<PAGE>

                     U.S. 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, 2002

[ ] 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 [X] No [ ]

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 August 12, 2002
          -----                                -------------------------------
Common Stock, $1.00 par value                           1,069,259

          Transitional Small Business Disclosure Format: Yes [ ] No [X]


                                       1

<PAGE>

                          PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

                               CNB HOLDINGS, INC.
                                 AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                         JUNE 30,        DECEMBER 31,
                                                                           2002             2001
                                                                           ----             ----
                                                                       (Unaudited)        (Audited)

<S>                                                                    <C>               <C>    <C>
ASSETS

Cash and due from banks ............................................  $  1,583,234       $    560,523
Federal funds sold .................................................     6,371,346          5,375,013
Bank-owned certificates of deposit .................................     1,293,000                 --
Investment securities:
         Securities available-for-sale, at market value ............    24,734,947         31,886,764
         Restricted equity securities ..............................       888,000            638,000
Loans net of deferred loan fees and allowance for loan losses
         of $699,821 and $708,918 ..................................    66,065,863         62,045,635
Premises and equipment (net) .......................................       585,597            624,928
Other assets .......................................................     3,014,685          3,130,547
                                                                      ------------       ------------
         TOTAL ASSETS ..............................................  $104,536,672       $104,261,410
                                                                      ============       ============

LIABILITIES
Deposits:

         Non interest-bearing demand ...............................  $ 10,090,041       $  9,394,574
         Interest-bearing demand and money market ..................    15,676,948         15,489,407
         Savings ...................................................       118,716             69,826
         Time deposits of $100,000 or more .........................    18,257,446         21,065,470
         Other time deposits .......................................    36,309,039         39,452,303
                                                                      ------------       ------------
         Total Deposits ............................................    80,452,190         85,471,580
Securities sold under repurchase agreements ........................       518,729            683,648
Other borrowings ...................................................    12,569,500          7,569,500
Other liabilities ..................................................     1,928,096          1,760,241
                                                                      ------------       ------------
TOTAL LIABILITIES ..................................................    95,468,515         95,484,969

STOCKHOLDERS' EQUITY:
Preferred stock, par value not stated;
         10,000,000 shares authorized, no
         shares issued and outstanding .............................            --                 --
Common stock, par value $1.00 per share;
         10,000,000 shares authorized; 1,235,000 issued ............     1,235,000          1,235,000
Surplus ............................................................    10,006,752         10,004,858
Accumulated other comprehensive income (loss) -
         market valuation reserve on investment
              securities available-for-sale ........................        95,608             (4,862)
Treasury stock .....................................................    (1,315,442)        (1,402,333)
Unearned ESOP shares ...............................................      (399,998)          (399,998)
Accumulated deficit ................................................      (553,763)          (656,224)
                                                                      ------------       ------------
TOTAL STOCKHOLDERS' EQUITY .........................................     9,068,157          8,776,441
                                                                      ------------       ------------
TOTAL LIABILITIES AND EQUITY .......................................  $104,536,672       $104,261,410
                                                                      ============       ============

</TABLE>
              See notes to the consolidated financial statements.


                                       2

<PAGE>

                               CNB HOLDINGS, INC.
                                 AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
<TABLE>
<CAPTION>

                                                                                  FOR THE                          FOR THE
                                                                                 SIX-MONTH                       THREE-MONTH
                                                                                PERIOD ENDED                    PERIOD ENDED
                                                                                  JUNE 30,                        JUNE 30,

                                                                              2002        2001                2002        2001
                                                                              ----        ----               -----        ----

<S>                                                                       <C>          <C>                <C>           <C>
Interest income:
Loans and leases, including fees ......................................   $2,422,547   $2,440,447         $1,237,383    $1,249,967
Bank-owned  certificates of deposit ...................................          958           --                958            --
Investment securities:
         U.S. Treasury Securities .....................................           --       13,071                 --            --
         U.S. Government agencies .....................................      581,567      775,455            248,075       439,798
Other investments .....................................................      156,718       57,043             80,456        53,468
Federal funds sold ....................................................       45,964      241,622             20,316        85,229
                                                                          ----------   ----------         ----------    ----------
Total interest income .................................................    3,207,754    3,527,638          1,587,188     1,828,462
Interest expense:
         Interest bearing demand and money market .....................      200,565      235,434             92,540       128,510
         Savings ......................................................        1,107          562                666           317
         Time deposits of $100,000 or more ............................      338,757      612,808            161,407       315,421
         Other time deposits ..........................................      947,915    1,171,885            440,524       612,759
         Other borrowings .............................................      235,194      123,505            124,717        56,551
                                                                          ----------   ----------         ----------    ----------
                  Total interest expense ..............................    1,723,538    2,144,194            819,854     1,113,558
                                                                          ----------   ----------         ----------    ----------
         Net interest income ..........................................    1,484,216    1,383,444            767,334       714,904
Provision for possible loan losses ....................................       84,082      108,000             37,082        87,000
                                                                          ----------   ----------         ----------    ----------
         Net interest income after provision for possible loan losses .    1,400,134    1,275,444            730,252       627,904

