##### Table of Contents

Exhibit 13

HENRY COUNTY BANCSHARES, INC.

AND SUBSIDIARIES

CONSOLIDATED FINANCIAL REPORT

DECEMBER 31, 2006



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##### Table of Contents

HENRY COUNTY BANCSHARES, INC.

AND SUBSIDIARIES

CONSOLIDATED FINANCIAL REPORT

DECEMBER 31, 2006

TABLE OF CONTENTS



|                                                        |  |     
|------------------------------------------------------- |  | ----
|                                                        |  | Page
|REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |  | 1   
|                                                        | 
|FINANCIAL STATEMENTS                                    |  |     
|                                                        | 
|Consolidated balance sheets                             |  | 2   
|Consolidated statements of income                       |  | 3   
|Consolidated statements of comprehensive income         |  | 4   
|Consolidated statements of stockholders equity         |  | 5   
|Consolidated statements of cash flows                   |  | 6   
|Notes to consolidated financial statements              |  | 7-27



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##### Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.

To the Board of Directors

Henry County Bancshares, Inc.

Stockbridge, Georgia

We have audited the accompanying consolidated balance sheets of Henry County Bancshares, Inc. and subsidiaries as of December 31, 2006 and
2005, and the related consolidated statements of income, comprehensive income, stockholders equity and cash flows for each of the three years in the period ended December 31, 2006. These financial statements are the responsibility of the
Companys management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our
audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit 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 Henry County Bancshares, Inc. and subsidiaries as of December 31, 2006
and 2005, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2006, in conformity with U.S. generally accepted accounting principles.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Henry
County Bancshares, Inc. and subsidiaries internal control over financial reporting as of December 31, 2006 based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO), and our report dated February 27, 2007 expressed an unqualified opinion on managements assessment of the effectiveness of Henry County Bancshares, Inc. and subsidiaries internal control over financial
reporting and an unqualified opinion on the effectiveness of Henry County Bancshares, Inc. and subsidiaries internal control over financial reporting.

/s/ MAULDIN & JENKINS, LLC

Atlanta, Georgia

February 27, 2007



1



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##### Table of Contents

HENRY COUNTY BANCSHARES, INC.

AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2006 AND 2005



|                                                                                                                 |  |      |             |   |      |   |             |  
|---------------------------------------------------------------------------------------------------------------- |  | ---- | ----------- | - | ---- | - | ----------- | -
|                                                                                                                 |  | 2006 |             |   | 2005 |  
|Assets                                                                                                           |  |      |             |   |      |   |             |  
|Cash and due from banks                                                                                          |  | $    | 18,584,790  |   |      | $ | 15,950,626  |  
|Interest-bearing deposits in banks                                                                               |  |      | 294,763     |   |      |   | 388,078     |  
|Federal funds sold                                                                                               |  |      | 5,500,000   |   |      |   | 9,600,000   |  
|Securities available for sale                                                                                    |  |      | 84,379,359  |   |      |   | 70,348,924  |  
|Securities held to maturity, at cost (fair value 2006 $4,263,163; 2005 $297,166)                                 |  |      | 4,328,339   |   |      |   | 295,785     |  
|Restricted equity securities, at cost                                                                            |  |      | 2,369,651   |   |      |   | 2,057,451   |  
|Loans held for sale                                                                                              |  |      | 666,066     |   |      |   | 822,000     |  
|                                                                                                                 |  |     
|Loans                                                                                                            |  |      | 561,646,248 |   |      |   | 518,113,879 |  
|Less allowance for loan losses                                                                                   |  |      | 5,229,838   |   |      |   | 4,971,852   |  
|                                                                                                                 |  |      |             |   |      |   |             |  
|Loans, net                                                                                                       |  |      | 556,416,410 |   |      |   | 513,142,027 |  
|                                                                                                                 |  |     
|Premises and equipment                                                                                           |  |      | 9,936,123   |   |      |   | 9,041,588   |  
|Other assets                                                                                                     |  |      | 11,835,315  |   |      |   | 9,386,818   |  
|                                                                                                                 |  |      |             |   |      |   |             |  
|Total assets                                                                                                     |  | $    | 694,310,816 |   |      | $ | 631,033,297 |  
|                                                                                                                 |  |      |             |   |      |   |             |  
|Liabilities and Stockholders Equity                                                                             |  |      |             |   |      |   |             |  
|Liabilities:                                                                                                     |  |      |             |   |      |   |             |  
|Deposits:                                                                                                        |  |      |             |   |      |   |             |  
|Noninterest-bearing                                                                                              |  | $    | 77,493,610  |   |      | $ | 84,615,988  |  
|Interest-bearing                                                                                                 |  |      | 517,379,804 |   |      |   | 460,631,141 |  
|                                                                                                                 |  |      |             |   |      |   |             |  
|Total deposits                                                                                                   |  |      | 594,873,414 |   |      |   | 545,247,129 |  
|Other borrowings                                                                                                 |  |      | 24,221,682  |   |      |   | 19,988,352  |  
|Other liabilities                                                                                                |  |      | 4,017,123   |   |      |   | 3,049,949   |  
|                                                                                                                 |  |      |             |   |      |   |             |  
|Total liabilities                                                                                                |  |      | 623,112,219 |   |      |   | 568,285,430 |  
|                                                                                                                 |  |      |             |   |      |   |             |  
|Commitments and contingencies                                                                                    |  |      |             |   |      |   |             |  
|                                                                                                                 |  |     
|Stockholders equity                                                                                             |  |      |             |   |      |   |             |  
|Common stock, par value $2.50; 20,000,000 shares authorized; 14,388,749.60 and 7,237,065.60 issued, respectively |  |      | 35,971,874  |   |      |   | 18,092,664  |  
|Surplus                                                                                                          |  |      | 739,560     |   |      |   | 739,560     |  
|Retained earnings                                                                                                |  |      | 35,942,063  |   |      |   | 45,880,738  |  
|Accumulated other comprehensive loss                                                                             |  |      | (159,299    | ) |      |   | (399,481    | )
|Treasury stock, 67,282 and 85,382 shares, respectively                                                           |  |      | (1,295,601  | ) |      |   | (1,565,614  | )
|                                                                                                                 |  |      |             |   |      |   |             |  
|Total stockholders equity                                                                                       |  |      | 71,198,597  |   |      |   | 62,747,867  |  
|                                                                                                                 |  |      |             |   |      |   |             |  
|Total liabilities and stockholders equity                                                                       |  | $    | 694,310,816 |   |      | $ | 631,033,297 |  
|                                                                                                                 |  |      |             |   |      |   |             |  

See Notes to Consolidated Financial Statements.



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HENRY COUNTY BANCSHARES, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004



|                                                    |  |      |            |      |   |            |  |   |           
|--------------------------------------------------- |  | ---- | ---------- | ---- | - | ---------- |  | - | ----------
|                                                    |  | 2006 |            | 2005 |   | 2004      
|Interest income:                                    |  |      |            |      |   |            |  |   |           
|Loans, including fees                               |  | $    | 44,108,552 |      | $ | 34,226,407 |  | $ | 26,906,483
|Taxable securities                                  |  |      | 3,077,351  |      |   | 1,639,413  |  |   | 1,364,729 
|Nontaxable securities                               |  |      | 332,024    |      |   | 225,926    |  |   | 325,269   
|Deposits in banks                                   |  |      | 13,719     |      |   | 14,887     |  |   | 6,545     
|Federal funds sold                                  |  |      | 780,048    |      |   | 494,918    |  |   | 82,010    
|                                                    |  |      |            |      |   |            |  |   |           
|Total interest income                               |  |      | 48,311,694 |      |   | 36,601,551 |  |   | 28,685,036
|                                                    |  |      |            |      |   |            |  |   |           
|Interest expense:                                   |  |      |            |      |   |            |  |   |           
|Deposits                                            |  |      | 19,357,142 |      |   | 12,812,755 |  |   | 8,873,571 
|Other borrowings                                    |  |      | 1,141,326  |      |   | 1,045,922  |  |   | 1,147,941 
|                                                    |  |      |            |      |   |            |  |   |           
|Total interest expense                              |  |      | 20,498,468 |      |   | 13,858,677 |  |   | 10,021,512
|                                                    |  |      |            |      |   |            |  |   |           
|Net interest income                                 |  |      | 27,813,226 |      |   | 22,742,874 |  |   | 18,663,524
|Provision for loan losses                           |  |      | 476,860    |      |   | 546,150    |  |   | 443,000   
|                                                    |  |      |            |      |   |            |  |   |           
|Net interest income after provision for loan losses |  |      | 27,336,366 |      |   | 22,196,724 |  |   | 18,220,524
|                                                    |  |      |            |      |   |            |  |   |           
|Other income:                                       |  |      |            |      |   |            |  |   |           
|Service charges on deposit accounts                 |  |      | 1,492,460  |      |   | 1,908,418  |  |   | 2,280,582 
|Other service charges and fees                      |  |      | 1,099,671  |      |   | 1,023,284  |  |   | 868,362   
|Mortgage banking income                             |  |      | 703,566    |      |   | 1,051,195  |  |   | 1,173,436 
|                                                    |  |      |            |      |   |            |  |   |           
|Total other income                                  |  |      | 3,295,697  |      |   | 3,982,897  |  |   | 4,322,380 
|                                                    |  |      |            |      |   |            |  |   |           
|Other expenses:                                     |  |      |            |      |   |            |  |   |           
|Salaries and employee benefits                      |  |      | 6,649,091  |      |   | 6,340,830  |  |   | 5,799,164 
|Equipment and occupancy expenses                    |  |      | 1,698,863  |      |   | 1,649,251  |  |   | 1,539,699 
|Other operating expenses                            |  |      | 2,265,734  |      |   | 2,249,019  |  |   | 2,209,610 
|                                                    |  |      |            |      |   |            |  |   |           
|Total other expenses                                |  |      | 10,613,688 |      |   | 10,239,100 |  |   | 9,548,473 
|                                                    |  |      |            |      |   |            |  |   |           
|Income before income taxes                          |  |      | 20,018,375 |      |   | 15,940,521 |  |   | 12,994,431
|                                                    |  |      |           
|Income tax expense                                  |  |      | 7,609,083  |      |   | 5,664,599  |  |   | 4,611,267 
|                                                    |  |      |            |      |   |            |  |   |           
|Net income                                          |  | $    | 12,409,292 |      | $ | 10,275,922 |  | $ | 8,383,164 
|                                                    |  |      |            |      |   |            |  |   |           
|Earnings per share                                  |  | $    | 0.87       |      | $ | 0.72       |  | $ | 0.59      
|                                                    |  |      |            |      |   |            |  |   |           

See Notes to Consolidated Financial Statements.



