<PAGE>
 
                          GREATER ROME BANCSHARES, INC.
                                 AND SUBSIDIARY

                        Consolidated Financial Statements

                        December 31, 1997, 1996 and 1995

                 (with Independent Accountants' Report thereon)
<PAGE>
 
                [LOGO OF PORTER KEADLE MOORE, LLP APPEARS HERE]

                           Porter Keadle Moore, LLP
                           ------------------------


              REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS







To the Board of Directors and Stockholders
Greater Rome Bancshares, Inc.
Rome, Georgia


We have audited the accompanying consolidated balance sheets of Greater Rome
Bancshares, Inc. and subsidiary as of December 31, 1997 and 1996, and the
related consolidated statements of operations, changes in stockholders' equity
and cash flows for each of the three years in the period ended December 31,
1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Greater Rome
Bancshares, Inc. and subsidiary as of December 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1997, in conformity with generally accepted
accounting principles.


                                    /s/ Porter Keadle Moore, LLP

Atlanta, Georgia
January 23, 1998
<PAGE>
 
                         GREATER ROME BANCSHARES, INC.

                          Consolidated Balance Sheets

                          December 31, 1997 and 1996


                                    Assets
                                    ------
                                                         1997           1996
                                                         ----           ----
Cash and due from banks                             $  1,530,896        764,891
Federal funds sold                                     1,433,528      4,058,912
                                                      ----------     ----------

      Cash and cash equivalents                        2,964,424      4,823,803

Securities available for sale                          2,690,808      1,489,375
Securities held to maturity                            6,325,869      4,748,925
Loans, net                                            29,722,423     13,095,601
Premises and equipment, net                            2,271,350      2,099,035
Accrued interest receivable                              356,295        192,802
Other assets                                             365,408         59,100
                                                      ----------     ----------

                                                    $ 44,696,577     26,508,641
                                                      ==========     ==========

                     Liabilities and Stockholders' Equity
                     ------------------------------------

Deposits:
  Demand                                            $  4,414,480      3,006,709
  Interest - bearing demand                            2,987,988      1,692,466
  Savings                                              4,780,996      3,479,435
  Time                                                15,799,484      8,481,592
  Time, over $100,000                                  5,583,231      3,184,334
                                                      ----------     ----------

    Total deposits                                    33,566,179     19,844,536

Federal Home Loan Bank borrowings                      4,000,000          --
Securities sold under repurchase agreement               500,000          --
Accrued interest payable                                  76,586         38,515
Other liabilities                                        130,787        247,633
                                                      ----------     ----------

      Total liabilities                               38,273,552     20,130,684
                                                      ----------     ----------

Commitments (note 13)

Stockholders' equity:
  Preferred stock, par value $1.00 per share;
    100,000 shares authorized; no shares
    issued or outstanding                                  --             --
  Common stock, par value $.01 per share;
    10,000,000 shares authorized; 700,000
    shares issued and outstanding                          7,000          7,000
  Additional paid-in capital                           6,930,117      6,930,117
  Accumulated deficit                                   (518,877)      (560,820)
  Unrealized gain on securities available for sale         4,785          1,660
                                                      ----------     ----------

      Total stockholders' equity                       6,423,025      6,377,957
                                                      ----------     ----------

                                                    $ 44,696,577     26,508,641
                                                      ==========     ==========

See accompanying notes to consolidated financial statements.

                                      -3-
<PAGE>
 
                         GREATER ROME BANCSHARES, INC.

                     Consolidated Statements of Operations

             For the Years Ended December 31, 1997, 1996 and 1995

<TABLE> 
<CAPTION> 

                                                                                       1997          1996           1995
                                                                                       ----          ----           ----
<S>                                                                               <C>             <C>             <C>
Interest income:
    Interest and fees on loans                                                    $ 2,255,079       605,126          --
    Interest on federal funds sold and deposits with other banks                      100,499       175,449        184,160
    Interest and dividends on investments                                             482,641       280,826          --
                                                                                    ---------     ---------        -------

            Total interest income                                                   2,838,219     1,061,401        184,160
                                                                                    ---------     ---------        -------

Interest expense:
    Interest bearing demand deposits                                                   55,224        26,066          --
    Savings deposits                                                                  160,563        75,701          --
    Time deposits                                                                     963,689       211,831          --
    Other                                                                              79,841            26         34,883
                                                                                    ---------     ---------        -------

         Total interest expense                                                     1,259,317       313,624         34,883
                                                                                    ---------     ---------        -------

         Net interest income                                                        1,578,902       747,777        149,277

Provision for loan losses                                                             433,694       134,000          --
                                                                                    ---------     ---------        -------

         Net interest income after provision for loan losses                        1,145,208       613,777        149,277
                                                                                    ---------     ---------        -------

Other income:
    Service charges                                                                    97,380        26,254          --
    Other                                                                              61,484        22,487          --
                                                                                    ---------     ---------        -------

         Total other income                                                           158,864        48,741          --
                                                                                    ---------     ---------        -------

Other expenses:
      Salaries and employee benefits                                                  834,413       544,925        119,865
      Occupancy                                                                       255,629       167,716         16,448
      Other operating                                                                 420,370       346,351        120,755
                                                                                    ---------     ---------        -------

         Total other expenses                                                       1,510,412     1,058,992        257,068
                                                                                    ---------     ---------        -------

         Loss before income taxes                                                    (206,340)     (396,474)      (107,791)
                                                                                    ---------     ---------        -------

Income tax benefit                                                                    248,283         --             --
                                                                                    ---------     ---------        -------

         Net earnings (loss)                                                      $    41,943      (396,474)      (107,791)
                                                                                    =========     =========        =======

Net earnings (loss) per share                                                     $       .06          (.57)          (.15)
                                                                                    =========     =========        =======

Diluted net earnings (loss) per share                                             $       .06          (.57)          (.15)
                                                                                    =========     =========        =======

</TABLE> 

See accompanying notes to consolidated financial statements.

                                      -4-
<PAGE>
 
                         GREATER ROME BANCSHARES, INC.

          Consolidated Statements of Changes in Stockholders' Equity

             For the Years Ended December 31, 1997, 1996 and 1995

<TABLE> 
<CAPTION> 

                                                                                                        Unrealized
                                                                                                         Gain on
                                                                                                        Investment
                                                                  Additional                            Securities
                                                   Common          Paid-In           Accumulated        Available                 
                                                    Stock          Capital             Deficit           for Sale            Total
                                                   ------         ----------         -----------        ----------           -----
<S>                                                <C>            <C>                <C>                <C>                 <C> 
Balance, December 31, 1994                             1                 49            (56,555)              --             (56,505)


Redemption of organization
shares                                                (1)               (49)              --                 --                 (50)


Issuance of 700,000 shares at
  $10 per share, net of offering
  costs of $62,883                                 7,000          6,930,117               --                 --           6,937,117

Net loss                                            --                 --             (107,791)              --            (107,791)
                                                   -----          ---------           --------              -----         ---------

Balance, December 31, 1995                         7,000          6,930,117           (164,346)              --           6,772,771

Change in unrealized gain
  on investment securities
  available for sale                                --                 --                 --                1,660             1,660

Net loss                                            --                 --             (396,474)              --            (396,474)
                                                   -----          ---------           --------              -----         ---------

Balance December 31, 1996                          7,000          6,930,117           (560,820)             1,660         6,377,957

Change in unrealized gain
  on investment securities                          --                 --                 --                3,125             3,125
  available for sale

Net earnings                                        --                 --               41,943               --              41,943
                                                   -----          ---------           --------              -----         ---------

Balance, December 31, 1997                         7,000          6,930,117           (518,877)             4,785         6,423,025
                                                   =====          =========           ========              =====         =========

</TABLE> 

See accompanying notes to consolidated financial statements.

                                      -5-
<PAGE>
 
                         GREATER ROME BANCSHARES, INC.

