##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





FORM 10-K





|   |  |                                                                                             
|-- |  | --------------------------------------------------------------------------------------------
|þ  |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934    
|  
|   |  | For the Fiscal Year Ended December 31, 2004                                                 
|  
|OR
|  
|o  |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934
|  
|   |  | For the Transition Period
    from           to                                             

Commission File Number: 000-50904


SNB Bancshares, Inc.


(Exact name of Registrant as specified in its charter)


|                                                                   |  |                                      
|------------------------------------------------------------------ |  | -------------------------------------
|Texas                                                              |  | 76-0472829                           
|(State or other jurisdiction of
    Incorporation or organization) |  | (IRS Employer
    Identification No.)

14060 Southwest Freeway


Sugar Land, Texas 77478


(Address of principal executive office)


(Registrants telephone number)


(281) 269-7200


Securities registered pursuant to Section 12(b) of the
Act:


None


Securities registered pursuant to section 12(g) of the
Act:


Common Stock, $0.01 par value per share


(Title of Class)


þ o


o þ


o








DOCUMENTS INCORPORATED BY REFERENCE












---










SNB BANCSHARES, INC.


2004 ANNUAL REPORT ON FORM 10-K


TABLE OF CONTENTS


|                                                |  |                                                                                                                  |    |      |    | 
|----------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------- | -- | ---- | -- | 
|                                                |  |                                                                                                                  |    | Page |   
|                                                |  |                                                                                                                  |    |      |   
|PART I                                         
|Item 1.                                         |  | Business                                                                                                         |    |      | 1  | 
|                                                |  | General                                                                                                          |    |      | 1  | 
|                                                |  | Available Information                                                                                            |    |      | 1  | 
|                                                |  | Recent Developments                                                                                              |    |      | 1  | 
|                                                |  | Our Community Banking Strategy                                                                                   |    |      | 1  | 
|                                                |  | Banking Activities                                                                                               |    |      | 2  | 
|                                                |  | Business Strategies                                                                                              |    |      | 2  | 
|                                                |  | Officers and Employees                                                                                           |    |      | 3  | 
|                                                |  | Competition                                                                                                      |    |      | 3  | 
|                                                |  | Supervision and Regulation                                                                                       |    |      | 3  | 
|Item 2.                                         |  | Properties                                                                                                       |    |      | 11 | 
|Item 3.                                         |  | Legal Proceedings                                                                                                |    |      | 12 | 
|Item 4.                                         |  | Submission of Matters to a Vote of Security Holders                                                              |    |      | 12 | 
|                                               
|PART II                                        
|Item 5.                                         |  | Market for Registrants Common Equity, Related Shareholder
    Matters and Issuer Purchases of Equity Securities |    |      | 12 | 
|Item 6.                                         |  | Selected Consolidated Financial Data                                                                             |    |      | 14 | 
|Item 7.                                         |  | Managements Discussion and Analysis of Financial Condition
    and Results of Operations                        |    |      | 16 | 
|                                                |  | Overview                                                                                                         |    |      | 17 | 
|                                                |  | Critical Accounting Policies                                                                                     |    |      | 17 | 
|                                                |  | Results of Operations                                                                                            |    |      | 18 | 
|                                                |  | Financial Condition                                                                                              |    |      | 24 | 
|Item 7A.                                        |  | Quantitative and Qualitative Disclosures about Market Risk                                                       |    |      | 43 | 
|Item 8.                                         |  | Financial Statements and Supplementary Data                                                                      |    |      | 43 | 
|Item 9.                                         |  | Changes in Disagreements with Accountants on Accounting and
    Financial Disclosure                             |    |      | 43 | 
|Item 9A.                                        |  | Controls and Procedures                                                                                          |    |      | 44 | 
|                                               
|PART III                                       
|Item 10.                                        |  | Directors and Executive Officers of the Registrant                                                               |    |      | 44 | 
|Item 11.                                        |  | Executive Compensation                                                                                           |    |      | 44 | 
|Item 12.                                        |  | Security Ownership of Certain Beneficial Owners and Management
    and Related Stockholder Matters               |    |      | 44 | 
|Item 13.                                        |  | Certain Relationships and Related Transactions                                                                   |    |      | 45 | 
|Item 14.                                        |  | Principal Accounting Fees and Services                                                                           |    |      | 45 | 
|                                               
|PART IV                                        
|Item 15.                                        |  | Exhibits and Financial Statement Schedules                                                                       |    |      | 45 | 
|Signatures                                      |  |                                                                                                                  | 47 |     
|Consent of Deloitte & Touche LLP               
|Certification of CEO Pursuant to Rule 13a-14(a)
|Certification of CFO Pursuant to Rule 13a-14(a)
|Certification of CEO Pursuant to Section 906   
|Certification of CFO Pursuant to Section 906   





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##### Table of Contents






PART I.







|        |         
|------- | --------
|Item 1. | Business




General









Available Information


www.snbtx.com





Recent Developments







Our Community Banking Strategy




1



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Banking Activities











Business Strategies






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Continue and strengthen our community banking strategy.
    We will continue to focus on our strategy of furnishing a
    hospitable banking environment, providing excellent customer
    service and supporting community and charitable organizations in
    order to be the premier independent community-oriented financial
    institution in Fort Bend County while maintaining a
    competitive presence in other markets.
|
| |  | Continue our expansion and increase our market share. We
    plan to grow in Fort Bend County and other suitable
    markets. Consistent with this strategy, during 2004 we opened
    our fourth branch in Katy, Texas. We also plan to grow through
    commercial bank acquisitions, targeting banks with a similar
    culture, sound asset quality and compatible management.                                                 

2



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| |   |                                                                                                                                                                                                                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Increase our Loan to Deposit Ratio. We plan to grow our
    loan portfolio by expanding commercial lending, hiring new loan
    officers and offering competitive loan products. Our goal is to
    increase our loan to deposit ratio to 70% or greater. We plan to
    continue to offer new loan products, provided that we can offer
    them competitively.
|
| |  | Increase Core Deposits. We plan to increase core deposits
    in order to provide us with a low cost source of funding to
    continue growth in loans. Consistent with that strategy, we plan
    to target lower cost deposits from retail and middle market
    business customers and select public funds from our immediate
    market area.               
|
| |  | Diversify Revenue Stream by Increasing Fee Income. We
    plan to increase fee income by focusing on marketing current
    products and services to our customers to ensure that we are
    offering them a full-service banking relationship. We plan to
    target new and existing customers through a call program on the
    retail and lending side.      
|
| |  | Actively Manage our Balance Sheet. We will actively
    manage our balance sheet to enhance earnings and maintain
    flexibility.                                                                                                                                                                                                                              




Officers and Employees









Competition







Supervision and Regulation






3



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| |                     
| | --------------------
| | SNB Bancshares, Inc.



Regulatory Restrictions on Dividends; Source of Strength.






Scope of Permissible Activities.




4



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Safe and Sound Banking Practices.




Anti-Tying Restrictions.


Capital Adequacy Requirements.






Imposition of Liability for Undercapitalized
Subsidiaries.




5



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Acquisitions by Bank Holding Companies.


Control Acquisitions.




Sarbanes-Oxley Act of 2002.








| |   |                                                                                                                                                                                                                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | audit committees for all listed companies;                                                                                                                                                                                                                                                                                                              
|
| |  | certification of financial statements by the chief executive
    officer and the chief financial officer;                                                                                                                                                                                                                                               
|
| |  | the forfeiture of bonuses or other incentive-based compensation
    and profits from the sale of an issuers securities by
    directors and senior officers in the twelve month period
    following initial publication of any financial statements that
    later require restatements due to material noncompliance of the
    issuer or misconduct;
|
| |  | a prohibition on insider trading during pension plan black-out
    periods;                                                                                                                                                                                                                                                                             
|
| |  | disclosure of off-balance sheet transactions;                                                                                                                                                                                                                                                                                                           
|
| |  | a prohibition on personal loans to directors and officers except
    for financial institutions;                                                                                                                                                                                                                                                        
|
| |  | expedited filing requirements for Form 4s;                                                                                                                                                                                                                                                                                                             
|
| |  | disclosure of a code of ethics, if applicable, and filing a
    Form 8-K for a change or waiver of such code;                                                                                                                                                                                                                                           
|
| |  | accelerated filing of periodic reports;                                                                                                                                                                                                                                                                                                                 
|
| |  | the formation of a public accounting oversight board;                                                                                                                                                                                                                                                                                                   
|
| |  | auditor independence; and                                                                                                                                                                                                                                                                                                                               
|
| |  | increased criminal penalties for violations of securities laws.                                                                                                                                                                                                                                                                                         

6



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| |                                
| | -------------------------------
| | Southern National Bank of Texas



Financial Modernization.


Branching.


Restrictions on Transactions with Affiliates and
Insiders.






Restrictions on Distribution of Subsidiary Bank Dividends and
Assets.


7



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Examinations.


Audit Reports.


Capital Adequacy Requirements.






Corrective Measures for Capital Deficiencies.


8



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Deposit Insurance Assessments.






Enforcement Powers.


9



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Brokered Deposit Restrictions.


Cross-Guarantee Provisions.


Community Reinvestment Act.


Consumer Laws and Regulations.


Privacy.


USA PATRIOT Act of 2001.


10



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| |                                
| | -------------------------------
| | Expanding Enforcement Authority





| |                               
| | ------------------------------
| | Effect on Economic Environment








Item 2.Properties






|                                           |  |                                                 |  |                |         |  |  | 
|------------------------------------------ |  | ----------------------------------------------- |  | -------------- | ------- |  |  | 
|                                           |  |                                                 |  | Deposits at    |        
|                                           |  |                                                 |  | December 31,   |        
|Facility                                   |  | Address                                         |  |                | 2004    | 
|                                           |  |                                                 |  |                |         | 
|                                           |  |                                                 |  | (In thousands) |        
|Main Office                                |  | 14060 Southwest Freeway Sugar Land, Texas 77478 |  | $              | 611,775 | 
|Memorial Hermann Southwest Hospital Branch |  | 7737 Southwest Freeway Houston, Texas 77074     |  |                | 83,039  | 
|Uptown/ Post Oak                           |  | 1101 Post Oak Boulevard Houston, Texas 77056    |  |                | 170,836 | 
|Old Town Katy(1)                           |  | 5733 Second StreetKaty, Texas 77493             |  |                | 2,736   | 






|    |                         
|--- | ------------------------
|(1) | Opened October 12, 2004.





11



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Monticello. Poplar Forest. Farmington







|        |                  
|------- | -----------------
|Item 3. | Legal Proceedings








|        |                                                    
|------- | ---------------------------------------------------
|Item 4. | Submission of Matters to a Vote of Security Holders






PART II.







|        |                                                                                                                     
|------- | --------------------------------------------------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity, Related
    Shareholder Matters and Issuer Purchases of Equity
    Securities





|                                        |  |      |       |  |     |   |       | 
|--------------------------------------- |  | ---- | ----- |  | --- | - | ----- | 
|2004                                    |  | High |       |  | Low |  
|                                        |  |      |       |  |     |  
|Fourth Quarter                          |  | $    | 15.49 |  |     | $ | 11.76 | 
|Third Quarter (8/18/04 through 9/30/04) |  |      | 12.00 |  |     |   | 10.00 | 



|                                       |  |      |       |  |     |   |       | 
|-------------------------------------- |  | ---- | ----- |  | --- | - | ----- | 
|2004                                   |  | High |       |  | Low |  
|                                       |  |      |       |  |     |  
|Third Quarter (6/30/04 though 8/17/04) |  | $    | 19.00 |  |     | $ | 11.00 | 
|Second Quarter                         |  |      | 19.00 |  |     |   | 11.00 | 
|First Quarter                          |  |      | 16.00 |  |     |   | 10.00 | 

|               |  |      |       |  |     |   |      | 
|-------------- |  | ---- | ----- |  | --- | - | ---- | 
|2003           |  | High |       |  | Low |  
|               |  |      |       |  |     |  
|Fourth Quarter |  | $    | 17.95 |  |     | $ | 8.50 | 
|Third Quarter  |  |      | 17.95 |  |     |   | 8.50 | 
|Second Quarter |  |      | 10.00 |  |     |   | 8.50 | 
|First Quarter  |  |      | 10.50 |  |     |   | 8.00 | 

12



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Dividends








Recent Sales of Unregistered Securities




Issuer Purchases of Equity Securities




13



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|        |                                     
|------- | ------------------------------------
|Item 6. | Selected Consolidated Financial Data



|                       |                                                     |                                                     |       |        |        |        |       |        |        |       |       |        |        |       |       |        |        |       |       |        |        |       | 
|---------------------- | --------------------------------------------------- | --------------------------------------------------- | ----- | ------ | ------ | ------ | ----- | ------ | ------ | ----- | ----- | ------ | ------ | ----- | ----- | ------ | ------ | ----- | ----- | ------ | ------ | ----- | 
|                       |                                                     | As of and for the Years Ended December 31,          |      
|                       |                                                     |                                                     |      
|                       |                                                     | 2004                                                |       |        | 2003   |        |       | 2002   |        |       | 2001  |        |        | 2000  |      
|                       |                                                     |                                                     |       |        |        |        |       |        |        |       |       |        |        |       |      
|                       |                                                     | (Dollars in thousands, except per share data)       |      
|Income Statement Data: |                                                     |                                                     |       |        |        |        |       |        |        |       |       |        |        |       |       |        |        |       |       |       
|                       | Interest income                                     |                                                     | $     | 46,653 |        |        | $     | 33,238 |        |       | $     | 29,371 |        |       | $     | 28,459 |        |       | $     | 27,184 |       
|                       | Interest expense                                    |                                                     |       | 18,006 |        |        |       | 12,059 |        |       |       | 11,519 |        |       |       | 14,245 |        |       |       | 13,253 |       
|                       |                                                     |                                                     |       |        |        |        |       |        |        |       |       |        |        |       |      
|                       |                                                     | Net interest income                                 |       |        | 28,647 |        |       |        | 21,179 |       |       |        | 17,852 |       |       |        | 14,214 |       |       |        | 13,931 |      
|                       | Provision for loan losses                           |                                                     |       | 2,950  |        |        |       | 2,821  |        |       |       | 1,590  |        |       |       | 900    |        |       |       | 709    |       
|                       |                                                     |                                                     |       |        |        |        |       |        |        |       |       |        |        |       |      
|                       |                                                     | Net interest income after provision for loan losses |       |        | 25,697 |        |       |        | 18,358 |       |       |        | 16,262 |       |       |        | 13,314 |       |       |        | 13,222 |      
|                       | Noninterest income                                  |                                                     |       | 2,120  |        |        |       | 2,309  |        |       |       | 1,893  |        |       |       | 1,523  |        |       |       | 1,136  |       
|                       | Noninterest expense                                 |                                                     |       | 18,821 |        |        |       | 15,489 |        |       |       | 13,351 |        |       |       | 11,245 |        |       |       | 10,509 |       
|                       |                                                     |                                                     |       |        |        |        |       |        |        |       |       |        |        |       |      
|                       |                                                     | Income before income taxes                          |       |        | 8,996  |        |       |        | 5,178  |       |       |        | 4,804  |       |       |        | 3,592  |       |       |        | 3,849  |      
|                       | Provision for income tax expense                    |                                                     |       | 3,049  |        |        |       | 1,761  |        |       |       | 1,642  |        |       |       | 1,135  |        |       |       | 1,283  |       
|                       |                                                     |                                                     |       |        |        |        |       |        |        |       |       |        |        |       |      
|Net income             |                                                     | $                                                   | 5,947 |        |        | $      | 3,417 |        |        | $     | 3,162 |        |        | $     | 2,457 |        |        | $     | 2,566 |       
|                       |                                                     |                                                     |       |        |        |        |       |        |        |       |       |        |        |       |      
|Per Share Data:        |                                                     |                                                     |       |        |        |        |       |        |        |       |       |        |        |       |       |        |        |       |       |       
|                       | Basic earnings per share                            |                                                     | $     | 0.67   |        |        | $     | 0.49   |        |       | $     | 0.56   |        |       | $     | 0.59   |        |       | $     | 0.53   |       
|                       | Diluted earnings per share                          |                                                     |       | 0.65   |        |        |       | 0.48   |        |       |       | 0.56   |        |       |       | 0.59   |        |       |       | 0.53   |       
|                       | Book value per share                                |                                                     |       | 6.95   |        |        |       | 4.40   |        |       |       | 4.35   |        |       |       | 2.76   |        |       |       | 2.15   |       
|                       | Tangible book value per share                       |                                                     |       | 6.95   |        |        |       | 4.40   |        |       |       | 4.35   |        |       |       | 2.76   |        |       |       | 2.15   |       
|                       | Weighted average shares outstanding (in thousands): |                                                     |       |        |        |        |       |        |        |       |       |        |        |       |       |        |        |       |       |        |       
|                       |                                                     | Class B stock                                       |       |        | 2,900  |        |       |        | 3,286  |       |       |        | 3,498  |       |       |        | 3,719  |       |       |        | 4,815  |      
|                       |                                                     | Common stock                                        |       |        | 5,999  |        |       |        | 3,708  |       |       |        | 2,182  |       |       |        | 455    |       |       |        | 32     |      
|                       |                                                     |                                                     |       |        |        |        |       |        |        |       |       |        |        |       |      
|                       |                                                     |                                                     | Total |        |        | 8,899  |       |        |        | 6,994 |       |        |        | 5,680 |       |        |        | 4,174 |       |        |        | 4,847 | 
|                       |                                                     |                                                     |       |        |        |        |       |        |        |       |       |        |        |       |      
|                       | Shares outstanding at end of period (in thousands): |                                                     |       |        |        |        |       |        |        |       |       |        |        |       |       |        |        |       |       |        |       
|                       |                                                     | Class B stock                                       |       |        | 2,679  |        |       |        | 3,258  |       |       |        | 3,306  |       |       |        | 3,719  |       |       |        | 3,719  |      
|                       |                                                     | Common stock                                        |       |        | 9,754  |        |       |        | 3,736  |       |       |        | 3,688  |       |       |        | 455    |       |       |        | 455    |      
|                       |                                                     |                                                     |       |        |        |        |       |        |        |       |       |        |        |       |      
|                       |                                                     |                                                     | Total |        |        | 12,433 |       |        |        | 6,994 |       |        |        | 6,994 |       |        |        | 4,174 |       |        |        | 4,174 | 
|                       |                                                     |                                                     |       |        |        |        |       |        |        |       |       |        |        |       |      

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|                               |                                                                 |                                               |   |           |      |  |   |         |   |  |      |         |   |      |   |         |   |  |   |         |  
|------------------------------ | --------------------------------------------------------------- | --------------------------------------------- | - | --------- | ---- |  | - | ------- | - |  | ---- | ------- | - | ---- | - | ------- | - |  | - | ------- | -
|                               |                                                                 | As of and for the Years Ended December 31,    |  
|                               |                                                                 |                                               |  
|                               |                                                                 | 2004                                          |   |           | 2003 |  |   | 2002    |   |  | 2001 |         |   | 2000 |  
|                               |                                                                 |                                               |   |           |      |  |   |         |   |  |      |         |   |      |  
|                               |                                                                 | (Dollars in thousands, except per share data) |  
|Period-End Balance Sheet Data: |                                                                 |                                               |   |           |      |  |   |         |   |  |      |         |   |      |   |         |   |  |   |        
|                               | Total assets                                                    |                                               | $ | 1,130,088 |      |  | $ | 883,841 |   |  | $    | 574,594 |   |      | $ | 461,229 |   |  | $ | 366,539 |  
|                               | Total securities                                                |                                               |   | 488,523   |      |  |   | 412,620 |   |  |      | 177,200 |   |      |   | 128,865 |   |  |   | 77,689  |  
|                               | Total loans                                                     |                                               |   | 598,292   |      |  |   | 424,479 |   |  |      | 342,085 |   |      |   | 280,921 |   |  |   | 250,195 |  
|                               | Allowance for loan losses                                       |                                               |   | 8,121     |      |  |   | 5,650   |   |  |      | 4,006   |   |      |   | 3,371   |   |  |   | 2,501   |  
|                               | Total deposits                                                  |                                               |   | 868,386   |      |  |   | 733,971 |   |  |      | 526,171 |   |      |   | 420,765 |   |  |   | 341,705 |  
|                               | Shareholders equity                                            |                                               |   | 86,401    |      |  |   | 30,767  |   |  |      | 30,429  |   |      |   | 11,534  |   |  |   | 8,962   |  
|Average Balance Sheet Data:    |                                                                 |                                               |   |           |      |  |   |         |   |  |      |         |   |      |   |         |   |  |   |        
|                               | Total assets                                                    |                                               | $ | 1,041,949 |      |  | $ | 730,252 |   |  | $    | 522,189 |   |      | $ | 387,974 |   |  | $ | 333,242 |  
|                               | Total securities                                                |                                               |   | 482,626   |      |  |   | 302,590 |   |  |      | 157,562 |   |      |   | 82,542  |   |  |   | 79,089  |  
|                               | Total loans                                                     |                                               |   | 509,142   |      |  |   | 383,844 |   |  |      | 305,912 |   |      |   | 265,342 |   |  |   | 226,133 |  
|                               | Allowance for loan losses                                       |                                               |   | 6,868     |      |  |   | 4,788   |   |  |      | 3,629   |   |      |   | 2,944   |   |  |   | 2,244   |  
|                               | Total deposits                                                  |                                               |   | 807,605   |      |  |   | 591,070 |   |  |      | 474,588 |   |      |   | 354,760 |   |  |   | 287,010 |  
|                               | Shareholders equity                                            |                                               |   | 50,156    |      |  |   | 30,709  |   |  |      | 21,765  |   |      |   | 10,922  |   |  |   | 11,240  |  
|Performance Ratios:            |                                                                 |                                               |   |           |      |  |   |         |   |  |      |         |   |      |   |         |   |  |   |        
|                               | Return on average assets                                        |                                               |   | 0.57      | %    |  |   | 0.47    | % |  |      | 0.61    | % |      |   | 0.63    | % |  |   | 0.77    | %
|                               | Return on average equity                                        |                                               |   | 11.86     |      |  |   | 11.13   |   |  |      | 14.53   |   |      |   | 22.50   |   |  |   | 22.83   |  
|                               | Net interest margin(1)                                          |                                               |   | 2.85      |      |  |   | 3.07    |   |  |      | 3.69    |   |      |   | 3.96    |   |  |   | 4.58    |  
|                               | Efficiency ratio(2)                                             |                                               |   | 62.60     |      |  |   | 68.51   |   |  |      | 69.21   |   |      |   | 72.64   |   |  |   | 69.75   |  
|Asset Quality Ratios(3):       |                                                                 |                                               |   |           |      |  |   |         |   |  |      |         |   |      |   |         |   |  |   |        
|                               | Nonperforming assets to total loans and other real estate owned |                                               |   | 0.80      | %    |  |   | 1.07    | % |  |      | 0.76    | % |      |   | 0.27    | % |  |   | 0.47    | %
|                               | Net charge-offs to average loans                                |                                               |   | 0.09      |      |  |   | 0.31    |   |  |      | 0.31    |   |      |   | 0.01    |   |  |   | 0.05    |  
|                               | Allowance for loan losses to period-end loans                   |                                               |   | 1.36      |      |  |   | 1.33    |   |  |      | 1.17    |   |      |   | 1.20    |   |  |   | 1.00    |  
|                               | Allowance for loan losses to nonperforming loans                |                                               |   | 234.17    |      |  |   | 125.25  |   |  |      | 153.25  |   |      |   | 437.79  |   |  |   | 233.96  |  
|Capital Ratios:                |                                                                 |                                               |   |           |      |  |   |         |   |  |      |         |   |      |   |         |   |  |   |        
|                               | Leverage ratio(4)                                               |                                               |   | 10.87     | %    |  |   | 5.09    | % |  |      | 6.33    | % |      |   | 3.78    | % |  |   | 3.85    | %
|                               | Average shareholders equity to average total assets            |                                               |   | 4.81      |      |  |   | 4.21    |   |  |      | 4.17    |   |      |   | 2.82    |   |  |   | 3.37    |  
|                               | Tier 1 risk-based capital ratio                                 |                                               |   | 17.72     |      |  |   | 8.84    |   |  |      | 10.15   |   |      |   | 5.56    |   |  |   | 5.71    |  
|                               | Total risk-based capital ratio                                  |                                               |   | 19.86     |      |  |   | 15.35   |   |  |      | 11.27   |   |      |   | 7.83    |   |  |   | 8.29    |  






|    |                                                                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Calculated on a tax-equivalent basis using a 34% tax rate for
    all periods presented.                                                                       
|   
|(2) | The efficiency ratio is computed by dividing noninterest expense
    by net interest income plus noninterest income, excluding
    securities gains and losses.
|   
|(3) | At period end, except net charge-offs to average loans.                                                                                                        
|   
|(4) | Computed by dividing period-end equity by fourth quarter average
    assets.                                                                                   

15



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|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis of Financial
    Condition and Results of Operations

Special Cautionary Notice Regarding Forward-Looking
Statements






| |   |                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the effects of future economic and business conditions on us and
    our customers;                                                                                                               
|
| |  | changes in statues and governmental regulations or their
    interpretations including changes in tax requirements and tax
    rates;                                                             
|
| |  | changes in interest rates which could reduce our net interest
    margins, asset valuations and expense expectations;                                                                             
|
| |  | increased competition from other banks and financial
    institutions for customer deposits and loans;                                                                                            
|
| |  | changes in the levels of loan prepayments and the resulting
    effects on the value of our loan portfolio;                                                                                       
|
| |  | the failure of assumptions underlying the establishment of and
    provisions made to the allowance for loan losses;                                                                              
|
| |  | increased credit risk in our assets and increased operating risk
    caused by a material change in commercial, consumer and/or real
    estate loans as a percentage of the total loan portfolio;
|
| |  | changes in the availability of funds resulting in increased
    costs or reduced liquidity;                                                                                                       
|
| |  | the effect of changes in accounting policies and practices which
    may be adopted by regulatory agencies and/or the Financial
    Accounting Standards Board;                                   
|
| |  | our ability to acquire, operate and maintain cost effective and
    efficient systems without incurring unexpectedly difficult or
    expensive technological changes;                            
|
| |  | acquisition and integration of acquired businesses;                                                                                                                                               
|
| |  | the loss of senior management or operating personnel and the
    potential inability to hire qualified personnel at reasonable
    compensation levels;                                           
|
| |  | acts of terrorism, hostilities or other international or
    domestic calamities; and                                                                                                             
|
| |  | other risks and uncertainties listed from time to time in our
    reports and documents filed with the Securities and Exchange
    Commission.                                                    



For the Years Ended December 31, 2004, 2003 and 2002




16



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Overview









Critical Accounting Policies




Allowance for Loan Losses


Stock-based Compensation




17



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Results of Operations










| |                    
| | -------------------
| | Net Interest Income



2004 versus 2003.




