U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   Form 10-KSB
 Annual report under Section 13 or 15(d) of the Securities Exchange Act of 1934

                   For the fiscal year ended December 31, 1998
                           Commission File No. 0-28280

                          GREATER ROME BANCSHARES, INC.
                          -----------------------------
                 (Name of Small Business Issuer in Its Charter)
                     
                     Georgia                     58-2117940
                    ---------                    ----------
          (State or Other Jurisdiction         (I.R.S. Employer
        of Incorporation or Organization)     Identification No.)

            1490 Martha Berry Blvd.
                Rome, Georgia                    30162-5271
            ----------------------               ----------
     (Address of Principal Executive Offices)    (Zip Code)

                                 (706) 295-9300
                                 --------------
                (Issuer's Telephone Number, Including Area Code)

Securities registered under Section 12(b) of the Exchange Act: None

Securities  registered  under  Section  12(g) of the Exchange  Act: Common 
     Stock, $.01 par value

Check  whether  the issuer:  (1) filed all reports  required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing  requirements for the past 90 days.
Yes  X    No
    ---      ---
     
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this Form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ X ]

State issuer's revenues for its most recent fiscal year.   $4,740,651
                                                           ----------

The aggregate market value of the voting stock as of March 26, 1999, held by
non-affiliates computed by reference to the price at which the stock was sold is
$5,879,616.

Seven hundred thousand (701,600) shares of the issuer's common stock were issued
and outstanding as of March 26, 1999.

Portions of the following documents are incorporated by reference: (1) 1998
Annual Report to Shareholders, into Part II; (2) Proxy Statement (the "Proxy
Statement") for the Annual Meeting of Shareholders to be held May 13, 1999, into
Part III.

Transitional Small Business Disclosure Format (check one). Yes     No  X  
                                                               ---    ---
<PAGE>


                                     PART I

Item 1.  Description of Business
--------------------------------

                           FORWARD LOOKING STATEMENTS

Certain statements contained in this Annual Report which are not statements of
historical fact constitute forward-looking statements. Examples of
forward-looking statements include, but are not limited to: (1) projections of
revenues, income or loss, earnings or loss per share, the payment or non-payment
of dividends, capital structure and other financial items; (2) statements of
plans and objectives of the Company or its management or Board of Directors,
including those relating to products or services; (3) statements of future
economic performance; and (4) statements of assumptions underlying such
statements. Words such as "believes," "anticipates," "expects," "intends,"
"targeted," and similar expressions are intended to identify forward-looking
statements but are not the exclusive means of identifying such statements.

Forward-looking statements involve risks and uncertainties, which may cause
actual results to differ materially from those in such statements. Facts that
could cause actual results to differ from those discussed in the forward-looking
statements include, but are not limited to: (1) the strength of the U.S. economy
in general and the strength of the local economies in which operations are
conducted; (2) the effects of and changes in trade, monetary and fiscal policies
and laws, including interest rate policies of the Board of Governors of the
Federal Reserve System; (3) inflation, interest rate, market and monetary
fluctuations; (4) the timely development of and acceptance of new products and
services and perceived overall value of these products and services by users;
(5) changes in consumer spending, borrowing and saving habits; (6) Year 2000
issues and technological changes; (7) acquisitions; (8) the ability to increase
market share and control expenses; (9) the effect of changes in laws and
regulations (including laws and regulations concerning taxes, banking,
securities and insurance) with which the Company and its subsidiary must comply;
(10) the effect of changes in accounting policies and practices, as may be
adopted by the regulatory agencies as well as the Financial Accounting Standards
Board; (11) changes in the Company's organization, compensation and benefit
plans; (12) the costs and effects of litigation and of unexpected or adverse
outcomes in such litigation; and (13) the success of the Company at managing the
risks involved in the foregoing.

Such forward-looking statements speak only as of the date on which such
statements are made, and the Company undertakes no obligation to update any
forward-looking statement to reflect events or circumstances after the date on
which such statement is made to reflect the occurrence of unanticipated events.

                                     GENERAL

Greater Rome Bancshares, Inc. (the "Registrant" or the "Company") was
incorporated as a Georgia corporation on June 17, 1994, primarily to own and
control all of the capital stock of Greater Rome Bank (the "Bank"). The Company
acquired the Bank on February 26, 1996, and the Bank opened for business on the
same date. The Bank is chartered under the laws of the State of Georgia and
engages in the commercial banking business.

                            LOCATION AND SERVICE AREA

The Bank provides general commercial banking services within Floyd County,
emphasizing the needs of individuals and small- to medium-sized businesses.
Floyd County is located in northwest Georgia, almost directly in the center of
what is referred to as the "ABC" (Atlanta, Birmingham, and Chattanooga)
triangle. Rome, the county seat of Floyd County, and the only major incorporated
area of the County, is located 60 miles northwest of Atlanta, 62 miles south of
Chattanooga, Tennessee and 123 east of Birmingham, Alabama. The 1990 census
indicated Floyd County had a population of 81,251. Recent estimates indicate
that Floyd County has a current population of approximately 84,009 with a median
family income of $30,743 per household. Rome is reached via U.S. 411, which
connects to Interstate 75 just 25 miles southeast of Rome at Cartersville. It is
also served by major rail carriers and by the Richard B. Russell Airport, which
is located just 7 miles north of the Bank and maintains a 6,000-foot instrument
runway with ILS and VOR approaches. Rome is home to

                                       2
<PAGE>

several institutes of higher learning including Berry Colleg (undergraduate and
graduate), Shorter College (private) and Floyd College (a two-year unit of the
University System of Georgia). Technical training is available through one of
Georgia's most advanced training schools, Coosa Valley Technical Institute.
Rome is also home to one of the state's most prestigious private schools, The
Darlington School, which offers kindergarten through 12th grade and attracts
students from throughout the United States and many foreign countries.

                                BANKING SERVICES

The Bank offers a full range of deposit services that are typically available in
most banks and savings and loan associations, including checking accounts, NOW
accounts, savings accounts, money market accounts and time deposits. The
transaction accounts and time certificates of deposit are tailored to the Bank's
principal market area at rates intended to be competitive to those offered in
the area. In addition, the Bank offers Individual Retirement Accounts (IRAs).
All deposit accounts are insured by the FDIC up to the maximum amount allowed by
law (generally, $100,000 per depositor subject to aggregation rules). The Bank
solicits these accounts from individuals, businesses, associations and
organizations, and governmental entities.

The Bank offers a full range of short-to-medium term commercial and personal
loans. Commercial loans include both secured and unsecured loans for working
capital (including inventory and receivables), business expansion (including
acquisition of real estate and improvements), and purchase of equipment and
machinery. Consumer loans include secured and unsecured loans for financing
automobiles, other consumer goods, home improvements, education and personal
investments. Additionally, the Bank offers loans for the purpose of community
development and/or improvement. The Bank also originates and holds or sells into
the secondary market fixed and variable rate mortgage loans and real estate
construction and acquisition loans. The Bank's lending activities are subject to
a variety of lending limits imposed by state law. All loans to directors or
executive officers of the Bank are approved by the Bank's board of directors and
are made on terms not more favorable than would be available to a person not
affiliated with the Bank. See "Lending Activities."

The Bank may also engage in investment activities. It is authorized to invest
without limit in obligations of the United States or any state or territorial
government or any agency of such governments or in any securities that are
guaranteed as to principal and interest by such governments. Subject to
limitations, the Bank may also invest in investment grade securities issued by
political subdivisions, in deposits in other financial institutions, and in
certain types of commercial paper. The Bank concentrates its investment
activities primarily in intermediate term government and agency securities.

Other bank services include cash management services, safe deposit boxes,
travelers' checks, direct deposit of payroll and social security checks, and
automatic drafts for various accounts. The Bank is a member of a shared network
of automated teller machines that may be used by Bank customers throughout
Georgia and other regions.

