U.
S. SECURITIES AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-Q








x
            Quarterly Report Under Section 13
      or 15(d) of the Securities Exchange Act of
  1934


For the
quarterly period ended June 30,
2008





 ̈
            Transition Report under Section
      13 or 15(d) of the Securities Exchange Act of
  1934


For the
transition period from __________ to __________




Commission
File Number: 000-53194







Freedom
      Bancshares, Inc.(Exact name of small
      business issuer as specified in its charter)





Georgia
            
            06-1671382(State
      of Incorporation)
            
            (IRS
      Employer Identification No.)





3165 Maysville Road, Commerce,
      GA 30529(Address of
      principal executive offices)
   (706)
      423-2500(Issuer’s telephone
      number)




N/A(Former name, former
      address and former fiscal year, if changed since last
    report)


Check
whether the issuer: (1) filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90
days.





YES xNO  ̈





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.




Large
      accelerated filer 
              Accelerated
      filer 
              Non-accelerated
      filer 
              Smaller
      reporting company ý


Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).      Yes
   No ý





State the
number of shares outstanding of each of the issuer’s classes of common equity,
as of





August 14, 2008: 1,317,505
shares outstanding, $1.00 par value












FREEDOM BANCSHARES, INC.


AND
SUBSIDIARY





Index








PagePart
      I.  Financial InformationItem
      1.  Financial Statements (unaudited)Consolidated
      Balance Sheets - June 30, 2008 and December 31, 2007
            2Consolidated
      Statements of Operations – Three and Six Months Ended June 30, 2008 and
      2007
            3Consolidated
      Statements of Comprehensive Income (Loss) – Three and Six Months Ended
      June 30, 2008 and 2007
            4Consolidated
      Statements of Cash Flows - Six Months Ended June 30, 2008 and
      2007
            5Notes
      to Consolidated Financial Statements
            6 -
      10Item
      2.  Management's Discussion and Analysis
            11
      - 19Item
      3.  Quantitative and Qualitative Disclosures about Market
      Risk
            20Item
      4(T).  Controls and Procedures
            20Part
      II.  Other InformationItem
      1.  Legal Proceedings
            21Item
      1A. Risk Factors
            21Item
      2.  Unregistered Sales of Equity Securities and Use of
      Proceeds
            21Item
      3.  Defaults Upon Senior Securities
            21Item
      4.  Submission of Matters to a Vote of Security
      Holders
            21Item
      5.  Other Information
            21Item
      6.  Exhibits
            22Signature
      Page
            23Exhibit
      Index


Index




PART
I - FINANCIAL INFORMATION





ITEM
I.  FINANCIALSTATEMENTS





FREEDOMBANCSHARES, INC. AND SUBSIDIARY





CONSOLIDATED
BALANCE SHEETS


(Unaudited)





June 30,
            
            
            December 31,Assets
            
            2008
            
            
            2007Cash
      and due from banks
            
            $
            2,791,091
            
            
            $
            3,016,248Interest
      bearing deposits in banks
            
            
            183,711
            
            
            
            137,392Federal
      funds sold
            
            
            2,504,961
            
            
            
            1,113,000Securities
      available for sale, at fair value
            
            
            17,925,845
            
            
            
            16,322,944Loans,
      less allowance for loan losses of $3,142,110 and $1,616,837,
      respectively
            
            
            110,906,385
            
            
            
            116,670,671Property
      and equipment, net
            
            
            5,650,421
            
            
            
            5,830,047Federal
      Home Loan Bank stock
            
            
            1,097,600
            
            
            
            1,071,100Accrued
      interest receivable
            
            
            984,433
            
            
            
            1,418,985Foreclosed
      assets
            
            
            6,790,466
            
            
            
            881,579Other
      assets
            
            
            2,223,652
            
            
            
            700,117Total
      assets
            
            $
            151,058,565
            
            
            $
            147,162,083Liabilities and
      Stockholders' EquityLiabilities:Deposits:Noninterest-bearing
            
            $
            8,303,241
            
            
            $
            6,542,891Interest-bearing
            
            
            113,807,476
            
            
            
            108,011,123Total
      deposits
            
            
            122,110,717
            
            
            
            114,554,014Federal
      Home Loan Bank advances
            
            
            17,000,000
            
            
            
            18,500,000Accrued
      interest payable
            
            
            622,134
            
            
            
            638,728Other
      liabilities
            
            
            167,411
            
            
            
            10,329Total
      liabilities
            
            
            139,900,262
            
            
            
            133,703,071Commitments
      and contingenciesStockholders'
      equityPreferred
      stock, no par value; 2,000,000 shares authorized;no shares issued and
      outstanding
            
            
            -
            
            
            
            -Common
      stock, $1.00 par value; 10,000,000 shares authorized;1,317,505 and
      1,316,005 shares issued and outstanding, respectively
            
            
            1,317,505
            
            
            
            1,316,005Additional
      paid-in capital
            
            
            12,850,831
            
            
            
            12,807,750Accumulated
      deficit
            
            
            (2,766,194
            )
            
            
            (620,327
            )Accumulated
      other comprehensive loss
            
            
            (243,839
            )
            
            
            (44,416
            )Total
      stockholders' equity
            
            
            11,158,303
            
            
            
            13,459,012Total
      liabilities and stockholders' equity
            
            $
            151,058,565
            
            
            $
            147,162,083





See
Notes to Consolidated Financial Statements





2
 Index




FREEDOMBANCSHARES, INC. AND SUBSIDIARY





CONSOLIDATED
STATEMENTS OF OPERATIONS


THREE
AND SIX MONTHS ENDED JUNE 30, 2008 AND 2007


(Unaudited)





Three
      Months
              Ended
      June 30, 2008
            
            
            Three
      Months
              Ended
      June 30, 2007
            
            
            Six
      Months Ended June 30, 2008
            
            
            Six
      Months Ended June 30, 2007Interest
      income:Loans
            
            $
            1,785,890
            
            
            $
            2,690,973
            
            
            $
            3,954,633
            
            
            $
            5,182,048Taxable
      securities
            
            
            210,973
            
            
            
            259,796
            
            
            
            414,110
            
            
            
            514,011Federal
      funds sold
            
            
            10,864
            
            
            
            21,713
            
            
            
            34,166
            
            
            
            42,374Other
            
            
            15,886
            
            
            
            14,234
            
            
            
            33,004
            
            
            
            42,609Total
      interest income
            
            
            2,023,613
            
            
            
            2,986,716
            
            
            
            4,435,913
            
            
            
            5,781,042Interest
      expense:Deposits
            
            
            1,232,162
            
            
            
            1,500,626
            
            
            
            2,598,688
            
            
            
            2,823,843Other
      borrowings
            
            
            144,596
            
            
            
            149,139
            
            
            
            323,729
            
            
            
            348,693Total
      interest expense
            
            
            1,376,758
            
            
            
            1,649,765
            
            
            
            2,922,417
            
            
            
            3,172,536Net
      interest income
            
            
            646,855
            
            
            
            1,336,951
            
            
            
            1,513,496
            
            
            
            2,608,506Provision
      for loan losses
            
            
            1,500,000
            
            
            
            58,000
            
            
            
            2,940,000
            
            
            
            149,000Net
      interest income (loss) afterprovision for loan
      losses
            
            
            (853,145
            )
            
            
            1,278,951
            
            
            
            (1,426,504
            )
            
            
            2,459,506Noninterest
      income:Service
      charges on deposit accounts
            
            
            79,010
            
            
            
            39,974
            
            
            
            145,512
            
            
            
            74,536Other
      operating income
            
            
            149,135
            
            
            
            40,239
            
            
            
            224,477
            
            
            
            78,805Total
      noninterest income
            
            
            228,145
            
            
            
            80,213
            
            
            
            369,989
            
            
            
