----

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**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**Washington,      D.C. 20549**

**FORM      10-Q**

**Quarterly      Report Pursuant to Section 13 or 15(d) of the**

**Securities      Exchange Act of 1934**

**PAB      BANKSHARES, INC.**

**3250      North Valdosta Road, Valdosta, Georgia 31602**

**Telephone      Number: (229) 241-2775**

| Large                accelerated filer o | Accelerated                filer x | Non-accelerated                filer o |
|------------------------------------------|------------------------------------|----------------------------------------|

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**TABLE      OF CONTENTS**

|                    |                                                                                                                      | Page   |
|-------------------------|---------------------------------------------------------------------------------------------------------------------------|--------|
| PART                I   | FINANCIAL                INFORMATION                                                                                      |   |
| Item                1.  | Consolidated                Financial Statements                                                                          |   |
|                    | Statements                of Condition                                                                                    | 1      |
|                    | Statements                of Income                                                                                       | 2      |
|                    | Statements                of Comprehensive Income                                                                         | 3      |
|                    | Statements                of Stockholders’ Equity                                                                   | 4      |
|                    | Statements                of Cash Flows                                                                                   | 5      |
|                    | Notes                to Consolidated Financial                Statements                                                  | 7      |
| Item                2.  | Management’s                Discussion and Analysis of Financial Condition                and Results of Operations | 14     |
| Item                3.  | Quantitative                and Qualitative Disclosures About Market                Risk                                  | 24     |
| Item                4.  | Controls                and Procedures                                                                                    | 26     |
|                    |                                                                                                                      |   |
| PART                II  | OTHER                INFORMATION                                                                                          |   |
| Item                1.  | Legal                Proceedings                                                                                          | 26     |
| Item                1A. | Risk                Factors                                                                                               | 26     |
| Item                2.  | Unregistered                Sales of Equity Securities and Use of                Proceeds                                 | 26     |
| Item                3.  | Defaults                Upon Senior Securities                                                                            | 26     |
| Item                4.  | Submissions                of Matters to a Vote of Security                Holders                                        | 26     |
| Item                5.  | Other                Information                                                                                          | 27     |
| Item                6.  | Exhibits                                                                                                                  | 27     |
|                    |                                                                                                                      |   |
| SIGNATURES              | 28                                                                                                                        |

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*Table          of Contents*

| **PARTI.** | **FINANCIAL                INFORMATION** |
|------------|------------------------------------------|

| **Item                1.** | **Consolidated                Financial Statements** |
|----------------------------|------------------------------------------------------|

**PAB      BANKSHARES, INC. AND SUBSIDIARIES**

**CONSOLIDATED      STATEMENTS OF CONDITION**

**AS      OF SEPTEMBER 30, 2006 AND DECEMBER 31, 2005**

|                                                                                                                                                         |   |                             |          |                            |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------|---------------|---------------------------------|--------|
|                                                                                                                                                         |   | **September                30,** |          | **December                31,** |   |
|                                                                                                                                                         |   | **2006**                         |          | **2005**                        |   |
|                                                                                                                                                         |   | **(UNAUDITED)**                  |          |                            |   |
| **ASSETS**                                                                                                                                                   |   |                             |          |                            |   |
| Cash                and due from banks                                                                                                                       |   | $                                | 19,423,809    |                            | $      | 21,196,183 |   |
| Interest-bearing                deposits in other banks                                                                                                      |   |                             | 728,590       |                            |   | 3,077,900 |   |
| Federal                funds sold                                                                                                                            |   |                             | 36,766,259    |                            |   | 42,578,849 |   |
| Investment                securities                                                                                                                         |   |                             | 186,700,186   |                            |   | 157,454,725 |   |
|                                                                                                                                                         |   |                             |          |                            |   |   |   |
| Loans                                                                                                                                                        |   |                             | 806,636,326   |                            |   | 752,938,145 |   |
| Allowance                for loan losses                                                                                                                     |   |                             | (10,685,826   | )                               |   | (11,079,193 | ) |
| Net                loans                                                                                                                                     |   |                             | 795,950,500   |                            |   | 741,858,952 |   |
|                                                                                                                                                         |   |                             |          |                            |   |   |   |
| Premises                and equipment, net                                                                                                                   |   |                             | 20,455,916    |                            |   | 18,511,163 |   |
| Goodwill                                                                                                                                                     |   |                             | 5,984,604     |                            |   | 5,984,604 |   |
| Cash                value of bank-owned life insurance policies                                                                                              |   |                             | 11,375,675    |                            |   | 11,080,722 |   |
| Foreclosed                assets                                                                                                                             |   |                             | 813,274       |                            |   | 41,774 |   |
| Other                assets                                                                                                                                  |   |                             | 17,637,419    |                            |   | 15,541,495 |   |
|                                                                                                                                                         |   |                             |          |                            |   |   |   |
| Total                assets                                                                                                                                  |   | $                                | 1,095,836,232 |                            | $      | 1,017,326,367 |   |
|                                                                                                                                                         |   |                             |          |                            |   |   |   |
| **LIABILITIES                AND STOCKHOLDERS' EQUITY**                                                                                                      |   |                             |          |                            |   |   |   |
| Deposits:                                                                                                                                                    |   |                             |          |                            |   |   |   |
| Noninterest-bearing                demand                                                                                                                    |   | $                                | 100,702,609   |                            | $      | 107,917,453 |   |
| Interest-bearing                demand and savings                                                                                                           |   |                             | 316,385,399   |                            |   | 284,125,557 |   |
| Time                                                                                                                                                         |   |                             | 466,612,715   |                            |   | 423,637,732 |   |
| Total                deposits                                                                                                                                |   |                             | 883,700,723   |                            |   | 815,680,742 |   |
|                                                                                                                                                         |   |                             |          |                            |   |   |   |
| Federal                funds purchased and securities sold under agreements to                repurchase                                                     |   |                             | 6,030,832     |                            |   | 6,317,135 |   |
| Advances                from the Federal Home Loan Bank of Atlanta                                                                                           |   |                             | 90,338,880    |                            |   | 90,043,598 |   |
| Guaranteed                preferred beneficial interests in debentures (trust preferred                securities)                                           |   |                             | 10,310,000    |                            |   | 10,310,000 |   |
| Other                liabilities                                                                                                                             |   |                             | 12,015,842    |                            |   | 7,974,109 |   |
| Total                liabilities                                                                                                                             |   |                             | 1,002,396,277 |                            |   | 930,325,584 |   |
|                                                                                                                                                         |   |                             |          |                            |   |   |   |
| **Stockholders'                equity:**                                                                                                                     |   |                             |          |                            |   |   |   |
| Preferred                stock, no par value; 1,500,000 shares authorized; no shares                issued                                                   |   |                             | -             |                            |   | - |   |
| Common                stock, no par value; 98,500,000 shares authorized; 9,493,763 and                9,469,017                shares issued and outstanding |   |                             | 1,217,065     |                            |   | 1,217,065 |   |
| Additional                paid-in capital                                                                                                                    |   |                             | 27,404,791    |                            |   | 28,126,032 |   |
| Retained                earnings                                                                                                                             |   |                             | 65,508,615    |                            |   | 58,872,179 |   |
| Accumulated                other comprehensive loss                                                                                                          |   |                             | (690,516      | )                               |   | (1,214,493 | ) |
| Total                stockholders' equity                                                                                                                    |   |                             | 93,439,955    |                            |   | 87,000,783 |   |
|                                                                                                                                                         |   |                             |          |                            |   |   |   |
| Total                liabilities and stockholders' equity                                                                                                    |   | $                                | 1,095,836,232 |                            | $      | 1,017,326,367 |   |

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*Table          of Contents*

