##### Index to Financial Statements

EXHIBIT 13

HENRY COUNTY BANCSHARES, INC.

AND SUBSIDIARIES

CONSOLIDATED FINANCIAL REPORT

DECEMBER 31, 2008



---

##### Index to Financial Statements

HENRY COUNTY BANCSHARES, INC.

AND SUBSIDIARIES

CONSOLIDATED FINANCIAL REPORT

DECEMBER 31, 2008

TABLE OF CONTENTS



|                                                        |  |     
|------------------------------------------------------- |  | ----
|                                                        |  | Page
|REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |  | 1   
|                                                        | 
|FINANCIAL STATEMENTS                                    |  |     
|                                                        | 
|Consolidated balance sheets                             |  | 2   
|Consolidated statements of operations                   |  | 3   
|Consolidated statements of comprehensive income (loss)  |  | 4   
|Consolidated statements of stockholders equity         |  | 5   
|Consolidated statements of cash flows                   |  | 6   
|Notes to consolidated financial statements              |  | 7-30



---

##### Index to Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

Henry County Bancshares, Inc.

Stockbridge, Georgia

We have audited the consolidated
balance sheets of Henry County Bancshares, Inc. and subsidiaries as of December 31, 2008 and 2007, and the related consolidated statements of operations, comprehensive income (loss), stockholders equity and cash flows for each of
the three years in the period ended December 31, 2008. 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, 2008 and 2007, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2008, 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), Henry County Bancshares, Inc. and subsidiaries internal control over financial reporting as of December 31, 2008, 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 March 16, 2009 expressed an unqualified opinion on the effectiveness of Henry County Bancshares, Inc. and subsidiaries internal
control over financial reporting.



/s/ MAULDIN & JENKINS, LLC


Atlanta, Georgia

March 16, 2009



1



---

##### Index to Financial Statements

HENRY COUNTY BANCSHARES, INC.

AND SUBSIDIARIES

CONSOLIDATED
BALANCE SHEETS

DECEMBER 31, 2008 AND 2007



|                                                                                       |  |      |             |   |      |   |             |  
|-------------------------------------------------------------------------------------- |  | ---- | ----------- | - | ---- | - | ----------- | -
|                                                                                       |  | 2008 |             |   | 2007 |  
|Assets                                                                                 |  |      |             |   |      |   |             |  
|Cash and due from banks                                                                |  | $    | 14,039,311  |   |      | $ | 16,826,236  |  
|Interest-bearing deposits in banks                                                     |  |      | 1,499,648   |   |      |   | 2,731,987   |  
|Federal funds sold                                                                     |  |      | 14,300,000  |   |      |   | 9,500,000   |  
|Securities available for sale                                                          |  |      | 60,455,998  |   |      |   | 87,717,716  |  
|Securities held to maturity, at cost (fair value 2008 - $3,349,682; 2007 - $4,143,401) |  |      | 3,360,711   |   |      |   | 4,164,690   |  
|Restricted equity securities, at cost                                                  |  |      | 1,643,251   |   |      |   | 1,897,751   |  
|Loans held for sale                                                                    |  |      |            |   |      |   | 950,405     |  
|                                                                                       |  |     
|Loans                                                                                  |  |      | 533,608,559 |   |      |   | 569,387,551 |  
|Less allowance for loan losses                                                         |  |      | 17,730,410  |   |      |   | 7,657,387   |  
|                                                                                       |  |      |             |   |      |   |             |  
|Loans, net                                                                             |  |      | 515,878,149 |   |      |   | 561,730,164 |  
|                                                                                       |  |     
|Premises and equipment                                                                 |  |      | 9,776,484   |   |      |   | 10,341,368  |  
|Other real estate                                                                      |  |      | 18,397,754  |   |      |   | 10,394,433  |  
|Other assets                                                                           |  |      | 16,526,168  |   |      |   | 12,741,299  |  
|                                                                                       |  |      |             |   |      |   |             |  
|Total assets                                                                           |  | $    | 655,877,474 |   |      | $ | 718,996,049 |  
|                                                                                       |  |      |             |   |      |   |             |  
|                                                                                       |  |     
|Liabilities and Stockholders Equity                                                   |  |      |             |   |      |   |             |  
|Liabilities:                                                                           |  |      |             |   |      |   |             |  
|Deposits:                                                                              |  |      |             |   |      |   |             |  
|Noninterest-bearing                                                                    |  | $    | 68,210,136  |   |      | $ | 71,388,083  |  
|Interest-bearing                                                                       |  |      | 522,266,489 |   |      |   | 554,463,038 |  
|                                                                                       |  |      |             |   |      |   |             |  
|Total deposits                                                                         |  |      | 590,476,625 |   |      |   | 625,851,121 |  
|Other borrowings                                                                       |  |      | 2,598,266   |   |      |   | 13,424,498  |  
|Other liabilities                                                                      |  |      | 3,459,932   |   |      |   | 4,186,288   |  
|                                                                                       |  |      |             |   |      |   |             |  
|Total liabilities                                                                      |  |      | 596,534,823 |   |      |   | 643,461,907 |  
|                                                                                       |  |      |             |   |      |   |             |  
|Commitments and contingencies (Note 11)                                                |  |      |             |   |      |   |             |  
|                                                                                       |  |     
|Stockholders equity:                                                                  |  |      |             |   |      |   |             |  
|Preferred stock, no par value; 10,000,000 shares authorized; none issued               |  |      |             |   |      |   |             |  
|Common stock, par value $2.50; 30,000,000 shares authorized; 14,388,749.60 issued      |  |      | 35,971,874  |   |      |   | 35,971,874  |  
|Surplus                                                                                |  |      | 739,560     |   |      |   | 739,560     |  
|Retained earnings                                                                      |  |      | 24,161,264  |   |      |   | 40,644,829  |  
|Accumulated other comprehensive income                                                 |  |      | 788,557     |   |      |   | 435,733     |  
|Treasury stock, 143,060 and 138,560 shares, respectively                               |  |      | (2,318,604  | ) |      |   | (2,257,854  | )
|                                                                                       |  |      |             |   |      |   |             |  
|Total stockholders equity                                                             |  |      | 59,342,651  |   |      |   | 75,534,142  |  
|                                                                                       |  |      |             |   |      |   |             |  
|Total liabilities and stockholders equity                                             |  | $    | 655,877,474 |   |      | $ | 718,996,049 |  
|                                                                                       |  |      |             |   |      |   |             |  

See Notes to Consolidated Financial Statements.



2



---

##### Index to Financial Statements

HENRY COUNTY BANCSHARES, INC.

AND SUBSIDIARIES

CONSOLIDATED
STATEMENTS OF OPERATIONS

YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006



|                                                              |  |      |             |   |      |   |            |  |   |           
|------------------------------------------------------------- |  | ---- | ----------- | - | ---- | - | ---------- |  | - | ----------
|                                                              |  | 2008 |             |   | 2007 |   | 2006      
|Interest income:                                              |  |      |             |   |      |   |            |  |   |           
|Loans, including fees                                         |  | $    | 31,162,823  |   |      | $ | 44,788,448 |  | $ | 44,108,552
|Taxable securities                                            |  |      | 3,641,099   |   |      |   | 5,254,842  |  |   | 3,077,351 
|Nontaxable securities                                         |  |      | 355,272     |   |      |   | 377,994    |  |   | 332,024   
|Deposits in banks                                             |  |      | 38,025      |   |      |   | 73,735     |  |   | 13,719    
|Federal funds sold                                            |  |      | 212,529     |   |      |   | 1,081,871  |  |   | 780,048   
|                                                              |  |      |             |   |      |   |            |  |   |           
|Total interest income                                         |  |      | 35,409,748  |   |      |   | 51,576,890 |  |   | 48,311,694
|                                                              |  |      |             |   |      |   |            |  |   |           
|Interest expense:                                             |  |      |             |   |      |   |            |  |   |           
|Deposits                                                      |  |      | 19,371,408  |   |      |   | 25,335,743 |  |   | 19,357,142
|Other borrowings                                              |  |      | 257,034     |   |      |   | 970,692    |  |   | 1,141,326 
|                                                              |  |      |             |   |      |   |            |  |   |           
|Total interest expense                                        |  |      | 19,628,442  |   |      |   | 26,306,435 |  |   | 20,498,468
|                                                              |  |      |             |   |      |   |            |  |   |           
|Net interest income                                           |  |      | 15,781,306  |   |      |   | 25,270,455 |  |   | 27,813,226
|Provision for loan losses                                     |  |      | 24,285,750  |   |      |   | 2,959,254  |  |   | 476,860   
|                                                              |  |      |             |   |      |   |            |  |   |           
|Net interest income (expense) after provision for loan losses |  |      | (8,504,444  | ) |      |   | 22,311,201 |  |   | 27,336,366
|                                                              |  |      |             |   |      |   |            |  |   |           
|Other income:                                                 |  |      |             |   |      |   |            |  |   |           
|Service charges on deposit accounts                           |  |      | 1,361,700   |   |      |   | 1,354,352  |  |   | 1,492,460 
|Other service charges and fees                                |  |      | 1,044,900   |   |      |   | 1,070,729  |  |   | 1,099,671 
|Mortgage banking income                                       |  |      | 377,325     |   |      |   | 600,346    |  |   | 703,566   
|                                                              |  |      |             |   |      |   |            |  |   |           
|Total other income                                            |  |      | 2,783,925   |   |      |   | 3,025,427  |  |   | 3,295,697 
|                                                              |  |      |             |   |      |   |            |  |   |           
|Other expenses:                                               |  |      |             |   |      |   |            |  |   |           
|Salaries and employee benefits                                |  |      | 6,965,255   |   |      |   | 7,391,435  |  |   | 6,649,091 
|Equipment and occupancy expenses                              |  |      | 1,946,498   |   |      |   | 1,886,319  |  |   | 1,698,863 
|Other real estate losses                                      |  |      | 3,235,010   |   |      |   | 25,521     |  |   |          
|Other operating expenses                                      |  |      | 3,051,076   |   |      |   | 2,489,217  |  |   | 2,265,734 
|                                                              |  |      |             |   |      |   |            |  |   |           
|Total other expenses                                          |  |      | 15,197,839  |   |      |   | 11,792,492 |  |   | 10,613,688
|                                                              |  |      |             |   |      |   |            |  |   |           
|Income (loss) before income taxes                             |  |      | (20,918,358 | ) |      |   | 13,544,136 |  |   | 20,018,375
|                                                              |  |      |            
|Income tax expense (benefit)                                  |  |      | (6,571,647  | ) |      |   | 4,835,410  |  |   | 7,609,083 
|                                                              |  |      |             |   |      |   |            |  |   |           
|Net income (loss)                                             |  | $    | (14,346,711 | ) |      | $ | 8,708,726  |  | $ | 12,409,292
|                                                              |  |      |             |   |      |   |            |  |   |           
|Earnings (losses) per share                                   |  | $    | (1.01       | ) |      | $ | 0.61       |  | $ | 0.87      
|                                                              |  |      |             |   |      |   |            |  |   |           

See Notes to Consolidated Financial Statements.



