##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-QSB
  þ
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For
the quarterly period ended September 30, 2006
 o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File No. 000-24043
 ebank Financial Services, Inc.
  Georgia
    
    
    
    58-2349097(State of Incorporation)
    
    
    
    (I.R.S. Employer Identification No.)
 2410 Paces Ferry Road, Suite 190, Atlanta, Georgia 30339
 (Issuers Telephone Number, Including Area Code)
 (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
 þ o
 o þ
  o þ




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TABLE OF CONTENTS  PART I FINANCIAL INFORMATIONItem 1. Financial StatementsItem 2. Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 3. Controls and ProceduresPART II OTHER INFORMATIONItem 2. Unregistered Sales of Equity Securities and Use of ProceedsItem 6. ExhibitsSIGNATURESEX-31.1 SECTION 302 CERTIFICATION OF CEOEX-31.2 SECTION 302 CERTIFICATION OF CFOEX-32.1 SECTION 906 CERTIFICATION OF CEOEX-32.2 SECTION 906 CERTIFICATION OF CFO    Table of Contents  
 PART I
FINANCIAL INFORMATION
 
 Item 1. Financial Statements.
 ebank Financial Services, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
 September 30,
    
    
    December 31,2006
    
    
    2005(Unaudited)
    
    
    (Audited)ASSETSCash and due from banks
    
    $
    834,423
    
    
    $
    660,307Interest-bearing deposits in banks
    
    
    738,448
    
    
    
    529,467Federal funds sold
    
    
    6,170,000
    
    
    
    5,189,000Cash and cash equivalents
    
    
    7,742,871
    
    
    
    6,378,774Securities available for sale
    
    
    31,440,469
    
    
    
    21,789,026Other securities
    
    
    433,800
    
    
    
    621,400Mortgage loans held for sale
    
    
    4,873,080
    
    
    
    Loans, net of allowance for loan losses of $549,280 and
$805,461, respectively
    
    
    90,907,812
    
    
    
    94,600,789Premises and equipment, net
    
    
    640,975
    
    
    
    406,495Accrued interest receivable and other assets
    
    
    2,616,364
    
    
    
    3,392,370Total assets
    
    $
    138,655,371
    
    
    $
    127,188,854LIABILITIES AND SHAREHOLDERS EQUITYLiabilities:Deposits
    
    $
    117,920,016
    
    
    $
    106,784,000Other borrowings
    
    
    8,785,472
    
    
    
    9,000,000Accrued interest payable and other liabilities
    
    
    878,060
    
    
    
    385,104Total liabilities
    
    
    127,583,548
    
    
    
    116,169,104Minority interest
    
    
    552,547
    
    
    
    Shareholders equity:Series A preferred stock, $.01 par value, 8% cumulative,
convertible into one share of common stock; 10,000,000
shares authorized;
1,617,884 and 2,316,912 issued and outstanding;
accumulated declared dividends of $405,739 and $0;
accumulated undeclared dividends
of $1,161,330 and $1,316,514 (liquidation
preference of $4,044,710
and $5,792,280 plus accumulated unpaid dividends)
    
    
    16,179
    
    
    
    23,169Common stock, $.01 par value; 15,000,000 shares authorized,
7,202,427 and 6,440,991 shares issued and outstanding
    
    
    72,024
    
    
    
    64,410Capital surplus
    
    
    22,965,006
    
    
    
    23,360,285Accumulated deficit
    
    
    (12,039,776
    )
    
    
    (11,963,855
    )Accumulated other comprehensive loss
    
    
    (494,157
    )
    
    
    (464,259
    )Total shareholders equity
    
    
    10,519,276
    
    
    
    11,019,750Total liabilities and shareholders equity
    
    $
    138,655,371
    
    
    $
    127,188,854
  2




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ebank Financial Services, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 For the three months ended
    
    
    For the nine months endedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Interest income:Loans, including fees
    
    $
    2,071,347
    
    
    $
    1,801,375
    
    
    $
    5,938,613
    
    
    $
    5,154,145Interest-bearing deposits
    
    
    8,478
    
    
    
    1,989
    
    
    
    21,475
    
    
    
