<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 September 30, 1999

     | |  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 November 10, 1999
          -----                               ---------------------------------
Common Stock, $1.00 par value                            1,114,628

         Transitional Small Business Disclosure Format: Yes | | No |X|
<PAGE>

                         PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

                               CNB HOLDINGS, INC.
                                 AND SUBSIDIARY
                          CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

                                                                                   SEPTEMBER 30,   DECEMBER 31,
                                                                                       1999           1998
                                                                                  --------------  -------------
                                                                                   (Unaudited)      (Audited)
                                                                                  --------------  -------------
<S>                                                                               <C>             <C>
ASSETS

Cash and due from banks ........................................................... $ 1,287,753    $ 1,053,182
Federal funds sold ................................................................   2,829,973        380,000
Investment securities:
     Securities available-for-sale, at market value................................   7,679,901      5,702,770
     Other securities .............................................................     437,800        339,100
Loans net of allowance for loan losses
     of $357,000 and $222,000......................................................  23,406,142     14,609,983
Premises and equipment (net) ......................................................     451,036        470,523
Accrued interest receivable .......................................................     180,715        140,547
Other assets ......................................................................     174,735        120,465
                                                                                    -----------    -----------
     TOTAL ASSETS ................................................................. $36,448,055    $22,816,570
                                                                                    ===========    ===========
LIABILITIES

Deposits:
     Non interest-bearing demand .................................................. $ 3,076,635    $ 1,346,146
     Interest-bearing demand and money market......................................  12,144,453      3,268,262
     Savings ......................................................................       6,313             --
     Time deposits of $100,000 or more ............................................   4,415,728      5,124,023
     Other time deposits ..........................................................   6,032,660      2,272,812
                                                                                    -----------    -----------
     Total Deposits ...............................................................  25,675,789     12,011,243
Other borrowed money ..............................................................   1,000,000             --
Accrued interest payable ..........................................................     108,906         30,764
Other liabilities .................................................................     228,704         69,306
                                                                                    -----------    -----------
     TOTAL LIABILITIES ............................................................  27,013,399     12,111,313

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 ...........................................................................  10,170,283     10,170,283
Treasury stock, 120,372 shares.....................................................  (1,081,805)            --
Accumulated other comprehensive income (loss)-
     market valuation reserve on investment
     securities available-for-sale.................................................     (51,101)         9,263
Accumulated deficit................................................................    (837,721)      (709,289)
                                                                                    -----------    -----------
     TOTAL STOCKHOLDERS' EQUITY ...................................................   9,434,656     10,705,257
                                                                                    -----------    -----------
     TOTAL LIABILITIES AND EQUITY ................................................. $36,448,055    $22,816,570
                                                                                    ===========    ===========
</TABLE>
              See notes to the consolidated financial statements.
<PAGE>

                               CNB HOLDINGS, INC.
                                 AND SUBSIDIARY
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (UNAUDITED)
<TABLE>
<CAPTION>
                                                                                            FOR THE                  FOR THE
                                                                                          NINE-MONTH               THREE-MONTH
                                                                                         PERIOD ENDED              PERIOD ENDED
                                                                                         SEPTEMBER 30,             SEPTEMBER 30,
                                                                                       1999        1998           1999      1998
                                                                                    ----------   ----------    --------- ---------
<S>                                                                                 <C>          <C>           <C>       <C>
Interest income loans and leases, including fees ................................   $1,401,001   $ 103,321     $573,401  $ 103,321
Investment securities:
 U.S. Treasury securities .......................................................      148,139      16,350       49,703     16,350
 U.S. government agencies .......................................................       88,136       2,663       40,201      2,663
Other investments ...............................................................       15,849          --        2,832         --
Federal funds sold ..............................................................       99,017     167,179       49,075    129,696
                                                                                    ----------   ---------     --------  ---------
Total interest income ...........................................................    1,752,142     289,513      715,212    252,030
Interest expense:
 Interest bearing demand and money market .......................................      290,127      22,976      122,536     22,976
 Savings ........................................................................          172          17           42         17
 Time deposits of $100,000 or more ..............................................      130,982      39,482       56,637     39,482
 Other time deposits ............................................................      165,631       2,089       74,221      2,089
 Other borrowings ...............................................................       21,763       4,668       12,968      4,668
                                                                                    ----------   ---------     --------  ---------
  Total interest expense ........................................................      608,675      69,232      266,404     69,232
                                                                                    ----------   ---------     --------  ---------
 Net interest income ............................................................    1,143,467     220,281      448,808    182,798
Provision for possible loan losses ..............................................      135,000     127,000       54,000    127,000
                                                                                    ----------   ---------     --------  ---------
 Net interest income after provision for possible loan losses ...................    1,008,467      93,281      394,808     55,798

