CRESCENT BANKING CO, 10KSB40, 1997-03-31

CRESCENT BANKING CO
10KSB40, 1997-03-31
STATE COMMERCIAL BANKS

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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-KSB

x Annual Report under Section 13 of the Securities Exchange Act of
- ------- 1934 for the Fiscal Year ended December 31, 1996 (Fee required)

- ------- Transition report under Section 13 of 15(d) of the Securities Exchange
Act of 1934 (No fee required)

Commission File No. 0-20251
CRESCENT BANKING COMPANY
------------------------
(Name of Small Business Issuer in Its Charter)

Georgia 58-1968323
- ---------------------------------- -------------------------
(State or Other Jurisdiction (I.R.S. Employer Identification No)
of Incorporation or Organization)

251 Highway 515 30143
- --------------------------------------- ---------------------
(Address of Principal Executive Offices) (Zip Code)

(706) 692-2424
-------------------------------------------------
(Issuer's Telephone Number, Including Area Code)

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

Name of Each Exchange on which Registered: None

Title of Each Class Securities registered under Section 12(g) of the Exchange
Act:

Common Stock, $1.00 par value
(Title of Class)

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 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
---------

The Company's revenues for its fiscal year ended December 31, 1996 were
$7.5 million.

The aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as March 24, 1997 was $14.00. The number of
shares outstanding of the Company Common Stock as of March 24, 1997 was 704,854.

Portions of the Company's 1996 Annual Report to Shareholders for the year
ended December 31, 1996 ("Annual Report") are incorporated by reference into
Parts I and II of this Form 10-KSB.

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Portions of the Company's definitive Proxy Statement for its 1997 Annual
Meeting of Shareholders filed pursuant to Rule 14a-6 of the Securities Exchange
Act of 1934 ("Proxy Statement") are incorporated by reference into Part III of
this Form 10-KSB.

PART I

ITEM 1 - DESCRIPTION OF BUSINESS

GENERAL

Crescent Banking Company (the "Company") is a Georgia corporation that is
registered as a bank holding company with the Board of Governors of the Federal
Reserve System ("Federal Reserve") under the Federal Bank Holding Company Act of
1956, as amended, and with the Georgia Department of Banking and Finance (the
"Georgia Department") under the Financial Institutions Code of Georgia. The
Company was incorporated on November 19, 1991, to facilitate a reorganization
(the "Reorganization") pursuant to which the Company became the parent holding
company of Crescent Bank and Trust Company (the "Bank"). The Reorganization was
completed on May 1, 1992. Through the Bank, the Company provides a broad range
of banking and financial services in the areas surrounding Jasper, Georgia, and
wholesale mortgage banking services to correspondents located in the Atlanta,
Georgia metropolitan area and throughout the Southeast. The Company owns 100%
of Crescent Mortgage Services, Inc. ("CMS"), which offers wholesale mortgage
banking services in the New England states and provides servicing for
residential mortgage loans. As of December 31, 1996, the Company and
subsidiaries had total assets of approximately $74.7 million, total deposits of
approximately $55.8 million and shareholders' equity of approximately $7.7
million.

The Bank is a Georgia banking corporation that has been engaged in the
general commercial banking business since it opened for business in August 1989.
The Bank began wholesale mortgage banking operations in February 1993. The Bank
is a member of the Federal Deposit Insurance Corporation ("FDIC") and its
deposits are insured by the Bank Insurance Fund ("BIF") of the FDIC.

CMS was incorporated as a separate subsidiary of the Company on October 11,
1994, to engage in the servicing of mortgage loans. CMS is an approved servicer
of mortgage loans sold to Federal Home Loan Mortgage Corporation ("Freddie
Mac"), Federal National Mortgage Association ("Fannie Mae") and private
investors. In December 1996, CMS opened a wholesale mortgage banking operation
in the Northeast United States.

BUSINESS STRATEGY

The Company currently intends to expand and diversify its operations into
new lines of business through the Bank and CMS, including in plans to engage in
FHA/VA mortgage lending in 1997. As part of its diversification efforts, CMS
opened a wholesales mortgage banking operation in the Northeast with an office
located in Manchester, New Hampshire.

COMMERCIAL BANKING OPERATIONS

The Bank's commercial banking operations are primarily retail-oriented and
aimed at individuals and small- to medium-sized businesses located within its
market area. The Bank considers its primary market area for commercial banking
services to be Pickens County, Bartow County and surrounding areas of Dawson,
Cherokee and Gilmer Counties, Georgia, which are north of Atlanta. While the
Bank provides most traditional banking services, its principal activities are
the taking of demand and time deposits and the making of secured and unsecured
consumer and business loans.

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The retail nature of the Bank's commercial banking operations allows for
diversification of depositors and borrowers, and management believes the Bank is
not dependent upon a single or a few customers. Most of the Bank's deposits
are attracted from individuals and small- to moderate-sized business related
sources. No material portion of the Bank's commercial banking loans is
concentrated within a single industry or group of related industries.

MORTGAGE BANKING OPERATIONS

The Company currently originates, sells and services mortgage loans through
the Mortgage Division of the Bank and CMS. The Bank and CMS acquires mortgage
loans from small retail-oriented originators in the North and Southeast.
Substantially all of the mortgage loans are currently being resold after being
"warehoused" for 10 to 30 days, with associated servicing rights sold or
retained, in the secondary market to Freddie Mac, Fannie Mae, and private
investors. To the extent that the Company retains the servicing rights on
mortgage loans that it resells, it collects annual servicing fees. Loans that
are resold with associated servicing rights released include a premium for such
servicing in the sale price paid to the Company.

Mortgage loan purchases are funded through loan sales, a warehouse line of
credit with the Federal Home Loan Bank of Atlanta, Paine Webber and the Bank's
regular funding sources. Prior to being resold, mortgage loans held generally
generate net interest income due to the Company seeking to maintain a positive
spread on the rates of interest paid to the Company on the mortgage loans as
compared to the rates of interest paid by the Company on its funding sources.
Pending resale, the Company does incur interest rate risk that affects the value
of such mortgage loans. The Company also generates ancillary income through
late fees, mortgage life insurance commissions and assumption fees, in addition
to servicing fees and gestation fee income.

The Company attempts to minimize potential interest rate risks incurred as
a result of market movements between the time commitments to purchase mortgage
loans are made and the time the loans are closed, by either having in place
commitments to purchase the loans from the Company through the secondary market,
or purchasing an option to deliver to the secondary market a mortgage-backed
security. Other "hedging" techniques may also be used to minimize interest rate
risk, but speculative secondary market activities are not engaged in. The
success of the Company's mortgage banking operations is highly dependent on the
efforts of Robert C. KenKnight, the Bank's Executive Vice President for Mortgage
Banking Operations, and President of CMS.

The Company's mortgage banking business is not dependent on any particular
mortgage loan originators or borrowers. Such business does depend upon a
reliable sources of warehouse credit to fund the origination and holding of
mortgage loans pending securitization.

SEASONALITY

While the Bank does not consider its commercial banking business to be
seasonal, the Company's mortgage banking business is somewhat seasonal, with the
volume of home financings, in particular, being lower during the winter months.

COMPETITION

The Bank's Commercial and Mortgage Divisions operate in highly competitive
markets. The Bank competes directly for deposits in its commercial banking
market with other commercial banks, savings and loan associations, credit
unions, mutual funds, securities brokers, insurance companies, locally and
regionally and nationally, certain of which compete with offerings by mail,
telephone, computer and/or the Internet. In its commercial bank lending
activities, the Bank competes with other financial institutions as

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well as consumer finance companies, mortgage companies and other lenders engaged
in the business of extending credit to customers located in its market area.
Interest rates, both on loans and deposits, and prices of services are
significant competitive factors among financial institutions generally. Office
location, types and quality of services and products, office hours, customer
service, a local presence, community reputation and continuity of personnel may
be other important competitive factors, and are emphasized by the Bank.

In addition to the Bank, three other commercial banks have offices in the
Jasper area of Pickens County. Many of the largest banks operating in Georgia,
including some of the largest banks in the country, also have offices within a
short distance of the Bank's market area. Virtually, every type of competition
for business of the type served by the Bank has offices in Atlanta,
approximately 50 miles away from Jasper. These institutions have greater
resources, broader geographic markets and higher lending limits, may offer
various services that the Bank does not offer, and can better afford and make
broader use of media advertising, support services, and electronic technology
than can the Bank. To offset these competitive disadvantages, the Bank depends
on its reputation as an independent and locally-owned community bank, personal
service, greater community involvement and its ability to make credit and other
business decisions quickly.

The wholesale mortgage banking business is also intensely competitive
locally, regionally and nationally. The Company competes with thrifts,
commercial banks, mortgage companies, insurance companies, and securities firms
having local, regional and national operations with respect to the purchase,
servicing and sale of mortgage loans. Many of such institutions have
substantially greater resources than the Company.

SUPERVISION AND REGULATION

Bank holding companies and banks are extensively regulated under both
federal and state law. The following discussion summarizes certain statutes,
rules and regulations affecting the Company and the Bank. This summary is
qualified in its entirety by reference to the statutory and regulatory
provisions referred to below and is not intended to be an exhaustive description
of the statutes or regulations applicable to the Company's and the Bank's
businesses. Any change in applicable law or regulations may have a material
effect on the business of the Company and the Bank. Supervision, regulation and
examination of banks by the bank regulatory agencies are intended primarily for
the protection of depositors rather than holders of Company common stock.

BANK HOLDING COMPANY REGULATION. As a bank holding company registered with
the Federal Reserve under the BHC Act, and with the Georgia Department under the
Georgia Financial Institutions Code, the Company is subject to supervision,
examination and reporting by the Federal Reserve and the Georgia Department.

The Company is required to file with the Federal Reserve its periodic
reports and such additional information as the Federal Reserve may require. The
Federal Reserve examines the Company and may examine its subsidiaries. The
Georgia Department also may examine the Company.

The BHC Act requires prior Federal Reserve approval for, among other
things, the acquisition by a bank holding company of direct or indirect
ownership or control of more than 5% of the voting shares or substantially all
of the assets of any bank, or for a merger or consolidation of a bank holding
company with another bank holding company. A bank holding company may acquire
direct or indirect ownership or control of voting shares of any company that is
engaged directly or indirectly in banking or managing or controlling banks or
performing services for its authorized subsidiaries. A bank holding company
may, however, engage in or acquire an interest in a company that engages in
activities which the Federal Reserve has determined by regulation or order to be
so closely related to banking as to be a proper

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incident thereto.

The BHC Act, as amended by the interstate banking provisions of the Riegle-
Neal Interstate Banking and Branching Efficiency Act of 1994 ("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 bank based in another
state, 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 has
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 March 1996, the Georgia legislature adopted legislation opting
into interstate branching effective June 1, 1997.

