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, 2002
                    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 S-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)  Not applicable.

      Indicate  by check mark whether the registrant is an  accelerated
filer (as defined in Exchange Act Rule 12b-2)
Yes             No     X

     State  the  aggregate  market value of the voting  and  non-voting
common equity held by nonaffiliates computed by reference to the  price
at  which the common equity was last sold, or the average bid  and  ask
price  of  such  common  equity, as of the last  business  day  of  the
registrant's   must   recently   completed   second   fiscal   quarter:
$2,067,024.   The price is based on the price of the last  sales  price
known to the registrant, which occurred on September 13, 2001.

      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,
2003
Common stock $1.00 par value per share                 399,500
                  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;

          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 bank holding company
organized at the direction of Alma Exchange Bank & Trust ("Alma  Bank")
and  Citizens State Bank ("Citizens Bank").  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 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.   Georgia
Bankshares,  Inc.'s  subsidiary  Georgia  bank,  Peoples   State   Bank
("Peoples  Bank")  is  now  a  wholly-owned  subsidiary  bank  of   the
Registrant.   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" and, collectively
with  Alma  Bank,  Citizens Bank and Peoples  Bank,  the  "Banks"))  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.  SFP 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.

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.

Recent Developments

      During the fourth quarter of 2002 and the first quarter of  2003,
the  Board  of  Directors  decided  to  propose  an  amendment  to  the
Registrant's articles of incorporation, which would effect  a  1-for-50
reverse  stock  split  of  the Registrant's outstanding  common  stock,
thereby  reducing the number of authorized shares of common stock  from
1,000,000  to  20,000 and increasing the par value of the common  stock
from  $1.00 per share to $50.  The Registrant is proposing the  reverse
stock  split  in  order to "go private" - meaning that  the  Registrant
would  terminate its status as a "public" company.  The Registrant  can
terminate the periodic report filing and other obligations it has under
the  federal  Securities Exchange Act if it reduces the number  of  its
record  shareholders below 300, which the proposed reverse stock  split
is designed to do.

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.

      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, 2002, 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  non-
interest bearing accounts.

Employees

     On December 31, 2002, the  Registrant and its  subsidiaries had 95
full-time and 34 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.   Many of these competitors have substantially greater resources
than do the Banks.

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

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  (i)   acquire
substantially all the assets of any bank or ownership or control of any
voting  shares of any bank; (ii) it may acquire directly or indirectly,
more than five percent of the voting shares of a bank; or (iii) it  may
merge or consolidate with any other bank holding company.

      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.

     Although   the   activities  of  bank   holding   companies   have
traditionally  been limited to the business of banking  and  activities
closely  related  or  incidental to banking (as discussed  above),  the
Gramm-Leach-Bliley  Act  became effective  in  2000,  and  relaxed  the
previous  limitations thus permitting bank holding companies to  engage
in a broader range of financial activities.  Specifically, bank holding
companies  may  elect to become financial holding companies  which  may
affiliate  with securities firms and insurance companies and engage  in
other  activities that are financial in nature.  Among  the  activities
that will be deemed "financial in nature" include:

          lending,  exchanging, transferring, investing for others  or
       safeguarding money or securities;
          insuring, guaranteeing, or indemnifying against loss,  harm,
       damage,  illness, disability, or death, or providing and issuing
       annuities, and acting as principal, agent, or broker with
	 respect thereto;
         providing financial, investment, or economic advisory
       services, including advising an investment company;
         issuing or selling instruments representing interests in
       pools of assets permissible for a bank to hold directly; and
         underwriting, dealing in or making a market in securities.

     A  bank  holding  company may become a financial  holding  company
under  this  statute  only  if each of its  subsidiary  banks  is  well
capitalized,  is  well managed and has at least a  satisfactory  rating
under  the  Community  Reinvestment Act.  A bank holding  company  that
falls  out of compliance with such requirement may be required to cease
engaging in certain activities.  Any bank holding company that does not
elect  to  become a financial holding company remains  subject  to  the
current restrictions of the Act.

      Under  this legislation, the Federal Reserve Board serves as  the
primary  "umbrella"  regulator  of  financial  holding  companies  with
supervisory  authority over each parent company and  limited  authority
over  its subsidiaries.  The primary regulator of each subsidiary of  a
financial holding company will depend on the type of activity conducted
by  the  subsidiary.  For example, broker-dealer subsidiaries  will  be
regulated  largely by securities regulators and insurance  subsidiaries
will be regulated largely by insurance authorities.

      The  Registrant  has  no plans of becoming  a  financial  holding
company.

      The  Registrant must also register with the Department of Banking
and  Finance  of  the State of Georgia (the "DBF")  and  file  periodic
information  with  the  DBF.   As part of such  registration,  the  DBF
requires   information  with  respect  to  the  Registrant's  financial
condition, operations, management and inter-company relationships,  and
related matters.  The DBF may also require such other information as is
necessary  to  keep  itself informed as to whether  the  provisions  of
Georgia law and the regulations and orders issued thereunder by the DBF
have  been  complied with, and the DBF may examine the  Registrant  and
each of the Banks.

      The  Registrant is an "affiliate" of the Banks under the  Federal
Reserve  Act,  which imposes certain restrictions on (i) loans  by  the
Banks  to  the Registrant,  (ii) investments in the stock or securities
of  the  Registrant by the Banks,  (iii) the Banks taking the stock  or
securities of an "affiliate" as collateral for loans by the Banks to  a
borrower  and  (iv) the purchase of assets from the Registrant  by  the
Banks.   Further,  a  bank  holding company and  its  subsidiaries  are
prohibited  from engaging in certain tie-in arrangements in  connection
with  any  extension of credit, lease or sale of property or furnishing
of services.

      The  Banks, as Georgia banks, are subject to the supervision  of,
and   are   regularly  examined  by,  the  Federal  Deposit   Insurance
Corporation (the "FDIC") and the DBF.  Both the FDIC and the  DBF  must
grant  prior  approval of any merger, consolidation or other  corporate
reorganization involving the Banks.  A bank can be held liable for  any
loss incurred by, or reasonably expected to be incurred by, the FDIC in
connection with the default of a commonly-controlled institution.

Payment of Dividends and Other Restrictions

      The  Registrant 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  the  Banks  can  pay
dividends or otherwise supply funds to the Registrant.

      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%.

      The payment of dividends by the Registrant and the Banks may also
be  affected  or  limited by other factors, such as the requirement  to
maintain  adequate capital above regulatory guidelines.   In  addition,
if, in the opinion of the applicable regulatory authority, a bank under
its  jurisdiction is engaged in or is about to engage in an  unsafe  or
unsound practice (which, depending upon the financial condition of  the
Banks,  could  include  the payment of dividends)  such  authority  may
require, after notice and hearing, that such bank cease and desist from
such  practice.  The FDIC has issued a policy statement providing  that
insured  banks  should  generally only pay  dividends  out  of  current
operating   earnings.    In  addition  to  the  formal   statutes   and
regulations, regulatory authorities consider the adequacy  of  each  of
the  Bank's total capital in relation to its assets, deposits and other
such  items.  Capital adequacy considerations could further  limit  the
availability of dividends to the Banks.

Capital Adequacy

      The Federal Reserve and FDIC have adopted substantially identical
risk-based  capital  guidelines for banks and 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,  banks and bank holding companies must also  have  a  minimum
stockholders' equity to risk-weighted assets of 4%.

      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 Federal Reserve 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.

       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  Banks  are  "well
capitalized" institutions.

      The  written  policies of 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, 2002, 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.

Support of Subsidiary Banks

      Under  the  FRB policy, the Registrant is expected to  act  as  a
source  of  financial strength to, and to commit resources to  support,
each  of the Banks.  This support may be required at times when, absent
such FRB policy, the Registrant 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  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  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 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 2002.

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 Registrant is unable to assess the impact  of
any  proposed  legislation on its financial condition or operations  at
this time.

Available Information.

     The Registrant is subject to the information requirements of the
Securities Exchange Act of 1934, which means that it is required to
file certain reports and other information, all of which are available
at the Public Reference Section of the Securities and Exchange
Commission at Room 1024, 450 Fifth Street, NW, Washington, D.C. 20549.
You may also obtain copies of the reports and other information from
the Public Reference Section of the SEC, at prescribed rates, by
calling 1-800-SEC-0330.  The SEC maintains a World Wide Web site on the
Internet at www.sec.gov where you can access reports, information and
registration statements, and other information regarding registrants
that file electronically with the SEC through the EDGAR system.

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,
                        2002             2001             2000
ASSETS                                       (In Thousands)
Cash and due from banks       $     7,013    $     6,705   $     6,283
Cash in bank - interest bearing     1,634            957           822
Taxable investment securities      16,115         16,518        16,884
Nontaxable investment securities    1,018          1,326         1,613
Others                                983          1,343         1,487
Federal funds sold and securities
 purchased under agreements to
 resell                            18,976         18,028         9,945
Loans - net                       167,750        166,639       148,195
Other assets                       14,285         14,555        10,762

Total Assets                  $   227,774    $   226,071   $   195,991

LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits: Demand - non-interest
           bearing            $    29,724    $    24,903   $    22,444
     Demand - interest bearing     34,293         30,600        24,959
     Savings                       12,001         11,809        11,122
     Time                         121,984        131,154       114,026
Total Deposits                $   198,002    $   198,466   $   172,551
Federal funds purchased                19             23           114
Other borrowed funds                6,912          6,065         4,518
Other liabilities                   2,062          2,453         1,768

Total Liabilities             $   206,995    $   207,007   $   178,951
Shareholders' equity               20,779         19,064        17,040

Total Liabilities and
 Shareholders' Equity         $   227,774    $   226,071   $   195,991

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

                                     Year Ended December 31, 2002
                              Average        Yield/        Average
                              Balance        Interest      Rate
ASSETS                                       (In Thousands)
Cash in banks - interest
    bearing                    $   1,634     $     60        3.67%
Loans                            167,750       13,614        8.11%
Taxable investments               16,115          716        4.44%
Non-taxable investments            1,018           52        5.11%
Other                                983           39        3.97%
Federal funds sold and
 securities purchased
  under agreements to resell      18,976          307        1.62%
Total Interest-Bearing
    Assets                     $ 206,476     $ 14,788        7.16%

LIABILITIES
Demand   - interest bearing    $  34,293     $    419        1.22%
Savings deposits                  12,001          194        1.62%
Other  time deposits             121,984        4,459        3.66%
Other borrowing                    6,912          258        3.73%
Federal funds  purchased              19            -           -%
Total Interest-Bearing
    Liabilities                $ 175,209     $  5,330        3.04%

Net interest earnings          $   9,458
Net interest margin                                          4.12%

                                     Year Ended December 31, 2001
                              Average        Yield/        Average
                              Balance        Interest      Rate
ASSETS                                       (In Thousands)
Cash in banks - interest
 bearing                     $    957        $     54        5.64%
Loans                         166,639          16,737       10.04%
Taxable investments            16,518             947        5.73%
Non-taxable investments         1,326              66        4.97%
Other                           1,343              60        4.47%
Federal funds sold and
 securities purchased under
 agreements to resell          18,028             741        4.11%
Total Interest-Bearing
 Assets                      $204,811        $ 18,605        9.08%

LIABILITIES
Demand - interest bearing    $ 30,600        $    694        2.27%
Savings deposits               11,809             314        2.65%
Other time deposits           131,154           7,897        6.02%
Other borrowing                 6,065             429        7.07%
Federal funds purchased            23               1        4.34%
Total Interest-Bearing
 Liabilities                 $179,651        $  9,335        5.20%

Net interest earning         $  9,270
Net interest margin                                          3.88%


                                     Year Ended December 31, 2000
                              Average        Yield/        Average
                              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 interest margin                                          4.77%
(1)   Note:  Loan fees are  included for  rate  calculation purposes.
Loan  fees  included in interest amounted to approximately $1,097,015
in  2002, $1,208,871 in 2001 and $999,520 in 2000.  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.

