<PAGE>

                   THE SAVANNAH BANCORP, INC. AND SUBSIDIARIES
                        CONSOLIDATED FINANCIAL HIGHLIGHTS
                           DECEMBER 31, 2000 AND 1999
                                                                      PERCENT
                                                                      INCREASE
BALANCE SHEET AT DECEMBER 31,                  2000         1999     (DECREASE)
--------------------------------------------------------------------------------
(Amounts in thousands, except per share data)

Total assets                                 $344,096     $286,098          20
Interest-earning assets                       323,138      268,737          20
Loans                                         250,436      205,914          22
Allowance for loan losses                       3,369        2,794          21
Non-performing assets                             694          342         103
Deposits                                      291,856      234,262          25
Interest-bearing liabilities                  265,230      218,827          21
Shareholders' equity                           28,656       25,231          14

Allowance for possible
   loan losses to total loans                    1.35%        1.36%         (1)
Loan to deposit ratio                           85.81%       87.90%         (2)
Equity to assets                                 8.33%        8.82%         (6)
Tier 1 capital to risk-weighted assets          11.31%       12.15%         (7)
Book value per share                           $10.63       $ 9.31          14
Outstanding shares                              2,695        2,709          (1)

EARNINGS AND PERFORMANCE DATA
FOR THE YEARS ENDED DECEMBER 31,               2000         1999
--------------------------------------------------------------------------------
NET INCOME                                   $  4,292     $  3,533          21
Return on average assets                         1.36%        1.29%          6
Return on average equity                        16.23 %      14.17%         15
Net interest margin                              4.77 %       4.72%          1
Efficiency ratio                                56.74 %      59.76%         (5)


EARNINGS PER SHARE:
Basic                                          $ 1.59       $ 1.31          21
Diluted                                        $ 1.56       $ 1.28          22

AVERAGE OUTSTANDING SHARES:
Basic                                           2,704        2,704           0
Diluted                                         2,748        2,770          (1)


<PAGE>


                   THE SAVANNAH BANCORP, INC. AND SUBSIDIARIES
                           FINANCIAL STATEMENT SECTION
                                      INDEX

                                                                     Page
                                                                     Number

Index to Financial Statement Section                                  F-1
Management's Responsibility for Financial Reporting                   F-2
Report of Independent Certified Public Accountants                    F-3
Consolidated Balance Sheets
    December 31, 2000 and 1999                                        F-4
Consolidated Statements of Income For the Years
    Ended December 31, 2000, 1999 and 1998                            F-5
Consolidated Statements of Changes in Shareholders'
    Equity For the Years Ended December 31, 2000,
    1999 and 1998                                                     F-6
Consolidated Statements of Cash Flows For the Years
    Ended December 31, 2000, 1999 and 1998                            F-7
Notes to Consolidated Financial Statements                            F-8

Managements Discussion and Analysis of Financial
Condition and Results of Operations                                   F-20

     Selected Five-Year Financial Data - 1996-2000
        Table 1 - Selected Financial Condition Highlights             F-20
        Table 2 - Selected Operating Highlights                       F-21
     Liquidity and Interest Rate Sensitivity Management               F-22
     Financial Condition and Capital Ratios                           F-24
     Results of Operations
        2000 Compared to 1999                                         F-24
        1999 Compared to 1998                                         F-25
     Market Price For Registrant's Common Equity and
        Related Shareholder Matters                                   F-26
     Selected Quarterly Data                                          F-27

                                      F-1

<PAGE>





               MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING



The management of The Savannah Bancorp, Inc. is responsible for the preparation
of the financial statements, related financial data and other financial
information in this annual report. The financial statements are prepared in
accordance with generally accepted accounting principles and include amounts
based on management's estimates and judgment where appropriate. Financial
information appearing in this annual report is consistent with the financial
statements.

In meeting its responsibility both for the integrity and fairness of these
statements and information, management depends on the accounting system and
related internal control structures that are designed to provide reasonable
assurance that transactions are authorized and recorded in accordance with
established procedures, and that assets are safeguarded and proper and reliable
records are maintained.

The Audit Committee of The Savannah Bancorp, Inc.'s Board of Directors, composed
solely of outside directors, meets regularly with the Company's management,
internal auditors, independent certified public accountants and regulatory
examiners to review matters relating to financial reporting, internal control
structure and the nature, extent and results of the audit effort. The
independent certified public accountants have direct access to the Audit
Committee with or without management present.

The financial statements for 2000 and 1999 have been audited by BDO Seidman, LLP
and the 1998 financial statements have been audited by Arthur Andersen LLP,
independent certified public accountants. Their appointments were recommended by
the Audit Committee and approved by the Board of Directors. Their audits provide
an objective assessment of the degree to which the Company's management meets
its responsibility for financial reporting. Their opinions on the financial
statements are based on auditing procedures, which include reviewing internal
control structure and performing selected tests of transactions and records as
indicated in their report. These auditing procedures are designed to provide a
reasonable level of assurance that the financial statements are fairly presented
in all material respects.





              Archie H. Davis                        Robert B. Briscoe
              President and Chief                    Chief Financial
              Executive Officer                      Officer
              January 19, 2001                       January 19, 2001

                                      F-2

<PAGE>


               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


To the Board of Directors and Shareholders
of The Savannah Bancorp, Inc.:

         We have audited the accompanying consolidated balance sheets of The
Savannah Bancorp, Inc. (a Georgia Corporation) and its subsidiaries as of
December 31, 2000 and 1999, and the related consolidated statements of income,
changes in shareholders' equity and cash flows for the years then ended. These
consolidated financial statements are the responsibility of The Savannah
Bancorp, Inc.'s management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits. The Savannah Bancorp,
Inc.'s consolidated statements of income, changes in shareholders' equity and
cash flows for the year ended December 31, 1998, were audited by other auditors
whose report, dated January 25, 1999, expressed an unqualified opinion on those
statements.

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

         In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
The Savannah Bancorp, Inc. and its subsidiaries as of December 31, 2000 and
1999, and the results of their operations and their cash flows for the years
then ended in conformity with accounting principles generally accepted in the
United States of America.




Atlanta, Georgia
January 19, 2001

                                      F-3
<PAGE>

                   THE SAVANNAH BANCORP, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS


                                                          DECEMBER 31,
--------------------------------------------------------------------------------
($ in thousands, except share data)                 2000             1999
--------------------------------------------------------------------------------
ASSETS
Cash and due from banks                         $  15,130        $  13,004
Interest-bearing deposits in bank                   1,319              314
Federal funds sold                                 12,456            2,892
Securities available for sale, at fair value
   (amortized cost of $59,572 in 2000 and
   $59,845 in 1999)                                59,771           58,163
Loans                                             250,436          205,914
Less allowance for loan losses                     (3,369)          (2,794)
--------------------------------------------------------------------------------
       Net loans                                  247,067          203,120
Premises and equipment, net                         4,530            4,678
Other real estate owned                              -                  45
Other assets                                        3,823            3,882
--------------------------------------------------------------------------------
    TOTAL ASSETS                                $ 344,096        $ 286,098
--------------------------------------------------------------------------------
LIABILITIES
Deposits:
   Non interest-bearing deman                   $  47,405        $  40,150
   Interest-bearing demand                         48,069           40,186
   Savings                                         11,528           12,213
   Money market accounts                           34,873           40,346
   Time, $100,000 and over                         60,385           38,889
   Other time deposits                             89,596           62,478
--------------------------------------------------------------------------------
       Total deposits                             291,856          234,262
Federal Home Loan Bank Advances                    14,044           18,248
Securities sold under repurchase agreements         6,547            5,562
Federal funds purchased                               188              905
Other liabilities                                   2,805            1,890
--------------------------------------------------------------------------------
    TOTAL LIABILITIES                             315,440          260,867
--------------------------------------------------------------------------------

Commitments and contingencies
SHAREHOLDERS' EQUITY
  Common stock, par value $1 per share:
     authorized 20,000,000 shares; issued
     2,719,614 in  2000 and 1999                    2,720            2,720
  Preferred stock, par value $1 per share:
     authorized 10,000,000 shares, none issued       -
  Contributed capital                              12,822           13,038
  Retained earnings                                13,476           10,727
  Treasury stock, 25,107 and 10,675 shares
     in 2000 and 1999, respectively                  (485)            (210)
  Accumulated other comprehensive income (loss)       123           (1,044)

--------------------------------------------------------------------------------
    TOTAL SHAREHOLDERS' EQUITY                     28,656           25,231
--------------------------------------------------------------------------------
    TOTAL LIABILITIES AND SHAREHOLDERS'
       EQUITY                                   $ 344,096        $ 286,098
--------------------------------------------------------------------------------

The accompanying notes are an integral part of these consolidated financial
statements.

                                      F-4

<PAGE>


                   THE SAVANNAH BANCORP, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                            FOR YEAR ENDED DECEMBER 31,

($ in thousands, except share data)            2000        1999        1998
--------------------------------------------------------------------------------
INTEREST INCOME
Loans                                       $ 22,078    $ 16,769    $ 15,120
Investment securities:
   Taxable                                     3,019       3,026       2,739
   Non-taxable                                   476         419          36
Deposits with banks                               77          10          20
Federal funds sold                               397         518         954
--------------------------------------------------------------------------------
   Total  interest income                     26,047      20,742      19,195
--------------------------------------------------------------------------------
INTEREST EXPENSE
Deposits                                      10,546       7,785       8,304
Federal Home Loan Bank advances                  982         464         205
Other borrowings                                 582         491         227
--------------------------------------------------------------------------------
   Total interest expense                     12,110       8,740       8,736
--------------------------------------------------------------------------------
NET INTEREST INCOME                           13,937      12,002      10,459
Provision for loan losses                        745         545         435
--------------------------------------------------------------------------------

Net interest income after
   provision for loan losses                  13,192      11,457      10,024
--------------------------------------------------------------------------------
OTHER INCOME
Trust fees                                       291         192          60
Service charges on deposit accounts            1,281       1,032         849
Mortgage origination fees                        473         601         933
Other income                                     464         432         459
--------------------------------------------------------------------------------
   Total other operating revenue               2,509       2,257       2,301
Gains on sales of securities                    -             13           3
--------------------------------------------------------------------------------
   Total other income                          2,509       2,270       2,304
--------------------------------------------------------------------------------
OTHER EXPENSE
Salaries and employee benefits                 5,099       4,578       4,214
Occupancy expense                                670         667         530
Equipment expense                                640         594         480
Other operating expenses                       2,922       2,682       2,223
Merger expenses                                 -           -            619
--------------------------------------------------------------------------------
   Total other expense                         9,331       8,521       8,066
--------------------------------------------------------------------------------
Income before provision for income taxes       6,370       5,206       4,262
Provision for income taxes                     2,078       1,673       1,636
--------------------------------------------------------------------------------