3



---

##### Index to Financial Statements

HENRY COUNTY BANCSHARES, INC.

AND SUBSIDIARIES

CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006



|                                                                                                                        |  |      |             |   |      |   |           |  |   |           
|----------------------------------------------------------------------------------------------------------------------- |  | ---- | ----------- | - | ---- | - | --------- |  | - | ----------
|                                                                                                                        |  | 2008 |             |   | 2007 |   | 2006     
|Net income (loss)                                                                                                       |  | $    | (14,346,711 | ) |      | $ | 8,708,726 |  | $ | 12,409,292
|                                                                                                                        |  |      |             |   |      |   |           |  |   |           
|Other comprehensive income:                                                                                             |  |      |             |   |      |   |           |  |   |           
|                                                                                                                        |  |      |            
|Net unrealized holding gains arising during period, net of tax expense of $181,757, $306,532 and $123,730, respectively |  |      | 352,824     |   |      |   | 595,032   |  |   | 240,182   
|                                                                                                                        |  |      |             |   |      |   |           |  |   |           
|Comprehensive income (loss)                                                                                             |  | $    | (13,993,887 | ) |      | $ | 9,303,758 |  | $ | 12,649,474
|                                                                                                                        |  |      |             |   |      |   |           |  |   |           

See Notes to Consolidated Financial Statements.



4



---

##### Index to Financial Statements

HENRY COUNTY BANCSHARES, INC.

AND SUBSIDIARIES

CONSOLIDATED
STATEMENTS OF STOCKHOLDERS EQUITY

YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006



|                                        |  |              |  |           |            |                  |   |               |                               |   |             |                |  |      |                          |   |  |         |   |  |   |            |   |  |   |             |  
|--------------------------------------- |  | ------------ |  | --------- | ---------- | ---------------- | - | ------------- | ----------------------------- | - | ----------- | -------------- |  | ---- | ------------------------ | - |  | ------- | - |  | - | ---------- | - |  | - | ----------- | -
|                                        |  | Common Stock |  | Surplus   |            | RetainedEarnings |   |               | AccumulatedOtherComprehensive |   |             | Treasury Stock |  |      | TotalStockholdersEquity |  
|                                        |  | Shares       |  | Par Value |            |                  |   | Income (Loss) |                               |   | Shares      |                |  | Cost |                          |  
|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, $.31 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  |  
|Net income                              |  |             |  |           |           |                  |   |              |                               |   | 8,708,726   |                |  |      |                         |   |  |        |   |  |   |           |   |  |   | 8,708,726   |  
|Cash dividends declared, $.28 per share |  |             |  |           |           |                  |   |              |                               |   | (4,005,960  | )              |  |      |                         |   |  |        |   |  |   |           |   |  |   | (4,005,960  | )
|Purchase of treasury stock              |  |             |  |           |           |                  |   |              |                               |   |            |                |  |      |                         |   |  | 81,000  |   |  |   | (1,093,500 | ) |  |   | (1,093,500  | )
|Reissuance of treasury stock            |  |             |  |           |           |                  |   |              |                               |   |            |                |  |      |                         |   |  | (9,722  | ) |  |   | 131,247    |   |  |   | 131,247     |  
|Other comprehensive income              |  |             |  |           |           |                  |   |              |                               |   |            |                |  |      | 595,032                  |   |  |        |   |  |   |           |   |  |   | 595,032     |  
|                                        |  |              |  |           |            |                  |   |               |                               |   |             |                |  |      |                          |   |  |         |   |  |   |            |   |  |   |             |  
|Balance, December 31, 2007              |  | 14,388,750   |  |           | 35,971,874 |                  |   | 739,560       |                               |   | 40,644,829  |                |  |      | 435,733                  |   |  | 138,560 |   |  |   | (2,257,854 | ) |  |   | 75,534,142  |  
|Net loss                                |  |             |  |           |           |                  |   |              |                               |   | (14,346,711 | )              |  |      |                         |   |  |        |   |  |   |           |   |  |   | (14,346,711 | )
|Cash dividends declared, $.15 per share |  |             |  |           |           |                  |   |              |                               |   | (2,136,854  | )              |  |      |                         |   |  |        |   |  |   |           |   |  |   | (2,136,854  | )
|Purchase of treasury stock              |  |             |  |           |           |                  |   |              |                               |   |            |                |  |      |                         |   |  | 4,500   |   |  |   | (60,750    | ) |  |   | (60,750     | )
|Other comprehensive income              |  |             |  |           |           |                  |   |              |                               |   |            |                |  |      | 352,824                  |   |  |        |   |  |   |           |   |  |   | 352,824     |  
|                                        |  |              |  |           |            |                  |   |               |                               |   |             |                |  |      |                          |   |  |         |   |  |   |            |   |  |   |             |  
|Balance, December 31, 2008              |  | 14,388,750   |  | $         | 35,971,874 |                  | $ | 739,560       |                               | $ | 24,161,264  |                |  | $    | 788,557                  |   |  | 143,060 |   |  | $ | (2,318,604 | ) |  | $ | 59,342,651  |  
|                                        |  |              |  |           |            |                  |   |               |                               |   |             |                |  |      |                          |   |  |         |   |  |   |            |   |  |   |             |  

See Notes to Consolidated Financial Statements.



5



---

##### Index to Financial Statements

HENRY COUNTY BANCSHARES, INC.