The Economic Growth and Regulatory Paperwork Reduction Act of 1996
("EGRPRA") was signed into law on September 30, 1996. EGRPRA streamlined the
non-banking activities application process for well-capitalized and well-managed
bank holding companies. Under EGRPRA, qualified bank holding companies may
commence a regulatory approved non-banking activity without prior notice to the
Federal Reserve; written notice is required within 10 days after commencing the
activity. Under EGRPRA, the prior notice period is reduced to 12 days in the
event of any non-banking acquisition or share purchase or de novo non-baking
activity previously approved by order of the Federal Reserve, but not yet
implemented by regulations, assuming the size of the acquisition or proposed
activity does not exceed 10% of risk-weighted assets of the acquiring bank
holding company and the consideration does not exceed 15% of Tier 1 capital.

On February 20, 1997, the Federal Reserve adopted, effective April 21,
1997, amendments to its Regulation Y implementing certain provisions of EGRPRA.
Among other things, these amendments to Federal Reserve Regulation Y to reduce
the notice and application requirements applicable to bank and nonbank
acquisitions and de novo expansion by well-capitalized and well managed holding
companies; expand the list of non-banking activities permitted under Regulation
Y and reduce certain limitations on previously permitted activities; and amend
Federal Reserve anti-tying restrictions that include provisions that allow banks
greater flexibility to package products with their affiliates.

The Company is a legal entity separate and distinct from the Bank and its
other Subsidiaries. Various legal limitations restrict the Bank from lending or
otherwise supplying funds to the Company or its non-bank Subsidiaries, including
CMS. The Company and the Bank are subject to Section 23A of the Federal Reserve
Act. Section 23A defines "covered transactions", which include extensions of
credit, and limits a bank's covered transactions with any affiliate to 10% of
such bank's capital and surplus. All covered and exempt transactions between a
bank and its affiliates must be on terms and conditions consistent with safe and
sound banking practices, and banks and their subsidiaries are prohibited from
purchasing low-quality assets from the bank's affiliates. Finally, Section 23A
requires that all of a bank's extensions of credit to an affiliate be
appropriately secured by acceptable collateral, generally United States
government or agency securities. The Company and the Bank also are subject to
Section 23B of the Federal Reserve Act, which generally limits covered and other
transactions among affiliates to terms and under circumstances, including credit
standards, that are substantially the same or at least as favorable to the bank
or its subsidiary as prevailing at the time for transactions with unaffiliated
companies.

Federal Reserve policy requires a bank holding company to act as a source
of financial strength and to take measures to preserve and protect bank
subsidiaries in situations where additional investments in a troubled bank may
not otherwise be warranted. In addition, under the Financial Institutions
Reform, Recovery and Enforcement Act of 1989 ("FIRREA"), where a bank holding
company has more than one bank or thrift subsidiary, each of the bank holding
company's subsidiary depository institutions are

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responsible for any losses to the FDIC as a result of an affiliated depository
institution's failure. As a result, a bank holding company may be required to
loan money to its subsidiaries in the form of capital notes or other instruments
which qualify as capital under regulatory rules. However, any loans from the
holding company to such subsidiary banks likely will be unsecured and
subordinated to such bank's depositors and perhaps to other creditors of the
bank.

The Company is also regulated by the Georgia Department. The Financial
Institutions Code requires annual registration with the Georgia Department by
all Georgia bank holding companies. Such registration includes information with
respect to the financial condition, operations and management of intercompany
relationships of the bank holding company and its subsidiaries and related
matters. The Georgia Department may also require such other information as is
necessary to keep itself informed as to whether the provisions of Georgia law
and the regulations and orders issued thereunder by the Georgia Department have
been complied with.

BANK REGULATION. As a Georgia bank whose deposits are insured by the
FDIC's Bank Insurance Fund ("BIF") maintained by the FDIC, the Bank is subject
to regulation and examination by the Georgia Department and by its primary
federal regulator, the FDIC. The Georgia Department and the FDIC regulate and
monitor all of the Bank's operations, including reserves, loans, mortgages,
payments of dividends, interest rates and the establishment of branches.
Interest and certain other charges collected or contracted for by the Bank are
subject to state usury laws and certain federal laws concerning interest rates.

There are various statutory and contractual limitations on the ability of
the Bank to pay dividends, extend credit or otherwise supply funds to the
Company and its subsidiaries. Dividends from the Bank are expected to
constitute the Company's major source of funds for any cash dividends to be paid
on the Common Stock. Under Georgia law, the Georgia Department's approval of a
dividend by the Bank is not required if each of the following conditions is met:
(1) total classified assets at the most recent examination of the Bank do not
exceed 80% of equity capital as reflected at such examination; (2) the aggregate
amount of dividends to be paid in the calendar year does not exceed 50% of the
Bank's net profits, after taxes but before dividends, for the previous year; and
(3) the ratio of the Bank's equity capital to its adjusted total assets is not
less than 6%.

The FDIC has the general authority to limit the dividends paid by insured
banks if such payment may be deemed to constitute an unsafe and unsound
practice. The FDIC has indicated that paying dividends that deplete a state
non-member bank's capital base to an inadequate level would be an unsound and
unsafe banking practice. The FDIC regularly examines the Bank and has the
authority to approve or disapprove the establishment of branches, mergers,
consolidations and other similar corporate actions. Furthermore, the FDIC has
the right to prevent or remedy unsafe or unsound banking practices or other
violations of law.

Deposits in the Bank are insured by the BIF to the full extent provided by
law, for which the Bank pays deposit insurance premiums. In September 1992, the
FDIC first adopted a risk-based premium schedule which increased the assessment
rates for depository institutions and which subsequently has been modified.
Under this risk-based system each financial institution will be assigned to one
of three capital groups--well capitalized, adequately capitalized or
undercapitalized (see "FDICIA" below), and further assigned to one of three
subgroups within a capital group on the basis of supervisory and other
information relevant to the institution's primary federal and, if applicable,
state supervisors and other information relevant to the institution's financial
condition and the risk posed to BIF. The actual assessment rate applicable to a
particular institution will, therefore, depend in part upon the risk assessment
classification so assigned to the institution by the FDIC. During 1996, the
Bank paid $7,759 in BIF deposit insurance premiums.

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During its 1996 Session, the Georgia Legislature adopted legislation
effective July 1, 1996, that permits, subject to the prior approval of the
Georgia Department, banks in Georgia to establish new branch banks in up to
three counties in Georgia. Statewide branching will be permissible after June
30, 1998. Branch banks established pursuant to the acquisition of existing
depository institutions are not counted towards the three new branch bank
limitation. Other legislation that was passed recently by the Georgia
Legislature deletes the reciprocity requirements for interstate acquisitions,
and will permit bank holding companies to enter Georgia by acquiring banks in
Georgia that are at least five years old and banks to merge across state lines
beginning July 1, 1997.

MORTGAGE BANKING REGULATION. CMS is licensed and regulated as a "mortgage
banker" by the Georgia Department. It is also qualified as a Freddie Mac
servicer and CMS must meet the requirements of such corporations and various
private parties with which it conducts business, including warehouse lenders and
those private entities to which it sells mortgage loans.

CAPITAL REQUIREMENTS. The Federal Reserve and the FDIC have adopted risk-
based capital guidelines for bank holding companies and national and state
member banks. The guideline for a minimum ratio of capital to risk-weighted
assets (including certain off-balance-sheet activities, such as standby letters
of credit) is 8%. At least half of the total capital must consist of common
equity, retained earnings and a limited amount of qualifying preferred stock,
less goodwill ("Tier 1 capital"). The remainder may consist of subordinated
debt, non qualifying preferred stock and a limited amount of any loan loss
allowance ("Tier 2 capital" and, together with Tier 1 capital, "Total Capital").

In addition, the federal agencies have established minimum leverage ratio
guidelines for bank holding companies, national banks, and state member banks,
which provide for a minimum leverage ratio of Tier 1 capital to adjusted average
quarterly assets ("leverage ratio") equal to 3%, plus an additional cushion of
100 to 200 basis points (i.e., 1%-2%) if the institution has less than the
highest regulatory rating. The guidelines also provide that institutions
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's guidelines indicate that the Federal Reserve will continue to consider
a "tangible Tier 1 leverage ratio" (deducting all intangibles) in evaluating
proposals for expansion or new activity. The Federal Reserve and the FDIC have
not advised the Company or the Bank of any specific minimum leverage ratio or
tangible Tier 1 leverage ratio applicable to them.

The Federal Deposit Insurance Corporation Improvement Act of 1992
("FDICIA"), among other things, requires the federal banking agencies to take
"prompt corrective action" in respect of depository institutions that do not
meet minimum capital requirements. FDICIA establishes five capital tiers: "well
capitalized," "adequately capitalized," "undercapitalized," "significantly
undercapitalized," and "critically undercapitalized." A depository institution's
capital tier will depend upon how its capital levels compare to various relevant
capital measures and certain other factors, as established by regulation.

All of the federal banking agencies have adopted regulations establishing
relevant capital measures and relevant capital levels. The relevant capital
measures are the Total Capital ratio, Tier 1 capital ratio, and the leverage
ratio. Under the regulations, a national or state member bank will be (i) well
capitalized if it has a Total Capital ratio of 10% or greater, a Tier 1 capital
ratio of 6% or greater, and a leverage ratio of 5% or greater and is not subject
to any order or written directive by a federal bank regulatory agency to meet
and maintain a specific capital level for any capital measure, (ii) adequately
capitalized if it has a Total Capital ratio of 8% or greater, a Tier 1 capital
ratio of 4% or greater, and a leverage ratio of 4% or greater (3% in certain
circumstances) and is not well capitalized, (iii) undercapitalized if it has a
Total Capital ratio of less than 8%, a Tier 1 capital ratio of less than 4% (3%
in certain circumstances), or (iv) critically undercapitalized if its tangible
equity is equal to or less than 2% of average quarterly tangible assets.

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The Federal Reserve has adopted changes to its risk-based and leverage
ratio requirements applicable to bank holding companies and state-chartered
member banks that require that all intangibles, including core deposit
intangibles, purchased mortgage servicing rights ("PMSR's") and purchased credit
card relationships ("PCCR's") be deducted from Tier 1 capital. The changes,
however, grandfather identifiable assets (other than PMSR's and PCCR's) acquired
on or before February 19, 1992, and permit the inclusion of readily marketable
PMSR's and PCCR's to be included in Tier 1 capital only up to the lesser of (i)
90% of their fair market value, and (ii) 100% of the remaining unamortized book
value of such assets. The FDIC has adopted substantially similar regulations.

As of December 31, 1996, the Company had Tier 1 capital and total capital
of approximately 13.8% and 14.4% of risk-weighted assets, and the Bank had Tier
1 capital and total capital of approximately 11.6% and 12.3% of risk-weighted
assets. As of December 31, 1996, the Company had a leverage ratio of Tier 1
capital to total average assets of approximately 10.7% and the Bank had a
leverage ratio of Tier 1 capital to total average assets of approximately 9.0%.
The Company has not been informed of a particular leverage capital requirement
applicable to it, however, the Bank has agreed with the Georgia Department to
maintain a leverage ratio of 8%.

