UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549
                                    FORM 10-K

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

                   For the Fiscal Year Ended December 31, 1999

            / / Transition Report Pursuant to Section 13 or 15(d) of
                       The Securities Exchange Act of 1934

                         Commission File Number 33-81890

                           Community Bankshares, Inc.
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             (Exact name of registrant as specified in its charter)

                  Georgia                                    58-1415887
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      (State or other jurisdiction of                    (I. R. S. Employer
       Incorporation or organization)                   Identification No.)


                 448 North Main Street, Cornelia, Georgia 30531
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               (Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (706)778-2265

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

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

         Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12  months(or  for such  shorter  period  that the
Registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .

         Indicate by check mark if disclosure of delinquent  filers  pursuant to
Item 405 of Regulation S-K is not contained herein and will not be contained, to
the  best  of  registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K.  Not  applicable.  Registrant is not required to be
registered under the Securities Exchange Act of 1934.

         Aggregate  market  value of the  voting  stock  held by  non-affiliates
(which for purposes  hereof are all holders  other than  executive  officers and
directors)  of the  Registrant  as of March 20,  2000:  $27,762,595  (based upon
approximate  market value of $40.00 /share,  the latest sales price known to the
Registrant  for the Common  Stock,  for which  there is no  established  trading
market.

         As of March 20, 2000, 2,178,830 shares of Common Stock, par value $1.00
per share, were issued and outstanding.

<PAGE>

                                     PART 1

ITEM 1.   BUSINESS.

         Community Bankshares, Inc. (the "Company") was organized under the laws
of Georgia in 1980 and commenced operations in 1981. The Company is a registered
bank holding company. All of the Company's activities are currently conducted by
or   through    its    subsidiaries,    Community    Bank   &    Trust-Habersham
("Community-Habersham"),  Community Bank & Trust-Alabama  ("Community-Alabama"),
Community  Bank  &  Trust-Jackson  ("Community-Jackson")  and  Community  Bank &
Trust-Troup   ("Community-Troup")    (collectively,   the   "Community   Banking
Subsidiaries") and the non-bank subsidiaries of  Community-Habersham,  Financial
Supermarkets,  Inc. ("Financial  Supermarkets") and Financial  Properties,  Inc.
("Financial Properties").

         All  references  herein to the Company  include  Community  Bankshares,
Inc., the Community Banking  Subsidiaries and Financial  Supermarkets unless the
context indicates a different meaning.

Forward Looking Statements
--------------------------

         This  Form  10-K,  both in the  Management's  Discussion  and  Analysis
section and elsewhere,  contains  forward-looking  statements  under the Private
Securities  Litigation Reform Act of 1995 that involve risks and  uncertainties.
Although we believe the assumptions  underlying the  forward-looking  statements
contained in the  discussions are  reasonable,  any of the assumptions  could be
inaccurate;  therefore, no assurance can be made that any of the forward-looking
statements  included in this  discussion  will be  accurate.  Factors that could
cause  actual  results  to differ  from  results  discussed  in  forward-looking
statements include,  but are not limited to: economic conditions (both generally
and in the  markets  where we  operate);  competition  from other  providers  of
financial services;  government regulation and legislation;  changes in interest
rates;  material  unforeseen changes in the financial stability and liquidity of
our  credit  customers;  and  other  risks  detailed  in our  filings  with  the
Securities  and Exchange  Commission,  all of which are difficult to predict and
which  may  be  beyond  our  control.  We  undertake  no  obligation  to  revise
forward-looking  statements to reflect  events or changes after the date of this
discussion or to reflect the occurrence of unanticipated events.

Business Description of Community Banking Subsidiaries
------------------------------------------------------

         GENERAL.    Each   of   the   Community    Banking    Subsidiaries   is
community-oriented  and offers such customary  banking  services as consumer and
commercial checking accounts,  NOW accounts,  savings accounts,  certificates of
deposit, lines of credit and money transfers.  Each Community Banking Subsidiary
finances  commercial  and consumer  transactions,  makes  secured and  unsecured
loans, and provides a variety of other banking services.

         DEPOSITS.  Each  Community  Banking  Subsidiary  offers a full range of
depository  accounts and services to both consumers and businesses.  At December
31, 1999, the Company's  aggregate deposit base, totaling  approximately  $444.1
million, consisted of approximately $65.8 million in non-interest-bearing demand
deposits   (14.82%  of  total   deposits),   approximately   $99.2   million  in
interest-bearing  demand deposits  (including money market accounts)  (22.34% of
total deposits), approximately $20.9 million in savings deposits (4.70% of total
deposits),  approximately  $178.2  million in time deposits in amounts less than
$100,000 (40.13% of total  deposits),  and  approximately  $80.0 million in time
deposits of $100,000 or more (18.01% of total deposits).

         LOANS.  Each  Community  Banking  Subsidiary  makes  both  secured  and
unsecured loans to individuals,  firms and  corporations,  and both consumer and
commercial lending operations include various types of credit for customers.  In
addition, the Company operates a loan production office in Gainesville,  Georgia
through  Community-Habersham.  The Gainesville loan production  office funds and
sells on the open market loans  guaranteed by the Small Business  Administration
(the "SBA") and  services  rights with respect to those  loans.  Each  Community
Banking  Subsidiary also makes direct  installment  loans to consumers on both a
secured  and  unsecured  basis.  At December  31,  1999,  consumer,  real estate
(including  mortgage and construction  loans) and commercial  loans  represented
approximately  13.56%, 31.20% and 54.60%,  respectively,  of the Company's total
loan portfolio.  The real estate loans made by each Community Banking Subsidiary
include residential real estate construction, acquisition and development loans,
as well as some loans for other purposes which are secured by real estate.
<PAGE>

         Commercial lending is directed principally toward businesses within the
defined market area of the Community Banking  Subsidiaries or which are existing
or  potential  deposit  customers of the  Community  Banking  Subsidiaries.  The
Gainesville loan production office,  however,  makes a large portion of loans to
individuals and businesses  that are not located in its market area.  Collateral
includes marketable  securities,  certificates of deposit,  accounts receivable,
inventory  and  equipment.   Commercial  lending  decisions  are  based  upon  a
determination of the borrower's ability and willingness to repay the loan, which
in turn are impacted by such factors as the borrower's  cash flow,  sales trends
and inventory  levels, as well as relevant  economic  conditions.  This category
includes  loans made to  individuals,  partnership  or corporate  borrowers  and
obtained for a variety of  purposes.  Risks  associated  with these loans can be
significant. Risks include, but are not limited to, fraud, bankruptcy,  economic
downturn,  deteriorated  or  non-existing  collateral,  and  changes in interest
rates.

         Some loans  secured by real  estate  which are made to  businesses  are
categorized as real estate loans.  Often, real estate collateral is deemed to be
superior to other collateral available to small- to medium-sized businesses. The
underwriting standards of and risks to the Community Banking Subsidiaries are as
described below with respect to real estate loans.

         The Community  Banking  Subsidiaries  offer  traditional first mortgage
loans to individuals for single-family  structures.  These loans are sold in the
secondary market.  Since the Community  Banking  Subsidiaries are originators of
mortgages rather than investors,  they sell them servicing-released.  They offer
loan-to-value  amounts  from  70%  to  95%.  Various  types  of  fixed-rate  and
variable-rate  products are available.  Risks involved with residential mortgage
lending  include,  but are not limited to, title  defects,  fraud,  general real
estate market deterioration,  inaccurate appraisals,  interest rate fluctuations
and financial deterioration of the borrower.

         The Community Banking  Subsidiaries also make residential  construction
loans,  generally  for  one-to-four  unit  structures.   The  Community  Banking
Subsidiaries  require  a  first  lien  position  on the  loans  associated  with
construction  projects  and offer  these  loans  only to bona fide  professional
building   contractors.   Loan  disbursements   require   independent,   on-site
inspections  to assure the project is on budget and that the loan  proceeds  are
being  used in  accordance  with the plans,  specifications,  and survey for the
construction  project and not being  diverted to other uses.  The  loan-to-value
ratio for such  loans is usually  75% to 85% of the  as-built  appraised  value.
Loans for  construction  can present a high degree of risk,  depending on, among
other  things,  whether the  builder  can sell the home to a buyer,  whether the
buyer can obtain permanent financing, whether the transaction produces income in
the interim, and the nature of changing economic conditions.

         Additionally,  the Community Banking  Subsidiaries make acquisition and
development loans to approved  developers for the purpose of developing  acreage
into single-family  lots on which houses will be built. The loan-to-value  ratio
for such loans  does not  exceed  75% of the value as defined by an  independent
appraisal,  or 100% of the cost,  whichever is less.  Loans for  acquisition and
development  can  present  a  high  degree  of  risk  to the  Community  Banking
Subsidiaries, depending upon, among other things, whether the developer can find
builders to buy the lots, whether the builders can obtain financing, whether the
transaction  produces income in the interim, and the nature of changing economic
conditions.

         In addition,  the Community  Banking  Subsidiaries make consumer loans,
consisting  primarily of installment  loans to individuals for personal,  family
and household purposes,  including loans for automobiles,  home improvements and
investments.  Consumer  lending  decisions are based on a  determination  of the
borrower's ability and willingness to repay the loan, which in turn are impacted
by such factors as the borrower's income, job stability, previous credit history
and collateral for the loan. Risks associated with these loans include,  but are
not  limited to,  fraud,  deteriorated  or  non-existing  collateral,  a general
economic downturn, and consumer financial problems.

         LENDING POLICY.  The current lending strategy of each Community Banking
Subsidiary is to offer consumer,  real estate and commercial  credit services to
individuals  and  entities  that  meet  the  Company's  credit  standards.  Each
Community  Banking  Subsidiary   provides  its  lending  officers  with  written
guidelines for lending  activities.  Lending authority is delegated by the Board
of Directors of the particular  Community  Banking  Subsidiary to loan officers,
each of whom is limited in the amount of secured and unsecured loans which he or
she can make to a single borrower or related group of borrowers.
<PAGE>

         LOAN  REVIEW  AND   NON-PERFORMING   ASSETS.   Each  Community  Banking
Subsidiary  reviews its loan portfolio to determine  deficiencies and corrective
action to be taken, and the Company reviews the loan portfolio of each Community
Banking  Subsidiary.   Senior  lending  officers  conduct  periodic  reviews  of
borrowers  with total  direct and indirect  indebtedness  of $75,000 or more and
ongoing  reviews of all past due  loans.  Past due loans are  reviewed  at least
weekly by  lending  officers  and a summary  report is  reviewed  monthly by the
particular  Community  Banking  Subsidiary's  Board of Directors.  Each Board of
Directors review all loans over $100,000,  whether current or past due, at least
once annually. In addition, each Community Banking Subsidiary maintains internal
classifications of problem and potential problem loans.

         ASSET/LIABILITY  MANAGEMENT.  Each Community Banking Subsidiary's Board
of  Directors  is charged  with  establishing  policies to manage the assets and
liabilities  of the bank.  Each  Board's  task is to manage  asset  growth,  net
interest margin and liquidity and capital.  The Board directs the bank's overall
acquisition  and  allocation  of funds.  At monthly  meetings,  a  committee  of
executives  of the  Company  receives a report from each bank with regard to the
monthly  asset and  liability  funds  budget and income  and  expense  budget in
relation to the actual composition and flow of funds, the ratio of the amount of
rate-sensitive assets to the amount of rate-sensitive liabilities, the amount of
interest  rate  risk  and  equity  market  value  exposure  under  varying  rate
environments,  the ratio of loan loss  reserve  to  outstanding  loans and other
variables, such as expected loan demand, investment opportunities,  core deposit
growth  within  specified  categories,   regulatory  changes,   monetary  policy
adjustments and the overall condition of the local and state economy.

         INVESTMENT  POLICY.  The Company's  investment  portfolio  policy is to
maximize  income  consistent  with  liquidity,   asset  quality  and  regulatory
constraints.  The policy is reviewed from time to time by the Company's Board of
Directors.  Individual  transactions,  portfolio composition and performance are
reviewed  and  approved  monthly  by the  Board of  Directors  of each bank or a
committee thereof. The President of each Community Banking Subsidiary implements
the policy and reports to the bank's full Board of Directors on a monthly  basis
information  concerning  sales,  purchases,  resultant gains or losses,  average
maturity,  federal taxable equivalent yields and appreciation or depreciation by
investment categories.

Business Description of Non-banking Subsidiaries
------------------------------------------------

         FINANCIAL  SUPERMARKETS.  Financial  Supermarkets,  formed as a Georgia
corporation in 1984, is a wholly-owned subsidiary of Community-Habersham and has
three divisions. Financial Supermarkets' primary division, The Supermarket Bank,
provides various consulting and licensing services to financial  institutions in
connection  with the  establishment  of bank  branches  in  supermarkets.  These
services  are  marketed  to  international,  national,  regional  and  community
financial institutions. Financial Supermarkets enters into agreements with major
supermarket chains for the right to establish bank branches in particular sites.
Financial  Supermarkets  then  licenses  such  rights,  along  with the right to
operate  the  "Supermarket  Bank",  to  individual  financial  institutions,  in
addition to  providing  consulting  services to such  institutions  ranging from
providing alternative construction designs to coordinating employee training.

         Since  1984,  Financial  Supermarkets  has  assisted  clients  with the
development of  Supermarket  Bank  facilities in grocery  stores  throughout the
United States.  Financial  Supermarkets  primarily competes in the in-store bank
branch consulting business with International  Banking  Technologies of Atlanta,
Georgia, and Memphis-based National Commerce Bank Services,  Inc. a wholly owned
subsidiary of National Commerce Bancorporation.

         Over its 14-year history, Financial Supermarkets has expanded the scope
of its business  beyond the  supermarket  bank  industry.  In 1988,  it formed a
consulting  division for the financial services industry.  The division is based
in Atlanta and works with financial  institutions across the Southeastern United
States with regard to state and federal  regulatory  compliance issues and other
day-to-day operational matters.

         In  1992,  Financial   Supermarkets  formed  a  full-service  marketing
consulting  firm  to  consult  with  financial  institutions  primarily  in  the
Southeastern United States, in addition to working closely with Supermarket Bank
clients to develop related advertising and marketing programs.

         In 1994,  Financial  Supermarkets  formed a travel  agency  to  provide
customers with a full range of travel services.
<PAGE>

         FINANCIAL  PROPERTIES.   Community-Habersham  acquired  in  March  1998
Financial  Properties,  Inc.  ("Financial  Properties").   Financial  Properties
engages in real estate brokerage and related activities.

Competition
-----------

         The  banking  business  is  highly   competitive.   Community-Habersham
competes  with four other  institutions  in  Habersham  County,  Georgia,  three
institutions  in White County,  Georgia,  and nine  institutions in Hall County,
Georgia;  Community -Jackson competes with five other depository institutions in
Jackson County,  Georgia;  Community-Alabama  competes with one other depository
institution in Bullock County, Alabama, and eleven other depository institutions
in Montgomery, Alabama, and Community-Troup competes with eight other depository
institutions in Troup County,  Georgia.  Each Community Banking  Subsidiary also
competes with other financial service organizations,  including savings and loan
associations,   finance  companies,   credit  unions  and  certain  governmental
agencies. To the extent that banks must maintain  non-interest-earning  reserves
against deposits,  they may be at a competitive  disadvantage when compared with
other financial service organizations that are not required to maintain reserves
against  substantially  equivalent  sources  of funds.  Further,  the  increased
competition  from  investment  bankers and brokers and other  financial  service
organizations  may have a significant  impact on the competitive  environment in
which each Community Banking Subsidiary operates.

Employees
---------

         At December 31, 1999,  the Company had 290  full-time  employees and 46
part-time employees.  Neither the Company nor any of its subsidiaries is a party
to any collective bargaining  agreement,  and management of the Company believes
that its employee relations are good.

Supervision and Regulation
--------------------------

         GENERAL.  The Company is a registered  bank holding  company subject to
regulation  by the Board of  Governors  of the  Federal  Reserve  (the  "Federal
Reserve")  under the Bank  Holding  Company Act of 1956,  as amended  (the "Bank
Holding Act").  The Company is required to file financial  information  with the
Federal  Reserve  periodically  and is subject to  periodic  examination  by the
Federal Reserve.

         The Act  requires  every bank  holding  company  to obtain the  Federal
Reserve's prior approval before (1) it may acquire direct or indirect  ownership
or  control  of more than 5% of the  voting  shares of any bank that it does not
already control;  (2) it or any of its non-bank  subsidiaries may acquire all or
substantially  all of the assets of a bank;  and (3) it may merge or consolidate
with any other bank  holding  company.  In addition,  a bank holding  company is
generally prohibited from engaging in, or acquiring,  direct or indirect control
of the voting  shares of any company  engaged in  non-banking  activities.  This
prohibition  does not  apply  to  activities  listed  in the Act or found by the
Federal  Reserve,  by order or regulation,  to be closely  related to banking or
managing or controlling  banks as to be a proper incident  thereto.  Some of the
activities  that the Federal Reserve has determined by regulation or order to be
closely related to banking are:

         o        making or servicing loans and certain types of leases;
         o        performing certain data processing services;
         o        acting as fiduciary or investment or financial advisor;
         o        providing brokerage services;
         o        underwriting bank eligible securities;
         o        underwriting  debt and equity  securities  on a limited  basis
                  through  separately  capitalized  subsidiaries;  and o  making
                  investments in corporations or projects designed  primarily to
                  promote community welfare.

         In addition,  bank holding companies whose banking subsidiaries are all
well-capitalized  and  well-managed  may  apply to  become a  financial  holding
company.  Financial holding companies have the authority to engage in activities
that are  "financial  in nature" that are not  permitted  for other bank holding
companies.  Some of the activities that the Act provides are financial in nature
are:
<PAGE>

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

         Effective  March 13, 2000, we were  registered  as a financial  holding
company, but have no immediate plans to engage in new activities.

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

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

         Community-Habersham,  Community-Jackson and Community-Troup, as Georgia
banking  associations,  are  subject to the  supervision  of, and are  regularly
examined by, the Federal Deposit Insurance Corporation (the "FDIC") and the DBF.
Community-Alabama  is subject to the  supervision and examination of the Alabama
State Banking  Department (the "ABD") in addition to the FDIC. Both the FDIC and
the DBF  must  grant  prior  approval  of any  merger,  consolidation  or  other
corporate  reorganization  involving  Community-Habersham,  Community-Jackson or
Community-Troup.  The ABD must grant prior approval of any merger, consolidation
or other corporate  reorganization  involving  Community-Alabama.  A bank can be
held liable for any loss incurred by, or reasonably  expected to be incurred by,
the FDIC in connection with the default of a commonly-controlled institution.

         PAYMENT OF  DIVIDENDS.  The  Company  is a legal  entity  separate  and
distinct from the Community  Banking  Subsidiaries.  Most of the revenues of the
Company result from dividends paid to it by the Community Banking  Subsidiaries.
There are statutory  and  regulatory  requirements  applicable to the payment of
dividends by the Community  Banking  Subsidiaries,  as well as by the Company to
its shareholders.

         The  Community  Banking  Subsidiaries  are each  state-chartered  banks
regulated by the DBF or ABD, as applicable,  and the FDIC. Under the regulations
of the DBF,  dividends  may not be declared  out of the  retained  earnings of a
Georgia bank without first  obtaining  the written  permission of the DBF unless
such bank meets all of the following requirements:

         (a)      Total classified  assets as of the most recent  examination of
                  the bank do not exceed 80% of equity  capital  (as  defined by
                  regulation);
<PAGE>

         (b)      The aggregate  amount of dividends  declared or anticipated to
                  be  declared in the  calendar  year does not exceed 50% of the
                  net profits after taxes but before  dividends for the previous
                  calendar year; and

         (c)      The ratio of equity  capital  to  adjusted  assets is not less
                  than 6%.

         Under the regulations of the ABD,  dividends may be declared by a state
bank without  obtaining  the prior  written  approval of the ABD only if (i) the
bank's  surplus  (as  defined  by  regulation)  is equal to at least  20% of its
capital (as  defined by  regulation)  and (ii) the  aggregate  of all  dividends
declared or  anticipated to be declared in the calendar year does not exceed the
total of its net earnings (as defined by  regulation) of that year combined with
its retained net earnings of the preceding two year, less any required transfers
to surplus.  No dividends may be paid from an Alabama bank's surplus without the
prior written approval of the ABD.

         The  payment of  dividends  by the Company  and the  Community  Banking
Subsidiaries  may also be  affected  or  limited by other  factors,  such as the
requirement  to  maintain  adequate  capital  above  regulatory  guidelines.  In
addition,  if, in the opinion of the  applicable  regulatory  authority,  a bank
under  its  jurisdiction  is  engaged  in or is about to  engage in an unsafe or
unsound practice (which, depending upon the financial condition of the Community
Banking Subsidiaries, could include the payment of dividends) such authority may
require,  after  notice and  hearing,  that such bank cease and desist from such
practice.  The FDIC has issued a policy  statement  providing that insured banks
should  generally  only pay  dividends  out of current  operating  earnings.  In
addition to the formal statutes and regulations, regulatory authorities consider
the adequacy of each of the  Community  Banking  Subsidiary's  total  capital in
relation  to its  assets,  deposits  and  other  such  items.  Capital  adequacy
considerations  could  further  limit  the  availability  of  dividends  to  the
Community  Banking  Subsidiaries.   At  December  31,  1999,  retained  earnings
available  from the Community  Banking  Subsidiaries  to pay  dividends  totaled
approximately  $4.3 million.  For 1999,  the Company's  cash dividend  payout to
shareholders was 5.36% of net income.

         MONETARY  POLICY.  The results of operations  of the Community  Banking
Subsidiaries   are  affected  by  credit   policies  of  monetary   authorities,
particularly the Federal Reserve. The instruments of monetary policy employed by
the  Federal  Reserve  include  open  market   operations  in  U.S.   government
securities,  changes in the  discount  rate on bank  borrowings  and  changes in
reserve  requirements  against bank deposits.  In view of changing conditions in
the national economy and in the money markets,  as well as the effect of actions
by monetary and fiscal authorities, including the Federal Reserve, no prediction
can be made as to possible  future changes in interest  rates,  deposit  levels,
loan demand or the business and earnings of the Community Banking Subsidiaries.

         CAPITAL  ADEQUACY.  The Federal  Reserve and the FDIC have  implemented
substantially  identical  risk-based  rules for assessing  bank and bank holding
company capital adequacy.  These regulations establish minimum capital standards
in relation to assets and  off-balance  sheet  exposures  as adjusted for credit
risk. Banks and bank holding  companies are required to have (1) a minimum level
of total capital (as defined) to risk-weighted assets of eight percent (8%); (2)
a minimum Tier One Capital (as defined) to risk-weighted  assets of four percent
(4%); and (3) a minimum stockholders' equity to risk-risk-weighted assets of our
percent (4%). In addition,  the Federal Reserve and the FDIC have  established a
minimum three  percent (3%)  leverage  ratio of Tier One Capital to total assets
for the most highly-rated banks and bank holding  companies.  "Tier One Capital"
generally consists of common equity not including  unrecognized gains and losses
on  securities,   minority   interests  in  equity   accounts  of   consolidated
subsidiaries and certain perpetual preferred stock less certain intangibles. The
Federal  Reserve and the FDIC will  require a bank  holding  company and a bank,
respectively,  to maintain a leverage  ratio  greater than three percent (3%) if
either is experiencing or anticipating  significant  growth or is operating with
less than  well-diversified  risks in the  opinion of the Federal  Reserve.  The
Federal  Reserve  and the  FDIC  use the  leverage  ratio  in  tandem  with  the
risk-based  ratio to assess  the  capital  adequacy  of banks  and bank  holding
companies.  The FDIC, the Office of the  Comptroller of the Currency (the "OCC")
and the Federal Reserve amended, effective January 1, 1997, the capital adequacy
standards to provide for the  consideration of interest rate risk in the overall
determination  of a bank's capital ratio,  requiring banks with greater interest
rate risk to maintain adequate capital for the risk.
<PAGE>

         In  addition,  effective  December  19,  1992,  a new Section 38 to the
Federal  Deposit   Insurance  Act  implemented  the  prompt   corrective  action
provisions  that  Congress  enacted as a part of the Federal  Deposit  Insurance
Corporation  Improvement  Act of 1991 (the "1991 Act").  The "prompt  corrective
action" provisions set forth five regulatory zones in which all banks are placed
largely  based on their  capital  positions.  Regulators  are  permitted to take
increasingly harsh action as a bank's financial condition  declines.  Regulators
are also  empowered  to place in  receivership  or require the sale of a bank to
another depository  institution when a bank's capital leverage ratio reaches two
percent (2%).  Better  capitalized  institutions  are generally  subject to less
onerous regulation and supervision than banks with lesser amounts of capital.