    3,053Investment securities
    
    
    414,473
    
    
    
    281,132
    
    
    
    1,171,971
    
    
    
    784,555Other investments
    
    
    6,451
    
    
    
    7,855
    
    
    
    25,197
    
    
    
    27,975Federal funds sold
    
    
    101,257
    
    
    
    196,538
    
    
    
    311,481
    
    
    
    303,965Total interest income
    
    
    2,602,006
    
    
    
    2,288,889
    
    
    
    7,468,737
    
    
    
    6,273,693Interest expense:Deposits
    
    
    1,320,562
    
    
    
    911,217
    
    
    
    3,540,181
    
    
    
    2,131,550Other borrowings
    
    
    61,315
    
    
    
    119,662
    
    
    
    183,954
    
    
    
    408,527Total interest expense
    
    
    1,381,877
    
    
    
    1,030,879
    
    
    
    3,724,135
    
    
    
    2,540,077Net interest income
    
    
    1,220,129
    
    
    
    1,258,010
    
    
    
    3,744,602
    
    
    
    3,733,616Provision for loan losses
    
    
    24,000
    
    
    
    155,000
    
    
    
    242,000
    
    
    
    220,000Net interest income after provision for loan losses
    
    
    1,196,129
    
    
    
    1,103,010
    
    
    
    3,502,602
    
    
    
    3,513,616Other income:Deposit fees
    
    
    31,705
    
    
    
    28,229
    
    
    
    90,089
    
    
    
    84,115Miscellaneous fees
    
    
    88,429
    
    
    
    6,802
    
    
    
    84,717
    
    
    
    34,734Total other income
    
    
    120,134
    
    
    
    35,031
    
    
    
    174,806
    
    
    
    118,849Other expense:Salaries and other compensation
    
    
    546,769
    
    
    
    435,552
    
    
    
    1,609,832
    
    
    
    1,331,362Employee benefits
    
    
    102,369
    
    
    
    99,036
    
    
    
    315,400
    
    
    
    284,594Net occupancy and equipment expense
    
    
    260,003
    
    
    
    194,717
    
    
    
    722,187
    
    
    
    559,723Professional and other outside services
    
    
    247,851
    
    
    
    134,128
    
    
    
    700,270
    
    
    
    437,091Other expense
    
    
    242,521
    
    
    
    147,410
    
    
    
    588,092
    
    
    
    411,103Total other expenses
    
    
    1,399,513
    
    
    
    1,010,843
    
    
    
    3,935,781
    
    
    
    3,023,873Minority interest
    
    
    58,500
    
    
    
    
    
    
    
    182,453
    
    
    
    Net earnings (loss)
    
    
    (24,750
    )
    
    
    127,198
    
    
    
    (75,920
    )
    
    
    608,592Preferred stock dividends paid during the
period upon conversion of shares of preferred
stock
    
    
    (68,864
    )
    
    
    (4,142
    )
    
    
    (78,560
    )
    
    
    (6,178
    )Preferred stock dividends
    
    
    (100,253
    )
    
    
    (119,036
    )
    
    
    (329,049
    )
    
    
    (354,020
    )Net earnings (loss) attributable to common
stockholders
    
    $
    (193,867
    )
    
    $
    4,020
    
    
    $
    (483,529
    )
    
    $
    248,394Basic and fully diluted earnings (loss) per common
share
    
    $
    (.03
    )
    
    $
    .00
    
    
    $
    (.07
    )
    
    $
    .04
  3




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ebank Financial Services, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 For the nine months endedSeptember 30,2006
    
    
    2005Net earnings (loss)
    
    $
    (75,920
    )
    
    $
    608,592Other comprehensive income:Unrealized losses on securities
available for sale:Holding losses arising during the period,
net of taxes of $18,293 and $6,144, respectively
    
    
    (29,898
    )
    
    
    (13,023
    )Comprehensive income (loss)
    
    $
    (105,818
    )
    
    $
    595,569
  4




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ebank Financial Services, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 For the nine months endedSeptember 30,2006
    
    
    2005Cash flows from operating activities:Net earnings (loss)
    
