FIRST
CENTURY BANCORP. AND SUBSIDIARY


GAINESVILLE,
GEORGIA








CONSOLIDATED
FINANCIAL STATEMENTS AS OF


DECEMBER
31, 2007 AND 2006 AND


REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




















FIRST
CENTURY BANCORP. AND SUBSIDIARY








CONTENTS








Report
      of Independent Registered Public Accounting Firm
            1Consolidated
      Balance Sheets
            2Consolidated
      Statements of Operations
            4Consolidated
      Statements of Comprehensive Income (Loss)
            5Consolidated
      Statements of Changes in Stockholders’ Equity
            6Consolidated
      Statements of Cash Flows
            7Notes
      to Consolidated Financial Statements
            8


McNair,
McLemore, Middlebrooks & Co., LLP


CERTIFIED
PUBLIC ACCOUNTANTS


389
Mulberry Street • Post Office Box One • Macon, GA 31202


Telephone
(478) 746-6277 • Facsimile (478) 743-6858


www.mmmcpa.com


RALPH S.
McLEMORE, SR., CPA (1902-1981)


SIDNEY
B. McNAIR, CPA (1913-1992)





SIDNEY
      E. MIDDLEBROOKS, CPA, PC
            RICHARD
      A. WHITTEN, JR., CPARAY
      C. PEARSON, CPA
            ELIZABETH
      WARE HARDIN, CPAJ.
      RANDOLPH NICHOLS, CPA
            CAROLINE
      E. GRIFFIN, CPAWILLIAM
      H. EPPS, JR., CPA
            RONNIE
      K. GILBERT, CPARAYMOND
      A. PIPPIN, JR., CPA
            RON
      C. DOUTHIT, CPAJERRY
      A. WOLFE, CPA
            CHARLES
      A. FLETCHER, CPAW.
      E. BARFIELD, JR., CPA
            MARJORIE
      HUCKABEE CARTER, CPAHOWARD
      S. HOLLEMAN, CPA
            BRYAN
      A. ISGETT, CPAF.
      GAY McMICHAEL, CPA
            DAVID
      PASCHAL MUSE, JR., CPA





March 31,
2008





REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





The Board
of Directors and Stockholders


First
Century Bancorp.





We have
audited the accompanying consolidated balance sheets of First Century Bancorp. and
Subsidiary as of December 31, 2007, and 2006 and the related consolidated
statements of operations, comprehensive income (loss), changes in stockholders’
equity and cash flows for the years then ended.  These consolidated
financial statements are the responsibility of the Company’s
management.  Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.





We
conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation.  We believe that our audits provide a reasonable basis
for our opinion.





In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of First Century Bancorp. and
Subsidiary as of December 31, 2007 and 2006, and the results of its operations
and its cash flows for the years then ended, in conformity with accounting
principles generally accepted in the United States of America.





We were
not engaged to examine management’s assertion about the effectiveness of First
Century Bancorp’s internal control over financial reporting as of December 31,
2007 included in the Management’s Report on Internal Control Over Financial
Reporting and, accordingly, we do not express an opinion thereon.








Company
NameDate
              By:
              /s/ McNair,
      McLemore, Middlebrooks & Co., LLPMcNAIR,
      McLEMORE, MIDDLEBROOKS & CO., LLP




- 1
-


FIRST
CENTURY BANCORP. AND SUBSIDIARY


CONSOLIDATED
BALANCE SHEETS


DECEMBER
31








ASSETS2007
            
            
            2006Cash
      and Cash EquivalentsCash
      and Due from Banks
            
            $
            2,111,446
            
            
            $
            496,476Federal
      Funds Sold
            
            
            6,238,000
            
            
            
            841,0008,349,446
            
            
            
            1,337,476Investment
      Securities Available for Sale, at Fair Value
            
            
            8,404,238
            
            
            
            9,070,829Other
      Investments
            
            
            402,770
            
            
            
            321,320Loans
            
            
            19,305,101
            
            
            
            20,363,719Allowance
      for Loan Losses
            
            
            (275,920
            )
            
            
            (445,629
            )19,029,181
            
            
            
            19,918,090Premises
      and Equipment
            
            
            2,122,763
            
            
            
            2,204,839Other
      Real Estate
            
            
            98,343
            
            
            
            96,500Other
      Assets
            
            
            244,721
            
            
            
            295,099Total
      Assets
            
            $
            38,651,462
            
            
            $
            33,244,153








The
accompanying notes are an integral part of these consolidated balance
sheets.


- 2
-




FIRST
      CENTURY BANCORP. AND SUBSIDIARYCONSOLIDATED
      BALANCE SHEETSDECEMBER
      31LIABILITIES
      AND STOCKHOLDERS’ EQUITY2007
            
            
            2006DepositsNoninterest-Bearing
            
            
            1,566,488
            
            
            $
            1,644,701Interest-Bearing
            
            
            29,439,470
            
            
            
            26,577,40531,005,958
            
            
            
            28,222,106Borrowings
            
            
            4,000,000
            
            
            
            2,000,000Other
      Liabilities
            
            
            151,816
            
            
            
            168,994CommitmentsStockholders’
      EquityPreferred
      Stock, No Par Value; 10,000,000 SharesAuthorized;
      75,000 and 35,000 Shares Issued and Outstanding in 2007 and 2006,
      Respectively
            
            
            750,000
            
            
            
            350,000Common
      Stock, No Par Value; 50,000,000 Shares Authorized; 1,732,458 and 993,560
      Shares Issued and Outstanding in 2007 and 2006,
    Respectively
            
            
            10,311,206
            
            
            
            8,450,049Accumulated
      Deficit
            
            
            (7,559,873
            )
            
            
            (5,813,847
            )Accumulated
      Other Comprehensive Loss
            
            
            (7,645
            )
            
            
            (133,149
            )3,493,688
            
            
            
            2,853,053Total
      Liabilities and Stockholders’ Equity
            
            
            38,651,462
            
            
            $
            33,244,153








The
accompanying notes are an integral part of these consolidated balance
sheets.


- 3
-


FIRST
CENTURY BANCORP. AND SUBSIDIARY


CONSOLIDATED
STATEMENTS OF OPERATIONS


FOR
THE YEARS ENDED DECEMBER 31





2007
            
            
            2006Interest
      IncomeLoans,
      Including Fees
            
            $
            1,634,711
            
            
            $
            2,067,949Investments
            
            
            416,533
            
            
            
            364,461Federal
      Funds Sold
            
            
            143,398
            
            
            
            49,721Interest
      Bearing Deposits
            
            
            22,636
            
            
            
            9,3812,217,278
            
            
            
            2,491,512Interest
      ExpenseDeposits
            
            
            1,301,153
            
            
            
            1,270,168Borrowings
            
            
            143,024
            
            
            
            76,162Federal
      Funds Purchased
            
            
            9,139
            
            
            
            1,1041,453,316
            
            
            
            1,347,434Net
      Interest Income
            
            
            763,962
            
            
            
            1,144,078Provision
      for Loan Losses
            
            
            115,199
            
            
            
            -Net
      Interest Income After Provision for Loan Losses
            
            
            648,763
            
            
            
            1,144,078Noninterest
      IncomeService
      Charges on Deposits
            
            
            21,664
            
            
            
            61,268Mortgage
      Origination and Processing Fees
            
            
            -
            
            
            
            10,125Other
            
            
            38,501
            
            
            
            14,52360,165
            
            
            
            85,916Noninterest
      ExpensesSalaries
      and Employee Benefits
            
            
            1,161,072
            
            
            
            942,572Occupancy
      and Equipment
            
            
            356,737
            
            
            
            338,601Professional
      Fees
            
            
            351,996
            
            
            
            369,389Other
            
            
            585,149
            
            
            
            736,5462,454,954
            
            
            
            2,387,108Loss
      Before Income Taxes
            
            
            (1,746,026
            )
            
            
            (1,157,114
            )Income
      Taxes
            
            
            -
            
            
            
            -Net
      Loss
            
            $
            (1,746,026
            )
            
            $
            (1,157,114
            )Basic
      Loss Per Share
            
            $
            (1.16
            )
            
            $
            (1.16
            )Weighted
      Average Shares Outstanding
            
            
            1,503,383
            
            
            
            993,423





The
accompanying notes are an integral part of these consolidated
statements.