NET INCOME                                  $  4,292    $  3,533    $  2,626
================================================================================

NET INCOME PER SHARE:
   Basic                                    $   1.59    $   1.31    $    .99
================================================================================

   Diluted                                  $   1.56    $   1.28    $    .95
================================================================================

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

                                      F-5

<PAGE>


                   THE SAVANNAH BANCORP, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                                                    Accumulated
                                                                                                       Other
                                         Common      Share    Contributed   Retained   Treasury    Comprehensive
($ in thousands,  except share data)     Shares      Amount      Capital    Earnings     Stock      Income(Loss)    Total
--------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1997              2,713,148    $2,713      $12,977     $7,093      ($504)         $118       $22,397
--------------------------------------------------------------------------------------------------------------------------
<S>                                         <C>        <C>          <C>        <C>          <C>          <C>          <C>
Comprehensive income:
   Net income                                                                 2,626                                  2,626
   Other comprehensive income:
   Change in unrealized gains on
      securities available for sale, net of tax                                                          398           398
                                                                                                                   -------
        Total comprehensive income                                                                                   3,024
Cash dividends - $.34 per share                                               (588)                                   (588)
Cash dividends of acquired bank                                               (693)                                   (693)

Exercise of options                         7,400         8           28                   229                         265
Tax benefit from exercise of options                                  86                                                86

Retirement of Bryan treasury stock           (934)       (1)         (15)                                              (16)
--------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1998              2,719,614     2,720       13,076     8,438        (275)          516        24,475
--------------------------------------------------------------------------------------------------------------------------
Comprehensive income:
   Net income                                                                3,533                                   3,533
   Other comprehensive income:
   Change in unrealized losses on
      securities available for sale, net of tax                                                       (1,560)       (1,560)
                                                                                                                   -------
           Total comprehensive income                                                                                1,973
Cash dividends - $.46 per share                                             (1,244)                                 (1,244)

Exercise of options                                                  (38)                  272                         234

Purchase of treasury stock                                                                (207)                       (207)
--------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1999              2,719,614     2,720       13,038    10,727        (210)       (1,044)       25,231
--------------------------------------------------------------------------------------------------------------------------
Comprehensive income:
   Net income                                                                4,292                                   4,292
   Other comprehensive income:
   Change in unrealized losses on
      securities available for sale, net of tax                                                        1,167         1,167
                                                                                                                   -------
           Total comprehensive income                                                                                5,459
Cash dividends - $.57 per share                                             (1,543)                                 (1,543)

Exercise of options                                                 (216)                  314                          98

Purchase of treasury stock                                                                (589)                       (589)
--------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2000              2,719,614    $2,720      $12,822   $13,476       ($485)         $123       $28,656
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

                                      F-6

<PAGE>

                   THE SAVANNAH BANCORP, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS


($ in thousands)                                 FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------
OPERATING ACTIVITIES                                2000      1999        1998
--------------------------------------------------------------------------------
Net income                                       $ 4,292    $ 3,533     $ 2,626
Adjustments to reconcile net income to cash
   Provided by operating activities:
   Provision for loan losses                         745        545         435
   Depreciation and amortization                     553        584         471
   Gain on sale of land                              -          -           (57)
   Gains on sales of securities                      -          (13)         (3)
   Amortization of investment securities
      discount-net                                    37         91         326
   Increase in other assets                         (611)      (245)       (715)
   Increase  in other liabilities                    915         81         450
--------------------------------------------------------------------------------
Net cash provided by operating activities          5,931      4,576       3,533
--------------------------------------------------------------------------------
INVESTING ACTIVITIES
Purchases of investment securities                (4,509)   (15,834)    (36,419)
Proceeds from sale of investment securities          -        1,008       2,002
Proceeds from maturities of investment securities  4,746     16,765      14,192
Net increase in loans made to customers          (44,692)   (35,130)    (16,815)
Capital expenditures                                (405)      (435)     (1,172)
Proceeds from sale of land                           -          -           356
--------------------------------------------------------------------------------
Net cash used in investing activities            (44,860)   (33,626)    (37,856)
--------------------------------------------------------------------------------
FINANCING ACTIVITIES
Net increase in demand, savings and money
   market accounts                                 8,980      2,978      22,868
Net  increase (decrease) in certificates
   of deposit                                     48,614     (1,088)      9,060
Net increase in securities sold under
   agreements to repurchase                          985      2,888         382
Net (decrease) increase in federal funds
   purchased                                        (717)       368        (551)
Net (decrease) increase in FHLB advances          (4,204)    13,798       2,860
Purchase of treasury stock                          (589)      (207)        -
Dividend payments                                 (1,543)    (1,244)     (1,281)
Exercise of options                                   98        234         335
--------------------------------------------------------------------------------
Net cash provided by financing activities         51,624     17,727      33,673
--------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS  12,695    (11,323)       (650)
Cash and cash equivalents at beginning of year    16,210     27,533      28,183
--------------------------------------------------------------------------------
Cash and cash equivalents at end of year         $28,905    $16,210     $27,533
================================================================================

--------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
   Cash paid during the year for:
      Interest on deposits and other borrowings  $11,467     $8,736      $8,622
      Income taxes                                 2,141      1,665       1,703
   Noncash investing activity:
      Change in unrealized gain (loss) on investment
      securities available for sale, net of income
      taxes                                        1,167     (1,560)        398


The accompanying notes are an integral part of these consolidated financial
statements.

                                      F-7
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ in thousands, except share data)
--------------------------------------------------------------------------------

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations - The Savannah Bancorp, Inc. ("the Company") was
incorporated in Georgia on October 5, 1989, for the purpose of becoming a bank
holding company for The Savannah Bank, N.A. ("Savannah Bank"). The Company is a
two-bank holding company that offers a full range of lending, deposit,
residential mortgage origination and fiduciary trust products. The primary
service area of the Company is the city of Savannah, Georgia, surrounding
Chatham County, Richmond Hill, Georgia (20 miles south of downtown Savannah) and
Bryan County.

Merger - The Savannah Bancorp, Inc. merged with Bryan Bancorp of Georgia, Inc.,
a bank holding company for Bryan Bank & Trust ("Bryan Bank") in Richmond Hill,
Georgia on December 15, 1998. The merger was accounted for as a
pooling-of-interests transaction and consequently, the financial position and
results of operations and cash flows of the respective companies are restated as
though the companies were combined for all historical periods.

Principles of Consolidation - The consolidated financial statements include the
accounts of the Company and Savannah Bank and Bryan Bank (the "Subsidiary
Banks"). All material intercompany accounts and transactions have been
eliminated in consolidation. Certain amounts in the previous years have been
reclassified to conform to the current year's presentation.

Use of Estimates - The preparation of these financial statements in conformity
with generally accepted accounting principles requires the use of certain
estimates by management. These estimates include primarily the estimation of the
allowance for loan losses. Actual results could differ from these estimates.

Cash and Cash Equivalents - For purposes of reporting cash flows, cash and cash
equivalents include cash on hand, amounts due from banks, federal funds sold and
interest-bearing deposits with other banks.

Investment Securities Available for Sale --Management has classified the entire
investment security portfolio as available for sale. Securities available for
sale are carried at estimated fair value with unrealized gains and losses, net
of deferred income taxes, recorded as a separate component of shareholders'
equity.

Loans and Loan Fees - Loans are stated at principal amounts outstanding reduced
by an allowance for loan losses. Interest income on loans is recognized to
reflect a constant rate of return on net funds outstanding. Accrual of interest
income is discontinued when management believes the collection of interest or
principal is doubtful. Accrued interest is reversed and charged against current
income when management believes, after considering economic and business
conditions and collection efforts, that the ultimate collection of interest
accrued in the current year is doubtful. Interest accrued in prior years is
charged against the allowance for loan losses when collection is doubtful.

Generally, the Company recognizes loan fees to the extent costs are incurred in
the origination of the loans. For certain loans, fees in excess of origination
costs are deferred and amortized over the life of the loan. The methodology
applied by the Company does not differ materially from generally accepted
accounting principles.

Non-Performing and Impaired Loans - The accrual of interest is generally
discontinued on all loans, except consumer loans, that become 90 days past due
as to principal or interest unless collection of both principal and interest is
assured by way of collateralization, guarantees or other security. Generally
loans past due 180 days or more are placed on nonaccrual status regardless of
collateral. A loan is also considered impaired if its terms are modified in a
troubled debt restructuring or if it is in a nonaccruing status. For accruing
impaired loans, cash receipts are typically applied to principal and interest
receivable in accordance with the terms of the restructured loan agreement.

Allowance for Loan Losses - The allowance for loan losses is based on estimates
and maintained at a level considered adequate to provide for potential loan
losses. The adequacy of the allowance is based on management's continuing
evaluation of the loan portfolio under current economic conditions, underlying
collateral value securing loans and such other factors that deserve recognition
in estimating loan losses. Actual future losses may be different from estimates
due to unforeseen events. Loans that are determined to be uncollectible are
charged against the allowance.

                                      F-8
<PAGE>

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Premises and Equipment - Building, furniture, banking equipment and leasehold
improvements are stated at cost less accumulated depreciation and amortization.
Depreciation and amortization are computed using the straight-line method over
the estimated useful lives or estimated lease terms including expected lease
renewals, ranging from three to fifty years, of the respective assets for
financial reporting purposes and using an accelerated method for income tax
purposes. Additions and major improvements are capitalized, while routine
maintenance and repairs and gain or loss on dispositions are recognized
currently.

Mortgage Origination Fees - The Company originates mortgage loans on behalf of
third parties. Such loans are originated pursuant to commitments from third
parties to acquire the loans that are in place prior to extension of a
commitment to make the loan. In connection therewith, the Company generally
charges certain origination fees to borrowers and may be paid amounts by
purchasers that exceed the Company's basis in the loan (for example, a servicing
release premium). Net cash gains from those activities are reported as mortgage
origination fees in the accompanying consolidated statements of income when the
loans are closed.