2002 Compared to 2001
                                    Increase (Decrease) Due to (1)
                              Volume         Rate          Change
Interest earned on:                         (In Thousands)
Cash in banks - interest
  bearing                    $     38       $(       32)   $     6
Loans                              98        (    3,221)    (3,123)
Taxable investments           (    23)       (      208)    (  231)
Nontaxable  investments       (    15)                1     (   14)
Other                         (    16)       (        5)    (   21)
Federal funds sold and
 securities purchased under
  agreement to resell              39        (      473)    (  434)

Total Interest-Earning Assets$    121       $(    3,938)   $(3,817)
Interest paid on:
  NOW deposits               $     83       $(      358)   $(  275)
  Savings deposits                  5        (      125)    (  120)
  Other time deposits         (   552)       (    2,886)    (3,438)
  Other borrowing                  60        (      231)    (  171)
  Federal funds purchased           -        (        1)    (    1)

Total Interest-Bearing
  Liabilities                $(   404)      $(    3,601)   $(4,005)

Net Interest Earnings        $    525       $(      337)   $   188

(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.

2001 Compared to 2000
                                    Increase (Decrease) Due to (1)
                              Volume         Rate          Change
Interest earned on:                         (In Thousands)
Cash in banks - interest
  bearing                     $      9       $(        8)   $     1
Loans                            2,066        (    1,933)       133
Taxable investments            (    22)       (       52)    (   74)
Nontaxable   investments       (    14)                1     (   13)
Other                          (     7)       (        6)    (   13)
Federal funds sold and
 securities purchased under
  agreement to resell              505        (      387)       118

Total Interest-Earning Assets $  2,537       $(    2,385)   $   152

Interest paid on:
  NOW deposits                $    144       $(       98)   $    46
  Savings deposits                  22        (       67)    (   45)
  Other time deposits            1,070        (      288)       782
  Other borrowing                  153        (      172)    (   19)
  Federal funds purchased      (     6)       (        1)    (    7)

Total Interest-Bearing
  Liabilities                 $  1,383       $(      626)   $   757

Net Interest Earnings         $  1,154       $(    1,759)   $(  605)

(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
,
                              2002           2001          2000
                                            (In Thousands)
U. S. Treasury and other
 U. S. government agencies
 and corporations             $    17,233    $    15,691   $    18,449
State and political
 subdivisions (domestic)              933          1,131         1,529
Mortgage backed securities             20            236           399
Equities                              753            262           465

Totals                        $    18,939    $    17,320   $    20,842

B.   Maturities  The amounts of investment securities in each  category
as  of December 31, 2002 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 $     458    3.30% $   406   7.29%  $     -        -
After one year
 through five years 16,012    3.92%       -       -        -        -
After five years
 through ten years     763    6.00%     267   7.36%        -        -
After ten years          -        -     260   8.76%       20    7.72%

Totals           $  17,233    4.00% $   933   7.72%  $    20    7.72%


(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,
                              2002          2001          2000
(In Thousands)
Commercial, financial and
 agricultural                 $    43,939    $    49,558   $    42,973
Real  estate - mortgage            90,492         85,876        81,314
Real  estate - construction         8,809          9,015         7,646
Installments                       26,565         27,929        31,294

                              $   169,805    $   172,378   $   163,227
Less   -   Unearned  income           237            289           253
       Reserve for possible
         losses                     2,893          2,756         2,728

Total Loans                   $   166,675    $   169,333   $   160,246

B.  Maturities and Sensitivity to Changes in Interest Rates  The amount
of  total loans by category outstanding as of December 31, 2002  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           $  37,692   $    5,381    $    866   $  43,939
Real estate
    mortgage               68,206       20,762       1,524      90,492
Real estate
    construction            7,661          410         738       8,809
Installment                12,762       11,136       2,667      26,565

Total loans due
 after one year
 with:
 Predetermined
  interest rate                         42,447
 Floating interest
  rate                                   1,037

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,
                           2002          2001            2000
                                            (In Thousands)
Loans accounted for on a
 non-accrual basis        $       748    $     1,002     $       876

Loans contractually past
 due ninety days or more
 as to interest or principal
 payments                         466          1,028             734

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           -              4               8
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.

E. Rate Sensitivity Analysis

                              SOUTH BANKING COMPANY
                                DECEMBER 31, 2002
                               INTEREST RATE RISK

Note:  Dollar amounts in columns are cumulative amounts

Total assets on this date equaled $230,758

Interest Rate Risk            0-3      0-12     0-3       0-5     0-15
                             Months   Months   Years     Years   Years
Rate sensitive assets:
 Securities (fixed rates)$    201  $   864 $  5,699  $ 16,876 $ 18,166
 Securities (floating rates)    21      21        21       21       21
 Mutual funds                   48      48        48       48       48
 CD's at banks                 396   2,667     3,760    3,860    3,860
 Loans (fixed rates)        19,881  41,714    70,060   80,083   87,124
 Loans (floating rates)     79,079  80,699    81,042   81,736   81,736
 Federal funds sold         18,600  18,600    18,600   18,600   18,600
Total rate sensitive
  assets 			 $118,226 $144,613 $ 179,230 $201,224 $209,555

Rate sensitive liabilities:
 CD/IRA's under $100M    $ 27,709 $ 77,882 $  85,384 $ 85,845 $ 85,845
 CD/IRA's => $100M         11,335   32,407    35,701   35,972   35,972
 Regular savings/Christmas 13,061   13,061    13,061   13,061   13,061
 Now/Super Now             25,597   25,597    25,597   25,597   25,597
 Money market deposit       9,634    9,634     8,634    9,634    9,634
 Treasury, tax & loan note     25       25        25       25       25
 Federal funds purchased        -        -         -        -        -
 Note payable-Ford Motor        -        8        16       16       16
 Note payable-Banker's Bank     -      375     1,275    2,375    4,400
 Note payable-Waycross
  Bank & Trust                  -        -         -        -        -
 Note payable-Banker's
  Bank (BDS)                   54      216       619      619      619
 Note payable-FHLB          3,000    3,000     3,000    3,000    3,000
Total rate sensitive
  liabilities            $ 90,415 $162,205  $174,312 $176,144 $178,169

Rate sensitive assets less
Rate sensitive
  liabilities            $ 27,811 $(17,592) $  4,918 $ 25,080 $ 31,386

Rate sensitive assets less
Rate sensitive
  liabilities/Total assets  12.05% ( 7.62%)     2.13%   10.87%   13.60%

Rate sensitive assets/
Rate sensitive liabilities 130.76%  89.15%    102.82%  114.24%  117.62%


Notes to Market Risk Sensitivity Table:

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

     (2)  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.

     (3)  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.

     (4)  Loans receivable includes non-performing loans.

     (5)  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.

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

     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 an increase in net income for South and an increase in interest
  rates will result in a decrease in net income.

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,
                              2002           2001          2000
                                            (In Thousands)

A.  Average amount of loans
     outstanding              $   167,750    $   166,639   $   148,195
B.  Balance of reserve for
     possible loan losses at
     beginning of period      $     2,757    $     2,728   $     2,169
C.  Loans charged off:
     Commercial, financial
      and agricultural        $       398    $       398   $       274
     Real estate - mortgage           278            225           127
     Installments                     330            379           263

                              $     1,006    $     1,002   $       664
D.  Recoveries of loans
     previously charged off:
     Commercial, financial
      and agricultural        $        27    $         4   $        83
     Real estate                       18             49            29
     Installment                       93             85            99

                              $       138    $       138   $       211
E.  Net loans charged off
     during period            $       868    $       864   $       453
    Additions to reserve
     charged to operating
     expense during period (1)$     1,004    $       893   $       424
    Addition from bank
     acquisition                        -              -           588
                              $     1,004    $       893   $     1,012
F.  Balance of reserve for
     possible loan losses at
     end of period            $     2,893    $     2,757   $     2,728

G.  Ratio of net loans charged
     off during the period to
       average  loans  outstanding   .52             .52           .31

(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 December 31,
                      2002               2001               2000
                          Average            Average            Average
               Balance  Interest   Balance  Interest  Balance  Interest
                          Rate                Rate               Rate

Noninterest-    $29,724         -  $24,903         -  $22,444         -
bearing demand
Interest-        34,293     1.22%   30,600     2.27%   24,959     2.59%
bearing demand
deposits
Savings          12,001     1.62%   11,809     2.65%   11,122     3.23%
deposits
Time deposits   121,984     3.66%  131,154     6.02%  114,026     6.24%
Total deposits $198,002     2.56% $198,466     3.91% $172,551     4.71%

      B.  The amounts of time certificates of deposit issued in amounts
of  $100,000  or  more  as  of December 31, 2002  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                         $    11,335
     Over three through twelve months                  20,972
     Over twelve months                                 3,564
     Total                                        $    35,871

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,
                              2002           2001           2000

Return  on  assets (1)              .79%            .74%          1.35%
Return  on  equity (2)             8.61%           8.83%         15.53%
Dividend payout ratio (3)         15.63%          16.63%         10.57%
Equity  to  assets ratio (4)       9.12%           8.43%          8.69%

(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 two branches. 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.

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.

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  Equity  and  Related
          Stockholder 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  September  13, 2001.  As of March 1, 2003, the Company  had  454
shareholders with 399,500 shares outstanding.

      For  the  years ended December 31, 2002, 2001 and 2000,  South
paid  cash dividends of $279,628 or $.70 per share, $279,628 or $.70
per  share,  and  $279,628 or $.70 per share,  respectively.   These
dollars  equate  to   dividend  payout  ratios  (dividends  declared
divided  by  net income) of 15.63%, 16.63% and 10.57% in 2002,  2001
and   2000,  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,  2002,  there
were 454 shareholders of record.
                                                 SALES   PRICES   BY
QUARTER
                                                 High        Low
     Fiscal Year 2002
     First Quarter                                $    -      $    -
     Second Quarter                                    -           -
     Third Quarter                                     -           -
     Fourth Quarter                                    -           -

                                                SALES PRICES BY QUARTER
                                                  High          Low
     Fiscal Year 2001
     First Quarter                              $      -        $    -
     Second Quarter                                    -             -
     Third Quarter                                 12.00         12.00
     Fourth Quarter                                    -             -


                                               DIVIDENDS PAID PER SHARE
     Fiscal Year                                  2002          2001
     March 31                                     $  .00           .00
     June 30                                         .00           .00
     September 30                                    .00           .00
     December 31                                     .70           .70

Item 6.  Selected Financial Data

                              Years Ended December 31,
                2002       2001       2000        1999       1998
                                   (In Thousands)
Total Assets    $ 230,758  $ 224,791  $ 220,450   $173,807   $164,890

Operations:
 Interest income$  14,788  $  18,605  $  18,454   $ 14,518   $ 13,920
  Interest expense  5,330      9,335      8,578      6,261      6,392
Net interest
 income         $   9,458  $   9,270  $   9,876   $  8,257   $  7,528
Provision for
    loan losses     1,004        893        424        503        286
Net interest
 income after
 provision for
 loan losses    $   8,454  $   8,377  $   9,452   $  7,754   $  7,242
Other income    $   2,988  $   3,125  $   2,718   $  2,298   $  1,905
Other expenses  $   8,829  $   9,085  $   8,302   $  6,906   $  6,387
Income before
 income taxes   $   2,613  $   2,417  $   3,868   $  3,146   $  2,760
Federal income
    taxes             824        733      1,222      1,017        831
Net income before
 extraordinary
 items          $   1,789  $   1,684  $   2,646   $  2,129   $  1,929
Extraordinary
 items          $       -  $       -  $       -   $      -   $      -
Net income      $   1,789  $   1,684  $   2,646   $  2,129   $  1,929

Per Share Data:
 Income after
  extraordinary
  items         $    4.48  $    4.21  $    6.62   $   5.33   $   4.83
 Net income     $    4.48  $    4.21  $    6.62   $   5.33   $   4.83
 Dividends
  declared      $     .70  $     .70  $     .70   $    .65   $    .65
 Book value     $   54.37  $   49.71  $   45.73   $  39.57   $  35.56

Profitability Ratios
 Net income to
 average total
    assets            .79%       .74%      1.35%      1.28%      1.23%
Net income to average
 stockholders'
    equity           8.61%      8.83%     15.52%     14.18%     14.45%
Net interest
    Margin           4.12%      3.88%      4.77%      4.83%      4.52%


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.

Critical Accounting Policies

      The  accounting and reporting policies of the Registrant and  its
subsidiaries conform with generally accepted accounting principles  and
with  practices  within the banking industry.  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.

Financial Condition

      The  Registrant 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 the Registrant 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  the  Registrant has managed its sources and uses of  funds.   The
Registrant used its funds primarily to support its lending activities.