Other income:
 Service charges on deposit accounts ............................................       28,112          82        9,609         82
 Gains on the sale of leases (net) ..............................................      105,078          --       47,425         --
 Gains on the sale of securities available for sale..............................          303          --           --         --
 Other income ...................................................................      154,912      16,809       49,781     16,809
                                                                                    ----------   ---------     --------  ---------
 Total other income .............................................................      288,405      16,891      106,815     16,891
Other expense:
 Salaries and other compensation ................................................      623,939     236,040      234,170    130,951
 Employee benefits ..............................................................      100,191      52,098       31,920     26,157
 Net occupancy and equipment expense ............................................      190,534      49,958       62,848     28,466
 Professional and other outside services ........................................      205,110      41,187       29,160     36,768
 Other expense ..................................................................      305,473     107,953      115,138     73,415
                                                                                    ----------   ---------     --------  ---------
  Total other expenses ..........................................................    1,425,247     487,236      473,236    295,757
                                                                                    ----------   ---------     --------  ---------

Net income (loss) before income tax benefit......................................     (128,375)   (377,064)      28,387   (223,068)
Income tax benefit...............................................................           --          --           --         --
                                                                                    ----------   ---------     --------  ---------
Net income (loss) before change in accounting principle..........................   $ (128,375)  $(377,064)    $ 28,387  $(223,068)
Change in accounting principle...................................................           --    (151,913)          --   (151,913)
                                                                                    ----------   ---------     --------  ---------
Net income (loss)................................................................   $ (128,375)  $(528,977)    $ 28,387  $(374,981)
                                                                                    ==========   =========     ========  =========

Basic and diluted earnings (loss) per share .....................................        $(.11)      $(.59)        $.02      $(.31)
                                                                                    ==========   =========     ========  =========

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

                               CNB HOLDINGS, INC.
                                 AND SUBSIDIARY
             CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
                                  (UNAUDITED)
<TABLE>
<CAPTION>
                                                                                        FOR THE                     FOR THE
                                                                                      NINE-MONTH                 THREE-MONTH
                                                                                     PERIOD ENDED                PERIOD ENDED
                                                                                     SEPTEMBER 30,                SEPTEMBER 30,
                                                                                  1999            1998         1999         1998
                                                                              ------------     ---------     ---------   ---------
<S>                                                                           <C>              <C>           <C>         <C>
Net income (loss) ..........................................................     $(128,375)    $(528,977)     $ 28,387   $(374,981)
Other comprehensive income (loss), before tax:
 Unrealized holding gains (losses) arising during period....................       (89,109)       20,205        35,956      20,205
 Income tax benefit.........................................................        28,745            --       (12,944)         --
                                                                                 ---------     ---------      --------   ---------
Comprehensive income (loss).................................................     $(188,739)    $(508,772)     $ 51,399   $(354,776)
                                                                                 =========     =========      ========   =========
</TABLE>



              See notes to the consolidated financial statements.
<PAGE>

                               CNB HOLDINGS, INC.
                                 AND SUBSIDIARY
                            STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)


