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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

Commission file number 0-24203

GB&T Bancshares, Inc.
(Exact name of registrant as specified in its charter)

        Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not 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-K or any amendment to this Form 10-K.    ý

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes o    No ý

        The aggregate market value of the registrant's capital stock held by nonaffiliates as of June 30, 2002 was approximately $66,345,213. For this purpose, directors and executive officers have been assumed to be affiliates.

        As of March 19, 2003, we had issued and outstanding 5,365,478 shares of the 20,000,000 authorized shares of its no par value common stock.

DOCUMENTS INCORPORATED BY REFERENCE

        Portions of the Proxy Statement for the 2003 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days of the Registrant's 2002 fiscal year end are incorporated by reference into Part III of this report.

CAUTIONARY NOTICE REGARDING FORWARD LOOKING STATEMENTS

        Some of the statements in this Report, including, without limitation, matters discussed under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operation," GB&T Bancshares, Inc. (the "Company") are "forward-looking statements" within the meaning of the federal securities laws. Forward-looking statements include statements about the competitiveness of the banking industry, potential regulatory obligations, our entrance and expansion into other markets, our other business strategies and other statements that are not historical facts. When we use words like "anticipate", "believe", "intend", "expect", "estimate", "could", "should", "will", and similar expressions, you should consider them as identifying forward-looking statements, although we may use other phrasing. These forward-looking statements involve risks and uncertainties and are based on our beliefs and assumptions, and on the information available to us at the time that these disclosures were prepared. Factors that may cause actual results to differ materially from those expressed or implied by such forward-looking statements include, among others, the following possibilities: (1) competitive pressures among depository and other financial institutions may increase significantly; (2) changes in the interest rate environment may reduce margins; (3) general economic conditions may be less favorable than expected, resulting in, among other things, a deterioration in credit quality and/or a reduction in demand for credit; (4) legislative or regulatory changes, including changes in accounting standards, may adversely affect the businesses in which we are engaged; (5) costs or difficulties related to the integration of our businesses, may be greater than expected; (6) deposit attrition, customer loss or revenue loss following acquisitions may be greater than expected; (7) competitors may have greater financial resources and develop products that enable such competitors to compete more successfully than us; and (8) adverse changes may occur in the equity markets.

        Many of such factors are beyond our ability to control or predict, and readers are cautioned not to put undue reliance on such forward-looking statements. We disclaim any obligation to update or revise any forward-looking statements contained in this Report, whether as a result of new information, future events or otherwise.

PART I

ITEM 1.    BUSINESS

The Company

        GB&T Bancshares, Inc. (the "Company") was formed in 1998 as a bank holding company existing under the laws of the State of Georgia. On April 24, 1998, we acquired all of the outstanding common stock of Gainesville Bank & Trust ("GB&T") in exchange for 1,676,160 shares at $5 par value common stock. The acquisition was accounted for as a pooling of interests. At December 31, 2002, we had four wholly-owned bank subsidiaries, GB&T, United Bank & Trust, Community Trust Bank, and HomeTown Bank of Villa Rica, collectively the ("Banks") and a consumer finance company, Community Loan Company.

        We operate as a multi-bank holding company. At December 31, 2002, we also held common stock in two de novo banks in Georgia, representing a less than 5% ownership in each bank. Our current plans include aggressively exploring opportunities through mergers and acquisitions. Currently, there are 16 employees of the holding company.

Gainesville Bank & Trust

        GB&T located in Gainesville, Hall County, Georgia was incorporated under the laws of the State of Georgia on July 20, 1987 and commenced operations as a Georgia state-chartered bank on February 1, 1988.

        GB&T conducts business from its main office facility at 500 Jesse Jewell Parkway, Gainesville, Georgia, which is owned equally by GB&T and Donald J. Carter, a director of the Company. GB&T occupies 90% of this facility. The remainder of this facility is available for lease and approximately 2,800 square feet in the building is currently under lease to one tenant unrelated to GB&T. GB&T has four full-service and one limited service branch in Gainesville, Georgia, one branch in Oakwood, Georgia and one branch in Buford, Georgia.

        GB&T provides a full range of banking services to customers within its primary market area of Hall County and surrounding counties. GB&T offers checking accounts, money market accounts, savings accounts, certificates of deposit, commercial, small business, real estate, consumer, home equity, automobile and credit card loans. GB&T also offers a variety of other traditional banking services to its customers, including drive-up and night depository facilities, 24-hour automated teller machines, internet banking, telephone banking and limited trust services.

United Bank & Trust

        United Bank & Trust ("UB&T") is located in Rockmart, Polk County, Georgia and was also incorporated under the laws of the State of Georgia on October 27, 1988 and commenced operations as a Georgia state-chartered bank on January 16, 1990. On February 29, 2000, UB&T was acquired by the Company in a business combination accounted for as a pooling of interests.

        UB&T conducts business from its main office facility at 129 East Elm Street, Rockmart, Georgia. UB&T has branches in Cedartown and Cartersville, Georgia.

        UB&T provides a full range of banking services to customers within its primary market area of Polk County and surrounding counties. UB&T offers checking accounts, money market accounts, savings accounts, certificates of deposit, commercial, small business, real estate, consumer, home equity and automobile loans. UB&T also offers a variety of other traditional banking services to its customers, including drive-up and night depository facilities and 24-hour automated teller machine, internet banking and telephone banking.

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Community Trust Bank

        Community Trust Bank ("CTB") is located in Hiram, Paulding County, Georgia and was also incorporated under the laws of the State of Georgia and commenced operations as a Georgia state- chartered bank in 1988. On June 30, 2001, CTB was acquired by the Company in a business combination accounted for as a pooling of interests.

        CTB conducts business from its main office facility at 3844 Atlanta Highway, Hiram, Georgia. CTB has branches in Dallas, Marietta, and Kennesaw, Georgia.

        CTB provides a full range of banking services to customers within its primary market areas of Paulding and Cobb Counties and surrounding counties. CTB offers checking accounts, money market accounts, savings accounts, certificates of deposit, commercial, small business, real estate, consumer, home equity and automobile loans. CTB also offers a variety of other traditional banking services to its customers, including drive-up and night depository facilities and 24-hour automated teller machine, internet banking and telephone banking.

HomeTown Bank of Villa Rica

        HomeTown Bank of Villa Rica ("HTB") is located in Villa Rica, Carroll County, Georgia and was incorporated as a bank under the laws of the State of Georgia in March 1997 and opened for business in October 1997. On November 30, 2002, HTB was acquired by the Company in a business combination accounted for as a purchase.

        HTB conducts business from its main office facility at 1849 Carrollton-Villa Rica Highway, Villa Rica, Georgia. HTB has branches in Villa Rica and Hiram, Georgia.

        HTB provides a full range of banking services to customers within its primary market areas of Carroll and Paulding Counties and surrounding counties. HTB offers checking accounts, money market accounts, savings accounts, certificates of deposit, commercial, small business, real estate, consumer, home equity and automobile loans. HTB also offers a variety of other traditional banking services to its customers, including drive-up and night depository facilities and 24-hour automated teller machine and telephone banking.

Community Loan Company

        Community Loan Company ("CLC") was formed in 1995 as a consumer finance company. CLC operates eight offices located in the North Georgia cities of Woodstock, Rockmart, Rossville, Gainesville, Dalton, Rome, Dahlonega and Cartersville.