- 4
-


FIRST
CENTURY BANCORP. AND SUBSIDIARY


CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME (LOSS)


DECEMBER
31





2007
            
            
            2006Net
      Loss
            
            $
            (1,746,027
            )
            
            $
            (1,157,114
            )Other
      Comprehensive Income (Loss)Unrealized
      Gains on Securities Arising During the Year
            
            
            125,504
            
            
            
            40,123Reclassification
      Adjustment
            
            
            -
            
            
            
            -Net
      Change in Unrealized Gains on Securities
            
            
            125,504
            
            
            
            40,123Comprehensive
      Loss
            
            $
            (1,620,523
            )
            
            $
            (1,116,991
            )





The
accompanying notes are an integral part of these consolidated
statements.


- 5
-


FIRST
CENTURY BANCORP. AND SUBSIDIARY


CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY


FOR
THE YEARS ENDED DECEMBER 31, 2007 AND 2006








AccumulatedPreferred
      Stock
            
            
            Common
      Stock
            
            
            Accumulated
            
            
            ComprehensiveShares
            
            
            Amount
            
            
            Shares
            
            
            Amount
            
            
            Deficit
            
            
            Income
      (Loss)
            
            
            TotalBalance,
      December 31, 2005
            
            
            -
            
            
            $
            -
            
            
            
            991,560
            
            
            $
            8,603,888
            
            
            $
            (4,656,733
            )
            
            $
            (173,272
            )
            
            $
            3,773,883Issuance
      of Common Stock
            
            
            -
            
            
            
            -
            
            
            
            2,000
            
            
            
            8,000
            
            
            
            -
            
            
            
            -
            
            
            
            8,000Issuance
      of Preferred Stock
            
            
            35,000
            
            
            
            350,000
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            350,000Common
      Stock Issuance Costs
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (193,399
            )
            
            
            -
            
            
            
            -
            
            
            
            (193,399
            )Stock
      Compensation Costs
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            31,560
            
            
            
            -
            
            
            
            -
            
            
            
            31,560Net
      Change in Unrealized Gain on Securities Available for Sale
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            40,123
            
            
            
            40,123Net
      Loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (1,157,114
            )
            
            
            -
            
            
            
            (1,157,114
            )Balance,
      December 31, 2006
            
            
            35,000
            
            
            
            350,000
            
            
            
            993,560
            
            
            
            8,450,049
            
            
            
            (5,813,847
            )
            
            
            (133,149
            )
            
            
            2,853,053Issuance
      of Common Stock
            
            
            -
            
            
            
            -
            
            
            
            738,898
            
            
            
            2,002,002
            
            
            
            -
            
            
            
            -
            
            
            
            2,002,002Issuance
      of Preferred Stock
            
            
            75,000
            
            
            
            750,000
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            750,000Redemption
      of Preferred Stock
            
            
            (35,000
            )
            
            
            (350,000
            )
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (350,000
            )Common
      Stock Issuance Costs
            
            
            -
            
            
            
            -
            
            
            
            
            
            
            
            (169,045
            )
            
            
            -
            
            
            
            -
            
            
            
            (169,045
            )Stock
      Compensation Costs
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            28,200
            
            
            
            -
            
            
            
            -
            
            
            
            28,200Net
      Change in Unrealized Gain on Securities Available for Sale
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            125,504
            
            
            
            125,504Net
      Loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (1,746,026
            )
            
            
            -
            
            
            
            (1,746,026
            )Balance,
      December 31, 2007
            
            
            75,000
            
            
            $
            750,000
            
            
            
            1,732,458
            
            
            $
            10,311,206
            
            
            $
            (7,559,873
            )
            
            $
            (7,645
            )
            
            $
            3,493,688





The
accompanying notes are an integral part of these consolidated
statements.


- 6
-





FIRST
CENTURY BANCORP. AND SUBSIDIARY


CONSOLIDATED
STATEMENTS OF CASH FLOWS


FOR
THE YEARS ENDED DECEMBER 31








2007
            
            
            2006Cash
      Flows from Operating ActivitiesNet
      Loss
            
            $
            (1,746,026
            )
            
            $
            (1,157,114
            )Adjustments
      to Reconcile Net Loss toNet
      Cash Used by Operating ActivitiesProvision
      for Loan Losses
            
            
            115,199
            
            
            
            -Provision
      for Losses on Other Real Estate
            
            
            -
            
            
            
            208,995Depreciation,
      Amortization and Accretion
            
            
            164,783
            
            
            
            186,546Gain
      on Sale of Other Assets
            
            
            23,514
            
            
            
            -Loss
      on Sale of Other Real Estate
            
            
            25,725
            
            
            
            13,127Loss
      on Sale of Bank Vehicle
            
            
            -
            
            
            
            1,304Stock
      Compensation Expense
            
            
            28,200
            
            
            
            31,560Change
      InOther
      Assets
            
            
            37,244
            
            
            
            (47,635
            )Other
      Liabilities
            
            
            (17,178
            )
            
            
            3,760(1,368,539
            )
            
            
            (759,457
            )Cash
      Flows from Investing ActivitiesPurchases
      of Investment Securities Available for Sale
            
            
            (971,061
            )
            
            
            (1,911,269
            )Proceeds
      from Maturities, Calls and Paydowns ofInvestment
      Securities Available for Sale
            
            
            1,765,706
            
            
            
            1,299,937Purchases
      of Other Investments
            
            
            (119,150
            )
            
            
            (90,000
            )Proceeds
      from the Sale of Other Investments
            
            
            37,700
            
            
            
            38,800Net
      Change in Loans
            
            
            609,136
            
            
            
            4,240,269Proceeds
      from the Sale of Other Real Estate
            
            
            137,006
            
            
            
            1,170,873Proceeds
      from the Sale of Bank Vehicle
            
            
            -
            
            
            
            3,000Purchases
      of Premises and Equipment
            
            
            (95,637
            )
            
            
            (64,426
            )1,363,700
            
            
            
            4,687,184Cash
      Flows from Financing ActivitiesNet
      Change in Deposits
            
            
            2,783,852
            
            
            
            (5,720,076
            )Payment
      of Stock Issuance Costs
            
            
            (169,045
            )
            
            
            (3,556
            )Proceeds
      from Borrowings
            
            
            2,000,000
            
            
            
            2,000,000Redemption
      of Preferred Stock
            
            
            (350,000
            )
            
            
            -Proceeds
      from Issuance of Preferred Stock
            
            
            750,000
            
            
            
            350,000Proceeds
      from the Issuance of Common Stock
            
            
            2,002,002
            
            
            
            8,0007,016,809
            
            
            
            (3,365,632
            )Net
      Increase (Decrease) in Cash and Cash Equivalents
            
            
            7,011,970
            
            
            
            562,095Cash
      and Cash Equivalents, Beginning
            
            
            1,337,476
            
            
            
            775,381Cash
      and Cash Equivalents, Ending
            
            $
            8,349,446
            
            
            $
            1,337,476





The
accompanying notes are an integral part of these consolidated
statements.


- 7
-


FIRST
CENTURY BANCORP. AND SUBSIDIARY





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS





(1)
              Summary
      of Significant Accounting Policies


Principles
of Consolidation





The
consolidated financial statements include the accounts of First Century Bancorp.
(the Company) and its wholly-owned subsidiary, First Century Bank, National
Association (the Bank).  On September 20, 2007, the Company changed
its name from NBOG Bancorporation, Inc. to First Century Bancorp.  The
Bank’s name was also changed from The National Bank of Gainesville to First
Century Bank, National Association.  All significant intercompany
balances and transactions have been eliminated in consolidation.





Nature
of Operations





The Bank
provides a variety of retail and commercial banking services for consumers and
small businesses located primarily in the Gainesville, Georgia
area.  Lending and investing activities are funded primarily by
deposits gathered through its banking office.  The Bank commenced
operations on March 25, 2002.