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HENRY COUNTY BANCSHARES, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004



|                                                                                                                                                |  |      |            |      |   |            |      |  |   |           |  
|----------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ---------- | ---- | - | ---------- | ---- |  | - | --------- | -
|                                                                                                                                                |  | 2006 |            | 2005 |   |            | 2004 | 
|Net income                                                                                                                                      |  | $    | 12,409,292 |      | $ | 10,275,922 |      |  | $ | 8,383,164 |  
|                                                                                                                                                |  |      |            |      |   |            |      |  |   |           |  
|Other comprehensive income (loss):                                                                                                              |  |      |            |      |   |            |      |  |   |           |  
|Net unrealized holding gains (losses) arising during period, net of tax expense (benefits) of $123,730, $(149,480) and $(202,410),
respectively |  |      | 240,182    |      |   | (290,167   | )    |  |   | (392,915  | )
|                                                                                                                                                |  |      |            |      |   |            |      |  |   |           |  
|Comprehensive income                                                                                                                            |  | $    | 12,649,474 |      | $ | 9,985,755  |      |  | $ | 7,990,249 |  
|                                                                                                                                                |  |      |            |      |   |            |      |  |   |           |  

See Notes to Consolidated Financial Statements.



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HENRY COUNTY BANCSHARES, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004



|                                        |        |              |           |   |            |          |          |         |                                |               |             |                |        |   |                     |      |  |         |        |  |   |            |   |  |   |            |  
|--------------------------------------- | ------ | ------------ | --------- | - | ---------- | -------- | -------- | ------- | ------------------------------ | ------------- | ----------- | -------------- | ------ | - | ------------------- | ---- |  | ------- | ------ |  | - | ---------- | - |  | - | ---------- | -
|                                        |        | Common Stock |           |   |            | Retained |          |         | Accumulated OtherComprehensive |               |             | Treasury Stock |        |   | Total Stockholders |     
|                                        | Shares |              | Par Value |   | Surplus    |          | Earnings |         |                                | Income (Loss) |             |                | Shares |   |                     | Cost |  |         | Equity | 
|Balance, December 31, 2003              |        | 7,237,066    |           | $ | 18,092,664 |          | $        | 739,560 |                                | $             | 33,661,983  |                |        | $ | 283,601             |      |  | 76,074  |        |  | $ | (1,393,416 | ) |  | $ | 51,384,392 |  
|Net income                              |        |             |           |   |           |          |          |        |                                |               | 8,383,164   |                |        |   |                    |      |  |        |        |  |   |           |   |  |   | 8,383,164  |  
|Cash dividends declared, $.41 per share |        |             |           |   |           |          |          |        |                                |               | (2,936,007  | )              |        |   |                    |      |  |        |        |  |   |           |   |  |   | (2,936,007 | )
|Purchase of treasury stock              |        |             |           |   |           |          |          |        |                                |               |            |                |        |   |                    |      |  | 9,308   |        |  |   | (172,198   | ) |  |   | (172,198   | )
|Other comprehensive loss                |        |             |           |   |           |          |          |        |                                |               |            |                |        |   | (392,915            | )    |  |        |        |  |   |           |   |  |   | (392,915   | )
|                                        |        |              |           |   |            |          |          |         |                                |               |             |                |        |   |                     |      |  |         |        |  |   |            |   |  |   |            |  
|Balance, December 31, 2004              |        | 7,237,066    |           |   | 18,092,664 |          |          | 739,560 |                                |               | 39,109,140  |                |        |   | (109,314            | )    |  | 85,382  |        |  |   | (1,565,614 | ) |  |   | 56,266,436 |  
|Net income                              |        |             |           |   |           |          |          |        |                                |               | 10,275,922  |                |        |   |                    |      |  |        |        |  |   |           |   |  |   | 10,275,922 |  
|Cash dividends declared, $.49 per share |        |             |           |   |           |          |          |        |                                |               | (3,504,324  | )              |        |   |                    |      |  |        |        |  |   |           |   |  |   | (3,504,324 | )
|Other comprehensive loss                |        |             |           |   |           |          |          |        |                                |               |            |                |        |   | (290,167            | )    |  |        |        |  |   |           |   |  |   | (290,167   | )
|                                        |        |              |           |   |            |          |          |         |                                |               |             |                |        |   |                     |      |  |         |        |  |   |            |   |  |   |            |  
|Balance, December 31, 2005              |        | 7,237,066    |           |   | 18,092,664 |          |          | 739,560 |                                |               | 45,880,738  |                |        |   | (399,481            | )    |  | 85,382  |        |  |   | (1,565,614 | ) |  |   | 62,747,867 |  
|Net income                              |        |             |           |   |           |          |          |        |                                |               | 12,409,292  |                |        |   |                    |      |  |        |        |  |   |           |   |  |   | 12,409,292 |  
|Two for one common stock split          |        | 7,151,684    |           |   | 17,879,210 |          |          |        |                                |               | (17,879,210 | )              |        |   |                    |      |  |        |        |  |   |           |   |  |   |           |  
|Cash dividends declared, $.62 per share |        |             |           |   |           |          |          |        |                                |               | (4,434,044  | )              |        |   |                    |      |  |        |        |  |   |           |   |  |   | (4,434,044 | )
|Reissuance of treasury stock            |        |             |           |   |           |          |          |        |                                |               | (34,713     | )              |        |   |                    |      |  | (18,100 | )      |  |   | 270,013    |   |  |   | 235,300    |  
|Other comprehensive income              |        |             |           |   |           |          |          |        |                                |               |            |                |        |   | 240,182             |      |  |        |        |  |   |           |   |  |   | 240,182    |  
|                                        |        |              |           |   |            |          |          |         |                                |               |             |                |        |   |                     |      |  |         |        |  |   |            |   |  |   |            |  
|Balance, December 31, 2006              |        | 14,388,750   |           | $ | 35,971,874 |          | $        | 739,560 |                                | $             | 35,942,063  |                |        | $ | (159,299            | )    |  | 67,282  |        |  | $ | (1,295,601 | ) |  | $ | 71,198,597 |  
|                                        |        |              |           |   |            |          |          |         |                                |               |             |                |        |   |                     |      |  |         |        |  |   |            |   |  |   |            |  



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HENRY COUNTY BANCSHARES, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004



|                                                                                  |  |      |              |   |      |   |             |      |  |   |             |  
|--------------------------------------------------------------------------------- |  | ---- | ------------ | - | ---- | - | ----------- | ---- |  | - | ----------- | -
|                                                                                  |  | 2006 |              |   | 2005 |   |             | 2004 | 
|OPERATING ACTIVITIES                                                              |  |      |              |   |      |   |             |      |  |   |             |  
|Net income                                                                        |  | $    | 12,409,292   |   |      | $ | 10,275,922  |      |  | $ | 8,383,164   |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |      |              |   |      |   |             |      |  |   |             |  
|Depreciation                                                                      |  |      | 601,386      |   |      |   | 578,534     |      |  |   | 547,800     |  
|Provision for loan losses                                                         |  |      | 476,860      |   |      |   | 546,150     |      |  |   | 443,000     |  
|Loss on sale of other real estate                                                 |  |      | 3,722        |   |      |   |            |      |  |   |            |  
|Deferred income taxes                                                             |  |      | (36,405      | ) |      |   | (389,379    | )    |  |   | (111,019    | )
|Net (increase) decrease in loans held for sale                                    |  |      | 155,934      |   |      |   | (244,245    | )    |  |   | 1,095,613   |  
|Increase in interest receivable                                                   |  |      | (1,679,023   | ) |      |   | (1,396,977  | )    |  |   | (677,699    | )
|Increase in interest payable                                                      |  |      | 1,079,952    |   |      |   | 814,416     |      |  |   | 165,325     |  
|Net other operating activities                                                    |  |      | 246,826      |   |      |   | 25,344      |      |  |   | (33,710     | )
|                                                                                  |  |      |              |   |      |   |             |      |  |   |             |  
|Net cash provided by operating activities                                         |  |      | 13,258,544   |   |      |   | 10,209,765  |      |  |   | 9,812,474   |  
|                                                                                  |  |      |              |   |      |   |             |      |  |   |             |  
|INVESTING ACTIVITIES                                                              |  |      |              |   |      |   |             |      |  |   |             |  
|Purchases of securities available for sale                                        |  |      | (137,258,378 | ) |      |   | (33,242,717 | )    |  |   | (22,970,861 | )
|Proceeds from maturities of securities available for sale                         |  |      | 123,591,856  |   |      |   | 13,903,291  |      |  |   | 27,426,244  |  
|Purchases of securities held to maturity                                          |  |      | (4,215,000   | ) |      |   |            |      |  |   |            |  
|Proceeds from maturities of securities held to maturity                           |  |      | 182,446      |   |      |   | 136,940     |      |  |   | 139,644     |  
|(Purchases) retirement of restricted equity securities                            |  |      | (312,200     | ) |      |   | 302,022     |      |  |   | (1,376,000  | )
|Net (increase) decrease in federal funds sold                                     |  |      | 4,100,000    |   |      |   | (9,600,000  | )    |  |   |            |  
|Net (increase) decrease in interest-bearing deposits in banks                     |  |      | 93,315       |   |      |   | (57,941     | )    |  |   | 241,747     |  
|Net increase in loans                                                             |  |      | (45,179,650  | ) |      |   | (32,013,801 | )    |  |   | (68,255,001 | )
|Proceeds from sale of other real estate                                           |  |      | 208,281      |   |      |   | 370,106     |      |  |   | 40,000      |  
|Purchase of premises and equipment                                                |  |      | (1,495,921   | ) |      |   | (522,549    | )    |  |   | (546,086    | )
|                                                                                  |  |      |              |   |      |   |             |      |  |   |             |  
|Net cash used in investing activities                                             |  |      | (60,285,251  | ) |      |   | (60,724,649 | )    |  |   | (65,300,313 | )
|                                                                                  |  |      |              |   |      |   |             |      |  |   |             |  
|FINANCING ACTIVITIES                                                              |  |      |              |   |      |   |             |      |  |   |             |  
|Net increase in deposits                                                          |  |      | 49,626,285   |   |      |   | 74,933,638  |      |  |   | 43,280,357  |  
|Net proceeds (repayment) from other borrowings                                    |  |      | 4,233,330    |   |      |   | (22,069,553 | )    |  |   | 7,222,640   |  
|Dividends paid                                                                    |  |      | (4,434,044   | ) |      |   | (3,504,324  | )    |  |   | (2,936,007  | )
|Reissuance (purchase) of treasury stock                                           |  |      | 235,300      |   |      |   |            |      |  |   | (172,198    | )
|                                                                                  |  |      |              |   |      |   |             |      |  |   |             |  
|Net cash provided by financing activities                                         |  |      | 49,660,871   |   |      |   | 49,359,761  |      |  |   | 47,394,792  |  
|                                                                                  |  |      |              |   |      |   |             |      |  |   |             |  
|Net increase (decrease) in cash and due from banks                                |  |      | 2,634,164    |   |      |   | (1,155,123  | )    |  |   | (8,093,047  | )
|Cash and due from banks at beginning of year                                      |  |      | 15,950,626   |   |      |   | 17,105,749  |      |  |   | 25,198,796  |  
|                                                                                  |  |      |              |   |      |   |             |      |  |   |             |  
|Cash and due from banks at end of year                                            |  | $    | 18,584,790   |   |      | $ | 15,950,626  |      |  | $ | 17,105,749  |  
|                                                                                  |  |      |              |   |      |   |             |      |  |   |             |  
|SUPPLEMENTAL DISCLOSURES                                                          |  |      |              |   |      |   |             |      |  |   |             |  
|Cash paid for:                                                                    |  |      |              |   |      |   |             |      |  |   |             |  
|Interest                                                                          |  | $    | 19,418,516   |   |      | $ | 13,044,261  |      |  | $ | 9,856,187   |  
|Income taxes                                                                      |  | $    | 7,630,923    |   |      | $ | 5,620,000   |      |  | $ | 4,581,960   |  
|NONCASH TRANSACTIONS                                                              |  |      |              |   |      |   |             |      |  |   |             |  
|Other real estate acquired in settlement of loans                                 |  | $    | 1,597,669    |   |      | $ | 682,050     |      |  | $ | 36,854      |  
|Financed sales of other real estate owned                                         |  | $    | 169,262      |   |      | $ |            |      |  | $ |            |  