            153,341Noninterest
      expenses:Salaries
      and other employee benefits
            
            
            587,309
            
            
            
            613,004
            
            
            
            1,222,862
            
            
            
            1,176,794Occupancy
      and equipment expenses
            
            
            157,380
            
            
            
            168,477
            
            
            
            319,884
            
            
            
            314,819Other
      operating expenses
            
            
            484,721
            
            
            
            377,949
            
            
            
            835,105
            
            
            
            634,018Total
      noninterest expenses
            
            
            1,229,410
            
            
            
            1,159,430
            
            
            
            2,377,851
            
            
            
            2,125,631Loss
      (income) before income taxes
            
            
            (1,854,410
            )
            
            
            199,734
            
            
            
            (3,434,366
            )
            
            
            487,216Income
      tax (benefit) expense
            
            
            (695,800
            )
            
            
            80,800
            
            
            
            (1,288,500
            )
            
            
            191,850Net
      (loss) income
            
            $
            (1,158,610
            )
            
            $
            118,934
            
            
            $
            (2,145,866
            )
            
            $
            295,366Basic
      (losses) earnings per share
            
            $
            (0.88
            )
            
            $
            0.09
            
            
            $
            (1.63
            )
            
            $
            0.24Diluted
      earnings per share
            
            
            
            
            
            $
            0.09
            
            
            
            
            
            
            $
            0.22Cash
      dividends per share
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -





See
Notes to Consolidated Financial Statements





3
 Index




FREEDOMBANCSHARES, INC. AND SUBSIDIARY





CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME (LOSS)


THREE
AND SIX MONTHS ENDED JUNE 30, 2008 AND 2007


(Unaudited)





Three
      Months Ended June 30, 2008
            
            
            Three
      Months Ended June 30, 2007
            
            
            Six
      Months EndedJune 30,
      2008
            
            
            Six
      MonthsEnded
      June 30, 2007Net
      (loss) income
            
            $
            (1,158,610
            )
            
            $
            118,934
            
            
            $
            (2,145,866
            )
            
            $
            295,366Other
      comprehensive income (loss):Unrealized
      losses on securities availablefor sale, net of
      tax
            
            
            (377,950
            )
            
            
            (175,317
            )
            
            
            (207,612
            )
            
            
            (147,852
            )Unrealized
      gain (loss) on interest rate floor, net of tax
            
            
            1,374
            
            
            
            (2,047
            )
            
            
            8,189
            
            
            
            760Other
      comprehensive loss
            
            
            (376,576
            )
            
            
            (177,364
            )
            
            
            (199,423
            )
            
            
            (147,092
            )Comprehensive
      (loss) income
            
            $
            (1,535,186
            )
            
            $
            (58,430
            )
            
            $
            (2,345,289
            )
            
            $
            148,274





See
Notes to Consolidated Financial Statements





4
 Index




FREEDOMBANCSHARES, INC. AND SUBSIDIARY





CONSOLIDATED
STATEMENTS OF CASH FLOWS


SIX
MONTHS ENDED JUNE 30, 2008 AND 2007


(Unaudited)





2008
            
            
            2007OPERATING
      ACTIVITIESNet
      (loss) income
            
            $
            (2,145,866
            )
            
            $
            295,366Adjustments
      to reconcile net (loss) income to net cash provided byoperating
      activities:Amortization
      and accretion on securities
            
            
            (5,305
            )
            
            
            (1,935
            )Depreciation
            
            
            181,336
            
            
            
            168,347Provision
      for loan losses
            
            
            2,940,000
            
            
            
            149,000Stock
      compensation expense
            
            
            29,581
            
            
            
            23,150Gain
      on sale of foreclosed assets
            
            
            (6,595
            )
            
            
            (11,273
            )Increase
      (decrease) in interest receivable
            
            
            434,552
            
            
            
            (216,689
            )(Decrease)
      increase in interest payable
            
            
            (16,594
            )
            
            
            190,271Increase
      in other assets
            
            
            (1,389,445
            )
            
            
            (23,653
            )Increase
      (decrease) in other liabilities
            
            
            157,082
            
            
            
            (35,100
            )Net
      cash provided by operating activities
            
            
            178,746
            
            
            
            537,484INVESTING
      ACTIVITIESPurchases
      of securities available for sale
            
            
            (7,778,597
            )
            
            
            (1,740,514
            )Proceeds
      from maturities and paydowns of securities available for
    sale
            
            
            5,847,487
            
            
            
            1,534,269(Purchase)
      redemption of Federal Home Loan Bank stock
            
            
            (26,500
            )
            
            
            129,000Net
      increase in loans
            
            
            (3,843,365
            )
            
            
            (11,839,837
            )Purchases
      of premises and equipment
            
            
            (1,710
            )
            
            
            (2,641,420
            )Investment
      in foreclosed assets
            
            
            (168,036
            )
            
            
            -Proceeds
      from sale of foreclosed assets
            
            
            933,395
            
            
            
            180,590Net
      cash used in investing activities
            
            
            (5,037,326
            )
            
            
            (14,377,912
            )FINANCING
      ACTIVITIESNet
      increase in deposits
            
            
            7,556,703
            
            
            
            18,292,558Repayments
      of FHLB advances
            
            
            (1,500,000
            )
            
            
            (6,000,000
            )Proceeds
      from sale of common stock, net
            
            
            15,000
            
            
            
            1,036,947Net
      cash provided by financing activities
            
            
            6,071,703
            
            
            
            13,329,505Net
      increase (decrease) in cash and cash equivalents
            
            
            1,213,123
            
            
            
            (510,923
            )Cash
      and cash equivalents at beginning of period
            
            
            4,266,640
            
            
            
            3,633,957Cash
      and cash equivalents at end of period
            
            $
            5,479,763
            
            
            $
            3,123,034SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATIONCash
      paid for:Interest
            
            $
            2,939,011
            
            
            $
            2,982,265Income
      taxes
            
            $
            14,008
            
            
            $
            220,586NONCASH
      INVESTING ACTIVITIESLoans
      transferred to other real estate owned
            
            $
            6,667,651
            
            
            $
            169,317Decrease
      in accumulated other comprehensive income
            
            $
            199,423
            
            
            $
            147,092





See
Notes to Consolidated Financial Statements


5
 Index




FREEDOMBANCSHARES, INC.


AND
SUBSIDIARY








NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


June 30,
2008


(Unaudited)




NOTE 1.
            BASIS OF
      PRESENTATION




The
financial information contained herein is unaudited. Accordingly, the
information does not include all the information and footnotes required by
accounting principles generally accepted in the United States of America for
complete financial statements, however, such information reflects all
adjustments (consisting solely of normal recurring adjustments), which are, in
the opinion of management, necessary for a fair statement of results for the
interim periods.





Operating
results for the three- and six-month periods ended June 30, 2008 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2008. These statements should be read in conjunction with the
financial statements and footnotes thereto included in the annual report for the
year ended December 31, 2007.





NOTE 2.
            SUMMARY OF
      ORGANIZATION





Freedom
Bancshares, Inc., Commerce, Georgia (the “Company”), is a one-bank holding
company with respect to its subsidiary bank, Freedom Bank of Georgia, Commerce,
Georgia (the “Bank”). The Company’s articles of incorporation authorize its
Board of Directors, without further action by the shareholders, to issue up to
10.0 million shares of its $1.00 par value per share common stock (“Common
Stock”). Each share entitles its owners to one vote and shareholders have no
preemptive, cumulative voting or conversion rights. As of June 30, 2008, there
were 1,317,505 shares of the Company’s Common Stock issued and
outstanding.