    $
    (75,920
    )
    
    $
    608,592Adjustments to reconcile net earnings (loss)
to net cash provided by operating activities:Minority interest
    
    
    (182,453
    )
    
    
    Loss on sale of real estate owned
    
    
    53,882
    
    
    
    Compensation expense related to stock options
    
    
    11,085
    
    
    
    Net amortization (accretion) of securities available for sale
    
    
    4,909
    
    
    
    7,080Depreciation expense
    
    
    152,369
    
    
    
    130,182Provision for loan losses
    
    
    242,000
    
    
    
    220,000Change in deferred loan fees and costs
    
    
    1,627
    
    
    
    35,938Change in other assets
    
    
    (136,671
    )
    
    
    (48,775
    )Change in mortgage loans held for sale
    
    
    (4,873,080
    )
    
    
    Change in accrued interest receivable
    
    
    83,732
    
    
    
    (108,193
    )Change in accrued interest payable
    
    
    68,776
    
    
    
    94,202Change in other liabilities
    
    
    18,441
    
    
    
    (33,865
    )Net cash (used) provided by operating activities
    
    
    (4,631,303
    )
    
    
    905,161Cash flows from investing activities:Maturities of securities available for sale
    
    
    312,832
    
    
    
    1,000,000Purchase of securities available for sale
    
    
    (10,017,378
    )
    
    
    (4,531,095
    )Purchase of other securities
    
    
    (37,400
    )
    
    
    Proceeds from sale of other securities
    
    
    225,000
    
    
    
    5,800Net change in loans
    
    
    2,620,280
    
    
    
    (13,416,642
    )Proceeds from sale of other real estate owned
    
    
    1,622,428
    
    
    
    Purchases of premises and equipment
    
    
    (386,850
    )
    
    
    (116,700
    )Net cash used by investing activities
    
    
    (5,661,088
    )
    
    
    (17,058,637
    )Cash flows from financing activities:Net increase in deposits
    
    
    11,136,016
    
    
    
    50,432,843Repayments on other borrowings
    
    
    (5,000,000
    )
    
    
    (11,500,000
    )Proceeds from other borrowings
    
    
    4,785,472
    
    
    
    Net proceeds from minority LLC owner
    
    
    735,000
    
    
    
    Stock offering costs
    
    
    
    
    
    
    (2,600
    )Net cash provided by financing activities
    
    
    11,656,488
    
    
    
    38,930,243Net increase in cash and cash equivalents
    
    
    1,364,097
    
    
    
    22,776,767Cash and cash equivalents:Beginning of period
    
    
    6,378,774
    
    
    
    1,924,266End of period
    
    $
    7,742,871
    
    
    $
    24,701,033
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ebank Financial Services, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 NOTE 1  BASIS OF PRESENTATION
    Significant Accounting Policies
   6




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Use of Estimates
  Stock Compensation Plans
 Accounting for Stock Issued to
Employees Accounting for
Stock-Based Compensation Accounting for Stock-Based Compensation
Transition and Disclosure Share-Based Payment ,
   Weighted-Number of
    
    
    Range of Per
    
    
    Aggregate Per
    
    
    AggregateShares
    
    
    Option Price
    
    
    Share Price
    
    
    Option PriceOutstanding at
December 31, 2005
and September 30,
2006
    
    
    150,000
    
    
    $
    1.25
    
    
    
    1.25
    
    
    
    0.43
 7




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Weighted-Weighted-
    
    
    AverageAverage
    
    
    Remaining
    
    
    AggregateExercise
    
    
    Contractual
    
    
    IntrinsicOptions
    
    Shares
    
    
    Price
    
    
    Term
    
    
    ValueOutstanding at
December 31, 2005
    
    
    468,917
    
    
    $
    2.08Granted
    
    
    285,000
    
    
    
    1.15Exercised
    
    
    0
    
    
    
    0Forfeited
    
    
    (38,417
    )
    
    
    2.98Expired
    
    
    0
    
    
    
    0Outstanding at
September 30, 2006
    
    
    715,500
    
    
    $
    1.66
    
    
    