AND SUBSIDIARIES

CONSOLIDATED
STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006



|                                                                                         |  |      |             |   |      |   |              |      |  |   |              |  
|---------------------------------------------------------------------------------------- |  | ---- | ----------- | - | ---- | - | ------------ | ---- |  | - | ------------ | -
|                                                                                         |  | 2008 |             |   | 2007 |   |              | 2006 | 
|OPERATING ACTIVITIES                                                                     |  |      |             |   |      |   |              |      |  |   |              |  
|Net income (loss)                                                                        |  | $    | (14,346,711 | ) |      | $ | 8,708,726    |      |  | $ | 12,409,292   |  
|Adjustments to reconcile net income (loss) to net cash provided by operating activities: |  |      |             |   |      |   |              |      |  |   |              |  
|Depreciation                                                                             |  |      | 679,326     |   |      |   | 677,546      |      |  |   | 601,386      |  
|Provision for loan losses                                                                |  |      | 24,285,750  |   |      |   | 2,959,254    |      |  |   | 476,860      |  
|Loss on sale of other real estate                                                        |  |      | 324,174     |   |      |   | 25,521       |      |  |   | 3,722        |  
|Writedowns of other real estate                                                          |  |      | 2,910,836   |   |      |   |             |      |  |   |             |  
|Deferred income taxes                                                                    |  |      | (2,493,799  | ) |      |   | (1,802,382   | )    |  |   | (36,405      | )
|Net (increase) decrease in loans held for sale                                           |  |      | 950,405     |   |      |   | (284,339     | )    |  |   | 155,934      |  
|(Increase) decrease in interest receivable                                               |  |      | 3,991,591   |   |      |   | (378,096     | )    |  |   | (1,679,023   | )
|Increase (decrease) in interest payable                                                  |  |      | (745,167    | ) |      |   | 304,628      |      |  |   | 1,079,952    |  
|Increase in taxes receivable                                                             |  |      | (5,712,405  | ) |      |   | (409,125     | )    |  |   |             |  
|Decrease in income taxes payable                                                         |  |      |            |   |      |   | (115,783     | )    |  |   | (129,585     | )
|Net other operating activities                                                           |  |      | 266,798     |   |      |   | (53,260      | )    |  |   | 376,411      |  
|                                                                                         |  |      |             |   |      |   |              |      |  |   |              |  
|Net cash provided by operating activities                                                |  |      | 10,110,798  |   |      |   | 9,632,690    |      |  |   | 13,258,544   |  
|                                                                                         |  |      |             |   |      |   |              |      |  |   |              |  
|INVESTING ACTIVITIES                                                                     |  |      |             |   |      |   |              |      |  |   |              |  
|Purchases of securities available for sale                                               |  |      | (50,789,539 | ) |      |   | (116,222,164 | )    |  |   | (137,258,378 | )
|Proceeds from maturities of securities available for sale                                |  |      | 78,585,838  |   |      |   | 113,785,371  |      |  |   | 123,591,856  |  
|Purchases of securities held to maturity                                                 |  |      |            |   |      |   | (1,346,140   | )    |  |   | (4,215,000   | )
|Proceeds from maturities of securities held to maturity                                  |  |      | 803,979     |   |      |   | 1,509,789    |      |  |   | 182,446      |  
|Retirement (purchases) of restricted equity securities                                   |  |      | 254,500     |   |      |   | 471,900      |      |  |   | (312,200     | )
|Net (increase) decrease in federal funds sold                                            |  |      | (4,800,000  | ) |      |   | (4,000,000   | )    |  |   | 4,100,000    |  
|Net (increase) decrease in interest-bearing deposits in banks                            |  |      | 1,232,339   |   |      |   | (2,437,224   | )    |  |   | 93,315       |  
|Net (increase) decrease in loans                                                         |  |      | 8,383,821   |   |      |   | (18,099,042  | )    |  |   | (45,179,650  | )
|Proceeds from sale of other real estate                                                  |  |      | 1,944,113   |   |      |   | 816,747      |      |  |   | 208,281      |  
|Purchase of premises and equipment                                                       |  |      | (114,442    | ) |      |   | (1,082,791   | )    |  |   | (1,495,921   | )
|                                                                                         |  |      |             |   |      |   |              |      |  |   |              |  
|Net cash provided by (used in) investing activities                                      |  |      | 35,500,609  |   |      |   | (26,603,554  | )    |  |   | (60,285,251  | )
|                                                                                         |  |      |             |   |      |   |              |      |  |   |              |  
|FINANCING ACTIVITIES                                                                     |  |      |             |   |      |   |              |      |  |   |              |  
|Net increase (decrease) in deposits                                                      |  |      | (35,374,496 | ) |      |   | 30,977,707   |      |  |   | 49,626,285   |  
|Net proceeds from (repayment of) other borrowings                                        |  |      | (10,826,232 | ) |      |   | (10,797,184  | )    |  |   | 4,233,330    |  
|Dividends paid                                                                           |  |      | (2,136,854  | ) |      |   | (4,005,960   | )    |  |   | (4,434,044   | )
|Purchase of treasury stock                                                               |  |      | (60,750     | ) |      |   | (1,093,500   | )    |  |   |             |  
|Reissuance of treasury stock                                                             |  |      |            |   |      |   | 131,247      |      |  |   | 235,300      |  
|                                                                                         |  |      |             |   |      |   |              |      |  |   |              |  
|Net cash provided by (used in) financing activities                                      |  |      | (48,398,332 | ) |      |   | 15,212,310   |      |  |   | 49,660,871   |  
|                                                                                         |  |      |             |   |      |   |              |      |  |   |              |  
|Net increase (decrease) in cash and due from banks                                       |  |      | (2,786,925  | ) |      |   | (1,758,554   | )    |  |   | 2,634,164    |  
|Cash and due from banks at beginning of year                                             |  |      | 16,826,236  |   |      |   | 18,584,790   |      |  |   | 15,950,626   |  
|                                                                                         |  |      |             |   |      |   |              |      |  |   |              |  
|Cash and due from banks at end of year                                                   |  | $    | 14,039,311  |   |      | $ | 16,826,236   |      |  | $ | 18,584,790   |  
|                                                                                         |  |      |             |   |      |   |              |      |  |   |              |  
|SUPPLEMENTAL DISCLOSURES                                                                 |  |      |             |   |      |   |              |      |  |   |              |  
|Cash paid for:                                                                           |  |      |             |   |      |   |              |      |  |   |              |  
|Interest                                                                                 |  | $    | 20,373,609  |   |      | $ | 26,001,807   |      |  | $ | 19,418,516   |  
|Income taxes                                                                             |  | $    | 1,479,657   |   |      | $ | 7,018,299    |      |  | $ | 7,630,923    |  
|NONCASH TRANSACTIONS                                                                     |  |      |             |   |      |   |              |      |  |   |              |  
|Other real estate acquired in settlement of loans                                        |  | $    | 14,110,681  |   |      | $ | 9,899,879    |      |  | $ | 1,597,669    |  
|Financed sales of other real estate owned                                                |  | $    | 928,237     |   |      | $ | 73,845       |      |  | $ | 169,262      |  
|                                                                                         |  |      |             |   |      |   |              |      |  |   |              |  

See Notes to Consolidated Financial Statements.



6



---

##### Index to Financial Statements

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 six 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 deferred income taxes. 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 include 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 Bank did not have any reserve requirement at December 31, 2008 or at December 31, 2007.

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 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.



7



---

##### Index to Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)



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 trade 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. 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, 2008 or December 31, 2007.

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 and in process of collection. 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 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.



8



---

##### Index to Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)



Loans (Continued)

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. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and
interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis,
taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of delay, the reasons for the delay, the borrowers prior payment record, and the amount of shortfall in relation to the principal
and interest owed. 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. Large groups of smaller balance homogeneous loans are collectively evaluated for impairment.

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 deemed impaired under Statement of Financial Accounting Standards (SFAS) No. 114. For such loans that are deemed 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 loans assessed under Statement of Financial Accounting Standards (SFAS) No. 5 and is based on a
number of qualitative factors.



9



---

##### Index to Financial Statements

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, consisting of properties obtained through foreclosure or in satisfaction of loans, is adjusted to fair value upon transfer of the real
estate held as collateral to other real estate owned. Subsequently, other real estate owned is carried at the lower of carrying value or fair value, determined on the basis of current appraisals, comparable sales, and other estimates of value
obtained principally from independent sources, adjusted for estimated selling costs. At the time of foreclosure, any excess of the loan balance over fair value of the real estate held as collateral is recorded as a charge to the allowance for loan
losses. Gains or losses on sale and any subsequent adjustments to the value are recorded as a component of non-interest expense. The carrying amount of other real estate owned at December 31, 2008 and 2007 was $18,397,754 and $10,394,433,
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. Due to uncertainties as to when the Company will have taxable income in the future, a valuation allowance of $1,970,151 has
been recorded against deferred tax assets. The balance of deferred tax assets after the recording of the valuation allowance is equal to the amount of tax refunds that are recoverable in open carryback years.

Earnings (Losses) Per Share

Earnings
(losses) per share are computed by dividing net income (loss) by the weighted average number of shares outstanding. Weighted average shares outstanding were 14,245,715, 14,314,171, and 14,303,517 for the years ending December 31, 2008, 2007 and
2006, respectively. Weighted average shares outstanding for the year ending December 31, 2006 has 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 (Loss)

Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income (losses). 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 (loss), are components of comprehensive income (loss).

Reclassifications

Certain items on
the consolidated balance sheets and the consolidated statements of cash flows for the years ended December 31, 2007 and 2006 have been reclassified, with no effect on total assets or on net income, to be consistent with the classifications
adopted for the year ended December 31, 2008.



10



---

##### Index to Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2. SECURITIES

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



|                               |  |               |            |                      |   |                       |  |   |           |   |  |   |           
|------------------------------ |  | ------------- | ---------- | -------------------- | - | --------------------- |  | - | --------- | - |  | - | ----------
|                               |  | AmortizedCost |            | GrossUnrealizedGains |   | GrossUnrealizedLosses |  |   | FairValue
|Securities Available for Sale  |  |               |            |                      |   |                       |  |   |           |   |  |   |           
|December 31, 2008:             |  |               |            |                      |   |                       |  |   |           |   |  |   |           
|Government-sponsored agencies  |  | $             | 25,719,945 |                      | $ | 342,801               |  | $ |          |   |  | $ | 26,062,746
|State and municipal securities |  |               | 6,035,312  |                      |   | 94,578                |  |   | (8,203    | ) |  |   | 6,121,687 
|Mortgage-backed securities     |  |               | 27,505,958 |                      |   | 848,033               |  |   | (82,426   | ) |  |   | 28,271,565
|                               |  |               |            |                      |   |                       |  |   |           |   |  |   |           
|                               |  | $             | 59,261,215 |                      | $ | 1,285,412             |  | $ | (90,629   | ) |  | $ | 60,455,998
|                               |  |               |            |                      |   |                       |  |   |           |   |  |   |           
|December 31, 2007:             |  |               |            |                      |   |                       |  |   |           |   |  |   |           
|Government-sponsored agencies  |  | $             | 58,103,044 |                      | $ | 312,825               |  | $ | (2,099    | ) |  | $ | 58,413,770
|State and municipal securities |  |               | 4,549,874  |                      |   | 45,506                |  |   | (9,816    | ) |  |   | 4,585,564 
|Mortgage-backed securities     |  |               | 24,404,596 |                      |   | 376,922               |  |   | (63,136   | ) |  |   | 24,718,382
|                               |  |               |            |                      |   |                       |  |   |           |   |  |   |           
|                               |  | $             | 87,057,514 |                      | $ | 735,253               |  | $ | (75,051   | ) |  | $ | 87,717,716
|                               |  |               |            |                      |   |                       |  |   |           |   |  |   |           
|Securities Held to Maturity    |  |               |            |                      |   |                       |  |   |           |   |  |   |           
|December 31, 2008:             |  |               |            |                      |   |                       |  |   |           |   |  |   |           
|State and municipal securities |  | $             | 3,360,000  |                      | $ | 14,612                |  | $ | (25,644   | ) |  | $ | 3,348,968 
|Mortgage-backed securities     |  |               | 711        |                      |   | 3                     |  |   |          |   |  |   | 714       
|                               |  |               |            |                      |   |                       |  |   |           |   |  |   |           
|                               |  | $             | 3,360,711  |                      | $ | 14,615                |  | $ | (25,644   | ) |  | $ | 3,349,682 
|                               |  |               |            |                      |   |                       |  |   |           |   |  |   |           
|December 31, 2007:             |  |               |            |                      |   |                       |  |   |           |   |  |   |           
|State and municipal securities |  | $             | 4,160,000  |                      | $ | 20,540                |  | $ | (41,880   | ) |  | $ | 4,138,660 
|Mortgage-backed securities     |  |               | 4,690      |                      |   | 51                    |  |   |          |   |  |   | 4,741     
|                               |  |               |            |                      |   |                       |  |   |           |   |  |   |           
|                               |  | $             | 4,164,690  |                      | $ | 20,591                |  | $ | (41,880   | ) |  | $ | 4,143,401 
|                               |  |               |            |                      |   |                       |  |   |           |   |  |   |           

Restricted equity securities are summarized as follows:



|                             |  |              |           |      |   |          
|---------------------------- |  | ------------ | --------- | ---- | - | ---------
|                             |  | December 31,
|                             |  | 2008         |           | 2007
|Federal Home Loan Bank stock |  | $            | 1,367,900 |      | $ | 1,622,400
|Correspondent bank stock     |  |              | 275,351   |      |   | 275,351  
|                             |  |              |           |      |   |          
|                             |  | $            | 1,643,251 |      | $ | 1,897,751
|                             |  |              |           |      |   |          

Securities with a carrying value of $31,500,000 and $59,372,000 at December 31, 2008 and
2007, 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, 2008, 2007, and 2006.



