FIRST GEORGIA HOLDING, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(1) BASIS OF PRESENTATION

In the opinion of Management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly the financial position of First Georgia Holding, Inc. as of March 31, 2000 and September 30, 1999. Also included are the results of its operations and changes in financial position for the three and six months ended March 31, 2000 and 1999. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the full year.

The consolidated financial statements include the accounts of the Company and the Bank. All significant intercompany balances and transactions have been eliminated in consolidation.

For further information, refer to the consolidated financial statements and footnotes thereto included in the Bank's Annual Report to Shareholders, incorporated by reference into the Company's Form 10-KSB for the year ended September 30, 1999.

2. EARNINGS PER SHARE

Earnings per share were calculated using the weighted average number of shares outstanding for the period. The diluted earnings per share takes into consideration the assumed increase in shares from the conversion of stock options as well.

The incremental shares from the assumed conversion of stock options were determined using the treasury stock method under which the assumed proceeds were equal to the amount that the Company would receive upon the exercise of the options plus the amount of total benefit that would be credited to additional paid-in-capital assuming exercise of options. The assumed proceeds are used to purchase outstanding shares at the average market price during the period.

(3) ALLOWANCE FOR LOAN LOSSES

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

FIRST GEORGIA

HOLDING, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

LIQUIDITY

First Georgia Bank (the Bank) has traditionally maintained levels of liquidity above the levels required by regulatory authorities. As a member of the Federal Home Loan Bank System, the Bank is required to maintain a daily average balance of cash and eligible liquidity investments equal to a monthly average of 4% of withdrawable savings and short-term borrowings. The Bank's liquidity level was 6.27% and 5.88% at March 31, 2000 and September 30, 1999, respectively.

The Bank's operational needs, demand for loan disbursements, and savings withdrawals can be met by loan principal and interest payments received, new deposits, and excess liquid assets. Significant loan demand, deposit withdrawal, increased delinquencies, and increased real estate acquired in settlement of loans (REO) could alter this condition. Management does not foresee any liquidity problems for fiscal 2000.

CAPITAL RESOURCES

The following is reconciliation at March 31, 2000 of the Bank's equity capital to regulatory capital, under generally accepted accounting principles:

Current regulations require institutions to keep minimum regulatory tangible capital equal to 1.5% of adjusted assets, minimum core capital to adjusted assets of 3% (the leverage ratio), and risk-based capital to risk-adjusted assets of 8%. The Office of Thrift Supervision (the OTS) may increase the minimum core capital, or leverage ratio, based on its assessment of the institution's risk management systems and the level of total risk in the individual institution. At Mar ch 31, 2000, the bank met all three capital requirements.

The Bank's regulatory capital and the required minimum amounts at March 31, 2000 are summarized as follows:

The Federal Deposit Insurance Corporation Improvement Act (FDICIA) required the Federal banking agencies to take "prompt corrective action" in respect to institutions that do not meet minimum capital requirements. Along with the ratios described above, FDICIA also introduced an additional capital measurement, the Tier 1 risk-based capital ratio. The Tier 1 ratio is the ratio of Tier 1 or core capital to total risk-adjusted assets. FDICIA establishes five capital tiers: "well capitalized," "adequatel y capitalized," "undercapitalized," "significantly undercapitalized," and "critically undercapitalized." The regulators summarize their minimum requirements for the five capital tiers established by the FDICIA as follows:

An unsatisfactory examination rating may cause an institution's capitalization category to be lower than suggested by its actual capital position.

At March 31, 2000, the Bank's Tier 1 risk-based capital ratio was 9.80%. If a depository institution should fail to meet its regulatory capital requirements, regulatory agencies can require submission and funding of a capital restoration plan by the institution, place limits on its activities, require the raising of additional capital, and ultimately require the appointments of a conservator or receiver for the institution.