    7.8
    
    
    $
    1,950Exercisable at
September 30, 2006
    
    
    425,500
    
    
    $
    2.01
    
    
    
    6.6
    
    
    $
    0
  For the nine monthsendedSeptember 30, 2006Expected volatility
    
    
    64.85
    %Expected dividend yield
    
    
    0
    %Expected life (in years)
    
    
    10.0Risk-free rate
    
    
    4.38% to 4.99

    %
    8




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For the nine monthsendedSeptember 30, 2005Net earnings
attributable to common
stockholders
    
    As reported
    
    $
    248,394Effect of stock options grants
    
    
    (110,270
    )Pro forma
    
    $
    138,124Basic earnings per share
    
    As reported
    
    $
    .04Pro forma
    
    $
    .02
 NOTE 2  EARNINGS (LOSS) PER COMMON SHARE
  For the three months endedSeptember 30,2006
    
    
    2005Earnings (loss) per common share:Weighted average common shares outstanding
    
    
    6,828,851
    
    
    
    6,371,567Net earnings (loss)
    
    $
    (24,750
    )
    
    $
    127,198Preferred stock dividend paid upon conversion
of shares of preferred stock
    
    
    (68,864
    )
    
    
    (4,142
    )Preferred stock dividend accrued
    
    
    (100,253
    )
    
    
    (119,036
    )Net earnings (loss) attributable to common
stockholders
    
    $
    (193,867
    )
    
    $
    4,020Basic and fully diluted earnings (loss) per
common share
    
    $
    (.03
    )
    
    $
    .00
 For the nine months endedSeptember 30,2006
    
    
    2005Earnings (loss) per common share:Weighted average common shares outstanding
    
    
    6,580,508
    
    
    
    6,369,691Net earnings (loss)
    
    $
    (75,920
    )
    
    $
    608,592Preferred stock dividend paid upon conversion
of shares of preferred stock
    
    
    (78,560
    )
    
    
    (6,178
    )Preferred stock dividend accrued
    
    
    (329,049
    )
    
    
    (354,020
    )Net earnings (loss) attributable to common
stockholders
    
    $
    (483,529
    )
    
    $
    248,394Basic and fully diluted earnings (loss) per
common share
    
    $
    (.07
    )
    
    $
    .04
  9




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NOTE 3  DIVIDENDS ON PREFERRED STOCK
  NOTE 4  FORMATION OF NEW SUBSIDIARY
      10




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
    
    maintain at all times ebank Mortgages members equity of at least $1 million;
    
    maintain a maximum ratio of indebtedness to ebank Mortgages members equity of 15.00
to 1.00; and
    
    maintain net income of ebank Mortgage at $5,000 or more per fiscal quarter beginning
with the fiscal quarter ending December 31, 2006.
  
    
    grant liens on the assets of ebank Mortgage;
    
    incur additional future indebtedness other than:
 o
    
    current liabilities for taxes and assessments incurred in the ordinary course of business;o
    
    accounts payable incurred in the ordinary course of business; ando
    
    indebtedness for the acquisition of fixed assets, not to exceed
$100,000 in the aggregate at any time; and
 
    
    pay any dividend or distribution (including any repurchase or redemption of membership
interests), except to the extent necessary to pay an amount equal to the combined federal
and state tax liability (if any) of the members arising from their respective allocable
share of the earnings and profits of ebank Mortgage as long as any such payment does not
result in a Default or an Event of Default;
   11




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NOTE 5  RECENT ACCOUNTING PRONOUNCEMENTS
 Accounting for Uncertainty in Income Taxes
 Accounting for Uncertainty in Income Taxes  an interpretation of
FASB Statement No. 109
 12




