<PAGE>

                         SECURITIES AND EXCHANGE COMMISSION
                               Washington, D.C. 20549


                                    FORM 10-QSB


/X/    Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities 
       Exchange Act of 1934 for the quarterly period ended June 30, 1998

/ /    Transition report under Section 13 or 15(d) of the Exchange Act for the
       transition period from ____________ to ____________

                         Commission file number:  000-23991


                                 CNB HOLDINGS, INC.
         (Exact name of small business issuer as specified in its charter)


              Georgia                                    58-2362335
    (State of Incorporation)               (I.R.S. Employer Identification No.)


                              7855 North Point Parkway
                                     Suite 200
                           Alpharetta, Georgia 30022-4849
                      (Address of principal executive offices)
                                          
                                          
                                  (770)  650-8262
                  (Issuer's telephone number, including area code)



Check whether the issuer (1) has filed all reports required to be filed by 
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 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       No /X/ 

State the number of shares outstanding of each of the issuer's classes of 
common equity, as of the latest practicable date: 

               Class                       Outstanding at July 27, 1998
     -----------------------------         ----------------------------
     Common Stock, $1.00 par value                     1,235,000
                                          
Transitional Small Business Disclosure Format:    Yes / /        No /X/  

<PAGE>

PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS.

                                 CNB HOLDINGS, INC.
                                          
                                   BALANCE SHEETS
<TABLE>
<CAPTION>
                                                            June 30, 1998      December 31, 1997
                                                            -------------      -----------------
                                                             (Unaudited) 
<S>                                                         <C>                <C>
ASSETS              
     Cash and due from banks                                 $    23,904           $ 60,698
     Federal Funds sold                                        9,800,000               --
     Investment securities:             
         Securities available-for-sale, 
               at market value                                      --                 --
     Other investments                                              --                 --
     Loans, net                                                     --                 --
     Premises and equipment, net                                 277,579             60,947
     Accrued interest receivable                                    --                 --
     Other assets                                                283,339             73,400
                                                             -----------           --------
          Total assets                                       $10,391,822           $195,045
                                                             -----------           --------
                                                             -----------           --------

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:        
     Deposits:           
          Noninterest-bearing demand                         $      --             $   --
          Interest-bearing demand and
               money market                                         --                 --
          Savings                                                   --                 --
          Time deposits of $100,000 or more                         --                 --
          Other time deposits                                       --                 --
                                                             -----------           --------
               Total deposits                                       --                 --
               
     Accrued interest payable                                       --                 --
     Other liabilities                                           329,887            103,324
                                                             -----------           --------
          Total liabilities                                      329,887            103,324
                                                             -----------           --------
Shareholders' Equity:              
     Common stock, $1.00 par value per share;
          10,000,000 shares authorized, 
          1,100,000 and none shares
          issued and outstanding, respectively                 1,100,000               --
Surplus                                                        9,144,210            120,000
Retained earnings (deficit)                                      (28,279)              --
Accumulated other comprehensive 
     income (loss)                                              (153,996)           (28,279)
                                                             -----------           --------
     Total shareholders' equity                               10,061,935             91,721
               
Commitments and contingent liabilities                              --                 --
                                                             -----------           --------
     Total liabilities and shareholders' equity              $10,391,822           $195,045
                                                             -----------           --------
                                                             -----------           --------
</TABLE>

                     Refer to notes to the financial statements. 