Income Taxes - Deferred tax assets and liabilities arise from temporary
differences in the recognition of revenues and expenses for income tax and
financial reporting purposes. They are reflected at currently enacted income tax
rates applicable to the period in which the deferred tax assets or liabilities
are expected to be realized or settled. As changes in tax laws or rates are
enacted, deferred tax assets and liabilities are adjusted through the provision
for income taxes.

Earnings Per Share - Basic earnings per share are calculated based on
weighted-average number of shares of common stock outstanding. Diluted earnings
per share is calculated based on the weighted average number of shares of common
stock outstanding and common stock equivalents, consisting of outstanding stock
options. Common stock equivalents are determined using the treasury method for
diluted shares outstanding. The weighted average common shares outstanding used
in the computation of basic earnings per share were 2,704,000, 2,704,000, and
2,661,000 in 2000, 1999 and 1998, respectively. The weighted average common and
common equivalent diluted shares outstanding used in the computation of diluted
earnings per share were 2,748,000, 2,770,000, and 2,760,000 in 2000, 1999 and
1998, respectively. The differences between diluted and basic shares outstanding
are common stock equivalents from stock options outstanding in the years ended
December 31, 2000, 1999 and 1998.

Reporting Comprehensive Income - In June 1997, the Financial Accounting
Standards Board (FASB) issued SFAS No. 130, "Reporting Comprehensive Income."
This statement establishes standards for reporting the components of
comprehensive income and requires that certain transactions and other economic
events that bypass the income statement be included in a financial statement
that is displayed with the same prominence as the other financial statements.
The Company's comprehensive income consists of net income and changes in
unrealized gains and (losses) on securities available-for-sale, net of income
taxes. The Company adopted the provisions of this statement in 1998 by reporting
comprehensive income in the consolidated statement of shareholders' equity.
These disclosure requirements had no impact on financial position or results of
operations.

Disclosures About Segments of an Enterprise and Related Information - In June,
1997, FASB issued SFAS No. 131, Disclosures about Segments of an Enterprise and
Related Information. The provisions of this statement require disclosure of
financial and descriptive information about an enterprise's operating segments
in annual and interim financial reports issued to shareholders. The statement
defines an operating segment as a component of an enterprise that engages in
business activities that generate revenue and incur expense, whose operating
results are reviewed by the chief operating decision maker in the determination
of resource allocation and performance, and for which discrete financial
information is available. The Company presently operates as two commercial banks
offering traditional banking services. Certain departmental revenues, asset and
liability volumes are used by executive management for performance and resource
allocation purposes, however, sufficient discrete financial information is not
available for presentation of segmented line of business financial information
to shareholders. These disclosure requirements had no impact on the Company's
financial position or results of operations.

Accounting for Derivative Instruments and Hedging Activities - In June, 1998 the
FASB issued SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities. The provisions of this statement require that derivative instruments
be carried at fair value on the balance sheet along with various other related

                                      F-9

<PAGE>

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

accounting treatments. The provisions of this statement (as amended by FAS 138)
became effective for quarterly and annual reporting periods beginning after June
15, 2000. The Company presently has no derivative or hedging instruments
applicable to the provisions of this statement and therefore this statement had
no impact on its financial position or results of operations upon adoption.


NOTE 2 - BUSINESS COMBINATIONS

On December 15, 1998, the Company merged with Bryan  Bancorp,  headquartered  in
Richmond Hill,  Georgia.  Each  outstanding  share of the Bryan Bancorp's common
stock was converted  into and exchanged for 1.85 shares of the Company's  common
stock,   resulting  in  the  issuance  of  approximately   937,000  shares.  The
acquisition was accounted for as a  pooling-of-interests,  and accordingly,  all
historical  financial  information  for the Company has been restated to include
Bryan  Bancorp's  historical  information  for  all  periods  presented  herein.
Intercompany transactions prior to the merger have been eliminated,  and certain
reclassifications  were made to Bryan Bancorp's financial  statements to conform
to the Company's presentations. No material adjustments were recorded to conform
Bryan  Bancorp's  accounting  policies.  In  connection  with  the  merger,  the
Corporation  recorded  net  nonrecurring  charges  of $555 for  direct and other
merger-related  items.  The  net  after-tax  charges  include  $544  for  legal,
accounting,  investment  advisor and printing charges.  Other nonrecurring items
include a $75 deductible expense for a data processing contract buyout and a $57
taxable gain on sale of land.

The following table shows the revenues and net income for the individual and
combined companies prior to the merger for the periods presented. Merger
expenses have been excluded for comparative purposes.

                                                           For the 11.5 Months
                                                            Ended December 15,
                                                                  1998
Total revenues (net interest income & other income)
         Savannah Bancorp                                       $ 7,787
         Bryan Bancorp                                            4,391
                                                                -------
         Combined                                               $12,178
                                                                =======
Net income
         Savannah Bancorp                                       $ 1,865
         Bryan Bancorp                                            1,268
                                                                -------
         Combined                                               $ 3,133
                                                                =======

NOTE 3 - CASH AND DEMAND BALANCES DUE FROM BANKS
The Company's subsidiary banks are required by the Federal Reserve Bank to
maintain minimum cash reserves based on reserve requirements calculated on their
deposit balances. Cash reserves of $4,331 and $3,759 were required as of
December 31, 2000 and 1999, respectively.

                                      F-10
<PAGE>

NOTE 4 - SECURITIES AVAILABLE FOR SALE

The aggregate amortized cost and fair value of securities  available for sale as
of December 31, 2000 and 1999 were as follows:

                                                          2000
                                      ------------------------------------------
                                      Amortized  Unrealized  Unrealized   Fair
                                         Cost       Gains      Losses     Value
                                      ---------  ----------  ----------  -------
Investment securities:
  U.S. Treasury securities             $  1,002        $  6      $  -    $ 1,008
  U S. Government agencies               45,938         100       (53)    45,985
  Mortgage-backed securities                966         -         (13)       953
  State and municipal                     9,612         208         -      9,820
  Other taxable securities                2,054         -         (49)     2,005
                                      ---------  ----------  ----------  -------
                                       $ 59,572        $314     $(115)   $59,771
                                      =========  ==========  ==========  =======

                                                          1999
                                      ------------------------------------------
                                      Amortized  Unrealized  Unrealized   Fair
                                         Cost       Gains      Losses     Value
                                      ---------  ----------  ----------  -------
Investment securities:
  U. S. Treasury securities            $  4,009        $  -     $ (24)    $3,985
  U. S. Government agencies              42,965           -    (1,561)    41,404
  Mortgage-backed securities              1,360           -       (21)     1,339
  State and municipal                     9,407          40       (71)     9,376
  Other taxable securities                2,104           -       (45)     2,059
                                       --------- ----------  ----------  -------
                                       $ 59,845        $ 40   $(1,722)   $58,163
                                       ========= ==========  ==========  =======

Proceeds from the sale or call of investment securities were $ 4,350, $1,008,
and $2,002 in 2000, 1999, and 1998, respectively. There was no gain or loss in
2000 and gains of $13 and $3 in 1999 and 1998, respectively.

The distribution of securities by maturity at December 31, 2000 is shown below.

                                                       Amortized
                                                          Cost       Fair Value
Securities available for sale:                         ---------     ----------
    Due in one year or less                            $ 18,207       $ 18,176
    Due after one year through five years                35,098         35,301
    Due after five years through ten years                3,665          3,727
    Due after ten years                                   2,602          2,567
                                                       ---------     ----------
Total investment securities                            $ 59,572       $ 59,771
                                                       =========     ==========

At December 31, 2000 and 1999, investment securities with a carrying value of
$48,316 and $42,411 respectively, were pledged as collateral to secure public
funds and securities sold under repurchase agreements.

                                      F-11

<PAGE>

NOTE 5 - LOANS
The composition of the loan portfolio at December 31, 2000 and 1999 is presented
below.

                                                    Percent           Percent
                                            2000    of Total    1999    of Total
                                         ---------  --------  --------  --------
Commercial                                $ 28,061    11.2%   $ 32,299    15.7%
Real estate - construction and
   development                              31,689    12.6      24,018    11.7
Real estate -  mortgage                    164,171    65.6     132,085    64.1
Installment and other consumer              26,515    10.6      17,512     8.5
                                         ---------  --------  --------  --------
Total Loans                               $250,436   100.0%   $205,914   100.0%
                                         =========  ========  ========  ========

At December 31, 2000 and 1999, there were $694 and $342 in non-performing
assets. At December 31, 2000 and 1999, nonaccruing loans were $645 and $229,
respectively.

Changes in the allowance for loan losses are summarized as follows:

                                                  2000        1999        1998
                                                 ------      ------      ------
Balance at the beginning of the year             $2,794      $2,323      $2,063
Provision for loan losses                           745         545         435
Charge-offs                                        (264)       (168)       (258)
Recoveries                                           94          94          83
                                                 ------      ------      ------
Balance at the end of the year                   $3,369      $2,794      $2,323
                                                 ======      ======      ======

The Company has granted loans to certain directors of the Company and to their
associates. The aggregate amounts of loans were $13,402 and $10,402 at December
31, 2000 and 1999, respectively. During 2000, $17,437 of new loans was made, and
repayments totaled $14,437. Unused lines of credit available to related parties
aggregated $3,738 and $2,249 at December 31, 2000 and 1999, respectively.
Related party loans are made on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for comparable
transactions with unrelated persons and do not involve more than normal risk of
collectibility.


NOTE 6 - PREMISES AND EQUIPMENT

Bank premises and equipment at December 31, 2000 and 1999, are summarized as
follows:

                                       Depreciable Lives      2000      1999
                                       -----------------     ------    ------
Land                                          -              $  581    $  439
Buildings                                  39 - 50            2,305     2,289
Furniture and banking equipment             5 - 15            3,142     3,009
Leasehold improvements                     10 - 39            1,361     1,316
                                                             ------    ------
                                                              7,389     7,053
Less accumulated depreciation
   and amortization                                           2,859     2,375
                                                             ------    ------
Premises and equipment, net                                  $4,530    $4,678
                                                             ======    ======
                                      F-12
<PAGE>

NOTE 7 - DEPOSITS

Total time deposits maturing in one to five years are as follow: 2001 -
$110,108; 2002 - $20,455; 2003 - $12,432; 2004 - $1,256; and 2005 and thereafter
- $5,730.