The Bank's capital position changed during the quarter ended March 31, 1999. Total capital as well as tangible capital, core capital, and risk-based capital continued to increase during the quarter. The mix of risk-based assets and additional earnings are the primary factors for this increase.

RESULTS OF OPERATIONS

INTEREST INCOME

INTEREST EXPENSE

Interest on deposits increased $326,318 for the quarter ended March 31, 2000 and $269,048 (7.04%) for the six-month period ended March 31, 2000 as compared to the same period in 1999. Average deposit balances increased approximately $30 million in the six-month period from September 30, 1999 to March 31, 2000. The market place in which the Bank operates is extremely conducive to deposit growth, and the Bank has positioned its deposit products to take full advantage of the area's deposit demand. Interest on borrowings decreased $188 or .16% for the quarter and increased $54,396, or 22.03% for the six-month period ending March 31, 2000. During the first three months of the year, the Bank was borrowing Federal funds daily. This explains the increase in interest expense over the year. The Bank has been able to sell Federal funds for the last three months of the period, resulting in a decrease in interest expense for the three months ended March 31, 2000 over the same period in 1999. The increased flow of mon ey into the Bank from deposits has made it possible to pay off several Federal Home Loan Bank advances and other borrowings.

NET INTEREST INCOME

Net interest income increased $549,954, or 28.42% for the quarter and $1,080,770, or 28.29% for the six-month period ended March 31, 2000 as compared to the same periods last year. While increases in loan balances offset by interest earning deposits have contributed to the substantial increase, the increase in non-interest bearing deposits held by the Bank has been the deciding factor in the increase. Management believes this growth will continue throughout fiscal 2000.

PROVISION FOR LOAN LOSSES

The provision for loan losses for the six-month period ended March 31, 2000 totaled $90,000, increasing over the same period in 1999. The loan loss provision increased $60,000 for the quarter and increased $89,944 for the six months ended March 31, 2000 as compared to the same periods ended March 31, 1999. With the growth in loan volume and the increase in charge-offs over the same period in 1999, Management found it necessary to increase the loan loss provision. Net Interest Income after the Provision for Loan Losses for the quarter ended March 31, 2000 increased $489,954, or 25.32% from the same period last year and $990,825, or 25.93% for the six-month period ended March 31, 2000 over March 31, 1999.

OTHER INCOME

Other income for the quarter increased $97,393 or 18.25% from the same quarter the previous year and $88,746 or 7.60% for the six-month period ended March 31, 2000 as compared to the same period in the previous year. The main factor for this increase was deposit service charges. As the volume of deposits increased, the fee income, such as service charges and insufficient funds fees, increased as well. Therefore, deposit service charges increased $151,322, or 48.61% for the quarter and $232,561, or 34.66 % for the six-month period ended March 31, 2000 compared to the same periods in the previous year.

OTHER EXPENSES

Other expenses for the quarter ended March 31, 2000 increased $302,104, or 17.54%, over the quarter ended March 31, 1999. Other expenses for the six-month period ended March 31, 2000 increased $702,485, or 21.07%, over the six-month period ended March 31, 1999. Salaries and employee benefits increased $124,756, or 14.92% in the three-month period ending March 31, 2000 over the same period ended March 31, 1999, and $278,615, or 17.01% for the six-month period ended March 31, 2000 over the same period las t year. The Bank has added several new employees to help with the growth the Bank is experiencing. Management does not foresee any extraordinary hiring concerns for the remainder of the year. Premises and occupancy costs increased $169,282 or 53.32% for the quarter ended March 31, 2000 over the quarter ended March 31, 1999. Premises and occupancy expenses increased $347,669 or 58.77% over the six-month period ended March 31, 2000 as compared to the same period last year last year. This increase results fro m additional computer, phone, and other office equipment purchased. Other operating expenses increased $27,891, or 5.40%, for the quarter and $96,906, or 9.68% for the six-month period ended March 31, 2000 as compared to last year. This increase results primarily from additional expenses related to the implementation of Internet banking services and the establishment of additional communication lines.