                     Consolidated Statements of Cash Flows

             For the Years Ended December 31, 1997, 1996 and 1995

<TABLE> 
<CAPTION> 

                                                                                    1997                1996                1995
                                                                                    ----                ----                ----
<S>                                                                            <C>                  <C>                  <C>    
Cash flows from operating activities:
  Net earnings (loss)                                                          $     41,943            (396,474)           (107,791)

  Adjustments to reconcile net earnings (loss) to net cash
    used by operating activities:
      Depreciation, amortization and accretion                                      147,050              59,725               4,961
      Provision for loan losses                                                     433,694             134,000                --
      Provision for deferred income taxes                                          (248,283)              --                   --
      Change in:
        Interest receivable                                                        (163,493)           (192,803)               --
        Other assets                                                                (65,471)             (8,034)             (9,579)
        Interest payable                                                             38,071              38,574              (4,498)
        Other liabilities                                                          (116,846)            157,994              65,579
                                                                                ===========         ===========          ==========
          Net cash used by operating activities                                      66,665            (207,018)            (51,328)
                                                                                -----------         -----------          ----------
Cash flows from investing activities:
  Proceeds from maturities and calls of securities
    available for sale                                                              249,709             500,000                --
  Proceeds from maturities and calls of securities
    held to maturity                                                                801,890                --                  --
  Purchases of securities available for sale                                     (1,442,653)         (1,986,289)               --
  Purchases of securities held to maturity                                       (2,377,684)         (3,748,672)         (1,000,000)
  Net increase in loans                                                         (17,060,516)        (13,229,601)               --
  Purchases of premises and equipment                                              (318,433)         (1,772,659)           (169,790)
  Organization cost                                                                    --                  --                (2,451)
  Deferred offering expense                                                            --                  --                49,156
                                                                                ===========         ===========          ==========

          Net cash used by investing activities                                 (20,147,687)        (20,237,221)         (1,123,085)
                                                                                -----------         -----------          ----------
Cash flows from financing activities:
  Net change in demand and savings deposits                                       4,004,854           8,178,610                --
  Net change in time deposits                                                     9,716,789          11,665,926                --
  Federal Home Loan Bank advances                                                 4,000,000                --                  --
  Securities sold under repurchase agreements                                       500,000                --                  --
  Payment of note payable to organizer                                                 --                  --              (150,739)
  Net change in lines of credit                                                        --                  --              (195,820)

  Proceeds from the sale of common stock,
    net of offering costs                                                              --                  --             6,937,117
  Redemption of organization shares                                                    --                  --                   (50)
                                                                                -----------         -----------          ----------

          Net cash  provided by financing activities                             18,221,643          19,844,536           6,590,508
                                                                                -----------         -----------          ----------

Net change in cash and cash equivalents                                          (1,859,379)           (599,703)          5,416,095

Cash and cash equivalents at beginning of year                                    4,823,803           5,423,506               7,411
                                                                                -----------         -----------          ----------

Cash and cash equivalents at end of year                                       $  2,964,424           4,823,803           5,423,506
                                                                                ===========         ===========          ==========

</TABLE> 

                                      -6-
<PAGE>
 
                         GREATER ROME BANCSHARES, INC.

               Consolidated Statements of Cash Flows, continued

             For the Years Ended December 31, 1997, 1996 and 1995

<TABLE> 
<CAPTION> 

                                                                                    1997             1996           1995
                                                                                    ----             ----           ----
<S>                                                                             <C>                <C>             <C> 
Supplementary disclosures of cash flow information: 
  Cash paid during the year for:
    Interest                                                                    $ 1,221,246        275,050         39,529

Non cash investing and financing activities:
    Change in unrealized gain on securities available for sale                  $     3,125          1,600           -

</TABLE> 

See accompanying notes to consolidated financial statements.

                                      -7-
<PAGE>
 
                         GREATER ROME BANCSHARES, INC.

                  Notes to Consolidated Financial Statements

(1)   Summary of Significant Accounting Policies

      Organization
      ------------
      Greater Rome Bancshares, Inc. (the "Company") is a bank holding company
      whose business is conducted by its wholly-owned bank subsidiary, Greater
      Rome Bank (the "Bank"). The Company is subject to regulation under the
      Bank Holding Company Act of 1956.

      The Bank is a commercial bank that serves Rome, Georgia, a community
      located approximately 50 miles north of metropolitan Atlanta, and
      surrounding Floyd County. The Bank is chartered and regulated by the State
      of Georgia Department of Banking and Finance and is insured and subject to
      regulation by the Federal Deposit Insurance Corporation.

      Operations of the Company for the period from inception (June 17, 1994) to
      February 26, 1996 related primarily to expenditures by the organizers for
      incorporating and organizing the Bank including raising capital and
      securing banking facilities.

      Basis of Presentation and Reclassification
      ------------------------------------------
      The 1997 and 1996 consolidated financial statements include the accounts
      of the Company and the Bank. All intercompany accounts and transactions
      have been eliminated in consolidation. The 1995 financial statements
      include the accounts of the Company only, as the Bank did not open for
      business until February 26, 1996. Certain 1996 and 1995 amounts have been
      reclassified to conform to the 1997 presentation.

      The accounting principles followed by Greater Rome Bancshares, Inc. and
      its subsidiary, and the methods of applying these principles, conform with
      generally accepted accounting principles ("GAAP") and with general
      practices within the banking industry. In preparing financial statements
      in conformity with GAAP, management is required to make estimates and
      assumptions that affect the reported amounts in the financial statements.
      Actual results could differ significantly from those estimates. Material
      estimates common to the banking industry that are particularly susceptible
      to significant change in the near term include, but are not limited to,
      the determination of the allowance for loan losses and the valuation of
      real estate acquired in connection with or in lieu of foreclosure on
      loans.

      Cash and Cash Equivalents
      -------------------------
      For presentation purposes in the consolidated statements of cash flows,
      cash and cash equivalents include cash on hand, amounts due from banks,
      interest-bearing deposits with banks and federal funds sold.

      Investment Securities
      ---------------------
      The Company classifies its securities in one of three categories: trading,
      available for sale, or held to maturity. Trading securities are bought and
      held principally for sale in the near term. Held to maturity securities
      are those securities for which the Company has the ability and intent to
      hold the security until maturity. All other securities not included in
      trading or held to maturity are classified as available for sale. The
      Company's current investment policy prohibits trading activity.

      Held to maturity securities are recorded at cost, adjusted for the
      amortization or accretion of premiums or discounts. Transfers of
      securities between categories are recorded at fair value at the date of
      transfer. Unrealized holding gains or losses associated with transfers of
      securities from held to maturity to available for sale are recorded as a
      separate component of stockholders' equity.

      Available for sale securities consist of investment securities not
      classified as trading securities or held to maturity securities and are
      recorded at fair value. Unrealized holding gains and losses on securities
      available for sale are excluded from earnings and are reported as a
      separate component of stockholders' equity until realized.

                                      -8-
<PAGE>
 
                         GREATER ROME BANCSHARES, INC.

             Notes to Consolidated Financial Statements, continued

(1)   Summary of Significant Accounting Policies, continued
      Investment Securities, continued
      --------------------------------
      A decline in the market value of any available for sale or held to
      maturity investment below cost that is deemed other than temporary is
      charged to earnings and establishes a new cost basis for the security.

      Premiums and discounts are amortized or accreted over the life of the
      related security as an adjustment to the yield. Realized gains and losses
      for securities classified as available for sale and held to maturity are
      included in earnings and are derived using the specific identification
      method for determining the cost of securities sold.

      Loans, Loan Fees and Interest Income
      ------------------------------------
      Loans that management has the intent and ability to hold for the
      foreseeable future or until maturity are reported at the principal amount
      outstanding, net of the allowance for loan losses and any deferred fees or
      costs on originated loans. Interest on all loans is calculated principally
      by using the simple interest method on the daily balance of the principal
      amount outstanding.

      A loan is considered impaired when, based on current information and
      events, it is probable that all amounts due according to the contractual
      terms of the loan agreement will not be collected. Impaired loans are
      measured based on the present value of expected future cash flows
      discounted at the loan's effective interest rate, or at the loan's
      observable market price, or at the fair value of the collateral of the
      loan if the loan is collateral dependent. Interest income from impaired
      loans is recognized using a cash basis method of accounting during the
      time within that period in which the loans were impaired.

      Allowance for Loan Losses
      -------------------------
      The Bank's provision for loan losses is based upon management's continuing
      review and evaluation of the loan portfolio and is intended to create an
      allowance adequate to absorb losses on loans outstanding as of the end of
      each reporting period. For individually significant loans, management's
      review consists of evaluations of the financial strength of the borrowers
      and the related collateral. The review of groups of loans, which are
      individually insignificant, is based upon delinquency status of the group,
      lending policies, and collection experience.

      Management believes that the allowance for loan losses is adequate. While
      management uses available information to recognize losses on loans, future
      additions to the allowance may be necessary based on changes in economic
      conditions. In addition, various regulatory agencies, as an integral part
      of their examination process, periodically review the allowance for loan
      losses. Such agencies may require the Bank to recognize additions to the
      allowance based on their judgments of information available to them at the
      time of their examination.

      Premises and Equipment
      ----------------------
      Premises and equipment are stated at cost less accumulated depreciation.
      Major additions and improvements are charged to the asset accounts while
      maintenance and repairs that do not improve or extend the useful lives of
      the assets are expensed currently. When assets are retired or otherwise
      disposed of, the cost and related accumulated depreciation are removed
      from the accounts, and any gain or loss is reflected in earnings for the
      period.

      Depreciation expense is computed using the straight-line method over the
      following estimated useful lives:

         Buildings                                             40 years
         Land improvements                                     20 years
         Furniture, fixtures and equipment                     3-7 years

                                      -9-
<PAGE>
 
                         GREATER ROME BANCSHARES, INC.

             Notes to Consolidated Financial Statements, continued

(1)   Summary of Significant Accounting Policies, continued
      Income Taxes
      ------------
      Deferred tax assets and liabilities are recorded for the future tax
      consequences attributable to differences between the financial statement
      carrying amounts of existing assets and liabilities and their respective
      tax bases. Future tax benefits, such as net operating loss carryforwards,
      are recognized to the extent that realization of such benefits is more
      likely than not. Deferred tax assets and liabilities are measured using
      enacted tax rates expected to apply to taxable income in the years in
      which the assets and liabilities are expected to be recovered or settled.
      The effect on deferred tax assets and liabilities of a change in tax rates
      is recognized in income tax expense in the period that includes the
      enactment date.

