##### Table of Contents

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Securities and Exchange Commission

Washington, D.C. 20549



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FORM 10-QSB



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|x | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------



For the quarterly period ended September 30, 2004



| ̈ | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------



From the transition period from  to



COMMISSION FILE NUMBER: 333-109586



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FIRST NATIONAL BANC, INC.

(Name of Small Business Issuer in Its Charter)



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|                         |  |                                     
|------------------------ |  | ------------------------------------
|Georgia                  |  | 58-2249282                          
|(State of Incorporation) |  | (I.R.S. Employer Identification No.)



2509 Osborne Road

St. Marys, Georgia 31558

(Address of principal executive offices)



(912) 882-3400

(Issuers telephone number)



N/A

(Former name, former address and former fiscal year, if changed since last report)



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Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of
the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No ̈



Number of shares outstanding of the issuers sole class of common equity, $0.001 par value per share, as of November 14, 2004:
1,016,782.



Transitional Small Business Disclosure
Format    Yes ̈No  x



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##### Table of Contents

FIRST NATIONAL BANC, INC.



FORM 10-QSB



INDEX



|           |  |                                                            |  |      
|---------- |  | ---------------------------------------------------------- |  | -----
|           |  |                                                            |  | Page 
|           |  |                                                           
|PART I     |  | FINANCIAL INFORMATION                                      |  |      
|           |  |                                                           
|Item 1.    |  | Financial Statements:                                      |  |      
|           |  |                                                           
|           |  | Consolidated Balance Sheets                                |  | 1    
|           |  | Consolidated Statements of Income                          |  | 2    
|           |  | Consolidated Statements of Changes in Shareholders Equity |  | 3    
|           |  | Consolidated Statements of Cash Flows                      |  | 4    
|           |  | Notes to Unaudited Consolidated Financial Statements       |  | 5-9  
|           |  |                                                           
|Item 2.    |  | Managements Discussion and Analysis                       |  | 10-18
|Item 3.    |  | Controls and Procedures                                    |  | 18-19
|           |  |                                                           
|PART II    |  | OTHER INFORMATION                                          |  |      
|           |  |                                                           
|Item 6.    |  | Exhibits                                                   |  | 20   
|           |  |                                                           
|SIGNATURES |  |                                                            |  | 21   



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##### Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements



FIRST NATIONAL BANC, INC. & SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS



|                                                                                                                                   |  |                              |             |   |                            |   |             |  
|---------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------- | ----------- | - | -------------------------- | - | ----------- | -
|                                                                                                                                   |  | September 30,2004(Unaudited) |             |   | December 31,2003 (Audited) |  
|ASSETS                                                                                                                             |  |                              |             |   |                            |   |             |  
|Cash and due from banks                                                                                                            |  | $                            | 8,264,800   |   |                            | $ | 4,797,226   |  
|Federal funds sold                                                                                                                 |  |                              |            |   |                            |   | 4,823,000   |  
|                                                                                                                                   |  |                              |             |   |                            |   |             |  
|Cash and cash equivalents                                                                                                          |  |                              | 8,264,800   |   |                            |   | 9,620,226   |  
|Interest-bearing deposits in other banks                                                                                           |  |                              | 621,336     |   |                            |   | 1,054,206   |  
|Securities available-for-sale                                                                                                      |  |                              | 17,039,909  |   |                            |   | 9,045,775   |  
|Loans                                                                                                                              |  |                              | 212,903,100 |   |                            |   | 116,879,504 |  
|                                                                                                                                   |  |                              | (2,764,011  | ) |                            |   | (1,578,058  | )
|                                                                                                                                   |  |                              |             |   |                            |   |             |  
|Loans, net                                                                                                                         |  |                              | 210,139,089 |   |                            |   | 115,301,446 |  
|Premises and equipment, net                                                                                                        |  |                              | 8,364,673   |   |                            |   | 2,889,272   |  
|Foreclosed real estate, net                                                                                                        |  |                              | 1,203,126   |   |                            |   | 1,846,823   |  
|Other investments                                                                                                                  |  |                              | 1,438,500   |   |                            |   | 776,000     |  
|Intangible assets                                                                                                                  |  |                              | 2,525,012   |   |                            |   |            |  
|Other assets                                                                                                                       |  |                              | 2,328,010   |   |                            |   | 1,663,840   |  
|                                                                                                                                   |  |                              |             |   |                            |   |             |  
|Total assets                                                                                                                       |  | $                            | 251,924,455 |   |                            | $ | 142,197,588 |  
|                                                                                                                                   |  |                              |             |   |                            |   |             |  
|LIABILITIES                                                                                                                        |  |                              |             |   |                            |   |             |  
|Deposits:                                                                                                                          |  |                              |             |   |                            |   |             |  
|Noninterest-bearing                                                                                                                |  | $                            | 24,030,320  |   |                            | $ | 10,507,006  |  
|Interest-bearing                                                                                                                   |  |                              | 173,820,349 |   |                            |   | 102,287,651 |  
|                                                                                                                                   |  |                              |             |   |                            |   |             |  
|Total deposits                                                                                                                     |  |                              | 197,850,669 |   |                            |   | 112,794,657 |  
|Federal funds purchased                                                                                                            |  |                              | 3,805,000   |   |                            |   |            |  
|Securities sold under agreements to repurchase                                                                                     |  |                              | 2,837,000   |   |                            |   | 3,597,000   |  
|Federal Home Loan Bank advances                                                                                                    |  |                              | 18,250,000  |   |                            |   | 13,000,000  |  
|Subordinated debentures                                                                                                            |  |                              | 5,155,000   |   |                            |   |            |  
|Other liabilities                                                                                                                  |  |                              | 1,950,208   |   |                            |   | 1,015,835   |  
|                                                                                                                                   |  |                              |             |   |                            |   |             |  
|Total liabilities                                                                                                                  |  |                              | 229,847,877 |   |                            |   | 130,407,492 |  
|                                                                                                                                   |  |                              |             |   |                            |   |             |  
|SHAREHOLDERS EQUITY                                                                                                               |  |                              |             |   |                            |   |             |  
|Common stock - par value $.001 per share; 9,000,000 shares authorized; 1,033,027 and 492,441 issued in 2004 and 2003,
respectively |  |                              | 1,033       |   |                            |   | 492         |  
|Preferred stock - par value $.001 per share 1,000,000 shares authorized; none issued                                               |  |                              |            |   |                            |   |            |  
|Additional paid-in capital                                                                                                         |  |                              | 16,646,096  |   |                            |   | 7,113,867   |  
|Retained earnings                                                                                                                  |  |                              | 6,186,810   |   |                            |   | 4,881,686   |  
|Accumulated other comprehensive income                                                                                             |  |                              | 19,865      |   |                            |   | 11,161      |  
|                                                                                                                                   |  |                              |             |   |                            |   |             |  
|                                                                                                                                   |  |                              | 22,853,804  |   |                            |   | 12,007,206  |  
|Treasury stock, at cost - 16,245 shares in 2004 and 6,536 shares in 2003                                                           |  |                              | (777,226    | ) |                            |   | (217,110    | )
|                                                                                                                                   |  |                              |             |   |                            |   |             |  
|Total shareholders equity                                                                                                         |  |                              | 22,076,578  |   |                            |   | 11,790,096  |  
|                                                                                                                                   |  |                              |             |   |                            |   |             |  
|Total liabilities and shareholders equity                                                                                         |  | $                            | 251,924,455 |   |                            | $ | 142,197,588 |  
|                                                                                                                                   |  |                              |             |   |                            |   |             |  



See notes to consolidated financial
statements



1



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##### Table of Contents

FIRST NATIONAL BANC, INC. & SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)