18



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2003 versus 2002.






19



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|                                      |                                                           |                                                 |                                       |           |           |         |   |         |        |  |             |      |      |          |   |         |         |        |   |             |        |  |          |      |      |         |   |         |         |        |   |        |        |  |  |       |      |   | 
|------------------------------------- | --------------------------------------------------------- | ----------------------------------------------- | ------------------------------------- | --------- | --------- | ------- | - | ------- | ------ |  | ----------- | ---- | ---- | -------- | - | ------- | ------- | ------ | - | ----------- | ------ |  | -------- | ---- | ---- | ------- | - | ------- | ------- | ------ | - | ------ | ------ |  |  | ----- | ---- | - | 
|                                      |                                                           | For the Years Ended December 31,                |                                      
|                                      |                                                           |                                                 |                                      
|                                      |                                                           | 2004                                            |                                       |           | 2003      |         |   | 2002    |       
|                                      |                                                           |                                                 |                                       |           |           |         |   |         |       
|                                      |                                                           | Average                                         |                                       |           | Interest  |         |   | Average |        |  | Average     |      |      | Interest |   |         | Average |        |   | Average     |        |  | Interest |      |      | Average |  
|                                      |                                                           | Outstanding                                     |                                       |           | Earned/   |         |   | Yield/  |        |  | Outstanding |      |      | Earned/  |   |         | Yield/  |        |   | Outstanding |        |  | Earned/  |      |      | Yield/  |  
|                                      |                                                           | Balance                                         |                                       |           | Paid      |         |   | Rate    |        |  | Balance     |      |      | Paid     |   |         | Rate    |        |   | Balance     |        |  | Paid     |      |      | Rate    |  
|                                      |                                                           |                                                 |                                       |           |           |         |   |         |        |  |             |      |      |          |   |         |         |        |   |             |        |  |          |      |      |         |  
|                                      |                                                           | (Dollars in thousands)                          |                                      
|ASSETS:                               |                                                           |                                                 |                                       |           |           |         |   |         |        |  |             |      |      |          |   |         |         |        |   |             |        |  |          |      |      |         |   |         |         |        |   |        |        |  |  |      
|Interest-earning assets:              |                                                           |                                                 |                                       |           |           |         |   |         |        |  |             |      |      |          |   |         |         |        |   |             |        |  |          |      |      |         |   |         |         |        |   |        |        |  |  |      
|                                      | Loans                                                     |                                                 | $                                     | 509,142   |           |         | $ | 30,770  |        |  |             | 5.94 | %    |          | $ | 383,844 |         |        | $ | 24,200      |        |  |          | 6.22 | %    |         | $ | 305,912 |         |        | $ | 21,659 |        |  |  | 6.98  | %   
|                                      | Investment securities(1)                                  |                                                 |                                       | 482,626   |           |         |   | 15,729  |        |  |             | 3.28 |      |          |   | 302,590 |         |        |   | 9,000       |        |  |          | 2.97 |      |         |   | 157,562 |         |        |   | 7,365  |        |  |  | 4.67  |     
|                                      | Federal funds sold                                        |                                                 |                                       | 8,945     |           |         |   | 87      |        |  |             | 0.96 |      |          |   | 1,058   |         |        |   | 11          |        |  |          | 1.03 |      |         |   | 7,266   |         |        |   | 121    |        |  |  | 1.64  |     
|                                      | Interest-earning deposits in other financial institutions |                                                 |                                       | 5,830     |           |         |   | 67      |        |  |             | 1.13 |      |          |   | 2,387   |         |        |   | 27          |        |  |          | 1.12 |      |         |   | 13,057  |         |        |   | 226    |        |  |  | 1.71  |     
|                                      |                                                           |                                                 |                                       |           |           |         |   |         |        |  |             |      |      |          |   |         |         |        |   |             |        |  |          |      |      |         |  
|                                      |                                                           | Total interest-earning assets                   |                                       |           | 1,006,543 |         |   |         | 46,653 |  |             |      | 4.56 | %        |   |         | 689,879 |        |   |             | 33,238 |  |          |      | 4.75 | %       |   |         | 483,797 |        |   |        | 29,371 |  |  |       | 5.99 | %
|                                      |                                                           |                                                 |                                       |           |           |         |   |         |        |  |             |      |      |          |   |         |         |        |   |             |        |  |          |      |      |         |  
|                                      | Less allowance for loan losses                            |                                                 |                                       | (6,868    | )         |         |   |         |        |  |             |      |      |          |   | (4,788  | )       |        |   |             |        |  |          |      |      |         |   | (3,629  | )       |        |   |        |        |  |  |       |     
|                                      |                                                           |                                                 |                                       |           |           |         |   |         |        |  |             |      |      |          |   |         |         |        |   |             |        |  |          |      |      |         |  
|                                      |                                                           | Total interest-earning assets, net of allowance |                                       |           | 999,675   |         |   |         |        |  |             |      |      |          |   |         | 685,091 |        |   |             |        |  |          |      |      |         |   |         | 480,168 |        |   |        |        |  |  |       |      |  
|                                      |                                                           |                                                 |                                       |           |           |         |   |         |        |  |             |      |      |          |   |         |         |        |   |             |        |  |          |      |      |         |  
|Non-earning assets:                   |                                                           |                                                 |                                       |           |           |         |   |         |        |  |             |      |      |          |   |         |         |        |   |             |        |  |          |      |      |         |   |         |         |        |   |        |        |  |  |      
|                                      | Cash and due from banks                                   |                                                 |                                       | 15,533    |           |         |   |         |        |  |             |      |      |          |   | 26,543  |         |        |   |             |        |  |          |      |      |         |   | 27,472  |         |        |   |        |        |  |  |       |     
|                                      | Premises and equipment                                    |                                                 |                                       | 13,466    |           |         |   |         |        |  |             |      |      |          |   | 11,784  |         |        |   |             |        |  |          |      |      |         |   | 9,929   |         |        |   |        |        |  |  |       |     
|                                      | Accrued interest receivable and other assets              |                                                 |                                       | 13,275    |           |         |   |         |        |  |             |      |      |          |   | 6,834   |         |        |   |             |        |  |          |      |      |         |   | 4,620   |         |        |   |        |        |  |  |       |     
|                                      |                                                           |                                                 |                                       |           |           |         |   |         |        |  |             |      |      |          |   |         |         |        |   |             |        |  |          |      |      |         |  
|                                      |                                                           | Total noninterest-earning assets                |                                       |           | 42,274    |         |   |         |        |  |             |      |      |          |   |         | 45,161  |        |   |             |        |  |          |      |      |         |   |         | 42,021  |        |   |        |        |  |  |       |      |  
|                                      |                                                           |                                                 |                                       |           |           |         |   |         |        |  |             |      |      |          |   |         |         |        |   |             |        |  |          |      |      |         |  
|                                      | Total assets                                              |                                                 | $                                     | 1,041,949 |           |         |   |         |        |  |             |      |      |          | $ | 730,252 |         |        |   |             |        |  |          |      |      |         | $ | 522,189 |         |        |   |        |        |  |  |       |     
|                                      |                                                           |                                                 |                                       |           |           |         |   |         |        |  |             |      |      |          |   |         |         |        |   |             |        |  |          |      |      |         |  
|                                     
|LIABILITIES AND SHAREHOLDERS EQUITY:
|Interest-bearing liabilities:         |                                                           |                                                 |                                       |           |           |         |   |         |        |  |             |      |      |          |   |         |         |        |   |             |        |  |          |      |      |         |   |         |         |        |   |        |        |  |  |      
|                                      | NOW, savings, and money market accounts                   |                                                 | $                                     | 334,865   |           |         | $ | 4,514   |        |  |             | 1.35 | %    |          | $ | 236,022 |         |        | $ | 2,757       |        |  |          | 1.17 | %    |         | $ | 231,460 |         |        | $ | 4,480  |        |  |  | 1.94  | %   
|                                      | Time deposits                                             |                                                 |                                       | 368,015   |           |         |   | 9,041   |        |  |             | 2.46 |      |          |   | 259,968 |         |        |   | 6,753       |        |  |          | 2.60 |      |         |   | 147,742 |         |        |   | 5,883  |        |  |  | 3.98  |     
|                                      | Other borrowed funds                                      |                                                 |                                       | 142,498   |           |         |   | 2,256   |        |  |             | 1.56 |      |          |   | 78,063  |         |        |   | 941         |        |  |          | 1.19 |      |         |   | 8,436   |         |        |   | 137    |        |  |  | 1.60  |     
|                                      | Notes payable to bank                                     |                                                 |                                       |          |           |         |   |        |        |  |             |     |      |          |   | 1,651   |         |        |   | 53          |        |  |          | 3.21 |      |         |   | 7,562   |         |        |   | 272    |        |  |  | 3.60  |     
|                                      | Junior subordinated debentures                            |                                                 |                                       | 38,250    |           |         |   | 2,195   |        |  |             | 5.64 |      |          |   | 25,934  |         |        |   | 1,555       |        |  |          | 6.00 |      |         |   | 7,320   |         |        |   | 747    |        |  |  | 10.20 |     
|                                      |                                                           |                                                 |                                       |           |           |         |   |         |        |  |             |      |      |          |   |         |         |        |   |             |        |  |          |      |      |         |  
|                                      |                                                           | Total interest-bearing liabilities              |                                       |           | 883,628   |         |   |         | 18,006 |  |             |      | 2.04 | %        |   |         | 601,638 |        |   |             | 12,059 |  |          |      | 2.00 | %       |   |         | 402,520 |        |   |        | 11,519 |  |  |       | 2.86 | %
|                                      |                                                           |                                                 |                                       |           |           |         |   |         |        |  |             |      |      |          |   |         |         |        |   |             |        |  |          |      |      |         |  
|Noninterest-bearing liabilities:      |                                                           |                                                 |                                       |           |           |         |   |         |        |  |             |      |      |          |   |         |         |        |   |             |        |  |          |      |      |         |   |         |         |        |   |        |        |  |  |      
|                                      | Demand deposits                                           |                                                 |                                       | 104,725   |           |         |   |         |        |  |             |      |      |          |   | 95,080  |         |        |   |             |        |  |          |      |      |         |   | 95,386  |         |        |   |        |        |  |  |       |     
|                                      | Accrued interest payable and other liabilities            |                                                 |                                       | 3,440     |           |         |   |         |        |  |             |      |      |          |   | 2,825   |         |        |   |             |        |  |          |      |      |         |   | 2,518   |         |        |   |        |        |  |  |       |     
|                                      |                                                           |                                                 |                                       |           |           |         |   |         |        |  |             |      |      |          |   |         |         |        |   |             |        |  |          |      |      |         |  
|                                      |                                                           |                                                 | Total noninterest-bearing liabilities |           |           | 108,165 |   |         |        |  |             |      |      |          |   |         |         | 97,905 |   |             |        |  |          |      |      |         |   |         |         | 97,904 |   |        |        |  |  |       |      |   | 
|                                      |                                                           |                                                 |                                       |           |           |         |   |         |        |  |             |      |      |          |   |         |         |        |   |             |        |  |          |      |      |         |  
|                                      | Total liabilities                                         |                                                 |                                       | 991,793   |           |         |   |         |        |  |             |      |      |          |   | 699,543 |         |        |   |             |        |  |          |      |      |         |   | 500,424 |         |        |   |        |        |  |  |       |     
|                                      | Shareholders equity                                      |                                                 |                                       | 50,156    |           |         |   |         |        |  |             |      |      |          |   | 30,709  |         |        |   |             |        |  |          |      |      |         |   | 21,765  |         |        |   |        |        |  |  |       |     
|                                      |                                                           |                                                 |                                       |           |           |         |   |         |        |  |             |      |      |          |   |         |         |        |   |             |        |  |          |      |      |         |  
|                                      | Total liabilities and shareholders equity                |                                                 | $                                     | 1,041,949 |           |         |   |         |        |  |             |      |      |          | $ | 730,252 |         |        |   |             |        |  |          |      |      |         | $ | 522,189 |         |        |   |        |        |  |  |       |     
|                                      |                                                           |                                                 |                                       |           |           |         |   |         |        |  |             |      |      |          |   |         |         |        |   |             |        |  |          |      |      |         |  
|                                      | Net interest income                                       |                                                 |                                       |           |           |         | $ | 28,647  |        |  |             |      |      |          |   |         |         |        | $ | 21,179      |        |  |          |      |      |         |   |         |         |        | $ | 17,852 |        |  |  |       |     
|                                      |                                                           |                                                 |                                       |           |           |         |   |         |        |  |             |      |      |          |   |         |         |        |   |             |        |  |          |      |      |         |  
|                                      | Net interest spread                                       |                                                 |                                       |           |           |         |   |         |        |  |             | 2.52 | %    |          |   |         |         |        |   |             |        |  |          | 2.75 | %    |         |   |         |         |        |   |        |        |  |  | 3.13  | %   
|                                      |                                                           |                                                 |                                       |           |           |         |   |         |        |  |             |      |      |          |   |         |         |        |   |             |        |  |          |      |      |         |  
|                                      | Net interest margin(2)                                    |                                                 |                                       |           |           |         |   |         |        |  |             | 2.85 | %    |          |   |         |         |        |   |             |        |  |          | 3.07 | %    |         |   |         |         |        |   |        |        |  |  | 3.69  | %   
|                                      |                                                           |                                                 |                                       |           |           |         |   |         |        |  |             |      |      |          |   |         |         |        |   |             |        |  |          |      |      |         |  






|    |                                                                                                                                                                                               
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The tax equivalent yield is based on amortized cost and does not
    include any component of unrealized gains or losses. It is
    calculated using a 34% tax rate for all periods presented.
|   
|(2) | The net interest margin is equal to net interest income, on a
    tax equivalent basis using a 34% tax rate for all periods
    presented, divided by average interest-earning assets.        

20



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|                                              |                                                           |                                  |        |       |               |  |                     |        |   |  |        |       |   |      |        |       |       |  |        |        |   |  |       |        |  
|--------------------------------------------- | --------------------------------------------------------- | -------------------------------- | ------ | ----- | ------------- |  | ------------------- | ------ | - |  | ------ | ----- | - | ---- | ------ | ----- | ----- |  | ------ | ------ | - |  | ----- | ------ | -
|                                              |                                                           | For the Years Ended December 31, |       
|                                              |                                                           |                                  |       
|                                              |                                                           | 2004 vs. 2003                    |        |       | 2003 vs. 2002 | 
|                                              |                                                           |                                  |        |       |               | 
|                                              |                                                           | Increase (Decrease)              |        |       |               |  | Increase (Decrease) |        |   | 
|                                              |                                                           | Due to Change in                 |        |       |               |  | Due to Change in    |        |   | 
|                                              |                                                           |                                  |        |       |               |  |                     |        |   | 
|                                              |                                                           | Volume                           |        |       | Rate          |  |                     | Total  |   |  | Volume |       |   | Rate |        |       | Total | 
|                                              |                                                           |                                  |        |       |               |  |                     |        |   |  |        |       |   |      |        |       |       | 
|                                              |                                                           | (Dollars in thousands)           |       
|Interest-earning assets:                      |                                                           |                                  |        |       |               |  |                     |        |   |  |        |       |   |      |        |       |       |  |        |        |   |  |       |       
|                                              | Loans                                                     |                                  | $      | 7,784 |               |  | $                   | (1,214 | ) |  | $      | 6,570 |   |      | $      | 5,442 |       |  | $      | (2,901 | ) |  | $     | 2,541  |  
|                                              | Securities                                                |                                  |        | 5,355 |               |  |                     | 1,374  |   |  |        | 6,729 |   |      |        | 6,780 |       |  |        | (5,145 | ) |  |       | 1,635  |  
|                                              | Federal funds sold                                        |                                  |        | 79    |               |  |                     | (3     | ) |  |        | 76    |   |      |        | (102  | )     |  |        | (8     | ) |  |       | (110   | )
|                                              | Interest-bearing deposits in other financial institutions |                                  |        | 40    |               |  |                     |       |   |  |        | 40    |   |      |        | (182  | )     |  |        | (17    | ) |  |       | (199   | )
|                                              |                                                           |                                  |        |       |               |  |                     |        |   |  |        |       |   |      |        |       |       | 
|Total increase (decrease) in interest income  |                                                           |                                  | 13,258 |       |               |  | 157                 |        |   |  | 13,415 |       |   |      | 11,938 |       |       |  | (8,071 | )      |   |  | 3,867 |       
|                                              |                                                           |                                  |        |       |               |  |                     |        |   |  |        |       |   |      |        |       |       | 
|Interest-bearing liabilities:                 |                                                           |                                  |        |       |               |  |                     |        |   |  |        |       |   |      |        |       |       |  |        |        |   |  |       |       
|                                              | NOW, savings and money market accounts                    |                                  |        | 1,154 |               |  |                     | 603    |   |  |        | 1,757 |   |      |        | 88    |       |  |        | (1,811 | ) |  |       | (1,723 | )
|                                              | Time deposits                                             |                                  |        | 2,807 |               |  |                     | (519   | ) |  |        | 2,288 |   |      |        | 4,469 |       |  |        | (3,599 | ) |  |       | 870    |  
|                                              | Other borrowed funds                                      |                                  |        | 776   |               |  |                     | 539    |   |  |        | 1,315 |   |      |        | 1,115 |       |  |        | (311   | ) |  |       | 804    |  
|                                              | Notes payable to bank                                     |                                  |        | (53   | )             |  |                     |       |   |  |        | (53   | ) |      |        | (213  | )     |  |        | (6     | ) |  |       | (219   | )
|                                              | Junior subordinated debentures                            |                                  |        | 729   |               |  |                     | (89    | ) |  |        | 640   |   |      |        | 1,900 |       |  |        | (1,092 | ) |  |       | 808    |  
|                                              |                                                           |                                  |        |       |               |  |                     |        |   |  |        |       |   |      |        |       |       | 
|Total increase (decrease) in interest expense |                                                           |                                  | 5,413  |       |               |  | 534                 |        |   |  | 5,947  |       |   |      | 7,359  |       |       |  | (6,819 | )      |   |  | 540   |       
|                                              |                                                           |                                  |        |       |               |  |                     |        |   |  |        |       |   |      |        |       |       | 
|                                              | Increase (decrease) in net interest income                |                                  | $      | 7,845 |               |  | $                   | (377   | ) |  | $      | 7,468 |   |      | $      | 4,579 |       |  | $      | (1,252 | ) |  | $     | 3,327  |  
|                                              |                                                           |                                  |        |       |               |  |                     |        |   |  |        |       |   |      |        |       |       | 



| |                          
| | -------------------------
| | Provision for Loan Losses





21



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| |                   
| | ------------------
| | Noninterest Income



|                                    |                          |                        |     |       |      |   |     |       |  |   |     |       | 
|----------------------------------- | ------------------------ | ---------------------- | --- | ----- | ---- | - | --- | ----- |  | - | --- | ----- | 
|                                    |                          | For the Years Ended    |    
|                                    |                          | December 31,           |    
|                                    |                          |                        |    
|                                    |                          | 2004                   |     |       | 2003 |   |     | 2002  | 
|                                    |                          |                        |     |       |      |   |     |       | 
|                                    |                          | (Dollars in thousands) |    
|Service charges on deposit accounts |                          | $                      | 786 |       |      | $ | 873 |       |  | $ | 884 |      
|Gains on sales of securities, net   |                          |                        | 700 |       |      |   | 880 |       |  |   | 454 |      
|Other noninterest income            |                          |                        | 634 |       |      |   | 556 |       |  |   | 555 |      
|                                    |                          |                        |     |       |      |   |     |       | 
|                                    | Total noninterest income |                        | $   | 2,120 |      |   | $   | 2,309 |  |   | $   | 1,893 | 
|                                    |                          |                        |     |       |      |   |     |       | 







| |                    
| | -------------------
| | Noninterest Expense



|                                   |                                |                           |        |       |        |   |       |       |        |   |       |       |        | 
|---------------------------------- | ------------------------------ | ------------------------- | ------ | ----- | ------ | - | ----- | ----- | ------ | - | ----- | ----- | ------ | 
|                                   |                                | For the Years Ended       |       
|                                   |                                | December 31,              |       
|                                   |                                |                           |       
|                                   |                                | 2004                      |        |       | 2003   |   |       | 2002  |       
|                                   |                                |                           |        |       |        |   |       |       |       
|                                   |                                | (Dollars in thousands)    |       
|Employee compensation and benefits |                                | $                         | 11,365 |       |        | $ | 9,328 |       |        | $ | 7,709 |      
|Non-staff expenses:                |                                |                           |        |       |        |   |       |       |        |   |       |      
|                                   | Net occupancy expense          |                           |        | 1,820 |        |   |       | 1,679 |        |   |       | 1,380 |       
|                                   | Data processing expense        |                           |        | 1,218 |        |   |       | 1,163 |        |   |       | 1,099 |       
|                                   | Legal and professional fees    |                           |        | 653   |        |   |       | 571   |        |   |       | 463   |       
|                                   | FDIC deposit insurance premium |                           |        | 115   |        |   |       | 83    |        |   |       | 72    |       
|                                   | Other                          |                           |        | 3,650 |        |   |       | 2,665 |        |   |       | 2,628 |       
|                                   |                                |                           |        |       |        |   |       |       |       
|                                   |                                | Total non-staff expenses  |        |       | 7,456  |   |       |       | 6,161  |   |       |       | 5,642  | 
|                                   |                                |                           |        |       |        |   |       |       |       
|                                   |                                | Total noninterest expense |        | $     | 18,821 |   |       | $     | 15,489 |   |       | $     | 13,351 | 
|                                   |                                |                           |        |       |        |   |       |       |       



22



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| |             
| | ------------
| | Income Taxes



23



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##### Table of Contents






Financial Condition




| |               
| | --------------
| | Loan Portfolio



|                                 |                                   |                        |             |         |         |         |      |        |       |       |         |         |         |         |      |      |       |       |  
|-------------------------------- | --------------------------------- | ---------------------- | ----------- | ------- | ------- | ------- | ---- | ------ | ----- | ----- | ------- | ------- | ------- | ------- | ---- | ---- | ----- | ----- | -
|                                 |                                   | As of December 31,     |            
|                                 |                                   |                        |            
|                                 |                                   | 2004                   |             |         | 2003    |        
|                                 |                                   |                        |             |         |         |        
|                                 |                                   | Amount                 |             |         | Percent |         |      | Amount |       |       | Percent |        
|                                 |                                   |                        |             |         |         |         |      |        |       |       |         |        
|                                 |                                   | (Dollars in thousands) |            
|Business and industrial          |                                   | $                      | 70,101      |         |         |         | 11.7 | %      |       | $     | 55,218  |         |         |         | 13.0 | %   
|Real estate:                     |                                   |                        |             |         |         |         |      |        |       |       |         |         |         |         |      |     
|                                 | Construction and land development |                        |             | 123,655 |         |         |      | 20.7   |       |       |         | 65,628  |         |         |      | 15.5 |      
|                                 | Residential mortgages             |                        |             | 126,200 |         |         |      | 21.1   |       |       |         | 117,593 |         |         |      | 27.7 |      
|                                 | Commercial mortgages              |                        |             | 267,158 |         |         |      | 44.7   |       |       |         | 175,686 |         |         |      | 41.4 |      
|Consumer                         |                                   |                        | 12,592      |         |         |         | 2.1  |        |       |       | 11,092  |         |         |         | 2.6  |     
|Other                            |                                   |                        | 227         |         |         |         | 0.0  |        |       |       | 198     |         |         |         | 0.1  |     
|                                 |                                   |                        |             |         |         |         |      |        |       |       |         |        
|                                 |                                   | Gross loans            |             |         | 599,933 |         |      |        | 100.3 |       |         |         | 425,415 |         |      |      | 100.3 |      
|Less unearned discounts and fees |                                   |                        | (1,641      | )       |         |         | (0.3 | )      |       |       | (936    | )       |         |         | (0.3 | )   
|                                 |                                   |                        |             |         |         |         |      |        |       |       |         |        
|                                 |                                   |                        | Total loans |         | $       | 598,292 |      |        |       | 100.0 | %       |         | $       | 424,479 |      |      |       | 100.0 | %
|                                 |                                   |                        |             |         |         |         |      |        |       |       |         |        

|                                 |                                   |                        |             |         |         |         |      |        |       |       |         |        |         |         |      |      |         |       |        |        |         |         |      |      |       |       |  
|-------------------------------- | --------------------------------- | ---------------------- | ----------- | ------- | ------- | ------- | ---- | ------ | ----- | ----- | ------- | ------ | ------- | ------- | ---- | ---- | ------- | ----- | ------ | ------ | ------- | ------- | ---- | ---- | ----- | ----- | -
|                                 |                                   | As of December 31,     |            
|                                 |                                   |                        |            
|                                 |                                   | 2002                   |             |         | 2001    |         |      | 2000   |      
|                                 |                                   |                        |             |         |         |         |      |        |      
|                                 |                                   | Amount                 |             |         | Percent |         |      | Amount |       |       | Percent |        |         | Amount  |      |      | Percent |      
|                                 |                                   |                        |             |         |         |         |      |        |       |       |         |        |         |         |      |      |         |      
|                                 |                                   | (Dollars in thousands) |            
|Business and industrial          |                                   | $                      | 52,284      |         |         |         | 15.3 | %      |       | $     | 58,450  |        |         |         | 20.8 | %    |         | $     | 48,879 |        |         |         | 19.5 | %   
|Real estate:                     |                                   |                        |             |         |         |         |      |        |       |       |         |        |         |         |      |      |         |       |        |        |         |         |      |     
|                                 | Construction and land development |                        |             | 53,788  |         |         |      | 15.7   |       |       |         | 50,392 |         |         |      | 17.9 |         |       |        | 43,585 |         |         |      | 17.4 |      
|                                 | Residential mortgages             |                        |             | 99,087  |         |         |      | 29.0   |       |       |         | 79,412 |         |         |      | 28.3 |         |       |        | 86,397 |         |         |      | 34.5 |      
|                                 | Commercial mortgages              |                        |             | 126,252 |         |         |      | 36.9   |       |       |         | 80,402 |         |         |      | 28.6 |         |       |        | 58,713 |         |         |      | 23.5 |      
|Consumer                         |                                   |                        | 11,165      |         |         |         | 3.3  |        |       |       | 12,200  |        |         |         | 4.4  |      |         |       | 12,402 |        |         |         | 5.0  |     
|Other                            |                                   |                        | 210         |         |         |         | 0.1  |        |       |       | 372     |        |         |         | 0.1  |      |         |       | 603    |        |         |         | 0.2  |     
|                                 |                                   |                        |             |         |         |         |      |        |       |       |         |        |         |         |      |      |         |      
|                                 |                                   | Gross loans            |             |         | 342,786 |         |      |        | 100.3 |       |         |        | 281,228 |         |      |      | 100.1   |       |        |        | 250,579 |         |      |      | 100.1 |      
|Less unearned discounts and fees |                                   |                        | (701        | )       |         |         | (0.3 | )      |       |       | (307    | )      |         |         | (0.1 | )    |         |       | (384   | )      |         |         | (0.1 | )   
|                                 |                                   |                        |             |         |         |         |      |        |       |       |         |        |         |         |      |      |         |      
|                                 |                                   |                        | Total loans |         | $       | 342,085 |      |        |       | 100.0 | %       |        | $       | 280,921 |      |      |         | 100.0 | %      |        | $       | 250,195 |      |      |       | 100.0 | %
|                                 |                                   |                        |             |         |         |         |      |        |       |       |         |        |         |         |      |      |         |      







24



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Business and Industrial.