See Notes to Consolidated Financial Statements.



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HENRY COUNTY BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

Henry County
Bancshares, Inc. (the Company) is a bank holding company whose principal activity is the ownership and management of its wholly-owned subsidiary, The First State Bank, (the Bank) and the Banks wholly-owned subsidiary,
First Metro Mortgage Co. (First Metro). The Bank is a commercial bank located in Stockbridge, Henry County, Georgia with five other branches located in Henry County. The Bank provides a full range of banking services in its primary
market area of Henry County and surrounding counties. First Metro is also located in Stockbridge and provides mortgage loan origination services in the same primary market area as the Bank.

Basis of Presentation and Accounting Estimates

The consolidated financial statements include the accounts of the Company and its subsidiaries. Significant intercompany transactions and balances have been eliminated in consolidation.

In preparing the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, management
is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the balance sheet date and the 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 foreclosed real estate, and contingent assets and liabilities. The determination of the adequacy of the allowance for loan losses is based on
estimates that are susceptible to significant changes in the economic environment and market conditions. In connection with the determination of the estimated losses on loans and the valuation of foreclosed real estate, management obtains
independent appraisals for significant collateral.

Cash, Due From Banks and Cash Flows

For purposes of reporting cash flows, cash and due from banks includes cash on hand, cash items in process of collection and amounts due from banks. Cash
flows from loans, federal funds sold, interest-bearing deposits in banks, deposits and other borrowings are reported net.

The Bank is
required to maintain reserve balances in cash or on deposit with the Federal Reserve Bank, based on a percentage of deposits. The total of those reserve balances was approximately $93,000 and $339,000 at December 31, 2006 and 2005,
respectively.

Securities

Debt securities that management has the positive intent and ability to hold to maturity are classified as held to maturity and recorded at amortized cost. Securities not classified as held to maturity, including equity securities with
readily determinable fair values, are classified as available for sale and recorded at fair value with unrealized gains and losses excluded from earnings and reported in

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)



other comprehensive income, net of the related deferred tax effect. Equity securities without a readily determinable fair value are classified as available
for sale and recorded at cost.

Securities (Continued)

The amortization of premiums and accretion of discounts are recognized in interest income using the interest method over the life of the securities. Realized gains and losses, determined on the basis of the cost of
specific securities sold, are included in earnings on the settlement date. Declines in the fair value of held to maturity and available-for-sale securities below their cost that are deemed to be other than temporary are reflected in earnings as
realized losses.

Loans Held for Sale

Loans held for sale consist of mortgage loans originated by the Company, which the Company intends to sell into the secondary market and are carried at the lower of cost or fair value, as determined by the aggregate
outstanding commitments from investors, net of origination costs. These loans are sold with servicing rights attached; therefore, no servicing rights are retained by the Company.

The Company sells mortgage loans to investors under various blanket agreements. Under the agreements, investors generally have a limited right of recourse
to the Company for normal representations and warranties and, in some cases, delinquencies within the first three to six months, which lead to loan default and foreclosure. These recourse provisions represent off-balance sheet risks in the normal
course of business. Any liability applicable to loans sold with recourse would be included in other liabilities. No recourse liability was required at December 31, 2006 or December 31, 2005.

Mortgage banking income in the statement of income includes gains and losses on the sale of loans and miscellaneous fees received from borrowers. Gains
and losses on the sale of loans are recognized at the settlement date and are determined by the difference between the selling price and the carrying value of the loans sold.

Loans

Loans are reported at their
outstanding principal balances less the allowance for loan losses. Interest income is accrued on the outstanding principal balance.

Loan
origination fees and certain direct costs are netted and recognized in income over the life of the loans using a method which approximates a level yield.

The accrual of interest on loans is discontinued when, in managements opinion, the borrower may be unable to meet payments as they become due, unless the loan is well-secured. All interest accrued but not
collected for loans that are placed on nonaccrual or charged off is reversed against interest income, unless management believes that the accrued interest is recoverable through the liquidation of collateral. Interest income on nonaccrual loans is
recognized on the cost-recovery



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)



method, until the loans are returned to accrual status. Loans are returned to accrual status when all the principal and interest amounts are brought current
and future payments are reasonably assured.

A loan is considered impaired when it is probable, based on current information and events, the
Company will be unable to collect all principal and interest payments due in accordance with the contractual terms of the loan agreement. 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 obtainable market price, or the fair value of the collateral if the loan is collateral dependent. The amount of impairment, if any, and any subsequent changes are included in the allowance for
loan losses. Interest on accruing impaired loans is recognized as long as such loans do not meet the criteria for nonaccrual status.

Allowance for Loan Losses

The allowance for loan losses is established through a provision for loan losses charged to
expense. Loan losses are charged against the allowance when management believes the collectibility of the principal is unlikely. Subsequent recoveries, if any, are credited to the allowance.

The allowance is an amount that management believes will be adequate to absorb estimated losses relating to specifically identified loans, as well as
probable credit losses inherent in the balance of the loan portfolio, based on an evaluation of the collectibility of existing loans and prior loss experience. This evaluation also takes into consideration such factors as changes in the nature and
volume of the loan portfolio, overall portfolio quality, review of specific problem loans, concentrations and current economic conditions that may affect the borrowers ability to pay. This evaluation does not include the effects of expected
losses on specific loans or groups of loans that are related to future events or expected changes in economic conditions. While management uses the best information available to make its evaluation, future adjustments to the allowance may be
necessary if there are any significant changes in economic conditions. In addition, regulatory agencies, as an integral part of their examination process, periodically review the Companys allowance for loan losses, and may require the Company
to make additions to the allowance based on their judgment about information available to them at the time of their examinations.

The
allowance consists of specific, general and unallocated components. The specific component relates to loans that are classified as either doubtful, substandard or special mention. For such loans that are also classified as impaired, an allowance is
established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers non-classified loans and is based on historical 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.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)



Premises and Equipment

Land is carried at cost. Premises and equipment are carried at cost less accumulated depreciation. Depreciation is computed principally by the
straight-line method over the estimated useful lives of the assets.

Other Real Estate Owned

Other real estate owned represents properties acquired through or in lieu of loan foreclosure and is initially recorded at the lower of cost or fair value
less estimated costs to sell. Any write-down to fair value at the time of transfer to other real estate owned is charged to the allowance for loan losses. Costs of improvements are capitalized, whereas costs relating to holding other real estate
owned and subsequent adjustments to the value are expensed. The carrying amount of other real estate owned at December 31, 2006 and 2005 was $1,410,667 and $194,263, respectively.

Income Taxes

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

Earnings Per Share

Earnings per share are computed by dividing net income by the weighted average number of shares outstanding. Weighted average shares outstanding were
14,303,517, 14,303,368, and 14,311,557 for the years ending December 31, 2006, 2005 and 2004, respectively. Weighted average shares outstanding for the years ending December 31, 2006, 2005, and 2004 have been adjusted for a two for one
stock split in the form of a 100% stock dividend declared and paid on December 14, 2006.

Comprehensive Income

Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Although certain changes in assets
and liabilities, such as unrealized gains and losses on available for sale securities, are reported as a separate component of the equity section of the balance sheet, such items, along with net income, are components of comprehensive income.

Reclassifications

Certain items on the consolidated statements of cash flows for the years ended December 31, 2005 and 2004 have been reclassified, with no effect on net income, to be consistent with the classifications adopted for the year ended
December 31, 2006.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)



Recent Accounting Standards

In July 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes  An Interpretation of FASB Statement
No. 109.This interpretation addresses the accounting for uncertainty in income taxes recognized in a Companys financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes. It prescribes a
comprehensive model for recognizing, measuring, presenting and disclosing in the financial statements tax positions taken or expected to be taken in a tax return. It requires that only benefits from tax positions that are more-likely-than-not of
being sustained upon examination should be recognized in the financial statements. These benefits would be recorded at amounts considered to be the maximum amounts more-likely-than-not of being sustained. At the time these positions become
more-likely-than-not to be disallowed, their recognition would be reversed. This interpretation is effective for fiscal years beginning after December 15, 2006 and is not expected to have a material impact on the Companys financial
condition or results of operations.