Use
of Estimates





In
preparing the consolidated financial statements in conformity with generally
accepted accounting principles, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities as of the
date of the balance sheet and reported amounts of revenues and expenses during
the reporting period.  Actual results could differ from those
estimates.  Material estimates that are particularly susceptible to
significant change in the near term relate to the determination of the allowance
for loan losses, the valuation of real estate acquired in connection with
foreclosures or in satisfaction of loans and the valuation of deferred tax
assets.





Concentrations
of Credit Risk





Lending
is concentrated in mortgage, commercial and consumer loans to local
borrowers.  In management's opinion, although the Bank has a high
concentration of real estate loans, these loans are well collateralized and do
not pose an adverse credit risk.  In addition, the balance of the loan
portfolio is sufficiently diversified to avoid significant concentration of
credit risk.





The
success of the Bank is dependent, to a certain extent, upon the economic
conditions in the geographic markets it serves.  No assurance can be
given that the current economic conditions will continue.  Adverse
changes in the economic conditions in these geographic markets would likely have
a material detrimental effect on the Bank's results of operations and financial
condition.  The operating results of the Bank depend primarily on its
net interest income.  Accordingly, operations are subject to risks and
uncertainties surrounding the exposure to changes in the interest rate
environment.





At times,
the Bank may have cash and cash equivalents at financial institutions in excess
of insured limits.  The Bank places its cash and cash equivalents with
high credit quality financial institutions whose credit rating is monitored by
management to minimize credit risk.


- 8
-




(1)
              Summary
      of Significant Accounting Policies
(Continued)




Investment
Securities





Investment
securities are recorded under the provisions of Statement of Financial
Accounting Standards (SFAS) No. 115, whereby the Bank may classify its
securities as trading, available for sale or held to
maturity.  Trading securities are purchased and held for sale in the
near term.  Securities held to maturity are those which the Bank has
the ability and intent to hold until maturity.  All other securities
not classified as trading or held to maturity are considered available for
sale.  As of December 31, 2007 and 2006, all investment securities are
classified as available for sale.





Securities
available for sale are reported at estimated fair value.  Unrealized
gains and losses on securities available for sale are excluded from earnings and
are reported in accumulated other comprehensive income (loss), a component of
stockholders’ equity.  Gains and losses from sales of securities
available for sale are computed using the specific identification
method.  Securities available for sale may be sold to meet liquidity
needs arising from unanticipated deposit and loan fluctuations, changes in
regulatory capital requirements or unforeseen changes in market
conditions.  Premiums and discounts are recognized in interest income
using the interest method over the period to maturity.





Declines
in the fair value of individual securities available for sale below their cost
that are deemed to be other than temporary are reflected in earnings as realized
losses.  In estimating other than temporary impairment losses,
management considers (1) the length of time and the extent to which the fair
value has been less than cost, (2) the financial condition and near-term
prospects of the issuer and (3) the intent and ability of the Bank to retain its
investment in the issuer for a period of time sufficient to allow for any
anticipated recovery in fair value.





Other
Investments





Other
investments include equity securities with no readily determinable fair value.
These investments are carried at cost.





Loans





Loans
that the Bank has the ability and intent to hold for the foreseeable future or
until maturity are recorded at their principal amount outstanding, net of
unearned interest and fees.  Interest income on loans is recognized
using the effective interest method.





A loan is
considered to be delinquent when payments have not been made according to
contractual terms, typically evidenced by nonpayment of a monthly installment by
the due date.





When
management believes there is sufficient doubt as to the collectibility of
principal or interest on any loan, the accrual of applicable interest is
discontinued and the loan is designated as nonaccrual, unless the loan is well
secured and in the process of collection.  Interest payments received
on nonaccrual loans are either applied against principal or reported as income,
according to management’s judgment as to the collectibility of
principal.  Loans are returned to an accrual status when factors
indicating doubtful collectibility on a timely basis no longer
exist.


- 9
-


(1)
                Summary
      of Significant Accounting Policies
(Continued)


Allowance
for Loan Losses





The
allowance for loan losses is established as losses are estimated to have
occurred through a provision for loan losses charged to
earnings.  Loan losses are charged against the allowance when
management believes the uncollectibility of a loan balance is
confirmed.  Subsequent recoveries, if any, are credited to the
allowance.





The
allowance for loan losses is evaluated on a regular basis by management and is
based upon management’s periodic review of the collectibility of the loans in
light of historical experience, the nature and volume of the loan portfolio,
adverse situations that may affect the borrower’s ability to repay, estimated
value of any underlying collateral and prevailing economic
conditions.  This evaluation is inherently subjective, as it requires
estimates that are susceptible to significant revisions as more information
becomes available.





The
allowance consists of specific, general and unallocated
components.  The specific component relates to specific individual
loans that are classified as impaired.  Specific allowances on
impaired loans are measured by either the present value of expected future cash
flows discounted at the loan’s effective interest rate, the loan’s observable
market price or the fair value of the collateral if the loan is collateral
dependent.  The general component covers nonclassified loans and is
based on historical loss experience adjusted for qualitative
factors.  An unallocated component is maintained to cover
uncertainties that could affect management’s estimate of probable
losses.  The unallocated component of the allowance reflects the
margin of imprecision inherent in the underlying assumptions used in the
methodologies for estimating specific and general losses in the
portfolio.





A loan is
considered impaired when, based on current information and events, it is
probable that the Bank will be unable to collect the scheduled payments of
principal or interest when due according to the contractual terms of the loan
agreement.  Factors considered by management in determining impairment
include payment status, collateral value and the probability of collecting
scheduled principal and interest payments when due.  Loans that
experience insignificant payment delays and payment shortfalls generally are not
classified as impaired.  Management determines the significance of
payment delays and payment shortfalls on a case-by-case basis, taking into
consideration all of the circumstances surrounding the loan and the borrower,
including the length of the delay, the reasons for the delay, the borrower’s
prior payment record and the amount of the shortfall in relation to the
principal and interest owed.  Impairment is measured on a loan-by-loan
basis by either the present value of expected future cash flows discounted at
the loan’s effective interest rate, the loan’s obtainable market price or the
fair value of the collateral if the loan is collateral dependent.





Off-Balance
Sheet Credit Related Financial Instruments





In the
ordinary course of business, the Bank has entered into commitments to extend
credit, including commitments under standby letters of credit.  Such
financial instruments are recorded when they are funded.





- 10
-




(1)
              Summary
      of Significant Accounting Policies
(Continued)




Premises
and Equipment





Premises
and equipment are carried at cost less accumulated
depreciation.  Depreciation of premises and equipment is provided over
the estimated useful lives of the respective assets utilizing the straight-line
method.  Premises and equipment that are still undergoing development
and have not been placed in service are classified as construction in process
and are not depreciated.  Expenditures for major renewals and
betterments are capitalized and those for maintenance and repairs are charged to
income as incurred.  When premises and equipment are retired or sold,
the cost and accumulated depreciation are removed from their respective accounts
and any gain or loss is reflected in other income or expense.





Other
Real Estate





Other
real estate owned represents property acquired through
foreclosure.  Properties are carried at the lower of cost or current
appraisal values.  Losses from the acquisition of property in full or
partial satisfaction of debt are recorded as loan losses.  Subsequent
declines in value, routine holding costs and gains or losses upon disposition
are included in other expense.





Transfers
of Financial Assets





Transfers
of financial assets are accounted for as sales, when control over the asset has
been surrendered.  Control over transferred assets is deemed to be
surrendered when (1) the assets have been isolated from the Company, (2) the
transferee obtains the right (free of conditions that constrain it from taking
advantage of that right) to pledge or exchange the transferred assets, and (3)
the Company does not maintain effective control over the transferred assets
through an agreement to repurchase them before their maturity.





Advertising
Costs





The
Company expenses the costs of advertising in the periods in which those costs
are incurred.





Income
Taxes





The
Company accounts for income taxes under the liability
method.  Accordingly, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit
carryforwards.  Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or
settled.  The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in earnings in the period that includes the
enactment date.