Construction and Land Development.


Residential Mortgage.




Commercial Mortgage.


25



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##### Table of Contents









Consumer.


Underwriting Strategy.




| |   |                                                                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------
| |  | granting loans on a sound and collectible basis;                                                                                                   
|
| |  | serving the legitimate needs of the community and our general
    market area while obtaining a balance between maximum yield and
    minimum risk;
|
| |  | ensuring that primary and secondary sources of repayment are
    adequate in relation to the amount of the loan;                                   
|
| |  | developing and maintaining adequate diversification of the loan
    portfolio as a whole and of the loans within each
    category; and            
|
| |  | ensuring that each loan is properly documented and, if
    appropriate, insurance coverage is adequate.                                            



26



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|                                         |                                   |                         |        |           |            |   |         |            |  |   |        |         |  |   |         |         | 
|---------------------------------------- | --------------------------------- | ----------------------- | ------ | --------- | ---------- | - | ------- | ---------- |  | - | ------ | ------- |  | - | ------- | ------- | 
|                                         |                                   | As of December 31, 2004 |       
|                                         |                                   |                         |       
|                                         |                                   |                         |        | After One |            |   |        
|                                         |                                   | One Year                |        |           | through    |   |         | After Five |  |   |       
|                                         |                                   | or Less                 |        |           | Five Years |   |         | Years      |  |   | Total  |        
|                                         |                                   |                         |        |           |            |   |         |            |  |   |        |        
|                                         |                                   | (Dollars in thousands)  |       
|Business and industrial                  |                                   | $                       | 34,884 |           |            | $ | 26,690  |            |  | $ | 8,527  |         |  | $ | 70,101  |        
|Real estate:                             |                                   |                         |        |           |            |   |         |            |  |   |        |         |  |   |         |        
|                                         | Construction and land development |                         |        | 56,628    |            |   |         | 53,514     |  |   |        | 13,513  |  |   |         | 123,655 | 
|                                         | Residential mortgages             |                         |        | 7,232     |            |   |         | 71,104     |  |   |        | 47,864  |  |   |         | 126,200 | 
|                                         | Commercial mortgages              |                         |        | 12,878    |            |   |         | 168,896    |  |   |        | 85,384  |  |   |         | 267,158 | 
|Consumer and other                       |                                   |                         | 4,151  |           |            |   | 8,043   |            |  |   | 625    |         |  |   | 12,819  |        
|                                         |                                   |                         |        |           |            |   |         |            |  |   |        |        
|                                         | Total                             |                         | $      | 115,773   |            |   | $       | 328,247    |  |   | $      | 155,913 |  |   | $       | 599,933 | 
|                                         |                                   |                         |        |           |            |   |         |            |  |   |        |        
|Loans with a predetermined interest rate |                                   | $                       | 20,190 |           |            | $ | 169,713 |            |  | $ | 93,727 |         |  | $ | 283,630 |        
|Loans with a floating interest rate      |                                   |                         | 95,583 |           |            |   | 158,534 |            |  |   | 62,186 |         |  |   | 316,303 |        
|                                         |                                   |                         |        |           |            |   |         |            |  |   |        |        
|                                         | Total                             |                         | $      | 115,773   |            |   | $       | 328,247    |  |   | $      | 155,913 |  |   | $       | 599,933 | 
|                                         |                                   |                         |        |           |            |   |         |            |  |   |        |        





| |                     
| | --------------------
| | Nonperforming Assets







27



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|                                                          |                            |                        |       |       |      |   |       |       |  |   |       |       |  |      |      |     |  |   |      |       | 
|--------------------------------------------------------- | -------------------------- | ---------------------- | ----- | ----- | ---- | - | ----- | ----- |  | - | ----- | ----- |  | ---- | ---- | --- |  | - | ---- | ----- | 
|                                                          |                            | As of December 31,     |      
|                                                          |                            |                        |      
|                                                          |                            | 2004                   |       |       | 2003 |   |       | 2002  |  |   | 2001  |       |  | 2000 |     
|                                                          |                            |                        |       |       |      |   |       |       |  |   |       |       |  |      |     
|                                                          |                            | (Dollars in thousands) |      
|Nonaccrual loans                                          |                            | $                      | 1,489 |       |      | $ | 2,496 |       |  | $ | 2,526 |       |  | $    | 467  |     |  | $ | 451  |      
|Accruing loans past due 90 days or more                   |                            |                        | 62    |       |      |   |      |       |  |   |      |       |  |      | 20   |     |  |   | 294  |      
|Restructured loans                                        |                            |                        | 1,917 |       |      |   | 2,015 |       |  |   | 88    |       |  |      | 283  |     |  |   | 324  |      
|Other real estate                                         |                            |                        | 1,320 |       |      |   | 40    |       |  |   |      |       |  |      |     |     |  |   | 119  |      
|                                                          |                            |                        |       |       |      |   |       |       |  |   |       |       |  |      |     
|                                                          | Total nonperforming assets |                        | $     | 4,788 |      |   | $     | 4,551 |  |   | $     | 2,614 |  |      | $    | 770 |  |   | $    | 1,188 | 
|                                                          |                            |                        |       |       |      |   |       |       |  |   |       |       |  |      |     
|Nonperforming assets to total loans and other real estate |                            |                        | 0.80  | %     |      |   | 1.07  | %     |  |   | 0.76  | %     |  |      | 0.27 | %   |  |   | 0.47 | %    









| |                          
| | -------------------------
| | Allowance for Loan Losses

Accounting by Creditors for Impairment of a Loan.




28



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|                                  |                                        |                        |       |       |      |   |       |       |  |   |       |       |  |      |     |       |  |   |     |       | 
|--------------------------------- | -------------------------------------- | ---------------------- | ----- | ----- | ---- | - | ----- | ----- |  | - | ----- | ----- |  | ---- | --- | ----- |  | - | --- | ----- | 
|                                  |                                        | As of December 31,     |      
|                                  |                                        |                        |      
|                                  |                                        | 2004                   |       |       | 2003 |   |       | 2002  |  |   | 2001  |       |  | 2000 |    
|                                  |                                        |                        |       |       |      |   |       |       |  |   |       |       |  |      |    
|                                  |                                        | (Dollars in thousands) |      
|Watch                             |                                        | $                      | 142   |       |      | $ | 327   |       |  | $ | 31    |       |  | $    | 49  |       |  | $ | 239 |      
|Special mention                   |                                        |                        | 430   |       |      |   | 132   |       |  |   | 214   |       |  |      | 12  |       |  |   | 123 |      
|Substandard                       |                                        |                        | 74    |       |      |   | 409   |       |  |   | 262   |       |  |      | 9   |       |  |   | 1   |      
|Business and industrial           |                                        |                        | 1,156 |       |      |   | 901   |       |  |   | 556   |       |  |      | 558 |       |  |   | 432 |      
|Construction and land development |                                        |                        | 1,904 |       |      |   | 1,086 |       |  |   | 908   |       |  |      | 869 |       |  |   | 651 |      
|Residential mortgages             |                                        |                        | 763   |       |      |   | 184   |       |  |   | 178   |       |  |      | 144 |       |  |   | 91  |      
|Commercial mortgages              |                                        |                        | 2,787 |       |      |   | 1,842 |       |  |   | 1,380 |       |  |      | 913 |       |  |   | 601 |      
|Consumer and other                |                                        |                        | 110   |       |      |   | 82    |       |  |   | 60    |       |  |      | 88  |       |  |   | 72  |      
|                                  |                                        |                        |       |       |      |   |       |       |  |   |       |       |  |      |    
|                                  | Total unallocated portion of allowance |                        | $     | 7,366 |      |   | $     | 4,963 |  |   | $     | 3,589 |  |      | $   | 2,642 |  |   | $   | 2,210 | 
|                                  |                                        |                        |       |       |      |   |       |       |  |   |       |       |  |      |    









29



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|                                                               |                         |                                            |         |      |      |   |         |      |        |   |         |      |        |      |         |     |      |   |         |     |      |  
|-------------------------------------------------------------- | ----------------------- | ------------------------------------------ | ------- | ---- | ---- | - | ------- | ---- | ------ | - | ------- | ---- | ------ | ---- | ------- | --- | ---- | - | ------- | --- | ---- | -
|                                                               |                         | As of and for the Years Ended December 31, |        
|                                                               |                         |                                            |        
|                                                               |                         | 2004                                       |         |      | 2003 |   |         | 2002 |        |   | 2001    |      |        | 2000 |        
|                                                               |                         |                                            |         |      |      |   |         |      |        |   |         |      |        |      |        
|                                                               |                         | (Dollars in thousands)                     |        
|Average loans outstanding                                      |                         | $                                          | 509,142 |      |      | $ | 383,844 |      |        | $ | 305,912 |      |        | $    | 265,342 |     |      | $ | 226,133 |    
|                                                               |                         |                                            |         |      |      |   |         |      |        |   |         |      |        |      |        
|Total loans outstanding at end of period                       |                         | $                                          | 598,292 |      |      | $ | 424,479 |      |        | $ | 342,085 |      |        | $    | 280,921 |     |      | $ | 250,195 |    
|                                                               |                         |                                            |         |      |      |   |         |      |        |   |         |      |        |      |        
|Allowance for loan losses at beginning of period               |                         | $                                          | 5,650   |      |      | $ | 4,006   |      |        | $ | 3,371   |      |        | $    | 2,501   |     |      | $ | 1,899   |    
|Provision for loan losses                                      |                         |                                            | 2,950   |      |      |   | 2,821   |      |        |   | 1,590   |      |        |      | 900     |     |      |   | 709     |    
|Charge-offs:                                                   |                         |                                            |         |      |      |   |         |      |        |   |         |      |        |      |         |     |      |   |         |    
|                                                               | Business and industrial |                                            |         | (242 | )    |   |         | (516 | )      |   |         | (580 | )      |      |         |    |      |   |         | (84 | )   
|                                                               | Real estate             |                                            |         | (262 | )    |   |         | (673 | )      |   |         | (313 | )      |      |         | (25 | )    |   |         | (52 | )   
|                                                               | Consumer                |                                            |         | (110 | )    |   |         | (337 | )      |   |         | (115 | )      |      |         | (86 | )    |   |         | (25 | )   
|                                                               |                         |                                            |         |      |      |   |         |      |        |   |         |      |        |      |        
|                                                               |                         | Total charge-offs                          |         |      | (614 | ) |         |      | (1,526 | ) |         |      | (1,008 | )    |         |     | (111 | ) |         |     | (161 | )
|                                                               |                         |                                            |         |      |      |   |         |      |        |   |         |      |        |      |        
|Recoveries:                                                    |                         |                                            |         |      |      |   |         |      |        |   |         |      |        |      |         |     |      |   |         |    
|                                                               | Business and industrial |                                            |         | 50   |      |   |         | 185  |        |   |         | 41   |        |      |         | 37  |      |   |         | 11  |     
|                                                               | Real estate             |                                            |         | 63   |      |   |         | 51   |        |   |         | 1    |        |      |         | 21  |      |   |         | 17  |     
|                                                               | Consumer                |                                            |         | 22   |      |   |         | 113  |        |   |         | 11   |        |      |         | 23  |      |   |         | 26  |     
|                                                               |                         |                                            |         |      |      |   |         |      |        |   |         |      |        |      |        
|                                                               |                         | Total recoveries                           |         |      | 135  |   |         |      | 349    |   |         |      | 53     |      |         |     | 81   |   |         |     | 54   |  
|                                                               |                         |                                            |         |      |      |   |         |      |        |   |         |      |        |      |        
|Net charge-offs                                                |                         |                                            | (479    | )    |      |   | (1,177  | )    |        |   | (955    | )    |        |      | (30     | )   |      |   | (107    | )  
|                                                               |                         |                                            |         |      |      |   |         |      |        |   |         |      |        |      |        
|Allowance for loan losses at end of period                     |                         | $                                          | 8,121   |      |      | $ | 5,650   |      |        | $ | 4,006   |      |        | $    | 3,371   |     |      | $ | 2,501   |    
|                                                               |                         |                                            |         |      |      |   |         |      |        |   |         |      |        |      |        
|Allowance for loan losses to end of period loans               |                         |                                            | 1.36    | %    |      |   | 1.33    | %    |        |   | 1.17    | %    |        |      | 1.20    | %   |      |   | 1.00    | %  
|Net charge-offs to average loans                               |                         |                                            | 0.09    |      |      |   | 0.31    |      |        |   | 0.31    |      |        |      | 0.01    |     |      |   | 0.05    |    
|Allowance for loan losses to end of period nonperforming loans |                         |                                            | 234.17  |      |      |   | 125.25  |      |        |   | 153.25  |      |        |      | 437.79  |     |      |   | 233.96  |    

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|                                                    |                                   |                                 |       |                        |             |  |      |        |            |   |             |     |       |  |      |      |       |  
|--------------------------------------------------- | --------------------------------- | ------------------------------- | ----- | ---------------------- | ----------- |  | ---- | ------ | ---------- | - | ----------- | --- | ----- |  | ---- | ---- | ----- | -
|                                                    |                                   | As of December 31,              |      
|                                                    |                                   |                                 |      
|                                                    |                                   | 2004                            |       |                        | 2003        | 
|                                                    |                                   |                                 |       |                        |             | 
|                                                    |                                   |                                 |       | Percent of             |             |  |      |        | Percent of |  
|                                                    |                                   |                                 |       | Loans to               |             |  |      |        | Loans to   |  
|                                                    |                                   | Amount                          |       |                        | Gross Loans |  |      | Amount |            |   | Gross Loans |    
|                                                    |                                   |                                 |       |                        |             |  |      |        |            |   |             |    
|                                                    |                                   |                                 |       | (Dollars in thousands) |            
|Balance of allowance for loan losses applicable to: |                                   |                                 |       |                        |             |  |      |        |            |   |             |     |       |  |      |     
|Business and industrial                             |                                   | $                               | 208   |                        |             |  | 11.7 | %      |            | $ |            |     |       |  | 13.0 | %   
|Real estate:                                        |                                   |                                 |       |                        |             |  |      |        |            |   |             |     |       |  |      |     
|                                                    | Construction and land development |                                 |       | 100                    |             |  |      | 20.6   |            |   |             |    |       |  |      | 15.4 |      
|                                                    | Residential mortgages             |                                 |       | 7                      |             |  |      | 21.0   |            |   |             | 92  |       |  |      | 27.6 |      
|                                                    | Commercial mortgages              |                                 |       | 352                    |             |  |      | 44.6   |            |   |             | 519 |       |  |      | 41.3 |      
|Consumer and other                                  |                                   |                                 | 88    |                        |             |  | 2.1  |        |            |   | 76          |     |       |  | 2.7  |     
|Unallocated                                         |                                   |                                 | 7,366 |                        |             |  |     |        |            |   | 4,963       |     |       |  |     |     
|                                                    |                                   |                                 |       |                        |             |  |      |        |            |   |             |    
|                                                    |                                   | Total allowance for loan losses |       | $                      | 8,121       |  |      |        | 100.0      | % |             | $   | 5,650 |  |      |      | 100.0 | %
|                                                    |                                   |                                 |       |                        |             |  |      |        |            |   |             |    

|                                                    |                                   |                                 |       |            |             |  |      |        |            |   |             |     |       |            |      |      |             |   |       |    |       |  |      |      |       |  
|--------------------------------------------------- | --------------------------------- | ------------------------------- | ----- | ---------- | ----------- |  | ---- | ------ | ---------- | - | ----------- | --- | ----- | ---------- | ---- | ---- | ----------- | - | ----- | -- | ----- |  | ---- | ---- | ----- | -
|                                                    |                                   | As of December 31,              |      
|                                                    |                                   |                                 |      
|                                                    |                                   | 2002                            |       |            | 2001        |  |      | 2000   |           
|                                                    |                                   |                                 |       |            |             |  |      |        |           
|                                                    |                                   |                                 |       | Percent of |             |  |      |        | Percent of |   |             |     |       | Percent of |     
|                                                    |                                   |                                 |       | Loans to   |             |  |      |        | Loans to   |   |             |     |       | Loans to   |     
|                                                    |                                   | Amount                          |       |            | Gross Loans |  |      | Amount |            |   | Gross Loans |     |       | Amount     |      |      | Gross Loans |  
|                                                    |                                   |                                 |       |            |             |  |      |        |            |   |             |     |       |            |      |      |             |  
|Balance of allowance for loan losses applicable to: |                                   |                                 |       |            |             |  |      |        |            |   |             |     |       |            |      |      |             |   |       |    |       |  |      |     
|Business and industrial                             |                                   | $                               | 395   |            |             |  | 15.3 | %      |            | $ | 483         |     |       |            | 20.8 | %    |             | $ | 148   |    |       |  | 19.5 | %   
|Real estate:                                        |                                   |                                 |       |            |             |  |      |        |            |   |             |     |       |            |      |      |             |   |       |    |       |  |      |     
|                                                    | Construction and land development |                                 |       |           |             |  |      | 15.7   |            |   |             |    |       |            |      | 17.8 |             |   |       |   |       |  |      | 17.3 |      
|                                                    | Residential mortgages             |                                 |       |           |             |  |      | 28.9   |            |   |             | 45  |       |            |      | 28.3 |             |   |       | 45 |       |  |      | 34.5 |      
|                                                    | Commercial mortgages              |                                 |       |           |             |  |      | 36.8   |            |   |             | 160 |       |            |      | 28.6 |             |   |       | 10 |       |  |      | 23.5 |      
|Consumer and other                                  |                                   |                                 | 22    |            |             |  | 3.3  |        |            |   | 41          |     |       |            | 4.5  |      |             |   | 88    |    |       |  | 5.2  |     
|Unallocated                                         |                                   |                                 | 3,589 |            |             |  |     |        |            |   | 2,642       |     |       |            |     |      |             |   | 2,210 |    |       |  |     |     
|                                                    |                                   |                                 |       |            |             |  |      |        |            |   |             |     |       |            |      |      |             |  
|                                                    |                                   | Total allowance for loan losses |       | $          | 4,006       |  |      |        | 100.0      | % |             | $   | 3,371 |            |      |      | 100.0       | % |       | $  | 2,501 |  |      |      | 100.0 | %
|                                                    |                                   |                                 |       |            |             |  |      |        |            |   |             |     |       |            |      |      |             |  



| |           
| | ----------
| | Securities



31



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|                                                |       |                         |     |     |                   |  |      |                  |   |   |                 |         |  |        |      |      |       |   |        |        |  |  |       |      |   |        |        |         |       |  |      |      |   |   |         |         |  |  |      |      |  
|----------------------------------------------- | ----- | ----------------------- | --- | --- | ----------------- |  | ---- | ---------------- | - | - | --------------- | ------- |  | ------ | ---- | ---- | ----- | - | ------ | ------ |  |  | ----- | ---- | - | ------ | ------ | ------- | ----- |  | ---- | ---- | - | - | ------- | ------- |  |  | ---- | ---- | -
|                                                |       | As of December 31, 2004 |    
|                                                |       |                         |    
|                                                |       | Due within              |     |     | After One but     |  |      | After Five but   |   |   |                 |         | 
|                                                |       | One Year                |     |     | within Five Years |  |      | within Ten Years |   |   | After Ten Years |         |  | Total  |     
|                                                |       |                         |     |     |                   |  |      |                  |   |   |                 |         |  |        |     
|                                                |       | Amount                  |     |     | Yield             |  |      | Amount           |   |   | Yield           |         |  | Amount |      |      | Yield |   |        | Amount |  |  | Yield |      |   | Amount |        |         | Yield | 
|                                                |       |                         |     |     |                   |  |      |                  |   |   |                 |         |  |        |      |      |       |   |        |        |  |  |       |      |   |        |        |         |       | 
|                                                |       | (Dollars in thousands)  |    
|U.S. Treasury/ Agency securities                |       | $                       |    |     |                   |  |     | %                |   | $ | 266,979         |         |  |        | 2.92 | %    |       | $ | 11,993 |        |  |  | 3.41  | %    |   | $      |       |         |       |  |     | %    |   | $ | 278,972 |         |  |  | 2.94 | %   
|Mortgage-backed securities                      |       |                         | 151 |     |                   |  | 6.02 |                  |   |   | 8,445           |         |  |        | 4.42 |      |       |   | 77,426 |        |  |  | 3.76  |      |   |        | 15,298 |         |       |  | 4.10 |      |   |   | 101,320 |         |  |  | 3.86 |     
|Collateralized mortgage obligations             |       |                         |    |     |                   |  |     |                  |   |   |                |         |  |        |     |      |       |   | 1,412  |        |  |  | 4.07  |      |   |        | 82,490 |         |       |  | 3.91 |      |   |   | 83,902  |         |  |  | 3.91 |     
|Obligations of state and political subdivisions |       |                         | 130 |     |                   |  | 5.86 |                  |   |   | 2,027           |         |  |        | 3.10 |      |       |   | 456    |        |  |  | 3.45  |      |   |        | 8,110  |         |       |  | 4.82 |      |   |   | 10,723  |         |  |  | 4.44 |     
|                                                |       |                         |     |     |                   |  |      |                  |   |   |                 |         |  |        |      |      |       |   |        |        |  |  |       |      |   |        |        |         |       | 
|                                                | Total |                         | $   | 281 |                   |  |      | 5.94             | % |   | $               | 277,451 |  |        |      | 2.96 | %     |   | $      | 91,287 |  |  |       | 3.71 | % |        | $      | 105,898 |       |  |      | 4.00 | % |   | $       | 474,917 |  |  |      | 3.34 | %
|                                                |       |                         |     |     |                   |  |      |                  |   |   |                 |         |  |        |      |      |       |   |        |        |  |  |       |      |   |        |        |         |       | 
|Other                                           |       |                         |     |     |                   |  |      |                  |   |   |                 |         |  |        |      |      |       |   | 1,498  |        |  |  | 7.50  | %    |   |        |        |         |       |  |      |      |   |   | 1,498   |         |  |  | 7.50 | %   
|                                                |       |                         |     |     |                   |  |      |                  |   |   |                 |         |  |        |      |      |       |   |        |        |  |  |       |      |   |        |        |         |       | 
|Equities(1)                                     |       |                         |     |     |                   |  |      |                  |   |   |                 |         |  |        |      |      |       |   |        |        |  |  |       |      |   |        |        |         |       |  |      |      |   |   | 18,746  |         |  |  |      |     
|                                                |       |                         |     |     |                   |  |      |                  |   |   |                 |         |  |        |      |      |       |   |        |        |  |  |       |      |   |        |        |         |       | 
|                                                | Total |                         |     |     |                   |  |      |                  |   |   |                 |         |  |        |      |      |       |   |        |        |  |  |       |      |   |        |        |         |       |  |      |      |   |   | $       | 495,161 |  |  |      |      |  
|                                                |       |                         |     |     |                   |  |      |                  |   |   |                 |         |  |        |      |      |       |   |        |        |  |  |       |      |   |        |        |         |       | 






|    |                                                                                                                                                                                           
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes Federal Home Loan Bank stock, Federal Reserve Bank
    stock, investment in Community Reinvestment Act funds and the
    common securities of our wholly-owned subsidiary trusts.