|                                                    |  |                                 |           |                                |   |           |  |   |            |   |  |   |          
|--------------------------------------------------- |  | ------------------------------- | --------- | ------------------------------ | - | --------- |  | - | ---------- | - |  | - | ---------
|                                                    |  | Three Months EndedSeptember 30, |           | Nine Months EndedSeptember 30,
|                                                    |  | 2004                            |           | 2003                           |   | 2004      |  |   | 2003      
|INTEREST INCOME                                     |  |                                 |           |                                |   |           |  |   |            |   |  |   |          
|Loans, including fees                               |  | $                               | 3,944,481 |                                | $ | 2,243,950 |  | $ | 10,075,482 |   |  |   | 6,328,724
|Investment securities:                              |  |                                 |           |                                |   |           |  |   |            |   |  |   |          
|Taxable                                             |  |                                 | 114,512   |                                |   | 41,173    |  |   | 253,000    |   |  |   | 154,680  
|Tax-exempt                                          |  |                                 | 10,500    |                                |   | 14,202    |  |   | 31,500     |   |  |   | 64,888   
|Other interest                                      |  |                                 | 13,846    |                                |   | 27,743    |  |   | 35,981     |   |  |   | 144,551  
|                                                    |  |                                 |           |                                |   |           |  |   |            |   |  |   |          
|Total interest income                               |  |                                 | 4,083,339 |                                |   | 2,327,068 |  |   | 10,395,963 |   |  |   | 6,692,843
|                                                    |  |                                 |           |                                |   |           |  |   |            |   |  |   |          
|INTEREST EXPENSE                                    |  |                                 |           |                                |   |           |  |   |            |   |  |   |          
|Deposits                                            |  |                                 | 926,304   |                                |   | 579,570   |  |   | 2,336,431  |   |  |   | 1,806,386
|Federal Home Loan Bank advances                     |  |                                 | 140,667   |                                |   | 175,810   |  |   | 418,805    |   |  |   | 521,697  
|Other borrowed funds                                |  |                                 | 74,930    |                                |   | 12,056    |  |   | 143,671    |   |  |   | 47,006   
|                                                    |  |                                 |           |                                |   |           |  |   |            |   |  |   |          
|Total interest expense                              |  |                                 | 1,141,901 |                                |   | 767,436   |  |   | 2,898,907  |   |  |   | 2,375,089
|                                                    |  |                                 |           |                                |   |           |  |   |            |   |  |   |          
|NET INTEREST INCOME                                 |  |                                 | 2,941,438 |                                |   | 1,559,632 |  |   | 7,497,056  |   |  |   | 4,317,754
|PROVISION FOR LOAN LOSSES                           |  |                                 | 49,000    |                                |   | 125,000   |  |   | 314,658    |   |  |   | 294,916  
|                                                    |  |                                 |           |                                |   |           |  |   |            |   |  |   |          
|NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES |  |                                 | 2,892,438 |                                |   | 1,434,632 |  |   | 7,182,398  |   |  |   | 4,022,838
|                                                    |  |                                 |           |                                |   |           |  |   |            |   |  |   |          
|NONINTEREST INCOME                                  |  |                                 |           |                                |   |           |  |   |            |   |  |   |          
|Service charges on deposit accounts                 |  |                                 | 140,221   |                                |   | 92,518    |  |   | 352,254    |   |  |   | 261,896  
|Mortgage origination fees                           |  |                                 | 196,668   |                                |   | 90,099    |  |   | 442,059    |   |  |   | 283,413  
|Other service charges and fees                      |  |                                 | 209,030   |                                |   | 124,686   |  |   | 568,637    |   |  |   | 315,525  
|Other income                                        |  |                                 | 77,791    |                                |   | 70,060    |  |   | 224,968    |   |  |   | 228,496  
|Gain (Loss) on sale of securities                   |  |                                 |          |                                |   | 27,978    |  |   | (26,075    | ) |  |   | 27,978   
|                                                    |  |                                 |           |                                |   |           |  |   |            |   |  |   |          
|Total noninterest income                            |  |                                 | 623,710   |                                |   | 405,341   |  |   | 1,561,843  |   |  |   | 1,117,308
|                                                    |  |                                 |           |                                |   |           |  |   |            |   |  |   |          
|NONINTEREST EXPENSES                                |  |                                 |           |                                |   |           |  |   |            |   |  |   |          
|Salaries and employee benefits                      |  |                                 | 1,008,361 |                                |   | 585,204   |  |   | 2,608,202  |   |  |   | 1,721,706
|Net occupancy expense                               |  |                                 | 131,092   |                                |   | 63,538    |  |   | 336,953    |   |  |   | 153,229  
|Professional                                        |  |                                 | 129,153   |                                |   | 49,971    |  |   | 267,891    |   |  |   | 123,241  
|Data Processing                                     |  |                                 | 110,856   |                                |   | 68,826    |  |   | 334,245    |   |  |   | 255,255  
|Directors Fees                                     |  |                                 | 129,300   |                                |   | 64,550    |  |   | 323,000    |   |  |   | 182,400  
|Contributions                                       |  |                                 | 421,899   |                                |   | 1,600     |  |   | 426,332    |   |  |   | 4,272    
|Other expenses                                      |  |                                 | 679,849   |                                |   | 311,051   |  |   | 1,680,646  |   |  |   | 908,465  
|                                                    |  |                                 |           |                                |   |           |  |   |            |   |  |   |          
|Total noninterest expense                           |  |                                 | 2,610,510 |                                |   | 1,144,740 |  |   | 5,977,269  |   |  |   | 3,348,568
|                                                    |  |                                 |           |                                |   |           |  |   |            |   |  |   |          
|INCOME BEFORE INCOME TAXES                          |  |                                 | 905,638   |                                |   | 695,233   |  |   | 2,766,972  |   |  |   | 1,791,578
|PROVISION FOR INCOME TAXES                          |  |                                 | 306,953   |                                |   | 229,927   |  |   | 1,037,190  |   |  |   | 650,088  
|                                                    |  |                                 |           |                                |   |           |  |   |            |   |  |   |          
|NET INCOME                                          |  | $                               | 598,685   |                                | $ | 465,306   |  | $ | 1,729,782  |   |  | $ | 1,141,490
|                                                    |  |                                 |           |                                |   |           |  |   |            |   |  |   |          
|Earnings per share:                                 |  |                                 |           |                                |   |           |  |   |            |   |  |   |          
|Basic                                               |  | $                               | 0.59      |                                | $ | 0.65      |  | $ | 1.89       |   |  | $ | 1.60     
|                                                    |  |                                 |           |                                |   |           |  |   |            |   |  |   |          
|Diluted                                             |  | $                               | 0.58      |                                | $ | 0.64      |  | $ | 1.86       |   |  | $ | 1.58     
|                                                    |  |                                 |           |                                |   |           |  |   |            |   |  |   |          



See notes to consolidated financial
statements



2



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##### Table of Contents

FIRST NATIONAL BANC, INC. & SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY

(Unaudited)

Nine
Months Ended September 30, 2004 and 2003



|                                                                                     |  |              |  |        |       |                            |   |            |                   |  |   |                                               |   |  |                |         |   |       |   |          |   |  |   |            |  
|------------------------------------------------------------------------------------ |  | ------------ |  | ------ | ----- | -------------------------- | - | ---------- | ----------------- |  | - | --------------------------------------------- | - |  | -------------- | ------- | - | ----- | - | -------- | - |  | - | ---------- | -
|                                                                                     |  |              |  |        |       | Additional Paid-In Capital |   |            | Retained Earnings |  |   | Accumulated Other Comprehensive Income (Loss) |   |  | Treasury Stock |         |   | Total |  
|                                                                                     |  |              |  |        |       |                            |  
|                                                                                     |  | Common Stock |  |        |       |                            |  
|                                                                                     |  | Shares       |  | Amount |       |                            |   |            |                  
|BALANCE - DECEMBER 31, 2002                                                          |  | 489,279      |  | $      | 489   |                            | $ | 7,071,713  |                   |  | $ | 3,452,946                                     |   |  | $              | 87,131  |   |       | $ | (79,414  | ) |  | $ | 10,532,865 |  
|                                                                                     |  |              |  |        |       |                            |  
|Comprehensive income:                                                                |  |              |  |        |       |                            |   |            |                   |  |   |                                               |   |  |                |         |   |       |   |          |   |  |   |            |  
|Net income                                                                           |  |              |  |        |       |                            |   |            |                   |  |   | 1,141,490                                     |   |  |                |         |   |       |   |          |   |  |   | 1,141,490  |  
|Other comprehensive income:                                                          |  |              |  |        |       |                            |   |            |                   |  |   |                                               |   |  |                |         |   |       |   |          |   |  |   |            |  
|Net change in unrealized (loss) on securities available-for-sale, net of tax effects |  |              |  |        |       |                            |   |            |                   |  |   |                                               |   |  |                | (75,654 | ) |       |   |          |   |  |   | (75,654    | )
|                                                                                     |  |              |  |        |       |                            |   |            |                   |  |   |                                               |   |  |                |         |   |       |   |          |   |  |   |            |  
|Total comprehensive income                                                           |  |              |  |        |       |                            |   |            |                   |  |   |                                               |   |  |                |         |   |       |   |          |   |  |   | 1,065,836  |  
|                                                                                     |  |              |  |        |       |                            |   |            |                   |  |   |                                               |   |  |                |         |   |       |   |          |   |  |   |            |  
|Exercise of options                                                                  |  | 3,162        |  |        | 3     |                            |   | 34,016     |                   |  |   |                                               |   |  |                |         |   |       |   | 30,981   |   |  |   | 65,000     |  
|                                                                                     |  |              |  |        |       |                            |  
|Reissuance treasury stock (326 shares)                                               |  |              |  |        |       |                            |   | 2,471      |                   |  |   |                                               |   |  |                |         |   |       |   | 10,996   |   |  |   | 13,467     |  
|                                                                                     |  |              |  |        |       |                            |  
|Purchase of treasury stock (4,888 shares)                                            |  |              |  |        |       |                            |   |            |                   |  |   |                                               |   |  |                |         |   |       |   | (247,041 | ) |  |   | (247,041   | )
|                                                                                     |  |              |  |        |       |                            |   |            |                   |  |   |                                               |   |  |                |         |   |       |   |          |   |  |   |            |  
|BALANCE - SEPTEMBER 30, 2003                                                         |  | 492,441      |  | $      | 492   |                            | $ | 7,108,200  |                   |  | $ | 4,594,436                                     |   |  | $              | 11,477  |   |       | $ | (284,478 | ) |  | $ | 11,430,127 |  
|                                                                                     |  |              |  |        |       |                            |   |            |                   |  |   |                                               |   |  |                |         |   |       |   |          |   |  |   |            |  
|BALANCE - DECEMBER 31, 2003                                                          |  | 492,441      |  | $      | 492   |                            | $ | 7,113,867  |                   |  | $ | 4,881,686                                     |   |  | $              | 11,161  |   |       | $ | (217,110 | ) |  | $ | 11,790,096 |  
|Comprehensive income:                                                                |  |              |  |        |       |                            |   |            |                   |  |   |                                               |   |  |                |         |   |       |   |          |   |  |   |            |  
|Net income                                                                           |  |              |  |        |       |                            |   |            |                   |  |   | 1,729,782                                     |   |  |                |         |   |       |   |          |   |  |   | 1,729,782  |  
|Other comprehensive income:                                                          |  |              |  |        |       |                            |   |            |                   |  |   |                                               |   |  |                |         |   |       |   |          |   |  |   |            |  
|Net change in unrealized gain on securities available-for-sale, net of tax effects   |  |              |  |        |       |                            |   |            |                   |  |   |                                               |   |  |                | 8,704   |   |       |   |          |   |  |   | 8,704      |  
|                                                                                     |  |              |  |        |       |                            |   |            |                   |  |   |                                               |   |  |                |         |   |       |   |          |   |  |   |            |  
|Total comprehensive income                                                           |  |              |  |        |       |                            |   |            |                   |  |   |                                               |   |  |                |         |   |       |   |          |   |  |   | 1,738,486  |  
|                                                                                     |  |              |  |        |       |                            |   |            |                   |  |   |                                               |   |  |                |         |   |       |   |          |   |  |   |            |  
|Exercise of options                                                                  |  | 10,775       |  |        | 11    |                            |   | 353,344    |                   |  |   |                                               |   |  |                |         |   |       |   | (132,367 | ) |  |   | 220,988    |  
|                                                                                     |  |              |  |        |       |                            |  
|Cash dividends                                                                       |  |              |  |        |       |                            |   |            |                   |  |   | (424,658                                      | ) |  |                |         |   |       |   |          |   |  |   | (424,658   | )
|                                                                                     |  |              |  |        |       |                            |  
|Purchase of treasury stock (11,332 shares)                                           |  |              |  |        |       |                            |   |            |                   |  |   |                                               |   |  |                |         |   |       |   | (427,749 | ) |  |   | (427,749   | )
|                                                                                     |  |              |  |        |       |                            |  
|Stock issuance in merger                                                             |  | 204,000      |  |        | 204   |                            |   | 9,179,211  |                   |  |   |                                               |   |  |                |         |   |       |   |          |   |  |   | 9,179,415  |  
|                                                                                     |  |              |  |        |       |                            |  
|Stock dividend effected in form of a stock split                                     |  | 325,811      |  |        | 326   |                            |   | (326       | )                 |  |   |                                               |   |  |                |         |   |       |   |          |   |  |   |            |  
|                                                                                     |  |              |  |        |       |                            |   |            |                   |  |   |                                               |   |  |                |         |   |       |   |          |   |  |   |            |  
|BALANCE - SEPTEMBER 30, 2004                                                         |  | 1,033,027    |  | $      | 1,033 |                            | $ | 16,646,096 |                   |  | $ | 6,186,810                                     |   |  | $              | 19,865  |   |       | $ | (777,226 | ) |  | $ | 22,076,578 |  
|                                                                                     |  |              |  |        |       |                            |   |            |                   |  |   |                                               |   |  |                |         |   |       |   |          |   |  |   |            |  