The Bank does not plan to exercise trust powers during its initial years of
operation. The Bank may in the future offer a full-service trust department, but
cannot do so without prior regulatory approval.

                               LENDING ACTIVITIES

General

The Bank offers a range of lending services, including real estate, commercial
and consumer loans, to individuals and small- to medium-sized businesses and
professional concerns that are located in or conduct a substantial portion of
their business in the Bank's market area.

                                       3
<PAGE>


Credit Risk

There are certain risks inherent in making all loans. A principal economic risk
inherent in making loans is the creditworthiness of the borrower. Other risks
inherent in making loans include the following: 
     - risks with respect to the period of time over which loans may be repaid,
     - risks resulting from changes in economic and industry conditions, 
     - risks inherent in dealing with individual borrowers and, 
     - in the case of a collateralized loan, risks resulting from uncertainties
       as to the future value of the collateral.

Management maintains an allowance for loan losses based on, among other things,
an evaluation of economic conditions and regular reviews of delinquencies and
loan portfolio quality. Based upon such factors, management makes various
assumptions and judgments about the ultimate collectibility of the loan
portfolio and provides an allowance for potential loan losses based upon a
percentage of the outstanding balances and for specific loans when their
ultimate collectibility is considered questionable. Certain specific risks with
regard to each category of loans are described under the separate subheading for
each type of loan below.

Real Estate Loans

Loans secured generally by first or second mortgages on real estate are one of
the primary components of the Bank's loan portfolio. These loans consist of
commercial real estate loans, construction and development loans, residential
real estate loans and home equity loans. Loan terms generally are limited to
five years and often do not exceed three years, although installment payments
may be structured up to a fifteen-year amortization basis. Interest rates may be
fixed or adjustable, and tend to be fixed in the case of three-year term loans
and adjustable in the case of five-year term loans. The Bank generally charges
an origination fee. Management attempts to reduce credit risk in the commercial
real estate portfolio by emphasizing loans on owner-occupied office and retail
buildings where the loan-to-value ratio, established by qualified appraisals,
will generally not exceed 80%. In addition, the Bank typically requires personal
guarantees of the principal owners of the property backed with a review by the
Bank of the principal owner's personal financial statements. A number of the
loans that are classified as commercial real estate loans are actually
commercial loans for which a security interest in real estate is taken as
additional collateral. These loans are subject to underwriting as commercial
loans as described below. The principal economic risk associated with each
category of loans, including real estate loans, is the creditworthiness of the
Bank's borrowers. The risk associated with real estate loans varies with many
factors including employment levels and fluctuations in the value of real
estate.

In 1997, the Bank began originating one-to-four family residential real estate
loans for sale into the secondary market. This provides long term home financing
for qualified customers and generates origination fee income to the Bank. The
Bank limits interest rate and credit risk on these loans by locking in the
interest rate for each loan with the secondary market investor and receiving the
investor's underwriting approval prior to closing the loan.

Commercial Loans

The Bank makes loans for commercial purposes in various lines of businesses.
Equipment loans are typically made for a term of up to five years (more
typically three years) at fixed or variable rates, with the loan fully amortized
over the term and secured by the financed equipment with a loan-to-value ratio
of 80% or less. Working capital loans are made for a term typically not
exceeding one year, and are usually secured by accounts receivable, inventory
and/or personal guarantees of the principals of the business, and bear interest
at floating rates which are payable monthly, or less typically, quarterly. In
the case of the loans secured by accounts receivable or inventory, principal is
repaid as the assets securing the loan are converted into cash, and in other

                                       4
<PAGE>

cases, principal is due at maturity. The principal economic risk associated with
each category of loans, including commercial loans, is the creditworthiness of
the Bank's borrowers. The risk associated with commercial loans varies with many
factors including the economy in the Bank's lending area. In addition many of
the Bank's commercial loans are made to small- to medium-sized businesses and
professionals who may be less able to withstand competitive, economic and
financial conditions than larger borrowers.

Consumer Loans

The Bank makes a variety of loans to individuals for personal and household
purposes, including secured and unsecured installment and term loans, home
equity loans and lines of credit and revolving lines of credit. These loans
typically carry balances of less than $35,000 and, in the case of non-revolving
loans, are either amortized over a period not exceeding 60 months or are
ninety-day term loans, and in each case bear interest at a fixed rate. The
revolving loans bear interest at a fixed or variable rate and require monthly
payments of interest and a portion of the principal balance (typically 2-3% of
the outstanding balance). The underwriting criteria in the case of home equity
loans and lines of credit, is the same as applied by the Bank when making a
first mortgage loan, as described above, and home equity lines of credit
typically expire ten years after their origination. As with the other categories
of loans, the principal economic risk associated with consumer loans is the
creditworthiness of the Bank's borrowers.

Loan Approval and Review

The Bank's loan approval policies provide for various levels of officer lending
authority. When the aggregate outstanding loans to a single borrower exceed that
individual officer's lending authority, the loan request requires prior approval
of the President or senior loan officer. Any loan in excess of the President's
or senior loan officer's authority requires prior approval by the loan committee
of the Bank's board of directors. The Bank has a continuous loan review
procedure involving several Bank officers. The procedures are designed to
provide early identification of credit quality problems. All loan officers are
charged with the responsibility of rating each of their loans and reviewing
those loans on a periodic basis, the frequency of which will increase as the
quality of the loans decreases.

Lending Limit

Under the Financial Institutions Code of Georgia, the Bank is limited in the
amount it can loan to a single borrower (including the borrower's related
interests) by the amount of the Bank's statutory capital base. The limit is 15%
of the statutory capital base unless each loan in excess of 15% is approved by
the Bank's board of directors and the entire amount of the loan is secured by
good collateral or other ample security. In no event may the amount loaned to
any borrower exceed 25% of the Bank's statutory capital base.

The statutory method of calculating the Bank's lending limits is based on its
initial capitalization level of $6.5 million. Under this method, the Bank's
lending limit is approximately $975,000 for loans not fully secured plus an
additional $650,000 (or an aggregate of approximately $1.625 million) for loans
on which the entire amount is properly secured. These limits will increase and
decrease as the Bank's statutory capital base increases and decreases. Most of
the Bank's expected loan demand will be from borrowers who will not require
loans in excess of these limits. If a borrower's credit needs exceeds these
limits, the Bank seeks to sell participations in the loan to the extent
necessary to maintain these lending limits.

                                   COMPETITION

The Bank competes with other commercial banks, savings and loan associations,
credit unions and money market mutual funds operating in Floyd County and
elsewhere. As of June 1998, nine FDIC-insured institutions

                                       5
<PAGE>

were operating in Floyd County. A number of these competitors are well
established in the Floyd County area. Most of them have substantially greater
resources and lending limits and may have a lower cost of funds than the Bank.
These banks offer certain services, such as extensive and established branch
networks and trust services, which the Bank does not expect to provide in the
foreseeable future. As a result of these competitive factors, the Bank may have
to pay higher rates of interest and provide superior customer service in order
to attract deposits. Management believes that the Bank can compete effectively
with these institutions but cannot assure that it will do so.

                                    EMPLOYEES

The Bank commenced operations on February 26, 1996 with 14 full-time employees
and had 30 equivalent full-time employees on December 31, 1998. The Bank's
employees are not subject to a collective bargaining agreement. The Company has
no employees other than its officers, none of whom receive remuneration for
their services to the Company. The Company reimburses the Bank for certain
management services performed by the Bank's officers. The Company conducts no
business other than that of the being a bank holding company. The Company
currently has three officers: 
          - Thomas D. Caldwell, III, President and Chief Executive Officer,
          - Robert L. Berry, Secretary, and 
          - E. Grey Winstead, III, Chief Financial Officer and Principal
                Accounting Officer.


                                       6
<PAGE>

                             STATISTICAL INFORMATION

The following tables set forth certain statistical information and should be
read in conjunction with the financial statements of Greater Rome Bancshares,
Inc.