                                        2

<PAGE>
                                 CNB HOLDINGS, INC.
                                          
                                Statements of Income
                                     (Unaudited)
<TABLE>
<CAPTION>
                                                               For the             For the
                                                              six-month          three-month
                                                             period ended        period ended
                                                             June 30, 1998       June 30, 1998
                                                             -------------       -------------
<S>                                                         <C>                <C>
Interest income               
     Loans, including fees                                  $      --          $       --
     Investment securities:
          U.S. Treasury Securities                                 --                  --
          U.S. Government agencies and corporations                --                  --
          Other investments                                        --                  --
     Federal funds sold                                          37,483              37,483
                                                             ----------            --------
          Total interest income                                  37,483              37,483
                                                             ----------            --------

Interest expense              
     Interest bearing demand and money market                     --                   --
     Savings                                                      --                   --
     Time deposits of $100,000 or more                            --                   --
     Other time deposits                                          --                   --
     Other borrowings                                             --                   --
                                                             ----------            --------
          Total interest expense                                  --                   --
                                                             ----------            --------
          Net interest income                                    37,483              37,483
               
Provision for possible loan losses                                --                   --
          Net interest income after provision for
          possible loan losses                                   37,483              37,483
                                                             ----------            --------
               
Other income             
     Service charges on deposit accounts                          --                   --
     Investment securities gains, net                             --                   --
     Other income                                                 --                   --
                                                             ----------            --------
          Total other income                                      --                   --
                                                             ----------            --------

Other expense            
     Salaries and other compensation                            105,089              55,988
     Employee benefits                                           25,941              14,903
     Net occupancy and equipment expense                         21,492              20,969
     Professional and other outside services                      4,419                --
     Other expense                                               34,538              18,413
                                                             ----------            --------
          Total other expenses                                  191,479             110,273
                                                             ----------            --------
               
Net income (loss) before taxes                                 (153,996)            (72,790)
               
Income taxes                                                       --                  --
                                                             ----------            --------
               
Net income (loss)                                            $ (153,996)           $(72,790)
                                                             ----------            --------
                                                             ----------            --------

Basic income (loss) per share                                $     (.38)           $   (.18)
                                                             ----------            --------
                                                             ----------            --------
</TABLE>

                       Refer to notes to the financial statements. 

                                         3  

<PAGE>

                                 CNB HOLDINGS, INC.
                                          
                         Statement of Comprehensive Income
                                     (Unaudited)

<TABLE>
<CAPTION>
                                                               For the             For the
                                                              six-month          three-month
                                                             period ended        period ended
                                                             June 30, 1998       June 30, 1998
                                                             -------------       -------------
<S>                                                         <C>                <C>
Net loss                                                     $ (153,996)           $(72,790)
               
Other comprehensive income, before tax:           
     Unrealized holding gains (losses) arising
          during period                                            --                  --
               
          Income tax benefit (expense)                             --                  --
                                                             ----------            --------
Comprehensive loss                                           $ (153,996)           $(72,790)
                                                             ----------            --------
                                                             ----------            --------
</TABLE>

                    Refer to notes to the financial statements.


                                         4

<PAGE>

                                 CNB HOLDINGS, INC.
                                          
                               Statement of Cash Flow
                                     (Unaudited)

<TABLE>
<CAPTION>
                                                                                    For the six-month
                                                                                       period ended
                                                                                       June 30, 1998
                                                                                    -----------------
<S>                                                                                 <C>
Cash flows from operating activities:   
     Net loss                                                                        $   (153,996)

     Adjustments to reconcile net loss to net cash used by operating activities:
               Net (accretion) amortization of investment securities                         --
     Depreciation and amortization of premises and equipment                               10,957
          Provision for loan losses                                                          --
          Deferred income tax benefit                                                        --
          Amortization of organization costs                                                 --
          Increases in other assets                                                       (18,900)
          Increase in deferred organizational costs                                      (128,039)
          Increase in accrued interest payable                                               --
          Increase in other liabilities                                                   226,563
                                                                                     ------------
               Net cash used by operating activities                                      (63,415)
                                                                                     ------------
     
Cash flows from investing activities:   
     Purchases of investment securities available-for-sale                                   --
     Purchases of other investments                                                       (70,000)
     Maturities of investment securities available-for-sale                                  --
     Loans originated, net of principal repayments                                           --
     Purchases of premises and equipment                                                 (227,590)
                                                                                     ------------
          Net cash used by investing activities                                          (297,590)
                                                                                     ------------
     