In the
event the future tax consequences of differences between the financial reporting
bases and the tax bases of the assets and liabilities result in deferred tax
assets, an evaluation of the probability of being able to realize the future
benefits indicated by such asset is required.  A valuation allowance
is provided for the portion of the deferred tax asset when it is more likely
than not that some portion or all of the deferred tax asset will not be
realized.  In assessing the realizability of the deferred tax assets,
management considers the scheduled reversals of deferred tax liabilities,
projected future taxable income and tax planning strategies.


- 11
-




(1)
              Summary
      of Significant Accounting Policies
(Continued)




Comprehensive
Income





Accounting
principles generally require that recognized revenue, expenses, gains and losses
be included in net income. Certain changes in assets and liabilities, such as
unrealized gains and losses on securities available for sale, represent equity
changes from economic events of the period other than transactions with owners
and are not reported in the consolidated statements of operations but as a
separate component of the equity section of the consolidated balance
sheets.  Such items are considered components of other comprehensive
income.  SFAS No. 130, Reporting Comprehensive
Income, requires the presentation in the consolidated financial
statements of net income and all items of other comprehensive income as total
comprehensive income.





Net
Loss Per Share





Net loss
per common share is based on the weighted average number of common shares
outstanding during the period.  The effects of potential common shares
outstanding are included in diluted earnings (loss) per share.  No
common stock equivalents were considered in 2007 or 2006 as the effects of such
would be antidilutive to the loss per share calculation.





Stock
Compensation Plans





The
Company adopted Statement of Financial Accounting Standards No. 123 (revised
2004), Share-Based Payment (FAS 123R) on January 1, 2006 using the modified
prospective transition method.  Under the modified prospective
transition method, awards that are granted, modified or settled beginning at the
date of adoption will be measured and accounted for in accordance with FAS
123R.  In addition, expense is recognized in the statements of
operations for unvested awards that were granted prior to the date of adoption
based on the fair value of the award as determined at the grant
date.  The financial statements as of and for the twelve months ended
December 31, 2007 and 2006 reflect additional compensation expense of $28,200
and $31,560, respectively, as a result of implementing FAS 123R.





Statements
of Cash Flows





For
reporting cash flows, cash and cash equivalents include cash on hand,
noninterest-bearing amounts due from banks and federal funds
sold.  Cash flows from demand deposits, NOW accounts, savings
accounts, loans and certificates of deposit are reported net.





Supplementary
      cash flow information:2007
              
              
              2006Cash
      Paid During the Year for Interest
              
              $
              1,448,076
              
              
              $
              1,268,908Noncash
      Investing and Financing Activities:Transfer
      of Loans to Other Real Estate
              
              $
              164,574
              
              
              $
              571,500Change
      in Unrealized Loss on Securities Available for Sale
              
              $
              125,504
              
              
              $
              40,123


- 12
-


(1)
                Summary
      of Significant Accounting Policies
(Continued)


Changes
in Accounting Principles and Effects of New Accounting
Pronouncements





In June
2006, the Financial Accounting Standards Board ("FASB") issued Interpretation
No. 48 ("FIN 48"), Accounting
for Uncertainty in Income Taxes.  FIN 48 prescribes a
comprehensive model for how a company should recognize, measure, present and
disclose in its financial statements uncertain tax positions that the company
has taken or expects to take on a tax return (including a decision whether to
file or not to file a return in a particular jurisdiction).  Under FIN
48, the consolidated financial statements will reflect expected future tax
consequences of such positions presuming the taxing authorities’ full knowledge
of the position and all relevant facts, but without considering time
values.  FIN 48 also revises disclosure requirements and introduces a
prescriptive, annual, tabular roll-forward of the unrecognized tax
benefits.  The Company adopted the provisions of FIN 48 on January 1,
2007.  The implementation of FIN 48 did not impact the Company’s
consolidated financial statements.





In
September 2006, the FASB issued Statement of Financial Accounting Standards No.
157 ("FAS 157"), Fair Value
Measurements, which provides enhanced guidance for using fair value to
measure assets and liabilities. FAS 157 establishes a common definition of fair
value, provides a framework for measuring fair value under U.S. Generally
Accepted Accounting Principles and expands disclosure requirements about fair
value measurements. FAS 157 is effective for financial statements issued in
fiscal years beginning after November 15, 2007, and interim periods within those
fiscal years. The Company does not expect the adoption of FAS 157 to have a
material impact on its financial condition or results or
operations.





In
February 2007, the FASB issued Statement of Financial Accounting Standards No.
159 ("FAS 159"), The Fair
Value Option for Financial Assets and Financial Liabilities - Including an
Amendment of FASB Statement No. 115, which will permit entities to
measure many financial instruments and certain other assets and liabilities at
fair value on an instrument-by-instrument basis (the Fair Value
Option).  The Fair Value Option permits all entities to choose
to measure eligible items at fair value at specified election
dates.  An entity will be required to report unrealized gains and
losses on items for which the fair value option has been elected in earnings at
each subsequent reporting date.  FAS 159 is expected to improve
financial reporting by providing entities with the opportunity to mitigate
volatility without having to apply complex hedge accounting provisions and is
effective as of the beginning of an entity’s first fiscal year that begins after
November 15, 2007.  Early adoption is permitted as of the beginning of
a fiscal year that begins on or before November 15, 2007, provided the entity
also elects to apply the provisions of FAS 157.  The Company has not
elected to measure any financial instruments at fair value under FAS 159 as of
December 31, 2007.







In
December 2007, the FASB issued Statement of Financial Accounting Standards No.
141 (revised 2007), Business
Combinations(“FAS
141R”). FAS 141R established principles and requirements for how the
acquirer of a business recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed, and any noncontrolling
interest in the acquiree. FAS 141R also provides guidance for recognizing and
measuring the goodwill acquired in the business combination and determines what
information to disclose to enable users of the financial statements to evaluate
the nature and financial effects of the business combination. FAS 141R is
effective for business combinations where the acquisition date is on or after
fiscal years beginning after December 15, 2008. Earlier adoption is not allowed.
The Company does not believe that the adoption of FAS 141R will have a
significant impact on its financial condition or results of
operations.




- 13
-




In
December 2007, the FASB issued Statement of Financial Accounting Standard No.
160, Noncontrolling Interests
in Consolidated Financial Statements – an amendment of ARB No. 51 (“FAS
160”).FAS 160 establishes accounting and reporting standards
for the noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary.  FAS 160 clarifies that a noncontrolling interest in a
subsidiary is an ownership interest in the consolidated entity that should be
reported as equity in the consolidated financial statements and requires
retroactive adoption of the presentation and disclosure requirements for
existing minority interests. All other requirements of FAS 160 shall be applied
prospectively. The effective date of FAS 160 is the same as that for FAS 141R.
The Company does not expect the adoption of FAS 160 to have a material impact on
its financial condition or results of operation.




- 14
-





(2)
            Investment
      Securities Available for Sale





At
December 31, 2007 and 2006, the amortized cost and fair value of investment
securities available for sale are summarized as follows:




2007
              
              Amortized
                Cost
              
              
              Gross
                Unrealized
                Gains
              
              
              Gross
                Unrealized
                Losses
              
              
              Fair
                ValueU.S.
      Government Agencies
              
              $
              4,898,448
              
              
              $
              12,744
              
              
              $
              (2,942
              )
              
              $
              4,908,250Mortgage
      Backed Securities
              
              
              3,513,435
              
              
              
              4,086
              
              
              
              (21,533
              )
              
              
              3,495,988$
              8,411,883
              
              
              $
              16,830
              
              
              $
              (24,475
              )
              
              $
              8,404,2382006U.S.
      Government Agencies
              
              $
              5,400,371
              
              
              $
              -
              
              
              $
              (64,381
              )
              
              $
              5,335,990Mortgage
      Backed Securities
              
              
              3,803,607
              
              
              
              -
              
              
              
              (68,768
              )
              
              
              3,734,839$
              9,203,978
              
              
              $
              -
              
              
              $
              (133,149
              )
              