         The FDIC has adopted  regulations  implementing  the prompt  corrective
action  provisions of the 1991 Act, which place  financial  institutions  in the
following  five  categories  based  upon  capitalization  ratios:  (1)  A  "well
capitalized" institution has a total risk-based capital ratio of at least 10%, a
Tier One  risk-based  ratio of at least 6% and a leverage  ratio of at least 5%;
(2) an "adequately capitalized" institution has a total risk-based capital ratio
of at least 8%, a Tier One risk-based  ratio of at least 4% and a leverage ratio
of at least 4%; (3) an  "undercapitalized"  institution  has a total  risk-based
capital ratio of under 8%, a Tier One risk-based ratio of under 4% or a leverage
ratio of under 4%;  (4) a  "significantly  undercapitalized"  institution  has a
total risk-based capital ratio of under 6%, a Tier One risk-based ratio of under
3% or a  leverage  ratio of under 3%;  and (5) a  "critically  undercapitalized"
institution has a leverage ratio of 2% or less. Institutions in any of the three
undercapitalized  categories  would be prohibited  from  declaring  dividends or
making capital distributions. The FDIC regulations also establish procedures for
"downgrading"  an institution  to a lower capital  category based on supervisory
factors other than capital.  Under the FDIC's regulations,  all of the Community
Banking Subsidiaries were "well capitalized" institutions at December 31, 1999.

         Set forth below are  pertinent  capital  ratios for the Company and the
Community Banking Subsidiaries as of December 31, 1999.

<TABLE>
<CAPTION>
Minimum Capital              Community     Community      Community      Community         The
Requirement                 -Habersham     -Jackson        -Alabama       -Troup        Company
---------------------       -----------    ----------     ---------      --------      ---------
<S>                          <C>           <C>            <C>            <C>           <C>
     Tier One Capital           11.91%         9.33%         10.21%         11.23%        10.71%
       to Risk-based
     Assets: 4.00%<F1>

     Total Capital to           13.17%        10.58%         11.46%         12.48%        11.97%
        Risk-based
     Assets 8.00%<F2>

      Leverage Ratio            8.65%          6.82%          7.27%         8.23%          8.54%
     (Tier One Capital
    to Average Assets)
         4.00%<F3>


<FN>
<F1>  Minimum  required  ratio for "well  capitalized"  banks is 6%
<F2>  Minimumrequired ratio for "well  capitalized"  banks is 10%
<F3>  Minimum required ratio for "well capitalized" banks is 5%
 </FN>
 </TABLE>


<PAGE>

         RECENT LEGISLATIVE AND REGULATORY ACTION.

         On November 12, 1999,  President Clinton signed the  Gramm-Leach-Bliley
Act, a very significant piece of legislation intended to modernize the financial
services industry. The bill repeals the anti-affiliation  provisions of the 1933
Glass-Steagall   Act  to  allow  for  the  merger  of  banking  and   securities
organizations   and  permits  banking   organizations  to  engage  in  insurance
activities including insurance  underwriting.  The bill also allows bank holding
companies to engage in financial  activities  that are  "financial  in nature or
complementary  to a financial  activity."  The act lists the expanded areas that
are financial in nature and includes  insurance and securities  underwriting and
merchant banking among others. The bill also:

         o        prohibits    non-financial    entities   from   acquiring   or
                  establishing a thrift while  grandfathering  existing  thrifts
                  owned by non-financial entities.

         o        establishes  state  regulators as the  appropriate  functional
                  regulators  for insurance  activities  but provides that state
                  regulators  cannot "prevent or  significantly  interfere" with
                  affiliations between banks and insurance firms.

         o        contains provisions designed to protect consumer privacy.  The
                  bill requires financial  institutions to disclose their policy
                  for  collecting and protecting  confidential  information  and
                  allows  consumers to "opt out" of  information  sharing except
                  with  unaffiliated  third parties who market the institutions'
                  own  products  and  services or  pursuant to joint  agreements
                  between two or more financial institutions.

         o        provides  for  functional  regulation  of a bank's  securities
                  activities by the Securities and Exchange Commission.

         Various portions of the bill have different  effective  dates,  ranging
from immediately to more than a year for implementation.

ITEM 2.   PROPERTIES.

         Community-Habersham's  main office is located at 448 North Main Street,
Cornelia,  Georgia.  Community-Jackson's main office is located at 117 North Elm
Street, Commerce, Georgia.  Community-Alabama's main office is located at 202 N.
Powell Street, Union Springs, Alabama.  Community-Troup's main office is located
at 201 Broad Street, LaGrange, Georgia.  Community-Habersham has fourteen branch
offices (four owned and ten leased,  nine of which are operated in supermarkets)
located in Cornelia,  Clarkesville,  Clayton, Cleveland, Demorest,  Gainesville,
and Toccoa,  Georgia. In addition,  the Bank leases the property occupied by the
Loan Production Office in Gainesville. Community-Jackson has five branch offices
(one owned and four leased, three of which are operated in supermarkets) located
in Commerce and Jefferson, Georgia. Community-Alabama has one branch (leased and
operated in a  supermarket)  in Montgomery,  Alabama.  Community - Troup has one
branch  office  (leased and operated in a  supermarket)  in  LaGrange,  Georgia.
Financial  Supermarkets owns its main office located in Cornelia,  Georgia,  and
leases a division office in Atlanta, Georgia. Management of the Company believes
that all of its properties are adequately covered by insurance.


ITEM 3.   LEGAL PROCEEDINGS.

         The Company is not a party to, nor is any of its  property  the subject
of, any material pending legal proceedings.


ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

         No matters were submitted to a vote of security  holders of the Company
during the fourth quarter of its fiscal year.
<PAGE>

                                     PART II

ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

         There is no established  public trading market for the Common Stock. As
of  January  1, 2000,  there  were 474  holders  of record of the Common  Stock.
Management  is aware of 32 and 30 trades of Company  stock during 1999 and 1998,
respectively.  During  1999,  trades  ranged from 25 shares to 13,849  shares at
prices ranging from $33.00 to $40.00 per share.  During 1998, trades ranged from
25 shares to 9,000 shares at prices ranging from $25.00 to $33.00 per share.

         In 1999, the Company paid cash dividends of $.15 per share. The Company
paid cash dividends of $.15 and $.14 in 1998 and 1997, respectively. The Company
intends to continue to pay cash dividends.  However, the amount and frequency of
dividends will be determined by the Company's Board of Directors in light of the
earnings,  capital  requirements and the financial condition of the Company, and
no  assurances  can be given  that  dividends  will be paid in the  future.  The
Company's ability to pay dividends will also be dependent on cash dividends paid
to it by the  Community  Banking  Subsidiaries.  The  ability  of the  Community
Banking Subsidiaries to pay dividends to the Company is restricted by applicable
regulatory requirements. See "ITEM 1 -- BUSINESS -- Supervision and Regulation."


<PAGE>



ITEM 6.           SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
                                                                     Year Ended December 31,
                                                         1999        1998        1997        1996         1995
                                                 --------------------------------------------------------------
                                                        Dollars in Thousands, Except Per Share Amounts
<S>                                                   <C>         <C>        <C>         <C>         <C>
SELECTED INCOME STATEMENT DATA:

     Total interest income                            $40,290    $ 34,613    $ 28,703    $ 24,465     $ 21,871

     Total interest expense                            17,697      15,950      13,191      11,236        9,875

     Net Interest income                               22,593      18,663      15,512      13,229       11,996

     Provision for loan losses                          1,637       1,165         936         757          849

     Non bank subsidiary income                         6,720       9,043       8,820       5,559        3,780

     Other operating income                             4,790       4,338       3,599       2,833        2,432

     Other operating expenses                          23,831      20,402      18,724      14,950       12,970

     Net income                                         6,076       7,032       5,647       4,044        3,125

Diluted earnings per share                               2.80        3.20        2.60        1.93         1.54

     Cash dividends per share                            0.15        0.15        0.14        0.14         0.13

SELECTED BALANCE SHEET DATA:

Total assets                                         $516,150   $ 460,593   $ 377,080   $ 315,579    $ 270,007

Total deposits                                        444,056     405,283     335,545     278,709      242,442

Other borrowings                                       16,054       5,808         462         616          787

Redeemable common stock held
     by ESOP                                           13,982      14,254      10,622       6,177            -

Shareholders' equity                                   30,820      26,291      23,119      21,083       22,469

</TABLE>



<PAGE>


Item 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
          AND RESULTS OF OPERATION.

         The following is a discussion  and analysis of the Company's  financial
condition at December 31, 1999 and the results of operations  for the three year
period ended  December 31, 1999.  The purpose of the  discussion  is to focus on
information  about the Company's  financial  condition and results of operations
which  are not  otherwise  apparent  from  the  audited  consolidated  financial
statements  included in this annual report.  This discussion and analysis should
be read in conjunction  with the consolidated  financial  statements and related
notes and the selected  financial  information  and  statistical  data presented
elsewhere in this Annual Report.

         BALANCE SHEET REVIEW. The Company experienced significant growth during
1999.  For the year ended  December  31,  1999,  consolidated  assets grew $55.6
million, or 12.06%, up from 1998 growth of $83.5 million or 22.15%. During 1999,
the Company's  average assets were $494.7 million,  compared with $418.6 million
during 1998.  This  represents an 18.19%  increase in average assets during 1999
compared with a 22.35% increase during 1998.

         Total earning  assets,  which  include  investment  securities,  loans,
Federal  Funds sold,  and  interest-bearing  deposits in banks  increased  $50.0
million or 12.17%  during 1999.  During 1998,  earning  assets  increased  $76.9
million,  or 23.04%.  Average  earning  assets for 1999 were $443.3 million , an
increase of 19.38% over average earning assets in 1998 which were $371.3 million
or an increase of 19.95% over 1997.
         Total  investments  increased  by $7.6  million  or 10.41%  over  1998.
Average  investments  were $79.5 million for 1999, a 4.52% increase over average
investments  for 1998.  This increase  occurred mainly in the available for sale
portfolio.

         Total loans grew by $62.7 million during 1999 for an increase of 19.97%
over 1998.  During  1999  average  loans were  $350.3  million or an increase of
22.57%  over  1998  compared  to an  increase  during  1998 of  28.07% to $285.8
million.  The increase in loans is primarily the result of continued loan growth
in the Company's existing markets.

          Federal Funds sold  decreased by $19.9 million or 87.16% from year end
1998 to 1999.  Average  Federal  Funds for 1999 were  $13.1  million or a 37.73%
increase. During 1998, average Federal Funds sold decreased by of $.2 million or
2.15% as compared to 1997.

         The growth in assets for the year ended  December  31,  1999 was funded
mainly by growth in  deposits  and  advances  from the  Federal  Home Loan Bank.
Consolidated  deposits  grew $38.8 million or 9.57% in 1999 as compared to $69.7
million or 20.78% in 1998. Deposit growth was concentrated in time deposits. The
Company  experienced a 5.00%  increase in interest  bearing  demand with minimal
growth in  noninterest-bearing  demand and  savings.  The Company  borrowed  $10
million  from the  Federal  Home Loan Bank to add to the $5 million  advanced in
1998.

          As shown in Table 2 of the  Selected  Statistical  Data,  the  average
yields on interest  earning  assets and interest  bearing  liabilities  showed a
slight  decrease  from  1998 to 1999  due to a  fairly  stable  market.  The net
interest  spread  increased  by 4 basis  points  from 1998 to 1999,  and the net
interest margin increased by 7 basis points from 1998 to 1999.

         At December 31, 1999,  the Company  reported net  unrealized  losses of
approximately  $1,327,000  in the  securities  available  for sale  portfolio as
compared to net unrealized gains of approximately $227,000 at December 31, 1998.
Net unrealized gains (losses)  represent the difference in the amortized cost of
those  securities  compared to the fair value at those dates and are included in
shareholders' equity, net of the tax effect. Management sells securities to meet
liquidity needs and may sell securities in rising interest-rate  environments to
take advantage of higher returns in the long run. In 1998 the Company sold $14.2
million of securities  classified as available for sale,  realizing net gains of
$78,653 on a consolidated  basis. The company had no sales of securities  during
1999. The held to maturity  securities  portfolio included net unrealized losses
of approximately  $590,000 at December 31, 1999 compared to net unrealized gains
of $1,259,000 in 1998.  Table 4 of the Selected  Statistical Data summarizes the

<PAGE>

combined investment  portfolios by types of securities.  U.S. Treasury and other
U.S.  Government  agencies  and  corporations  represent  37.87%  of  the  total
portfolio,  which typically  provide  reasonable  returns with limited risk. The
remaining  portfolio  is  comprised  of  municipal  securities,  mortgage-backed
securities, and other investments which provide, in general, higher returns on a
tax equivalent basis, with greater risk elements.  Management regularly monitors
the Company's  investment  portfolios and utilizes forecasting models to project
the  Company's  net  interest  margin  in  various  rising,  flat,  and  falling
interest-rate  scenarios.  In a changing interest rate  environment,  management
would act to change the Company's  asset or liability  composition  and interest
sensitivity  in response to a  definitive  change in the  direction  of interest
rates. The Company actively manages the mix of asset and liability maturities to
control  the effects of changes in the  general  level of interest  rates on net
interest income. Except for the effect of inflation on interest rates, inflation
does not have a material impact on the Company due to variability and short-term
maturities of its earning assets repriced or matured within one year.

         LIQUIDITY AND CAPITAL RESOURCES. The liquidity and capital resources of
the Company and the Community  Banking  Subsidiaries are monitored by management
and on a  periodic  basis by  state  and  federal  regulatory  authorities.  The
individual Community Banking Subsidiaries' liquidity ratios at December 31, 1999
were  considered  satisfactory  under their own guidelines as well as regulatory
guidelines.  At  that  date,  the  Community  Banking  Subsidiaries'  short-term
investments were adequate to cover any reasonably anticipated immediate need for
funds.

         The  purpose of  liquidity  management  is to ensure  that cash flow is
sufficient to satisfy  demands for credit,  withdrawals,  and other needs of the
Company. Traditional sources of liquidity include asset maturities and growth in
core deposits.  A company may achieve its desired liquidity  objectives from the
management of assets and liabilities,  and through funds provided by operations.
Funds invested in short-term marketable  instruments and the continuous maturing
of other earning assets are sources of liquidity from the asset perspective. The
liability  base  provides  sources  of  liquidity  through  deposit  growth  and
accessibility to market sources of funds.

         Scheduled  loan payments are a relatively  stable source of funds,  but
loan  payoffs and  deposit  flows are  influenced  by  interest  rates,  general
economic conditions and competition and may fluctuate significantly. The Company
attempts to price its deposits to meet its asset/liability objectives consistent
with local market conditions.

         Cash flows for the Company are of three  major  types.  Cash flows from
operating  activities  consist primarily of interest and fees received on loans,
interest  received on investment  securities,  federal funds sold,  and interest
bearing deposits less cash paid for interest and operating  expenses.  Investing
activities use cash for the purchase of  interest-bearing  deposits,  investment
securities,  fixed assets and to fund loans.  Investing activities also generate
cash from the proceeds of matured interest-bearing  deposits, matured investment
securities,  sales of  investment  securities,  loan  repayments  and  principal
prepayments of securities.  Cash flows from financing  activities  generate cash
from a net increase in deposit  accounts,  the increases in other borrowed funds
and the issuance of common stock.  Financing activities use cash for the payment
of cash dividends and the repayment of other borrowed funds.

         For the year ended December 31, 1999,  $40.3 million in cash flows from
operating  activities  were  provided by interest and fees  received from loans,
securities  and federal  funds.  Approximately  $11.5 million in cash flows were
provided by service charges,  nonbank subsidiary income, sale of loans and other
income.  Cash flows used in operating  activities  consisted of $18.4 million of
interest  paid on deposits and  borrowings,  $12.3 million paid for salaries and
other  personnel  benefits and $14.0  million paid for  occupancy  and equipment
<PAGE>

expenses, income taxes and other operating payments. Cash flows of $10.3 million
were provided by maturities of  investment  securities.  Cash flows  provided by
financing  activities  consisted  primarily of $38.8 million in net increases in
deposits and an increase in other  borrowings  of $10 million.  The increases in
deposits and other  borrowings  were primarily used to fund the $64.4 million in
net increase in loans.  The net increase in cash and due from banks for the year
ended December 31, 1999 was $5.0 million.

         For the year ended December 31, 1998,  $33.4 million in cash flows from
operating  activities  were  provided by interest and fees  received from loans,
securities  and federal  funds.  Approximately  $13.4 million in cash flows were
provided by service charges,  nonbank subsidiary income, sale of loans and other
income.  Cash flows used in operating  activities  consisted of $14.8 million of
interest  paid on deposits and  borrowings,  $10.7 million paid for salaries and
other  personnel  benefits and $13.2  million paid for  occupancy  and equipment
expenses, income taxes and other operating payments. Cash flows of $41.2 million
were provided by the proceeds of sales and maturities of investment  securities.
Cash flows  provided by  financing  activities  consisted  $69.7  million in net
increases in deposits and an increase in other  borrowings of $5.5 million.  The
increases in deposits and other borrowings were primarily used to fund the $69.7
million net  increase in loans.  The net increase in cash and due from banks for
the year ended December 31, 1998 was $2.8 million.

         At December 31, 1999, the Company's and Community Banking Subsidiaries'
capital ratios were considered adequate based on minimum capital requirements of
the FDIC and  applicable  state  regulatory  agencies.  During 1999, the Company
increased  capital by retaining net earnings of $5.7 million and the issuance of
$.09 million in common stock  compared to an increase in 1998 of $6.7 million in
retained net earnings. Management believes that the liquidity and capital ratios
of the Company and the  Community  Banking  Subsidiaries  are adequate  based on
regulatory requirements.

         The Company is capable of meeting its debt service requirements related
to existing long-term and other borrowings through dividends  available from its
subsidiaries and current operations.  Although the Company considers that it has
adequate capital to meet its short-term  needs, the Company,  at times, may seek
additional capital to support its long-term business goals,  including expansion
of its fixed asset base, and for general corporate purposes.

         For a  tabular  presentation  of the  Community  Banking  Subsidiaries'
capital ratios at December 31, 1999 see "SUPERVISION AND REGULATION".

         The Company is not aware of any other trends,  events or  uncertainties
that will have or that are  reasonably  likely to have a material  effect on the
Company's liquidity,  capital resources or operations.  The Company is not aware
of any current recommendations by the regulatory authorities which, if they were
implemented, would have such an effect.

         EFFECTS  OF  INFLATION.   Inflation   impacts  banks  differently  than
non-financial  institutions.  Banks,  as financial  intermediaries,  have assets
which  are  primarily  monetary  in  nature  and which  tend to  fluctuate  with
inflation.  A bank can reduce  the  impact of  inflation  by  managing  its rate
sensitivity gap, which represents the difference between  rate-sensitive  assets
and  rate-sensitive  liabilities.   The  Company,  through  its  asset-liability
committee,  attempts  to  structure  the assets and  liabilities  and manage the
rate-sensitivity  gap,  thereby  seeking to minimize  the  potential  effects of
inflation. See "Asset/liability Management".

RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998

         NET INTEREST INCOME. The Company's results of operations are influenced
by management's  ability to effectively  manage interest income and expense,  to
minimize loan and  investment  losses,  to generate  non-interest  income and to
control  operating  expenses.  Because  interest  rates are determined by market
forces and economic conditions beyond the control of the Company,  the Company's
ability to generate net interest  income is dependent upon its ability to obtain
an  adequate  net  interest  spread  between  the rate paid on  interest-bearing
liabilities and the rate earned on  interest-earning  assets.  The Company's net
interest  income  increased by $3.9 million for the year ended December 31, 1999
as  compared  to an  increase  of $3.2  million  for the same period in 1998 The
increase in net interest  income is attributable to increases in earning assets,
particularly  loans.  The yield on  interest-earning  assets  decreased 23 basis
points  in 1999 from  1998,  while the  yield on  interest  earning  liabilities
decreased by 27 basis points. The increase in average interest earning assets of
$72.0 million,  net of the increase in average  interest-bearing  liabilities of
$55.4  million,  accounts for the 21.06%  increase in net interest  income.  Net
interest income increased for all Community Banking Subsidiaries.

         The 4 basis point increase in the net interest spread in Table 2 is due
in part to the  percentage  on  interest  income  earned  from loans  increasing
compared to 1998. In addition,  the rates on deposits  decreased slightly during
1999.  The  Company  will  continue to actively  monitor  and  maintain  the net
interest spread to counteract the current market trends. Net interest income for
1998 increased $3.2 million over 1997.  The increase is mainly  attributable  to
growth in earning assets as shown in Table 1.
<PAGE>

         PROVISION  FOR LOAN LOSSES.  The provision for loan losses for the year
ended  December 31, 1999  increased by $472,000 from  $1,165,000 at December 31,
1998.  This  compares to an increase of $229,000 in 1998 from the  December  31,
1997 level of  $936,000.  The increase  during both 1999 and 1998 is  associated
with loan growth, as management  maintains an allowance for loan losses based on
the  evaluation of potential  problem loans as well as minimal  reserves for all
loans based on past net charge-off  experience.  The guaranteed portion of loans
generated by the loan  production  office are  subsequently  sold.  Because most
loans  generated  by the loan  production  office are out-of  market,  the loans
generated by the loan production office require additional allowances due to the
greater  risk of loss in the  event of a  default.  These  loans,  however,  are
subjected to the same underwriting standards and periodic loan review procedures
as other loans made by the Community Banking Subsidiaries.

         As shown in Table 8 of the Selected  Statistical  Data,  nonaccrual and
restructured  loans,  increased  $789,000  from  December 31, 1998 compared to a
$378,000  increase  over 1997.  The increase in delinquent  nonaccrual  loans is
attributable  to an increase in delinquent  SBA loans  associated  with interest
rate increases  related to the aggressive loan growth in recent years.  Although
management is aware of this  increase,  management  has reviewed these loans and
determined  that the likelihood of any loss of principal is minimal  because the
loans are adequately collateralized.  The ratio of the allowance for loan losses
to nonaccrual and restructured loans decreased from 271% at December 31, 1998 to
220% at December 31, 1999. However, the Company determined that no reserves were
required because of the Company's collateral positions.

         The  allowances  for  loan  losses  as  a  percentage  of  total  loans
outstanding at December 31, 1999 and 1998 was 1.51% and 1.55%, respectively. Net
charge-offs  in 1999 were  $817,469,  an increase of $491,529  from  $325,940 in
1998,  and the net charge-off  ratio  increased from .11 in 1998 to .23 in 1999.
Based on management's  evaluation of the loan  portfolio,  including a review of
past loan losses,  current  conditions  which may affect  borrowers'  ability to
repay and the underlying collateral value of the loans, management considers the
allowance for loan losses to be adequate.

         OTHER INCOME.  Other income  consists of income from  operations of the
Community   Banking   Subsidiaries  and  Financial   Supermarkets.   Traditional
non-interest  income of the  Community  Banking  Subsidiaries  accounts for only
40.7%, or $4.6 million of total other income for 1999,  32.1% in 1998, and 28.5%
in 1997.  The majority of the increase in other income of the Community  Banking
Subsidiaries  is the continued  growth in deposits.  Service  charges on deposit
accounts increased by $ 336,802 and $510,919,  respectively, for the years ended
December 31, 1999 and 1998. These increases normally have a direct  relationship
with the change in demand deposit and savings  accounts.  Average demand deposit
and savings accounts  increased 23.2% in 1999 compared to 30.9% increase in 1998
over 1997.  Included in other income of the Community  Banking  Subsidiaries are
gains on sale of loans recognized by Community-Habersham and Jackson of $199,943
and $118,814, respectively. This represents a decrease from 1998 of $241,318.

     The  allocation  of services as a percentage  of total income for Financial
Supermarkets is shown below:

                       FINANCIAL SUPERMARKETS

Consulting Services provided for Supermarket
bank installation and opening                      51%
Supermarket consulting and ancillary services      45
Other Miscellaneous Consulting Services             4
                                                  ---
                                                  100%

         The primary  business of Financial  Supermarkets is services offered in
connection with the establishment  and operation of Supermarket  Bank(R) service
centers.  In 1999,  Financial  Supermarkets  had net consulting  revenue of $3.9
million compared to $6.4 million in 1998, a decrease of $2.5 million or 39%. The
decrease in net consulting revenues in 1998 over 1997 was $.2 million, or 3%.
<PAGE>

         The  Company  has had fewer  installations  of  supermarket  bank units
during  1999 as  compared  to  1998,  due to the  decreased  branching  activity
directly related to the banking industry's efforts to prepare for the Year 2000.
In addition,  FSI terminated its Master  Consulting  Agreement with  NationsBanc
Services, Inc.  ("NationsBanc") in 1998 and received non-recurring  compensation
as a result of this  agreement.  Although  the  consulting  service  provided to
NationsBanc  during 1997 and 1998  enhanced  FSI's  income and FSI is  currently
collecting  consulting  fees on 69 supermarket  branches in operation under this
agreement,  management  anticipates  the  establishment  of Supermarket  Bank(R)
service  centers to increase in 2000 compared to 1999,  due increased  branching
activity in the industry as well as FSI's  agreement with the Canadian  Imperial
Bank of Commerce to establish banking pavilions in Florida.