The Georgia Department also expects bank holding companies to maintain
minimum levels of primary capital and adjusted primary capital on a consolidated
basis (generally 5% of total assets). Under Georgia Department policies, the
components of primary capital include common stock, perpetual preferred stock,
surplus, undivided profits, mandatory convertible instruments, allowances for
loan and lease losses, minority interests in consolidated subsidiaries and
certain types of debt for loan and lease losses, minority interests in
consolidated subsidiaries and certain types of debt instruments. While
Georgia's policies do not require the risk-weighing of assets as the Federal
Reserve's risk-based capital rules do, the Georgia Department assumes that
moderate degrees of risk exist. If it discovers high amounts of risk or
significant non-banking activities, the Georgia Department may require higher
capital ratios. Further, the written policies of the Georgia Department require
that Georgia banks generally maintain a minimum ratio of primary capital to
total assets of 6.0%.

The table which follows sets forth certain capital information of the
Company and Bank as of December 31, 1996:
<TABLE>
<CAPTION>

Capital Adequacy
(Dollars in thousands)
<S> <C> <C> <C> <C>
Company Bank
------- -----
Amount Percent Amount Percent
Leverage Ratio: ------- ------- ------- -------
Actual $7,471 10.7% $6,059 9.0%
Minimum Required (1) $3,501 5.0% $5,401 8.0%(2)

Risk-Based Capital:
Tier 1 Capital
Actual $7,471 13.8% $6,059 11.6%
Minimum Required $2,169 4.0% $2,085 4.0%

Total Capital:
Actual $7,809 14.4% $6,394 12.3%
Minimum Required $4,337 8.0% $4,169 8.0%

</TABLE>

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(1) Represents the highest minimum requirement. Institutions that are
contemplating acquisitions anticipating or experiencing significant
growth may be required to maintain a substantially higher leve rage
ratio.

(2) Results from an agreement with the Georgia Department.

Bank regulators continue to indicate their desire to raise capital
requirements applicable to banking organizations, including a proposal to add an
interest rate-risk component to risk-based capital requirements.

On December 20, 1996, the FDIC adopted the Federal Financial Institutions
Examination Council's ("FFIEC") updated statement of policy entitled "Uniform
Financial Institutions Rating System" ("UFIRS") effective January 1, 1997. UFIRS
is an internal rating system used by the federal and state regulators for
assessing the soundness of financial institutions on a uniform basis and for
identifying those institutions requiring special supervisory attention. Under
the previous UFIRS, each financial institution was assigned a confidential
composite rating based on an evaluation and rating of five essential components
of an institution's financial condition and operations including Capital
adequacy, Asset quality, Management, Earnings, and Liquidity. The major changes
include an increased emphasis on the quality of risk management practices and
the addition of a sixth component of Sensitivity to market risk. For most
institutions, the FDIC has indicated that market risk primarily reflects
exposures to changes in interest rate. When regulators evaluate this component,
consideration is expected to be given to management's ability to identify,
measure, monitor and control market risk; the institution's size; the nature and
complexity of its activities and its risk profile; and the adequacy of its
capital and earnings in relation to its level of market risk exposure. Market
risk is rated based upon, but not limited to, an assessment of the sensitivity
of the financial institution's earnings or the economic value of its capital to
adverse changes in interest rates, foreign exchange rates, commodity prices, or
equity prices; management's ability to identify measure, and control exposure to
market risk; and the nature and complexity of interest rate risk exposure
arising from nontrading positions.

FIDICIA

FDICIA directs that each federal banking regulatory agency prescribe
standards for depository institutions and depository institution holding
companies relating to internal controls, information systems, internal audit
systems, loan documentation, credit underwriting, interest rate exposure, asset
growth, compensation, a maximum ratio of classified assets to capital, minimum
earnings sufficient to absorb losses, a minimum ratio of market value to book
value for publicly traded shares, and such other standards as the agency deems
appropriate. These standards are not expected to have any material effect on the
Company and the Bank.

FDICIA also contains a variety of other provisions that may affect the
operations of the Company and the Bank, including new reporting requirements,
regulatory standards for estate lending, "truth in savings" provisions, the
requirement that a depository institution give 90 days' prior notice to
customers and regulatory authorities before closing any branch, and a
prohibition on the acceptance or renewal of brokered deposits by depository
institutions that are not well capitalized or are adequately capitalized and
have not received a waiver from the FDIC. Under regulations relating to brokered
deposits, the Bank is well capitalized and not restricted.

FDICIA generally prohibits a depository institution from making any capital
distribution (including payment of a dividend) or paying any management fee to
its holding company if the depository institution would thereafter be
undercapitalized. Undercapitalized depository institutions are subject to growth

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limitations and are required to submit a capital restoration plan for approval.
For a capital restoration plan to be acceptable, the depository institution's
parent holding company must guarantee that the institution comply with such
capital restoration plan. The aggregate liability of the parent holding company
is limited to the lesser of 5% of the depository institution's total assets at
the time it became undercapitalized and the amount necessary to bring the
institution into compliance with applicable capital standards. If a depository
institution fails to submit an acceptable plan, it is treated as if it is
significantly undercapitalized. If the controlling holding company fails to
fulfill its obligations under FDICIA and files (or has filed against it) a
petition under the federal Bankruptcy Code, the claim would be entitled to a
priority in such bankruptcy proceeding over third party creditors of the bank
holding company.

Significantly undercapitalized depository institutions may be subject to a
number of requirements and restrictions, including orders to sell sufficient
voting stock to become adequately capitalized, requirements to reduce total
assets, and cessation of receipt of deposits from correspondent banks.
Critically undercapitalized institutions are subject to the appointment of a
receiver or conservator.

FDIC INSURANCE ASSESSMENTS

The Bank is subject to FDIC deposit insurance assessments. The Bank's
deposits are primarily insured by the FDIC Bank Insurance Fund ("BIF"). In
1995, the FDIC adopted a new risk-based deposit insurance premium scheme to
determine the assessment rates for BIF-insured depository institutions. Each
financial institution is assigned to one of three capital groups - well
capitalized, adequately capitalized or undercapitalized - and further assigned
to one of three subgroups within a capital group, on the basis of supervisory
evaluations by the institution's primary federal and, if applicable, state
regulators and other information relevant to the institution's financial
condition and the risk posed to the applicable insurance fund. The actual
assessment rate applicable to a particular institution will, therefore, depend
in part upon the risk assessment classification so assigned to the institution
by the FDIC. During the year ended December 31, 1995, the Bank paid $76,233 in
BIF deposit premiums.

The FDIC's Board of Directors voted on November 26, 1996, to retain the
1996 BIF assessment schedule of 0 to 27 basis points (annual rates) for the
first semiannual period of 1997, and to collect an assessment against BIF-
assessable deposits to be paid to the Financing Corporation ("FICO"). In
addition, the FDIC Board eliminated the $2,000 minimum annual assessment and
authorized the refund of the fourth-quarter minimum assessment of $500 paid by
certain BIF-insured institutions on September 30, 1996 by crediting such amount
against each BIF member's first semiannual assessment in 1997. The Deposit
Insurance Funds Act of 1996 (the "Funds Act") authorized FICO to levy
assessments on BIF-assessable deposits at a rate equal to one-fifth of the FICO
assessment rate that is applied to deposits assessable by the Savings
Association Insurance Fund ("SAIF"). The actual assessment rates for FICO for
1997 have been set at 1.30 basis points on an annual basis for BIF-assessable
deposits.

BIF and SAIF assessment rates are designed to increase the reserve ratios
(i.e., the ratios of reserves to insured deposits) of these funds to 1.25%.
During 1995, the BIF reached 1.25%. As a result, the FDIC refunded BIF premiums
in September 1995, and reduced BIF premiums with a nominal payment of $2,000 per
year for the best-rated banks.

EGRPRA also recapitalized the FDIC's Saving Association Insurance Fund
("SAIF") in order to bring it into parity with the Bank Insurance Fund ("BIF")
of the FDIC. As part of this recapitalization, holdings of SAIF-insured
deposits were subjected to a one-time special deposit insurance assessment. The
Bank held no SAIF deposits and was not subject to such special assessment.

10
<PAGE>

COMMUNITY DEVELOPMENT ACT

The Community Development Act has several titles. Title I provides for the
establishment of community development financial institutions to provide equity
investments, loans and development services to financially undeserved
communities. A portion of this Title also contains various provisions regarding
reverse mortgages, consumer protection for qualifying mortgages and hearings for
home equity lending, among other things. Title II provides for small business
loan securitization and securitizations of other loans, including authorizing a
study on the impact of additional securities based on pooled obligations. Small
business capital enhancement is also provided. Title III of the Act provides for
paperwork reduction and regulatory improvement, including certain examination
and call report issues, as well as changes in certain consumer compliance
requirements, certain audit requirements and real estate appraisals, and
simplification and expediting processing of bank holding company applications,
merger applications and securities filings, among other things. It also provides
for commercial mortgage-related securities to be added to the definition of a
"mortgage-related security" in the Exchange Act. This will permit commercial
mortgages to be pooled and securitized, and permit investment in such
instruments without limitation by insured depository institutions. It also
preempts state legal investment and blue sky laws related to qualifying
commercial mortgage securities. Title IV deals with money laundering and
currency transaction reports, and Title V reforms the national flood insurance
laws and requirements.

LEGISLATIVE AND REGULATORY CHANGES

Various changes have been proposed with respect to restructuring and
changing the regulation of the financial services industry. FIRREA required a
study of the deposit insurance system. On February 5, 1991, the Department of
the Treasury released "Modernizing the Financial System; Recommendations for
Safer, More Competitive Banks." Among other matters, this study analyzed and
made recommendations regarding reduced bank competitiveness and financial
strength, overextension of deposit insurance, the fragmented regulatory system
and the under capitalized deposit insurance fund. It proposed restoring
competitiveness by allowing banking organizations to participate in a full range
of financial services outside of insured commercial banks. Deposit insurance
coverage would be narrowed to promote market discipline. Risk based deposit
insurance premiums were feasibility tested through an FDIC demonstration project
using private reinsurers to provide market pricing for risk based premiums.

The United States Supreme Court in 1995 and 1996 decided in Valic that
national banks could sell annuities, and in Barnett Bank that national banks
could see other forms of insurance from towns of 5,000 or fewer population. The
State of Georgia generally prohibits bank-affiliates from selling insurance.
However, in 1996, the Georgia Departments of Insurance and Banking and Finance
adopted regulations permitting the sales of certain other insurance products.
The Bank has not exercised any activities permitted by these new regulations,
but may do so in the future.