              $
              9,070,829





The
following outlines the unrealized losses and fair value by investment category
and length of time that individual securities have been in a continuous
unrealized loss position at December 31, 2007 and 2006:





Less
      Than 12 Months
            
            
            12
      Months or Greater
            
            
            Total2007
            
            Fair
              Value
            
            
            Gross
              Unrealized
              (Losses)
            
            
            Fair
              Value
            
            
            Gross
              Unrealized
              (Losses)
            
            
            Fair
              Value
            
            
            Gross
              Unrealized
              (Losses)U.S.
      Government Agencies
            
            $
            -
            
            
            $
            -
            
            
            $
            1,996,750
            
            
            $
            (2,942
            )
            
            $
            1,996,750
            
            
            $
            (2,942
            )Mortgage
      Backed Securities
            
            
            435,579
            
            
            
            (4,575
            )
            
            
            1,521,421
            
            
            
            (16,958
            )
            
            
            1,957,000
            
            
            
            (21,533
            )$
            435,579
            
            
            $
            (4,575
            )
            
            $
            3,518,171
            
            
            $
            (19,900
            )
            
            $
            3,953,750
            
            
            $
            (24,475
            )2006U.S.
      Government Agencies
            
            $
            1,399,040
            
            
            $
            (7,874
            )
            
            $
            3,936,950
            
            
            $
            (56,507
            )
            
            $
            5,335,990
            
            
            $
            (64,381
            )Mortgage
      Backed Securities
            
            
            496,889
            
            
            
            (1,122
            )
            
            
            3,237,950
            
            
            
            (67,646
            )
            
            
            3,734,839
            
            
            
            (68,768
            )$
            1,895,929
            
            
            $
            (8,996
            )
            
            $
            7,174,900
            
            
            $
            (124,153
            )
            
            $
            9,070,829
            
            
            $
            (133,149
            )


- 15
-





(2)
            Investment
      Securities Available for Sale
(Continued)





At
December 31, 2007, eight of the fifteen securities issued by U.S. Government
agencies and Government sponsored corporations, including mortgage backed
securities, contained unrealized losses.  Because the declines in
market value of investments are attributable to changes in interest rates and
not credit quality and because the Company has the ability and intent to hold
these investments until a recovery of fair value, which may be until maturity,
the Company does not consider these investments to be other than temporarily
impaired at December 31, 2007.





The
amortized cost and estimated fair value of investment securities available for
sale at December 31, 2007, by contractual maturity, are shown
below.  Expected maturities will differ from contractual maturities
because borrowers have the right to call or prepay obligations with or without
call or prepayment penalties.





Amortized
            
            
            EstimatedCost
            
            
            Fair
      ValueU.S.
      Government AgenciesWithin
      1 Year
            
            $
            1,499,692
            
            
            $
            1,498,6001
      to 5 Years
            
            
            1,996,549
            
            
            
            1,998,1505
      to 10 Years
            
            
            1,002,207
            
            
            
            1,008,500Over
      10 Years
            
            
            400,000
            
            
            
            403,000Mortgage
      Backed Securities
            
            
            3,513,435
            
            
            
            3,495,988$
            8,411,883
            
            
            $
            8,404,238





At
December 31, 2007 and 2006, there were no securities required to be pledged to
secure public deposits.








(3)
            Loans





The
composition of loans as of December 31 are:





2007
            
            
            2006Commercial,
      Financial and Agricultural
            
            $
            3,339,020
            
            
            $
            4,292,891Real
      Estate-Mortgage
            
            
            13,865,088
            
            
            
            12,051,850Real
      Estate-Construction
            
            
            508,577
            
            
            
            1,290,914Consumer
            
            
            1,592,416
            
            
            
            2,728,064$
            19,305,101
            
            
            $
            20,363,719





The Bank
grants loans and extensions of credit to individuals and a variety of businesses
and corporations located primarily in its general trade area of Hall County,
Georgia. Although the Bank has a diversified loan portfolio, a substantial
portion of the loan portfolio is collateralized by improved and unimproved real
estate and is dependent upon the real estate market.


- 16
-


(4)
            Allowance
      for Loan Losses





Transactions
in the allowance for loan losses are summarized for the years ended December 31
as follows:


2007
            
            
            2006Balance,
      Beginning
            
            $
            445,629
            
            
            $
            785,326Provision
      Charged to Operating Expenses
            
            
            115,199
            
            
            
            -Loans
      Charged Off
            
            
            (335,175
            )
            
            
            (372,180
            )Loan
      Recoveries
            
            
            50,267
            
            
            
            32,483Balance,
      Ending
            
            $
            275,920
            
            
            $
            445,629





There
were no loans past due 90 days or more and still accruing interest as of
December 31, 2007 and 2006.  At December 31, 2007 and 2006, the total
recorded investment in loans on nonaccrual status approximated $851,000 and
$210,000, respectively.  Interest income that would have been
recognized on nonaccrual loans totaled $34,151 and $21,981 in 2007 and 2006,
respectively.  Impaired loans approximated $1,140,000 and $63,000 as
of December 31, 2007 and 2006, respectively.  The allowance for loan
loss included a specific allowance of $102,960 and $12,334 for impaired loans as
of December 31, 2007 and 2006, respectively.  Impaired loans with no
specific allowance included in the allowance for loan losses approximated
$650,000 and $0 as of December 31, 2007 and 2006, respectively.  The
average investment in impaired loans during 2007 and 2006 approximated $490,000
and $180,000, respectively.  Interest income recognized on impaired
loans approximated $97,000 and $9,300 in 2007 and 2006,
respectively.  The cash basis interest income recognized on impaired
loans was $90,000 and $0 as of December 31, 2007 and 2006,
respectively.  No additional funds are committed to be advanced in
connection with impaired loans.








(5)
            Premises
      and Equipment





Premises
and equipment are comprised of the following as of December 31:





2007
            
            
            2006Land
      and Land Improvements
            
            
            409,442
            
            
            $
            409,442Building
            
            
            1,693,776
            
            
            
            1,717,291Furniture
      and Equipment
            
            
            752,728
            
            
            
            659,665Leasehold
      Improvements
            
            
            1,175
            
            
            
            -2,857,121
            
            
            
            2,786,398Accumulated
      Depreciation
            
            
            (734,358
            )
            
            
            (581,559
            )2,122,763
            
            
            $
            2,204,839





Depreciation
charged to operations totaled $154,199 and $171,158 for 2007 and 2006,
respectively.


- 17
-


Certain
bank facilities are leased under various operating leases.  Lease
expense was $22,140 and $0 for the years ended December 31, 2007 and 2006,
respectively.  Future minimum lease commitments under leases are under
noncancelable leases are:





Year
            
            Amount2008
            
            $
            60,8432009
            
            
            50,703$
            111,546


- 18
-


(6)
            Deposits





The
aggregate amount of overdrawn deposit accounts reclassified as loan balances
totaled $2,350 and $1,443 as of December 31, 2007 and 2006,
respectively.





Components
of interest-bearing deposits as of December 31 are as follows:





2007
            
            
            2006Interest-Bearing
      Demand
            
            $
            1,296,161
            
            
            $
            1,273,978Savings
            
            
            1,185,383
            
            
            
            620,918Time,
      $100,000 and Over
            
            
            2,866,927
            
            
            
            3,698,326Other
      Time
            
            
            24,090,999
            
            
            
            20,984,183$
            29,439,470
            
            
            $
            26,577,405





The
aggregate amount of short-term jumbo certificates of deposit, each with a
minimum denomination of $100,000, was approximately $2,644,000 and $3,477,000 as
of December 31, 2007 and 2006, respectively.





As of
December 31, 2007, the scheduled maturities of certificates of deposit are as
follows:





Year
            
            Amount2008
            
            $
            23,173,3432009
            
            
            2,348,9682010
            
            
            1,232,1572012
            
            
            104,458After
      2012
            
            
            99,000$
            26,957,926








(7)
            Income
      Taxes





The
components of the income tax expense for the years ended December 31 are as
follows:





2007
            
            
            2006Deferred
      Expense
            
            $
            594,774
            
            
            $
            445,838Change
      in Valuation Allowance
            
            
            (594,774
            )
            
            
            (445,838
            )$
            -
            
            
            $
            -


- 19
-


(7)
            Income
      Taxes (Continued)





The
difference between income tax expense and the amount computed by applying the
statutory federal income tax rate to the earnings before income taxes for the
years ended December 31, 2007 and 2006 relates primarily to the change in the
valuation allowance.