         NON-INTEREST  EXPENSE.  Other  expenses  increased  for the year  ended
December 31, 1999 by $3.4 million compared to the $1.7 million increase in 1998.
This  represented a 16.81%  increase in expenses for 1999 and 8.97%  increase in
1998. Salaries and benefits increased $1,668,541 or 15.63% in 1999 over 1998 due
primarily  to the  staffing  of new  branches.  This  compares to an increase of
$202,492 or 1.93 % in 1998 over 1997. Although salaries and benefits continue to
increase as a result of the growth in the banking subsidiaries, incentive pay in
FSI decreased in 1998 as compared to 1997 resulting in a smaller increase in the
overall  salaries and benefits  during that period of time.  For the years ended
1999,  1998, and 1997 the Company had total employees  (F.T.E.) of 313, 282, and
249,  respectively.  Other  expenses  increased  by 1.0  million  in 1999 and .9
million in 1998 primarily due to growth of the banking  subsidiaries,  increased
costs associated with day-to-day operations and increased activity of FSI.

         Equipment  and  occupancy  expenses  increased by $781,112 or 24.82% in
1999 over 1998 and  $583,289  or 22.76% in 1998 over 1997.  The growth is due to
the  increased   number  of  facilities   operated  by  the  Community   banking
subsidiaries as well as additions of computer equipment necessary to operate the
Company.  The Company  operated  29, 26 and 23  locations  at the year end 1999,
1998, and 1997,  respectively.  As 1999 closed,  preparations were being made to
open three additional facilities during 2000. Management expects these locations
to add to the continued growth and profitability of the Company.

<TABLE>
                                                                Other Operating      Increase/
                                                                   Expenses         (Decrease)
                                                               1999       1998
                                                           ----------- ---------- -------------
                                                                 (Dollars in Thousands)
<S>                     <S>                                <C>         <C>        <C>
The Company
                        Salaries and benefits                 $12,346   $ 10,677        $1,669
                        Equipment expenses                      2,542      1,841           701
                        Occupancy expenses                      1,386      1,306            80
                        Data processing expenses                  886        949          (63)
                        Travel expenses                           678        469           209
                        Office supply expenses                    623        460           163
                        Other operating expenses                5,370      4,700           670
                                                           ----------- ---------- -------------
                                                              $23,831   $ 20,402        $3,429
                                                           =========== ========== =============
</TABLE>


         INCOME TAXES.  The Company incurred income tax expenses of $2.6 million
in 1999 which  represented an effective tax rate of 30%, compared to tax expense
of $3.4  million in 1998,  or an effective  tax rate of 33%.  Income tax expense
increased $ .8 million from 1997 to $3.4 million in 1998. The effective tax rate
at December 31, 1997 was 32%. The decrease in the  effective tax rate is related
to the decreased income of Financial Supermarkets, which does not have a portion
of its income tax-free as do the Community Banking Subsidiaries.

         NET INCOME.  The  Company's  net income for 1999 was $6.1  million , as
compared to $7.0  million in 1998, a decrease of 14%. The decrease in net income
between 1999 and 1998 is primarily  attributable  to the decrease in income from
FSI. Net income for 1998 increased to $7.0 million or 25% over 1997's net income
of $5.6  million.  Although the Company  experienced a decrease in income during
1999, management does not expect this trend to continue.
<PAGE>

         ASSET/LIABILITY MANAGEMENT. The Company's objective is to manage assets
and liabilities to maintain satisfactory and consistent profitability.  Officers
of each Community  Banking  Subsidiary are charged with monitoring  policies and
procedures designed to ensure an acceptable  asset/liability  mix.  Management's
philosophy is to support asset growth primarily  through growth of core deposits
within the Community Banking Subsidiaries' market areas.

         The Company's  asset/liability mix is monitored regularly with a report
reflecting  the  interest  rate  sensitive  assets and interest  rate  sensitive
liabilities  is  prepared  and  presented  to the  Board  of  Directors  of each
Community  Banking  Subsidiary  on at  least  a  quarterly  basis.  Management's
objective is to monitor  interest rate sensitive assets and liabilities so as to
minimize the impact on earnings of substantial  fluctuations  in interest rates.
An asset or liability is  considered  to be interest  rate-sensitive  if it will
reprice or mature within the time period analyzed, usually one year or less. The
interest  rate-sensitivity  gap is the difference  between the  interest-earning
assets and  interest-bearing  liabilities  scheduled to mature or reprice within
the relevant  period.  A gap is considered  positive when the amount of interest
rate-sensitive assets exceeds the amount of interest rate-sensitive liabilities.
A gap  is  considered  negative  when  the  amount  of  interest  rate-sensitive
liabilities  exceeds  the  interest  rate-sensitive  assets.  During a period of
rising  interest  rates,  a  negative  gap would  tend to  adversely  affect net
interest income, while a positive gap would tend to result in an increase in net
interest  income.  Conversely,  during a period of  falling  interest  rates,  a
negative gap would tend to result in an increase in net interest income, while a
positive  gap  would  tend to  adversely  affect  net  interest  income.  If the
Company's assets and liabilities  were equally flexible and moved  concurrently,
the impact of any increase or decrease in interest rates on net interest  income
would be minimal.

         A simple  interest rate "gap" analysis by itself may not be an accurate
indicator  of how net  interest  income  will be affected by changes in interest
rates.  Accordingly,  the Company also  evaluates how changes in interest  rates
impacts the repayment of particular  assets and liabilities.  Income  associated
with   interest-earning   assets  and  costs  associated  with  interest-bearing
liabilities  may not be  affected  uniformly  by changes in interest  rates.  In
addition,   the  magnitude  and  duration  of  changes  in  interest  rates  may
significantly  effect net interest income. For example,  although certain assets
and  liabilities may have similar  maturities or periods of repricing,  they may
react in different  degrees to changes in market interest rates.  Interest rates
on certain  types of assets and  liabilities  fluctuate in advance of changes in
general market rates, while interest rates on other types may lag behind changes
in general market rates.  In addition,  certain assets have features  (generally
referred to as "interest  rate caps and floors") which limit changes in interest
rates. Also, prepayments and early withdrawal levels could deviate significantly
from those assumed in  calculating  the interest  rate gap.  Changes in interest
rates also effect the Company's liquidity  position,  if deposits are not priced
in  response  to market  rates,  a loss of  deposits  could  occur  which  would
negatively  effect the  Company's  liquidity  position.  The Company  prepares a
report  monthly that  measures the  potential  impact on net interest  margin by
rising or falling rates. This report is reviewed monthly by the  Asset/Liability
Committee  and  quarterly by each Board of  Directors.  (See  "QUANTITATIVE  AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK")

         At December 31, 1999,  the Company's  cumulative one year interest rate
sensitivity gap ratio was 91%. The Company was cumulatively  within its targeted
range of 80% to 120% for all time horizons.

         The following table sets forth the distribution of the repricing of the
Company's  earning  assets and  interest-bearing  liabilities as of December 31,
1999,   the   interest   rate   sensitivity   gap,   the   cumulative   interest
rate-sensitivity gap, the interest rate-sensitivity gap ratio and the cumulative
interest  rate-sensitivity gap ratio. The table also sets forth the time periods
in which earning assets and liabilities will mature or may reprice in accordance
with their contractual terms.  However,  the table does not necessarily indicate
the impact of general  interest rate movements on the net interest  margin since
the  repricing of various  categories  of assets and  liabilities  is subject to
competitive  pressures  and the needs of the Company's  customers.  In addition,
various assets and liabilities indicated as repricing within the same period may
in fact, reprice at different times within such period and at different rates.
<PAGE>


                                      Community Bankshares, Inc.
                                       Consolidated Gap Report
<TABLE>
<CAPTION>
                                                    After        After
                                                    Three         One
                                                    Month      Year but
                                       Within        But        Within       After
                                        Three       Within       Five        Five
                                       Months      One Year      Years       Years          Total
                                     -------------------------------------------------  ------------
                                                       (Dollars in  Thousands)
<S>                                       <C>          <C>        <C>         <C>            <C>
Earning assets:
     Interest-bearing deposits               160                                                160
     Federal funds sold                    2,940                                              2,940
     Investment securities                 2,211        5,195      22,627      53,262        83,295
     Loans                               153,872       77,566     134,055      11,375       376,868
                                     -------------------------------------------------  ------------
                                         159,183       82,761     156,682      64,637       463,263
                                     -------------------------------------------------  ------------

Interest-bearing liabilities:
     Interest-bearing demand              99,185                                             99,185
     Savings                              20,863                                             20,863
     Time deposits, $100,000
          and over                        19,640       49,643      10,641           -        79,924
     Time deposits, less than
          $100,000                        39,085       37,095     102,088                   178,268
     Other borrowings                      1,054                    5,000      10,000        16,054
                                     -------------------------------------------------  ------------
                                         179,827       86,738     117,729      10,000       394,294
                                     -------------------------------------------------  ------------

Interest rate sensitivity
     Gap                                (20,644)      (3,977)      38,953      54,637        68,969
                                     -------------------------------------------------  ------------

Cumulative interest rate
     Sensitivity gap                    (20,644)     (24,621)      14,332      68,969
                                     -------------------------------------------------

Interest rate sensitivity
     Gap                                    0.89         0.95        1.33        6.46
                                     -------------------------------------------------

Cumulative interest rate
     Sensitivity gap                        0.89         0.91        1.04        1.17
                                     -------------------------------------------------
</TABLE>


YEAR 2000 COMPLIANCE

         Based  on a review  of the  Bank's  and the  Company's  business  since
January 1, 2000,  the Company has not  experienced  any material  effects of the
Year 2000  problem.  Although the Company has not been  informed of any material
risks associated with the Year 2000 problem from third parties,  there can be no
assurance that the Company will not be impacted in the future.  The Company will
continuously  monitor its business  applications  and maintain  contact with its
third party vendors and key business  partners to resolve any Year 2000 problems
that may arise in the future.

<PAGE>

ITEM 7a.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

         Interest  rates  play a  major  part in the net  interest  income  of a
financial  institution.  The  sensitivity  to rate changes is known as "interest
rate  risk." The  repricing  of  interest  earning  assets and  interest-bearing
liabilities  can  influence the changes in net interest  income.  As part of the
Company's asset/liability  management program, the timing of repriced assets and
liabilities is referred to as Gap management. It is the policy of the Company to
maintain  Gap  ratio  in  the  one-year  time  horizon  of  .80  to  1.20.   See
"ASSET/LIABILITY MANAGEMENT".

         GAP  management  alone is not enough to properly  manage  interest rate
sensitivity,  because  interest rates do not respond at the same speed or at the
same level to market rate changes.  For example,  savings and money market rates
are more stable  than loans tied to a "Prime"  rate and thus  respond  with less
volatility to a market rate change.

         The Company uses a simulation  model to monitor changes in net interest
income due to changes in market rates.  The model of rising,  falling and stable
interest rate scenarios  allows  management to monitor and adjust  interest rate
sensitivity to minimize the impact of market rate swings. The analysis of impact
on net  interest  margins as well as market  value of equity over a twelve month
period is  subjected to a 200 basis point  increase  and  decrease in rate.  The
December  model  reflects  an increase  of 2% in net  interest  income and a 14%
decrease in market  value  equity for a 200 basis point  increase in rates.  The
same model  shows a 1%  decrease in net  interest  income and a 16%  increase in
market  value  equity for a 200 basis  point  decrease in rates.  The  Company's
policy is to allow no more than +- 8% change in net interest  income and no more
than +- 25% change in market value equity for these  scenarios.  Therefore,  the
Company is within its policy  guidelines and is protected  from any  significant
impact due to market rate changes.

SELECTED STATISTICAL INFORMATION

The tables and  schedules on the following  pages set forth certain  significant
financial  information and statistical  data with respect to the distribution of
assets,  liabilities and shareholders' equity of the Company; the interest rates
and interest differentials  experienced by the Company; the investment portfolio
of the Company;  the loan  portfolio of the Company,  including  types of loans,
maturities  and  sensitivity  to changes in interest  rates and  information  on
nonperforming  loans;  summary of the loan loss experience and reserves for loan
losses of the Company; types of deposits of the Company and the return on equity
and assets for the Company.

<PAGE>




DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY:
INTEREST RATES AND INTEREST DIFFERENTIALS

Table 1  Average Balances
<TABLE>
<CAPTION>

The condensed average balance sheets for the periods indicated are presented below.<F1>

                                                               1999             1998          1997
                                                          -----------------------------------------------
<S>                                                        <C>               <C>               <C>
                              ASSETS


Cash and due from banks                                    $  28,757         $  25,330         $  16,260
Interest-bearing deposits in banks                               390               747               488

Taxable securities                                            48,378            42,262            50,957
Nontaxable securities                                         31,134            32,991            25,223
Unrealized gains (losses) on securities
     Available for sale                                         (645)              200               (93)
Federal Funds Sold                                            13,077             9,495             9,704
Loans<F2><F3>                                                350,278           285,809           223,170
Allowance for loan losses                                     (5,287)           (4,382)           (3,873)
Other assets                                                  28,605            26,098            20,243
                                                           ---------------------------------------------

                                                           $ 494,687         $ 418,550         $ 342,079
                                                           ==============================================

Total interest-earning assets                              $ 443,257         $ 371,304         $ 309,542
                                                           ============================================-

               LIABILITIES AND SHAREHOLDERS' EQUITY

Deposits:
     Noninterest-bearing demand                            $  66,719         $  52,966         $  41,472
     Interest-bearing demand                                 102,770            83,422            61,638
     Savings                                                  21,540            18,672            15,387
     Time                                                    242,434           217,831           185,936
                                                           ---------------------------------------------

          Total deposits                                     433,463           372,891           304,433

Other borrowings                                              10,271             1,699               545
Other liabilities                                              8,181             6,633             6,894
                                                           ---------------------------------------------

          Total liabilities                                  451,915           381,223           311,872
                                                           ---------------------------------------------

Shareholders' equity<F4>                                      42,772            37,327            30,207
                                                           ---------------------------------------------

                                                           $ 494,687         $ 418,550         $ 342,079
                                                           =============================================

Total interest-bearing liabilities                         $ 377,015         $ 321,624         $ 263,506
                                                           =============================================

<FN>
<F1>     Average balances calculated using month-end balances
<F2>     Includes non-accrual loans
<F3>     Loans are net of unearned fees
<F4>     Unrealized gains & losses are included in equity
</FN>
</TABLE>
<PAGE>


 TABLE 2 INTEREST INCOME AND INTEREST EXPENSE

         The  following  tables set forth the amount of the  Company's  interest
income and  interest  expense for each  category of  interest-earning  asset and
interest-bearing   liabilities   and  the  average   interest   rate  for  total
interest-earning  assets and total  interest-bearing  liabilities,  net interest
spread and net yield on average interest-earning assets.
<TABLE>
<CAPTION>
                                                            Year Ended December 31,
                                                 1999                 1998                 1997
                                          -------------------  -------------------  --------------------
                                                      Average              Average              Average
                                         Interest      Rate    Interest     Rate    Interest     Rate
                                          -------------------  -------------------  --------------------
INTEREST INCOME:
<S>                                         <C>        <C>       <C>       <C>        <C>       <C>
     Interest and fees on loans             35,040     10.00%    29,767     10.41%    23,562     10.56%
     Interest on taxable securities          2,378      4.92%     2,565      6.07%     3,108      6.10%
     Interest on nontaxable securities       1,995      6.41%     1,710      5.18%     1,327      5.26%
     Interest on Federal Funds sold            858      6.56%       535      5.63%       673      6.94%
     Interest on deposits in banks              19      4.87%        36      4.82%        33      6.76%

          Total interest income             40,290      9.09%    34,613      9.32%    28,703      9.27%
                                            ------               ------               ------

INTEREST EXPENSE:
     Interest expense on
interest-bearing
          Demand deposits                    2,764      2.69%     2,511      3.01%     2,009      3.26%
     Interest on savings deposits              566      2.63%       516      2.76%       436      2.83%
     Interest on time deposits              13,838      5.71%    12,812      5.88%    10,704      5.76%
     Interest on other borrowings              529      5.15%       111      6.53%        42      7.71%

          Total interest expense            17,697      4.69%    15,950      4.96%    13,191      5.01%
                                            ------               ------               ------

NET INTEREST INCOME                         22,593               18,663               15,512
                                            ------               ------               ------


     Net interest spread                                4.40%                4.36%                4.26%
     Net yield on average
          Interest-earning assets                       5.10%                5.03%                5.01%

</TABLE>




TABLE 3  RATE AND VOLUME ANALYSIS

         The following  table  describes the extent to which changes in interest
rates and  changes in volume of  interest-earning  assets  and  interest-bearing
liabilities  have affected the Company's  interest income and expense during the
year   indicated.   For   each   category   of   interest-earning   assets   and
interest-bearing liabilities, information is provided on changes attributable to
(1) change in volume  (change in volume  multiplied by old rate);  (2) change in
rate (change in rate multiplied by old volume);  and (3) a combination of change
in rate and  change in  volume.  The  changes in  interest  income and  interest
expense attributable to both volume and rate have been allocated proportionately
to the change due to volume and the change due to rate.


<PAGE>


<TABLE>
<CAPTION>

                                                                               Year Ended December 31,
                                                                                    1999 vs. 1998
                                                                                   Changes Due to:

                                                                                                             Increase
                                                                           Rate           Volume            (decrease)
                                                                 -----------------------------------------------------
                                                                                (Dollars in Thousands)
<S>                                                                       <C>             <C>                   <C>
Increase (decrease) in:
     Income from interest-earning assets:
     Interest and fees on loans                                          (1,216)           6,485                5,273
     Interest on taxable securities                                        (528)             340                (187)
     Interest on nontaxable securities                                       386           (101)                  285


     Interest on Federal Funds sold                                           98             225                  323
     Interest on deposits in banks                                             0            (17)                 (17)
                                                                 -----------------------------------------------------
          Total interest income                                          (1,260)           6,937                5,677
                                                                 -----------------------------------------------------

     Expense from interest-bearing liabilities:
     Interest expense on interest-bearing deposits                         (286)             539                  253
     Interest on savings deposits                                           (26)              76                   50
     Interest on time deposits                                             (380)           1,406                1,026
     Interest on other borrowings                                           (29)             447                  418
                                                                 -----------------------------------------------------
          Total interest expense                                           (728)           2,475                1,747
                                                                 -----------------------------------------------------

          Net interest income                                              (532)           4,462                3,930

                                                                 -----------------------------------------------------

                                                                               Year Ended December 31,
                                                                                    1998 vs. 1997
                                                                                   Changes Due to:
                                                                                                             Increase
                                                                           Rate           Volume            (decrease)
                                                                 -----------------------------------------------------
                                                                                (Dollars in Thousands)
Increase (decrease) in:
     Income from interest-earning assets:
     Interest and fees on loans                                            (323)           6,528                6,205
     Interest on taxable securities                                         (15)           (528)                (543)
     Interest on nontaxable securities                                      (20)             403                  383
     Interest on Federal Funds sold                                        (124)            (14)                (138)
     Interest on deposits in banks                                          (11)              14                    3
                                                                 -----------------------------------------------------
          Total interest income                                            (493)           6,403                5,910
                                                                 -----------------------------------------------------

     Expense from interest-bearing liabilities:
     Interest expense on interest-bearing deposits                         (163)             665                  502
     Interest on savings deposits                                           (11)              91                   80
     Interest on time deposits                                               237           1,871                2,108
     Interest on other borrowings                                            (7)              76                   69
                                                                 -----------------------------------------------------
          Total interest expense                                              56           2,703                2,759
                                                                 -----------------------------------------------------

          Net interest income                                              (549)           3,700                3,151
                                                                 =====================================================

</TABLE>


<PAGE>


                              INVESTMENT PORTFOLIO

TABLE 4  TYPES OF INVESTMENTS

<TABLE>
<CAPTION>

The carrying amounts of securities at the dates indicated are summarized as follows: <F1>

                                                                                December 31,
                                                                          1999            1998            1997
                                                               ------------------------------------------------
                                                                           (Dollars in Thousands)
<S>                                                                    <C>             <C>             <C>
U. S. Treasury and other U. S. Government
      Agencies and corporations                                        $30,708         $25,987         $29,094
Municipal securities                                                    39,865          36,753          29,497
Mortgage-backed securities                                               8,785           8,979          21,962
Equity securities                                                        1,725           1,721           1,448
                                                               ------------------------------------------------
                                                                       $81,083         $73,440         $82,001
                                                               ------------------------------------------------

<FN>
<F1>     Securities  include "held to maturity"  securities carried at amortized
         cost  and  "available-for-sale"  securities  carried  at fair  value in
         accordance with FASB 115.
</FN>
</TABLE>

         The Community Banking Subsidiaries'  mortgage-backed portfolio consists
of fifty-two U.S. Government  corporation  collateralized  mortgage obligations.
The  actual  maturity  of these  securities  will  differ  from the  contractual
maturity because  borrowers on the underlying loans may have the right to prepay
obligations with or without  prepayment  penalties.  Decreases in interest rates
will generally  cause  prepayments  to increase while  increases in the interest
rates  will  have  the  opposite  effect  on  prepayments.  Prepayments  of  the
underlying  loans  may  shorten  the  life of the  security,  thereby  adversely
effecting the yield to maturity.  In an increasing  interest rate, the Community
Banking  Subsidiaries  may have an  obligation  yielding a return  less than the
current  yields  on  securities.  However,  because  the  majority  of  these in
mortgage-backed securities have adjustable rates, negative effects of changes in
interest rates on earnings and carrying values of these  securities are somewhat
mitigated.



<PAGE>




         The amounts of  securities in each category as of December 31, 1999 are
shown in the following table according to maturity  classifications  of one year
or less, after one year through five years,  after five years through ten years,
and after ten years.

<TABLE>
<CAPTION>

                            U. S. Treasury and Other
                            U. S. Government agencies
                               and corporations <F3>     Municipal Securities <F2>     Other Securities <F4>
                               Amount       Yield<F1>      Amount       Yield<F1>      Amount       Yield<F1>
                         ------------------------------------------------------------------------------------
<S>                              <C>           <C>           <C>           <C>           <C>           <C>
One year or less                 3,690         5.91%         2,466         4.76%         1,725         7.00%

After one year
     through five years         19,643         5.80%         4,026         4.69%             -             -

After five years
     through ten years          12,039         6.03%        10,069         4.78%             -             -

After ten years                  4,121         6.26%        23,304         5.06%             -             -
                         --------------              --------------              --------------

          Total                 39,493         5.96%        39,865         5.08%         1,725         7.00%
                         --------------              --------------              --------------

<FN>
<F1>     Yields were computed using book value, coupon interest, adding discount
         accretion or subtracting  premium  amortization,  as appropriate,  on a
         ratable  basis over the life of each  security.  The  weighted  average
         yield for each maturity  range was computed using the carrying value of
         each security in that range.

<F2>     Yields on municipal securities have not been computed on a tax
         equivalent basis.

<F3>     The above schedule includes  mortgage-backed  securities based on their
         contractual  maturity date. In practice,  cash flow in these securities
         is significantly faster than their stated maturity schedules.

<F4>     Other securities  consists of equity securities and are included in the
         under  one  year  maturity  range  because  the   securities   have  no
         contractual maturity date.
</FN>
</TABLE>

<PAGE>

LOAN PORTFOLIO

TABLE 6  Types of Loans

         The  amount  of loans  outstanding  at the  indicated  dates are in the
following table according to the type of loan.
<TABLE>
<CAPTION>
                                                                                  December 31,
                                                       1999            1998           1997            1996            1995
                                            -------------------------------------------------------------------------------
                                                                        (Dollars in Thousands)

<S>                     <C>                         <C>            <C>            <C>             <C>              <C>
Commercial, financial
   and agricultural <F1>                            206,505        $161,572       $118,376        $102,231         $77,871
Real estate-construction                             24,208          21,327         21,234           9,506           8,036
Real estate-mortgage                                 93,063          82,413         69,541          57,566          63,312
Consumer and other <F2>                              53,093          48,825         36,070          36,483          30,072
                                            -------------------------------------------------------------------------------
                                                   $376,869        $314,137       $245,221        $205,786        $179,291
Less allowance for loan losses                      (5,683)         (4,863)        (4,024)         (3,592)         (3,060)
                                            -------------------------------------------------------------------------------
          Net loans                                $371,186        $309,274       $241,197        $202,194        $176,231
                                            -------------------------------------------------------------------------------


<FN>
<F1>     Commercial,  financial  and  agricultural  loans include loans held for
         sale which are disclosed separately in the consolidated balance sheets.