 I. Distribution of Assets, Liabilities, and Stockholders' Equity; Interest
    Rates and Interest Differential
<TABLE>
<CAPTION>

                                              1998           1997           1998         1997          1998         1997
                                            Average        Average        Income/       Income/       Yield         Yield
                                            Balance        Balance       (Expense)    (Expense)    (Rate Paid)  (Rate Paid)
                                            -------        -------       ---------    ---------    -----------  -----------
     <S>                             <C>                   <C>            <C>          <C>              <C>          <C>
 
     Loans                            $     36,596,138      22,517,410     3,659,279    2,255,079        10.00%       10.01%
     Taxable investment securities          10,247,085       7,791,229       625,781      482,641         6.11%        6.19%
                                                                                   
     Non-taxable investment
       securities                              294,164        -               12,183      -               4.14%        0.00%
     Interest bearing deposits
       in other banks                          706,613        -               37,611      -               5.32%        0.00%
     Federal funds sold                      2,118,499       1,858,945       114,510      100,499         5.41%        5.41%
                                         ------------------------------------------------------------------------------------
          Average earning assets      $     49,962,499      32,167,584     4,449,364    2,838,219         8.91%        8.82%
                                         ------------------------------------------------------------------------------------

     Cash & due from banks                   1,140,369         872,616
     Premises and                                       
       equipment                             2,569,013       2,274,665
     Other assets                              699,190         317,356        
                                         ------------------------------
          Average total assets        $     54,371,072      35,632,221
                                         ------------------------------

                                                                         
     Interest bearing demand deposits        3,381,823       2,810,804      (64,355)     (55,224)        -1.90%       -1.96%
     Savings and money market                                                         
       deposits                              6,736,847       4,424,565     (261,753)    (160,563)        -3.89%       -3.63%
     Time deposits                          27,189,134      16,518,978   (1,573,504)    (963,689)        -5.79%       -5.83%
     Borrowed funds                          4,399,260       1,367,814     (247,622)     (79,841)        -5.63%       -5.84%
                                         ------------------------------------------------------------------------------------
          Average interest bearing                                                   
          liabilities                 $     41,707,065      25,122,161   (2,147,234)  (1,259,317)        -5.15%       -5.01%
                                         ------------------------------------------------------------------------------------

     Non-interest bearing deposits           5,261,746       3,733,515
     Other liabilities                         293,186         158,381
     Stockholders' equity                    6,618,419       6,320,840
                                         ------------------------------
          Average total liabilities                     
          and equity                  $     53,880,416      35,334,897
                                         ------------------------------

                                         ------------------------------------------------------------------------------------
     Net interest income yield on                                                     
     average earning assets           $     49,962,499      32,167,584     2,302,131    1,578,902         4.61%        4.91%
                                         ------------------------------------------------------------------------------------
</TABLE>

Notes:
1. Non-accruing loans are included in the average balances. Average non-accruing
   loans were $88,014 in 1998 and were $38,547 in 1997. 
2. Loan fees are included in the interest income computation and were $187,642
   in 1998 and $123,908 in 1997.


                                       7
<PAGE>


The following table sets forth a summary of the changes in interest income and
interest expense resulting from changes in volume and rates from 1997 to 1998.

<TABLE>
<CAPTION>

                                                                    Increase/(Decrease)
                                                                    -------------------
                                                           Net           Due to          Due to
                                                         Change         Rate (1)       Volume (1)
                                                         ------         --------       ----------
<S>                                                    <C>            <C>            <C>    
Interest Earning Assets
Loans                                              $   1,404,200          (3,550)       1,407,750   
Taxable investment securities                            143,140          (6,930)         150,070              
Non-taxable investment securities                         12,183            -              12,183               
Interest bearing deposits in other banks                  37,611            -              37,611        
Federal funds sold                                        14,011             (19)          14,030
                                                       ---------         -------        --------- 
       Total Interest Income                           1,611,145         (10,499)       1,621,644
                                                       ---------         -------        ---------
                                                       
                                                     
Interest Bearing Liabilities                                                    
Interest bearing demand deposits                           9,131          (1,782)          10,913
Savings and money market deposits                        101,190          12,055           89,135
Time deposits                                            609,815          (7,755)         617,570        
Borrowed funds                                           167,781          (2,951)         170,732
                                                       ---------         -------        ---------    
       Total Interest Expense                            887,917           (433)          888,350
                                                       ---------         -------        ---------
                                                          
Net Interest Income                                $     723,228         (10,066)         733,294
                                                       =========         =======        =========
</TABLE>
                                                        
 (1)  The changes in interest income and expense not due solely to rate or
      volume have been allocated proportionately to the rate and volume amounts
      calculated before allocation.

II.   Investment Portfolio

Refer to note (2) Investment Securities of the Notes to Consolidated Financial
Statements included in the 1998 Annual Report, which is incorporated herein by
reference.

The weighted average yield of investment securities maturing in one year or less
as of December 31, 1998 was 5.77%. The weighted average yield of investment
securities maturing from one to five years as of December 31, 1998 was 6.03%.
The weighted average yield of investment securities maturing in greater than
five years as of December 31, 1998 was 5.26%



                                       8
<PAGE>


III.  Loan Portfolio
<TABLE>
<CAPTION>
                                             12/31/98            12/31/97
               Loan types                    Balance             Balance
               ----------                    -------             -------
               
<S>                                   <C>                  <C>            
      Commercial                      $      11,518,652    $     7,527,458

      Real estate - construction              1,226,296            475,431
                                                                    
      Real estate - mortgage                 19,271,316         14,976,035

      Consumer loans                          9,960,566          7,310,351
                                              ---------          ---------
                                          
                              Total   $      41,976,830     $   30,289,275
                                             ==========         ==========
</TABLE>
<TABLE>
<CAPTION>

                                                           Maturity and repricing by type
                                                                                    
                                    due in 1 year           due from 1 through 5 years      due after 5 years
                             --------------------------     --------------------------    -----------------------

                             Fixed rate   Variable rate    Fixed rate   Variable rate   Fixed rate   Variable rate
                             ----------   -------------    ----------   -------------   ----------   -------------

<S>                       <C>                <C>            <C>            <C>             <C>        <C>     
      Commercial          $   3,752,034      1,557,219      4,416,786      1,714,897       77,719         -

      Real estate -                          
        construction            925,995        300,302          -              -            -             -

      Real estate -                                                                                      
        mortgage              3,604,413      1,965,045     12,923,461        722,965        4,472         -

      Consumer loans          4,670,940         58,491      4,895,879        124,256      111,357         -                 
                              ---------         ------      ---------        -------      -------      -------  
                            
                    Total $  12,953,382      3,881,057     22,236,126      2,562,118      193,548         -
                             ==========      =========     ==========      =========      =======      ======= 
</TABLE>
                             
The maturity distribution is less than the total at year-end by the amount of
non-accrual loans totaling $150,599.

Risk Elements
<TABLE>
<CAPTION>
                                                             1998       1997
                                                             ----       ----
<S>                                                     <C>             <C>  
Nonaccrual, Past Due and Restructured Loans
-------------------------------------------
Nonaccrual loans                                       $    150,599   30,805
Accruing loans contractually past due 90 days or more  $      -          -
Troubled debt restructurings                           $      -          -
</TABLE>

The amount of interest that would have been included in income on the above
non-accrual loans if they had been current in accordance with their original
terms was $9,434 in 1998 and $1,127 in 1997. The amount of interest that was
included in interest income on the above loans was $8,572 in 1998 and $1,994 in
1997.

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, unless corrective action is
certain and imminent.

                                       9
<PAGE>

Potential Problem Loans
-----------------------

At year end, management had identified loans totaling $106,000 that were not
past due 90 days or more, but in which management has serious doubts as to the
ability of the borrowers to comply with the present loan repayment terms.
Potential losses are not currently expected on these loans given their
collateral positions and the ability of the borrowers to continue servicing the
debt, albeit on more favorable terms than originally agreed. Of these loans,
$96,806 was restructured as troubled debt in the first quarter of 1999.