The following table indicates the amount of the Company's time certificates of
deposit of $100,000 or more at December 31, 2000 by time remaining until
maturity.

      Maturity Period                           Amount
      ---------------                          --------
      Three months or less                     $ 13,873
      Over three through six months              12,107
      Over six through twelve months             19,901
      Over twelve months                         14,504
                                               --------
      Total                                    $ 60,385
                                               ========


NOTE 8 - FEDERAL HOME LOAN BANK ADVANCES
Short-term Advances - Short-term advances from the Federal Home Loan Bank of
Atlanta ("FHLB") totaled $0 at December 31, 2000 and $14,000 at December 31,
1999. The average interest rate was 6.51 percent for the year ended 2000. The
maximum amount outstanding at the end of any month was $20,000 and $14,000
during 2000 and 1999, respectively.

Convertible Advances - Convertible advances from the FHLB of $10,000 with a
fixed interest rate of 4.82 percent have a final maturity of December 21, 2010.
The advances are convertible to advances with rates equal to the three-month
LIBOR rate on December 21, 2001 and quarterly thereafter at the option of the
FHLB. If and when the FHLB exercises its option to convert the advance, the
Company has the option to prepay the advance in full without any prepayment
penalties. There are prepayment penalties if the FHLB does not exercise its
option to convert the advance and the Company wishes to prepay the advance.

Long -term Advances - Long-term advances from the FHLB with maturities from 2001
to 2010 totaled $4,044 and $4,248 at December 31, 2000 and 1999, respectively.
The weighted-average interest rates on the long -term advances were 6.01 percent
and 6.00 percent during 2000 and 1999. Aggregate maturities are $208 in 2001,
$211 in 2002, $215 in 2003, $1,219 in 2004, $223 in 2005 and $1,967 thereafter.
Interest is generally payable monthly and scheduled principal reductions are
made quarterly, semi-annually or at maturity. The advances are secured by a
blanket floating lien agreement which provides a security interest in all
unencumbered first mortgage residential loans and by stock in the FHLB. The
long-term FHLB advances include prepayment penalties for each advance.

FHLB Advance Borrowing Capacity - Savannah Bank and Bryan Bank are shareholders
of the Federal Home Loan Bank of Atlanta ("FHLB") and have access to secured
borrowings from the FHLB. Both subsidiary banks have a Blanket Floating Lien
Agreement with the FHLB. Under these agreements, the banks have credit lines up
to 75 percent of the book value of its 1-4 family first mortgage loans, or
approximately $38.9 million as of December 31, 2000. In addition, the banks had
approximately $6.2 million par value of investment securities pledged as
collateral at the FHLB. In aggregate, the Company had secured borrowing capacity
of approximately $44.9 million of which $14.0 million was advanced at December
31, 2000. These credit arrangements serve as a core funding source as well as
liquidity backup for the banks. Additional advances are subject to review and
approval by FHLB for the purpose and reasons for the advances. Savannah Bank and
Bryan Bank have credit lines approved by the FHLB of 20 percent and 16 percent
of assets, respectively, subject to the FHLB collateral requirements.

                                      F-13
<PAGE>

NOTE 9 - SHORT-TERM BORROWINGS

As of December 31, 2000 and 1999, Savannah Bank and Bryan Bank had short-term
borrowings totaling $6,735 and $6,467, respectively. The average interest rates
were 6.08 percent and 4.72 percent for the years ended 2000 and 1999. The
interest rates on short-term borrowings ranged from 5.90 percent to 6.40 percent
at December 31, 2000 and from 4.90 percent to 5.50 percent at December 31, 1999.
Short-term borrowings at December 31, 2000 and 1999 consist of securities sold
under agreement to repurchase and federal funds purchased. The maximum amount
outstanding at the end of any month was $12,726 and $12,887 during 2000 and
1999, respectively. At December 31, 2000 federal funds borrowing arrangements
aggregating $21 million were available to Savannah Bank and Bryan Bank from
correspondent banking institutions. There are no commitment fees, and
compensating balances are not required. These unused lines principally serve as
temporary liquidity back-up lines and are subject to availability of funds and
other specific limitations of the correspondent banks. Savannah Bank is a member
and shareholder of the Federal Reserve Bank of Atlanta and has access to
borrowings at the Federal Reserve Bank discount window.


NOTE 10 - INCOME TAXES

The provision for income taxes is composed of the following for each of the
years ended December 31:

                                                  2000      1999      1998
                                                 ------    ------    ------
      Current federal                            $2,143    $1,691    $1,541
      Current state                                 167        94       155
                                                 ------    ------    ------
      Total current                               2,310     1,785     1,696
                                                 ------    ------    ------
      Deferred federal                             (197)     (101)      (53)
      Deferred state                                (35)      (11)       (7)
                                                 ------    ------    ------
      Total deferred                               (232)     (112)      (60)
                                                 ------    ------    ------
      Provision for income taxes                 $2,078    $1,673    $1,636
                                                 ======    ======    ======

A deferred tax liability of $75 at December 31, 2000 and a deferred tax asset of
$640 in 1999 has been recognized for the tax effect of the change in the
valuation account for unrealized gains and losses on available for sale
securities which are recorded net of tax in the equity section in accordance
with SFAS No. 115.

A reconciliation between the amounts computed by applying the U.S. federal tax
rate of 34 percent to income before income taxes is as follows:

                                                  2000      1999      1998
                                                 ------    ------    ------
      Tax provision at 34%                       $2,166    $1,770    $1,449
      State tax, net of federal tax benefit         105        63       103
      Tax-exempt interest, net                     (163)     (133)     (113)
      Nondeductible merger expenses                 -         -         185
      Other                                         (30)      (27)       12
                                                 ------    ------    ------
      Provision for income taxes                 $2,078    $1,673    $1,636
                                                 ======    ======    ======

Deferred income tax assets and liabilities are comprised of the following at
December 31, 2000 and 1999:

                                                  2000      1999
      Deferred tax assets:                       ------    ------
      Allowance for loan losses                  $1,229     $ 955
      Unrealized losses on  securities               19       640
      Other                                          81        27
                                                 ------    ------
      Total deferred tax assets                   1,329     1,622
                                                 ------    ------
      Deferred tax liabilities:
      Unrealized gains on securities                 94       -
      Depreciation                                  409       323
      Other                                          20        10
                                                 ------    ------
      Total deferred tax liabilities                523       333
                                                 ------    ------
      Net deferred tax assets                    $  806    $1,289
                                                 ======    ======
                                      F-14
<PAGE>

NOTE 11 - STOCK OPTION PLAN AND BENEFIT PLANS

In 1990, the Company granted options to the organizers permitting each organizer
to purchase up to 4,125 shares of Common Stock (74,250 shares in the aggregate)
at an option price of $6.06 per share. These options were all exercised prior to
their expiration date of April 10, 2000. Bryan Bancorp of Georgia, Inc. granted
two officers a total of 9,250 non-qualified options per year from 1990 to 1994
at exercise prices between $5.14 and $6.35. The unexercised options were all
converted at the exchange ratio and assumed by the Company as a part of the
merger agreement.

The Company also has an Incentive Stock Option Plan that provides for the
granting of incentive stock options (ISOs) to certain key officers for the
purchase of shares at the fair market value of the stock at the date of the
grant. In April 2000, the shareholders increased the authorized ISO shares
available for issuance by 100,000 shares. There are 82,500 remaining ISOs
authorized under this plan at December 31, 2000. Under this plan in April 1995,
44,550 ISOs were granted with an exercise price of $7.50 for a period of ten
years commencing April 18, 1995. In January 1996, another 44,550 ISOs were
granted under this plan with an exercise price of $13.33 for a period of ten
years commencing January 2, 1996. In April 1996, 9,000 additional ISOs were
granted to other key officers at an exercise price of $13.33 per share. The
April 1996 ISOs vest over five years and are exercisable over ten years. In
January, July and August 1997, 9,250 (assumed in merger), 9,000 and 3,000 ISOs
were granted to key officers at an exercise price of $10.27, $21.50 and $21.63
per share, respectively. The 1997 ISOs vest over five years and are exercisable
over ten years, except for the 9,250 options that vested at the time of the
merger. In February 1998, 4,625 ISOs (assumed in merger) were granted at an
exercise price of $25.50 per share and 10,000 ISOs were granted upon
consummation of the merger at an exercise price of $25.63 per share. The 1998
ISOs vest over five years and are exercisable over ten years. In May, 1999,
4,000 ISO's were granted at an exercise price of $23.94 and vest over five years
and are exercisable over ten years. In April, 2000, 20,000 ISO's were granted at
an exercise price of $18.88 and vest over five years and are exercisable over
ten years.

<TABLE>
<CAPTION>

                                         2000                  1999                    1998
                                 --------------------   -------------------     -------------------
                                             Weighted               Weighted               Weighted
                                             Average                Average                Average
                                             Exercise               Exercise               Exercise
                                  Shares      Price      Shares      Price       Shares      Price
                                 -------     -------    -------     -------     -------     -------
<S>                                <C>         <C>        <C>         <C>         <C>         <C>
Outstanding at the beginning
   of year                       156,025     $12.65     190,800     $11.08      219,575     $ 9.11
Granted                           20,000      18.88       4,000      23.94       14,625      21.53
Exercised                        (20,475)      7.19     (38,775)      6.10      (43,400)      6.06
Forfeited                         (6,600)     19.57         -          -            -          -
                                 -------                -------      12.65      -------
Outstanding at end of year       148,950      13.93     156,025                 190,800      11.08
                                 -------                -------                 -------
Exercisable at end of year       115,175     $11.80     129,525     $10.62      161,175     $ 9.07
                                 =======                =======                 =======
</TABLE>

During 2000, 1999 and 1998, the weighted average fair value of options granted
was $8.11, $7.05 and $10.46 per option, respectively.