<F2>     Amounts are disclosed net of unearned loan income.
</FN>
</TABLE>

         See  "Business  Description  of the  Community  Banking-  Loans"  for a
description of the composition of each loan, the underwriting criteria and risks
that are unique to each.



<PAGE>


TABLE 7   MATURITIES AND SENSITIVITIES OF LOANS TO CHANGES IN INTEREST
          RATES

         Total loans as of December  31, 1999 are shown in the  following  table
according to maturity  classifications  one year or less, after one year through
five years and after five years.
<TABLE>
<CAPTION>
                                                                      December 31, 1999
                                                                   (Dollars in Thousands)
<S>                                                                          <C>
Maturity:
   One year or less:
          Commercial, financial and agricultural                             $90,635
          Real estate-construction                                            23,140
          All other loans                                                     46,665
                                                                      ---------------
                                                                            $160,440
                                                                      ---------------
   After one year through five years:
          Commercial, financial and agricultural                             479,433
          Real estate-construction                                               560
          All other loans                                                     90,496
                                                                      ---------------
                                                                            $170,489
                                                                      ---------------
   After five years:
          Commercial, financial and agricultural                             $35,670
          All other loans                                                      9,294
                                                                      ---------------
                                                                             $44,964
                                                                      ---------------

                                                                            $375,893
                                                                      ---------------

</TABLE>

         The  following  table  summarizes  loans at December  31, 1999 with due
dates  after one year  which  have  predetermined  and  floating  or  adjustable
interest rates.
<TABLE>
<CAPTION>
                                                                       December 31, 1999
                                                                      (Dollars in Thousands)
<S>                                                                           <C>
          Predetermined interest rates                                        $163,744
          Floating or adjustable interest rates                                 51,709
                                                                          -------------
                                                                              $215,453
                                                                          -------------

</TABLE>

         Records  were not  available to present the above  information  in each
loan category listed in the first paragraph above and could not be reconstructed
without undue burden and cost to the Company.



<PAGE>


TABLE 8  Nonaccrual, Past Due and Restructured Loans

         Information with respect to nonaccrual past due and restructured  loans
at the indicated dates is as follows:
<TABLE>
<CAPTION>
                                                                                December 31,
                                                            1999          1998          1997          1996          1995
                                                   ----------------------------------------------------------------------
                                                                          (Dollars in Thousands)

<S>                                                       <C>           <C>             <C>         <C>           <C>
Nonaccrual loans                                          $1,743        $1,119          $714        $1,119        $1,456

Loans contractually past due ninety days
  or more as to interest or principal
  Payments and still accruing                              1,572           706           533           445           345

Loans, the terms of which  have been
  Renegotiated  to  provide a  reduction
  or deferral of interest or principal
  because of deterioration in the
  financial position of the borrower                         842           572           704           620           629

Loans, now current about which there are
  serious doubts as to the ability of the
  borrower to comply with present
  loan repayment terms                                         -             -             -             -             -
</TABLE>

         The  reduction  in  interest  income  associated  with  nonaccrual  and
renegotiated loans as of December 31, 1999 is as follows:
<TABLE>
<CAPTION>

                                                                                           December 31, 1999
<S>                                                                                              <C>
Interest income that would have been recorded on nonaccrual
     and restructured loans under original terms
                                                                                                 292,576


Interest income that was recorded on nonaccrual and restructured loans
                                                                                                 105,867

</TABLE>
<PAGE>

         The  Community  Banking  Subsidiaries'  policy  is to  discontinue  the
accrual of interest  income when,  in the opinion of  management,  collection of
such interest becomes  doubtful.  This status is accorded such interest when (1)
there is a significant  deterioration in the financial condition of the borrower
and full  repayment  of  principal  and  interest  is not  expected  and (2) the
principal or interest is more than ninety days past due, unless the loan is both
well-secured and in the process of collection. Accrual of interest on such loans
is resumed, in management's  judgment,  the collection of interest and principal
become probable.  Loans classified for regulatory purposes as loss, substandard,
or  special  mention  that  have not been  included  in the  table  above do not
represent or result from trends or  uncertainties  which  management  reasonably
expects will materially  effect future operating  results,  liquidity or capital
resources.  These classified loans do not represent material credits about which
management is aware and which causes management to have serious doubts as to the
ability of such borrowers to comply with the loan repayment terms.


COMMITMENTS AND LINES OF CREDIT

         The  Community  Banking  Subsidiaries  will,  in the  normal  course of
business,  commit to extend  credit in the form of letters of credit or lines of
credit.  The amount of  outstanding  loan  commitments  and letters of credit at
December  31,  1999 and 1998 were  $30,544,552  and  $28,756,057,  respectively.
Commitments  to extend credit  generally  have fixed  expiration  dates or other
termination  clauses  and  may  require  payment  of a fee.  Since  many  of the
commitments  are  expected  to  expire  without  being  drawn  upon,  the  total
commitment amounts do not necessarily represent future cash requirements.

SUMMARY OF LOAN LOSS EXPERIENCE

TABLE 9

         The  following  table  summarizes  average loan  balances for each year
determined  using the daily  average  balances  during the year;  changes in the
reserve for possible loan losses  arising from loans charged off and  recoveries
on loans  previously  charged  off;  additions  to the  reserve  which have been
charged to operating  expense;  and the ratio of net charge-offs during the year
to average loans.
<TABLE>
<CAPTION>
                                                                          December 31,
                                                       1999          1998          1997          1996          1995
                                              ----------------------------------------------------------------------
                                                                     (Dollars in Thousands)

<S>                                                <C>           <C>           <C>           <C>           <C>
Average amount of loans outstanding                $350,278      $285,809      $223,170      $191,180      $170,525
                                              ----------------------------------------------------------------------

Balance of allowance for loan losses
     at beginning of year                            $4,863        $4,024        $3,592        $3,060        $2,686
                                              ----------------------------------------------------------------------

Loans charged off
     Commercial                                      ($423)         ($97)        ($136)        ($118)        ($221)
     Real estate mortgage                             ($23)           (7)          (35)             -             -
     Consumer                                        ($632)         (391)         (424)         (211)         (331)
                                              ----------------------------------------------------------------------
                                                   ($1,078)        ($495)        ($595)        ($329)        ($552)
                                              ----------------------------------------------------------------------

Loans recovered
     Commercial                                         $45           $20           $11            $5           $12
     Real estate mortgage                                $4            19            28            35            12
     Consumer                                          $212           130            52            64            53
                                              ----------------------------------------------------------------------
                                                       $261          $169           $91          $104           $77
                                              ----------------------------------------------------------------------

Net charge-offs                                      ($817)        ($326)        ($504)        ($225)        ($475)
                                              ----------------------------------------------------------------------

Additions to allowance charged
     to operating expense during year                $1,637        $1,165          $936          $757          $849
                                              ----------------------------------------------------------------------

Balance of allowance for loan losses
     at end of year                                  $5,683        $4,863        $4,024        $3,592        $3,060
                                              ======================================================================

Ratio of net loans charged off during
     the year to average loans outstanding            0.23%         0.11%         0.23%         0.12%         0.28%
                                              ======================================================================

</TABLE>

<PAGE>



ALLOWANCE FOR LOAN LOSSES

         The provision for possible loan losses is created by direct  charges to
income.  Losses on loans are charged  against the allowance in the year in which
such loans, in management's opinion, become uncollectible. Recoveries during the
year are credited to this  allowance.  The factors that  influence  management's
judgment  in  determining  the  amount  charged  to  income  are past  loan loss
experience,  composition of the loan  portfolio,  evaluation of possible  future
losses,  current economic  conditions and other relevant factors.  The Company's
allowance  for loan losses was  approximately  $5,683,000  at December 31, 1999,
representing  1.51% of total loans,  compared with  approximately  $4,863,000 at
December 31, 1998,  which  represented  1.55% of total loans.  The allowance for
loan losses is reviewed  regularly based on  management's  evaluation of current
risk characteristics of the loan portfolio,  as well as the impact of prevailing
and expected economic business  conditions.  Management  considers the allowance
for loan losses adequate to cover possible loan losses at December 31, 1999.

         Historically,  management has not allocated the Company's allowance for
loan losses to specific categories of loans. However, based on management's best
estimate and  historical  experience,  the  allocation of the allowance for loan
losses for December 31, 1999, 1998, 1997, 1996 and 1995 is summarized below:
<TABLE>
<CAPTION>

                                                                  December 31,
                                       1999            1998            1997          1996             1995
                            -------------------------------------------------------------------------------
                                                            (Dollars in Thousands)
<S>                                  <C>             <C>             <C>           <C>              <C>
Commercial                           $2,671          $2,160          $1,850        $1,830           $1,347
Real estate                             568             270             230           105              467
Consumer                              2,444           2,433           1,944         1,657            1,246
                            -------------------------------------------------------------------------------
                                     $5,683          $4,863          $4,024        $3,592           $3,060
                            ===============================================================================

                                           Percent of loans in Each Category of Total Loans

                                                                  December 31,
                                       1999            1998            1997          1996             1995
                            -------------------------------------------------------------------------------
                                                            (Dollars in Thousands)
Commercial                              55%             51%             49%           50%              43%
Real estate                             31%             33%             35%           33%              40%
Consumer                                14%             16%             16%           17%              17%
                            -------------------------------------------------------------------------------
                                       100%            100%            100%          100%             100%
                            ===============================================================================

</TABLE>


<PAGE>


DEPOSITS

TABLE 10

<TABLE>
<CAPTION>

         Average   amount  of  deposits   and  average   rates  paid   thereon,   classified   as  to
noninterest-bearing demand deposits,  interest-bearing demand and savings deposits and time deposits,
for the years indicated are presented below. <F1>

                                                                        Year Ended December 31,
                                                              1999                 1998                 1997
                                                      --------------------   -----------------    -----------------
                                                                  Average              Average              Average
                                                      Balance    Interest    Balance  Interest    Balance  Interest
                                                                   Rate                 Rate                 Rate
                                                      --------------------   -----------------    -----------------
<S>                                                    <C>                  <C>                  <C>
Noninterest-bearing demand                             $66,719              $52,966          -   $41,472          -
Interest-bearing demand deposits                       102,770      2.69%    83,422      3.01%    61,638      3.26%
Savings deposits                                        21,540      2.63%    18,672      2.76%    15,387      2.83%
Time deposits                                          242,434      5.71%   217,831      5.88%   185,936      5.76%
                                                     ----------           ----------           ----------
          Total deposits                              $433,463             $372,891             $304,433
                                                     ==========           ==========           ==========

<FN>
<F1> Average balances were determined  using month-end  balances during the year
for each category.

</FN>
</TABLE>

         The  amounts  of time  certificates  of  deposit  issued in  amounts of
$100,000 or more as of December 31, 1999 are shown below by  category,  which is
based on time  remaining  until  maturity of (1) three months or less,  (2) over
three through six months, (3) over six through twelve months and (4) over twelve
months.

<TABLE>
<CAPTION>

                                                            December 31, 1999
                                                           Dollars in Thousands)
<S>                                                                <C>
Three months or less                                               $18,111
Over three through six months                                       16,996
Over six through twelve months                                      34,224
Over twelve months                                                  10,593
                                                              ------------
                                                                   $79,924
                                                              ------------

</TABLE>


<PAGE>



RETURN ON ASSETS AND SHAREHOLDERS' EQUITY

TABLE 11

         The  following  rate of return  information  for the years is presented
below.
<TABLE>
<CAPTION>
                                                         Year Ended December 31,
                                                         1999           1998            1997
                                              -----------------------------------------------
<S>                                                     <C>            <C>             <C>
Return on assets <F1>                                   1.23%          1.68%           1.65%
Return on equity <F2>                                  14.21%         18.84%          18.69%
Dividend payout ratio <F3>                              5.36%          4.69%           5.38%
Equity to assets ratio <F4>                             8.65%          8.92%           8.83%

<FN>
<F1>     Net income divided by average total assets.
<F2>     Net income divided by average equity.
<F3>     Dividends declared per share divided by net income per share.
<F4>     Average equity divided by average total assets.
</FN>
</TABLE>
<PAGE>


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The financial statements and the report of independent  accountants are
included in this Report beginning at page F-1.

ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          FINANCIAL DISCLOSURE.

         During the Company's two most recent fiscal years,  the Company did not
change  accountants and had no disagreement  with its accountants on any matters
of accounting principles or practices or financial statement disclosure.

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         The following is a brief  description,  as of December 31, 1999, of the
business  experience  of each of the  directors  and  executive  officers of the
Company who,  except as otherwise  indicated,  has been or was engaged in his or
her present of last principal employment, in the same or a similar position, for
more than five years:

              Steven C. Adams       Mr. Adams has been an attorney with the firm
              (51)                  of Adams, Ellard & Frankum,  P.C. since 1973
                                    and President of Chatham Transport  Company,
                                    a trucking company,  since 1994. He has been
                                    a  director  of  the  Company,  Community  -
                                    Habersham,  and Financial Supermarkets since
                                    1990.  He was named a director of  Financial
                                    Properties, Inc. in 1998.


              Edwin B. Burr         Mr. Burr  has  served  as a  director of the
              (66)                  Company  since  April of 1995 and  Financial
                                    Supermarkets  since 1992.  Mr. Burr has been
                                    President  of  Financial  Solutions,  a bank
                                    consulting  firm since  1988.  He has been a
                                    director of Community - Alabama since 1997.


              Elton S. Collins      Mr. Collins  has  been  the President, Chief
              (56)                  Executive   Officer   and  a   director   of
                                    Community - Jackson since 1982.

              Annette R. Fricks     Mrs.  Fricks  has  been  an  Executive  Vice
              (55)                  President  and  Corporate  Secretary  of the
                                    Company and Community - Habersham since 1992
                                    and 1967, respectively,  and has also served
                                    as   Corporate    Secretary   of   Financial
                                    Supermarkets  since 1984.  She was named the
                                    Executive   Vice   President  and  Corporate
                                    Secretary for Financial Properties in 1998.

              Charles M. Miller     Mr. Miller  has  served as an Executive Vice
              (58)                  President  of  Company,  the  President  and
                                    Chief  Operating  Officer  and  director  of
                                    Community - Habersham and the Executive Vice
                                    President    and   director   of   Financial
                                    Supermarkets  since  1990.  Mr.  Miller  has
                                    served as a director  of  Community  - Troup
                                    since November 1995. He was named a director
                                    of Financial Properties in 1998.


<PAGE>

        Harry H. Purvis            Mr.  Purvis  has  been  a  director  of  the
        (93)                        Company since 1981 and Community - Habersham
                                    since 1956.  Mr. Purvis has also served as a
                                    director  of  Financial  Supermarkets  since
                                    1984.  He was named a director of  Financial
                                    Properties, Inc. in 1998.

        Harry L. Stephens           Mr. Stephens  has  been  an  Executive  Vice
        (53)                        President and the Chief Financial Officer of
                                    the Company and Community - Habersham  since
                                    1992  and  has   served  as   Treasurer   of
                                    Financial  Supermarkets  since 1986.  He has
                                    been  Executive  Vice  President  and  Chief
                                    Financial  Officer of  Community - Habersham
                                    since  1993.  He was  named  Executive  Vice
                                    President   and   Treasurer   of   Financial
                                    Properties, Inc. in 1998

        H. Calvin Stovall, Jr.      Mr. Stovall,  who  is    retired,  was  the
        (84)                        President and  treasurer of Stovall  Tractor
                                    Company,  a retail  farm  equipment  dealer,
                                    from 1948 until  November 1995. He served as
                                    the  Chairman  of  the  Company's  Board  of
                                    Directors  1981-1998 and was named  Chairman
                                    Emeritus  in  1998.  Mr.  Stovall  has  also
                                    served  as  a  director   of   Community   -
                                    Habersham,  Community  - Jackson,  Financial
                                    Supermarkets  and  Community  - Troup  since
                                    1963,   1982,   1984  and   November   1994,
                                    respectively.  He was also  named a director
                                    of Financial Properties, Inc. in 1998.

        Dean C. Swanson             Mr. Swanson  was  President  of the Standard
        (68)                        Group,  a  telecommunications  company until
                                    January   1999.   He   is  a   director   of
                                    Independent  Telecommunications Network. Mr.
                                    Swanson  has  served  as a  director  of the
                                    Company, Community - Habersham and Financial
                                    Supermarkets  since  1981,  1972,  and 1984,
                                    respectively.  He was  named a  director  of
                                    Financial Properties, Inc. in 1998.

        George D. Telford           Mr. Telford is a retired bank executive and
        (79)                        has served as a director  of the Company and
                                    Community -  Habersham  since 1981 and 1965,
                                    respectively,   as  well  as  of   Financial
                                    Supermarkets  since  1993.  He was  named  a
                                    director of  Financial  Properties,  Inc. in
                                    1998.

        J. Alton Wingate            Mr. Wingate has served as a director and the
        (60)                        President and Chief Executive Officer of the
                                    Company, Community - Habersham and Financial
                                    Supermarkets  since  1981,  1977  and  1984,
                                    respectively. Mr. Wingate was named Chairman
                                    of the  Board in 1998.  He has also been the
                                    Chairman  of the  Board of  Directors  and a
                                    director of Community - Jackson, Community -
                                    Alabama,  and  Community - Troup since 1982,
                                    1990,  and November 1994,  respectively.  He
                                    was  named  President  and  Chief  Executive
                                    Officer of  Financial  Properties,  Inc.  in
                                    1998.  Mr.  Wingate  has been  Chairman  and
                                    Chief  Executive   Officer  of  Community  -
                                    Habersham  since 1996 and has been Chairman,
                                    President,  and Chief  Executive  Officer of
                                    Financial Supermarkets since 1984.

        Lois M. Wood-Schroyer       Ms. Wood-Schroyer  is  the  Chairman,  Chief
        (61)                        Executive Officer,  Director,  and President
                                    of Woods Furniture Co. Ms. Wood-Schroyer has
                                    served  as  a  Director   of   Community   -
                                    Habersham  since 1990 and was elected to the
                                    Company's Board of Directors in 1999.

<PAGE>

         Directors are elected at each annual meeting of  shareholders  and hold
office until the next annual meeting and until their  successors are elected and
qualified.  The  executive  officers are elected by the Board of  Directors  and
serve  at the will of the  Board.  There  are no  family  relationships  between
executive officers and directors of the Company.

         The company is not subject to Section 16(a) of the Securities  Exchange
Act of 1934.

ITEM 11.   EXECUTIVE COMPENSATION.

         The following  table sets forth the annual and  long-term  compensation
paid by the Company to the Chief Executive  Officer of the Company and the three
other most highly  compensated  officers of the Company  whose  salary and bonus
exceeded $100,000 during the last fiscal year (the "Named Executive Officers").
<TABLE>
<CAPTION>

                                              Summary Compensation Table
------------------------------------------------------------- ------------------------------------------------------
                    Annual Compensation                                      Long-Term Compensation
------------------------------------------------------------- ------------------------------------------------------
                                                                           Securities
    Name and Principal              Salary                                 Underlying         All Other
         Position            Year   $<F1>          Bonus <F2>           Options/SARS (#)     Compensation
---------------------------- ------ ------------- ------------- ------ ------------------- ----------------- -------

<S>                          <C>      <C>          <C>            <C>                 <C>       <C>            <C>
     J. Alton Wingate        1999     347,950      1,222,960    <F7>                            41,966        <F3>
    President and Chief      1998     245,500      1,360,258    <F7>                   --       30,499
     Executive Officer       1997     243,200       728,981     <F7>                   --       30,687
---------------------------- ------ ------------- ------------- ------ ------------------- ----------------- -------

     Charles M. Miller       1999     145,600        35,000                            --       27,512        <F4>
      Executive Vice         1998     145,600        30,000                            --       23,512
         President           1997     145,600        20,000                            --       23,974
---------------------------- ------ ------------- ------------- ------ ------------------- ----------------- -------

     Harry L. Stephens       1999     105,960        52,500                            --       22,658        <F5>
      Executive Vice         1998      98,000        52,500                            --       20,816
    President and Chief      1997      93,000        52,500                            --       19,811
     Financial Officer

---------------------------- ------ ------------- ------------- ------ ------------------- ----------------- -------
     Annette R. Fricks       1999      99,460        62,500                                     21,096        <F6>
      Executive Vice         1998      88,000        57,500                            --       17,844
       President and         1997      83,000        52,500                            --       17,088
    Corporate Secretary
---------------------------- ------ ------------- ------------- ------ ------------------- ----------------- -------
<PAGE>
<FN>

<F1>     Includes directors' fees.

<F2>     Bonuses are included in this report in the year paid.

<F3>     Included  premiums of $4,397.03  paid for Mr.  Wingate's life insurance
         policies  and  estimated   employee   stock   ownership  plan  ("ESOP")
         contributions of $17,500.  Final ESOP  contributions  have not yet been
         determined for 1999.

<F4>     Includes  premiums of $3,171.9  paid for Mr.  Miller's  life  insurance
         policies and estimated ESOP  contributions  of  $16,500.00.  Final ESOP
         contributions have not yet been determined for 1999.

<F5>     Includes  premiums of $912.00  paid for Mr.  Stephens'  life  insurance
         policies   and   estimated   ESOP   contributions   of  $16,000.   ESOP
         contributions have not yet been determined for 1999.

<F6>     Includes  premiums  of $660.00  paid for Mrs.  Fricks'  life  insurance
         policies  and  estimated  ESOP  contributions  of  $15,500.  Final ESOP
         contributions have not yet been determined for 1999.

<F7>     Mr.  Wingate's  bonus  is  contractually  based on the  performance  of
         Financial Supermarkets, with caps and guaranteed rates of return before
         the bonus can be calculated and paid.

</FN>
</TABLE>


         DIRECTOR'S  COMPENSATION.  The Chairman Emeritus of the Company's Board
of Directors,  Calvin Stovall,  currently receives a fee of $2,250 per month for
service as the  Chairman  of the Board and other  directors  of the Board of the
Company  receive $2,000 a year for service on the Company's  Board of Directors.
The  directors  of  Community  -  Habersham,  Community  - Jackson,  Community -
Alabama,  Community - Troup and Financial Supermarkets currently receive fees of
$11,000, $6,500, $3,850, $3,600, and $6,000 per year, respectively.

         AGREEMENTS WITH OFFICERS.  In 1990,  Community - Habersham entered into
an employment  agreement  with Mr. Miller  pursuant to which the parties  agreed
that Mr.  Miller  would  serve as the  President,  Chief  Operating  Officer and
General Manager of Community - Habersham.  The initial term of the agreement was
one year,  subject to successive  automatic renewals of one year each unless (i)
either party gives written  notice at least 60 days prior to the annual  renewal
date of the desire to terminate,  or (ii)  Community - Habersham  terminates for
cause (as defined in the agreement).

         The  agreement  provides for Mr.  Miller to receive an annual salary of
$125,000 plus certain benefits and perquisites.  The agreement also entitles Mr.
Miller to certain severance  payments  following a change of control (as defined
in the agreement) of Community - Habersham.  Further,  Mr. Miller agrees that he
will not compete with or solicit  certain  customers  from Community - Habersham
within  Habersham or Jackson County (or any  contiguous  county) for a period of
three  years after  termination  of Mr.  Miller's  employment  with  Community -
Habersham.

         In  1987,  Community  -  Habersham  and  Mr.  Wingate  entered  into  a
change-in-control  agreement for a three year term,  renewable for an additional
one year period annually  thereafter in the sole discretion of the  compensation
committee of the Board of Directors of Community - Habersham. The agreement also
provides for the payment of certain  severance  benefits to Mr. Wingate if there
is a change in control (as defined in the  agreement)  of  Community - Habersham
and Mr. Wingate's  employment is involuntarily  terminated other than for cause,
disability or retirement or is voluntarily  terminated as a result of a material
reduction  of duties,  compensation  or  benefits or a forced  relocation.  Such
benefits include the continuation of salary payments to Mr. Wingate for a period
of 36 months from the date of  termination,  the payment of certain  bonuses for
the year in which his  employment is  terminated  and the following two calendar
years, the continuation of health and life insurance  coverage and the continued
participation by Mr. Wingate in all employee retirement plans.
<PAGE>
<TABLE>
<CAPTION>
               Aggregated Option Exercises In Last Fiscal Year And FY-End Option Values

                                                                  Number of
                                                                  Securities           Value of
                                                                  Underlying           Unexercised
                                                                  Unexercised          In-The-Money
                                                                  Options at Fiscal    Options At Fiscal
                                                                  Year-End             Year-End ($)
                        Shares Acquired on                        (Exercisable/        (Exercisable/
         Name           Exercise (#)         Value Realized ($)   Unexercisable)       Unexercisable)
         ----           ------------         ------------------   --------------       --------------
<S>                            <C>                 <C>                  <C>   <C>              <C>
Charles M. Miller             -3,000-              $80,610              2,500/0                0/0
Harry L. Stephens               -0-                  -0-                8,500/0             161,220/0
Annette R. Fricks             -3,000-              $80,610             14,500/0             322,440/0
</TABLE>


ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

         The following  table sets forth the percent and number of shares of the
Common Stock  beneficially  owned as of January 1, 2000 by (i) each of the Named
Executive  Officers,  (ii) each of the  directors  of the  Company,  (iii)  each
shareholder who owns greater than five percent (5%) of the Company's  securities
and (iv) all executive officers and directors of the Company as a group, without
naming such  individuals.  There were 2,178,830  shares  outstanding as of that
date.