The
following summarizes the components of deferred taxes at December
31:





2007
            
            
            2006Deferred
      Income Tax AssetsAllowance
      for Loan Losses
            
            $
            -
            
            
            $
            50,571Pre-opening
      Expenses
            
            
            -
            
            
            
            35,755Operating
      Loss Carryforwards
            
            
            2,741,251
            
            
            
            2,068,108Other
            
            
            13,594
            
            
            
            7,9742,754,845
            
            
            
            2,162,408Deferred
      Tax LiabilitiesPremises
      and Equipment
            
            
            1,090
            
            
            
            3,4262,753,755
            
            
            
            2,158,982Less
      Valuation Allowance
            
            
            (2,753,755
            )
            
            
            (2,158,982
            )Net
      Deferred Tax Asset
            
            $
            -
            
            
            $
            -





The
future tax consequences of the differences between the financial reporting and
tax bases of the Company’s assets and liabilities resulted in a net deferred tax
asset.  The ultimate realization of deferred tax assets is dependent
upon the generation of future taxable income during the periods in which those
temporary differences become deductible.





At
December 31, 2007, the Company had federal and state net operating loss
carryforwards for tax purposes of approximately $8,098,000 and $8,456,000,
respectively, which will expire beginning in 2022 if not previously
utilized.




(8)
            Borrowings





At
December 31, 2007, the Bank has two advances from the Federal Home Loan Bank of
Atlanta in the amount of $4,000,000.  The advances mature on April 21, 2008
and July 23, 2008.  The Bank has pledged as collateral investment
securities available for sale with a carrying amount of $7,009,675 at December
31, 2007.





The Bank
has lines of credit available with correspondent banks which represent available
credit for overnight borrowing from financial institutions.  As of December
31, 2007 and 2006, these lines of credit totaled $2,000,000 and $2,000,000,
respectively, of which no balances were outstanding. The Bank has pledged
investment securities with a carrying amount of $1,402,208 as collateral for one
of the two lines.


- 20
-


(9)
            Contingencies
      and Commitments





Financial
Instruments with Off-Balance Sheet Risk





The Bank
is a party to financial instruments with off-balance sheet risk in the normal
course of business to meet the financing needs of its
customers.  These financial instruments include commitments to extend
credit and standby letters of credit. Those instruments involve, to varying
degrees, elements of credit risk in excess of the amount recognized on the
consolidated balance sheets. The contractual amounts of those instruments
reflect the extent of involvement the Bank has in particular classes of
financial instruments.





The
Bank’s exposure to credit loss in the event of nonperformance by the other party
to the financial instrument for commitments to extend credit and standby letters
of credit is represented by the contractual amount of those instruments. The
Bank uses the same credit policies in making commitments and conditional
obligations as it does for on-balance sheet instruments. In most cases, the Bank
requires collateral to support financial instruments with credit
risk.





The
following summarizes commitments as of December 31:





Approximate
              Contract
      Amount2007
            
            
            2006Financial
      Instruments Whose Contract  Amounts Represent Credit
      RiskCommitments
      to Extend Credit
            
            $
            2,442,000
            
            
            $
            2,054,000Standby
      Letters of Credit
            
            
            294,000
            
            
            
            294,000





Commitments
to extend credit are agreements to lend to a customer as long as there is no
violation of any condition established in the contract. Commitments generally
have fixed expiration dates or other termination clauses and may require payment
of a fee. Since many of the commitments may expire without being drawn upon, the
total commitment amounts do not necessarily represent future cash requirements.
The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The
amount of collateral obtained, if deemed necessary by the Bank, upon extension
of credit is based on management’s credit evaluation. Collateral held varies but
may include unimproved and improved real estate, certificates of deposit or
personal property.





Standby
letters of credit are conditional commitments issued by the Bank to guarantee
the performance of a customer to a third party. The credit risk involved in
issuing letters of credit is essentially the same as that involved in extending
loan facilities to customers.




Going
Concern




As
shown in the accompanying consolidated financial statements, the Company has
incurred net losses of $1,746,026 and $1,157,114 from operations for the years
ended December 31, 2007 and 2006, respectively, and has an accumulated deficit
of $7,559,873 as of December 31, 2007.  These conditions create an
uncertainty about the Company's ability to continue as a going
concern.  Management of the company has developed a capital plan to
maintain minimum capital levels equal to or above those determined by regulatory
authorities through the issuance of additional stock.  The ability of the
Company to continue as a going concern is dependant on the success of the
capital plan.  The financial statements do not include any adjustment that
might be necessary if the Company is unable to continue as a going
concern.


- 21
-


(10)
            Stockholders’
      Equity





Shares of
preferred stock may be issued from time to time in one or more series as
established by resolution of the board of directors of the Company, up to a
maximum of 10,000,000 shares.  Each resolution shall include the
number of shares issued, preferences, special rights and limitations as
determined by the board.





During
2006, First Century Bancorp. ("First Century") issued 35,000 shares of Series A
Preferred Stock, no par value (the "Series A Preferred Stock"), for $10.00 per
share.  The Series A Preferred Stock is noncumulative perpetual
preferred stock and will be treated as Tier 1 capital under existing Federal
Reserve regulations. The Series A Preferred Stock is generally nonvoting and
cannot be converted into common stock of First Century.  First Century
has the right, subject to Federal Reserve approval, to redeem the shares for
their purchase price plus accrued dividends, if any.  The Bank is
currently not allowed to pay dividends to the Company until it becomes
cumulatively profitable.  On May 4, 2007, the Company redeemed the
35,000 shares of Series A Preferred Stock at $10.00 per share.





On
December 31, 2007, First Century issued 75,000 shares of Series B Preferred
Stock, no par value (the "Series B Preferred Stock"), for $10.00 per share in a
private placement.  The Series B Preferred Stock is cumulative
perpetual preferred stock and will be treated as Tier 1 capital under existing
Federal Reserve regulations. The Series B Preferred Stock is generally nonvoting
and cannot be converted into common stock of First Century.  First
Century has the right, subject to Federal Reserve approval, to redeem the shares
for their purchase price plus accrued dividends, if any.  Dividends
accrue on the Series B Preferred Stock at a rate per annum initially equal to
the prime rate in effect on the date of issuance, adjusted semi-annually on the
first date of January and the first day of July each year to be equal to the
prime rate in effect on such date.  The investors also received a
warrant to acquire one share of common stock for each share of Series B
Preferred Stock purchased in the offering at an exercise price of $1.50 per
share, which was the fair market value of the common stock on the date of the
issuance of the warrants.  The warrants have no expiration
date





Dividends
paid by the Bank are the primary source of funds available to the
Company.  Banking regulations limit the amount of dividends that may
be paid without prior approval of the regulatory authorities.  These
restrictions are based on the level of regulatory classified assets, the prior
years’ net earnings and the ratio of equity capital to total
assets.


- 22
-


(11)
            Related
      Party Transactions





It is the
Bank’s policy to make loans to directors and officers, including companies in
which they have a beneficial interest, in the normal course of business. It is
also the Bank’s policy to comply with federal regulations that require that loan
and deposit transactions with directors and executive officers be made on
substantially the same terms as those prevailing at the time made for comparable
loans and deposits to other persons.





The
following summary reflects activities for related party loans:





2007
            
            
            2006Balance,
      Beginning
            
            $
            604,348
            
            
            $
            547,444New
      Loans
            
            
            487,038
            
            
            
            109,491Principal
      Repayments
            
            
            (544,049
            )
            
            
            (52,587
            )Balance,
      Ending
            
            $
            547,427
            
            
            $
            604,348





As of
December 31, 2007 and 2006, deposit accounts for related parties totaled
approximately $696,000 and $251,000, respectively.