The
Company’s articles of incorporation also authorize its Board of Directors to
issue up to 2.0 million shares of its no par value per share preferred stock
(“Preferred Stock”). The Company’s Board of Directors may, without further
action by the shareholders, direct the issuance of Preferred Stock for any
proper corporate purpose with preferences, voting powers, conversion rights,
qualifications, special or relative rights and privileges which could adversely
affect the voting power or other rights of shareholders of Common Stock. As of
June 30, 2008, no shares of the Company’s Preferred Stock were issued or
outstanding.





In
connection with the Company’s formation and Offering, 184,140 stock warrants
were awarded to the Company’s organizers. Each warrant entitles its owner to
purchase one share of Common Stock for a price of $10.00. The warrants vested in
one-third annual increments over a three-year period beginning on the one-year
anniversary of the date that the Company first issued its common stock. Warrants
are exercisable for a period of no more than ten years from February 17, 2004,
or no more than ninety days after a warrant holder ceases to be either a
director or senior executive of the Company, whichever period is
shorter.





As of
June 30, 2008, the Company has 13,000 non-qualified stock options
outstanding.





The
Company originally reserved up to 80,000 shares of Common Stock for issuance
under a stock incentive option plan (plan).  On May 20, 2004 the
shareholders of the Company approved an amendment to the plan increasing the
number of shares of Common Stock available under the plan to 160,000 shares. The
plan is administered by the Company’s Personnel and Compensation Committee (the
“Committee”). The Committee has the authority to award stock options to eligible
persons, to determine exercise price, expiration date, forfeiture or termination
provisions, and all other administrative responsibilities.  As of June
30, 2008, the Company had 108,300 options outstanding.





6
 Index




NOTE 3.
            SUMMARY OF SIGNIFICANT ACCOUNTING
      POLICIES





Basis of Accounting.The
accounting and reporting policies of the Company conform to accounting
principles generally accepted in the United States of America. In preparing the
financial statements, management is required to make estimates and assumptions
that affect the reported amounts of assets, liabilities, shareholders’ equity
and net income. Actual results may differ significantly from those estimates.
The Company uses the accrual basis of accounting by recognizing revenues when
they are earned and expenses in the period incurred, without regard to the time
of receipt or payment of cash.





Cash and Cash Equivalents.Cash refers to cash that is held at an unrelated financial institution.
Cash equivalents refers to financial instruments that are almost as liquid as
cash, such as federal funds sold. At June 30, 2008 and December 31, 2007,
cash and cash equivalents amounted to $5,479,763 and $4,266,640,
respectively.





Allowance for Loan
Losses:  Arriving at an appropriate level of allowance for loan
losses involves a high degree of judgment.  The Company’s allowance
for loan losses provides for probable losses based upon evaluations of known and
inherent risks in the loan portfolio.  Management uses historical
information of the Company and of similar banks to assess the adequacy of the
allowance for loan losses as well as the prevailing business environment; as it
is affected by changing economic conditions and various external factors, which
may impact the portfolio in ways currently unforeseen.  The allowance
for loan losses is increased by provisions for loan losses and by recoveries of
loans previously charged-off and reduced by loans charged-off.





The
process of reviewing the adequacy of the allowance for loan losses requires
management to make numerous assumptions  and subjective judgments,
including the likelihood of loan repayment, risk evaluation, extrapolation of
historical losses of similar banks, and similar judgments and
assumptions.  If these assumptions prove to be incorrect, charge-offs
in future periods could exceed the allowance for loan losses.





Property and Equipment.Furniture and equipment are stated at cost, net of accumulated
depreciation. Land is carried at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the related assets.
Maintenance and repairs are charged to operations, while major improvements are
capitalized. Upon retirement, sale or other disposition of property and
equipment, the cost and accumulated depreciation are eliminated from the
accounts and gain or loss is included in operations. The Company had no
capitalized lease obligations at June 30, 2008 and December 31,
2007.





Income Taxes.Deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and operating
loss and tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date. In
the event the future tax consequences of difference between the financial
reporting bases and the tax bases of the assets and liabilities result in
deferred tax assets, an evaluation of the probability of being able to realize
the future benefits indicated by such asset is required. A valuation allowance
is provided for the portion of the deferred tax asset when it is more likely
than not that some portion or all of the deferred tax asset will not be
realized.





In
assessing the realizability of the deferred tax assets, management considers the
scheduled reversals of deferred tax liabilities, projected future taxable
income, and tax planning strategies.  As of June 30, 2008 and
December 31, 2007, no valuation allowances were provided for deferred tax
assets.





Stock-Based Compensation.At
June 30, 2008, the Company has two stock-based employee/director
compensation plans which are more fully described in Note 11 of the consolidated
financial statements in the Annual Report on Form 10-K for the year ended
December 31, 2007. Effective January 1, 2006, the Company adopted the fair value
recognition provisions of Financial Accounting Standards Board (FASB) Statement
No. 123(R), Share-Based
Payment, using the modified-prospective-transition
method.  Under that transition method, compensation cost recognized in
the first six months of 2008 and 2007 includes: (a) compensation cost for all
share-based payments granted prior to, but not yet vested as of December 31,
2005, based on the grant date fair value estimated in accordance with the
original provisions of Statement 123, and (b) compensation cost for all
share-based payments granted subsequent to December 31, 2005, based on the
grant-date fair value estimated in accordance with the provisions of Statement
123(R). The Company recorded stock-based compensation expense of $14,873 and
$14,044 for the three months ended June 30, 2008 and 2007, respectively and
$29,581 and $23,150 for the six months ended June 30, 2008 and 2007,
respectively.





7
 Index





At
June 30, 2008, there was $61,835 of unrecognized compensation cost related
to stock-based payments, which is expected to be recognized over a
weighted-average period of 1.0 year.





Statement of Cash Flows.The
statement of cash flows was prepared using the indirect method. Under this
method, net income was reconciled to net cash flows from operating activities by
adjusting for the effects of short-term assets and liabilities.





NOTE 4.
            EARNINGS  PER
      SHARE





Basic
earnings (losses) per share are computed by dividing net income (loss) by the
weighted average number of shares of common stock outstanding. Diluted earnings
per share are computed by dividing net income by the sum of the weighted average
number of shares of common stock outstanding and potential common shares.
Potential common shares consist of stock options and stock warrants that are
dilutive and none were included in the calculations for the three and six month
periods ended June 30, 2008.  Weighted average shares outstanding
including potential common shares were 1,348,333 and 1,364,012 for the three
months ended June 30, 2008 and 2007, respectively and 1,364,605 and
1,341,648 for the six months ended June 30, 2008 and 2007,
respectively.





NOTE
      5.
            FAIR
      VALUE MEASUREMENTS




On
January 1, 2008, the Company adopted SFAS No. 157, Fair Value
Measurements.  SFAS No. 157 defines fair value, establishes a
framework for measuring fair value, and expands disclosures about fair value
measurements.  SFAS No. 157 applies to reported balances that are
required or permitted to be measured at fair value under existing accounting
pronouncements; accordingly, the standard does not require any new fair value
measurements of reported balances.





SFAS No.
157 emphasizes that fair value is a market-based measurement, not an
entity-specific measurement.  Therefore, a fair value measurement
should be determined based on the assumptions that market participants would use
in pricing the asset or liability.  As a basis for considering market
participant assumptions in fair value measurements, SFAS No. 157 establishes a
fair value hierarchy that distinguishes between market participant assumptions
based on market data obtained from sources independent of the reporting entity
(observable inputs that are classified within Levels 1 and 2 of the hierarchy)
and the reporting entity’s own assumptions about market participant assumptions
(unobservable inputs classified within Level 3 of the hierarchy).