<TABLE>
<CAPTION>

Name of                               Amount of Shares                                      Percent
Beneficial Owner                      Beneficially Owned                                    of Class
----------------                      ------------------                                    --------
<S>                                   <C>                                                    <C>
Joye H. Adams                         141,720 <F1>                                           6.50%
Steven C. Adams                       495,620 <F2><F3><F4><F5><F6>                          22.74%
Edwin B. Burr                           1,080 <F7>                                            *
Elton S. Collins                      403,540 <F3><F8><F16>                                 18.52%
Community Bankshares, Inc.            380,780 <F9>                                          17.48%
  Employee Stock Ownership
  Plan and Trust
Annette R. Fricks                      29,986 <F19>                                          1.23%
Emmett D. Hart                        151,500 <F10>                                          6.95%
Charles M. Miller                      12,360 <F11>                                           *
Harry H. Purvis                        40,510                                                1.90%
Harry L. Stephens                      10,248 <F12>                                           *
H. Calvin Stovall                     166,660 <F13><F14>                                     7.65%
Dean C. Swanson                         30,000                                               1.38%
George D. Telford                       82,617                                               3.79%
J. Alton Wingate                       724,780 <F2><F3><F4><F15><F17>                       33.26%
Lois M. Wood-Schroyer                    3,030                                                *

All executive officers and            1,145,611 <F18>                                       52.58%
directors as a group (12 Persons)


* less than one percent
<FN>

<F1>     Mrs. Adams' address is 664 Chenocetah Drive, Cornelia, Georgia 30531.

<F2>     Includes an aggregate of 48,000 shares held by the Taft Chatham  Trusts
         I  and  II  with  respect  to  which  Messrs.  Wingate  and  Adams  are
         co-trustees and share voting and investment power.
<F3>     Includes  380,780 shares held by Community  Bankshares,  Inc. ESOP with
         respect to which Messrs. Wingate, Adams and Collins are co-trustees and
         share voting and investment power.
<F4>     Includes 19,500 shares held by Chatham  Transport  company with respect
         to which Messrs. Wingate and Adams share voting power.

<F5>     Includes  44,340  shares  held by Mr.  Adams as trustee for the F. Jack
         Adams  Testamentary  Trust,  as to  which  Mr.  Adams  has  voting  and
         investment control.

<F6>     Mr. Adam's address is 148 North Main Street, Cornelia Georgia 30531.

<F7>     Does not include 750 shares of Common  Stock owned by Mr.  Burr's wife,
         as to which he disclaims beneficial ownership.
<F8>     Mr. Collins' address is 1851 North Elm Street, Commerce, Georgia 30329.

<F9>     The  address of the ESOP is 448 North Main  Street,  Cornelia,  Georgia
         30531.

<F10>    Mr. Hart's  address is 1729 Davis  (By-Pass)  Road,  LaGrange,  Georgia
         30241.

<F11>    Includes  presently-exercisable  options  to  acquire  2,500  shares of
         Common Stock.

<F12>    Includes  presently-exercisable  options  to  acquire  8,500  shares of
         Common Stock.

<F13>    Mr. Stovall's address is 215 Grandview Circle, Cornelia, Georgia 30531.

<F14>    Does not  include  250 shares of Common  Stock  owned by Mr.  Stovall's
         wife, as to which he disclaims beneficial ownership.

<F15>    Includes 16,500 shares held by the Estate of H. Milton Stewart, Sr., of
         which  Mr.  Wingate  is a  co-trustee  and has  voting  and  investment
         control.

<F16>    Includes  presently-exercisable  options  to  acquire  2,500  shares of
         Common Stock.

<F17>    Mr.  Wingate's  address is 186  Hillcrest  Heights,  Cornelia,  Georgia
         30531.

<F18>    Includes  presently-exercisable  options  to acquire  28,000  shares of
         Common Stock.

<F19>    Includes  presently-exercisable  options  to acquire  14,500  shares of
         Common Stock.
</FN>
</TABLE>
<PAGE>


ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         Each of the Community Banking Subsidiaries has had, and expects to have
in the future,  banking  transactions  in the ordinary  course of business  with
directors  and  officers  of the  particular  bank  and the  Company  and  their
associates,  including  corporations  in which such  officers or  directors  are
shareholders,  directors and/or officers,  on the same terms (including interest
rates  and   collateral)  as  those   prevailing  at  the  time  for  comparable
transactions  with other persons.  Such transactions have not involved more than
the normal risk of collectibility  or presented other unfavorable  features ITEM

14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

     (a)    Financial Statements.

         The following financial  statements and notes thereto of the Registrant
         are included in this Report beginning at page F-1:

         Independent Auditor's Report on the Financial Statement

         Consolidated Balance Sheets - December 31, 1999 and 1998

         Consolidated  Statements  of Income for the years  ended  December  31,
         1999, 1998 and 1997

         Consolidated  Statements  of  Comprehensive  Income for the years ended
         December 31, 1999, 1998 and 1997

         Consolidated  Statements  of  Shareholder's  Equity for the years ended
         December 31, 1999, 1998 and 1997

         Consolidated  Statements of Cash Flows for the Years Ended December 31,
         1999, 1998 and 1997

         Notes to Consolidated Financial Statements

         (b)      Exhibits.

The following  exhibits are required to be filed with this Report by Item 601 of
Regulation S-K:

3.1      Articles of  Incorporation of the Registrant,  as amended  (included as
         Exhibit 3.1 to the  Registrant's  Form 10-K for the year ended December
         31, 1995,  previously filed with the Commission and incorporated herein
         by reference).

3.2      By-Laws of the Registrant  (included as Exhibit 3.3 to the Registrant's
         Form  S-4  Registration   Statement,   Commission  File  No.  33-81890,
         previously  filed  with  the  Commission  and  incorporated  herein  by
         reference).

4.1      See exhibits 3.1 and 3.2 for  provisions  of Articles of  Incorporation
         and Bylaws as amended, which define the rights of the holders of Common
         Stock of the  Registrant  (included as Exhibit 4.1 to the  Registrant's
         Form  S-4  Registration   Statement,   Commission  File  No.  33-81890,
         previously  filed  with  the  Commission  and  incorporated  herein  by
         reference).

10.1     Incentive  Stock Option Plan, as adopted  August 17, 1987  (included as
         Exhibit  10.1 to the  Registrant's  Form  S-4  Registration  Statement,
         Commission File No. 33-81890,  previously filed with the Commission and
         incorporated herein by reference).

10.2     Employment   Agreement  between  Charles  M.  Miller  and  Community  -
         Habersham,  dated  March  31,  1990(included  as  Exhibit  10.2  to the
         Registrant's  Form  S-4  Registration  Statement,  Commission  File No.
         33-81890,  previously filed with the Commission and incorporated herein
         by reference).

10.3     Agreement  Regarding  Change in Control  between J. Alton  Wingate  and
         Community - Habersham,  dated August 17, 1987 (included as Exhibit 10.3
         to the Registrant's  Form S-4 Registration  Statement,  Commission File
         No.  33-81890,  previously  filed with the Commission and  incorporated
         herein by reference).

10.4     Master Consulting  Agreement between Financial  Supermarkets,  Inc. and
         NationsBanc Services, Inc.(included as Exhibit 10.1 to the Registrant's
         Form 10-QSB for the period ended March 31, 1996 and incorporated herein
         by reference).

10.5     Amendment   to   Master   Consulting    Agreement   between   Financial
         Supermarkets, Inc. and NationsBanc Services, Inc. dated July 3, 1997.

10.6     Termination   of  Master   Consulting   Agreement   between   Financial
         Supermarkets,  Inc. and NationsBanc Services, Inc. (included as Exhibit
         10.1 to the  Registrant's  Form 10-Q for the period ended September 30,
         1998 and incorporated herein by reference).

10.7     Amended and Restated  Revolving  Credit/Term Loan Agreement between the
         Registrant and SunTrust Bank dated July 31, 1999.

10.8     Community  Bankshares,  Inc. 1999 Stock Award Plan, as adopted December
         22, 1999.

21       List of  Subsidiaries  of  Registrant.

27       Financial Data Schedule (for SEC use only)

(c)      No reports on Form 8-K were filed during the last quarter of 1999.

<PAGE>
<PAGE>



                           COMMUNITY BANKSHARES, INC.
                                AND SUBSIDIARIES

                          CONSOLIDATED FINANCIAL REPORT
                                DECEMBER 31, 1999

---------------------------------------------------------------------------

                                TABLE OF CONTENTS

                                                                       PAGE

INDEPENDENT AUDITOR'S REPORT...........................................F-1

FINANCIAL STATEMENTS

     CONSOLIDATED BALANCE SHEETS.......................................F-2
     CONSOLIDATED STATEMENTS OF INCOME.................................F-3
     CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME...................F-4
     CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY...................F-5
     CONSOLIDATED STATEMENTS OF CASH FLOWS.........................F-6 AND 7
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.....................F-8-35



<PAGE>

                          INDEPENDENT AUDITOR'S REPORT

-----------------------------------------------------------------------------


TO THE BOARD OF DIRECTORS
COMMUNITY BANKSHARES, INC.
   AND SUBSIDIARIES
CORNELIA, GEORGIA


         We  have  audited  the  accompanying  consolidated  balance  sheets  of
COMMUNITY  BANKSHARES,  INC. AND  SUBSIDIARIES as of December 31, 1999 and 1998,
and  the  related  consolidated  statements  of  income,  comprehensive  income,
shareholders'  equity and cash  flows for each of the three  years in the period
ended December 31, 1999. These financial  statements are the  responsibility  of
the Company's  management.  Our responsibility is to express an opinion on these
financial statements based on our audits.


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


         In our opinion, the consolidated financial statements referred to above
present fairly, in all material  respects,  the financial  position of Community
Bankshares,  Inc. and  subsidiaries  as of December  31, 1999 and 1998,  and the
results of their  operations and their cash flows for each of the three years in
the period ended  December 31,  1999,  in  conformity  with  generally  accepted
accounting principles.





Atlanta, Georgia
January 14, 2000


                                      F-1
<PAGE>
                                                    COMMUNITY BANKSHARES, INC.
                                                         AND SUBSIDIARIES

                                                   CONSOLIDATED BALANCE SHEETS
                                                    DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>

--------------------------------------------------------------------------------------------------------------------------------
                                     ASSETS                                                 1999                    1998
                                     ------                                       ----------------------   ---------------------
<S>                                                                               <C>                      <C>
Cash and due from banks                                                           $          31,834,329    $         26,796,002
Interest-bearing deposits in banks                                                              160,751                 427,870
Federal funds sold                                                                            2,940,000              22,890,000
Securities available-for-sale                                                                49,143,458              42,525,208
Securities held-to-maturity (fair value $31,349,477 and $32,173,821)                         31,939,177              30,915,014
Loans held for sale                                                                           1,274,927                 699,498

Loans                                                                                       375,593,370             313,437,773
Less allowance for loan losses                                                                5,682,612               4,863,181
                                                                                  ----------------------   ---------------------
          Loans, net                                                                        369,910,758             308,574,592

Premises and equipment                                                                       13,443,644              13,463,273
Other assets                                                                                 15,502,518              14,301,983
                                                                                  ----------------------   ---------------------

          TOTAL ASSETS                                                            $         516,149,562    $        460,593,440
                                                                                  ======================   =====================

          LIABILITIES, REDEEMABLE COMMON STOCK AND SHAREHOLDERS' EQUITY
          -------------------------------------------------------------

Deposits
    Noninterest-bearing demand                                                    $          65,814,563    $         65,266,672
    Interest-bearing demand                                                                  99,185,353              94,458,133
    Savings                                                                                  20,863,081              19,731,233
    Time, $100,000 and over                                                                  79,924,593              67,003,184
    Other time                                                                              178,268,414             158,823,651
                                                                                  ----------------------   ---------------------
          TOTAL DEPOSITS                                                                    444,056,004             405,282,873
                                                                                  ----------------------   ---------------------
Federal Home Loan Bank advances                                                              15,000,000               5,000,000
Notes payable                                                                                 1,054,100                 808,200
Other liabilities                                                                            11,236,847               8,958,004
                                                                                  ----------------------   ---------------------
          TOTAL LIABILITIES                                                                 471,346,951             420,049,077
                                                                                  ----------------------   ---------------------

Commitments and contingent liabilities

Redeemable common stock held by ESOP, 380,780 and 363,616
     shares outstanding at December 31, 1999 and 1998, respectively                          13,982,242              14,253,747
                                                                                  ----------------------   ---------------------

Shareholders' equity
    Common stock, par value $1; 5,000,000 shares authorized;
        2,178,830 and 2,169,830 shares issued and outstanding, respectively                   2,178,830               2,169,830
    Capital surplus                                                                           6,115,827               6,036,220
    Retained earnings                                                                        23,853,170              17,857,974
    Accumulated other comprehensive income (loss)                                            -1,327,458                 226,592
                                                                                  ----------------------   ---------------------
       TOTAL SHAREHOLDERS' EQUITY                                                            30,820,369              26,290,616
                                                                                  ----------------------   ---------------------

       TOTAL LIABILITIES, REDEEMABLE COMMON STOCK AND
           SHAREHOLDERS' EQUITY                                                   $         516,149,562    $        460,593,440
                                                                                  ======================   =====================

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>

                                                             F-2

<PAGE>
                                           COMMUNITY BANKSHARES, INC.
                                                AND SUBSIDIARIES

                                        CONSOLIDATED STATEMENTS OF INCOME
                                  YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>

---------------------------------------------------------------------------------------------------------------
                                                                 1999               1998               1997
                                                             -----------        -----------        ------------
INTEREST INCOME
<S>                                                          <C>                <C>                <C>
    Loans                                                    $35,040,618        $29,767,173        $ 23,562,784
    Taxable securities                                         2,377,935          2,564,894           3,107,805
    Nontaxable securities                                      1,994,814          1,710,141           1,326,884
    Deposits in banks                                             18,653             35,973              33,523
    Federal funds sold                                           858,093            534,903             672,915
                                                             -----------        -----------        ------------
       TOTAL INTEREST INCOME                                  40,290,113         34,613,084          28,703,911
                                                             -----------        -----------        ------------
INTEREST EXPENSE
    Deposits                                                  17,167,809         15,839,093          13,149,225
    Other borrowings                                             529,052            111,411              42,224
                                                             -----------        -----------        ------------
       TOTAL INTEREST EXPENSE                                 17,696,861         15,950,504          13,191,449
                                                             -----------        -----------        ------------

       NET INTEREST INCOME                                    22,593,252         18,662,580          15,512,462
PROVISION FOR LOAN LOSSES                                      1,636,900          1,164,950             936,216
                                                             -----------        -----------        ------------
      NET INTEREST INCOME AFTER PROVISION FOR
          LOAN LOSSES                                         20,956,352         17,497,630          14,576,246
                                                             -----------        -----------        ------------

OTHER INCOME
    Service charges on deposits accounts                       2,864,632          2,527,830           2,016,911
    Other service charges, commissions and fees                  649,378            523,438             431,729
    Trust department fees                                        112,998            112,061              93,450
    Nonbank subsidiary income                                  6,720,159          9,043,292           8,819,919
    Gain on sale of loans                                        318,757            560,075             614,060
    Net realized gains (losses) on sale of securities                  0             78,653              (3,992)
    Other                                                        844,053            535,636             447,053
                                                             -----------        -----------        ------------
       TOTAL OTHER INCOME                                     11,509,977         13,380,985          12,419,130
                                                             -----------        -----------        ------------

OTHER EXPENSES
    Salaries and employee benefits                            12,345,498         10,676,957          10,474,465
    Equipment expenses                                         2,541,601          1,840,529           1,487,528
    Occupancy expenses                                         1,386,038          1,305,998           1,075,710
    Other operating expenses                                   7,558,207          6,578,930           5,686,110
                                                             -----------        -----------        ------------
       TOTAL OTHER EXPENSES                                   23,831,344         20,402,414          18,723,813
                                                             -----------        -----------        ------------

       INCOME BEFORE INCOME TAXES                              8,634,985         10,476,201           8,271,563

INCOME TAX EXPENSE                                             2,558,820          3,444,497           2,624,797
                                                             -----------        -----------        ------------

       NET INCOME                                            $ 6,076,165        $ 7,031,704        $  5,646,766
                                                             ===========        ===========        ============

BASIC EARNINGS PER COMMON SHARE                              $      2.80        $      3.24        $       2.73
                                                             ===========        ===========        ============
DILUTED EARNINGS PER COMMON SHARE                            $      2.80        $      3.20        $       2.60
                                                             ===========        ===========        ============
</TABLE>

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                                     F-3
<PAGE>
                                           COMMUNITY BANKSHARES, INC.
                                                AND SUBSIDIARIES

                                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                  YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------------------------------------------
                                                                                    1999             1998            1997
                                                                                -----------      -----------      ----------
<S>                                                                             <C>              <C>              <C>
Net income                                                                      $ 6,076,165      $ 7,031,704      $5,646,766
                                                                                -----------      -----------      ----------

Other comprehensive income (loss):

    Unrealized gains (losses) on securities available-for-sale:

        Unrealized  holding gains  (losses)  arising during  period,  net of taxes  (benefits) of  $(1,036,081),
            $95,593, and $134,777,
            respectively                                                         (1,554,050)         143,388         202,167

         Reclassification adjustment for (gains) losses realized
            in net income, net of  taxes  (benefits) of $0, $31,461, and
            $(1,597), respectively                                                        0          (47,192)          2,395
                                                                                -----------      -----------      ----------

Other comprehensive income (loss)                                                (1,554,050)          96,196         204,562
                                                                                -----------      -----------      ----------

Comprehensive income                                                            $ 4,522,115      $ 7,127,900      $5,851,328
                                                                                ===========      ===========      ==========
</TABLE>


See Notes to Consolidated Financial Statements

                                                     F-4
<PAGE>
                                        COMMUNITY BANKSHARES, INC.
                                             AND SUBSIDIARIES

                             CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                               YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------


                                                        Common Stock
                                                -------------------------     Capital          Retained
                                                  Shares       Par Value       Surplus         Earnings
                                                ----------    -----------    ----------     ------------

<S>                                             <C>           <C>            <C>            <C>
BALANCE, DECEMBER 31, 1996                      2,004,830     $2,004,830     $5,276,520     $ 13,875,615
    Net income                                          -              -              -        5,646,766
    Cash dividends declared, $.14 per share             -              -              -         (295,157)
    Exercise of stock options                     165,000        165,000        759,700                -
    Adjustment for shares owned by ESOP                 -              -              -       (4,444,491)
    Sale of treasury stock to ESOP                      -              -              -                -
    Other comprehensive income                          -              -              -                -
                                                ---------     ----------     ----------     ------------
BALANCE, DECEMBER 31, 1997                      2,169,830      2,169,830      6,036,220       14,782,733
    Net income                                          -              -              -        7,031,704
    Cash dividends declared, $.15 per share             -              -              -         (324,607)
    Adjustment for shares owned by ESOP                 -              -              -       (3,631,856)
    Other comprehensive income                          -              -              -                -
                                                ---------     ----------     ----------     ------------
BALANCE, DECEMBER 31, 1998                      2,169,830      2,169,830      6,036,220       17,857,974
    Net income                                          -              -              -        6,076,165
    Exercise of stock options                       9,000          9,000         79,607                -
    Cash dividends declared, $.15 per share             -              -              -         (352,474)
    Adjustment for shares owned by ESOP                 -              -              -          271,505
    Other comprehensive loss                            -              -              -                -
                                                ---------     ----------     ----------     ------------
BALANCE, DECEMBER 31, 1999                      2,178,830     $2,178,830     $6,115,827     $ 23,853,170
                                                =========     ==========     ==========     ============
<CAPTION>
                                                                              Accumulated
                                                     Treasury Stock              Other               Total
                                                  ---------------------       Comprehensive      Shareholders'
                                                  Shares        Amount        Income (Loss)         Equity
                                                  ------       --------       -------------      ------------
BALANCE, DECEMBER 31, 1996                             -       $      -       $   (74,166)       $ 21,082,799
    Net income                                         -              -                 -           5,646,766
    Cash dividends declared, $.14 per share            -              -                 -            (295,157)
    Exercise of stock options                     35,661       (782,050)                -             142,650
    Adjustment for shares owned by ESOP                -              -                 -          (4,444,491)
    Sale of treasury stock to ESOP               (35,661)       782,050                 -             782,050
    Other comprehensive income                         -              -           204,562             204,562
                                                  ------       --------       -----------        ------------
BALANCE, DECEMBER 31, 1997                             -              -           130,396          23,119,179
    Net income                                         -              -                 -           7,031,704
    Cash dividends declared, $.15 per share            -              -                 -            (324,607)
    Adjustment for shares owned by ESOP                -              -                 -          (3,631,856)
    Other comprehensive income                         -              -            96,196              96,196
                                                  ------       --------       -----------        ------------
BALANCE, DECEMBER 31, 1998                             -              -           226,592          26,290,616
    Net income                                         -              -                 -           6,076,165
    Exercise of stock options                          -              -                 -              88,607
    Cash dividends declared, $.15 per share            -              -                 -            (352,474)
    Adjustment for shares owned by ESOP                -              -                 -             271,505
    Other comprehensive loss                           -              -        (1,554,050)         (1,554,050)
                                                  ------       --------       -----------        ------------
BALANCE, DECEMBER 31, 1999                             -       $      -       $(1,327,458)       $ 30,820,369
                                                  ======       ========       ===========        ============
</TABLE>
                                                    F-5

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
<TABLE>
<CAPTION>

                                                   COMMUNITY BANKSHARES, INC.
                                                        AND SUBSIDIARIES

                                              CONSOLIDATED STATEMENTS OF CASH FLOWS
                                          YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997


-------------------------------------------------------------------------------------------------------------------------------
                                                                                1999                1998               1997
                                                                           ------------        ------------        ------------
<S>                                                                        <C>                 <C>                 <C>
OPERATING ACTIVITIES
    Net income                                                             $  6,076,165        $  7,031,704        $  5,646,766
    Adjustments to reconcile net income to net cash
        provided by operating activities:
        Depreciation                                                          1,981,267           1,585,729           1,154,306
        Amortization of intangibles                                             429,247             288,156             244,911
        Provision for loan losses                                             1,636,900           1,164,950             936,216
        Provision for other real estate losses                                        0              10,000              65,000
        Deferred income tax benefits                                           (381,217)           (292,525)           (195,033)
        (Increase) decrease in loans held for sale                             (575,429)          1,861,417             (76,798)
        Net (gains) losses on sale of securities available-for-sale                   0             (78,653)              3,992
        Loss on disposal of premises and equipment                               16,460                   0                   0
        Net losses (gains) on sale of other real estate                         (54,132)             (3,563)             39,182
        (Increase) decrease in interest receivable                              266,634          (1,187,060)           (690,955)
        Increase (decrease) in interest payable                                (655,877)          1,180,385             277,325
        Increase (decrease) in taxes payable                                    438,959             348,661            (661,580)
        (Increase) decrease in accounts receivable of
             nonbank subsidiary                                                (136,686)           (618,731)          1,314,629
        (Increase) decrease in work in process of nonbank subsidiary            145,959            (513,252)          1,342,849
        Increase (decrease) in accruals and payables of
             nonbank subsidiary                                               2,303,101             325,031          (3,773,361)
        Other operating activities                                             (171,219)         (1,145,989)            257,796
                                                                           ------------        ------------        ------------

              Net cash provided by operating activities                      11,320,132           9,956,260           5,885,245
                                                                           ------------        ------------        ------------