11



---

##### Index to Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 2. SECURITIES (Continued)



The amortized cost and fair value of debt securities as of December 31, 2008 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                 |            | FairValue                   |   | AmortizedCost |  | FairValue
|Due in one year or less    |  | $                             | 3,498,085  |                             | $ | 3,519,215     |  | $         | 2,315,000 |  | $ | 2,319,070
|Due from one to five years |  |                               | 23,686,336 |                             |   | 24,022,256    |  |           | 1,045,000 |  |   | 1,029,898
|Due from five to ten years |  |                               | 4,064,842  |                             |   | 4,120,413     |  |           |          |  |   |         
|Due after ten years        |  |                               | 505,994    |                             |   | 522,549       |  |           |          |  |   |         
|Mortgage-backed securities |  |                               | 27,505,958 |                             |   | 28,271,565    |  |           | 711       |  |   | 714      
|                           |  |                               |            |                             |   |               |  |           |           |  |   |          
|                           |  | $                             | 59,261,215 |                             | $ | 60,455,998    |  | $         | 3,360,711 |  | $ | 3,349,682
|                           |  |                               |            |                             |   |               |  |           |           |  |   |          

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.

Information pertaining to securities with gross unrealized losses at December 31, 2008 and 2007 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   |        | FairValue          |   | GrossUnrealizedLosses |  | FairValue
|December 31, 2008              |  |                         |        |                    |   |                       |  |           |         |  |   |          
|Government-sponsored agencies  |  | $                       |       |                    | $ |                      |  | $         |        |  | $ |         
|State and municipal securities |  |                         | 8,203  |                    |   | 197,790               |  |           | 25,644  |  |   | 574,356  
|Mortgage-backed securities     |  |                         | 36,898 |                    |   | 2,995,680             |  |           | 45,528  |  |   | 842,900  
|                               |  |                         |        |                    |   |                       |  |           |         |  |   |          
|                               |  | $                       | 45,101 |                    | $ | 3,193,470             |  | $         | 71,172  |  | $ | 1,417,256
|                               |  |                         |        |                    |   |                       |  |           |         |  |   |          
|December 31, 2007              |  |                         |        |                    |   |                       |  |           |         |  |   |          
|Government-sponsored agencies  |  | $                       | 1,693  |                    | $ | 998,307               |  | $         | 406     |  | $ | 999,277  
|State and municipal securities |  |                         | 399    |                    |   | 185,101               |  |           | 51,298  |  |   | 2,218,702
|Mortgage-backed securities     |  |                         | 1,321  |                    |   | 1,160,580             |  |           | 61,814  |  |   | 1,074,484
|                               |  |                         |        |                    |   |                       |  |           |         |  |   |          
|                               |  | $                       | 3,413  |                    | $ | 2,343,988             |  | $         | 113,518 |  | $ | 4,292,463
|                               |  |                         |        |                    |   |                       |  |           |         |  |   |          



12



---

##### Index to Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 2. SECURITIES (Continued)



The unrealized losses on the Companys investment in State and municipal securities are caused
by changes in interest rates. The Companys investments in State and municipal securities consist primarily of general obligations of municipalities located in the state of Georgia. 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, 2008 and December 31, 2007.

The unrealized losses on the Companys
investment in federal agency mortgage-backed securities were also caused by changes in interest rates. 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 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, 2008 and December 31, 2007.

NOTE 3. LOANS

The composition of loans is summarized as follows:



|                           |  |              |             |   |      |   |             |  
|-------------------------- |  | ------------ | ----------- | - | ---- | - | ----------- | -
|                           |  | December 31, |            
|                           |  | 2008         |             |   | 2007 |  
|Real estate  commercial   |  | $            | 181,255,000 |   |      | $ | 170,791,000 |  
|Real estate  construction |  |              | 263,052,000 |   |      |   | 325,151,000 |  
|Real estate  1-4 family   |  |              | 61,980,000  |   |      |   | 41,996,000  |  
|Commercial                 |  |              | 21,181,000  |   |      |   | 23,752,000  |  
|Consumer                   |  |              | 6,209,559   |   |      |   | 7,740,551   |  
|                           |  |              |             |   |      |   |             |  
|                           |  |              | 533,677,559 |   |      |   | 569,430,551 |  
|Deferred loan fees         |  |              | (69,000     | ) |      |   | (43,000     | )
|Allowance for loan losses  |  |              | (17,730,410 | ) |      |   | (7,657,387  | )
|                           |  |              |             |   |      |   |             |  
|Loans, net                 |  | $            | 515,878,149 |   |      | $ | 561,730,164 |  
|                           |  |              |             |   |      |   |             |  

Changes in the allowance for loan losses are as follows:



|                                           |  |                          |             |   |      |   |           |      |  |   |           |  
|------------------------------------------ |  | ------------------------ | ----------- | - | ---- | - | --------- | ---- |  | - | --------- | -
|                                           |  | Years Ended December 31, |            
|                                           |  | 2008                     |             |   | 2007 |   |           | 2006 | 
|                                           |  |                          |             |   |      |   |           |      |  |   |           |  
|Balance, beginning of year                 |  | $                        | 7,657,387   |   |      | $ | 5,229,838 |      |  | $ | 4,971,852 |  
|Provision for loan losses                  |  |                          | 24,285,750  |   |      |   | 2,959,254 |      |  |   | 476,860   |  
|Loans charged off                          |  |                          | (14,219,949 | ) |      |   | (550,280  | )    |  |   | (240,608  | )
|Recoveries of loans previously charged off |  |                          | 7,222       |   |      |   | 18,575    |      |  |   | 21,734    |  
|                                           |  |                          |             |   |      |   |           |      |  |   |           |  
|Balance, end of year                       |  | $                        | 17,730,410  |   |      | $ | 7,657,387 |      |  | $ | 5,229,838 |  
|                                           |  |                          |             |   |      |   |           |      |  |   |           |  



13



---

##### Index to Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 3. LOANS (Continued)



The following is a summary of information pertaining to impaired loans, nonaccrual loans, and past
due loans:



|                                                            |  |              |            |      |   |           
|----------------------------------------------------------- |  | ------------ | ---------- | ---- | - | ----------
|                                                            |  | December 31,
|                                                            |  | 2008         |            | 2007
|Impaired loans without a valuation allowance                |  | $            | 47,637,030 |      | $ | 8,057,715 
|Impaired loans with a valuation allowance                   |  |              | 46,766,863 |      |   | 29,486,642
|                                                            |  |              |            |      |   |           
|Total impaired loans                                        |  | $            | 94,403,893 |      | $ | 37,544,357
|                                                            |  |              |            |      |   |           
|Valuation allowance related to impaired loans               |  | $            | 12,495,573 |      | $ | 3,427,489 
|                                                            |  |              |            |      |   |           
|Total nonaccrual loans                                      |  | $            | 77,804,171 |      | $ | 32,743,802
|                                                            |  |              |            |      |   |           
|Total loans past due ninety days or more and still accruing |  | $            | 20,066,000 |      | $ | 4,714,000 
|                                                            |  |              |            |      |   |           

The average recorded investment in impaired loans for 2008, 2007, and 2006 was $68,560,833,
$15,671,333, and $1,035,750, respectively. Interest income recognized on impaired loans for cash payments received was $874,784 for 2008. Interest income recognized on impaired loans for cash payments received was not material for 2007 and 2006.

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, 2008 are as follows:



|                           |  |   |          |  
|-------------------------- |  | - | -------- | -
|Balance, beginning of year |  | $ | 172,435  |  
|Advances                   |  |   | 96,514   |  
|Repayments                 |  |   | (143,553 | )
|                           |  |   |          |  
|Balance, end of year       |  | $ | 125,396  |  
|                           |  |   |          |  

NOTE 4. OTHER REAL ESTATE OWNED

A summary of other real estate owned is presented as follows:



|                           |  |                          |            |   |      |   |            |  
|-------------------------- |  | ------------------------ | ---------- | - | ---- | - | ---------- | -
|                           |  | Years Ended December 31, |           
|                           |  | 2008                     |            |   | 2007 |  
|Balance, beginning of year |  | $                        | 10,394,433 |   |      | $ | 1,410,667  |  
|Additions                  |  |                          | 14,110,681 |   |      |   | 9,899,879  |  
|Disposals                  |  |                          | (2,268,287 | ) |      |   | (842,268   | )
|Internally financed sales  |  |                          | (928,237   | ) |      |   | (73,845    | )
|Writedowns                 |  |                          | (2,910,836 | ) |      |   |           |  
|                           |  |                          |            |   |      |   |            |  
|Balance, end of year       |  | $                        | 18,397,754 |   |      | $ | 10,394,433 |  
|                           |  |                          |            |   |      |   |            |  

Expenses applicable to other real estate owned include the following:



|                                         |  |                          |           |      |   |         |  |   |       
|---------------------------------------- |  | ------------------------ | --------- | ---- | - | ------- |  | - | ------
|                                         |  | Years Ended December 31,
|                                         |  | 2008                     |           | 2007 |   | 2006   
|Net loss on sales of other real estate   |  | $                        | 324,174   |      | $ | 25,521  |  | $ | 3,722 
|Writedowns of other real estate          |  |                          | 2,910,836 |      |   |        |  |   |      
|Operating expenses, net of rental income |  |                          | 323,875   |      |   | 163,359 |  |   | 24,790
|                                         |  |                          |           |      |   |         |  |   |       
|                                         |  | $                        | 3,558,885 |      | $ | 188,880 |  | $ | 28,512
|                                         |  |                          |           |      |   |         |  |   |       