GB&T Bancshares, Inc. Statutory Trust I

        In 2002, the Company formed a wholly-owned grantor trust to issue cumulative trust preferred securities in a private placement offering. The grantor trust has invested the proceeds of the trust preferred securities in subordinated debentures of the Company. The trust preferred securities can be redeemed, in whole or in part, from time to time, prior to maturity at the option of the Company on or after October 30, 2007. The sole assets of the grantor trust are the Subordinated Debentures of the Company (the Debentures). The Debentures have the same interest rate (5.1875%) as the trust preferred securities. The Company has the right to defer interest payments on the Debentures up to twenty consecutive quarterly periods (five years), so long as the Company is not in default under the subordinated debentures. See the notes to the consolidated financial statements for further information on the trust.

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Market Area and Competition

        Our Banks compete with local as well as with regional financial institutions in all of our markets. In addition, the banks compete with credit unions and various other finance companies. The banking business continues to be competitive in the Hall, Gwinnett, Cobb, Polk, Paulding, Bartow and Carroll County markets. The banking industry continues to experience increased competition for deposits from brokerage firms and money market funds.

        As a whole, the banking industry in Georgia is highly competitive. We compete with institutions, some of which have much greater financial resources than our Banks, and which may be able to offer more services to their customers. In recent years, intense market demands, economic pressures, and increased customer awareness of products, services, and the availability of electronic services have forced banks to diversify their services and become more cost effective. Our Banks face strong competition in attracting and retaining deposits and loans.

        Direct competition for deposits comes from other commercial banks, savings banks, credit unions and issuers of securities such as shares in money market funds. Interest rates, convenience, products and services, and marketing are all significant factors in the competition for deposits.

        Competition for loans comes from other commercial banks, savings banks, insurance companies, consumer finance companies, credit unions and other institutional lenders. We compete for loan originations through interest rates, loan fees, efficiency in closing and handling of loans, and the overall quality of service. Competition is affected by the availability of lendable funds, general and local economic conditions, interest rates, and other factors that are not readily predictable.

        Management expects that competition will continue in the future due to statewide branching laws and the entry of additional bank and nonbank competitors.

Lending Activities

        We originate loans primarily secured by single family real estate, residential construction, owner-occupied commercial buildings, and other loans to small businesses and individuals. In addition, loans are made to small and medium-sized commercial businesses, as well as to consumers for a variety of purposes. We also lend to residential contractors and developers in the Hall, Gwinnett, Cobb, Polk, Paulding, Bartow and Carroll County areas.

        In addition, GB&T originates loans to small businesses secured by real estate and other collateral, which loans are in part (up to 75% of each loan) guaranteed by the U.S. Small Business Administration.

        Our commercial lending includes loans to smaller business ventures, credit lines for working capital and short-term seasonal or inventory financing, as well as letters of credit. Commercial borrowers typically secure their loans with assets of the business, personal guaranties of their principals, and often secured by mortgages on their personal residences.

        We provide commercial and consumer installment loans to our customers. Such loans are typically of multiple-year duration and, if not variable rate, bear interest at a rate tied to our cost of funds of equivalent maturity. Commercial installment loans generally finance commercial equipment and real estate, while consumer installment loans typically finance automobiles, consumer products, or home improvements.

        Risks associated with loans made by us include, but are not limited to, the real estate markets in Hall, Gwinnett, Cobb, Polk, Carroll, Bartow and Paulding Counties, fraud, deteriorating or non-existing collateral, general economic conditions, interest rate risk, and deteriorating borrower financial conditions.

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        Our Boards of Directors establishes and periodically review the Banks' lending policies and procedures. State banking regulations provide that no secured loan relationship may exceed 25% of the Banks' statutory capital or net assets, as defined, and no unsecured loan relationship may exceed 15% of statutory capital, except in limited circumstances. Our Banks occasionally sell participation interests in loans to other lenders, primarily when a loan exceeds the Banks' legal lending limits.

Deposits

        Checking, savings, money market accounts, and certificates of deposit are the primary sources of funds for investing in loans and securities. We obtain most of our deposits from individuals and businesses in our market areas. We do not solicit deposits by offering depositors rates of interest on certificates of deposit or money market accounts significantly above rates paid by other local competitors. A secondary source of funding is through advances from the Federal Home Loan Bank of Atlanta and other borrowings which enable us to borrow funds at rates and terms, which at times, are more beneficial to us.

Securities

        After establishing necessary cash reserves and funding loans, we invest our remaining liquid assets in securities allowed under banking laws and regulations. We invest primarily in obligations of the United States or obligations guaranteed as to principal and interest by the United States, other taxable securities and in certain obligations of states and municipalities. We also invest excess funds in Federal funds with our correspondents and primarily act as a net seller of such funds. The sale of Federal funds amounts to a short term loan from us to another bank. Risks associated with securities include, but are not limited to, interest rate fluctuation, maturity, and concentration.

Asset/Liability Management

        It is our objective to manage our assets and liabilities to provide a satisfactory and consistent level of profitability within the framework of established cash, loan, securities, borrowing and capital policies. Certain officers are charged with the responsibility for developing and monitoring policies and procedures that are designed to insure acceptable composition of the asset/liability mix. It is the overall philosophy of management to support asset growth primarily through growth of core deposits, which include deposits of all categories from individuals and businesses. Management seeks to invest the largest portion of our assets in loans.

        Our asset-liability mix is monitored on a periodic basis with a report reflecting interest-sensitive assets and interest-sensitive liabilities being prepared and presented to each Bank Board of Directors on a monthly basis. The objective of this policy is to manage interest-sensitive assets and liabilities so as to minimize the impact of substantial movements in interest rates on our earnings.

        We have grown from our initial capital base of $7 million to a total asset base of approximately $742 million. The continued growth in total assets and loans was generated almost exclusively from deposits obtained from our market areas. The loan portfolio of $543 million as of December 31, 2002 is comprised of commercial loans ($43 million), loans secured by real estate ($469 million), and consumer and other loans ($31 million).

Employees

        As of December 31, 2002, we had 312 full-time equivalent employees, of which 113 were employed by GB&T, 43 were employed by UB&T, 68 were employed by CTB, 24 were employed by CLC, 48 were employed by HTB, and 16 were employed by the Company. We are not a party to any collective bargaining agreement and, in the opinion of management, we enjoy satisfactory relations with our employees.

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REGULATION AND SUPERVISION

        We are subject to extensive state and federal banking laws and regulations that impose specific requirements or restrictions on and provide for general regulatory oversight of virtually all aspects of our operations. These laws and regulations are generally intended to protect depositors, not shareholders. The following summary is qualified by reference to the statutory and regulatory provisions discussed. Changes in applicable laws or regulations may have a material effect on our business and prospects. Beginning with the enactment of the Financial Institutions Reform Recovery and Enforcement Act in 1989 and following with the FDIC Improvement Act in 1991, numerous additional regulatory requirements have been placed on the banking industry in the past several years and additional changes have been proposed. Legislative changes and the policies of various regulatory authorities may significantly affect our operations. We cannot predict the effect that fiscal or monetary policies, or new federal or state legislation may have on our business and earnings in the future.