INVESTING ACTIVITIES
    Purchases of securities available-for-sale                              (18,271,344)        (29,111,438)        (25,373,331)
    Proceeds from sales of securities available-for-sale                              0          14,296,060          10,687,389
    Proceeds from maturities of securities available-for-sale                 9,063,010          25,811,265           9,158,723
    Purchases of securities held-to-maturity                                 (2,268,432)         (3,323,556)        (11,403,699)
    Proceeds from maturities of securities held-to-maturity                   1,244,269           1,127,193           1,338,890
    Net (increase) decrease in Federal funds sold                            19,950,000         (16,930,000)          2,385,000
    Net (increase) decrease  in interest-bearing deposits in banks              267,119             341,044            (560,690)
    Net increase in loans                                                   (63,874,282)        (71,584,937)        (40,109,318)
    Purchase of premises and equipment                                       (1,978,098)         (2,931,496)         (5,334,330)
    Net cash acquired in branch acquisition                                           0             170,667              99,612
    Proceeds from sale of other real estate                                     821,387             252,492             383,638
                                                                           ------------        ------------        ------------

              Net cash used in investing activities                         (55,046,371)        (81,882,706)        (58,728,116)
                                                                           ------------        ------------        ------------
</TABLE>
                                                              F-6
<PAGE>
<TABLE>
<CAPTION>

                                                   COMMUNITY BANKSHARES, INC.
                                                        AND SUBSIDIARIES

                                              CONSOLIDATED STATEMENTS OF CASH FLOWS
                                          YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997


------------------------------------------------------------------------------------------------------------------------------
                                                                              1999              1998                1997
                                                                      ---------------    ---------------    ------------------
<S>                                                                   <C>                <C>                <C>
FINANCING ACTIVITIES
    Net increase in deposits                                          $   38,773,131     $   69,738,048     $      56,835,456
    Increase in FHLB advances                                             10,000,000          5,000,000                     -
    Increase in notes payable                                                400,000            500,000                     -
    Repayment of notes payable                                              (154,100)          (154,099)             (154,100)
    Proceeds from the issuance of common stock                                88,607                  -               924,700
    Dividends paid                                                          (343,072)          (318,531)             (285,728)
                                                                      --------------     --------------     -----------------

          Net cash provided by financing activities                       48,764,566         74,765,418            57,320,328
                                                                      --------------     --------------     -----------------

Net increase in cash and due from banks                                    5,038,327          2,838,972             4,477,457

Cash and due from banks at beginning of year                              26,796,002         23,957,030            19,479,573
                                                                      --------------     --------------     -----------------

Cash and due from banks at end of year                                $   31,834,329     $   26,796,002     $      23,957,030
                                                                      ==============     ==============     =================

SUPPLEMENTAL DISCLOSURES Cash paid for:
        Interest                                                      $   18,352,738     $   14,957,440     $      12,914,124

        Income taxes                                                  $    2,501,078     $    3,445,529     $       3,526,919

NONCASH TRANSACTIONS
    Unrealized (gains) losses on securities available-for-sale        $    2,590,131     $     (160,328)    $         340,936

    Principal balances of loans transferred to other
        real estate                                                   $      901,216     $      481,806     $         426,273

BRANCH ACQUISITIONS
    Net cash acquired                                                 $            -     $      170,667     $          99,612
                                                                      ==============     ==============     =================

    Loans                                                             $            -     $    2,981,087     $       4,357,901
    Premises and equipment                                                         -             10,085               608,071
    Other assets                                                                   -              9,063                 1,828
    Core deposit intangible                                                        -            760,597             2,190,765
    Deposits                                                                       -         (5,837,754)          (12,387,583)
    Other liabilities                                                              -            (20,687)              (62,790)
                                                                      --------------     --------------     -----------------
    Net liabilities assumed, net of cash and due from
        banks of $170,667 and $99,612                                 $            -     $   (2,097,609)    $      (5,291,808)
                                                                      ==============     ==============     =================

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>

                                                             F-7

<PAGE>


                           COMMUNITY BANKSHARES, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



-------------------------------------------------------------------------------



NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         NATURE OF BUSINESS

            Community  Bankshares,  Inc. (the "Company") is a multi-bank holding
            company whose  business is presently  conducted by its  wholly-owned
            subsidiaries:   Community  Bank  &  Trust  -  Habersham  located  in
            Cornelia,  Georgia;  Community  Bank & Trust -  Jackson  located  in
            Commerce, Georgia; Community Bank & Trust - Alabama located in Union
            Springs,  Alabama;  and  Community  Bank & Trust - Troup  located in
            LaGrange,  Georgia.  Financial Supermarkets,  Inc. is a wholly-owned
            subsidiary of Community  Bank & Trust - Habersham  which  provides a
            variety of bank  related  products  and  services  to the  financial
            institution industry.  Financial Properties,  inc. is a wholly-owned
            subsidiary  of  Community  Bank &  Trust-Habersham  which  is a real
            estate sales agency which  provides a variety of real estate related
            services.

            The   banking    subsidiaries   are   commercial   banks   operating
            independently of one another in their  respective  market areas. The
            banking subsidiaries in Georgia have identified their primary market
            areas to be the county in which they are located and all surrounding
            counties.   The  Georgia  banking   subsidiaries   are  all  located
            approximately 85 miles from the metropolitan Atlanta area. Community
            Bank & Trust -  Alabama  is  located  approximately  50  miles  from
            Montgomery,  Alabama.  The  Banks  provide a full  range of  banking
            services  to   individual   and   corporate   customers.   Financial
            Supermarkets,   Inc.   currently   provides  products  and  services
            primarily in the southeastern United States; however, their products
            and  services are marketed  internationally.  Financial  Properties,
            Inc.  currently  operates  primarily in Cornelia,  Habersham County,
            Georgia.

         BASIS OF PRESENTATION

            The consolidated  financial  statements  include the accounts of the
            Company and its subsidiaries.  Significant intercompany transactions
            and accounts are eliminated in consolidation.

            The preparation of financial statements in conformity with generally
            accepted accounting principles requires management to make estimates
            and  assumptions  that  affect  the  reported  amounts of assets and
            liabilities and disclosures of contingent  assets and liabilities as
            of the balance  sheet date and the reported  amounts of revenues and
            expenses  during the reporting  period.  Actual results could differ
            from  those  estimates.  Material  estimates  that are  particularly
            susceptible  to  significant  change in the near term  relate to the
            determination  of the  allowance  for loan losses,  the valuation of
            foreclosed real estate, and deferred tax assets.

         CASH AND DUE FROM BANKS

            Cash on hand,  cash items in process of collection,  and amounts due
            from banks are included in cash and due from banks.

            The Company  maintains  amounts due from banks which, at times,  may
            exceed Federally insured limits. The Company has not experienced any
            losses in such accounts.


                                     F-8
<PAGE>

                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



--------------------------------------------------------------------------------


NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         SECURITIES

            Securities are  classified  based on  management's  intention on the
            date of purchase.  Securities  which  management  has the intent and
            ability to hold to maturity are classified as  held-to-maturity  and
            recorded at amortized  cost. All other  securities are classified as
            available-for-sale  and  recorded at fair value with net  unrealized
            gains and losses  reported  in other  comprehensive  income  (loss).
            Equity  securities  without a readily  determinable  fair  value are
            classified as securities available-for-sale and recorded at cost.

            Interest and  dividends on  securities,  including  amortization  of
            premiums  and  accretion  of  discounts,  are  included  in interest
            income.  Realized  gains and losses from the sale of securities  are
            determined using the specific identification method.

         LOANS HELD FOR SALE

            Loans held for sale include  mortgage and other loans originated and
            intended for sale in the  secondary  market,  and are carried at the
            lower of aggregate  cost or  estimated  fair value.  Net  unrealized
            losses,  if any,  are  recognized  through a valuation  allowance by
            charges to income.

         LOANS

            Loans are  reported at their  outstanding  principal  balances  less
            unearned  income and the allowance for loan losses.  Interest income
            is accrued based on the principal balance outstanding.

            Loan origination fees and certain direct  origination  costs of most
            loans are  recognized at the time the loan is recorded.  Because the
            net  origination  loan fees and costs related to these loans are not
            material,  the results of operations  are not  materially  different
            than the results which would be obtained by accounting  for the loan
            fees and costs in  accordance  with  generally  accepted  accounting
            principles. Loan origination fees and costs incurred for other loans
            are deferred and recognized as income over the life of the loan.

            The  allowance  for  loan  losses  is  maintained  at a  level  that
            management believes to be adequate to absorb potential losses in the
            loan  portfolio.  Loan losses are charged against the allowance when
            management  believes the  uncollectibility  of a loan is  confirmed.
            Subsequent  recoveries are credited to the  allowance.  Management's
            determination  of the  adequacy  of the  allowance  is  based  on an
            evaluation  of the  portfolio,  past loan loss  experience,  current
            economic  conditions,   volume,  growth,  composition  of  the  loan
            portfolio,   and  other  risks  inherent  in  the  portfolio.   This
            evaluation  is  inherently   subjective  as  it  requires   material
            estimates that are susceptible to significant  change  including the
            amounts and timing of future  cash flows  expected to be received on
            impaired loans.  In addition,  regulatory  agencies,  as an integral
            part of their examination process, periodically review the Company's
            allowance  for loan  losses,  and may  require the Company to record
            additions to the allowance based on their judgment about information
            available to them at the time of their examinations.


                                     F-9
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



--------------------------------------------------------------------------------


NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         LOANS (CONTINUED)

            The  accrual  of  interest  on  loans  is   discontinued   when,  in
            management's opinion, the borrower may be unable to meet payments as
            they become due. Interest income is subsequently  recognized only to
            the extent cash payments are received.

            A loan is  considered  impaired when it is probable the Company will
            be unable to collect all  principal  and  interest  payments  due in
            accordance  with  the  contractual  terms  of  the  loan  agreement.
            Individually  identified  impaired  loans are measured  based on the
            present value of expected  payments using the contractual  loan rate
            as the discount rate,  the loan's  observable  market price,  or the
            fair value of the collateral if the loan is collateral dependent. If
            the recorded  investment in the impaired loan exceeds the measure of
            fair value,  a valuation  allowance is established as a component of
            the  allowance for loan losses.  Changes to the valuation  allowance
            are recorded as a component of the provision for loan losses.

         PREMISES AND EQUIPMENT

            Land is carried at cost.  Premises and equipment are carried at cost
            less   accumulated   depreciation   computed   principally   by  the
            straight-line method over the estimated useful lives of the assets.

         OTHER REAL ESTATE OWNED

            Other real  estate  owned  represents  properties  acquired  through
            foreclosure. Other real estate owned is held for sale and is carried
            at the lower of the recorded amount of the loan or fair value of the
            properties  less  estimated  selling  costs.  Any write-down to fair
            value at the time of transfer to other real estate  owned is charged
            to the allowance for loan losses. Subsequent gains or losses on sale
            and any  subsequent  adjustment  to the value are  recorded as other
            expenses. The carrying amount of other real estate owned at December
            31, 1999 and 1998 was $1,142,631 and $1,000,900, respectively.

         INCOME TAXES

            Income tax expense  consists of current and deferred taxes.  Current
            income tax provisions  approximate  taxes to be paid or refunded for
            the applicable year.  Deferred income tax assets and liabilities are
            determined  using the balance sheet method.  Under this method,  the
            net deferred tax asset or liability is  determined  based on the tax
            effects  of the  differences  between  the book and tax bases of the
            various  balance  sheet  assets and  liabilities  and gives  current
            recognition to changes in tax rates and laws.


                                     F-10
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



--------------------------------------------------------------------------------


NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         INCOME TAXES (CONTINUED)

            Recognition  of  deferred  tax  balance  sheet  amounts  is based on
            management's  belief  that it is more  likely  than not that the tax
            benefit  associated  with  certain  temporary  differences  will  be
            realized.  A valuation  allowance is recorded for those deferred tax
            items for which it is more likely than not that realization will not
            occur.

            The Company and subsidiaries file a consolidated  income tax return.
            Each entity  provides for income taxes based on its  contribution to
            income taxes of the consolidated group.

         SALE OF LOANS

            The Banks originate and sell  participations in certain loans. Gains
            are  recognized at the time the sale is  consummated.  The amount of
            gain  recognized  on the  sale of a  specific  loan is  equal to the
            percentage  resulting from determining the fair value of the portion
            of the loan  sold  relative  to the fair  value of the  entire  loan
            including servicing rights.

         TRUST DEPARTMENT

            Trust  income is  recognized  on the cash basis in  accordance  with
            established  industry  practices.  The results of operations are not
            materially  different  than the  results  which would be obtained by
            accounting for such fees on the accrual basis.

         NONBANK SUBSIDIARY REVENUE RECOGNITION

            Financial Supermarkets, Inc., a wholly-owned subsidiary of Community
            Bank &  Trust -  Habersham,  recognizes  revenue  and  costs  on its
            installation   contracts   on  the   completed-contract   method  of
            accounting.  Under this method,  billings and costs are  accumulated
            during  the period of  installation,  but no  profits  are  recorded
            before the completion of the work.  Provisions for estimated  losses
            on  uncompleted  contracts  are made at the  time  such  losses  are
            identified.  The results of operations are not materially  different
            than the results  which would be  obtained by  accounting  for these
            contracts  in  accordance   with   generally   accepted   accounting
            principles.   Operating  expenses,   including  indirect  costs  and
            administrative  expenses, are charged as incurred to periodic income
            and not allocated to contract  costs.  Income from other  consulting
            services  is  recognized  as  services  are  provided  and costs and
            expenses are incurred for each individual contract.


                                     F-11
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



--------------------------------------------------------------------------------


NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         STOCK COMPENSATION PLAN

            Statement  of  Financial  Accounting  Standards  ("SFAS")  No.  123,
            ACCOUNTING FOR STOCK-BASED COMPENSATION,  encourages all entities to
            adopt a fair value based method of  accounting  for  employee  stock
            compensation  plans,  whereby  compensation  cost is measured at the
            grant  date based on the value of the award and is  recognized  over
            the service period, which is usually the vesting period. However, it
            also allows an entity to continue to measure  compensation  cost for
            those plans using the  intrinsic  value based  method of  accounting
            prescribed by Accounting Principles Board Opinion No. 25, ACCOUNTING
            FOR STOCK  ISSUED TO  EMPLOYEES,  whereby  compensation  cost is the
            excess, if any, of the quoted market price of the stock at the grant
            date (or other  measurement  date) over the amount an employee  must
            pay to acquire the stock.  Stock options  issued under the Company's
            stock  option plan have no  intrinsic  value at the grant date,  and
            under Opinion No. 25 no  compensation  cost is recognized  for them.
            The Company has elected to continue with the accounting  methodology
            in  Opinion  No.  25  and,  as a  result,  has  provided  pro  forma
            disclosures   of  net  income  and  earnings  per  share  and  other
            disclosures,  as if the fair value based  method of  accounting  had
            been applied.  The pro forma disclosures  include the effects of all
            awards granted on or after January 1, 1995.

         EARNINGS PER COMMON SHARE

            Basic  earnings per common share are computed by dividing net income
            by  the   weighted-average   number  of   shares  of  common   stock
            outstanding.  Diluted  earnings  per common  share are  computed  by
            dividing  net  income by the sum of the  weighted-average  number of
            shares of common stock  outstanding  and  potential  common  shares.
            Potential common shares consist of stock options.

         COMPREHENSIVE INCOME

            SFAS  No.   130,   "Reporting   Comprehensive   Income",   describes
            comprehensive income as the total of all components of comprehensive
            income,  including net income.  Other comprehensive income refers to
            revenues,  expenses,  gains and losses that under generally accepted
            accounting  principles  are  included  in  comprehensive  income but
            excluded   from  net  income.   Currently,   the   Company's   other
            comprehensive  income  consists  of  unrealized  gains and losses on
            available-for-sale securities.



                                     F-12
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



-------------------------------------------------------------------------------


NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         RECENT DEVELOPMENTS

            In June 1998, the Financial  Accounting  Standards Board issued SFAS
            No.  133,   "Accounting  for  Derivative   Instruments  and  Hedging
            Activities".  The effective date of this statement has been deferred
            by SFAS No. 137 until  fiscal years  beginning  after June 15, 2000.
            However, the statement permits early adoption as of the beginning of
            any fiscal quarter after its issuance.  The Company expects to adopt
            this statement  effective January 1, 2001. SFAS No. 133 requires the
            Company to recognize all derivatives as either assets or liabilities
            in the balance  sheet at fair value.  For  derivatives  that are not
            designated  as  hedges,  the  gain or loss  must  be  recognized  in
            earnings  in  the  period  of  change.   For  derivatives  that  are
            designated  as  hedges,  changes  in the fair  value  of the  hedged
            assets,  liabilities,  or firm  commitments  must be  recognized  in
            earnings  or  recognized  in other  comprehensive  income  until the
            hedged item is  recognized  in earnings,  depending on the nature of
            the hedge. The ineffective  portion of a derivative's change in fair
            value must be recognized in earnings immediately. Management has not
            yet determined what effect the adoption of SFAS No. 133 will have on
            the Company's earnings or financial position.

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

NOTE 2.  SECURITIES

         The  amortized  cost and fair value of  securities  are  summarized  as
follows:
<TABLE>
<CAPTION>
                                                                    GROSS             GROSS
                                                 AMORTIZED        UNREALIZED       UNREALIZED           FAIR
                                                   COST             GAINS            LOSSES             VALUE
                                               --------------   ---------------   --------------    --------------
            <S>                                 <C>              <C>               <C>               <C>

            SECURITIES AVAILABLE-FOR-SALE
               December 31, 1999:
               U. S. Government and agency
                  securities                   $  31,705,707    $        9,688    $ (1,007,814)     $  30,707,581
               State and municipal securities      8,955,524             4,205      (1,033,338)         7,926,391
               Mortgage-backed securities          8,969,973            23,170        (208,388)         8,784,755
               Equity securities                   1,724,731                 -                -         1,724,731
                                               --------------   ---------------   --------------    --------------
                                               $  51,355,935    $       37,063    $ (2,249,540)     $  49,143,458
                                               ==============   ===============   ==============    ==============

               December 31, 1998:
               U. S. Government and agency
                  securities                   $  25,704,416    $      324,048    $    (41,299)     $  25,987,165
               State and municipal securities      5,791,730            67,382         (21,121)         5,837,991
               Mortgage-backed securities          8,930,047            85,267         (36,623)         8,978,691
               Equity securities                   1,721,361                 -                -         1,721,361
                                               --------------   ---------------   --------------    --------------
                                               $  42,147,554    $      476,697    $    (99,043)     $  42,525,208
                                               ==============   ===============   ==============    ==============
</TABLE>


                                     F-13
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



-------------------------------------------------------------------------------


NOTE 2.  SECURITIES (CONTINUED)
<TABLE>
<CAPTION>

                                                                    GROSS             GROSS
                                                 AMORTIZED        UNREALIZED       UNREALIZED           FAIR
                                                   COST             GAINS            LOSSES             VALUE
                                               --------------   ---------------   --------------    --------------
            <S>                                <C>              <C>               <C>               <C>

            SECURITIES HELD-TO-MATURITY
               DECEMBER 31, 1999:
               State and municipal securities  $  31,939,177    $      111,195    $   (700,895)     $  31,349,477
                                               ==============   ===============   ==============    ==============

               December 31, 1998:
               State and municipal securities  $  30,915,014    $    1,300,295    $    (41,488)     $  32,173,821
                                               ==============   ===============   ==============    ==============
</TABLE>

            Securities  with a carrying value of $39,625,995  and $36,621,313 at
            December  31, 1999 and 1998,  respectively,  were  pledged to secure
            public deposits and for other purposes.

            Gross  gains and  losses on sales of  securities  available-for-sale
            consist of the following:
<TABLE>
<CAPTION>
                                                                           DECEMBER 31,
                                                           ---------------------------------------------
                                                                1999            1998            1997
                                                           -------------   -------------   -------------

                 <S>                                       <C>             <C>             <C>
                 Gross gains                               $          -    $    114,546    $     47,843
                 Gross losses                                         -        (35,893)        (51,835)
                                                           -------------   -------------   -------------
                  Net realized gains (losses)              $          -    $     78,653    $    (3,992)
                                                           =============   =============   =============
</TABLE>

            The amortized cost and fair value of debt  securities as of December
            31, 1999 by  contractual  maturity are shown below.  Maturities  may
            differ from  contractual  maturities in  mortgage-backed  securities
            because the mortgages  underlying  the  securities  may be called or
            prepaid with or without penalty. Therefore, these securities are not
            included in the categories in the following summary.
<TABLE>
<CAPTION>

                                                  SECURITIES AVAILABLE-FOR-SALE           SECURITIES HELD-TO-MATURITY
                                                -----------------------------------    ----------------------------------
                                                   AMORTIZED            FAIR              AMORTIZED           FAIR
                                                     COST               VALUE               COST              VALUE
                                                ----------------   ----------------    ----------------  ----------------

                  <S>                           <C>                <C>                 <C>               <C>
                  Due in one year or less       $     3,846,583    $     3,823,146     $     2,164,129   $     2,165,931
                  Due from one to five years         19,837,872         19,246,669           4,076,980         4,079,784
                  Due from five to ten years          9,072,671          8,635,475           9,223,869         9,099,527
                  Due after ten years                 7,904,105          6,928,682          16,474,199        16,004,235
                  Mortgage-backed securities          8,969,973          8,784,755                   -                 -
                                                ---------------    ---------------     ---------------   ---------------
                                                $    49,631,204    $    47,418,727     $    31,939,177   $    31,349,477
                                                ===============    ===============     ===============   ===============
</TABLE>

                                     F-14
<PAGE>


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



-------------------------------------------------------------------------------


NOTE 3.  LOANS AND ALLOWANCE FOR LOAN LOSSES

            The composition of loans is summarized as follows:
<TABLE>
<CAPTION>

                                                                                    DECEMBER 31,
                                                                           --------------------------------
                                                                                 1999              1998
                                                                           --------------    --------------

                <S>                                                        <C>               <C>
                Commercial, financial, and agricultural                    $ 205,230,143     $ 160,872,954
                Real estate - construction                                    24,208,000        21,327,303
                Real estate - mortgage                                        93,063,000        82,413,280
                Consumer                                                      50,956,000        46,047,519
                Other                                                          2,435,876         3,042,663
                                                                           -------------     -------------
                                                                             375,893,019       313,703,719
                Unearned income                                                (299,649)         (265,946)
                Allowance for loan losses                                    (5,682,612)       (4,863,181)
                                                                           -------------     -------------
                Loans, net                                                 $ 369,910,758     $ 308,574,592
                                                                           =============     =============
</TABLE>

            Changes in the allowance for loan losses are as follows:
<TABLE>
<CAPTION>

                                                                                    Years Ended December 31,
                                                                          ---------------------------------------------
                                                                               1999            1998            1997
                                                                          ---------------------------------------------
                                                                                       ---             ---

                <S>                                                       <C>             <C>             <C>
                Balance, beginning of year                                $  4,863,181    $  4,024,171    $  3,591,958
                    Provision charged to operations                          1,636,900       1,164,950         936,216
                    Loans charged off                                       (1,077,974)      (495,008)       (595,258)
                    Recoveries of loans previously charged off                 260,505         169,068          91,255
                                                                          -------------   -------------   -------------
                Balance, end of year                                      $  5,682,612    $  4,863,181    $  4,024,171
                                                                          =============   =============   =============
</TABLE>

            The  following is a summary of  information  pertaining  to impaired
            loans:
<TABLE>
<CAPTION>
                                                                                                DECEMBER 31,
                                                                                       --------------------------------
                                                                                             1999              1998
                                                                                       --------------    --------------

                 <S>                                                                   <C>               <C>
                 Impaired loans without a valuation allowance                          $   2,737,255     $   1,690,592
                 Impaired loans with a valuation allowance                                         -                 -
                                                                                       --------------    --------------
                 Total impaired loans                                                  $   2,737,255     $   1,690,592
                                                                                       ==============    ==============
                 Valuation allowance related to impaired loans                         $           -     $           -
                                                                                       ==============    ==============

                 Average investment in impaired loans                                  $   2,289,057     $   1,404,191
                                                                                       ==============    ==============
</TABLE>

            Interest income  recognized on impaired loans was  insignificant for
            the years ended December 31, 1999, 1998, and 1997.