<TABLE>
<CAPTION>
                                                                                                                  FOR THE
                                                                                                                 NINE-MONTH
                                                                                                                PERIOD ENDED
                                                                                                                SEPTEMBER 30,
                                                                                                             1999          1998
                                                                                                        ------------  ------------
<S>                                                                                                     <C>           <C>
Cash flows from operating activities:
 Net loss ............................................................................................. $   (128,375) $   (528,977)
 Adjustments to reconcile net loss to net cash provided by and used in
  operating activities:
   Net (accretion) amortization of investment securities...............................................       12,138           818
   Depreciation and amortization of premises and equipment.............................................       95,246         6,396
   Gains on the sale of lease receivables..............................................................     (105,078)           --
   Gains on the sale of available for sale securities..................................................         (303)           --
   Provision for loan losses ..........................................................................      135,000       127,000
   Increases in other assets ..........................................................................      (54,270)     (104,865)
   Increase in accrued interest receivable ............................................................      (40,168)     (123,132)
   Increase in accrued interest payable ...............................................................       78,142        10,738
   Increase (decrease) in other liabilities ...........................................................      159,398       (70,611)
                                                                                                        ------------  ------------
    Net cash provided by and used in operating
    activities ........................................................................................      151,730      (682,633)

Cash flows from investing activities:
 Maturities of investment securities available-for-sale ...............................................      416,551            --
 Purchases of investment securities available-for-sale.................................................   (6,084,428)   (5,057,663)
 Purchases of other investments .......................................................................   (2,928,293)     (409,100)
 Sales of investment securities available-for-sale.....................................................    1,505,313            --
 Sales of lease receivables............................................................................    2,475,684            --
 Loans originated, net of principal repayments ........................................................   (8,796,159)   (8,240,898)
 Purchases of premises and equipment ..................................................................      (88,568)     (350,902)
                                                                                                        ------------  ------------
   Net cash used in investing activities ..............................................................  (13,499,900)  (14,058,563)

Cash flows from financing activities:
 Proceeds from capital contributions by organizers.....................................................           --    11,285,283
 Note payable..........................................................................................    1,000,000            --
 Purchase of treasury stock............................................................................   (1,081,805)           --
 Repayment of note payable.............................................................................           --       (55,529)
 Increase in deposits .................................................................................   13,664,546     8,687,037
                                                                                                        ------------  ------------
   Net cash provided by financing activities ..........................................................   13,582,741    19,916,791
                                                                                                        ------------  ------------

Net increase in cash and cash due from banks...........................................................      234,571     5,175,595
Cash and due from banks, beginning of period ..........................................................    1,053,182        60,698
                                                                                                        ------------  ------------
Cash and cash due from banks, end of period ........................................................... $  1,287,753  $  5,236,293
                                                                                                        ============  ============

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

                               CNB HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              FOR THE NINE MONTHS
                            ENDED SEPTEMBER 30, 1999
                                  (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 accruals) considered necessary for a fair
presentation have been included. Operating results for the nine month period
ended September 30, 1999 are not necessarily indicative of the results that may
be expected for the year ended December 31, 1999.  Since the Company's wholly-
owned subsidiary, Chattahoochee National Bank (the "Bank"), began banking
operations the last week of July 1998, comparison of income statements and
statements of cash flow for interim periods of fiscal year 1998 are not
meaningful. 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, 1998, included in the
Company's Form 10-KSB for the year ended December 31, 1998.

The consolidated financial statements include the account of the Company and 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 1,183,143 shares for the nine
months, and 1,150,172 for the three months, ended September 30, 1999.  During
the second quarter of 1999, the Company began a stock repurchase program for
61,750 shares whereby 47,750 shares were repurchased. This repurchase program
was completed on July 2. During the third quarter, the Company completed another
repurchase program for 58,622 shares. As of September 21, 1999, 120,372 shares
had been repurchased by the Company. There were no potentially dilutive common
shares at September 30, 1999.