See notes to consolidated financial
statements



3



---

##### Table of Contents

FIRST NATIONAL BANC, INC. & SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



|                                                                                  |  |                                 |             |   |      |   |             |  
|--------------------------------------------------------------------------------- |  | ------------------------------- | ----------- | - | ---- | - | ----------- | -
|                                                                                  |  | Nine Months Ended September 30, |            
|                                                                                  |  | 2004                            |             |   | 2003 |  
|OPERATING ACTIVITIES                                                              |  |                                 |             |   |      |   |             |  
|Net income                                                                        |  | $                               | 1,729,782   |   |      | $ | 1,141,490   |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                                 |             |   |      |   |             |  
|Depreciation                                                                      |  |                                 | 288,372     |   |      |   | 132,686     |  
|Amortization and accretion, net                                                   |  |                                 | (24,721     | ) |      |   | 89,461      |  
|(Gain) loss on sale of securities                                                 |  |                                 | 26,075      |   |      |   | (27,978     | )
|Provision for loan losses                                                         |  |                                 | 314,658     |   |      |   | 294,916     |  
|Loss on foreclosed real estate                                                    |  |                                 | 26,599      |   |      |   | 23,188      |  
|Changes in other assets and other liabilities, net                                |  |                                 | (289,275    | ) |      |   | (22,482     | )
|                                                                                  |  |                                 |             |   |      |   |             |  
|Net cash provided by operating activities                                         |  |                                 | 2,071,490   |   |      |   | 1,631,281   |  
|                                                                                  |  |                                 |             |   |      |   |             |  
|INVESTING ACTIVITIES                                                              |  |                                 |             |   |      |   |             |  
|Net decrease in interest-bearing deposits in other banks                          |  |                                 | 448,920     |   |      |   | 745,491     |  
|Activity in securities available-for-sale:                                        |  |                                 |             |   |      |   |             |  
|Maturities, prepayments and calls                                                 |  |                                 | 6,516,410   |   |      |   | 10,623,336  |  
|Sales                                                                             |  |                                 | 1,973,290   |   |      |   | 1,368,467   |  
|Purchases                                                                         |  |                                 | (12,321,631 | ) |      |   | (9,887,413  | )
|Net increase in loans                                                             |  |                                 | (32,424,828 | ) |      |   | (20,036,253 | )
|Net cash received in bank acquisition                                             |  |                                 | 4,475,712   |   |      |   |            |  
|Proceeds from sale of foreclosed real estate                                      |  |                                 | 693,742     |   |      |   | 149,798     |  
|Purchase of Federal Home Loan Bank stock                                          |  |                                 | (402,500    | ) |      |   | (12,150     | )
|Proceeds from sale of Federal Home Loan Bank stock                                |  |                                 | 235,000     |   |      |   |            |  
|Purchase of trust preferred securities                                            |  |                                 | (155,000    | ) |      |   |            |  
|Additions to premises and equipment                                               |  |                                 | (331,552    | ) |      |   | (20,956     | )
|                                                                                  |  |                                 |             |   |      |   |             |  
|Net cash used for investing activities                                            |  |                                 | (31,292,437 | ) |      |   | (17,069,680 | )
|                                                                                  |  |                                 |             |   |      |   |             |  
|FINANCING ACTIVITIES                                                              |  |                                 |             |   |      |   |             |  
|Net increase in deposits                                                          |  |                                 | 16,643,940  |   |      |   | 18,914,648  |  
|Net increase in Federal Home Loan Bank advances                                   |  |                                 | 5,250,000   |   |      |   |            |  
|Net increase in federal funds purchased                                           |  |                                 | 3,805,000   |   |      |   |            |  
|Net decrease in securities sold under agreements to repurchase                    |  |                                 | (2,248,000  | ) |      |   | (939,000    | )
|Proceeds from issuance of subordinated debentures                                 |  |                                 | 5,155,000   |   |      |   |            |  
|Cash dividends paid                                                               |  |                                 | (424,658    | ) |      |   |            |  
|Exercise of stock options                                                         |  |                                 | 111,988     |   |      |   |            |  
|Reissuance of treasury stock                                                      |  |                                 |            |   |      |   | 13,467      |  
|Purchase of treasury stock                                                        |  |                                 | (427,749    | ) |      |   | (247,041    | )
|                                                                                  |  |                                 |             |   |      |   |             |  
|Net cash provided by financing activities                                         |  |                                 | 27,865,521  |   |      |   | 17,742,074  |  
|                                                                                  |  |                                 |             |   |      |   |             |  
|Increase (decrease) in cash and cash equivalents                                  |  |                                 | (1,355,426  | ) |      |   | 2,303,675   |  
|                                                                                  |  |                                
|Cash and cash equivalents - beginning                                             |  |                                 | 9,620,226   |   |      |   | 4,623,197   |  
|                                                                                  |  |                                 |             |   |      |   |             |  
|Cash and cash equivalents - ending                                                |  | $                               | 8,264,800   |   |      | $ | 6,926,872   |  
|                                                                                  |  |                                 |             |   |      |   |             |  



See notes to consolidated financial
statements



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##### Table of Contents

FIRST NATIONAL BANC, INC. & SUBSIDIARIES



NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



NOTE
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



Basis of
presentation



The accompanying unaudited interim consolidated financial
statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with rules and regulations of the Securities and Exchange Commission. The statements do
not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. All adjustments have been made, which, in the opinion of management, are necessary for a fair presentation of
the results for the interim periods presented. Such adjustments are all of a normal and recurring nature. All significant inter-company accounts and transactions have been eliminated in consolidation. The results of operations for the three months
and nine months ended September 30, 2004 are not necessarily indicative of the results that may be expected for the year ending December 31, 2004. The December 31, 2003 consolidated balance sheet has been derived from the Companys 2003 audited
financial statements.



Critical accounting policies



A summary of significant accounting policies is included in the Companys Form 10-QSB
for the quarterly period ended March 31, 2004 filed with the Securities and Exchange Commission.