(12)
            Employee
      Benefit Plan





The
Company has a qualified retirement plan pursuant to Internal Revenue Code
Section 401(K) covering substantially all employees subject to minimum age and
service requirements.  Contribution to the plan by employees is
voluntary.  The Company made no contributions to the plan in 2007 or
2006.


- 23
-


(13)
            Stock
      Options





During
2003, the stockholders approved a stock option plan (the Option Plan) whereby
the Company may grant options to acquire shares of common stock of the Company
at the then fair value. A total of 125,000 shares of common stock were reserved
for possible issuance under this plan. Vesting periods are established by the
board at the date of grant and expire on the tenth anniversary of the grant
date.  All options granted to directors in the Company’s stock option
plan became fully vested as of June 30, 2005.  On April 21, 2005, the
Company’s board of directors voted to accelerate the vesting of these options in
recognition of directors who exercised one-third of their existing options at
March 31, 2005 to help the Company meet the minimum capital requirements of the
Formal Agreement with the OCC.





On
September 20, 2005, the board of directors approved the granting of nonqualified
stock options to a consultant of the Company.  The options allow the
consultant the right to purchase 100,000 shares at an exercise price of $5 per
share.  The options have a maximum term of ten years and vest in equal
one-third annual increments commencing on September 20, 2005.





A summary
of activity related to the stock options, for the years ended December 31, 2007
and 2006 is presented below:





Shares
            
            
            Weighted
      Average
              Exercise
      PriceOutstanding,
      December 31, 2005
            
            
            153,001
            
            
            $
            5.65Granted
            
            
            -
            
            
            
            -Exercised
            
            
            -
            
            
            
            -Forfeited
            
            
            (1,500
            )
            
            
            5.00Outstanding,
      December 31, 2006
            
            
            151,501
            
            
            $
            5.66Granted
            
            
            7,500
            
            
            
            2.01Exercised
            
            
            -Forfeited
            
            
            (28,500
            )
            
            
            4.21Outstanding,
      December 31, 2007
            
            
            130,501
            
            
            
            5.77Eligible
      to be Exercised, December 31, 2007
            
            
            120,001
            
            
            
            5.83





The
options outstanding and exercisable at December 31, 2007 had no aggregate
intrinsic value.  At December 31, 2007, there was $1,890 of total
unrecognized compensation expense related to nonvested share-based compensation
arrangements.  The cost is expected to be recognized over a weighted
average period of eight months.


- 24
-


(13)
            Stock
      Option Plan and Warrants
(Continued)





Information
pertaining to options outstanding at December 31, 2007 is as
follows:





Exercise
      Prices
            
            Number
              Outstanding
            
            Weighted
      Average
              Remaining
      Contractual
              Life
            
            Number
              Exercisable$10.00
            
            20,001
            
            5.5
      Years
            
            20,001$5.00
            
            118,000
            
            7.8
      Years
            
            100,000138,001
            
            7.5
      Years
            
            120,001








(14)
            Stock
      Warrants





Organizers
of the Company were entitled to receive, in aggregate, 199,736 stock warrants.
Each warrant entitled its holder to purchase an additional share of the
Company’s common stock for $10.  The warrants vested over a three-year
period from the date of grant, March 25, 2002, and became fully vested in
2005.  Expiration of the warrants occurs on the tenth anniversary of
the grant date.





In
connection with the sale of 738,008 shares of common stock to William R. Blanton
on April 23, 2007, the Company issued a warrant to purchase up to 738,008 shares
at $2.71.  On December 31, 2007, the exercise price of the warrant was
adjusted from $2.71 per share to $1.50 per share.  The warrant does
not have an expiration date.





On
December 31, 2007, the Company issued 75,000 shares of its Series B Preferred
Stock for $10.00 per share in a private placement to certain Company
directors.  The investors also received a warrant to acquire one share
of common stock for each share of Series B Preferred Stock purchased in the
offering at an exercise price of $1.50 per share, which was the fair market
value of the common stock on the date of issuance of the
warrants.  The warrants have no expiration date.








(15)
            Fair
      Value of Financial Instruments





SFAS No.
107, Disclosures about Fair
Value of Financial Instruments, requires disclosure of fair value
information about financial instruments, whether or not recognized on the face
of the balance sheet, for which it is practicable to estimate that
value.  The assumptions used in the estimation of the fair value of
First Century Bank’s financial instruments are detailed below.  Where
quoted prices are not available, fair values are based on estimates using
discounted cash flows and other valuation techniques.  The use of
discounted cash flows can be significantly affected by the assumptions used,
including the discount rate and estimates of future cash flows.  The
following disclosures should not be considered a surrogate of the liquidation
value of the Bank, but rather a good-faith estimate of the increase or decrease
in value of financial instruments held by the Bank since purchase, origination
or issuance.





Cash and Short-Term
Investments - For cash, due from banks and federal funds sold, the
carrying amount is a reasonable estimate of fair value.





Investment Securities Available for
Sale - Fair values for investment securities are based on quoted market
prices.


- 25
-


Other Investments- The fair
value of other investments approximates carrying value.





Loans - The fair value of
fixed rate 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.  For variable rate loans, the carrying amount is a
reasonable estimate of fair value.


- 26
-


(15)
            Fair
      Value of Financial Instruments
(Continued)





Deposit Liabilities - 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 by discounting the future
cash flows using the rates currently offered for deposits of similar remaining
maturities.





Borrowings –Due to their
short-term nature, the fair value of FHLB advances approximates carrying
amount.





Standby Letters of Credit and
Unfulfilled Loan Commitments- Fair values are based on fees currently
charged to enter into similar agreements taking into account the remaining terms
of the agreements and the counterparties’ credit standing.  The fees
associated with these instruments are not considered material.





The
carrying amount and estimated fair values of the Bank's financial instruments as
of December 31 are presented hereafter:





2007
            
            
            2006Carrying
            
            
            Estimated
            
            
            Carrying
            
            
            EstimatedAmount
            
            
            Fair
      Value
            
            
            Amount
            
            
            Fair
      Value(in
      Thousands)AssetsCash
      and Short-Term Investments
            
            $
            8,349
            
            
            $
            8,349
            
            
            $
            1,337
            
            
            $
            1,337Investment
      Securities Available for Sale
            
            
            8,404
            
            
            
            8,404
            
            
            
            9,071
            
            
            
            9,071Other
      Investments
            
            
            403
            
            
            
            403
            
            
            
            321
            
            
            
            321Loans
            
            
            19,305
            
            
            
            19,476
            
            
            
            20,364
            
            
            
            20,238LiabilitiesDeposits
            
            
            31,006
            
            
            
            31,417
            
            
            
            28,222
            
            
            
            28,268Borrowings
            
            
            4,000
            
            
            
            4,000
            
            
            
            2,000
            
            
            
            2,000





Fair
value estimates are made at a specific point in time, based on relevant market
information and information about the financial instrument.  These
estimates do not reflect any premium or discount that could result from offering
for sale at one time the entire holdings of a particular financial
instrument.  Because no market exists for a significant portion of the
Bank's financial instruments, fair value estimates are based on many
judgments.  These estimates are subjective in nature and involve
uncertainties and matters of significant judgment and therefore cannot be
determined with precision.  Changes in assumptions could significantly
affect the estimates.





Fair
value estimates are based on existing on- and off-balance sheet financial
instruments without attempting to estimate the value of anticipated future
business and the value of assets and liabilities that are not considered
financial instruments.  Significant assets and liabilities that are
not considered financial instruments include the deferred income taxes and
premises and equipment.  In addition, the tax ramifications related to
the realization of the unrealized gains and losses can have a significant effect
on fair value estimates and have not been considered in the
estimates.


- 27
-


(16)
            Regulatory Matters





The
Company and the Bank are subject to various regulatory capital requirements
administered by the federal banking agencies.  Failure to meet minimum
capital requirements can initiate certain mandatory and possibly additional
discretionary actions by regulators that, if undertaken, could have a direct
material effect on the consolidated financial statements.  Under
certain adequacy guidelines and the regulatory framework for prompt corrective
action, specific capital guidelines that involve quantitative measures of the
assets, liabilities and certain off-balance sheet items, as calculated under
regulatory accounting practices, must be met. The capital amounts and
classification are also subject to qualitative judgments by the regulators about
components, risk weightings and other factors.