Recent Accounting Standards (Continued)

In September 2006, the FASB issued SFAS 157, Fair Value Measurements. The standard provides for guidance for using fair value to measure assets and
liabilities. It defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles and expands disclosures about fair value measurement. Under the standard, fair value refers to the price what would
be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the reporting entity transacts. It clarifies the principle that fair value should be used on the assumptions
market participants would use when pricing the asset or liability. In support of this principle, the standard establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. Under the standard, fair value
measurements would be separately disclosed by level within the fair value hierarchy. Statement 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. The Company is currently evaluating the impact
the adoption of this statement could have on its financial condition, results of operations and cash flows.

NOTE 2. SECURITIES

The amortized cost and fair value of securities are summarized as follows:



|                               |  |               |            |                      |   |                       |  |   |            |   |  |   |           
|------------------------------ |  | ------------- | ---------- | -------------------- | - | --------------------- |  | - | ---------- | - |  | - | ----------
|                               |  | AmortizedCost |            | GrossUnrealizedGains |   | GrossUnrealizedLosses |  |   | Fair Value
|Securities Available for Sale  |  |               |            |                      |   |                       |  |   |            |   |  |   |           
|December 31, 2006:             |  |               |            |                      |   |                       |  |   |            |   |  |   |           
|U.S. Treasury securities       |  | $             |           |                      | $ |                      |  | $ |           |   |  | $ |          
|Government-sponsored agencies  |  |               | 71,435,383 |                      |   | 58,442                |  |   | (231,274   | ) |  |   | 71,262,551
|State and municipal securities |  |               | 5,194,263  |                      |   | 31,384                |  |   | (42,478    | ) |  |   | 5,183,169 
|Mortgage-backed securities     |  |               | 7,991,076  |                      |   | 56,221                |  |   | (113,658   | ) |  |   | 7,933,639 
|                               |  |               |            |                      |   |                       |  |   |            |   |  |   |           



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2. SECURITIES (Continued)



|                               |  |   |            |  |   |         |  |   |          |   |  |   |           
|------------------------------ |  | - | ---------- |  | - | ------- |  | - | -------- | - |  | - | ----------
|                               |  |   |            |  |   |         |  |   |          |   |  |   |           
|                               |  | $ | 84,620,722 |  | $ | 146,047 |  | $ | (387,410 | ) |  | $ | 84,379,359
|                               |  |   |            |  |   |         |  |   |          |   |  |   |           
|December 31, 2005:             |  |   |            |  |   |         |  |   |          |   |  |   |           
|U.S. Treasury securities       |  | $ | 996,663    |  | $ |        |  | $ | (1,038   | ) |  | $ | 995,625   
|Government-sponsored agencies  |  |   | 59,732,647 |  |   |        |  |   | (536,753 | ) |  |   | 59,195,894
|State and municipal securities |  |   | 5,293,573  |  |   | 45,267  |  |   | (41,980  | ) |  |   | 5,296,860 
|Mortgage-backed securities     |  |   | 4,931,315  |  |   | 30,699  |  |   | (101,469 | ) |  |   | 4,860,545 
|                               |  |   |            |  |   |         |  |   |          |   |  |   |           
|                               |  | $ | 70,954,198 |  | $ | 75,966  |  | $ | (681,240 | ) |  | $ | 70,348,924
|                               |  |   |            |  |   |         |  |   |          |   |  |   |           
|Securities Held to Maturity    |  |   |            |  |   |         |  |   |          |   |  |   |           
|December 31, 2006:             |  |   |            |  |   |         |  |   |          |   |  |   |           
|State and municipal securities |  | $ | 4,315,000  |  | $ | 7,006   |  | $ | (72,191  | ) |  | $ | 4,249,815 
|Mortgage-backed securities     |  |   | 13,339     |  |   | 9       |  |   |         |   |  |   | 13,348    
|                               |  |   |            |  |   |         |  |   |          |   |  |   |           
|                               |  | $ | 4,328,339  |  | $ | 7,015   |  | $ | (72,191  | ) |  | $ | 4,263,163 
|                               |  |   |            |  |   |         |  |   |          |   |  |   |           
|December 31, 2005:             |  |   |            |  |   |         |  |   |          |   |  |   |           
|State and municipal securities |  | $ | 270,000    |  | $ | 1,057   |  | $ |         |   |  | $ | 271,057   
|Mortgage-backed securities     |  |   | 25,785     |  |   | 324     |  |   |         |   |  |   | 26,109    
|                               |  |   |            |  |   |         |  |   |          |   |  |   |           
|                               |  | $ | 295,785    |  | $ | 1,381   |  | $ |         |   |  | $ | 297,166   
|                               |  |   |            |  |   |         |  |   |          |   |  |   |           



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2. SECURITIES (Continued)



Restricted equity securities are summarized as follows:



|                             |      |              |           |  |   |          
|---------------------------- | ---- | ------------ | --------- |  | - | ---------
|                             |      | December 31,
|                             | 2006 |              | 2005     
|Federal Home Loan Bank stock |      | $            | 2,094,300 |  | $ | 1,782,100
|Correspondent bank stock     |      |              | 275,351   |  |   | 275,351  
|                             |      |              |           |  |   |          
|                             |      | $            | 2,369,651 |  | $ | 2,057,451
|                             |      |              |           |  |   |          

Securities with a carrying value of $66,695,000 and $58,976,000 at December 31, 2006 and 2005,
respectively, were pledged to secure public deposits and for other purposes required or permitted by law.

There were no sales of securities
available-for-sale for the years ended December 31, 2006, 2005, and 2004.

The amortized cost and fair value of debt securities as of
December 31, 2006 by contractual maturity are shown below. Maturities may differ from contractual maturities in mortgage-backed securities because the mortgages underlying the securities may be called or repaid without penalty. Therefore, these
securities are not included in the maturity categories in the following summary.



|                           |               |                               |            |                             |               |            |            |   |           |  |   |          
|-------------------------- | ------------- | ----------------------------- | ---------- | --------------------------- | ------------- | ---------- | ---------- | - | --------- |  | - | ---------
|                           |               | Securities Available for Sale |            | Securities Held to Maturity
|                           | AmortizedCost |                               | Fair Value |                             | AmortizedCost |            | Fair Value
|Due in one year or less    |               | $                             | 20,512,273 |                             | $             | 20,371,383 |            | $ | 100,000   |  | $ | 100,108  
|Due from one to five years |               |                               | 48,374,359 |                             |               | 48,304,246 |            |   | 3,215,000 |  |   | 3,214,797
|Due from five to ten years |               |                               | 7,234,502  |                             |               | 7,231,146  |            |   | 1,000,000 |  |   | 934,910  
|Due after ten years        |               |                               | 508,512    |                             |               | 538,945    |            |   |          |  |   |         
|Mortgage-backed securities |               |                               | 7,991,076  |                             |               | 7,933,639  |            |   | 13,339    |  |   | 13,348   
|                           |               |                               |            |                             |               |            |            |   |           |  |   |          
|                           |               | $                             | 84,620,722 |                             | $             | 84,379,359 |            | $ | 4,328,339 |  | $ | 4,263,163
|                           |               |                               |            |                             |               |            |            |   |           |  |   |          

In 2003, the FASB Emerging Issues Task Force released Issue 03-01, The Meaning of
Other-Than-Temporary Impairment and Its Application to Certain Investments. The issue requires disclosure of certain information about other than temporary impairments in the market value of securities. The market value of securities is based on
quoted market values and is significantly affected by the interest rate environment.

Management evaluates securities for
other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to (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 Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in
fair value.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2. SECURITIES (Continued)



Information pertaining to securities with gross unrealized losses at December 31, 2006 and 2005,
aggregated by investment category and length of time that individual securities have been in a continuous loss position, follows:



|                               |                       |                         |            |                    |                       |            |            |   |         |  |   |           
|------------------------------ | --------------------- | ----------------------- | ---------- | ------------------ | --------------------- | ---------- | ---------- | - | ------- |  | - | ----------
|                               |                       | Less Than Twelve Months |            | Over Twelve Months
|                               | GrossUnrealizedLosses |                         | Fair Value |                    | GrossUnrealizedLosses |            | Fair Value
|December 31, 2006              |                       |                         |            |                    |                       |            |            |   |         |  |   |           
|U.S. Treasury securities       |                       | $                       |           |                    | $                     |           |            | $ |        |  | $ |          
|Government-sponsored agencies  |                       |                         | 21,398     |                    |                       | 19,473,958 |            |   | 209,876 |  |   | 26,086,305
|State and municipal securities |                       |                         | 76,623     |                    |                       | 4,047,441  |            |   | 38,046  |  |   | 1,967,454 
|Mortgage-backed securities     |                       |                         | 304        |                    |                       | 74,009     |            |   | 113,354 |  |   | 1,721,455 
|                               |                       |                         |            |                    |                       |            |            |   |         |  |   |           
|                               |                       | $                       | 98,325     |                    | $                     | 23,595,408 |            | $ | 361,276 |  | $ | 29,775,214
|                               |                       |                         |            |                    |                       |            |            |   |         |  |   |           
|                               |                       |                         |            |                   
|December 31, 2005              |                       |                         |            |                    |                       |            |            |   |         |  |   |           
|U.S. Treasury securities       |                       | $                       | 1,038      |                    | $                     | 995,625    |            | $ |        |  | $ |          
|Government-sponsored agencies  |                       |                         | 149,783    |                    |                       | 31,049,130 |            |   | 386,970 |  |   | 27,056,763
|State and municipal securities |                       |                         | 39,114     |                    |                       | 2,861,232  |            |   | 2,866   |  |   | 310,234   
|Mortgage-backed securities     |                       |                         | 2,090      |                    |                       | 227,525    |            |   | 99,379  |  |   | 2,366,310 
|                               |                       |                         |            |                    |                       |            |            |   |         |  |   |           
|                               |                       | $                       | 192,025    |                    | $                     | 35,133,512 |            | $ | 489,215 |  | $ | 29,733,307
|                               |                       |                         |            |                    |                       |            |            |   |         |  |   |           

The unrealized losses on the Companys investments in U.S. Treasury obligations and direct
obligations of the U.S. government sponsored agencies were caused by interest rate increases. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost of the investment.
Because the Company has the ability and intent to hold these investments until a recovery of fair value, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at December 31, 2006 and
December 31, 2005.