**PAB      BANKSHARES, INC. AND SUBSIDIARIES**

**CONSOLIDATED      STATEMENTS OF INCOME**

**THREE      MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005**

**(UNAUDITED)**

|                                                               |   |                                  |       |                                 |   |
|--------------------------------------------------------------------|--------|---------------------------------------|------------|--------------------------------------|--------|
|                                                               |   | **Three                Months Ended** |       | **Nine                Months Ended** |   |
|                                                               |   | **September                30,**      |       | **September                30,**     |   |
|                                                               |   | **2006**                              |       | **2005**                             |   | **2006** |   | **2005** |   |
|                                                               |   |                                  |       |                                 |   |   |   |   |   |
| **Interest                income**                                 |   |                                  |       |                                 |   |   |   |   |   |
| Interest                and fees on loans                          |   | $                                     | 17,716,438 |                                 | $      | 13,811,241 |   | $ | 49,940,744 |   | $ | 37,120,694 |   |
| Interest                and dividends on investment securities:    |   |                                  |       |                                 |   |   |   |   |   |   |   |   |   |
| Taxable                                                            |   |                                  | 1,948,777  |                                 |   | 1,375,150 |   |   | 5,620,769 |   |   | 4,001,454 |   |
| Nontaxable                                                         |   |                                  | 261,529    |                                 |   | 110,562 |   |   | 643,030 |   |   | 285,881 |   |
| Other                interest income                               |   |                                  | 246,363    |                                 |   | 486,525 |   |   | 1,122,259 |   |   | 1,022,712 |   |
| Total                interest income                               |   |                                  | 20,173,107 |                                 |   | 15,783,478 |   |   | 57,326,802 |   |   | 42,430,741 |   |
|                                                               |   |                                  |       |                                 |   |   |   |   |   |   |   |   |   |
| **Interest                expense**                                |   |                                  |       |                                 |   |   |   |   |   |   |   |   |   |
| Interest                on deposits                                |   |                                  | 7,548,569  |                                 |   | 4,510,934 |   |   | 20,294,681 |   |   | 11,129,205 |   |
| Interest                on Federal Home Loan Bank advances         |   |                                  | 1,073,909  |                                 |   | 817,497 |   |   | 2,766,446 |   |   | 2,269,721 |   |
| Interest                on other borrowings                        |   |                                  | 313,151    |                                 |   | 227,909 |   |   | 836,658 |   |   | 632,181 |   |
| Total                interest expense                              |   |                                  | 8,935,629  |                                 |   | 5,556,340 |   |   | 23,897,785 |   |   | 14,031,107 |   |
|                                                               |   |                                  |       |                                 |   |   |   |   |   |   |   |   |   |
| Net                interest income                                 |   |                                  | 11,237,478 |                                 |   | 10,227,138 |   |   | 33,429,017 |   |   | 28,399,634 |   |
|                                                               |   |                                  |       |                                 |   |   |   |   |   |   |   |   |   |
| **Provision                for loan losses**                       |   |                                  | -          |                                 |   | 275,000 |   |   | - |   |   | 888,600 |   |
| Net                interest income after provision for loan losses |   |                                  | 11,237,478 |                                 |   | 9,952,138 |   |   | 33,429,017 |   |   | 27,511,034 |   |
|                                                               |   |                                  |       |                                 |   |   |   |   |   |   |   |   |   |
| **Other                income**                                    |   |                                  |       |                                 |   |   |   |   |   |   |   |   |   |
| Service                charges on deposit accounts                 |   |                                  | 983,122    |                                 |   | 1,069,117 |   |   | 2,922,378 |   |   | 3,010,227 |   |
| Other                fee income                                    |   |                                  | 300,019    |                                 |   | 366,737 |   |   | 1,017,317 |   |   | 969,211 |   |
| Securities                transactions, net                        |   |                                  | (277,762   | )                                    |   | 38 |   |   | (708,105 | ) |   | (1,204 | ) |
| Other                noninterest income                            |   |                                  | 198,603    |                                 |   | 134,140 |   |   | 569,999 |   |   | 397,201 |   |
| Total                other income                                  |   |                                  | 1,203,982  |                                 |   | 1,570,032 |   |   | 3,801,589 |   |   | 4,375,435 |   |
|                                                               |   |                                  |       |                                 |   |   |   |   |   |   |   |   |   |
| **Other                expenses**                                  |   |                                  |       |                                 |   |   |   |   |   |   |   |   |   |
| Salaries                and employee benefits                      |   |                                  | 4,458,783  |                                 |   | 3,827,996 |   |   | 13,395,603 |   |   | 11,204,516 |   |
| Occupancy                expense of premises                       |   |                                  | 508,537    |                                 |   | 496,119 |   |   | 1,472,213 |   |   | 1,453,167 |   |
| Furniture                and equipment expense                     |   |                                  | 594,550    |                                 |   | 535,675 |   |   | 1,616,891 |   |   | 1,565,226 |   |
| Other                noninterest expense                           |   |                                  | 1,438,029  |                                 |   | 1,399,573 |   |   | 4,452,752 |   |   | 4,029,397 |   |
| Total                other expenses                                |   |                                  | 6,999,899  |                                 |   | 6,259,363 |   |   | 20,937,459 |   |   | 18,252,306 |   |
|                                                               |   |                                  |       |                                 |   |   |   |   |   |   |   |   |   |
| Income                before income tax expense                    |   |                                  | 5,441,561  |                                 |   | 5,262,807 |   |   | 16,293,147 |   |   | 13,634,163 |   |
| **Income                tax expense**                              |   |                                  | 1,908,063  |                                 |   | 1,744,407 |   |   | 5,856,188 |   |   | 4,510,057 |   |
|                                                               |   |                                  |       |                                 |   |   |   |   |   |   |   |   |   |
| Net                income                                          |   | $                                     | 3,533,498  |                                 | $      | 3,518,400 |   | $ | 10,436,959 |   | $ | 9,124,106 |   |
|                                                               |   |                                  |       |                                 |   |   |   |   |   |   |   |   |   |
| **Earnings                per common share**                       |   |                                  |       |                                 |   |   |   |   |   |   |   |   |   |
| Basic                                                              |   | $                                     | 0.37       |                                 | $      | 0.37 |   | $ | 1.10 |   | $ | 0.96 |   |
| Diluted                                                            |   | $                                     | 0.36       |                                 | $      | 0.36 |   | $ | 1.07 |   | $ | 0.94 |   |

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*Table          of Contents*

**PABBANKSHARES,      INC. AND SUBSIDIARIES**

**CONSOLIDATED      STATEMENTS OF COMPREHENSIVE INCOME**

**THREE      MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005**

**(UNAUDITED)**

|                                                                                                                                                                                                                                                                                |   |                                  |      |                                 |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------|-----------|--------------------------------------|--------|
|                                                                                                                                                                                                                                                                                |   | **Three                Months Ended** |      | **Nine                Months Ended** |   |
|                                                                                                                                                                                                                                                                                |   | **September                30,**      |      | **September                30,**     |   |
|                                                                                                                                                                                                                                                                                |   | **2006**                              |      | **2005**                             |   | **2006** |   | **2005** |   |
|                                                                                                                                                                                                                                                                                |   |                                  |      |                                 |   |   |   |   |   |
| Net                income                                                                                                                                                                                                                                                           |   | $                                     | 3,533,498 |                                 | $      | 3,518,400 |   | $ | 10,436,959 |   | $ | 9,124,106 |   |
|                                                                                                                                                                                                                                                                                |   |                                  |      |                                 |   |   |   |   |   |   |   |   |   |
| Other                comprehensive income (loss):                                                                                                                                                                                                                                   |   |                                  |      |                                 |   |   |   |   |   |   |   |   |   |
| Unrealized                gain on cash flow hedge during the period, net of tax of $127,492                and $0                for the quarter and $124,237 and $0 for the year to date                                                                                           |   |                                  | 244,677   |                                 |   | - |   |   | 238,631 |   |   | - |   |
| Unrealized                holding gains (losses) on investment securities arising during the                period,                net of tax (benefit) of $1,245,745 and $106,504 for the quarter and                ($94,190) and $131,026 for the year to date                   |   |                                  | 2,313,524 |                                 |   | 206,743 |   |   | (174,922 | ) |   | 254,344 |   |
| Reclassification                adjustment for (gains) losses on investment securities included in                net                income, net of tax (benefit) of ($97,217) and $13 for the quarter                and                ($247,837) and ($409) for the year to date |   |                                  | 180,545   |                                 |   | (25 | ) |   | 460,268 |   |   | 795 |   |
|                                                                                                                                                                                                                                                                                |   |                                  | 2,738,746 |                                 |   | 206,718 |   |   | 523,977 |   |   | 255,139 |   |
|                                                                                                                                                                                                                                                                                |   |                                  |      |                                 |   |   |   |   |   |   |   |   |   |
| Comprehensive                income                                                                                                                                                                                                                                                 |   | $                                     | 6,272,244 |                                 | $      | 3,725,118 |   | $ | 10,960,936 |   | $ | 9,379,245 |   |

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*Table          of Contents*

**PAB      BANKSHARES, INC. AND SUBSIDIARIES**

**CONSOLIDATED      STATEMENTS OF STOCKHOLDERS’ EQUITY**

**NINE      MONTHS ENDED SEPTEMBER 30, 2006 (UNAUDITED) AND YEAR ENDED DECEMBER 31,      2005**

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|                                                                    |   |                            |      |        |   |           |   |              |       | **Accumulated** |   |       |   |
|-------------------------------------------------------------------------|--------|---------------------------------|-----------|-------------|--------|----------------|--------|-------------------|------------|-----------------|--------|------------|--------|
|                                                                    |   |                            |      |        |   | **Additional** |   |              |       | **Other**       |   |       |   |
|                                                                    |   | **Common                Stock** |      | **Paid-in** |   | **Retained**   |   | **Comprehensive** |       |            |   |
|                                                                    |   | **Shares**                      |      | **Amount**  |   | **Capital**    |   | **Earnings**      |       | **Loss**        |   | **Total**  |   |
|                                                                    |   |                            |      |        |   |           |   |              |       |            |   |       |   |
| **Balance,                December 31, 2004**                           |   |                            | 9,495,320 |        | $      | 1,217,065      |   | $                 | 29,143,017 |            | $      | 50,938,254 |   | $ | (298,452 | ) | $ | 80,999,884 |   |
| Net                income                                               |   |                            | -         |        |   | -              |   |              | -          |            |   | 12,452,723 |   |   | - |   |   | 12,452,723 |   |
| Other                comprehensive loss                                 |   |                            | -         |        |   | -              |   |              | -          |            |   | -          |   |   | (916,041 | ) |   | (916,041 | ) |
| Cash                dividends declared, $.475 per share                 |   |                            | -         |        |   | -              |   |              | -          |            |   | (4,518,798 | )      |   | - |   |   | (4,518,798 | ) |
| Stock                acquired and cancelled under stock repurchase plan |   |                            | (87,483   | )           |   | -              |   |              | (1,468,714 | )               |   | -          |   |   | - |   |   | (1,468,714 | ) |
| Stock                options exercised                                  |   |                            | 61,180    |        |   | -              |   |              | 451,729    |            |   | -          |   |   | - |   |   | 451,729 |   |
| **Balance,                December 31, 2005**                           |   |                            | 9,469,017 |        |   | 1,217,065      |   |              | 28,126,032 |            |   | 58,872,179 |   |   | (1,214,493 | ) |   | 87,000,783 |   |
| Net                income                                               |   |                            | -         |        |   | -              |   |              | -          |            |   | 10,436,959 |   |   | - |   |   | 10,436,959 |   |
| Other                comprehensive income                               |   |                            | -         |        |   | -              |   |              | -          |            |   | -          |   |   | 523,977 |   |   | 523,977 |   |
| Cash                dividends declared, $.40 per share                  |   |                            | -         |        |   | -              |   |              | -          |            |   | (3,800,523 | )      |   | - |   |   | (3,800,523 | ) |
| Stock                acquired and cancelled under stock repurchase plan |   |                            | (124,046  | )           |   | -              |   |              | (2,493,171 | )               |   | -          |   |   | - |   |   | (2,493,171 | ) |
| Stock                options expensed                                   |   |                            | -         |        |   | -              |   |              | 225,126    |            |   | -          |   |   | - |   |   | 225,126 |   |
| Stock                options exercised                                  |   |                            | 148,792   |        |   | -              |   |              | 1,546,804  |            |   | -          |   |   | - |   |   | 1,546,804 |   |
| **Balance,                September 30, 2006**                          |   |                            | 9,493,763 |        | $      | 1,217,065      |   | $                 | 27,404,791 |            | $      | 65,508,615 |   | $ | (690,516 | ) | $ | 93,439,955 |   |