NOTE 3 - LOANS AND LEASES RECEIVABLE

     Major classifications of loans and leases are as follows:
<TABLE>
<CAPTION>

                                                      SEPTEMBER 30, 1999  DECEMBER 31, 1998
                                                      ------------------  -----------------
<S>                                                   <C>                 <C>
     Commercial Loans                                     $14,067,746        $ 8,066,156
     Commercial Leases                                      2,808,383          1,893,655
     Real Estate - commercial and residential               4,376,841          4,303,328
     Installment Loans                                      2,510,172            568,844
                                                          -----------        -----------
     Total Loans                                           23,763,142         14,831,983
     Less: Allowance for loans and lease losses               357,000            222,000
                                                          -----------        -----------
     Loans and leases receivable, net                     $23,406,142        $14,609,983
                                                          ===========        ===========

</TABLE>

NOTE 4 - ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Accumulated other comprehensive income (loss)-market valuation reserve on
investment securities available-for-sale is as follows
<PAGE>

               Beginning balance - January 1, 1999         $  9,263
               Current - period change                      (60,364)
                                                           --------
               Ending balance - September 30, 1999         $(51,101)
                                                           ========



NOTE 5 - NEW ACCOUNTING PRONOUNCEMENTS


ACCOUNTING PRONOUNCEMENTS AFFECTING FUTURE PERIODS

The Financial Accounting Standards Board ("FASB") has issued Statement of
Financial Accounting Standards No. 133 ("SFAS 133") "Accounting for Derivative
Instruments and Hedging Activities." The effective date of this statement has
been deferred by SFAS 137 until fiscal years beginning after June 15, 2000.
Under SFAS 133, a company will recognize all free-standing derivative
instruments in the statement of financial position as either assets or
liabilities and will measure them at fair value. The difference between a
derivative's previous carrying amount and its fair value shall be reported as a
transition adjustment presented in net income or other comprehensive income, as
appropriate, in a manner similar to the cumulative effect of a change in
accounting principle. This statement also determines the accounting for the
changes in fair value of a derivative, depending on the intended use of the
derivative and resulting designation. The adoption of SFAS 133 is not expected
to have a significant impact on the consolidated financial condition or results
of operations of the Company.

In October 1998, the FASB issued Statement of Financial Accounting Standards No.
134 ("SFAS 134"), "Accounting for Mortgage-Backed Securities Retained after the
Securitization of Mortgage Loans Held for Sale by a Mortgage Banking
Enterprise." SFAS 134 is effective for the first fiscal quarter after December
15, 1998, and amends Statement of Financial Accounting Standards No. 65,
"Accounting for Certain Mortgage Banking Activities," which revises the
accounting for retained securities and beneficial interests. The adoption of
SFAS 134 is not expected to have a significant impact on the consolidated
financial condition or results of operations of the Company.


              CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

     Certain of the statements made in this Report, 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 CNB Holdings,
Inc. (the "Company") or its officers, directors or employees, may constitute
forward-looking statements within the meaning of Section 21E of the Securities
Exchange Act of 1934, 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 the Company and the Company's
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. 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
economies in the Bank's primary service areas, (iii) rapid fluctuations in
interest rates, (iv) the inability of the Bank to maintain regulatory capital
standards, (v) changes in the legislative and regulatory environment, and (vi)
problems associated with the Year 2000. 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 contained in this Report,
whether as a result of new information, future events or otherwise.
<PAGE>

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

     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 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' expenses. 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 the Bank's opening
on July 27, 1998.

FINANCIAL CONDITION

     Since banking operations commenced on July 27, 1998, a comparison of the
Company's financial condition on September 30, 1999 to those at September 30,
1998 (when banking operations had been conducted for only two months of the
quarter) is not meaningful. This discussion will, therefore, compare the
Company's financial condition at September 30, 1999 with that at December 31,
1998.

     Total assets increased from $22,816,570 on December 31, 1998 to $36,448,055
on September 30, 1999, an increase of $13,631,485. This increase was due to an
increase in loans of $8,796,159 and a $2,449,973 increase in federal funds sold.
This increase was funded by a $13,664,546 increase in deposits and a $1,000,000
long term note with the Federal Home Loan Bank of Atlanta. Increased marketing
efforts were largely responsible for the increases in loans and deposits.

Allowance for Loan Losses

     The allowance for loan losses for the third quarter of 1999 was $357,000
compared to $222,000 as of December 31, 1998. The increase in the allowance
during 1999 was prompted by the increase in loan volume. However, as a
percentage of total gross loans, the allowance for loan losses remained at 1.50%
at September 30, 1999, the same percentage as at December 31, 1998.