The unrealized losses on the Companys investment in State and municipal securities are caused by interest
rate increases. The Companys investments in State and municipal securities consist primarily of general obligations of municipalities located in the state of Georgia. Within the Companys portfolio of State and municipal securities
approximately 50% of the total fair value and 58% of the unrealized losses are attributed to general obligation bonds purchased during 2005 when interest rates were lower. Because the decline in market value is attributable to changes in interest
rates and not credit quality, and because the Company has the ability and intent to hold those investments until a recovery of fair value, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired
at December 31, 2006 and December 31, 2005.

The unrealized losses on the Companys investment in federal agency
mortgage-backed securities were caused by interest rate increases. The Company purchased those investments at a discount relative to their face amount, and the contractual cash flows of those investments are guaranteed by an agency of



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2. SECURITIES (Continued)



the U.S. government. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost of the Companys
investment. Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Company has the ability and intent to hold those investments until a recovery of fair value, which may be maturity,
the Company does not consider those investments to be other-than-temporarily impaired at December 31, 2006 and December 31, 2005.

NOTE 3.
LOANS

The composition of loans is summarized as follows:



|                                        |      |              |             |      |  |   |             |  
|--------------------------------------- | ---- | ------------ | ----------- | ---- |  | - | ----------- | -
|                                        |      | December 31, |            
|                                        | 2006 |              |             | 2005 | 
|Commercial, financial, and agricultural |      | $            | 32,765,000  |      |  | $ | 36,349,000  |  
|Real estate  construction              |      |              | 309,565,000 |      |  |   | 260,912,000 |  
|Real estate  mortgage                  |      |              | 210,368,000 |      |  |   | 210,366,000 |  
|Consumer installment and other          |      |              | 8,948,248   |      |  |   | 10,486,879  |  
|                                        |      |              |             |      |  |   |             |  
|                                        |      |              | 561,646,248 |      |  |   | 518,113,879 |  
|Allowance for loan losses               |      |              | (5,229,838  | )    |  |   | (4,971,852  | )
|                                        |      |              |             |      |  |   |             |  
|Loans, net                              |      | $            | 556,416,410 |      |  | $ | 513,142,027 |  
|                                        |      |              |             |      |  |   |             |  

Changes in the allowance for loan losses are as follows:



|                                           |      |                          |           |      |  |   |           |   |  |   |           |  
|------------------------------------------ | ---- | ------------------------ | --------- | ---- |  | - | --------- | - |  | - | --------- | -
|                                           |      | Years Ended December 31, |          
|                                           | 2006 |                          |           | 2005 |  |   | 2004      |  
|Balance, beginning of year                 |      | $                        | 4,971,852 |      |  | $ | 4,488,958 |   |  | $ | 4,178,472 |  
|Provision for loan losses                  |      |                          | 476,860   |      |  |   | 546,150   |   |  |   | 443,000   |  
|Loans charged off                          |      |                          | (240,608  | )    |  |   | (85,909   | ) |  |   | (153,598  | )
|Recoveries of loans previously charged off |      |                          | 21,734    |      |  |   | 22,653    |   |  |   | 21,084    |  
|                                           |      |                          |           |      |  |   |           |   |  |   |           |  
|Balance, end of year                       |      | $                        | 5,229,838 |      |  | $ | 4,971,852 |   |  | $ | 4,488,958 |  
|                                           |      |                          |           |      |  |   |           |   |  |   |           |  

The total recorded investment in impaired loans, consisting solely of loans on nonaccrual status,
was $416,377 and $781,922 at December 31, 2006 and 2005, respectively. There were no impaired loans that had related allowances for loan losses determined in accordance with SFAS No. 114, Accounting by Creditors for Impairment of a
Loan, at December 31, 2006 and 2005. The average recorded investment in impaired loans for 2006 and 2005 was $1,035,750 and $797,855, respectively. Interest income recognized on impaired loans for cash payments received was not material for
the years ended 2006, 2005 and 2004.

Loans past due ninety days or more and still accruing interest amounted to $1,001,000 and $4,173,000
at December 31, 2006 and 2005, respectively.

In the ordinary course of business, the Company has granted loans to certain related
parties, including directors, executive officers, and their affiliates. The interest rates on these loans were substantially the same as rates prevailing at the time of the transaction and repayment terms are customary for the type of loan. Changes
in related party loans for the year ended December 31, 2006 are as follows:



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##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3. LOANS (Continued)



|                           |  |   |          |  
|-------------------------- |  | - | -------- | -
|Balance, beginning of year |  | $ | 840,097  |  
|Advances                   |  |   | 85,016   |  
|Repayments                 |  |   | (587,018 | )
|                           |  |   |          |  
|Balance, end of year       |  | $ | 338,095  |  
|                           |  |   |          |  

NOTE 4. PREMISES AND EQUIPMENT

Premises and equipment are summarized as follows:



|                                                              |      |              |            |      |  |   |            |  
|------------------------------------------------------------- | ---- | ------------ | ---------- | ---- |  | - | ---------- | -
|                                                              |      | December 31, |           
|                                                              | 2006 |              |            | 2005 | 
|Land                                                          |      | $            | 2,209,015  |      |  | $ | 2,211,515  |  
|Buildings                                                     |      |              | 8,998,338  |      |  |   | 8,998,338  |  
|Equipment                                                     |      |              | 4,186,339  |      |  |   | 3,997,184  |  
|Construction in progress, estimated cost to complete $275,000 |      |              | 1,345,920  |      |  |   | 36,653     |  
|                                                              |      |              |            |      |  |   |            |  
|                                                              |      |              | 16,739,612 |      |  |   | 15,243,690 |  
|Accumulated depreciation                                      |      |              | (6,803,489 | )    |  |   | (6,202,102 | )
|                                                              |      |              |            |      |  |   |            |  
|                                                              |      | $            | 9,936,123  |      |  | $ | 9,041,588  |  
|                                                              |      |              |            |      |  |   |            |  

NOTE 5. DEPOSITS

The aggregate amount of time deposits in denominations of $100,000 or more at December 31, 2006 and 2005 was $153,971,000 and $132,201,000, respectively. The scheduled maturities of time deposits at
December 31, 2006 are as follows:



|     |  |   |              
|---- |  | - | -------------
|     | 
|2007 |  |   | $ 289,229,533
|2008 |  |   | 29,184,170   
|2009 |  |   | 15,790,584   
|2010 |  |   | 14,607,602   
|2011 |  |   | 12,845,291   
|     |  |   |              
|     |  | $ | 361,657,180  
|     |  |   |              

The Company had brokered time deposits of $17,034,000 and $21,669,000 at December 31, 2006
and December 31, 2005, respectively.

Overdraft demand deposits reclassified to loans totaled $133,000 and $33,000 at December 31,
2006 and 2005, respectively.



16



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##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6. OTHER BORROWINGS



Other borrowings consist of the following:



|                                                                                                                                                        |      |              |            |  |   |           
|------------------------------------------------------------------------------------------------------------------------------------------------------- | ---- | ------------ | ---------- |  | - | ----------
|                                                                                                                                                        |      | December 31,
|                                                                                                                                                        | 2006 |              | 2005      
|Advance from Federal Home Loan Bank with interest at 5.00%, due March 30, 2009.                                                                         |      | $            |           |  | $ | 5,000,000 
|Advance from Federal Home Loan Bank with interest at 5.51%, due March 26, 2008.                                                                         |      |              | 5,000,000  |  |   | 5,000,000 
|Advance from Federal Home Loan Bank with interest at 4.00%, due April 19, 2010.                                                                         |      |              | 1,000,000  |  |   | 1,000,000 
|Advance from Federal Home Loan Bank with interest at 3.28%, due April 17, 2008.                                                                         |      |              | 1,000,000  |  |   | 1,000,000 
|Advance from Federal Home Loan Bank with interest at 3.16%, due April 19, 2010.                                                                         |      |              | 1,500,000  |  |   | 1,928,572 
|Advance from Federal Home Loan Bank with interest at prime minus 287.5 basis points (5.375% at December 31, 2006), adjustable daily, due
June 28, 2007. |      |              | 10,000,000 |  |   |          
|Treasury, tax and loan note option account, with interest at .25% less than the federal funds rate, due on demand.                                      |      |              | 721,682    |  |   | 1,059,780 
|Federal funds purchased and securities sold under agreements to repurchase.                                                                             |      |              | 5,000,000  |  |   | 5,000,000 
|                                                                                                                                                        |      |              |            |  |   |           
|                                                                                                                                                        |      | $            | 24,221,682 |  | $ | 19,988,352
|                                                                                                                                                        |      |              |            |  |   |           

The advances from the Federal Home Loan Bank are secured by Federal Home Loan Bank stock of
$2,094,300 and Federal Home Loan Bank Agency bonds in the amount of $19,690,000.

Securities sold under agreements to repurchase, which are
secured borrowings, generally mature within thirty days from the transaction date. Securities sold under repurchase agreements are reflected at the amount of cash received in connection with the transactions. The Company may be required to provide
additional collateral based on the fair value of the underlying securities. The Company monitors the fair value of the underlying securities on a daily basis.

The Company has available unused lines of credit with various financial institutions totaling $31,600,000 at December 31, 2006.



17



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##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7. MORTGAGE BANKING INCOME



Mortgage banking income consists of the following:



|                                |      |                          |         |  |      |           |  |   |          
|------------------------------- | ---- | ------------------------ | ------- |  | ---- | --------- |  | - | ---------
|                                |      | Years Ended December 31,
|                                | 2006 |                          | 2005    |  | 2004
|Gains (losses) on sale of loans |      | $                        | 330,959 |  | $    | 502,309   |  | $ | 550,613  
|Other fees from borrowers       |      |                          | 372,607 |  |      | 548,886   |  |   | 622,823  
|                                |      |                          |         |  |      |           |  |   |          
|                                |      | $                        | 703,566 |  | $    | 1,051,195 |  | $ | 1,173,436
|                                |      |                          |         |  |      |           |  |   |          

NOTE 8. EMPLOYEE BENEFIT PLANS

The Company has a noncontributory profit-sharing plan and a 401(k) retirement plan covering substantially all employees. Contributions to the plans
charged to expense during 2006, 2005 and 2004 amounted to $417,816, $398,259 and $347,081, respectively.