      In the event the future tax consequences of differences between the
      financial reporting bases and the tax bases of the Company's assets and
      liabilities results in deferred tax assets, an evaluation of the
      probability of being able to realize the future benefits indicated by such
      asset is required. A valuation allowance is provided for the portion of
      the deferred tax asset when it is more likely than not that some portion
      or all of the deferred tax asset will not be realized. In assessing the
      realizability of the deferred tax assets, management considers the
      scheduled reversals of deferred tax liabilities, projected future taxable
      income, and tax planning strategies.

      Net Earnings Per Share
      ----------------------
      Statement of Financial Accounting Standards (SFAS) No. 128 "Earnings Per
      Share" became effective for the Company for the year ended December 31,
      1997. This new standard specifies the computation, presentation and
      disclosure requirements for earnings per share and is designed to simplify
      previous earnings per share standards and to make domestic and
      international practices more compatible. Earnings per share are based on
      the weighted average number of common shares outstanding during the period
      while the effects of potential shares outstanding during the period are
      included in diluted earnings per share. All earnings per share amounts
      have been restated to conform to the provisions of SFAS No. 128.

      SFAS No. 128 requires the presentation on the face of the statement of
      earnings of earnings per share with and without the dilutive effects of
      potential common stock issuances from instruments such as options,
      convertible securities and warrants. Additionally, the new statement
      requires the reconciliation of the amounts used in the computation of both
      "earnings per share" and "diluted earnings per share" for the year ended
      December 31, 1997:

<TABLE> 
<CAPTION> 
                                                         Net               Common           Per Share
                                                       Earnings             Share             Amount
                                                       --------             -----             ------     
           <S>                                        <C>                 <C>               <C> 
            Earnings per share                        $  41,943            700,000             0.06
                                                      
            Effect of stock options                           -              5,713                -
                                                         ------            -------             ----

            Diluted earnings per share                $  41,943            705,713             0.06
                                                         ======            =======             ====
</TABLE> 

      With regard to 1996, the effect of the stock options would be anti
      dilutive. There were no stock options outstanding at December 31, 1995.
      There were 700,000 weighted average number of shares outstanding for the
      years ending December 31, 1996 and 1995.

      Recent Accounting Pronouncements
      --------------------------------
      In June 1997, the Financial Accounting Standards Board issued SFAS No.
      130, "Reporting Comprehensive Income" and SFAS No. 131, "Disclosures about
      Segments of an Enterprise and Related Information". SFAS No. 130
      establishes standards for the reporting and display of comprehensive
      income and its components in a full set of general-purpose financial
      statements. SFAS No. 131 specifies the presentation and disclosure of
      operating segment information reported in the annual report and interim
      reports issued to stockholders. The provisions of both statements are
      effective for fiscal years beginning after December 15, 1997. The
      management of the Company believes that the adoption of these statements
      will not have a material impact on the Company's financial position,
      results of operations, or liquidity.

                                      -10-
<PAGE>
 
                         GREATER ROME BANCSHARES, INC.

             Notes to Consolidated Financial Statements, continued

(2)   Investment Securities
      Investment securities at December 31, 1997 and 1996 are summarized as
      follows:

<TABLE> 
<CAPTION> 
Securities Held to Maturity                                                     December 31, 1997
                                                      -----------------------------------------------------------------------
                                                                            Gross                Gross              Estimated
                                                        Amortized         Unrealized           Unrealized              Fair
                                                          Cost              Gains                Losses               Value
                                                        ---------         ----------           ----------           ---------
<S>                                                   <C>                 <C>                  <C>                 <C>  

U.S. Government agencies                              $ 5,865,453           5,292               (14,305)            5,856,440
Mortgage-backed securities                                460,416           1,306                  (226)              461,496
                                                        ---------           -----                ------             ---------

                                                      $ 6,325,869           6,598               (14,531)            6,317,936
                                                        =========           =====                ======             =========
<CAPTION> 
                                                                                December 31, 1996
                                                      -----------------------------------------------------------------------
                                                                            Gross                Gross              Estimated
                                                        Amortized         Unrealized           Unrealized              Fair
                                                          Cost              Gains                Losses               Value
                                                        ---------         ----------           ----------           ---------
<S>                                                   <C>                 <C>                  <C>                 <C>  

U.S. Government agencies                              $ 4,748,925           6,011               (32,781)            4,722,155
                                                        =========           =====                ======             =========

<CAPTION> 

Securities Available for Sale                                                   December 31, 1997
                                                      -----------------------------------------------------------------------
                                                                            Gross                Gross              Estimated
                                                        Amortized         Unrealized           Unrealized              Fair
                                                          Cost              Gains                Losses               Value
                                                        ---------         ----------           ----------           ---------
<S>                                                   <C>                 <C>                  <C>                 <C> 

U.S. Treasuries                                       $ 2,195,823           5,771                  (986)            2,200,608

FHLB Stock                                                490,200               -                     -               490,200
                                                        ---------           -----                ------             ---------

                                                      $ 2,686,023           5,771                  (986)            2,690,808
                                                        =========           =====                ======             =========
<CAPTION> 
                                                                                December 31, 1996
                                                      -----------------------------------------------------------------------
                                                                            Gross                Gross              Estimated
                                                        Amortized         Unrealized           Unrealized              Fair
                                                          Cost              Gains                Losses               Value
                                                        ---------         ----------           ----------           ---------
<S>                                                   <C>                 <C>                  <C>                 <C> 

U.S. Treasuries                                       $ 1,238,125           4,296                (3,280)            1,239,141
U.S. Government agencies                                  249,590             644                     -               250,234
                                                        ---------           -----                ------             ---------

                                                      $ 1,487,715           4,940                (3,280)            1,489,375
                                                        =========           =====                ======             =========
</TABLE> 

                                      -11-
<PAGE>
 
                         GREATER ROME BANCSHARES, INC.

             Notes to Consolidated Financial Statements, continued

(2)   Investment Securities, continued
      The amortized cost and estimated fair value of investment securities at
      December 31, 1997, by contractual maturity, are shown below. Expected
      maturities of certain securities will differ from contractual maturities
      because borrowers may have the right to call or prepay certain obligations
      with or without call or prepayment penalties.

<TABLE> 
<CAPTION> 
                                                                   Securities Available                  Securities Held
                                                                         for Sale                          to Maturity
                                                                 --------------------------         --------------------------
                                                                 Amortized        Estimate          Amortized        Estimated
                                                                   Cost          Fair Value           Cost          Fair Value
                                                                 ---------       ----------         ---------       ----------
<S>                                                            <C>               <C>               <C>              <C> 
U.S. Treasuries
  Within 1 year                                                $   498,776          500,781              --               --
  1 to 5 years                                                   1,697,049        1,699,827              --               --
                                                                 ---------        ---------        ---------         ---------  

                                                                 2,195,825        2,200,608              --               --
                                                                 ---------        ---------        ---------         ---------  
U.S. Government agencies
  1 to 5 years                                                        --               --           5,865,453        5,856,440
                                                                 ---------        ---------        ---------         ---------  

                                                                      --               --           5,865,453        5,856,440
                                                                 ---------        ---------        ---------         ---------  


Total securities other than mortgage-back securities:
  Within 1 year                                                    498,776          500,781             --                --
  1 to 5 years                                                   1,697,047        1,699,827        5,865,453         5,856,440


FHLB stock                                                         490,200          490,200             --                --

Mortgage-backed securities                                            --               --            460,416           461,496
                                                                 ---------        ---------        ---------         ---------  
                     

                                                               $ 2,686,023        2,690,808        6,325,869         6,317,936
                                                                 =========        =========        =========         =========  
</TABLE> 



Investment securities with a fair value of approximately $658,000 as of December
31, 1997, were pledged to secure short term borrowings. FHLB advances were
secured by the FHLB stock with a value of $490,200 in addition to qualifying
first mortgage loans totaling $5,613,148.

                                      -12-
<PAGE>
 
                         GREATER ROME BANCSHARES, INC.

             Notes to Consolidated Financial Statements, continued

(3)   Loans
      Major classifications of loans at December 31, 1997 and 1996 are presented
      below.

<TABLE> 
<CAPTION> 
                                                                    1997                       1996
                                                                    ----                       ----
<S>                                                             <C>                         <C> 
Commercial                                                      $ 7,527,458                  4,155,632
Real estate - mortgage                                           14,976,036                  5,112,913
Real estate - construction                                          475,430                    355,635
Installment and other consumer                                    7,310,351                  3,656,887
                                                                -----------                 ----------
                                                             
        Total loans                                              30,289,275                 13,281,067
                                                             
        Less:  Unearned fees                                         86,308                     52,124
               Allowance for loan losses                            480,544                    133,342
                                                                -----------                 ----------
                                                             
        Total net loans                                         $29,722,423                 13,095,601
                                                                ===========                 ==========
</TABLE> 

      The Bank grants loans and extensions of credit to individuals and a
      variety of firms and corporations located primarily in Floyd County,
      Georgia. Although the Bank has a diversified loan portfolio, a substantial
      portion of the loan portfolio is collateralized by improved and unimproved
      real estate and is dependent upon the real estate market. 

