aggregate  dollar
         amount  of these loans was $633,116 and $506,787 at  December
         31,  2000 and 1999.  During 2000, $297,951 of new loans  were
         made, and repayments totaled $226,308.

Note 4.  Reserve for Loan Losses

                Transactions  in  the  reserve  for  loan  losses  are
         summarized
         as follows:
                              Year Ended    Year Ended    Year Ended
                              December 31,  December 31,  December 31,
                              2000          1999          1998

         Balance at beginning
          of period            $ 2,168,877   $ 1,970,620   $ 1,821,680
         Additions:  Provision
          charged to operating
          expenses             $   424,000   $   503,000   $   286,000
         Balance from bank
          acquisition              588,306             -             -
                               $ 1,012,306   $   503,000  $    286,000


                                   F19

                          SOUTH BANKING COMPANY
                              ALMA, GEORGIA
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            DECEMBER 31, 2000


Note 4.  Reserve for Loan Losses (Con't)


                              Year Ended   Year Ended     Year Ended
                              December 31,  December 31,  December 31,
                              2000         1999           1998
         Deductions: Loans
          charged off         $    664,298   $   432,472   $   257,163
         Less: recoveries          211,334       127,729       120,103
                              $    452,964   $   304,743   $   137,060

         Balance at end of
              Period                 $     2,728,219      $    2,168,877
         $ 1,970,620

               Additions to the reserve for loan losses are  based  on
         management's  evaluation of the loan portfolio under  current
         economic conditions, past loan loss experience and such other
         factors  which, in management's judgment, deserve recognition
         in  estimating loan losses.  Loans are charged off  when,  in
         the  opinion  of  management, such loans  are  deemed  to  be
         uncollectible.  Recognized losses are charged to the  reserve
         and subsequent recoveries added.

               Loans  having carrying values of $833,029 and  $189,070
         were  transferred to foreclosed real estate in 2000 and 1999,
         respectively.

             The  bank  is not committed to lend additional  funds  to
         debtors whose loans have been modified.


Note 5.  Deposits

             The aggregate amount of short-term jumbo CDs, each with a
         minimum   denomination   of   $100,000,   was   approximately
         $37,569,711 in 2000 and $24,392,234 in 1999.

             At December 31, 2000, the scheduled maturities of CDs are
         as follows:
                                           (In Thousands)
                    2001                    $    116,446
                    2002 and 2003                 12,824
                    2004 and thereafter              379

                                            $    129,649



                                   F20


                        SOUTH BANKING COMPANY
                            ALMA, GEORGIA
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          DECEMBER 31, 2000


Note 6.  Premises and Equipment

          A summary of the account:
                                              Year Ended     Year Ended
                                            December 31,  December 31,
                                             2000         1999
           Land                               $     526,763   $    448,148
Buildings                                      4,936,869     3,779,637
           Furniture  and  equipment              5,470,568      3,989,406
$       10,934,200                                       $       8,217,191
Less:  Accumulated depreciation                4,822,839     4,119,786
                                            $  6,111,361   $ 4,097,405
                Depreciation expense was $803,318 in 2000,  $614,430  in
     1999 and $605,161 in 1998.

Note 7. Borrowings

         Data relating to borrowing is as follows:

                                            Year Ended    Year ended
                                            December 31,  December 31,
         Parent Company -                   2000          1999

                       Note payable in 10 annual payments
         with interest payable quarterly
         and accrues at prime rate minus
         50 basis points.  Subsidiary bank
         stock is pledged to secure loan.   $  5,000,000  $        -0-

         Note payable in 10 annual payments
          of $350,000.  Interest is payable
          quarterly and accrues at prime rate
          and is secured by subsidiary bank
          stock.                                     -0-     2,100,000
         Note payable due June 30, 2001.
          Interest payable quarterly and
          accrues at prime rate and is
          secured by bank stock                  200,000       260,000

        Subsidiary - Bankers Data Services, Inc.

        Note payable due January 27, 2001
         monthly principal amount of
         $10,833.33 plus interest. Interest
         accrues at prime rate basis.
        Computer equipment is pledged as
         collateral for loan.                    987,847       276,097

                                   F21


                         SOUTH BANKING COMPANY
                             ALMA, GEORGIA
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          DECEMBER 31, 2000


Note 7. Borrowings (Con't)
                                             Year Ended     Year ended
                                              December  31,   December  31,
2000           1999

        Note payable in 36 monthly payments
         of $434.02.  Interest accrues at
         1.9% rate and is secured by vehicle.      5,580        10,630

        Note payable in 24 monthly payments
         of $664.13.  Interest accrued at
         5.9% rate and is secured by vehicle.     13,816           -0-

        Subsidiary - South Financial Products, Inc.