        General.    The Company is a bank holding company registered with the Board of Governors of the Federal Reserve System (the "Federal Reserve") and the Georgia Department of Banking and Finance (the "Georgia Department") under the Bank Holding Company Act of 1956, as amended (the "BHC Act") and the Financial Institutions Code of Georgia (the "FICG"), respectively.

        The Banks are state banks incorporated under the laws of Georgia and are subject to examination by the Georgia Department and the Federal Deposit Insurance Corporation ("FDIC"). The Banks deposits are insured by the FDIC to the maximum extent provided by law. The FDIC and the Georgia Department regularly examine our operations and are given authority to approve or disapprove mergers, consolidations, the establishment of branches, and similar corporate actions. The agencies also have the power to prevent the continuance or development of unsafe or unsound banking practices or other violations of law.

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

        The BHC Act further provides that the Federal Reserve may not approve any transaction that would result in a monopoly or would be in furtherance of any combination or conspiracy to monopolize or attempt to monopolize the business of banking in any section of the United States, or the effect of which may be substantially to lessen competition or to tend to create a monopoly in any section of the country, or that in any other manner would be in restraint of trade, unless the anticompetitive effects of the proposed transaction are clearly outweighed by the public interest in meeting the convenience and needs of the communities to be served. The Federal Reserve is also required to consider the financial and managerial resources and future prospects of the bank holding companies and banks involved and the convenience and needs of the communities to be served. Consideration of financial resources generally focuses on capital adequacy, and consideration of convenience and needs issues generally focuses on the parties' performance under the Community Reinvestment Act of 1977.

        Under the Riegle-Neal Interstate Banking and Branching Efficiency Act, the restrictions on interstate acquisitions of banks by bank holding companies were repealed. As a result, the Company, and any other bank holding company located in Georgia, is able to acquire a bank located in any other state, and a bank holding company located outside of Georgia can acquire any Georgia-based bank, in either case subject to certain deposit percentage and other restrictions. The legislation provides that unless an individual state has elected to prohibit out-of-state banks from operating interstate branches within its territory, adequately capitalized and managed bank holding companies are able to consolidate their multistate banking operations into a single bank subsidiary and to branch interstate through

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acquisitions. De novo branching by an out-of-state bank is permitted only if it is expressly permitted by the laws of the host state. Georgia does not permit de novo branching by an out-of-state bank. Therefore, the only method by which an out-of-state bank or bank holding company may enter Georgia is through an acquisition. Georgia has adopted an interstate banking statute that removes the existing restrictions on the ability of banks to branch interstate through mergers, consolidations and acquisitions. However, Georgia law prohibits a bank holding company from acquiring control of a financial institution until the target financial institution has been incorporated three years.

        Activities.    The BHC Act has generally prohibited a bank holding company from engaging in activities other than banking or managing or controlling banks or other permissible subsidiaries and from acquiring or retaining direct or indirect control of any company engaged in any activities other than those determined by the Federal Reserve to be closely related to banking or managing or controlling banks as to be a proper incident thereto. Provisions of the Gramm-Leach-Bliley Act (the "GLB Act"), discussed below, have expanded the permissible activities of a bank holding company that qualifies as a financial holding company. In determining whether a particular activity is permissible, the Federal Reserve must consider whether the performance of such an activity can be reasonably expected to produce benefits to the public, such as a greater convenience, increased competition, or gains in efficiency, that outweigh possible adverse effects such as undue concentration of resources, decreased or unfair competition, conflicts of interest, or unsound banking practices.

        Gramm-Leach-Bliley Act.    The GLB Act implemented major changes to the statutory framework for providing banking and other financial services in the United States. The GLB Act, among other things, eliminated many of the restrictions on affiliations among banks and securities firms, insurance firms, and other financial service providers. A bank holding company that qualifies as a financial holding company will be permitted to engage in activities that are financial in nature or incidental or complimentary to a financial activity. The GLB Act specifies certain activities that are deemed to be financial in nature, including underwriting and selling insurance, providing financial and investment advisory services, underwriting, dealing in, or making a market in securities, limited merchant banking activities, and any activity currently permitted for bank holding companies under Section 4(c)(8) of the BHC Act.

        To become eligible for these expanded activities, a bank holding company must qualify as a financial holding company. To qualify as a financial holding company, each insured depository institution controlled by the bank holding company must be well-capitalized, well-managed, and have at least a satisfactory rating under the Community Reinvestment Act. In addition, the bank holding company must file declaration with the Federal Reserve of its intention to become a financial holding company.

        The GLB Act designates the Federal Reserve as the overall umbrella supervisor of the new financial services holding companies. The GLB Act adopts a system of functional regulation where the primary regulator is determined by the nature of activity rather than the type of institution. Under this principle, securities activities are regulated by the Securities and Exchange Commission and other securities regulators, insurance activities by the state insurance authorities, and banking activities by the appropriate banking regulator. As a result, to the extent that we engage in non-banking activities permitted under the GLB Act, we will be subject to the regulatory authority of the SEC or state insurance authority, as applicable.

        Payment of Dividends.    The Company is a legal entity separate and distinct from its subsidiaries. Its principal source of cash flow is dividends from its subsidiary banks. There are statutory and regulatory limitations on the payment of dividends by the subsidiary banks to the Company, as well as by the Company to its shareholders.

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

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

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

        The minimum guideline for the ratio of Total Capital to risk-weighted assets (including certain off-balance-sheet items, such as standby letters of credit) is 8.0%. Total Capital consists of Tier 1 Capital, which is comprised of common stock, undivided profits, minority interests in the equity accounts of consolidated subsidiaries and noncumulative perpetual preferred stock, less goodwill and certain other intangible assets, and Tier 2 Capital, which consists of subordinated debt, other preferred stock, and a limited amount of loan loss reserves.

        In addition, the Federal Reserve has established minimum leverage ratio guidelines for bank holding companies. These guidelines provide for a minimum ratio (the "Leverage Ratio") of Tier 1 Capital to average assets, less goodwill and certain other intangible assets, of 3.0% for bank holding companies that meet certain specified criteria, including those having the highest regulatory rating. All other bank holding companies generally are required to maintain a Leverage Ratio of at least 3.0%, plus an additional cushion of 1.0% to 2.0%. The guidelines also provide that bank holding companies experiencing internal growth or making acquisitions will be expected to maintain strong capital positions substantially above the minimum supervisory levels without significant reliance on intangible assets. Furthermore, the Federal Reserve has indicated that it will consider a "tangible Tier 1 Capital Leverage Ratio" (deducting all intangibles) and other indicators of capital strength in evaluating proposals for expansion or new activities.

        The Banks are subject to risk-based and leverage capital requirements adopted by its federal banking regulators, which are substantially similar to those adopted by the Federal Reserve for bank holding companies.

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

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        The federal bank agencies continue to indicate their desire to raise capital requirements applicable to banking organizations beyond their current levels. In this regard, the Federal Reserve and the FDIC have, pursuant to FDICIA, recently adopted final regulations requiring regulators to consider interest rate risk (when the interest rate sensitivity of an institution's assets does not match the sensitivity of its liabilities or its off-balance-sheet position) in the evaluation of a bank's capital adequacy. The bank regulatory agencies have concurrently proposed a methodology for evaluating interest rate risk that would require banks with excessive interest rate risk exposure to hold additional amounts of capital against such exposures.