Cash flows from financing activities:   
     Proceeds from loans by Organizers                                                    240,000
     Repayment of loans by Organizers                                                    (360,000)
     Sale of common stock                                                              10,244,210
     Increase in deposits                                                                    --
                                                                                     ------------
          Net cash provided from financing activities                                  10,124,210
                                                                                     ------------
     
Net increase in cash and cash equivalents                                               9,763,205
Cash and cash equivalents, beginning of period                                             60,698
Cash and cash equivalents, end of period                                             $  9,823,903
                                                                                     ------------
                                                                                     ------------
</TABLE>
                       Refer to notes to the financial statements.
                                           
                                          5
<PAGE>

                                  CNB HOLDINGS, INC.
                       For the Six Months Ended June 30, 1998
                                    (Unaudited)
                                          

NOTE 1 - BASIS OF PRESENTATION

     The accompanying unaudited financial statements have been prepared in 
accordance with generally accepted accounting principles for interim 
financial information and with the instructions for Form 10-QSB.  
Accordingly, they do not include all the information and footnotes required 
by generally accepted accounting principles for complete financial 
statements.  In the opinion of management, all adjustments (consisting of 
normal recurring accruals) considered necessary for a fair presentation have 
been included.  Operating results for the six-month period ended June 30, 
1998 are not necessarily indicative of the results that may be expected for 
the year ending December 31, 1998.  For further information, refer to the 
financial statements and footnotes included in the Company's Registration 
Statement on Form SB-2 (Registration No. 333-49137).

NOTE 2 - ORGANIZATION OF THE BUSINESS

     CNB Holdings, Inc., Alpharetta, Georgia (the "Company"), was 
incorporated under the laws of the State of Georgia on November 5, 1997, for 
the purpose of becoming a bank holding company for a proposed national bank, 
Chattahoochee National Bank (the "Bank").  On April 30, 1998, the Company 
completed an offering (the "Organizers' Offering") of its common stock, $1.00 
par value per share (the "Common Stock"), to its organizers.  Each share of 
Common Stock was sold for $10.00 per share, and 200,000 shares were sold.  
Proceeds from the Organizers' Offering amounted to $1,607,500, net of selling 
expenses and repayment of the organizers.  On June 12, 1998, the Company 
commenced an initial public offering of Common Stock and sold 900,000 shares 
of Common Stock at $10.00 per share.  The underwriter also exercised a 30-day 
over-allotment option in July 1998 to purchase an additional 135,000 shares. 
Proceeds from the initial public offering (excluding the exercise of the 
over-allotment option) amounted to $8,257,500, net of selling expenses.  
Proceeds from exercise of the over-allotment option amounted to $1,238,625, net
of expenses. The Company injected approximately $9.6 million into the Bank's 
capital accounts upon opening on July 27, 1998.

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     BASIS OF PRESENTATION AND RECLASSIFICATION.  Because principal banking 
operations commenced on July 27, 1998, the financial statements included in 
this Report include only the accounts of the Company.  The Company expects 
that future reports will present consolidated financial statements that 
include the accounts of the Company and the Bank, with all significant 
intercompany accounts and transactions eliminated in consolidation.

     BASIS OF ACCOUNTING.  The accounting and reporting policies of the 
Company conform to generally accepted accounting principles and to general 
practices in the banking industry.  The Company uses the accrual basis of 
accounting by recognizing revenues when earned and expenses when incurred, 
without regarding the time of receipt or payment of cash.

     ORGANIZATIONAL COSTS.  In accordance with the Financial Accounting 
Standards Board ("FASB") Statement No. 7, the Company and the Bank 
capitalized all direct organizational costs that were incurred in the 
expectation that they would generate future revenues or otherwise be of 
benefit after the Bank opened for business.  These capitalized costs are 
amortized over a sixty-month period using the straight line method.  As of 
June 30, 1998, total organizational costs, net of accumulated amortization, 
were $148,294.