14



---

##### Index to Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5. PREMISES AND EQUIPMENT

Premises and
equipment are summarized as follows:



|                         |  |              |            |   |      |   |            |  
|------------------------ |  | ------------ | ---------- | - | ---- | - | ---------- | -
|                         |  | December 31, |           
|                         |  | 2008         |            |   | 2007 |  
|Land                     |  | $            | 2,674,015  |   |      | $ | 2,674,015  |  
|Buildings                |  |              | 10,436,470 |   |      |   | 10,436,470 |  
|Equipment                |  |              | 4,826,360  |   |      |   | 4,711,918  |  
|                         |  |              |            |   |      |   |            |  
|                         |  |              | 17,936,845 |   |      |   | 17,822,403 |  
|Accumulated depreciation |  |              | (8,160,361 | ) |      |   | (7,481,035 | )
|                         |  |              |            |   |      |   |            |  
|                         |  | $            | 9,776,484  |   |      | $ | 10,341,368 |  
|                         |  |              |            |   |      |   |            |  

NOTE 6. DEPOSITS

The aggregate amount of time deposits in denominations of $100,000 or more at December 31, 2008 and 2007 was $134,716,000 and $170,521,000, respectively. The scheduled maturities of time deposits at
December 31, 2008 are as follows:



|     |  |   |            
|---- |  | - | -----------
|2009 |  | $ | 260,357,919
|2010 |  |   | 72,442,436 
|2011 |  |   | 11,259,719 
|2012 |  |   | 8,387,112  
|2013 |  |   | 37,288,994 
|2014 |  |   | 25,758     
|     |  |   |            
|     |  | $ | 389,761,938
|     |  |   |            

The Company had brokered time deposits of $44,795,000 and $10,548,000 at December 31, 2008
and December 31, 2007, respectively.

Overdraft demand deposits reclassified to loans totaled $179,000 and $10,000 at December 31,
2008 and 2007, respectively.



15



---

##### Index to Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7. OTHER BORROWINGS

Other borrowings consist of
the following:



|                                                                                                                   |  |              |           |      |   |           
|------------------------------------------------------------------------------------------------------------------ |  | ------------ | --------- | ---- | - | ----------
|                                                                                                                   |  | December 31,
|                                                                                                                   |  | 2008         |           | 2007
|Advance from Federal Home Loan Bank with interest at 5.51%, due March 26, 2008.                                    |  | $            |          |      | $ | 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 
|Advance from Federal Home Loan Bank with interest at 3.16%, due April 19, 2010.                                    |  |              | 642,857   |      |   | 1,071,429 
|Treasury, tax and loan note option account, with interest at .25% less than the federal funds rate, due on demand. |  |              | 955,409   |      |   | 353,069   
|Federal funds purchased and securities sold under agreements to repurchase.                                        |  |              |          |      |   | 5,000,000 
|                                                                                                                   |  |              |           |      |   |           
|                                                                                                                   |  | $            | 2,598,266 |      | $ | 13,424,498
|                                                                                                                   |  |              |           |      |   |           

The advances from the Federal Home Loan Bank are secured by Federal Home Loan Bank stock of
$1,367,900, and Federal Home Loan Bank Agency bonds in the amount of $6,576,000.

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 an available unused line of credit with a financial institution totaling $12,000,000 at December 31, 2008.

NOTE 8. MORTGAGE BANKING INCOME

Mortgage banking income consists of the following:



|                          |  |                          |         |      |   |         |  |   |        
|------------------------- |  | ------------------------ | ------- | ---- | - | ------- |  | - | -------
|                          |  | Years Ended December 31,
|                          |  | 2008                     |         | 2007 |   | 2006   
|Gains on sale of loans    |  | $                        | 183,012 |      | $ | 270,095 |  | $ | 330,959
|Other fees from borrowers |  |                          | 194,313 |      |   | 330,251 |  |   | 372,607
|                          |  |                          |         |      |   |         |  |   |        
|                          |  | $                        | 377,325 |      | $ | 600,346 |  | $ | 703,566
|                          |  |                          |         |      |   |         |  |   |        



16



---

##### Index to Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9. 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 2008, 2007 and 2006 amounted to $84,325, $434,018 and $417,816, respectively.

The Company also has deferred compensation agreements with certain key officers. Amounts charged to expense under these agreements totaled $59,844,
$56,320, and $53,064 for the years ended December 31, 2008, 2007 and 2006, respectively.

NOTE 10. INCOME TAXES

The allocation of income tax expense (benefit) between current and deferred income taxes is as follows:



|                             |  |                          |            |   |      |   |            |      |  |   |           |  
|---------------------------- |  | ------------------------ | ---------- | - | ---- | - | ---------- | ---- |  | - | --------- | -
|                             |  | Years Ended December 31, |           
|                             |  | 2008                     |            |   | 2007 |   |            | 2006 | 
|Current                      |  |                          |            |   |      |   |            |      |  |   |           |  
|Federal                      |  | $                        | (3,525,605 | ) |      | $ | 6,104,827  |      |  | $ | 6,888,902 |  
|State                        |  |                          | (552,243   | ) |      |   | 532,965    |      |  |   | 756,586   |  
|Deferred                     |  |                          |            |   |      |   |            |      |  |   |           |  
|Federal                      |  |                          | (3,523,117 | ) |      |   | (1,541,583 | )    |  |   | (15,021   | )
|State                        |  |                          | (940,833   | ) |      |   | (260,799   | )    |  |   | (21,384   | )
|Valuation allowance          |  |                          | 1,970,151  |   |      |   |           |      |  |   |          |  
|                             |  |                          |            |   |      |   |            |      |  |   |           |  
|Income tax expense (benefit) |  | $                        | (6,571,647 | ) |      | $ | 4,835,410  |      |  | $ | 7,609,083 |  
|                             |  |                          |            |   |      |   |            |      |  |   |           |  

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



|                                            |  |                          |            |   |      |   |           |      |  |   |           |  
|------------------------------------------- |  | ------------------------ | ---------- | - | ---- | - | --------- | ---- |  | - | --------- | -
|                                            |  | Years Ended December 31, |           
|                                            |  | 2008                     |            |   | 2007 |   |           | 2006 | 
|Income taxes (benefit) at federal statutory |  | $                        | (7,321,426 | ) |      | $ | 4,740,448 |      |  | $ | 7,006,431 |  
|Tax-exempt interest                         |  |                          | (108,823   | ) |      |   | (123,637  | )    |  |   | (109,750  | )
|State income taxes (benefit)                |  |                          | (1,189,659 | ) |      |   | 117,266   |      |  |   | 580,302   |  
|Rate adjustment                             |  |                          |           |   |      |   |          |      |  |   |          |  
|Valuation allowance                         |  |                          | 1,970,151  |   |      |   |          |      |  |   |          |  
|Surtax exemption                            |  |                          | (98,330    | ) |      |   | (23,357   | )    |  |   |          |  
|Other items, net                            |  |                          | 176,440    |   |      |   | 124,690   |      |  |   | 132,100   |  
|                                            |  |                          |            |   |      |   |           |      |  |   |           |  
|Income tax expense (benefit)                |  | $                        | (6,571,647 | ) |      | $ | 4,835,410 |      |  | $ | 7,609,083 |  
|                                            |  |                          |            |   |      |   |           |      |  |   |           |  



17



---

##### Index to Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10. INCOME TAXES (Continued)



The components of deferred income taxes are as follows:



|                              |  |              |            |   |      |   |          
|----------------------------- |  | ------------ | ---------- | - | ---- | - | ---------
|                              |  | December 31,
|                              |  | 2008         |            |   | 2007
|Deferred tax assets:          |  |              |            |   |      |   |          
|Loan loss reserves            |  | $            | 6,857,991  |   |      | $ | 2,961,820
|Deferred compensation         |  |              | 247,636    |   |      |   | 234,768  
|Deferred loan fees            |  |              | 26,472     |   |      |   | 16,681   
|Other real estate expenses    |  |              | 929,134    |   |      |   | 64,114   
|Nonaccrual loan interest      |  |              |           |   |      |   | 717,189  
|Unused state tax credits      |  |              | 332,930    |   |      |   |         
|Contributions                 |  |              | 2,862      |   |      |   |         
|                              |  |              |            |   |      |   |          
|                              |  |              | 8,397,025  |   |      |   | 3,994,572
|Valuation allowance           |  |              | (1,970,151 | ) |      |   |         
|                              |  |              |            |   |      |   |          
|                              |  |              | 6,426,874  |   |      |   | 3,994,572
|Deferred tax liabilities:     |  |              |            |   |      |   |          
|Securities available for sale |  |              | 406,226    |   |      |   | 224,469  
|Depreciation                  |  |              | 43,723     |   |      |   | 105,221  
|                              |  |              |            |   |      |   |          
|                              |  |              | 449,949    |   |      |   | 329,690  
|                              |  |              |            |   |      |   |          
|Net deferred tax assets       |  | $            | 5,976,925  |   |      | $ | 3,664,882
|                              |  |              |            |   |      |   |          

NOTE 11. 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,
|                                |  | 2008         |            | 2007
|Commitments to extend credit    |  | $            | 68,193,838 |      | $ | 75,223,974
|Other standby letters of credit |  |              | 6,259,448  |      |   | 6,559,617 
|                                |  |              |            |      |   |           
|                                |  | $            | 74,453,286 |      | $ | 81,783,591
|                                |  |              |            |      |   |           



18



---

##### Index to Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 11. COMMITMENTS AND CONTINGENCIES (Continued)



Loan Commitments (Continued)

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. 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 deems necessary.