Other income:
         Service charges on deposit accounts ..........................       30,891       27,291             15,177        15,005
         Gains on the sale of loans and leases (net) ..................      215,950      125,714             88,898        64,183
         Gains (losses) on the sale of securities available for sale ..          469       40,284             (1,175)       40,284
         Other income .................................................      168,507       59,675             86,110        18,551
                                                                          ----------   ----------         ----------    ----------
         Total other income ...........................................      415,817      252,964            189,010       138,023
Other expense:
         Salaries and other compensation ..............................      785,568      715,195            392,014       365,525
         Employee benefits ............................................      145,711      136,667             70,712        72,091
         Net occupancy and equipment expense ..........................      259,459      250,413            132,601       127,017
         Professional and other outside services ......................      189,756      130,487            105,543        59,644
         Other expense ................................................      332,996      277,126            172,279       143,423
                                                                          ----------   ----------         ----------    ----------
                  Total other expenses ................................    1,713,491    1,509,888            873,149       767,700
                                                                          ----------   ----------         ----------    ----------

Net income (loss) before income tax benefit ...........................      102,461       18,520             46,113        (1,773)
Income tax benefit ....................................................           --           --                 --            --
                                                                          ----------   ----------         ----------    ----------
Net income (loss) .....................................................   $  102,461   $   18,520         $   46,113    $   (1,773)
                                                                          ==========   ==========         ==========    ===========

Basic and diluted earnings (loss) per share ...........................   $      .10   $      .02         $      .04    $      .00
                                                                          ==========   ==========         ==========    ==========

</TABLE>

               See notes to the consolidated financial statements.


                                       3

<PAGE>

                               CNB HOLDINGS, INC.
                                 AND SUBSIDIARY
             CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
                                   (UNAUDITED)
<TABLE>
<CAPTION>

                                                                                   FOR THE                       FOR THE
                                                                                  SIX-MONTH                     THREE-MONTH
                                                                                PERIOD ENDED                    PERIOD ENDED
                                                                                  JUNE 30,                        JUNE 30,

                                                                             2002           2001              2002            2001
                                                                             ----           ----              ----            ----

<S>                                                                        <C>               <C>            <C>           <C>
Net income (loss) .....................................................    $102,461          $ 18,520       $  46,113     $  (1,773)
Other comprehensive income (loss), before tax:
         Unrealized holding gains (losses) arising during period ......     156,984            20,937         325,081      (205,526)
         Income tax benefit (expense) .................................     (56,514)          (10,288)       (117,029)       71,239
                                                                           --------          --------       ---------     ---------
Comprehensive income (loss) ...........................................    $202,931          $ 29,169       $ 254,165     $(136,060)
                                                                           ========          ========       =========     =========

</TABLE>


               See notes to the consolidated financial statements.


                                       4

<PAGE>

                               CNB HOLDINGS, INC.
                                 AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
<TABLE>
<CAPTION>

                                                                                            FOR THE
                                                                                          SIX-MONTH
                                                                                         PERIOD ENDED
                                                                                           JUNE 30,

                                                                                     2002              2001
                                                                                     ----              ----

<S>                                                                               <C>            <C>
Cash flows from operating activities:
         Net income ............................................................  $  102,461     $    18,520
         Adjustments to reconcile net income (loss) to net cash provided by and
                  used in operating activities:

                  Net (accretion) amortization of investment securities ........     107,722          (1,489)
                  Depreciation and amortization of premises and equipment ......      79,997          94,323
                  Gains on the sale of loans ...................................    (215,950)       (125,714)
                  Gains on the sale of available for sale securities ...........        (469)        (40,284)
                  Provision for loan losses ....................................      84,082         108,000
                  Decrease in other assets .....................................      59,348          72,782
                  Increase in other liabilities ................................     167,855         734,167
                                                                                  ----------     -----------
                           Net cash provided by operating
                           activities ..........................................     385,046         860,305