Level 1
inputs utilize quoted prices (unadjusted) in active markets for identical assets
or liabilities that the Company has the ability to access. Level 2 inputs are
inputs other than quoted prices included in Level 1 that are observable for the
asset or liability, either directly or indirectly. Level 2 inputs may include
quoted prices for similar assets and liabilities in active markets, as well as
inputs that are observable for the asset or liability (other than quoted
prices), such as interest rates, foreign exchange rates and yield curves that
are observable at commonly quoted intervals. Level 3 inputs are unobservable
inputs for the asset or liability, which are typically based on an entity’s own
assumptions, as there is little, if any, related market activity. In instances
where the determination of the fair value measurement is based on inputs from
different levels of the fair value hierarchy, the level in the fair value
hierarchy within which the entire fair value measurement falls is based on the
lowest level input that is significant to the fair value measurement in its
entirety. The Company’s assessment of the significance of a particular input to
the fair value measurement in its entirety requires judgment, and considers
factors specific to the asset or liability.





The table
below presents the Company’s assets and liabilities measured at fair value on a
recurring basis as of June 30, 2008, aggregated by the level in the fair value
hierarchy within which those measurements fall (dollars in
thousands).





Fair
      Value Measurements at June 30, 2008Total
            
            Quoted
      Prices inActive
      Markets forIdentical
      SecuritiesLevel
      1
            
            Significant
      Other Observable Inputs Level 2
            
            Significant
      Unobservable InputsLevel
      3Investment
      securities available-for-sale
            $
            
            17,926
            
            $
            
            -
            
            $
            
            17,926
            
            $
            
            -Total
      assets at fair value
            $
            
            17,926
            
            $
            
            -
            
            $
            
            17,926
            
            $
            
            -


8
 Index




Securities
classified as available-for-sale are reported at fair value utilizing Level 2
inputs. For these securities, the Company obtains fair value measurements from
an independent pricing service. The fair value measurements consider observable
data that may include dealer quotes, market spreads, cash flows, the U.S.
Treasury yield curve, live trading levels, trade execution data, market
consensus prepayment speeds, credit information and the bond’s terms and
conditions, among other things. The investments in the Company’s portfolio are
generally not quoted on an exchange but are actively traded in the secondary
institutional markets.





The
following table presents the assets that are measured at fair value on a
non-recurring basis by level within the fair value hierarchy as reported on the
consolidated statements of financial position at June 30, 2008 (dollars in
thousands).





Fair
      Value Measurements at June 30, 2008Total
            
            
            Quoted
      Prices in
              Active
      Markets for
              Identical
      Securities
              Level
      1
            
            
            Significant
      Other Observable Inputs Level 2
            
            
            Significant
      Unobservable Inputs
              Level
      3Impaired
      loans
            
            $
            15,900
            
            
            $
            -
            
            
            $
            -
            
            
            $
            15,900Other
      real estate owned
            
            
            6,691
            
            
            
            -
            
            
            
            -
            
            
            
            6,691Total
      assets at fair value
            
            $
            22,591
            
            
            $
            -
            
            
            $
            -
            
            
            $
            22,591





Impaired
loans are evaluated and valued at the time the loan is identified as impaired,
at the lower of cost or fair value. Fair value is measured based on the value of
the collateral securing these loans and is classified at a Level 3 in the fair
value hierarchy. Collateral may include real estate, or business assets
including equipment, inventory and accounts receivable. The value of real estate
collateral is determined based on an appraisal by qualified licensed appraisers
hired by the Company. The value of business equipment is based on an appraisal
by qualified licensed appraisers hired by the Company if significant, or the
equipment’s net book value on the business’ financial statements. Inventory and
accounts receivable collateral are valued based on independent field examiner
review or aging reports. Appraised and reported values may be discounted based
on management’s historical knowledge, changes in market conditions from the time
of the valuation, and management’s expertise and knowledge of the client and
client’s business. Impaired loans are evaluated on at least a quarterly basis
for additional impairment and adjusted accordingly.





Foreclosed
assets are adjusted to fair value upon transfer of the loans to other real
estate. Subsequently, foreclosed assets are carried at the lower of carrying
value or fair value. Fair value is based upon independent market prices or
appraised values of the collateral. The fair value of the collateral is based on
an observable market price or a current appraised value, and therefore the
foreclosed asset is recorded as nonrecurring Level 2. When an appraised value is
not available or management determines the fair value of the collateral is
further impaired below the appraised value and there is no observable market
price, the Company records the foreclosed asset as nonrecurring Level
3.





NOTE 6.
            RECENT ACCOUNTING
      PRONOUNCEMENTS





In
December 2007, the FASB issued SFAS No. 141(R), Business Combinations,which
replaces SFAS 141. SFAS 141(R) establishes principles and requirements for how
the acquirer of a business recognizes and measures in its financial statements
the identifiable assets acquired, the liabilities assumed, and any
noncontrolling interest in the acquiree. SFAS 141(R) also provides guidance for
recognizing and measuring the goodwill acquired in the business combination and
determines what information to disclose to enable users of the financial
statements to evaluate the nature and financial effects of the business
combination. SFAS 141(R) applies prospectively to business combinations for
which the acquisition date is on or after the beginning of the first annual
reporting period beginning on or after December 15, 2008. The Company believes
the adoption of SFAS 141(R) will not have a material impact on its financial
statements.




In
December 2007, the FASB issued SFAS 160, Noncontrolling Interests in
Consolidated Financial Statements—an amendment of ARB No. 51.
SFAS 160 amends ARB 51 to establish accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an
ownership interest in the consolidated entity that should be reported as equity
in the consolidated financial statements. In addition to the amendments to ARB
51, SFAS 160 amends SFAS No. 128, Earnings per Share; so that
earnings-per-share data will continue to be calculated the same way those data
were calculated before SFAS 160 was issued. SFAS 160 is effective for fiscal
years, and interim periods within those fiscal years, beginning on or after
December 15, 2008. The Company believes the adoption of SFAS 160 will not have a
material impact on its financial statements.





9
 Index




In March
2008, the FASB issued SFAS 161, Disclosures about Derivative
Instruments and Hedging Activities, an amendment to SFAS 133 intended to
improve financial reporting about derivative instruments and hedging activities
by requiring enhanced disclosures.Entities
are required to provide enhanced disclosures about (a) how and why an entity
uses derivative instruments, (b) how derivative instruments and related hedged
items are accounted for under SFAS 133 and its related interpretations, and (c)
how derivative instruments and related hedged items affect an entity’s financial
position, financial performance, and cash flows. It is effective for financial
statements issued for fiscal years and interim periods beginning after November
15, 2008, with early application encouraged. The Company believes the adoption
of SFAS 161 will not have a material impact on its financial
statements.




10
 Index




Part
      I.
            Financial
      Information


Item
      2.
            Management'sDiscussion and
  Analysis





The
following discussion and analysis provides information which management believes
is relevant to an assessment and understanding of the Company’s results of
operations and financial condition. This discussion should be read in
conjunction with the financial statements and accompanying notes.





SPECIAL
CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS





This
Report contains statements which constitute forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and the Securities
Exchange Act of 1934. These statements are based on many assumptions and
estimates and are not guarantees of future performance. Our actual results may
differ materially from those projected in any forward-looking statements, as
they will depend on many factors about which we are unsure, including many
factors which are beyond our control. The words “may,” “would,” “could,” “will,”
“expect,” “anticipate,” “believe,” “intend,” “plan,” and “estimate,” as well as
similar expressions, are meant to identify such forward-looking statements.
Potential risks and uncertainties include, but are not limited to:





·
            significant
      increases in competitive pressure in the banking and financial services
      industries;





·
            changes
      in the interest rate environment which could reduce anticipated or actual
      margins;





·
            changes
      in political conditions or the legislative or regulatory
      environment;





·
            general
      economic conditions, either nationally or regionally and especially in our
      primary service area, becoming less favorable than expected resulting in,
      among other things, a deterioration in credit
  quality;





·
            changes
      occurring in business conditions and
inflation;





·
            changes
      in technology;





·
            changes
      in monetary and tax policies;





·
            the
      level of allowance for loan loss;





·
            the
      rate of delinquencies and amounts of
  charge-offs;





·
            the
      rates of loan growth;





·
            adverse
      changes in asset quality and resulting credit risk-related losses and
      expenses;





·
            changes
      in the securities markets; and





·
            other
      risks and uncertainties detailed from time to time in our filings with the
      Securities and Exchange Commission.