      An analysis of the activity in the allowance for loan losses for the years
      ended December 31, 1997 and 1996 is presented below:

<TABLE> 
<CAPTION> 
                                                                     1997                       1996
                                                                     ----                       ----
<S>                                                               <C>                        <C>  
Balance at beginning of year                                      $ 133,342                       --
Provision charged to operations                                     433,694                    134,000
Loans charged off                                                   (87,254)                      (658)
Recoveries                                                              762                       --
                                                                  ---------                    -------
Balance at end of year                                            $ 480,544                    133,342
                                                                  =========                    =======
</TABLE> 

(4)   Premises and Equipment
      Premises and equipment at December 31, 1997 and 1996 are summarized as
      follows:

<TABLE> 
<CAPTION> 
                                                                     1997                       1996
                                                                     ----                       ----
<S>                                                              <C>                        <C>  
                                                                
Land                                                             $  524,669                    313,438
Land improvements                                                   133,506                    115,287
Buildings and improvements                                        1,268,270                  1,254,155
Furniture, fixtures and equipment                                   482,265                    448,153
Construction in progress                                              5,066                       --
                                                                  ---------                  ---------

                                                                  2,413,776                  2,131,033
                                                                                           
Less: Accumulated depreciation                                      142,426                     31,998
                                                                  ---------                  ---------
                                                                                           
                                                                 $2,271,350                  2,099,035
                                                                  =========                  =========
</TABLE> 

      Depreciation expense was $146,118 and $49,318 for the years ended December
      31, 1997 and 1996, respectively. No depreciation expense was charged to
      operations in 1995. During the first quarter of 1998, the Company
      commenced construction of a branch which has resulted in contract
      commitments of approximately $300,000.

                                      -13-
<PAGE>
 
                         GREATER ROME BANCSHARES, INC.

             Notes to Consolidated Financial Statements, continued

(5)   Time Deposits
      The scheduled maturities of time deposits as of December 31, 1997 are as
      follows:

              1998                                 $  17,191,361
              1999                                     2,759,399
              2000                                     1,372,780
              2001                                        59,175
                                                    ------------

                                                   $  21,382,715
                                                    ============
(6)   Income Taxes
      The components of income tax benefit for the year ended December 31, 1997
      is as follows:


       Currently payable                                   $      -
       Deferred tax benefit                                    (30,988)
       Change in valuation allowance                           (217,295)
                                                                --------
                                                           $   (248,283)
                                                                ========

      The differences between the income tax benefit and the amount computed by
      applying the statutory federal income tax rate to the loss before income
      taxes for the years ended December 31, 1997, 1996 and 1995 relate
      primarily to the benefit of net operating loss carryforwards not
      recognized and changes in the valuation allowance.

      The following summarizes the sources and expected tax consequences of
      future taxable deductions which comprise the net deferred taxes:

<TABLE> 
<CAPTION> 
                                                             1997                     1996
                                                             ----                     ----
<S>                                                       <C>                       <C> 
 Deferred tax assets:                                  
   Deferred pre-opening expenses                          $  54,046                   71,574              
   Allowance for loan losses                                159,640                   40,795
   Operating loss carryforwards                              53,951                  112,669
   Other                                                      1,712                    8,483
                                                           --------                  --------
                                                       
      Total gross deferred tax assets                       269,349                  233,521
                                                       
      Less valuation allowance                                 --                   (217,295)
                                                           --------                  --------
                                                       
           Net deferred tax assets                          269,349                   16,226

Deferred tax liability:                                
  Premises and equipment                                    (21,066)                 (16,226)
                                                           --------                  --------
                                                       
           Net deferred taxes                             $ 248,283                     --
                                                           ========                  ========
</TABLE> 

      The ultimate realization of deferred tax assets is dependent upon the
      generation of future taxable income during the periods in which those
      temporary differences become deductible. As of December 31, 1997, based
      upon the projections for future taxable income over the periods which the
      deferred tax assets are deductible, management believes it is more likely
      than not that the benefits of these deductible differences will be
      realized.

      At December 31, 1997, the Company had a federal net operating loss
      carryforward and state net operating loss carryforward for tax purposes of
      approximately $234,000 and $784,000, respectively, which will begin to
      expire in 2009 if not previously utilized.

                                      -14-
<PAGE>
 
                          GREATER ROME BANCSHARES, INC.

      Notes to Consolidated Financial Statements, continued

(7)   Lines of Credit

      At December 31, 1997 the Bank had advances outstanding from the Federal
      Home Loan Bank (FHLB) of Atlanta amounting to $4,000,000. There were no
      outstanding amounts outstanding in 1996. The following advances require
      monthly interest payments:

<TABLE> 
<CAPTION> 

                         Advance        Interest Rate      Maturity               Call Feature
                         -------        -------------      --------   --------------------------------------
                  <S>                   <C>                <C>        <C>     
                  $     1,000,000           5.93%          7/16/98                   -
                  $     2,000,000           5.66%          9/24/02         Callable September 24, 1999
                  $     1,000,000           5.45%           9/8/00    Callable quarterly after March 8, 1998

</TABLE> 

      The FHLB advances are secured by the Bank's stock in the FHLB and its 1-4
      family first mortgage loans. As of December 31, 1997, the Bank has pledged
      $5,613,148 of the portfolio related to the FHLB borrowings. There were no
      amounts outstanding in 1996. If called, the advances will be converted
      into a three month LIBOR-based floating rate advance at three month LIBOR
      flat.

(8)   Stockholders' Equity

      Dividends paid by the Bank are the primary source of funds available to
      the Company. Banking regulations limit the amount of dividends that may be
      paid without prior approval of the regulatory authorities. These
      restrictions are based on the level of regulatory capital and retained net
      earnings in prior years. At December 31, 1997, the Bank could not pay the
      Company a dividend without obtaining prior regulatory approval.

      Shares of preferred stock may be issued from time to time in one or more
      series as may be established by resolution of the board of directors of
      the Company. Each resolution shall include the number of shares issued,
      preferences, dividend provisions, special rights and limitations as
      determined by the board.

(9)   Stock Incentive Plan

      The Company has a Stock Incentive Plan whereby 105,000 shares of common
      stock have been reserved for issuance pursuant to the plan, which may
      include options, stock appreciation rights, stock awards, dividend
      equivalent rights, performance unit awards, or phantom shares. Incentive
      stock options were granted to employees at exercise prices not less than
      fair market value at the date of grant. The options vest evenly over four
      and five year periods and are exercisable no later than ten years from the
      date of grant.

      On January 9, 1997 the Board of Directors of the Company granted options
      to purchase shares of common stock in the Company to the non-employee
      directors of the Company and the Bank subject to the approval by
      shareholders at the 1997 annual meeting. Each of the ten non-employee
      directors was awarded an option to purchase 3,500 shares at an exercise
      price not less than fair market value at the date of grant. The options
      vest evenly over a four year period and are exerciseable no later than ten
      years from the date of grant.

      A summary status of the Company's stock plans as of December 31, 1997 and
      1996, and changes during the years, are presented below:

<TABLE> 
<CAPTION> 

                                                                          1997                        1996
                                                               --------------------------   -------------------------
                                                                                Weighted                    Weighted
                                                                                 Average                     Average
                                                                                Exercise                    Exercise
                                                                Shares           Price       Shares          Price
                                                                ------           -----       ------          -----
        <S>                                                     <C>             <C>          <C>           <C> 
        Outstanding, beginning of year                          63,000          $  10.00       -
        Granted during the year                                 37,000          $  10.00     63,000        $  10.00
        Forfeited during the year                               (1,000)         $  10.00       -
                                                                ======                       ======

        Outstanding, end of year                                99,000          $  10.00     63,000        $  10.00
                                                                ======                       ======

        Options exercisable at year end                         17,200          $  10.00       -                -  
                                                                ======                       ======
                                                                                               
        Weighted average fair value of options
          granted during the year                                               $   3.79                   $   4.12
                                                                                   =====                     ======

</TABLE> 

                                      -15-
<PAGE>
 
                         GREATER ROME BANCSHARES, INC.

             Notes to Consolidated Financial Statements, continued

(9)   Stock Incentive Plan, continued

      SFAS No. 123, "Accounting for Stock-Based Compensation," became effective
      January 1, 1996. This statement encourages, but does not require, entities
      to compute the fair value of options at the date of grant and to recognize
      such costs as compensation expense over the vesting period or immediately
      if only subject to a service requirement and the award is expected to
      vest. The Company has chosen not to adopt the cost recognition principles
      of this statement. No compensation expense has been recognized in 1997 or
      1996 related to the stock option plan. Had compensation cost been
      determined based upon the fair value of the options at the grant dates
      consistent with the method of the new statement, the Company's net
      earnings and net earnings per share would have been reduced to the
      proforma amounts indicated below:

<TABLE> 
<CAPTION> 

                                                                                                1997              1996
                                                                                                ----              ----
        <S>                                 <C>                                              <C>                <C> 
        Net earnings (loss)                 As reported                                      $   41,943         (396,474)
                                            Proforma                                         $  (42,649)        (557,401)

        Earnings (loss) per share           As reported                                      $      .06             (.57)
                                            Proforma                                         $     (.06)            (.80)
                                                                                                       
        Diluted earnings (loss) per share   As reported                                      $      .06             (.57)
                                            Proforma                                         $     (.06)            (.79)

</TABLE> 

      The fair value of each option is estimated on the date of grant using the
      Minimum Value pricing model with the following weighted average
      assumptions used for grants in 1997 and 1996: no dividend yield, a risk
      free interest rate of 5% and 6%, respectively, and an expected life of 10
      years for both years. For disclosure purposes, the Company immediately
      recognized the expense assuming that all awards will vest.