                                     F-15
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



-------------------------------------------------------------------------------


NOTE 3.  LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)

            The Banks have granted loans to certain related  parties,  including
            directors,  executive  officers  and  their  related  entities.  The
            interest rates on these loans were  substantially  the same as rates
            prevailing at the time of the  transaction  and repayment  terms are
            customary  for the type of loan  involved.  Changes in related party
            loans for the year ended December 31, 1999 are as follows:

                  BALANCE, BEGINNING OF YEAR                     $   8,282,339
                     Advances, including renewals                      996,968
                     Repayments, including renewals                  (902,238)
                                                                 -------------

                  BALANCE, END OF YEAR                           $   8,377,069
                                                                 =============


NOTE 4.  PREMISES AND EQUIPMENT

            Premises and equipment are summarized as follows:
<TABLE>
<CAPTION>

                                                                  DECEMBER 31,
                                                        ------------------------------
                                                              1999            1998
                                                        --------------  --------------

                   <S>                                  <C>             <C>
                   Land                                 $   2,413,916   $   2,408,053
                   Buildings                                9,809,767       9,750,436
                   Equipment                               11,638,526      10,399,876
                                                        --------------  --------------
                                                           23,862,209      22,558,365
                   Accumulated depreciation               (10,418,565)    (9,095,092)
                                                        --------------  --------------
                                                        $  13,443,644   $  13,463,273
                                                        ==============  ==============
</TABLE>


                                     F-16
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



-------------------------------------------------------------------------------


NOTE 5.  DEPOSITS

            At December 31, 1999, the scheduled  maturities of time deposits are
            as follows:

                2000                                       $     214,604,451
                2001                                              14,411,756
                2002                                               6,561,585
                2003                                              14,289,354
                2004                                               8,297,733
                Thereafter                                            28,128
                                                            ----------------
                                                           $    258,193,007
                                                            ================

            At December 31,  1999,  the Company has  brokered  time  deposits of
            $792,000.


NOTE 6.  OTHER BORROWINGS

            Other borrowings consist of the following:
<TABLE>
<CAPTION>
                                                                                                               DECEMBER 31,
                                                                                                     -----------------------------
                                                                                                         1999             1998
                                                                                                     ------------      ------------
                 <S>                                                                                  <C>                <C>
                 Note  payable  to bank,  interest  due  quarterly  at prime  minus 1% or
                    7.50% at  December  31,  1999, collateralized by 50,000 shares of common
                    stock of Community Bank & Trust-Habersham.  Matures July 31, 2000                 $ 1,054,100        $  808,200
                 Advance from the Federal Home Loan Bank with interest due quarterly at 4.96%,
                    due September 15, 2003, with a six month call option                                5,000,000         5,000,000
                 Advance from the Federal Home Loan Bank with interest due quarterly at
                    4.95%, due August 7, 2009, with a six month call option                            10,000,000              --
                                                                                                      -----------        ----------
                                                                                                      $16,054,100        $5,808,200
                                                                                                      ===========        ==========
</TABLE>

            Advances  from the  Federal  Home  Loan Bank are  collateralized  by
            blanket floating liens on qualifying  first  mortgages.  At December
            31, 1999, aggregate maturities of other borrowings are as follows:

                      2000                                      $ 1,054,100
                      2003                                        5,000,000
                      2009                                       10,000,000
                                                                -----------
                                                                $16,054,100
                                                                ===========


                                     F-17
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



-------------------------------------------------------------------------------


NOTE 7.  EMPLOYEE BENEFIT PLANS

         INCENTIVE STOCK OPTION PLAN

            The Company has an Incentive  Stock Option Plan in which the Company
            can grant to key  personnel  options  for an  aggregate  of  225,000
            shares  of the  Company's  common  stock at not  less  than the fair
            market  value of such shares on the date the option is  granted.  If
            the optionee owns shares of the Company  representing  more than 10%
            of the total combined voting power, then the price shall not be less
            than 110% of the fair  market  value of such  shares on the date the
            option is granted. Also, the option period will not exceed ten years
            from date of  grant.  Other  pertinent  information  related  to the
            options is as follows:
<TABLE>
<CAPTION>
                                             ------------------------  --------------------------  ---------------------------
                                                      1999                       1998                         1997
                                             ------------------------  --------------------------  ---------------------------

                                                          WEIGHTED-                  WEIGHTED-                    WEIGHTED-
                                                           AVERAGE                    AVERAGE                      AVERAGE
                                                          EXERCISE                    EXERCISE                    EXERCISE
                                              NUMBER        PRICE        NUMBER        PRICE         NUMBER         PRICE
                                             ----------  ------------  -----------  -------------  -----------  --------------

          <S>                                  <C>        <C>              <C>       <C>              <C>        <C>
          Under option, beginning of year       39,000    $     9.85       39,000    $      9.85      204,000    $       6.42
             Granted                            29,500         39.20            -              -            -               -
             Exercised                         (9,000)          9.85            -              -    (165,000)            5.60
                                             ----------                -----------                 -----------
          Under option, end of year             59,500    $    24.40       39,000    $      9.85       39,000    $       9.85
                                             ==========                ===========                 ===========

          Options exercisable at year-end       30,000    $     9.85       39,000    $      9.85       39,000    $       9.85
                                             ==========                ===========                 ===========

          Weighted-average fair value of
             options granted during the year              $    17.77                 $         -                 $          -
</TABLE>

            Information  pertaining to options  outstanding at December 31, 1999
            is as follows:

<TABLE>
<CAPTION>
                                                 --------------------------------------------  -----------------------------
                                                             OPTIONS OUTSTANDING                   OPTIONS EXERCISABLE
                                                 --------------------------------------------  -----------------------------
                                                            WEIGHTED-
                                                                  AVERAGE        WEIGHTED-                      WEIGHTED-
                                                                 REMAINING        AVERAGE                        AVERAGE
                       RANGE OF                     NUMBER      CONTRACTUAL       EXERCISE        NUMBER        EXERCISE
                    EXERCISE PRICES              OUTSTANDING        LIFE           PRICE       EXERCISABLE        PRICE
          ------------------------------------   ------------- ---------------  -------------  -------------  --------------

                        <S>                            <C>          <C>          <C>                 <C>       <C>
                         $9.85                         30,000         5 years    $      9.85         30,000    $       9.85
                        $39.20                         29,500        10 years          39.20              -               -
                                                 -------------                                 -------------
          Outstanding at end of year                   59,500       7.5 years    $     24.40         30,000    $       9.85
                                                 =============                                 =============
</TABLE>


                                     F-18
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



-------------------------------------------------------------------------------


NOTE 7.  EMPLOYEE BENEFIT PLANS (CONTINUED)

         INCENTIVE STOCK OPTION PLAN (CONTINUED)

            The Company  applies APB Opinion 25 and related  Interpretations  in
            accounting for the stock option plan.  Accordingly,  no compensation
            cost has been recognized. Had compensation cost for the stock option
            plan been determined  based on the fair value at the grant dates for
            awards under the plan consistent with the method  prescribed by SFAS
            No. 123, net income and earnings per share would have been  adjusted
            to the pro forma amounts indicated below.
<TABLE>
<CAPTION>
                                                                         Years Ended December 31,
                                                                --------------------------------------------
                                                                     1999            1998            1997
                                                                --------------------------------------------
                                                                   (In thousands, except per share data)

                  <S>                                           <C>             <C>             <C>
                  Net income           As reported              $      6,076    $     7,032     $     5,647
                                       Pro forma                $      6,076    $     7,032     $     5,647

                  Earnings per share   As reported              $       2.80    $      3.24     $      2.73
                                       Pro forma                $       2.80    $      3.24     $      2.73

                  Earnings per share - As reported              $       2.80    $      3.20     $      2.60
                    assuming dilution  Pro forma                $       2.80    $      3.20     $      2.60
</TABLE>

            The fair  value of each  option  grant is  estimated  on the date of
            grant  using  the  Black-Scholes   option-pricing   model  with  the
            following weighted-average assumptions:

<TABLE>
<CAPTION>

                                                                     Year Ended December 31,
                                                                     ------------------------
                                                                                1999
                                                                     ------------------------
                              <S>                                                   <C>
                              Dividend yield                                            .38%
                              Expected life                                         10 years
                              Expected volatility                                      6.37%
                              Risk-free interest                                       6.86%
                              rate
</TABLE>


                                     F-19
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



-------------------------------------------------------------------------------


NOTE 7.  EMPLOYEE BENEFIT PLANS (CONTINUED)

         401(K) PLAN

            The Company  has a  contributory  401(K)  retirement  plan  covering
            substantially  all employees.  Contributions  to the plan charged to
            expense  for the  years  ended  December  31,  1999,  1998  and 1997
            amounted to $86,478, $77,668 and $77,799, respectively.

         EMPLOYEE STOCK OWNERSHIP PLAN

            The  Company  has an Employee  Stock  Ownership  Plan (ESOP) for the
            benefit of  employees  who meet  certain  eligibility  requirements.
            Contributions  to the Plan are  determined by the Board of Directors
            of the Company taking into consideration the financial condition and
            fiscal  requirements  of the Company  and such other  factors as the
            Board of  Directors  may deem  pertinent  and  applicable  under the
            circumstances. For the years ended December 31, 1999, 1998 and 1997,
            the  Company  made cash  contributions  of  $666,724,  $820,007  and
            $644,133, respectively, to the Plan.

            In  accordance  with the Plan,  the Company is expected to honor the
            rights of certain  participants to diversify their account  balances
            or to liquidate  their ownership of the common stock in the event of
            distribution.  The purchase price of the common stock would be based
            on the fair market  value of the  Company's  common  stock as of the
            annual  valuation  date  which  precedes  the date the put option is
            exercised.  No  participant  has  exercised  these  rights since the
            inception of the Plan,  and no  significant  cash outlay is expected
            during  2000.  However,  since the  redemption  of  common  stock is
            outside the  control of the  Company,  the  Company's  maximum  cash
            obligation based on the approximate market prices of common stock as
            of the reporting  date has been presented  outside of  shareholders'
            equity.  The amount presented as redeemable common stock held by the
            ESOP in the  consolidated  balance  sheet  represents  the Company's
            maximum  cash  obligation  and has been  reflected as a reduction of
            retained earnings.

            At  December  31,  1999,  the ESOP held  363,469  shares  and 17,311
            committed-to-be-released   shares.  Shares  held  by  the  ESOP  are
            considered  outstanding  for purposes of  calculating  the Company's
            earnings per share.


                                     F-20
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


-------------------------------------------------------------------------------


NOTE 8.  INCOME TAXES

            Income tax expense consists of the following:
<TABLE>
<CAPTION>
                                                                                               YEARS ENDED DECEMBER 31,
                                                                            ------------------------------------------------------
                                                                                 1999                1998                 1997
                                                                            -------------       -------------       --------------
                <S>                                                          <C>                 <C>                 <C>
                Current                                                      $ 2,985,546         $ 3,782,531         $ 2,865,339
                Deferred                                                        (381,217)           (292,525)           (195,033)
                Current tax effect of net operating loss carryforward            (45,509)            (45,509)            (45,509)
                                                                             -----------         -----------         -----------
                              Income tax expense                             $ 2,558,820         $ 3,444,497         $ 2,624,797
                                                                             ===========         ===========         ===========
                 </TABLE>


            The Company's  income tax expense differs from the amounts  computed
            by applying the Federal income tax statutory  rates to income before
            income taxes. A reconciliation of the differences is as follows:
<TABLE>
<CAPTION>

                                                                         YEARS ENDED DECEMBER 31,
                                                ---------------------------------------------------------------------------
                                                          1999                      1998                      1997
                                                ------------------------   ----------------------    ----------------------
                                                  AMOUNT       PERCENT       AMOUNT      PERCENT       AMOUNT       PERCENT
                                                ------------  ----------   ------------  --------    ------------   -------

                 <S>                              <C>              <C>     <C>              <C>     <C>              <C>
                 Tax provision at statutory       $ 2,935,895      34 %    $ 3,561,908      34 %    $ 2,812,331      34 %
                    rate
                    Tax-exempt interest              (696,773)     (8)        (615,376)     (6)        (477,425)     (6)
                    Disallowed interest               104,207       1           93,901       1           70,054       1
                    Current tax effect of net
                       operating loss                 (45,509)     --          (45,509)     --          (45,509)     --
                       carryforward
                    Nondeductible expenses             39,395      --           17,445      --           38,012      --
                    State income taxes                224,656       3          454,555       4          264,672       3
                    Other items                        (3,051)     --          (22,427)     --          (37,338)     --
                                                  -----------      --      -----------      --      -----------      --
                 Income tax expense               $ 2,558,820      30 %    $ 3,444,497      33 %    $ 2,624,797      32 %
                                                  ===========      ==      ===========      ==      ===========      ==
</TABLE>


                                     F-21
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



-------------------------------------------------------------------------------


NOTE 8.  INCOME TAXES (CONTINUED)

            The components of deferred income taxes are as follows:
<TABLE>
<CAPTION>

                                                                                  DECEMBER 31,
                                                                         ----------------------------
                                                                             1999             1998
                                                                         -----------      -----------
                 <S>                                                     <C>              <C>
                 Deferred tax assets:
                    Loan loss reserves                                   $ 1,783,592      $ 1,506,432
                    Net operating loss carryforward                           94,113          139,622
                    Other                                                      9,292             --
                    Unrealized loss on securities available-for-sale         884,991             --
                    Valuation allowance                                      (94,113)        (139,622)
                                                                         -----------      -----------
                                                                           2,677,875        1,506,432
                                                                         -----------      -----------

                 Deferred tax liabilities:
                    Depreciation                                              17,859           96,907
                    Accretion                                                156,895          141,942
                    Unrealized gain on securities available-for-sale            --            151,062
                    Other                                                       --             30,670
                                                                         -----------      -----------
                                                                             174,754          420,581
                                                                         -----------      -----------

                 Net deferred tax assets                                 $ 2,503,121      $ 1,085,851
                                                                         ===========      ===========
</TABLE>

         At December 31, 1999,  the Company has  available  net  operating  loss
         carryforwards  of   approximately   $276,000  for  Federal  income  tax
         purposes. If unused, the carryforwards will expire in 2009.


NOTE 9.  EARNINGS PER COMMON SHARE

         Diluted  earnings per common share were computed by dividing net income
         by the  weighted  average  number of shares of common  stock and common
         stock  equivalents  outstanding.   The  number  of  common  shares  was
         increased  by the number of shares  issuable  upon the  exercise of the
         stock  options  described in Note 7. This  theoretical  increase in the
         number of common  shares was  reduced  by the  number of common  shares
         which are assumed to have been  repurchased  for the treasury  with the
         proceeds from the exercise of the options; these purchases were assumed
         to have been made at the price  per  share  that  approximates  average
         market price.  The treasury stock method for  determining the amount of
         dilution of stock  options is based on the concept  that common  shares
         which could have been  purchased  with the  proceeds of the exercise of
         common  stock  options  at market  price are not  actually  outstanding
         common shares.


                                     F-22
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



-------------------------------------------------------------------------------


NOTE 9.  EARNINGS PER COMMON SHARE (CONTINUED)

         Presented  below is a summary of the components used to calculate basic
         and diluted  earnings per share for the years ended  December 31, 1999,
         1998, and 1997.
<TABLE>
<CAPTION>

                                                                                 YEARS ENDED DECEMBER 31,
                                                                   ------------------------------------------------------
                                                                        1999                1998              1997
                                                                   ----------------   -----------------  ----------------

                 <S>                                               <C>                <C>                <C>
                 Net income                                        $     6,076,165    $      7,031,704   $     5,646,766
                                                                   ================   =================  ================

                 Weighted average common shares outstanding              2,171,983           2,169,830         2,065,908
                 Net effect of the assumed exercise of stock
                    options based on the treasury stock method
                    using average market price for the year        $             -    $         28,029   $       107,203
                                                                   ----------------   -----------------  ----------------

                 Total weighted average common shares and
                    common stock equivalents outstanding                 2,171,983           2,197,859         2,173,111
                                                                   ================   =================  ================

                 Diluted earnings per share                        $          2.80    $           3.20   $          2.60
                                                                   ================   =================  ================
</TABLE>


NOTE 10. COMMITMENTS AND CONTINGENT LIABILITIES

         In the  normal  course  of  business,  the  Company  has  entered  into
         off-balance-sheet  financial instruments which are not reflected in the
         financial  statements.  These financial instruments include commitments
         to  extend  credit  and  standby  letters  of  credit.  Such  financial
         instruments  are included in the  financial  statements  when funds are
         disbursed or the instruments become payable. These instruments involve,
         to varying  degrees,  elements  of credit  risk in excess of the amount
         recognized in the consolidated balance sheet.

         The Company's exposure to credit loss in the event of nonperformance by
         the other party to the financial  instrument for  commitments to extend
         credit and standby  letters of credit is represented by the contractual
         amount of those instruments.  A summary of the Company's commitments is
         as follows:
<TABLE>
<CAPTION>
                                                                           DECEMBER 31,
                                                                  -------------------------------
                                                                       1999              1998
                                                                  -------------     -------------

                 <S>                                              <C>               <C>
                 Commitments to extend credit                     $ 24,265,552      $ 20,878,572
                 Credit card lines                                   4,070,000         3,144,000
                 Standby letters of credit                           2,209,000         4,733,485
                                                                  ------------      ------------
                                                                  $ 30,544,552      $ 28,756,057
                                                                  ============      ============
</TABLE>


                                     F-23
<PAGE>
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



-------------------------------------------------------------------------------


NOTE 10. COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)

         Commitments to extend credit  generally have fixed  expiration dates or
         other termination  clauses and may require payment of a fee. Since many
         of the commitments are expected to expire without being drawn upon, the
         total  commitment  amounts do not  necessarily  represent  future  cash
         requirements.  The credit  risk  involved  in issuing  these  financial
         instruments is essentially the same as that involved in extending loans
         to customers. The Company evaluates each customer's creditworthiness on
         a  case-by-case  basis.  The amount of collateral  obtained,  if deemed
         necessary  by the  Company  upon  extension  of  credit,  is  based  on
         management's credit evaluation of the customer.  Collateral held varies
         but may include real estate and  improvements,  marketable  securities,
         accounts  receivable,   inventory,   equipment,   crops,  and  personal
         property.

         Standby  letters of credit are  conditional  commitments  issued by the
         Company to guarantee  the  performance  of a customer to a third party.
         Those  guarantees  are primarily  issued to support  public and private
         borrowing arrangements.  The credit risk involved in issuing letters of
         credit is  essentially  the same as that  involved  in  extending  loan
         facilities to customers.  Collateral held varies as specified above and
         is required in instances which the Company deems necessary.

         In the normal  course of  business,  the Company is involved in various
         legal  proceedings.  In the opinion of management  of the Company,  any
         liability  resulting  from such  proceedings  would not have a material
         effect on the Company's financial statements.

         The  Company  has  leased  various   properties  and  equipment   under
         noncancelable  agreements which expire at various times through January
         8, 2011 and  require  minimum  annual  rentals.  The leases  related to
         properties  also  require  the  payment  of  property   taxes,   normal
         maintenance and insurance.

         The total  minimum  rental  commitment  at December  31, 1999 is due as
         follows:

              During the year ending December 31:
                 2000                                            $      523,305
                 2001                                                   435,001
                 2002                                                   280,657
                 2003                                                   123,101
                 2004                                                    76,086
                 Due thereafter                                         111,071
                                                                 --------------
                                                                 $    1,549,221
                                                                 ==============

         The total rental  expense for the years ended  December 31, 1999,  1998
         and 1997 was $528,865, $467,546 and $512,293, respectively.


                                     F-24
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



------------------------------------------------------------------------------


NOTE 11. CONCENTRATIONS OF CREDIT

         The banking subsidiaries  originate primarily commercial,  residential,
         and  consumer  loans  to  customers  in  their  local  communities  and
         surrounding  counties.  The  ability  of the  majority  of  the  Banks'
         customers to honor their  contractual  loan obligations is dependent on
         their local economy as well as the economy in the metropolitan  Atlanta
         and Montgomery areas.

         Thirty-one  percent of the Company's loan portfolio is  concentrated in
         loans secured by real estate.  A substantial  portion of these loans is
         in the Banks' primary market areas. In addition,  a substantial portion
         of the other  real  estate  owned is  located  in those  same  markets.
         Accordingly,   the  ultimate   collectibility  of  the  Company's  loan
         portfolio and the recovery of the carrying  amount of other real estate
         owned is  susceptible  to  changes in market  conditions  in the Banks'
         primary market areas.

         The Company's loan portfolio also includes a concentration,  55% of the
         total portfolio,  of commercial,  financial,  and  agricultural  loans.
         These loans represent  loans made primarily to local  businesses in the
         Banks' market areas.  A portion of these loans are small business loans
         and  residential  loans  originated by the loan  production  office,  a
         division of Community  Bank & Trust - Habersham,  which are outside the
         Banks' primary market areas.  The Company's  lending  policies  require
         loans of all types to be  adequately  collateralized  and  supported by
         adequate cash flows.

         Other  significant  concentrations  of  credit  by type of loan are set
         forth in Note 3. The  Banks,  as a matter of policy,  do not  generally
         extend credit to any single  borrower or group of related  borrowers in
         excess  of  25%  of  each  individual  Bank's  statutory  capital,   or
         approximately  $3,000,000,   $1,075,000,  $500,000,  and  $987,500  for
         Community  Bank & Trust  -  Habersham;  Jackson;  Alabama;  and  Troup;
         respectively.


NOTE 12. REGULATORY MATTERS

         The  Banks  are  subject  to  certain  restrictions  on the  amount  of
         dividends that may be declared  without prior regulatory  approval.  At
         December 31, 1999,  approximately  $4,251,000 of retained earnings were
         available for dividend declaration without regulatory approval.

         The  Company  and Banks  are  subject  to  various  regulatory  capital
         requirements  administered by the federal banking agencies.  Failure to
         meet minimum capital  requirements can initiate certain mandatory,  and
         possibly  additional  discretionary  actions  by  regulators  that,  if
         undertaken,  could  have a  direct  material  effect  on the  financial
         statements.  Under  capital  adequacy  guidelines  and  the  regulatory
         framework for prompt corrective action, the Company and Banks must meet
         specific capital guidelines that involve  quantitative  measures of the
         assets, liabilities,  and certain off-balance-sheet items as calculated
         under  regulatory  accounting   practices.   The  capital  amounts  and
         classification  are  also  subject  to  qualitative  judgments  by  the
         regulators about components, risk weightings, and other factors. Prompt
         corrective  action  provisions  are  not  applicable  to  bank  holding
         companies.


                                     F-25
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



-------------------------------------------------------------------------------


NOTE 12. REGULATORY MATTERS (CONTINUED)

         Quantitative  measures  established  by  regulation  to ensure  capital
         adequacy  require the Company and Banks to maintain minimum amounts and
         ratios of Total and Tier I capital to  risk-weighted  assets and Tier I
         capital to average  assets.  Management  believes,  as of December  31,
         1999, the Banks met all capital adequacy requirements to which they are
         subject.

         As of December 31, 1999, the most recent  notification from the Federal
         Deposit Insurance Corporation categorized the Banks as well capitalized
         under the  regulatory  framework for prompt  corrective  action.  To be
         categorized as well capitalized,  the Banks must maintain minimum Total
         risk-based,  Tier I risk-based, and Tier I leverage ratios as set forth
         in the  following  table.  There are no conditions or events since that
         notification that management believes have changed the Banks' category.