Critical
Accounting Policies





We have
adopted various accounting policies which govern the application of accounting
principles generally accepted in the U.S. in the preparation of financial
statements. The Company’s significant accounting policies are described in Note
1 to the Company’s consolidated financial statements as of and for the year
ended December 31, 2007. Certain accounting policies require the Company to make
significant assumptions and estimates, the use of which has a material impact on
the carrying value of certain assets and liabilities, and could potentially
result in materially different results under different assumptions and
conditions. Management believes that the allowance for loan losses, the
accounting for deferred income taxes and stock-based compensation are the most
critical accounting policies upon which the Company’s financial condition
depends. The allowance for loan losses, the recognition of deferred taxes, and
the assumptions related to stock-based compensation involve the most complex and
subjective decisions and assessments that management must make.





11
 Index





Allowance for Loan Losses:
Arriving at an appropriate level of allowance for loan losses involves a high
degree of judgment. The Company’s allowance for loan losses provides for
probable losses based upon evaluations of known and inherent risks in the loan
portfolio. The allowance for loan losses is increased by charges to income and
decreased by charge-offs (net of recoveries).  Loans are charged
against the allowance for loan losses when management believes the collection of
the principal is unlikely.  The Company’s allowance for loan and lease
losses is the amount considered adequate to absorb probable losses within the
portfolio based on management’s evaluation of the size and current risk
characteristics of the loan portfolio. Such evaluation considers prior loss
experience, the risk rating distribution of the portfolios, the impact of
current internal and external influences on credit loss and the levels of
nonperforming loans. Specific allowances for loan and lease losses are
established for large impaired loans and leases on an individual basis. The
specific allowance established for these loans and leases is based on a thorough
analysis of the most probable source of repayment, including the present value
of the loan’s expected future cash flows, the loan’s estimated market value, or
the estimated fair value of the underlying collateral. General allowances are
established for loans that are classified as either special mention,
substandard, or doubtful. These loans are assigned a risk rating, and the
allocated allowance for loan losses is determined based upon the loss percentage
factors that correspond to each risk rating. Loss percentage factors are based
on the probable loss including qualitative factors. The qualitative factors
consider credit concentrations, recent levels and trends in delinquencies and
nonaccrual, and growth in the loan portfolio. The occurrence of certain events
could result in changes to the loss factors. Accordingly, these loss factors are
reviewed periodically and modified as necessary.




General
allowances are established for loans and leases that can be grouped into pools
based on similar characteristics. In this process, general allowance factors are
based on an analysis of historical charge-off experience and expected losses
given default derived from the Company’s internal risk rating process. These
factors are developed and applied to the portfolio in terms of line of business
and loan type. Adjustments are also made to the allowance for the pools after an
assessment of internal and external influences on credit quality that have not
yet been reflected in the historical loss or risk rating data. Unallocated
allowances relate to inherent losses that are not otherwise evaluated in the
first two elements. The qualitative factors associated with unallocated
allowances are subjective and require a high degree of management judgment.
These factors include the inherent imprecisions in mathematical models and
credit quality statistics, recent economic uncertainty, losses incurred from
recent events, and lagging or incomplete data.





The
process of reviewing the adequacy of the allowance for loan losses requires
management to make numerous judgments and assumptions about current events and
subjective judgments, including the likelihood of loan repayment, risk
evaluation, extrapolation of historical losses of similar banks, and similar
judgments and assumptions. If these assumptions prove to be incorrect,
charge-offs in future periods could exceed the allowance for loan
losses.





Management
considers the allowance for loan losses to be adequate and sufficient to absorb
possible future losses; however, there can be no assurance that charge-offs in
future periods will not exceed the allowance for loan losses or that additional
provisions to the allowance will not be required.





Deferred Income Taxes:
Deferred income tax assets and liabilities are determined using the liability
(or balance sheet) method. Under this method, the net deferred tax asset or
liability is determined based on the tax effects of the differences between the
book and tax bases of the various balance sheet assets and liabilities and gives
current recognition to changes in tax rates and laws.





A
valuation allowance for deferred tax assets is required when it is more likely
than not that some portion or all of the deferred tax asset will not be
realized. In assessing the realization of the deferred tax assets, management
considers the scheduled reversals of deferred tax liabilities, projected future
taxable income (in the near-term based on current projections), and tax planning
strategies. As of June 30, 2008, deferred income taxes of $2,075,866 are
included in other assets.  Changes in the estimate about future
taxable income could significantly affect the determination of the necessity for
a valuation allowance for deferred tax assets.





Stock-based
compensation:  The assumptions used in the determination of the
fair value of stock options granted ultimately determine the recognition of
stock-based compensation expense. The short-cut method is used to determine the
expected life of the options.  This method, as prescribed by Staff
Accounting Bulletin (SAB) Topic 14.D.2, calculates the expected term based on
the midpoint between the vesting date of the option and the end of the
contractual term. Expected volatility is determined by using a combination of a
calculated value based upon expected volatility of similar entities and on the
historical volatility of the Company’s stock. Risk-free interest rates for
periods within the contractual life of the option are based upon the U.S.
Treasury yield curve in effect at the time of the grant. Because of the need to
retain capital for expected growth and past history, the expected dividend rate
is 0%. These assumptions have a significant impact on the amount of expense
recognized for stock-based compensation.





12
 Index





Overview





We
commenced banking operations on February 17, 2004 in our primary location of
Commerce, Georgia. We have subsequently expanded geographically by adding
branches in Jefferson, Homer and Winder, Georgia.  We have grown in
assets to over $150 million as of June 30, 2008.





Financial
Condition





At
June 30, 2008, total assets of Freedom Bancshares, Inc. were $151.1
million, which included loans totaling $114.0 million and securities with a fair
market value of $17.9 million.  Deposits at June 30, 2008 totaled
$122.1 million and other borrowings totaled $17.0 million and consisted solely
of advances from the Federal Home Loan Bank of Atlanta.





Investment
securities available-for-sale totaled $17.9 million at June 30, 2008. These
investments consisted of $3.0 million in US government-sponsored agency
securities and $14.9 million in mortgage-backed securities issued by US
government-sponsored agencies. Generally, we purchase mortgage-backed securities
because we believe they will provide good income yields as well as a consistent
cash flow from the monthly mortgage payments. These cash flows are then
reinvested in new loans or additional purchases of similar securities, depending
on loan demand and market conditions. These cash flows also allow us to
regularly invest at current market rates. While we invest in traditional
government-sponsored agency securities on occasion, recent market conditions
have resulted in historically low yields on those securities, so we have chosen
to maximize our yields by investing in other segments of the market. It is
generally our policy to designate our marketable investment securities as
available-for-sale, and all securities were so designated at June 30,
2008.





Gross
loans totaled $114.0 million at June 30, 2008.  Net loans totaled
$110.9 million at June 30, 2008.  The majority of our loans are
secured by real estate. Balances within the major loan categories as of
June 30, 2008 are as follows:





Composition
of Loan Portfolio


June
30, 2008





Category
            
            Amount
              (in
      thousands)
            
            
            Percent
      of
              TotalConstruction
      loans
            
            $
            51,274
            
            
            
            44.96
            %Other
      real estate loans
            
            
            48,728
            
            
            
            42.73
            %Commercial
      loans
            
            
            8,983
            
            
            
            7.87
            %Other
      loans
            
            
            5,063
            
            
            
            4.44
            %114,048
            
            
            
            100.00
            %Allowance
      for loan losses
            
            
            (3,142
            )$
            110,906





We expect
to continue to fund loan growth from our deposit growth. We will also hold funds
in federal funds sold and purchase investment securities as conditions warrant
and as we identify opportunities appropriate to our overall asset and liability
strategies and goals. We expect minimal growth in assets and liabilities during
the remainder of 2008.