(10)  Defined Contribution Plan

      The Company adopted a 401(k) profit sharing plan, effective January 1,
      1997, covering substantially all employees subject to certain minimum age
      and service requirements. Employer contributions to the plan are
      determined annually by the Board of Directors. There were no contributions
      for the year ended December 31, 1997.

(11)  Related Party Transactions

      At December 31, 1997 and 1996, deposits from directors, executive officers
      and their related interests aggregated approximately $3,999,000 and
      $3,622,000, respectively. These deposits were taken in the normal course
      of business at market interest rates.

      The Bank conducts transactions with directors and executive officers,
      including companies in which they have beneficial interest, in the normal
      course of business. It is the policy of the Bank that loan and deposit
      transactions with directors and executive officers be made on
      substantially the same terms as those prevailing at the time for
      comparable loans and deposits to other persons.

      The following table summarizes related party loan activity during 1997:

           Beginning balance                                       $    308,041
           New loans                                                  1,364,348
           Repayments                                                (1,122,562)
                                                                      ---------

           Ending balance                                          $    549,827
                                                                      =========

                                      -16-
<PAGE>
 
                         GREATER ROME BANCSHARES, INC.

             Notes to Consolidated Financial Statements, continued


(12)  Regulatory Matters

      The Bank is subject to various regulatory capital requirements
      administered by the federal banking agencies. Failure to meet minimum
      requirements can initiate certain mandatory and possibly additional
      discretionary actions by regulators that, if undertaken, could have a
      direct material effect on the Bank's financial statements. Under certain
      adequacy guidelines and the regulatory framework for prompt corrective
      action, the Bank must meet specific capital guidelines that involve
      quantitative measures of the Bank's assets, liabilities, and certain
      off-balance-sheet items as calculated under regulatory accounting
      practices. The Bank's capital amounts and classification are also subject
      to qualitative judgments by the regulators about components, risk
      weightings, and other factors.

      Quantitative measures established by regulation to ensure capital adequacy
      require the Bank to maintain minimum amounts and ratios of total and Tier
      1 capital to risk-weighted assets and of Tier 1 capital to average assets.
      Management believes, as of December 31, 1997, that the Bank meets all
      capital adequacy requirements to which it is subject.

      As of December 31, 1997, the most recent notification from the Federal
      Deposit Insurance Corporation categorized the Bank as well capitalized
      under the regulatory framework for prompt corrective action. To be
      categorized as well capitalized, the Bank must maintain minimum total
      risk-based, Tier 1 risk-based, Tier 1 leverage ratios as set forth below.
      There are no conditions or events since that notification that management
      believes have changed the institution's category.

      The Bank's actual capital amounts and ratios are also presented below.
      Consolidated amounts do not materially differ from Bank - only capital
      amounts and ratios:

<TABLE> 
<CAPTION> 

                                                                                               To Be Well
                                                                                            Capitalized Under   
                                                                      For Capital           Prompt Corrective   
                                               Actual              Adequacy Purposes        Action Provisions
                                         ------------------        ------------------       -----------------
                                         Amount       Ratio        Amount       Ratio       Amount      Ratio
                                         ------       -----        ------       -----       ------      -----
<S>                                   <C>             <C>        <C>            <C>       <C>           <C> 
As of December 31, 1997:
 Total Capital
   (to Risk Weighted Assets)          $ 6,456,000      20.4%     $ 2,534,000     8.0%     $ 3,167,000   10.0%
 Tier 1 Capital
   (to Risk Weighted Assets)          $ 6,059,000      19.1%     $ 1,267,000     4.0%     $ 1,900,000    6.0%
 Tier 1 Capital
   (to Average Assets)                $ 6,059,000      14.3%     $ 1,691,000     4.0%     $ 2,114,000    5.0%

As of December 31, 1996:
 Total Capital
   (to Risk Weighted Assets)          $ 6,177,000      39.3%     $ 1,257,000     8.0%     $ 1,571,000   10.0%
 Tier 1 Capital
   (to Risk Weighted Assets)          $ 6,043,000      38.5%     $   628,000     4.0%     $   943,000    6.0%
 Tier 1 Capital
   (to Average Assets)                $ 6,043,000      41.5%     $   583,000     4.0%     $   729,000    5.0%

</TABLE> 

      As a condition to the Bank's charter approval, the Georgia Department of
      Banking and Finance has also required that the Bank maintain a ratio of
      equity capital to adjusted assets of not less than 8% during the first
      three years of the Bank's operation and that the Bank not declare
      dividends to the Company until the Bank is cumulatively profitable.

                                      -17-
<PAGE>
 
                         GREATER ROME BANCSHARES, INC.

             Notes to Consolidated Financial Statements, continued


(13)  Commitments

      The Bank 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. Those instruments involve, to
      varying degrees, elements of credit and interest rate risk in excess of
      the amount recognized on the consolidated balance sheets. The contractual
      amounts of those instruments reflect the extent of involvement the Bank
      has in particular classes of financial instruments.

      The Bank's exposure to credit loss in the event of non-performance by the
      other party to the financial instrument for commitments to extend credit
      and standby letters of credit is represented by the contractual amount of
      those instruments. The Bank uses the same credit policies in making
      commitments and conditional obligations as it does for on-balance-sheet
      instruments.

      In most cases, the Bank requires collateral or other security to support
      financial instruments with credit risk.

      The following summarizes commitments as of December 31, 1997 and 1996.

                                                            Approximate
                                                          Contract Amount
                                                          ---------------
                                                       1997             1996
                                                       ----             ----
      Financial instruments whose contract 
        amounts represent credit risk:
          Commitments to extend credit            $   3,949,000       1,111,000
          Standby letters of credit               $     182,000          25,000
          Credit card guarantees                  $      80,500            -


      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. Since many of the commitments
      may expire without being drawn upon, the total commitment amounts do not
      necessarily represent future cash requirements. The Bank evaluates each
      customer's creditworthiness on a case by case basis. The amount of
      collateral obtained, if deemed necessary by the Bank, upon extension of
      credit is based on management's credit evaluation. Collateral held varies
      but may include unimproved and improved real estate, certificates of
      deposit or personal property.

      Standby letters of credit are conditional commitments issued by the Bank
      to guarantee the performance of a customer to a third party. The credit
      risk involved in issuing letters of credit is essentially the same as that
      involved in extending loan facilities to customers.

(14)  Supplemental Financial Data

      Components of other operating expenses in excess of 1% of total interest
      and other income for the years ended December 31, 1997, 1996 and 1995 are
      as follows:

                                           1997       1996       1995
                                           ----       ----       ----

        Professional fees                 87,142     55,098     68,207
        Advertising and marketing         50,156     64,861      9,346
        Processing fees                   96,508     71,417      1,021
        Supplies                          36,156     43,819     10,748

                                      -18-
<PAGE>
 
                         GREATER ROME BANCSHARES, INC.

             Notes to Consolidated Financial Statements, continued


(15)   Greater Rome Bancshares, Inc. (Parent Company Only) Financial Information

                                Balance Sheets

                          December 31, 1997 and 1996

                                    Assets
                                    ------
                                                   1997                  1996
                                                   ----                  ----

Cash and cash equivalents                     $    75,863               286,582
Securities available for sale                     200,844                  -
Investment in Bank                              6,077,548             6,063,451
Other assets                                       70,834                27,924
                                                ---------             ---------

                                              $ 6,425,089             6,377,957
                                                =========             =========


                     Liabilities and Stockholders' Equity
                     ------------------------------------

Other liabilities                             $     2,064                  -
Stockholders' equity                            6,423,025             6,377,957
                                                ---------             ---------

                                              $ 6,425,089             6,377,957
                                                =========             =========
 


                           Statements of Operations

             For the Years Ended December 31, 1997, 1996 and 1995

                                          1997          1996          1995
                                          ----          ----          ----

Interest income                        $ 15,852        15,742       147,703
Interest expense                           --            --         (34,883)
                                         ------       -------       -------

    Net interest income                  15,852        15,742       112,820
                                         ------       -------       -------

Other expenses:
  Salaries and employee benefits           --            --          69,863
  Occupancy                                --             305        12,696
  Other operating                        31,653         9,319       102,435
                                         ------       -------       -------

    Total expenses                       31,653         9,624       184,994
                                         ------       -------       -------

    (Loss) earnings before income tax 
      benefit and undistributed 
      earnings (loss) of Bank           (15,801)        6,118       (72,174)

Income tax benefit                       46,072          --            --
                                         ------       -------       -------

    Earnings (losses) before equity in 
      undistributed earnings (losses) 
      of Bank                            30,271         6,118       (72,174)

Equity in undistributed earnings 
  (losses) of Bank                       11,672      (402,592)      (35,617)
                                         ------       -------       -------

    Net earnings (loss)                $ 41,943      (396,474)     (107,791)
                                         ======       =======       =======

                                      -19-
<PAGE>
 
                         GREATER ROME BANCSHARES, INC.