        Note payable in 36 monthly payments
         of $696.98.  Interest accrues at
         3.9% rate and is secured by vehicle.     16,120        23,016

                Following are maturities of long term debt for  each  of
        the next five years.

                    2001                      $1,483,404
                    2002 389,989
                    2003 425,000
                    2004 475,000
                    2005 525,000

Note 8.  Income Taxes

             Income  tax expense (benefit) was $1,221,738 for 2000,  (an
        effective rate of 31.6%, $1,017,056 for 1999 (an effective  rate
        of  32.3%)  and $830,744 for 1998 (an effective rate of  30.1%).
        The  actual  expense for 2000, 1999 and 1998  differs  from  the
        "expected"  tax  expense for those years (computed  by  applying
        the federal corporate rate of 34%) as follows:

                               2000          1999          1998
     Computed "expected"
       tax  expenses                   34.0%          34.0%          34.0%
Alternative minimum tax                  -             -             -
     Effect of State Income Tax       1.1%          2.4%             -
     Tax exempt interest
       on  securities and loans     (   3.6%)     (   2.9%              )(
4.2% )
      Other,  net                       .1%       (    1.2%              )
 .3%

                                     31.6%         32.3%         30.1%



                                   F22


                          SOUTH BANKING COMPANY
                              ALMA, GEORGIA
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            DECEMBER 31, 2000


Note 8. Income Taxes (Con't)


             The  current  and deferred amounts of these tax  provisions
        were as follows:

                              2000          1999          1998

          Current   -  Federal              $ 1,178,493  $  1,140,833     $
912,639                                         -  State             83,299
104,994                   -
          Deferred - Federal     (   24,534)   (  146,891             )  (
81,895    )                                          - State  (    15,520)
(   81,880                               )          -

                               $ 1,221,738   $ 1,017,056   $   830,744

           The  tax effects of each type of income and expense item that
     gave rise to deferred taxes are:

                                             December 31,  December 31,
                                             2000          1999
         Net unrealized appreciation on
          securities available for sale      $    50,833   $   107,121
          Depreciation                         (   190,400              )(
185,348   )                                Deferred loan  fees           8
5,229                                81,086                              A
llowance  for credit losses                        806,587               5
60,611
           0ther                                     9,626               -
Purchase accounting treatment                 (   65,820              )  (
69,763   )
         Net deferred tax asset (liability)  $   696,055   $   493,707
Note 9.  Employee Benefit Plans

               The  Company maintains a 401K deferred compensation  plan
         for  all  subsidiaries effective January 1, 1993.  The  Company
         elected  to  match  75% of employee  contributions   for  2000,
         1999  and 1998.  The expense to the Company for 2000, 1999  and
         1998 was $134,297, $115,297, and $87,658, respectively.

Note 10. Leases

               The  Pineland  State Bank leases 5.35 acres  of  land  in
         Candler  County under an operating lease expiring December  31,
         2054  with  an  option to lease the land for an  additional  75
         years.

                Minimum  future  rental  payments  under  non-cancelable
     operating  lease having remaining term in excess of 1  year  as  of
     December 31, 2000 for each of the next 5 years and in the aggregate
     is:

                                   F23

                          SOUTH BANKING COMPANY
                              ALMA, GEORGIA
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            DECEMBER 31, 2000



Note 10. Leases - (Con't)

                    Year Ended

                    2001                     $     4,000
                    2002                           4,000
                    2003                           4,000
                    2004                           4,000
                    2005                           4,000
                    Subsequent to 2005           196,000

                    Total minimum future
                           rental payments   $   216,000

                In  June, 1997, the parties amended the lease  to  allow
     Pineland  State  Bank  to  sublet  part  of  the  property  and  in
     consideration, the landlord will receive 50% of gross rental  under
     the sublease in addition to the minimum amount above.

Note 11. Liabilities

         Standby Letters of Credit.  These transactions are used by  the
         Company's  customers  as  a  means of  improving  their  credit
         standing   in   their  dealings  with  others.    Under   these
         agreements,  the  Company  agrees to  honor  certain  financial
         commitments  in the event that its customers are unable  to  do
         so.  As of December 31, 2000 and 1999, the Company had $450,240
         and $526,000 in outstanding standby letters of credit.

         Loan  Commitments.   As  of December 31,  2000  and  1999,  the
         Company  had commitments outstanding to  extend credit totaling
         $28,328,739  and  $21,211,119, respectively. These  commitments
         generally  require  the  customers to maintain  certain  credit
         standards.  Management does not anticipate any material  losses
         as a result of these commitments.