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

        Prompt Corrective Action.    FDICIA established a system of prompt corrective action to resolve the problems of undercapitalized institutions. Under this system, the federal banking regulators have established five capital categories (well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized), and are required to take certain mandatory supervisory actions, and are authorized to take other discretionary actions, with respect to institutions in the three undercapitalized categories. The severity of the action will depend upon the capital category in which the institution is placed. Generally, subject to a narrow exception, the banking regulator must appoint a receiver or conservator for an institution that is critically undercapitalized. The federal banking agencies have specified by regulation the relevant capital level for each category.

        An institution that is categorized as undercapitalized, significantly undercapitalized, or critically undercapitalized is required to submit an acceptable capital restoration plan to its appropriate federal banking agency. A bank holding company must guarantee that a subsidiary depository institution meets its capital restoration plan, subject to certain limitations. The controlling holding company's obligation to fund a capital restoration plan is limited to the lesser of 5.0% of an undercapitalized subsidiary's assets or the amount required to meet regulatory capital requirements. An undercapitalized institution is also generally prohibited from increasing its average total assets, making acquisitions, establishing any branches or engaging in any new line of business, except under an accepted capital restoration plan or with FDIC approval. In addition, the appropriate federal banking agency may test an undercapitalized institution in the same manner as it treats a significantly undercapitalized institution if it determines that those actions are necessary.

        FDIC Insurance Assessments.    The FDIC has adopted a risk-based assessment system for insured depository institutions that takes into account the risks attributable to different categories and concentrations of assets and liabilities. The system assigns an institution to one of three capital categories: (i) well capitalized; (ii) adequately capitalized; and (iii) undercapitalized. These three categories are substantially similar to the prompt corrective action categories described above, with the "undercapitalized" category including institutions that are undercapitalized, significantly undercapitalized, and critically undercapitalized for prompt corrective action purposes. The FDIC also assigns an institution to one of three supervisory subgroups within each capital group. The supervisory subgroup to which an institution is assigned is based on a supervisory evaluation that the institution's primary federal regulator provides to the FDIC and information that the FDIC determines to be relevant to the institution's financial condition and the risk posed to the deposit insurance funds. The FDIC then determines an institution's insurance assessment rate based on the institution's capital

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category and supervisory category. Under the risk-based assessment system, there are nine combinations of capital groups and supervisory subgroups to which different assessment rates are applied. Assessments range from 0 to 27 cents per $100 of deposits, depending on the institution's capital group and supervisory subgroup. The FDIC may terminate its insurance of deposits if it finds that the institution has engaged in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC.

        Safety and Soundness Standards.    The FDIA, as amended by the FDICIA and the Riegle Community Development and Regulatory Improvement Act of 1994, requires the federal bank regulatory agencies to prescribe standards, by regulations or guidelines, relating to internal controls, information systems and internal audit systems, loan documentation, credit underwriting, interest rate risk exposure, asset growth, asset quality, earnings, stock valuation and compensation, fees and benefits, and such other operational and managerial standards as the agencies deem appropriate. The federal bank regulatory agencies have adopted a set of guidelines prescribing safety and soundness standards pursuant to FDICIA, as amended. The guidelines establish general standards relating to internal controls and information systems, internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth and compensation and fees and benefits. In general, the guidelines require, among other things, appropriate systems and practices to identify and manage the risks and exposures specified in the guidelines. The guidelines prohibit excessive compensation as an unsafe and unsound practice and describe compensation as excessive when the amounts paid are unreasonable or disproportionate to the services performed by an executive officer, employee, director, or principal shareholder. In addition, the agencies adopted regulations that authorize, but do not require, an agency to order an institution that has been given notice by an agency that it is not satisfying any of such safety and soundness standards to submit a compliance plan. If, after being so notified, an institution fails to submit an acceptable compliance plan or fails in any material respect to implement an acceptable compliance plan, the agency must issue an order directing action to correct the deficiency and may issue an order directing other actions of the types to which an undercapitalized institution is subject under the "prompt corrective action" provisions of FDICIA. If an institution fails to comply with such an order, the agency may seek to enforce such order in judicial proceedings and to impose civil money penalties. The federal regulatory agencies also proposed guidelines for asset quality and earnings standards.

        Community Reinvestment Act.    Under the Community Reinvestment Act ("CRA") the Banks, as FDIC insured institutions, have a continuing and affirmative obligation to help meet the credit needs of the entire community, including low- and moderate-income neighborhoods, consistent with safe and sound banking practices. The CRA requires the appropriate federal regulator, in connection with its examination of an insured institution, to assess the institution's record of meeting the credit needs of its community and to take such record into account in its evaluation of certain applications, such as applications for a merger or the establishment of a branch. An unsatisfactory rating may be used as the basis for the denial of an application by the federal banking regulator. The Banks have received satisfactory ratings in its CRA examinations.

        Privacy.    The GLB Act also modified laws related to financial privacy. The new financial privacy provisions generally prohibit a financial institution from disclosing nonpublic personal financial information about consumers to third parties unless consumers have the opportunity to "opt out" of the disclosure. A financial institution is also required to provide its privacy policy annually to its customers. Compliance with the implementing regulations was mandatory effective July 1, 2001. The Banks implemented the required financial privacy provisions by July 1, 2001.

        Monetary Policy.    The earnings of the Banks are affected by domestic and foreign conditions, particularly by the monetary and fiscal policies of the United States government and its agencies. The

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Federal Reserve has had, and will continue to have, an important impact on the operating results of commercial banks through its power to implement monetary policy in order, among other things, to mitigate recessionary and inflationary pressures by regulating the national money supply. The techniques used by the Federal Reserve include setting the reserve requirements of member banks and establishing the discount rate on member bank borrowings. The Federal Reserve also conducts open market transactions in United States government securities.

        USA Patriot Act of 2001.    In October 2001, the USA Patriot Act of 2001 (the "Patriot Act") was enacted in response to the terrorist attacks in New York, Pennsylvania, and Washington, D.C. that occurred on September 11, 2001. The Patriot Act impacts financial institutions in particular through its anti-money laundering and financial transparency laws. The Patriot Act establishes regulations which, among others, set standards for identifying customers who open an account and promoting cooperation with law enforcement agencies and regulators in order to effectively identify parties that may be associated with, or involved in, terrorist activities or money laundering.

        Georgia Fair Lending Act.    The Georgia Fair Lending Act (the "GFLA") became effective on October 1, 2002 and establishes a number of prohibitions for loans that are "covered" by the statute. Generally, a loan is "covered" by the GFLA if it has an annual interest rate that exceeds the prime rate or comparable yield on treasury securities by an amount specified by the statute or if its points and fees exceed a specified percentage of the total loan amount. The GFLA has a broad definition of points and fees. Any creditor who violates the GFLA may be liable to the borrower for actual damages; statutory damages equal to two times the interest paid under the loan; forfeiture of interest; punitive damages; costs; and/or reasonable attorney's fees. For any violation for which statutory damages may be awarded, the GFLA provides the borrower with a right of rescission.