      The  Registrant's total assets increased to $230,758,333 at year
end  2002  from  $224,790,523  at year end  2001.   This  increase  of
$5,967,810  represents  a  2.6% increase  in  2002  compared  to  1.9%
increase  in  2001.  This increase is attributable  to  normal  growth
within the banking area with limited entry into competitive situations
for large deposits.  The net interest margins have remained stable  in
2002  after  two  years  of decline. The net interest  margin  is  not
anticipated  to  change  much  in  2002  as  the  effect  of  the  new
competition  and rate reductions have leveled off.  However,  increase
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 the Registrant.  The  gap
ratios  for 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 has leveled after years of sustained growth  with
loans  decreasing $2,573,379 in 2002.  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, which
had  been  stable  prior to 1998 has declined beginning  in  1999  and
continued  into  2002  especially  in  the  agricultural  and   timber
industries.  While the Banks are not heavy into these industries,  the
decline  in  these areas has impacted the overall economy.  Classified
loans for regulatory purposes remain at acceptable 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.

      The Registrant's investment portfolio, including certificates of
deposits  in  other banks, increased to $22,844,919 from  $18,593,836.
The  increase  of $4,251,083 from operations is an indication  of  the
declining  loan  demand of the banks and the desire of  the  banks  to
utilize  the  assets of the Registrant in the highest yielding  manner
available  to  the  banks  without creating liquidity  problems.   The
Registrant  has maintained adequate federal funds sold and investments
available  for sale to sufficiently maintain adequate liquidity.   The
Registrant's securities remain primarily short term of five  years  or
less  in maturity, enabling the Registrant to better monitor the  rate
sensitivity  of  these  assets,  however,  some  extended   terms   on
securities have been secured for yield purposes.  Unrealized gain  and
losses  on  this  portfolio is not material to the  statement  as  the
Registrant maintains a slight unrealized gain of $221,257.

      As the primary source of funds, aggregate deposits increased  by
$3,765,403 in 2002 compared to $3,321,388 in 2001.  This represents  a
1.92%  increase  for the year compared to a 1.72%  increase  in  2001.
This  illustrates  the  efforts of the banks  to  maintain  good  core
deposits.  Most of the growth was from the demand accounts which  have
lower  interest rates as time certificate rates have dropped to levels
customers do not wish to lock-in rates for extended periods.

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.


     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, 2002.  The first 30 days there is an
excess  of  interest-bearing assets over interest-bearing liabilities.
The Registrant becomes more sensitive to interest rate fluctuations on
a  short  time period.  While the cumulative gap declines  during  the
first  twelve  months,  the  Registrant remains  within  a  manageable
position.

     Marketable investment securities, particularly those  of  shorter
maturities,  CD's  at  other  banks and federal  funds  sold  are  the
principal sources of asset liquidity.  Securities and CD's maturing in
one year or less amounted to $3,552,000 and federal funds sold net  of
federal  funds purchased with daily maturities amounted to $18,600,000
at  year  end  2002,  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 the Registrant has been enhanced by  a
significant  aggregate amount of core deposits.  These  core  deposits
have  remained  constant  during  this  period.   The  Registrant  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.    The
Registrant  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 until 2001.  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 Banks' cash flow indicates a nonrepeating  source
such  as proceeds from borrowings utilized as sources of cash for  the
purpose  of  acquisition or expansion.  The Registrant's overall  cash
flows  indicate the relative stability and manageable  growth  of  the
bank's  assets.  The Registrant utilized deposit growth as its primary
source  of  funds  to  handle growth.  The Registrant's  liquidity  is
maintained  at  levels determined by management to  be  sufficient  to
handle  the  cash needs that might arise at any given  date.   Outside
sources are maintained, but the Registrant looks to these sources only
on  a  very  short term basis.  The Registrant'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 Registrant 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, 2002, total loans, net of unearned discounts, were 80%
of  total earning assets.  Loans secured by real estate accounted  for
58%  of  total  loans  as of December 31, 2002.   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.

      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 the Registrant's loan loss experience is
included elsewhere in this report.

Distribution of Nonperforming Assets
                                           2002      2001    2000
                                                 (In Thousands)
Nonaccrual loans                           $   748   $ 1,002   $   876
Past due 90 days still accruing                466     1,028       734
Other real estate (ORE)                        314     1,265       725

                                           $ 1,528   $ 3,295   $ 2,335
Nonperforming loans to year
 end loans                                     .71%     1.18%      .99%
Nonperforming assets to year
 end loan and ORE                              .90%     1.91%     1.42%

      The  ratio of nonperforming assets has increased each year  from
1999  to 2001.  However in 2002, a decrease occurred as the banks  put
special  attention to the problem loans.  During 2000  and  2001,  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 even lower.

Asset-Liability Management and Market Risk Sensitivity

      Market  risk is the risk of loss from adverse changes in  market
prices  and  rates.   The Registrant'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 Registrant 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 Registrant'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
Registrant's business activities.

      The  Registrant'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
Registrant'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
Registrant 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 Registrant'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 Registrant.   The  Registrant
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 Registrant'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 Registrant  is
influenced  significantly  by  management's  ability  to  manage   the
relationship  between  rate  sensitive  assets  and  liabilities.   At
December  31,  2002,  approximately 69% of the  Registrant's  earnings
assets could be repriced within one year compared to approximately 91%
of  its interest-bearing liabilities.  This compares to 69% and 92% in
2001.

     The Registrant's current GAP analysis reflects that in periods of
increasing  interest rates, rate sensitive assets will reprice  slower
than  rate sensitive liabilities.  The Registrant's GAP analysis  also
shows that at the interest repricing of one year, the Registrant'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
Registrant 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 Registrant is able to manage the  deposit  side.
The  Registrant generally does not raise deposit rates as fast  or  as
much.  The Registrant also has the ability to manage its funding costs
by choosing alternative sources of funds.
      The  Registrant's current GAP position would also be interpreted
to  mean that in periods of declining interest rates, the Registrant's
net interest margin would benefit.  However, competitive pressures  in
the  local  market  may not allow the Registrant  to  lower  rates  on
deposits, but force the Registrant 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 Registrant  could
undertake in response to changes in interest rates.


      The  rate  sensitivity  analysis as presented  in  the  selected
statistical  information shows the Registrant'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.

     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 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.

     The  Registrant also measures its short-term exposure to  interest
rate risk by simulating the impact to net interest income under several
rate  change  levels.   Interest-earning  assets  and  interest-bearing
liabilities  are rate shocked to stress test the impact to  the  Banks'
net  interest income and margin.  The rate shock levels span three  100
basis  point increments up and down from current interest rates.   This
information is used to monitor interest rate exposure risk relative  to
anticipated  interest rate trends.  ALM strategies are developed  based
on  this analysis in an effort to limit the Banks' exposure to interest
rate risk.

Results of Operations
                         2002 Compared to 2001

      Net interest income remains an effective measurement of how well
management  has  balanced  the Registrant's  interest  rate  sensitive
assets  and  liabilities.  Net interest income increased by  $187,682.
The increase of 2.0% compared to a 6.1% increase in 2001.  The primary
determinants  of  the  increase were rates associated  with  deposits.
Loan   demand  decreased  slightly  and  funds  were  channeled   into
securities  and  CD's  at other banks as they  represent  the  highest
available yielding asset.  Management continued its policy of  limited
solicitation  of  high  interest  deposits. The drastic  reduction  in
rates  by the Federal Reserve system resulted in repricing of most  of
interest  rate sensitive assets and deposits.  After 2001 where  asset
rates decreased faster than deposits, deposit rates in 2002 stabilized
which  allowed the net interest margin to increase slightly. The yield
on  interest  earning  assets decreased  to  7.16%  from  9.08%  while
interest bearing deposits yield decreased to 3.04% from 5.20%. The net
interest  margin  increased  to  4.12%  from  3.88%.   With  the  rate
reduction  not anticipated to continue and possible increase  in  late
2003  the  banks anticipate that net interest margins will not  change
much and margins will remain low.

      Interest and fees on loans decreased $3,122,564 or 18.7% in 2002
from  2001  due to rate decreases of 193 basis points and loan  demand
declining  1.5% in 2002.  Interest on investment securities  decreased
$251,189 or 22.3% in 2002 from 2001 due to a decrease in the yield  in
investments as rates have decreased.  Interest income on federal funds
sold  decreased $434,001 or 58.6% due to lower rates as the  rates  on
federal funds sold reached lows not seen in years.
     Total interest expense decreased 42.9% or $4,004,436 from 2001 to
2002.   The  largest component of total interest expense  is  interest
expense on deposits, which decreased $3,832,492 or 43.0% from 2001  to
2002  due to a substantial reduction in rates.  The average rate  paid
on  deposits  was  3.04%,  5.20% and 5.54% in  2002,  2001  and  2000,
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 $1,004,000 and $893,000, respectively,
for the years ended December 31, 2002 and 2001.  The provision in 2002
reflects  replenishing  the allowance for loan  losses  to  cover  net
charge-offs of $867,569, plus providing for the increase as  a  result
of  the local economies.  The allowance for loan losses to total loans
outstanding is 1.70% at December 31, 2002.  Net charge-offs to average
loans are 0.52% for 2002 as compared to 0.52% for 2001.

     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 2002 decreased by $137,200 or 4.4%  over
2001,  as  compared to an increase in 2001 of $407,219 or  15.0%  over
2000.  These  increases generally resulted from increased activity  in
data processing and decreased in financial services, other income loss
on sale of fixed assets and service charges on deposits. A significant
contributor  to  non-interest income is  service  charges  on  deposit
accounts which decreased 1.3%.  Management views deposit fee income as
critical   influence   on  profitability.   Periodic   monitoring   of
competitive fee schedules and examination of alternative opportunities
ensure  that  the  Registrant  realizes the  maximum  contribution  to
profits from this area.


Non-Interest Expense

      Non-interest expenses totaled $8,829,471 in 2002 as compared  to
$9,084,778  in 2001.  This represented a 2.8% decrease  from  2001  to
2002,  compared  to  a 9.4% increase from 2000 to 2001.   The  overall
decreases during the year were attributable primarily to salaries  and
employee  benefits  and includes reduction of staff  and  expenses  of
small  branch  closed  during  2002.   Salaries  and  other  personnel
expenses, which comprised 50% of total non-interest expenses for 2002,
were  down  $497,717 or 10.1% over 2001 due to staff  reductions  from
branch closing and from continuing operations.  During 2001 and  2000,
salaries  and other personnel expenses accounted for 50%  and  52%  of
total other operating expenses, respectively.

      Combined  net  occupancy and furniture  and  equipment  expenses
increased  $284,255,  or 21.2% from 2001 to 2002,  as  compared  to  a
decrease  of  $130,966, or 8.8% in 2001.  The increase is primarily  a
result  of  addition at two banks and the complete remodeling  of  one
bank.

Income Taxes

      Income  tax  expense  totaled $823,633 in 2002  as  compared  to
$733,859 in 2001.  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
Registrant works actively with outside tax consultants to minimize tax
expenses.
                         2001 Compared to 2000

      Net interest income remains an effective measurement of how well
management  has  balanced  the Registrant's  interest  rate  sensitive
assets  and  liabilities.  Net interest income decreased by  $605,669.
The  decrease of 6.1%, which included a full year of the  2000  branch
acquisitions,  compared to a 25.8% increase in 2000  when  the  branch
acquisitions were included after August.  The primary determinants  of
the  decrease  were  loans and time deposits.  Loan  demand  increased
slightly  and  funds were channeled into loans as they  represent  the
highest  yielding asset.  Management continued its policy  of  limited
solicitation  of  high  interest deposits.  The drastic  reduction  in
rates  by the Federal Reserve system resulted in repricing of most  of
interest  rate sensitive assets and deposits.  As the tables presented
earlier  demonstrate the assets rates decreased faster  than  deposits
therefore, the margins were squeezed resulting in the decrease in  net
interest  income.  The yield on interest earning assets  decreased  to
9.08%  from 10.31% while interest bearing deposits yield decreased  to
5.20%  from  5.54%.  The net interest margin decreased to  3.88%  from
4.77%. With the rate reduction not anticipated to continue this  trend
should  correct  itself  during 2002;  however,  with  the  low  rates
currently in the market, this margin will remain low.

     Interest and fees on loans increased only $133,211 or .8% in 2001
from 2000 due to rate decreases of 123 basis points and loan growth of
5.6% in 2001.  Interest on investment securities decreased $131,101 or
11.1%  in  2001  from 2000 due to a slight decrease in  the  yield  in
investments as rates have decreased. Interest income on federal  funds
sold  increased  $117,989  or  18.9% due to  higher  average  balances
invested and lower rates.