Note 12. Financial Instruments

               The  Bank  is a party to financial instruments with  off-
         balance-sheet risk in the normal course of business to meet the
         financing needs of its customers and to reduce its own exposure
         to fluctuations in interest rates.  These financial instruments
         include  commitments to extend credit, and standby  letters  of
         credit,  and financial guarantees.  Those instruments  involve,
         to  varying   degrees,  elements of  credit and   interest-rate
         risk in
         excess  of the amount recognized in the consolidated statements
         of  financial condition.  The contract or notional  amounts  of
         those  instruments reflect the extent of the Bank's involvement
         in particular classes of financial instruments.

                                       F24

                          SOUTH BANKING COMPANY
                              ALMA, GEORGIA
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            DECEMBER 31, 2000



         Note 12.Financial Instruments - (Con't)

              The  Bank's  exposure  to credit  loss  in  the  event  of
         nonperformance  by the other party to the financial  instrument
         for  commitments to extend credit, standby letters  of  credit,
         and   financial  guarantees  written  is  represented  by   the
         contractual  notional  amount of those instruments.   The  Bank
         uses  the  same  credit  policies  in  making  commitments  and
         conditional   obligations  as  it  does  for   on-balance-sheet
         instruments.

         Commitments to Extend Credit and Financial Guarantees.

               Commitments to extend credit are agreements to lend to  a
         customer  as  long  as there is no violation of  any  condition
         established in the contract.  Commitments generally have  fixed
         expiration  dates or other termination clauses and may  require
         payment  of a fee.  Since many of the commitments are  expected
         to
         to  expire  without  being  drawn upon,  the  total  commitment
         amounts  do not necessarily represent future cash requirements.
         The  Bank evaluates each  customer's  credit  worthiness  on  a
         case-by-case basis.  The amount of collateral obtained,  if  it
         is  deemed  necessary by the Bank upon extension of credit,  is
         based  on  management's credit evaluation of the  counterparty.
         Collateral  held varies; but, may include accounts  receivable;
         inventory,  property, plant and equipment; and income-producing
         commercial properties.

              Standby letters of credit and financial guarantees written
         are conditional commitments issued by the Bank to guarantee the
         performance  of a customer to a third party.  Those  guarantees
         are primarily issued to support private borrowing arrangements,
         including  commercial  paper  and  similar  transactions.   The
         credit   risk  involved  in  issuing  letters  of   credit   is
         essentially  the  same  as  that  involved  in  extending  loan
         facilities  to  customers. The Bank  holds  various  assets  as
         collateral supporting those commitments for which collateral is
         deemed necessary.

              The Bank has not been required to perform on any financial
         guarantees  during  the  past two  years.   The  Bank  has  not
         incurred any losses on its commitments in 2000, 1999 or 1998.

Note 13. Restrictions on Subsidiary Dividends, Loans or Advances

               Dividends  are paid by the Company from its assets  which
         are  mainly  provided  by dividends from  the  Banks.  However,
         certain  restrictions exist regarding the ability of the  Banks
         to transfer funds to the Company in the form of cash dividends,
         loans  or advances.  The approval of the Georgia Department  of
         Banking  is required to pay dividends in excess of 50%  of  the
         Bank's net profits for the prior year.

                                   F25

                          SOUTH BANKING COMPANY
                              ALMA, GEORGIA
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          DECEMBER 31, 2000

Note 14. Restrictions on Cash and Due from Banks

              Under Federal Reserve regulation, the Bank also is limited
         as  to the amount it may loan to its affiliates, including  the
         Company,  unless  such  loans are collateralized  by  specified
         obligations.    At  December  31,  2000,  the  maximum   amount
         available for transfer from the Bank to the Company in the form
         of loans approximated 20% of consolidated net equity.

              The bank is required to maintain reserve balances with the
         Federal  Reserve  Bank.  The average amount  of  those  reserve
         balances for the year ended December 31, 2000 was approximately
         $-0-.

Note 15. Related Party Transactions

              The Company has entered into a split dollar life insurance
         arrangement  with a director and substantial shareholder.   The
         Company and director's trust each contribute toward the payment
         of  premium for life insurance policy.  The Company records its
         contribution at the present value of anticipated future  return
         or  total cash surrender value of policy, whichever is  higher;
         however,  the  carrying  amount cannot  exceed  the  amount  of
         premiums  paid  by the Company.  The Company will  receive  all
         reimbursement  from anticipated withdrawal  of  cash  surrender
         value  or  from the proceeds of policy in  the  event  of   the
         death   of the director. All cash surrender value of the policy
         accrues  to the benefit of the Company until such time  as  the
         cash surrender value exceeds advances made by the Company.   As
         of  December  31, 2000, $1,004,596 is carried in  other  assets
         related to this arrangement.