32



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|                    |                                                 |                         |   |         |            |  |       |            |     |  |       |        |        |   |   |         |         | 
|------------------- | ----------------------------------------------- | ----------------------- | - | ------- | ---------- |  | ----- | ---------- | --- |  | ----- | ------ | ------ | - | - | ------- | ------- | 
|                    |                                                 | As of December 31, 2004 |  
|                    |                                                 |                         |  
|                    |                                                 |                         |   | Gross   |            |  | Gross |            |     | 
|                    |                                                 | Amortized               |   |         | Unrealized |  |       | Unrealized |     |  | Fair  |       
|                    |                                                 | Cost                    |   |         | Gains      |  |       | Losses     |     |  | Value |       
|                    |                                                 |                         |   |         |            |  |       |            |     |  |       |       
|                    |                                                 | (Dollars in thousands)  |  
|Available-for-Sale: |                                                 |                         |   |         |            |  |       |            |     |  |       |        |        |   |   |        
|                    | U.S. Treasury/ Agency securities                |                         | $ | 278,972 |            |  | $     | 6          |     |  | $     | (4,220 | )      |   | $ | 274,758 |        
|                    | Mortgage-backed securities                      |                         |   | 101,320 |            |  |       | 250        |     |  |       | (1,682 | )      |   |   | 99,888  |        
|                    | Collateralized mortgage obligations             |                         |   | 78,627  |            |  |       | 4          |     |  |       | (1,031 | )      |   |   | 77,600  |        
|                    | Obligations of state and political subdivisions |                         |   | 2,630   |            |  |       | 44         |     |  |       | (16    | )      |   |   | 2,658   |        
|                    | Other securities                                |                         |   | 20,244  |            |  |       | 63         |     |  |       | (56    | )      |   |   | 20,251  |        
|                    |                                                 |                         |   |         |            |  |       |            |     |  |       |       
|                    |                                                 | Total                   |   | $       | 481,793    |  |       | $          | 367 |  |       | $      | (7,005 | ) |   | $       | 475,155 | 
|                    |                                                 |                         |   |         |            |  |       |            |     |  |       |       
|Held-to-Maturity:   |                                                 |                         |   |         |            |  |       |            |     |  |       |        |        |   |   |        
|                    | Collateralized mortgage obligations             |                         | $ | 5,275   |            |  | $     |           |     |  | $     | (14    | )      |   | $ | 5,261   |        
|                    | Obligations of state and political subdivisions |                         |   | 8,093   |            |  |       | 146        |     |  |       | (7     | )      |   |   | 8,232   |        
|                    |                                                 |                         |   |         |            |  |       |            |     |  |       |       
|                    |                                                 | Total                   |   | $       | 13,368     |  |       | $          | 146 |  |       | $      | (21    | ) |   | $       | 13,493  | 
|                    |                                                 |                         |   |         |            |  |       |            |     |  |       |       

|                    |                                                 |                         |   |         |            |  |       |            |       |  |       |        |        |   |   |         |         | 
|------------------- | ----------------------------------------------- | ----------------------- | - | ------- | ---------- |  | ----- | ---------- | ----- |  | ----- | ------ | ------ | - | - | ------- | ------- | 
|                    |                                                 | As of December 31, 2003 |  
|                    |                                                 |                         |  
|                    |                                                 |                         |   | Gross   |            |  | Gross |            |       | 
|                    |                                                 | Amortized               |   |         | Unrealized |  |       | Unrealized |       |  | Fair  |       
|                    |                                                 | Cost                    |   |         | Gains      |  |       | Losses     |       |  | Value |       
|                    |                                                 |                         |   |         |            |  |       |            |       |  |       |       
|                    |                                                 | (Dollars in thousands)  |  
|Available-for-Sale: |                                                 |                         |   |         |            |  |       |            |       |  |       |        |        |   |   |        
|                    | U.S. Treasury/ Agency securities                |                         | $ | 245,977 |            |  | $     | 374        |       |  | $     | (2,376 | )      |   | $ | 243,975 |        
|                    | Mortgage-backed securities                      |                         |   | 71,419  |            |  |       | 639        |       |  |       | (277   | )      |   |   | 71,781  |        
|                    | Collateralized mortgage obligations             |                         |   | 83,308  |            |  |       | 151        |       |  |       | (970   | )      |   |   | 82,489  |        
|                    | Obligations of state and political subdivisions |                         |   | 2,525   |            |  |       | 60         |       |  |       | (269   | )      |   |   | 2,316   |        
|                    | Other securities                                |                         |   | 12,040  |            |  |       | 19         |       |  |       |       |        |   |   | 12,059  |        
|                    |                                                 |                         |   |         |            |  |       |            |       |  |       |       
|                    |                                                 | Total                   |   | $       | 415,269    |  |       | $          | 1,243 |  |       | $      | (3,892 | ) |   | $       | 412,620 | 
|                    |                                                 |                         |   |         |            |  |       |            |       |  |       |       

33



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|                    |                                                 |                         |   |         |            |  |       |            |       |  |       |     |     |   |   |         |         | 
|------------------- | ----------------------------------------------- | ----------------------- | - | ------- | ---------- |  | ----- | ---------- | ----- |  | ----- | --- | --- | - | - | ------- | ------- | 
|                    |                                                 | As of December 31, 2002 |  
|                    |                                                 |                         |  
|                    |                                                 |                         |   | Gross   |            |  | Gross |            |       | 
|                    |                                                 | Amortized               |   |         | Unrealized |  |       | Unrealized |       |  | Fair  |    
|                    |                                                 | Cost                    |   |         | Gains      |  |       | Losses     |       |  | Value |    
|                    |                                                 |                         |   |         |            |  |       |            |       |  |       |    
|                    |                                                 | (Dollars in thousands)  |  
|Available-for-Sale: |                                                 |                         |   |         |            |  |       |            |       |  |       |     |     |   |   |        
|                    | U.S. Treasury/ Agency securities                |                         | $ | 100,642 |            |  | $     | 491        |       |  | $     | (3  | )   |   | $ | 101,130 |        
|                    | Mortgage-backed securities                      |                         |   | 41,741  |            |  |       | 1,308      |       |  |       | (1  | )   |   |   | 43,048  |        
|                    | Collateralized mortgage obligations             |                         |   | 27,124  |            |  |       | 157        |       |  |       | (17 | )   |   |   | 27,264  |        
|                    | Obligations of state and political subdivisions |                         |   | 1,951   |            |  |       | 82         |       |  |       |    |     |   |   | 2,033   |        
|                    | Other securities                                |                         |   | 3,725   |            |  |       |           |       |  |       |    |     |   |   | 3,725   |        
|                    |                                                 |                         |   |         |            |  |       |            |       |  |       |    
|                    |                                                 | Total                   |   | $       | 175,183    |  |       | $          | 2,038 |  |       | $   | (21 | ) |   | $       | 177,200 | 
|                    |                                                 |                         |   |         |            |  |       |            |       |  |       |    





Accounting for Certain Investments in Debt and Equity
Securities.




| |         
| | --------
| | Deposits



34



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##### Table of Contents





|                                 |                                 |                                  |         |         |      |  |      |        |   |   |         |         |  |        |      |      |      |   |         |         |  |  |      |      |  
|-------------------------------- | ------------------------------- | -------------------------------- | ------- | ------- | ---- |  | ---- | ------ | - | - | ------- | ------- |  | ------ | ---- | ---- | ---- | - | ------- | ------- |  |  | ---- | ---- | -
|                                 |                                 | For the Years Ended December 31, |        
|                                 |                                 |                                  |        
|                                 |                                 | 2004                             |         |         | 2003 |  |      | 2002   |  
|                                 |                                 |                                  |         |         |      |  |      |        |  
|                                 |                                 | Amount                           |         |         | Rate |  |      | Amount |   |   | Rate    |         |  | Amount |      |      | Rate |  
|                                 |                                 |                                  |         |         |      |  |      |        |   |   |         |         |  |        |      |      |      |  
|                                 |                                 | (Dollars in thousands)           |        
|Regular savings                  |                                 | $                                | 7,192   |         |      |  | 0.39 | %      |   | $ | 7,175   |         |  |        | 0.41 | %    |      | $ | 9,434   |         |  |  | 2.01 | %   
|NOW accounts                     |                                 |                                  | 192,362 |         |      |  | 1.19 |        |   |   | 115,001 |         |  |        | 0.98 |      |      |   | 112,864 |         |  |  | 1.79 |     
|Money market accounts            |                                 |                                  | 135,311 |         |      |  | 1.63 |        |   |   | 113,846 |         |  |        | 1.40 |      |      |   | 109,162 |         |  |  | 2.08 |     
|Time deposits less than $100,000 |                                 |                                  | 107,491 |         |      |  | 2.44 |        |   |   | 74,894  |         |  |        | 2.65 |      |      |   | 61,349  |         |  |  | 3.73 |     
|Time deposits $100,000 and over  |                                 |                                  | 260,524 |         |      |  | 2.46 |        |   |   | 185,074 |         |  |        | 2.59 |      |      |   | 86,393  |         |  |  | 4.15 |     
|                                 |                                 |                                  |         |         |      |  |      |        |   |   |         |         |  |        |      |      |      |  
|                                 | Total interest-bearing deposits |                                  |         | 702,880 |      |  |      | 1.93   |   |   |         | 495,990 |  |        |      | 1.92 |      |   |         | 379,202 |  |  |      | 2.73 |  
|Noninterest bearing deposits     |                                 |                                  | 104,725 |         |      |  |     |        |   |   | 95,080  |         |  |        |     |      |      |   | 95,386  |         |  |  |     |     
|                                 |                                 |                                  |         |         |      |  |      |        |   |   |         |         |  |        |      |      |      |  
|                                 | Total deposits                  |                                  | $       | 807,605 |      |  |      | 1.68   | % |   | $       | 591,070 |  |        |      | 1.61 | %    |   | $       | 474,588 |  |  |      | 2.18 | %
|                                 |                                 |                                  |         |         |      |  |      |        |   |   |         |         |  |        |      |      |      |  











|                                     |       |                         |         |         | 
|------------------------------------ | ----- | ----------------------- | ------- | ------- | 
|                                     |       | As of December 31, 2004 |        
|                                     |       |                         |        
|                                     |       | (Dollars in thousands)  |        
|Three months or less                 |       | $                       | 88,264  |        
|Over three months through six months |       |                         | 48,950  |        
|Over six months through one year     |       |                         | 110,302 |        
|Over one year                        |       |                         | 15,512  |        
|                                     |       |                         |        
|                                     | Total |                         | $       | 263,028 | 
|                                     |       |                         |        



35



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| |           
| | ----------
| | Borrowings





|                                                        |  |                        |   |  |      |   |       |      |  |   |       |  
|------------------------------------------------------- |  | ---------------------- | - |  | ---- | - | ----- | ---- |  | - | ----- | -
|                                                        |  | As of and for the      |  
|                                                        |  | Years Ended            |  
|                                                        |  | December 31,           |  
|                                                        |  |                        |  
|                                                        |  | 2004                   |   |  | 2003 |   |       | 2002 | 
|                                                        |  |                        |   |  |      |   |       |      | 
|                                                        |  | (Dollars in thousands) |  
|Ending balance                                          |  |                        |  |  |      | $ |      |      |  | $ | 7,080 |  
|Average balance for the period                          |  |                        |  |  |      |   | 1,651 |      |  |   | 7,562 |  
|Maximum month-end balance during the period             |  |                        |  |  |      |   | 7,080 |      |  |   | 8,020 |  
|Average interest rate for the period                    |  |                        |  |  |      |   | 3.15  | %    |  |   | 3.59  | %
|Weighted average interest rate at the end of the period |  |                        |  |  |      |   | 3.10  | %    |  |   | 3.54  | %





|                       |  |                        |           |  |           |          |              |      |  |        |            |   |              |                      |           |                    |  |          |        |  |  |   |           |  |  |  |           | 
|---------------------- |  | ---------------------- | --------- |  | --------- | -------- | ------------ | ---- |  | ------ | ---------- | - | ------------ | -------------------- | --------- | ------------------ |  | -------- | ------ |  |  | - | --------- |  |  |  | --------- | 
|                       |  |                        |           |  |           | Interest |              |      |  |        |            |   | Junior       |                      |           |                   
|                       |  |                        |           |  |           | Rate at  |              |      |  |        | Interest   |   | Subordinated |                      |           | Final              | 
|                       |  | Issuance               |           |  |           |          | December 31, |      |  | Fixed/ |            |   | Rate         |                      | Debt Owed |                    |  | Maturity |       
|Description            |  | Date                   |           |  | Call Date |          |              | 2004 |  |        | Adjustable |   |              | Basis                |           | to Trusts          |  |          | Date   | 
|                       |  |                        |           |  |           |          |              |      |  |        |            |   |              |                      |           |                    |  |          |        | 
|                       |  | (Dollars in thousands) |          
|SNB Capital Trust I    |  |                        | 12/6/2000 |  |           |          | 12/6/2005    |      |  |        | 10.20      | % |              |                      | Fixed     |                    |  |          | N/A    |  |  | $ | 7,320     |  |  |  | 12/6/2030 | 
|SNB Statutory Trust II |  |                        | 3/26/2003 |  |           |          | 3/26/2008    |      |  |        | 5.70       | % |              | Adjustable Quarterly |           | 3 mo LIBOR + 3.15% |  |          | 10,310 |  |  |   | 3/26/2033 | 
|SNB Capital Trust III  |  |                        | 3/27/2003 |  |           |          | 3/27/2008    |      |  |        | 5.22       | % |              | Adjustable Quarterly |           | 3 mo LIBOR + 3.15% |  |          | 10,310 |  |  |   | 3/27/2033 | 
|SNB Capital Trust IV   |  |                        | 9/25/2003 |  |           |          | 9/25/2008    |      |  |        | 5.55       | % |              | Adjustable Quarterly |           | 3 mo LIBOR + 3.00% |  |          | 10,310 |  |  |   | 9/25/2033 | 



36



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Consolidation of Variable Interest Entities, an
interpretation of Accounting Research Bulletin No. 51
(Revised December 2003).








| |          
| | ---------
| | Liquidity





37



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##### Table of Contents





| |                        
| | -----------------------
| | Contractual Obligations



|                                                           |       |                        |       |        |           |   |        |           |  |   |            |       |  |       |        |        |  |   |        |         | 
|---------------------------------------------------------- | ----- | ---------------------- | ----- | ------ | --------- | - | ------ | --------- |  | - | ---------- | ----- |  | ----- | ------ | ------ |  | - | ------ | ------- | 
|                                                           |       | Payments Due in:       |      
|                                                           |       |                        |      
|                                                           |       |                        |       | Fiscal |           |   | Fiscal |           |  |  
|                                                           |       | 2005                   |       |        | 2006-2008 |   |        | 2009-2010 |  |   | Thereafter |       |  | Total |       
|                                                           |       |                        |       |        |           |   |        |           |  |   |            |       |  |       |       
|                                                           |       | (Dollars in thousands) |      
|FHLB advances                                              |       | $                      |      |        |           | $ | 75,000 |           |  | $ |           |       |  | $     |       |        |  | $ | 75,000 |        
|Junior subordinated debentures                             |       |                        |      |        |           |   |       |           |  |   |           |       |  |       | 38,250 |        |  |   | 38,250 |        
|Interest expense related to junior subordinated debentures |       |                        | 747   |        |           |   | 2,241  |           |  |   | 1,494      |       |  |       | 14,940 |        |  |   | 19,422 |        
|Operating leases                                           |       |                        | 271   |        |           |   | 189    |           |  |   | 44         |       |  |       |       |        |  |   | 504    |        
|Building construction                                      |       |                        | 3,081 |        |           |   |       |           |  |   |           |       |  |       |       |        |  |   | 3,081  |        
|                                                           |       |                        |       |        |           |   |        |           |  |   |            |       |  |       |       
|                                                           | Total |                        | $     | 4,099  |           |   | $      | 77,430    |  |   | $          | 1,538 |  |       | $      | 53,190 |  |   | $      | 136,257 | 
|                                                           |       |                        |       |        |           |   |        |           |  |   |            |       |  |       |       





| |                               
| | ------------------------------
| | Off-Balance Sheet Arrangements





|                             |  |                        |        |        |           |   |        |           |  |   |            |  |  |       |        |  |  |   |        | 
|---------------------------- |  | ---------------------- | ------ | ------ | --------- | - | ------ | --------- |  | - | ---------- |  |  | ----- | ------ |  |  | - | ------ | 
|                             |  | Payments Due in:       |       
|                             |  |                        |       
|                             |  |                        |        | Fiscal |           |   | Fiscal |           |  |  
|                             |  | 2005                   |        |        | 2006-2007 |   |        | 2008-2009 |  |   | Thereafter |  |  | Total |       
|                             |  |                        |        |        |           |   |        |           |  |   |            |  |  |       |       
|                             |  | (Dollars in thousands) |       
|Standby letters of credit    |  | $                      | 1,667  |        |           | $ | 6      |           |  | $ | 27         |  |  | $     | 413    |  |  | $ | 2,113  | 
|Commitments to extend credit |  |                        | 50,882 |        |           |   | 8,875  |           |  |   | 18,573     |  |  |       | 18,995 |  |  |   | 97,325 | 
|                             |  |                        |        |        |           |   |        |           |  |   |            |  |  |       |       
|Total                        |  | $                      | 52,549 |        |           | $ | 8,881  |           |  | $ | 18,600     |  |  | $     | 19,408 |  |  | $ | 99,438 | 
|                             |  |                        |        |        |           |   |        |           |  |   |            |  |  |       |       

Standby Letters of Credit.


Commitments to Extend Credit.


38



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##### Table of Contents





| |                                          
| | -----------------------------------------
| | Interest Rate Sensitivity and Market Risk















39



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##### Table of Contents







|                                                                                  |                                                 |                                     |          |         |         |   |          |         |         |   |          |         |         |       |          |         |         |   |         |         |         |   |         |         |         |  |   |         |           | 
|--------------------------------------------------------------------------------- | ----------------------------------------------- | ----------------------------------- | -------- | ------- | ------- | - | -------- | ------- | ------- | - | -------- | ------- | ------- | ----- | -------- | ------- | ------- | - | ------- | ------- | ------- | - | ------- | ------- | ------- |  | - | ------- | --------- | 
|                                                                                  |                                                 | Volumes Subject to Repricing within |         
|                                                                                  |                                                 |                                     |         
|                                                                                  |                                                 |                                     |          | Greater |         |   |         
|                                                                                  |                                                 | 0-30                                |          |         | 31-180  |   |          | 181-365 |         |   | 1-3      |         |         | 3-5   |          |         | Than    |   |         |        
|                                                                                  |                                                 | Days                                |          |         | Days    |   |          | Days    |         |   | Years    |         |         | Years |          |         | 5 Years |   |         | Total   |        
|                                                                                  |                                                 |                                     |          |         |         |   |          |         |         |   |          |         |         |       |          |         |         |   |         |         |        
|                                                                                  |                                                 | (Dollars in thousands)              |         
|Interest-earning assets:                                                          |                                                 |                                     |          |         |         |   |          |         |         |   |          |         |         |       |          |         |         |   |         |         |         |   |         |         |         |  |   |        
|                                                                                  | Securities                                      |                                     | $        | 19,452  |         |   | $        | 613     |         |   | $        | 698     |         |       | $        | 176,326 |         |   | $       | 111,843 |         |   | $       | 179,591 |         |  | $ | 488,523 |          
|                                                                                  | Loans                                           |                                     |          | 279,897 |         |   |          | 38,506  |         |   |          | 30,901  |         |       |          | 67,801  |         |   |         | 105,842 |         |   |         | 76,986  |         |  |   | 599,933 |          
|                                                                                  |                                                 |                                     |          |         |         |   |          |         |         |   |          |         |         |       |          |         |         |   |         |         |        
|                                                                                  |                                                 | Total interest-earning assets       |          |         | 299,349 |   |          |         | 39,119  |   |          |         | 31,599  |       |          |         | 244,127 |   |         |         | 217,685 |   |         |         | 256,577 |  |   |         | 1,088,456 | 
|Interest-bearing liabilities:                                                     |                                                 |                                     |          |         |         |   |          |         |         |   |          |         |         |       |          |         |         |   |         |         |         |   |         |         |         |  |   |        
|                                                                                  | NOW, money market and savings deposits          |                                     | $        | 398,051 |         |   | $        |        |         |   | $        |        |         |       | $        |        |         |   | $       |        |         |   | $       |        |         |  | $ | 398,051 |          
|                                                                                  | Certificates of deposit and other time deposits |                                     |          | 31,854  |         |   |          | 146,965 |         |   |          | 158,798 |         |       |          | 19,857  |         |   |         | 2,003   |         |   |         |        |         |  |   | 359,477 |          
|                                                                                  | Borrowed funds                                  |                                     |          | 57,900  |         |   |          |        |         |   |          |        |         |       |          | 75,000  |         |   |         |        |         |   |         |        |         |  |   | 132,900 |          
|                                                                                  | Junior subordinated debentures                  |                                     |          |        |         |   |          | 30,930  |         |   |          |        |         |       |          |        |         |   |         |        |         |   |         | 7,320   |         |  |   | 38,250  |          
|                                                                                  |                                                 |                                     |          |         |         |   |          |         |         |   |          |         |         |       |          |         |         |   |         |         |        
|                                                                                  |                                                 | Total interest-bearing liabilities  |          |         | 487,805 |   |          |         | 177,895 |   |          |         | 158,798 |       |          |         | 94,857  |   |         |         | 2,003   |   |         |         | 7,320   |  |   |         | 928,678   | 
|Cumulative GAP                                                                    |                                                 | $                                   | (188,456 | )       |         | $ | (327,232 | )       |         | $ | (454,431 | )       |         | $     | (305,161 | )       |         | $ | (89,479 | )       |         | $ | 159,778 |         |         |  |   |        
|Cumulative GAP to total assets                                                    |                                                 |                                     | (16.68   | )%      |         |   | (28.98   | )%      |         |   | (40.21   | )%      |         |       | (27.00   | )%      |         |   | (7.92   | )%      |         |   | 14.14   | %       |         |  |   |        
|Cumulative interest-earning assets to cumulative
    interest-bearing liabilities |                                                 |                                     | 61.37    | %       |         |   | 50.84    | %       |         |   | 44.88    | %       |         |       | 66.81    | %       |         |   | 90.29   | %       |         |   | 117.20  | %       |         |  |   |        





40



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|                |      |             |        |    | 
|--------------- | ---- | ----------- | ------ | -- | 
|                |      | % Change in |       
|Change in Rates |      | Net Income  |       
|                |      |             |       
|-50 bp          |      |             | 13.62  | % 
|                | 0 bp |             |        |   | 
|+100 bp         |      |             | (17.26 | )%
|+200 bp         |      |             | (35.17 | )%







| |                     
| | --------------------
| | Shareholders Equity





| |                   
| | ------------------
| | Regulatory Capital





41



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##### Table of Contents









|                                |  |                      |      |                      |                   |  |       |                   |  |  |       |  
|------------------------------- |  | -------------------- | ---- | -------------------- | ----------------- |  | ----- | ----------------- |  |  | ----- | -
|                                |  |                      |      | To be Categorized as |                   |  |      
|                                |  |                      |      | Well-Capitalized     |                   |  |      
|                                |  | Minimum Required for |      |                      | under Prompt      |  |       |                  
|                                |  | Capital Adequacy     |      |                      | Corrective Action |  |       | Actual Ratio at   | 
|                                |  | Purposes             |      |                      | Provisions        |  |       | December 31, 2004 | 
|                                |  |                      |      |                      |                   |  |       |                   | 
|SNB Bancshares, Inc.            |  |                      |      |                      |                   |  |       |                   |  |  |       |  
|Leverage ratio                  |  |                      | 4.00 | %(1)                 |                   |  | N/A   |                   |  |  | 10.87 | %
|Tier 1 risk-based capital ratio |  |                      | 4.00 |                      |                   |  | N/A   |                   |  |  | 17.72 |  
|Risk-based capital ratio        |  |                      | 8.00 |                      |                   |  | N/A   |                   |  |  | 19.86 |  
|Southern National Bank of Texas |  |                      |      |                      |                   |  |       |                   |  |  |       |  
|Leverage ratio                  |  |                      | 4.00 | %(2)                 |                   |  | 5.00  | %                 |  |  | 9.89  | %
|Tier 1 risk-based capital ratio |  |                      | 4.00 |                      |                   |  | 6.00  |                   |  |  | 16.17 |  
|Risk-based capital ratio        |  |                      | 8.00 |                      |                   |  | 10.00 |                   |  |  | 17.35 |  






|    |                                                                                                
|--- | -----------------------------------------------------------------------------------------------
|(1) | The Federal Reserve may require us to maintain a leverage ratio
    above the required minimum.
|   
|(2) | The OCC may require the Bank to maintain a leverage ratio above
    the required minimum.      