     INVESTMENT SECURITIES.  The Company adopted Statement of Financial 
Accounting Standards No. 115, "Accounting for Certain Investment in Debt and 
Equity Securities" ("SFAS 115") on April 24, 1998.  SFAS 115 requires 
investments in equity and debt securities to be classified into three 
categories:

                                       6

<PAGE>

     1.   Held-to-maturity securities:  These are securities which the Company 
          has the ability and intent to hold until maturity.  These securities
          are stated at cost, adjusted for amortization of premiums and the 
          accretion of discounts.
     
     2.   Trading securities:  These are securities which are bought and held
          principally for the purpose of selling in the near future.  Trading
          securities are reported at fair market value, and related unrealized
          gains and losses are recognized in the income statement.
     
     3.   Available-for-sale securities:  These are securities which are not
          classified as either held-to-maturity or as trading securities.  These
          securities are reported at fair market value.  Unrealized gains and 
          losses are reported, net of tax, as separate components of 
          shareholders' equity. Unrealized gains and losses are excluded from 
          the income statement.
     
     Premium and discount on all investment securities are amortized 
(deducted) and accredited (added), respectively, to interest income on the 
effective yield method over the period to the maturity of the related 
securities.

     Gains or losses on disposition are computed by the specific 
identification method for all securities.
     
     PROPERTY AND EQUIPMENT.  Furniture and equipment are stated at cost, net 
of accumulated depreciation.  Depreciation is computed using the straight 
line method over the estimated useful lives of the related assets.  
Maintenance and repairs are charged to operations, while major improvements 
are capitalized. Upon retirement, sale or other disposition of property and 
equipment, the cost and accumulated depreciation are eliminated from the 
accounts, and gain or loss is included in income from operations.
     
     INCOME TAXES.  The financial statements have been prepared on the 
accrual basis. When income and expenses are recognized in different periods 
from financial reporting purposes and for purposes of computing income taxes 
currently payable, deferred taxes are provided on such temporary differences.
     
     Effective April 24, 1998, the Company adopted Statement of Financial 
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109").  
Under SFAS 109, deferred tax assets and liabilities are recognized for the 
expected future tax consequences of events that have been recognized in the 
financial statements or tax return.  Deferred tax assets and liabilities are 
measured using the enacted tax rates expected to apply to taxable income in 
the years in which those temporary differences are expected to be realized or 
settled.

     STATEMENT OF CASH FLOWS.  For purposes of reporting cash flows, cash and 
cash equivalents include cash on hand, amounts due from banks and federal 
funds sold. Generally, federal funds are purchased or sold for one day 
periods.
     
     NET INCOME (LOSS) PER SHARE.  Net income per share was calculated using 
406,557, as the weighted average number of shares outstanding for the period 
ended June 30, 1998.  For the six-month period ended June 30, 1998 net income 
(loss) per share was $(.38).
     
     ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND 
EXTINGUISHMENTS OF LIABILITIES.  SFAS 125 is effective for transfers and 
servicing of financial assets and extinguishments of liabilities occurring 
after December 31, 1996, and is to be applied prospectively.  Earlier or 
retroactive application is not permitted. However, in December 1996, the 
Financial Accounting Standards Board issued Statement of Financial Accounting 
Standards No. 127 ("SFAS 127"), "Deferral of the Effective Date of Certain 
Provisions of FASB Statement No. 125."  This statement defers the effective 
date of certain provisions for one year (December 31, 1997).  The deferred 
provisions relate to repurchase agreements, dollar-roll transactions, 
securities lending, and similar transactions.  The effective 


                                       7

<PAGE>

date for all other transfers and servicing of financial assets is unchanged.  
The adoption of SFAS 125 did not have a material impact on the Company's 
financial statements.
     