             Notes to Consolidated Financial Statements, continued

(15)  Greater Rome Bancshares, Inc. (Parent Company Only) Financial Information,
      continued

                           Statements of Cash Flows

             For the Years Ended December 31, 1997, 1996 and 1995

<TABLE> 
<CAPTION> 

                                                                                  1997                 1996                1995
                                                                                  ----                 ----                ----
<S>                                                                            <C>                   <C>                <C> 
Cash flows from operating activities:
  Net earnings (loss)                                                          $   41,943            (396,474)           (107,791)
  Adjustments to reconcile net earnings (loss) to net
    cash used in operating activities:
      Equity in undistributed earnings (losses) of Bank                           (11,672)            402,591              35,618
      Depreciation and amortization                                                 7,490               7,448               3,805
      Other                                                                       (48,292)            (60,489)             31,991
                                                                                  -------             -------           ---------

        Net cash used in operating activities                                     (10,531)            (46,924)            (36,377)
                                                                                  -------             -------           ---------
Cash flows from investing activities:
  Purchase of securities available for sale                                      (200,188)               --                  --
  Infusion of capital into Bank                                                      --                  --            (6,500,000)
  Transfer of premises and equipment to Bank                                         --                  --               207,058
  Transfer of organization cost to Bank                                              --                  --                15,750
  Deferred offering expenses                                                                                               49,156
                                                                                  -------             -------           ---------

        Net cash used in investing activities                                    (200,188)               --            (6,228,036)

Cash flows from financing activities:
  Payment of note payable - organizer                                                --                  --              (150,739)
  Net change in lines of credit                                                      --                  --              (195,820)
  Proceeds from the sale of common stock,
    net of offering costs                                                            --                  --             6,937,117
    Redemption of organization shares                                                --                  --                   (50)
                                                                                  -------             -------           ---------

        Net cash provided by financing activities                                    --                  --             6,590,508
                                                                                  -------             -------           ---------

Net change in cash and cash equivalents                                          (210,719)            (46,924)            326,095
Cash and cash equivalents at beginning of period                                  286,582             333,506               7,411
                                                                                  =======             =======           =========

Cash and cash equivalents at end of period                                     $   75,863             286,582             333,506
                                                                                  =======             =======           =========

Noncash investing and financing activities:
  Change in unrealized gain on securities available
    for sale of Bank                                                           $    2,425               1,660                --

</TABLE> 

                                      -20-
<PAGE>
 
           Market for Common Equity and Related Stockholder Matters

The Company's Articles of Incorporation authorize it to issue up to 10,000,000
shares of Common Stock, par value $.01 per share ("Common Stock"), of which
700,000 shares have been issued.  The Company has not declared or paid any
dividends.  All shares of the Company's Common Stock are entitled to share
equally in dividends from funds legally available therefor, when, as and if
declared by the Company's board of directors.  The Company does not plan to
declare any dividends in the immediate future.  The source of funds for the
payment of dividends by the Company is the payment of dividends by the Bank to
the Company.  A condition to the approval by the Georgia Department of Banking
and Finance (the "DBF") of the Bank's charter application and the Company's
application for approval to become a bank holding company is that the Bank will
not pay any dividends without the DBF's prior approval until the Bank has made a
cumulative profit.

There is currently no market for the Common Stock and there are no present plans
for the Company's Common Stock to be traded on any stock exchange or in the over
the counter market.  As a result, investors who need or wish to dispose of all
or part of their Common Stock may be unable to do so except in private, directly
negotiated sales.  The Company has approximately 682 shareholders.  The Company
has not had any unregistered sales of equity securities since its organization
(June 17, 1994).

Item 2.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations.

FINANCIAL CONDITION

As of December 31, 1997, the Company had concluded twenty-two months of banking
operations with $44.7 million in total assets, up $18.2 million over year-end
1996. Total deposits had increased $13.7 million over year-end 1996 to $33.6
million. Total loans outstanding had increased $16.6 million over year-end 1996
to $29.7 million. The Bank's loan-to-deposit ratio at December 31, 1997 was
90.0%, as compared to 66.7% at year-end 1996. The Bank has continued to benefit
from strong loan demand in the local market, which has produced steady loan
growth over the year. In 1997 deposit growth, although strong, did not keep pace
with loan demand, despite competitively priced deposit products and banking
services.

The banking industry continues to experience stiff competition from non-banks
for deposit and investment type products.  Competition for local deposit dollars
continues to put upward pressure on the cost of deposits.   In the current
market environment, management has found that the Bank can borrow term funds
from wholesale resources at rates that are less than the cost of local
certificates of deposit.  The Bank's Asset/Liability Management Committee has
adopted policies designed to diversify funding sources in the event that local
market deposits become even less available and more costly. Within limits, the
Bank may obtain funding from brokered certificates of deposit and other forms of
wholesale borrowing, such as the Federal Home Loan Bank and term repurchase
agreements. These policies should allow the Bank to continue to meet the local
market's credit demands and provide the flexibility to obtain funding from
various sources at optimum rates.  While this policy shift opens up greater
funding flexibility, in the long run the Bank will continue to place primary
funding emphasis on local deposit growth.

Capital

At December 31, 1997, the Bank's capital position was in excess of FDIC
guidelines to qualify as "well capitalized".   Based on the level of the Bank's
risk weighted assets at quarter end, the Bank had $3.3 million more capital than
necessary to satisfy the "well-capitalized" criteria.  The Bank's capital
adequacy is monitored quarterly by the Bank's Asset/Liability Committee, as
asset and liability growth, mix and pricing strategies are developed.

Liquidity

At December 31, 1997, the Bank's loan-to-asset ratio was 68.1%, up from 50.5% at
year-end 1996.  The Bank's net-non-core-fund-dependence ratio was 21.2%, up from
0.3% at year-end 1996. The net-non-core-fund-
<PAGE>
 
Management's Discussion and Analysis, continued

dependence ratio calculates the percentage of long term earning assets that are
funded by short term borrowed funds and certificates greater than one hundred
thousand dollars after deducting the Bank's short-term investments. Liquidity
management guidelines are established to maintain the loan-to-asset ratio
between 65% and 70% and to maintain the net-non-core-fund-dependence ratio not
to exceed 25%. These ratios are reviewed weekly by the Asset Review Committee
along with projections of funding needs and available funding capacity within
these guidelines. From time to time management will limit new loan development
to assure that liquidity objectives are achieved. As of February 28, 1998 the
Bank's loan-to-asset ratio was 67.2% and the net-non-core-fund-dependence ratio
was 13.7%.

The Bank's internal and external liquidity resources are considered by
management to be adequate to handle expected growth and normal cash flow demands
from existing deposits and loans.  For 1997, loan growth exceeded deposit growth
by $2.9 million. Securities held to maturity increased $1.6 million to $6.3
million, and the securities available for sale increased $1.2 million to $2.7
million.  Investment securities were purchased in order to improve the yield on
the Bank's internal liquidity resources.  U.S. Treasury and government agency
securities with final maturities under five years were purchased with yields 75
to 100 basis points greater than Federal funds sold at the time of purchase.  At
December 31, 1997, the average life of the Bank's security portfolio was 2.8
years with an average yield of 6.22%.   All of the Bank's investment securities
are available as collateral for borrowings under either repurchase agreements
with its correspondent banks or advances from the Federal Home Loan Bank
("FHLB").

During 1997, the Bank borrowed $4 million from the FHLB of Atlanta to improve
its cost of funds and to reduce its interest rate risk exposure.  One million
dollars were borrowed at a fixed rate of 5.93% for one year maturing in July of
1998.  Two million dollars were borrowed at a fixed rate of 5.66% for five years
maturing in September 2002, with a one-time call option in September 1999.  One
million dollars were borrowed at a fixed rate of 5.45% for almost three years,
with a quarterly call option beginning March 8, 1998.  These borrowings are
secured by first mortgage real estate loans and the Bank's stock in the FHLB.
The callable advances, if called, will be converted into three-month LIBOR-based
floating rate advances at three month LIBOR flat, or the Bank may pay out the
advances.  In comparison, at the time these advances were received, the Bank
paid more than 6.0% for one-year time deposits in the local market and more than
6.2% for two year time deposits in the local market.  The Bank's interest rate
risk is reduced with this longer term, fixed rate funding.  The Bank has over
$8.3 million in loans, which reprice from three to five years beyond December
31, 1997.

Net deposit growth, federal funds sold and marketable securities provide the
primary liquidity resource for loan disbursements and Bank working capital.  The
Bank's investment securities portfolio provides liquidity in the form of
financing through master repurchase agreements executed with the Bank's
correspondent banks.  At year end the funds available for liquidity purposes
consisted of $7.9 million in securities (eligible for sale under repurchase
agreements) plus Federal funds sold of $1.4 million, for a total of $9.3
million. At year end, investment securities with a fair value of approximately
$658,000 were pledged to secure $500 thousand in short term borrowings and the
FHLB stock with a value of $490,200 was pledged as security against the $4.0
million in FHLB advances.