Note 16. Fair Value of Financial Instruments

              The following table shows the estimated fair value and the
         related  carrying  values of South Banking Company's  financial
         instruments at December 31, 2000 and 1999.  Items which are not
         financial instruments are not included.
                                                        2000
                                             Carrying     Estimated
        Cash and due from financial          Amount       Fair Value
         institutions                        $  8,911,914 $  8,911,914
        Interest earning balances with
         financial institutions                   825,279      825,279
        Federal funds sold                     14,693,000   14,693,000
        Securities available for sale          20,695,055   20,695,055
        Securities held to maturity               147,326      151,512
        Federal Home Loan Bank stock              426,100      426,100
        Georgia Bankers Bank - stock              547,283      784,085
        Loans - net of allowances             160,246,187  158,371,357
        Demand and savings deposits            63,030,105   63,030,105
        Time deposits                         129,649,110 132,081,000

                                   F26


                          SOUTH BANKING COMPANY
                            ALMA,     GEORGIA
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            DECEMBER 31, 2000



Note 16. Fair Value of Financial Instruments - (Con't)

                                                        1999
                                             Carrying     Estimated
                                             Amount       Fair Value
        Cash and due from financial
         institutions                        $ 11,695,998 $ 11,695,998
        Interest earning balances with
         financial institutions                   869,000      869,000
        Federal funds sold                      3,180,000    3,180,000
        Securities available for sale          18,306,239   18,306,239
        Securities held to maturity               747,339      749,139
        Federal Home Loan Bank stock              426,100      426,100
         Georgia Bankers Bank - stock              547,283       798,470
Loans - net of allowances                     129,897,341  129,912,490
        Demand and savings deposits            55,072,202   55,072,202
        Time deposits                          97,727,773   98,079,626
        Federal funds purchased                 1,140,000    1,140,000

              For  purposes  of the above disclosures of estimated  fair
        value,  the  following assumptions were used as of December  31,
        2000  and 1999.  The estimated fair value for cash and due  from
        financial institutions and federal funds sold are considered  to
        approximate cost.  The estimated fair value for interest-earning
        balances  with financial institutions, securities available-for-
        sale,  securities  held-to-maturity, and  Georgia  Bankers  Bank
        stock  are  based  on  quoted market values for  the  individual
        securities  or  for  equivalent securities. The  estimated  fair
        value  for  commercial  loans  is  based  on  estimates  of  the
        difference  in  interest  rates the  Company  would  charge  the
        borrowers for similar such loans with similar maturities made at
        December 31, 2000 and 1999, applied for an estimated time period
        until  the loan is assumed to reprice or be paid.  The estimated
        fair value for other loans is based on estimates of the rate the
        Company would charge for similar such loans at December 31, 2000
        and  1999 applied for the time period until estimated repayment.
        The  estimated  fair  value  for individual  retirement  account
        deposits and time deposits is based on estimates of the rate the
        Company would pay on such deposits or borrowings at December 31,
        2000 and 1999, applied for the time period until maturity.   The
        estimated  fair value for other financial instruments  and  off-
        balance-sheet  loan  commitments are considered  to  approximate
        cost at December 31, 2000 and 1999.


                                   F27

                          SOUTH BANKING COMPANY
                              ALMA, GEORGIA
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            DECEMBER 31, 2000



Note 16.  Fair Value of Financial Instruments (Con't)

               While  these  estimates  of  fair  value  are  based   on
        management's judgment of the most appropriate factors, there  is
        no  assurance that were the Company to have disposed of such  it
        ems  at  December  31, 2000  and  1999,  the    estimated   fair
        values  would necessarily have been achieved at that date, since
        market  values  may  differ depending on various  circumstances.
        The  estimated fair values at December 31, 2000 and 1999  should
        not necessarily be considered to apply at subsequent dates.

              In  addition, other assets and liabilities of the  Company
        that  are  not defined as financial instruments are not included
        in the above disclosures, such as property and equipment.  Also,
        non-financial  instruments  typically  not  recognized  in   the
        financial statements, nevertheless, may have value but  are  not
        included  in the above disclosures.  These include, among  other
        items,  the  estimated earnings power of core deposit  accounts,
        the  earnings  potential of loan servicing rights,  the  trained
        work force, customer goodwill, and similar items.