Our total
equity was $11.2 million at June 30, 2008.  Equity consisted of
common stock and surplus of $14.2 million, an accumulated deficit at December
31, 2007 of $620 thousand; net loss for the six months ended June 30, 2008
of $2.1 million; and unrealized losses on securities available-for-sale, net of
tax, of $244 thousand.





Results
of Operations for the Six Months Ended June 30, 2008 and 2007




The
results of operations are determined by our ability to effectively manage net
interest income, control non-interest expenses, generate non-interest income and
minimize loan losses. In order for us to become cumulatively profitable and to
remain profitable in the future, we must increase the amount of earning assets
so that net interest income along with non-interest income will be sufficient to
cover normal operating expenses incurred in a banking operation and the Bank’s
provision for loan losses.





13
 Index




Net
losses for the first six months of 2008 amounted to $2.1 million, or $(1.63) per
basic share.  Net income for the first six months of 2007 amounted to
$295 thousand, or $0.24 per basic share and $0.22 per diluted
share.  Following is a brief discussion concerning our operational
results for the six-month periods ended June 30, 2008 and
2007.





Interest
income, which represents interest received on interest earning assets, was $4.4
million for the first six months of 2008 and $5.8 million for the first six
months of 2007. The drop in income is indicative of the drop in interest rates
during the first quarter and the reduction of income on non-accrual
loans.  The cost of funds, which represents interest paid on deposits
and borrowings, was $2.9 million for the first six months of 2008 and $3.2
million for the first six months of 2007.





Net yield
on earning assets, defined as net interest income divided by average interest
earning assets, was 2.19% for the first six months of 2008.





(Dollars
in thousands)





Description
            
            Avg
              Assets/Liabilities
            
            
            Interest
              Income/Expense
            
            
            Yield/CostFederal
      funds sold
            
            $
            2,390
            
            
            $
            34
            
            
            
            2.85
            %Securities
            
            
            17,645
            
            
            
            414
            
            
            
            4.69
            %Loans
            
            
            117,301
            
            
            
            3,955
            
            
            
            6.74
            %Other
            
            
            1,204
            
            
            
            33
            
            
            
            5.48
            %Total
            
            $
            138,540
            
            
            
            4,436
            
            
            
            6.40
            %Transactional
      accounts
            
            $
            15,989
            
            
            
            254
            
            
            
            3.18
            %Savings
            
            
            902
            
            
            
            6
            
            
            
            1.33
            %CDs
            
            
            95,752
            
            
            
            2,338
            
            
            
            4.88
            %Other
      borrowings
            
            
            17,107
            
            
            
            324
            
            
            
            3.79
            %Total
            
            $
            129,750
            
            
            
            2,922
            
            
            
            4.50
            %Net
      interest income
            
            
            
            
            
            $
            1,514Net
      yield on earning assets
            
            
            
            
            
            
            
            
            
            
            2.19
            %





Net yield
on earning assets, defined as net interest income annualized, divided by average
interest earning assets, was 3.96% for the first six months of
2007.





(Dollars
in thousands)





Description
            
            Avg
              Assets/Liabilities
            
            
            Interest
              Income/Expense
            
            
            Yield/CostFederal
      funds sold
            
            $
            1,609
            
            
            $
            42
            
            
            
            5.26
            %Securities
            
            
            21,380
            
            
            
            514
            
            
            
            4.85
            %Loans
            
            
            108,776
            
            
            
            5,182
            
            
            
            9.61
            %Other
            
            
            1,047
            
            
            
            43
            
            
            
            8.28
            %Total
            
            $
            132,812
            
            
            
            5,781
            
            
            
            8.78
            %Money
      market/NOW accounts
            
            $
            8,697
            
            
            
            153
            
            
            
            3.55
            %Savings
            
            
            815
            
            
            
            6
            
            
            
            1.48
            %CDs
            
            
            99,140
            
            
            
            2,665
            
            
            
            5.42
            %Other
      borrowings
            
            
            12,877
            
            
            
            349
            
            
            
            5.46
            %Total
            
            $
            121,529
            
            
            
            3,173
            
            
            
            5.26
            %Net
      interest income
            
            
            
            
            
            $
            2,608Net
      yield on earning assets
            
            
            
            
            
            
            
            
            
            
            3.96
            %


14
 Index




For the
first six months of 2008, non-interest income amounted to $370 thousand, or
0.25% of average assets.  For the first six months of 2007,
non-interest income amounted to $153 thousand or 0.22% of average assets.
Because the Bank is in a competitive market, it prices its services very
competitively in order to maintain and grow deposits. The increase in
non-interest income is attributable to revenues earned from mortgage
originations which began in 2007 and payments received from an interest rate
contract. Revenues on mortgage originations were approximately $74 thousand for
the first six months of 2008 and income from the interest rate contract was
approximately $55 thousand for the first six months of 2008. The interest rate
contract expired on May 22, 2008.





The
Company adopted the fair value recognition provisions of FASB Statement No. 123
(R), Share Based
Payment effective January 1, 2006, using the modified-
prospective-transition method. The Company did not grant any options in the
first six months of 2008 or 2007.  No modifications were made to
outstanding options and warrants and there have been no significant changes to
valuation methodologies or assumptions. There have not been any significant
changes in the quantity, types or terms of instruments used in share-based
payment programs.  At June 30, 2008, total compensation cost
related to nonvested awards not yet recognized is $61,835 which is expected to
be recognized over a weighted average period of 1.0 year.





The
income tax benefit for the first six months of 2008 was $1.3 million as compared
to an expense of $192 thousand for first six months of 2007.  The
amounts provided take into account all share-based compensation expense
recognized for which an income tax benefit will not be received.





Results
of Operations for the Three Months Ended June 30, 2008 and 2007




Net
losses for the three month period ended June 30, 2008 amounted to $1.2 million,
or $(0.88) per basic share.  Net income for the three month period
ended June 30, 2007 amounted to $118,934, or $0.09 per basic and diluted
share.  Following is a brief discussion concerning our operational
results for the three month periods ended June 30, 2008 and 2007.





Interest
income was $2.0 million for the three month period ended June 30, 2008 and $3.0
million for the three month period ended June 30, 2007.  The cost
of funds was $1.4 million for the three month period ended June 30, 2008 and
$1.6 million for the three month period ended June 30, 2007.





Net yield
on earning assets, defined as net interest income annualized, divided by average
interest earning assets, was at 1.89% during the three month period ended June
30, 2008.





(Dollars
in thousands)





Description
            
            Avg
              Assets/Liabilities
            
            
            Interest
              Income/Expense
            
            
            Yield/CostFederal
      funds sold
            
            $
            2,140
            
            
            $
            11
            
            
            
            2.04
            %Securities
            
            
            18,127
            
            
            
            211
            
            
            
            4.67
            %Loans
            
            
            115,937
            
            
            
            1,786
            
            
            
            6.18
            %Other
            
            
            1,205
            
            
            
            16
            
            
            
            5.29
            %Total
            
            $
            137,409
            
            
            
            2,024
            
            
            
            5.91
            %Transactional
      accounts
            
            $
            17,451
            
            
            
            123
            
            
            
            2.83
            %Savings
            
            
            940
            
            
            
            3
            
            
            
            1.46
            %CDs
            
            
            94,819
            
            
            
            1,106
            
            
            
            4.68
            %Other
      borrowings
            
            
            17,000
            
            
            
            145
            
            
            
            3.41
            %Total
            
            $
            130,210
            
            
            
            1,377
            
            
            
            4.24
            %Net
      interest income
            
            
            
            
            
            $
            647Net
      yield on earning assets
            
            
            
            
            
            
            
            
            
            
            1.89
            %





Net yield
on earning assets, defined as net interest income divided by average interest
earning assets, was at 3.95% during the three month period ended June 30,
2007.