COMMUNITY REINVESTMENT ACT

The Company and the Bank are subject to the provisions of the Community
Reinvestment Act of 1977, as amended (the "CRA") and the federal banking
agencies' regulations thereunder. Under the CRA, all banks and thrifts have a
continuing and affirmative obligation, consistent with its safe and sound
operation to help meet the credit needs for their entire communities, including
low- and moderate-income neighborhoods. The CRA does not establish specific
lending requirements or programs for financial institutions, nor does it limit
an institution's discretion to develop the types of products and services that
it believes are best suited to its particular community, consistent with the
CRA. The CRA requires a depository institution's primary federal regulator, in
connection with its examination of the institution, to assess the institution's
record in assessing and meeting the credit needs of the community served by that
institution, including low- and moderate-income neighborhoods. The regulatory
agency's assessment of the institution's record is made available to the public.
Further, such assessment is required of any

11
<PAGE>

institution which has applied to: (i) charter a national bank; (ii) obtain
deposit insurance coverage for a newly-chartered institution; (iii) establish a
new branch office that accepts deposits; (iv) relocate an office; or (v) merge
or consolidate with, or acquire the assets or assume the liabilities of, a
federally regulated financial institution. In the case of a bank holding
company applying for approval to acquire a bank or other bank holding company,
the Federal Reserve will assess the records of each subsidiary depository
institution of the applicant bank holding company, and such records may be the
basis for denying the application. Following their most recent CRA
examinations, the Bank received a "satisfactory" CRA rating.

Under new CRA regulations, effective January 1, 1996, the process-based CRA
assessment factors have been replaced with a new evaluation system that rates
institutions based on their actual performance in meeting community credit
needs. The evaluation system used to judge an institution's CRA performance
consists of three tests: a lending test; an investment test; and a service
test. Each of these tests will be applied by the institution's primary federal
regulator taking into account such factors as: (i) demographic data about the
community; (ii) the institution's capacity and constraints; (iii) the
institution's product offerings and business strategy; and (iv) data on the
prior performance of the institution and similarly-situated lenders. The new
lending test, the most important of the three tests for all institutions other
than wholesale and limited purpose (e.g., credit card) banks, will evaluate an
institution's lending activities as measured by its home mortgage loans, small
business and farm loans, community development loans, and, at the option of the
institution, its consumer loans.

Each of these lending categories will be weighted to reflect its relative
importance to the institution's overall business and, in the case of community
development loans, the characteristics and needs of the institution's service
area and the opportunities available for this type of lending. Assessment
criteria for the lending test will include: (i) geographic distribution of the
institution's lending; (ii) distribution of the institution's home mortgage and
consumer loans among different economic segments of the community; (iii) the
number and amount of small business and small farm loans made by the
institution; (iv) the number and amount of community development loans
outstanding; and (v) the institution's use of innovative or flexible lending
practices to meet the needs of low-to-moderate income individuals and
neighborhoods. At the election of an institution, or if particular
circumstances so warrant, the banking agencies will take into account in making
their assessments lending by the institution's affiliates as well as community
development loans made by the lending consortia and other lenders in which the
institution has invested. As part of the new regulation, all financial
institutions will be required to report data on their small business and small
farm loans as well as their home mortgage loans, which are currently required to
be reported under the Home Mortgage Disclosure Act.

The investment test focuses on the institution's qualified investments within
its service area that (i) benefit low-to-moderate income individuals and small
businesses or farms, (ii) address affordable housing needs, or (iii) involve
donations of branch offices to minority or women's depository institutions.
Assessment of an institution's performance under the investment test is based
upon the dollar amount of the institution's qualified investments, its use of
innovative or complex techniques to support community development initiatives,
and its responsiveness to credit and community development needs.

The service test evaluates an institution's systems for delivering retail
banking services, taking into account such factors as (i) the geographic
distribution of the institution's branch offices and ATMs, (ii) the
institution's record of opening and closing branch offices and ATMs, and (iii)
the availability of alternative product delivery systems such as home banking
and loan production offices in low-to-moderate income areas. The federal
regulators also will consider an institution's community development service as
part of the service test. A separate community development test will be applied
to wholesale or limited purpose financial institutions.

Institutions having total assets of less than $250 million, such as the Bank,
will be evaluated under more streamlined criteria. In addition, a financial
institution will have the option of having its CRA

12
<PAGE>

performance evaluated based on a strategic plan of up to five years in length
that it had developed in cooperation with local community groups. In order to
be rated under a strategic plan, the institution will be required to obtain the
prior approval of its federal regulator.

The interagency CRA regulations provide that an institution evaluated under a
given test will receive one of five ratings for that test: outstanding, high
satisfactory, low satisfactory, needs to improve, or substantial non-compliance.
An institution will receive a certain number of points for its rating on each
test, and the points are combined to produce an overall composite rating of
either outstanding, satisfactory, needs to improve, or substantial
noncompliance. Under the agencies' rating guidelines, an institution that
receives an "outstanding" rating on the lending test will receive an overall
rating of at least "satisfactory", and no institution can receive an overall
rating of "satisfactory" unless it receives a rating of at least "low
satisfactory" on its lending test. In addition, evidence of discriminatory or
other illegal credit practices would adversely affect an institution's overall
rating. Under the new regulations, an institution's CRA rating would continue
to be taken into account by its primary federal regulator in considering various
types of applications.

Other legislative and regulatory proposals regarding changes in banking,
and the regulation of banks, thrifts and other financial institutions and bank
and bank holding company powers are being considered by the executive branch of
the Federal government, Congress and various state governments, including
Georgia. Among other items under consideration are changes in or repeal of the
Glass-Steagall Act which separates commercial banking from investment banking,
and changes in the BHC Act to broaden the powers of "financial services"
companies to own and control depository institutions and engage in activities
not closely related to banking. Certain of these proposals, if adopted, could
significantly change the regulation of banks and the financial services
industry. It cannot be predicted whether any of these proposals will be
adopted, and, if adopted, how these proposals will affect the Company.

FISCAL AND MONETARY POLICY

Banking is a business which depends on interest rate differentials. In
general, the difference between the interest paid by a bank on its deposits and
its other borrowings, and the interest received by a bank on its loans and
securities holdings, constitutes the major portion of a bank's earnings. Thus,
the earnings and growth of the Company and the Bank will be subject to the
influence of economic conditions generally, both domestic and foreign, and also
to the monetary and fiscal policies of the United States and its agencies,
particularly the Federal Reserve. The Federal Reserve regulates the supply of
money through various means, including open market dealings in United States
government securities, the discount rate at which banks may borrow from the
Federal Reserve, and the reserve requirements on deposits. The nature and timing
of any changes in such policies and their effect on the Bank cannot be
predicted.

EFFECTS OF INFLATION AND CHANGING PRICES

Inflation generally increases the costs of funds and operating overhead,
and to the extent loans and other assets bear variable rates, the yields on such
assets. Unlike most industrial companies, virtually all of the assets and
liabilities of a financial institution are monetary in nature. As a result,
interest rates generally have a more significant effect on the performance of a
financial institution than the effects of general levels of inflation. Although
interest rates do not necessarily move in the same direction or to the same
extent as the prices of goods and services, increases in inflation generally
have resulted in increased interest rates. In addition, inflation affects
financial institutions' increased cost of goods and services purchased, the cost
of salaries and benefits, occupancy expense, and similar items. Inflation and
related increases in interest rates generally decrease the market value of
investments, mortgages and mortgage servicing held for sale, and loans held and
may adversely affect liquidity, earnings, and stockholders' equity. Mortgage
originations and refinancings tend to slow as interest rates increase, and
likely will reduce the Company's earnings from such activities and the income
from the sale of residential mortgage loans in the secondary market.

13
<PAGE>

EMPLOYEES

At December 31, 1996, the Company, the Bank, and CMS had 58 full-time
and 12 part-time employees. The Company considers its employee relations to be
good, and it has no collective bargaining agreements with any employees.

ITEM 2 - DESCRIPTION OF PROPERTY

During 1996, the Bank conducted its business primarily through its
principal executive offices for the Company, the Bank, and CMS located on an
approximately two-acre site at 251 Highway 515, Jasper, Pickens County, Georgia,
approximately 3,000 square feet of office space in the Atlanta metropolitan area
leased for its mortgage division operations and approximately 3,400 square feet
of office space in Manchester, New Hampshire leased for CMS mortgage operations.
The Bank's main offices are approximately 1.2 miles west of downtown Jasper,
Georgia and 60 miles north of metropolitan Atlanta. The main offices are housed
in a two-story office building owned by the Bank and containing approximately
9,200 square feet of finished space used for offices, operations and storage,
and four teller windows and the Bank lobby. The building also has three drive-
up teller windows and an automated teller machine with a 24-hour-a -day access.
The main office facility opened for business on January 29,1990 and is in good
condition. The lease term for the Bank's mortgage division offices expires in
August 1999. The term for CMS New Hampshire office expires in December 1998.

In addition, the Bank leases approximately 268 square feet for its
Branch in Marble Hill with a lease expiration of August 31,1999. The Bank also
leases 600 square feet of office space for its loan production office in Bartow
County with an expiration of January 1, 1999.

The Bank also leases a site for an automated teller machine in the Big
Canoe community. The lease agreement expires on October 31, 1998. The Big
Canoe community is located in eastern Pickens and western Dawson Counties,
Georgia, approximately 15 road miles east of the Bank's main office.

ITEM 3 - LEGAL PROCEEDINGS

While the Company, the Bank, and CMS are from time to time parties to
various legal proceedings arising in the ordinary course of their business,
management believes after consultation with legal counsel that there are no
proceedings threatened or pending against the Company, the Bank, or CMS that
will, individually or in the aggregate, have a material adverse effect on the
business or consolidated financial condition of the Company.

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS

No matter was submitted during the fourth quarter of the fiscal year
ended December 31, 1996 to a vote of shareholders of the Company, through the
solicitation of proxies or otherwise.

PART II

ITEM 5 - MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS

MARKET INFORMATION

There is no active trading market for Company Common Stock, and it is
not traded on Nasdaq or

14
<PAGE>

any other organized securities market or exchange. The last known selling price
of Company Common Stock, in what the Company's management believes were arm's-
length transactions and based on information available to the Company's
management, was $13.75 per share in sales during March 1997.

It is not anticipated that an active trading market for Company Common
Stock will develop in the foreseeable future.

HOLDERS

As of March 28,1997, there were approximately 620 holders of record of
the Common Stock of the Company.

DIVIDENDS

Dividends were suspended in 1995 as a result of the decrease in
earnings in the third quarter of that year. The Company resumed the payment of a
quarterly dividend during the fourth quarter 1996. A quarterly dividend of $.05
per share or $35,077 were paid in November 1996 with respect to the Company
Common Stock. Future dividends on the Common Stock will depend upon the earnings
of the Company, its financial condition, the capital adequacy of the Company and
its subsidiaries, and their need for funds, and other relevant factors,
including applicable restrictions and governmental policies and regulations. The
ability of the Company to pay dividends is subject to statutory restrictions on
cash dividends applicable to Georgia business corporations, in particular the
requirements that, after giving effect to the dividends, the corporation be able
to pay its debts as they become due in the usual course of business and that the
corporation's assets not be less than the sum of its total liabilities.