Cash flows from investing activities:

         Purchase of bank-owned certificates of deposit ........................  (1,293,000)             --
         Maturities of investment securities available-for-sale ................   8,354,643       9,047,559
         Purchases of investment securities available for sale ................. (12,157,695)    (34,520,968)
         Proceeds from sales of investment securities available-for-sale .......  11,004,600       7,299,776
         Purchases of restricted equity securities .............................    (250,000)             --
         Proceeds from sale of loans and leases ................................   2,877,482       2,946,128
         Loans originated, net of principal repayments .........................  (6,765,842)    (14,718,792)
         Purchases of premises and equipment ...................................     (40,666)        (58,693)
                                                                                 -----------     -----------
                  Net cash provided by (used in) investing activities ..........   1,729,522     (30,004,990)

Cash flows from financing activities:

         Increase (decrease) in other borrowings ...............................   5,000,000        (965,000)
         Sale of treasury stock ................................................      88,785              --
         Increase (decrease) in deposits .......................................  (5,019,390)     27,613,236
         Decrease in securities sold under repurchase agreements ...............    (164,919)       (722,037)
                                                                                 -----------     -----------
                  Net cash provided by (used in) financing activities ..........     (95,524)     25,926,199
                                                                                 -----------     -----------

Net increase/(decrease) in cash and cash equivalents ...........................   2,019,044      (3,218,486)
Cash and cash equivalents, beginning of period .................................   5,935,536       6,413,375
                                                                                 -----------     -----------

Cash and cash equivalents, end of period ....................................... $ 7,954,580     $ 3,194,889
                                                                                 ===========     ===========

</TABLE>

               See notes to the consolidated financial statements.


                                       5

<PAGE>

                               CNB HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               FOR THE SIX MONTHS
                               ENDED JUNE 30, 2002
                                   (UNAUDITED)

NOTE 1 - BASIS OF PRESENTATION

     The accompanying unaudited consolidated financial statements for CNB
Holdings, Inc. (the "Company") 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 adjustments) considered necessary for a fair
presentation have been included. Operating results for the six and three month
periods ended June 30, 2002 are not necessarily indicative of the results that
may be expected for the year ended December 31, 2002 For further information,
refer to the financial statements and footnotes included in the Company's
consolidated financial statements and footnotes thereto for the year ended
December 31, 2001, included in the Company's Form 10-KSB.

     The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary, Chattahoochee National Bank (the "Bank"), with
all significant intercompany accounts and transactions eliminated in
consolidation.

NOTE 2 - EARNINGS (LOSS) PER COMMON SHARE

     Earnings (loss) per share is computed by dividing net income (loss)
available to common shareholders by the weighted average number of share
outstanding during the period, which totaled 1,064,287 and 1,059,260 shares for
the six months and the three months ended June 30, 2002 respectively. There were
no potentially dilutive common shares at June 30, 2002.

NOTE 3 - LOANS AND LEASES RECEIVABLE

     Major classifications of loans and leases are as follows in thousands
(000):

                                         JUNE 30, 2001   DECEMBER 31, 2000
                                         -------------   -----------------
Commercial Loans                            $24,691         $27,529
Real Estate -- construction                  29,237          24,063
Real Estate - mortgage                        7,112           5,362
Leasing financing                             3,123           3,270
Installment Loans                             2,716           2,611
                                            -------         -------
Total Loans                                  66,879          62,835
Less: Deferred loan fees and costs              113              80
Less: Allowance for loans and lease losses      700             709
                                            -------         -------
Loans and leases receivable, net            $66,066         $62,046
                                            =======         =======



NOTE 4 - ACCUMULATED OTHER COMPREHENSIVE INCOME

     Accumulated other comprehensive income-market valuation reserve on
investment securities available-for-sale is as follows

 Beginning balance - January 1, 2002          $ (4,862)
 Current - period change                       100,470
                                              --------
 Ending balance - June 30, 2002               $ 95,608
                                              ========





                                       6

<PAGE>

NOTE 5 - NEW ACCOUNTING PRONOUNCEMENTS

ACCOUNTING PRONOUNCEMENTS AFFECTING FUTURE PERIODS

     There are no recent accounting pronouncements that have had, or are
expected to have, a material effect on the Company's financial statements.

              CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

     Certain of the statements made in this Report and in documents incorporated
by reference herein, including matters discussed under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations," as
well as oral statements made by the Company or its officers, directors or
employees, may constitute forward-looking statements within the meaning of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as amended.
Such forward-looking statements are based on management's beliefs, current
expectations, estimates and projections about the financial services industry,
the economy and about CNB Holdings, Inc. (the "Company") and its wholly-owned
subsidiary, Chattahoochee National Bank (the "Bank") in general. The words
"expect," "anticipate," "intend," "plan," "believe," "seek," "estimate" and
similar expressions are intended to identify such forward-looking statements;
however, this Report also contains other forward-looking statements in addition
to historical information. 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 any results expressed or implied by such forward-looking
statements. Such factors include, without limitation, (i) increased competition
with other financial institutions, (ii) lack of sustained growth in the economy
in Fulton County, Georgia, (iii) the inability of the Bank to maintain
regulatory capital standards and (iv) changes in the legislative and regulatory
environment. Additionally, rapid increases or decreases in interest rates could
significantly harm the Bank's non-interest income, which is the difference
between the interest income earned on its interest-earning assets (such as
loans), and the interest expense paid on its interest-bearing liabilities (such
as deposits). Because the Bank is cumulatively asset sensitive (its assets
reprice sooner that its liabilities) within the next six months, continued
decreases in interest rates could result in reduced earnings. Many of the
forgoing 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 revise any
forward-looking statements contained in this Report, whether as a result of new
information, future events or otherwise.

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 of the organizers'
expense. The Company purchased 100% of


                                       7

<PAGE>

the Bank's common stock by injecting approximately $9.6 million into the Bank's
capital accounts immediately prior to the Bank's opening on July 27, 1998.

FINANCIAL CONDITION

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

     Total assets increased from $104,261,410 on December 31, 2001 to
$104,536,672 on June 30, 2002, an increase of $275,262. This increase was due to
an increase in loans of $4,020,228, a $6,901,817 decrease in investment
securities, a $1,293,000 increase in bank-owned certificates of deposit and a
$996,333 increase in federal funds. This growth was primarily funded by a
$4,835,081 increase in other borrowed money and a $5,019,390 decrease in
deposits. Increase loan demand was funded by decreases in investment securities
due to sales and maturities. The funding source changed from deposits to other
borrowed money obtained from the Federal Home Loan Bank of Atlanta. Since rates
have dropped to historic lows, Federal Home Loan Bank advances, at least for
now, have become less expensive than competing for deposits in the Metropolitan
Atlanta market.

     The $5,019,390 decrease in deposits came from a decrease of $2,808,024 in
time deposits of $100,000 or more and a decrease of $3,143,264 in other time
deposits.

Allowance for Loan Losses

     The allowance for loan losses as of June 30, 2002 was $699,821 compared to
$708,918 as of December 31, 2001. The allowance for loan losses, as a percentage
of total gross loans, for June 30, 2001 was 1.05%, compared to 1.13% as of
December 31, 2001. The amount provided for the allowance during the second
quarter of 2002 was prompted by risks inherent in the loan portfolio. Most of
our known loan collection problems were either partly or entirely recognized as
losses during this quarter. During the second quarter of 2002, a review of the
Bank's loan portfolio by an independent firm was conducted. The purpose of this
review was to assess the risk in the loan portfolio and to determine the
adequacy of the allowance for loan losses. The review included analyses of
historical performance, the level of non-conforming and rated loans, loan volume
and activity, review of loan files and consideration of economic conditions and
other pertinent information. Upon completion and review by the Bank's Board of
Directors and management, the Bank approved the firm's report. The Bank will
continue engaging, on a biannual basis, an independent firm to review the Bank's
loan portfolio. In addition to the independent reviews, the Bank's primary
regulator, the OCC, also conducts an annual examination of the loan portfolio.
Upon completion, the OCC presents its report of findings to the Bank's Board of
Directors and management. Information provided from the above two independent
sources, together with information provided by the management and other
information known to the Bank's Board of Directors, are utilized by the Board of
Directors to monitor, on a quarterly basis, the loan portfolio. Specifically,
the Bank's Board of Directors attempts to identify risks inherent in the loan
portfolio (e.g., problem loans, potential problem loans and loans to be charged
off), assess the overall quality and collectibility of the loan portfolio, and
determine amounts of the allowance for loan losses and the provision for loan
losses to be reported based on the results of their review.