        The GFLA is a controversial law because of provisions such as those creating potential liability for assignees and holders of "covered" loans. As a result, the GFLA was amended by the Georgia legislature in February 2003 in an effort to address a number of those provisions. In addition, there are issues concerning federal preemption of the GFLA pending. The Office of the Comptroller of the Currency (the "OCC") has begun the process of issuing a determination or order regarding the preemption of GFLA. If the OCC determines that federal law preempts the GFLA, then banks operating under a national charter will not be subject to the GFLA while banks operating under a state charter will be required to comply with the GFLA. Depending upon (i) the OCC's determination regarding preemption, and (ii) the amendments to the GFLA passed by the Georgia legislature, state-chartered banks could be at a competitive disadvantage to banks operating pursuant to national charters in certain segments of the lending market. We are monitoring developments in this area and, even though the Banks are state-chartered banks, we do not believe that we will be exposed to any significant competitive disadvantage as a result of GFLA.

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ITEM 2.    PROPERTIES

        GB&T's main office is owned jointly by GB&T and Carter Family Properties. Carter Family Properties is controlled by Donald J. Carter, a director of the Company. The three-story building is located in downtown Gainesville at the intersection of Jesse Jewell Parkway and Race Street. GB&T occupies over 90% of the building, with remaining space presently leased to one tenant. GB&T's main office also has a drive-in automated teller machine.

        GB&T has four full-service and one limited service locations in Gainesville, Georgia, the first located in a leased shopping center facility at 2412 Old Cornelia Highway, in a small community just north of Gainesville, the second located in a leased shopping center facility at 475 Dawsonville Highway, the third located in a leased facility at 1403 Atlanta Highway, and the fourth in a building owned by GB&T located at 3640 Thompson Bridge Road, all of which have an automated teller machine. The limited service branch is located in a leased shopping center facility at 1210 Thompson Bridge Road and also has an automated teller machine.

        GB&T has two other branch banking facilities, one in Oakwood, Georgia and one in Buford, Georgia. Both branches are owned by GB&T and located in Hall County south of Gainesville. Both branches have automated teller machines.

        GB&T operates an automated teller machine in the hospital atrium at 675 White Sulphur Road in Gainesville, Georgia.

        UB&T's main office is located at 129 East Elm Street in Rockmart, Georgia. The main office is an office building owned by UB&T and contains approximately 8,000 square feet of finished space used for UB&T offices and operations. This office also has an automated teller machine.

        UB&T's Cedartown branch is an office building owned by UB&T and contains approximately 4,700 square feet of finished space. The branch also has an automated teller machine.

        UB&T's Cartersville branch is a leased facility at 2 N. Dixie Avenue, Cartersville, Georgia containing approximately 2,300 square feet.

        CTB's main office is located at 3844 Atlanta Highway in Hiram, Georgia. The main office is an office building owned by CTB and contains approximately 16,000 square feet of finished space. This office also has an automated teller machine.

        CTB's Dallas branch is an office building owned by CTB and contains approximately 4,000 square feet of space. The branch also has an automated teller machine.

        CTB leases space in shopping center facilities in Marietta and Kennesaw.

        CLC leases office space in the Georgia cities of Woodstock, Rockmart, Rossville, Gainesville, Dalton, Rome, Dahlonega and Cartersville.

        HTB's main office is located at 1849 Carrollton-Villa Rica Highway in Villa Rica, Georgia. The main office is an office building owned by HTB and contains approximately 13,000 square feet of space. This office also has an automated teller machine.

        HTB has a branch located at 435 W. Bankhead Highway in Villa Rica, Georgia. This building is owned by HTB and contains approximately 4,800 square feet of space. The branch has an automated teller machine. HTB also has a branch in Hiram, Georgia. The building is owned by HTB and contains approximately 6,000 square feet of space and an automated teller machine.

        In the opinion of management, all properties including improvements and furnishings are adequately insured.

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ITEM 3.    LEGAL PROCEEDINGS

        We are not a party to, nor is any of our property the subject of, any material pending legal proceedings, other than ordinary routine proceedings incidental to our business, nor to the knowledge of the management are any such proceedings contemplated or threatened against us.

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

        There were no matters submitted to a vote of security holders during the fourth quarter of 2002.

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PART II

ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

(a)

Effective January 5, 1999, we began listing our stock on The NASDAQ Stock Market under the symbol "GBTB." The following table sets forth the high and low closing sale prices for our capital stock for the periods set forth below as reported on The NASDAQ Stock Market. The sales prices indicated reflect inter-dealer prices, without mark-up, mark-down or commission, and may not represent actual transactions.

(b)

As of March 19, 2003, there were approximately 2,056 holders of record of our capital stock.



(c)

We paid a cash dividend of $.34 and $.29 per share on our capital stock for the years ended December 31, 2002 and 2001, respectively. We anticipate continuing to pay a quarterly dividend in the future. Any declaration and payment of dividends will be based on our earnings, economic conditions, and the Board of Directors' evaluation of other relevant factors. Our ability to pay dividends will also be dependent on cash dividends paid to us by our Banks. The ability of our Banks to pay dividends to us is restricted by applicable regulatory requirements. See "Supervision and Regulation."

Equity Compensation Plan Information

        See "Item 12—Security Ownership of Certain Beneficial Owners and Management—Equity Compensation Plan Information" for disclosure regarding the Company's equity compensation plans.

ITEM 6.    SELECTED FINANCIAL DATA

        The following table presents selected historical consolidated financial information for us and our subsidiaries and is derived from the consolidated financial statements and related notes included in this annual report. This information is only a summary and should be read in conjunction with our historical financial statements and related notes. The year ended December 31, 2002 includes the

15

acquisition of HTB which was accounted for as a purchase. See Results of Operations for further discussion on the acquisition of HTB.

ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General

        The purpose of this discussion is to focus on information about our financial condition and results of operations which is not otherwise apparent from the consolidated financial statements included in this Annual Report. Reference should be made to those statements and the selected financial data presented elsewhere in this report for an understanding of the following discussion and analysis. Historical results of operations and any trends which may appear, are not necessarily indicative of the results to be expected in future years.

        During 2001, we completed our acquisition of Community Trust Financial Services Corporation which was accounted for as a pooling of interests. All prior financial information has been restated to reflect the combination as of the earliest period presented. Our discussion and analysis reflects the combined performance and financial position for the periods presented.

        During 2002, we completed our acquisition of HomeTown Bank of Villa Rica which was accounted for as a purchase. The results of operations related to HTB have been included since the date of acquisition.

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Summary

        During 2002 and 2001, we continued to experience moderate internal growth in interest-earning and total assets which was funded by increases in deposits, borrowings, and the retention of net profits. During 2002, we experienced additional growth through the acquisition of HTB as explained below. We recorded net income of $6,528,000 and $3,970,000 for the years ended December 31, 2002 and 2001, respectively. Total equity at December 31, 2002 increased to $60,777,000 from $44,774,000, or $16,003,000 from December 31, 2001. The aforementioned acquisition of HTB accounted for $9,571,000 of this increase.

Balance Sheets

        Our total assets increased $194.4 million or 35.5% for the year ended December 31, 2002 compared to $35.1 million or 6.9% for the same period in 2001. The acquisition of HTB accounted for approximately $134.7 million of this increase. The increase in total assets for the year ended December 31, 2002, exclusive of HTB, consists primarily of an increase in interest-earning assets of $61.9 million or 12.2% compared to an increase of $32.2 million or 6.8% during the same period in 2001. The overall growth in 2002 and 2001 is consistent with management's plans. The competition for deposits plays an important role in the overall growth of the Company.