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*Table          of Contents*

**PAB      BANKSHARES, INC. AND SUBSIDIARIES**

**CONSOLIDATED      STATEMENTS OF CASH FLOWS**

**NINE      MONTHS ENDED SEPTEMBER 30, 2006 AND 2005**

**(UNAUDITED)**

----

|                                                                                                                  |   | **Nine                Months Ended September 30,** |        |
|-----------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------|-------------|
|                                                                                                                  |   | **2006**                                           |        | **2005** |   |
|                                                                                                                  |   |                                               |        |   |   |
| **CASH                FLOWS FROM OPERATING ACTIVITIES**                                                               |   |                                               |        |   |   |
| Net                income                                                                                             |   | $                                                  | 10,436,959  |   | $ | 9,124,106 |   |
| Adjustments                to reconcile net income to net cash provided by operating                activities:       |   |                                               |        |   |   |   |   |
| Depreciation,                amortization and accretion, net                                                          |   |                                               | 1,330,214   |   |   | 1,670,545 |   |
| Provision                for loan losses                                                                              |   |                                               | -           |   |   | 888,600 |   |
| Net                realized loss on securities transactions                                                           |   |                                               | 708,105     |   |   | 1,204 |   |
| (Gain)                loss on disposal of assets                                                                      |   |                                               | (29,991     | ) |   | 22,599 |   |
| Compensation                expense related to stock options                                                          |   |                                               | 225,126     |   |   | - |   |
| Increase                in cash value of bank-owned life insurance                                                    |   |                                               | (294,953    | ) |   | (246,016 | ) |
| Increase                (decrease) in deferred compensation accrual                                                   |   |                                               | 116,615     |   |   | (11,045 | ) |
| Decrease                in retirement accruals                                                                        |   |                                               | (172,876    | ) |   | (257,401 | ) |
| Net                change in taxes receivable and taxes payable                                                       |   |                                               | (125,517    | ) |   | (1,051,083 | ) |
| Increase                in interest receivable                                                                        |   |                                               | (932,456    | ) |   | (1,023,420 | ) |
| Increase                in interest payable                                                                           |   |                                               | 526,936     |   |   | 670,303 |   |
| Net                increase in prepaid expenses and other assets                                                      |   |                                               | (609,897    | ) |   | (373,851 | ) |
| Net                increase in accrued expenses and other liabilities                                                 |   |                                               | 43,870      |   |   | 634,516 |   |
| Net                cash provided by operating activities                                                              |   |                                               | 11,222,135  |   |   | 10,049,057 |   |
|                                                                                                                  |   |                                               |        |   |   |   |   |
| **CASH                FLOWS FROM INVESTING ACTIVITIES**                                                               |   |                                               |        |   |   |   |   |
| (Increase)                decrease in interest-bearing deposits in other banks                                        |   |                                               | 2,349,310   |   |   | (2,177,742 | ) |
| (Increase)                decrease in federal funds sold                                                              |   |                                               | 5,812,590   |   |   | (16,875,846 | ) |
| Purchase                of debt securities                                                                            |   |                                               | (52,053,443 | ) |   | (41,525,494 | ) |
| Proceeds                from sales and calls of debt securities                                                       |   |                                               | 18,142,477  |   |   | 9,092,792 |   |
| Proceeds                from maturities and paydowns of debt securities                                               |   |                                               | 8,047,330   |   |   | 12,840,922 |   |
| Purchase                of equity investments                                                                         |   |                                               | (670,630    | ) |   | (302,300 | ) |
| Redemption                of equity investments                                                                       |   |                                               | 338,600     |   |   | 418,800 |   |
| Net                increase in loans                                                                                  |   |                                               | (61,214,405 | ) |   | (84,745,254 | ) |
| Purchase                of premises and equipment                                                                     |   |                                               | (3,105,429  | ) |   | (912,575 | ) |
| Proceeds                from disposal of assets                                                                       |   |                                               | 6,382,771   |   |   | 160,295 |   |
| Net                cash used in investing activities                                                                  |   |                                               | (75,970,829 | ) |   | (124,026,402 | ) |
|                                                                                                                  |   |                                               |        |   |   |   |   |
| **CASH                FLOWS FROM FINANCING ACTIVITIES**                                                               |   |                                               |        |   |   |   |   |
| Net                increase in deposits                                                                               |   |                                               | 68,019,981  |   |   | 130,113,186 |   |
| Net                decrease in federal funds purchased and securities sold under repurchase                agreements |   |                                               | (286,303    | ) |   | (6,650,844 | ) |
| Advances                from the Federal Home Loan Bank                                                               |   |                                               | 45,000,000  |   |   | 38,318,600 |   |
| Payments                on Federal Home Loan Bank advances                                                            |   |                                               | (44,704,718 | ) |   | (47,076,575 | ) |
| Dividends                paid                                                                                         |   |                                               | (3,655,023  | ) |   | (3,140,574 | ) |
| Proceeds                from the exercise of stock options                                                            |   |                                               | 1,546,804   |   |   | 414,163 |   |
| Acquisition                of stock under stock repurchase plans                                                      |   |                                               | (2,493,171  | ) |   | (249,988 | ) |
| Purchase                of cash flow hedge derivative instrument                                                      |   |                                               | (451,250    | ) |   | - |   |
| Repurchase                of preferred stock in REIT subsidiaries                                                     |   |                                               | -           |   |   | (8,000 | ) |
| Net                cash provided by financing activities                                                              |   |                                               | 62,976,320  |   |   | 111,719,968 |   |

----

*Table          of Contents*

**PAB      BANKSHARES, INC. AND SUBSIDIARIES**

**CONSOLIDATED      STATEMENTS OF CASH FLOWS (CONTINUED)**

**NINE      MONTHS ENDED SEPTEMBER 30, 2006 AND 2005**

**(UNAUDITED)**

----

|                                                                         |   | **Nine                Months Ended September 30,** |       |
|------------------------------------------------------------------------------|--------|----------------------------------------------------|------------|
|                                                                         |   | **2006**                                           |       | **2005** |   |
|                                                                         |   |                                               |       |   |   |
| Net                decrease in cash and due from banks                       |   | $                                                  | (1,772,374 | ) | $ | (2,257,377 | ) |
|                                                                         |   |                                               |       |   |   |   |   |
| Cash                and due from banks at beginning of period                |   |                                               | 21,196,183 |   |   | 22,976,924 |   |
|                                                                         |   |                                               |       |   |   |   |   |
| Cash                and due from banks at end of period                      |   | $                                                  | 19,423,809 |   | $ | 20,719,547 |   |
|                                                                         |   |                                               |       |   |   |   |   |
| **SUPPLEMENTAL                DISCLOSURES OF CASH FLOW INFORMATION**         |   |                                               |       |   |   |   |   |
| Cash                paid during the period for:                              |   |                                               |       |   |   |   |   |
| Interest                                                                     |   | $                                                  | 23,370,849 |   | $ | 13,360,804 |   |
| Taxes                                                                        |   | $                                                  | 5,981,705  |   | $ | 5,561,140 |   |
|                                                                         |   |                                               |       |   |   |   |   |
| **NONCASH                INVESTING AND FINANCING TRANSACTIONS**              |   |                                               |       |   |   |   |   |
| Increase                in unrealized gains on securities available for sale |   | $                                                  | 438,993    |   | $ | 386,575 |   |

----

*Table          of Contents*

**PAB      BANKSHARES, INC. AND SUBSIDIARIES**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**(UNAUDITED)**

----

| **NOTE                1.** | **NATURE                OF BUSINESS** |
|----------------------------|---------------------------------------|

| **Banking                Locations**                    |   | **Number                of Banking Offices** |
|---------------------------------------------------------|--------|----------------------------------------------|
| **South                Georgia Market:**                |   |                                         |
| Valdosta,                Lowndes County, Georgia        |   | 3                (including the main office) |
| Lake                Park, Lowndes County, Georgia       |   | 1                                            |
| Adel,                Cook County, Georgia               |   | 1                                            |
| Bainbridge,                Decatur County, Georgia      |   | 3                                            |
| Cairo,                Grady County, Georgia             |   | 1                                            |
| Statesboro,                Bulloch County, Georgia      |   | 2                                            |
| Baxley,                Appling County, Georgia          |   | 1                                            |
| Hazlehurst,                Jeff Davis County, Georgia   |   | 1                                            |
| **North                Georgia Market:**                |   |                                         |
| McDonough,                Henry County, Georgia         |   | 1                                            |
| Stockbridge,                Henry County, Georgia       |   | 1                                            |
| Oakwood,                Hall County, Georgia            |   | 1                                            |
| Athens,                Clarke County, Georgia           |   | 1                (loan production office)    |
| Atlanta,                Cobb County, Georgia            |   | 1                (loan production office)    |
| Snellville,                Gwinnett County, Georgia     |   | 1                (loan production office)    |
| **Florida                Market:**                      |   |                                         |
| Ocala,                Marion County, Florida            |   | 1                                            |
| St.                Augustine, St. Johns County, Florida |   | 1                (loan production office)    |
| Jacksonville,                Duval County, Florida      |   | 1                (loan production office)    |