Under the repurchase agreements, margin requirements range from 3% to 10% of the
current market value of the underlying security, and the borrowing rate tends to
have a spread of approximately 25 to 40 basis points over the Federal funds sold
rate.   The repurchase agreements allow the Bank to raise funds using its
securities portfolio as collateral, instead of being forced to sell the
securities and recognize gains or losses as a result of the sale.  In addition
to these sources of funds, the Bank has unsecured Federal funds purchase lines
of credit totaling $3.0 million, all of which were available at December 31,
1997.  The correspondent banks may revoke these lines at any time.

Given the potential need to use its securities to raise liquidity, the Bank's
current investment practices limit securities to final maturities not exceeding
five years from the date of purchase and to U.S. Treasuries and triple A rated
government agency securities.
<PAGE>
 
Management's Discussion and Analysis, continued

The Bank became a member of the Federal Home Loan Bank of Atlanta in June of
1997.  FHLB membership provides an additional source of liquidity through credit
programs, which can provide term funding for up to 10 years and, in certain
qualified programs, up to 20 years.  The Bank's first mortgage loans are
assigned as collateral for such financing.  The Bank has $6.1 million in
eligible residential first mortgage loans that have been assigned to the FHLB.
These loans provide approximately $4.9 million in lendable value, $4 million of
which is already used.  The Bank also has $6.7 million in commercial first
mortgage loans that may qualify as collateral for advances with the FHLB.

As of December 31, 1997, the Bank had unfunded loan commitments, primarily on
commercial lines of credit, totaling $4.2 million.  The Bank intends to manage
its loan growth such that deposit flows will provide the primary funding for all
loans as well as cash reserves for working capital and short to intermediate
term marketable investments.  Management will continue to seek cost effective
alternative funding sources for both the short and long term, in the event that
local deposit growth does not keep pace with local loan demand.  Such funding
sources may include institutional certificates of deposit ("CD's"), local market
CD's and brokered CD's.


RESULTS OF OPERATIONS

The Company had net income of $41,943 ($0.06 per share) for 1997 as compared to
a net loss of $396,474 ($0.57 per share) for 1996.  1997 had 12 full months of
banking operations, whereas 1996 had only 10 full months.  The Bank opened for
business on February 26, 1996.

Net interest income increased $831,125 in 1997 to $1,578,902.  This was due to
the increase in average earning assets from $13.9 million for 1996 to $32.2
million for 1997 and the improvement in the average earning asset mix.  For
1997, average loans comprised 70% of average earning assets.   For 1996, average
loans were only 44% of average earning assets.  The high growth rate in earning
assets and the significant improvement in earning asset mix are primarily due to
the fact that the Bank opened for business on February 26, 1996.  Prior to that
date the Bank had no loans and no deposits.  The net yield on average earning
assets, before the provision for loan losses, was 4.91% for 1997.  This compares
to 5.39% for 1996.   The higher yield for 1996 was primarily due to the lower
funding cost associated with 54% of average assets being funded by the Bank's
capital and non-interest bearing deposits.  For 1997, 29% of average assets were
funded by capital and non-interest bearing deposits.

The provision for loan losses was  $433,694 for 1997, up $299,694 from 1996.
This increase was due to the growth in the Bank's loan portfolio and
management's desire to have the allowance for loan losses at least at 1.50% of
total loans by year-end.  At December 31, 1997 the allowance for loan losses was
$480,544 representing 1.59% of total loans.  At year-end 1996, the allowance was
$133,342, which was 1.00% of total loans.  Total loans charged off, net of
recoveries, for 1997 were $86,492 (0.38% of average loans outstanding) and were
all consumer loans.   At December 31, 1997, the Bank had three loans totaling
$30,805 in non-accrual status.   Other than non-accrual loans, no loans were in
a past-due status more than 90 days.  The Bank had no troubled debt
restructurings.  Total loans charged off in 1996 were $658 and were all consumer
loans.  At December 31, 1996, the Bank had non-accrual loans totaling $1,781, no
loans past-due more than 90 days and no troubled debt restructurings.

Management takes a number of factors into consideration when determining the
additions to be made to the loan loss allowance.  Since the Bank has just
concluded twenty-two months of operations, it does not have sufficient history
in its portfolio performance on which to base additions.  Accordingly, additions
to the reserve are primarily based on achieving a targeted ratio for the
allowance for loan losses to total loans of at least 1.50% by the end of 1997.
This target is based on national peer group ratios and Georgia banking industry
ratios.  Under this methodology, charge-offs will increase the amount of
additions to the allowance and recoveries will reduce additions.


In addition, management performs an on-going loan review process. All new loans
are risk rated under loan policy 
<PAGE>
 
Management's Discussion and Analysis, continued

guidelines. On a monthly basis, the composite risk ratings are evaluated in a
model that assesses the adequacy of the current allowance for loan losses, and
this evaluation is presented to the Board of Directors each month. On a weekly
basis, loan reviews are performed on new loans and presented to the Asset Review
Committee each week. Large loans are reviewed periodically. Risk ratings may be
changed if it appears that new loans may not have received the proper initial
grading or, if on existing loans, credit conditions have improved or worsened.
Until historical trends begin to indicate potential losses that are inconsistent
with our current risk evaluation assumptions in the loan portfolio, management
expects the allowance for loan losses to be maintained at approximately 1.50% of
total loans.

The Bank's policy is to place loans on non-accrual status when it appears that
the collection of principal and interest in accordance with the terms of the
loan is doubtful.  Any loan that becomes 90 days past due as to principal or
interest is automatically placed on non-accrual.

As the Bank matures, the additions to the loan loss allowance will be based more
on historical performance, the detailed loan review and allowance adequacy
evaluation.  Management expects to incur losses on loans from time to time when
borrowers' financial conditions deteriorate.  Where feasible, loans charged down
or charged off will continue to be collected.  Management considers the current
allowance adequate to cover potential losses in the loan portfolio.

Non-interest income for 1997 was $158,864 up $110,123 or 226% from 1996.
Service charges on deposit accounts increased $71,126 or 271% to $97,380.
Mortgage origination fees were $23,374.  In 1997 the Bank expanded its
residential real estate lending program to include mortgage loan programs
available through the secondary mortgage markets.  This expands the availability
of longer-term mortgage financing for our qualified customers and produces loan
origination fee income for the Bank.  Credit life and disability insurance
income increased $7,967 or 58% to $21,631.  The growth of non-interest income
for 1997 over 1996 was also due to the fact that 1996 had only 10 months of
banking operations.  Service charges on deposit accounts are evaluated annually
against service charges from other banks in the local market and against the
Bank's own cost structure in providing the deposit services.  This income should
grow with the growth in the Bank's demand deposit account base.  The credit life
and disability insurance is sold primarily on consumer installment debt and
should continue to grow with the growth in the Bank's consumer loan portfolio.
The mortgage origination fee income is less stable than the other service
income.  It will tend to diminish with rising interest rates and can also be
reduced by competition from mortgage sources which are not local and may in fact
come from any part of the country due to the widespread nature of the secondary
mortgage markets in this country.

Non-interest expenses increased $451,420 or 43% to $1,510,412 for 1997 over
1996.  Average earning assets for 1997 increased $18.3 million or 132% to $32.2
million over 1996.   The Bank's operating efficiencies continue to improve.

Salaries and benefits for 1997 increased 289,488 or 53% to $834,413 over 1996.
This is due primarily to the growth in the number of full-time-equivalent
employees from 14 in the first quarter of 1996 to 23 in the fourth quarter of
1997.   Occupancy costs for 1997 increased by $87,913 or 52% to $255,629 over
1996.  In the fourth quarter of 1996, the Bank moved from modular office units,
containing 2,600 square feet of leased office space and leased furniture, to its
newly constructed bank building containing 9,000 square feet of office space as
well as purchased furniture, fixtures and equipment.  Other operating expenses
increased in 1997 by $74,019 or 21% to $420,370.  1997 included expenses for a
full twelve months necessary to the operations of an established bank, such as
data processing services, business development and marketing expenses,
professional fees, postage and communications costs.   The same period in 1996
included banking operations for ten months, as the Bank was just becoming
operational. The Bank's average earning asset growth in 1997 of 132% was over
six times the growth rate of other operating expenses at 21%.  Management
continues to focus on improving operating expense efficiencies, through the use
of current banking technologies, out-sourcing solutions and human resource
training and development.
<PAGE>
 
Management's Discussion and Analysis, continued

As of December 31, 1997, the Bank had experienced six months of positive
earnings that were consistently improving.  The prospects for continued earnings
improvement on a month to month basis appears good, subject to a stable economic
environment and no significant deterioration of asset quality.  Until 1997, the
Company had fully reserved for the deferred tax assets created primarily by net
operating losses and provisions for loan losses in excess of those allowed for
tax purposes.  Management evaluated the likelihood of realizing its deferred tax
assets as of December 31, 1997, in accordance with FAS 109, and determined that
it was more likely than not that the benefits of its deferred tax assets would
be realized and that a valuation allowance would be inappropriate. Accordingly
an income tax benefit of $248,283 was recognized in the fourth quarter of 1997.