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
  
    
    significant increases in competitive pressure in the banking and financial services
industries;
    
    changes in the interest rate environment which could reduce anticipated or actual
margins;
    
    the evolving nature of the market for Internet banking and financial services generally;
    
    changes in political conditions or the legislative or regulatory environment;
    
    general economic conditions, either nationally or regionally and especially in our
primary service area, becoming less favorable than expected resulting in, among other
things, a deterioration in credit quality;
    
    changes occurring in business conditions and inflation;
    
    changes in technology;
    
    the adverse effects of any failure to satisfy regulatory capital requirements;
    
    changes in monetary and tax policies;
    
    reductions in earnings if we experience an increase in delinquencies and defaults of
mortgage loans;
    
    changes in the securities markets;
    
    the potential economic effects of terrorist attacks, such as those that occurred on
September 11, 2001, as well as other acts of violence or war, including the ongoing
military actions in Iraq and Afghanistan; and
    
    other risks and uncertainties detailed from time to time in our filings with the
Securities and Exchange Commission.
  13




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General
   Financial Condition
   Results of Operations
  14




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Results of Operations
    15




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Allowance for Loan Losses
  16




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17




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Total
    
    
    
    
    
    
    
    
    
    
    Potential
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-Classified
    
    
    
    
    
    
    Allocated
    
    
    Problem
    
    
    
    
    
    
    Allocated
    
    
    Impaired
    
    
    
    
    
    
    Allocated
    
    
    performing
    
    
    
    
    
    
    AllocatedLoans
    
    
    No.
    
    
    Provision
    
    
    Loans
    
    
    No.
    
    
    Provision
    
    
    Loans
    
    
    No.
    
    
    Provision
    
    
    Loans
    
    
    No.
    
    
    ProvisionCommercial
    
    $
    234,321
    
    
    
    3
    
    
    $
    8,977
    
    
    $
    134,750
    
    
    
    1
    
    
    $
    6,737
    
    
    $
    99,571
    
    
    
    2
    
    
    $
    2,240
    
    
    $
    99,571
    
    
    
    2
    
    
    $
    2,240Real Estate 
Commercial
    
    
    1,882,801
    
    
    
    5
    
    
    
    20,470
    
    
    
    365,409
    
    
    
    1
    
    
    
    2,192
    
    
    
    1,517,392
    
    
    
    4
    
    
    
    18,278
    
    
    
    1,517,392
    
    
    
    4
    
    
    
    18,278Real Estate 
Individual
    
    
    1,401,312
    
    
    
    6
    
    
    
    19,772
    
    
    
    208,372
    
    
    
    2
    
    
    
    2,701
    
    
    
    1,192,940
    
    
    
    4
    
    
    
    17,071
    
    
    
    1,192,940
    
    
    
    4
    
    
    
    17,071Installment 
Individual
    
    
    151,350
    
    
    
    6
    
    
    
    34,524
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    151,350
    
    
    
    6
    
    
    
    34,524
    
    
    
    151,350
    
    
    
    6
    
    
    
    34,524Totals
    
    $
    3,669,784
    
    
    
    20
    
    
    $
    83,743
    
    
    $
    708,531
    
    
    
    4
    
    
    $
    11,630
    
    
    $
    2,961,253
    
    
    
    16
    
    
    $
    72,113
    
    
    $
    2,961,253
    
    
    
    16
    
    
    $
    72,113
  18




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Total
    
    
    
    
    
    
    
    
    
    
    Potential
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-Classified
    
    
    
    
    
    
    Allocated
    
    
    Problem
    
    
    
    
    
    
    Allocated
    
    
    Impaired
    
    
    
    
    
    
    Allocated
    
    
    performing
    
    
    
    
    
    
    AllocatedLoans
    
    
    No.
    
    
    Provision
    
    
    Loans
    
    
    No.
    
    
    Provision
    
    
    Loans
    
    
    No.
    
    
    Provision
    
    
    Loans
    
    
    No.
    
    
    ProvisionCommercial
    
    $
    293,981
    
    
    
    2
    
    
    $
    146,990
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    293,981
    
    
    
    2
    
    
    $
    146,990
    
    
    $
    293,981
    
    
    
    2
    
    
    $
    146,990Real Estate 
Commercial
    
    
    2,271,671
    
    
    
    6
    
    
    
    21,215
    
    
    
    378,613
    
    
    
    1
    
    
    
    2,272
    
    
    
    1,893,058
    
    
    
    5
    
    
    
    18,943
    
    
    
    1,893,058
    
    
    
    5
    
    
    
    18,943Real Estate 
Individual
    
    
    1,064,780
    
    
    