*Consolidation      of Variable Interest Entities*

----

*Table          of Contents*

**PAB      BANKSHARES, INC. AND SUBSIDIARIES**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**(UNAUDITED)**

----

| **NOTE                2.** | **BASIS                OF PRESENTATION** |
|----------------------------|------------------------------------------|

| **NOTE                3.** | **EARNINGS                PER COMMON SHARE** |
|----------------------------|----------------------------------------------|

|                                                              |   | **Three                Months Ended September 30,** |      | **Nine                Months Ended September 30,** |   |
|-------------------------------------------------------------------|--------|-----------------------------------------------------|-----------|----------------------------------------------------|--------|
|                                                              |   | **2006**                                            |      | **2005**                                           |   | **2006** |   | **2005** |   |
| Basic                earnings per share:                          |   |                                                |      |                                               |   |   |   |   |   |
| Net                income                                         |   | $                                                   | 3,533,498 |                                               | $      | 3,518,400 |   | $ | 10,436,959 |   | $ | 9,124,106 |   |
|                                                              |   |                                                |      |                                               |   |   |   |   |   |   |   |   |   |
| Weighted                average common shares outstanding         |   |                                                | 9,500,742 |                                               |   | 9,530,712 |   |   | 9,498,962 |   |   | 9,518,797 |   |
|                                                              |   |                                                |      |                                               |   |   |   |   |   |   |   |   |   |
| Earnings                per common share                          |   | $                                                   | 0.37      |                                               | $      | 0.37 |   | $ | 1.10 |   | $ | 0.96 |   |
|                                                              |   |                                                |      |                                               |   |   |   |   |   |   |   |   |   |
| Diluted                earnings per share:                        |   |                                                |      |                                               |   |   |   |   |   |   |   |   |   |
| Net                income                                         |   | $                                                   | 3,533,498 |                                               | $      | 3,518,400 |   | $ | 10,436,959 |   | $ | 9,124,106 |   |
|                                                              |   |                                                |      |                                               |   |   |   |   |   |   |   |   |   |
| Weighted                average common shares outstanding         |   |                                                | 9,500,742 |                                               |   | 9,530,712 |   |   | 9,498,962 |   |   | 9,518,797 |   |
| Effect                of dilutive stock options                   |   |                                                | 183,709   |                                               |   | 179,107 |   |   | 208,824 |   |   | 161,177 |   |
| Weighted                average diluted common shares outstanding |   |                                                | 9,684,451 |                                               |   | 9,709,819 |   |   | 9,707,786 |   |   | 9,679,974 |   |
|                                                              |   |                                                |      |                                               |   |   |   |   |   |   |   |   |   |
| Earnings                per common share                          |   | $                                                   | 0.36      |                                               | $      | 0.36 |   | $ | 1.07 |   | $ | 0.94 |   |

----

*Table          of Contents*

**PAB      BANKSHARES, INC. AND SUBSIDIARIES**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**(UNAUDITED)**

----

| **NOTE                4.** | **DERIVATIVE                FINANCIAL INSTRUMENTS** |
|----------------------------|-----------------------------------------------------|

|                                                                 |   | **Notional                amount** |       | **Floor                rate** |   | **Maturity                in months** |   | **Estimated                fair value at September 30, 2006** |   | **Net                unrealized gains (losses)** |   |
|----------------------------------------------------------------------|--------|------------------------------------|------------|-------------------------------|--------|---------------------------------------|--------|---------------------------------------------------------------|--------|--------------------------------------------------|--------|
| **Derivatives                Designated as Cash Flow Hedges:**       |   |                               |       |                          |   |                                  |   |                                                          |   |                                             |   |
|                                                                 |   |                               |       |                          |   |                                  |   |                                                          |   |                                             |   |   |   |   |   |   |
| Hedging                cash flows on prime-based floating rate loans |   | $                                  | 50,000,000 |                          |   | 8.25                                  | %      |                                                          | 33     |                                             | $      | 806,000 |   |   | 363,000 |   |
|                                                                 |   |                               |       |                          |   |                                  |   |                                                          |   |                                             |   |   |   |   |   |   |
| **Total                Derivative Instruments**                      |   | $                                  | 50,000,000 |                          |   | 8.25                                  | %      |                                                          | 33     |                                             | $      | 806,000 |   | $ | 363,000 |   |

| **NOTE                5.** | **STOCK                PLANS AND STOCK-BASED EMPLOYEE                COMPENSATION** |
|----------------------------|-------------------------------------------------------------------------------------|

----

*Table          of Contents*

**PAB      BANKSHARES, INC. AND SUBSIDIARIES**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**(UNAUDITED)**

----

| **NOTE                5.** | **STOCK                PLANS AND STOCK-BASED EMPLOYEE COMPENSATION                (continued)** |
|----------------------------|-------------------------------------------------------------------------------------------------|

----

*Table          of Contents*

**PAB      BANKSHARES, INC. AND SUBSIDIARIES**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**(UNAUDITED)**

----

| **NOTE                5.** | **STOCK                PLANS AND STOCK-BASED EMPLOYEE COMPENSATION                (continued)** |
|----------------------------|-------------------------------------------------------------------------------------------------|

|                                                                                                                                                              |   | **Three                Months****Ended****September                30, 2005** |      | **Nine                Months****Ended****September                30, 2005** |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------|-----------|------------------------------------------------------------------------------|--------|
|                                                                                                                                                              |   |                                                                          |      |                                                                         |   |
| Net                income, as reported                                                                                                                            |   | $                                                                             | 3,518,400 |                                                                         | $      | 9,124,106 |   |
| Deduct:                                                                                                                                                           |   |                                                                          |      |                                                                         |   |   |   |
| Total                stock-based employee compensation expense determined under fair value                based method for all awards, net of related tax effects |   |                                                                          | (65,740   | )                                                                            |   | (188,853 | ) |
| Pro                forma net income                                                                                                                               |   | $                                                                             | 3,452,660 |                                                                         | $      | 8,935,253 |   |
|                                                                                                                                                              |   |                                                                          |      |                                                                         |   |   |   |
| Earnings                per share:                                                                                                                                |   |                                                                          |      |                                                                         |   |   |   |
| Basic                - as reported                                                                                                                                |   | $                                                                             | 0.37      |                                                                         | $      | 0.96 |   |
| Basic                - pro forma                                                                                                                                  |   | $                                                                             | 0.36      |                                                                         | $      | 0.94 |   |
| Diluted                - as reported                                                                                                                              |   | $                                                                             | 0.36      |                                                                         | $      | 0.94 |   |
| Diluted                - pro forma                                                                                                                                |   | $                                                                             | 0.36      |                                                                         | $      | 0.93 |   |

|                                                                                                                                 |   | **Quarter                ended****September                30, 2006** |    | **Nine                Months ended****September                30, 2006** |   | **Year                ended****December                31, 2005** |   |
|--------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------|---------|---------------------------------------------------------------------------|--------|-------------------------------------------------------------------|--------|
|                                                                                                                                 |   | **Number**                                                            |    | **Weighted-Average                Exercise Price**                        |   | **Number**                                                        |   | **Weighted-                Average Exercise Price** |   | **Number** |   | **Weighted-                Average Exercise****Price** |   |
| Under                option, beginning of period                                                                                     |   |                                                                  | 632,804 |                                                                      | $      | 12.55                                                             |   |   | 703,597 |   | $ | 11.91 |   |   | 651,777 |   | $ | 11.03 |   |
| Granted                                                                                                                              |   |                                                                  | -       |                                                                      |   | -                                                                 |   |   | 36,000 |   |   | 18.64 |   |   | 122,500 |   |   | 14.57 |   |
| Exercised                                                                                                                            |   |                                                                  | (42,799 | )                                                                         |   | 10.52                                                             |   |   | (148,792 | ) |   | 10.40 |   |   | (61,180 | ) |   | 7.38 |   |
| Forfeited                                                                                                                            |   |                                                                  | (3,000  | )                                                                         |   | 12.75                                                             |   |   | (3,800 | ) |   | 13.00 |   |   | (9,500 | ) |   | 13.16 |   |
| Under                option, end of period                                                                                           |   |                                                                  | 587,005 |                                                                      | $      | 12.70                                                             |   |   | 587,005 |   | $ | 12.70 |   |   | 703,597 |   | $ | 11.91 |   |
|                                                                                                                                 |   |                                                                  |    |                                                                      |   |                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Exercisable                at end of period                                                                                          |   |                                                                  | 409,805 |                                                                      | $      | 12.00                                                             |   |   | 409,805 |   | $ | 12.00 |   |   | 477,295 |   | $ | 11.73 |   |
|                                                                                                                                 |   |                                                                  |    |                                                                      |   |                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted-average                fair value per option of options granted during period                                               |   |                                                                  |    |                                                                      | $      | -                                                                 |   |   |   |   | $ | 6.02 |   |   |   |   | $ | 4.41 |   |
| Total                intrinsic value of options exercised during the period                                                          |   |                                                                  |    |                                                                      | $      | 382,000                                                           |   |   |   |   | $ | 1,394,000 |   |   |   |   | $ | 439,000 |   |
| Weighted                average remaining contractual term of exercisable options at end                of the                period |   |                                                                  |    |                                                                      |   | 4.33                years                                         |   |   |   |   |   | 4.33                years |   |   |   |   |   | 4.16                years |   |
| Aggregate                intrinsic value of exercisable options at end of period                                                     |   |                                                                  |    |                                                                      | $      | 3,223,000                                                         |   |   |   |   | $ | 3,223,000 |   |   |   |   | $ | 3,113,000 |   |