Intangible Assets



Intangible assets
include goodwill and core deposit premiums resulting from the acquisition of First National Bank located in Orange Park, Florida. Core deposit premiums are amortized over 10 to 15 years using the straight-line or the sum-of-the-years digits
method based upon historical studies of core deposits. Goodwill is not amortized but tested annually for impairment or at any time an event occurs or circumstances change that may trigger a decline in the value of the reporting unit. Examples of
such events or circumstances include adverse changes in legal factors, business climate, unanticipated competition, change in regulatory environment, or loss of key personnel.



The Company tests for impairment in accordance with SFAS No. 142, Goodwill and Other Intangible Assets (SFAS 142).
Potential impairment of goodwill exists when the carrying amount of a reporting unit exceeds its implied fair value. The fair value for each reporting unit is computed using one or a combination of the following three methods: income, market value,
or cost method. The income method uses a discounted cash flow analysis to determine fair value by considering a reporting units capital structure and applying a risk-adjusted discount rate to forecast earnings based on a capital asset pricing
model. The market value method uses recent transaction analysis or publicly traded comparable analysis for similar assets and liabilities to determine fair value. The cost method assumes the net assets of a recent business combination accounted for
under the purchase method of accounting will be recorded at fair value if no event or circumstance has occurred triggering a decline in the value. To the extent a reporting units carrying amount exceeds its fair value, an indication exists
that the reporting units goodwill may be impaired, and a second step of impairment testing will be performed. In the second step, the implied fair value of the reporting units goodwill is determined by allocating the reporting
units fair value to all of its assets (recognized and unrecognized) and liabilities as if the reporting unit had been acquired in a business combination at the date of the impairment test. If the implied fair value of reporting unit goodwill
is lower than its carrying amount, goodwill is impaired and is written down to its implied fair value. The loss recognized is limited to the carrying amount of goodwill.



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##### Table of Contents

Once an impairment loss is recognized, future increases in fair value will not result in the reversal of previously
recognized losses.



As of September 30, 2004, the Company had unamortized
goodwill in the amount of $1,497,554 and unamortized identifiable core deposit intangible assets in the amount of $1,027,458.



Recently Issued Accounting Standards



No recent authoritative pronouncements that affect accounting, reporting, and disclosure of financial information by us have occurred during the quarter ending September
30, 2004, other than the items described below.



In November 2003, the Emerging
Issues Task Force (EITF) reached a consensus that certain quantitative and qualitative disclosures should be required for debt and marketable equity securities classified as available for sale or held to maturity under SFAS No. 115 and
SFAS No. 124 that are impaired at the balance sheet date but for which other-than-temporary impairment has not been recognized. Accordingly EITF issued EITF No. 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to
Certain Investments. This issue addresses the meaning of other-than-temporary impairment and its application to investments classified as either available for sale or held to maturity under SFAS No. 115 and provides guidance determining the
amount of impairment and additional quantitative and qualitative disclosures. The guidance for determining the amount of impairment was scheduled to be effective for periods ending after June 15, 2004, but has been delayed indefinitely pending
implementation guidance by the FASB. The disclosure provisions of EITF No. 03-1 were effective for fiscal years ending after December 15, 2003. Adopting the disclosure provisions of EITF No. 03-1 did not have any impact on the Companys
financial position or results of operations.



In March 2004, the FASB
issued an exposure draft on Share-Based Payment. The proposed Statement addresses the accounting for transactions in which an enterprise receives employee services in exchange for (a) equity instruments of the enterprise or (b)
liabilities that are based on the fair value of the enterprises equity instruments or that may be settled by the issuance of such equity instruments. This proposed Statement would eliminate the ability to account for share-based compensation
transactions using APB Opinion No. 25, Accounting for Stock Issued to Employees, and generally would require instead that such transactions be accounted for using a fair-value-based method. This Statement, if approved, was scheduled to
be effective for awards that are granted, modified, or settled in fiscal years beginning after a) December 15, 2004 for public entities and nonpublic entities that used the fair-value-based method of accounting under the original provisions of
Statement 123 for recognition or pro forma disclosure purposes and b) December 15, 2005 for all other nonpublic entities.On October 16, 2004, the FASB delayed the effective date of this proposal by six months and anticipates it will be
effective for by the third quarter of 2005. Retrospective application of this Statement is not permitted. The adoption of this Statement, if approved, could have an impact on the Companys financial position or results of operations.



Accounting standards which have been issued or proposed by the Financial
Accounting Standards Board that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption.



NOTE 2. EARNINGS PER SHARE



Basic and diluted earnings per share have been computed based upon net income presented in the accompanying consolidated statements of income divided by the weighted
average number of common shares outstanding or assumed outstanding after giving retroactive effect for a 46% stock dividend to shareholders of record on April 1, 2004 as summarized below. Diluted earnings per share reflect the dilutive effect of
additional shares of common stock that could be issued upon the exercise of outstanding stock options.



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##### Table of Contents

|                                                                                                          |  |                                 |  |                                |  |         |  |        
|--------------------------------------------------------------------------------------------------------- |  | ------------------------------- |  | ------------------------------ |  | ------- |  | -------
|                                                                                                          |  | Three Months EndedSeptember 30, |  | Nine Months EndedSeptember 30,
|                                                                                                          |  | 2004                            |  | 2003                           |  | 2004    |  | 2003   
|Weighted average number of common shares used in basic earnings per share                                 |  | 1,016,486                       |  | 714,901                        |  | 917,135 |  | 715,619
|Effect of dilutive securities:                                                                            |  |                                 |  |                                |  |         |  |        
|Stock options                                                                                             |  | 11,767                          |  | 9,031                          |  | 11,767  |  | 9,031  
|                                                                                                          |  |                                 |  |                                |  |         |  |        
|Weighted average number of common and dilutive potential common shares used in diluted earnings per share |  | 1,028,253                       |  | 723,932                        |  | 928,902 |  | 724,650
|                                                                                                          |  |                                 |  |                                |  |         |  |        



NOTE 3. MERGER



Effective March 31, 2004, the Company consummated its acquisition of First National Bank
located in Orange Park, Florida (First National Bank). Under the terms of the merger, the Company issued 204,000 shares of its common stock in exchange for 100% of the outstanding common stock of First National Bank. Each issued and outstanding
share of common stock of First National Bank was converted into 0.68 shares of common stock of the Company at the effective time of the merger.



The acquisition was accounted for under the purchase method in accordance with SFAS 141, Business Combinations, and was intended to qualify as a tax-free
reorganization under Section 368(a) of the Internal Revenue Code. In accordance with SFAS 141, the purchase price has been allocated to the assets and liabilities assumed based on the estimated fair values at the date of acquisition. The estimated
fair values of the purchased assets and liabilities at the date of the transaction were determined from a study prepared by Kraft Bros, Esstman, Patton & Harrell, PLLC of Nashville, Tennessee and their affiliate Centennial Valuation Group, LLC,
also of Nashville, Tennessee. The excess of purchase price over the estimated fair values of net assets acquired has been recorded as goodwill. The allocation of the purchase price, including related acquisition costs, to the assets and acquired and
liabilities assumed is presented in note 4.



The following pro forma
consolidated results of operations have been prepared as if the acquisition of First National Bank had occurred at January 1, 2003. The pro forma information is not necessarily indicative of the results of operations that would have been achieved
had the merger been completed at the beginning of the applicable periods presented, nor is it intended to be a projection of future results.



|                               |  |                                 |           |                                |   |           |  |      |           |  |   |          
|------------------------------ |  | ------------------------------- | --------- | ------------------------------ | - | --------- |  | ---- | --------- |  | - | ---------
|                               |  | Three Months EndedSeptember 30, |           | Nine Months EndedSeptember 30,
|                               |  | 2004                            |           | 2003                           |   | 2004      |  | 2003
|Net interest income            |  | $                               | 2,941,438 |                                | $ | 2,303,376 |  | $    | 8,334,046 |  | $ | 6,345,307
|Net income                     |  |                                 | 598,687   |                                |   | 720,100   |  |      | 1,911,691 |  |   | 1,693,178
|                               |  |                                 |           |                               
|Net interest income per share: |  |                                 |           |                                |   |           |  |      |           |  |   |          
|Basic                          |  | $                               | 2.89      |                                | $ | 2.27      |  | $    | 9.09      |  | $ | 6.25     
|Diluted                        |  |                                 | 2.86      |                                |   | 2.25      |  |      | 8.92      |  |   | 6.17     
|                               |  |                                 |           |                               
|Earnings per share:            |  |                                 |           |                                |   |           |  |      |           |  |   |          
|Basic                          |  | $                               | 0.59      |                                | $ | 0.71      |  | $    | 2.08      |  | $ | 1.67     
|Diluted                        |  |                                 | 0.58      |                                |   | 0.70      |  |      | 2.05      |  |   | 1.65     



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##### Table of Contents

NOTE 4. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION



Cash paid during the period for:



|             |  |                                |           |      |   |          
|------------ |  | ------------------------------ | --------- | ---- | - | ---------
|             |  | Nine Months EndedSeptember 30,
|             |  | 2004                           |           | 2003
|Income taxes |  | $                              | 1,475,381 |      | $ | 756,999  
|Interest     |  | $                              | 2,929,124 |      | $ | 2,478,873



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##### Table of Contents

Supplemental schedule of noncash investing and financing activities:



Acquisition of First National Bank, Orange Park, Florida:



|                                                      |  |                  |           
|----------------------------------------------------- |  | ---------------- | ----------
|                                                      |  | At June 30, 2004
|Assets Acquired:                                      |  |                  |           
|Cash                                                  |  | $                | 4,082,355 
|Federal funds sold                                    |  |                  | 544,000   
|Investment securities                                 |  |                  | 4,236,979 
|Loans, net                                            |  |                  | 62,804,117
|Premises and equipment                                |  |                  | 5,432,221 
|Other investments                                     |  |                  | 340,000   
|Goodwill                                              |  |                  | 1,497,554 
|Core deposit intangibles                              |  |                  | 1,128,000 
|Other assets                                          |  |                  | 653,452   
|                                                      |  |                  |           
|Total Assets                                          |  | $                | 80,718,678
|                                                      |  |                  |           
|Liabilities Assumed:                                  |  |                  |           
|Deposits                                              |  | $                | 68,583,381
|Securities sold under agreement to repurchase         |  |                  | 1,488,000 
|Other liabilities                                     |  |                  | 1,317,239 
|                                                      |  |                  |           
|Total Liabilities                                     |  |                  | 71,388,620
|                                                      |  |                  |           
|Issuance of stock in merger                           |  |                  | 9,179,415 
|                                                      |  |                  |           
|Direct out-of-pocket costs of acquisition             |  |                  | 150,643   
|                                                      |  |                  |           
|Net cash and cash equivalents received in acquisition |  | $                | 4,475,712 
|                                                      |  |                  |           



NOTE 5. SUBORDINATED DEBT TO
NONCONSOLIDATED SUBSIDIARY



During the second quarter 2004, the Company
formed First National Banc Statutory Trust I (the Trust), a subsidiary whose sole purpose was to issue $5,000,000 principal amount of Trust Preferred Securities at a rate per annum equal to the 3-Month LIBOR plus 2.80% through a pool
sponsored by a national brokerage firm. The Trust Preferred Securities have a maturity of 30 years and are redeemable at the Companys option on any quarterly interest payment date after five years. There are certain circumstances (as described
in the Trust agreement) in which the securities may be redeemed within the first five years at the Companys option. The Companys liability to the nonconsolidated Trust is recorded as a liability of $5,155,000 and an investment of
$155,000 on the consolidated balance sheet. The proceeds from the offering were used to fund the expected capital needs of the Companys bank subsidiaries.



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##### Table of Contents

Item 2. Managements Discussion and Analysis of Financial Condition



This discussion is intended to assist in understanding the consolidated financial condition and results of operations of First National Banc, Inc. (the Company). The information should be reviewed in
conjunction with the consolidated financial statements and the related notes contained elsewhere in this report and in the Companys Annual Report on Form 10-KSB for the year ended December 31, 2003.



Overview



The Company was formed in 1996 to act as a holding company for First National Bank, St. Marys, Georgia, a national banking association that
was organized in 1988, in order to broaden the banks ability to serve its customers needs for financial services. The holding company structure enables the organization to expand its business through the acquisition of other financial
institutions and to respond to new or additional banking-related services opportunities to which a bank might not be permitted to respond.



First National Bank of St. Marys offers a full range of interest bearing and non-interest bearing accounts, including commercial and retail checking accounts, money
market accounts, individual retirement accounts, regular interest bearing statement savings accounts, certificates of deposit, commercial loans, real estate loans and consumer/installment loans. The bank operates two branches in Kingsland, Georgia
in addition to its main office in St. Marys, Georgia.



In June 1999, the
Company formed First National Insurance Agency, Inc., a full service insurance agency offering personal and commercial insurance products through major carriers. First National Insurance Agency operates out of First National Bank of St. Marys
main office in St. Marys, Georgia.



On March 31, 2004, the Company acquired
First National Bank located in Orange Park, Florida, which is now a subsidiary of the Company. First National Bank was originally chartered in November 1999 and its market area consists of the communities in and surrounding Clay County, Florida. The
Company expects the acquisition to create a banking organization with an increased regional scope while recognizing revenue enhancements and cost synergies. For more information on the acquisition see Note 3 of the unaudited consolidated financial
statements included in this report.



Since the acquisition of First National
Bank occurred on March 31, 2004, the acquired banks second and third quarter net income is reflected in the Companys net income through September 30, 2004.



Critical Accounting Policies



The Company has adopted various accounting policies which govern the application of accounting principles generally accepted in the United States of America in the
preparation of the Companys financial statements. The significant accounting policies of the Company are described in Note 1 to the unaudited consolidated financial statements included herein and in the Companys Form 10-QSB for the
quarterly period ended March 31, 2004.



Certain accounting policies involve
significant judgments and assumptions by management which have a material impact on the carrying value of certain assets and liabilities. Management considers such accounting policies to be critical accounting policies. The judgments and assumptions
used by management are based on historical experience and other factors which are believed to be reasonable under the circumstances. Because of the nature of the judgments and assumptions made by management, actual results could differ from these
judgments and estimates, which could have a material impact on the carrying values of assets and liabilities and the results of operations of the Company.



The Company believes the allowance for loan losses and valuation of intangible assets are critical accounting policies that require the most significant judgments and
estimates used in preparation of its consolidated financial statements. Refer to the sections Loan Portfolio and Asset Quality in this report and the section Intangible Assets in Note 1 to the unaudited
consolidated financial statements included herein for a detailed description of the Companys estimation process and methodology related to the allowance for loan losses and intangible assets.



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##### Table of Contents

Results Of Operations



Overview



For the nine months ended September 30, 2004, the Companys net income was $1,729,784, compared to $1,141,490 for the nine months ended September 30, 2003, an increase of 51.5%. For the nine months ended
September 30, 2004, the Companys basic earnings per share was $1.89 compared to $1.60 for the nine months ended September 30, 2003. The Companys return on average equity for the nine months ended September 30, 2004 was 13.62%
(annualized) compared to 12.86% (annualized) for the nine months ended September 30, 2003.



The Companys net income was $598,687 for the third quarter of 2004, compared to $465,306 for the third quarter of 2003, an increase of 28.7%. Basic earnings per share was $0.59 for the third quarter of 2004
compared to $0.65 for the third quarter of 2003.



The increase in net income
for the three and nine-month periods ended September 30, 2004 as compared to the same periods in 2003 was primarily due to the increase in earning assets resulting from the acquisition of First National Bank in Orange Park, Florida on March 31,
2004.



Net Interest Income



Net interest income is the difference between the interest and fees earned on loans,
securities, and other interest-earning assets (interest income) and the interest paid on deposits and borrowed funds (interest expense).



Net interest income was $7,497,056 for the nine months ended September 30, 2004, an increase of $3,179,302 (73.6%) over net interest income of $4,317,754 for the nine
months ended September 30, 2003. This increase was primarily the result of additional interest income generated by the growth in the Companys interest earning assets as a result of the bank acquisition at the end of the first quarter. Average
interest-earning assets grew to $181,183,415 for the nine months ended September 30, 2004, an increase of $62,892,152, or 53.2%, as compared to the average of $118,291,263 for the nine months ended September 30, 2003. Average interest-bearing
liabilities grew to $161,376,000 for the nine months ended September 30, 2004, an increase of $55,483,022, or 52.4%, as compared to the average of $105,892,978 for the nine months ended September 30, 2003. Loans are the highest yielding component of
interest-earning assets. The annualized yield on loans for the nine months ended September 30, 2004 and 2003 was 8.15% and 8.00%, respectively. The increase in the yield on loans is primarily due to the effect of the increasing interest rate
environment on the Companys loan portfolio. Annualized net interest margin for the nine months ended September 30, 2004 and 2003 was 5.52% and 4.87%, respectively. The Companys asset sensitive balance sheet position has resulted in an
increasing net interest margin in the current interest rate environment since rate sensitive assets continue to reprice at a faster rate than rate sensitive liabilities. Strong loan demand and the resulting loan fees have also served to increase the
net interest margin.



Net interest income was $2,941,438 for the three months
ended September 30, 2004, an increase of $1,381,806 (88.6%) over net interest income of $1,559,632 for the three months ended September 30, 2003. The increase was primarily the result of the acquisition of First National Bank and the Companys
asset sensitive balance sheet position. Additionally, although the interest rate environment is increasing, the Companys cost of funds continues to remain relatively low. The Companys annualized cost of funds was 2.35% for three months
ended September 30, 2004, a decrease of 42 basis points from 2.77% for the three months ended September 30, 2003. The annualized yield on interest earning assets was 7.34% for the three months ended September 30, 2004, a decrease of 28 basis points
from 7.62% for the three months ended September 30, 2003. The Company continues to utilize loan pricing guidelines and floors on variable rate loans in an effort to maintain the yield on interest earning assets.



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##### Table of Contents

Interest Income



Interest income for the nine months ended September 30, 2004 was $10,395,963, an increase of $3,703,120 (55.3%) from $6,692,843 for the nine
months ended September 30, 2003. The increase in interest income was primarily due to an increase in interest and fees on loans generated from a larger loan portfolio resulting from the bank acquisition at the end of the first quarter as well as
growth due to strong loan demand.