     EARNINGS PER SHARE.  The Financial Accounting Standards Board has issued 
Statement of Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings 
Per Share."  This statement is effective for financial statements issued for 
periods ending after December 15, 1997.  This statement supersedes Accounting 
Principles Board Opinion No. 15 ("APB 15"), "Earnings Per Share," and 
simplifies earnings per share computations by replacing primary earnings per 
share with basic earnings per share, which shows no effects from dilutive 
securities.  Entities with complex capital structures will have to show 
diluted earnings per share, which is similar to the fully diluted earnings 
per share computation under APB 15.  The adoption of SFAS 128 did not have a 
significant impact on the financial condition or results of operations of the 
Company.
     
     DISCLOSURE OF INFORMATION ABOUT CAPITAL STRUCTURE.  The Financial 
Accounting Standards Board has issued Statement of Financing Accounting 
Standards No. 129 ("SFAS 129"), "Disclosure of Information About Capital 
Structure."  This statement is effective for financial statements issued for 
periods ending after December 15, 1997. This statement consolidates existing 
disclosure requirements on capital structure. The adoption of SFAS 129 did 
not have a significant impact on the financial condition or results of 
operations of the Company.
     
     REPORTING COMPREHENSIVE INCOME.  The Financial Accounting Standards 
Board has issued Statement of Financial Accounting Standards No. 130 ("SFAS 
130"), "Reporting Comprehensive Income."  SFAS 130 is effective July 1, 1998. 
 Under SFAS 130, a company will begin showing changes in assets and 
liabilities in a new comprehensive income statement or alternative 
presentation as opposed to showing some of the items as transactions in 
shareholders' equity accounts.  Upon adoption, all comparative annual and 
interim financial statements will present a comprehensive income statement or 
alternative disclosure, for all years presented.  The adoption of SFAS 130 
did not have a significant impact on the financial condition or results of 
operations of the Company. 
     
     PENDING ACCOUNTING PRONOUNCEMENTS.  The Financial Accounting Standards 
Board has issued Statement of Financial Accounting Standard No. 131 ("SFAS 
131"), "Disclosures about Segments of an Enterprise and Relation 
Information."  SFAS 131 is effective July 1, 1998, and requires disclosure of 
certain financial information by segments of a company's business.  The 
adoption of SFAS 131 is not expected to have a significant impact on the 
financial condition or results of operations of the Company.
     
     The Financial Accounting Standards Board has issued Statement of 
Financial Accounting Standards No. 132 ("SFAS 132"), "Employers' Disclosures 
about Pensions and other Postretirement Benefits."  SFAS 132 is effective for 
fiscal years beginning after December 31, 1997.  The adoption of SFAS 132 is 
not expected to have a significant impact on the financial condition or 
results of operations of the Company.
     
NOTE 4 - OTHER COMPREHENSIVE INCOME

     Other comprehensive income (loss) is compiled of the following:

                                                            Unrealized
                                                          Gains (Losses)
                                                          on Securities
                                                          -------------
           Beginning balance - January 1, 1998            $    --
           Current - period change                             --
                                                          -------------
           Ending balance - June 30, 1998                 $    --
                                                          -------------
                                                          -------------
 
                                       8

<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS.

               CNB Holdings, Inc. (the "Company") was incorporated in Georgia 
on November 5, 1997 to become a bank holding company and to own and control 
all of the outstanding shares of a de novo bank, Chattahoochee National Bank, 
Alpharetta, Georgia (the "Bank").  In a private offering and a separate 
public offering conducted during 1998, the Company sold and issued an 
aggregate of 1,235,000 shares of common stock, par value $1.00 per share (the 
"Common Stock"), at $10.00 per share.  Proceeds from these stock offerings 
amounted to an aggregate of $11,103,625, net of selling expenses and 
repayment to organizers. The Company purchased 100% of the Bank's common 
stock by injecting approximately $9.6 million into the Bank's capital 
accounts immediately prior to commencement of banking operations on July 27, 
1997.