----

*Table          of Contents*

**PAB      BANKSHARES, INC. AND SUBSIDIARIES**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**(UNAUDITED)**

----

| **NOTE                5.** | **STOCK                PLANS AND STOCK-BASED EMPLOYEE COMPENSATION                (continued)** |
|----------------------------|-------------------------------------------------------------------------------------------------|

|                                                            |   | **Three                Months ended****September                30, 2006** |    | **Nine                Months ended****September                30, 2006** |   |
|-----------------------------------------------------------------|--------|----------------------------------------------------------------------------|---------|---------------------------------------------------------------------------|--------|
|                                                            |   | **Number**                                                                 |    | **Weighted-Average                Grant-Date Fair Value**                 |   | **Number** |   | **Weighted-Average                Grant-Date Fair Value** |   |
| Nonvested,                beginning of period                   |   |                                                                       | 219,772 |                                                                      | $      | 4.44 |   |   | 226,302 |   | $ | 4.07 |   |
| Granted                                                         |   |                                                                       | -       |                                                                      |   | - |   |   | 36,000 |   |   | 6.02 |   |
| Vested                                                          |   |                                                                       | (39,572 | )                                                                         |   | 3.21 |   |   | (81,302 | ) |   | 3.55 |   |
| Forfeited                                                       |   |                                                                       | (3,000  | )                                                                         |   | 4.17 |   |   | (3,800 | ) |   | 4.19 |   |
| Nonvested,                end of period                         |   |                                                                       | 177,200 |                                                                      | $      | 4.71 |   |   | 177,200 |   | $ | 4.71 |   |
|                                                            |   |                                                                       |    |                                                                      |   |   |   |   |   |   |   |   |   |
| Total                fair value of options vested during period |   |                                                                       |    |                                                                      | $      | 127,000 |   |   |   |   | $ | 289,000 |   |

|                                        |   | **Options                Outstanding** |    | **Options                Exercisable**                         |   |
|---------------------------------------------|--------|----------------------------------------|---------|----------------------------------------------------------------|--------|
| **Range                of Exercise Prices** |   | **Number**                             |    | **Weighted-                Average Contractual Life in Years** |   | **Weighted-Average                Exercise Price** |   | **Number** |   | **Weighted-Average                Exercise Price** |   |
| $                7.70 - 9.38                |   |                                   | 133,050 |                                                           |   | 5.40 |   | $ | 8.32 |   |   | 104,850 |   | $ | 8.45 |   |
| 10.01                - 10.71                |   |                                   | 119,155 |                                                           |   | 4.68 |   |   | 10.44 |   |   | 114,155 |   |   | 10.46 |   |
| 10.80                - 13.94                |   |                                   | 121,700 |                                                           |   | 5.29 |   |   | 13.04 |   |   | 81,000 |   |   | 12.80 |   |
| 14.00                - 16.25                |   |                                   | 130,000 |                                                           |   | 5.29 |   |   | 15.49 |   |   | 87,200 |   |   | 15.99 |   |
| 16.99                - 21.63                |   |                                   | 83,100  |                                                           |   | 7.31 |   |   | 18.10 |   |   | 22,600 |   |   | 17.98 |   |
|                                        |   |                                   | 587,005 |                                                           |   | 5.48 |   |   | 12.70 |   |   | 409,805 |   |   | 12.00 |   |

|                                                                               | **Quarter                ended****September                30, 2006** |   | **Nine                months ended****September                30, 2006** |   | **Year                ended****December                31, 2005** |
|------------------------------------------------------------------------------------|-----------------------------------------------------------------------|--------|---------------------------------------------------------------------------|--------|-------------------------------------------------------------------|
|                                                                               |                                                                  |   |                                                                      |   |                                                              |
| Risk-free                interest rate                                             | 5.12%                - 5.14%                                          |   | 4.39%                - 5.14%                                              |   | 3.95%                - 4.27%                                      |
| Expected                life of the options                                        | 7                -                10 years                            |   | 7                -                10 years                                |   | 7                -                10 years                        |
| Expected                dividends (as a percentage of the fair value of the stock) | 2.72%                                                                 |   | 2.72%                - 2.74%                                              |   | 3.05%                - 3.08%                                      |
| Expected                volatility                                                 | 32.08%                                                                |   | 31.44%                - 32.19%                                            |   | 32.68%                - 35.29%                                    |

----

*Table          of Contents*

**PAB      BANKSHARES, INC. AND SUBSIDIARIES**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**(UNAUDITED)**

----

| **NOTE                6.** | **SUBSEQUENT                EVENT** |
|----------------------------|-------------------------------------|

----

*Table          of Contents*

**CAUTIONARY      NOTICE REGARDING FORWARD-LOOKING STATEMENTS**

*Management's      Discussion and Analysis of Financial Condition and Results of      Operation*

| **ITEM                2.** | **MANAGEMENT’S                DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF                OPERATION** |
|----------------------------|------------------------------------------------------------------------------------------------------------------------------|

----

*Table          of Contents*

**FINANCIAL      CONDITION**

| As                of Quarter End                                  |   | Sep-06                                |    | Jun-06 |   | Mar-06  |   | Dec-05 |    | Sep-05 |   |
|-------------------------------------------------------------------|--------|---------------------------------------|---------|--------|--------|---------|--------|--------|---------|--------|--------|
|                                                              |   | (Dollars                In Thousands) |    |
| Commercial                and financial                           |   | $                                     | 60,413  |   | $      | 53,185  |   | $      | 47,164  |   | $      | 50,860 |   | $ | 55,536 |   |
| Agricultural                (including loans secured by farmland) |   |                                  | 44,716  |   |   | 47,754  |   |   | 53,368  |   |   | 55,830 |   |   | 45,759 |   |
| Real                estate - construction                         |   |                                  | 297,026 |   |   | 304,387 |   |   | 290,863 |   |   | 268,629 |   |   | 257,522 |   |
| Real                estate - commercial                           |   |                                  | 253,586 |   |   | 251,966 |   |   | 229,236 |   |   | 231,601 |   |   | 206,910 |   |
| Real                estate - residential                          |   |                                  | 133,983 |   |   | 127,020 |   |   | 123,902 |   |   | 127,326 |   |   | 145,395 |   |
| Installment                loans to individuals and other loans   |   |                                  | 18,211  |   |   | 19,966  |   |   | 20,836  |   |   | 20,380 |   |   | 22,239 |   |
|                                                              |   |                                  | 807,935 |   |   | 804,278 |   |   | 765,369 |   |   | 754,626 |   |   | 733,361 |   |
|                                                              |   |                                  |    |   |   |    |   |   |    |   |   |   |   |   |   |   |
| Deferred                loan fees and unearned interest, net      |   |                                  | (1,299  | )      |   | (1,243  | )      |   | (1,279  | )      |   | (1,688 | ) |   | (1,816 | ) |
|                                                              |   |                                  | 806,636 |   |   | 803,035 |   |   | 764,090 |   |   | 752,938 |   |   | 731,545 |   |
| Allowance                for loan losses                          |   |                                  | (10,686 | )      |   | (10,903 | )      |   | (11,186 | )      |   | (11,079 | ) |   | (10,768 | ) |
|                                                              |   | $                                     | 795,950 |   | $      | 792,132 |   | $      | 752,904 |   | $      | 741,859 |   | $ | 720,777 |   |

| As                of Quarter End                                  |   | Sep-06 |   | Jun-06 |   | Mar-06 |   | Dec-05 |   | Sep-05 |   |
|-------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Commercial                and financial                           |   |   | 7.49   | %      |   | 6.62   | %      |   | 6.17   | %      |   | 6.75 | % |   | 7.59 | % |
| Agricultural                (including loans secured by farmland) |   |   | 5.54   | %      |   | 5.95   | %      |   | 6.98   | %      |   | 7.41 | % |   | 6.26 | % |
| Real                estate - construction                         |   |   | 36.82  | %      |   | 37.89  | %      |   | 38.07  | %      |   | 35.68 | % |   | 35.20 | % |
| Real                estate - commercial                           |   |   | 31.44  | %      |   | 31.38  | %      |   | 30.00  | %      |   | 30.76 | % |   | 28.28 | % |
| Real                estate - residential                          |   |   | 16.61  | %      |   | 15.82  | %      |   | 16.22  | %      |   | 16.91 | % |   | 19.88 | % |
| Installment                loans to individuals and other loans   |   |   | 2.26   | %      |   | 2.49   | %      |   | 2.73   | %      |   | 2.71 | % |   | 3.04 | % |
|                                                              |   |   | 100.16 | %      |   | 100.15 | %      |   | 100.17 | %      |   | 100.22 | % |   | 100.25 | % |
| Deferred                loan fees and unearned interest, net      |   |   | -0.16  | %      |   | -0.15  | %      |   | -0.17  | %      |   | -0.22 | % |   | -0.25 | % |
| Total                loans                                        |   |   | 100.00 | %      |   | 100.00 | %      |   | 100.00 | %      |   | 100.00 | % |   | 100.00 | % |
| Allowance                for loan losses                          |   |   | -1.32  | %      |   | -1.36  | %      |   | -1.46  | %      |   | -1.47 | % |   | -1.47 | % |
| Net                loans                                          |   |   | 98.68  | %      |   | 98.64  | %      |   | 98.54  | %      |   | 98.53 | % |   | 98.53 | % |

----

*Table          of Contents*

| As                  of September 30, 2006           |   | Construction                  and Development |    | %                  of Total |   |   |   | Commercial                  Real Estate |                                          | %                  of Total |   |
|-----------------------------------------------------|--------|-----------------------------------------------|---------|-----------------------------|--------|--------|--------|-----------------------------------------|-----------------------------------------------|-----------------------------|--------|
|                                                |   | (Dollars                  in Thousands)       |    |                        |   |
| Acquisition                  and Development:       |   |                                          |    |                        |   |   |   |                                    | Owner-occupied:                               |                        |   |   |   |   |   |   |
| 1-4                  family residential             |   | $                                             | 127,028 |                        |   | 42.77  | %      |                                    | Office                                        |                        | $      | 32,414 |   |   | 12.78 | % |
| Commercial                  and multi-family        |   |                                          | 74,593  |                        |   | 25.11  | %      |                                    | Retail                                        |                        |   | 26,240 |   |   | 10.35 | % |
| Construction:                                       |   |                                          |         |                        |   |   |   |                                    | Other                                         |                        |   | 36,472 |   |   | 14.38 | % |
| 1-4                  family residential spec        |   |                                          | 34,192  |                        |   | 11.51  | %      |                                    | Not                  owner-occupied:          |                        |   |  |   |   |  |   |
| 1-4                  family residential pre-sold    |   |                                          | 3,412   |                        |   | 1.15   | %      |                                    | Office                                        |                        |   | 27,241 |   |   | 10.74 | % |
| 1-4                  family residential other       |   |                                          | 8,067   |                        |   | 2.72   | %      |                                    | Retail                                        |                        |   | 30,185 |   |   | 11.90 | % |
| Commercial                  owner-occupied          |   |                                          | 14,941  |                        |   | 5.03   | %      |                                    | Other                                         |                        |   | 23,862 |   |   | 9.41 | % |
| Commercial                  not owner-occupied      |   |                                          | 9,843   |                        |   | 3.31   | %      |                                    | Other:                                        |                        |   |  |   |   |  |   |
| Hotel/motel                                         |   |                                          | 5,774   |                        |   | 1.94   | %      |                                    | Hotel/motel                                   |                        |   | 17,482 |   |   | 6.90 | % |
| Multi-family                  properties            |   |                                          | 17,718  |                        |   | 5.97   | %      |                                    | Industrial                                    |                        |   | 3,072 |   |   | 1.21 | % |
| Special                  purpose property           |   |                                          | 1,315   |                        |   | 0.44   | %      |                                    | Multi-family                  properties      |                        |   | 19,103 |   |   | 7.53 | % |
| Other                                               |   |                                          | 143     |                        |   | 0.05   | %      |                                    | Special                  purpose property     |                        |   | 37,515 |   |   | 14.80 | % |
| Total                  Construction and Development |   | $                                             | 297,026 |                        |   | 100.00 | %      |                                    | Total                  Commercial Real Estate |                        | $      | 253,586 |   |   | 100.00 | % |