Note 17. Regulatory Matters

            The  Company  and  its subsidiaries are subject  to  various
        regulatory  capital  requirements administered  by  the  federal
        banking  agencies.  Failure to meet minimum capital requirements
        can   initiate  certain  mandatory  -  and  possibly  additional
        discretionary - actions by regulators that, if undertaken, could
        have  a  direct  material  effect  on  the  Company's  financial
        statements.    Under   capital  adequacy  guidelines   and   the
        regulatory  framework for prompt corrective action, the  Company
        must  meet specific capital guidelines that involve quantitative
        measures  of  the Company's  assets, liabilities,  and   certain
        off-balance-sheet   items   as   calculated   under   regulatory
        accounting   practices.  The  Company'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 Company to maintain minimum amounts
        and  ratios  of  total and Tier I capital  (as  defined  in  the
        regulations) to risk-weighted assets (as defined) and of Tier  I
        capital (as defined) to average assets (as defined).  Management
        believes,  as  of  December 31, 2000, that the Company  and  its
        subsidiaries meet all capital adequacy requirements to which  it
        is subject.


                                   F28

                          SOUTH BANKING COMPANY
                              ALMA, GEORGIA
                      NOTES TO FINANCIAL STATEMENTS
                            DECEMBER 31, 2000


Note 17. Regulatory Matters (Con't)

                  As  of December 31, 2000, the most recent notification
   from  the  FDIC  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.  There are no conditions or  events  since
   that  notification  that,  management  believes,  have  changed   the
   institution's category.

              The  Company and its subsidiaries' actual capital  amounts
        and ratios are also presented in the table.
                                                     To Be Well
                                                    Capitalized Under
                                 For Capital           Prompt Corrective
                      Actual            Adequacy    Purposes        Action
Provisions:
              Amount   Ratio     Amount    Ratio      Amount     Ratio
As of December 31, 2000:

Total Capital
 (to Risk
 Weighted
 Assets)
 Consolidated $  18,647   10.7%     $13,933    8.0%     $17,407     10.0%
 Subsidiary -
  Alma            7,463   12.9%       4,597    8.0%       5,746     10.0%
 Subsidiary -
  Baxley          6,444   16.1%       3,324    8.0%       4,155     10.0%
 Subsidiary -
  Kingsland       2,914   12.7%       1,841    8.0%       2,302     10.0%
 Subsidiary -
  Metter         4,924     8.9%       4,435    8.0%       5,544     10.0%

As of December 31, 2000:

Tier I Capital
 (to Risk Weighted
  Assets)
 Consolidated $ 16,441     9.4%     $ 6,963     4.0%    $10,444      6.0%
 Subsidiary -
  Alma            6,739   11.7%       2,298    4.0%       3,448      6.0%
 Subsidiary -
  Baxley          5,924   14.8%       1,662    4.0%       2,493     6.0%
 Subsidiary -
  Kingsland       2,625   11.4%         921    4.0%       1,381      6.0%
 Subsidiary -
  Metter          4,251    7.7%   2,217    4.0%    3,326       6.0%


                                   F29

                          SOUTH BANKING COMPANY
                              ALMA, GEORGIA
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            DECEMBER 31, 2000



Note 17. Regulatory Matters (Con't)


                                                        To Be
                                                        Capitalized Under
                                 For Capital                      Prompt
                               Corrective
                     Actual           Adequacy   Purposes           Action
Provisions:
              Amount   Ratio      Amount     Ratio      Amount   Ratio

As of December 31, 2000:

Tier I
 Capital (to
  Average Assets)
 Consolidated    16,441   9.3%        7,038   4.0%        8,797     5.0%
 Subsidiary -
  Alma            6,739  9.1%         2,977  4.0%         3,721    5.0%
 Subsidiary -
  Baxley          5,924 12.2%         1,938  4.0%         2,422    5.0%
 Subsidiary -
  Kingsland       2,625  8.8%        1,182   4.0%         1,477    5.0%
 Subsidiary -
  Metter          4,251  6.9%         2,461  4.0%         3,077    5.0%


As of December 31, 1999:

Total Capital
 (to Risk Weighted
 Assets)
 Consolidated  $ 17,534  12.7%      $11,002   8.0%      $13,752   10.0%
 Subsidiary -
  Alma            6,698 12.3%         4,350  8.0%         5,438   10.0%
 Subsidiary -
  Baxley          5,808 17.0%         2,734  8.0%         3,417   10.0%
 Subsidiary -
  Kingsland       2,498  13.7%        1,456   8.0%        1,820   10.0%
 Subsidiary -
  Metter          3,384 11.0%         2,246   8.0%        3,058   10.0%