IV. Summary of Loan Loss Experience
<TABLE>
<CAPTION>

    Allowance for possible loan losses                  1998             1997
    ----------------------------------                  ----             ----
<S>                                              <C>                       <C>    
Balance at the beginning of the period           $        480,544          133,342
Charge-offs:
    Commercial                                            107,607             -
    Real estate - mortgage                                  2,924             -                               
    Consumer loans                                         77,925           87,254
                                                   ---------------  ---------------
    Total                                                 188,456           87,254
                                                   ---------------  ---------------
Recoveries:
    Consumer loans                                         21,457              762
                                                   ---------------  ---------------
    Total                                                  21,457              762
                                                   ---------------  ---------------
Net charge-offs:                                          166,998           86,492
Additions charged to operations                           255,640          433,694
                                                   ---------------  ---------------
Balance at end of period                         $        569,185          480,544
                                                   ===============  ===============
Average loans outstanding                        $     36,596,138       22,517,410
Ratio of net charge-offs to average loans                   0.46%            0.38%
</TABLE>

The provision for loan losses was $255,640 for 1998, down 178,054 from 1997. In
1997, the $433,694 provision expense was primarily determined by reference to a
target ratio. The ratio of the loss reserve to total loans was targeted to be
1.50% by the end of 1997, when the Bank would be almost two years old.
Management adopted this methodology, by reference to peer information, in order
to build the loss reserve for the Bank's new loan portfolio. More traditional
methods of determining loan loss provisions are based on historical loan
portfolio performance, including analysis of historical charge-offs and
recoveries, detail loan reviews and portfolio reviews, loan growth and changing
economic conditions. Since the Bank had only limited history, the target ratio
method was determined to be more appropriate for the first two years.

In the fourth quarter of 1998, management evaluated the history of the Bank's
loan charge-offs and reviewed the credit risk in the Bank's loan portfolio.
Futhermore, an independent credit review was conducted in early January 1999, to
validate the credit risk classifications as of December 31, 1998. Based on the
results of these reviews, management and the board modified the loan loss
reserve policy to eliminate the target balance ratio method. Under the revised
policy, management and the board will evaluate the adequacy of the loan loss
reserve on a quarterly basis. This evaluation considers historical loan losses
by risk grade under each major category of loans, i.e., commercial, real estate
and consumer. It also considers current portfolio risk, industry concentrations
and the uncertainty associated with changing economic conditions.

                                       10
<PAGE>

In addition, management performs an on-going loan review process. All new loans
are risk rated under loan policy 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 for
compliance with underwriting policy on new loans and presented in the weekly
Asset Review Committee meeting. 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.

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 year end allowance
adequate to cover potential losses in the loan portfolio.

Allocation of the Allowance for Loan Losses
-------------------------------------------

Under the Bank's credit risk Loan Grading Policy, each loan in the portfolio is
assigned one of the following risk grades:
<TABLE>
<CAPTION>

                     Grade                        Short Definition
                     -----                        ----------------
                    <S>         <C>                                   
                       1         Total absence of credit risk
                       2         Minimal credit risk
                       3         Average credit risk
                       4         Acceptable, but more than average credit risk
                       5         Greater than normal credit risk
                       6         Excessive credit risk
                       7         Potential loss
                       8         Uncollectable
</TABLE>

The policy provides more explicit guidance on the application of risk grades. On
a monthly basis, loan balances are aggregated for each grade and a loan loss
allowance is calculated using factors that represent management's estimate of
the allowance applicable to each grade. These factors are compared to historical
charge-offs for reasonableness and adjusted, as necessary.

At December 31, 1998 the allowance for loan losses was allocated by grade as
follows:
<TABLE>
<CAPTION>

                           Number of       Loan                   Calculated
                  Grade      Loans        Balance         Factor    Reserve
                  -----      -----        -------         ------    -------
                 <S>       <C>        <C>               <C>        <C>                        
                    1            5         146,778          0.00%      -               
                    2           16         223,661          0.10%       224        
                    3        1,173      29,489,735          0.33%    97,316
                    4          672      11,322,704          0.75%    84,920                
                    5           34         636,840          5.00%    31,842              
                    6           13         157,112         15.00%    23,567              
                    7          -               -           50.00%      -
                    8          -               -          100.00%      -
                            ------      ----------                  -------          
                   Total     1,913      41,796,830                  237,869
                             =====      ==========                  
                                      Unallocated                   331,316
                                                                    -------
                                      Total loss reserve            569,185
                                                                    =======
</TABLE>

                                       11
<PAGE>


At December 31, 1997 the allowance for loan losses was allocated by grade as
follows:
<TABLE>
<CAPTION>

                           Number of       Loan                   Calculated
                  Grade      Loans        Balance         Factor    Reserve
                  -----      -----        -------         ------    -------
                 <S>       <C>        <C>               <C>        <C>                        
                    1            2           5,640          0.00%      -               
                    2            8         163,052          0.10%       163        
                    3          771      20,833,144          0.33%    68,749
                    4          523       9,210,791          0.75%    69,081                
                    5            6          53,250          5.00%     2,663              
                    6            4          23,398         15.00%     2,340              
                    7          -               -           50.00%      -
                    8          -               -          100.00%      -
                            ------      ----------                  -------          
                   Total     1,314      30,289,275                  142,996
                             =====      ==========                  
                                      Unallocated                   337,548
                                                                    -------
                                      Total loss reserve            480,544
                                                                    =======
</TABLE>

The approximate anticipated amount of charge-offs by risk grade for 1999 is:
<TABLE>
<CAPTION>

                                                      Projected
                                        Grade        Charge-offs
                                        -----        -----------
                                        <S>       <C>         
                                          1       $       -
                                          2                 107
                                          3              46,639
                                          4              40,699
                                          5              15,260
                                          6              11,295
                                          7               -
                                          8               -
                                                       --------
                                        Total     $     114,000
                                                       ========
</TABLE>


                                       12
<PAGE>

V.   Deposits
<TABLE>
<CAPTION>
                                                          Average        Average     Average     Average
                                                          Balance        Balance      Rate        Rate
                                                            1998           1997       1998        1997
                                                            ----           ----       ----        ----
<S>                                             <C>                      <C>         <C>         <C>
    Non-interest bearing deposits               $          5,261,746     3,733,515
    Interest bearing demand deposits                       3,381,823     2,810,804    1.90%       1.96%
    Savings and money market deposits                      6,736,847     4,424,565    3.89%       3.63%
    Time deposits                                         27,189,134    16,518,978    5.79%       5.83%
                                                        --------------------------------------------------
                Total average deposits          $         42,569,551    27,487,862    4.46%       4.29%
                                                        ==================================================
</TABLE>

As of December 31, 1998 the amount outstanding of time certificates of deposit
of $100,000 or more was $6,704,185. Amounts by time remaining until maturity on
time deposits of $100,000 or more were:
<TABLE>

                    <S>                                <C>                             
                       3 months or less                $          1,090,508
                       over 3 through 6 months                    1,273,635
                       over 6 through 12 months                   3,285,532
                       over 12 months                             1,054,510
                                                           -----------------
                                                       $          6,704,185
                                                           =================
</TABLE>

VI.  Return on Equity and Assets
<TABLE>
<CAPTION>
                                                         1998           1997
                                                         ----           ----
<S>                                                      <C>            <C>  
     Return on average assets                            0.69%          0.12%

     Return on average equity                            5.65%          0.66%

     Dividend payout ratio                               0.00%          0.00%

     Average equity to average asset ratio              12.17%         17.74%
</TABLE>


                                       13
<PAGE>


                           SUPERVISION AND REGULATION

The following discussion sets forth the material elements of the regulatory
framework applicable to banks and bank holding companies and provides certain
specific information related to the Company.