|                                                              |   | **South**                             |    | **North**   |   |        |   |         |    |      |   |
|-------------------------------------------------------------------|--------|---------------------------------------|---------|-------------|--------|-------------|--------|--------------|---------|-----------|--------|
| **As                of September 30, 2006**                       |   | **Georgia**                           |    | **Georgia** |   | **Florida** |   | **Treasury** |    | **Total** |   |
|                                                              |   | (Dollars                in Thousands) |    |
| **Loans**                                                         |   |                                  |    |        |   |        |   |         |    |      |   |
| Commercial                and financial                           |   | $                                     | 35,375  |        | $      | 24,735      |   | $            | 245     |      | $      | 58 |   | $ | 60,413 |   |
| Agricultural                (including loans secured by farmland) |   |                                  | 39,475  |        |   | 4,247       |   |         | 994     |      |   | - |   |   | 44,716 |   |
| Real                estate - construction                         |   |                                  | 80,561  |        |   | 180,667     |   |         | 35,765  |      |   | 33 |   |   | 297,026 |   |
| Real                estate - commercial                           |   |                                  | 79,586  |        |   | 145,419     |   |         | 23,027  |      |   | 5,554 |   |   | 253,586 |   |
| Real                estate - residential                          |   |                                  | 100,759 |        |   | 25,324      |   |         | 5,442   |      |   | 2,458 |   |   | 133,983 |   |
| Installment                loans to individuals and other loans   |   |                                  | 15,819  |        |   | 928         |   |         | 101     |      |   | 1,363 |   |   | 18,211 |   |
|                                                              |   |                                  | 351,575 |        |   | 381,320     |   |         | 65,574  |      |   | 9,466 |   |   | 807,935 |   |
| Deferred                loan fees and unearned interest, net      |   |                                  | (60     | )           |   | (729        | )      |         | (523    | )         |   | 13 |   |   | (1,299 | ) |
| Total                loans                                        |   | $                                     | 351,515 |        | $      | 380,591     |   | $            | 65,051  |      | $      | 9,479 |   | $ | 806,636 |   |
| Percentage                of total                                |   |                                  | 43.6    | %           |   | 47.2        | %      |         | 8.1     | %         |   | 1.1 | % |   | 100.0 | % |
|                                                              |   |                                  |    |        |   |        |   |         |    |      |   |   |   |   |   |   |
| **Deposits**                                                      |   |                                  |    |        |   |        |   |         |    |      |   |   |   |   |   |   |
| Noninterest-bearing                demand                         |   | $                                     | 74,737  |        | $      | 13,131      |   | $            | 6,405   |      | $      | 6,430 |   | $ | 100,703 |   |
| Interest-bearing                demand and savings                |   |                                  | 235,633 |        |   | 49,775      |   |         | 30,248  |      |   | 729 |   |   | 316,385 |   |
| Time                                                              |   |                                  | 252,571 |        |   | 65,852      |   |         | 105,687 |      |   | 42,503 |   |   | 466,613 |   |
| Total                deposits                                     |   | $                                     | 562,941 |        | $      | 128,758     |   | $            | 142,340 |      | $      | 49,662 |   | $ | 883,701 |   |
| Percentage                of total                                |   |                                  | 63.7    | %           |   | 14.6        | %      |         | 16.1    | %         |   | 5.6 | % |   | 100.0 | % |

----

*Table          of Contents*

**RESULTS      OF OPERATIONS**

*Net      Interest Income*

----

*Table          of Contents*

| For                the Three Months Ended September 30, |   |                                  |      | 2006     |   |    |   |    |   | 2005     |   |    |   |
|---------------------------------------------------------|--------|---------------------------------------|-----------|----------|--------|---------|--------|---------|--------|----------|--------|---------|--------|
|                                                    |   |                                  |      | Interest |   | Average |   |    |   | Interest |   | Average |   |
|                                                    |   | Average                               |      | Income/  |   | Yield/  |   | Average |   | Income/  |   | Yield/  |   |
|                                                    |   | Balance                               |      | Expense  |   | Rate    |   | Balance |   | Expense  |   | Rate    |   |
|                                                    |   | (Dollars                In Thousands) |      |
| Interest-earning                assets:                 |   |                                  |      |     |   |    |   |    |   |     |   |    |   |
| Loans                                                   |   | $                                     | 805,732   |     | $      | 17,717  |   |    | 8.72   | %        | $      | 722,410 |   | $ | 13,811 |   |   | 7.58 | % |
| Investment                securities:                   |   |                                  |      |     |   |    |   |    |   |     |   |    |   |   |   |   |   |   |   |
| Taxable                                                 |   |                                  | 155,807   |     |   | 1,949   |   |    | 4.96   | %        |   | 125,352 |   |   | 1,375 |   |   | 4.35 | % |
| Nontaxable                                              |   |                                  | 27,050    |     |   | 402     |   |    | 5.90   | %        |   | 11,547  |   |   | 167 |   |   | 5.76 | % |
| Other                short-term investments             |   |                                  | 19,327    |     |   | 246     |   |    | 5.06   | %        |   | 56,692  |   |   | 487 |   |   | 3.40 | % |
| Total                interest-earning assets            |   | $                                     | 1,007,916 |     | $      | 20,314  |   |    | 8.00   | %        | $      | 916,001 |   | $ | 15,840 |   |   | 6.86 | % |
| Interest-bearing                liabilities:            |   |                                  |      |     |   |    |   |    |   |     |   |    |   |   |   |   |   |   |   |
| Demand                deposits                          |   | $                                     | 271,228   |     | $      | 2,281   |   |    | 3.34   | %        | $      | 203,036 |   | $ | 880 |   |   | 1.72 | % |
| Savings                deposits                         |   |                                  | 38,701    |     |   | 143     |   |    | 1.47   | %        |   | 42,062  |   |   | 82 |   |   | 0.77 | % |
| Time                deposits                            |   |                                  | 454,902   |     |   | 5,125   |   |    | 4.47   | %        |   | 406,891 |   |   | 3,549 |   |   | 3.44 | % |
| FHLB                advances                            |   |                                  | 90,423    |     |   | 1,074   |   |    | 4.71   | %        |   | 98,151  |   |   | 817 |   |   | 3.30 | % |
| Notes                payable                            |   |                                  | 10,310    |     |   | 240     |   |    | 9.25   | %        |   | 10,310  |   |   | 193 |   |   | 7.43 | % |
| Other                short-term borrowings              |   |                                  | 7,240     |     |   | 73      |   |    | 3.99   | %        |   | 7,904   |   |   | 35 |   |   | 1.74 | % |
| Total                interest-bearing liabilities       |   | $                                     | 872,804   |     | $      | 8,936   |   |    | 4.06   | %        | $      | 768,354 |   | $ | 5,556 |   |   | 2.86 | % |
|                                                    |   |                                  |      |     |   |    |   |    |   |     |   |    |   |   |   |   |   |   |   |
| Interest                rate spread                     |   |                                  |      |     |   |    |   |    | 3.94   | %        |   |    |   |   |   |   |   | 4.00 | % |
| Net                interest income                      |   |                                  |      |     | $      | 11,378  |   |    |   |     |   |    |   | $ | 10,284 |   |   |   |   |
| Net                interest margin                      |   |                                  |      |     |   |    |   |    | 4.48   | %        |   |    |   |   |   |   |   | 4.45 | % |