     Management considers the allowance for loan losses to be adequate and
sufficient; however, there can be no assurance that charge-offs in future
periods will not exceed the allowance for loan losses or that additional
provisions of the allowance will not be required.

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. Management
believes that the June 30, 2002 financial statements evidence a satisfactory
liquidity position as total cash and cash equivalents amounted to approximately
$8.0 million, representing 7.6% of total assets. Securities and bank-owned
certificates of deposit amounted to $26.0 million,


                                       8

<PAGE>

representing 24.9% of total assets; these securities provide a secondary source
of liquidity since they can be converted into cash in a timely manner. The
Company's ability to maintain and expand its deposit base and borrowing
capabilities are also a source of liquidity. For the six-month period ended June
30, 2002, other borrowed money increased $4.8 million. During the three-month
period ended June 30, 2002, management used this $4.8 million to replace the
decrease of $5.0 million in total deposits. Management does not anticipate that
this change in funding sources to continue indefinitely. The Company's
management closely monitors and maintains appropriate levels of interest earning
assets and interest bearing liabilities so that maturities of assets are such
that adequate funds are provided to meet customer withdrawals and loan demand.
Management is aware of no trends, demands, commitments, events or uncertainties
that will result in, or are reasonably likely to result in, the Company's
liquidity increasing or decreasing in any material way.

     During 2002, the Company reissued 10,000 shares of its common stock which
were purchased by the Bank's 401k Plan. Participants in the plan purchased the
common stock for $88,785.

         This table below illustrates the Company's regulatory capital ratios at
the date indicated:

                                                                      MINIMUM
                                                                     REGULATORY
                                                 JUNE 30, 2002      REQUIREMENT

Tier 1 Capital                                       12.32%              4.0%
Tier 2 Capital                                        0.91                --
                                                     -----               ---
         Total risk-based capital ratio              13.23%              8.0%
                                                     =====               ===
Leverage ratio                                        9.31%              3.0%
                                                     =====               ===



                                       9

<PAGE>

RESULTS OF OPERATIONS

Six-Month Period Ended June 30, 2002

     Net income for the six-month period ended June 30, 2002 amounted to
$102,461 or $.10 per basic and diluted income per share compared to a net income
of $18,520, or $.02 per basic and diluted income per share for the same
six-month period in 2001. The following is a brief discussion of the more
significant components of net income during this period:

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.

     June 30, 2002
     -------------

      Interest                                        Interest       Annualized
        Earning Assets/                 Average        Income/         Yield/
       Bearing Liabilities              Balance         Cost           Cost
                                        -------       --------       ----------
     Federal funds sold               $ 5,513,791    $   45,964         1.67%
     Securities and bank-owned
         certificates of deposit       27,819,998       739,243         5.31%
     Loans                             63,966,854     2,422,547         7.57%
                                      -----------    ----------
              Total                   $97,300,643    $3,207,754         6.59%
                                      ===========    ==========
     Deposits                         $71,798,996    $1,488,344         4.15%
     Other borrowings                  11,266,034       235,194         4.18%
                                      -----------    ----------
                    Total             $83,065,030    $1,723,538         4.15%
                                      ===========    ----------         ----
     Net interest income                             $1,484,216         2.44%
                                                     ==========         ====
     Net yield on earning assets                                        3.05%
                                                                        ====

     June 30, 2001
     -------------

      Interest                                        Interest       Annualized
        Earning Assets/                 Average       Income/          Yield/
       Bearing Liabilities              Balance        Cost             Cost
                                        -------       --------       ----------
     Federal funds sold               $ 9,173,225    $  241,622        5.27%
     Securities                        26,494,888       845,569        6.38%
     Loans                             48,439,738     2,440,447       10.08%
                                      -----------    ----------
              Total                   $84,107,851    $3,527,638        8.39%
                                      ===========    ==========
     Deposits                         $71,798,996    $2,020,689        5.63%
     Other borrowings                   4,927,775       123,505        5.01%
                                      -----------    ----------
                    Total             $76,726,771    $2,144,194        5.59%
                                      ===========    ----------       -----
     Net interest income                             $1,383,444        2.80%
                                                     ==========       =====
     Net yield on earning assets                                       3.29%
                                                                      =====