General

The Company is a bank holding company registered with the Board of Governors of
the Federal Reserve System (the "Federal Reserve") under the Bank Holding
Company Act of 1956, as amended (the "BHC Act"). As such, the Company and, if
applicable, its non-bank subsidiaries are subject to the supervision,
examination, and reporting requirements of the BHC Act and the regulations of
the Federal Reserve.

The BHC Act requires every bank holding company to obtain the prior approval of
the Federal Reserve before: (a) it may acquire direct or indirect ownership or
control of any voting shares of any bank if, after such acquisition, the bank
holding company will directly or indirectly own or control more than 5% of the
voting shares of the bank; (b) it or any of its subsidiaries, other than a bank,
may acquire all or substantially all of the assets of any bank; or (c) it may
merge or consolidate with any other bank holding company.

The BHC Act further provides that the Federal Reserve may not approve any
transaction that would result in a monopoly or would be in furtherance of any
combination or conspiracy to monopolize or attempt to monopolize the business of
banking in any section of the United States, or the effect of which may be
substantially to lessen competition or to tend to create a monopoly in any
section of the country, or that in any other manner would be in restraint of
trade, unless the anticompetitive effects of the proposed transaction are
clearly outweighed by the public interest in meeting the convenience and needs
of the community to be served. The Federal Reserve is also required to consider
the financial and managerial resources and future prospects of the bank holding
companies and banks concerned and the convenience and needs of the community to
be served. Consideration of financial resources generally focuses on capital
adequacy, which is discussed below.

The BHC Act, as amended by the interstate banking provisions of the Riegle-Neal
Interstate Banking and Branching Efficiency Act of 1994 (the "Interstate Banking
Act"), which became effective on September 29, 1995, repealed the prior
statutory restrictions on interstate acquisitions of banks by bank holding
companies, such that the Company, and any other bank holding company located in
Georgia may now acquire a bank located in any other state, and any bank holding
company located outside Georgia may lawfully acquire any Georgia-based bank,
regardless of state law to the contrary, in either case subject to certain
deposit-percentage, aging requirements, and other restrictions. The Interstate
Banking Act also generally provides that, after June 1, 1997, national and
state-chartered banks may branch interstate through acquisitions of banks in
other states. By adopting legislation prior to that date, a state had the
ability either to "opt in" and accelerate the date after which interstate
branching is permissible or "opt out" and prohibit interstate branching
altogether.

In response to the Interstate Banking Act, the Georgia General Assembly adopted
the Georgia Interstate Banking Act, which was effective on July 1, 1995. The
Georgia Interstate Banking Act provides that (a) interstate acquisitions by
institutions located in Georgia will be permitted in states that also allow
national interstate acquisitions and (b) interstate acquisitions of institutions
located in Georgia will be permitted by institutions in states that allow
national interstate acquisitions.

Additionally, on January 26, 1996, the Georgia Assembly adopted the Georgia
Interstate Branching Act which permits Georgia-based banks and bank holding
companies owning or acquiring banks outside of Georgia and all non-Georgia banks
and bank holding companies owning or acquiring banks in Georgia to merge any
lawfully acquired bank into an interstate branch network. The Georgia Interstate
Branching Act also allows

                                       14
<PAGE>

banks to establish de novo branches on a limited basis as of July 1, 1996.
Beginning July 1, 1998, the number of de novo branches which may be established
will no longer be limited.

The BHC Act generally prohibits the Company from engaging in activities other
than banking or managing or controlling banks or other permissible subsidiaries
and from acquiring or retaining direct or indirect control of any company
engaged in any activities other than those activities determined by the Federal
Reserve to be so closely related to banking or managing or controlling banks as
to be a proper incident thereto. In determining whether a particular activity is
permissible, the Federal Reserve must consider whether the performance of such
an activity reasonably can be expected to produce benefits to the public, such
as greater convenience, increased competition, or gains in efficiency, that
outweigh possible adverse effects, such as undue concentration of resources,
decreased or unfair competition, conflicts of interest, or unsound banking
practices. For example, factoring accounts receivable, acquiring or servicing
loans, leasing personal property, conducting discount securities brokerage
activities, performing certain data processing services, acting as agent or
broker in selling credit life insurance and certain other types of insurance in
connection with credit transactions, and performing certain insurance
underwriting activities all have been determined by the Federal Reserve to be
permissible activities of bank holding companies. The BHC Act does not place
territorial limitations on permissible non-banking activities of bank holding
companies. Despite prior approval, the Federal Reserve has the power to order a
holding company or its subsidiaries to terminate any activity or to terminate
its ownership or control of any subsidiary when it has reasonable cause to
believe that continuation of such activity or such ownership or control
constitutes a serious risk to the financial safety, soundness, or stability of
any bank subsidiary of that bank holding company.

The bank subsidiary of the Company is a member of the Federal Deposit Insurance
Corporation (the "FDIC"), and as such, its deposits are insured by the FDIC to
the maximum extent provided by law. Such subsidiary is also subject to numerous
state and federal statutes and regulations that affect its business, activities,
and operations, and it is supervised and examined by one or more state or
federal bank regulatory agencies.

The FDIC and the Georgia Department of Banking and Finance (the "Georgia
Department") regularly examine the operations of the Bank and is given authority
to approve or disapprove mergers, consolidations, the establishment of branches,
and similar corporate actions. The FDIC and the Georgia Department also have the
power to prevent the continuance or development of unsafe or unsound banking
practices or other violations of law.

Payment of Dividends

The Company is a legal entity separate and distinct from its banking subsidiary.
The principal sources of cash flow of the Company, including cash flow to pay
dividends to its shareholders, are dividends by the Bank. There are statutory
and regulatory limitations on the payment of dividends by the Bank to the
Company as well as by the Company to its shareholders.

If, in the opinion of the federal banking regulator, a depository institution
under its jurisdiction is engaged in or is about to engage in an unsafe or
unsound practice (which, depending on the financial condition of the depository
institution, could include the payment of dividends), such authority may
require, after notice and hearing, that such institution cease and desist from
such practice. The federal banking agencies have indicated that paying dividends
that deplete a depository institution's capital base to an inadequate level
would be an unsafe and unsound banking practice. Under the Federal Deposit
Insurance Corporation Improvement Act of 1991 ("FDICIA"), a depository
institution may not pay any dividend if payment would cause it to become
undercapitalized or if it already is undercapitalized. See "-- Prompt Corrective
Action." Moreover, the federal agencies have issued policy statements that
provide that bank holding companies and insured banks should generally only pay
dividends out of current operating earnings.

                                       15
<PAGE>

At December 31, 1998, under dividend restrictions imposed under federal and
state laws, and the conditions included in the Georgia Department's approval of
the Bank's charter application, the Bank could not declare dividends to the
Company.

The payment of dividends by the Company and the Bank may also be affected or
limited by other factors, such as the requirement to maintain adequate capital
above regulatory guidelines.

Capital Adequacy

 The Company and the Bank are required to comply with the capital adequacy
standards established by the Federal Reserve and the appropriate federal banking
regulator in the case of Bank. There are two basic measures of capital adequacy
for bank holding companies that have been promulgated by the Federal Reserve: a
risk-based measure and a leverage measure. All applicable capital standards must
be satisfied for a bank holding company to be considered in compliance.

The risk-based capital standards are designed to make regulatory capital
requirements more sensitive to differences in risk profile among banks and bank
holding companies, to account for off-balance-sheet exposure, and to minimize
disincentives for holding liquid assets. Assets and off-balance-sheet items are
assigned to broad risk categories, each with appropriate weights. The resulting
capital ratios represent capital as a percentage of total risk-weighted assets
and off-balance-sheet items.