The Company has chosen to continue to account for its options under the
provisions of Accounting Principles Board Statement No. 25, "Accounting for
Stock Issued to Employees" and thus has adopted the disclosure-only provisions
of SFAS No. 123, "Accounting for Stock-Based Compensation." Accordingly, no
compensation cost has been recognized for the stock option plans. Had
compensation cost for the options granted in 2000, 1999 and 1998 been determined
based on fair value at the grant date for awards in 2000, 1999 and 1998
consistent with the provisions of SFAS No. 123, the Corporation's net income and
net income per share would have been reduced to the pro forma amounts as shown
in the following table:


                                                   2000     1999      1998
                                                  ------   ------    ------
   Net Income - as reported                       $4,292   $3,533    $2,626
   Net Income - pro forma                         $4,168   $3,435    $2,552

   Net Income per share - basic - as reported     $ 1.59   $ 1.31    $ 0.99
   Net Income per share - pro forma               $ 1.54   $ 1.27    $ 0.96

   Net Income per share - diluted - as reported   $ 1.56   $ 1.28    $ 0.95
   Net Income per share - diluted - pro forma     $ 1.52   $ 1.24    $ 0.92

                                      F-15
<PAGE>

NOTE 11 - STOCK OPTION PLAN AND BENEFIT PLANS (CONTINUED)

The assumptions regarding the stock options issued to executives in 2000, 1999
and 1998 are that the options shares vest equally between 2001-2005, 2000-2004
and 1999-2003, respectively. The assumptions regarding the stock options issued
to executives in 1996 are that 100 percent of such options vested on grant date,
except for the 9,000 granted in April, 1996 shares which vest equally between
1997-2001. The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following assumptions. In
2000: dividend yield of 3.0 percent; expected volatility of 30.0 percent; risk
free interest rate of 5.00 percent and expected life of options of 7 years. In
1999: dividend yield of 2.3 percent; expected volatility of 0.19 percent; risk
free interest rate of 5.00 percent and expected life of options of 8 years. In
1998: dividend yield of 1.4 percent; expected volatility of 0.19 percent;
risk-free interest rate of 5.50 percent and expected life of options of 8 years.

The Company sponsors a 401(k) employee savings and profit sharing plan in which
substantially all full-time employees are eligible to participate. The plan
allows eligible employees to save a portion of their salary on a pre-tax basis.
Contributions by the Company to the plan are discretionary. Contributions and
administrative expenses related to the plan aggregated $190 and $177 for the
years ended December 31, 2000 and 1999, respectively.


NOTE 12 - CAPITAL RATIOS AND DIVIDEND RESTRICTIONS

The subsidiary banks' primary regulators have adopted capital requirements that
specify the minimum level for which no prompt corrective action is required. In
addition, the Federal Deposit Insurance Corporation (FDIC) has adopted FDIC
insurance assessment rates based on certain "well-capitalized" risk-based and
equity capital ratios. Failure to meet minimum capital requirements can result
in the initiation of certain actions by the regulators that, if undertaken,
could have a material effect on the Company's and the subsidiary bank's
financial statements. Management believes as of December 31, 2000, that the
Company and the Banks meet all capital adequacy requirements to which they are
subject. The following table shows these capital ratios for the Company, the
regulatory minimum and the well-capitalized capital ratios at December 31, 2000
and 1999:

Capital Ratios                            2000     1999
------------------                      -------   -------
Qualifying Capital
------------------
Tier 1 capital                         $ 28,533  $ 26,275
Total capital                            31,689    28,955

Average assets for the year             314,461   273,935
Adjusted risk-weighted assets           252,293   216,170


                                                                      Well-
                                          2000      1999   Minimum  Capitalized
Leverage Ratios                         -------   -------  -------  -----------
------------------
Tier 1 capital to average assets          8.51%      9.59%    4.0%      5.0%

Risk-based Ratios
------------------
Tier 1 capital to risk-weighted assets   11.31%     12.15%    4.0%      6.0%
Total capital to risk-weighted assets    12.56%     13.39%    8.0%     10.0%


The most recent notification from the subsidiary banks' primary regulators was
December 31, 1999 for Savannah Bank and March 31, 2000 for Bryan Bank. They
categorized the Savannah Bank and Bryan Bank as well capitalized under the
regulatory framework for prompt corrective action. To be categorized as
well-capitalized, a bank must maintain minimum total risk based, Tier 1
risk-based, Tier 1 leverage ratios of 10.0 percent, 6.0 percent and 5.0 percent,
respectively. There are no conditions or events since that notification that
management believes have changed the institution's category.

Bank regulators restrict the amount of dividends that banks may pay without
obtaining prior approval. At December 31, 2000, $3,494 in retained earnings of
the Banks was available for the payment of dividends, subject to maintaining
adequate capital ratios in the Banks. The Company is not subject to any
regulatory restrictions on the payment of dividends to its shareholders.

                                     F-16
<PAGE>

NOTE 13 - LEASES AND COMMITMENTS

Future minimum payments under noncancelable land and office space operating
leases with remaining terms in excess of one year are presented as follows: 2001
- $357; 2002 - $294; 2003 - $266; 2004 - $171; 2005 - $86 and $216 thereafter.
The land and office space leases contain customary escalation clauses.
Additionally, the Company has entered into a non-cancelable data processing
servicing agreement which provides for minimum payments as follows: 2001 - $205;
2002 - $212; 2003 - $218; 2004 - $225; 2005 - $231 and $402 thereafter. The
agreement includes a termination clause where the Company may buyout the
remainder of the contract for 60 percent of the current monthly contract times
the remaining months.

The net rental expense for all office space operating leases amounted to $379 in
2000, $370 in 1999, and $272 in 1998. The leases on the office space have five
or ten-year renewal options and require increased rentals under cost of living
escalation clauses.


NOTE 14  - OTHER EXPENSE
The components of other operating expense for the years ended December 31, 2000,
1999 and 1998 were as follows:


                                                 2000     1999     1998
                                                ------   ------   ------
      Outside data processing                     $904     $809     $535
      Professional and directors fees              304      268      253
      Postage and courier                          229      211      197
      Regulatory exams and audit fees              226      188      171
      Stationery and supplies                      178      167      197
      Advertising and sales promotion              164      163      243
      Taxes and licenses                           126      125      111
      Telephone                                    122      108      101
      Loan costs                                   110       69       70
      Correspondent bank charges                   103       97       55
      Dues and subscriptions                        62       59       54
      Insurance                                     40       38       39
      Other expense                                354      380      197
                                                ------   ------   ------
      Total other operating                     $2,922   $2,682   $2,223
                                                ======   ======   ======
expenses

NOTE 15 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

The Company is a party to financial instruments with off-balance sheet risk in
the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit and standby
letters of credit. These instruments involve, to varying degrees, elements of
credit and interest rate risk in excess of the amount recognized in the balance
sheets. The contract amounts of these instruments reflect the extent of
involvement the Company has in particular classes of financial instruments.

The Company's exposure to credit losses 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 amounts of those
instruments. The Company uses the same credit policies in making commitments and
conditional obligations as it does for on-balance sheet instruments.

Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. At December 31, 2000 unfunded commitments to extend
credit were $54,683. None of these commitments to extend credit exceeded one
year in duration. The Company evaluates each customer's credit worthiness 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 borrower. Collateral varies, but may include accounts receivable, inventory,
property, plant and equipment and income-producing commercial properties.

                                     F-17
<PAGE>

NOTE 15 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK (CONTINUED)

Letters of credit are conditional commitments issued by the Company to guarantee
the performance of a customer to a third party. At December 31, 2000 and 1999,
commitments under letters of credit aggregated approximately $1,680 and $1,861,
respectively. The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loan facilities to customers.
Collateral varies but may include accounts receivable, inventory, equipment,
marketable securities and property. Since most of the letters of credit are
expected to expire without being drawn upon, they do not necessarily represent
future cash requirements.

The Company is not a party to any off-balance sheet derivative financial
instruments.


NOTE 16 - FAIR VALUE OF FINANCIAL INSTRUMENTS

For the Company, as with most financial institutions, the majority of its assets
and liabilities are considered financial instruments. Many of the financial
instruments, however, lack an available trading market as characterized by a
willing buyer and willing seller engaging in an exchange transaction. Therefore,
significant estimations and present value calculations are used for the purpose
of this disclosure. Such estimations involve judgements as to economic
conditions, risk characteristics and future expected loss experience of various
financial instruments and other factors that cannot be determined with
precision.

Cash and due from banks, federal funds sold, variable rate loans, all deposits
except time deposits with remaining maturities over six months and other
borrowings have carrying amounts which approximate fair value primarily because
of the short repricing opportunities of these instruments.

Following is a description of the methods and assumptions used by the Company to
estimate the fair value of its financial instruments:

Investment Securities: Fair value is based upon quoted market prices, if
available. If a quoted market price is not available, fair value is estimated
using quoted market prices for similar securities.

Loans: The fair value for various types of fixed rate loans is estimated by
discounting the expected future cash flows using the Banks' current interest
rates at which loans would be made to borrowers with similar credit risk. As the
discount rates are based on current loan rates, as well as management estimates,
the fair values presented may not necessarily be indicative of the value
negotiated in an actual sale. The estimated fair value of the Banks'
off-balance-sheet commitments is nominal since the committed rates approximate
current rates offered for commitments with similar rate and maturity
characteristics and since the estimated credit risk associated with such
commitments is not significant.

Deposit liabilities: The fair value of fixed-maturity time deposits is estimated
using the rates currently offered for deposits of similar remaining maturities.