At December 31, 2008 and 2007, 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, 2008 and
2007.

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 12. 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-five 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. Additionally, forty-nine percent of the Companys loan portfolio is concentrated in real estate
construction loans. 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.



19



---

##### Index to Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13. 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, 2008, no dividends could be declared without prior 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 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. As a result of the findings of the FDIC in its most recent examination of the Bank, the Banks Directors entered into an informal agreement with the FDIC and Georgia Department of Banking and
Finance to improve the condition of the Bank. Specifically, the agreement provides for reducing adversely classified assets, upgrading the overall quality of the loan portfolio, maintaining a Tier I leverage capital ratio of not less than 8% and a
Total Risk Based capital ratio of not less than 10%, maintaining an adequate reserve for loan losses, prohibiting dividends without prior regulatory approval, improving liquidity, and adopting a revised strategic plan covering the next three years.
The Bank has agreed to submit certain of these plans and programs to the regulators for review and comment. Failure to adequately address the provisions contained in the agreement may result in a formal enforcement action by the regulatory agencies.
The Bank presently exceeds the capital ratios and is complying with the reporting provisions of the agreement.

As of December 31,
2008, 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.



20



---

##### Index to Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13. REGULATORY MATTERS (Continued)



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



|                         |  |                        |        |       |                             |   |        |                                                               |        |  |      |        |  |       |        |  |       |  
|------------------------ |  | ---------------------- | ------ | ----- | --------------------------- | - | ------ | ------------------------------------------------------------- | ------ |  | ---- | ------ |  | ----- | ------ |  | ----- | -
|                         |  | Actual                 |        |       | For CapitalAdequacyPurposes |   |        | To Be WellCapitalized UnderPrompt CorrectiveAction Provisions |       
|                         |  | Amount                 |        | Ratio |                             |   | Amount |                                                               | Ratio  |  |      | Amount |  | Ratio |       
|                         |  | (Dollars in Thousands) |       
|As of December 31, 2008: |  |                        |        |       |                             |   |        |                                                               |        |  |      |        |  |       |        |  |       |  
|Total Capital to Risk    |  |                        |        |       |                             |   |        |                                                               |        |  |      |        |  |       |        |  |       |  
|Weighted Assets:         |  |                        |        |       |                             |   |        |                                                               |        |  |      |        |  |       |        |  |       |  
|Consolidated             |  | $                      | 65,778 |       | 11.59                       | % |        | $                                                             | 45,408 |  | 8.00 | %      |  |       | N/A    |  | N/A   |  
|Bank                     |  | $                      | 65,541 |       | 11.55                       | % |        | $                                                             | 45,396 |  | 8.00 | %      |  | $     | 56,745 |  | 10.00 | %
|Tier I Capital to Risk   |  |                        |        |       |                             |   |        |                                                               |        |  |      |        |  |       |        |  |       |  
|Weighted Assets:         |  |                        |        |       |                             |   |        |                                                               |        |  |      |        |  |       |        |  |       |  
|Consolidated             |  | $                      | 58,554 |       | 10.32                       | % |        | $                                                             | 22,704 |  | 4.00 | %      |  |       | N/A    |  | N/A   |  
|Bank                     |  | $                      | 58,317 |       | 10.28                       | % |        | $                                                             | 22,698 |  | 4.00 | %      |  | $     | 34,047 |  | 6.00  | %
|Tier I Capital to        |  |                        |        |       |                             |   |        |                                                               |        |  |      |        |  |       |        |  |       |  
|Average Assets:          |  |                        |        |       |                             |   |        |                                                               |        |  |      |        |  |       |        |  |       |  
|Consolidated             |  | $                      | 58,554 |       | 8.43                        | % |        | $                                                             | 27,786 |  | 4.00 | %      |  |       | N/A    |  | N/A   |  
|Bank                     |  | $                      | 58,317 |       | 8.40                        | % |        | $                                                             | 27,780 |  | 4.00 | %      |  | $     | 34,725 |  | 5.00  | %
|                         |  |                        |       
|                         |  | Actual                 |        |       | For CapitalAdequacyPurposes |   |        | To Be WellCapitalized UnderPrompt CorrectiveAction Provisions |       
|                         |  | Amount                 |        | Ratio |                             |   | Amount |                                                               | Ratio  |  |      | Amount |  | Ratio |       
|                         |  | (Dollars in Thousands) |       
|As of December 31, 2007: |  |                        |        |       |                             |   |        |                                                               |        |  |      |        |  |       |        |  |       |  
|Total Capital to Risk    |  |                        |        |       |                             |   |        |                                                               |        |  |      |        |  |       |        |  |       |  
|Weighted Assets:         |  |                        |        |       |                             |   |        |                                                               |        |  |      |        |  |       |        |  |       |  
|Consolidated             |  | $                      | 82,756 |       | 13.37                       | % |        | $                                                             | 49,510 |  | 8.00 | %      |  |       | N/A    |  | N/A   |  
|Bank                     |  | $                      | 82,426 |       | 13.32                       | % |        | $                                                             | 49,497 |  | 8.00 | %      |  | $     | 61,871 |  | 10.00 | %
|Tier I Capital to Risk   |  |                        |        |       |                             |   |        |                                                               |        |  |      |        |  |       |        |  |       |  
|Weighted Assets:         |  |                        |        |       |                             |   |        |                                                               |        |  |      |        |  |       |        |  |       |  
|Consolidated             |  | $                      | 75,099 |       | 12.13                       | % |        | $                                                             | 24,755 |  | 4.00 | %      |  |       | N/A    |  | N/A   |  
|Bank                     |  | $                      | 74,769 |       | 12.08                       | % |        | $                                                             | 24,748 |  | 4.00 | %      |  | $     | 37,123 |  | 6.00  | %
|Tier I Capital to        |  |                        |        |       |                             |   |        |                                                               |        |  |      |        |  |       |        |  |       |  
|Average Assets:          |  |                        |        |       |                             |   |        |                                                               |        |  |      |        |  |       |        |  |       |  
|Consolidated             |  | $                      | 75,099 |       | 9.89                        | % |        | $                                                             | 30,369 |  | 4.00 | %      |  |       | N/A    |  | N/A   |  
|Bank                     |  | $                      | 74,769 |       | 9.85                        | % |        | $                                                             | 30,363 |  | 4.00 | %      |  | $     | 37,953 |  | 5.00  | %



21



---

##### Index to Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14. FAIR VALUES

On January 1, 2008, the
Company adopted Statement of Financial Accounting Standards No. 157, Fair Value Measurements (SFAS No. 157). SFAS No. 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures
about fair value measurements. SFAS No. 157 applies to reported balances that are required or permitted to be measured at fair value under existing accounting pronouncements; accordingly, the standard does not require any new fair value
measurements of reported balances. On February 12, 2008, the FASB issued Staff Position 157-2 which defers the effective date of Statement 157 for certain nonfinancial assets and liabilities to fiscal years beginning after November 15,
2008 and interim periods within those fiscal years.

On October 10, 2008, the FASB issued FSP FAS 157-3, Determining the Fair
Value of a Financial Asset When the Market for that Asset Is Not Active.This FSP clarified the application of SFAS No. 157 in a market that is not active and reiterated that the results of distressed sales or forced liquidations are
not determinative when measuring fair value. It emphasized that when determining fair value, the use of managements internal assumptions concerning future cash flows discounted at an appropriate risk-adjusted interest rate is acceptable when
relevant observable market data do not exist. In some situations, multiple inputs from a variety of sources may provide the best evidence of fair value. The FSP also described how the use of broker quotes should be considered when assessing the
relevance of observable and unobservable inputs. The impact of this statement is minimal, as this FSP provides clarification to existing guidance.

As defined in SFAS No. 157, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, the
Company uses various methods including market, income and cost approaches. Based on these approaches, the Company often utilizes certain assumptions that market participants would use in pricing the asset or liability, including assumptions about
market risk and/or risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable inputs. The Company utilizes valuation techniques that maximize the use of observable
inputs and minimize the use of unobservable inputs. Based on the observability of the inputs used in the valuation techniques the Company is required to provide the following information according to fair value hierarchy. The fair value hierarchy
ranks the quality and reliability of the information used to determine fair values. Financial assets and liabilities carried at fair value will be classified and disclosed in one of the following categories:

Level 1Quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities include debt and equity securities
traded in an active market, as well as certain U.S. Treasury and U.S. Government-sponsored enterprise debt securities that are highly liquid and are actively traded in over-the-counter markets.

Level 2Observable inputs other than Level 1 prices such as quoted prices for similar assets and liabilities; quoted prices in markets that are not
active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets and liabilities. Level 2 assets and liabilities include debt securities with quoted prices that are traded
less frequently than exchange-traded instruments or whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data.

Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or
liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value
requires significant management judgment or estimation.



22



---

##### Index to Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14. FAIR VALUES (Continued)



Assets Measured at Fair Value on a Recurring Basis

Following is a description of the valuation methodologies used for instruments measured at fair value on a recurring basis and recognized in the
accompanying balance sheet, as well as the general classification of such instruments pursuant to the valuation hierarchy.

Available
for Sale Securities

Where quoted market prices are available in an active market, securities are classified within Level 1 of the
valuation hierarchy. Level 1 securities would include highly liquid government bonds, mortgage products and exchange traded equities. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of
securities with similar characteristics or discounted cash flows. Level 2 securities include U. S. agency securities, mortgage-backed agency securities, obligations of state and political subdivisions and certain corporate, asset backed and other
securities. In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy.