42



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|         |                                                               
|-------- | --------------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosures about Market
    Risk








|        |                                            
|------- | -------------------------------------------
|Item 8. | Financial Statements and Supplementary Data





| |                                     
| | ------------------------------------
| | Quarterly Financial Data (Unaudited)



|                                                    |         |                                               |        |        |         |   |        |         |  |   |         |       |  |         |       |       |         |   |       |         |  |   |         |       |  |   |       |       |  |   |       |       | 
|--------------------------------------------------- | ------- | --------------------------------------------- | ------ | ------ | ------- | - | ------ | ------- |  | - | ------- | ----- |  | ------- | ----- | ----- | ------- | - | ----- | ------- |  | - | ------- | ----- |  | - | ----- | ----- |  | - | ----- | ----- | 
|                                                    |         | 2004                                          |        |        | 2003    |  
|                                                    |         |                                               |        |        |         |  
|                                                    |         | Fourth                                        |        |        | Third   |   |        | Second  |  |   | First   |       |  | Fourth  |       |       | Third   |   |       | Second  |  |   | First   |      
|                                                    |         | Quarter                                       |        |        | Quarter |   |        | Quarter |  |   | Quarter |       |  | Quarter |       |       | Quarter |   |       | Quarter |  |   | Quarter |      
|                                                    |         |                                               |        |        |         |   |        |         |  |   |         |       |  |         |       |       |         |   |       |         |  |   |         |      
|                                                    |         | (Dollars in thousands, except per share data) |       
|Interest income                                     |         | $                                             | 13,275 |        |         | $ | 12,279 |         |  | $ | 11,156  |       |  | $       | 9,943 |       |         | $ | 9,377 |         |  | $ | 8,589   |       |  | $ | 7,851 |       |  | $ | 7,421 |      
|Interest expense                                    |         |                                               | 5,295  |        |         |   | 4,713  |         |  |   | 4,188   |       |  |         | 3,810 |       |         |   | 3,648 |         |  |   | 3,136   |       |  |   | 2,796 |       |  |   | 2,479 |      
|                                                    |         |                                               |        |        |         |   |        |         |  |   |         |       |  |         |       |       |         |   |       |         |  |   |         |      
|Net interest income                                 |         |                                               | 7,980  |        |         |   | 7,566  |         |  |   | 6,968   |       |  |         | 6,133 |       |         |   | 5,729 |         |  |   | 5,453   |       |  |   | 5,055 |       |  |   | 4,942 |      
|Provision for loan losses                           |         |                                               | 675    |        |         |   | 625    |         |  |   | 900     |       |  |         | 750   |       |         |   | 720   |         |  |   | 660     |       |  |   | 726   |       |  |   | 715   |      
|                                                    |         |                                               |        |        |         |   |        |         |  |   |         |       |  |         |       |       |         |   |       |         |  |   |         |      
|Net interest income after provision for loan losses |         |                                               | 7,305  |        |         |   | 6,941  |         |  |   | 6,068   |       |  |         | 5,383 |       |         |   | 5,009 |         |  |   | 4,793   |       |  |   | 4,329 |       |  |   | 4,227 |      
|Noninterest income                                  |         |                                               | 345    |        |         |   | 543    |         |  |   | 488     |       |  |         | 744   |       |         |   | 332   |         |  |   | 356     |       |  |   | 862   |       |  |   | 759   |      
|Noninterest expense                                 |         |                                               | 5,461  |        |         |   | 4,731  |         |  |   | 4,410   |       |  |         | 4,219 |       |         |   | 4,130 |         |  |   | 3,845   |       |  |   | 3,769 |       |  |   | 3,745 |      
|                                                    |         |                                               |        |        |         |   |        |         |  |   |         |       |  |         |       |       |         |   |       |         |  |   |         |      
|Income before income taxes                          |         |                                               | 2,189  |        |         |   | 2,753  |         |  |   | 2,146   |       |  |         | 1,908 |       |         |   | 1,211 |         |  |   | 1,304   |       |  |   | 1,422 |       |  |   | 1,241 |      
|Provision for income taxes                          |         |                                               | 736    |        |         |   | 935    |         |  |   | 729     |       |  |         | 649   |       |         |   | 412   |         |  |   | 443     |       |  |   | 484   |       |  |   | 422   |      
|                                                    |         |                                               |        |        |         |   |        |         |  |   |         |       |  |         |       |       |         |   |       |         |  |   |         |      
|Net income                                          |         | $                                             | 1,453  |        |         | $ | 1,818  |         |  | $ | 1,417   |       |  | $       | 1,259 |       |         | $ | 799   |         |  | $ | 861     |       |  | $ | 938   |       |  | $ | 819   |      
|                                                    |         |                                               |        |        |         |   |        |         |  |   |         |       |  |         |       |       |         |   |       |         |  |   |         |      
|Earnings per share:                                 |         |                                               |        |        |         |   |        |         |  |   |         |       |  |         |       |       |         |   |       |         |  |   |         |       |  |   |       |       |  |   |       |      
|                                                    | Basic   |                                               | $      | 0.12   |         |   | $      | 0.20    |  |   | $       | 0.20  |  |         | $     | 0.18  |         |   | $     | 0.11    |  |   | $       | 0.12  |  |   | $     | 0.13  |  |   | $     | 0.12  | 
|                                                    | Diluted |                                               |        | 0.11   |         |   |        | 0.19    |  |   |         | 0.20  |  |         |       | 0.17  |         |   |       | 0.11    |  |   |         | 0.12  |  |   |       | 0.13  |  |   |       | 0.11  | 
|Weighted average shares outstanding:                |         |                                               |        |        |         |   |        |         |  |   |         |       |  |         |       |       |         |   |       |         |  |   |         |       |  |   |       |       |  |   |       |      
|                                                    | Basic   |                                               |        | 12,432 |         |   |        | 9,137   |  |   |         | 6,994 |  |         |       | 6,994 |         |   |       | 6,994   |  |   |         | 6,994 |  |   |       | 6,994 |  |   |       | 6,994 | 
|                                                    | Diluted |                                               |        | 12,833 |         |   |        | 9,347   |  |   |         | 7,233 |  |         |       | 7,197 |         |   |       | 7,166   |  |   |         | 7,249 |  |   |       | 7,156 |  |   |       | 7,154 | 








|        |                                                                                      
|------- | -------------------------------------------------------------------------------------
|Item 9. | Changes in Disagreements with Accountants on Accounting
    and Financial Disclosures



43



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##### Table of Contents








|         |                        
|-------- | -----------------------
|Item 9A. | Controls and Procedures

Evaluation of disclosure controls and procedures.


Changes in internal control over financial reporting.





PART III.







|         |                                                   
|-------- | --------------------------------------------------
|Item 10. | Directors and Executive Officers of the Registrant








|         |                       
|-------- | ----------------------
|Item 11. | Executive Compensation








|         |                                                                                                   
|-------- | --------------------------------------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial Owners and
    Management and Related Stockholder Matters



44



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##### Table of Contents



Securities Authorized for Issuance under Equity Compensation
Plans




|                                                           |       |                      |           |           |                     |                      |                    |                      |  |  |        |        | 
|---------------------------------------------------------- | ----- | -------------------- | --------- | --------- | ------------------- | -------------------- | ------------------ | -------------------- |  |  | ------ | ------ | 
|                                                           |       |                      |           |           |                     | Number of Securities |                   
|                                                           |       |                      |           |           |                     | Remaining Available  |                   
|                                                           |       |                      |           |           |                     | for Future Issuance  |                   
|                                                           |       | Number of Securities |           |           |                     |                      | under Equity       |                     
|                                                           |       | to be Issued upon    |           |           |                     |                      | Compensation Plans |                     
|                                                           |       | Exercise of          |           |           | Weighted Average    |                      |                    | (Excluding           | 
|                                                           |       | Outstanding Options, |           |           | Exercise Price of   |                      |                    | Securities Reflected | 
|                                                           |       | Warrants and Rights  |           |           | Outstanding Options |                      |                    | in Column (a))       | 
|Plan Category                                              |       | (a)                  |           |           | (b)                 |                      |                    | (c)                  | 
|                                                           |       |                      |           |           |                     |                      |                    |                      | 
|Equity compensation plans approved by security holders     |       |                      | 1,281,700 |           |                     | $                    | 9.29               |                      |  |  | 16,000 |       
|Equity compensation plans not approved by security holders |       |                      |          |           |                     |                      |                   |                      |  |  |       |       
|                                                           |       |                      |           |           |                     |                      |                    |                      | 
|                                                           | Total |                      |           | 1,281,700 |                     |                      | $                  | 9.29                 |  |  |        | 16,000 | 






|         |                                               
|-------- | ----------------------------------------------
|Item 13. | Certain Relationships and Related Transactions








|         |                                       
|-------- | --------------------------------------
|Item 14. | Principal Accounting Fees and Services






PART IV.







|         |                                           
|-------- | ------------------------------------------
|Item 15. | Exhibits and Financial Statement Schedules



| |                                   
| | ----------------------------------
| | Financial Statements and Schedules





| |   |                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------
| |  | Report of Independent Registered Public Accounting Firm                                                             
|
| |  | Consolidated Balance Sheets as of December 31, 2004 and 2003                                                        
|
| |  | Consolidated Statements of Income for the Years Ended
    December 31, 2004, 2003 and 2002                          
|
| |  | Consolidated Statements of Changes in Shareholders Equity
    for the Years Ended December 31, 2004, 2003, and 2002
|
| |  | Consolidated Statements of Cash Flows for the Years Ended
    December 31, 2004, 2003 and 2002                      
|
| |  | Notes to consolidated financial statements                                                                          



| |                              
| | -----------------------------
| | Financial Statement Schedules



45



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##### Table of Contents





| |         
| | --------
| | Exhibits



|          |    |             |  |                                                                                                                                                                                                                        
|--------- | -- | ----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit   |    |            
|Number(1) |    | Description
|          |    |            
|          | 3  | .1          |  | Amended and Restated Articles of Incorporation of the Company
    (incorporated herein by reference to Exhibit 3.1 to the
    Companys Registration Statement on Form S-1
    (Registration No. 333-116366)).         
|         
|          | 3  | .2          |  | Amended and Restated Bylaws of the Company (incorporated herein
    by reference to Exhibit 3.2 to the Companys
    Registration Statement on Form S-1 (Registration
    No. 333-116366)).                            
|         
|          | 4  | .1          |  | Specimen Certificate Representing Shares of the Companys
    Common Stock (incorporated herein by reference to
    Exhibit 4.1 to the Companys Registration Statement on
    Form S-1 (Registration No. 333-116366)).
|         
|          | 10 | .1         |  | SNB Bancshares, Inc. 2002 Stock Option Plan, as amended and
    restated (incorporated herein by reference to Exhibit 10.1
    to the Companys Registration Statement on Form S-1
    (Registration No. 333-116366)). 
|         
|          | 10 | .2         |  | Employment Agreement between the Company and Harvey E. Zinn
    (incorporated herein by reference to Exhibit 10.2 to the
    Companys Registration Statement on Form S-1
    (Registration No. 333-116366)).          
|         
|          | 10 | .3         |  | Employment Agreement between the Company and Dan
    Agnew(incorporated herein by reference to Exhibit 10.3 to
    the Companys Registration Statement on Form S-1
    (Registration No. 333-116366)).                
|         
|          | 10 | .4         |  | Employment Agreement between the Company and R. Darrell Brewer
    (incorporated herein by reference to Exhibit 10.4 to the
    Companys Registration Statement on Form S-1
    (Registration No. 333-116366)).       
|         
|          | 21 | .1          |  | Subsidiaries of SNB Bancshares, Inc. (incorporated herein by
    reference to Exhibit 10.4 to the Companys
    Registration Statement on Form S-1 (Registration
    No. 333-116366)).                                 
|         
|          | 23 | .1*         |  | Consent of Deloitte & Touche LLP                                                                                                                                                                                       
|         
|          | 31 | .1*         |  | Certification of the Chief Executive Officer pursuant to
    Rule 13a-14(a) of the Securities Exchange Act of 1934, as
    amended                                                                                     
|         
|          | 31 | .2*         |  | Certification of the Chief Financial Officer pursuant to
    Rule 13a-14(a) of the Securities Exchange Act of 1934, as
    amended                                                                                     
|         
|          | 32 | .1**        |  | Certification of the Chief Executive Officer pursuant to
    18 U.S.C. Section 1350, adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002                                                             
|         
|          | 32 | .2**        |  | Certification of the Chief Financial Officer pursuant to
    18 U.S.C. Section 1350, adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002                                                             






|  |                                            
|- | -------------------------------------------
|* | Filed with this Annual Report on Form 10-K.



|   |                                                
|-- | -----------------------------------------------
|** | Furnished with this Annual Report on Form 10-K.



|  |                                                         
|- | --------------------------------------------------------
| | Management contract or compensatory plan or arrangement.



|    |                                                                                                                                                                                                                                             
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The Company has other long-term debt agreements that meet the
    exclusion set forth in Section 601(b)(4)(iii)(A) of
    Regulation S-K. The Company hereby agrees to furnish a copy
    of such agreements to the Commission upon request.

46



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##### Table of Contents






SIGNATURES






| |                     
| | --------------------
| | SNB BANCSHARES, INC.



| |     |                
| | --- | ---------------
| | By: | /s/ Harvey Zinn

| |                                      
| | -------------------------------------
| |                                      
| | Harvey Zinn                          
| | President and Chief Executive Officer





|                                                   |  |                                                                                                         |  |                |  | 
|-------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------- |  | -------------- |  | 
|Name                                               |  | Title                                                                                                   |  | Date          
|                                                   |  |                                                                                                         |  |               
|                                                  
|/s/ Stewart MorrisStewart
    Morris               |  | Senior Chairman of the Board                                                                            |  | March 31, 2005
|                                                  
|/s/ Caralisa Morris SimonCaralisa
    Morris Simon |  | Chairman of the Board                                                                                   |  | March 31, 2005
|                                                  
|/s/ Harvey ZinnHarvey
    Zinn                     |  | President and Chief Executive Officer and Director
    (principal executive officer)                    |  | March 31, 2005
|                                                  
|/s/ R. Darrell BrewerR.
    Darrell Brewer         |  | Treasurer and Chief Financial Officer (principal financial
    officer and principal accounting officer |  | March 31, 2005
|                                                  
|/s/ Wallace J. McKenzieWallace
    J. McKenzie     |  | Director                                                                                                |  | March 31, 2005
|                                                  
|/s/ Richard D. ParkerRichard
    D. Parker         |  | Director                                                                                                |  | March 31, 2005
|                                                  
|/s/ Edmond S. SolymosyEdmond
    S. Solymosy       |  | Director                                                                                                |  | March 31, 2005
|                                                  
|/s/ James W. StevensJames
    W. Stevens           |  | Director                                                                                                |  | March 31, 2005
|                                                  
|/s/ Robert Viles, M.D.Robert
    Viles, M.D.       |  | Director                                                                                                |  | March 31, 2005
|                                                  
|/s/ Dan WilfordDan
    Wilford                     |  | Director                                                                                                |  | March 31, 2005

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


SNB Bancshares, Inc.


|                                                                                                                                                       |  |      |    | 
|------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ---- | -- | 
|                                                                                                                                                       |  | Page |   
|                                                                                                                                                       |  |      |   
|Report of Independent Registered Public
    Accounting Firm                                                                                            |  |      | 49 | 
|Consolidated Balance Sheets as of
    December 31, 2004 and 2003                                                                                       |  |      | 50 | 
|Consolidated Statements of Income for the
    Years Ended December 31, 2004, 2003 and 2003                                                             |  |      | 51 | 
|Consolidated Statements of Changes in
    Shareholders Equity and Other Comprehensive Income for the
    Years Ended December 31, 2004, 2003 and 2002 |  |      | 52 | 
|Consolidated Statements of Cash Flows for
    the Years Ended December 31, 2004, 2003 and 2002                                                         |  |      | 53 | 
|Notes to Consolidated Financial
    Statements                                                                                                         |  |      | 54 | 

48



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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM












Deloitte & Touche
LLP






49



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SNB BANCSHARES, INC.





CONSOLIDATED BALANCE SHEETS


As of December 31, 2004 and 2003


|                                                                                                                                                    |                                                                                                                                                                                            |                                          |                            |        |              |           |           |        |         |         |         | 
|--------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ---------------------------------------- | -------------------------- | ------ | ------------ | --------- | --------- | ------ | ------- | ------- | ------- | 
|                                                                                                                                                    |                                                                                                                                                                                            | December 31,                             |                            |        | December 31, |          
|                                                                                                                                                    |                                                                                                                                                                                            | 2004                                     |                            |        | 2003         |          
|                                                                                                                                                    |                                                                                                                                                                                            |                                          |                            |        |              |          
|                                                                                                                                                    |                                                                                                                                                                                            | (In thousands, except share              |                           
|                                                                                                                                                    |                                                                                                                                                                                            | data)                                    |                           
|ASSETS                                                                                                                                             
|Cash and cash equivalents (Note 2)                                                                                                                  |                                                                                                                                                                                            | $                                        | 21,235                     |        |              | $         | 27,928    |       
|Federal funds sold                                                                                                                                  |                                                                                                                                                                                            |                                          |                           |        |              |           | 3,195     |       
|Available for sale securities (Note 3), at fair value
    (amortized cost of $481,793 and $415,269 at December 31,
    2004 and 2003, respectively) |                                                                                                                                                                                            |                                          | 475,155                    |        |              |           | 412,620   |       
|Held to maturity securities (Note 3), at amortized cost
    (fair value of $13,493 at December 31, 2004)                                            |                                                                                                                                                                                            |                                          | 13,368                     |        |              |           |          |       
|Loans (Notes 4 and 5)                                                                                                                               |                                                                                                                                                                                            |                                          | 598,292                    |        |              |           | 424,479   |       
|Less allowance for loan losses (Note 6)                                                                                                             |                                                                                                                                                                                            |                                          | (8,121                     | )      |              |           | (5,650    | )     
|                                                                                                                                                    |                                                                                                                                                                                            |                                          |                            |        |              |          
|                                                                                                                                                    |                                                                                                                                                                                            | Net Loans                                |                            |        | 590,171      |           |           |        | 418,829 |        
|                                                                                                                                                    |                                                                                                                                                                                            |                                          |                            |        |              |          
|Premises and equipment  Net (Note 7)                                                                                                               |                                                                                                                                                                                            |                                          | 16,137                     |        |              |           | 12,691    |       
|Accrued interest receivable                                                                                                                         |                                                                                                                                                                                            |                                          | 4,485                      |        |              |           | 3,500     |       
|Other assets                                                                                                                                        |                                                                                                                                                                                            |                                          | 9,537                      |        |              |           | 5,078     |       
|                                                                                                                                                    |                                                                                                                                                                                            |                                          |                            |        |              |          
|                                                                                                                                                    |                                                                                                                                                                                            |                                          |                            | TOTAL  |              | $         | 1,130,088 |        |         | $       | 883,841 | 
|                                                                                                                                                    |                                                                                                                                                                                            |                                          |                            |        |              |          
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                               
|LIABILITIES:                                                                                                                                        |                                                                                                                                                                                            |                                          |                            |        |              |           |           |       
|                                                                                                                                                    | Deposits:                                                                                                                                                                                  |                                          |                            |        |              |           |           |        |        
|                                                                                                                                                    |                                                                                                                                                                                            | Noninterest-bearing                      |                            | $      | 110,858      |           |           | $      | 101,749 |        
|                                                                                                                                                    |                                                                                                                                                                                            | Interest-bearing (Note 8)                |                            |        | 757,528      |           |           |        | 632,222 |        
|                                                                                                                                                    |                                                                                                                                                                                            |                                          |                            |        |              |          
|                                                                                                                                                    |                                                                                                                                                                                            |                                          | Total deposits             |        |              | 868,386   |           |        |         | 733,971 |        
|                                                                                                                                                    |                                                                                                                                                                                            | Other borrowings (Note 9)                |                            |        | 132,900      |           |           |        | 77,800  |        
|                                                                                                                                                    |                                                                                                                                                                                            | Accrued interest payable                 |                            |        | 2,724        |           |           |        | 2,089   |        
|                                                                                                                                                    |                                                                                                                                                                                            | Junior subordinated debentures (Note 17) |                            |        | 38,250       |           |           |        | 38,250  |        
|                                                                                                                                                    |                                                                                                                                                                                            | Other liabilities                        |                            |        | 1,427        |           |           |        | 964     |        
|                                                                                                                                                    |                                                                                                                                                                                            |                                          |                            |        |              |          
|                                                                                                                                                    |                                                                                                                                                                                            |                                          | Total liabilities          |        |              | 1,043,687 |           |        |         | 853,074 |        
|                                                                                                                                                    |                                                                                                                                                                                            |                                          |                            |        |              |          
|COMMITMENTS AND CONTINGENCIES (Notes 13 and 15)                                                                                                     |                                                                                                                                                                                            |                                          |                            |        |              |           |           |       
|SHAREHOLDERS EQUITY (Notes 11 and 16):                                                                                                             |                                                                                                                                                                                            |                                          |                            |        |              |           |           |       
|                                                                                                                                                    | Preferred stock, $0.01 par value 
    20,000,000 shares authorized, no shares issued or
    outstanding                                                                                   |                                          |                            |       |              |           |           |       |        
|                                                                                                                                                    | Common stock, $0.01 par value  50,000,000 and
    20,000,000 shares authorized, 9,753,612 and
    3,735,523 shares issued and outstanding at
    December 31, 2004 and 2003, respectively |                                          |                            | 98     |              |           |           | 37     |        
|                                                                                                                                                    | Class B stock, $0.01 par value  3,216,781
    and 5,227,575 shares authorized, 2,679,041 and 3,258,466 shares
    issued and outstanding at December 31, 2004 and 2003,
    respectively  |                                          |                            | 27     |              |           |           | 33     |        
|                                                                                                                                                    | Capital surplus                                                                                                                                                                            |                                          |                            | 66,173 |              |           |           | 13,974 |        
|                                                                                                                                                    | Accumulated other comprehensive loss  net unrealized
    losses on available-for-sale securities  net of taxes
    (Note 3)                                                              |                                          |                            | (4,315 | )            |           |           | (1,748 | )      
|                                                                                                                                                    | Retained earnings                                                                                                                                                                          |                                          |                            | 24,418 |              |           |           | 18,471 |        
|                                                                                                                                                    |                                                                                                                                                                                            |                                          |                            |        |              |          
|                                                                                                                                                    |                                                                                                                                                                                            |                                          | Total shareholders equity |        |              | 86,401    |           |        |         | 30,767  |        
|                                                                                                                                                    |                                                                                                                                                                                            |                                          |                            |        |              |          
|                                                                                                                                                    |                                                                                                                                                                                            |                                          |                            | TOTAL  |              | $         | 1,130,088 |        |         | $       | 883,841 | 
|                                                                                                                                                    |                                                                                                                                                                                            |                                          |                            |        |              |          



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SNB BANCSHARES, INC.





CONSOLIDATED STATEMENTS OF INCOME


Years Ended December 31, 2004, 2003 and 2002


|                                                    |                                         |                                 |        |        |        |   |        |        |        |   |        |        |        | 
|--------------------------------------------------- | --------------------------------------- | ------------------------------- | ------ | ------ | ------ | - | ------ | ------ | ------ | - | ------ | ------ | ------ | 
|                                                    |                                         | Years Ended December 31,        |       
|                                                    |                                         |                                 |       
|                                                    |                                         | 2004                            |        |        | 2003   |   |        | 2002   |       
|                                                    |                                         |                                 |        |        |        |   |        |        |       
|                                                    |                                         | (In thousands, except per share |       
|                                                    |                                         | amounts)                        |       
|INTEREST INCOME:                                    |                                         |                                 |        |        |        |   |        |        |        |   |        |       
|                                                    | Loans-including fees                    |                                 | $      | 30,770 |        |   | $      | 24,200 |        |   | $      | 21,659 |       
|                                                    | Securities:                             |                                 |        |        |        |   |        |        |        |   |        |        |       
|                                                    |                                         | Taxable                         |        |        | 15,527 |   |        |        | 8,904  |   |        |        | 7,256  | 
|                                                    |                                         | Nontaxable                      |        |        | 202    |   |        |        | 96     |   |        |        | 109    | 
|                                                    | Federal funds sold and earning deposits |                                 |        | 154    |        |   |        | 38     |        |   |        | 347    |       
|                                                    |                                         |                                 |        |        |        |   |        |        |       
|                                                    |                                         | Total interest income           |        |        | 46,653 |   |        |        | 33,238 |   |        |        | 29,371 | 
|                                                    |                                         |                                 |        |        |        |   |        |        |       
|INTEREST EXPENSE:                                   |                                         |                                 |        |        |        |   |        |        |        |   |        |       
|                                                    | Demand deposits                         |                                 |        | 4,514  |        |   |        | 2,757  |        |   |        | 4,480  |       
|                                                    | Certificates and other time deposits    |                                 |        | 9,041  |        |   |        | 6,753  |        |   |        | 5,883  |       
|                                                    | Other borrowings                        |                                 |        | 4,451  |        |   |        | 2,549  |        |   |        | 1,156  |       
|                                                    |                                         |                                 |        |        |        |   |        |        |       
|                                                    |                                         | Total interest expense          |        |        | 18,006 |   |        |        | 12,059 |   |        |        | 11,519 | 
|                                                    |                                         |                                 |        |        |        |   |        |        |       
|NET INTEREST INCOME                                 |                                         |                                 | 28,647 |        |        |   | 21,179 |        |        |   | 17,852 |       
|PROVISION FOR LOAN LOSSES                           |                                         |                                 | 2,950  |        |        |   | 2,821  |        |        |   | 1,590  |       
|                                                    |                                         |                                 |        |        |        |   |        |        |       
|NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES |                                         |                                 | 25,697 |        |        |   | 18,358 |        |        |   | 16,262 |       
|                                                    |                                         |                                 |        |        |        |   |        |        |       
|NONINTEREST INCOME:                                 |                                         |                                 |        |        |        |   |        |        |        |   |        |       
|                                                    | Service charges on deposit accounts     |                                 |        | 786    |        |   |        | 873    |        |   |        | 884    |       
|                                                    | Gains on sales of securities-net        |                                 |        | 700    |        |   |        | 880    |        |   |        | 454    |       
|                                                    | Other                                   |                                 |        | 634    |        |   |        | 556    |        |   |        | 555    |       
|                                                    |                                         |                                 |        |        |        |   |        |        |       
|                                                    |                                         | Total noninterest income        |        |        | 2,120  |   |        |        | 2,309  |   |        |        | 1,893  | 
|                                                    |                                         |                                 |        |        |        |   |        |        |       
|NONINTEREST EXPENSE:                                |                                         |                                 |        |        |        |   |        |        |        |   |        |       
|                                                    | Salaries and employee benefits          |                                 |        | 11,365 |        |   |        | 9,328  |        |   |        | 7,709  |       
|                                                    | Net occupancy expense                   |                                 |        | 1,820  |        |   |        | 1,679  |        |   |        | 1,380  |       
|                                                    | Data processing                         |                                 |        | 1,218  |        |   |        | 1,163  |        |   |        | 1,099  |       
|                                                    | Legal and professional fees             |                                 |        | 653    |        |   |        | 571    |        |   |        | 463    |       
|                                                    | FDIC deposit insurance premium          |                                 |        | 115    |        |   |        | 83     |        |   |        | 72     |       
|                                                    | Other                                   |                                 |        | 3,650  |        |   |        | 2,665  |        |   |        | 2,628  |       
|                                                    |                                         |                                 |        |        |        |   |        |        |       
|                                                    |                                         | Total noninterest expense       |        |        | 18,821 |   |        |        | 15,489 |   |        |        | 13,351 | 
|                                                    |                                         |                                 |        |        |        |   |        |        |       
|EARNINGS BEFORE INCOME TAXES                        |                                         |                                 | 8,996  |        |        |   | 5,178  |        |        |   | 4,804  |       
|PROVISION FOR INCOME TAXES                          |                                         |                                 | 3,049  |        |        |   | 1,761  |        |        |   | 1,642  |       
|                                                    |                                         |                                 |        |        |        |   |        |        |       
|NET EARNINGS                                        |                                         | $                               | 5,947  |        |        | $ | 3,417  |        |        | $ | 3,162  |       
|                                                    |                                         |                                 |        |        |        |   |        |        |       
|EARNINGS PER SHARE:                                 |                                         |                                 |        |        |        |   |        |        |        |   |        |       
|                                                    | Basic                                   |                                 | $      | 0.67   |        |   | $      | 0.49   |        |   | $      | 0.56   |       
|                                                    | Diluted                                 |                                 | $      | 0.65   |        |   | $      | 0.48   |        |   | $      | 0.56   |       



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SNB BANCSHARES, INC.





CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS
EQUITY AND


OTHER COMPREHENSIVE INCOME


Years Ended December 31, 2004, 2003 and 2002


|                            |                                                                                       |                                     |    |    |         |   |    |               |   |   |        |        |       |          |        |        |               |   |        |       |  |   |        |        |       | 
|--------------------------- | ------------------------------------------------------------------------------------- | ----------------------------------- | -- | -- | ------- | - | -- | ------------- | - | - | ------ | ------ | ----- | -------- | ------ | ------ | ------------- | - | ------ | ----- |  | - | ------ | ------ | ----- | 
|                            |                                                                                       |                                     |    |    |         |   |    | Accumulated   |   |   |        |        |      
|                            |                                                                                       |                                     |    |    |         |   |    | Other         |   |   |        |        |      
|                            |                                                                                       |                                     |    |    |         |   |    | Comprehensive |   |   |        |        | Total |         
|                            |                                                                                       | Common                              |    |    | Class B |   |    | Capital       |   |   | Income |        |       | Retained |        |        | Shareholders |  
|                            |                                                                                       | Stock                               |    |    | Stock   |   |    | Surplus       |   |   | (Loss) |        |       | Earnings |        |        | Equity        |  
|                            |                                                                                       |                                     |    |    |         |   |    |               |   |   |        |        |       |          |        |        |               |  
|                            |                                                                                       | (In thousands, except share data)   |   
|BALANCE  December 31, 2001 |                                                                                       | $                                   | 5  |    |         | $ | 37 |               |   | $ |       |        |       | $        | (400   | )      |               | $ | 11,892 |       |  | $ | 11,534 |       
|                            | Change in unrealized gain (loss) on available-for-sale
    securities  net           |                                     |    |    |         |   |    |               |   |   |        |        |       |          |        | 2,031  |               |   |        |       |  |   |        | 2,031  |      
|                            | Less reclassification adjustment for gains included in net
    earnings  net of tax  |                                     |    |    |         |   |    |               |   |   |        |        |       |          |        | (300   | )             |   |        |       |  |   |        | (300   | )    
|                            | Net Earnings                                                                          |                                     |    |    |         |   |    |               |   |   |        |        |       |          |        |        |               |   |        | 3,162 |  |   |        | 3,162  |      
|                            |                                                                                       |                                     |    |    |         |   |    |               |   |   |        |        |       |          |        |        |               |  
|                            |                                                                                       | Total comprehensive income (Note 1) |    |    |         |   |    |               |   |   |        |        |       |          |        |        |               |   |        |       |  |   |        |        | 4,893 | 
|                            |                                                                                       |                                     |    |    |         |   |    |               |   |   |        |        |       |          |        |        |               |  
|                            | Conversion of 412,823 shares of Class B stock into
    412,823 shares of common stock |                                     |    | 4  |         |   |    | (4            | ) |   |        |        |       |          |        |        |               |   |        |       |  |   |        |       |      
|                            | Issuance of 2,820,000 shares of common stock                                          |                                     |    | 28 |         |   |    |               |   |   |        | 13,974 |       |          |        |        |               |   |        |       |  |   |        | 14,002 |      
|                            |                                                                                       |                                     |    |    |         |   |    |               |   |   |        |        |       |          |        |        |               |  
|BALANCE  December 31, 2002 |                                                                                       |                                     | 37 |    |         |   | 33 |               |   |   | 13,974 |        |       |          | 1,331  |        |               |   | 15,054 |       |  |   | 30,429 |       
|                            | Change in unrealized gain (loss) on available-for-sale
    securities  net           |                                     |    |    |         |   |    |               |   |   |        |        |       |          |        | (2,499 | )             |   |        |       |  |   |        | (2,499 | )    
|                            | Less reclassification adjustment for gains included in net
    earnings  net of tax  |                                     |    |    |         |   |    |               |   |   |        |        |       |          |        | (580   | )             |   |        |       |  |   |        | (580   | )    
|                            | Net Earnings                                                                          |                                     |    |    |         |   |    |               |   |   |        |        |       |          |        |        |               |   |        | 3,417 |  |   |        | 3,417  |      
|                            |                                                                                       |                                     |    |    |         |   |    |               |   |   |        |        |       |          |        |        |               |  
|                            |                                                                                       | Total comprehensive income (Note 1) |    |    |         |   |    |               |   |   |        |        |       |          |        |        |               |   |        |       |  |   |        |        | 338   | 
|                            |                                                                                       |                                     |    |    |         |   |    |               |   |   |        |        |       |          |        |        |               |  
|                            | Conversion of 47,645 shares of Class B stock into
    47,645 shares of common stock   |                                     |    |   |         |   |    |              |   |   |        |        |       |          |        |        |               |   |        |       |  |   |        |       |      
|                            |                                                                                       |                                     |    |    |         |   |    |               |   |   |        |        |       |          |        |        |               |  
|BALANCE  December 31, 2003 |                                                                                       |                                     | 37 |    |         |   | 33 |               |   |   | 13,974 |        |       |          | (1,748 | )      |               |   | 18,471 |       |  |   | 30,767 |       
|                            | Change in unrealized gain (loss) on available-for-sale
    securities  net           |                                     |    |    |         |   |    |               |   |   |        |        |       |          |        | (2,105 | )             |   |        |       |  |   |        | (2,105 | )    
|                            | Less reclassification adjustment for gains included in net
    earnings  net of tax  |                                     |    |    |         |   |    |               |   |   |        |        |       |          |        | (462   | )             |   |        |       |  |   |        | (462   | )    
|                            | Net Earnings                                                                          |                                     |    |    |         |   |    |               |   |   |        |        |       |          |        |        |               |   |        | 5,947 |  |   |        | 5,947  |      
|                            |                                                                                       |                                     |    |    |         |   |    |               |   |   |        |        |       |          |        |        |               |  
|                            |                                                                                       | Total comprehensive income (Note 1) |    |    |         |   |    |               |   |   |        |        |       |          |        |        |               |   |        |       |  |   |        |        | 3,380 | 
|                            |                                                                                       |                                     |    |    |         |   |    |               |   |   |        |        |       |          |        |        |               |  
|                            | Conversion of 610,425 shares of Class B stock into
    610,425 shares of common stock |                                     |    | 6  |         |   |    | (6            | ) |   |        |        |       |          |        |        |               |   |        |       |  |   |        |       |      
|                            | Issuance of 5,438,664 shares of common stock                                          |                                     |    | 55 |         |   |    |               |   |   |        | 52,199 |       |          |        |        |               |   |        |       |  |   |        | 52,254 |      
|                            |                                                                                       |                                     |    |    |         |   |    |               |   |   |        |        |       |          |        |        |               |  
|BALANCE  December 31, 2004 |                                                                                       | $                                   | 98 |    |         | $ | 27 |               |   | $ | 66,173 |        |       | $        | (4,315 | )      |               | $ | 24,418 |       |  | $ | 86,401 |       
|                            |                                                                                       |                                     |    |    |         |   |    |               |   |   |        |        |       |          |        |        |               |  



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SNB BANCSHARES, INC.





CONSOLIDATED STATEMENTS OF CASH FLOWS


Years Ended December 31, 2004, 2003 and 2002


|                                         |                                                                                         |                                                                                         |                                           |          |          |       |         |          |          |     |        |          |          |       | 
|---------------------------------------- | --------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------- | ----------------------------------------- | -------- | -------- | ----- | ------- | -------- | -------- | --- | ------ | -------- | -------- | ----- | 
|                                         |                                                                                         | Year Ended December 31,                                                                 |                                          
|                                         |                                                                                         |                                                                                         |                                          
|                                         |                                                                                         | 2004                                                                                    |                                           |          | 2003     |       |         | 2002     |         
|                                         |                                                                                         |                                                                                         |                                           |          |          |       |         |          |         
|                                         |                                                                                         | (In thousands)                                                                          |                                          
|CASH FLOWS FROM OPERATING ACTIVITIES:    |                                                                                         |                                                                                         |                                           |          |          |       |         |          |          |     |        |         
|                                         | Net Earnings                                                                            |                                                                                         | $                                         | 5,947    |          |       | $       | 3,417    |          |     | $      | 3,162    |         
|                                         | Adjustments to reconcile net earnings to net cash provided by
    operating activities: |                                                                                         |                                           |          |          |       |         |          |          |     |        |          |         
|                                         |                                                                                         | Depreciation and amortization                                                           |                                           |          | 1,293    |       |         |          | 1,416    |     |        |          | 1,301    |      
|                                         |                                                                                         | Provision for loan losses                                                               |                                           |          | 2,950    |       |         |          | 2,815    |     |        |          | 1,590    |      
|                                         |                                                                                         | Amortization and accretion of premiums and discounts on
    investment securities  net |                                           |          | 841      |       |         |          | 1,682    |     |        |          | 337      |      
|                                         |                                                                                         | Gain on sales of securities  net                                                       |                                           |          | (700     | )     |         |          | (880     | )   |        |          | (454     | )    
|                                         |                                                                                         | Loss on sale of real estate acquired by foreclosure                                     |                                           |          | 88       |       |         |          |         |     |        |          |         |      
|                                         |                                                                                         | Increase in accrued interest receivable                                                 |                                           |          | (985     | )     |         |          | (1,522   | )   |        |          | (150     | )    
|                                         |                                                                                         | Decrease (increase) in other assets                                                     |                                           |          | (1,088   | )     |         |          | (6,151   | )   |        |          | (518     | )    
|                                         |                                                                                         | Increase (decrease) in accrued interest payable                                         |                                           |          | 635      |       |         |          | 402      |     |        |          | (695     | )    
|                                         |                                                                                         | Increase (decrease) in other liabilities                                                |                                           |          | 463      |       |         |          | (442     | )   |        |          | 697      |      
|                                         |                                                                                         |                                                                                         |                                           |          |          |       |         |          |         
|                                         |                                                                                         |                                                                                         | Net cash provided by operating activities |          |          | 9,444 |         |          |          | 737 |        |          |          | 5,270 | 
|                                         |                                                                                         |                                                                                         |                                           |          |          |       |         |          |         
|CASH FLOWS FROM INVESTING ACTIVITIES:    |                                                                                         |                                                                                         |                                           |          |          |       |         |          |          |     |        |         
|                                         | Purchases of held-to-maturity securities                                                |                                                                                         |                                           | (13,517  | )        |       |         |         |          |     |        |         |         
|                                         | Purchases of available-for-sale securities                                              |                                                                                         |                                           | (296,100 | )        |       |         | (582,641 | )        |     |        | (253,890 | )       
|                                         | Proceeds from sales of available-for-sale securities                                    |                                                                                         |                                           | 188,250  |          |       |         | 282,874  |          |     |        | 164,317  |         
|                                         | Proceeds from maturities, calls or principal repayments of
    investment securities    |                                                                                         |                                           | 41,334   |          |       |         | 59,854   |          |     |        | 43,979   |         
|                                         | Proceeds from sales of real estate acquired by foreclosure                              |                                                                                         |                                           | 1,578    |          |       |         |         |          |     |        |         |         
|                                         | Net increase in loans                                                                   |                                                                                         |                                           | (177,588 | )        |       |         | (83,572  | )        |     |        | (62,119  | )       
|                                         | Decrease in federal funds sold                                                          |                                                                                         |                                           | 3,195    |          |       |         |         |          |     |        |         |         
|                                         | Purchase of bank premises and equipment                                                 |                                                                                         |                                           | (5,058   | )        |       |         | (1,534   | )        |     |        | (3,628   | )       
|                                         |                                                                                         |                                                                                         |                                           |          |          |       |         |          |         
|                                         |                                                                                         | Net cash used in investing activities                                                   |                                           |          | (257,906 | )     |         |          | (325,019 | )   |        |          | (111,341 | )    
|                                         |                                                                                         |                                                                                         |                                           |          |          |       |         |          |         
|CASH FLOWS FROM FINANCING ACTIVITIES:    |                                                                                         |                                                                                         |                                           |          |          |       |         |          |          |     |        |         
|                                         | Net increase in deposits                                                                |                                                                                         |                                           | 134,415  |          |       |         | 207,800  |          |     |        | 105,407  |         
|                                         | Net increase (decrease) in other borrowings                                             |                                                                                         |                                           | 55,100   |          |       |         | 70,220   |          |     |        | (10,940  | )       
|                                         | Issuance of junior subordinated debentures, net                                         |                                                                                         |                                           |         |          |       |         | 30,000   |          |     |        |         |         
|                                         | Proceeds from sale of common stock                                                      |                                                                                         |                                           | 52,254   |          |       |         |         |          |     |        | 14,002   |         
|                                         |                                                                                         |                                                                                         |                                           |          |          |       |         |          |         
|                                         |                                                                                         | Net cash provided by financing activities                                               |                                           |          | 241,769  |       |         |          | 308,020  |     |        |          | 108,469  |      
|                                         |                                                                                         |                                                                                         |                                           |          |          |       |         |          |         
|DECREASE IN CASH AND CASH EQUIVALENTS    |                                                                                         |                                                                                         | (6,693                                    | )        |          |       | (16,262 | )        |          |     | 2,398  |         
|CASH AND EQUIVALENTS  Beginning of year |                                                                                         |                                                                                         | 27,928                                    |          |          |       | 44,190  |          |          |     | 41,792 |         
|                                         |                                                                                         |                                                                                         |                                           |          |          |       |         |          |         
|CASH AND EQUIVALENTS  End of period     |                                                                                         | $                                                                                       | 21,235                                    |          |          | $     | 27,928  |          |          | $   | 44,190 |         
|                                         |                                                                                         |                                                                                         |                                           |          |          |       |         |          |         
|SUPPLEMENTAL DISCLOSURES:                |                                                                                         |                                                                                         |                                           |          |          |       |         |          |          |     |        |         
|                                         | Interest paid                                                                           |                                                                                         | $                                         | 17,371   |          |       | $       | 11,610   |          |     | $      | 12,191   |         
|                                         | Income taxes paid                                                                       |                                                                                         |                                           | 4,193    |          |       |         | 3,079    |          |     |        | 1,214    |         
|                                         | Other real estate owned acquired through foreclosure                                    |                                                                                         |                                           | 3,296    |          |       |         | 40       |          |     |        |         |         



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SNB BANCSHARES, INC.





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Years Ended December 31, 2004, 2003 and 2002




|   |                                                                                                    
|-- | ---------------------------------------------------------------------------------------------------
|1. | Organization, Nature of Operations and Summary of Significant
    Accounting and Reporting Policies

Organization


Nature of Operations


Summary of Significant Accounting and Reporting
Policies


Basis of Presentation


Use of Estimates


Securities




Loans




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SNB BANCSHARES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Nonaccrual, Past Due and Restructured Loans




Allowance for Loan Losses










Premises and Equipment


Real Estate Acquired by Foreclosure


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SNB BANCSHARES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




Income Taxes






Recent Accounting Standards Consolidation of Variable
Interest Entities.


Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity.


Share-Based Payment (Revised 2004).


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SNB BANCSHARES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




The Meaning of Other-Than-Temporary
Impairment and Its Application to Certain Investments. The
Meaning of Other-Than-Temporary Impairment and its Application
to Certain Investments.


Impairment of Long-Lived Assets


Statements of Cash Flows


Reclassifications


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SNB BANCSHARES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Comprehensive Income


Stock-Based Compensation




|                                                                                                                                       |             |                          |       |      |      |   |       |      |  |   |       |      | 
|-------------------------------------------------------------------------------------------------------------------------------------- | ----------- | ------------------------ | ----- | ---- | ---- | - | ----- | ---- |  | - | ----- | ---- | 
|                                                                                                                                       |             | Years Ended December 31, |      
|                                                                                                                                       |             |                          |      
|                                                                                                                                       |             | 2004                     |       |      | 2003 |   |       | 2002 | 
|                                                                                                                                       |             |                          |       |      |      |   |       |      | 
|Net earnings-as reported                                                                                                               |             | $                        | 5,947 |      |      | $ | 3,417 |      |  | $ | 3,162 |     
|Less total stock-based employee compensation expense determined
    under the fair value based method  net of related tax
    effects |             |                          | 254   |      |      |   | 60    |      |  |   | 5     |     
|                                                                                                                                       |             |                          |       |      |      |   |       |      | 
|                                                                                                                                       |             | $                        | 5,693 |      |      | $ | 3,357 |      |  | $ | 3,157 |     
|                                                                                                                                       |             |                          |       |      |      |   |       |      | 
|Earnings per share:                                                                                                                    |             |                          |       |      |      |   |       |      |  |   |       |     
|Basic:                                                                                                                                 |             |                          |       |      |      |   |       |      |  |   |       |     
|                                                                                                                                       | As reported |                          | $     | 0.67 |      |   | $     | 0.49 |  |   | $     | 0.56 | 
|                                                                                                                                       | Pro forma   |                          |       | 0.64 |      |   |       | 0.48 |  |   |       | 0.56 | 
|Diluted:                                                                                                                               |             |                          |       |      |      |   |       |      |  |   |       |     
|                                                                                                                                       | As reported |                          | $     | 0.65 |      |   | $     | 0.48 |  |   | $     | 0.56 | 
|                                                                                                                                       | Pro forma   |                          |       | 0.62 |      |   |       | 0.47 |  |   |       | 0.55 | 

Share-Based Payment (Revised
2004), Recent Accounting Standards


Earnings Per Share


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SNB BANCSHARES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                           |                                                                         |                                          |       |       |       |   |       |       |       |   |       |       |       | 
|-------------------------- | ----------------------------------------------------------------------- | ---------------------------------------- | ----- | ----- | ----- | - | ----- | ----- | ----- | - | ----- | ----- | ----- | 
|                           |                                                                         | For the Years Ended December 31,         |      
|                           |                                                                         |                                          |      
|                           |                                                                         | 2004                                     |       |       | 2003  |   |       | 2002  |      
|                           |                                                                         |                                          |       |       |       |   |       |       |      
|Net earnings               |                                                                         | $                                        | 5,947 |       |       | $ | 3,417 |       |       | $ | 3,162 |      
|Basic:                     |                                                                         |                                          |       |       |       |   |       |       |       |   |       |      
|                           |                                                                         | Weighted average shares outstanding      |       |       | 8,899 |   |       |       | 6,994 |   |       |       | 5,680 | 
|                           |                                                                         |                                          |       |       |       |   |       |       |      
|Basic earnings per share   |                                                                         | $                                        | 0.67  |       |       | $ | 0.49  |       |       | $ | 0.56  |      
|                           |                                                                         |                                          |       |       |       |   |       |       |      
|Diluted:                   |                                                                         |                                          |       |       |       |   |       |       |       |   |       |      
|                           |                                                                         | Weighted average shares outstanding      |       |       | 8,899 |   |       |       | 6,994 |   |       |       | 5,680 | 
|                           |                                                                         | Potentially dilutive shares from options |       |       | 261   |   |       |       | 169   |   |       |       | 12    | 
|                           |                                                                         |                                          |       |       |       |   |       |       |      
|                           | Weighted average shares and potentially dilutive shares
    outstanding |                                          |       | 9,160 |       |   |       | 7,163 |       |   |       | 5,692 |      
|                           |                                                                         |                                          |       |       |       |   |       |       |      
|Diluted earnings per share |                                                                         | $                                        | 0.65  |       |       | $ | 0.48  |       |       | $ | 0.56  |      
|                           |                                                                         |                                          |       |       |       |   |       |       |      



|   |                         
|-- | ------------------------
|2. | Restricted Cash Balances





|   |           
|-- | ----------
|3. | Securities



|                    |                                                 |                         |   |         |            |  |       |            |     |  |       |        |        |   |   |         |         | 
|------------------- | ----------------------------------------------- | ----------------------- | - | ------- | ---------- |  | ----- | ---------- | --- |  | ----- | ------ | ------ | - | - | ------- | ------- | 
|                    |                                                 | As of December 31, 2004 |  
|                    |                                                 |                         |  
|                    |                                                 |                         |   | Gross   |            |  | Gross |            |     | 
|                    |                                                 | Amortized               |   |         | Unrealized |  |       | Unrealized |     |  | Fair  |       
|                    |                                                 | Cost                    |   |         | Gains      |  |       | Losses     |     |  | Value |       
|                    |                                                 |                         |   |         |            |  |       |            |     |  |       |       
|Available-for-Sale: |                                                 |                         |   |         |            |  |       |            |     |  |       |        |        |   |   |        
|                    | U.S. Treasury/ Agency securities                |                         | $ | 278,972 |            |  | $     | 6          |     |  | $     | (4,220 | )      |   | $ | 274,758 |        
|                    | Mortgage-backed securities                      |                         |   | 101,320 |            |  |       | 250        |     |  |       | (1,682 | )      |   |   | 99,888  |        
|                    | Collateralized mortgage obligations             |                         |   | 78,627  |            |  |       | 4          |     |  |       | (1,031 | )      |   |   | 77,600  |        
|                    | Obligations of state and political subdivisions |                         |   | 2,630   |            |  |       | 44         |     |  |       | (16    | )      |   |   | 2,658   |        
|                    | Other securities                                |                         |   | 20,244  |            |  |       | 63         |     |  |       | (56    | )      |   |   | 20,251  |        
|                    |                                                 |                         |   |         |            |  |       |            |     |  |       |       
|                    |                                                 | Total                   |   | $       | 481,793    |  |       | $          | 367 |  |       | $      | (7,005 | ) |   | $       | 475,155 | 
|                    |                                                 |                         |   |         |            |  |       |            |     |  |       |       
|Held-to-Maturity:   |                                                 |                         |   |         |            |  |       |            |     |  |       |        |        |   |   |        
|                    | Collateralized mortgage obligations             |                         | $ | 5,275   |            |  | $     |           |     |  | $     | (14    | )      |   | $ | 5,261   |        
|                    | Obligations of state and political subdivisions |                         |   | 8,093   |            |  |       | 146        |     |  |       | (7     | )      |   |   | 8,232   |        
|                    |                                                 |                         |   |         |            |  |       |            |     |  |       |       
|                    |                                                 | Total                   |   | $       | 13,368     |  |       | $          | 146 |  |       | $      | (21    | ) |   | $       | 13,493  | 
|                    |                                                 |                         |   |         |            |  |       |            |     |  |       |       

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SNB BANCSHARES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


|                    |                                                 |                         |   |         |            |  |       |            |       |  |       |        |        |   |   |         |         | 
|------------------- | ----------------------------------------------- | ----------------------- | - | ------- | ---------- |  | ----- | ---------- | ----- |  | ----- | ------ | ------ | - | - | ------- | ------- | 
|                    |                                                 | As of December 31, 2003 |  
|                    |                                                 |                         |  
|                    |                                                 |                         |   | Gross   |            |  | Gross |            |       | 
|                    |                                                 | Amortized               |   |         | Unrealized |  |       | Unrealized |       |  | Fair  |       
|                    |                                                 | Cost                    |   |         | Gains      |  |       | Losses     |       |  | Value |       
|                    |                                                 |                         |   |         |            |  |       |            |       |  |       |       
|Available-for-Sale: |                                                 |                         |   |         |            |  |       |            |       |  |       |        |        |   |   |        
|                    | U.S. Treasury/ Agency securities                |                         | $ | 245,977 |            |  | $     | 374        |       |  | $     | (2,376 | )      |   | $ | 243,975 |        
|                    | Mortgage-backed securities                      |                         |   | 71,419  |            |  |       | 639        |       |  |       | (277   | )      |   |   | 71,781  |        
|                    | Collateralized mortgage obligations             |                         |   | 83,308  |            |  |       | 151        |       |  |       | (970   | )      |   |   | 82,489  |        
|                    | Obligations of state and political subdivisions |                         |   | 2,525   |            |  |       | 60         |       |  |       | (269   | )      |   |   | 2,316   |        
|                    | Other securities                                |                         |   | 12,040  |            |  |       | 19         |       |  |       |       |        |   |   | 12,059  |        
|                    |                                                 |                         |   |         |            |  |       |            |       |  |       |       
|                    |                                                 | Total                   |   | $       | 415,269    |  |       | $          | 1,243 |  |       | $      | (3,892 | ) |   | $       | 412,620 | 
|                    |                                                 |                         |   |         |            |  |       |            |       |  |       |       