    6
    
    
    
    75,637
    
    
    
    866,153
    
    
    
    4
    
    
    
    51,004
    
    
    
    198,627
    
    
    
    2
    
    
    
    24,633
    
    
    
    198,627
    
    
    
    2
    
    
    
    24,633Installment 
Individual
    
    
    162,321
    
    
    
    4
    
    
    
    15,110
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    162,321
    
    
    
    4
    
    
    
    15,110
    
    
    
    162,321
    
    
    
    4
    
    
    
    15,110Totals
    
    $
    3,792,753
    
    
    
    18
    
    
    $
    258,952
    
    
    $
    1,244,766
    
    
    
    5
    
    
    $
    53,276
    
    
    $
    2,547,987
    
    
    
    13
    
    
    $
    205,676
    
    
    $
    2,547,987
    
    
    
    13
    
    
    $
    205,676
     19




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##### Table of Contents



Allowance for Loan Losses
  For the Nine
    
    
    For theMonths Ended
    
    
    Year EndedSeptember 30,
    
    
    December 31,2006
    
    
    2005(Dollars in thousands)Average loans outstanding
    
    $
    96,178
    
    
    $
    94,583Loans outstanding at period end
    
    $
    91,457
    
    
    $
    95,406Total nonperforming loans
    
    $
    2,961
    
    
    $
    2,548Beginning balance of allowance
    
    $
    805
    
    
    $
    1,013Loans charged off:Commercial
    
    
    (57
    )
    
    
    (410
    )Real estate  commercial
    
    
    (223
    )
    
    
    Real estate  individual
    
    
    (177
    )
    
    
    (64
    )Installment loans to
individuals
    
    
    (45
    )
    
    
    (44
    )Total charge-offs
    
    
    (502
    )
    
    
    (518
    )Recoveries of previous charge-offs:Commercial
    
    
    4
    
    
    
    10Total recoveries
    
    
    4
    
    
    
    10Net loans charged-off
    
    
    (498
    )
    
    
    (508
    )Provision for loan losses
    
    
    242
    
    
    
    300Balance at period end
    
    $
    549
    
    
    $
    805Net charge-offs to average loans
    
    
    0.52
    %
    
    
    0.54
    %Allowance as percent of total
loans
    
    
    0.60
    %
    
    
    0.84
    %Nonperforming loans as a
percentage of total loans
    
    
    3.24
    %
    
    
    2.67
    %Allowance as a percent of
nonperforming loans
    
    
    18.54
    %
    
    
    31.59
    %
  Percentage of
    
    
    
    
    
    
    Percentage ofNine Months
    
    
    loans in
    
    
    Year ended
    
    
    loans inEnded
    
    
    each category
    
    
    December 31,
    
    
    each categorySeptember 30, 2006
    
    
    to total loans
    
    
    2005
    
    
    to total loansCommercial
    
    $
    206,514
    
    
    
    9.31
    %
    
    $
    367,990
    
    
    
    9.94
    %Real estate 
individual
    
    
    109,772
    
    
    
    57.73
    %
    
    
    102,110
    
    
    
    59.14
    %Real estate 
commercial
    
    
    159,470
    
    
    
    24.63
    %
    
    
    169,215
    
    
    
    23.10
    %Installment loans
to individuals
    
    
    73,524
    
    
    
    8.33
    %
    
    
    111,637
    
    
    
    7.82
    %Unallocated
    
    
    
    
    
    
    
    
    
    
    54,509
    
    
    
    Total
    
    $
    549,280
    
    
    
    100.00
    %
    
    $
    805,461
    
    
    
    100.00
    %
  20




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##### Table of Contents



Average Balances, Income and Expense, and Rates
  Interest-
    
    
    
    
    
    InterestEarning Assets/
    
    Average
    
    
    Income/
    
    
    Yield/Bearing Liabilities
    
    Balance
    
    
    Cost
    
    
    CostFederal funds sold
    
    $
    9,021,617
    
    
    $
    311,481
    
    
    
    4.60
    %Interest-bearing deposits
    
    
    634,690
    
    
    
    21,475
    
    
    