The Company also has deferred
compensation agreements with certain key officers. Amounts charged to expense under these agreements totaled $53,064, $49,996, and $38,386 for the years ended December 31, 2006, 2005 and 2004, respectively.

NOTE 9. INCOME TAXES

Income tax expense consists of
the following:



|                   |      |                          |           |      |  |   |           |   |  |   |           |  
|------------------ | ---- | ------------------------ | --------- | ---- |  | - | --------- | - |  | - | --------- | -
|                   |      | Years Ended December 31, |          
|                   | 2006 |                          |           | 2005 |  |   | 2004      |  
|Current            |      | $                        | 7,645,488 |      |  | $ | 6,053,978 |   |  | $ | 4,722,286 |  
|Deferred           |      |                          | (36,405   | )    |  |   | (389,379  | ) |  |   | (111,019  | )
|                   |      |                          |           |      |  |   |           |   |  |   |           |  
|Income tax expense |      | $                        | 7,609,083 |      |  | $ | 5,664,599 |   |  | $ | 4,611,267 |  
|                   |      |                          |           |      |  |   |           |   |  |   |           |  

The Companys income tax expense differs from the amounts computed by applying the federal
income tax statutory rates to income before income taxes. A reconciliation of the differences is as follows:



|                                       |      |                          |           |      |  |   |           |   |  |   |           |  
|-------------------------------------- | ---- | ------------------------ | --------- | ---- |  | - | --------- | - |  | - | --------- | -
|                                       |      | Years Ended December 31, |          
|                                       | 2006 |                          |           | 2005 |  |   | 2004      |  
|Income taxes at federal statutory rate |      | $                        | 7,006,431 |      |  | $ | 6,057,398 |   |  | $ | 4,548,051 |  
|Tax-exempt interest                    |      |                          | (109,750  | )    |  |   | (85,852   | ) |  |   | (112,970  | )
|State income taxes                     |      |                          | 580,302   |      |  |   | 334,538   |   |  |   | 208,016   |  
|Surtax exemption                       |      |                          |          |      |  |   | (550,000  | ) |  |   | (100,000  | )
|Other items, net                       |      |                          | 132,100   |      |  |   | (91,485   | ) |  |   | 68,170    |  
|                                       |      |                          |           |      |  |   |           |   |  |   |           |  
|Income tax expense                     |      | $                        | 7,609,083 |      |  | $ | 5,664,599 |   |  | $ | 4,611,267 |  
|                                       |      |                          |           |      |  |   |           |   |  |   |           |  



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##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9. INCOME TAXES (Continued)



The components of deferred income taxes are as follows:



|                              |      |              |           |  |   |          
|----------------------------- | ---- | ------------ | --------- |  | - | ---------
|                              |      | December 31,
|                              | 2006 |              | 2005     
|Deferred tax assets:          |      |              |           |  |   |          
|Loan loss reserves            |      | $            | 1,975,988 |  | $ | 1,975,763
|Deferred compensation         |      |              | 223,262   |  |   | 228,614  
|Deferred loan fees            |      |              | 50,064    |  |   | 51,957   
|Securities available for sale |      |              | 82,063    |  |   | 205,793  
|                              |      |              |           |  |   |          
|                              |      |              | 2,331,377 |  |   | 2,462,127
|                              |      |              |           |  |   |          
|Deferred tax liabilities:     |      |              |           |  |   |          
|Depreciation                  |      |              | 162,345   |  |   | 205,770  
|                              |      |              |           |  |   |          
|Net deferred tax assets       |      | $            | 2,169,032 |  | $ | 2,256,357
|                              |      |              |           |  |   |          

NOTE 10. COMMITMENTS AND CONTINGENCIES

Loan Commitments

The Company 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. They involve,
to varying degrees, elements of credit risk and interest rate risk in excess of the amount recognized in the balance sheets. The majority of all commitments to extend credit and standby letters of credit are variable rate instruments.

The Company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 Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. A summary of the
Companys commitments is as follows:



|                                |      |              |             |  |   |            
|------------------------------- | ---- | ------------ | ----------- |  | - | -----------
|                                |      | December 31,
|                                | 2006 |              | 2005       
|Commitments to extend credit    |      | $            | 104,075,148 |  | $ | 104,126,894
|Other standby letters of credit |      |              | 6,485,481   |  |   | 5,362,211  
|                                |      |              |             |  |   |            
|                                |      | $            | 110,560,629 |  | $ | 109,489,105
|                                |      |              |             |  |   |            

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 are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash requirements. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on managements credit evaluation of the party.



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##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10. COMMITMENTS AND CONTINGENCIES (Continued)



Collateral held varies, but may include accounts receivable, inventory, property and equipment, residential real estate, and income-producing commercial
properties.

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a
third party. Those guarantees are primarily issued to support public and private borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers. Collateral held
varies as specified above and is required in instances which the Company deemed necessary.

At December 31, 2006 and 2005, the carrying
amount of liabilities related to the Companys obligation to perform under financial standby letters of credit was insignificant. The Company has not been required to perform on any financial standby letters of credit, and the Company has not
incurred any losses on financial standby letters of credit for the years ended December 31, 2006 and 2005.

Contingencies

In the normal course of business, the Company is involved in various legal proceedings. In the opinion of management, any liability
resulting from such proceedings would not have a material adverse effect on the Companys financial statements.

NOTE 11. CONCENTRATIONS OF CREDIT

The Company originates primarily commercial, commercial real estate, residential real estate, and consumer loans to customers in Henry
County and surrounding counties. The ability of the majority of the Companys customers to honor their contractual loan obligations is dependent on the economy in these areas.

Ninety-three percent of the Companys loan portfolio is concentrated in loans secured by real estate, of which a substantial portion is secured by
real estate in the Companys primary market area. In addition, a substantial portion of the other real estate owned is located in those same markets. Accordingly, the ultimate collectibility of the loan portfolio and recovery of other real
estate owned are susceptible to changes in market conditions in the Companys primary market area. The other significant concentrations of credit by type of loan are set forth in Note 3.

The Company, as a matter of policy, does not generally extend credit to any single borrower or group of related borrowers in excess of 25% of statutory
capital, or approximately $12,000,000.

NOTE 12. REGULATORY MATTERS

The Bank is subject to certain restrictions on the amount of dividends that may be declared without prior regulatory approval. At December 31, 2006, approximately $6,278,000 of retained earnings were available
for dividend declaration without regulatory approval.

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



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##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12. REGULATORY MATTERS (Continued)



direct material effect on the consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action,
the Company and Bank must meet specific capital guidelines that involve quantitative measures of the assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. Capital amounts and classification are
also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures
established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios of Total and Tier I capital to risk-weighted assets, as defined, and of Tier I capital to average assets, as defined.
Management believes, as of December 31, 2006 and 2005, the Company and the Bank met all capital adequacy requirements to which they are subject.

As of December 31, 2006, 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 I risk-based, and Tier I leverage ratios as set forth in the following table. There are no conditions or events since that notification that management believes
have changed the Banks category. Prompt corrective action provisions are not applicable to bank holding companies.

The Company and
Banks actual capital amounts and ratios are presented in the following table.



|                         |  |                        |        |       |                               |   |        |                                                                  |        |  |      |        |  |         |  |       |   |  | 
|------------------------ |  | ---------------------- | ------ | ----- | ----------------------------- | - | ------ | ---------------------------------------------------------------- | ------ |  | ---- | ------ |  | ------- |  | ----- | - |  | 
|                         |  | Actual                 |        |       | For Capital Adequacy Purposes |   |        | To Be Well Capitalized Under Prompt
Corrective Action Provisions |       
|                         |  | Amount                 |        | Ratio |                               |   | Amount |                                                                  | Ratio  |  |      | Amount |  | Ratio   | 
|                         |  | (Dollars in Thousands) |       
|As of December 31, 2006: |  |                        |        |       |                               |   |        |                                                                  |        |  |      |        |  |         | 
|Total Capital to Risk    |  |                        |        |       |                               |   |        |                                                                  |        |  |      |        |  |         |  |       |  
|Weighted Assets:         |  |                        |        |       |                               |   |        |                                                                  |        |  |      |        |  |         |  |       |  
|Consolidated             |  | $                      | 76,588 |       | 12.77                         | % |        | $                                                                | 47,987 |  | 8.00 | %      |  | N/A     |  | N/A   |  
|Bank                     |  | $                      | 75,518 |       | 12.59                         | % |        | $                                                                | 47,975 |  | 8.00 | %      |  | $59,969 |  | 10.00 | %
|Tier I Capital to Risk   |  |                        |        |       |                               |   |        |                                                                  |        |  |      |        |  |         |  |       |  
|Weighted Assets:         |  |                        |        |       |                               |   |        |                                                                  |        |  |      |        |  |         |  |       |  
|Consolidated             |  | $                      | 71,358 |       | 11.90                         | % |        | $                                                                | 23,994 |  | 4.00 | %      |  | N/A     |  | N/A   |  
|Bank                     |  | $                      | 70,288 |       | 11.72                         | % |        | $                                                                | 23,987 |  | 4.00 | %      |  | $35,981 |  | 6.00  | %
|Tier I Capital to        |  |                        |        |       |                               |   |        |                                                                  |        |  |      |        |  |         |  |       |  
|Average Assets:          |  |                        |        |       |                               |   |        |                                                                  |        |  |      |        |  |         |  |       |  
|Consolidated             |  | $                      | 71,358 |       | 9.85                          | % |        | $                                                                | 28,973 |  | 4.00 | %      |  | N/A     |  | N/A   |  
|Bank                     |  | $                      | 70,288 |       | 9.71                          | % |        | $                                                                | 28,963 |  | 4.00 | %      |  | $36,204 |  | 5.00  | %
|As of December 31, 2005: |  |                        |        |       |                               |   |        |                                                                  |        |  |      |        |  |         |  |       |  
|Total Capital to Risk    |  |                        |        |       |                               |   |        |                                                                  |        |  |      |        |  |         |  |       |  
|Weighted Assets:         |  |                        |        |       |                               |   |        |                                                                  |        |  |      |        |  |         |  |       |  