     A review of the loan portfolio by an independent firm will be conducted
annually. The most recent review was performed in July.  The purpose of these
review is to assess the risk in the loan portfolio and to determine the adequacy
of the allowance for loan losses.  The review includes 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, the report was approved by the
Bank's Board of Directors and reviewed by management of the Bank.  In addition
to the above review, the Bank's primary regulator, the Office of the Comptroller
of the Currency (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 of the Bank. Information provided from
the above two independent sources, together with information provided by the
management of the Bank and other information known to the Bank's Board of
Directors, are utilized by management to monitor, on a quarterly basis, the loan
portfolio.  Specifically, the Bank's management 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 this review.
Results are reported to the Bank's Board of Directors. As of September 30, 1999,
the Company had no non-performing loans.

     Management considers the allowance for loan losses to be adequate and
sufficient to absorb future losses; 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.
<PAGE>

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
September 30, 1999 financial statements evidence a satisfactory liquidity
position as total cash and cash equivalents amounted to approximately
$4,110,000, representing 11.28% of total assets. Securities amounted to
$8,118,000, representing 22.27% of total assets; these securities provide a
secondary source of liquidity since they can be converted into cash in a timely
manner. Note that the Company's ability to maintain and expand its deposit base
and borrowing capabilities are a source of liquidity. For the nine-month period
ended September 30, 1999, total deposits increased $14,902,000 as a result of
increased marketing efforts.  Additionally, the Company obtained a secured line
of credit for $1,000,000 from the Federal Home Loan Bank of Atlanta at a rate of
5.01% due April 2004, callable in April 2001. 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. There are 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.

     The Company is currently implementing a stock repurchase program. During
the recent two quarters, 120,372 shares have been repurchased for $1,081,805, an
average repurchase price of $8.99 per share.

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

                                                                MINIMUM
                                                               REGULATORY
                                      SEPTEMBER 30, 1999       REQUIREMENT
                                      ------------------       -----------
      Tier 1 Capital                         39.06%               4.0%
      Tier 2 Capital                          1.25                 --
                                             -----                ---
        Total risk-based capital ratio       40.31%               8.0%
                                             =====                ===
      Leverage ratio                         25.89%               3.0%
                                             =====                ===

     Note that with respect to the leverage ratio, the OCC expects a minimum of
5.0% to 6.0% ratio for similar banks.

RESULTS OF OPERATIONS

     Since banking operations commenced on July 27, 1998, a comparison of the
Company's results of operations as of September 30, 1999 to those as of
September 30, 1998 (when banking operations had been conducted for only two
months of the quarter) is not meaningful. This discussion will, therefore,
concentrate on the Company's results of operations as of September 30, 1999.
<PAGE>

Nine-Month Period Ended September 30, 1999

     Net loss for the nine-month period ended September 30, 1999 amounted to
$128,375, or $.11 per diluted share. 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.

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

         Federal funds sold     $ 2,654,560  $   99,017       4.98%
         Securities               6,434,538     252,124       5.22%
         Loans                   18,526,293   1,401,001      10.08%
                                -----------  ----------      -----
               Total            $27,615,391  $1,752,142       8.46%
                                ===========

         Deposits               $19,181,153  $  608,675       4.23%
                                ===========  ----------      -----

         Net interest income                 $1,143,467       4.23%
                                             ==========      =====

         Net yield on earning assets                          5.52%
                                                             =====

     b.  Other income for the nine-month period ended September 30, 1999
         amounted to $288,405. On an annualized basis, this represents 3.17% of
         total assets. The Bank sold leases totaling $2,475,684 without
         recourse. The profit from this sale was $105,078 or 36.43% of other
         income. The service charge on deposit accounts is relatively low, at
         $28,112 or 9.75% of other income. In order to attract new banking
         relationships, the Bank's fee structure and charges are low when
         compared to other banks. The Bank's fees and charges may increase in
         the future. Of the $154,912 in other income, which is 53.71% of total
         other income, $109,657 consists of mortgage origination and fee income
         from mortgage loans, which are not added to the Bank's loan portfolio.


     c.  Operating expenses for the nine-month period ended September 30, 1999
         amounted to $1,425,247, with the largest expense being related to
         salaries and employee benefits and professional and outside services.
         On an annualized basis, this represents 5.21% of total assets. The
         Company expects that in the future this percentage may decrease due to
         balance sheet growth outpacing expense growth.
<PAGE>

Three-Month Period Ended September 30, 1999

     Net income for the three-month period ended September 30, 1999 amounted to
$28,387, or $.02 per diluted share. 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.