      Total  interest expense increased 8.8% or $756,847 from 2000  to
2001.  The  largest  component of total interest expense  is  interest
expense  on  deposits, which increased $783,123 or 9.6% from  2000  to
2001  due  to a growth in deposits.  The average rate paid on deposits
was 5.13%, 5.54% and 4.82% in 2001, 2000 and 1999, 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 $893,000 and $424,000, respectively, for
the  years  ended December 31, 2001 and 2000.  The provision  in  2001
reflects  replenishing  the allowance for loan  losses  to  cover  net
charge-offs  of  $864,439, plus providing for the  increase  in  total
loans  outstanding.   The allowance for loan  losses  to  total  loans
outstanding is 1.60% at December 31, 2001.  Net charge-offs to average
loans are .52% for 2001 as compared to 0.31% for 2000.

     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 2001 increased by $407,219 or 15.0% over
2000,  as  compared to an increase in 2000 of $420,249 or  15.5%  over
1999.  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 13.4%.  Management views deposit  fee
income as critical influence on profitability.  Periodic monitoring of
competitive fee schedules and examination of alternative opportunities
ensure  that  the  Registrant  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 $9,084,778 in 2001 as compared  to
$8,301,997  in 2000.  This represented a 9.4% increase  from  2000  to
2001,  and  a 20.2% increase from 1999 to 2000.  The overall increases
during the year were attributable to growth in all geographic markets,
and  includes  operations of branches acquired during 2000.   Salaries
and  other  personnel  expenses, which comprised  54%  of  total  non-
interest expenses for 2001, were up $694,299 or 16.4% over 2000 due to
normal   salary  increases,  benefit  cost  increases,  and  increased
personnel due to two new branches.  During 2000 and 1999, salaries and
other  personnel  expenses accounted for 52% and 54%  of  total  other
operating expenses, respectively.

      Combined  net  occupancy and furniture  and  equipment  expenses
decreased  $130,966,  or 8.8% from 2000 to 2001,  as  compared  to  an
increase of $298,051, or 25.4% in 2000.
Income Taxes

      Income  tax  expense  totaled $733,859 in 2001  as  compared  to
$1,221,738  in  2000.  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
Registrant works actively with outside tax consultants to minimize tax
expenses.

Results of Operations

                        2000 Compared to 1999

      Net interest income remains an effective measurement of how well
management  has  balanced  the Registrant'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  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 primarily the reason for the increase  as
net  interest margin decreased slightly to 4.77% from 4.83%.  With the
low interest rate currently in the market and the Registrant's current
rate  gap, the Registrant continued its efforts to channel funds  into
higher  yielding  assets.   Due  to  the  rate  sensitivity  gap,  the
Registrant 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 $3,744,981 or 29.13% in 2000
from 1999 due to rate increased 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 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.

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  Registrant  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 a 20.2% increase from  1999  to
2000,  and  an 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 the one new branch. 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
Registrant works actively with outside tax consultants to minimize tax
expenses.
Regulatory Matters

      During  the  year  2002, federal and state  regulatory  agencies
completed  asset  quality examinations at the Registrant's  subsidiary
banks.   The  Registrant's  level  and  classification  of  identified
potential  problem loans was not revised significantly as a result  of
this  regulatory examination process. However, one bank has seen  some
increase in classified loans as a result of branch acquisitions in the
year 2000.

      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 the Registrant 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.

      Management  and  the boards of directors of the  Registrant  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  the
Registrant  and  its affiliates.  As a matter of practice,  management
and  the  boards  of directors of the Registrant 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  the Registrant'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 7A.  Quantitative And Qualitative Disclosures About Market Risk

     The  Registrant  is  exposed  only to U.S.  dollar  interest  rate
changes and accordingly, the Registrant manages exposure by considering
the  possible changes in the net interest margin.  The Registrant  does
not  have  any trading instruments nor does it classify any portion  of
the  investment portfolio as held for trading.  The Registrant does not
engage   in  any  hedging  activities  or  enter  into  any  derivative
instruments  other than mortgage backed securities, which are  commonly
pass  through securities.  Finally, the Registrant has no  exposure  to
foreign  currency exchange rate risk, commodity price risk,  and  other
market risks.

     Interest rates play a major part in the net interest income  of  a
financial  institution.  The sensitivity to rate changes  is  known  as
"interest  rate  risk."  The repricing of interest earning  assets  and
interest-bearing liabilities can influence the changes in net  interest
income.    See  "Management's  Discussion  and  Analysis  of  Financial
Condition  and  Results of Operations - Asset-Liability Management  and
Market Risk Sensitivity."

Item 8.  Financial Statements and Supplementary Data

     The following consolidated financial statements of the Registrant
and  its  subsidiaries are included on pages F1 through  F42  of  this
Annual report on Form 10-K.

     Consolidated Balance Sheets - December 31, 2002 and 2001

      Consolidated Statements of Income and Other Comprehensive Income
-         Years ended December 31, 2002, 2001 and 2000

      Consolidated  Statements of Changes in  Stockholders'  Equity  -
          Years ended December 31, 2002, 2001 and 2000

     Consolidated Statements of Cash Flow - Years ended December 31,
          2002, 2001 and 2000

     Notes to Consolidated Financial Statements

Item 9.  Changes  in  and Disagreements with Accountants on Accounting
         and Financial Disclosures

     Not applicable.

Part III.

Item 10. Directors and Executive Officers of the Registrant

      The  name, present principal occupation or employment,  five-year
employment  history  and ownership of common stock  of  the  directors,
executive  officers and controlling persons of the  Registrant  is  set
forth  below.   Companies  listed other than  the  Registrant  are  its
subsidiaries.  None  of  the  persons  listed  below  has  engaged   in
transactions with respect to the common stock during the past 60  days.
During  the last five years, none of the persons listed below has  been
convicted in a criminal proceeding nor were any of such persons a party
to a judicial or administrative proceeding that resulted in a judgment,
decree  or final order enjoining the person from future violations  of,
or  prohibiting activities subject to, federal or state securities laws
or  finding  any  violation of such laws.  All such  persons  are  U.S.
citizens,  and  except  as  otherwise indicated,  the  address  of  the
corporation  in  which  such persons conduct  their  present  principal
occupation or employment is 501 West 12th Street, Alma, Georgia  31510.
Beneficial  ownership  information is given o the  extent  known  after
reasonable  inquiry,  and is based on 399,500 shares  of  common  stock
outstanding as of March 21, 2003.  Each of persons named below has been
principally  employed by South Banking Company or its subsidiaries  for
at least five years.

                                                             Number of
                                                  Director    Shares
                    Position with Company and     (Officer)     Owned
Name                 Principal Occupation or       Since    (Percent
                           Employment                           of
                                                            Outstanding)

Olivia          Executive Vice President,           1969      189,372
Bennett(1)(2)   Secretary and Director, South                (47.40%)
                Banking Company; Chairman and
                Director, Alma Exchange Bank &
                Trust; Director, Banker's Data
                Services, Inc.; Chairman,
                President and Director, Citizens
                State Bank; Chairman, President
                and Director, Peoples State Bank
                & Trust

Paul T.         President, Treasurer and            1978      19,526
Bennett(1)(3)   Director, South Banking Company;              (4.89%)
                Vice Chairman and Director,
                Citizens State Bank; Vice
                Chairman and Director, Peoples
                State Bank & Trust; Director and
                President, Banker's Data
                Services, Inc.; Vice Chairman
                and Director, Alma Exchange Bank
                & Trust; Director, Chairman and
                President, Pineland State Bank

Lawrence        Director, South Banking Company;    1987      12,814
Bennett(1)(4)   President and Director, Alma                  (3.21%)
                Exchange Bank & Trust; Director
                and Secretary, Banker's Data
                Services, Inc.; Director,
                Peoples State Bank & Trust;
                Director, Pineland State Bank

Kenneth F.      Director, South Banking Company;    1980       4,934
Wade            Executive Vice President and                  (1.24%)
                Director, Alma Exchange Bank &
                Trust; Director, Banker's Data
                Services, Inc.

Charles         Director, South Banking Company;    1990        992
Stuckey         Executive Vice President and                  (0.25%)
                Director, Peoples State Bank &
                Trust; Director, Banker's Data
                Services, Inc.

James W.        Director, South Banking Company;    1989        279
Whiddon         Executive Vice President and                  (0.07%)
                Director, Citizens Bank;
                Director, Banker's Data Services

Richard         Director, South Banking Company;    2001         -
Williams        Executive Vice President and
                Director, Pineland State Bank;
                Director, Banker's Data
                Services, Inc.

(1)  Olivia Bennett is the mother of Paul T. Bennett and Lawrence
Bennett.
(2)  Includes 166,085 shares owned by Estate of Valene Bennett of which
     Olivia Bennett is the Executrix and 23,287 shares owned by Bennett
     Family Limited Partnership of which she is the general partner.
(3)  The shares reported include 226 shares owned by Paul T. Bennett's
     wife and 150 shares owned jointly with each of two children.
(4)    Owned jointly with Lawrence Bennett's wife.

      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.

  Item 11.  Executive Compensation

      The  following  information is given as  to  the  cash  and  cash
equivalent  forms of renumeration received by South's  Chief  Executive
Officer  and  only  other  executive officer  whose  salary  and  bonus
exceeded $100,000 during the last fiscal year.

                                                Long-Term Compensation
                   Annual Compensation
                                              Securities   All Other
   Name and                                   Underlying   Annual
  Principal     Year     Salary      Bonus    Options/SARS Compensation

Paul T.
Bennett
Chief           2002     203,896                                31,505

Executive       2001     196,700                                32,090

Officer         2000     182,848                                31,440


Olivia
Bennett
Secretary       2002     202,355                                21,975

                2001     202,618                                20,875

                2000     215,099                                20,915


(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.

      The  Registrant  has no compensation plans (including  individual
compensation  arrangements)  under  which  equity  securities  of   the
Registrant are authorized for issuance.

Directors' Compensations.

      The  members Registrant's Board of Directors currently receive  a
fee  of  $2,500  per  year  for service on the Registrants's  Board  of
Directors.

Agreements with Officers

      The  Registrant has no employment or change in control agreements
with any of its executive officers.

Compensation Committee Interlocks and Insider Participation

     The Board of Directors of the Registrant reviewed the compensation
of  Paul  Bennett  and  Olivia Bennett and of  the  Registrant's  other
executive  officers  for the 2002 fiscal year.   Although  Mr.  Bennett
participated  in  deliberations regarding  the  salaries  of  executive
officers,  he  did not participate in any decisions regarding  his  own
compensation as an executive officer.

Report on Executive Compensation

      Under rules established by the SEC, the Registrant is required to
provide  certain information with respect to compensation  provided  to
the  Registrant's  President  and Chief  Executive  Officer  and  other
executive officers.  The SEC regulations require a report setting forth
a  description  of  the Registrant's executive compensation  policy  in
general  and the considerations that led to the compensation  decisions
affecting  Paul  Bennett and Olivia Bennett.  In  fulfillment  of  this
requirement,  the  Board of Directors and Compensation  Committee  have
prepared the following report for inclusion in this Form 10-K.

     The fundamental policy of the Registrant's compensation program is
to  offer  competitive  compensation and benefits  for  all  employees,
including  the  President and Chief Executive  Officer  and  the  other
officers  of  the  Registrant,  to  compete  for  and  retain  talented
personnel who will lead the Registrant in achieving levels of financial
performance that enhance shareholder value.  The Registrant's executive
compensation  package  historically has  consisted  of  salary,  annual
bonus, and other customary fringe benefits.

       The  members  of  the  Board  of  Directors  of  the  Registrant
participated in deliberations regarding salaries of executive officers.
Mr.  Bennett  did not participate in deliberations concerning  his  own
compensation.  Although subjective in nature, factors considered by the
Board  in setting the salaries of executive officers were Mr. Bennett's
recommendations  (except with respect to his own salary),  compensation
paid by comparable companies to their executive officers (although such
information was obtained informally and the Registrant did not  attempt
to  pay any certain percentage of salary for comparable positions  with
other companies), each executive officer's performance, contribution to
the   Registrant,  tenure  in  his  or  her  position,   and   internal
comparability considerations.  The Board of Directors set the salary of
Mr.  Bennett based on Mr. Bennett's salary during the preceding  fiscal
year,  his  tenure,  the  salaries  of  chief  executive  officers   of
comparable bank holding companies, and the increase in earnings of  the
Registrant in recent years.  The Board did not assign relative  weights
to  the  factors considered in setting salaries of executive  officers,
including Mr. Bennett.