               Total consolidated assets increased by $10,196,776 from 
$195,045 at December 31, 1997 to $10,391,821 during the six-month period 
ended June 30, 1998.  The increase was generated through a $10,124,210 
increase in capital.

FINANCIAL CONDITION

               Management intends to monitor the financial condition of the 
Bank in order to protect depositors, increases retained earnings and protect 
current and future earnings.  Further discussion of significant items 
affecting the Bank's financial condition are discussed in detail below.

ASSET QUALITY

               A major key to long-term earnings growth is the maintenance of 
a high-quality loan portfolio.  The Bank's directive in this regard will be 
carried out through its policies and procedures for extending credit to the 
Bank's customers.  The goal and result of these policies and procedures is to 
provide a sound basis for a new credit extensions and an early recognition of 
problem assets to allow the most flexibility in their timely disposition.

               Because principal banking operations commenced on July 27, 
1998, management is not yet in a position to determine the composition of 
non-performing assets. Additions to the allowance for loan losses will be 
made periodically to maintain the allowance at an appropriate level based 
upon management's analysis of potential risk in the loan portfolio.  The 
amount of the loan loss provision will be determined by an evaluation for the 
level of loans outstanding, the level of non-performing loans, historical 
loan loss experience, delinquency trends, the amount of actual losses charged 
to the reserve in a given period, and assessment of present and anticipated 
economic conditions.

LIQUIDITY AND SOURCES OF CAPITAL

               Liquidity is the Company's ability to meet all deposit 
withdrawals immediately, while also providing for the credit needs of 
customers.  The June 30, 1998 financial statements evidence a satisfactory 
liquidity position as total cash and cash equivalents amounted to 
approximately $9.8 million, representing 96.1% of total assets.

               Management is committed to maintaining capital at a level 
sufficient to protect depositors, provide for reasonable growth, and fully 
comply with all regulatory requirements.  Management's strategy to achieve 
this goal is to retain sufficient earnings while providing a reasonable 
return on equity.

               This table below illustrates the Company's regulatory capital 
ratios at June 30, 1998:

<TABLE>
<CAPTION>
                                                                     Minimum
                                                                   regulatory
                                                 June 30, 1998     requirement
                                                 -------------     -----------
<S>                                              <C>               <C>
               Tier 1 Capita                         96.4%            4.0%
               Tier 2 Capita                          --              --
                  Total risk-based capital ratio     96.4%            8.0%
                                                     ----             ---
               Leverage ratio                        97.8%            3.0%
                                                     ----             ---
</TABLE>

                                       9

<PAGE>

    Note that with respect to the leverage ratio, the OCC expects a minimum 
of 5.0 percent to 6.0 percent ratio for banks that are not rated CAMEL 1. The 
Bank does not yet have a CAMEL rating.

RESULTS OF OPERATIONS

               Since principal banking operations only commenced on July 27, 
1998, a comparison of the June 30, 1998 results (when banking operations were 
in progress) to those of June 30, 1997 (when banking operations had not 
commenced) is not meaningful.  This discussion will therefore only comment on 
the June 30, 1998 results.

               Net loss for the six-month period ended June 30, 1998 amounted 
to $153,996, or $(.38) per share.  The following is a brief discussion of the 
more significant components of net income (loss):

               a.   Net interest income represents the difference between 
                    interest received on interest earning assets and interest
                    paid on interest bearing liabilities. The following 
                    presents, in a tabular form, the main components of 
                    interest earning assets and interest bearing liabilities.