The carrying amounts and estimated fair values of the Company's financial
instruments are as follows:


                                        December 31, 2000     December 31, 1999
                                       ------------------    ------------------
                                                 Estimated             Estimated
                                       Carrying     Fair     Carrying     Fair
                                         Value      Value      Value      Value
Financial assets:                      --------   --------   --------   --------
  Cash and federal funds sold          $ 27,586   $ 27,586   $ 15,896   $ 15,896
  Interest-bearing deposits               1,319      1,319        314        314
  Securities available for sale          59,771     59,771     58,163     58,163
  Loans                                 250,436    250,223    205,914    204,175

Financial liabilities:
  Deposits                             $291,856   $293,177   $234,262   $234,170
  Securities sold under repurchase
     agreements                           6,547      6,547      5,562      5,562
  Federal funds purchased                   188        188        905        905
   Federal Home Loan Bank advances       14,044     13,898     18,248     18,147

                                      F-18
<PAGE>


NOTE 17 - THE SAVANNAH BANCORP, INC.
          (PARENT COMPANY ONLY) FINANCIAL INFORMATION

The following are condensed balance sheets of the Parent Company at December 31,
2000 and 1999:

ASSETS                                   2000       1999
                                       -------     -------
Cash on deposit                        $   317     $   203
Investment securities                       91         101
Investment in subsidiaries              28,344      24,446
Other assets                                96         704
                                       -------     -------
  Total assets                         $28,848     $25,454
                                       =======     =======
LIABILITIES
Other liabilities                      $   192     $   223
                                       -------     -------
SHAREHOLDERS' EQUITY
Common stock                             2,720       2,720
Capital surplus                         12,822      13,038
Treasury stock                            (485)       (210)
Accumulated other comprehensive
     Income                                123      (1,044)
Retained earnings                       13,476      10,727
                                       -------     -------
  Total liabilities and
     Shareholders' equity              $28,848     $25,454
                                       =======     =======


The operating results of the Parent Company are shown below for the three years
ended December 31:

                                       2000       1999       1998
                                      ------     ------     ------
Dividend income                       $1,700     $2,295     $1,000
Interest income                            9          3          4
                                      ------     ------     ------
Net interest & dividend income         1,709      2,298      1,004
                                      ------     ------     ------
Gain on sale of property                 -          -           57
                                      ------     ------     ------
Total expenses                           222        230        758
                                      ------     ------     ------
Income before income taxes and
  equity in undistributed
  net income of subsidiaries           1,487      2,068        303
Credit for income taxes                   80         85         57
                                      ------     ------     ------
Income before equity in
   undistributed net income
   of subsidiaries                     1,567      2,153        360
Equity in undistributed net
   income of subsidiaries              2,725      1,380      2,266
                                      ------     ------     ------

Net income                            $4,292     $3,533     $2,626
                                      ======     ======     ======


The cash flows of the Parent Company are shown below for the three years ended
December 31:

                                       2000       1999       1998
                                      ------     ------     ------
OPERATING ACTIVITIES
Net income                            $4,292     $3,533     $2,626
Adjustments to reconcile net
  income to cash used
  for operations:
      Equity in undistributed
        net income of subsidiaries    (2,725)    (1,380)    (2,266)
      Gain on sale of assets             -          -          (57)
      Decrease (increase) in
        other assets                     612       (581)       (45)
     (Decrease) increase in
        accrued expenses                 (31)       (89)       256
                                      ------     ------     ------
      Net cash provided by
        operating activities           2,148      1,483        514
                                      ------     ------     ------
INVESTING ACTIVITIES
Purchase of investment securities        -         (140)       -
Proceeds from sale of land               -          -          356
                                      ------     ------     ------
      Net cash (used) provided
        by investing activities          -         (140)       356
                                      ------     ------     ------

FINANCING ACTIVITIES
Exercise of options                       98        234        336
Purchase of treasury stock              (589)      (207)       -
Dividends paid                        (1,543)    (1,244)    (1,281)
                                      ------     ------     ------
      Net cash used in
        financing activities          (2,034)    (1,217)      (945)
                                      ------     ------     ------
INCREASE (DECREASE) IN CASH
      AND CASH EQUIVALENTS               114        126        (75)

      Cash at January 1                  203         77        152
                                      ------     ------     ------
      Cash at December 31             $  317     $  203     $   77
                                      ======     ======     ======

No interest or income taxes were paid by the parent company in any of the three
years presented.

The Parent Company financial statements include the following intercompany
items: interest-bearing deposits on the balance sheet; dividend income, interest
income and $14 of fees paid each year to the Banks in other expenses on the
income statements.

                                      F-19
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
($ in thousands, except share data)
--------------------------------------------------------------------------------

For a comprehensive presentation of the Company's financial condition and
results of operations, the following selected financial data and analysis should
be reviewed along with the consolidated financial statements and the
accompanying notes to the consolidated financial statements. All dollar amounts
except per share amounts are in thousands.

TABLE 1 - SELECTED FINANCIAL CONDITION HIGHLIGHTS - FIVE-YEAR COMPARISON

<TABLE>
<CAPTION>

                                           2000       1999       1998       1997       1996
                                         --------   --------   --------   --------   --------
<S>                                         <C>        <C>        <C>        <C>        <C>
 SELECTED AVERAGE BALANCES
 Total assets                            $314,461   $273,935   $245,014   $205,032   $179,806
 Loans - net of unearned income           231,760    186,997    160,262    139,772    120,232
 Securities                                59,938     59,997     52,448     40,556     37,801
 Other interest-earning assets              7,353     10,677     18,509     12,795     10,048
 Total interest-earning assets            298,406    257,671    231,219    193,123    168,081
 Interest-bearing deposits                220,651    191,818    181,976    151,478    132,870
 Borrowed funds                            25,053     18,484      7,683      4,241      1,748
 Total interest-bearing liabilities       245,704    210,302    189,659    155,719    134,618
 Noninterest-bearing deposits              39,905     36,724     30,137     26,550     24,416
 Total deposits                           260,556    228,542    212,113    178,028    157,286
 Loan to deposit ratio - average               89%        82%        76%        79%        76%
 Shareholders' equity                      26,439     24,941     23,445     21,040     19,020

 CREDIT QUALITY DATA
 Nonperforming assets                    $    694   $    342   $    233   $    497   $     82
 Nonperforming loans                          694        297        233        497         82
 Net loan losses                              170         74        175        111         79
 Allowance for loan losses                  3,369      2,794      2,323      2,063      1,695
 Nonperforming assets to total loans         0.28%      0.17%      0.14%      0.32%      0.06%
 Net loan losses to average loans            0.07%      0.04%      0.11%      0.08%      0.07%
 Allowance for loan losses
     to total loans                          1.35%      1.36%      1.36%      1.34%      1.29%
 Allowance for loan losses / net
     loan losses                               20         38         13         19         21

 SELECTED FINANCIAL DATA AT PERIOD-END
 Total assets                            $344,096   $286,098   $266,380   $229,172   $197,665
 Interest-earning assets                  323,138    268,737    242,669    209,920    177,618
 Loans - net of unearned income           250,436    205,914    170,858    154,218    130,909
 Deposits                                 291,856    234,262    232,372    200,444    174,005
 Loan to deposit ratio                         86%        88%        74%        77%        75%
 Interest-bearing liabilities             265,230    218,827    200,680    171,833    144,851
 Shareholders' equity                      28,656     25,231     24,475     22,397     20,056
 Shareholders' equity to total assets        8.33%      8.82%      9.19%      9.77%     10.15%
 Dividend payout ratio                      35.95%     35.21%     48.78%     22.91%     19.22%
 Risk-based capital ratios:
    Tier 1 capital to risk-based assets     11.31%     12.15%     13.12%     14.20%     15.72%
    Total capital to risk-based assets      12.56%     13.39%     14.36%     15.44%     16.90%
 Per share:
   Book value                            $  10.63   $   9.31   $   9.12   $   8.48   $   7.61
   Common stock closing price (Nasdaq)   $  19.25   $  19.70   $  26.00   $  23.38   $  16.33
 Common shares outstanding (000s)           2,695      2,709      2,683      2,640      2,635
</TABLE>

                                      F-20
<PAGE>


TABLE 2 - SELECTED OPERATING HIGHLIGHTS - FIVE-YEAR COMPARISON

<TABLE>
<CAPTION>

SUMMARY OF OPERATIONS                        2000      1999      1998      1997      1996
                                            -------   -------   -------   -------   -------
<S>                                         <C>       <C>       <C>       <C>       <C>
Interest income - taxable equivalent        $26,352   $20,990   $19,342   $16,803   $14,559
Interest expense                             12,110     8,740     8,736     7,343     6,388
                                            -------   -------   -------   -------   -------
 Net interest income - taxable equivalent    14,242    12,250    10,606     9,460     8,171
 Taxable equivalent adjustment                 (305)     (248)     (147)     (136)     (115)
                                            -------   -------   -------   -------   -------
 Net interest income                         13,937    12,002    10,459     9,324     8,056
 Provision for loan losses                      745       545       435       480       285
                                            -------   -------   -------   -------   -------
 Net interest income after provision
    for loan losses                          13,192    11,457    10,024     8,844     7,771
                                            -------   -------   -------   -------   -------
 Other operating revenue
    Trust fees                                  291       192        60       -         -
    Service charges on deposit accounts       1,281     1,032       849       749       741
    Mortgage origination fees                   473       601       933       479       211
    Other income (a)                            464       432       459       441       250
    Gains (losses) on sale of securities        -          13         3         4       -
                                            -------   -------   -------   -------   -------
 Total other income                           2,509     2,270     2,304     1,673     1,202
                                            -------   -------   -------   -------   -------
 Personnel expense                            5,099     4,578     4,214     3,405     2,722
 Occupancy and equipment expense              1,310     1,261     1,010       846       717
 Nonrecurring merger expenses (b)               -         -         619       -         -
 Other expense                                2,922     2,682     2,223     1,843     1,692
                                            -------   -------   -------   -------   -------
 Total other expense                          9,331     8,521     8,066     6,094     5,131
                                            -------   -------   -------   -------   -------
 Income before income taxes                   6,370     5,206     4,262     4,423     3,842
 Provision for income taxes                   2,078     1,673     1,636     1,512     1,314
                                            -------   -------   -------   -------   -------
 Net income                                 $ 4,292   $ 3,533   $ 2,626   $ 2,911   $ 2,528
                                            =======   =======   =======   =======   =======

 NET INCOME PER SHARE:
   Basic                                    $  1.59   $  1.31   $   .99   $  1.10   $   .96
   Diluted                                  $  1.56   $  1.28   $   .95   $  1.06   $   .93
 Cash dividends paid per share  (d)         $   .57   $   .46   $   .34   $   .14   $   .08
 Average basic shares outstanding             2,704     2,704     2,661     2,640     2,641
 Average diluted shares outstanding           2,748     2,770     2,760     2,757     2,716


 PERFORMANCE RATIOS (AVERAGES)
 Net yield on interest-earning assets          4.77%     4.75%     4.59%     4.90%     4.86%
 Return on assets                              1.36%     1.29%     1.07%     1.42%     1.41%
 Return on equity                             16.23%    14.17%    11.20%    13.84%    13.29%
 Overhead ratio                               56.74%    59.76%    63.21%    55.44%    55.42%

EXCLUDING NONRECURRING ITEMS (c)
 Operating net income                       $ 4,292   $ 3,533   $ 3,181   $ 2,911   $ 2,528
 Operating net income per diluted share     $  1.56   $  1.28   $  1.15   $  1.06   $  0.93
 Return on assets                              1.36%     1.29%     1.30%     1.42%     1.41%
 Return on equity                             16.23%    14.17%    13.57%    13.84%    13.29%
 Overhead ratio                               56.74%    59.76%    58.62%    55.44%    55.42%

</TABLE>


   (a)  1998 includes $57 first quarter Bryan gain on the sale of land purchased
        for a new Bryan office.
   (b)  1998 includes $75 non-recurring data processing buyout expense incurred
        in the fourth quarter.
   (c)  Excludes the effects of after-tax merger expenses of  $544 and after-tax
        non-recurring items described in (a) and (b) of $11 in net charges.
   (d)  Cash dividends per common share are those of The Savannah Bancorp, Inc.
        (historical).