                                   F30

                          SOUTH BANKING COMPANY
                              ALMA, GEORGIA
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            DECEMBER 31, 2000



Note 17. Regulatory Matters (Con't)


                                                    To Be
                                                     Capitalized Under
                                  For Capital        Prompt Corrective
                     Actual        Adequacy  Purposes  Action  Provisions:
              Amount   Ratio  Amount   Ratio   Amount          Ratio

As of December 31, 1999:

Tier I Capital
 (to Risk
  Weighted
  Assets)
 Consolidated    15,782  11.5%       5,501    4.0%       8,251    6.0%
 Subsidiary -
  Alma            6,009  11.0%        2,175   4.0%        3,263    6.0%
 Subsidiary -
  Baxley          5,363 15.7%         1,367  4.0%         2,050    6.0%
 Subsidiary -
  Kingsland       2,270 12.8%           728   4.0%        1,092    6.0%
 Subsidiary -
  Metter          2,999  8.3%         1,438  4.0%         1,798    6.0%

As of December 31, 1999:

Tier I
 Capital (to
  Average Assets)
 Consolidated  $ 15,782   9.3%      $ 6,820   4.0%   $ 8,526    5.0%
 Subsidiary -
  Alma            6,009  9.2%         2,623   4.0%        3,279    5.0%
 Subsidiary -
  Baxley          5,363 12.1%         1,779  4.0%         2,224    5.0%
 Subsidiary -
  Kingsland       2,270  8.8%        1,029   4.0%         1,287    5.0%
 Subsidiary -
  Metter          2,999  8.4%         1,438  4.0%         1,798    5.0%



                                   F31


                          SOUTH BANKING COMPANY
                        (PARENT CORPORATION ONLY)

                              ALMA, GEORGIA

                          FINANCIAL STATEMENTS

                            DECEMBER 31, 2000



                                    F32


               REPORT OF INDEPENDENT ACCOUNTANTS


Board of Directors
South Banking Company
Alma, Georgia 31510

      Under  date  of February 12, 2001, we reported on the consolidated
balance  sheets of South Banking Company, as of December  31,  2000  and
1999, and the related statements of income, cash flows and stockholders'
equity for the three years in the period ended December 31, 2000.

       In   connection   with  our  examination  of  the  aforementioned
consolidated  financial  statements, we also  audited  the  accompanying
balance  sheets (Parent Corporation Only) as of December  31,  2000  and
1999  and the related statements of income, cash flows and stockholders'
equity  for  each  of the three years in the period ended  December  31,
2000.   These  financial  statements  are  the  responsibility  of   the
company's  management.  Our responsibility is to express an  opinion  on
the financial statements based on our audit.

      We  conducted  our  audit  in accordance with  generally  accepted
auditing  standards.  Those standards require that we plan  and  perform
the  audit to obtain reasonable assurance about whether the consolidated
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 financial statements referred to above present
fairly,  in  all  material  respects, the financial  position  of  South
Banking  Company (Parent Corporation Only) as of December 31,  2000  and
1999,  and the results of its operations, stockholders' equity  and  its
cash  flows for the three years then ended in conformity with  generally
accepted accounting principles.

                                    Respectfully submitted,


                                H. H. BURNET & COMPANY, P. C.

February 12, 2001


                                   F33

                          SOUTH BANKING COMPANY
                       (PARENT CORPORATION ONLY)
                             ALMA, GEORGIA
                             BALANCE SHEETS

                                              December 31,   December 31
,
                                            2000           1999

                                 ASSETS
Cash and due from banks
 Interest bearing                            $ 1,064,896   $   479,315
 Non-interest bearing                             32,846        47,869
Investment in bank's subsidiaries             21,420,680    16,672,228
Investment in nonbank subsidiaries                341,298
315,416
Investment-Habersham Bank Corp.-available
 for sale                                        215,760       295,104
Investment-Nexity Financial-available
 for sale                                        250,000       250,000
Other assets                                      60,948        26,161
Prepaid income taxes                             214,577             -
Due from subsidiaries                                   -      105,762
Total Assets                                 $23,601,005   $18,191,855


                  LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable                           $       186 $       186
Other liabilities                                    788             -
Accrued income taxes                                   -        21,653
Notes payable                                  5,200,000     2,360,000
Due to subsidiaries                              129,471             -
Total Liabilities                            $ 5,330,445   $ 2,381,839

Stockholders' Equity
Common stock of $1 par value;
 authorized 1,000,000 shares;
 issued and outstanding, 2000 and 1999
 399,500 and 399,500, respectively           $   399,500   $   399,500
Surplus                                        3,070,831     3,070,831
Undivided profits                                           14,887,046
12,520,614
Accumulated  other  comprehensive  income        (     86,817             )
(  180,929                                             )
Total Stockholders' Equity                   $18,270,560   $15,810,016

Total Liabilities and Stockholders' Equity   $23,601,005   $18,191,855






The accompanying note is an integral part of these financial statements.

