UNITED
STATES


SECURITIES AND
EXCHANGE COMMISSION


WASHINGTON,
D.C.  20549








FORM
10-K





ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d)


OF
THE SECURITIES EXCHANGE ACT OF 1934





(Mark
One)


ý
            ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





For
      the fiscal year ended December 31,
2007


OR





o
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





For
      the transition period from
            to





Commission
File Number:  000-51287








SOUTHCREST
FINANCIAL
GROUP, INC.


(Exact
Name of Registrant as Specified in its Charter)





Georgia
            58-2256460(State
      of Incorporation)
            (I.R.S.
      Employer Identification No.)600
      North Glynn Street, Suite B, Fayetteville, Georgia
            30214(Address
      of Principal Executive Offices)
            (Zip
      Code)


(770)
461-2781


(Registrant’s
telephone number, including area code)





Securities
Registered Pursuant to Section 12(b) of the Act:


None





Securities
Registered Pursuant to Section 12(g) of the Act:


Common
Stock, no par value stated





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.


Yes o   No
ý





Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Exchange Act.


Yes o   No ý





Indicate
by check mark whether the Registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during
the preceding 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 ý   No
o





Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (229.405 of this chapter) is not contained herein, and will not
be contained, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.   ý





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting
company.  See the definition of “large accelerated filer,”
“accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.


Large
accelerated filer o      
Accelerated filer o      
Non-accelerated filer oSmaller
reporting companyý





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes o   No
ý





The
aggregate market value of the registrant’s outstanding common stock held by
nonaffiliates of the registrant as of June 30, 2007, was approximately
$72,837,000, based on the registrant’s closing sales price as reported on the
NASDAQ Over-the-Counter Bulletin Board.  There
were  3,931,528 shares of the registrant’s common stock outstanding as
of March 31, 2008.





DOCUMENTS
INCORPORATED BY REFERENCE


Document
            Parts Into Which
      IncorporatedAnnual
      Report to Shareholders for the Year Ended December 31,
2007
            Part
      IIProxy
      Statement for the Annual Meeting of Shareholders to be held May 15,
      2008
            Part
      III










TABLE OF CONTENTS


PagePART
      I
            1ITEM
      1.
            BUSINESS
            1ITEM
      1A.
            RISK FACTORS
            13ITEM
      1B.
            UNRESOLVED STAFF COMMENTS
            19ITEM
      2.
            PROPERTIES
            19ITEM
      3.
            LEGAL PROCEEDINGS
            19ITEM
      4.
            SUBMISSION OF MATTERS TO A VOTE OF SECURITY
      HOLDERS
            20PART
      II
            20ITEM
      5.
            MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
      MATTERS AND ISSUERS PURCHASES OF EQUITY SECURITIES
            20ITEM
      6.
            SELECTED FINANCIAL DATA
            21ITEM
      7.
            MANAGEMENT’S DISCUSSION AND ANALYSIS
            21ITEM
      7A.
            QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK
            21ITEM
      8.
            FINANCIAL STATEMENTS
            21ITEM
      9.
            CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
      AND FINANCIAL DISCLOSURE
            21ITEM
      9A(T).
            CONTROLS AND PROCEDURES
            22ITEM
      9B.
            OTHER INFORMATION
            23PART
      III
            23ITEM
      10.
            DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE
      GOVERNANCE
            23ITEM
      11.
            EXECUTIVE COMPENSATION
            23ITEM
      12.
            SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
      MANAGEMENT AND RELATED STOCKHOLDER MATTERS
            23ITEM
      13.
            CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
      INDEPENDENCE
            24ITEM
      14.
            PRINCIPAL ACCOUNTANT FEES AND SERVICES
            24PART
      IV
            25ITEM
      15.
            EXHIBITS AND FINANCIAL STATEMENT
    SCHEDULES
            25SIGNATURESEXHIBIT INDEX