Assets Measured at Fair Value on a Recurring Basis (Continued)

The following table presents financial assets measured at
fair value on a recurring basis:



|                              |  |                                                          |            |                                                            |   |                                           |  |                                        |            |  |   |  
|----------------------------- |  | -------------------------------------------------------- | ---------- | ---------------------------------------------------------- | - | ----------------------------------------- |  | -------------------------------------- | ---------- |  | - | -
|                              |  |                                                          |            | Fair Value Measurements at December 31, 2008 Using        
|                              |  | Assets/LiabilitiesMeasured atFair ValueDecember 31, 2008 |            | Quoted PricesIn ActiveMarkets forIdentical Assets(Level 1) |   | SignificantOtherObservableInputs(Level 2) |  | SignificantUnobservableInputs(Level 3)
|Available for sale securities |  | $                                                        | 60,455,998 |                                                            | $ | 320,000                                   |  | $                                      | 60,135,998 |  | $ | 

Assets Measured at Fair Value on a Nonrecurring Basis

Following is a description of the valuation methodologies used for instruments measured at fair value on a nonrecurring basis and recognized in the
accompanying balance sheet, as well as the general classification of such instruments pursuant to the valuation hierarchy.

Impaired
Loans

The Company does not record loans at fair value on a recurring basis. However, from time to time, a loan is considered impaired
and an allowance for loan losses is established. Once a loan is identified as individually impaired, management measures the impairment in accordance with Statement of Financial Accounting Standards No. 114, Accounting by Creditors for
Impairment of a Loan (SFAS 114). The fair value of impaired loans is estimated using one of several methods, including the present value of future cash flows discounted at the loans effective interest rate or a loans
observable market price, or the fair value of the collateral if the loan is collateral dependent. In accordance with SFAS 114, impaired loans where an allowance is established based on fair value of collateral require classification in the fair
value hierarchy.



23



---

##### Index to Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 14. FAIR VALUES (Continued)



The Company measures the fair value of collateral dependent loans based on the fair value of
collateral securing these loans. These measurements are classified as Level 3 within the valuation hierarchy. All impaired loans are secured by real estate. The fair value of these real estate properties is generally determined based upon appraisals
performed by a certified or licensed appraiser using inputs such as absorption rates, capitalization rates, and comparables. Management also considers other factors or recent developments which could result in adjustments to the valuation. Impaired
loans are reviewed and evaluated on at least a quarterly basis for additional impairment and adjusted accordingly, based on the same factors identified above. For the year ended December 31, 2008, a nonrecurring change in fair value of $22.2
million has been recorded on those loans considered impaired at December 31, 2008.

Other Real Estate Owned

Foreclosed assets are adjusted to fair value upon transfer of the loans to other real estate owned. Subsequently, other real estate owned is carried at
the lower of carrying value or fair value. Fair value is based upon independent market prices, appraised values of the collateral or managements estimation of the value of the collateral. When the fair value of the collateral is based on an
observable market price, the Company records the other real estate owned as nonrecurring Level 2. When a current appraisal is not available or management determines the fair value is further impaired below the appraised value and there is no
observable market price, the Company records the other real estate owned as nonrecurring Level 3. As a result of continued deterioration in the appraised values of our other real estate owned as evidenced by current market conditions, the Company
recorded additional write-downs of $2.9 million through a charge to earnings during the twelve months ending December 31, 2008.

The
following table presents the assets and liabilities carried on the balance sheet by caption and by level within the FAS No. 157 valuation hierarchy (as described above) as of December 31, 2008, for which a nonrecurring change in fair value
has been recorded during the year ended December 31, 2008:



|                        |  |                                                          |            |                                                            |   |                                           |  |                                        |   |  |   |           
|----------------------- |  | -------------------------------------------------------- | ---------- | ---------------------------------------------------------- | - | ----------------------------------------- |  | -------------------------------------- | - |  | - | ----------
|                        |  |                                                          |            | Fair Value Measurements at December 31, 2008 Using        
|                        |  | Assets/LiabilitiesMeasured atFair ValueDecember 31, 2008 |            | Quoted PricesIn ActiveMarkets forIdentical Assets(Level 1) |   | SignificantOtherObservableInputs(Level 2) |  | SignificantUnobservableInputs(Level 3)
|Impaired loans          |  | $                                                        | 71,936,348 |                                                            | $ |                                          |  | $                                      |  |  | $ | 71,936,348
|Other real estate owned |  | $                                                        | 18,397,754 |                                                            | $ |                                          |  | $                                      |  |  | $ | 18,397,754

Fair Values of Financial Instruments

In February, 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of
FASB Statement No. 115.SFAS No. 159 allows companies to report selected financial assets and liabilities at fair value. The changes in fair value are recognized in earnings and the assets and liabilities measured under this
methodology are required to be displayed separately on the balance sheet. While SFAS No. 159 became effective for the Company beginning January 1, 2008, the Company has not elected the fair value option that is offered by this statement.



24



---

##### Index to Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14. FAIR VALUES (Continued)



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 Value of Financial Instruments, excludes certain financial 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 approximate 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 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 and is
not significant. The carrying amount of the off-balance sheet financial instruments is based on fees charged to enter into such agreements.



25



---

##### Index to Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14. FAIR VALUES (Continued)



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



|                                                                                 |  |                   |             |                   |   |                |  |           |             |  |   |            
|-------------------------------------------------------------------------------- |  | ----------------- | ----------- | ----------------- | - | -------------- |  | --------- | ----------- |  | - | -----------
|                                                                                 |  | December 31, 2008 |             | December 31, 2007
|                                                                                 |  | CarryingAmount    |             | FairValue         |   | CarryingAmount |  | FairValue
|Financial assets:                                                                |  |                   |             |                   |   |                |  |           |             |  |   |            
|Cash and due from banks,interest-bearing deposits inbanks and federal funds sold |  | $                 | 29,838,959  |                   | $ | 29,838,959     |  | $         | 29,058,223  |  | $ | 29,058,223 
|Securities available for sale                                                    |  |                   | 60,455,998  |                   |   | 60,455,998     |  |           | 87,717,716  |  |   | 87,717,716 
|Securities held to maturity                                                      |  |                   | 3,360,711   |                   |   | 3,349,682      |  |           | 4,164,690   |  |   | 4,143,401  
|Restricted equity securities                                                     |  |                   | 1,643,251   |                   |   | 1,643,251      |  |           | 1,897,751   |  |   | 1,897,751  
|Loans held for sale                                                              |  |                   |            |                   |   |               |  |           | 950,405     |  |   | 950,405    
|Loans, net                                                                       |  |                   | 515,878,149 |                   |   | 520,205,733    |  |           | 561,730,164 |  |   | 563,021,108
|Accrued interest receivable                                                      |  |                   | 3,164,328   |                   |   | 3,164,328      |  |           | 7,155,919   |  |   | 7,155,919  
|                                                                                 |  |                   |             |                  
|Financial liabilities:                                                           |  |                   |             |                   |   |                |  |           |             |  |   |            
|Deposits                                                                         |  |                   | 590,476,625 |                   |   | 599,314,687    |  |           | 625,851,121 |  |   | 629,444,479
|Other borrowings                                                                 |  |                   | 2,598,266   |                   |   | 2,600,000      |  |           | 13,424,498  |  |   | 13,600,000 
|Accrued interest payable                                                         |  |                   | 2,701,015   |                   |   | 2,701,015      |  |           | 3,446,182   |  |   | 3,446,182  



26



---

##### Index to Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15. 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.

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, 2008       |  | CommercialBanking |             |   | Mortgage |   |           | AllOther |  |   | Eliminations |   |  | Total |           
|Interest income                            |  | $                 | 35,436,579  |   |          | $ | 8,204     |          |  | $ |             |   |  | $     | (35,035    | ) |  | $ | 35,409,748  |  
|Interest expense                           |  |                   | 19,636,646  |   |          |   | 26,831    |          |  |   |             |   |  |       | (35,035    | ) |  |   | 19,628,442  |  
|Net interest income (expense)              |  |                   | 15,799,933  |   |          |   | (18,627   | )        |  |   |             |   |  |       |           |   |  |   | 15,781,306  |  
|Intersegment net interest income (expense) |  |                   | 18,627      |   |          |   | (18,627   | )        |  |   |             |   |  |       |           |   |  |   |            |  
|Other revenue from all sources             |  |                   | 2,418,540   |   |          |   | 377,325   |          |  |   | 12,900       |   |  |       |           |   |  |   | 2,808,765   |  
|Intersegment other revenues (expenses)     |  |                   | 24,840      |   |          |   | (24,840   | )        |  |   |             |   |  |       |           |   |  |   |            |  
|Depreciation                               |  |                   | 672,737     |   |          |   | 345       |          |  |   | 6,244        |   |  |       |           |   |  |   | 679,326     |  
|Provision for loan losses                  |  |                   | 24,285,750  |   |          |   |          |          |  |   |             |   |  |       |           |   |  |   | 24,285,750  |  
|Segment loss                               |  |                   | (20,622,466 | ) |          |   | (244,410  | )        |  |   | (51,482      | ) |  |       |           |   |  |   | (20,918,358 | )
|Segment assets                             |  |                   | 656,245,974 |   |          |   | 634,887   |          |  |   | 250,388      |   |  |       | (1,253,775 | ) |  |   | 655,877,474 |  
|Expenditures for premises and equipment    |  |                   | 114,442     |   |          |   |          |          |  |   |             |   |  |       |           |   |  |   | 114,442     |  
|                                           | 
|                                           |  | INDUSTRY SEGMENTS |            
|For the Year Ended December 31, 2007       |  | CommercialBanking |             |   | Mortgage |   |           | AllOther |  |   | Eliminations |   |  | Total |           
|Interest income                            |  | $                 | 51,637,930  |   |          | $ | 17,133    |          |  | $ |             |   |  | $     | (78,173    | ) |  | $ | 51,576,890  |  
|Interest expense                           |  |                   | 26,323,568  |   |          |   | 61,040    |          |  |   |             |   |  |       | (78,173    | ) |  |   | 26,306,435  |  
|Net interest income (expense)              |  |                   | 25,314,362  |   |          |   | (43,907   | )        |  |   |             |   |  |       |           |   |  |   | 25,270,455  |  
|Intersegment net interest income (expense) |  |                   | 43,907      |   |          |   | (43,907   | )        |  |   |             |   |  |       |           |   |  |   |            |  
|Other revenue from all sources             |  |                   | 2,437,321   |   |          |   | 600,346   |          |  |   | 12,600       |   |  |       |           |   |  |   | 3,050,267   |  
|Intersegment other revenues (expenses)     |  |                   | 24,840      |   |          |   | (24,840   | )        |  |   |             |   |  |       |           |   |  |   |            |  
|Depreciation                               |  |                   | 670,723     |   |          |   | 579       |          |  |   | 6,244        |   |  |       |           |   |  |   | 677,546     |  
|Provision for loan losses                  |  |                   | 2,959,254   |   |          |   |          |          |  |   |             |   |  |       |           |   |  |   | 2,959,254   |  
|Segment profit (loss)                      |  |                   | 13,787,632  |   |          |   | (197,525  | )        |  |   | (45,971      | ) |  |       |           |   |  |   | 13,544,136  |  
|Segment assets                             |  |                   | 719,528,021 |   |          |   | 1,740,446 |          |  |   | 381,964      |   |  |       | (2,654,382 | ) |  |   | 718,996,049 |  
|Expenditures for premises and equipment    |  |                   | 1,082,791   |   |          |   |          |          |  |   |             |   |  |       |           |   |  |   | 1,082,791   |  