                                   F34



                         SOUTH BANKING COMPANY
                       (PARENT CORPORATION ONLY)
                             ALMA, GEORGIA
                          STATEMENT OF INCOME


                              Year Ended   Year Ended Year Ended
                               December 31,December 31,   December 31,
                              2000         1999            1998
Income
Dividends from bank
 subsidiaries                 $   985,387   $    977,614   $   926,568
Miscellaneous income                  788            682         1,484
Interest income                    23,479         18,431        21,158
Management fees                   102,000        102,000       102,000
Dividends - other                   5,345          10,091             -

Total Income                 $  1,116,999   $  1,108,818   $ 1,051,210

Expenses
Salaries                      $     83,169   $     79,300   $    75,467
Amortization                       13,526         13,526
13,526
Interest                          318,822        212,684       235,182
Professional fees                  75,045         33,045        22,621
Other                              75,621         63,109        75,277
Total  Expenses               $    566,183   $    401,664   $    422,073
Income before income taxes
 and equity in undistributed
 income (loss) of
 subsidiaries                $    550,816   $    707,154   $   629,137
Provision (credit) for
  income  taxes                  (   164,606)      (    95,172         )
(   105,360)

Income before equity in
 undistributed income in
 subsidiaries                 $    715,422  $    802,326   $   734,497

Equity in undistributed
 income of bank subsidiaries  $  1,904,756  $  1,251,684   $ 1,135,934
Equity in undistributed
 income (loss) of nonbank
 subsidiaries                        25,882      74,491        59,165
                              $  1,930,638  $  1,326,175   $ 1,195,099
Net Income                    $  2,646,060  $  2,128,501   $ 1,929,596


The accompanying note is an integral part of these financial statements.

                                   F35

                           SOUTH BANKING COMPANY
                        (PARENT CORPORATION ONLY)
                              ALMA, GEORGIA
                       STATEMENT OF INCOME (con't)


                               Year Ended      Year Ended    Year Ended
                              December 31,    December 31,  December 31,
                              2000            1999          1998

Other Comprehensive Income
 before tax
Unrealized gain on securities$    151,160    $(  402,268)  $    61,798
Other Comprehensive Income
   before  tax                   $     151,160     $(   402,268)    $
61,798

Income tax expenses related
 to items of other
 comprehensive income             57,048      ( 136,771)       21,011
Other comprehensive income,
 net of tax                  $     94,112    $(  265,497)  $    40,787

Comprehensive income         $  2,740,172   $ 1,863,004    $ 1,970,383

Per share data based on
 weighted outstanding shares:

  Weighted average
   outstanding                    399,500        399,500      399,500

Net Income                    $      6.62    $      5.33   $      4.83




The accompanying note is an integral part of these financial statements.


                                   F36

                                        SOUTH BANKING COMPANY
                        (PARENT CORPORATION ONLY)
                              ALMA, GEORGIA
                    STATEMENT OF STOCKHOLDERS' EQUITY



                     Common                      Undivided
                     Stock         Surplus       Profits
Balance,
 December 31, 1997  $  399,500   $ 3,070,831  $ 8,981,846
 Net income                   -             -    1,929,596
 Cash dividends               -             -   (  259,654)
 Unrealized gain
  (loss) on securities
   available for
   sale                       -             -            -

Balance,
 December 31, 1998  $  399,500   $ 3,070,831   $10,651,788
 Net income                   -             -     2,128,501
 Cash dividends               -             -     (  259,675)
 Unrealized gain
  (loss) on securities
   available for
   sale                      -              -             -

Balance,
 December 31, 1999   $  399,500   $ 3,070,831   $12,520,614
 Net income                   -             -     2,646,060
 Cash dividends               -             -    (  279,628          )
 Unrealized gain
  (loss) on securities
  available for sale          -             -            -
 Redemption of
  shares                      -             -            -
Balance,
 December 31, 2000   $  399,500   $ 3,070,831  $14,887,046




                    Accumulated
                     Other          Total
                     Comprehensive  Stockholders'
                     Income         Equity
Balance,
 December 31, 1997   $     43,781   $ 12,495,958
 Net income                     -      1,929,596
 Cash dividends                 -    (   259,654)
 Unrealized gain
  (loss) on securities
   available for
   sale                    40,787          40,787