         The Company and Banks' actual capital  amounts and ratios are presented
         in the following tables.
<TABLE>
<CAPTION>
                                                                                                             TO BE WELL
                                                                                      FOR CAPITAL         CAPITALIZED UNDER
                                                                                       ADEQUACY           PROMPT CORRECTIVE
                                                                ACTUAL                 PURPOSES           ACTION PROVISIONS
                                                       ------------------------  ---------------------- -----------------------
                                                          AMOUNT        RATIO       AMOUNT       RATIO     AMOUNT       RATIO
                                                       ------------   ---------  -----------   -------- -------------  --------
                                                                               (DOLLARS IN THOUSANDS)
                                                       ------------------------------------------------------------------------
           <S>                                         <C>              <C>      <C>             <C>    <C>            <C>
           As of December 31, 1999
             Total Capital to Risk Weighted Assets:
                 Consolidated                          $     48,685     11.97%   $    32,538     8.00%  $        N/A       N/A
                 Community Bank & Trust - Habersham    $     29,116     13.17%   $    17,693     8.00%  $     22,116    10.00%
                 Community Bank & Trust - Jackson      $      9,953     10.58%   $     7,524     8.00%  $      9,405    10.00%
                 Community Bank & Trust - Alabama      $      3,796     11.46%   $     2,650     8.00%  $      3,313    10.00%
                 Community Bank & Trust - Troup        $      4,934     12.48%   $     3,164     8.00%  $      3,955    10.00%
              Tier I Capital to Risk Weighted Assets:
                 Consolidated                          $     43,592     10.71%   $    10,435     4.00%  $        N/A       N/A
                 Community Bank & Trust - Habersham    $     26,346     11.91%   $     8,847     4.00%  $     13,270     6.00%
                 Community Bank & Trust - Jackson      $      8,775      9.33%   $     3,762     4.00%  $      5,643     6.00%
                 Community Bank & Trust - Alabama      $      3,381     10.21%   $     1,325     4.00%  $      1,988     6.00%
                 Community Bank & Trust - Troup        $      4,439     11.23%   $     1,582     4.00%  $      2,373     6.00%
             Tier I Capital to Average Assets:
                   Consolidated                        $     43,592      8.54%   $    20,418     4.00%  $        N/A       N/A
                 Community Bank & Trust - Habersham    $     26,346      8.65%   $    12,188     4.00%  $     15,235     5.00%
                 Community Bank & Trust - Jackson      $      8,775      6.82%   $     5,144     4.00%  $      6,430     5.00%
                 Community Bank & Trust - Alabama      $      3,381      7.27%   $     1,862     4.00%  $      2,327     5.00%
                 Community Bank & Trust - Troup        $      4,439      8.23%   $     2,157     4.00%  $      2,696     5.00%
</TABLE>

                                     F-26
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



-------------------------------------------------------------------------------


NOTE 12. REGULATORY MATTERS (CONTINUED)
<TABLE>
<CAPTION>
                                                                                                             TO BE WELL
                                                                                      FOR CAPITAL         CAPITALIZED UNDER
                                                                                       ADEQUACY           PROMPT CORRECTIVE
                                                                ACTUAL                 PURPOSES           ACTION PROVISIONS
                                                       ------------------------  ---------------------- -----------------------
                                                          AMOUNT        RATIO       AMOUNT       RATIO     AMOUNT       RATIO
                                                       ------------   ---------  -----------   -------- -------------  --------
                                                                               (DOLLARS IN THOUSANDS)
                                                       ------------------------------------------------------------------------
           <S>                                         <C>              <C>      <C>             <C>    <C>            <C>
            As of December 31, 1998
              Total Capital to Risk Weighted Assets:
                 Consolidated                          $     41,630     12.12%   $    27,479     8.00%  $        N/A       N/A
                 Community Bank & Trust - Habersham    $     24,918     13.01%   $    15,321     8.00%  $     19,511    10.00%
                 Community Bank & Trust - Jackson      $      8,524     10.14%   $     6,724     8.00%  $      8,405    10.00%
                 Community Bank & Trust - Alabama      $      3,315     11.70%   $     2,267     8.00%  $      2,834    10.00%
                 Community Bank & Trust - Troup        $      4,389     14.30%   $     2,455     8.00%  $      3,069    10.00%
              Tier I Capital to Risk Weighted Assets:
                 Consolidated                          $     37,330     10.87%   $    13,737     4.00%  $        N/A       N/A
                 Community Bank & Trust - Habersham    $     22,521     11.76%   $     7,660     4.00%  $     11,491     6.00%
                 Community Bank & Trust - Jackson      $      7,470      8.89%   $     3,362     4.00%  $      5,043     6.00%
                 Community Bank & Trust - Alabama      $      2,960     10.44%   $     1,134     4.00%  $      1,700     6.00%
                 Community Bank & Trust - Troup        $      4,004     13.05%   $     1,228     4.00%  $      1,841     6.00%
              Tier I Capital to Average Assets:
                   Consolidated                        $     37,330      8.42%   $    17,734     4.00%  $        N/A       N/A
                 Community Bank & Trust - Habersham    $     22,521      8.58%   $    10,500     4.00%  $     13,125     5.00%
                 Community Bank & Trust - Jackson      $      7,470      6.71%   $     4,455     4.00%  $      5,569     5.00%
                 Community Bank & Trust - Alabama      $      2,960      7.19%   $     1,648     4.00%  $      2,059     5.00%
                 Community Bank & Trust - Troup        $      4,004      9.31%   $     1,721     4.00%  $      2,151     5.00%
</TABLE>

                                     F-27
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



--------------------------------------------------------------------------------


NOTE 13. FAIR VALUE OF FINANCIAL INSTRUMENTS

         The  following  methods  and  assumptions  were used by the  Company in
         estimating its fair value  disclosures  for financial  instruments.  In
         cases where quoted  market  prices are not  available,  fair values are
         based on estimates using discounted cash flow models.  Those models are
         significantly  affected by the assumptions used, including the discount
         rates and estimates of future cash flows.  In that regard,  the derived
         fair  value  estimates   cannot  be   substantiated  by  comparison  to
         independent  markets  and,  in many  cases,  could not be  realized  in
         immediate   settlement  of  the   instrument.   The  use  of  different
         methodologies  may have a material  effect on the estimated  fair value
         amounts.  Also, the fair value estimates  presented herein are based on
         pertinent  information  available to management as of December 31, 1999
         and 1998.  Such  amounts  have not been  revalued for purposes of these
         financial   statements  since  those  dates  and,  therefore,   current
         estimates  of fair  value may  differ  significantly  from the  amounts
         presented herein.

         CASH, DUE FROM BANKS,  INTEREST-BEARING  DEPOSITS IN BANKS, AND FEDERAL
         FUNDS SOLD:

            The  carrying  amounts  of cash,  due from  banks,  interest-bearing
            deposits in banks,  and Federal  funds sold  approximate  their fair
            value.

         SECURITIES:

            Fair values for  securities  are based on  available  quoted  market
            prices.  The carrying  values of equity  securities  with no readily
            determinable fair value approximate fair values.

         LOANS:

            For  loans  held for  sale  and  variable-rate  loans  that  reprice
            frequently  and have no  significant  change  in credit  risk,  fair
            values  are based on  carrying  values.  For other  loans,  the fair
            values are estimated using discounted cash flow models using current
            market  interest  rates  offered  for loans  with  similar  terms to
            borrowers of similar credit quality.  Fair values for impaired loans
            are estimated using discounted cash flow models or based on the fair
            value of underlying collateral.

         DEPOSITS:

            The  carrying  amounts of demand  deposits,  savings  deposits,  and
            variable-rate certificates of deposit approximate their fair values.
            Fair values for  fixed-rate  certificates  of deposit are  estimated
            using  discounted  cash flow models,  using current market  interest
            rates  being  offered  on   certificates   with  similar   remaining
            maturities.


                                     F-28
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



--------------------------------------------------------------------------------


NOTE 13. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

         OTHER BORROWINGS:

            The fair values of the  Company's  other  borrowings  are  estimated
            using  discounted  cash flow models based on the  Company's  current
            incremental   borrowing   rates  for  similar   types  of  borrowing
            arrangements.

         ACCRUED INTEREST:

            The  carrying  amounts of accrued  interest  approximate  their fair
            values.

         REDEEMABLE COMMON STOCK:

            The  fair  values  of  the   Company's   redeemable   common   stock
            approximates the recorded amounts.

         OFF-BALANCE SHEET INSTRUMENTS:

            Fair values of the Company's off-balance sheet financial instruments
            are based on fees charged to enter into similar agreements. However,
            commitments  to extend  credit and standby  letters of credit do not
            represent a significant  value to the Company until such commitments
            are funded. The Company has determined that these instruments do not
            have a  distinguishable  fair  value  and no  fair  value  has  been
            assigned.

            The  estimated  fair  values  and  related  carrying  amounts of the
            Company's financial instruments were as follows:
<TABLE>
<CAPTION>

                                                             DECEMBER 31, 1999                 December 31, 1998
                                                       -------------------------------   -------------------------------
                                                         CARRYING           FAIR           Carrying           Fair
                                                          AMOUNT           VALUE            Amount            Value
                                                       --------------  ---------------   --------------   --------------
            <S>                                        <C>             <C>               <C>              <C>
            Financial assets:
               Cash, due from banks, interest-bearing
                  deposits in banks, and Federal       $  31,834,329   $   31,834,329    $  50,113,872    $  50,113,872
                  funds sold
               Securities available-for-sale              49,143,458       49,143,458       42,525,208       42,525,208
               Securities held-to-maturity                31,939,177       31,349,477       30,915,014       32,173,821
               Loans held for sale                         1,274,927        1,274,927          699,498          699,498
               Loans                                     369,910,758      374,536,073      308,574,592      312,879,502
               Accrued interest receivable                 5,522,280        5,522,280        5,788,914        5,788,914

            Financial liabilities:
               Deposits                                  444,056,004      443,605,128      405,282,873      403,726,281
               Other borrowings                           16,054,100       16,054,000        5,808,200        5,808,200
               Accrued interest payable                    3,470,199       34,701,990        4,126,076        4,126,076
               Redeemable common stock                    13,982,242       13,982,242       14,253,747       14,253,747
</TABLE>


                                     F-29
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



-------------------------------------------------------------------------------


NOTE 14. SEGMENT INFORMATION

         The  Company's  operations  have been  classified  into two  reportable
         segments,  banking and bank  consulting  services.  The banking segment
         involves   traditional   banking  services  offered  through  its  four
         wholly-owned bank subsidiaries.  Financial Supermarkets,  Inc. provides
         various consulting and licensing services to financial  institutions in
         connection with the establishment of bank branches in supermarkets.  In
         connection  with the  establishment  of a Supermarket  Bank,  Financial
         Supermarkets   provides  consulting  services  ranging  from  providing
         alternative  construction  designs to coordinating  employee  training.
         Financial  Solutions,  a division of Financial  Supermarkets,  Inc. was
         formed  to  provide  various  consulting   services  to  the  financial
         institution industry including  compliance,  operational,  advertising,
         marketing and travel related services.

         The  Company's   reportable   segments  are  organizations  that  offer
         different products and services. They are managed separately because of
         products  and  services,   marketing  strategies,  and  the  regulatory
         environments  in which  the  Banks  operate.  In  addition,  the  Banks
         geographically are located in the Southeast and employ similar business
         strategies and are evaluated  using similar  performance  expectations.
         The bank consulting segment operates throughout the United States.

         Total revenue by industry segment includes  revenues from  unaffiliated
         customers and  affiliates.  Revenues from  affiliates are eliminated in
         consolidation.  Interest  income,  interest  expenses,  data processing
         fees,  management fees and other various  revenues and expenses between
         affiliates  are recorded on the accrual basis of accounting  consistent
         with  similar  transactions  with  customers  outside the  consolidated
         group.

         Selected segment information by industry segment is as follows:
<TABLE>
<CAPTION>

                                                      -----------------------------------------------------------------
                                                                            REPORTABLE SEGMENTS
                                                      -----------------------------------------------------------------
                                                                         FINANCIAL          ALL
           FOR THE YEAR ENDED DECEMBER 31, 1999           BANKING       SUPERMARKETS        OTHER           TOTAL
           ---------------------------------------    --------------  ---------------  --------------  ---------------
            <S>                                       <C>                <C>             <C>              <C>
            Interest income                           $  40,931,494      $   541,673     $     3,956      $ 41,477,123
            Interest expense                             18,806,249             --            77,622        18,883,871
            Intersegment net interest income               (531,089)         527,133           3,956              --
            (expense)
            Net interest income (loss)                   22,125,245          541,673         (73,666)       22,593,252
            Other revenue from external customers         4,489,623        6,720,159         300,195        11,509,977
            Intersegment other revenues                        --            250,493       1,575,600         1,826,093
            Depreciation and amortization                 1,684,949          151,485         574,080         2,410,514
            Provision for loan losses                     1,636,900             --              --           1,636,900
            Segment profit (loss)                         5,199,897        2,082,464      (1,219,010)        6,063,351
            Segment assets                              519,898,791       18,187,824       2,712,601       540,799,216
            Expenditures for premises and                 1,191,675          261,970         647,534         2,101,179
            equipment
</TABLE>

                                     F-30
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



-------------------------------------------------------------------------------


NOTE 14. SEGMENT INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
                                                      -----------------------------------------------------------------
                                                                            REPORTABLE SEGMENTS
                                                      -----------------------------------------------------------------
                                                                         FINANCIAL          ALL
           FOR THE YEAR ENDED DECEMBER 31, 1999           BANKING       SUPERMARKETS        OTHER           TOTAL
           ---------------------------------------    --------------  ---------------  --------------  ---------------
            <S>                                          <C>               <C>             <C>              <C>
            Interest income                             $  34,903,053      $   434,067     $     7,636      $ 35,344,756
            Interest expense                               16,651,395             --            30,781        16,682,176
            Intersegment net interest income                 (403,187)         395,551           7,636              --
            (expense)
            Net interest income (loss)                     18,251,658          434,067         (23,145)       18,662,580
            Other revenue from external customers           4,185,170        9,043,292         152,523        13,380,985
            Intersegment other revenues                          --            126,195       1,451,520         1,577,715
            Depreciation and amortization                   1,476,554          132,464         264,867         1,873,885
            Provision for loan losses                       1,164,950             --              --           1,164,950
            Segment profit (loss)                           4,505,680        3,485,106        (971,896)        7,018,890
            Segment assets                                470,906,187       13,756,048       2,195,710       486,857,945
            Expenditures for premises and equipment         2,620,509          260,104          50,883         2,931,496
                                                        -------------      -----------     -----------      ------------
<CAPTION>
           FOR THE YEAR ENDED DECEMBER 31, 1997
           ----------------------------------------     -------------      -----------     -----------      ------------

            Interest income                             $  28,484,716      $   360,350     $     7,515      $ 28,852,581
            Interest expense                               13,298,033             --            42,086        13,340,119
            Intersegment net interest income                 (334,340)         326,825           7,515              --
            (expense)
            Net interest income (loss)                     15,186,683          360,350         (34,571)       15,512,462
            Other revenue from external customers           3,517,131        8,819,917          82,082        12,419,130
            Intersegment other revenues                          --            117,221       1,365,200         1,482,421
            Depreciation and amortization                   1,203,921          129,460          65,836         1,399,217
            Provision for loan losses                         936,216             --              --             936,216
            Segment profit (loss)                           3,480,412        2,548,043        (394,503)        5,633,952
            Segment assets                                380,142,578        9,933,018       2,055,595       392,131,191
            Expenditures for premises and equipment         4,074,703          163,420       1,096,207         5,334,330
</TABLE>


                                     F-31
<PAGE>


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



-------------------------------------------------------------------------------


NOTE 14. SEGMENT INFORMATION (CONTINUED)

<TABLE>
<CAPTION>
                                                                -------------      -------------      -------------
                                                                     1999               1998               1997
                                                                -------------      -------------      -------------
          <S>                                                   <C>                <C>                <C>
          NET INTEREST INCOME

          Total net interest income for reportable segments     $  22,666,918      $  18,685,725      $  15,547,033
          Non-reportable segment net interest income                  (73,666)           (23,145)           (34,571)
                                                                -------------      -------------      -------------
               Total consolidated net interest income           $  22,593,252      $  18,662,580      $  15,512,462
                                                                =============      =============      =============


          OTHER INCOME

          Total other income for reportable segments            $  11,460,275      $  13,354,657      $  12,454,269
          Non-reportable segment other income                       1,875,795          1,604,043          1,447,282
          Elimination of intersegment other income                 (1,826,093)        (1,577,715)        (1,482,421)
                                                                -------------      -------------      -------------
               Total consolidated other income                  $  11,509,977      $  13,380,985      $  12,419,130
                                                                =============      =============      =============

          NET INCOME

          Total profit for reportable segments                  $   7,282,361      $   7,990,786      $   6,028,455
          Non-reportable segment loss                              (1,219,010)          (971,896)          (394,503)
          Elimination of intersegment (gains) losses                   12,814             12,814             12,814
                                                                -------------      -------------      -------------
               Total consolidated other income                  $   6,076,165      $   7,031,704      $   5,646,766
                                                                =============      =============      =============

          TOTAL ASSETS

          Total assets for reportable segments                  $ 538,086,615      $ 484,662,235      $ 390,075,596
          Non-reportable segment assets                             2,712,601          2,195,710          2,055,595
          Elimination of intersegment assets                      (24,649,654)       (26,264,505)       (15,051,675)
                                                                -------------      -------------      -------------
               Total consolidated assets                        $ 516,149,562      $ 460,593,440      $ 377,079,516
                                                                =============      =============      =============

          EXPENDITURES FOR PREMISES AND EQUIPMENT

          Total expenditures for reportable segments            $   1,453,645      $   2,880,613      $   4,238,123
          Non-reportable segment assets                               647,534             50,883          1,096,207
          Elimination of intersegment gains                          (123,081)              --                 --
                                                                -------------      -------------      -------------
               Total consolidated expenditures for
                  premises and equipment                        $   1,978,098      $   2,931,496      $   5,334,330
                                                                =============      =============      =============
</TABLE>


                                     F-32
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



-------------------------------------------------------------------------------


NOTE 15. SUPPLEMENTAL FINANCIAL DATA

         Components of other operating expenses in excess of 1% of total revenue
         are as follows:
<TABLE>
<CAPTION>

                                                                                        DECEMBER 31,
                                                                      ------------------------------------------------
                                                                            1999             1998             1997
                                                                      ---------------   -------------    -------------

                <S>                                                   <C>               <C>              <C>
                Data processing                                       $      885,699    $    948,644     $    385,795
                Travel expenses                                              677,840         469,126          583,208
                Office supply expenses                                       623,213         460,341          437,375
</TABLE>


NOTE 16. PARENT COMPANY ONLY FINANCIAL INFORMATION

         The following  information  presents the condensed balance sheets as of
         December 31, 1999 and 1998 and the  statements of income and cash flows
         as of and for the years ended December 31, 1999, 1998 and 1997:
<TABLE>
<CAPTION>

                                              CONDENSED BALANCE SHEETS
                                             DECEMBER 31, 1999 AND 1998
                                                                                            1999             1998
                                                                                      ---------------  --------------
          <S>                                                                           <C>             <C>
          Assets
             Cash                                                                       $   964,915     $   547,686
             Investment in subsidiaries                                                  43,950,731      39,703,016
             Equipment                                                                    1,011,134         923,645
             Other assets                                                                   634,960         593,572
                                                                                        -----------     -----------

                        Total assets                                                    $46,561,740     $41,767,919
                                                                                        ===========     ===========

          Liabilities
             Other borrowings                                                           $ 1,054,100     $   808,200
             Other liabilities                                                              678,419         385,082
                                                                                        -----------     -----------

                        Total liabilities                                                 1,732,519       1,193,282
                                                                                        -----------     -----------

          Redeemable common stock                                                        13,982,242      14,253,747
                                                                                        -----------     -----------

          Shareholders' equity                                                           30,846,979      26,320,890
                                                                                        -----------     -----------

                        Total liabilities, redeemable common stock,
                           and shareholders' equity                                     $46,561,740     $41,767,919
                                                                                        ===========     ===========
</TABLE>


                                     F-33
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



-------------------------------------------------------------------------------

NOTE 16. PARENT COMPANY ONLY FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
                                                     CONDENSED STATEMENTS OF INCOME
                                             YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

                                                                            1999             1998             1997
                                                                        -----------      -----------      -----------
            <S>                                                         <C>              <C>              <C>
            Income
               Dividends from subsidiaries                              $ 1,400,000      $ 1,250,000      $ 1,120,000
               Interest                                                       3,955            7,636            7,515
               Other income                                               1,724,166        1,506,545        1,447,282
                                                                        -----------      -----------      -----------
                                                                          3,128,121        2,764,181        2,574,797
                                                                        -----------      -----------      -----------

            Expense
               Interest                                                      77,557           30,781           42,086
               Salaries and employee benefits                             1,565,019        1,335,771        1,174,798
               Equipment expense                                            701,315          349,484          306,851
               Other expense                                              1,145,766        1,027,698          425,565
                                                                        -----------      -----------      -----------
                                                                          3,489,657        2,743,734        1,949,300
                                                                        -----------      -----------      -----------

                       Income (loss) before income tax benefits and
                       equity in undistributed earnings of subsidiaries    (361,536)          20,447          625,497

            Income tax benefits                                            (631,941)        (280,000)        (100,000)
                                                                        -----------      -----------      -----------

                       Income before equity in undistributed income
                           of subsidiaries                                  270,405          300,447          725,497

            Equity in undistributed income of subsidiaries                5,801,765        6,727,261        4,917,273
                                                                        -----------      -----------      -----------

                       Net income                                       $ 6,072,170      $ 7,027,708      $ 5,642,770
                                                                        ===========      ===========      ===========
</TABLE>



                                     F-34
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



--------------------------------------------------------------------------------


NOTE 16. PARENT COMPANY ONLY FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
                                                        CONDENSED STATEMENTS OF CASH FLOWS
                                                   YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

                                                                            1999             1998             1997
                                                                        -----------      -----------      -----------
            <S>                                                         <C>              <C>              <C>
            OPERATING ACTIVITIES
               Net income                                               $ 6,072,170      $ 7,027,708      $ 5,642,770
               Adjustments to reconcile net income to net
                  cash provided by operating activities:
                  Depreciation and amortization                             560,046          270,799           65,836
                  Undistributed earnings of subsidiaries                 (5,801,765)      (6,727,261)      (4,917,273)
                  Other operating activities                                251,949          367,725         (518,268)
                                                                        -----------      -----------      -----------

                          Net cash provided by operating activities       1,082,400          938,971          273,065
                                                                        -----------      -----------      -----------

            INVESTING ACTIVITIES
               Purchases of premises and equipment                       (1,053,841)         (22,856)      (1,115,771)
               Investment in subsidiary                                        --           (500,000)            --
               Disposal of premises and equipment                           406,306             --             19,564
                                                                        -----------      -----------      -----------

                           Net cash used in investing activities           (647,535)        (522,856)      (1,096,207)
                                                                        -----------      -----------      -----------

            FINANCING ACTIVITIES
               Increase in other borrowings                                 400,000          500,000             --
               Repayment of other borrowings                               (154,100)        (154,099)        (154,100)
               Exercise of stock options                                     88,607             --               --
               Proceeds from the issuance of common stock                      --               --            924,700
               Dividends paid                                              (352,143)        (318,531)        (285,728)
                                                                        -----------      -----------      -----------

                          Net cash provided by (used in) financing          (17,636)          27,370          484,872
                          activities
                                                                        -----------      -----------      -----------

            Net increase (decrease) in cash                                 417,229          443,485         (338,270)

            Cash at beginning of year                                       547,686          104,201          442,471
                                                                        -----------      -----------      -----------

            Cash at end of year                                         $   964,915      $   547,686      $   104,201
                                                                        ===========      ===========      ===========
</TABLE>


                                                         F-35
<PAGE>

                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report on Form 10-K to
be  signed on its  behalf  by the,  thereunto  duly  authorized,  in the City of
Cornelia, State of Georgia, on the 25th of March, 2000.

                                                 COMMUNITY BANKSHARES, INC.

                                                 By:  /s/ J. Alton Wingate
                                                      J. Alton Wingate
                                                      President and Chief
                                                      Executive Officer

                                POWER OF ATTORNEY

         KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below  constitutes and appoints J. Alton Wingate or Harry L. Stephens and either
of  them  (with  full  power  in  each  to  act  alone),   as  true  and  lawful
attorneys-in-fact,  with full  power of  substitution,  for him and in his name,
place and  stead,  in any and all  capacities,  to sign any  amendments  to this
Report on Form 10-K and to file the same,  with all  exhibits  thereto and other
documents in connection therewith,  with the Securities and Exchange Commission,
hereby  ratifying  and  confirming  all  that  said  attorney-in-fact,  or their
substitute  or  substitutes,  may  lawfully  do or  cause  to be done by  virtue
thereof.

         Pursuant  to  the   requirements   of  the   Securities  Act  of,  this
Registration  Statement  has  been  signed  by  the  following  persons  in  the
capacities indicated on the 25th day of March, 2000.

         Signature                                            Title

/s/ J. Alton Wingate                        President and Chief Executive
J. Alton Wingate                            Officer (Principal Executive
                                            Officer) and Director

/s/ Steven C. Adams                         Director
Steven C. Adams

/s/ Edwin B. Burr                           Director
Edwin B. Burr

/s/ Harry H. Purvis                         Director
Harry H. Purvis

/s/ H. Calvin Stovall, Jr.                  Director
H. Calvin Stovall, Jr.

/s/ Dean C. Swanson                         Director
Dean C. Swanson

/s/ George D. Telford                       Director
George D. Telford

/s/ Lois M. Wood-Schroyer                   Director
Lois M. Wood-Schroyer

/s/ Harry L. Stephens                       Executive Vice President and
Harry L. Stephens                           Chief Financial Officer
                                            (Principal Financial and
                                            Accounting Officer)


<PAGE>



SUPPLEMENTAL  INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(D) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO
SECTION 12 OF THE ACT.

         The  Registrant  has  furnished  annual  reports and proxy  material to
security  holders,  and  copies of such  documents  have been  furnished  to the
Commission for its information.




<PAGE>


                                  EXHIBIT INDEX


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

10.7     Amended and Restated  Revolving  Credit/Term Loan Agreement between the
         Registrant and SunTrust Bank dated July 31, 1999.

10.8     Community  Bankshares,  Inc. 1999 Stock Award Plan, as adopted December
         22, 1999.

21       Subsidiaries of Community Bankshares, Inc.

24.0     A Power of  Attorney is set forth on the  signature  pages to this Form
         10-K.

27       Financial Data Schedule