                                       10

<PAGE>

     The majority of the Bank's loans are adjusted to the Wall Street Prime
rate, which dropped 50% to 4.75% during 2001. The Bank's certificates of deposit
issued in the first quarter of 2001 were mostly one year certificates. While the
Bank's loan portfolio repriced immediately, the Bank's certificates of deposit
issued during that quarter have just repriced during the first quarter of 2002.
Therefore, the Bank's margin has decreased compared to the prior period.
Assuming no change or an increase in the Prime rate, the Bank expects that its
margin may continue to improve throughout 2002.

     b.   Total other income for six-month period ended June 30, 2002 amounted
          to $415,817 compared to $252,964 in 2001. On an annualized basis, this
          represents 0.40% of total assets compared to 0.24% in 2001. In 2001,
          the Bank sold loans and leases without recourse totaling $2,946,128
          recognizing a gain of $125,714 or 49.70% of total other income. In
          2002 the Bank sold leases totaling $2,877,482 recognizing a gain of
          $215,950 or 51.93% of total other income. The service charge on
          deposit accounts was $27,291 for the six-month period ended June 30,
          2001, or 10.79% of total other income compared to $30,891 or 7.42% for
          the same period in 2002. Most of our deposit customers maintain
          balances at levels that prevent service charges. Additionally,
          available for sale securities were sold for net gains of $40,284 in
          2001 or 15.92% compared to $469 for the same six-month period in 2002.
          Of the $59,675 in other miscellaneous income in first six months of
          2001, $52,159 consists of mortgage origination and fee income from
          mortgage loans, which are not added to the Company's loan portfolio.
          In the first six months of 2002, $105,603 of the $168,507 of
          miscellaneous other income consisted of mortgage and fee income from
          mortgage loans. Income from increased cash surrender values of bank
          owned life insurance did not exist in the first half of 2001. However,
          this insurance income is $57,932 or 34.38% of miscellaneous other
          income and 13.93% of total other income for the six-month period ended
          June 30, 2002.

     c.   Operating expenses for the six-month period ended June 30, 2001
          amounted to $1,509,888 compared to $1,713,490 for the same period in
          2002, with the largest expenses being related to salaries and employee
          benefits and professional and outside services. The majority of the
          increase was due to increases in incentive compensation for increased
          mortgage loan and SBA Loan origination. Also, legal and professional
          expenses increased due an increase in loan collection activity. Since
          the Bank has not had any significant loan collection activity in its
          brief four-year existence, this would be in the normal course of doing
          business with a more mature loan portfolio. On an annualized basis,
          operating expenses represent 2.87% of total assets compared to 3.28%
          in 2002.

     d.   The Company has recorded no provision for income taxes due to
          accumulated deficits incurred to date.







                                       11

<PAGE>

Three-Month Period Ended June 30, 2002

     Net income for the three-month period ended June 30, 2002 amounted to
$46,113, or $.04 per basic and diluted earnings per share compared to ($1,773),
or $.00 per basic and diluted loss per share in 2001. The following is a brief
discussion of the more significant components of net loss during this period:

     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.

          June 30, 2002
          -------------

          Interest                                      Interest     Annualized
          Earning Assets/                 Average        Income/         Yield/
          Bearing Liabilities             Balance         Cost           Cost
          -------------------             -------       --------     ----------

          Federal funds sold              $ 4,770,561   $   20,316        1.70%
          Securities and bank-owned
                certificates of deposit    24,528,654      329,489        5.37%
          Loans                            64,940,541    1,237,383        7.62%
                                          -----------   ----------
                           Total          $94,239,756   $1,587,188        6.74%
                                          ===========

          Deposits                        $68,122,769   $  695,137        4.08%
          Other borrowings                 10,736,421      124,717        4.65%
                                          -----------   ----------
                           Total          $78,859,190   $  819,854        4.16%
                                          ===========   ==========        ----
          Net interest income                           $  767,334        2.58%
                                                        ==========        ====
          Net yield on earning assets                                     3.26%
                                                                          ====


          June 30, 2001
          -------------

          Interest                                      Interest      Annualized
          Earning Assets/                 Average        Income/         Yield/
          Bearing Liabilities             Balance         Cost           Cost
          -------------------             -------       --------      ----------