Balance,
 December 31, 1998   $     84,568    $ 14,206,687
 Net income                     -       2,128,501
 Cash dividends                 -                 (    259,675)
 Unrealized gain
  (loss) on securities
   available for
   sale                (  265,497        )     (   265,497)

Balance,
 December 31, 1999   $ (  180,929)   $ 15,810,016
 Net income                     -       2,646,060
 Cash dividends                 -    (    279,628)
 Unrealized gain
  (loss) on securities
  available for sale       94,112          94,112
 Redemption of
  shares                        -               -

Balance,
 December 31, 2000   $ (   86,817)   $ 18,270,560

The accompanying note is an integral part of these financial statements.

                                              F37

                         SOUTH BANKING COMPANY
                       (PARENT CORPORATION ONLY)
                             ALMA, GEORGIA
                         STATEMENT OF CASH FLOWS


                               Year Ended    Year Ended     Year Ended
                                  December  31,  December 31,  December
31,
                                2000          1999          1998
Cash Flows From Operating
 Activities:
 Net income                     $ 2,646,060   $ 2,128,501   $ 1,929,596
 Add expenses not requiring
  cash:
 Depreciation and
    amortization                      21,870        17,649       20,697
 Undistributed earnings of
   subsidiaries                   (1,930,638)   (1,326,175)  (1,195,099)
 Increase (decrease) in
   accounts payable                        -               -           -
Increase (decrease) in
  other liabilities                      788               -           -
 Increase (decrease) in
  accrued income taxes            (   21,653)         21,652           -
 (Increase) decrease in
   other assets                          635      (    1,979)(       435)
 Increase (decrease) in
  prepaid income taxes           (   214,577)       145,937      34,474
 (Increase) decrease in
  due from subsidiary-taxes         105,672   (  129,928)   (   39,565)
 Increase (decrease) in
  due to subsidiary                 129,471            -             -

Net Cash Provided by Operating
 Activities                     $   737,718  $   855,657   $   749,668

Cash Flows From Investing
 Activities:
Capital contribution to
 subsidiary                     $(2,700,000)  $         - $         -
Purchase of Nexity Financial
 Stock                                    -    (  250,000)          -
Purchase of C B Financial
   Stock                                  -             -  (   300,000)
Purchase of fixed assets         (   27,532)            -            -
Net Cash Used by Investing
 Activities                      $(2,727,532) $(  250,000)  $(  300,000)

The accompanying note is an integral part of these financial statements.

                                   F38


                         SOUTH BANKING COMPANY
                       (PARENT CORPORATION ONLY)
                             ALMA, GEORGIA
                    STATEMENT OF CASH FLOWS (con't)



                               Year Ended    Year Ended    Year Ended
                                 December 31,  December 31,  December 31,
                               2000          1999          1998

Cash Flows From Financing
 Activities:
 Payments on note payable
  bank                         $(   60,000)  $(  390,000)   $(  350,000)
 Proceeds from notes payable
  to banks                       2,900,000             -        300,000
  Dividends paid                (  279,628)   (  259,675)    (  259,654)
  Redemption of common stock             -             -              -

 Net Cash Provided (Used)
  by Financing Activities      $ 2,560,372   $(  649,675)   $(  309,654)

Net increase (decrease) in
 cash and cash equivalents     $   570,558   $(   44,018)   $   140,014

Cash and Cash Equivalents at
 beginning of year                 527,184       571,202        431,188

Cash and Cash Equivalents
 at end of year                 $ 1,097,742   $   527,184    $   571,202


The accompanying note is an integral part of these financial statements.


                                   F39


                          SOUTH BANKING COMPANY
                      (PARENT CORPORATION ONLY)
                            ALMA, GEORGIA
                    NOTES TO FINANCIAL STATEMENTS



(A)  Summary of Significant Accounting Policies

     General - The following notes to the financial statements of  South
     Banking   Corporation,   formed   on   July   28,   1981,   (parent
     corporation   only)   (the   corporation)   includes   only    that
     information  which  is  in  addition to  information  presented  in
     the  consolidated  financial statements and notes  to  consolidated
     financial statements.

     Investment in subsidiaries - The corporation reports its investment
     in  the  common  stock of its subsidiaries at  its  equity  in  the
     net assets of the subsidiaries.

     Organization  costs - Organization costs have   been   deferred  and
     are
           being  amortized on a straight-line basis over  a  period  of
     five years.


                                   F40