Unless the Company is successful in its efforts to diversify or
acquire other financial institutions, it will have no substantial sources of
income other than dividends it may receive from the Bank. The Bank's ability to
pay dividends is subject to statutory and regulatory restrictions on the payment
of cash dividends applicable to banks chartered under the laws of the State of
Georgia. Certain other statutory and regulatory restrictions exist on the
payment of dividends by the Bank. See Part I, Item I, "Description of Business
- -Bank Regulation." Generally dividends cannot be paid without prior approval
of the Georgia Department by any Georgia bank in any year in excess of 50% of
the net income after taxes but before dividends, provided total classified
assets do not exceed 80% of equity capital as of the last regulatory examination
and provided further the ratio of equity capital to adjusted assets is at least
6%. It is therefore possible that the Company will be precluded from paying any
dividends, or that if any dividends are paid they will be in amounts less than
the dividend amounts received from the Bank.

ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

See "Statistical Information" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" at pages 4 through 19
of the Annual Report, which is incorporated herein by reference.

ITEM 7 - FINANCIAL STATEMENTS

The report of independent auditors on page 21 and the financial
statements on pages 22 through 54 of the Annual Report are incorporated herein
by reference.

ITEM 8 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

15
<PAGE>

Not Applicable. The information required by Item 304(a) of Regulation
S-B was reported on the Company's Current Report on Form 8-K, dated May 3, 1994.

PART III

ITEM 9 - DIRECTORS AND EXECUTIVE OFFICERS; COMPLIANCE WITH SECTION
16(a) OF THE EXCHANGE ACT

A. The information regarding the Company's directors required by this
Item is contained in the Proxy Statement under the captions "General" (pages 1-
2), "Compensation of Directors and Attendance at Meetings" (page 4) and
"Committees of the Board of Directors" (pages 4 and 5) and is incorporated
herein by reference. Information about compliance with Section 16 of the
Securities Exchange Act of 1934 by the directors and executive officers of the
Company is contained in the Proxy Statement under the caption "Section 16 (a)
Compliance" (page 9) and is incorporated herein by reference.

B. Officers of the Company and the Bank are elected annually by the
Board of Directors. Information regarding the executive officers, defined as
those persons who have major policy-making functions with respect to the Company
and/or Bank, and who are not directors or nominees for director is set forth
below:

Name and Age at Principal Occupation and Business Experience
March 31, 1997 For Past Five Years
- ---------------- --------------------------------------------------------

J. Donald Boggus, Jr. Mr. Boggus, Jr. has served as President of the Bank since
33 April, 1996. Mr. Boggus, Jr. served as the Vice President
and Controller of the Bank since February 1989 and as the
Vice President, Treasurer and Chief Financial Officer of
the Company since November 1991. He graduated from the
Georgia Institute of Technology with a Bachelor of
Science in Management in 1986. He first worked as an
accountant and then joined the Etowah Bank, Canton,
Georgia as an Assistant Comptroller in September 1987. He
was promoted to Comptroller and Auditor in October 1988
and served in that position until leaving to join the
Bank.

Robert C. KenKnight Mr. KenKnight joined the Bank as its Executive Vice
56 President for Mortgage Banking Operations in February
1993. Mr. KenKnight was the President of Liberty Mortgage

16
<PAGE>

Corporation, as Atlanta-based mortgage company with an
approximately $900 million mortgage servicing portfolio,
from October 1989 until joining the Bank. He was
previously employed as Executive Vice President of
Entrust Funding Company, Atlanta, from February 1986 to
August 1989, and has worked in the mortgage industry
since 1963. Mr. KenKnight is past President of the
Mortgage Bankers Association of Georgia and the Atlanta
Mortgage Bankers Association.

Michael P. Leddy Mr. Leddy has a B.S. from the University of Central
53 Florida majoring in finance. He was head of Secondary
Marketing with Molton Allen & Williams, Inc. before
leaving in 1976 to join Paine Webber's institutional
sales in Atlanta, Georgia. In 1985, he was part of the
initial management team who started Arvida Mortgage
Company in Boca Raton, Florida, a subsidiary of Walt
Disney Productions. He returned to Paine Webber before
joining Crescent Mortgage as Vice President of Secondary
Marketing in 1993.

ITEM 10 - EXECUTIVE COMPENSATION

Information on compensation of the Company's executive officers is
contained in the Proxy Statement under the captions "Compensation of Executive
Officers and Directors" (pages 6-8) and "Executive Employment Agreement" (page
9) and is incorporated herein by reference.

ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information concerning security ownership of certain beneficial owners
and management is contained in the Proxy Statement under the caption "Ownership
of Common Stock by Certain Beneficial Owners and Management" (pages 5-6) and is
incorporated herein by reference.

ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information on certain relationships and related transactions
involving the Company and its management is contained in the Proxy Statement
under the caption "Certain Transactions" (page 9) and is incorporated herein by
reference.

With the exception of the above disclosures, there have been no
transactions since January 1, 1996, nor are there any presently proposed
transactions, to which the Company was or is to be a party in which any of the
Company's officers or directors had or have direct or indirect material
interest.

ITEM 13 - EXHIBITS AND REPORTS ON FORM 8-K

A. Financial Statements. The following consolidated included in the Annual
Report, are incorporated financial statements of the Company, by reference
in Item 7:

- Report of Independent Auditors (page 21).
- Consolidated Balance Sheet at December 31,1996
(page 22).
- Consolidated Statements of Income for the years 1995 (page 23).
ended December 31,1996 and
- Consolidated Statements of Shareholders' Equity 31, 1996 and 1995
(pages 24 and 25). for the years ended December
- Consolidated Statements of Cash Flows for the 1995 (pages 26 and 27).
years ended December 31,1996 and
- Notes to Consolidated Financial Statements (pages
28 through 54).

B. Reports on Form 8-K. No reports on Form 8-K or during the last quarter of
the period covered by Form 8-KSB were filed by the Company this report.

C. Exhibits. The following Exhibits are attached (numbered to correspond to
Item 601(a) of hereto or incorporated herein by reference Regulation S-B):

3.1 Articles of Incorporation of the Company. Incorporated by reference
from Exhibit 3.1

17
<PAGE>

to the Company's Registration Statement on Form S-4 dated January 27,
1992, File No. 33-45254 (the "Form S-4").

3.2 Bylaws of the Company. Incorporated by reference from Exhibit 3.2 to
the Form S-4.

10.1 1991 Substitute Stock Option Plan. Incorporated by reference from
Exhibit 10.2 to the Form S-4.

10.2 1995 Stock Option Plan for Outside Directors. Incorporated by
reference from Exhibit 10.2 to the December 31, 1995 Form 10-KSB.

10.3 1993 Employee Stock Option Plan. Incorporated by reference from
Exhibit 10.3 to the December 31, 1995 Form 10-KSB.

10.4 Employment Agreement with Robert C. KenKnight. Incorporated by
reference from Exhibit 10.4 to the December 31, 1995 Form 10-KSB.

11 Statement Re: Computation of Per Share Earnings.

13 Crescent Banking Company 1996 Annual Report to Shareholders. With the
exception of information expressly incorporated herein, the 1996
Annual Report to Shareholders is not deemed filed as part of this
Annual Report on Form 10-KSB.

21 Subsidiaries of the Registrant.

27 Financial Data Schedule

99.1 Crescent Banking Company Proxy Statement for the 1997 Annual Meeting
of Shareholders.

18
<PAGE>

SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the Company caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

CRESCENT BANKING COMPANY

March 31, 1997 By: /s/ J. Donald Boggus, Jr.
-------------------------------------
J. Donald Boggus, Jr.
President and Chief Executive Officer

In accordance with the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Company and in
the capacities and on the dates indicated.

Signature Title Date
- --------- ----- -----

Principal Executive Officer:

/s/ J. Donald Boggus, Jr. President, Chief Executive Officer, March 31, 1997
- ------------------------
J. Donald Boggus, Jr. and Chief Financial Officer

Remaining Directors:

/s/ Arthur Howell Chairman of the Board of March 31, 1997
- ------------------------
Arthur Howell Directors

/s/ Charles Fendley Secretary of the Board March 31, 1997
- -------------------------
Charles Fendley

/s/ A. James Elliott Director March 31, 1997
- ----------------------------
A. James Elliott

/s/ Harry C. Howard Director March 31, 1997
- -------------------
Harry C. Howard

/s/ Michael W. Lowe Director March 31, 1997
- -------------------------
Michael W. Lowe

/s/ L. Edmund Rast Director March 31, 1997
- --------------------------
L. Edmund Rast

19
<PAGE>

EXHIBIT INDEX

Sequential
Page Number

3.1 Articles of Incorporation of the Company. Incorporated N/A
by reference from Exhibit 3.1 to the Company's Registration
Statement on Form S-4 dated January 27, 1992, File No.
33-45254 (the "Form S-4")

3.2 Bylaws of the Company. Incorporated by reference from N/A
Exhibit 3.2 to the Form S-4.

10.1 1991 Substitute Stock Option Plan. Incorporated by reference N/A
from Exhibit 10.2 to the Form S-4.

10.2 1993 Employee Stock Option Agreement. Incorporated by
reference from Exhibit 10.2 to the Form 10-KSB. N/A

10.3 1995 Stock Option Plan for Outside Directors. Incorporated by
reference from Exhibit 10.3 to the Form 10-KSB. N/A

10.4 Employment Agreement with Robert C. KenKnight. Incorporated N/A
by reference from Exhibit 10.4 to the Form 10-KSB.

11 Statement Re: Computation of Per Share Earnings Page 21

13 Crescent Banking Company 1996 Annual Report to Page 22
Shareholders. With the exception of information expressly
incorporated herein, the 1996 Annual Report to Shareholders
is not deemed filed as part of this Annual Report on Form
10-KSB.

21 Subsidiaries of the Registrant Page 80

27 Financial Data Schedule Page 81

99.1 Crescent Banking Company Proxy Statement for the Page 82
1997 Annual Meeting of Shareholders

20
<PAGE>

EXHIBIT 11
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS

Year ended December 31,
1996 1995

PRIMARY (a)

Weighted average Crescent common
shares outstanding during the year 701,520 703,037

Common shares issuable in connection with
assumed exercise of options under
the treasury stock method 8,316 7,513
------- -------

TOTAL 709,836 710,550
======= =======

Net income $583,348 $ 89,134
======== ========
Per Share amount $ .82 $ .13

(a) As dilution is less than 3% for both years, disclosure of primary EPS in
the financial statements is not required.