    4.51
    %Investment securities
    
    
    28,032,293
    
    
    
    1,197,168
    
    
    
    5.69
    %Loans
    
    
    96,178,272
    
    
    
    5,938,613
    
    
    
    8.23
    %Total
    
    $
    133,866,872
    
    
    $
    7,468,737
    
    
    
    7.44
    %Deposits
    
    $
    109,561,714
    
    
    $
    3,540,181
    
    
    
    4.31
    %Other borrowings
    
    
    10,012,658
    
    
    
    183,954
    
    
    
    7.95
    %Total
    
    $
    119,574,372
    
    
    $
    3,724,135
    
    
    
    4.15
    %Net interest income/spread
    
    
    
    
    
    $
    3,744,602
    
    
    
    3.29
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    3.73
    %
  21




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##### Table of Contents



Deposits
  Deposit CompositionSeptember 30,
    
    
    December 31,2006
    
    
    2005Percent
    
    
    
    
    
    
    Percentof
    
    
    
    
    
    
    ofAmount
    
    
    Deposits
    
    
    Amount
    
    
    Deposits(Dollar in thousands)Demand deposits
    
    $
    5,144
    
    
    
    4.36
    %
    
    $
    7,040
    
    
    
    6.59
    %Escrow deposits
    
    
    15
    
    
    
    0.01
    %
    
    
    2
    
    
    
    0
    %Total non-interest-bearing
    
    
    5,159
    
    
    
    4.38
    %
    
    
    7,042
    
    
    
    6.59
    %Now accounts
    
    
    6,679
    
    
    
    5.66
    %
    
    
    8,573
    
    
    
    8.03
    %MMDA
    
    
    74,464
    
    
    
    63.15
    %
    
    
    54,892
    
    
    
    51.40
    %Savings
    
    
    614
    
    
    
    0.52
    %
    
    
    1,191
    
    
    
    1.11
    %Certificates of deposits of
$100K or more
    
    
    10,975
    
    
    
    9.31
    %
    
    
    11,490
    
    
    
    10.76
    %Brokered deposits of $100K or
more
    
    
    0
    
    
    
    0.00
    %
    
    
    4,496
    
    
    
    4.21
    %Total certificates of deposit
of $100K or more
    
    
    10,975
    
    
    
    9.31
    %
    
    
    15,986
    
    
    
    14.97
    %Certificate of deposits less
than $100K
    
    
    19,732
    
    
    
    16.73
    %
    
    
    18,209
    
    
    
    17.05
    %Brokered deposits less than $100K
    
    
    297
    
    
    
    0.25
    %
    
    
    891
    
    
    
    0.83
    %Total certificates of deposit
less than $100K
    
    
    20,029
    
    
    
    16.99
    %
    
    
    19,100
    
    
    
    17.89
    %Total
    
    $
    117,920
    
    
    
    100.00
    %
    
    $
    106,784
    
    
    
    100.00
    %Total brokered deposits
    
    $
    297
    
    
    
    
    
    
    $
    5,387
 Liquidity and Sources of Capital
  22




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##### Table of Contents



Bank
    
    MinimumCapital
    
    RegulatoryRatio
    
    RequirementCapital ratios at September 30, 2006Tier 1 capital
    
    
    13.15
    %
    
    
    4.0
    %Tier 2 capital
    
    
    0.61
    %Total risk-based capital ratio
    
    
    13.76
    %
    
    
    8.0
    %Leverage ratio
    
    
    8.92
    %
    
    
    4.0
    %
  i.e.
  Liquidity And Rate Sensitivity
    23




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##### Table of Contents



After threeWithin
    
    
    but within
    
    
    After one
    
    
    Afterthree
    
    
    twelve
    
    
    but within
    
    
    fivemonths
    
    
    months
    
    
    five years
    
    
    years
    
    
    Total(Dollars in Thousands)Interest-earning assets:Interest-earning deposits
    
    $
    738
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    738Loans
    
    
    58,889
    
    
    
    4,130
    
    
    
    10,795
    
    
    
    17,783
    
    
    
    91,597Mortgage loans held for sale
    
    
    4,873
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,873Investment securities
    