                                      F-21
<PAGE>

LIQUIDITY AND INTEREST RATE SENSITIVITY MANAGEMENT

The objectives of funds management include maintaining adequate liquidity and
reasonable harmony between the repricing of sources and uses of funds or
interest sensitive assets and liabilities. The goal of liquidity management is
to ensure the availability of adequate funds to meet the loan demand and the
deposit withdrawal needs of the Bank's customers. This is achieved through
maintaining a combination of sufficient liquid assets, core deposit growth and
unused capacity to purchase funds in the money markets.

During 2000, loans increased $45 million, or 22 percent, and deposits increased
$58 million, or 25 percent resulting in a decrease in the loan to deposit ratio
from 88 percent at the beginning of the year to 86 percent at year-end. Loan
growth was fueled by an excellent local economy. Time deposit growth increased
due to higher time deposit rates in 2000 compared to other deposit products. A
substantial decline in stock prices also caused time deposits to become a more
favorable investment for some investors. Future core deposit growth will be
accomplished through management attention focused on deposit growth, improved
marketing strategies, deposit growth incentives and competitive interest rates.

Both subsidiary banks have a Blanket Floating Lien Agreement with the Federal
Home Loan Bank of Atlanta ("FHLB"). Under these agreements, the banks have
credit lines up to 75 percent of the book value of their 1-4 family first
mortgage loans, or approximately $38.9 million as of December 31, 2000. In
addition, the banks had approximately $6.2 million par value of investment
securities pledged as collateral at the FHLB. In aggregate, the Company had
secured borrowing capacity of approximately $44.9 million of which $14.0 million
was advanced at December 31, 2000. These credit arrangements serve as a core
funding source as well as liquidity backup for the banks. The Savannah Bank,
N.A. and Bryan Bank & Trust have credit lines approved by the FHLB of 20 percent
and 16 percent of assets, respectively, subject to the FHLB collateral
requirements. The subsidiary banks also have $20 million of federal funds
borrowing lines available from correspondent banks.

A continuing objective of the Bank's asset liability management is to maintain a
high level of variable rate assets, including variable rate loans and
shorter-maturity investments, to balance increases in interest rate sensitive
liabilities. Interest sensitivity management and its effects on the net interest
margin require analyses and actions that take into consideration volumes
repriced and the timing and magnitude of their change.

The Company's cash flow maturity and repricing gap at December 31, 2000, was a
$93.0 million asset gap within one year, or 28.9 percent of total
interest-earning assets (see Table 3). The Company is asset sensitive within one
year primarily because the NOW, savings and money market deposit accounts
reprice at 10 percent to 30 percent of the prime rate changes. The short-term
asset sensitivity position of the Company indicates that net interest income
will be impacted negatively when the prime rate and deposit rates decrease.
However, once market rates stop declining, the time deposits that reprice within
one year will cause a positive impact on net interest income.

Fixed rate earning assets with maturities over five years totaled $10.2 million,
or 3.2 percent of total interest-earning assets. The maturity and repricing gap
between one and five years will adjust significantly each year through normal
loan and deposit activity. Management uses interest rate risk models run on a
quarterly basis to measure interest rate risk and reports the results of such
models to the Credit/Asset Liability Committee of the Board of Directors. The
models indicate that changes in net interest income resulting from interest rate
fluctuations are within acceptable tolerances.

The gap position after one year is of less concern because management has time
to respond to changing financial conditions with actions that reduce the impact
of the longer-term gap positions. However, fixed rate assets with maturities
over five years may include significant rate risk in the event of significant
market rate increases where the subsidiary banks have no opportunity to reprice
the earning asset.

The Company is a party to financial instruments with off-balance sheet risks in
the normal course of business to meet the financing needs of its customers. At
December 31, 2000, the Company had unfunded commitments to extend credit of
$54,683 and outstanding stand-by letters of credit of $1,680. 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
Company uses the same credit policies in establishing commitments and issuing
letters of credit as it does for on-balance sheet instruments. Management does
not anticipate that funding obligations arising from these financial instruments
will adversely impact its ability to fund future loan growth or deposit
withdrawals.

                                      F-22
<PAGE>

TABLE 3 - LONG-TERM MATURITY GAP AND REPRICING DATA

The following is the long-term maturity and repricing data for the Company as of
December 31, 2000:

<TABLE>
<CAPTION>


           ($ in 000's)                          1-3        3-12       1-3        3-5       5-15
Interest-bearing assets            Immediate    Months     Months     Years      Years      Years     Total
                                   ---------  ---------  ---------  ---------  ---------  ---------  ---------
<S>                                 <C>        <C>       <C>        <C>         <C>        <C>        <C>
Investment securities               $    -     $ 10,525  $   7,682  $  24,767   $ 10,330   $  6,268   $ 59,572
Interest-bearing deposits                -        1,319        -          -          -          -        1,319
Federal funds sold                     9,696      2,760        -          -          -          -       12,456
Loans                                114,862     32,039     54,967     37,559      6,449      3,915    249,791
                                   ---------  ---------  ---------  ---------  ---------  ---------  ---------
Total interest-earning assets        124,558     46,643     62,649     62,326     16,779     10,183    323,138
                                   ---------  ---------  ---------  ---------  ---------  ---------  ---------
Interest bearing deposits:
NOW and savings                        7,539        -          -       52,058        -          -       59,597
Money market accounts                  6,204        -          -       28,669        -          -       34,873
Time, $100 and over                      -       13,873     32,008     11,239      3,265        -       60,385
Other Time                               -       17,703     46,530     21,642      3,721        -       89,596
Funds Purchased                        6,735        -          -          -          -          -        6,735
Federal Home Loan Bank Advances          -           42     10,166        426      1,443      1,967     14,044
                                   ---------  ---------  ---------  ---------  ---------  ---------  ---------
Total interest-bearing liabilities    20,478     31,618     88,704    114,034      8,429      1,967    265,230
                                   ---------  ---------  ---------  ---------  ---------  ---------  ---------

GAP-Excess Assets (Liabilities)      104,080     15,025    (26,055)   (51,708)     8,350      8,216     57,908
                                   ---------  ---------  ---------  ---------  ---------  ---------  ---------

GAP-Cumulative-12/31/00             $104,080   $119,105   $ 93,050   $ 41,342   $ 49,692   $ 57,908   $ 57,908
                                   =========  =========  =========  =========  =========  =========  =========

Cumulative Sensitivity Ratio *        6.08       3.29       1.66       1.16       1.19       1.22       1.22
                                   =========  =========  =========  =========  =========  =========  =========

</TABLE>

* Cumulative interest-earning assets / cumulative interest-bearing liabilities

                                      F-23
<PAGE>

FINANCIAL CONDITION AND CAPITAL RESOURCES

The financial condition of the Company can be assessed by examining the changes
and relationships in the sources and uses of funds as shown in the consolidated
statements of cash flows. Good loan and core deposit growth resulted in an
increase of $1,935, or 16 percent, in net interest income. In general,
investments have expected maturities of less than five years. Tax-exempt bank
qualified municipals total $9.8 million, or approximately 16 percent of the
investment portfolio, and have weighted average maturities of approximately 5.3
years. At December 31, 2000, approximately 15.8 percent of equity capital, or
$4,530, was invested in bank premises and equipment.

The Savannah Bank, N.A. has classified all investment securities as available
for sale since January 1, 1994. Bryan Bank & Trust classified their municipal
bonds as held to maturity until their merger with the Company in December 1998.
In 2000, a decrease in U.S. Treasury market rates of 100 to 150 basis points
caused net unrealized losses on available for sale securities of $1,044 at
December 31, 1999 to become net unrealized gains of $123 at December 31, 2000.
These amounts are included in shareholders' equity at December 31, 2000 in other
accumulated comprehensive income.

The Company's lending and investment policies continue to emphasize high quality
growth. Management is not aware of any known trends, events or uncertainties
that will have or that are reasonably likely to have a material effect on the
liquidity, capital resources or operations of the Company. However, weakening
economic conditions in latter 2000 could result in slower loan growth and higher
loan delinquencies and nonperforming assets.

The Office of the Comptroller of the Currency (OCC) has adopted capital
requirements that specify the minimum level for which no prompt corrective
action is required. In addition, the FDIC adopted FDIC insurance assessment
rates based on certain "well-capitalized" risk-based and equity capital ratios.
As of December 31, 2000, the Company and the Bank exceed the minimum
requirements necessary to be classified as "well-capitalized."

Total equity capital for the Company is $28,656, or 8.3 percent of total assets.
Management expects that the Company's and the Bank's capital ratios will
continue to remain above the well-capitalized capital ratio level, even in the
event of future substantial increases in market rates. The present capital ratio
and expected future earnings will allow the bank to continue its aggressive
growth objectives without having to raise additional capital in the near future.


RESULTS OF OPERATIONS

2000 COMPARED WITH 1999

For 2000, net income was $4,292, up 21 percent from $3,533 in 1999. This
represented annualized returns of 16.23 percent on average equity and 1.36
percent on average assets for 2000. Earnings were $1.56 per diluted share in
2000 compared to $1.28 in 1999, an increase of 22 percent.

Net interest income growth of 16 percent included a higher net yield on
interest-earning assets (net interest margin) caused by rising interest rates of
175 basis points from June 1999 through May 2000 and excellent growth in the
loan portfolio. Higher time deposit rates compared to the level prime in the
third and fourth quarters began to cause a declining net interest margin.