Interest income for the three months ended
September 30, 2004 was $4,083,339, an increase of $1,756,271 (75.5%) from $2,327,068 for the three months ended September 30, 2003. The Company continued to increase interest income primarily through the acquisition of First National Bank. In
addition, the Company maintained an increasing level of interest income and fees on loans for the three months ended September 30, 2004 compared to the three months ended September, 2003 as a result of increasing the Banks volume of loans and
through the repricing of the Companys rate sensitive loans in the currently increasing interest rate environment. The Companys opportunity to increase the volume of loans is primarily attributable to the Companys growth in the
Camden County, Georgia and north Florida market areas.



Interest
Expense



Interest expense for the nine months ended
September 30, 2004 was $2,898,907, an increase of $523,818 (22.1%) from $2,375,089 for the nine months ended September 30, 2003. While the Company has experienced a significant increase in interest-bearing deposits from September 30, 2003 to
September 2004, the cost of funds of these deposits has decreased due to the relatively low interest rate environment in which these funds were obtained.



Interest expense for the three months ended September 30, 2004 was $1,141,901, an increase of $374,465 (48.8%) from $767,436 for the three months ended September 30,
2003. The increase in interest expense is primarily the result of additional interest bearing liabilities that were assumed in the acquisition of First National Bank. Due to the prolonged period of low interest rates prior to the current environment
of increasing interest rates, the Companys annualized cost of funds for the three months ended September 30, 2004 decreased by 42 basis points to 2.35% from 2.77% from the three months ended September 30, 2003. The Companys use of other
borrowed funds increased with the addition of $5,155,000 in subordinated debentures resulting from an issue of trust preferred stock on April 20, 2004. As a result, interest expense on other borrowed funds for the three months ended September 30,
2004 was $74,930, an increase of $62,874 (521.5%) from $12,056 for the three months ended September 30, 2003.



Noninterest Income



Noninterest income for the nine months ended September 30, 2004 was $1,561,843, an increase of $444,535 (39.8%) from $1,117,308 for the nine months ended September 30, 2003. The increase is primarily the result of the inclusion of
noninterest income from the acquired bank during the second and third quarters of 2004 and a higher level of mortgage origination fees.



Noninterest income for the three months ended September 30, 2004 was $623,710, an increase of $218,369 (53.9%) from $405,341 for the three months ended September 30,
2003. The increase in noninterest income is primarily the result of the inclusion of third quarter noninterest income from the acquired bank, an increase in mortgage origination fees, and an increase in other service charges and fees. Mortgage
origination fees increased due to the additional production generated by the mortgage production office opened in Fort Lauderdale, Florida during the first quarter of 2004. Mortgage origination fees were $196,668 for the three months ended September
30, 2004, an increase of $106,569 (118.3%) from $90,099 for the three months ended September 30, 2003. Other service charges increased due to the inclusion of noninterest income from the acquired bank and service charges assessed to a large
commercial deposit relationship. Other service charges and fees were $209,030 for the three months ended September 30, 2004, an increase of $84,344 (67.7%) from $124,686 for the three months ended September 30, 2003.



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##### Table of Contents

Noninterest Expense



Noninterest expense for the nine months ended September 30, 2004 was $5,977,267, an increase of $2,628,699 (78.50%) from $3,348,568 for the nine months ended September
30, 2003. The increase is primarily the result of the inclusion of noninterest expense from the acquired bank during the second and third quarters of 2004 and a contribution of 14 acres of land during the third quarter.



Noninterest expense for the three months ended September 30, 2004 was $2,610,508, an increase
of $1,465,768 (128.0%) from $1,144,740 for the three months ended September 30, 2003. Salary and employee benefit costs were $1,008,361 for the three months ended September 30, 2004, an increase of $423,157 (72.3%) from $585,204 for the three months
ended September 30, 2003. The increase is primarily the result of the inclusion of the third quarter salary and employee benefit costs of the acquired bank as well as the additional staff operating from the mortgage origination office in Fort
Lauderdale, Florida that was opened during the first quarter of 2004. Occupancy expenses were $131,092 for the three months ended September 30, 2004, an increase of $67,554 (106.3%) from $63,538 for the three months ended September 30, 2003. These
increases are primarily the result of the addition of the acquired banks third quarter occupancy and other expenses as well as the additional costs associated with the operation of the mortgage origination office in Fort Lauderdale, Florida.
Professional expenses were $129,153 for the three months ended September 30, 2004, an increase of $79,182 (158.46%) from $49,971 for the three months ended September 30, 2003. The increase was primarily the result of the addition of the acquired
banks third quarter professional expense as well as legal and accounting expenses associated with additional reporting requirements resulting from the bank acquisition. Data processing fees were $110,856 for the three months ended September
30, 2004, an increase of $42,030 (61.07%) from $68,826 for the three months ended September 30, 2003. Directors fees were $129,300 for the three months ended September 30, 2004, an increase of $64,750 (100.31%) from $64,550 for the three
months ended September 30, 2003. The increases in data processing and directors fees are primarily the result of the addition of the acquired banks second and third quarter expenses. Contributions were $421,899 for the three months ended
September 30, 2004, an increase of $420,299 (26,268.69%) from $1,600 for the three months ended September 30, 2003. Contributions reflect a one-time charge of $418,736, which represents a donation of 14 acres of property to Camden County, Georgia.
The donation served to decrease other real estate owned and generated positive publicity and tax benefits for the Company. Other expenses were $679,849 for the three months ended September 30, 2004, an increase of $368,798 (118.57%) from $311,051
for the three months ended September 30, 2003. The increase was the result of the addition of the acquired banks third quarter expenses.



Income Taxes



The Company recorded income tax expense of $1,037,190 for the nine months ended September 30, 2004 resulting from the net income before taxes of $2,766,974, an increase of $387,102 (59.6%) from $650,088 resulting for
the nine months ended September 30, 2003. The increase was primarily the result of additional taxable income resulting from the inclusion of the acquired banks second and third quarter earnings and expenses.



The Company recorded income tax expense of $306,953, an increase of $77,026 (33.5%) for the
three months ended September 30, 2004, resulting from the net income before taxes of $905,640 for the quarter.



Review Of Financial Condition



Overview



Total consolidated assets at September 30, 2004 were
$251,924,455, an increase of $109,726,867 (77.2%) from December 31, 2003 total consolidated assets of $142,197,588. Interest-earning assets increased to



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$230,564,345 at September 30, 2004, from $131,802,485 at December 31, 2003, an increase of $98,761,860, or 74.9%. Total
loans, net of the allowance for loan losses, increased to $210,139,089 at September 30, 2004, from $115,301,446 at December 31, 2003, an increase of $94,837,643, or 82.3%.



The Companys growth in assets from December 31, 2003 to September 30, 2004 is primarily the result of the acquisition of First
National Bank located in Orange Park, Florida. The increase in assets was also the result of the Companys continued loan growth.



Management continuously monitors the financial condition of the Company in order to protect depositors, increase retained earnings and protect current and future
earnings. Significant items affecting the Companys financial condition are discussed in detail below.



Loans held by the Company for investment are primarily funded through deposits, Federal Home Loan Bank Advances, repurchase agreements, and federal funds agreements with correspondent financial institutions. At
September 30, 2004, loans represented 92.3% of interest-earning assets compared to 88.7% at December 31, 2003. Investments in securities available for sale at September 30, 2004 were $17,039,909, an increase of $7,994,134 (88.4%) from $9,045,775 at
December 31, 2003. The Companys Federal Home Loan Bank advances were $18,250,000 at September 30, 2004, an increase of $5,250,000 (40.4%) from the December 31, 2003 balance of $13,000,000. The Companys repurchase agreements were
$2,837,000 at September 30, 2004, a decrease of $760,000 (21.1%) from the December 31, 2003 balance of $3,597,000. The Companys balance of federal funds purchased was $3,805,000 at September 30, 2004 and was $0 at December 31, 2003.



Loan Portfolio



At September 30, 2004, the Companys loan portfolio was $212,903,100, an increase of
$96,023,596 compared to $116,879,504 at December 31, 2003. The increase was primarily the result of the acquisition of First National Bank located in Orange Park, Florida. The acquired banks loan portfolio was $71,348,836 at September 30,
2004. The addition of the loans from the acquired bank did not significantly change the Companys overall combination of loans in each loan category. The following table presents various categories of loans contained in the Companys loan
portfolio at the dates indicated:



|             |  |                      |  |                                               |   |  |                     |  |                                               |  
|------------ |  | -------------------- |  | --------------------------------------------- | - |  | ------------------- |  | --------------------------------------------- | -
|Type of Loan |  | At September 30,2004 |  | Percent ofloans in eachcategory tototal loans |   |  | At December 31,2003 |  | Percent ofloans in eachcategory tototal loans |  
|Real Estate  |  |                      |  |                                               |   |  |                     |  |                                               |  
|Construction |  | 48,278,530           |  | 22.7                                          | % |  | 23,999,305          |  | 20.5                                          | %
|Mortgage     |  | 129,399,598          |  | 60.8                                          | % |  | 71,962,843          |  | 61.6                                          | %
|             |  |                      |  |                                               |   |  |                     |  |                                               |  
|Total        |  | 177,678,128          |  | 83.5                                          | % |  | 95,962,148          |  | 82.1                                          | %
|Commercial   |  | 22,741,597           |  | 10.7                                          | % |  | 12,312,173          |  | 10.5                                          | %
|Consumer     |  | 11,876,473           |  | 5.5                                           | % |  | 8,401,947           |  | 7.2                                           | %
|Other        |  | 606,902              |  | 0.3                                           | % |  | 203,236             |  | 0.2                                           | %
|             |  |                      |  |                                               |   |  |                     |  |                                               |  
|Total        |  | 212,903,100          |  | 100.0                                         | % |  | 116,879,504         |  | 100.0                                         | %
|             |  |                      |  |                                               |   |  |                     |  |                                               |  