<PAGE>

EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT

SUBSIDIARIES OF CRESCENT BANKING COMPANY

Crescent Bank & Trust Company, Jasper, Georgia

Crescent Mortgage Services, Inc., Atlanta, Georgia

<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 3,012
<INT-BEARING-DEPOSITS> 77
<FED-FUNDS-SOLD> 570
<TRADING-ASSETS> 32,997
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 749
<INVESTMENTS-MARKET> 749
<LOANS> 28,500
<ALLOWANCE> 335
<TOTAL-ASSETS> 74,652
<DEPOSITS> 55,746
<SHORT-TERM> 0
<LIABILITIES-OTHER> 11,232
<LONG-TERM> 0
0
0
<COMMON> 705
<OTHER-SE> 6,969
<TOTAL-LIABILITIES-AND-EQUITY> 74,652
<INTEREST-LOAN> 2,831
<INTEREST-INVEST> 2,345
<INTEREST-OTHER> 158
<INTEREST-TOTAL> 5,334
<INTEREST-DEPOSIT> 2,068
<INTEREST-EXPENSE> 2,162
<INTEREST-INCOME-NET> 3,172
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 4,009
<INCOME-PRETAX> 976,837
<INCOME-PRE-EXTRAORDINARY> 976,837
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 583,348
<EPS-PRIMARY> 0.83
<EPS-DILUTED> 0.83
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 0
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0

</TABLE>

<PAGE>

[LOGO OF CRESCENT BANKING COMPANY APPEARS HERE]

March 24, 1997

TO THE SHAREHOLDERS OF
CRESCENT BANKING COMPANY:

You are cordially invited to attend the 1997 Annual Meeting of Shareholders
of Crescent Banking Company (the "Company"), which will be held at the Pickens
County Chamber of Commerce Community Center located at 500 Stegall Drive,
Jasper, Georgia, Thursday, April 17, 1997 at 2:00 p.m. ( the "Annual Meeting").

At the Annual Meeting, you will be asked to consider and vote upon:

(I) The election of two Class III directors to serve until the Annual
Meeting in 2000 or until their successors are elected and qualified.

We hope you can attend the Annual Meeting and vote your shares in person.
In any case, please complete the enclosed proxy and return it to us. Your
completion of the proxy will ensure that your preferences will be expressed on
the matters that are being considered. If you are able to attend the Annual
Meeting, you may revoke your proxy and vote your shares in person. If you have
any questions about the Proxy Statement, please let us hear from you.

Sincerely,

/s/ J. Donald Boggus, Jr.

J. Donald Boggus, Jr.
President and CEO
<PAGE>

March 24, 1997

TO THE SHAREHOLDERS OF
CRESCENT BANKING COMPANY:

At the Annual Meeting, you will be asked to consider and vote upon:

(I) The election of two Class III directors to serve until the Annual
Meeting in 2000 or until their successors are elected and qualified.

Sincerely,

/s/ J. Donald Boggus, Jr.

J. Donald Boggus, Jr.
President and CEO
<PAGE>

CRESCENT BANKING COMPANY
251 HIGHWAY 515
JASPER, GA 30143

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD THURSDAY, APRIL 17, 1997

TO THE SHAREHOLDERS OF CRESCENT BANKING COMPANY:

NOTICE IS HEREBY GIVEN that the 1997 Annual Meeting of Shareholders of
Crescent Banking Company (the "Company") will be held at the Pickens County
Chamber of Commerce Community Center located at 500 Stegall Drive, Jasper,
Georgia, Thursday, April 17, 1997 at 2:00 p.m. ( the "Annual Meeting"), for the
following purposes:

1. Elect Directors. To elect two Class III directors to serve until the
----------------
Annual Meeting of Shareholders in 2000 or until their successors are
elected and qualified.

2. Other Business. To transact such other business as may properly come
---------------
before the Annual Meeting or any adjournments thereof.

Only shareholders of record at the close of business on March 20, 1997 are
entitled to notice of and to vote at the Annual Meeting or any adjournments
thereof. All shareholders, whether or not they expect to attend the Annual
Meeting in person, are requested to complete, date, sign, and return the
enclosed form of proxy in the accompanying envelope. The proxy may be revoked
by the person executing the proxy by filing with the Secretary of the Company an
instrument of revocation or a duly executed proxy bearing a later date, or by
electing to vote in person at the Annual Meeting.

BY ORDER OF THE BOARD OF DIRECTORS

/s/ J. Donald Boggus, Jr.

J. Donald Boggus, Jr.
President and CEO

March 24, 1997

PLEASE COMPLETE, DATE, AND SIGN THE ENCLOSED PROXY AND RETURN IT TO THE COMPANY
IN THE ENVELOPE PROVIDED WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING.
IF YOU ATTEND THE ANNUAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY.
<PAGE>

PROXY STATEMENT FOR
ANNUAL MEETING OF SHAREHOLDERS
OF CRESCENT BANKING COMPANY
TO BE HELD THURSDAY, APRIL 17, 1997

INTRODUCTION

GENERAL

This Proxy Statement is being furnished to the shareholders of Crescent
Banking Company (the "Company") in connection with the solicitation by the
Company of proxies for use at the 1997 Annual Meeting (the "Annual Meeting") of
Shareholders of the Company to be held Thursday, April 17, 1997, and at any
postponements or adjournments thereof. The Annual Meeting is being held to
consider and vote upon (i) the election of two Class III directors to serve
until the Annual Meeting of Shareholders in 2000 or until their successors are
elected and qualified, and (ii) such other business as may properly come before
the Annual Meeting or any adjournments thereof. The Board of Directors of the
Company knows of no other business that will be presented for consideration at
the Annual Meeting other than the matters described in this Proxy Statement.

This Proxy Statement is dated March 24, 1997 and is first being mailed to
the shareholders of the Company on or about March 24, 1997. A copy of the
Company's 1996 Annual Report to Shareholders accompanies this Proxy Statement.
Shareholders of the Company may also receive, at no charge except the Company's
cost of copying exhibits, a copy of the Company's Annual Report on Form 10-KSB
as filed with the Securities and Exchange Commission by the Company for the year
ended December 31, 1996, by making a written or oral request to J. Donald
Boggus, Jr., President and CEO, Crescent Banking Company, P.O. Box 668, Jasper,
Georgia 30143, telephone (706) 692-2424.

RECORD DATE, SOLICITATION AND REVOCABILITY OF PROXIES

The Board of Directors of the Company has fixed the close of business on
March 20, 1997 as the record date (the "Record Date") for the determination of
the Company's shareholders entitled to notice of and to vote at the Annual
Meeting. Accordingly, only shareholders of the Company at the close of business
on the Record Date will be entitled to vote at the Annual Meeting. At the close
of business on the Record Date, there were 704,854 shares of the $1.00 par value
common stock of the Company ("Common Stock") issued and outstanding and held by
approximately 620 shareholders of record. Holders of Common Stock are entitled
to one vote on each matter considered and voted upon at the Annual Meeting for
each share of Common Stock held of record at the close of business on the
Record Date. Shares of Common Stock represented by a properly executed proxy,
if such proxy is received in time and not revoked, will be voted at the Annual
Meeting in accordance with the instructions indicated in such proxy. IF NO
INSTRUCTIONS ARE INDICATED, SUCH SHARES OF COMMON STOCK WILL BE VOTED FOR
ELECTION OF THE TWO NOMINEES FOR DIRECTOR NAMED IN THE PROXY AND IN THE
DISCRETION OF THE PROXY HOLDERS AS TO ANY OTHER BUSINESS PROPERLY BROUGHT BEFORE
THE ANNUAL MEETING.

A shareholder who gives a proxy may revoke it at any time prior to its
exercise at the Annual Meeting by (i) giving written notice of revocation to the
Secretary of the Company, (ii) properly submitting to the Company a duly
executed proxy bearing a later date, or (iii) appearing in person at the Annual
Meeting and voting in person. All written notices of revocation or other
communications with respect to proxies should be addressed as follows: Crescent
Banking Company, Post Office Box 668, Jasper, Georgia, 30143, Attention: J.
Donald Boggus, Jr., President and CEO.

1
<PAGE>

COST OF SOLICITATION OF PROXIES

The expense of this solicitation, including the cost of preparing and
mailing this Proxy Statement, will be paid by the Company. Copies of
solicitation material may be furnished to banks, brokerage houses and other
custodians, nominees and fiduciaries for forwarding to beneficial owners of
shares of the Company's Common Stock, and normal handling charges may be paid
for such forwarding service. In addition to solicitations by mail, directors
and regular employees of the Company may solicit Proxies in person or by
telephone or telegraph.

QUORUM AND VOTING REQUIREMENTS

In determining whether a quorum exists at the Annual Meeting for purposes
of all matters to be voted on, all votes "for" or "against," as well as all
abstentions (including votes to withhold authority to vote in certain cases),
with respect to the proposal receiving the most such votes, will be counted.
The vote required for the election of directors is a plurality of the votes cast
by the shares entitled to vote in the election, provided a quorum is present.
Consequently, with respect to the proposal for the election of directors,
abstentions and broker non-votes will not be counted as part of the base number
votes to be used in determining if the proposal has received the requisite
number of base votes for approval. Thus, with respect to the proposal for the
election of directors, an abstention or broker non-vote will have no effect,
other than for the purpose of determining a quorum.

ADJOURNMENT

In the event that a quorum is not represented in person or by proxy at the
Annual Meeting, a majority of shares represented at that time may adjourn the
Annual Meeting to allow the solicitation of additional proxies or other measures
to obtain a quorum.

PROPOSAL ONE
ELECTION OF DIRECTORS

GENERAL

The Board of Directors of the Company currently consists of six members
divided into three classes, designated Class I, Class II, and Class III, each
serving for a period of three years. The current members of the Company's Board
of Directors are serving terms ending with the Company's annual meetings of
shareholders in 1997 (Class III), 1998 (Class I), and 1999 (Class II). One-
third of the members of the Board of Directors are elected by the shareholders
annually. The Annual Meeting is being held in part to elect two Class III
directors of the Company to serve until the Company's Annual Meeting of
Shareholders in 2000 or until their respective successors are elected and
qualified.

The directors whose terms will expire at the 1997 Annual Meeting are Arthur
Howell and Michael W. Lowe. Messrs. Howell and Lowe have been nominated by the
Board of Directors to stand for reelection. If elected, Messrs. Howell and
Lowe will serve as Class III directors holding office until the Annual Meeting
of Shareholders in 2000 and until their successors are elected and qualified.
The following table sets forth as to each director or nominee his name; age at
March 24, 1997; the date first elected as a director; a description of positions
and offices with the Company (other than as a director), Crescent Bank and Trust
Company (the "Bank"), and Crescent Mortgage Services, Inc. ("CMS"), if any; a
brief description of principal occupation or occupations over at least the last
five years; other business experience; the number of shares of Common Stock
beneficially owned on March 24, 1997; and the percentage of the total shares of
Common Stock outstanding on March 24, 1997 that such beneficial ownership
represents. Messrs. Howell and Rast have served as directors of the Company
since its organization, and as directors of the Bank from its organization until
April 1995. Mr. Lowe has served as director of the Bank and of the Company
since their respective

2
<PAGE>

organizations. Mr. Fendley, who has served as a director of the Bank since its
organization, was elected to the Company's Board of Directors at the 1994 Annual
Meeting. Mr. Howard has served as a director of the Bank and Company since the
1994 Annual Meeting. Mr. Elliott has served as a director of the Company since
October 1996 and a director of the Bank since April 1995.
<TABLE>
<CAPTION>

NAME AND AGE
AT MARCH 24, 1997 SHARES OWNED AND
DATE FIRST ELECTED PERCENTAGE (1) PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE
- ------------------ ---------------- --------------------------------------------
<S> <C> <C>

Nominees for Election to Class III Directors (Term Expiring 2000)
-----------------------------------------------------------------

Arthur Howell 17,760 (2) Mr. Howell was a partner in the Atlanta law firm of Alston & Bird, LLP from
Age 78 (2.51%) 1945 through August 1988, and is currently of counsel with that firm. He
1991 He is the President and a director of Summit Industries, Inc., a family-
owned consumer products company, and is a director of the Enterprise Group
of Funds. Mr. Howell has served as Chairman of the Company's Board since
May 1995. Mr. Howell had previously served as Secretary of the Company.
Mr. Howell retired from the Bank's Board in April 1995.