15
 Index




(Dollars
in thousands)





Description
            
            Avg
              Assets/Liabilities
            
            
            Interest
              Income/Expense
            
            
            Yield/CostFederal
      funds sold
            
            $
            1,651
            
            
            $
            22
            
            
            
            5.27
            %Securities
            
            
            21,532
            
            
            
            260
            
            
            
            4.84
            %Loans
            
            
            111,545
            
            
            
            2,691
            
            
            
            9.68
            %Other
            
            
            990
            
            
            
            14
            
            
            
            5.77
            %Total
            
            $
            135,718
            
            
            
            2,987
            
            
            
            8.83
            %Transactional
      accounts
            
            $
            8,965
            
            
            
            86
            
            
            
            3.84
            %Savings
            
            
            791
            
            
            
            3
            
            
            
            1.52
            %CDs
            
            
            103,701
            
            
            
            1,412
            
            
            
            5.46
            %Other
      borrowings
            
            
            10,354
            
            
            
            149
            
            
            
            5.78
            %Total
            
            $
            123,811
            
            
            
            1,650
            
            
            
            5.34
            %Net
      interest income
            
            
            
            
            
            $
            1,337Net
      yield on earning assets
            
            
            
            
            
            
            
            
            
            
            3.95
            %





For the
three month period ended June 30, 2008, non-interest income amounted to $228
thousand, or 0.15% of average assets. For the three month period ended June 30,
2007, non-interest income amounted to $80 thousand, or 0.22% of average
assets.





The
income tax benefit for the three months ended June 30, 2008 was $696 thousand as
compared to an expense of $81 thousand for the three months ended June 30,
2007.  The amounts provided take into account all shared-based
compensation expense for which an income tax benefit will not be
received.





Asset
Quality





The
allowance for loan losses at June 30, 2008 was $3.1 million, or 2.75% of total
loans compared to $1.6 million, or 1.37% at December 31, 2007 and $1.3 million
or 1.15% at June 30, 2007. For the first six months of 2008, the provision for
loan losses was $2.9 million as compared to $149 thousand for the first six
months of 2007. The significant increase is relative to the increase in
non-accrual and loan concentrations within the portfolio. Management has closely
monitored the Company’s asset quality and has been proactive in working problem
assets. The loan portfolio is monitored on a weekly basis by management and the
allowance is analyzed quarterly. Management considers the allowance for loan
losses to be adequate and sufficient to absorb possible future losses; however,
there can be no assurance that charge-offs in future periods will not exceed the
allowance for loan losses or that additional provisions to the allowance will
not be required.





Net
charge-offs have been $1.4 million for the first six months of 2008 as compared
to $28 thousand for the first six months of 2007. The increased provision and
net charge-off amounts reflect a deterioration in credit conditions as a result
of the slowing residential real estate market. Should real estate conditions
continue to worsen, the Company may experience additional
charge-offs.





16
 Index





The
following table summarizes the allowance for loan losses for the six months
ended June 30, 2008 and 2007.





Six
      months ended June 30,2008
            
            
            2007(Dollars
      in thousands)Average
      amount of loans outstanding
            
            $
            117,301
            
            
            $
            108,776Allowance
      for loan losses, beginning of period
            
            $
            1,617
            
            
            $
            1,195Less
      charge-offs:Real
      estate
            
            
            1,417
            
            
            
            --Consumer
            
            
            11
            
            
            
            30Total
      charge-offs
            
            
            1,428
            
            
            
            30Plus
      recoveriesReal
      estate
            
            
            9
            
            
            
            --Consumer
            
            
            4
            
            
            
            2Total
      recoveries
            
            
            13
            
            
            
            2Net
      charge-offs
            
            
            1,415
            
            
            
            28Plus
      provision for loan losses
            
            
            2,940
            
            
            
            149Allowance
      for loan losses, end of period
            
            $
            3,142
            
            
            $
            1,316Net
      charge-offs to average loans (annualized)
            
            
            2.41
            %
            
            
            0.05
            %





The
accrual of interest on impaired loans is discontinued when, in management’s
opinion, the borrower may be unable to meet payments as they become
due.  When interest accrual is discontinued, all unpaid accrued
interest is reversed.  Interest income is subsequently recognized only
to the extent cash payments are received.  Loans are returned to
accrual status when all the principal and interest amounts contractually due are
reasonably assured of repayment within a reasonable time frame.





The
following table is a summary of the Company’s nonaccrual loans at June 30, 2008
and June 30, 2007. The table shows an increase in nonaccrual loans from $763
thousand at June 30, 2007 to $10.5 million at June 30, 2008.





June 30,
      2008Nonaccrual
              Loans
            
            
            Past
      Due 90 Days – Still AccruingReal
      estate loans
            
            $
            10,472
            
            
            $
            116Commercial
      loans
            
            
            18
            
            
            
            --Consumer
      loans
            
            
            61
            
            
            
            --Total
            
            $
            10,551
            
            
            $
            116








June 30,
      2007Nonaccrual
              Loans
            
            
            Past
      Due 90 Days – Still AccruingReal
      estate loans
            
            $
            674
            
            
            $
            --Commercial
      loans
            
            
            89
            
            
            
            --Consumer
      loans
            
            
            --
            
            
            
            --Total
            
            $
            763
            
            
            $
            --





Management
meets weekly to discuss various plans for the reduction of nonaccrual loans. In
addition to nonaccrual loans, the Company has foreclosed assets which are also
considered non-performing assets. As of June 30, 2008, the Company had $6.8
million in foreclosed assets compared to $882 thousand at December 31, 2007.
Foreclosed assets are written down to the lower of the carrying principal amount
or the fair market value as determined by an appraisal when transferred to
foreclosed assets. At June 30, 2008, nonaccrual loans and foreclosed assets
totaled $17.3 million, which is 11.4% of total assets.





17
 Index





Liquidity





Liquidity
is our ability to meet current and future obligations through liquidation or
maturity of existing assets or the acquisition of additional liabilities. Most
importantly, liquidity provides the means to fund all deposit withdrawals
immediately, while also providing for the credit needs of customers. Cash and
cash equivalents, which include cash on hand and in correspondent banks, as well
as federal funds sold to correspondent banks, are our primary sources of
liquidity.  The June 30, 2008 financial statements evidence a
satisfactory liquidity position as total cash and cash equivalents amounted to
approximately $5.5 million, representing 3.63% of total assets.





Investment
securities available-for-sale, which amounted to $17.9 million, or 11.9% of
total assets at June 30, 2008, provide a secondary source of liquidity
because they can be converted into cash in a timely manner. We also have lines
of credit available with correspondent banks. These lines of credit can be
accessed to meet temporary funding needs.  At June 30, 2008, we
had access to unused lines of credit totaling $2.5 million.





We draw
deposits primarily from our local market area. However, when we deem it
necessary and prudent we will access deposit markets other than the local market
for sources of funds. These deposits can include “brokered” deposits and
deposits generated from other sources, including internet sources. Historically,
the Company has not accepted brokered deposits and carried none at June 30,
2008.





Freedom
Bank of Georgia is a member of the Federal Home Loan Bank of Atlanta. The
Federal Home Loan Bank of Atlanta provides funds for real estate-related lending
and to promote home ownership. We use advances from the Federal Home Loan Bank
of Atlanta to fund loans and as a tool to manage our interest rate
risk.  At June 30, 2008 we had advances outstanding of $17.0
million.  We had access to additional advances up to $13.8
million.