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

          Federal funds sold     $ 3,731,543  $ 49,075      5.26%
          Securities               6,965,446    92,736      5.33%
          Loans                   21,373,232   573,401     10.73%
                                 -----------  --------     -----
               Total             $32,070,221  $715,212      8.92%
                                 ===========

          Deposits               $23,705,206  $266,404      4.50%
                                 ===========  --------      ----

          Net interest income                 $448,808      4.42%
                                              ========      ====

          Net yield on earning assets                       5.60%
                                                            ====

     b.  Other income for three-month period ended September 30, 1999 amounted
         to $106,815. On an annualized basis, this represents 1.17% of total
         assets. The Bank sold leases totaling $995,230 without recourse. The
         profit from this sale was $47,425 or 44.40% of other income. The
         service charge on deposit accounts was $9,609 or 9.00% of other income.
         This 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 Bank's fees and charges may increase in
         the future. Other income at $49,781 is 46.60% of total other income. Of
         this total, $38,211 is related to mortgage banking activities.

     c.  Operating expenses for the three-month period ended September 30, 1999
         amounted to $473,236, with the largest expense being related to
         salaries and employee benefits and professional and outside services.
         On an annualized basis, this represents 5.19% of total assets. The
         Company expects that in the future this percentage may decrease due to
         balance sheet growth outpacing expense growth.
<PAGE>

YEAR 2000 COMPLIANCE

     The Year 2000 issue refers generally to the data structure problem that may
prevent systems from properly recognizing dates after the year 1999. The Year
2000 issue affects information technology ("IT") systems, such as computer
programs and various types of electronic equipment that process date information
by using only two digits rather than four digits to define the applicable year,
and thus may recognize a date using "00" as the year 1900 rather than the Year
2000. The issue also affects some non-IT systems, such as devices which rely on
a micro controller to process date information. The Year 2000 issue could result
in system failures or miscalculations, causing disruptions of a company's
operations. For example, computer systems may compute payment, interest,
delinquency or other figures important to the operations of the Company based on
the wrong date. Moreover, even if the Company's systems are Year 2000 compliant,
a problem may exist to the extent that third parties with whom the Company deals
in financial transactions are not compliant.

     The Federal Deposit Insurance Corporation ("FDIC") has issued guidelines
for insured financial institutions with respect to Year 2000 compliance. The
Company has developed a Year 2000 action plan based in part on the guidelines
and timetables issued by the FDIC. The Company's action plan focuses on four
primary areas: (i) information systems, (ii) embedded systems located at the
Bank's offices, (iii) third party and customer relationships, and (iv)
contingency planning. The Company has designated a Year 2000 compliance team,
headed by its Chief Financial Officer and Chief Executive Officer, which reports
to the board of directors. In addition, the Company has engaged outside
consultants for purposes of conducting Year 2000 readiness assessments and
remediation where necessary.

     Information Systems. The Company has identified all mission critical IT
systems and has developed a schedule for testing and remediation of such
systems. Testing of key computer hardware and the modification or replacement of
such hardware, was completed during the first quarter of 1999. The Company has
completed its inventory of mission critical software or has contacted software
vendors for certification of Year 2000 compliance. Mission critical hardware
modification or replacement was completed during the first quarter of 1999. The
Company has also completed business resumption planning. Testing of the internal
business resumption occurred in September. There were no events during testing
that indicated normal banking operations in the Year 2000 will be impacted.

     Embedded Systems. The Company has performed a comprehensive inventory of
its embedded systems, such as microcontrollers used to operate security systems,
and has completed its inventory of mission critical non-IT systems. The Company
has had total cooperation from all of its mission critical vendors and has no
reason to believe any further change is necessary in order to avoid interruption
of service in the Year 2000.