Michael W. Lowe 70,150 (3) Mr. Lowe founded Jasper Jeep Sales, Inc., in 1976 and has served as
Age 49 (9.93%) its Chief Executive Officer since that time.
1991

Incumbent Class I Directors (Term Expiring 1998)
------------------------------------------------

Charles R. Fendley 6,650 Mr. Fendley served as the Vice President of Jasper Yarn Processing, Inc.,
Age 51 (.94%) a textile business, from 1972 until 1996, and a director of Oglethorpe
1994 Power Corporation since 1993. Since August 1996, Mr. Fendley has served
as a mortgage officer of Crescent Bank and Trust Company. Mr. Fendley
has served as Secretary of the Company since May, 1995.

A. James Elliott 5,400 Mr. Elliott served as a partner with Alston & Bird, LLP for thirty years upon
Age 55 (.77%) leaving in 1994. After leaving Alston & Bird, LLP in 1994, he joined Emory
1995 University Law School as the Associate Dean. Mr. Elliott has served as a
director of the Bank since April 1995 and as its Chairman since April 1996.
Mr. Elliott has served on the Board of the Company since October 1996.

Incumbent Class II Directors (Term Expiring 1999)
-------------------------------------------------

L. Edmund Rast 11,400 Mr. Rast began his career with the Southern Bell Telephone Company in
Age 81 (1.61%) 1937 and served in various capacities before leaving Southern Bell as
1991 President and Chief Executive Officer in 1981. Mr. Rast then joined
Audichron Co., an Atlanta electronics company, as Chairman and Chief
Executive Officer in 1983 and remained with Audichron until his retirement
in 1984. Mr. Rast previously served as Chairman of the Board of the Bank
until April 1995 when Mr. Rast retired from the Bank's Board. Mr. Rast also
served as Chairman of the Board of the Company since its organization
until May 1995.

Harry C. Howard 13,985 Mr. Howard was a partner in the Atlanta law firm of King & Spalding from
Age 67 (1.98%) 1960 through 1992 and is presently a retired partner of such firm. Mr.
1994 Howard served as Chairman of the Board of the Bank from April 1995 to
April 1996.
</TABLE>

(1) Information relating to beneficial ownership of Company Common Stock is
based upon information furnished by each person using "beneficial
ownership" concepts set forth in the rules of the Securities and Exchange
Commission. Under those rules, a person is deemed to be a "beneficial
owner" of a security if that person has or shares "voting power," which
includes the power to vote or direct the voting of such security, or
"investment power," which includes the power to dispose of or to direct the
disposition of such security. The person is also deemed to be a beneficial
owner of any security of

3
<PAGE>

which that person has a right to acquire beneficial ownership within 60
days. Under those rules, more than one person may be deemed to be a
beneficial owner of the same securities, and a person may be deemed to be a
beneficial owner of securities as to which he or she may disclaim any
beneficial interest. Accordingly, directors are named as beneficial owners
of shares as to which they may disclaim any beneficial interest.

(2) Includes 1,000 shares held by Mr. Howell's wife, as to which shares Mr.
Howell disclaims beneficial ownership.

(3) Includes 13,200 shares held as custodian for Mr. Lowe's children and 2,500
shares held by his wife.

RECOMMENDATION AND REQUIRED VOTE

A plurality of the votes cast by the shares entitled to vote on this
proposal at the Annual Meeting, at which a quorum is present, is required for
the election of each of the nominees listed above. THE BOARD OF DIRECTORS
RECOMMENDS A VOTE FOR ELECTION OF THE TWO NOMINEES LISTED ABOVE. Proxies
solicited by the Board of Directors will be so voted unless shareholders specify
a contrary choice in their proxies.

ADDITIONAL INFORMATION

COMPENSATION OF DIRECTORS AND ATTENDANCE AT MEETINGS

Members of the Board of Directors each received a $3000 retainer fee for
their service on the Company's Board of Directors. Beginning in 1995, non-
employee directors of the Company and the Bank received stock options pursuant
to the 1995 Stock Option Plan for Outside Directors. Each Outside Director who
serves in such capacity as of the day following the annual meeting of the
Company's shareholders is granted an option to purchase 200 shares of Common
Stock. The plan covers 25,000 shares of which 12,800 were granted in 1995. The
Board of Directors held four meetings during 1996. Each director of the Company
during 1996 who is a nominee for reelection attended at least 75% of the
aggregate number of meetings of the Board of Directors and committees of the
Board of Directors on which he serves.

COMMITTEES OF THE BOARD OF DIRECTORS

The Bank's Board of Directors maintains standing Executive, Audit, Mortgage
Banking, Loan and Investment Committees. The Company's Board of Directors
presently has only a standing Stock Option Committee, which is composed of
Messrs. Howell (Chairman), Lowe and Rast. The Company's Board of Directors
performs the function of a Nominating Committee. The Board will consider
nominees for director recommended by a shareholder entitled to vote in the
election of directors, provided that written notice of the shareholder's intent
to make such nomination or nominations has been given in writing to the
Secretary of the Company, in the case of an annual meeting of shareholder, no
later than 90 days prior to the close of business on the 10th day following the
date on which notice of the meeting at which the election is to take place is
first given to shareholders. The notice shall set forth: (a) the name and
address of the shareholder who intends to make the nomination and of the person
or persons to be nominated; (b) a statement that the shareholder is a holder of
record of stock of the Company entitled to vote at the meeting and intends to
appear in person or by proxy at the meeting to nominate the person or persons
specified in the notice; (c) such information regarding each nominee proposed by
such shareholder as would be required to be included in a proxy statement filed
pursuant to the proxy rules of the Securities and Exchange Commission; and (d)
the consent of each nominee to serve as a director of the Company if so elected.

The Audit Committee of the Board of Directors of the Bank is composed of
Messrs. Harry Howard (Chairman), Charles Wynne, and Charles Fendley. The Audit
Committee has the responsibility of reviewing

4
<PAGE>

the Bank's financial statements, evaluating internal accounting controls,
reviewing reports of regulatory authorities and determining that all audits and
examinations required by law are performed. It recommends to the Board of
Directors of the Company the appointment of the independent auditors for the
next fiscal year, reviews and approves their audit plan and reviews with the
independent auditors the results of the audit and management's response thereto.
The Audit Committee also reviews the adequacy of the internal audit budget and
personnel, the internal audit plan and schedule, and results of audits performed
by the internal audit staff. The Audit Committee is responsible for overseeing
the entire audit function and appraising the effectiveness of internal and
external audit efforts. The Audit Committee reports its findings to the Board
of Directors. The Audit Committee held four meetings during the year ended
December 31, 1996.

While the Company does not have a standing compensation committee, the
Board of Directors reviews and approves the compensation of executive officers
of the Bank. All officers of the Company are compensated by the Bank.

OWNERSHIP OF COMMON STOCK BY CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table also reflects the number of shares of Common Stock
beneficially owned by (i) each of the directors, (ii) each of the executive
officers named in the Summary Compensation Table, and (iii) all of the directors
and executive officers of the Company as a group including the name and address
of the only person known by the Company to beneficially own more than 5% of the
Common Stock as of March 20, 1997, together with the number of shares and
percentage of outstanding shares beneficially owned. Management of the Company
is informed that all such shares were held individually by each such shareholder
with sole voting and investment power, except as noted herein.
<TABLE>
<CAPTION>

AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL PERCENT
OF BENEFICIAL OWNER OWNERSHIP (1) OF CLASS
- ------------------- ----------------- --------
<S> <C> <C>

Michael W. Lowe, Director 70,150 (2) 9.93%
Fox Run
Jasper, GA 30143

Charles R. Fendley, Secretary 6,650 0.94%
165 Town Creek Trail
Jasper, GA 30143

Arthur Howell, Chairman 17,760 (3) 2.51%
200 Larksbur Lane
Highlands, NC 28741

Harry C. Howard, Director 13,985 1.98%
191 Peachtree Street
Suite 4900
Atlanta, GA 30303-1763

Robert C. KenKnight, Executive Officer 4,813 .68%
2043 Woodland Way
Dunwoody, GA 30338

L. Edmund Rast, Director 11,400 1.61%
4434 Harris Valley Road
Atlanta, GA 30327
</TABLE>

5
<PAGE>

<S> <C> <C>
J. Donald Boggus, Jr., President/CEO (4) 6,750 .95%
281 Happy Talk Trail
Jasper, GA 30143

A. James Elliott, Director 5,400 .77%
732 Big Canoe
Big Canoe, GA 30143

Michael P. Leddy, Senior Officer -0- 0%
4698 East Conway Drive
Atlanta, GA 30327

All current directors and executive
officers as a group (9 persons) 136,908 (5) 19.00%
</TABLE>

(1) Information relating to beneficial ownership of Common Stock is based upon
information furnished by each person using "beneficial ownership" concepts
as set forth in the rules of the Securities and Exchange Commission. Under
those rules, a person is deemed to be a "beneficial owner" of a security if
that person has or shares "voting power," which includes the power to vote
or direct the voting of such security, or "investment power," which
includes the power to dispose of or direct the disposition of such
security. The person is also deemed to be a beneficial owner of any
security of which that person has a right to acquire beneficial ownership
within 60 days. Under those rules, more than one person may be deemed to be
a beneficial owner of the same securities, and a person may be deemed to be
a beneficial owner of securities as to which he or she may disclaim any
beneficial interest. Accordingly, directors are named as beneficial owners
of shares as to which they may disclaim any beneficial interest.

(2) Includes 13,200 shares held as custodian for Mr. Lowe's children and 2,500
shares held by his wife.

(3) Includes 1,000 shares held by Mr. Howell's wife, as to which shares
Mr. Howell disclaims beneficial ownership.

(4) Includes 6,000 shares subject to stock options currently exercisable or
within 60 days and 340 shares held by Mr. Boggus' wife.

COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS

Under rules established by the Securities and Exchange Commission, the
Company is required to provide certain data and information in regard to the
compensation and benefits provided to the Company's chief executive officer and
other executive officers who make in excess of $100,000 per year (collectively,
the "named executive officers").

SUMMARY COMPENSATION TABLE

The table below sets forth certain elements of compensation for the named
executive officers of the Company or the Bank for the periods indicated.