<TABLE>
<CAPTION>

     Interest                                       Interest
  Earning Assets/                 Average           Income/              Yield/
Bearing Liabilities               Balance             Cost                Cost
-------------------               -------           ---------            ------
<S>                             <C>                 <C>                  <C>
Federal funds sold              $4,034,219           $37,483              5.28%
Securities                           --                 --                 --
Loans                                --                 --                 --
                                ----------           -------              ----
  Total                         $4,034,219           $37,483              5.28%
                                ----------           -------              ----
                                ----------           -------              ----
Deposit                         $    --              $  --                 --
                                ----------           -------              ----
                                ----------           -------              ----
Net interest income                                  $37,483              5.28%
                                                     -------              ----
                                                     -------              ----
Net yield on earning assets                                               5.28%
                                                                          ----
                                                                          ----
</TABLE>


               b.   Other income for the six-month period ended June 30, 1998 
                    amounted to $0.0. On an annualized basis, this represents 
                    0.0% of total assets.  The figure is relatively low 
                    because in order to attract new banking relationships, 
                    the Bank's fee structure and charges are low when 
                    compared to other banks. The above fees and charges may 
                    increase in the future.
               
               c.   Operating expenses for the six-month period ended June 
                    30, 1998 amounted to $191,479.  On an annualized basis, 
                    this represents 1.8% of total assets. In the future, this 
                    percentage will increase due to costs and expenses 
                    associated with the commencement of operations.

               At December 31, 1997 and June 30, 1998, the allowance for loan 
losses amounted to $0, as the Bank commenced operations after June 30, 1998.  
There can be no assurance that charge-offs in future periods will not exceed 
the allowance for loan losses that will be established in future periods.

               The Company is not aware of any current recommendation by the 
regulatory authorities which, if they were to be implemented, would have a 
material effect on the Company's liquidity, capital resources, or results of 
operations.

YEAR 2000 COMPLIANCE

               The Year 2000 issue refers generally to the data structure 
problem that will prevent certain systems from properly recognizing dates 
after the year 1999.  For example, computer programs and various types of 
electronic equipment that process date information by reference to two digits 
rather than four to define the applicable year may recognize a date using 
"00" as the year 1900 rather than the year 2000.  The Year 2000 problem could 
result in system failures or miscalculations causing disruptions of 
operations.  The Year 2000 problem may occur in 


                                      10

<PAGE>

computer software programs, computer hardware systems and any device that 
relies on a computer chip if that chip relies on date information. 

               In preparation for January 1, 2000, the Company has 
implemented a Company-wide program to prepare its computer systems and 
applications for the year 2000.  The Company's plans include necessary 
reviews of vendors, customers, third party processors and other external 
parties with whom the Company conducts business.  The Company is incurring 
internal staff costs as well as consulting and other expenses related to the 
execution of the implementation plan.  Presently, management has not yet 
completely determined the year 2000 implementation costs, but such costs are 
not expected to have a material financial impact on the Company's business, 
financial condition or results of operations because the Company and its 
computer systems are relatively new. The Company is aware that the Commission 
has recently issued an interpretive release, Release No. 33-7558 (the 
"Interpretation"), which supersedes Staff Legal Bulletin No. 5 for purposes 
of providing guidance to public companies with quarter ends after the 
effective date of the Interpretation (i.e., after August 4, 1998) as to 
disclosures concerning their year 2000 issues.  The Company is reviewing and 
evaluating the Interpretation for purposes of the Company's future filings.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