Net interest income was $13,937 in 2000 compared to $12,002 in 1999, an increase
of $1,935, or 16 percent. Average interest-earning assets were up $54 million,
or 20 percent in 2000 over 1999. The net yield on interest earning assets
increased to 4.77 percent in 2000 from 4.72 percent in 1999.

                                      F-24
<PAGE>

The provision for loan losses was $745 in 2000 compared to $545 in 1999. Net
loan charge-offs totaled $170 in 2000 and $74 in 1999. There was $694 in
non-performing assets at December 31, 2000 and $342 at December 31, 1999. The
allowance for possible loan losses was 1.35 percent of loans at December 31,
2000 compared with 1.36 percent at December 31, 1999.

Other income was $2,509 in 2000 compared to $2,270 in 1999. Service charges on
deposit accounts increased to $1,281 in 2000 from $1,032, an increase of 24
percent. Improved commercial analysis systems and fewer waived overdraft charges
were the primary reasons for the increases. Other income included mortgage
origination fees of $473 in 2000 and $601 in 1999. Higher mortgage rates during
2000 caused declines in mortgage origination fee income during 2000. Trust fee
income was $291 in 2000 and $192 in 1999.

Other expenses were $9,331 in 2000 compared to $8,521 in 1999, an increase of
$810, or 9.5 percent. Salary and employee benefit expense increased to $5,099 in
2000 from $4,578, an increase of 11.4 percent. Other operating expenses
increased to $ 2,922 or 9 percent. Occupancy expense and equipment combined were
$1,310 in 2000, up 3.9 percent over 1999. No significant space or equipment
additions were incurred in 2000.

The provision for income taxes was $2,078 in 2000 and $1,673 in 1999. The
effective federal and state tax rates were 32.6 percent and 32.1 percent in 2000
and 1999, respectively. The Company has not recorded a valuation allowance
against deferred tax assets. All deferred tax assets are considered to be
realizable due to expected future taxable income.

RESULTS OF OPERATIONS

1999 COMPARED WITH 1998

For 1999, the Company had operating net income of $3,533, up 11 percent from
$3,181 in 1998. This represented annualized returns of 14.17 percent on average
equity and 1.29 percent on average assets for 1999. Operating earnings were
$1.28 per diluted share in 1999 compared to $1.15 in 1998, an increase of 11
percent.

Earnings in 1998 include $555,000 in after-tax, nonrecurring charges related to
the merger of Bryan Bancorp of Georgia into The Savannah Bancorp on December 15,
1998. Including the nonrecurring items, net income per diluted share was 95
cents for the year with net income totaling $2,626. The merger with Bryan
Bancorp of Georgia has been accounted for under the pooling-of-interests
accounting method.

Operating net interest income growth included a higher net yield on
interest-earning assets (net interest margin) caused by rising interest rates
and excellent growth in the loan portfolio. Overhead expenses were higher due to
one full-service office opening in September 1998 and the implementation of
image check processing in September 1998. Year 2000 expenses consisting of
consulting, education and implementation costs were also incurred. The Company's
facilities and staff are well positioned to add significant asset growth with a
much lower overhead growth.

Net interest income was $12,002 in 1999 compared to $10,459 in 1998, an increase
of $1,543, or 15 percent. Average interest-earning assets were up $26.5 million,
or 11 percent in 1999 over 1998. The prime rate increased 75 basis points to
8.50 percent during July through December 1999 and time deposit rates increased
between 50 and 100 basis points during 1999. The net yield on interest earning
assets increased to 4.75 percent in 1999 from 4.59 percent in 1998.

The provision for loan losses was $545 in 1999 compared to $435 in 1998. Net
loan charge-offs totaled $74 in 1999 and $175 in 1998. There was $342 in

                                      F-25
<PAGE>

non-performing assets at December 31, 1999 and $233 at December 31, 1998. The
allowance for possible loan losses was 1.36 percent of loans at December 31,
1999 and 1998.

Other income was $2,270 in 1999 compared to $2,304 in 1998. Other income
included mortgage origination fees of $601 in 1999 and $933 in 1998. Higher
mortgage rates during 1999 caused declines in mortgage origination fee income
during 1999. Trust fee income was $192 in 1999 and $60 in 1998. Other income in
1998 also included the $57 gain from the sale of land by Bryan.

Other expenses were $8,521 in 1999 compared to $8,066 in 1998, an increase of
$455. Excluding 1998 merger costs of $619, other expenses increased $1,074, an
increase of 13 percent. Salary and employee benefit expense increased to $4,578
in 1999 from $4,214, an increase of 9 percent. Other operating expenses
increased to $ 2,682 or 21 percent for increases in data processing related
primarily to check imaging and Year 2000. Occupancy expense and equipment
increased because of the Medical Arts Office that opened in November 1998 and
additional space for the Trust Department, Operations and the Bluffton, SC
mortgage office.

The provision for income taxes was $1,673 in 1999 and $1,636 in 1998. The
effective federal and state tax rates were 32.1 percent and 38.4 percent in 1999
and 1998, respectively. The decrease in the effective rate was primarily due to
certain non-deductible merger expenses in 1998. The Company has not recorded a
valuation allowance against deferred tax assets. All deferred tax assets are
considered to be realizable due to expected future taxable income.


TABLE 4 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

The Company's common stock was sold in an initial public offering on April 10,
1990. It is traded in the over-the-counter market and is quoted on the Nasdaq
National Market under the symbol SAVB. The quarterly high, low and closing stock
trading prices for 2000 and 1999 are listed below. On December 15, 1998
approximately 937,000 additional shares were issued to shareholders of Bryan
Bancorp of Georgia, Inc. in exchange for all of the outstanding stock in Bryan
Bancorp of Georgia, Inc. There were approximately 600 holders of record of
Company Common Stock and, according to information available to the Company,
approximately 630 additional shareholders through brokerage accounts at March 2,
2001.

                                        Market Price per Common Share
                                    -------------------------------------
                                    Fourth     Third    Second     First
         2000                       Quarter   Quarter   Quarter   Quarter
         ----                       -------   -------   -------   -------
         High                        $21.75    $21.25    $19.88    $19.13
         Low                          19.25     18.81     18.06     17.00
         Close                        19.25     20.75     19.25     18.13

         1999
         ----
         High                        $20.75    $22.50    $24.00    $25.00
         Low                          19.00     19.75     21.00     21.50
         Close                        19.70     20.13     22.00     22.44

                                      F-26
<PAGE>

TABLE 5 - SELECTED QUARTERLY DATA

The following is a summary of unaudited quarterly results for 2000 and 1999.

<TABLE>
<CAPTION>

                                                     2000                              1999
                                     ---------------------------------    -------------------------------
CONDENSED INCOME STATEMENTS           Fourth    Third   Second   First    Fourth   Third   Second   First
----------------------------------------------------------------------    -------------------------------
<S>                                   <C>      <C>      <C>     <C>       <C>     <C>      <C>     <C>
Net interest income                   $3,680   $3,584   $3,425  $3,248    $3,215  $3,092   $2,946  $2,749
Provision for loan losses                175      195      225     150       155     165      120     105
----------------------------------------------------------------------    -------------------------------
Net interest income after
   provision for loan losses           3,505    3,389    3,200   3,098     3,060   2,927    2,826   2,644
Non-interest income                      639      650      675     545       593     555      557     552
Securities transactions                  -        -        -       -         -       -          8       5
Non-interest expense                   2,394    2,373    2,314   2,250     2,277   2,107    2,111   2,026
----------------------------------------------------------------------    -------------------------------
Income before income taxes             1,750    1,666    1,561   1,393     1,376   1,375    1,280   1,175
Applicable income taxes                  598      537      505     438       430     444      415     384
----------------------------------------------------------------------    -------------------------------
Net income                            $1,152   $1,129   $1,056  $  955    $  946  $  931   $  865  $  791
======================================================================    ===============================

PER SHARE:
    Net income - Basic                $ 0.43   $ 0.42   $ 0.39  $ 0.35    $ 0.35  $ 0.34   $ 0.32  $ 0.29
======================================================================    ===============================
    Net income - Diluted              $ 0.42   $ 0.41   $ 0.38  $ 0.34    $ 0.34  $ 0.34   $ 0.31  $ 0.29
======================================================================    ===============================
    Dividends                         $ 0.15   $ 0.15   $ 0.15  $ 0.12    $ 0.12  $ 0.12   $ 0.12  $ 0.10
======================================================================    ===============================


AVERAGE SHARES OUTSTANDING:
    Basic                              2,700    2,701    2,706   2,709     2,710   2,710    2,706   2,689
======================================================================    ===============================
    Diluted                            2,744    2,745    2,748   2,755     2,766   2,772    2,776   2,772
======================================================================    ===============================
</TABLE>

                                      F-27
<PAGE>

                             SHAREHOLDER INFORMATION

ANNUAL MEETING
The Annual Meeting of Shareholders of The
Savannah Bancorp, Inc. will be held at 11 a.m.,
Tuesday, April 17, 2001
Hyatt Regency Savannah
Two West Bay Street
Savannah, Georgia 31401
All shareholders are invited to attend.

The Robinson-Humphrey Co., Inc.
INDEPENDENT ACCOUNTANTS
BDO Seidman, LLP.
Atlanta, Georgia

INVESTOR RELATIONS
Archie H. Davis, President and
Chief Executive Officer
Investor Relations
912/651-8200

TRANSFER AGENT
Registrar and Transfer Company
10 Commerce Drive
Cranford, NJ
www.rtco.com   800-368-5948

FORM 10-K
Copies of The Savannah Bancorp, Inc.
Form 10-K may be obtained by contacting:
Robert B. Briscoe, Chief Financial Officer
Or on the Website www.savb.com
912/651-8225
The Savannah Bancorp, Inc.
P.O. Box 188, Savannah, GA  31402

REGISTERED MARKET MAKERS
AnPac Securities, Inc.
Knight Securities, Inc.
The Robinson-Humphrey Co., Inc.
Speer. Leads, Kellog, Inc.
Sterne, Agee & Leach, Inc.
Wachovia Securities, Inc.

COMMON STOCK LISTING
Nasdaq National Market
Stock Symbol - SAVB