                        The Board of Directors

Item   12.   Security  Ownership  of  Certain  Beneficial  Owners   and
Management

      The  following  table  sets forth,  as  of  March  1,  2003,  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.




                                              Number of     Percent of
                                              Shares Owned  Outstanding
Name                                          Beneficially  Shares
Estate of Valene Bennett
Route 4
Alma, Georgia 31510                                166,085       41.57%

Olivia Bennett
Route 4
Alma, Georgia 31510                                 23,287        5.83%

ll Executive Officers and Directors
 as a group (7 persons)                            227,248        57.0%

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.  Controls And Procedures

     The Registrant's management, including the Chief Executive Officer
and  Chief  Financial  Officer,  supervised  and  participated  in   an
evaluation  of  its disclosure controls and procedures (as  defined  in
federal  securities rules) within 90 days prior to the filing  of  this
report.   Based  on,  and  as  of the date  of,  that  evaluation,  the
Registrant's  Chief Executive Officer and Chief Financial Officer  have
concluded that the Registrant's disclosure controls and procedures were
effective  in accumulating and communicating information to management,
including  the Chief Executive Officer and Chief Financial Officer,  as
appropriate to allow timely decisions regarding required disclosures of
that  information under the Securities and Exchange Commission's  rules
and  forms and that the Registrant's disclosure controls and procedures
are designed to ensure that the information required to be disclosed in
reports  that  are  filed  or submitted by  the  Registrant  under  the
Securities Exchange Act is recorded, processed, summarized and reported
within  the  time  periods  specified in the  Securities  and  Exchange
Commission's rules and forms.

      There  were  no significant changes in the Registrant's  internal
controls  or  in  other factors that could significantly  affect  these
controls subsequent to the date of their evaluation.

Item 15.  Exhibits, Financial Statement Schedule and Reports on Form 8-K

     (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, 2002 and 2001
          (ii)  Consolidated Statements of Income and Other
Comprehensive Income - Years ended December 31,
                2002, 2001 and 2000
                (iii) Consolidated Statements of Stockholders' Equity
                - Years ended December 31, 2002, 2001 and 2000
          (iv)  Consolidated Statements of Cash Flow - Years ended
December 31, 2002, 2001 and 2000
          (b)       South Banking Company (Parent Corporation Only):
          (i)   Balance Sheets - December 31, 2002 and 2001
                (ii) Statements of Income and Other Comprehensive Income
                - Periods ended December 31, 2002, 2001 and 2000
          (iii)     Statements of Stockholders' Equity - Periods ended
December 31, 2002, 2001 and 2000
          (iv)  Statements of Cash Flow - Years ended December 31,
2002, 2001, and 2000

          3.  Exhibits required by Item 601 of regulation S-K:


(3.1)      Articles  of  Incorporation (included as  Exhibit  3(a)  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).

(3.2)      By-Laws  (included  as  Exhibit  3(b)  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).

(21)      List of the Registrant's subsidiaries:

(99.1)     Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

     (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.

                              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 28, 2003               By:          /s/
                                         Paul T. Bennett
                                         President, Treasurer
                                          and Director


                           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 28, 2003                   /s/
                                      Paul T. Bennett
                                      Principal Executive,
                                      Financial and Accounting
                                      Officer and Director

Date:      March 28, 2003                   /s/
                                      Olivia Bennett
                                      Executive Vice President
                                      And Director

Date:      March 28, 2003                   /s/
                                      Charles Stuckey
                                      Director

Date:      March 28, 2003                   /s/
                                      James W. Whiddon
                                      Director

Date:      March 28, 2003                   /s/
                                      Kenneth F. Wade
                                      Director

Date:      March 28, 2003                   /s/
                                      Lawrence Bennett
                                      Director

                       SUPPLEMENTAL INFORMATION


     The proxy statement for the 2003 annual meeting of shareholders
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.

     The foregoing material 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.

                             CERTIFICATION


I, Paul T. Bennett, certify that:

         1.   I have reviewed this annual report on Form 10-K of South
           Banking Company, Inc.;

         2.   Based on my knowledge, this annual report does not contain
           any untrue statement of a material fact or omit to state a
           material fact necessary to make the statements made, in light
           of the circumstances under which such statements were made,
           not misleading with respect to the period covered by this
           annual report;

         3.   Based on my knowledge, the financial statements, and other
           financial information included in this annual report, fairly
           present in all material respects the financial condition,
           results of operations and cash flows of the registrant as of,
           and for, the periods presented in this annual report;

         4.   The registrant's other certifying officers and I are
           responsible for establishing and maintaining disclosure
           controls and procedures (as defined in Exchange Act Rules
           13a-14 and 15d-14) for the registrant and have:

              a)   designed such disclosure controls and procedures to
                ensure that material information relating to the
                registrant, including its consolidated subsidiaries,
                is made known to us by others within those entities,
                particularly during the period in which this quarterly
                report is being prepared;

              b)   evaluated the effectiveness of the registrant's
                disclosure controls and procedures as of a date within
                90 days prior to the filing date of this annual report
                (the "Evaluation Date"); and

              c)   presented in this annual report our conclusions about
                the effectiveness of the disclosure controls and
                procedures based on our evaluation as of the Evaluation
                Date;

         5.   The registrant's other certifying officers and I have
           disclosed, based on our most recent evaluation, to the
           registrant's auditors and the audit committee of the
           registrant's board of directors (or persons performing the
           equivalent function):

              a)   all significant deficiencies in the design or
                operation of internal controls which could adversely
                affect the registrant's ability to record, process,
                summarize and report financial data and have identified
                for the registrant's auditors any material weaknesses
                in internal controls; and


              b)   any fraud, whether or not material, that involves
                management or other employees who have a significant
                role in the registrant's internal controls.

         6.   The registrant's other certifying officers and I have
           indicated in this annual report whether or not there were
           significant changes in internal controls or in other factors
           that could significantly affect internal controls subsequent
           to the date of our most recent evaluation, including any
           corrective actions with regard to significant deficiencies
           and material weaknesses.

Dated this 28th day of March 2003.

                                                     /s/
                                     Paul T. Bennett
                                     Chief Executive Officer
                                     Chief Financial Officer


                              EXHIBIT INDEX


(21)      List of the Registrant's subsidiaries:

(99.1)   Certification Pursuant to 18 U.S.C. Section  1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



                               EXHIBIT 21

                              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.

                              EXHIBIT 99.1

            CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

         I, Paul T. Bennett, Chief Executive and Chief Financial
Officer of South Banking Company, Inc. (the "Company"), certify,
pursuant to 18 U.S.C.  1350 as adopted by  906 of the Sarbanes-Oxley
Act of 2002, that:

(1)  the Annual Report on Form 10-K of the Company for the annual
     period ended December 31, 2002 (the "Report") fully complies with
     the requirements of Section 13(a) or 15(d) of the Securities
     Exchange Act of 1934; and

(2)  the information contained in the Report fairly presents, in all
     material respects, the financial condition and results of
     operations of the Company.

Dated: March 28, 2003

                                                     /s/
                                    Paul T. Bennett
                                    Chief Executive Officer
                                    Chief Financial Officer


                      SOUTH BANKING COMPANY

                          ALMA, GEORGIA

                      FINANCIAL STATEMENTS

                        DECEMBER 31, 2002

                               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,  2002  and
2001  and the related consolidated statements of income, stockholders'
equity, and cash flows for each of the three years in the period ended
December  31,  2002. 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 auditing  standards
generally accepted in the United States.  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,  2002  and  2001  and the consolidated  results  of  its
operations, stockholders' equity, and cash flows for each of the three
years  in  the  period  ended December 31, 2002,  in  conformity  with
accounting principles generally accepted in the United States.

                                        Respectfully submitted,

                                        DALTON & BENNETT, CPA'S

Waycross, Georgia
February 7, 2003
                                  F2
                         SOUTH BANKING COMPANY
                             ALMA, GEORGIA
                      CONSOLIDATED BALANCE SHEETS

                                          December 31,   December 31,
                                          2002           2001
ASSETS

Cash and due from banks                    $  9,436,272   $  11,140,462
Deposits in other banks -
 interest bearing                          $  3,905,136   $   1,273,000
Investment securities
 Available for sale                        $ 18,892,037   $  17,173,350
 Held to maturity - market value
  of $52,445 in 2002 and
  $152,583 in 2001                         $     47,746   $     147,536

Georgia Bankers stock                      $    547,283   $     547,283

Federal Home Loan Bank stock               $    438,100   $     426,100

Federal funds sold                         $ 18,600,000   $  10,252,000

Loans                                      $169,805,432   $ 172,378,811
Less: Unearned discount                    (    236,926)  (     288,968)
Reserve for loan losses                    (  2,893,211)  (   2,756,780)
                                           $166,675,295   $ 169,333,063
Bank premises and equipment                $  6,590,001   $   6,715,813
Intangible assets                          $  1,444,786   $   1,680,572
Other assets                               $  4,181,677   $   6,101,344
Total Assets                               $230,758,333   $ 224,790,523

    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,
                                          2002            2001

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities
Deposits:  Demand - non-interest
                     bearing              $  31,335,371   $  29,999,788
           Demand - interest bearing         35,171,392      32,764,586
Savings                                      11,863,852      10,537,057
Time                                        121,395,391     122,699,172

                                           $199,766,006   $ 196,000,603
Borrowing                                     5,035,257       5,581,251
Accrued expenses and other
 liabilities                                  1,235,777       1,850,430
Federal funds purchased                               -               -
N/P - Federal Home Loan Bank                  3,000,000       1,500,000
Total Liabilities                          $209,037,040   $ 204,932,284
Stockholders' Equity
Common stock $1 par value; shares
 authorized - 1,000,000,  shares
 issued and outstanding -
 2002 and 2001 - 399,500
 and 399,500, respectively                 $    399,500   $     399,500
Surplus                                       3,070,831       3,070,831
Undivided profits                            17,800,222      16,291,126
Accumulated other comprehensive income          450,740          96,782
Total Stockholders' Equity                 $ 21,721,293   $  19,858,239
Total Liabilities and
 Stockholders' Equity                      $230,758,333   $ 224,790,523

    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,
                          2002            2001            2000
Interest Income
Interest and other
 fees on loans            $  13,614,595   $  16,737,159   $  16,603,948
Interest on deposits -
 interest bearing                59,690          54,303          53,224
Interest on federal
 funds sold                     306,768         740,769         622,780
Interest on investment
 securities:
 U. S. Treasury                  21,853          31,021          77,571
 U. S. Government agencies      689,777         898,919         910,190
 Mortgage backed securities       4,481          16,360          33,411
 State and municipal
  subdivisions                   51,733          66,100          79,343
 Other securities                39,011          60,031          73,017
Total Interest Income     $  14,787,908   $  18,604,662   $  18,453,484
Interest Expense
Interest on deposits      $   5,072,288   $   8,904,780   $   8,121,657
Interest - other borrowing      257,930         429,874         456,150
Total Interest Expense    $   5,330,218   $   9,334,654   $   8,577,807
Net interest income       $   9,457,690   $   9,270,008   $   9,875,677
Provision for loan losses     1,004,000         893,000         424,000
Net interest income after
 provision for loan losses$   8,453,690   $   8,377,008   $   9,451,677
Other Operating Income
Service charge on deposits$   1,763,507   $   1,787,500   $   1,576,094
Commission on insurance          81,600          81,052          89,036
Other income                    456,387         528,323         429,101
Securities gains (losses)         6,699    (      3,684)              7
Data processing fees            615,594         537,212         459,036
Gain (Loss) on sale of fixed
 assets                    (     44,394)         60,333           2,019
Financial service income        108,744         134,601         162,825
Total Other Operating
 Income                   $   2,988,137   $   3,125,337   $   2,718,118
    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,
                          2002            2001            2000
Other Operating Expenses
Salaries                  $   3,530,330   $   3,676,504   $   3,354,689
Profit sharing and other
 personnel expenses             896,401       1,247,944         875,460
Occupancy expense of bank
 premises                       482,441         514,595         475,452
Furniture and equipment
 expense                      1,143,073         826,664         996,773
Stationery and supplies         192,885         199,901         254,881
Data processing                 233,800         295,852         310,141
Director fees                   187,925         182,760         174,260
Other real estate expenses      171,286          92,080          13,006
Other expenses                1,991,330       2,048,478       1,847,335
Total Other Operating
 Expenses                 $   8,829,471   $   9,084,778   $   8,301,997
Income before income taxes$   2,612,356   $   2,417,567   $   3,867,798
Applicable income taxes         823,633         733,859       1,221,738
Net Income                $   1,788,723   $   1,683,708   $   2,646,060
Other comprehensive income
 before tax
Unrealized gain on
 securities               $     567,603   $     291,307   $     151,160
Other comprehensive income
 before tax               $     567,603   $     291,307   $     151,160
Income tax expenses related
 to items of other
 comprehensive income           213,645         107,708          57,048
Other comprehensive income,
 net of tax               $     353,958   $     183,599   $      94,112
Comprehensive Income      $   2,142,681   $   1,867,307   $   2,740,172
Per share data based on
 weighted outstanding shares:
   Weighted average
   outstanding                  399,500         399,500         399,500
Net Income                $        4.48   $        4.21   $        6.62
The  accompanying  notes  are  an integral  part  of  these  financial
statements.
                                  F6
                              SOUTH BANKING COMPANY
                                         ALMA, GEORGIA
                        CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                                               Accumulated
                                               Other        Total
					                 Compre-      Stock-
		     Common		       Undivided hensive      holders'
                 Stock    Surplus    Profits   Income       Equity
Balance,
 December 31,1999 $399,500 $3,070,831 $12,520,614 $(180,929)$15,810,016
 Net income              -          -   2,646,060         -   2,646,060
 Cash dividends          -          - (   279,628)        - (   279,628)
 Unrealized gain
  (loss) on securities
  available for sale     -          -           -    94,112      94,112
 Redemption of shares    -          -           -         -           -
Balance,
 December 31,2000 $399,500 $3,070,831 $14,887,046  $(86,817)$18,270,560
 Net income              -          -   1,683,708         -   1,683,708
 Cash dividends          -          - (   279,628)        - (   279,628)
 Unrealized gain
  (loss) on securities
  available for sale     -          -           -   183,599     183,599
 Redemption of shares    -          -           -         -           -