| For                the Nine Months Ended September 30, |   |                                  |    | 2006     |   |    |   |    |   | 2005     |   |    |   |
|--------------------------------------------------------|--------|---------------------------------------|---------|----------|--------|---------|--------|---------|--------|----------|--------|---------|--------|
|                                                   |   |                                  |    | Interest |   | Average |   |    |   | Interest |   | Average |   |
|                                                   |   | Average                               |    | Income/  |   | Yield/  |   | Average |   | Income/  |   | Yield/  |   |
|                                                   |   | Balance                               |    | Expense  |   | Rate    |   | Balance |   | Expense  |   | Rate    |   |
|                                                   |   | (Dollars                In Thousands) |    |
| Interest-earning                assets:                |   |                                  |    |     |   |    |   |    |   |     |   |    |   |
| Loans                                                  |   | $                                     | 785,148 |     | $      | 49,941  |   |    | 8.50   | %        | $      | 694,072 |   | $ | 37,121 |   |   | 7.15 | % |
| Investment                securities:                  |   |                                  |    |     |   |    |   |    |   |     |   |    |   |   |   |   |   |   |   |
| Taxable                                                |   |                                  | 153,208 |     |   | 5,621   |   |    | 4.91   | %        |   | 121,100 |   |   | 4,001 |   |   | 4.42 | % |
| Nontaxable                                             |   |                                  | 22,481  |     |   | 989     |   |    | 5.88   | %        |   | 9,859   |   |   | 433 |   |   | 5.87 | % |
| Other                short-term investments            |   |                                  | 31,882  |     |   | 1,122   |   |    | 4.71   | %        |   | 45,568  |   |   | 1,023 |   |   | 3.00 | % |
| Total                interest-earning assets           |   | $                                     | 992,719 |     | $      | 57,673  |   |    | 7.77   | %        | $      | 870,599 |   | $ | 42,578 |   |   | 6.54 | % |
| Interest-bearing                liabilities:           |   |                                  |    |     |   |    |   |    |   |     |   |    |   |   |   |   |   |   |   |
| Demand                deposits                         |   | $                                     | 264,187 |     | $      | 5,912   |   |    | 2.99   | %        | $      | 198,131 |   | $ | 2,065 |   |   | 1.39 | % |
| Savings                deposits                        |   |                                  | 39,991  |     |   | 384     |   |    | 1.29   | %        |   | 42,690  |   |   | 219 |   |   | 0.69 | % |
| Time                deposits                           |   |                                  | 444,502 |     |   | 13,998  |   |    | 4.21   | %        |   | 372,581 |   |   | 8,845 |   |   | 3.17 | % |
| FHLB                advances                           |   |                                  | 90,062  |     |   | 2,767   |   |    | 4.11   | %        |   | 98,588  |   |   | 2,270 |   |   | 3.08 | % |
| Notes                payable                           |   |                                  | 10,310  |     |   | 686     |   |    | 8.90   | %        |   | 10,310  |   |   | 537 |   |   | 6.97 | % |
| Other                short-term borrowings             |   |                                  | 6,445   |     |   | 151     |   |    | 3.12   | %        |   | 8,173   |   |   | 95 |   |   | 1.55 | % |
| Total                interest-bearing liabilities      |   | $                                     | 855,497 |     | $      | 23,898  |   |    | 3.74   | %        | $      | 730,473 |   | $ | 14,031 |   |   | 2.57 | % |
|                                                   |   |                                  |    |     |   |    |   |    |   |     |   |    |   |   |   |   |   |   |   |
| Interest                rate spread                    |   |                                  |    |     |   |    |   |    | 4.03   | %        |   |    |   |   |   |   |   | 3.97 | % |
| Net                interest income                     |   |                                  |    |     | $      | 33,775  |   |    |   |     |   |    |   | $ | 28,547 |   |   |   |   |
| Net                interest margin                     |   |                                  |    |     |   |    |   |    | 4.55   | %        |   |    |   |   |   |   |   | 4.38 | % |

----

*Table          of Contents*

*Provision      for Loan Losses*

| As                of Quarter End                                                                                                                  |   | Sep-06                                |   | Jun-06 |   | Mar-06 |   | Dec-05 |   | Sep-05 |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                                                                                                                              |   | (Dollars                In Thousands) |   |
| Loans                accounted for on a nonaccrual basis                                                                                          |   | $                                     | 1,928  |   | $      | 412    |   | $      | 7,760  |   | $      | 7,856 |   | $ | 7,446 |   |
| Accruing                loans which are contractually past due 90 days or more as to principal                or                interest payments |   |                                  | 40     |   |   | 23     |   |   | 17     |   |   | 2 |   |   | 20 |   |
| Total                nonperforming loans                                                                                                          |   | $                                     | 1,968  |   | $      | 435    |   | $      | 7,777  |   | $      | 7,858 |   | $ | 7,466 |   |
| Total                nonperforming loans as a percentage of total loans                                                                           |   |                                  | 0.24   | %      |   | 0.05   | %      |   | 1.02   | %      |   | 1.04 | % |   | 1.02 | % |

|   | · | levels                of and trends in delinquencies and impaired                loans; |
|--------|--------|-----------------------------------------------------------------------------------------|

|   | · | levels                of and trends in charge-offs and                recoveries; |
|--------|--------|-----------------------------------------------------------------------------------|

|   | · | trends                in volume and terms of loans; |
|--------|--------|-----------------------------------------------------|

|   | · | effects                of any changes in risk selection and underwriting standards and other                changes in lending policies, procedures, and                practices; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | experience,                ability, and depth of lending management and other relevant                staff; |
|--------|--------|--------------------------------------------------------------------------------------------------------------|

|   | · | national                and local economic trends and                conditions; |
|--------|--------|----------------------------------------------------------------------------------|

|   | · | industry                conditions; and |
|--------|--------|-----------------------------------------|

|   | · | effects                of changes in credit                concentrations. |
|--------|--------|----------------------------------------------------------------------------|

----

*Table          of Contents*

*Other      Income*

|                                                                             |   | Three                Months EndedSeptember                30, |   |   |   | Nine                Months EndedSeptember                30, |   |   |   |
|----------------------------------------------------------------------------------|--------|---------------------------------------------------------------|--------|--------|--------|--------------------------------------------------------------|--------|--------|--------|
|                                                                             |   | 2006                                                          |   | 2005   |   | Pct.                Chg.                                     |   | 2006   |   | 2005 |   | Pct.                Chg. |   |
|                                                                             |   | (Dollars                in Thousands)                         |   |
| Noninterest                income:                                               |   |                                                          |   |   |   |                                                         |   |   |   |   |   |   |   |
| Service                charges on deposit accounts                               |   | $                                                             | 983    |   | $      | 1,069                                                        |   |   | -8.0   | % | $ | 2,923 |   | $ | 3,010 |   |   | -2.9 | % |
| Mortgage                origination fees                                         |   |                                                          | 111    |   |   | 189                                                          |   |   | -41.3  | % |   | 388 |   |   | 424 |   |   | -8.5 | % |
| Securities                transactions, net                                      |   |                                                          | (278   | )      |   | -                                                            |   |   | 0.0    | % |   | (708 | ) |   | (1 | ) |   | -70700.0 | % |
| Earnings                on bank-owned life insurance                             |   |                                                          | 105    |   |   | 83                                                           |   |   | 26.5   | % |   | 295 |   |   | 246 |   |   | 19.9 | % |
| Gain                (loss) on disposal of assets                                 |   |                                                          | 17     |   |   | (1                                                           | )      |   | 1800.0 | % |   | 27 |   |   | (23 | ) |   | 217.4 | % |
| Other                noninterest income                                          |   |                                                          | 266    |   |   | 230                                                          |   |   | 15.7   | % |   | 877 |   |   | 719 |   |   | 22.0 | % |
| Total                noninterest income                                          |   | $                                                             | 1,204  |   | $      | 1,570                                                        |   |   | -23.3  | % | $ | 3,802 |   | $ | 4,375 |   |   | -13.1 | % |
| Noninterest                income as a percentage of average assets (annualized) |   |                                                          | 0.45   | %      |   | 0.64                                                         | %      |   |   |   |   | 0.48 | % |   | 0.63 | % |   |   |   |

*Other      Expenses*

|                                                                              |   | Three                Months EndedSeptember                30, |   |   |   | Nine                Months EndedSeptember                30, |   |   |   |
|-----------------------------------------------------------------------------------|--------|---------------------------------------------------------------|--------|--------|--------|--------------------------------------------------------------|--------|--------|--------|
|                                                                              |   | 2006                                                          |   | 2005   |   | Pct.                Chg.                                     |   | 2006   |   | 2005 |   | Pct.                Chg. |   |
|                                                                              |   | (Dollars                in Thousands)                         |   |
| Noninterest                expenses:                                              |   |                                                          |   |   |   |                                                         |   |   |   |   |   |   |   |
| Salaries                and wages                                                 |   | $                                                             | 3,831  |   | $      | 3,442                                                        |   |   | 11.3   | % | $ | 11,471 |   | $ | 10,007 |   |   | 14.6 | % |
| Deferred                loan cost                                                 |   |                                                          | (445   | )      |   | (410                                                         | )      |   | 8.5    | % |   | (1,323 | ) |   | (1,178 | ) |   | 12.3 | % |
| Employee                benefits                                                  |   |                                                          | 1,010  |   |   | 796                                                          |   |   | 26.9   | % |   | 3,023 |   |   | 2,375 |   |   | 27.3 | % |
| Stock                option expense                                               |   |                                                          | 63     |   |   | -                                                            |   |   | 100.00 | % |   | 225 |   |   | - |   |   | 100.0 | % |
| Net                occupancy expense of premises                                  |   |                                                          | 509    |   |   | 496                                                          |   |   | 2.6    | % |   | 1,472 |   |   | 1,453 |   |   | 1.3 | % |
| Furniture                and equipment expense                                    |   |                                                          | 595    |   |   | 536                                                          |   |   | 11.0   | % |   | 1,617 |   |   | 1,565 |   |   | 3.3 | % |
| Advertising                and business development                               |   |                                                          | 117    |   |   | 145                                                          |   |   | -19.3  | % |   | 419 |   |   | 403 |   |   | 4.0 | % |
| Supplies                and printing                                              |   |                                                          | 111    |   |   | 135                                                          |   |   | -17.8  | % |   | 378 |   |   | 374 |   |   | 1.1 | % |
| Telephone                and internet charges                                     |   |                                                          | 117    |   |   | 92                                                           |   |   | 27.2   | % |   | 337 |   |   | 266 |   |   | 26.7 | % |
| Postage                and courier                                                |   |                                                          | 150    |   |   | 145                                                          |   |   | 3.4    | % |   | 427 |   |   | 456 |   |   | -6.4 | % |
| Legal                and accounting fees                                          |   |                                                          | 101    |   |   | 83                                                           |   |   | 21.7   | % |   | 321 |   |   | 293 |   |   | 9.6 | % |
| Director                fees and expenses                                         |   |                                                          | 93     |   |   | 108                                                          |   |   | -13.9  | % |   | 327 |   |   | 300 |   |   | 9.0 | % |
| Service                charges and fees                                           |   |                                                          | 125    |   |   | 126                                                          |   |   | -0.8   | % |   | 374 |   |   | 383 |   |   | -2.3 | % |
| Other                noninterest expense                                          |   |                                                          | 623    |   |   | 565                                                          |   |   | 10.3   | % |   | 1,869 |   |   | 1,555 |   |   | 20.2 | % |
| Total                noninterest expense                                          |   | $                                                             | 7,000  |   | $      | 6,259                                                        |   |   | 11.8   | % | $ | 20,937 |   | $ | 18,252 |   |   | 14.7 | % |
| Noninterest                expense as a percentage of average assets (annualized) |   |                                                          | 2.59   | %      |   | 2.55                                                         | %      |   |   |   |   | 2.66 | % |   | 2.63 | % |   |   |   |