We
closely monitor our balance sheet and liquidity in order to maintain appropriate
levels of interest earning assets and interest bearing liabilities, so that
maturities of assets can provide adequate funds to meet customer withdrawals and
loan demand. We know of no trends, demands, commitments, events or uncertainties
that will result in or are reasonably likely to result in our liquidity
increasing or decreasing in any material way.





Capital
Resources





Total
shareholders’ equity decreased from $13.5 million at December 31, 2007 to $11.2
million at June 30, 2008.  The decrease is due to net loss for
the first six months of 2008 of $2.1 million, an after-tax decrease of $208
thousand in the fair value of securities available-for-sale, an after tax
increase in the fair value of an interest rate floor of $8 thousand, an increase
in surplus from the recognition of stock compensation expense of $30 thousand,
and net proceeds of $15 thousand received from the sale of 1,500 shares of
common stock due to the exercise of stock options.





The
Federal Reserve Board and bank regulatory agencies require bank holding
companies and financial institutions to maintain capital at adequate levels
based on a percentage of assets and off-balance sheet exposures, adjusted for
risk-weights ranging from 0% to 100%. Under the risk-based standard, capital is
classified into two tiers: Tier 1 capital consists of common shareholders’
equity, excluding the unrealized gain (loss) on available-for-sale securities,
minus certain intangible assets. Tier 2 capital consists of the general reserve
for loan losses subject to certain limitations. An institution’s qualifying
capital base for purposes of its risk-based capital ratio consists of the sum of
its Tier 1 and Tier 2 capital. The regulatory minimum requirements are 4% for
Tier 1 and 8% for total risk-based capital.





Banks and
bank holding companies are also required to maintain capital at a minimum level
based on total assets, which is known as the leverage ratio. The minimum
requirement for the leverage ratio is 3%, but all but the highest-rated
institutions are required to maintain ratios that are 100 to 200 basis points
above the minimum. Both the Company and the Bank exceeded their minimum
regulatory capital ratios as of June 30, 2008 and 2007.








18
 Index





The
following table summarizes our risk-based capital ratios at June 30,
2008:





Freedom
      Bank
              June 30,
      2008
            
            
            Freedom
              Bancshares,
      Inc.
              June 30,
      2008
            
            
            Regulatory
              RequirementLeverage
      ratio
            
            
            6.88%
            
            
            7.07%
            
            
            4.0%Tier
      1 Risk weighted ratio
            
            
            8.01%
            
            
            8.23%
            
            
            4.0%Tier
      2 Risk weighted ratio
            
            
            9.28%
            
            
            9.49%
            
            
            8.0%





With
respect to the leverage ratio, the regulators expect a minimum of 5.0% to 6.0%
ratio for banks that are not rated CAMELS 1. Freedom Bank’s capital ratios are
in excess of the required minimums.





Regulatory
Matters




From time
to time, various bills are introduced in the United States Congress with respect
to the regulation of financial institutions. Certain of these proposals, if
adopted, could significantly change the regulation of banks and the financial
services industry. We cannot predict whether any of these proposals will be
adopted or, if adopted, how these proposals would affect us.





We are
not aware of any current recommendation by our regulatory authorities which, if
implemented, would have a material effect on our liquidity, capital resources,
or results of operations.


19
 Index




Part
      I.
            Financial
      Information


Item
      3.
            Quantitativeand Qualitative Disclosures about Market
      Risk





Pursuant
to the revised disclosure requirements for smaller reporting companies effective
February 4, 2008, no disclosure under this Item is required.





Part
      I.
            Financial
      Information


Item
      4(T).
            Controlsand
Procedures




The
Company’s Chief Executive Officer and Chief Financial Officer have evaluated the
Company’s disclosure controls and procedures as of the end of the period
reported, and concluded that these controls and procedures are
effective.  There have been no significant changes in internal
controls or in other factors that could significantly affect these controls
subsequent to the date of this evaluation.





Disclosure
controls and procedures are the Company’s controls and other procedures that are
designed to ensure that information it is required to disclose in the reports it
files under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the Securities and Exchange Commission’s
rules and forms.  Disclosure controls and procedures include, without
limitation, controls and procedures designed to ensure that information the
Company is required to disclose in the reports that it files under the Exchange
Act is accumulated and communicated to management, including the principal
executive and financial officers, as appropriate, to allow timely decisions
regarding required disclosure.





The
design of any system of controls and procedures is based in part upon certain
assumptions about the likelihood of future events.  There can be no
assurance that any design will succeed in achieving its stated goals under all
potential future conditions, regardless of how remote.





There
have been no changes in our internal control over financial reporting during our
second quarter that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.




20
 Index




FREEDOM
BANCSHARES, INC.


AND
SUBSIDIARY





Part
      II.
            Other
      Information








Item1.
            LegalProceedings





None.





Item 1A.
            RiskFactors





In
addition to the other information set forth in this report, you should carefully
consider the factors discussed in “Part I, Item 1A.  Risk Factors” in
our Annual Report on Form 10-K for the year ended December 31, 2007, which could
materially affect our business, financial condition or future
results.  The risks described in our Annual Report on Form 10-K are
not the only risk facing our Company.  Additional risks and
uncertainties not currently known to us or that we currently deem to be
immaterial also may materially adversely affect our business, financial
condition and/or operating results.





Item2.
            UnregisteredSales of Equity Securities and Use of
  Proceeds





None.





Item3.
            DefaultsUpon
      Senior Securities





None.





Item4.
            Submissionof
      Matters to a Vote of Security
Holders





We held
our Annual Meeting of Shareholders on May 21, 2008, where the following four
directors were elected to serve a three-year term expiring at the 2011 Annual
Meeting of Shareholders and upon the election and qualification of their
successors:  Richard S. Adams, Sr., William Keith Ariail, Claude
Philip Brown, and Vincent D. Cater.  There were no broker
votes.  The votes were as follows:





FOR
            
            
            AGAINST
            
            
            WITHHELDRichard
      S. Adams, Sr.
            
            788,937
            
            
            0
            
            
            0William
      Keith Ariail
            
            788,937
            
            
            0
            
            
            0Claude
      Philip Brown
            
            788,937
            
            
            0
            
            
            0Vincent
      D. Cater
            
            788,937
            
            
            0
            
            
            0





The terms
of our Class III Directors - Donald S. Shubert, Ronald R. Silva, Jr., and Harold
L. Swindell - will continue until the 2009 Annual Meeting of Shareholders and
upon the election and qualification of their successors.  The terms of
our Class I Directors – Harold C. Davis, Thomas H. Hardy, James S. Purcell, and
Verlin L. Reese - will continue until the 2010 Annual Meeting of Shareholders
and upon the election and qualification of their successors.





Item5.
            OtherInformation





None.


21
 Index




Item6.
            Exhibits





Number
            
            Description31.1
            
            Certification
      of the Chief Executive Officer, pursuant to Rule 15d-14(a) under the
      Securities Exchange Act of 1934.31.2
            
            Certification
      of the Chief Financial Officer, pursuant to Rule 15d-14(a) under the
      Securities Exchange Act of 1934.32.1
            
            Certification
      of Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to Rule 15d-14(b) under the Securities Exchange Act of
      1934.32.2
            
            Certification
      of Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to Rule 15d-14(b) under the Securities Exchange Act of
      1934.


22
 Index




FREEDOMBANCSHARES, INC.


AND
SUBSIDIARY




Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.






Freedom
      Bancshares, Inc.(Registrant)August
      14, 2008
            /s/
      Vincent D. CaterPresident
      and Chief Executive Officer(Principal
      Executive Officer)August
      14, 2008
            /s/
      Jennifer S. WethingtonChief
      Financial Officer(Principal
      Accounting Officer)






23