The Bank increased its provision for income taxes by $150,766, or 57.57% for the quarter and increased $200,815, or 32.80% for the six month-period ended March 31, 2000 as compared to the same periods in 1999. The effective tax rate remained consistent at a rate of 40%.

FINANCIAL CONDITION

ASSETS

Cash and cash equivalents increased $10,582,317 or 146.92%, over the six-month period ended March 31, 2000. With the increase in transaction deposit accounts, the Bank has maintained higher cash and cash equivalents balances. Interest bearing deposits in other banks decreased $130,511 for the six months ended March 31, 2000 and Federal funds sold increased $10,340,000 over the same period. Investment balances decreased $159,637, or 1.11%, for the six months ended March 31, 2000. The Bank is quickly turn ing new deposit balances into new loan disbursements. Premises and equipment increased $506,159, or 10.33% resulting from the purchase of new computer equipment. Other assets decreased $53,195 over the six-month period ended March 31, 2000. This decrease is primarily due to a $60,000 decrease in the cash letter adjustments account.

Loans receivable increased 22,776,544, or 13.15% as of the six months ended March 31, 2000 over September 30, 1999. The Bank has been aggressive, yet selective, in attracting new loan business. Loan demand is steady, and the Bank has been successful in drawing strong, safe loans to the Bank. Although loans receivable have increased over the period ended March 31, 2000, the provision for loan losses has decreased approximately $26,000. This decrease is due a greater amount of loans being charged-off duri ng the period than were allowed for. Net charge-offs were $116,805 and the transfer to provision for loan losses was $90,000. The Bank's loan portfolio at March 31, 2000 and September 30, 1999 is summarized as follows:

ALLOWANCE FOR LOAN LOSSES

Management conducts an extensive review of the provision for loan losses on a monthly basis. Additions to the allowance for loan losses are charged to operations based upon management's evaluation of the potential losses in its portfolio. This evaluation considers the estimated value of the underlying collateral and such other factors as, in management's judgement, deserve recognition under existing economic conditions. While management uses the best information available to make evaluations, future adjustments to the allowance may be necessary if conditions differ substantially from the assumptions used in making the evaluations. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Bank's allowances for loan losses on loan and real estate owned. Such agencies may require the bank to recognize additions to the allowances based on their judgements of information available to them at the time of their examination.

A loan is considered impaired when it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. The Bank's impaired loans include non-accrual loans, troubled debt restructurings, and large loans more than 90 days delinquent in which full payment of principal and interest is not expected. Cash receipts on impaired loans are used to reduce principal balances. Impairment losses are included in the allowance for loan losses through a cha rge to the provision for loan losses. Impairment losses are measured by the present value of expected future cash flows discounted at the loan's effective interest rate, or at either the loan's observable market price or the fair value of the collateral. Adjustment to impairment losses due to changes in the fair market value of an impaired loan's underlying collateral are included in the provision for losses. Upon disposition of an impaired loan, any related valuation allowance is reversed through a charge -off to the allowance for loan losses.

Large groups of smaller homogenous loans (consumer loans) are collectively evaluated for impairment. Commercial loans and larger balance real estate and other loans are individually evaluated for impairment.

The following tables illustrate the Bank's allowance for loan losses and its problem loans.

LIABILITIES

Accrued expenses and other liabilities decreased $1,971,135, or 42.13% during the six-month period ended March 31, 2000. The decrease is primarily attributable to a $2,860,000 decrease in the Federal funds purchased account offset by an increase in accrued expenses resulting from the growth of the Bank. The Bank has recently been selling federal funds due to an increase in deposits. Accrued interest payable increased $116,139, or 22.43% for the six-month period ended March 31, 2000. This is due to an in crease of approximately $30 million in average interest earning deposits over the six-month period.

PART II

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

ITEM 5. OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8K

1. Exhibits.

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.