Balance,
 December 31,2001 $399,500 $3,070,831 $16,291,126  $ 96,782 $19,858,239
 Net income              -          -   1,788,723         -   1,788,723
 Cash dividends          -          - (   279,627)        - (   279,627)
 Unrealized gain
  (loss) on securities
  available for sale     -          -           -   353,958     353,958
 Redemption of shares    -          -           -         -           -
 Balance,
 December 31,2002 $399,500 $3,070,831 $17,800,222  $450,740  $21,721,293
   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,
                            2002           2001            2000
Cash Flows From Operating
 Activities:
 Net income                 $ 1,788,723    $ 1,683,708     $ 2,646,060
 Add expenses not
  requiring cash:
  Provision for depreciation
     and amortization         1,126,529      1,080,954         930,972
  Provision for loan losses   1,004,000        893,000         424,000
  Provision for loss on ORE      75,518         52,000           3,408
  Bond portfolio losses
  (gains)                   (     6,699)         3,685               -
 (Gain) loss on sale of
   premises & equipment          44,395     (   60,070)    (     2,019)
 (Gain) loss on sale of
   other real estate owned       48,099         20,625          23,040
 Increase (decrease) in
    taxes payable           (    33,749)       136,792     (   236,230)
 Increase (decrease) in
   interest  payable        (   429,046)    (  403,513)        568,654
 Increase (decrease) in
   other  liabilities       (   151,858)    (  119,749)        324,957
 (Increase) decrease in
    interest receivable         384,228        341,390     (   460,066)
 (Increase) decrease in
   prepaid  expenses            145,737     (  175,310)    (    80,167)
 (Increase) decrease in
     other   assets             179,195        260,171     (   284,686)
 Recognition of unearned
    loan   income           (    52,042)        60,094               -
 Net Cash Provided By
  Operating Activities    $   4,123,030   $   3,773,777   $  3,857,923
Cash Flows From Investing
 Activities:
 Proceeds from maturities
  of securities held to
  maturity                $     100,000   $           -   $   600,000
 Purchase of securities
  held to maturity                    -               -             -
 Proceeds from maturity of
  securities available for
    sale                     18,714,220      25,668,030     2,101,866
  Net loans to customers      1,087,543   (  11,476,813)  (13,197,595)
 Proceeds from sale of
  securities available for sale       -         295,094              -
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,
                          2002            2001            2000
Cash Flows From Investing
 Activities: (con't)
 Purchase of securities
  available for sale      $( 19,851,099)  $( 22,139,058)  $( 4,339,254)
 Purchase of premises and
   equipment               (    833,062)   (  2,044,019)   ( 1,645,225)
 Proceeds from sale of
    premises and equipment       16,020         639,520         29,970
 Proceeds from sale of
    other real estate owned   1,491,512         659,090        885,084
 Purchase of Bank stock               -               -              -
    Purchase of FHLB stock (     12,000)              -              -
    Purchase of Bank Branches         -               -    ( 4,193,634)
Net Cash Provided By
 Investing Activities     $     713,134   $(  8,398,156)  $(19,758,788)
Cash Flows From Financing
 Activities:
 Net increase (decrease) in
  demand deposits, NOW and
  money markets           $   3,742,389   $  11,061,093   $  1,686,060
 Net increase in savings
   and  time  deposits           23,014    (  7,739,705)    19,819,341
   Proceeds from  borrowing   1,500,000       1,523,810      4,756,750
  Payments on borrowing    (    545,994)   (  1,705,722)   (   256,463)
  Dividends  paid          (    279,627)   (    279,628)   (   279,628)
 Payments to retire stock             -               -              -
 Increase in federal funds
   purchased                          -               -    ( 1,140,000)
Net Cash Provided By
 Financing Activities     $   4,439,782   $   2,859,648   $ 24,586,060
Net increase (decrease)in
 Cash and Cash Equivalents$   9,275,946   $(  1,764,731)  $  8,685,195
Cash and Cash Equivalents
  at  Beginning  of  Year    22,665,462      24,430,193     15,744,998
Cash and Cash Equivalents
 at End of Year           $  31,941,408   $  22,665,462   $ 24,430,193

The accompanying notes are an integral part of these financial
statements.
                                    F9
                           SOUTH BANKING COMPANY
                               ALMA, GEORGIA
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             DECEMBER 31, 2002

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, 2002
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 for  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, 2002
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 $438,100 and
        $426,100  at  December  31,  2002   and   2001, 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, 2002


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 income 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, 2002

Note 1.  Significant Accounting Policies (Con't)

         Loan Fees and Costs (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, 2002
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 of 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 and Core Deposits) recorded by
         the Company in  the acquisition of Pineland State Bank and
         subsequent branches  are being amortized on a straight line
         basis over eight to ten years.

         (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 CONSOLIDATED FINANCIAL STATEMENTS
                             DECEMBER 31,2002


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, 2002, 2001 and 2000 for interest was $5,759,264,
         $9,738,167, and $8,117,741, respectively. Total income tax
         payments during 2002, 2001 and 2000 were $790,000, $844,223,
         and $1,552,939, respectively.

         (o)  Recent Pronouncements and Accounting Changes

               The Financial Accounting Standards Board (FASB) issued
         Statement of Financial Standards (SFAS) No. 141,  Business
         Combinations, and SFAS No.142, Goodwill and Other  Intangible
         Assets, on July 20, 2001.

              SFAS No. 141 provides that all business combinations shall
         be accounted for using the purchase method of accounting;
         the use of the pooling-of-interests method is now prohibited.
         The provisions of SFAS No. 141 apply to all business
         combinations initiated after June 30, 2001 or to all business
         combinations accounted for by the purchase method that are
         completed after June 30, 2001. The Company  has  not been
         involved in any recent business combination discussions.

                                    F16
                           SOUTH BANKING COMPANY
                               ALMA, GEORGIA
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             DECEMBER 31,2002


Note 1.  Significant Accounting Policies  (Con't)

        (o)  Recent Pronouncements and Accounting Changes (Con't)

             SFAS No. 142 provides that goodwill shall not be amortized
        but should be tested for impairment on an annual basis, using
        criteria prescribed  in the statement.  If the carrying amount
        of goodwill exceeds  its  implied  fair value, as recalculated,
        an impairment loss equal to the  excess  shall  be  recognized.
        Recognized intangible  assets  other than goodwill should  be
        amortized over their useful lives and reviewed for impairment
        in accordance with SFAS No.121, Accounting for the Impairment
        of Long-Lived Assets and for Long-Lived Assets to Be Disposed
        Of (superseded  by SFAS No. 144, see discussion which follows).
        SFAS  No.  142  will  be effective for fiscal years beginning
        after December 15, 2001.

             The  Company's  intangible assets at  December  31,  2002
        are classified as intangible assets other than  goodwill.
        Approximately  $1.393 million of the intangibles  recorded  on
        the balance  sheet  at  December  31,  2002  represents  the
        remaining unamortized  intangible related to the Company's 2000
        acquisition of three branch offices from another bank.  The
        balance of $52 thousand is the remaining intangibles from the
        original purchase of the  bank  in 1996.  The intangible are
        being amortized over eight to ten years in accordance with SFAS
        No. 72, Accounting  for Certain  Acquisitions of Banking or
        Thrift Institutions, which  was not  superseded  by SFAS No.
        142. During December 2001, the FASB announced it will undertake
        a limited-scope project to  reconsider part of the guidance in
        SFAS No. 72.

             SFAS  No.  144, Accounting for the Impairment or  Disposal
        of Long-Lived Assets and for Long-Lived Assets to Be Disposed
        Of, was issued  by the FASB on October 3, 2001 and is effective
        for fiscal years  beginning  after  December  15,  2001. This
        statement effectively  supersedes  SFAS  No. 121  and Accounting
        Principles Board  (APB)  Opinion No. 30 and requires that
        long-lived  assets, including discontinued operations, that are
        to be disposed of by sale be  measured at the lower of carrying
        amount or fair value less cost to sell. The  statement  also
        resolves certain implementation  issues regarding SFAS No. 121.
        This statement is not expected to have a material impact on the
        Company's statements of financial condition or results of
        operations.

                                    F17
                           SOUTH BANKING COMPANY
                               ALMA, GEORGIA
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             DECEMBER 31,2002


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, 2002:
 U.S. Government
  and agency
  securities      $17,042,611   $   190,160   $         -   $17,232,771
 State and municipal
  securities          848,460        37,063             -       885,523
 Mortgage backed
  securities           20,453           190             -        20,643
 Equity securities    259,253       500,000         6,153       753,100

   Totals         $18,170,777   $   727,413   $     6,153   $18,892,037

December 31, 2001:
 U.S. Government
  and agency
  securities      $15,583,819   $   165,042   $    57,519   $15,691,342
 State and municipal
  securities          948,774        34,883             -       983,657
 Mortgage backed
  securities          227,844         8,207             -       236,051
 Equity securities    259,253         3,047             -       262,300

   Totals         $17,019,690   $   211,179   $    57,519   $17,173,350

Securities to be
 Held to Maturity -
December 31, 2002:
 U.S. Government
  and agency
  securities      $         -   $         -   $         -   $         -
 State and municipal
  securities           47,746         4,699             -        52,445
 Mortgage backed
  securities                -             -             -             -
  Totals          $    47,746   $     4,699   $         -   $    52,445
                                    F18
                           SOUTH BANKING COMPANY
                               ALMA, GEORGIA
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             DECEMBER 31, 2002

Note 2. Investment Securities (Con't)
                                Gross              Gross
                  Amortized     Unrealized    Unrealized          Fair
                  Cost          Gains             Losses         Value
December 31, 2001
 U.S. Government
  and agency
  securities      $         -   $         -    $       -    $       -
 State and municipal
  securities          147,536         5,047            -      152,583
 Mortgage backed
  securities                -             -            -            -
  Totals          $   147,536   $     5,047    $       -    $ 152,583

              Gross realized gains and loses on sales of available-for-
         sale securities were $6,699 and $-0- in 2002, respectively and
         $-0- and $(3,685), respectively for 2001 and $-0- and $-0-,
         respectively in 2000. During the year ended December 31, 2001,
         investment securities available for sale, with a fair value at
         the date of sale of  $295,094,  were sold.  In the years 2002
         and  2000, no securities were sold.  Securities called in 2002
         resulted in gain of $6,699.