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SNB BANCSHARES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                    |                                                 |                    |         |         |                    |   |        |        |       |   |            |        |  |       |        |        |            |   |         |         |  |   |        |        |  
|------------------- | ----------------------------------------------- | ------------------ | ------- | ------- | ------------------ | - | ------ | ------ | ----- | - | ---------- | ------ |  | ----- | ------ | ------ | ---------- | - | ------- | ------- |  | - | ------ | ------ | -
|                    |                                                 | Less Than12 Months |         |         | 12 Monthsor Longer |   |        | Total  |      
|                    |                                                 |                    |         |         |                    |   |        |        |      
|                    |                                                 |                    |         | Gross   |                    |   |        |        | Gross |   |            |        |  | Gross |       
|                    |                                                 | Fair               |         |         | Unrealized         |   |        | Fair   |       |   | Unrealized |        |  | Fair  |        |        | Unrealized |  
|                    |                                                 | Value              |         |         | Loss               |   |        | Value  |       |   | Loss       |        |  | Value |        |        | Loss       |  
|                    |                                                 |                    |         |         |                    |   |        |        |       |   |            |        |  |       |        |        |            |  
|Available-for-Sale: |                                                 |                    |         |         |                    |   |        |        |       |   |            |        |  |       |        |        |            |   |         |         |  |   |        |       
|                    | U.S. Treasury/ Agency securities                |                    | $       | 208,177 |                    |   | $      | (2,799 | )     |   | $          | 58,579 |  |       | $      | (1,421 | )          |   | $       | 266,756 |  |   | $      | (4,220 | )
|                    | Mortgage-backed securities                      |                    |         | 81,535  |                    |   |        | (1,540 | )     |   |            | 6,708  |  |       |        | (142   | )          |   |         | 88,243  |  |   |        | (1,682 | )
|                    | Collateralized mortgage obligations             |                    |         | 51,091  |                    |   |        | (411   | )     |   |            | 21,864 |  |       |        | (620   | )          |   |         | 72,955  |  |   |        | (1,031 | )
|                    | Obligations of state and political subdivisions |                    |         | 685     |                    |   |        | (7     | )     |   |            | 691    |  |       |        | (9     | )          |   |         | 1,376   |  |   |        | (16    | )
|                    | Other securities                                |                    |         | 3,105   |                    |   |        | (56    | )     |   |            |       |  |       |        |       |            |   |         | 3,105   |  |   |        | (56    | )
|                    |                                                 |                    |         |         |                    |   |        |        |       |   |            |        |  |       |        |        |            |  
|Total               |                                                 | $                  | 344,593 |         |                    | $ | (4,813 | )      |       | $ | 87,842     |        |  | $     | (2,192 | )      |            | $ | 432,435 |         |  | $ | (7,005 | )     
|                    |                                                 |                    |         |         |                    |   |        |        |       |   |            |        |  |       |        |        |            |  
|Held-to-Maturity:   |                                                 |                    |         |         |                    |   |        |        |       |   |            |        |  |       |        |        |            |   |         |         |  |   |        |       
|                    | Collateralized mortgage obligations             |                    | $       | 5,261   |                    |   | $      | (14    | )     |   | $          |       |  |       | $      |       |            |   | $       | 5,261   |  |   | $      | (14    | )
|                    | Obligations of state and political subdivisions |                    |         | 1,130   |                    |   |        | (7     | )     |   |            |       |  |       |        |       |            |   |         | 1,130   |  |   |        | (7     | )
|                    |                                                 |                    |         |         |                    |   |        |        |       |   |            |        |  |       |        |        |            |  
|Total               |                                                 | $                  | 6,391   |         |                    | $ | (21    | )      |       | $ |           |        |  | $     |       |        |            | $ | 6,391   |         |  | $ | (21    | )     
|                    |                                                 |                    |         |         |                    |   |        |        |       |   |            |        |  |       |        |        |            |  



|                                                                       |  |                        |         |  |                  |   |         |           |  |   |        |  |  |   |        | 
|---------------------------------------------------------------------- |  | ---------------------- | ------- |  | ---------------- | - | ------- | --------- |  | - | ------ |  |  | - | ------ | 
|                                                                       |  | As of December 31,2004 |        
|                                                                       |  |                        |        
|                                                                       |  | Available-for-sale     |         |  | Held-to-maturity |  
|                                                                       |  |                        |         |  |                  |  
|                                                                       |  | Amortized              |         |  | Fair             |   |         | Amortized |  |   | Fair   | 
|                                                                       |  | Cost                   |         |  | Value            |   |         | Cost      |  |   | Value  | 
|                                                                       |  |                        |         |  |                  |   |         |           |  |   |        | 
|Due in one to five years                                               |  | $                      | 269,136 |  |                  | $ | 265,131 |           |  | $ |       |  |  | $ |       | 
|Due after five years through ten years                                 |  |                        | 11,993  |  |                  |   | 11,802  |           |  |   | 456    |  |  |   | 459    | 
|Due after ten years                                                    |  |                        | 473     |  |                  |   | 483     |           |  |   | 7,637  |  |  |   | 7,773  | 
|                                                                       |  |                        |         |  |                  |   |         |           |  |   |        | 
|Subtotal                                                               |  |                        | 281,602 |  |                  |   | 277,416 |           |  |   | 8,093  |  |  |   | 8,232  | 
|Mortgage-backed securities and collateralized mortgage
    obligations |  |                        | 179,947 |  |                  |   | 177,488 |           |  |   | 5,275  |  |  |   | 5,261  | 
|Other securities                                                       |  |                        | 20,244  |  |                  |   | 20,251  |           |  |   |       |  |  |   |       | 
|                                                                       |  |                        |         |  |                  |   |         |           |  |   |        | 
|Total                                                                  |  | $                      | 481,793 |  |                  | $ | 475,155 |           |  | $ | 13,368 |  |  | $ | 13,493 | 
|                                                                       |  |                        |         |  |                  |   |         |           |  |   |        | 



61



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SNB BANCSHARES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








|   |      
|-- | -----
|4. | Loans



|                                 |                                   |                    |             |         |         |         |        |         |         |         | 
|-------------------------------- | --------------------------------- | ------------------ | ----------- | ------- | ------- | ------- | ------ | ------- | ------- | ------- | 
|                                 |                                   | As of December 31, |            
|                                 |                                   |                    |            
|                                 |                                   | 2004               |             |         | 2003    |        
|                                 |                                   |                    |             |         |         |        
|Business and industrial          |                                   | $                  | 70,101      |         |         | $       | 55,218 |        
|Real estate:                     |                                   |                    |             |         |         |         |        |        
|                                 | Construction and land development |                    |             | 123,655 |         |         |        | 65,628  |        
|                                 | Residential mortgages             |                    |             | 126,200 |         |         |        | 117,593 |        
|                                 | Commercial mortgages              |                    |             | 267,158 |         |         |        | 175,686 |        
|Consumer                         |                                   |                    | 12,592      |         |         |         | 11,092 |        
|Other                            |                                   |                    | 227         |         |         |         | 198    |        
|                                 |                                   |                    |             |         |         |        
|                                 |                                   | Gross loans        |             |         | 599,933 |         |        |         | 425,415 |        
|Less unearned discounts and fees |                                   |                    | (1,641      | )       |         |         | (936   | )      
|                                 |                                   |                    |             |         |         |        
|                                 |                                   |                    | Total loans |         | $       | 598,292 |        |         | $       | 424,479 | 
|                                 |                                   |                    |             |         |         |        







62



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SNB BANCSHARES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                         |                                   |                         |        |           |            |   |         |            |  |   |        |         |  |   |         |         | 
|---------------------------------------- | --------------------------------- | ----------------------- | ------ | --------- | ---------- | - | ------- | ---------- |  | - | ------ | ------- |  | - | ------- | ------- | 
|                                         |                                   | As of December 31, 2004 |       
|                                         |                                   |                         |       
|                                         |                                   |                         |        | After One |            |   |        
|                                         |                                   | One Year                |        |           | through    |   |         | After Five |  |   |       
|                                         |                                   | or Less                 |        |           | Five Years |   |         | Years      |  |   | Total  |        
|                                         |                                   |                         |        |           |            |   |         |            |  |   |        |        
|Business and industrial                  |                                   | $                       | 34,884 |           |            | $ | 26,690  |            |  | $ | 8,527  |         |  | $ | 70,101  |        
|Real estate:                             |                                   |                         |        |           |            |   |         |            |  |   |        |         |  |   |         |        
|                                         | Construction and land development |                         |        | 56,628    |            |   |         | 53,514     |  |   |        | 13,513  |  |   |         | 123,655 | 
|                                         | Residential mortgages             |                         |        | 7,232     |            |   |         | 71,104     |  |   |        | 47,864  |  |   |         | 126,200 | 
|                                         | Commercial mortgages              |                         |        | 12,878    |            |   |         | 168,896    |  |   |        | 85,384  |  |   |         | 267,158 | 
|Consumer and other                       |                                   |                         | 4,151  |           |            |   | 8,043   |            |  |   | 625    |         |  |   | 12,819  |        
|                                         |                                   |                         |        |           |            |   |         |            |  |   |        |        
|                                         | Total                             |                         | $      | 115,773   |            |   | $       | 328,247    |  |   | $      | 155,913 |  |   | $       | 599,933 | 
|                                         |                                   |                         |        |           |            |   |         |            |  |   |        |        
|Loans with a predetermined interest rate |                                   | $                       | 20,190 |           |            | $ | 169,713 |            |  | $ | 93,727 |         |  | $ | 283,630 |        
|Loans with a floating interest rate      |                                   |                         | 95,583 |           |            |   | 158,534 |            |  |   | 62,186 |         |  |   | 316,303 |        
|                                         |                                   |                         |        |           |            |   |         |            |  |   |        |        
|                                         | Total                             |                         | $      | 115,773   |            |   | $       | 328,247    |  |   | $      | 155,913 |  |   | $       | 599,933 | 
|                                         |                                   |                         |        |           |            |   |         |            |  |   |        |        





|                                            |  |              |       |   |      |   |       |  
|------------------------------------------- |  | ------------ | ----- | - | ---- | - | ----- | -
|                                            |  | December 31, |      
|                                            |  |              |      
|                                            |  | 2004         |       |   | 2003 |  
|                                            |  |              |       |   |      |  
|Balance  beginning of period               |  | $            | 1,048 |   |      | $ | 1,538 |  
|New loans including renewals and extensions |  |              | 490   |   |      |   | 198   |  
|Repayments/reductions/transfers             |  |              | (674  | ) |      |   | (688  | )
|                                            |  |              |       |   |      |  
|Balance  end of period                     |  | $            | 864   |   |      | $ | 1,048 |  
|                                            |  |              |       |   |      |  



|   |                                            
|-- | -------------------------------------------
|5. | Nonaccrual, Past Due and Restructured Loans



|                                        |                           |                    |       |       |      |   |       |       | 
|--------------------------------------- | ------------------------- | ------------------ | ----- | ----- | ---- | - | ----- | ----- | 
|                                        |                           | As of December 31, |      
|                                        |                           |                    |      
|                                        |                           | 2004               |       |       | 2003 |  
|                                        |                           |                    |       |       |      |  
|Nonaccrual loans                        |                           | $                  | 1,489 |       |      | $ | 2,496 |      
|Accruing loans past due 90 days or more |                           |                    | 62    |       |      |   |      |      
|Restructured loans                      |                           |                    | 1,917 |       |      |   | 2,015 |      
|                                        |                           |                    |       |       |      |  
|                                        | Total nonperforming loans |                    | $     | 3,468 |      |   | $     | 4,511 | 
|                                        |                           |                    |       |       |      |  

63



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SNB BANCSHARES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                |  |              |    |  |      |   |     |      |  |   |     | 
|--------------- |  | ------------ | -- |  | ---- | - | --- | ---- |  | - | --- | 
|                |  | December 31, |   
|                |  |              |   
|                |  | 2004         |    |  | 2003 |   |     | 2002 | 
|                |  |              |    |  |      |   |     |      | 
|Foregone income |  | $            | 65 |  |      | $ | 258 |      |  | $ | 131 | 



|   |                          
|-- | -------------------------
|6. | Allowance for Loan Losses



|                                |  |                     |       |   |      |   |        |  
|------------------------------- |  | ------------------- | ----- | - | ---- | - | ------ | -
|                                |  | For the Years Ended |      
|                                |  | December 31,        |      
|                                |  |                     |      
|                                |  | 2004                |       |   | 2003 |  
|                                |  |                     |       |   |      |  
|Balance  beginning of period   |  | $                   | 5,650 |   |      | $ | 4,006  |  
|Provision charged to operations |  |                     | 2,950 |   |      |   | 2,821  |  
|Loans charged off               |  |                     | (614  | ) |      |   | (1,526 | )
|Loan recoveries                 |  |                     | 135   |   |      |   | 349    |  
|                                |  |                     |       |   |      |  
|Balance  end of period         |  | $                   | 8,121 |   |      | $ | 5,650  |  
|                                |  |                     |       |   |      |  



|   |                       
|-- | ----------------------
|7. | Premises and Equipment



|                                  |  |              |        |   |      |   |        |  
|--------------------------------- |  | ------------ | ------ | - | ---- | - | ------ | -
|                                  |  | December 31, |       
|                                  |  |              |       
|                                  |  | 2004         |        |   | 2003 |  
|                                  |  |              |        |   |      |  
|Building and improvements         |  | $            | 8,907  |   |      | $ | 8,394  |  
|Furniture, fixtures and equipment |  |              | 6,615  |   |      |   | 5,892  |  
|Leasehold improvements            |  |              | 435    |   |      |   | 412    |  
|Automobiles                       |  |              | 58     |   |      |   | 127    |  
|Land                              |  |              | 4,624  |   |      |   | 3,493  |  
|Construction-in-process           |  |              | 2,186  |   |      |   | 109    |  
|                                  |  |              |        |   |      |  
|Total                             |  |              | 22,825 |   |      |   | 18,427 |  
|Accumulated depreciation          |  |              | (6,688 | ) |      |   | (5,736 | )
|                                  |  |              |        |   |      |  
|Premises and equipment  net      |  | $            | 16,137 |   |      | $ | 12,691 |  
|                                  |  |              |        |   |      |  





64



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SNB BANCSHARES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|   |                          
|-- | -------------------------
|8. | Interest-Bearing Deposits



|                                     |       |                   |         |         | 
|------------------------------------ | ----- | ----------------- | ------- | ------- | 
|                                     |       | December 31, 2004 |        
|                                     |       |                   |        
|Three months or less                 |       | $                 | 88,264  |        
|Over three months through six months |       |                   | 48,950  |        
|Over six months through one year     |       |                   | 110,302 |        
|Over one year through two years      |       |                   | 11,306  |        
|Over two years through three years   |       |                   | 2,721   |        
|Over three years through four years  |       |                   | 405     |        
|Over four years through five years   |       |                   | 1,080   |        
|Over five years                      |       |                   |        |        
|                                     |       |                   |        
|                                     | Total |                   | $       | 263,028 | 
|                                     |       |                   |        







|   |                 
|-- | ----------------
|9. | Other Borrowings



|                                            |       |              |        |         |      |   |        |        | 
|------------------------------------------- | ----- | ------------ | ------ | ------- | ---- | - | ------ | ------ | 
|                                            |       | December 31, |       
|                                            |       |              |       
|                                            |       | 2004         |        |         | 2003 |  
|                                            |       |              |        |         |      |  
|FHLB Purchased Overnight                    |       | $            | 57,400 |         |      | $ | 27,300 |       
|FHLB Long Term Borrowing                    |       |              | 75,000 |         |      |   | 50,000 |       
|Treasury, tax and loan (TT&L) note option |       |              | 500    |         |      |   | 500    |       
|                                            |       |              |        |         |      |  
|                                            | Total |              | $      | 132,900 |      |   | $      | 77,800 | 
|                                            |       |              |        |         |      |  

FHLB Purchased Overnight and Long Term
Borrowings


Treasury Tax and Loan (TT&L)
Note Option


65



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##### Table of Contents



SNB BANCSHARES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |             
|--- | ------------
|10. | Income Taxes



|                 |  |              |        |   |      |   |       |      |  |   |       |  
|---------------- |  | ------------ | ------ | - | ---- | - | ----- | ---- |  | - | ----- | -
|                 |  | December 31, |       
|                 |  |              |       
|                 |  | 2004         |        |   | 2003 |   |       | 2002 | 
|                 |  |              |        |   |      |   |       |      | 
|Current expense  |  | $            | 4,397  |   |      | $ | 2,353 |      |  | $ | 1,924 |  
|Deferred benefit |  | $            | (1,348 | ) |      | $ | (592  | )    |  | $ | (282  | )
|                 |  |              |        |   |      |   |       |      | 
|Total            |  | $            | 3,049  |   |      | $ | 1,761 |      |  | $ | 1,642 |  
|                 |  |              |        |   |      |   |       |      | 



|                               |                                                  |              |       |       |      |   |       |       |  
|------------------------------ | ------------------------------------------------ | ------------ | ----- | ----- | ---- | - | ----- | ----- | -
|                               |                                                  | December 31, |      
|                               |                                                  |              |      
|                               |                                                  | 2004         |       |       | 2003 |  
|                               |                                                  |              |       |       |      |  
|Deferred tax assets:           |                                                  |              |       |       |      |   |       |      
|                               | Allowance for loan losses                        |              | $     | 2,805 |      |   | $     | 1,858 |  
|                               | Deferral of loan origination income              |              |       | 575   |      |   |       | 318   |  
|                               | Unrealized loss on available for sale securities |              |       | 2,323 |      |   |       | 901   |  
|                               | Accrued bonus                                    |              |       | 213   |      |   |       | 69    |  
|                               | Other                                            |              |       | 218   |      |   |       |      |  
|                               |                                                  |              |       |       |      |  
|Total deferred tax assets      |                                                  |              | 6,134 |       |      |   | 3,146 |      
|                               |                                                  |              |       |       |      |  
|Deferred tax liabilities:      |                                                  |              |       |       |      |   |       |      
|                               | Depreciable assets                               |              |       | (271  | )    |   |       | (89   | )
|                               | FHLB and FRB stock dividends                     |              |       | (100  | )    |   |       | (64   | )
|                               |                                                  |              |       |       |      |  
|Total deferred tax liabilities |                                                  |              | (371  | )     |      |   | (153  | )    
|                               |                                                  |              |       |       |      |  
|Net deferred tax assets        |                                                  | $            | 5,763 |       |      | $ | 2,993 |      
|                               |                                                  |              |       |       |      |  



|                                    |                             |              |       |     |      |   |       |     |  
|----------------------------------- | --------------------------- | ------------ | ----- | --- | ---- | - | ----- | --- | -
|                                    |                             | December 31, |      
|                                    |                             |              |      
|                                    |                             | 2004         |       |     | 2003 |  
|                                    |                             |              |       |     |      |  
|Taxes calculated at statutory rate  |                             | $            | 3,059 |     |      | $ | 1,760 |    
|Increase (decrease) resulting from: |                             |              |       |     |      |   |       |    
|                                    | Tax-exempt interest         |              |       | (70 | )    |   |       | (33 | )
|                                    | Interest expense limitation |              |       | 25  |      |   |       | 8   |  
|                                    | Other  net                 |              |       | 35  |      |   |       | 26  |  
|                                    |                             |              |       |     |      |  
|Total                               |                             | $            | 3,049 |     |      | $ | 1,761 |    
|                                    |                             |              |       |     |      |  





|    |                     
|--- | --------------------
|11. | Shareholders Equity

Common Stock


66



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##### Table of Contents



SNB BANCSHARES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






Stock Options




|                                                                  |                  |           |           |          |          |   |      |           |          |  |          |         |   |           |      |      |          |  |         |         |  |   |      |      | 
|----------------------------------------------------------------- | ---------------- | --------- | --------- | -------- | -------- | - | ---- | --------- | -------- |  | -------- | ------- | - | --------- | ---- | ---- | -------- |  | ------- | ------- |  | - | ---- | ---- | 
|                                                                  |                  | 2004      |           |          | 2003     |   |      | 2002      |         
|                                                                  |                  |           |           |          |          |   |      |           |         
|                                                                  |                  |           |           | Weighted |          |   |      |           | Weighted |  |          |         |   | Weighted  |     
|                                                                  |                  |           |           | Average  |          |   |      |           | Average  |  |          |         |   | Average   |     
|                                                                  |                  | Number of |           |          | Exercise |   |      | Number of |          |  | Exercise |         |   | Number of |      |      | Exercise | 
|                                                                  |                  | Options   |           |          | Price    |   |      | Options   |          |  | Price    |         |   | Options   |      |      | Price    | 
|                                                                  |                  |           |           |          |          |   |      |           |          |  |          |         |   |           |      |      |          | 
|Shares under option  beginning of year                           |                  |           | 340,500   |          |          | $ | 5.00 |           |          |  | 363,000  |         |   | $         | 5.00 |      |          |  |        |         |  | $ |     |     
|                                                                  | Shares granted   |           |           | 945,500  |          |   |      | 10.82     |          |  |          |        |   |           |      |     |          |  |         | 363,000 |  |   |      | 5.00 | 
|                                                                  | Shares forfeited |           |           | (2,000   | )        |   |      | 5.00      |          |  |          | (22,500 | ) |           |      | 5.00 |          |  |         |        |  |   |      |     | 
|                                                                  | Shares exercised |           |           | (2,300   | )        |   |      | 5.00      |          |  |          |        |   |           |      |     |          |  |         |        |  |   |      |     | 
|                                                                  |                  |           |           |          |          |   |      |           |          |  |          |         |   |           |      |      |          | 
|Shares under option  end of period                               |                  |           | 1,281,700 |          |          |   | 9.29 |           |          |  | 340,500  |         |   |           | 5.00 |      |          |  | 363,000 |         |  |   | 5.00 |     
|Shares exercisable  end of period                                |                  |           | 133,400   |          |          |   | 5.00 |           |          |  | 68,100   |         |   |           | 5.00 |      |          |  |        |         |  |   |     |     
|Weighted average fair value of options granted during the year    |                  |           |           |          |          | $ | 4.57 |           |          |  |          |         |   |           |     |      |          |  |         |         |  | $ | 2.11 |     
|                                                                  |                  |           |           |          |          |   |      |           |          |  |          |         |   |           |      |      |          | 
|Remaining authorized shares under approved plan  end
    of year |                  |           | 16,000    |          |          |   |      |           |          |  | 159,500  |         |   |           |      |      |          |  | 137,000 |         |  |   |      |     



|                        |  |      |       |   |      |  |   |      |  |  |       |  
|----------------------- |  | ---- | ----- | - | ---- |  | - | ---- |  |  | ----- | -
|                        |  | 2004 |       |   | 2003 |  |   | 2002 | 
|                        |  |      |       |   |      |  |   |      | 
|Expected life (years)   |  |      | 7     |   |      |  |  |      |  |  | 7     |  
|Risk free interest rate |  |      | 4.23  | % |      |  |  |      |  |  | 4.19  | %
|Volatility              |  |      | 31.00 | % |      |  |  |      |  |  | 31.00 | %
|Dividend yield          |  |      | 0.00  | % |      |  |  |      |  |  | 0.00  | %



|                         |  |                     |         |           |                     |   |           |           |  |  |             |           |  |          |         |  |  |   |      | 
|------------------------ |  | ------------------- | ------- | --------- | ------------------- | - | --------- | --------- |  |  | ----------- | --------- |  | -------- | ------- |  |  | - | ---- | 
|                         |  | Options Outstanding |         |           | Options Exercisable |  
|                         |  |                     |         |           |                     |  
|                         |  |                     |         | Weighted- |                     |   | Weighted- |           |  |  |             | Weighted- | 
|                         |  |                     |         | Average   |                     |   | Average   |           |  |  |             | Average   | 
|                         |  | Number              |         |           | Exercise            |   |           | Remaining |  |  | Number      |           |  | Exercise |        
|Range of Exercise Prices |  | Outstanding         |         |           | Price               |   |           | Years     |  |  | Exercisable |           |  | Price    |        
|                         |  |                     |         |           |                     |   |           |           |  |  |             |           |  |          |        
|$5.00                    |  |                     | 336,200 |           |                     | $ | 5.00      |           |  |  | 7.8         |           |  |          | 133,400 |  |  | $ | 5.00 | 
|$10.82                   |  |                     | 945,500 |           |                     |   | 10.82     |           |  |  | 9.7         |           |  |          |        |  |  |   | N/A  | 

67



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##### Table of Contents



SNB BANCSHARES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |                             
|--- | ----------------------------
|12. | Employee 401(k) Savings Plan





|    |                              
|--- | -----------------------------
|13. | Commitments and Contingencies

Leases 


|           |       |   |     |     | 
|---------- | ----- | - | --- | --- | 
|2005       |       | $ | 271 |    
|2006       |       |   | 83  |    
|2007       |       |   | 62  |    
|2008       |       |   | 44  |    
|2009       |       |   | 44  |    
|Thereafter |       |   |    |    
|           |       |   |    
|           | Total |   | $   | 504 | 
|           |       |   |    





Building Contracts




|    |                                                      
|--- | -----------------------------------------------------
|14. | Disclosures about Fair Value of Financial Information







| |                                                                                                                                                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Cash and Short-Term Investments  For such
    short-term instruments, the carrying amount is a reasonable
    estimate of fair value.                                                                                          
|
| | Securities  For securities held as
    investments, fair value equals market price, if available. If a
    quoted market price is not available, fair value is estimated
    using quoted market prices for similar securities.