               Except for the historical information contained in this 
Report, the matters reflected or discussed in this Report which relate to the 
Company's beliefs, expectations, plans, future estimates and the like are 
forward-looking statements within the meaning of Section 27A of the 
Securities Act of 1933, as amended, and Section 21E of the Securities 
Exchange Act of 1934, as amended.  Such forward-looking statements are not 
guarantees of future performance and are subject to risks, uncertainties and 
other factors that may cause the actual results, performance or achievements 
of the Company to differ materially from historical results or from any 
results expressed or implied by such forward-looking statements.  Such 
factors include, without limitation, general economic conditions, 
governmental monetary and fiscal policies, deposit levels, loan demand, loan 
collateral values, securities portfolio values and interest rate risk 
management, the effects of competition in the banking business from other 
commercial banks, savings and loan associations, mortgage banking firms, 
consumer finance companies, credit unions, securities brokerage firms, 
insurance companies, money market mutual funds and other financial 
institutions operating in the Company's market area and elsewhere, including 
institutions operating through the Internet, changes in government 
regulations relating to the banking industry, including regulations relating 
to branching and acquisitions, failure of assumptions underlying the 
establishment of reserves for loan losses, including the value of collateral 
underlying delinquent loans, and other factors discussed in this report and 
the Company's Registration Statement on Form SB-2 (Registration No. 
333-49137).  Many of such factors are beyond the Company's ability to control 
or predict, and readers are cautioned not to put undue reliance on such 
forward-looking statements.  The Company disclaims any obligation to update 
or review any forward-looking statements contained in this Report or in any 
statement referencing this Report, whether as a result of new information, 
future events or otherwise.

                                      11

<PAGE>
 
                             PART II. OTHER INFORMATION

ITEM 3.  CHANGES IN SECURITIES AND USE OF PROCEEDS.
 
               On April 30, 1998, the Company issued to the organizers of the 
Company and their affiliates in a private placement exempt from registration 
under Section 4(2) of and Rule 506 promulgated under the Securities Act of 
1933, as amended, an aggregate of 200,000 shares of Common Stock for an 
aggregate purchase price of $2,000,000 (the "Organizers' Offering").  All of 
the Common Stock was acquired by the organizers for investment purposes and 
with no view toward the resale or distribution thereof.  The offers and sales 
were made without public solicitation, and the stock certificates bear 
restrictive legends.  No underwriter was involved in the transactions, and no 
commissions were paid.

               On June 8, 1998, the Company's Registration Statement on Form 
SB-2 (Registration No. 333-49137), relating to the registration of 1,035,000 
shares of Common Stock, was declared effective.  The underwriter for the 
offering was J.C. Bradford & Co. LLC. On June 12, 1998, 900,000 shares of 
Common Stock were sold, and the underwriter exercised an over-allotment 
option in July 1998 to purchase the additional 135,000 shares of Common Stock 
for an aggregate purchase price of $10,350,000 (the "IPO"). Proceeds from the 
IPO amounted to $9,496,125, net of underwriting discounts and commissions. 
Underwriting discounts and commissions incurred in the IPO were approximately 
$853,875.  The Company's total organizational and offering expenses for the 
IPO, consisting primarily of legal, accounting, marketing and printing 
expenses, were approximately $110,000, and the net offering proceeds to the 
Company were approximately $9,496,125.  The Company used the net proceeds of 
the IPO, together with the net proceeds of the Organizers' Offering, to 
inject approximately $9.6 million into the Bank's capital accounts upon 
opening on July 27, 1998.  In addition, approximately $360,000 was used to 
repay the organizers (all of the directors and certain officers of the 
Company) for repayment of their contributions.  Funds remaining, 
approximately $1,536,125, have been and will be used for working capital and 
other general purposes.

ITEM 6.        EXHIBITS AND REPORTS ON FORM 8-K.

               (a)  Exhibits.  The following exhibit is filed with this Report:
                    
                    Exhibit No.    Description
                    -----------    -----------
                    27.1           Financial Data Schedule (for SEC use only).
                    
               (b)  Reports on Form 8-K.  No report on Form 8-K was filed during
                    the quarter ended June 30, 1998.


                                        12

<PAGE>

                                     SIGNATURES

               Pursuant to the requirements 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.

Date: August 14, 1998                     By: /s/ H.N. Padget, Jr.          
                                             -----------------------------------
                                              H. N. Padget, Jr., President and 
                                               Chief Executive  Officer


Date: August 14, 1998                     By:  /s/ Valerie Donnell      
                                             -----------------------------------
                                             Valerie Donnell, Chief Financial 
                                              Officer