        Our primary focus is to maximize earnings through lending activities. Any excess funds are invested according to our investment policy. Total loans increased 29.7% or $124.2 million for the year ended December 31, 2002. Exclusive of HTB, which represented $91.2 million of this increase, total loans increased 7.9%. This increase is compared to an increase of 8.8% or $34.0 million during 2001. The economy in Gainesville, and Georgia as a whole, continues to grow despite the events of September 11, 2001. As of December 31, 2002, our loan-to-deposit ratio was 94% compared to 98% in 2001. At December 31, 2002 and 2001, we had total outstanding borrowings of $91.0 million and $70.2 million, respectively. These funds have been used to fund loan growth. The utilization of borrowings to fund loan growth enables us to maintain a higher loan to deposit ratio and maintain an adequate liquidity ratio. Our loan-to-funds ratio was 81% and 84% at December 31, 2002 and 2001, respectively.

        During 2002, total deposits grew by $153.5 million, or 36.0%. Exclusive of HTB, which accounted for $113.3 million of this increase, total deposits grew $40.2 million or 9.4% compared to an increase of $25.5 million or 6.3% in 2001. The increase in 2002, exclusive of HTB, consists primarily of an increase in interest-bearing deposits of $45.4 million or 12.2% compared to an increase of $20.4 million or 5.8% during 2001.

        The specific economic and credit risks associated with our loan portfolio, especially the real estate portfolio, include, but are not limited to, a general downturn in the economy which could affect unemployment rates in our market areas, general real estate market deterioration, interest rate fluctuations, deteriorated collateral, title defects, inaccurate appraisals, and financial deterioration of borrowers. Construction and development lending can also present other specific risks to the lender such as whether developers can find builders to buy lots for home construction, whether the builders can obtain financing for the construction, whether the builders can sell the home to a buyer, and whether the buyer can obtain permanent financing. Currently, real estate values and employment trends in our market areas have remained stable. The general economy and loan demand showed signs of declining slightly during the fourth quarter of 2000, and continued through 2001 and 2002. The events of September 11, 2001 have impacted our operations due to the continued cutting of interest rates. However, we have not realized significant losses to date in our loan portfolio which can be directly attributed to September 11, 2001.

        We attempt to reduce these economic and credit risks not only by adherence to our lending policy, which includes loan to value guidelines, but also by investigating the creditworthiness of the borrower

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and monitoring the borrower's financial position. Also, we periodically review our lending policies and procedures.

Liquidity and Capital Resources

        Liquidity management involves the matching of the cash flow requirements of customers who may be either depositors desiring to withdraw funds or borrowers needing assurance that sufficient funds will be available to meet their credit needs and our ability to meet those needs. We seek to meet liquidity requirements primarily through management of short-term investments, monthly amortizing loans, maturing single payment loans, and maturities of securities and prepayments. Also, we maintain relationships with correspondent banks which could provide funds on short notice. As of December 31, 2002, we had borrowed under Federal funds purchase lines and securities sold under repurchase agreements $11.5 million compared to $19.7 million as of December 31, 2001. These borrowings typically mature within one to four business days.

        The following table sets forth certain information about contractual cash obligations as of December 31, 2002.

        The Company's operating leases represent short-term obligations, normally with maturities of one year or less. Many of the operating leases have thirty-day cancellation provisions. The total contractual obligations for operating leases do not require a material amount of the Company's cash funds.

        At December 31, 2002, we had no binding commitments for capital expenditures.

        Our liquidity and capital resources are monitored on a periodic basis by management and state and Federal regulatory authorities. At December 31, 2002, our liquidity ratio was 22.34% which was above our target ratio of 20%. Management reviews liquidity on a periodic basis to monitor and adjust liquidity as necessary. Management has the ability to adjust liquidity by selling securities available for sale, selling participations in loans and accessing available funds through various borrowing arrangements. At December 31, 2002, we had available borrowing capacity totaling approximately $55.5 million through various borrowing arrangements and available lines of credit. Our short-term investments and available borrowing arrangements are adequate to cover any reasonably anticipated immediate need for funds. We are not aware of any events or trends likely to result in a material change in liquidity.

        At December 31, 2002, our capital to asset ratios were considered well-capitalized, with the exception of HTB, based on guidelines established by the regulatory authorities. Subsequent to December 31, 2002, the Company has injected sufficient capital into HTB to return HTB to well-capitalized status. At December 31, 2002, our total capital to risk weighted assets ratio was 12.58%, our Tier 1 capital to risk weighted assets ratio was 11.33%, and our Tier 1 capital to average assets ratio was 10.15%. During 2002, we increased our capital by retaining net earnings of $6.5 million. Also, the acquisition of HTB accounted for an increase in capital of $9.5 million.

        Management is not aware of any known trends, events or uncertainties, other than those discussed above, that will have or are reasonably likely to have a material effect on its liquidity, capital resources, or operations. Management is also not aware of any current recommendations by the regulatory authorities which, if they were implemented, would have such an effect.

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        The Banks are subject to certain restrictions on the amount of dividends that may be declared without prior regulatory approval. At December 31, 2002, approximately $3,105,000 of retained earnings were available for dividend declaration without regulatory approval.

Effects of Inflation

        The impact of inflation on banks differs from its impact on non-financial institutions. Banks, as financial intermediaries, have assets which are primarily monetary in nature and which tend to fluctuate in concert with inflation. A bank can reduce the impact of inflation if it can manage its rate sensitivity gap. This gap represents the difference between rate sensitive assets and rate sensitive liabilities. Through our asset-liability committees, we attempt to structure the assets and liabilities and manage the rate sensitivity gap, thereby seeking to minimize the potential effects of inflation. For information on the management of our interest rate sensitive assets and liabilities, see the "Asset/Liability Management" section in Item 1 of this report.

Results of Operations—For the Years Ended December 31, 2002, 2001 and 2000

        Our profitability is determined by our ability to effectively manage interest income and expense, to minimize loan and security losses, to generate noninterest income, and to control operating expenses. Because interest rates are determined by market forces and economic conditions beyond our control, our ability to generate net interest income depends upon our ability to obtain an adequate net interest spread between the rate earned on interest-earning assets and the rate paid on interest-bearing liabilities. The net yield on average interest-earning assets increased to 4.39% in 2002 from 4.33% in 2001. This increase is attributable primarily to increases in volume. In 2002, the average yield on interest-earning assets decreased to 7.11% from 8.55% in 2001 while the average yield on interest-bearing liabilities decreased to 3.13% in 2002 from 4.85% in 2001. The overall change in the interest rate spread from 2001 to 2002 was an increase of 28 basis points. The increase in the net interest spread is a result of increases in volume, which is offset by continued decreases in rates. Total interest-earning assets increased by $52.4 million, to $547,662,000 at December 31, 2002 from the same period of 2001 while interest-bearing liabilities only increased by $45.5 million, to $476,646,000 for the same period.