21



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##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12. REGULATORY MATTERS (Continued)



|                       |  |   |        |  |       |   |  |   |        |  |      |   |  |         |  |       |   |  | 
|---------------------- |  | - | ------ |  | ----- | - |  | - | ------ |  | ---- | - |  | ------- |  | ----- | - |  | 
|Consolidated           |  | $ | 68,119 |  | 12.44 | % |  | $ | 43,819 |  | 8.00 | % |  | N/A     |  | N/A   |  
|Bank                   |  | $ | 67,247 |  | 12.28 | % |  | $ | 43,806 |  | 8.00 | % |  | $54,758 |  | 10.00 | %
|Tier I Capital to Risk |  |   |        |  |       |   |  |   |        |  |      |   |  |         |  |       |  
|Weighted Assets:       |  |   |        |  |       |   |  |   |        |  |      |   |  |         |  |       |  
|Consolidated           |  | $ | 63,147 |  | 11.53 | % |  | $ | 21,909 |  | 4.00 | % |  | N/A     |  | N/A   |  
|Bank                   |  | $ | 62,275 |  | 11.37 | % |  | $ | 21,903 |  | 4.00 | % |  | $32,855 |  | 6.00  |  
|Tier I Capital to      |  |   |        |  |       |   |  |   |        |  |      |   |  |         |  |       |  
|Average Assets:        |  |   |        |  |       |   |  |   |        |  |      |   |  |         |  |       |  
|Consolidated           |  | $ | 63,147 |  | 9.73  | % |  | $ | 25,965 |  | 4.00 | % |  | N/A     |  | N/A   |  
|Bank                   |  | $ | 62,275 |  | 9.60  | % |  | $ | 25,959 |  | 4.00 | % |  | $32,449 |  | 5.00  |  

NOTE 13. FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair value of a financial instrument is the current amount that would be exchanged between willing parties, other than in a forced liquidation. Fair
value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Companys various financial instruments. In cases where quoted market prices are not available, fair value is based
on discounted cash flows or other valuation techniques. These techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in
an immediate settlement of the instrument. FASB Statement No. 107, Disclosures about Fair Values of Financial Instruments, excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements.
Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company.

The
following methods and assumptions were used by the Company in estimating the fair value of its financial instruments:

Cash, Due From
Banks, Interest-bearing Deposits in Banks and Federal Funds Sold:The carrying amount of cash, due from banks, interest-bearing deposits in banks and federal funds sold approximates fair values.

Securities:Fair values of securities are based on available quoted market prices. The carrying values of equity securities with no readily
determinable fair value approximates fair values.

Loans and Loans Held For Sale:The carrying amount of variable-rate loans that
reprice frequently and have no significant change in credit risk approximates fair value. The fair value of fixed-rate loans is estimated based on discounted contractual cash flows, using interest rates currently being offered for loans with similar
terms to borrowers with similar credit quality. The fair value of impaired loans is estimated based on discounted contractual cash flows or underlying collateral values, where applicable. The carrying amounts of loans held for sale approximate fair
value.

Deposits:The carrying amount of demand deposits, savings deposits, and variable-rate certificates of deposit approximates
fair value. The fair value of fixed-rate certificates of deposit is estimated



22



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##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13. FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)



based on discounted contractual cash flows using interest rates currently being offered for certificates of similar maturities.

Repurchase Agreements and Other Borrowings:The carrying amount of variable rate borrowings and securities sold under repurchase agreements
approximate fair value. The fair value of fixed rate other borrowings are estimated based on discounted contractual cash flows using the current incremental borrowing rates for similar type borrowing arrangements.

Accrued Interest:The carrying amounts of accrued interest approximates their fair value.

Off-Balance Sheet Instruments:The carrying amount of commitments to extend credit and standby letters of credit approximates fair value. The
carrying amount of the off-balance sheet financial instruments is based on fees charged to enter into such agreements.

The carrying amount
and estimated fair value of the Companys financial instruments were as follows:



|                                                                                   |  |                   |             |                   |   |                |  |            |             |  |   |            
|---------------------------------------------------------------------------------- |  | ----------------- | ----------- | ----------------- | - | -------------- |  | ---------- | ----------- |  | - | -----------
|                                                                                   |  | December 31, 2006 |             | December 31, 2005
|                                                                                   |  | CarryingAmount    |             | Fair Value        |   | CarryingAmount |  | Fair Value
|Financial assets:                                                                  |  |                   |             |                   |   |                |  |            |             |  |   |            
|Cash and due from banks, interest-bearing deposits in banks and federal funds sold |  | $                 | 24,379,553  |                   | $ | 24,379,553     |  | $          | 25,938,704  |  | $ | 25,938,704 
|Securities available for sale                                                      |  |                   | 84,379,359  |                   |   | 84,379,359     |  |            | 70,348,924  |  |   | 70,348,924 
|Securities held to maturity                                                        |  |                   | 4,328,339   |                   |   | 4,263,163      |  |            | 295,785     |  |   | 297,166    
|Restricted equity securities                                                       |  |                   | 2,369,651   |                   |   | 2,369,651      |  |            | 2,057,451   |  |   | 2,057,451  
|Loans held for sale                                                                |  |                   | 666,066     |                   |   | 666,066        |  |            | 822,000     |  |   | 822,000    
|Loans, net                                                                         |  |                   | 556,416,410 |                   |   | 552,234,501    |  |            | 513,142,027 |  |   | 506,487,383
|Accrued interest receivable                                                        |  |                   | 6,777,823   |                   |   | 6,777,823      |  |            | 5,098,800   |  |   | 5,098,800  
|                                                                                   |  |                   |             |                  
|Financial liabilities:                                                             |  |                   |             |                   |   |                |  |            |             |  |   |            
|Deposits                                                                           |  |                   | 594,873,414 |                   |   | 594,016,234    |  |            | 545,247,129 |  |   | 545,100,934
|Other borrowings                                                                   |  |                   | 24,221,682  |                   |   | 24,100,000     |  |            | 19,988,352  |  |   | 19,900,000 
|Accrued interest payable                                                           |  |                   | 3,141,554   |                   |   | 3,141,554      |  |            | 2,061,602   |  |   | 2,061,602  

NOTE 14. SUPPLEMENTAL SEGMENT INFORMATION

The Company has two reportable segments: commercial banking and mortgage loan origination. The commercial banking segment provides traditional banking
services offered through the Bank. The mortgage loan origination segment provides mortgage loan origination services offered through First Metro.

The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The Company evaluates performance based on profit and loss from operations before income taxes not including
nonrecurring gains and losses.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14. SUPPLEMENTAL SEGMENT INFORMATION (Continued)



The Company accounts for intersegment revenues and expenses as if the revenue/expense transactions
were to third parties, that is, at current market prices.

The Companys reportable segments are strategic business units that offer
different products and services. They are managed separately because each segment has different types and levels of credit and interest rate risk.



|                                           |  |                   |             |          |   |           |           |  |   |              |   |  |       |            |   |  |   |            
|------------------------------------------ |  | ----------------- | ----------- | -------- | - | --------- | --------- |  | - | ------------ | - |  | ----- | ---------- | - |  | - | -----------
|                                           |  | INDUSTRY SEGMENTS
|For the Year Ended December 31, 2006       |  | CommercialBanking |             | Mortgage |   |           | All Other |  |   | Eliminations |   |  | Total
|Interest income                            |  | $                 | 48,369,210  |          | $ | 16,857    |           |  | $ |             |   |  | $     | (74,373    | ) |  | $ | 48,311,694 
|Interest expense                           |  |                   | 20,515,325  |          |   | 57,516    |           |  |   |             |   |  |       | (74,373    | ) |  |   | 20,498,468 
|Net interest income (expense)              |  |                   | 27,853,885  |          |   | (40,659   | )         |  |   |             |   |  |       |           |   |  |   | 27,813,226 
|Intersegment net interest income (expense) |  |                   | 40,659      |          |   | (40,659   | )         |  |   |             |   |  |       |           |   |  |   |           
|Other revenue from external sources        |  |                   | 2,604,371   |          |   | 703,566   |           |  |   | 12,600       |   |  |       |           |   |  |   | 3,320,537  
|Intersegment other revenues (expenses)     |  |                   | 24,840      |          |   | (24,840   | )         |  |   |             |   |  |       |           |   |  |   |           
|Depreciation                               |  |                   | 592,515     |          |   | 1,209     |           |  |   | 7,662        |   |  |       |           |   |  |   | 601,386    
|Provision for loan losses                  |  |                   | 476,860     |          |   |          |           |  |   |             |   |  |       |           |   |  |   | 476,860    
|Segment profit                             |  |                   | 20,258,542  |          |   | (179,419  | )         |  |   | (60,748      | ) |  |       |           |   |  |   | 20,018,375 
|Segment assets                             |  |                   | 695,051,272 |          |   | 1,583,299 |           |  |   | 1,130,481    |   |  |       | (3,454,236 | ) |  |   | 694,310,816
|Expenditures for premises and equipment    |  |                   | 1,495,921   |          |   |          |           |  |   |             |   |  |       |           |   |  |   | 1,495,921  



|                                           |  |                   |             |          |   |           |           |  |   |              |   |  |       |            |   |  |   |            
|------------------------------------------ |  | ----------------- | ----------- | -------- | - | --------- | --------- |  | - | ------------ | - |  | ----- | ---------- | - |  | - | -----------
|                                           |  | INDUSTRY SEGMENTS
|For the Year Ended December 31, 2005       |  | CommercialBanking |             | Mortgage |   |           | All Other |  |   | Eliminations |   |  | Total
|Interest income                            |  | $                 | 36,683,561  |          | $ | 14,988    |           |  | $ |             |   |  | $     | (96,998    | ) |  | $ | 36,601,551 
|Interest expense                           |  |                   | 13,873,665  |          |   | 82,010    |           |  |   |             |   |  |       | (96,998    | ) |  |   | 13,858,677 
|Net interest income (expense)              |  |                   | 22,809,896  |          |   | (67,022   | )         |  |   |             |   |  |       |           |   |  |   | 22,742,874 
|Intersegment net interest income (expense) |  |                   | 67,022      |          |   | (67,022   | )         |  |   |             |   |  |       |           |   |  |   |           
|Other revenue from external sources        |  |                   | 2,919,102   |          |   | 1,051,195 |           |  |   | 12,600       |   |  |       |           |   |  |   | 3,982,897  
|Intersegment other revenues (expenses)     |  |                   | 24,840      |          |   | (24,840   | )         |  |   |             |   |  |       |           |   |  |   |           
|Depreciation                               |  |                   | 567,191     |          |   | 2,264     |           |  |   | 9,079        |   |  |       |           |   |  |   | 578,534    
|Provision for loan losses                  |  |                   | 546,150     |          |   |          |           |  |   |             |   |  |       |           |   |  |   | 546,150    
|Segment profit                             |  |                   | 16,124,988  |          |   | (72,830   | )         |  |   | (111,637     | ) |  |       |           |   |  |   | 15,940,521 
|Segment assets                             |  |                   | 631,874,962 |          |   | 1,856,742 |           |  |   | 916,963      |   |  |       | (3,615,370 | ) |  |   | 631,033,297
|Expenditures for premises and equipment    |  |                   | 520,995     |          |   | 1,554     |           |  |   |             |   |  |       |           |   |  |   | 522,549    