6
<PAGE>

<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE

ANNUAL COMPENSATION LONG-TERM
COMPENSATION
(A) (B) (C) (D) (E) (F) (G)
SECURITIES ALL
RESTRICTED UNDERLYING OTHER
NAME AND PRINCIPAL YEAR SALARY($) BONUS($) STOCK OPTIONS/ COMPENSA-
POSITION AWARDS SARs TION ($)(1)
(#)
======================================================================================================
<S> <C> <C> <C> <C> <C> <C>
J. DONALD BOGGUS, JR. 1996 $65,000 $ 6,500 - $4,361
President and Chief 1995 50,000 5,000 - 87
Executive Officer of the 1994 46,000 10,000 -
Company and the Bank

- ------------------------------------------------------------------------------------------------------
ROBERT C. KENKNIGHT 1996 $322,286 - 2,500 $9,050
Executive Vice President 1995 283,364 - - 5,064
of the Bank; President of 1994 176,375 - - 5,064
the Bank's Mortgage
Division

- ------------------------------------------------------------------------------------------------------
MICHAEL P. LEDDY 1996 $125,000 $25,000 1,500 $5,008
Senior Vice President of 1995 112,500 9,000 5,000 864
the Bank in Charge of 1994 110,864 25,000 - 864
Secondary Mortgage
Marketing

- ------------------------------------------------------------------------------------------------------
</TABLE>
(1) Other compensation represents insurance premiums paid by the Company on
group term life insurance in excess of $50,000 and car allowance.

OPTION/SAR GRANTS IN LAST FISCAL YEAR

The following table sets forth certain information concerning stock options
granted during 1996 to the named executive officers. No stock appreciation
rights ("SARs") were granted in 1996.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
(A) (B) (C) (D) (E)
NUMBER OF PERCENT OF
SECURITIES TOTAL
NAME UNDERLYING OPTIONS/SARS
OPTIONS/ GRANTED TO EXERCISE OR
SARS EMPLOYEES IN BASE PRICE EXPIRATION
GRANTED (#) FISCAL YEAR ($/SHARE) DATE
=================================================================================
<S> <C> <C> <C> <C>
J. Donald Boggus, Jr. N/A N/A N/A N/A
Robert C. KenKnight 2,500 (1) 28% $13.00 May 01, 2006
- ---------------------------------------------------------------------------------
Michael P. Leddy 1,500(1) 17% $13.00 May 01, 2006
- ---------------------------------------------------------------------------------
</TABLE>

7
<PAGE>

(1) One- third of the options granted to Messrs. KenKnight and Leddy become
exercisable on May 1, of each of 1999, 2000, and 2001.

AGGREGATED OPTION/SAR EXERCISES IN 1996
AND 1996 YEAR-END OPTION/SAR VALUES

The following table shows stock options exercised by the named executive
officers during 1996, including the aggregate value of gains on the date of
exercise. In addition, this table includes the number of shares covered by both
exercisable and non-exercisable options as of December 31, 1996. Also reported
are the values for "in-the-money" options, which represent the positive spread
between the exercise price of any such existing options and the year-end price
of the Company's Common Stock. No SARs were outstanding in 1996.
<TABLE>
<CAPTION>

(A) (B) (C) (D) (E)
VALUE OF
NUMBER OF UNEXERCISED
SECURITIES IN-THE-MONEY
UNDERLYING OPTIONS/SARS AT
UNEXERCISED FY-END ($)
SHARES OPTIONS/SARS AT
ACQUIRED VALUE FY-END (#) EXERCISABLE(E)/
NAME ON EXERCISE REALIZED UNEXERCISABLE(U)
(#) ($) EXERCISABLE(E)/
UNEXERCISABLE(U)

======================================================================================
<S> <C> <C> <C> <C>

J. Donald Boggus, Jr. 0 N/A 6,000 (E) $15,000 (E)
-0- (U) $ 0 (U)
Robert C. KenKnight 0 N/A 3,333 (E) $ 4,166 (E)
9,167 (U) $ 8,950 (U)
- --------------------------------------------------------------------------------------
Michael P. Leddy 0 N/A -0- (E) $ 0 (E)
6,500 (U) $ 0 (U)
- --------------------------------------------------------------------------------------
A. James Elliott 0 N/A 400 (E) $ 0 (E)
-0- (U) $ 0 (U)
- --------------------------------------------------------------------------------------
Charles R. Fendley 0 N/A 1,400 (E) $ 0 (E)
-0- (U) $ 0 (U)
- --------------------------------------------------------------------------------------
Harry C. Howard 0 N/A 400 (E) $ 0 (E)
-0- (U) $ 0 (U)
- --------------------------------------------------------------------------------------
Arthur Howell 0 N/A 1,400 (E) $ 0 (E)
-0- (U) $ 0 (U)
- --------------------------------------------------------------------------------------
Michael W. Lowe 0 N/A 1,400 (E) $ 0 (E)
-0- (U) $ 0 (U)
- --------------------------------------------------------------------------------------
L. Edmund Rast 0 N/A 1,400 (E) $ 0 (E)
-0- (U) $ 0 (U)
- --------------------------------------------------------------------------------------

</TABLE>

8
<PAGE>

EXECUTIVE EMPLOYMENT AGREEMENT

Robert C. KenKnight, the President of CMS and Executive Vice President of
the Bank, has entered into an employment agreement with the Company. In
addition to Mr. KenKnight's salary, he is entitled to incentive compensation in
the form of cash and shares of restricted stock based on a percentage of the
total added value of the Bank's mortgage division and CMS. In the event the
Bank or the Company is acquired and Mr. KenKnight's employment is terminated as
a result of such acquisition, the employment agreement authorizes a severance
payment approximately equal to 12 months of annual compensation in effect at
such time plus any accrued incentive compensation.

CERTAIN TRANSACTIONS

Directors and executive officers of the Company and the Bank and certain
business organizations and individuals associated with such persons have been
customers of and have had banking transactions with the Bank in the ordinary
course of business. Such transactions include loans, commitments, lines of
credit, and letters of credit. Such transactions were made on substantially the
same terms, including interest rates, repayment terms, and collateral, as those
prevailing at the time for comparable transactions with other persons, and did
not and do not involve more than normal risk of collectibility or present other
unfavorable features. Additional transactions with such persons and businesses
are anticipated in the future.

The Bank has had, and expects to have in the future, banking transactions
in the ordinary course of business with certain of its and the Company's
directors, nominees for director, executive officers, five percent shareholders,
and their associates. All loans included in such transactions have been made on
substantially the same terms, including interest rates, repayment terms and
collateral, as those prevailing at the time such loans were made for comparable
transactions with other persons, and do not involve more than the normal risk of
collectibility or present other features unfavorable to the Bank. At December
31, 1996, the amount of credit extended to directors, executive officers,
principal shareholders and their associates was approximately $2,216,122, or
28.9% of the Company's consolidated shareholders equity.

INFORMATION CONCERNING THE COMPANY'S INDEPENDENT AUDITOR

The certified public accounting public firm of Mauldin & Jenkins was the
independent auditor for the Company during the year ended December 31, 1996.
Representatives of Mauldin & Jenkins are expected to be present at the Annual
Meeting and will have the opportunity to make a statement if they desire to do
so and to respond to appropriate questions. At a meeting held on April 28,
1996, the Board of Directors of the Company approved the engagement of Mauldin &
Jenkins as its independent auditors for the fiscal year ending December 31,
1996.

During the two most recent fiscal years and through the date hereof, the
Company has not consulted with Mauldin & Jenkins on items which (i) were or
should have been subject to SAS 50 or (ii) concerned the subject matter of a
disagreement or reportable event with the former auditor as (described in
Regulation S-B, Item 304 (a)(2)).

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities and Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent of the Company's Common Stock, to file with the Securities and Exchange
Commission (the "SEC") initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company.
Directors, executive officers, and greater than ten percent shareholders are
required by SEC regulation to furnish the Company the copies of all 16(a)
reports they file. To the Company's knowledge, based solely on a review of the
copies of such reports furnished to the Company and written representations
that no other reports were required, during the fiscal year ended December 31,
1996, all Section 16(a) filing requirements applicable to directors, executive
officers, and greater than ten percent beneficial owners were complied with by
such persons.

9
<PAGE>

OTHER BUSINESS

Management of the Company does not know of any matters to be brought before
the Annual Meeting other than those described above. If any other matters
properly come before the Annual Meeting, the persons designated as proxies will
vote on such matters in accordance with their best judgement.

SHAREHOLDER'S PROPOSALS FOR THE 1998 ANNUAL MEETING

Proposals from Shareholders intended to be presented at the 1998 Annual
Meeting of Shareholders must be received by the Company on or before November
24, 1997 to be eligible for inclusion in the Company's Proxy Statement and Proxy
related to that meeting.

10
<PAGE>

REVOCABLE PROXY

CRESCENT BANKING COMPANY
REVOCABLE PROXY BY AND ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 17, 1997

The undersigned hereby appoints J. Donald Boggus, Jr. and Harry C. Howard, or
either of them, each with full power of substitution, as proxies to vote all
shares of the $1.00 par value common stock of Crescent Banking Company (the
"Company") which the undersigned is entitled to vote at the Annual Meeting of
Shareholders to be held Thursday, April 17, 1997, at 2:00 p.m., local time, at
Pickens County Chamber of Commerce Community Center located at 500 Stegall
Drive, Jasper, Georgia, and at any postponement or adjournment thereof (the
"Annual Meeting").

SAID PROXIES WILL VOTE ON THE PROPOSAL SET FORTH IN THE NOTICE OF ANNUAL MEETING
AND PROXY STATEMENTS AS SPECIFIED ON THIS PROXY AND ARE AUTHORIZED TO VOTE IN
THEIR DISCRETION AS TO ANY OTHER BUSINESS WHICH MAY COME PROPERLY BEFORE THE
MEETING. IF A VOTE IS NOT SPECIFIED, SAID PROXIES WILL VOTE FOR APPROVAL OF THE
PROPOSAL.

The Board of Directors recommends a Vote "For" the following proposal:

ELECTION OF DIRECTORS: Authority for the election of Arthur Howell and Michael
W. Lowe as Class III directors each to serve until the Annual Meeting of
Shareholders in 2000 or until their successors are elected and qualified.

FOR WITHHOLD AUTHORITY
----- -----
both nominees listed above to vote for nominees
(except as marked to written below.
the contrary below)
__________________________________________

Please sign exactly as name appears on the label below. When shares are held by
joint tenants both should sign. When signing as attorney, administrator,
trustee, or guardian please give full title as such. If a corporation, please
sign in full corporated name by president or other authorized officer. If a
partnership, please sign in partnership name by authorized person.

COMMON SHARES: DATED: ________________, 1997

ACCOUNT NUMBER:

____________________________________
Signature

_____________________________________
Signature if held jointly

PLEASE MARK, SIGN ABOVE, AND RETURN THIS PROXY PROMPTLY IN THE ENVELOPE
FURNISHED.
THIS PROXY IS SOLICITED BY THE COMPANY'S BOARD OF DIRECTORS AND MAY BE REVOKED
PRIOR TO ITS EXERCISE.