               Assets, principally securities carried at approximately
         $13,265,987  at December 31, 2002 and $11,615,367 at December
         31, 2001,  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, 2002 were as follows:

                  Securities                   Securities
                  To Be Held                   Available
                  To Maturity                  for Sale
                  Amortized                    Amortized
                  Cost          Fair Value     Cost         Fair Value
     Due in one year
       or less    $       -    $         -    $   852,634  $   864,704
     Due from one year
       to five years      -              -     15,839,960   16,011,428
     Due from five
       years to ten years -              -      1,000,000    1,030,502
     Due after ten
        years        47,746         52,445        218,930      232,303
                  $  47,746    $    52,445    $17,911,524  $18,138,937
                                    F19
                           SOUTH BANKING COMPANY
                               ALMA, GEORGIA
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             DECEMBER 31, 2002


Note 2. Investment Securities (Con't)

                  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:

                                             2002         2001
                                               (In Thousands)
         Commercial, financial and
           agricultural                      $  43,939    $  49,558
         Real estate - mortgage                 90,492       85,876
         Real estate - construction              8,809        9,015
         Installment and consumer               26,565       27,929
            Total  Loans                     $ 169,805    $ 172,378
         Less:  Unearned discount            (     237)   (     289)
         Reserve  for  loan losses           (   2,893)   (   2,756)
         Loans, net                          $ 166,675    $ 169,333

              Non-accrual loans (principally collateralized by real
         estate) amounted to  approximately $748,000, $1,002,000 and
         $876,000 at December 31, 2002, 2001, and 2000, respectively.
         Impaired loans were $-0- and $-0- at December 31, 2002 and
         2001.

               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 $546,892 and $805,074 at December 31,
         2002 and 2001. During 2002, $232,658 of new loans were made,
         and repayments totaled $490,840.

                                    F20
                           SOUTH BANKING COMPANY
                               ALMA, GEORGIA
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             DECEMBER 31, 2002


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,
                            2002           2001           2000

         Balance at beginning
          of period         $  2,756,780   $  2,728,219   $ 2,168,877
         Additions:  Provision
          charged to operating
           expenses         $  1,004,000   $    893,000   $   424,000
         Balance from bank
          acquisition                  -              -       588,306
                            $  3,760,780   $    893,000   $ 1,012,306

         Deductions: Loans
           charged  off     $  1,006,028   $  1,002,886   $   664,298
         Less: recoveries        138,459        138,447       211,334
                            $    867,569   $    864,439   $   452,964

         Balance at end of
          period            $  2,893,211   $  2,756,780   $ 2,728,219

               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 $618,267 and $1,436,843
	   were transferred to foreclosed real estate in 2002 and  2001,
         respectively.

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


                                    F21
                           SOUTH BANKING COMPANY
                               ALMA, GEORGIA
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             DECEMBER 31, 2002


Note 5.  Deposits

              The aggregate amount of short-term jumbo CDs, each with a
         minimum denomination of $100,000, was approximately
         $35,871,828 in 2002 and $31,805,741 in 2001.

              At December 31, 2002, the scheduled maturities of CDs are
         as follows:
                                         (In Thousands)
                    2003                 $      109,907
                    2004 and 2005                10,790
                    2006 and thereafter             698

                                         $      121,395

Note 6.  Premises and Equipment

         A summary of the account:
                                         Year Ended     Year Ended
                                         December 31,   December 31,
                                         2002           2001

         Land                            $  684,387     $   640,582
         Buildings                        5,512,798       5,971,572
         Furniture and equipment          5,643,224       5,697,359
                                        $11,840,409     $12,309,513
         Less: Accumulated depreciation   5,250,408       5,593,700
                                        $ 6,590,001     $ 6,715,813

		Depreciation expense was $898,459 in 2002, $860,117 in 2001
         and $803,318 in 2000.

Note 7. Borrowings

         Data relating to borrowing is as follows:
                                             Year Ended     Year ended
                                             December 31,   December 31,
        Parent Company -                     2002           2001

        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.    $ 4,400,000    $ 4,725,000
                                    F22
                           SOUTH BANKING COMPANY
                               ALMA, GEORGIA
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             DECEMBER 31, 2002

Note 7. Borrowings (Con't)

                                             Year Ended     Year Ended
                                             December 31,   December 31,
                                             2002           2001

     Subsidiary - Bankers Data Services, Inc.

        Note payable due January 27, 2003
         monthly principal amount of
         $10,833.33 plus interest. Interest
         accrues at prime minus 1%.
         Computer equipment is pledged as
         collateral for loan.                   611,466         824,419

        Note payable in 36 monthly payments
         of $434.02.  Interest accrues at
         1.9% rate and is secured by vehicle.         -             433

        Note payable in 24 monthly payments
         of $664.13.  Interest accrues at
         5.9% rate and is secured by vehicle.         -           6,465

        Note payable in 24 monthly payments
         of $791.66.  Interest accrues at 0%
         and is secured by auto.                  7,917          17,416

        Subsidiary - Alma Exchange Bank

        Note payable in 36 monthly payments
         of $696.98.  Interest accrues at
         3.9% rate and is secured by vehicle.        -            7,517

        Note payable in 3 annual payments
         of $7,937.  Interest accrues at 0%
         and is secured by auto.                15,874           23,811
                Following are maturities of long term debt for each of
        the next five years.
                    2003                     $    52,853
                    2004                         562,937
                    2005                         605,000
                    2006                         655,000
                    2007                         666,466

                                    F23
                           SOUTH BANKING COMPANY
                               ALMA, GEORGIA
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             DECEMBER 31, 2002

Note 8.  Income Taxes

             Income  tax expense (benefit) was $823,633  for  2002, (an
        effective rate of 31.53%), $733,859 for 2001 (an effective rate
        of 30.4%) and $1,221,738 for 2000 (an effective rate of 31.6%).
        The actual expense for 2002, 2001 and 2000 differs from the
        "expected" tax expense  for  those years (computed by  applying
        the federal corporate rate of 34%) as follows:

                                2002                2001          2000
         Computed "expected"
             tax expenses       34.0%              34.0%         34.0%
         Alternative minimum tax   -                  -             -
         Effect of State
           Income Tax            1.2%           (    .1%)         1.1%
         Tax exempt interest
          on securities and
           loans              (  3.8%)          (   4.6%)      (  3.6%)
         Other,net                .1%               1.1%           .1%
                                31.5%              30.4%         31.6%

             The  current and deferred amounts of these tax provisions
        were as follows:
                                2002            2001        2000

         Current  -  Federal   $ 716,252      $  725,56   $ 1,178,493
                  -  State             -              -        83,299
         Deferred -  Federal      89,838          7,123   (    24,534)
                  -  State        17,543          1,170   (    15,520)
                               $ 823,633      $ 733,859   $ 1,221,738
             The  tax effects of each type of income and expense item
        that gave rise to deferred taxes are:

                                           December 31,   December 31,
                                           2002           2001
        Net unrealized appreciation on
          securities available for sale    $(  272,843)   $(   55,726)
        Depreciation                        (  322,901)    (  219,899)
        Deferred loan fees                      83,448        101,281
        Allowance for credit losses            786,372        788,595
        Other                                   55,833         32,728
        Purchase accounting treatment       (   65,820)    (   65,820)
        Net deferred tax asset (liability) $   264,089    $   581,159

                                    F24
                           SOUTH BANKING COMPANY
                               ALMA, GEORGIA
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             DECEMBER 31, 2002
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 2002, 2001
         and  2000. The expense to the Company for 2002, 2001 and 2000
         was $128,120, $140,000, and $134,297, 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, 2001 for each of the next 5 years and in the
         aggregate is:
                    Year Ended
                    2003                                    $  4,000
                    2004                                       4,000
                    2005                                       4,000
                    2006                                       4,000
                    2007                                       4,000
                    Subsequent to 2008                       188,000
                    Total minimum future rental payments    $208,000
               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, 2002 and 2001, the Company had $622,179
         and $911,779 in outstanding standby letters of credit.

         Loan  Commitments.  As of December 31, 2002 and 2001, the
         Company had  commitments outstanding to extend credit totaling
         $14,493,616 and $15,710,009, 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.
                                    F25
                           SOUTH BANKING COMPANY
                               ALMA, GEORGIA
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             DECEMBER 31, 2002
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.
                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  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 2002, 2001 or
         2000.
                                    F26
                           SOUTH BANKING COMPANY
                               ALMA, GEORGIA
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             DECEMBER 31, 2002

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.

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, 2002, 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, 2002 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,
         2002, $920,596 is carried in other assets related to this
         arrangement.
                                    F27
                           SOUTH BANKING COMPANY
                               ALMA, GEORGIA
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             DECEMBER 31, 2002
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, 2002 and 2001.  Items
         which are not financial instruments are not included.
                                                       2002
                                            Carrying       Estimated
        Cash and due from financial         Amount         Fair Value
          institutions                      $  9,436,272   $ 9,436,272
        Interest earning balances with
          financial institutions               3,905,136     3,905,136
        Federal funds sold                    18,600,000    18,600,000
        Securities available for sale         18,892,037    18,892,037
        Securities held to maturity               47,746        52,445
        Federal Home Loan Bank stock             438,100       438,100
        Georgia Bankers Bank - stock             547,283     1,312,830
        Loans - net of allowances            166,675,295   169,209,000
        Demand and savings deposits           78,370,615    78,370,615
        Time deposits                        121,395,391   121,844,000
        Federal funds purchased                        -             -
                                                       2001
        Cash and due from financial
          institutions                        11,140,462   $11,140,462
        Interest earning balances with
           financial  institutions             1,273,000     1,273,000
         Federal  funds sold                  10,252,000    10,252,000
         Securities  available for sale       17,173,350    17,173,350
         Securities  held to maturity            147,536       152,583
         Federal  Home Loan Bank stock           426,100       426,100
         Georgia  Bankers Bank - stock           547,283       770,240
         Loans  - net of allowances          169,333,063   161,938,092
         Demand  and  savings deposits        73,301,431    73,301,431
         Time  deposits                      122,699,172   123,606,169
         Federal funds purchased                       -             -

             For purposes of the above disclosures of estimated fair
        value, the following assumptions were used as of December  31,
        2002 and 2001. 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

                                    F28
                           SOUTH BANKING COMPANY
                               ALMA, GEORGIA
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             DECEMBER 31, 2002

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

        Company  would  charge the borrowers for similar  such  loans
        with similar maturities made at December 31, 2002 and 2001,
        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, 2002 and 2001 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, 2002  and
        2001, 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, 2002 and 2001.

              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
        items at December 31, 2002 and 2001, 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, 2002 and 2001 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
                                    F29
                           SOUTH BANKING COMPANY
                               ALMA, GEORGIA
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             DECEMBER 31, 2002

Note 17. Regulatory Matters (Con't)

        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, 2002, that  the
        Company and its subsidiaries meet all capital adequacy
        requirements to which it is subject.