The minimum guideline for the ratio (the "Total Risk-Based Capital Ratio") of
total capital ("Total Capital") to risk-weighted assets (including certain
off-balance-sheet items, such as standby letters of credit) is 8%. At least half
of Total Capital must comprise common stock, minority interests in the equity
accounts of consolidated subsidiaries, noncumulative perpetual preferred stock,
and a limited amount of cumulative perpetual preferred stock, less goodwill and
certain other intangible assets ("Tier 1 Capital"). The remainder may consist of
subordinated debt, other preferred stock, and a limited amount of loan loss
reserves ("Tier 2 Capital"). At December 31, 1998, the Company's consolidated
Total Risk-Based Capital Ratio and its Tier 1 Risk-Based Capital Ratio (i.e.,
the ratio of Tier 1 Capital to risk-weighted assets) were 16% and 14%,
respectively.

In addition, the Federal Reserve has established minimum leverage ratio
guidelines for bank holding companies. These guidelines provide for a minimum
ratio (the "Leverage Ratio") of Tier 1 Capital to average assets, less goodwill
and certain other intangible assets, of 3% for bank holding companies that meet
certain specified criteria, including having the highest regulatory rating. All
other bank holding companies generally are required to maintain a Leverage Ratio
of at least 3%, plus an additional cushion of 100 to 200 basis points. The
Company's Leverage Ratio at December 31, 1998 was 11%. The guidelines also
provide that bank holding companies experiencing internal growth or making
acquisitions will be expected to maintain strong capital positions substantially
above the minimum supervisory levels without significant reliance on intangible
assets. Furthermore, the Federal Reserve has indicated that it will consider a
"tangible Tier 1 Capital Leverage Ratio" (deducting all intangibles) and other
indicia of capital strength in evaluating proposals for expansion or new
activities.

The Bank is subject to risk-based and leverage capital requirements adopted by
the FDIC, which are substantially similar to those adopted by the Federal
Reserve for bank holding companies.

The Bank was in compliance with applicable minimum capital requirements as of
December 31, 1998. The Company has not been advised by any federal banking
agency of any specific minimum capital ratio requirement applicable to it or its
subsidiary depository institution.

                                       16
<PAGE>

Failure to meet capital guidelines could subject a bank to a variety of
enforcement remedies, including issuance of a capital directive, the termination
of deposit insurance by the FDIC, a prohibition on the taking of brokered
deposits, and certain other restrictions on its business. As described below,
substantial additional restrictions can be imposed upon FDIC-insured depository
institutions that fail to meet applicable capital requirements. See "-- Prompt
Corrective Action."

The federal bank regulators continue to indicate their desire to raise capital
requirements applicable to banking organizations beyond their current levels. In
this regard, the Federal Reserve and the FDIC have, pursuant to FDICIA, recently
adopted final regulations, which will become mandatory on January 1, 1998,
requiring regulators to consider interest rate risk (when the interest rate
sensitivity of an institution's assets does not match the sensitivity of its
liabilities or its off-balance-sheet position) in the evaluation of a bank's
capital adequacy. The bank regulatory agencies' methodology for evaluating
interest rate risk requires banks with excessive interest rate risk exposure to
hold additional amounts of capital against such exposures. The market risk rules
apply to any bank or bank holding company whose trading activity equals 10% or
more of its total assets, or whose trading activity equals $1 billion or more.

Support of Subsidiary Institutions

Under Federal Reserve policy, the Company is expected to act as a source of
financial strength for, and to commit resources to support, each of its banking
subsidiaries. This support may be required at times when, absent such Federal
Reserve policy, the Company may not be inclined to provide it. In addition, any
capital loans by a bank holding company to any of its banking subsidiaries are
subordinate in right of payment to deposits and to certain other indebtedness of
such banks. In the event of a bank holding company's bankruptcy, any commitment
by the bank holding company to a federal bank regulatory agency to maintain the
capital of a banking subsidiary will be assumed by the bankruptcy trustee and
entitled to a priority of payment.

Under the Federal Deposit Insurance Act ("FDIA"), a depository institution
insured by the FDIC can be held liable for any loss incurred by, or reasonably
expected to be incurred by, the FDIC after August 9, 1989, in connection with
(a) the default of a commonly controlled FDIC-insured depository institution or
(b) any assistance provided by the FDIC to any commonly controlled FDIC-insured
depository institution "in danger of default." "Default" is defined generally as
the appointment of a conservator or receiver, and "in danger of default" is
defined generally as the existence of certain conditions indicating that a
default is likely to occur in the absence of regulatory assistance. The FDIC's
claim for damages is superior to claims of shareholders of the insured
depository institution or its holding company, but is subordinate to claims of
depositors, secured creditors, and holders of subordinated debt (other than
affiliates) of the commonly controlled insured depository institution. The
subsidiary depository institutions of the Company are subject to these
cross-guarantee provisions. As a result, any loss suffered by the FDIC in
respect of these subsidiaries would likely result in assertion of the
cross-guarantee provisions, the assessment of such estimated losses against the
depository institution's banking affiliates, and a potential loss of the
Company's investment in such other subsidiary depository institutions.

Prompt Corrective Action

FDICIA establishes a system of prompt corrective action to resolve the problems
of undercapitalized institutions. Under this system, which became effective in
December 1992, the federal banking regulators are required to establish five
capital categories (well capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized, and critically undercapitalized) and to take
certain mandatory supervisory actions, and are authorized to take other
discretionary actions, with respect to institutions in the three
undercapitalized categories, the severity of which will depend upon the capital
category in which the institution is placed. Generally, subject to a narrow
exception, FDICIA requires the banking regulator to appoint

                                       17
<PAGE>

a receiver or conservator for an institution that is critically
undercapitalized. The federal banking agencies have specified by regulation the
relevant capital level for each category.

The capital levels established for each of the categories are as follows:
<TABLE>
<CAPTION>

========================== ==================== ========================= ====================== ===================
                                                          Total                Tier 1 Risk-
    Capital Category          Tier 1 Capital       Risk-Based Capital          Based Capital           Other
========================== ==================== ========================= ====================== ===================
<S>                        <C>                  <C>                       <C>                    <C>                
Well Capitalized           5% or more           10% or more               6% or more             Not subject to a
                                                                                                 capital directive
========================== -------------------- ------------------------- ---------------------- ===================
Adequately Capitalized     4% or more           8% or more                4% or more                    --
========================== -------------------- ------------------------- ---------------------- ===================
Undercapitalized           less than 4%         less than 8%              less than 4%                  --
========================== -------------------- ------------------------- ---------------------- ===================
Significantly              less than 3%         less than 6%              less than 3%                  --
Undercapitalized
========================== ==================== ========================= ====================== ===================
Critically                 2% or less                      --                       --                  --
Undercapitalized           tangible equity
========================== ==================== ========================= ====================== ===================
</TABLE>

For purposes of the regulation, the term "tangible equity" includes core capital
elements counted as Tier 1 Capital for purposes of the risk-based capital
standards, plus the amount of outstanding cumulative perpetual preferred stock
(including related surplus), minus all intangible assets with certain
exceptions. A depository institution may be deemed to be in a capitalization
category that is lower than is indicated by its actual capital position if it
receives an unsatisfactory examination rating.

An institution that is categorized as undercapitalized, significantly
undercapitalized, or critically undercapitalized is required to submit an
acceptable capital restoration plan to its appropriate federal banking agency.
Under FDICIA, a bank holding company must guarantee that a subsidiary depository
institution meets its capital restoration plan, subject to certain limitations.
The obligation of a controlling holding company under FDICIA to fund a capital
restoration plan is limited to the lesser of 5% of an undercapitalized
subsidiary's assets or the amount required to meet regulatory capital
requirements. An undercapitalized institution is also generally prohibited from
increasing its average total assets, making acquisitions, establishing any
branches, or engaging in any new line of business, except in accordance with an
accepted capital restoration plan or with the approval of the FDIC. In addition,
the appropriate federal banking agency is given authority with respect to any
undercapitalized depository institution to take any of the actions it is
required to or may take with respect to a significantly undercapitalized
institution as described below if it determines "that those actions are
necessary to carry out the purpose" of FDICIA.

At December 31, 1998, the Bank had the requisite capital levels to qualify as
well capitalized.