    
    932
    
    
    
    498
    
    
    
    977
    
    
    
    29,467
    
    
    
    31,874Federal funds sold
    
    
    6,170
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,170Total earning assets
    
    
    71,602
    
    
    
    4,628
    
    
    
    11,772
    
    
    
    47,250
    
    
    
    135,252Interest-bearing liabilities:Money market and NOW
    
    
    81,142
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    81,142Savings deposits
    
    
    614
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    614Time deposits
    
    
    9,179
    
    
    
    19,003
    
    
    
    2,822
    
    
    
    
    
    
    
    31,004Other liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,000
    
    
    
    4,000Total interest-bearing liabilities
    
    
    90,935
    
    
    
    19,003
    
    
    
    2,822
    
    
    
    4,000
    
    
    
    116,760Interest-sensitivity gap
    
    $
    (19,333
    )
    
    $
    (14,375
    )
    
    $
    8,950
    
    
    $
    43,250
    
    
    $
    18,492Cumulative interest-sensitivity gap
    
    $
    (19,333
    )
    
    $
    (33,708
    )
    
    $
    (24,758
    )
    
    $
    18,492
    
    
    $
    18,492Ratio of interest-sensitivity gap
to total earning assets
    
    
    (14.83
    %)
    
    
    (11.03
    %)
    
    
    6.86
    %
    
    
    33.17
    %
    
    
    14.18
    %Ratio of cumulative interest-
sensitivity gap to total earning
assets
    
    
    (14.83
    %)
    
    
    (25.85
    %)
    
    
    (18.99
    %)
    
    
    14.18
    %
  Loan Portfolio
  24




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##### Table of Contents



PercentAmount
    
    
    of totalCommercial
    
    $
    8,525,871
    
    
    
    9.31
    %Real estate  individual
    
    
    52,881,456
    
    
    
    57.73
    %Real estate  commercial
    
    
    22,558,753
    
    
    
    24.63
    %Installment loans to individuals
    
    
    7,631,087
    
    
    
    8.33
    %Gross loans
    
    
    91,597,167
    
    
    
    100.00
    %Less: Net deferred loan fees
    
    
    (140,075
    )Allowance for loan loss
    
    
    (549,280
    )Total net loans
    
    $
    90,907,812
  Regulatory Matters
    
 Item 3. Controls and Procedures.
  25




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##### Table of Contents



PART II
OTHER INFORMATION
 
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
  
 
 
 
 
 
 
 
 
 
 
 26




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##### Table of Contents




 
 
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 
 
 
 
 
 
 
 
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 27




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##### Table of Contents




 
 
 
 
 
 
 
 
 
 
  
 Item 6. Exhibits.
 10.1
    
    First Amendment to Warehousing Credit Agreement dated July 21, 2006, between ebank Mortgage,
LLC and U.S. Bank National Association (incorporated by reference to Exhibit 10.1 to the Companys
Current Report on Form 8-K filed July 25, 2006).
 28




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##### Table of Contents



10.2
    
    Guarantors Acknowledgment of ebank Financial Services, Inc. (incorporated by reference to
Exhibit 10.2 to the Companys Current Report on Form 8-K filed July 25, 2006).10.3
    
    Guarantors Acknowledgment of Madison Mortgage Corporation (incorporated by reference to
Exhibit 10.3 to the Companys Current Report on Form 8-K filed July 25, 2006).10.4
    
    Mortgage Loan Subservicing Agreement between ebank Mortgage, LLC and Sunshine Mortgage
Corporation (incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K
filed September 29, 2006).10.5
    
    Cash Bonus Arrangement of ebank Mortgage. LLC for Lucien J. Barrette (incorporated by
reference to Exhibit 10.2 to the Companys Current Report on Form 8-K filed September 29, 2006).31.1
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.32.2
    
    Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
 29




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##### Table of Contents



SIGNATURES
  ebank Financial Services, Inc.Date: November 13, 2006
    By:
    /s/ James L. BoxJames L. BoxPresident and Chief Executive OfficerBy:
    /s/ Wayne W. ByersWayne W. ByersChief Financial Officer 30