27



---

##### Index to Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15. SUPPLEMENTAL SEGMENT INFORMATION (Continued)



|                                           |  |                   |             |          |   |           |          |  |   |              |   |  |       |            |   |  |   |            
|------------------------------------------ |  | ----------------- | ----------- | -------- | - | --------- | -------- |  | - | ------------ | - |  | ----- | ---------- | - |  | - | -----------
|                                           |  | INDUSTRY SEGMENTS
|For the Year Ended December 31, 2006       |  | CommercialBanking |             | Mortgage |   |           | AllOther |  |   | 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 all 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 (loss)                      |  |                   | 20,258,542  |          |   | (179,419  | )        |  |   | (60,748      | ) |  |       |           |   |  |   | 20,018,375 
|Segment assets                             |  |                   | 695,051,272 |          |   | 1,583,299 |          |  |   | 1,130,481    |   |  |       | (3,654,236 | ) |  |   | 694,310,816
|Expenditures for premises and equipment    |  |                   | 1,495,921   |          |   |          |          |  |   |             |   |  |       |           |   |  |   | 1,495,921  

NOTE 16. PARENT COMPANY FINANCIAL INFORMATION

The following information presents the condensed balance sheets as of December 31, 2008 and 2007 and statements of operations and cash flows for
Henry County Bancshares, Inc. for the years ended December 31, 2008, 2007 and 2006.

CONDENSED BALANCE SHEETS



|                                           |  |              |            |      |   |           
|------------------------------------------ |  | ------------ | ---------- | ---- | - | ----------
|                                           |  | December 31,
|                                           |  | 2008         |            | 2007
|Assets                                     |  |              |            |      |   |           
|Cash                                       |  | $            | 89,535     |      | $ | 216,999   
|Investment in subsidiaries                 |  |              | 59,105,402 |      |   | 75,204,573
|Premises and equipment                     |  |              | 140,940    |      |   | 147,184   
|Other assets                               |  |              | 19,913     |      |   | 17,780    
|                                           |  |              |            |      |   |           
|Total assets                               |  | $            | 59,355,790 |      | $ | 75,586,536
|                                           |  |              |            |      |   |           
|Liabilities and Stockholders Equity       |  |              |            |      |   |           
|Other liabilities                          |  | $            | 13,139     |      | $ | 52,394    
|Stockholders equity                       |  |              | 59,342,651 |      |   | 75,534,142
|                                           |  |              |            |      |   |           
|Total liabilities and stockholders equity |  | $            | 59,355,790 |      | $ | 75,586,536
|                                           |  |              |            |      |   |           



28



---

##### Index to Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 16. PARENT COMPANY FINANCIAL INFORMATION (Continued)



CONDENSED STATEMENTS OF OPERATIONS



|                                                                                            |  |                          |             |   |      |   |           |      |  |   |            |  
|------------------------------------------------------------------------------------------- |  | ------------------------ | ----------- | - | ---- | - | --------- | ---- |  | - | ---------- | -
|                                                                                            |  | Years Ended December 31, |            
|                                                                                            |  | 2008                     |             |   | 2007 |   |           | 2006 | 
|Income                                                                                      |  |                          |             |   |      |   |           |      |  |   |            |  
|Dividends from bank subsidiary                                                              |  | $                        | 2,136,854   |   |      | $ | 4,255,961 |      |  | $ | 4,434,044  |  
|Rental income                                                                               |  |                          | 12,900      |   |      |   | 12,600    |      |  |   | 12,600     |  
|                                                                                            |  |                          |             |   |      |   |           |      |  |   |            |  
|                                                                                            |  |                          | 2,149,754   |   |      |   | 4,268,561 |      |  |   | 4,446,644  |  
|                                                                                            |  |                          |             |   |      |   |           |      |  |   |            |  
|Expense                                                                                     |  |                          |             |   |      |   |           |      |  |   |            |  
|Depreciation                                                                                |  |                          | 6,244       |   |      |   | 6,244     |      |  |   | 7,662      |  
|Other expenses                                                                              |  |                          | 58,139      |   |      |   | 52,326    |      |  |   | 65,686     |  
|                                                                                            |  |                          |             |   |      |   |           |      |  |   |            |  
|Total expenses                                                                              |  |                          | 64,383      |   |      |   | 58,570    |      |  |   | 73,348     |  
|                                                                                            |  |                          |             |   |      |   |           |      |  |   |            |  
|Income before income tax benefits and equity in undistributed income (loss) of subsidiaries |  |                          | 2,085,371   |   |      |   | 4,209,991 |      |  |   | 4,373,296  |  
|Income tax benefits                                                                         |  |                          | (19,913     | ) |      |   | (17,780   | )    |  |   | (23,497    | )
|                                                                                            |  |                          |             |   |      |   |           |      |  |   |            |  
|Income before undistributed income (loss) of subsidiaries                                   |  |                          | 2,105,284   |   |      |   | 4,227,771 |      |  |   | 4,396,793  |  
|                                                                                            |  |                          |            
|Equity in undistributed income (loss) of subsidiaries                                       |  |                          | (16,451,995 | ) |      |   | 4,480,955 |      |  |   | 8,012,499  |  
|                                                                                            |  |                          |             |   |      |   |           |      |  |   |            |  
|Net income (loss)                                                                           |  | $                        | (14,346,711 | ) |      | $ | 8,708,726 |      |  | $ | 12,409,292 |  
|                                                                                            |  |                          |             |   |      |   |           |      |  |   |            |  



29



---

##### Index to Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 16. PARENT COMPANY FINANCIAL INFORMATION (Continued)



CONDENSED STATEMENTS OF CASH FLOWS



|                                                                                         |  |                          |             |   |      |   |            |      |  |   |            |  
|---------------------------------------------------------------------------------------- |  | ------------------------ | ----------- | - | ---- | - | ---------- | ---- |  | - | ---------- | -
|                                                                                         |  | Years Ended December 31, |            
|                                                                                         |  | 2008                     |             |   | 2007 |   |            | 2006 | 
|OPERATING ACTIVITIES                                                                     |  |                          |             |   |      |   |            |      |  |   |            |  
|Net income (loss)                                                                        |  | $                        | (14,346,711 | ) |      | $ | 8,708,726  |      |  | $ | 12,409,292 |  
|Adjustments to reconcile net income (loss) to net cash provided by operating activities: |  |                          |             |   |      |   |            |      |  |   |            |  
|Depreciation                                                                             |  |                          | 6,244       |   |      |   | 6,244      |      |  |   | 7,662      |  
|Undistributed (income) loss of subsidiaries                                              |  |                          | 16,451,995  |   |      |   | (4,480,955 | )    |  |   | (8,012,499 | )
|Net other operating activities                                                           |  |                          | (41,388     | ) |      |   | (2,361     | )    |  |   | 38,313     |  
|                                                                                         |  |                          |             |   |      |   |            |      |  |   |            |  
|Net cash provided by operating activities                                                |  |                          | 2,070,140   |   |      |   | 4,231,654  |      |  |   | 4,442,768  |  
|                                                                                         |  |                          |             |   |      |   |            |      |  |   |            |  
|FINANCING ACTIVITIES                                                                     |  |                          |             |   |      |   |            |      |  |   |            |  
|Dividends paid                                                                           |  |                          | (2,136,854  | ) |      |   | (4,005,960 | )    |  |   | (4,434,044 | )
|Reissuance of treasury stock                                                             |  |                          |            |   |      |   | 131,247    |      |  |   | 235,300    |  
|Purchase of treasury stock                                                               |  |                          | (60,750     | ) |      |   | (1,093,500 | )    |  |   |           |  
|                                                                                         |  |                          |             |   |      |   |            |      |  |   |            |  
|Net cash used in financing activities                                                    |  |                          | (2,197,604  | ) |      |   | (4,968,213 | )    |  |   | (4,198,744 | )
|                                                                                         |  |                          |             |   |      |   |            |      |  |   |            |  
|Net increase (decrease) in cash                                                          |  |                          | (127,464    | ) |      |   | (736,559   | )    |  |   | 244,024    |  
|                                                                                         |  |                          |            
|Cash at beginning of year                                                                |  |                          | 216,999     |   |      |   | 953,558    |      |  |   | 709,534    |  
|                                                                                         |  |                          |             |   |      |   |            |      |  |   |            |  
|Cash at end of year                                                                      |  | $                        | 89,535      |   |      | $ | 216,999    |      |  | $ | 953,558    |  
|                                                                                         |  |                          |             |   |      |   |            |      |  |   |            |  



30