FDIC Insurance Assessments

Pursuant to FDICIA, the FDIC adopted a risk-based assessment system for insured
depository institutions that takes into account the risks attributable to
different categories and concentrations of assets and liabilities. The system
assigns an institution to one of three capital categories: (a) well capitalized;
(b) adequately capitalized; and (c) undercapitalized. These three categories are
substantially similar to the prompt corrective action categories described
above, with the "undercapitalized" category including institutions that are

                                       18
<PAGE>

undercapitalized, significantly undercapitalized, and critically
undercapitalized for prompt corrective action purposes. An institution is also
assigned by the FDIC to one of three supervisory subgroups within each capital
group. The supervisory subgroup to which an institution is assigned is based on
a supervisory evaluation provided to the FDIC by the institution's primary
federal regulator and information which the FDIC determines to be relevant to
the institution's financial condition and the risk posed to the deposit
insurance funds (which may include, if applicable, information provided by the
institution's state supervisor). An institution's insurance assessment rate is
then determined based on the capital category and supervisory category to which
it is assigned. Under the risk-based assessment system there are nine assessment
risk classifications (i.e., combinations of capital groups and supervisory
subgroups) to which different assessment rates are applied. Assessment rates for
members of both the Bank Insurance Fund ("BIF") and the Savings Association
Insurance Fund ("SAIF") for the first half of 1995 ranged from 23 basis points
(0.23% of deposits) for an institution in the highest category (i.e., "well
capitalized" and "healthy") to 31 basis points (0.31% of deposits) for an
institution in the lowest category (i.e., "undercapitalized" and "substantial
supervisory concern"). These rates were established for both funds to achieve a
designated ratio of reserves to insured deposits (i.e., 1.25%) within a
specified period of time.

Once the designated ratio for the BIF was reached in May 1995, the FDIC reduced
the assessment rate applicable to BIF deposits in two stages, so that, beginning
in 1996, the deposit insurance premiums for 92% of all BIF members in the
highest capital and supervisory categories were set at $2,000 per year,
regardless of deposit size. The FDIC elected to retain the existing assessment
rate range of 23 to 31 basis points for SAIF members for the foreseeable future
given the undercapitalized nature of that insurance fund.

Recognizing that the disparity between the SAIF and BIF premium rates had
adverse consequences for SAIF-insured institutions and other banks with SAIF
assessed deposits, the Deposit Insurance Funds Act of 1996 (the "Funds Act") was
enacted by Congress as part of the omnibus budget legislation and signed into
law on September 30, 1996. As directed by the Funds Act, the FDIC implemented a
special one-time assessment of approximately 65.7 basis points (0.657%) on a
depository institution's SAIF-insured deposits held as of March 31, 1995 (or
approximately 52.6 basis points on SAIF deposits acquired by banks in certain
qualifying transactions).

In addition, the FDIC has implemented a revision in the SAIF assessment rate
schedule that effected, as of October 1, 1996 (a) a widening in the assessment
rate spread among institutions in the different capital and risk assessment
categories, (b) an overall reduction of the assessment rate range assessable on
SAIF deposits of from 0 to 27 basis points, and (c) a special interim assessment
rate range for the last quarter of 1996 of from 18 to 27 basis points on
institutions subject to Financing Corporation ("FICO") assessments. Effective
January 1, 1997, assessments to help pay off the $780 million in annual interest
payments on the $8 billion FICO bonds issued in the late 1980's as part of the
government rescue of the thrift industry were imposed on both BIF- and
SAIF-insured deposits in annual amounts presently estimated at 1.29 basis points
and 6.44 basis points, respectively. Beginning in January 2000, BIF- and SAIF-
insured institutions will share the FICO interest costs at equal rates currently
estimated at 2.43 basis points.

Under the FDIA, insurance of deposits may be terminated by the FDIC upon a
finding that the institution has engaged in unsafe and unsound practices, is in
an unsafe or unsound condition to continue operations, or has violated any
applicable law, regulation, rule, order, or condition imposed by the FDIC.

                                       19
<PAGE>

Proposed Legislation and Regulatory Action

New regulations and statutes are regularly proposed that contain wide-ranging
proposals for altering the structures, regulations and competitive relationships
of the nation's financial institutions. It cannot be predicted whether or what
form any proposed regulation or statute will be adopted or the extent to which
the business of the Company may be affected by such regulation or statute.

Item 2.  Description of Property
--------------------------------

The principal place of business of both the Company and the Bank is located at
1490 Martha Berry Blvd., Rome, Georgia 30165-1618. Construction of a new
one-story, 9,000 square foot brick, traditional bank building was completed in
October 1996. It includes office space for administration, lending, customer
service and new accounts, operations facilities, four drive-through teller
lanes, six stand-up teller windows, and a security vault with safe deposit
boxes. The Bank owns the building and the 2.29 acres of graded land on which the
building sits. Prior to completion and occupancy of the building, the Bank
operated out of two temporary office units on the bank site, which provided
2,608 square feet of office space and banking facilities.

In the second quarter of 1998, the Bank finished construction of a 1,820 square
foot branch banking facility at 800 East Second Avenue in Rome (the "East Rome
Office"), approximately two miles south of the Bank's main office. The East Rome
Office opened for business in the first week of June 1998. It is a full service
branch office with three drive-up banking lanes and has a drive-up ATM.

The East Rome site was acquired for $211 thousand in the first quarter of 1997.
The cost of the facility, including site work, furniture, fixtures and equipment
was $523 thousand. Management projects that the new office should be making a
contribution to earnings after twelve months of operations and should position
the Bank to more fully service the greater Rome market. Deposit growth at the
East Rome Office was $4.2 million through December 31, 1998, which was ahead of
budget.

Item 3.  Legal Proceedings
--------------------------

There are no material legal proceedings to which the Company or the Bank or any
of their properties are subject.

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

No matter was submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.

                                     Part II

Item 5.   Market for Registrant's Common Equity and Related Stockholder Matters
-------------------------------------------------------------------------------

The information set forth under the caption "Market for Common Equity and
Related Stockholder Matters" in the 1998 Annual Report is incorporated herein by
reference.

On May 26, 1998, an employee of the Company, a Georgia resident, exercised
options to purchase 400 shares of the Company's Common Stock. As a result, the
Company issued 400 shares of its Common Stock at $10.00 per share for a total
purchase price of $4,000.00. On December 10, 1998, an employee of the Company, a
Georgia resident, exercised options to purchase 1,200 shares of the Company's
Common Stock. As a result, the Company issued 1,200 shares of its Common Stock
at $10.00 per share for a total purchase price of $12,000.00.

                                       20
<PAGE>

Based primarily on these facts, the Company relied on Section 3(a)(11) and
Section 4(2) of the Securities Act of 1933, as amended, in issuing the 1,600
shares.

Item 6. Management's Discussion and Analysis of Financial Condition and Results
-------------------------------------------------------------------------------
        of Operations
        -------------
The information set forth under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in the 1998 Annual
Report is incorporated herein by reference.

Item 7.   Financial Statements
------------------------------

The consolidated balance sheets of the Company as of December 31, 1998 and 1997,
and the related consolidated statements of operations, changes in stockholders'
equity, and cash flows, and notes to the consolidated financial statements for
each of the three years in the period ended December 31, 1998, and the report
issued thereon by the Company's independent public accountants, which appear in
the 1998 Annual Report are incorporated herein by reference.

Item 8. Changes in and Disagreements with Accountants on Accounting and
-----------------------------------------------------------------------
        Financial Disclosure
        --------------------
No change in accountants has taken place in any period subsequent to the date of
the most recent financial statements. The Company had no disagreement with
accountants with respect to accounting principles or practices or financial
statement disclosures or auditing scope or procedure, or disagreements with
regard to reportable events. The Company has had the same independent accounting
firm since its inception.

                                    Part III

Item 9. Directors, Executive Officers, Promoters and Control Persons;
---------------------------------------------------------------------
        Compliance with Section 16(a) of the Exchange Act
        -------------------------------------------------
The information set forth under the caption "Election of Directors" in the Proxy
Statement is incorporated herein by reference.