     Third-Party and Customer Relationships. The Company has completed the
process of communicating with all suppliers and vendors to determine the
potential impact of such third parties' failure to remediate their own Year 2000
issues. These third parties include other financial institutions, office supply
vendors and telephone, electric and other utility companies. The Company has no
reason to believe that such third parties are not ready for the Year 2000 and
that normal banking operations will be impacted. The Company continues to
encourage its customers to conduct their own Year 2000 assessment and take
appropriate steps to become Year 2000 compliant.

     Contingency Plans. As part of the Company's normal business practice, it
maintains contingency plans to follow in the event of emergency situations, some
of which could arise from Year 2000-related problems. The Company has formulated
a detailed Year 2000 contingency plan, which contemplates several possible
scenarios to which the Company may be required to react. The Company's formal
Year 2000 contingency plan was successfully tested in September.

     Financial Implications. The Company believes that, since its equipment is
relatively new, the Year 2000 problem will not pose significant internal
operational problems or generate material additional expenditures. Maintenance,
testing, and modification costs have been expensed as incurred, while the costs
of new software or hardware will be capitalized and amortized over their useful
lives. Management currently does not expect the amounts required to be expensed
to resolve Year 2000 issues to have a material effect on its financial position
or
<PAGE>

results of operations. The costs of assessing, testing and remediation of Year
2000 issues totaled approximately $15,000 in 1998 and are expected to total
$12,000 in 1999. The costs associated with the Company's Year 2000 compliance
program do not include time and costs that may be incurred as a result of any
potential failure of third parties to become Year 2000 compliant or costs to
implement the Company's contingency plans.

     Potential Risks. The Year 2000 issue presents a number of risks to the
business and financial condition of the Company and the Bank. External factors,
which include, but are not limited to, electric and telephone service, are
beyond the control of the Company and the failure of such systems could have a
material adverse effect on the Company, its customers and third parties on whom
the Company relies for its day-to-day operations. The business of many of the
Company's customers may be negatively affected by the Year 2000 issue, and any
financial difficulties incurred by the Company's customers in connection with
the century change could negatively affect such customers' ability to repay
loans to the Company. The failure of the Bank's computer system or applications
or those operated by customers or third parties could have a material adverse
effect on the Bank's results of operations and financial condition.

     The foregoing are forward-looking statements reflecting management's
current assessment and estimates with respect to the Company's Year 2000
compliance efforts and the impact of Year 2000 issues on the Company's business
and operations. Various factors could cause actual plans and results to differ
materially from those contemplated by such assessments, estimates and forward-
looking statements, many of which are beyond the control of the Company. Some of
these factors include, but are not limited to, representations by the Company's
vendors and counterparties, technological advances, economic considerations, and
consumer perceptions. The Company's Year 2000 compliance program is an ongoing
process involving continual evaluation and may be subject to change in response
to new developments.
<PAGE>

                           PART II. OTHER INFORMATION


Item 5. Other Information.

In July, the Company announced the completion of a stock repurchase plan whereby
61,750 shares of its Common Stock were repurchased under a buyback program
announced on May 21, 1999. The aggregate amount spent in order to repurchase the
Common Stock was $588,469.

In August, the Company announced the start of another stock repurchase program
pursuant to which up to 58,622 shares of its Common Stock may be repurchased in
open market transactions. As of September 22, 1999, the Company completed this
repurchase program. The aggregate amount spent in order to repurchase the Common
Stock was $493,336.

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

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

     Exhibit No.     Description
     ------------    -----------

         27          Financial Data Schedule (for Commission use only).


(b)  Reports on Form 8-K. None
<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: November 10, 1999       By: /s/ H. N. Padget, Jr.
                                  ----------------------
                                  H. N. Padget, Jr., President
                                  and Chief Executive Officer
                                  (principal executive officer)

Date: November 10, 1999       By: /s/ Danny F. Dukes
                                  -------------------
                                  Danny F. Dukes, Senior Vice President,
                                  Chief Financial Officer
                                  (principal financial and accounting officer)