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14. SUPPLEMENTAL SEGMENT INFORMATION (Continued)





|                                           |  |                   |             |          |   |           |           |  |   |              |   |  |       |            |   |  |   |            
|------------------------------------------ |  | ----------------- | ----------- | -------- | - | --------- | --------- |  | - | ------------ | - |  | ----- | ---------- | - |  | - | -----------
|                                           |  | INDUSTRY SEGMENTS
|For the Year Ended December 31, 2004       |  | CommercialBanking |             | Mortgage |   |           | All Other |  |   | Eliminations |   |  | Total
|Interest income                            |  | $                 | 28,741,394  |          | $ | 15,108    |           |  | $ |             |   |  | $     | (71,466    | ) |  | $ | 28,685,036 
|Interest expense                           |  |                   | 10,036,620  |          |   | 56,358    |           |  |   |             |   |  |       | (71,466    | ) |  |   | 10,021,512 
|Net interest income (expense)              |  |                   | 18,704,774  |          |   | (41,250   | )         |  |   |             |   |  |       |           |   |  |   | 18,663,524 
|Intersegment net interest income (expense) |  |                   | 41,250      |          |   | (41,250   | )         |  |   |             |   |  |       |           |   |  |   |           
|Other revenue from external sources        |  |                   | 3,136,344   |          |   | 1,173,436 |           |  |   | 12,600       |   |  |       |           |   |  |   | 4,322,380  
|Intersegment other revenues (expenses)     |  |                   | 58,840      |          |   | (58,840   | )         |  |   |             |   |  |       |           |   |  |   |           
|Depreciation                               |  |                   | 536,244     |          |   | 2,475     |           |  |   | 9,081        |   |  |       |           |   |  |   | 547,800    
|Provision for loan losses                  |  |                   | 443,000     |          |   |          |           |  |   |             |   |  |       |           |   |  |   | 443,000    
|Segment profit                             |  |                   | 13,029,496  |          |   | 42,789    |           |  |   | (77,854      | ) |  |       |           |   |  |   | 12,994,431 
|Segment assets                             |  |                   | 571,402,974 |          |   | 1,684,930 |           |  |   | 962,259      |   |  |       | (3,521,840 | ) |  |   | 570,528,323
|Expenditures for premises and equipment    |  |                   | 546,086     |          |   |          |           |  |   |             |   |  |       |           |   |  |   | 546,086    

NOTE 15. PARENT COMPANY FINANCIAL INFORMATION

The following information presents the condensed balance sheets as of December 31, 2006 and 2005, statements of income, and cash flows for Henry
County Bancshares, Inc. for the periods ended December 31, 2006, 2005, and 2004.

CONDENSED BALANCE SHEETS



|                                           |  |              |            |      |   |           
|------------------------------------------ |  | ------------ | ---------- | ---- | - | ----------
|                                           |  | December 31,
|                                           |  | 2006         |            | 2005
|Assets                                     |  |              |            |      |   |           
|Cash                                       |  | $            | 953,558    |      | $ | 709,534   
|Investment in subsidiaries                 |  |              | 70,128,586 |      |   | 61,875,904
|Premises and equipment                     |  |              | 153,426    |      |   | 161,089   
|Other assets                               |  |              | 23,497     |      |   | 46,340    
|                                           |  |              |            |      |   |           
|Total assets                               |  | $            | 71,259,067 |      | $ | 62,792,867
|                                           |  |              |            |      |   |           
|                                           |  |             
|Liabilities and Stockholders Equity       |  |              |            |      |   |           
|Other liabilities                          |  | $            | 60,470     |      | $ | 45,000    
|Stockholders equity                       |  |              | 71,198,597 |      |   | 62,747,867
|                                           |  |              |            |      |   |           
|Total liabilities and stockholders equity |  | $            | 71,259,067 |      | $ | 62,792,867
|                                           |  |              |            |      |   |           



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##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15. PARENT COMPANY FINANCIAL INFORMATION (Continued)



CONDENSED STATEMENTS OF INCOME



|                                                                                     |  |                          |            |   |      |   |            |      |  |   |           |  
|------------------------------------------------------------------------------------ |  | ------------------------ | ---------- | - | ---- | - | ---------- | ---- |  | - | --------- | -
|                                                                                     |  | Years Ended December 31, |           
|                                                                                     |  | 2006                     |            |   | 2005 |   |            | 2004 | 
|Income                                                                               |  |                          |            |   |      |   |            |      |  |   |           |  
|Dividends from bank subsidiary                                                       |  | $                        | 4,434,044  |   |      | $ | 3,504,325  |      |  | $ | 2,936,007 |  
|Rental income                                                                        |  |                          | 12,600     |   |      |   | 12,600     |      |  |   | 12,600    |  
|                                                                                     |  |                          |            |   |      |   |            |      |  |   |           |  
|                                                                                     |  |                          | 4,446,644  |   |      |   | 3,516,925  |      |  |   | 2,948,607 |  
|                                                                                     |  |                          |            |   |      |   |            |      |  |   |           |  
|                                                                                     |  |                          |           
|Expense                                                                              |  |                          |            |   |      |   |            |      |  |   |           |  
|Salaries and employee benefits                                                       |  |                          |           |   |      |   |           |      |  |   | 16,667    |  
|Depreciation                                                                         |  |                          | 7,662      |   |      |   | 9,079      |      |  |   | 9,081     |  
|Other expenses                                                                       |  |                          | 65,686     |   |      |   | 115,158    |      |  |   | 64,706    |  
|                                                                                     |  |                          |            |   |      |   |            |      |  |   |           |  
|Total expenses                                                                       |  |                          | 73,348     |   |      |   | 124,237    |      |  |   | 90,454    |  
|                                                                                     |  |                          |            |   |      |   |            |      |  |   |           |  
|Income before income tax benefits and equity in undistributed income of subsidiaries |  |                          | 4,373,296  |   |      |   | 3,392,688  |      |  |   | 2,858,153 |  
|                                                                                     |  |                          |           
|Income tax benefits                                                                  |  |                          | (23,497    | ) |      |   | (46,340    | )    |  |   | (30,113   | )
|                                                                                     |  |                          |            |   |      |   |            |      |  |   |           |  
|Income before undistributed income of subsidiaries                                   |  |                          | 4,396,793  |   |      |   | 3,439,028  |      |  |   | 2,888,266 |  
|                                                                                     |  |                          |           
|Equity in undistributed income of subsidiaries                                       |  |                          | 8,012,499  |   |      |   | 6,836,894  |      |  |   | 5,494,898 |  
|                                                                                     |  |                          |            |   |      |   |            |      |  |   |           |  
|Net income                                                                           |  | $                        | 12,409,292 |   |      | $ | 10,275,922 |      |  | $ | 8,383,164 |  
|                                                                                     |  |                          |            |   |      |   |            |      |  |   |           |  



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##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15. PARENT COMPANY FINANCIAL INFORMATION (Continued)



CONDENSED STATEMENTS OF CASH FLOWS



|                                                                                  |  |                          |            |   |      |   |            |      |  |   |            |  
|--------------------------------------------------------------------------------- |  | ------------------------ | ---------- | - | ---- | - | ---------- | ---- |  | - | ---------- | -
|                                                                                  |  | Years Ended December 31, |           
|                                                                                  |  | 2006                     |            |   | 2005 |   |            | 2004 | 
|OPERATING ACTIVITIES                                                              |  |                          |            |   |      |   |            |      |  |   |            |  
|Net income                                                                        |  | $                        | 12,409,292 |   |      | $ | 10,275,922 |      |  | $ | 8,383,164  |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                          |            |   |      |   |            |      |  |   |            |  
|Depreciation                                                                      |  |                          | 7,662      |   |      |   | 9,079      |      |  |   | 9,081      |  
|Undistributed income of subsidiaries                                              |  |                          | (8,012,499 | ) |      |   | (6,836,894 | )    |  |   | (5,494,898 | )
|Net other operating activities                                                    |  |                          | 38,313     |   |      |   | 3,773      |      |  |   | 49,751     |  
|                                                                                  |  |                          |            |   |      |   |            |      |  |   |            |  
|Net cash provided by operating activities                                         |  |                          | 4,442,768  |   |      |   | 3,451,880  |      |  |   | 2,947,098  |  
|                                                                                  |  |                          |            |   |      |   |            |      |  |   |            |  
|                                                                                  |  |                          |           
|FINANCING ACTIVITIES                                                              |  |                          |            |   |      |   |            |      |  |   |            |  
|Dividends paid                                                                    |  |                          | (4,434,044 | ) |      |   | (3,504,324 | )    |  |   | (2,936,007 | )
|Reissuance of treasury stock                                                      |  |                          | 235,300    |   |      |   |           |      |  |   |           |  
|Purchase of treasury stock                                                        |  |                          |           |   |      |   |           |      |  |   | (172,198   | )
|                                                                                  |  |                          |            |   |      |   |            |      |  |   |            |  
|Net cash used in financing activities                                             |  |                          | (4,198,744 | ) |      |   | (3,504,324 | )    |  |   | (3,108,205 | )
|                                                                                  |  |                          |            |   |      |   |            |      |  |   |            |  
|Net increase (decrease) in cash                                                   |  |                          | 244,024    |   |      |   | (52,444    | )    |  |   | (161,107   | )
|Cash at beginning of year                                                         |  |                          | 709,534    |   |      |   | 761,978    |      |  |   | 923,085    |  
|                                                                                  |  |                          |            |   |      |   |            |      |  |   |            |  
|Cash at end of year                                                               |  | $                        | 953,558    |   |      | $ | 709,534    |      |  | $ | 761,978    |  
|                                                                                  |  |                          |            |   |      |   |            |      |  |   |            |  



27