Deposits



At September 30, 2004, the Companys deposits were $197,850,669, an increase of
$85,056,012 compared to $112,794,657 at December 31, 2003. The increase was primarily the result of the acquisition of First National Bank located in Orange Park, Florida. The acquired banks deposits were $72,307,551 at September 30, 2004. The
Companys combined money market accounts increased significantly by $29,271,897 to $31,681,604 at September 30, 2004 from $2,409,707 at December 31, 2003 primarily due



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to the addition of the acquired banks money market balances. The Company also introduced a special tiered money
market product during the last two weeks of the third quarter, which also contributed to the increase in money market deposits. The following table presents the Companys various categories of deposits at the dates indicated:



|                                          |  |                      |  |                                                     |   |  |                     |  |                                                     |  
|----------------------------------------- |  | -------------------- |  | --------------------------------------------------- | - |  | ------------------- |  | --------------------------------------------------- | -
|Deposit Category                          |  | At September 30,2004 |  | Percent ofdeposits in eachcategory tototal deposits |   |  | At December 31,2003 |  | Percent ofDeposits in eachcategory tototal deposits |  
|Non-interest bearing demand deposits      |  | 24,030,320           |  | 12.1                                                | % |  | 10,507,006          |  | 9.3                                                 | %
|NOW                                       |  | 17,326,931           |  | 8.8                                                 | % |  | 20,088,872          |  | 17.8                                                | %
|Money market                              |  | 31,681,604           |  | 16.0                                                | % |  | 2,409,707           |  | 2.1                                                 | %
|Savings                                   |  | 5,713,670            |  | 2.9                                                 | % |  | 4,169,538           |  | 3.7                                                 | %
|Certificates of deposit, $100,000 or more |  | 71,241,590           |  | 36.0                                                | % |  | 35,764,807          |  | 31.7                                                | %
|Other time deposits                       |  | 47,856,554           |  | 24.2                                                | % |  | 39,854,727          |  | 35.4                                                | %
|                                          |  |                      |  |                                                     |   |  |                     |  |                                                     |  
|Total                                     |  | 197,850,669          |  | 100.0                                               | % |  | 112,794,657         |  | 100.0                                               | %
|                                          |  |                      |  |                                                     |   |  |                     |  |                                                     |  



Other Borrowings



The Company has agreements for advances with the Federal Home Loan Bank. These advances are
secured by a blanket floating lien agreement, which provides a security interest in all unencumbered first mortgage residential loans, and by investments in Federal Home Loan Bank stock. At September 30, 2004, the Company had $18,250,000 in advances
from the Federal Home Loan Bank compared to $13,000,000 at December 31, 2003. Towards the end of the third quarter, the Company elected to temporarily increase its utilization of short-term Federal Home Loan Bank advances in anticipation of a
significant increase in deposits due to the introduction of the special tiered money market product. The Company intends to reduce Federal Home Loan Bank advances with a portion of the funds generated by the special tiered money market product. The
weighted average interest rate on the Companys outstanding advances at September 30, 2004 was 3.56%.



The Company also utilizes securities sold under agreements to repurchase, which are classified as secured borrowings and generally mature within 90 days from the transaction date. The Company may be required to
provide additional collateral based on the fair value of the underlying securities. At September 30, 2004, the Company had an agreement to repurchase in the amount of $2,837,000 compared to $3,597,000 at December 31, 2003. The agreements to
repurchase are partially secured by mortgage-backed securities, and a portion of the reduction reflects principal repayments received on the underlying securities. The interest rate on the Companys agreement to repurchase was 1.79%.



Subordinated Debentures



During the second quarter 2004, the Company formed First National Banc Statutory Trust I
(the Trust), a subsidiary whose sole purpose was to issue $5,000,000 principal amount of Trust Preferred Securities at a rate per annum equal to the 3-Month LIBOR plus 2.80% through a pool sponsored by a national brokerage firm. The
Trust Preferred Securities have a maturity of 30 years and are redeemable at the Companys option on any quarterly interest payment date after five years. There are certain circumstances (as described in the Trust agreement) in which the
securities may be redeemed within the first five years at the Companys option. The Companys liability to the nonconsolidated Trust is recorded as a liability of $5,155,000 and an other investment of $155,000 on the consolidated balance
sheet. The proceeds from the offering were used to fund the expected capital needs of the Companys bank subsidiaries.



The debentures qualify as Tier 1, or core capital of the Company, subject to a 25% of capital limitation under risk-based capital guidelines developed by the Federal
Reserve Board. Under the regulatory capital



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guidelines, the portion that exceeds the 25% of capital limitation qualifies as Tier 2, or supplementary capital of the
Company. At September 30, 2004, $4,970,260 of the debentures qualified as Tier 1 capital and $29,740 qualified as Tier 2 capital of the Company.



Intangible Assets



At September 30, 2004, the Company had $2,525,012 in intangible assets resulting from the acquisition of First National Bank located in Orange Park, Florida. The Company did not have any intangible assets at December
31, 2003. Goodwill of $1,497,554 and a core deposit of $1,027,458 represented the balance of the intangible assets at September 30, 2004. For more information on the acquisition see Note 3 and Note 4 of the unaudited consolidated financial
statements.



Asset Quality



A major key to long-term earnings growth is the maintenance of a high-quality loan
portfolio. The Companys directive in this regard is carried out through its policies and procedures for extending credit to the Banks customers. The goal of these policies and procedures is to provide a sound basis for new credit
extensions and an early recognition of problem assets to allow the most flexibility in their timely disposition.



Non-performing assets were $1,807,797 at September 30, 2004, a decrease of $235,472, or 11.5%, compared to $2,043,269 at December 31, 2003. The decrease in other real
estate owned was primarily due to the contribution of 14 acres of property to Camden County, Georgia previously discussed in the results of operations. The composition of non-performing assets for each date is shown below.



|                                 |  |                   |           |                   |   |          
|-------------------------------- |  | ----------------- | --------- | ----------------- | - | ---------
|                                 |  | September 30,2004 |           | December 31, 2003
|Non-accrual loans                |  | $                 | 604,671   |                   | $ | 196,446  
|OREO, net of valuation allowance |  |                   | 1,203,126 |                   |   | 1,846,823
|                                 |  |                   |           |                   |   |          
|                                 |  | $                 | 1,807,797 |                   | $ | 2,043,269
|                                 |  |                   |           |                   |   |          



The ratio of non-performing assets to
net loans and other real estate was 0.86% at September 30, 2004 and 1.74% at December 31, 2003.



Reduction and disposition of non-performing assets is a management priority.



Allowance for Loan Losses



Additions to
the allowance for loan losses are made periodically to maintain the allowance at an appropriate level based upon managements analysis of potential risk in the loan portfolio. The amount of the loan loss allowance and related provision is
determined by an evaluation of historical loan losses, loan concentrations, including geographic and industry concentrations, policy and staff considerations, collateral values, economic factors including current and anticipated conditions, volume
of the loan portfolio, delinquency trends and peer comparisons. The allowance provides for probable losses that have been identified with individual loan relationships and for probable losses that are believed to be inherent in the loan portfolio
that have yet not been identified. From the previously described analysis, management determined that the allowance for loan losses should be increased through a provision for loan losses of $314,658 during the nine months ended September 30, 2004.
The ratio of allowance for loan losses to total gross loans was 1.30% at September 30, 2004 and 1.35% at December 31, 2003. Management considers the current allowance for loan losses appropriate based upon its analysis of the potential risk in the
portfolio; however, there can be no assurance that charge-offs in future periods will not exceed the allowance for loan losses or that additional provisions will not be required.



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Liquidity and Capital Resources



Liquidity is the ability of an organization to meet its financial commitments and obligations on a timely basis. These commitments and
obligations include credit needs of customers, withdrawals by depositors, and payment of operating expenses and dividends. The Company does not anticipate any events which would require liquidity beyond that which is available through deposit
growth, Federal Home Loan Bank advances, repurchase agreements, federal funds lines, or investment portfolio maturities. The Companys subsidiary banks actively manage the levels, types and maturities of earning assets in relation to the
sources available to fund current and future needs to ensure that adequate funding will be available at all times.