The Company's net loss before income tax benefits in 1997 includes provisions
for loan losses that are in excess of net charge-offs by $347,202.  This amount
is not deductible in the current year for tax purposes.  Eliminating this amount
from the reported loss before income taxes produces a taxable income amount,
before net operating losses and other timing differences, of approximately
$140,000.  At this rate of taxable earnings, the net deferred tax assets as of
December 31, 1997 would be realized in less than six years.  The net operating
loss carryforwards begin to expire in 2010.

Management chose to book provisions for loan losses well in excess of current
charge offs in order to achieve a target allowance for loan loss to total loans
ratio of 1.50% by December 31, 1997.  The ratio of the 1997 provision to 1997
net charge-offs was five to one.  Future provisions for loan losses in relation
to actual net charge-offs will be much lower, as long as asset quality is
sustained.   Income for financial and tax reporting purposes should both
continue to increase and the difference between income reported for financial
and tax purposes should be reduced in future years.

Interest Rate Sensitivity

Improvement in the earnings of the Company depends upon continued earning asset
growth, good asset quality and a relatively stable economic environment.
Management feels it is reasonable for the Bank to continue to experience steady
earning asset growth as long as interest rates remain relatively stable.  The
Bank is liability sensitive out to the one year time horizon (meaning that
falling rates tend to be beneficial) and asset sensitive (meaning that rising
rates tend to be beneficial) in the long term.  If interest rates were to rise
in excess of 200 basis points, the Bank could experience reduced earnings in the
near term, and such a rate increase might significantly reduce the demand for
loans in the Bank's local market, thus diminishing the prospects for improved
earnings.  If interest rates were to fall in excess of 200 basis points, the
Bank could experience a short term increase in net interest margin but may have
difficulty retaining maturing certificates of deposit without having to pay
above market rates.

The Asset/Liability Committee monitors the Bank's exposure to interest rate risk
on a quarterly basis.  As of its most recent review, the effect of an immediate
and simultaneous change in interest rates, either up or down by 200 basis
points, was estimated to have less than a 10% impact on current net interest
income over the next twelve months.  This estimate assumes that all repricing
assets and liabilities will be replaced by similar term instruments.

Year 2000 Processing Risk

The Board and management consider the Year 2000 ("Y2K") computer processing risk
to be a very serious risk for the banking and financial services industry in
particular and for all businesses which depend on computer hardware and software
to perform the critical functions of their businesses.  In the third quarter of
1997, the Board established a Y2K Policy and Y2K Compliance Committee.  The
Committee is headed by senior management, meets monthly and regularly reports to
the Audit and Compliance Committee of the Board and to the full Board.

The Company and Bank do not use proprietary computer hardware or software.
Therefore, they depend upon outsourced data processing services and third party
software.  Management has identified all mission critical 
<PAGE>
 
Management's Discussion and Analysis, continued

hardware and software applications and is following the general guidelines
promulgated by the FDIC to assure that all mission critical applications will be
renovated, with testing in progress, by December 31, 1998, or contingency plans
will be in the process of implementation. At this time, the servicing vendors
appear to have completed their assessments and have described to the Bank their
time lines for renovation and testing. Management has no reason to believe at
this time, that all mission critical applications for the Bank and Company will
not be adequately addressed by our vendors' plans.

The Bank's core processing, which maintains all customer record keeping and
financial management information systems, is handled by Fiserv, Inc., an
international data processing company, which specializes in financial
institution data processing and serves 15% of the banks, credit unions and
savings institutions in the U.S.  Thousands of financial institutions with over
fifty million customer accounts are processed on its systems.  Accordingly,
Fiserv must satisfy all regulatory requirements imposed upon bank data
processors.  The Bank's Fiserv service center has reported that it will begin
testing its program renovations in June of 1998.

Management is currently reviewing all of the Bank's significant commercial loan
relationships to determine how much Y2K risk may exist in the Bank's customer
base.  To the extent that such risk is identified, management will request such
customers to develop their own compliance strategy and will require those
customers to keep us informed of their progress. Management's current plans are
to help the Bank's customers understand the risks involved, to share the Bank's
strategies and to encourage those customers to satisfy their compliance
requirements on time lines that are consistent with those of the Bank.  The
Bank's loan agreements and credit review processes are being modified to address
this risk.  The Bank's contingency plans for customers who fail to adequately
address this risk may include but will not be limited to, requiring such
customers to pay off their loans.

The costs of implementing Y2K solutions on mission critical systems have not
been fully determined as of the date of this report.  The Bank's local area
computer network was already budgeted for upgrade in 1998 to workstations and
file-servers that will be Y2K ready.  The budget for these upgrades is
approximately $30,000. Management expects that some of our mission critical
processing vendors will charge the Bank for conducting tests on renovated
systems.  While management has requested that these vendors provide estimates of
any renovation or testing charges, none have been provided to date, citing that
such charges, if any, have not yet been determined.  The Bank's core application
processor, Fiserv, has told us that we will not be charged for renovation work,
however, testing charges may be assessed.
<PAGE>
 
<TABLE>
<CAPTION>

        Directors of                                              Directors of
Greater Rome Bancshares, Inc.                                  Greater Rome Bank
<S>                                               <C>
   Thomas D. Caldwell, III                                  Thomas D. Caldwell, III
    Chairman of the Board                                    Chairman of the Board
President and Chief Executive Officer                President and Chief Executive Officer

      Bradford Lee Riddle                                     Bradford Lee Riddle
   Vice Chairman of the Board                             Vice Chairman of the Board
President and Director of Riddle, Inc.               President and Director of Riddle, Inc.
        (Office Supplies)                                      (Office Supplies)

        Robert L. Berry                                         Robert L. Berry
      Corporate Secretary                          Partner of  Brinson, Askew, Berry, Seigler,
Partner of  Brinson, Askew, Berry, Seigler,                   Richardson & Davis
       Richardson & Davis                                         (attorneys)
          (attorneys)

       Frank A. Brown, Jr.                                     Frank A. Brown, Jr.
Chairman of the Board and President of              Chairman of the Board and President of
    Cooper, Brown & Currie, Inc.                           Cooper, Brown & Currie, Inc.
       (insurance agency)                                      (insurance agency)

     Gene G. Davidson, M.D.                                  Gene G. Davidson, M.D.
President of Northwest Georgia Internal             President of Northwest Georgia Internal
 Medicine Associates, P.C.                                 Medicine Associates, P.C.

      Henry Haskell Perry                                     Henry Haskell Perry
CEO of North Georgia Equipment Co.                    CEO of North Georgia Equipment Co.
   (Heating and air contractor)                           (Heating and air contractor)

       M. Wayne Robinson                                       M. Wayne Robinson
President of M. Wayne Robinson Builder              President of M. Wayne Robinson Builder
        Developer, Inc.                                         Developer, Inc.

         Dale G. Smith                                          Dale G. Smith
Accountant, Whittington, McLemore, Land,           Accountant, Whittington, McLemore, Land,
   Davis, White and Givens, P.C.                         Davis, White and Givens, P.C.
      (public accounting)                                     (public accounting)

         Paul E. Smith                                          Paul E. Smith
Representative, District 12, Georgia                 Representative, District 12, Georgia
          Legislature                                            Legislature

        W. Fred Talley                                         W. Fred Talley
President, Fred Talley's Parkview Chapel           President, Fred Talley's Parkview Chapel
         Funeral Home                                           Funeral Home

         Martha B. Walstad                                    Martha B. Walstad
Partner, Lake Toccoa Development Company           Partner, Lake Toccoa Development Company
(real estate development and management)           (real estate development and management)
</TABLE>

                                       27
<PAGE>
 
<TABLE>
<CAPTION>

            Executive Officers of                        Executive Officers of
        Greater Rome Bancshares, Inc.                      Greater Rome Bank
<S>                                              <C>
           Thomas D. Caldwell, III                      Thomas D. Caldwell, III
            Chairman of the Board                        Chairman of the Board
      President and Chief Executive Officer      President and Chief Executive Officer

            Bradford Lee Riddle                           Bradford Lee Riddle
         Vice Chairman of the Board                    Vice Chairman of the Board
      President and Director of  Riddle, Inc.    President and Director of  Riddle, Inc.
             (Office Supplies)                             (Office Supplies)

             Robert L. Berry                             E. Grey Winstead, III
           Corporate Secretary                           Senior Vice President
  Partner of  Brinson, Askew, Berry, Seigler,           Chief Financial Officer
            Richardson & Davis                            Corporate Secretary
              (attorneys)

          E. Grey Winstead, III                             John W. Branam
       Chief Financial Officer and                       Senior Vice President
       Principal Accounting Officer                     Senior Lending Executive
</TABLE>

Shareholders may obtain, without charge, a copy of Greater Rome Bancshares, Inc.
1997 Annual Report to the Securities and Exchange Commission on Form 10-KSB.
Written requests should be addressed to: Robert L. Berry, Corporate Secretary,
Greater Rome Bancshares, Inc., P.O. Box 5271, Rome, Georgia 30162-5271.