             As of December 31, 2002, 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, 2002:
Total Capital
 (to Risk
 Weighted Assets)
  Consolidated  $ 22,137   12.0% > $ 14,655 > 8.0%   > $  18,320 > 10.0%
 Subsidiary -
   Alma            7,993   12.8% >    4,977 > 8.0%   >     6,221 > 10.0%
 Subsidiary -
   Baxley          7,141   15.2% >    3,750 > 8.0%   >     4,687 > 10.0%
 Subsidiary -
   Kingsland       3,343   13.4% >    1,997 > 8.0%   >     2,496 > 10.0%
 Subsidiary -
   Metter          5,622   11.7% >    3,840 > 8.0%   >     4,800 > 10.0%
                                    F30
                           SOUTH BANKING COMPANY
                               ALMA, GEORGIA
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             DECEMBER 31, 2002

Note 17. Regulatory Matters (Con't)

                                                       To Be Well
                                                       Capitalized Under
                                   For Capital         Prompt Corrective
               Actual              Adequacy Purposes   Action Provisions
               Amount Ratio        Amount   Ratio      Amount  Ratio
As of December 31, 2002:

Tier I Capital
 (to Risk Weighted
  Assets)
 Consolidated  $ 19,825 10.8%  >  $ 7,328  >  4.0%   >  $ 7,328 >  6.0%
 Subsidiary -
   Alma           7,207 11.6%  >    2,488  >  4.0%   >    3,732 >  6.0%
 Subsidiary -
   Baxley         6,540 13.9%  >    1,875  >  4.0%   >    2,812 >  6.0%
 Subsidiary -
  Kingsland       3,030 12.1%  >      998  >  4.0%   >    1,498 >  6.0%
 Subsidiary -
   Metter         5,019 10.5%  >    1,920  >  4.0%   >    2,880 >  6.0%


As of December 31, 2002:

Tier I
 Capital (to
  Average Assets)
 Consolidated   $19,825  8.7%  >  $ 9,123  >  4.0%   >  $11,404 >  5.0%
 Subsidiary -
   Alma           7,207  9.2%  >    3,132  >  4.0%   >    3,915 >  5.0%
 Subsidiary -
   Baxley         6,540 11.9%  >    2,197  >  4.0%   >    2,747 >  5.0%
 Subsidiary -
  Kingsland       3,030  9.1%  >    1,331  >  4.0%   >    1,663 >  5.0%
 Subsidiary -
   Metter         5,019  8.2%  >    2,440  >  4.0%   >    3,050 >  5.0%

                                    F31
                           SOUTH BANKING COMPANY
                               ALMA, GEORGIA
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             DECEMBER 31, 2002

Note 17. Regulatory Matters (Con't)

To Be Well
                                                       Capitalized Under
                                   For Capital         Prompt Corrective
               Actual              Adequacy Purposes   Action Provisions
               Amount Ratio        Amount Ratio        Amount    Ratio
As of December 31, 2001:

Total Capital
 (to Risk Weighted
 Assets)
  Consolidated  $ 20,435 10.9% >   $ 15,041 > 8.0%   > $  18,801 > 10.0%
 Subsidiary -
   Alma            7,775 11.5% >      5,384 > 8.0%   >     6,730 > 10.0%
 Subsidiary -
   Baxley          6,737 15.9% >      3,381 > 8.0%   >     4,227 > 10.0%
 Subsidiary -
  Kingsland        3,192 12.4% >      2,065 > 8.0%   >     2,581 > 10.0%
 Subsidiary -
  Metter           5,410 10.4% >      4,159 > 8.0%   >     5,199 > 10.0%

As of December 31, 2001:

Tier I Capital
 (to Risk
  Weighted
  Assets)
Consolidated       18,080   9.6%    > 7,520   >  4.0%  >  11,280  > 6.0%
 Subsidiary -
  Alma              6,924  10.3%    > 2,692   >  4.0%  >   4,038  > 6.0%
 Subsidiary -
   Baxley           6,207  14.7%    > 1,691   >  4.0%  >   2,536  > 6.0%
 Subsidiary -
  Kingsland         2,868  11.1%    > 1,032   >  4.0%  >   1,549  > 6.0%
 Subsidiary -
  Metter            4,769   9.2%    > 2,080   >  4.0%  >   3,120  > 6.0%

                                    F32
                           SOUTH BANKING COMPANY
                               ALMA, GEORGIA
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             DECEMBER 31, 2002

Note 17. Regulatory Matters (Con't)

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

As of December 31, 2001:

Tier I
 Capital (to
  Average Assets)
Consolidated  $ 18,080    8.1%   > $  8,924   4.0%   >  $11,155  > 5.0%
Subsidiary -
  Alma            6,924  8.9%    >    3,104  4.0%    >    3,881 >  5.0%
 Subsidiary -
  Baxley          6,207 12.1%    >    2,052  4.0%    >    2,565 >  5.0%
Subsidiary -
  Kingsland       2,868  9.1%    >    1,266  4.0%    >    1,583 >  5.0%
 Subsidiary -
  Metter          4,769  7.8%    >    2,435  4.0%    >    3,043 >  5.0%

                                    F33
                      SOUTH BANKING COMPANY
                   (PARENT CORPORATION ONLY)

                         ALMA, GEORGIA

                      FINANCIAL STATEMENTS

                       DECEMBER 31, 2002

                               F34
               REPORT OF INDEPENDENT ACCOUNTANTS

Board of Directors
South Banking Company
Alma, Georgia 31510

      Under  date  of  February  7,  2003,  we  reported  on  the
consolidated  balance  sheets of South  Banking  Company,  as  of
December 31, 2002 and 2001, and the related statements of income,
cash  flows and stockholders' equity for the three years  in  the
period ended December 31, 2002.

      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, 2002 and 2001 and the related statements of  income,
cash  flows and stockholders' equity for each of the three  years
in   the   period  ended  December  31,  2002.   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 auditing standards
generally  accepted  in  the United  States  of  America.   Those
standards  require that we plan and perform the audit  to  obtain
reasonable  assurance  about whether the  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,   2002   and  2001,  and  the  results  of  its   operations,
stockholders' equity and its cash flows for the three years  then
ended in conformity with accounting principles generally accepted
in the United States of America.

                                    Respectfully submitted,

                                    DALTON & BENNETT, CPA'S

February 7, 2003
                               F35
                         SOUTH BANKING COMPANY
                       (PARENT CORPORATION ONLY)
                              ALMA, GEORGIA
                             BALANCE SHEETS

                                  December 31,    December 31,
                                  2002            2001
                                 ASSETS
Cash and due from banks
 Interest bearing                 $1,337,688      $ 1,243,497
 Non-interest bearing                 43,077           36,862
Investment in bank's subsidiaries 23,386,303       22,543,800
Investment in nonbank subsidiaries   648,074          463,535
Investment-Nexity Financial-available
    for sale                         750,000          250,000
Other assets                          63,837           16,423
Prepaid income taxes                 362,355          351,370
Due from subsidiaries                      -                -
Total Assets                     $26,591,334      $24,905,487


                  LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable                 $       186      $       186
Other liabilities                    195,754            3,018
Accrued income taxes                       -                -
Notes payable                      4,400,000        4,725,000
Due to subsidiaries                  274,101          319,044
Total Liabilities                $ 4,870,041      $ 5,047,248

Stockholders' Equity
Common stock of $1 par value;
 authorized 1,000,000 shares;
 issued and outstanding, 2002 and 2001
 399,500 and 399,500, respectively $  399,500    $   399,500
Surplus                             3,070,831      3,070,831
Undivided    profits               17,800,222     16,291,126
Accumulated other
 comprehensive income                 450,740         96,782
Total Stockholders' Equity        $21,721,293    $19,858,239

Total Liabilities and
 Stockholders'Equity              $26,591,334    $24,905,487
The accompanying note is an integral part of these financial
statements.
                                   F36
                          SOUTH BANKING COMPANY
                        (PARENT CORPORATION ONLY)
                              ALMA, GEORGIA
                           STATEMENT OF INCOME

                              Year Ended    Year Ended    Year Ended
                              December 31,  December 31,  December 31,
                              2002          2001          2000
Income
Dividends from bank
 subsidiaries                 $   978,593   $  994,156    $   985,387
Miscellaneous income                    -            -            788
Interest income                    25,738       45,641         23,479
Management   fees                 112,800      108,000        102,000
Dividends - other                       -        2,673          5,345
Loss on sale of stock                   -    (   4,906)             -
Total Income                  $ 1,117,131   $1,145,564    $ 1,116,999

Expenses
Salaries                      $    82,158   $   80,543    $    83,169
Amortization                            -        1,498         13,526
Interest                          200,222      337,286        318,822
Professional fees                  36,236       25,791         75,045
Other                              91,840       67,837         75,621
Total Expenses                $   410,456   $  512,955    $   566,183
Income before income taxes
 and equity in undistributed
 income (loss) of subsidiaries$   706,675   $  632,609    $   550,816
Provision (credit) for
 income taxes                  (   97,665)   ( 136,526)    (  164,606)

Income before equity in
 undistributed income in
 subsidiaries                 $   804,340   $  769,135    $   715,422

Equity in undistributed
 income of bank subsidiaries  $   799,845   $  792,336    $ 1,904,756
Equity in undistributed
 income (loss) of nonbank
      subsidiaries                184,538      122,237         25,882
                              $   984,383   $  914,573    $ 1,930,638
Net Income                    $ 1,788,723   $1,683,708    $ 2,646,060
The accompanying note is an integral part of these financial
statements.
                                   F37
                         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,
                              2002            2001          2000

Other Comprehensive Income
 before tax
Unrealized gain on securities $     567,712   $  278,166    $   151,160
Other Comprehensive Income
 before tax                   $     567,712   $  278,166    $   151,160
Income tax expenses related
 to items of other
 comprehensive income               213,754       94,577         57,048
Other comprehensive income,
 net of tax                   $     353,958   $  183,589    $    94,112

Comprehensive income          $   2,142,681   $1,867,297    $ 2,740,172

Per share data based on
 weighted outstanding shares:

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

Net Income                    $        4.48   $     4.21    $      6.62

The accompanying note is an integral part of these financial statements.
                                   F38

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

                                                Accumulated
                                                Other        Total
                                                Compre-      Stock-
                    Common           Undivided  hensive      holders'
                    Stock   Surplus  Profits    Income       Equity
Balance,
 December 31, 1999$ 399,500 $3,070,831$12,520,614$( 180,929)$15,810,016
 Net income               -          -  2,646,060         -   2,646,060
 Cash dividends           -          - (  279,628)        -  (  279,628)
 Unrealized gain (loss)on
  securities available
  for sale                -          -          -    94,112      94,112
 Redemption of shares     -          -          -         -           -

Balance,
 December 31,2000 $ 399,500 $3,070,831$14,887,046$(  86,817)$18,270,560
 Net income               -          -  1,683,708         -   1,683,708
 Cash dividends           -          - (  279,628)        -  (  279,628)
 Unrealized gain (loss)on
  securities available
  for sale                -          -          -     183,599   183,599
Redemption of shares      -          -          -         -           -

Balance,
 December 31,2001 $ 399,500 $3,070,831$16,291,126$   96,782 $19,858,239
 Net income               -          -  1,788,723         -   1,788,723
 Cash dividends           -          - (  279,627)        -  (  279,627)
 Unrealized gain (loss) on
  securities available
  for sale                -          -          -   353,958     353,958
 Redemption of shares     -          -          -         -           -
Balance,
 December 31, 2002$ 399,500 $3,070,831$17,800,222  $450,740  $21,721,293
    The accompanying note is an integral part of these financial
 statements.
                                  F39
                          SOUTH BANKING COMPANY
                        (PARENT CORPORATION ONLY)
                              ALMA, GEORGIA
                         STATEMENT OF CASH FLOWS


                              Year Ended     Year Ended    Year Ended
                              December 31,   December 31,  December31,
                              2002           2001          2000
Cash Flows From Operating
 Activities:
 Net income                   $  1,788,723   $ 1,683,708   $ 2,646,060
 Add expenses not requiring
  cash:
 Depreciation and
  Amortization                      11,569        11,731        21,870
 Undistributed earnings of
    Subsidiaries               (   984,383)  (   914,573)  ( 1,930,638)
 Loss on sale of stock                   -         4,906             -
 Increase (decrease) in
  other liabilities                  4,035         2,230           788
 Increase (decrease) in
  accrued income taxes                   -             -   (    21,653)
 (Increase) decrease in
     other assets                      360         1,369           725
 (Increase) decrease in
   prepaid income taxes        (    10,985)  (   136,793)  (   214,577)
 (Increase) decrease in
   due from subsidiary-taxes             -             -       105,672
 Increase (decrease) in
    due to subsidiary          (    44,943)      189,573       129,471

Net Cash Provided by Operating
 Activities                   $    764,376   $   842,151   $   737,718

Cash Flows From Investing
 Activities:
Capital contribution to
 Subsidiary                   $          -   $(  200,000)  $(2,700,000)
Purchase of fixed assets       (    59,343)            -    (   27,532)
Sale of CB Financial                     -       295,094             -
Net Cash Used by Investing
 Activities                   $(    59,343)  $    95,094   $(2,727,532)

The accompanying note is an integral part of these financial statements.
                                   F40
                          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,
                              2002           2001          2000

Cash Flows From Financing
 Activities:
Payments on note payable
  Bank                        $(   325,000)  $(  475,000)  $(   60,000)
Proceeds from notes payable
  to banks                               -             -     2,900,000
Dividends paid                 (   279,627)   (  279,628)   (  279,628)
Redemption of common stock               -             -             -
Net Cash Provided (Used)
  by  Financing Activities    $(   604,627)  $(  754,628)  $ 2,560,372
Net increase (decrease) in
 cash and cash equivalents    $    100,406   $   182,617   $   570,558
Cash and Cash Equivalents at
   beginning   of   year         1,280,359     1,097,742       527,184
Cash and Cash Equivalents
 at end of year               $  1,380,765   $ 1,280,359   $ 1,097,742

The accompanying note is an integral part of these financial statements.
                                   F41
                          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.

                                   F42