        The net yield on average interest-earning assets decreased by 41 basis points to 4.33% from 4.74% for the year ended December 31, 2001 as compared to 2000. The decreased net yield in 2001 was primarily attributable to the continued decrease in interest rates in 2001. During 2001, the prime interest rate decreased 475 basis points.

        Net Interest Income.    Net interest income increased by $2,603,000 to $24.1 million in 2002, compared to an increase of $459,000 in 2001. The increase for both years continues to reflect the continued increase in interest-earning assets during 2002 and 2001. As shown in Table 1 and Table 2 included in this annual report, the change in net interest income is the result of the increases in net volume versus changes in net interest rates.

        Provision for Loan Loss.    Provisions for loan losses decreased by $461,000 during 2002 compared to an increase of $157,000 during 2001. The provision for loan losses is the charge to operations which management feels is necessary to fund the allowance for loan losses. This provision is based on the growth of the loan portfolio, the amount of historical net charge-offs incurred, consideration of peer group averages, and the general economy as well as the local economies. The allowance for loan loss was $7,538,000 or 1.39% of total loans at December 31, 2002 compared to $5,522,000 or 1.32% of total loans at December 31, 2001. We incurred net charge offs of $670,000, $883,000 and $268,000 for the years ended December 31, 2002, 2001 and 2000, respectively. The percentage of net charge-offs to average loans outstanding was .15% and .22% for the years ended December 31, 2002 and 2001. The decrease in the provision for loan losses in 2002 was due to decreases at two subsidiaries based on

19

positive trends in the loan portfolio and recoveries. The decrease in net charge-offs of $213,000 is primarily a result of recoveries during 2002 at two of the subsidiaries of $171,000 and $107,000. The consumer related charge-offs consist of many smaller balance loans while the real estate charge-offs consist of only a few larger balance loans. Real estate loans are normally secured by one to four family residences or other real estate with values exceeding the original loan balance, therefore minimizing the risk of loss. Consumer loans, however, may be secured by consumer goods and automobiles, or may be unsecured, and therefore subject to greater loss in the event of charge-off. During a recession, losses are more likely and the risk of loss is greater in the consumer portfolio. The allowance for loan losses as a percentage of nonaccrual loans at December 31, 2002 was 136.9%, which was down significantly from 1167.4% in 2001. This decrease is due to nonaccrual loans increasing to $5,506,000 at December 31, 2002 from $473,000 at December 31, 2001. This increase in nonaccrual loans was primarily attributable to the acquisition of HTB whose nonaccrual loan balance at December 31, 2002 was $3,846,000. Currently, HTB's nonaccrual loan balance has decreased by approximately $2,678,000 representing loans which have been either brought current or brought to resolution. During the same period, other problem loans, including past due loans greater than 90 days past due, increased by $1,618,000 compared to a decrease of $563,000 in 2001. The increase in past due loans is primarily attributable to one loan at a bank subsidiary of $1,414,000. Based on management's evaluations, the allowance for loan losses is adequate to absorb potential losses on existing loans.

        Other Income.    Other income increased during 2002 by $1,733,000 compared to an increase of $1,967,000 in 2001. For the year ended December 31, 2002, the most significant portion of the net increase consisted of an increase of $189,000 in service charges on deposit accounts, an increase of $445,000 in mortgage origination fees and an increase in security transactions, net of $772,000. For the same period in 2001, service charges increased by $1,245,000 and mortgage origination fees increased by $611,000. The increase in service charges was related to growth in transaction accounts and new service charge income related to a new product. The increase in mortgage origination fees is directly related to the decrease in prime rate which also impacts the mortgage rates. In a decreasing rate environment, refinancing of mortgage loans has provided an excellent opportunity for us to generate other fee income.

        Other Expense.    Other expense increased $1,195,000 and $2,712,000 for the years ended December 31, 2002 and 2001, respectively. Increases in salaries and employee benefits represent the most significant portions of these increases, which increased by $1,197,000 and $1,219,000 for the years ended 2002 and 2001, respectively. The number of full-time equivalent employees increased by 79 from December of 2001 to December of 2002, 48 of which related to the acquisition of HTB. In addition to the additional salary expense related to new employees, we incurred increases due to increases in profit sharing contributions, health insurance costs, incentive compensation and normal salary increases for the years ended December 31, 2002 and 2001. The increase in salaries and employee benefits in 2001 is related to one-time expenses incurred for salary continuation benefits related to the acquisition of Community Trust Financial Services Corporation. Other operating expenses increased by $62,000 and $1,005,000, respectively, for the years ended December 31, 2002 and 2001. The increase in other operating expenses in 2001 included professional and merger related expenses of $618,678 which were recognized in other operating expenses due to the business combination of Community Trust Financial Services Corporation being accounted for as a pooling of interests.

        Income Tax Expense.    Income tax expense increased $1,044,000 to $3,030,000 in 2002 from $1,986,000 in 2001. The effective tax rate was 32% for the year ended December 31, 2002 and 33% for the year ended December 31, 2001.

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        Net Income.    Net income increased by $2,558,000 for the year ended December 31, 2002, or by 64.43%. The decrease in net income for the same period in 2001 was $339,000, or 7.91%. The increase in net income in 2002 was the net of a combination of significant growth in interest-earning assets, moderate increases in other expenses, a decrease in provision for loan losses and increased non-interest income. The decrease in net income in 2001 is due to a decrease in growth rate of interest-earning assets, an overall decline in yields on interest-earning assets and one-time merger expenses recognized in connection with the aforementioned business combination.

SELECTED FINANCIAL INFORMATION AND STATISTICAL DATA

        The tables and schedules on the following pages set forth certain financial information and statistical data with respect to: the distribution of assets, liabilities and stockholders' equity; interest rates and interest differentials; interest rate sensitivity gap ratios; the securities portfolio; the loan portfolio; including types of loans, maturities and sensitivities to changes in interest rates and information on nonperforming loans; summary of the loan loss experience and allowance for loan losses; types of deposits; and the return on equity and assets.

        The following table sets forth the amount of our interest income or interest expense for each category of interest-earning assets and interest-bearing liabilities and the average interest yield/rate for total interest-earning assets and total interest-bearing liabilities, net interest spread and net yield on average interest-earning assets.

Table 1—Distribution of Assets, Liabilities and Stockholders' Equity Interest Rates and Interest Differentials

(1)

Average balances were determined using the daily average balances.

(2)

Average balances of loans include nonaccrual loans and are net of deferred interest and fees.

(3)

Average unrealized gains (losses) on securities available for sale, net of tax, have been included in stockholders' equity at $1,365,000, $844,000, and $(540,000) for 2002, 2001, and 2000, respectively.

(4)

Interest and fees on loans include $3,038,000, $2,916,000 and $2,390,000 of loan fee income for the years ended December 31, 2002, 2001 and 2000, respectively.

(5)

Yields on nontaxable securities are not presented on a tax-equivalent basis.

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Table 2—Rate and Volume Analysis

        The following table describes the extent to which changes in interest rates and changes in volume of interest-earning assets and interest-bearing liabilities have affected our interest income and expense during the years indicated. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to: (1) change in volume (change in volume multiplied by old rate); (2) change in rate (change in rate multiplied by old volume); and (3) a combination of change in rate and change in volume. The changes in interest income and interest expense attributable to both volume and rate have been allocated proportionately to the change due to volume and the change due to rate.