68



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##### Table of Contents



SNB BANCSHARES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                                                                                                                                                                                                                                                                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Loans  The fair value of loans is estimated by
    discounting the future cash flows using the current rates at
    which similar loans would be made to borrowers with similar
    credit ratings and for the same remaining maturities.                                                                                                                                                                
|
| | Deposits  The fair value of demand deposits,
    savings accounts and certain money market deposits is the amount
    payable on demand at the reporting date. The fair value of
    fixed-maturity certificates of deposit is estimated using the
    rates currently offered for deposits of similar remaining
    maturities.                                                                         
|
| | Junior Subordinated Debentures  The fair value
    of junior subordinate debentures is estimated by discounting the
    future cash flows using the characteristics of the instruments.                                                                                                                                                                                                                  
|
| | Other Borrowings  Rates currently available to
    the Company for debt with similar terms and remaining maturities
    are used to estimate the fair value of existing debt.                                                                                                                                                                                                                            
|
| | Off-Balance-Sheet Financial Instruments  The
    fair values of commitments to extend credit and standby letters
    of credit are estimated using the fees currently charged to
    enter into similar agreements, taking into account the remaining
    terms of the agreement and the present creditworthiness of the
    counterparties. These amounts are not significant at the
    reporting date.



|                       |                                 |              |           |         |       |   |           |          |   |   |         |         |   |   |         |         |  
|---------------------- | ------------------------------- | ------------ | --------- | ------- | ----- | - | --------- | -------- | - | - | ------- | ------- | - | - | ------- | ------- | -
|                       |                                 | December 31, |          
|                       |                                 |              |          
|                       |                                 | 2004         |           |         | 2003  |  
|                       |                                 |              |           |         |       |  
|                       |                                 | Carrying     |           |         | Fair  |   |           | Carrying |   |   | Fair    |        
|                       |                                 | Amount       |           |         | Value |   |           | Amount   |   |   | Value   |        
|                       |                                 |              |           |         |       |   |           |          |   |   |         |        
|Financial assets:      |                                 |              |           |         |       |   |           |          |   |   |         |         |   |   |         |        
|                       | Cash and short-term investments |              | $         | 21,235  |       |   | $         | 21,235   |   |   | $       | 27,928  |   |   | $       | 27,928  |  
|                       | Investment securities           |              |           | 488,523 |       |   |           | 488,648  |   |   |         | 412,620 |   |   |         | 412,620 |  
|                       | Loans                           |              |           | 598,292 |       |   |           | 599,836  |   |   |         | 424,479 |   |   |         | 427,299 |  
|                       | Less allowance for loan losses  |              |           | (8,121  | )     |   |           | (8,121   | ) |   |         | (5,650  | ) |   |         | (5,650  | )
|                       |                                 |              |           |         |       |   |           |          |   |   |         |        
|Total                  |                                 | $            | 1,099,929 |         |       | $ | 1,101,598 |          |   | $ | 859,377 |         |   | $ | 862,197 |        
|                       |                                 |              |           |         |       |   |           |          |   |   |         |        
|Financial liabilities: |                                 |              |           |         |       |   |           |          |   |   |         |         |   |   |         |        
|                       | Deposits                        |              | $         | 868,386 |       |   | $         | 867,820  |   |   | $       | 733,971 |   |   | $       | 734,971 |  
|                       | Junior subordinated debentures  |              |           | 38,250  |       |   |           | 38,521   |   |   |         | 38,250  |   |   |         | 38,412  |  
|                       | Other borrowings                |              |           | 132,900 |       |   |           | 132,880  |   |   |         | 77,800  |   |   |         | 77,800  |  
|                       |                                 |              |           |         |       |   |           |          |   |   |         |        
|Total                  |                                 | $            | 1,039,536 |         |       | $ | 1,039,221 |          |   | $ | 850,021 |         |   | $ | 851,183 |        
|                       |                                 |              |           |         |       |   |           |          |   |   |         |        





|    |                                                  
|--- | -------------------------------------------------
|15. | Financial Instruments with Off-Balance-Sheet Risk



69



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##### Table of Contents



SNB BANCSHARES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|                                                                        |                              |              |   |        |      |  |   |        | 
|----------------------------------------------------------------------- | ---------------------------- | ------------ | - | ------ | ---- |  | - | ------ | 
|                                                                        |                              | December 31, |  
|                                                                        |                              |              |  
|                                                                        |                              | 2004         |   |        | 2003 | 
|                                                                        |                              |              |   |        |      | 
|Financial instruments whose contract amounts represent credit
    risk: |                              |              |   |        |      |  |   |       
|                                                                        | Commitments to extend credit |              | $ | 2,113  |      |  | $ | 66,538 | 
|                                                                        | Standby letters of credit    |              |   | 97,325 |      |  |   | 2,444  | 







|    |                   
|--- | ------------------
|16. | Regulatory Matters







70



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##### Table of Contents



SNB BANCSHARES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|               |                         |                                          |  |             |                   |  |                   |              |       |                     |       |   |        |        |  |  |       |   |  |   |        |  |  |  |       |  
|-------------- | ----------------------- | ---------------------------------------- |  | ----------- | ----------------- |  | ----------------- | ------------ | ----- | ------------------- | ----- | - | ------ | ------ |  |  | ----- | - |  | - | ------ |  |  |  | ----- | -
|               |                         |                                          |  |             |                   |  |                   |              |       | To be Categorized   |      
|               |                         |                                          |  |             |                   |  |                   |              |       | as Well Capitalized |      
|               |                         |                                          |  |             |                   |  |                   | under Prompt |      
|               |                         |                                          |  | For Capital |                   |  | Corrective Action |             
|               |                         | Actual                                   |  |             | Adequacy Purposes |  |                   | Provisions   |      
|               |                         |                                          |  |             |                   |  |                   |              |      
|               |                         | Amount                                   |  |             | Ratio             |  |                   | Amount       |       |                     | Ratio |   |        | Amount |  |  | Ratio |  
|               |                         |                                          |  |             |                   |  |                   |              |       |                     |       |   |        |        |  |  |       |  
|CONSOLIDATED*: |                         |                                          |  |             |                   |  |                   |              |       |                     |       |   |        |        |  |  |       |   |  |   |        |  |  | 
|               | As of December 31, 2004 |                                          |  |             |                   |  |                   |              |       |                     |       |   |        |        |  |  |       |   |  |   |        |  |  |  |      
|               |                         | Total Capital (to Risk-Weighted Assets)  |  | $           | 136,756           |  |                   |              | 19.86 | %                   |       | $ | 55,091 |        |  |  | 8.00  | % |  |   |        |  |  |  |       |  
|               |                         | Tier I Capital (to Risk-Weighted Assets) |  |             | 122,049           |  |                   |              | 17.72 |                     |       |   | 27,545 |        |  |  | 4.00  |   |  |   |        |  |  |  |       |  
|               |                         | Tier I Capital (to Total Assets)         |  |             | 122,049           |  |                   |              | 10.87 |                     |       |   | 44,913 |        |  |  | 4.00  |   |  |   |        |  |  |  |       |  
|               | As of December 31, 2003 |                                          |  |             |                   |  |                   |              |       |                     |       |   |        |        |  |  |       |   |  |   |        |  |  |  |      
|               |                         | Total Capital (to Risk-Weighted Assets)  |  | $           | 75,244            |  |                   |              | 15.35 | %                   |       | $ | 39,214 |        |  |  | 8.00  | % |  |   |        |  |  |  |       |  
|               |                         | Tier I Capital (to Risk-Weighted Assets) |  |             | 43,329            |  |                   |              | 8.84  |                     |       |   | 19,607 |        |  |  | 4.00  |   |  |   |        |  |  |  |       |  
|               |                         | Tier I Capital (to Total Assets)         |  |             | 43,329            |  |                   |              | 5.09  |                     |       |   | 34,027 |        |  |  | 4.00  |   |  |   |        |  |  |  |       |  
|BANK:          |                         |                                          |  |             |                   |  |                   |              |       |                     |       |   |        |        |  |  |       |   |  |   |        |  |  | 
|               | As of December 31, 2004 |                                          |  |             |                   |  |                   |              |       |                     |       |   |        |        |  |  |       |   |  |   |        |  |  |  |      
|               |                         | Total Capital (to Risk-Weighted Assets)  |  | $           | 119,017           |  |                   |              | 17.35 | %                   |       | $ | 54,881 |        |  |  | 8.00  | % |  | $ | 68,601 |  |  |  | 10.00 | %
|               |                         | Tier I Capital (to Risk-Weighted Assets) |  |             | 110,896           |  |                   |              | 16.17 |                     |       |   | 27,440 |        |  |  | 4.00  |   |  |   | 41,161 |  |  |  | 6.00  |  
|               |                         | Tier I Capital (to Total Assets)         |  |             | 110,896           |  |                   |              | 9.89  |                     |       |   | 44,854 |        |  |  | 4.00  |   |  |   | 56,068 |  |  |  | 5.00  |  
|               | As of December 31, 2003 |                                          |  |             |                   |  |                   |              |       |                     |       |   |        |        |  |  |       |   |  |   |        |  |  |  |      
|               |                         | Total Capital (to Risk-Weighted Assets)  |  | $           | 75,227            |  |                   |              | 15.39 | %                   |       | $ | 39,095 |        |  |  | 8.00  | % |  | $ | 48,868 |  |  |  | 10.00 | %
|               |                         | Tier I Capital (to Risk-Weighted Assets) |  |             | 69,577            |  |                   |              | 14.24 |                     |       |   | 19,547 |        |  |  | 4.00  |   |  |   | 29,321 |  |  |  | 6.00  |  
|               |                         | Tier I Capital (to Total Assets)         |  |             | 69,577            |  |                   |              | 8.19  |                     |       |   | 33,966 |        |  |  | 4.00  |   |  |   | 47,457 |  |  |  | 5.00  |  






|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | At December 31, 2004 and December 31, 2003,
    Tier I Capital (for purposes of determining the Tier I
    Capital to Total Assets ratio and the Tier I Capital to
    Risk-Weighted Assets ratio) includes a portion of the trust
    preferred securities as allowed by regulatory capital
    guidelines. Trust Preferred Securities amounts not included
    in Tier I Capital are included in Tier II Capital for
    purposes of determining the Total Capital to Risk-Weighted
    Assets ratio.



71



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SNB BANCSHARES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |                               
|--- | ------------------------------
|17. | Junior Subordinated Debentures



|                       |  |               |           |           |             |   |          |              |  |  |            |  |               |                      |           |                    |       |          |        |  |  |  |           |  |  |  |  | 
|---------------------- |  | ------------- | --------- | --------- | ----------- | - | -------- | ------------ |  |  | ---------- |  | ------------- | -------------------- | --------- | ------------------ | ----- | -------- | ------ |  |  |  | --------- |  |  |  |  | 
|                       |  |               |           | Trust     |             |   | Interest |              |  |  |            |  |               | Junior               |           |                    |      
|                       |  |               |           | Preferred |             |   | Rate at  |              |  |  |            |  |               | Subordinated         |           |                    | Final |         
|                       |  | Issuance and  |           |           | Securities  |   |          | December 31, |  |  | Fixed/     |  | Interest Rate |                      | Debt Owed |                    |       | Maturity |       
|Description            |  | Call Dates(1) |           |           | Outstanding |   |          | 2004         |  |  | Adjustable |  | Basis         |                      | to Trusts |                    |       | Date     |       
|                       |  |               |           |           |             |   |          |              |  |  |            |  |               |                      |           |                    |       |          |       
|SNB Capital Trust I    |  |               | 12/6/2000 |           |             | $ | 7,098    |              |  |  | 10.20%     |  |               | Fixed                |           | N/A                |       | $        | 7,320  |  |  |  | 12/6/2030 | 
|SNB Statutory Trust II |  |               | 3/26/2003 |           |             |   | 10,000   |              |  |  | 5.70%      |  |               | Adjustable Quarterly |           | 3 mo LIBOR + 3.15% |       |          | 10,310 |  |  |  | 3/26/2033 | 
|SNB Capital Trust III  |  |               | 3/27/2003 |           |             |   | 10,000   |              |  |  | 5.22%      |  |               | Adjustable Quarterly |           | 3 mo LIBOR + 3.15% |       |          | 10,310 |  |  |  | 3/27/2033 | 
|SNB Capital Trust IV   |  |               | 9/25/2003 |           |             |   | 10,000   |              |  |  | 5.55%      |  |               | Adjustable Quarterly |           | 3 mo LIBOR + 3.00% |       |          | 10,310 |  |  |  | 9/25/2033 | 






|    |                                                                                                            
|--- | -----------------------------------------------------------------------------------------------------------
|(1) | Each issue of junior subordinated debentures is callable by us
    after five years from the issuance date.





Consolidation of Variable Interest Entities.


72



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SNB BANCSHARES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |                                         
|--- | ----------------------------------------
|18. | Parent Company Only Financial Statements

SNB BANCSHARES, INC.


(Parent Company Only)


BALANCE SHEETS


|                                     |                                                                                                                               |                            |         |        |              |         |        |        |        |        | 
|------------------------------------ | ----------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------- | ------ | ------------ | ------- | ------ | ------ | ------ | ------ | 
|                                     |                                                                                                                               | December 31,               |         |        | December 31, |        
|                                     |                                                                                                                               | 2004                       |         |        | 2003         |        
|                                     |                                                                                                                               |                            |         |        |              |        
|                                     |                                                                                                                               | (In thousands)             |        
|ASSETS                              
|Cash and cash equivalents            |                                                                                                                               | $                          | 17,369  |        |              | $       | 217    |       
|Investment in subsidiaries           |                                                                                                                               |                            | 107,822 |        |              |         | 69,055 |       
|Accrued interest receivable          |                                                                                                                               |                            | 26      |        |              |         | 25     |       
|Other assets                         |                                                                                                                               |                            | 347     |        |              |         | 553    |       
|                                     |                                                                                                                               |                            |         |        |              |        
|TOTAL                                |                                                                                                                               | $                          | 125,564 |        |              | $       | 69,850 |       
|                                     |                                                                                                                               |                            |         |        |              |        
|                                    
|LIABILITIES AND SHAREHOLDERS EQUITY
|LIABILITIES:                         |                                                                                                                               |                            |         |        |              |         |        |       
|                                     | Junior subordinated debentures                                                                                                |                            | $       | 38,250 |              |         | $      | 38,250 |       
|                                     | Accrued interest payable                                                                                                      |                            |         | 858    |              |         |        | 833    |       
|                                     | Other liabilities                                                                                                             |                            |         | 55     |              |         |        |       |       
|                                     |                                                                                                                               |                            |         |        |              |        
|                                     |                                                                                                                               | Total liabilities          |         |        | 39,163       |         |        |        | 39,083 |       
|                                     |                                                                                                                               |                            |         |        |              |        
|SHAREHOLDERS EQUITY                 |                                                                                                                               |                            |         |        |              |         |        |       
|                                     | Capital stock                                                                                                                 |                            |         | 125    |              |         |        | 70     |       
|                                     | Capital surplus                                                                                                               |                            |         | 66,173 |              |         |        | 13,974 |       
|                                     | Accumulated other comprehensive income (loss)  net
    unrealized losses on available-for-sale securities 
    net of taxes |                            |         | (4,315 | )            |         |        | (1,748 | )     
|                                     | Retained earnings                                                                                                             |                            |         | 24,418 |              |         |        | 18,471 |       
|                                     |                                                                                                                               |                            |         |        |              |        
|                                     |                                                                                                                               | Total shareholders equity |         |        | 86,401       |         |        |        | 30,767 |       
|                                     |                                                                                                                               |                            |         |        |              |        
|                                     |                                                                                                                               |                            | TOTAL   |        | $            | 125,564 |        |        | $      | 69,850 | 
|                                     |                                                                                                                               |                            |         |        |              |        

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SNB BANCSHARES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


SNB BANCSHARES, INC.


(Parent Company Only)


STATEMENTS OF INCOME


|                                               |                                |                           |       |       |       |   |       |       |       |   |       |       |       | 
|---------------------------------------------- | ------------------------------ | ------------------------- | ----- | ----- | ----- | - | ----- | ----- | ----- | - | ----- | ----- | ----- | 
|                                               |                                | For the Years Ended       |      
|                                               |                                | December 31,              |      
|                                               |                                |                           |      
|                                               |                                | 2004                      |       |       | 2003  |   |       | 2002  |      
|                                               |                                |                           |       |       |       |   |       |       |      
|                                               |                                | (In thousands)            |      
|INTEREST INCOME:                               |                                |                           |       |       |       |   |       |       |       |   |       |      
|                                               | Securities                     |                           | $     | 67    |       |   | $     | 47    |       |   | $     | 22    |      
|                                               | Dividend income                |                           |       | 1,497 |       |   |       | 1,600 |       |   |       | 1,900 |      
|                                               |                                |                           |       |       |       |   |       |       |      
|                                               |                                | Total interest income     |       |       | 1,564 |   |       |       | 1,647 |   |       |       | 1,922 | 
|                                               |                                |                           |       |       |       |   |       |       |      
|INTEREST EXPENSE:                              |                                |                           |       |       |       |   |       |       |       |   |       |      
|                                               | Other borrowings               |                           |       | 2,195 |       |   |       | 1,609 |       |   |       | 1,018 |      
|                                               |                                |                           |       |       |       |   |       |       |      
|                                               |                                | Total interest expense    |       |       | 2,195 |   |       |       | 1,609 |   |       |       | 1,018 | 
|                                               |                                |                           |       |       |       |   |       |       |      
|NET INTEREST (LOSS) INCOME                     |                                |                           | (631  | )     |       |   | 38    |       |       |   | 904   |      
|NONINTEREST EXPENSE:                           |                                |                           |       |       |       |   |       |       |       |   |       |      
|                                               | Salaries and employee benefits |                           |       | 371   |       |   |       | 264   |       |   |       | 214   |      
|                                               | Net occupancy expense          |                           |       | 63    |       |   |       | 46    |       |   |       | 35    |      
|                                               | Other                          |                           |       | 291   |       |   |       | 114   |       |   |       | 65    |      
|                                               |                                |                           |       |       |       |   |       |       |      
|                                               |                                | Total noninterest expense |       |       | 725   |   |       |       | 424   |   |       |       | 314   | 
|                                               |                                |                           |       |       |       |   |       |       |      
|EQUITY IN UNDISTRIBUTED EARNINGS OF SUBSIDIARY |                                |                           | 6,333 |       |       |   | 3,128 |       |       |   | 2,127 |      
|                                               |                                |                           |       |       |       |   |       |       |      
|EARNINGS BEFORE INCOME TAXES                   |                                |                           | 4,977 |       |       |   | 2,742 |       |       |   | 2,717 |      
|PROVISION (BENEFIT) FOR INCOME TAXES           |                                |                           | (970  | )     |       |   | (675  | )     |       |   | (445  | )    
|                                               |                                |                           |       |       |       |   |       |       |      
|NET EARNINGS                                   |                                | $                         | 5,947 |       |       | $ | 3,417 |       |       | $ | 3,162 |      
|                                               |                                |                           |       |       |       |   |       |       |      

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SNB BANCSHARES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


SNB BANCSHARES, INC.


(Parent Company Only)


STATEMENTS OF CASH FLOWS


|                                         |                                                                                                   |                                         |                                                     |         |      |        |     |         |      |     |     |         |    |       |  
|---------------------------------------- | ------------------------------------------------------------------------------------------------- | --------------------------------------- | --------------------------------------------------- | ------- | ---- | ------ | --- | ------- | ---- | --- | --- | ------- | -- | ----- | -
|                                         |                                                                                                   | Year Ended December 31,                 |                                                    
|                                         |                                                                                                   |                                         |                                                    
|                                         |                                                                                                   | 2004                                    |                                                     |         | 2003 |        |     | 2002    |     
|                                         |                                                                                                   |                                         |                                                     |         |      |        |     |         |     
|                                         |                                                                                                   | (In thousands)                          |                                                    
|CASH FLOWS FROM OPERATING ACTIVITIES:    |                                                                                                   |                                         |                                                     |         |      |        |     |         |      |     |     |        
|                                         | Net Earnings                                                                                      |                                         | $                                                   | 5,947   |      |        | $   | 3,417   |      |     | $   | 3,162   |   
|                                         | Equity in undistributed earnings of subsidiaries                                                  |                                         |                                                     | (6,333  | )    |        |     | (3,128  | )    |     |     | (2,127  | ) 
|                                         | Adjustments to reconcile net earnings to net cash provided by
    (used in) operating activities: |                                         |                                                     |         |      |        |     |         |      |     |     |         |   
|                                         |                                                                                                   | Increase in accrued interest receivable |                                                     |         | (1   | )      |     |         | (3   | )   |     |         | (5 | )    
|                                         |                                                                                                   | Decrease (increase) in other assets     |                                                     |         | 205  |        |     |         | (440 | )   |     |         | 4  |      
|                                         |                                                                                                   | Increase in accrued interest payable    |                                                     |         | 25   |        |     |         | 100  |     |     |         |   |      
|                                         |                                                                                                   | Increase in other liabilities           |                                                     |         | 55   |        |     |         |     |     |     |         |   |      
|                                         |                                                                                                   |                                         |                                                     |         |      |        |     |         |     
|                                         |                                                                                                   |                                         | Net cash provided by (used in) operating activities |         |      | (102   | )   |         |      | (54 | )   |         |    | 1,034 |  
|                                         |                                                                                                   |                                         |                                                     |         |      |        |     |         |     
|CASH FLOWS FROM FINANCING ACTIVITIES:    |                                                                                                   |                                         |                                                     |         |      |        |     |         |      |     |     |        
|                                         | Net decrease in other borrowings                                                                  |                                         |                                                     |        |      |        |     | (7,080  | )    |     |     | (940    | ) 
|                                         | Capital contribution to subsidiaries                                                              |                                         |                                                     | (35,000 | )    |        |     | (23,735 | )    |     |     | (14,002 | ) 
|                                         | Issuance of junior subordinated debentures                                                        |                                         |                                                     |        |      |        |     | 30,930  |      |     |     |        |   
|                                         | Proceeds from sale of common stock                                                                |                                         |                                                     | 52,254  |      |        |     |        |      |     |     | 14,002  |   
|                                         |                                                                                                   |                                         |                                                     |         |      |        |     |         |     
|                                         |                                                                                                   |                                         | Net cash provided by (used in) financing activities |         |      | 17,254 |     |         |      | 115 |     |         |    | (940  | )
|                                         |                                                                                                   |                                         |                                                     |         |      |        |     |         |     
|DECREASE IN CASH AND CASH EQUIVALENTS    |                                                                                                   |                                         | 17,152                                              |         |      |        | 61  |         |      |     | 94  |        
|CASH AND EQUIVALENTS  Beginning of year |                                                                                                   |                                         | 217                                                 |         |      |        | 156 |         |      |     | 62  |        
|                                         |                                                                                                   |                                         |                                                     |         |      |        |     |         |     
|CASH AND EQUIVALENTS  End of period     |                                                                                                   | $                                       | 17,369                                              |         |      | $      | 217 |         |      | $   | 156 |        
|                                         |                                                                                                   |                                         |                                                     |         |      |        |     |         |     



|    |                              
|--- | -----------------------------
|19. | Subsequent Events (unaudited)



75



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INDEX TO EXHIBITS


|          |    |             |  |                                                                                                                                                                                                                        
|--------- | -- | ----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit   |    |            
|Number(1) |    | Description
|          |    |            
|          | 3  | .1          |  | Amended and Restated Articles of Incorporation of the Company
    (incorporated herein by reference to Exhibit 3.1 to the
    Companys Registration Statement on Form S-1
    (Registration No. 333-116366)).         
|         
|          | 3  | .2          |  | Amended and Restated Bylaws of the Company (incorporated herein
    by reference to Exhibit 3.2 to the Companys
    Registration Statement on Form S-1 (Registration
    No. 333-116366)).                            
|         
|          | 4  | .1          |  | Specimen Certificate Representing Shares of the Companys
    Common Stock (incorporated herein by reference to
    Exhibit 4.1 to the Companys Registration Statement on
    Form S-1 (Registration No. 333-116366)).
|         
|          | 10 | .1         |  | SNB Bancshares, Inc. 2002 Stock Option Plan, as amended and
    restated (incorporated herein by reference to Exhibit 10.1
    to the Companys Registration Statement on Form S-1
    (Registration No. 333-116366)). 
|         
|          | 10 | .2         |  | Employment Agreement between the Company and Harvey E. Zinn
    (incorporated herein by reference to Exhibit 10.2 to the
    Companys Registration Statement on Form S-1
    (Registration No. 333-116366)).          
|         
|          | 10 | .3         |  | Employment Agreement between the Company and Dan
    Agnew(incorporated herein by reference to Exhibit 10.3 to
    the Companys Registration Statement on Form S-1
    (Registration No. 333-116366)).                
|         
|          | 10 | .4         |  | Employment Agreement between the Company and R. Darrell Brewer
    (incorporated herein by reference to Exhibit 10.4 to the
    Companys Registration Statement on Form S-1
    (Registration No. 333-116366)).       
|         
|          | 21 | .1          |  | Subsidiaries of SNB Bancshares, Inc. (incorporated herein by
    reference to Exhibit 10.4 to the Companys
    Registration Statement on Form S-1 (Registration
    No. 333-116366)).                                 
|         
|          | 23 | .1*         |  | Consent of Deloitte & Touche LLP                                                                                                                                                                                       
|         
|          | 31 | .1*         |  | Certification of the Chief Executive Officer pursuant to
    Rule 13a-14(a) of the Securities Exchange Act of 1934, as
    amended                                                                                     
|         
|          | 31 | .2*         |  | Certification of the Chief Financial Officer pursuant to
    Rule 13a-14(a) of the Securities Exchange Act of 1934, as
    amended                                                                                     
|         
|          | 32 | .1**        |  | Certification of the Chief Executive Officer pursuant to
    18 U.S.C. Section 1350, adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002                                                             
|          | 32 | .2**        |  | Certification of the Chief Financial Officer pursuant to
    18 U.S.C. Section 1350, adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002                                                             






|  |                                            
|- | -------------------------------------------
|* | Filed with this Annual Report on Form 10-K.



|   |                                                
|-- | -----------------------------------------------
|** | Furnished with this Annual Report on Form 10-K.



|  |                                                         
|- | --------------------------------------------------------
| | Management contract or compensatory plan or arrangement.



|    |                                                                                                                                                                                                                                             
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The Company has other long-term debt agreements that meet the
    exclusion set forth in Section 601(b)(4)(iii)(A) of
    Regulation S-K. The Company hereby agrees to furnish a copy
    of such agreements to the Commission upon request.