On August
18, 2004, the board of directors entered into a formal agreement with the Office
of the Comptroller of the Currency (OCC) which outlined actions to be taken by
the Bank to address concerns by the OCC.  The provisions of the formal
agreement required the Bank to achieve agreed-upon capital levels, obtain a
permanent president and senior lender, obtain current and satisfactory credit
information on all loans over $25,000, and eliminate the basis of criticism of
assets criticized, among others.  As of December 31, 2007, the Bank
believes it is in compliance with the provisions of the formal
agreement.





Quantitative
measures established by regulation to ensure capital adequacy require the
Company and the Bank to maintain minimum amounts and ratios (set forth in the
following table) of Total and Tier 1 Capital to risk-weighted assets and of Tier
1 Capital to average assets.





As of
December 31, 2007, the most recent notification from the Federal Deposit
Insurance Corporation categorized the Bank as well capitalized under the
regulatory framework for prompt corrective action. To be categorized as well
capitalized, the Bank must maintain minimum total risk-based, Tier 1 risk-based
and Tier 1 leverage ratios as set forth in the following
table.  Additionally, under an agreement with the OCC, the Bank is
required to achieve agreed-upon capital levels.  The actual capital
amounts and ratios for the Bank are also presented in the following table. In
the opinion of management, there are no conditions or events since prior
notification of capital adequacy from the regulators that have changed the
Bank’s classification.  Disclosures related to the Company have been
excluded as they did not significantly deviate from the disclosure
herein.


- 28
-


(16)
            Regulatory Matters
      (Continued)





To
      Be WellCapitalized
      UnderFor
      Capital
            
            
            Prompt
      CorrectiveActual
            
            
            Adequacy
      Purposes
            
            
            Action
      ProvisionsAmount
            
            
            Ratio
            
            
            Amount
            
            
            Ratio
            
            
            Amount
            
            
            Ratio(In
      Thousands)December
      31, 2007Total
      Capital toRisk-Weighted
      Assets
            
            $
            3,770
            
            
            
            16.62
            %
            
            $
            1,814
            
            
            
            8.00
            %
            
            $
            2,268
            
            
            
            10.00
            %Tier
      I Capital toRisk-Weighted
      Assets
            
            
            3,487
            
            
            
            15.38
            
            
            
            907
            
            
            
            4.00
            
            
            
            1,361
            
            
            
            6.00Tier
      I Capital toAverage
      Assets
            
            
            3,487
            
            
            
            9.41
            
            
            
            1,482
            
            
            
            4.00
            
            
            
            1,853
            
            
            
            5.00December
      31, 2006Total
      Capital toRisk-Weighted
      Assets
            
            
            3,295
            
            
            
            13.84
            
            
            
            1,905
            
            
            
            8.00
            
            
            
            2,381
            
            
            
            10.00Tier
      I Capital toRisk-Weighted
      Assets
            
            
            2,996
            
            
            
            12.59
            
            
            
            952
            
            
            
            4.00
            
            
            
            1,428
            
            
            
            6.00Tier
      I Capital toAverage
      Assets
            
            
            2,996
            
            
            
            8.84
            
            
            
            1,356
            
            
            
            4.00
            
            
            
            1,695
            
            
            
            5.00








(17)
            Other
      Operating Expenses





Components
of other operating expenses which are greater than 1 percent of interest income
and other operating income for the years ended December 31 are as
follows:





2007
            
            
            2006Data
      Processing Fees
            
            $
            134,028
            
            
            $
            118,281Advertising
      and Marketing
            
            
            58,937
            
            
            
            37,373Insurance
      and Assessments
            
            
            119,060
            
            
            
            146,619Office
      Supplies
            
            
            34,881
            
            
            
            31,340Telephone
            
            
            33,494
            
            
            
            27,151Postage
      and Courier
            
            
            30,796
            
            
            
            45,684Other
      Loan Related and Repossession
            
            
            76,545
            
            
            
            273,031


- 29
-


(18)
            Financial
      Information of First Century Bancorp. (Parent
  Only)


FIRST
      CENTURY BANCORP. (PARENT ONLY)CONDENSED
      BALANCE SHEETSDECEMBER
      31ASSETS2007
              
              
              2006Cash
      and Due from Banks
              
              $
              25,516
              
              
              $
              391Investment
      in Subsidiary
              
              
              3,480,244
              
              
              
              2,863,053Other
      Assets
              
              
              3,408
              
              
              
              5,089Total
      Assets
              
              $
              3,509,168
              
              
              $
              2,868,533LIABILITIES
      AND STOCKHOLDERS’ EQUITYOther
      Liabilities
              
              $
              15,480
              
              
              $
              15,480Stockholders’
      Equity
              
              
              3,493,688
              
              
              
              2,853,053Total
      Liabilities and Stockholders’ Equity
              
              $
              3,509,168
              
              
              $
              2,868,533


- 30
-


(18)
            Financial
      Information of First Century Bancorp. (Parent Only)
      (Continued)





FIRST
CENTURY BANCORP. (PARENT ONLY)


CONDENSED
STATEMENTS OF OPERATIONS


FOR
THE YEARS ENDED DECEMBER 31





2007
            
            
            2006Interest
      Income
            
            $
            1,684
            
            
            $
            396ExpensesSalaries
      and Employee Benefits
            
            
            24,000
            
            
            
            31,560Professional
      Fees
            
            
            135,429
            
            
            
            161,339Other
            
            
            25,767
            
            
            
            5,184185,196
            
            
            
            198,083Loss Before Equity
      in  Undistributed Loss of Subsidiary
            
            
            (183,512
            )
            
            
            (197,687
            )Equity
      in Undistributed Loss of Subsidiary
            
            
            (1,562,514
            )
            
            
            (959,427
            )Net
      Loss
            
            $
            (1,746,026
            )
            
            $
            (1,157,114
            )


- 31
-


(18)
            Financial
      Information of First Century Bancorp. (Parent Only)
      (Continued)





FIRST
CENTURY BANCORP. (PARENT ONLY)


CONDENSED
STATEMENTS OF CASH FLOWS


FOR
THE YEARS ENDED DECEMBER 31








2007
            
            
            2006Cash
      Flows from Operating ActivitiesNet
      Loss
            
            $
            (1,746,026
            )
            
            $
            (1,157,114
            )Adjustments
      to Reconcile Net Loss to NetCash
      Used by Operating ActivitiesEquity
      in Undistributed Loss of Subsidiary
            
            
            1,562,514
            
            
            
            959,427Stock
      Compensation Expense
            
            
            24,000
            
            
            
            31,560Change
      InOther
      Assets
            
            
            1,680
            
            
            
            (4,326
            )(157,832
            )
            
            
            (170,453
            )Cash
      Flows from Investing ActivitiesCapital
      Infusion in Subsidiary
            
            
            (2,050,000
            )
            
            
            (210,000
            )Cash
      Flows from Financing ActivitiesProceeds
      from Issuance of Common Stock
            
            
            2,002,002
            
            
            
            8,000Proceeds
      from Issuance of Preferred Stock
            
            
            750,000
            
            
            
            350,000Redemption
      of Preferred Stock
            
            
            (350,000
            )
            
            
            -Payment
      of Stock Issuance Costs
            
            
            (169,045
            )
            
            
            (3,556
            )2,232,957
            
            
            
            354,444Net
      Increase (Decrease) in Cash
            
            
            25,125
            
            
            
            (26,009
            )Cash
      and Cash Equivalents, Beginning
            
            
            391
            
            
            
            26,400Cash
      and Cash Equivalents, Ending
            
            $
            25,516
            
            
            $
            391


- 32
-




(19)
            Subsequent
      Events





On
February 5, 2008, the Office of the Comptroller of the Currency (“OCC”)
terminated the formal agreement that was entered into between the OCC and the
Bank on August 18, 2004.