Item 10.  Executive Compensation
--------------------------------

The information set forth under the caption "Executive Compensation" in the
Proxy Statement is incorporated herein by reference.

Item 11.  Security Ownership of Certain Beneficial Owners and Management
------------------------------------------------------------------------

The information set forth under the caption "Security Ownership of Certain
Beneficial Owners and Management" in the Proxy Statement is incorporated herein
by reference.

Item 12.  Certain Relationships and Related Transactions
--------------------------------------------------------

The information set forth under the caption "Certain Relationships and Related
Transactions" in the Proxy Statement is incorporated herein by reference.

                                       21
<PAGE>

Item 13.  Exhibits, List and Reports on Form 8-K
------------------------------------------------

(a) The following documents are filed as part of this report:

3.1     Articles of Incorporation (Incorporated by reference to Exhibit 3.1 to
        the Company's Registration Statement No. 33-82858 on Form SB-2).

3.2     Bylaws (Incorporated by reference to Exhibit 3.2 to the Company's 
        Registration Statement No. 33-82858 on Form SB-2).

4.1     Provisions of Company's Articles of Incorporation and Bylaws Defining
        the Rights of Shareholders (Incorporated by reference to Exhibit 4.1 to
        the Company's Registration Statement No. 33-82858 on Form SB-2).

4.2     Form of Stock Certificate (Incorporated by reference to Exhibit 4.2 to
        the Company's Registration Statement No. 33-82858 on Form SB-2).

10.1    *Employment Agreement between the Company and Thomas D. Caldwell, III
        dated September 1, 1997. (Incorporated by reference to Exhibit 10.1 of
        the Company's Quarterly Report on Form 10-QSB for the quarter ended
        September 30, 1997).

10.2    *Greater Rome Bancshares,  Inc. 1996 Stock Incentive Plan  (Incorporated
        by reference to Exhibit  10.12 of the  Company's  Annual  Report on Form
        10-KSB for the year ended December 31, 1995).

10.3    *Form of Incentive Stock Option Agreement (Incorporated by reference to
        Exhibit 10.13 of the Company's Annual Report on Form 10-KSB for the year
        ended December 31, 1996).

10.4    *Form of Stock Option Award to Non-employee Directors (Incorporated by
        reference to Appendix A to the Company's Proxy Statement for the 1997
        Annual Meeting of the Shareholders held May 15, 1997).

10.5    *Employment Agreement between the Company and E. Grey Winstead, III
        dated September 1, 1997. (Incorporated by reference to Exhibit 10.5 of
        the Company's Quarterly Report on Form 10-QSB for the quarter ended
        September 30, 1997).

13.1    1998 Annual Report to Shareholders.

21.1    Subsidiaries of the Registrant (Incorporated by reference to Exhibit
        21.1 of the Company's Annual Report on Form 10-KSB for the year ended
        December 31, 1996).

27.1    Financial Data Schedule (for S.E.C. use only).

*  Indicates a management contract or compensatory arrangement.

(b)  Reports on Form 8-K

        No reports on Form 8-K were filed during the fourth quarter of the year
ended December 31, 1998.


                                       22
<PAGE>



                                   SIGNATURES

In accordance with the requirements of Section 13 or 15(d) of the Exchange Act,
the registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                                    GREATER ROME BANCSHARES, INC.

                                    By:/s/ Thomas D. Caldwell, III   
                                       ---------------------------
                                           Thomas D. Caldwell, III, President
Date: March 26, 1999                   

In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
           Signature                   Title                   Date
           ---------                   -----                   ----

<S>                                  <C>                   <C> 
/s/ Robert L. Berry                   Director              March 26, 1999
----------------------------
Robert L. Berry

/s/ Frank A. Brown, Jr.               Director              March 26, 1999
----------------------------
Frank A. Brown, Jr.

/s/ Thomas D. Caldwell, III   Chairman, CEO and President   March 26, 1999
---------------------------- (Principal Executive Officer)
Thomas D. Caldwell, III                          

/s/ Gene G. Davidson                  Director              March 26, 1999
---------------------------
Gene G. Davidson

/s/ Henry Haskell Perry               Director              March 26, 1999
---------------------------
Henry Haskell Perry

/s/ Bradford Lee Riddle               Director              March 26, 1999
---------------------------
Bradford Lee Riddle

/s/ M. Wayne Robinson                 Director              March 26, 1999
---------------------------
M. Wayne Robinson

/s/ Dale G. Smith                     Director              March 26, 1999
---------------------------
Dale G. Smith

/s/ Paul E. Smith                     Director              March 26, 1999
---------------------------
Paul E. Smith

/s/ W. Fred Talley                    Director              March 26, 1999
---------------------------
W. Fred Talley

/s/ Martha Berry Walstad              Director              March 26, 1999
---------------------------
Martha Berry Walstad

/s/ E. Grey Winstead, III      Chief Financial Officer      March 26, 1999
---------------------------   (Principal Financial and 
E. Grey Winstead, III            Accounting Officer)
</TABLE>


                                       23
<PAGE>



                          GREATER ROME BANCSHARES, INC.
      Form 10-KSB Annual Report for the Fiscal Year ended December 31, 1998

                                INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit                                                                     
 Number                                     Description                            Sequential Page
 ------                                     -----------                            ---------------
<S>   <C>                                                                           <C>      
 3.1  Articles of Incorporation (Incorporated by reference to Exhibit 3.1 to the
      Company's Registration Statement No. 33-82858 on Form SB-2).                        N/A                     
                                                  
 3.2  Bylaws (Incorporated by reference to Exhibit 3.2 to the Company's
      Registration Statement No. 33-82858 on Form SB-2).                                  N/A

 4.1  Provisions of Company's Articles of Incorporation and Bylaws Defining the
      Rights of Shareholders (Incorporated by reference to Exhibit 4.1 to the
      Company's Registration Statement No. 33-82858 on Form SB-2).                        N/A

 4.2  Form of Stock Certificate (Incorporated by reference to Exhibit 4.2 to the
      Company's Registration Statement No. 33-82858 on Form SB-2).                        N/A

 10.1 *Employment Agreement between the Company and Thomas D. Caldwell, III
      dated September 1, 1997. (Incorporated by reference to Exhibit 10.1 of the
      Company's Quarterly Report on Form 10-QSB for the quarter ended September
      30, 1997).                                                                          N/A                       
                                                                                                                   
 10.2 *Greater Rome Bancshares, Inc. 1996 Stock Incentive Plan (Incorporated by
      reference to Exhibit 10.12 of the Company's Annual Report on Form 10-KSB
      for the year ended December 31, 1995).                                              N/A

 10.3 *Form of Incentive Stock Option Agreement (Incorporated by reference to
      Exhibit 10.13 of the Company's Annual Report on Form 10-KSB for the year
      ended December 31, 1996).                                                           N/A          
                                                                                                                   
 10.4 *Form of Stock Option Award to Non-employee Directors (Incorporated by
      reference to Appendix A to the Company's Proxy Statement for the 1997 
      Annual Meeting of the Shareholders held May 15, 1997).                              N/A

 10.5 *Employment Agreement between the Company and E. Grey Winstead, III dated
      September 1, 1997. (Incorporated by reference to Exhibit 10.5 of the 
      Company's Quarterly Report on Form 10-QSB for the quarter ended September
      30, 1997).                                                                          N/A

 13.1  1998 Annual Report to Shareholders.                                                N/A

 21.1  Subsidiaries of the Registrant (Incorporated by reference to Exhibit 21.1
       of the Company's Annual Report on Form 10-KSB for the year ended December
       31, 1996).                                                                         N/A     
                                                                                                                  
 27.1  Financial Data Schedule (for S.E.C. use only).                                     N/A
</TABLE>

----------
* Indicates a management contract or compensatory arrangement.



                                       24