Management is committed to maintaining capital at a level sufficient to protect depositors, provide for reasonable growth, and fully comply with all regulatory
requirements. Managements strategy to achieve this goal is to retain sufficient earnings while providing a reasonable return on equity. Federal banking regulations establish certain capital adequacy standards required to be maintained by
banks. These regulations set minimum requirements for risk-based capital of 4% for core capital (Tier I), 8% for total risk-based capital and 4% for the leverage ratio. The Company and its subsidiary banks actual capital amounts
and ratios as of September 30, 2004 are presented in the following table:



|                                           |  |        |            |       |                               |   |        |                                                                |            |  |      |        |  |       |            |  |       |  
|------------------------------------------ |  | ------ | ---------- | ----- | ----------------------------- | - | ------ | -------------------------------------------------------------- | ---------- |  | ---- | ------ |  | ----- | ---------- |  | ----- | -
|                                           |  | Actual |            |       | For Capital Adequacy Purposes |   |        | To Be Well CapitalizedUnder Prompt CorrectiveAction Provisions |           
|September 30, 2004                         |  | Amount |            | Ratio |                               |   | Amount |                                                                | Ratio      |  |      | Amount |  | Ratio |           
|Total Capital ( to Risk Weighted Assets )  |  |        |            |       |                               |   |        |                                                                |            |  |      |        |  |       |            |  |       |  
|Consolidated                               |  | $      | 27,606,129 |       | 12.67                         | % |        | $                                                              | 17,437,462 |  | 8.00 | %      |  | $     | 21,796,828 |  | 10.00 | %
|First National Bank - St. Marys            |  | $      | 17,746,413 |       | 12.07                         | % |        | $                                                              | 11,058,180 |  | 8.00 | %      |  | $     | 13,822,725 |  | 10.00 | %
|First National Bank - Orange Park          |  | $      | 9,416,341  |       | 11.49                         | % |        | $                                                              | 6,364,496  |  | 8.00 | %      |  | $     | 7,955,620  |  | 10.00 | %
|Tier 1 Capital ( to Risk Weighted Assets ) |  |        |            |       |                               |   |        |                                                                |            |  |      |        |  |       |            |  |       |  
|Consolidated                               |  | $      | 24,851,298 |       | 11.40                         | % |        | $                                                              | 8,718,731  |  | 4.00 | %      |  | $     | 13,078,097 |  | 6.00  | %
|First National Bank - St. Marys            |  | $      | 17,746,413 |       | 11.62                         | % |        | $                                                              | 5,529,090  |  | 4.00 | %      |  | $     | 8,293,635  |  | 6.00  | %
|First National Bank - Orange Park          |  | $      | 8,452,820  |       | 10.27                         | % |        | $                                                              | 3,182,248  |  | 4.00 | %      |  | $     | 4,773,372  |  | 6.00  | %
|Tier 1 Capital ( to Average Assets )       |  |        |            |       |                               |   |        |                                                                |            |  |      |        |  |       |            |  |       |  
|Consolidated                               |  | $      | 24,851,298 |       | 10.23                         | % |        | $                                                              | 9,715,864  |  | 4.00 | %      |  | $     | 12,144,830 |  | 5.00  | %
|First National Bank - St. Marys            |  | $      | 17,746,413 |       | 10.06                         | % |        | $                                                              | 6,386,600  |  | 4.00 | %      |  | $     | 7,983,250  |  | 5.00  | %
|First National Bank - Orange Park          |  | $      | 8,452,820  |       | 10.08                         | % |        | $                                                              | 3,330,440  |  | 4.00 | %      |  | $     | 4,163,050  |  | 5.00  | %



Off-Balance Sheet Arrangements



In the ordinary course of business, the Company is a party to various
contractual commitments not reflected on its balance sheet. These instruments represent unfunded commitments, not outstanding balances. Therefore, the risk associated with these financial instruments is referred to as off-balance sheet
risk. Financial instruments with off-balance sheet risk include (i) commitments to extend credit, (ii) credit card commitments, and (iii) standby letters of credit. All of the commitments involve elements of credit and interest rate risk not
reflected on the balance sheet. The Companys subsidiary banks use the same credit and collateral policies in making these commitments as they do for on-balance sheet instruments.



Commitments to extend credit are legally binding agreements to lend money to a customer as long as there is no violation of any material
condition established in the contract. All of the Companys commitments have predetermined variable or fixed interest rates and fixed expiration dates. At September 30, 2004, commitments to extend credit totaled $34,271,176 and represented the
unfunded portion of equity, working capital and general lines of credit. At September 30, 2004, the Company had $315,700 in credit card commitments and $2,036,500 in outstanding standby letters of credit.



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Past experience indicates that many of these commitments to extend credit will expire unused. However, as described in
Liquidity and Capital Resources above, management believes that the Company has adequate sources of liquidity from deposit growth, Federal Home Loan Bank Advances, federal funds lines and investment maturities to meet these obligations
should the need arise. The Company is not involved in any other off-balance sheet contractual relationships or transactions which could result in liquidity needs or significantly impact earnings nor does the Company have unconsolidated related
entities.



Impact of Inflation



The assets and liabilities of financial institutions are primarily monetary in nature.
Therefore, interest rates have a more significant effect on the Companys performance than do the effects of changes in the general rate of inflation and changing prices. In addition, interest rates do not necessarily move in the same direction
or in the same magnitude as the prices of goods and services. The Company seeks to manage the relationships between interest-sensitive assets and liabilities in order to protect against wide interest rate fluctuations, including those which may
result from inflation.



Cautionary Note Regarding Forward-Looking Statements



The Company may, from time to time, make written or oral forward-looking
statements, including statements contained in the Companys filings with the Securities and Exchange Commission and its reports to stockholders. Such forward-looking statements are made based on managements belief as well as assumptions
made by, and information currently available to, management pursuant to safe harbor provisions of the Private Securities Litigation Reform Act of 1995.



The Companys actual results may differ materially from the results anticipated in these forward-looking statements due to a variety of
factors, including governmental, monetary and fiscal policies, deposit levels, loan demand, loan collateral values, securities portfolio values and interest rate risk management; the effects of competition in the banking business from other
commercial banks, savings and loan associations, mortgage banking firms, consumer finance companies, credit unions, securities brokerage firms, insurance companies, money market mutual funds and other financial institutions operating in the
Companys market area and elsewhere, including institutions operating through the Internet; changes in government regulations relating to the banking industry, including regulations relating to branching and acquisitions; failure of assumptions
underlying the establishment of reserves for loan losses, including the value of collateral underlying delinquent loans, and other factors. The Company cautions that such factors are not exclusive. The Company does not undertake to update any
forward-looking statements that may be made from time to time by, or on behalf of, the Company.



Item 3. Controls and Procedures



Management
has developed and implemented a policy and procedures for reviewing disclosure controls and procedures and internal controls over financial reporting on a quarterly basis. Management, including the principal executive and financial officers,
evaluated the effectiveness of the design and operation of disclosure controls and procedures as of September 30, 2004 and, based on their evaluation, the Companys principal executive and financial officers have concluded that these controls
and procedures are operating effectively. Disclosure controls and procedures are the Companys controls and other procedures that are designed to ensure that information required to be disclosed by the Company in the reports that it files or
submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commissions rules and forms. Disclosure controls and procedures include, without limitation,
controls and procedures designed to ensure that information required to be disclosed by Company in the reports that it files under the Exchange Act is accumulated and communicated to management, including the principal executive and financial
officers, as appropriate to allow timely decisions regarding required disclosure.



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There were no significant changes in the Companys internal control over financial reporting during the
Companys last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting.



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PART II. OTHER INFORMATION



Item 6. Exhibits



The following exhibits are
filed with this Report:



|            |  |   |  |                                                                                                                                                                                                                               
|----------- |  | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  |   |  | Description                                                                                                                                                                                                                   
|3.1         |  | - |  | Articles of Incorporation of the Company (incorporated herein by reference to Exhibit 3.1 of Amendment No. 1 to the Companys Registration Statement on Form S-4, Registration No.
333-109586, filed 12/23/03 (Form S-4/A)).
|            |  |  
|3.2         |  | - |  | Bylaws of the Company (incorporated herein by reference to Exhibit 3.2 of the S-4/A.                                                                                                                                          
|            |  |  
|31.1        |  | - |  | Certification of Chief Executive Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002.                                                                                                                               
|            |  |  
|31.2        |  | - |  | Certification of President and Chief Operating Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002.                                                                                                                 
|            |  |  
|32.1        |  | - |  | Certifications Pursuant to Section 906 of Sarbanes-Oxley Act of 2002.                                                                                                                                                         



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SIGNATURES



In accordance with the requirements of
the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



|                        |  |                           |  |                                             
|----------------------- |  | ------------------------- |  | --------------------------------------------
|                        |  | FIRST NATIONAL BANC, INC.
|                        |  |                          
|Date: November 14, 2004 |  | By:                       |  | /s/ Roscoe H. Mullis                        
|                        |  |                           |  | Roscoe H. Mullis                            
|                        |  |                           |  | Chairman and Chief Executive Officer        
|                        |  |                           |  | (principal executive officer)               
|                        |  |                          
|Date: November 14, 2004 |  | By:                       |  | /s/ David G. Moffat                         
|                        |  |                           |  | David G. Moffat                             
|                        |  |                           |  | President and Chief Operating Officer       
|                        |  |                           |  | (principal financial and accounting officer)



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EXHIBIT INDEX



|             |  |                                                                                                              
|------------ |  | -------------------------------------------------------------------------------------------------------------
|Exhibit No.  |  | Description of Exhibit                                                                                       
|Exhibit 31.1 |  | Certification of Chief Executive Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002.              
|             | 
|Exhibit 31.2 |  | Certification of President and Chief Operating Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
|             | 
|Exhibit 32.1 |  | Certifications Pursuant to Section 906 of Sarbanes-Oxley Act of 2002.