Asset/Liability Management

        Our asset/liability mix is monitored on a regular basis and a report evaluating the interest rate sensitive assets and interest rate sensitive liabilities is prepared and presented to the Board of Directors on a monthly basis. The objective of this policy is to monitor interest rate sensitive assets and liabilities so as to minimize the impact of substantial movements in interest rates on earnings. An asset or liability is considered to be interest rate-sensitive if it will reprice or mature within the time period analyzed, usually one year or less. The interest rate-sensitivity gap is the difference between the interest-earning assets and interest-bearing liabilities scheduled to mature or reprice within such time period. A gap is considered positive when the amount of interest rate-sensitive assets exceeds the amount of interest rate-sensitive liabilities. A gap is considered negative when the amount of interest rate-sensitive liabilities exceeds the interest rate-sensitive assets. During a period of rising interest rates, a negative gap would tend to adversely affect net interest income, while a positive gap would tend to result in an increase in net interest income. Conversely, during a period of falling interest rates, a negative gap would tend to result in an increase in net interest income, while a positive gap would tend to adversely affect net interest income. If our assets and liabilities were equally flexible and moved

22

concurrently, the impact of any increase or decrease in interest rates on net interest income would be minimal.

        A simple interest rate "gap" analysis by itself may not be an accurate indicator of how net interest income will be affected by changes in interest rates. Accordingly, we also evaluate how the repayment of particular assets and liabilities is impacted by changes in interest rates. Income associated with interest-earning assets and costs associated with interest-bearing liabilities may not be affected uniformly by changes in interest rates. In addition, the magnitude and duration of changes in interest rates may have a significant impact on net interest income. For example, although certain assets and liabilities may have similar maturities or periods of repricing, they may react in different degrees to changes in market interest rates. Interest rates on certain types of assets and liabilities fluctuate in advance of changes in general market rates, while interest rates on other types may lag behind changes in general market rates. In addition, certain assets, such as adjustable rate mortgage loans, have features (generally referred to as "interest rate caps and floors") which limit the amount of changes in interest rates. Prepayment and early withdrawal levels also could deviate significantly from those assumed in calculating the interest rate gap. The ability of many borrowers to service their debts also may decrease during periods of rising interest rates.

        Changes in interest rates also affect our liquidity position. We currently price deposits in response to market rates and it is management's intention to continue this policy. If deposits are not priced in response to market rates, a loss of deposits could occur which would negatively affect our liquidity position.

        At December 31, 2002 our cumulative one year interest rate sensitivity gap ratio was .90%. Our targeted ratio is 80% to 120% in this time horizon. This indicates that our interest-bearing liabilities will reprice during this period at a rate faster than our interest-earning assets.

        The following table sets forth the distribution of the repricing of our interest-earning assets and interest-bearing liabilities as of December 31, 2002, the interest rate sensitivity gap (i.e., interest rate sensitive assets less interest rate sensitive liabilities), the cumulative interest rate sensitivity gap, the interest rate sensitivity gap ratio (i.e., interest rate sensitive assets divided by interest rate sensitive liabilities) and the cumulative interest rate sensitivity gap ratio.

        The table also sets forth the time periods in which interest-earning assets and interest-bearing liabilities will mature or may reprice in accordance with their contractual terms. However, the table does not necessarily indicate the impact of general interest rate movements on the net interest margin since the repricing of various categories of assets and liabilities is subject to competitive pressures and

23

the needs of our customers. In addition, various assets and liabilities indicated as repricing within the same period may in fact reprice at different times within such period and at different rates.

        We actively manage the mix of asset and liability maturities to control the effects of changes in the general level of interest rates on net interest income. Except for its effect on the general level of interest rates, inflation does not have a material impact on us due to the rate variability and short-term maturities of our earning assets. In particular, approximately 61.2% of the loan portfolio is comprised of loans which have variable rate terms or mature within one year. Most mortgage loans are made on a variable rate basis with rates being adjusted every one to five years.

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SECURITIES PORTFOLIO

        The carrying value at the dates indicated of securities are as follows:

(1)

Other securities consist of Federal Home Loan Bank of Atlanta stock, The Bankers Bank stock, common stock of two de novo banks and corporate notes. For presentation purposes, the equity securities are not included in the maturity table below because they have no contractual maturity date.

Maturities

        The amounts of debt securities as of December 31, 2002 are shown in the following table according to contractual maturities classified as; (1) one year or less; (2) after one year through five years; (3) after five years through ten years; and (4) after ten years.

(1)

Yields were computed using coupon interest rates, including discount accretion and premium amortization. The weighted average yield for each maturity range was computed using the carrying value of each security in that range.

(2)

Yields on municipal securities are not stated on a tax-equivalent basis.

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LOAN PORTFOLIO

Types of Loans

        Loans by type of collateral are presented below:

(1)

Real estate-mortgage loans are net of deferred loan fees.

Maturities and Sensitivities to Changes in Interest Rates

        Total loans as of December 31, 2002 are shown in the following table according to contractual maturity classifications (1) one year or less, (2) after one year through five years, and (3) after five years.

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        The following table summarizes loans at December 31, 2002 with the due dates after one year for predetermined and floating or adjustable interest rates.

Risk Elements

        The following table presents the aggregate of nonperforming loans for the categories indicated.

        The reduction in interest income associated with nonaccrual loans as of December 31, 2002 is as follows:

        Management includes nonaccrual loans in its definition of impaired loans as determined by Financial Accounting Standards Board Statement Numbers 114 and 118.

        Our policy is to discontinue the accrual of interest income when, in the opinion of management, collection of such interest becomes doubtful. This status is determined when; (1) there is a significant deterioration in the financial condition of the borrower and full repayment of principal and interest is not expected; and (2) the principal or interest is more than 90 days past due, unless the loan is both well-secured and in the process of collection. Accrual of interest on such loans is resumed when, in management's judgment, the collection of interest and principal becomes probable. Loans classified for regulatory purposes as loss, doubtful, substandard, or special mention that have not been included in the table above do not represent or result from trends or uncertainties which management reasonably expects will materially impact future operating results, liquidity, or capital resources. These classified loans do not represent material credits about which management is aware and which causes management to have serious doubts as to the ability of such borrowers to comply with the loan repayment terms. In the event of non-performance by the borrower, these loans have collateral pledged which would prevent the recognition of substantial losses.

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Commitments and Lines of Credit

        We will, in the normal course of business, commit to extend credit in the form of letters of credit, lines of credit, and credit cards. The amount of outstanding loan commitments at December 31, 2002 and 2001 was $108.7 million and $79.6 million, respectively. These commitments are recorded in the financial statements when funds are disbursed or the financial instruments become payable. We use the same credit and collateral policies for these off balance sheet commitments as we do for financial instruments that are recorded in the financial statements. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitment amounts expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.

SUMMARY OF LOAN LOSS EXPERIENCE

        The following table summarizes average loan balances for each year determined using the daily average balances during the year; changes in the allowance for loan losses arising from loans charged off and recoveries on loans previously charged off; additions to the allowance which have been charged to expense; and the ratio of net charge-offs during the year to average loans.

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        The following table sets forth the allowance for loan losses to total allowance for loan losses and the percent of loans to total loans in each of the categories listed at the dates indicated.