----

*Table          of Contents*

*Income      Tax Expense*

**LIQUIDITY      AND CAPITAL RESOURCES**

----

*Table          of Contents*

*Contractual      Obligations*

|                                                                   |   |                                  |    | Less                than |   | 1                to 3 |   | 3                to 5 |   | More                than |   |
|------------------------------------------------------------------------|--------|---------------------------------------|---------|--------------------------|--------|-----------------------|--------|-----------------------|--------|--------------------------|--------|
| Contractual                Obligations                                 |   | Total                                 |    | 1                year    |   | years                 |   | years                 |   | 5                years   |   |
|                                                                   |   | (Dollars                In Thousands) |    |
| Federal                Home Loan Bank of Atlanta                       |   |                                  |    |                     |   |                  |   |                  |   |                     |   |
| Advances                                                               |   | $                                     | 90,339  |                     | $      | 606                   |   | $                     | 12,438 |                     | $      | 1,318 |   | $ | 75,977 |   |
| Operating                Lease Obligations                             |   |                                  | 820     |                     |   | 272                   |   |                  | 382    |                     |   | 166 |   |   | - |   |
| Guaranteed                Preferred Beneficial Interests in Debentures |   |                                  | 10,310  |                     |   | -                     |   |                  | -      |                     |   | - |   |   | 10,310* |   |
|                                                                   |   | $                                     | 101,469 |                     | $      | 878                   |   | $                     | 12,820 |                     | $      | 1,484 |   | $ | 86,287 |   |

| * | Although                the contractual maturity of this obligation is December 8, 2031,                the                Company intends to exercise its call option and refinance this obligation                during the fourth quarter of 2006. |
|---|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*Off-Balance      Sheet Arrangements*

|                                        |   | Sep-06 |        | Dec-05 |   |
|---------------------------------------------|--------|--------|-------------|--------|--------|
| Commitments                to extend credit |   | $      | 108,433,000 |   | $      | 144,717,000 |   |
| Standby                letters of credit    |   | $      | 6,094,000   |   | $      | 9,787,000 |   |

*Stockholders’      Equity*

----

*Table          of Contents*

|                                                             |   |         |   |   |   | Minimum     |   |
|------------------------------------------------------------------|--------|--------------|--------|--------|--------|-------------|--------|
|                                                             |   | Company      |   |   |   | Regulatory  |   |
|                                                             |   | Consolidated |   | Bank   |   | Requirement |   |
| Total                Capital to Risk Weighted Assets             |   |         | 12.17  | %      |   | 12.13       | %      |   | 8.0 | % |
| Tier                1 Capital to Risk Weighted Assets            |   |         | 10.95  | %      |   | 10.94       | %      |   | 4.0 | % |
| Tier                1 Capital to Average Assets (Leverage Ratio) |   |         | 9.22   | %      |   | 9.22        | %      |   | 4.0 | % |

**CRITICAL      ACCOUNTING ESTIMATES**

*Allowance      for Loan Losses *

----

*Table          of Contents*

*Estimates      of Fair Value *

**Recent      Accounting Pronouncements**

| **ITEM                3.** | **QUANTITATIVE                AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK** |
|----------------------------|-------------------------------------------------------------------------------|

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*Table          of Contents*

|  As                of September 30, 2006   |   | 3-Month                               |    | 6-Month |   | 1-Year  |   |
|-------------------------------------------------|--------|---------------------------------------|---------|---------|--------|---------|--------|
|                                            |   | (Dollars                In Thousands) |    |
| *Regulatory                Defined*             |   |                                  |    |    |   |    |   |
| Rate                Sensitive Assets (RSA)      |   | $                                     | 579,901 |    | $      | 601,907 |   | $ | 645,353 |   |
| Rate                Sensitive Liabilities (RSL) |   |                                  | 498,849 |    |   | 601,254 |   |   | 755,107 |   |
| RSA                minus RSL (Gap)              |   | $                                     | 81,052  |    | $      | 653     |   | $ | (109,754 | ) |
|                                            |   |                                  |    |    |   |    |   |   |   |   |
| Gap                Ratio (RSA/RSL)              |   |                                  | 1.16    |    |   | 1.00    |   |   | 0.85 |   |
|                                            |   |                                  |    |    |   |    |   |   |   |   |
| *Management-Adjusted*                           |   |                                  |    |    |   |    |   |   |   |   |
| Rate                Sensitive Assets (RSA)      |   | $                                     | 584,932 |    | $      | 610,746 |   | $ | 661,192 |   |
| Rate                Sensitive Liabilities (RSL) |   |                                  | 315,782 |    |   | 418,187 |   |   | 634,469 |   |
| RSA                minus RSL (Gap)              |   | $                                     | 269,150 |    | $      | 192,559 |   | $ | 26,723 |   |
|                                            |   |                                  |    |    |   |    |   |   |   |   |
| Gap                Ratio (RSA/RSL)              |   |                                  | 1.85    |    |   | 1.46    |   |   | 1.04 |   |

| MarketRate                Change | Effect                on Net Interest Income |
|----------------------------------|----------------------------------------------|
| Gradual                          | Immediate                                    |
| +300                bps          | 7.63%                                        | 9.63% |
| +200                bps          | 6.29%                                        | 6.60% |
| +100                bps          | 3.44%                                        | 3.59% |
| -100                bps          | -1.93%                                       | -2.26% |
| -200                bps          | -4.65%                                       | -6.87% |
| -300                bps          | -5.80%                                       | -12.05% |

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*Table          of Contents*

| **ITEM                4.** | **CONTROLS                AND PROCEDURES** |
|----------------------------|--------------------------------------------|

| **PART                II.** | **OTHER                INFORMATION** |
|-----------------------------|--------------------------------------|

| **ITEM                1.** | **LEGAL                PROCEEDINGS** |
|----------------------------|--------------------------------------|

| **ITEM                  1A.** | **RISK                  FACTORS** |
|-------------------------------|-----------------------------------|

| **ITEM                2.** | **UNREGISTERED                SALE OF EQUITY SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF                EQUITY                SECURITIES** |
|----------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------|

|      |   | Total                number of shares purchased |   | Average                price paid per share |   | Number                of shares purchased as part of publicly announced plans or                programs |   | Maximum                number of shares that may yet be purchased under the plans or                programs1 |   |
|-----------|--------|-------------------------------------------------|--------|---------------------------------------------|--------|----------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------|--------|
| July      |   |                                            | 27,596 |                                        | $      | 20.02                                                                                                    |   |                                                                                                          | 27,596 |   |   | 254,596 |   |
| August    |   |                                            | 2,510  |                                        |   | 19.14                                                                                                    |   |                                                                                                          | 2,510  |   |   | 252,086 |   |
| September |   |                                            | 16,956 |                                        |   | 19.66                                                                                                    |   |                                                                                                          | 16,956 |   |   | 235,130 |   |
| Total     |   |                                            | 47,062 |                                        | $      | 19.84                                                                                                    |   |                                                                                                          | 47,062 |   |   | 235,130 |   |

| 1 | On                May 23, 2006, the Company renewed its annual plan to repurchase up                to                300,000 shares of the Company's common stock over the next twelve                month                period. The plan will expire May 23,                2007. |
|---|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **ITEM                3.** | **DEFAULTS                UPON SENIOR SECURITIES** |
|----------------------------|----------------------------------------------------|

| **ITEM                4.** | **SUBMISSION                OF MATTERS TO A VOTE OF SECURITY                HOLDERS** |
|----------------------------|---------------------------------------------------------------------------------------|

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*Table          of Contents*

| **ITEM                5.** | **OTHER                INFORMATION** |
|----------------------------|--------------------------------------|

| **ITEM                6.** | **EXHIBITS** |
|----------------------------|--------------|

|   | 4.1 | Amended                and Restated Trust Agreement among PAB Bankshares, Inc., as Depositor,                Wilmington Trust Company, as Property Trustee and Delaware Trustee,                and                the Administrative Trustees named therein dated as of October 5,                2006                (incorporated by reference to Exhibit 4.1 to the Registrant’s Current                Report on Form 8-K dated October 6,                2006). |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 4.2 | Junior                Subordinated Indenture between PAB Bankshares, Inc. and Wilmington                Trust                Company, as Trustee dated as of October 5, 2006 (incorporated by                reference                to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K dated                October 6, 2006). |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 4.3 | Guarantee                Agreement between PAB Bankshares, Inc., as Guarantor, and Wilmington                Trust                Company, as Guarantee Trustee dated as of October 5, 2006 (incorporated                by                reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K                dated October 6, 2006). |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 31.1 | Rule                13a-14(a) Certification of CEO |
|--------|------|----------------------------------------------------|

|   | 31.2 | Rule                13a-14(a) Certification of CFO |
|--------|------|----------------------------------------------------|

|   | 32.1 | Section                1350 Certification of CEO |
|--------|------|--------------------------------------------------|

|   | 32.2 | Section                1350 Certification of CFO |
|--------|------|--------------------------------------------------|

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*Table          of Contents*

SI

**PAB      BANKSHARES, INC.**

| Date:                  ***November                9, 2006*** | By:    | ***/s/                M. Burke Welsh, Jr.***                        |   |
|------------------------------------------------------------------------|--------|---------------------------------------------------------------------|--------|
|                                                                   |   | M.                Burke Welsh, Jr.                                  |   |
|                                                                   |   | President                and Chief Executive Officer                |   |
|                                                                   |   | (principal                executive officer of the registrant)      |   |
|                                                                   |   |                                                                |   |
|                                                                   |   |                                                                |   |
| Date:                  ***November                9, 2006*** | By:    | ***/s/                Donald J. Torbert, Jr.***                     |   |
|                                                                   |   | Donald                J. Torbert, Jr.                               |   |
|                                                                   |   | Executive                Vice President and Chief Financial Officer |   |
|                                                                   |   | (principal                financial officer of the registrant)      |   |

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