          Federal funds sold          $ 7,139,257      $   85,229        4.78%
          Securities                   30,644,229         493,266        6.44%
          Loans                        51,240,112       1,249,967        9.76%
                                      -----------      ----------
                   Total              $89,023,598      $1,828,462        8.22%
                                      ===========
          Deposits                    $70,894,842      $1,057,007        5.96%
          Other borrowings              4,663,225          56,551        4.85%
                                      -----------      ----------
                         Total        $75,558,067      $1,113,558        5.90%
                                      ===========      ==========        ----
          Net interest income                          $  714,904        2.32%
                                                       ==========        ====
          Net yield on earning assets                                    3.21%
                                                                         ====


                                       12

<PAGE>

     The majority of the Bank's loans are adjusted to the Wall Street Prime
rate, which dropped 50% to 4.75% during 2001. The Bank's certificates of deposit
issued in the first quarter of 2001 were mostly one year certificates. While the
Bank's loan portfolio repriced immediately, the Bank's certificates of deposit
issued during that quarter have just repriced during the first quarter of 2002.
Therefore, the Bank's margin has increased compared to the prior period.
Assuming no change or an increase in the Prime rate, the Bank expects that its
margin may continue to improve throughout 2002.

     b.   Total other income for three-month period ended June 30, 2001 amounted
          to $138,023 compared to $189,010 in 2002. On an annualized basis, this
          represents 0.52% of total assets compared to 0.72% of total assets in
          2002. The Bank sold loans and leases totaling $837,318 without
          recourse compared to $1,437,410 for the same period in 2002. The
          profit from these sales was $64,183 or 46.50% of total other income
          compared to $88,898 or 47.03% for the same period in 2002. The service
          charge on deposit accounts was $15,005 or 10.87% of total other income
          compared to $15,177 or 8.03% for the same period in 2002. Generally,
          our customer relationships are maintaining sufficient balances to
          avoid service charges. Additionally, available for sale securities
          were sold for net losses of $1,175 or (0.62%) in 2002. There were
          gains of $40,284 or 29.19% for the comparative three-month period in
          2001. Other miscellaneous income at $18,551 is 13.44% of total other
          income in 2001 compared to $86,110 or 45.56% for the same period in
          2002. Of this total, $18,551 is related to mortgage banking activities
          compared to $53,525 for the same period in 2002. Income from increased
          cash surrender values of bank owned life insurance did not exist in
          the second quarter of 2001. However, this insurance income is $28,966
          or 33.64% of miscellaneous other income and 15.33% of total other
          income for the three-month period ended June 30, 2002.

     c.   Operating expenses for the three-month period ended June 30, 2001
          amounted to $767,700 compared to $873,149 for the same period in 2002,
          with the largest expense being related to salaries and employee
          benefits and professional and outside services. Additional legal and
          professional expenses increased due an increase in loan collection
          activity. Operating expenses represent 2.91% of total assets in 2001
          compared to 3.34% in 2002.


                                       13

<PAGE>

                           PART II. OTHER INFORMATION

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

     The Company's Annual Meeting of Shareholders (the "Annual Meeting") was
held on June 19, 2002. Notice of the Annual Meeting was mailed on May 17, 2002
to each shareholder of record as of May 10, 2002. At this meeting, the Company's
shareholders considered electing four persons to serve as members of the
Company's Board of Directors for a term of three years and until their
successors are duly elected and qualified. The record shareholders of the
Company voted as follows:

     The proposal to elect four persons to serve as members of the Company's
Board of Directors for a term of three years and until their successors are duly
elected and qualified. The number of votes cast for and against the election of
each nominee was as follows:

                                              Votes                  Votes
          NOMINEE                              FOR                  WITHHELD
          -------                              ---                  --------

          Patricia R. Grimes                  980,929                2,700
          John A. Pond                        980,929                2,700
          Reid W. Simmons                     980,929                2,700
          W. David Sweatt                     980,929                2,700

     No other matters were presented or voted for at the Annual Meeting.

Item 6. Exhibits and Reports on Form 8-K.

(a)  Exhibits. The following exhibits are filed with this Report:

      Exhibit No.             Description
      -----------             -----------
         None

(b)  Reports on Form 8-K. None





                                       14

<PAGE>

                                   SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934 as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.

Date: August 13, 2002       By: /s/ H. N. Padget, Jr.
                                ----------------------
                                H. N. Padget, Jr., President and
                                Chief Executive Officer
                                (principal executive officer)

Date: August 13, 2002       By: /s/ Danny F. Dukes
                                -------------------
                                Danny F. Dukes, Senior Vice President,
                                Chief Financial Officer
                                (principal financial and accounting officer)




                                       15