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 December 31, 1999 and September 30, 1999. Also included are the results of its operations and changes in financial position for the three months ended December 31, 1999 and 1998. 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.

FIRST GEORGIA HOLDING, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the financial statements and related notes appearing elsewhere in this Form 10-Q

LIQUIDITY

First Georgia Bank (the Bank) has traditionally maintained levels of liquidity above 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 5.39% and 5.88% at December 31, 1999 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 2000.

CAPITAL RESOURCES

The following is a reconciliation at December 31, 1999 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 December 31, 1999, the Bank met a ll three capital requirements.

The Bank's regulatory capital and the required minimum amounts at December 31, 1999 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 December 31, 1999, the Bank's Tier 1 risk-based capital ratio was 9.31%. 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 December 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 income on loans increased $693,000, or 19.49%, for the three month period ended December 31, 1999 as compared to the same period in 1998. The Company has been aggressive in attracting new loan business while competition for loans remains strong and loan demand is still steady in the marketplace. However, the Bank continues to be selective in the loans that it makes, as evidenced by its low real estate foreclosed balances. Base interest rates increased at the beginning of the quarter, which i ncreased the interest income. Despite the increase in rates, Management expects loan demand to maintain healthy levels. With the strong loan demand, Management has not maintained large Fed funds sold balances. At December 31, 1998, the Bank was accumulating cash to fund the sale of the Blackshear branch. At December 31, 1999, the Bank utilized most of its cash to fund loans. Therefore, interest on Fed funds sold decreased $166,000 or 98.02%. Interest on investments remained fairly constant between t he two periods. The increase in investment income was $964, or 0.43%. As loan demand remained strong, the Bank invested proceeds received from pay downs on its securities in loan growth.

INTEREST EXPENSE

Interest on deposits decreased $57,270 or 2.96% for the quarter ended December 31, 1999 as compared to the same period in 1998. This decrease results primarily from the decrease in interest rates on deposits from the quarter ended December 31, 1998. Although interest rates, in general, increased for the quarter ended December 31, 1999, they actually decreased from the quarter ended December 31, 1998 due to a special, including higher than average interest rates, the bank was promoting in 1998 to attrac t new deposits. Interest on borrowings increased $54,583, or 41.97% for the quarter ending December 31, 1999 over the same quarter last year. At the end of the previous fiscal year end and the beginning of this first quarter, loan growth outpaced deposit growth. Therefore, the Bank found it necessary to borrow Federal funds. By the end of the quarter ended December 31, 1999, deposit growth had caught up with loan growth.

NET INTEREST INCOME

Net Interest Income increased $530,818, or 28.15% for the quarter ended December 1999 over the same period ended December 31, 1998. The substantial increase in loan balances is the main factor for this increase.

PROVISION FOR LOAN LOSSES

The provision for loan losses for the three-month period ended December 31, 1999 totaled $30,000, increasing over the same period in 1998. With the growth in loan volume and the increase in charge-offs over the same period in 1998, Management found it necessary to increase the loan loss provision. Net Interest Income after the Provision for Loan Losses for the quarter ended December 31, 1999 increased $500,874, or 26.56% from the same period last year.

OTHER INCOME

Other Income for the quarter decreased $8,547, or 1.35% from the same quarter the previous year. Loan servicing fees decreased 71,765, or 34.73% for the quarter ended December 31, 1999 as compared to the quarter ended December 31, 1998. Fees earned on brokered mortgage loans are down from last year. The rate environment at the beginning of the quarter resulted in less brokered mortgage loans closed. Deposit service charges increased $81,239 or 22.59% for the quarter ended December 31, 1999. This i ncrease is related to increased fee income, such as service charges and insufficient funds fees, resulting from an increase in deposits. Other operating income decreased $18,144, or 35.28% for the quarter ended December 31, 1999 as compared to the same quarter last year. The Bank realized a gain on the sale of a piece of real estate acquired in settlement of a loan in the quarter ended December 31, 1998. The Bank realized no such gain in the same quarter this year.

OTHER EXPENSES

Other expenses for the quarter ended December 31, 1999 increased $400,382, or 24.85%, over the quarter ended December 31, 1998. In the first quarter of fiscal 2000, the Bank implemented a few projects to increase the level of customer service. Internet banking was added and will be offered to customers in the second quarter. A customer call center was also added to give customers a better response time to questions regarding their accounts. With these new areas, the Bank incurred some additional cos ts. Salaries and employee benefits increased $153,859, or 19.18% in the three month period ending December 31, 1999 over December 31, 1998 as a result of additional personnel to service the internet banking and the call center. Premises and occupancy costs increased $178,387 or 65.07% in the quarter ended December 31, 1999 over the same period last year. Additional computer, phone, and other office equipment were added for the new customer service areas. Other operating expenses increased $42,159, or 8.1 9%, for the quarter as compared to the same quarter last year. This increase results primarily from additional expenses related to the Internet banking service and customer call center. Federal Insurance premiums for the quarter ended December 31, 1999 increased $20,624, or 458.31% from December 31, 1998. These premiums are based on the size of a bank's deposit portfolio, which has increased approximately $14,000,000 between the two periods (excluding the $9,000,000 sold from the Blackshear office).

The provision for income taxes increased by $50,049 or 14.28% for the quarter ended December 31, 1999 as compared to the same period in 1998. The effective tax rate Management uses is consistent at a rate of 40%.

FINANCIAL CONDITION

ASSETS

Cash and cash equivalents increased $719,111, or 9.98%, over the three month period ended December 31, 1999. This increase results primarily from an increase in average balances on deposits. Investment balances decreased $727,634, or 5.04%, for the three months ended December 31, 1999. The Bank has focused on utilizing it's capital to increase it's loan portfolio. Premises and equipment increased $127,131, or 2.59%. The Bank purchased additional equipment related to it's Internet banking service and customer call center.

Loans receivable increased $12,772,269, or 7.37% as of the three months ended December 31, 1999 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. Loans receivable at December 31 and September 30, 1999 are 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 loan 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, fut ure 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 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 charge 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

Deposits have increased $10,456,388, or 6.04%, for the three month period ended December 31, 1999. This increase reflects that First Georgia has been successful in its efforts to obtain new deposit business. With the increase of loan balances, the Bank increased its position in Federal Home Loan Bank advances, as evidenced by the increase of $2,000,000, or 23.26%. Additionally, the Bank increased its federal funds purchased line by $1,840,000 from September 30, 1999 in an effort to fund new loan growt h.

PART II

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.