Table of Contents





PART I





ITEM 1.
            BUSINESS





Cautionary
Notice Regarding Forward Looking Statements







Some of the statements in this Report,
including, without limitation, matters discussed under the caption “Management’s
Discussion and Analysis of Financial Condition and Results of Operation,” of
SouthCrest Financial Group, Inc. are “forward-looking statements” within the
meaning of the federal securities laws. Forward-looking statements include
statements about the competitiveness of the banking industry, potential
regulatory obligations, our entrance and expansion into other markets,
integration of recently acquired banks, pending or proposed acquisitions, our
other business strategies, our expectations with respect to our allowance for
loan losses and impaired loans, anticipated capital expenditures for our
operations center, and other statements that are not historical facts. When we
use words like “anticipate”, “believe”, “intend”, “expect”, “estimate”, “could”,
“should”, “will”, and similar expressions, you should consider them as
identifying forward-looking statements, although we may use other phrasing.
These forward-looking statements involve risks and uncertainties and are based
on our beliefs and assumptions, and on the information available to us at the
time that these disclosures were prepared. Factors that may cause actual results
to differ materially from those expressed or implied by such forward-looking
statements include, among others, the following possibilities:
(1) competitive pressures among depository and other financial institutions
may increase significantly; (2) changes in the interest rate environment
may reduce margins; (3) general economic conditions may be less favorable
than expected, resulting in, among other things, a deterioration in credit
quality and/or a reduction in demand for credit; (4) legislative or
regulatory changes, including changes in accounting standards, may adversely
affect the businesses in which we are engaged; (5) costs or difficulties
related to the integration of our businesses, may be greater than expected;
(6) deposit attrition, customer loss or revenue loss following acquisitions
may be greater than expected; (7) competitors may have greater financial
resources and develop products that enable such competitors to compete more
successfully than us; and (8) adverse changes may occur in the equity
markets.






Many of such factors are beyond our
ability to control or predict, and readers are cautioned not to put undue
reliance on such forward-looking statements. We disclaim any obligation to
update or revise any forward-looking statements contained in this Report,
whether as a result of new information, future events or otherwise.




Information
About SouthCrest Financial Group, Inc.





Description
of Business





SouthCrest Financial Group, Inc. (the
“Company” or “SouthCrest”) is a bank holding company headquartered in
Fayetteville, Georgia.  SouthCrest was incorporated under the laws of
the State of Georgia on August 15, 1996 as Upson Bankshares, Inc. and is
registered under the Bank Holding Company Act of 1956, as amended, and under the
bank holding company laws of the State of Georgia.  SouthCrest
conducts its operations through its wholly owned subsidiaries (collectively the
“Banks”), Bank of Upson (“Upson”), The First National Bank of Polk County (“FNB
Polk”), Peachtree (“Peachtree”) and Bank of Chickamauga
(“Chickamauga”).  The Company was created on September 30, 2004 when
Upson Bankshares, Inc. and First Polk Bankshares, Inc. merged and adopted the
name SouthCrest Financial Group.





1
 Table of Contents





Bank
of Upson / Meriwether Bank and Trust / SouthCrest Bank





Bank of Upson was chartered in 1951
under the laws of the State of Georgia.  Upson is headquartered in
Thomaston, Upson County, Georgia and operates a total of seven full-service
banking locations and seventeen 24-hour ATM sites in Meriwether, Spalding,
Fayette and Upson Counties in western Georgia.  In Upson County,
Georgia, Upson operates its main office and a full-service branch.  In
Meriwether County, Georgia, Upson operates three full-service branches under the
trade name "Meriwether Bank & Trust:" the Manchester and Warm Springs
branches were purchased in 1999, and the Luthersville branch was purchased in
2002.  In Fayette County, Georgia, Upson has opened two full-service
de-novo branches which it operates under the trade name “SouthCrest Bank” – the
Fayetteville branch was opened in 2004 and the Tyrone branch was opened in
2007.





Bank of Upson is a full service
commercial bank focusing on meeting the banking needs of individuals and small-
to medium-sized businesses.  Upson offers a broad line of banking and
financial products and services customary for full service banks of similar size
and character.  These services include consumer loans, real estate
loans, and commercial loans as well as maintaining deposit accounts such as
checking accounts, money market accounts, and a variety of certificates of
deposit.  Bank of Upson attracts most of its deposits and conducts
most of its lending transactions from and within its primary service area
encompassing Upson, Fayette, and Meriwether Counties Georgia.





The
First National Bank of Polk County





The First National Bank of Polk County
was chartered in 1920 under the laws of the United States.  FNB Polk
is headquartered in Cedartown, Polk County, Georgia and operates a total of
three full-service banking locations and three ATM sites in Polk County in
northwest Georgia.  FNB Polk operates out of its main office in
Cedartown, Polk County, Georgia.  In addition to its main office, FNB
Polk operates a branch office in Cedartown and another in the Rockmart, also in
Polk County.  FNB Polk also operates three ATM machines; one at each
of the branches.





FNB Polk is a full service commercial
bank that provides community-banking services to the individuals and business in
Polk County in northwest Georgia.  FNB Polk performs banking services
customary for full service banks of similar size and character.  Such
services include making real estate, commercial and consumer loans, providing
other banking services such as traveler's checks, and maintaining deposit
accounts such as checking, money market, consumer certificates of deposit and
IRA accounts.





Peachtree
Bank





Peachtree Bank was chartered in 1919
under the laws of the State of Alabama.  Peachtree is headquartered in
Maplesville, Chilton County, Alabama and operates a total of two full-service
banking locations in central Alabama.  On October 31, 2006, Peachtree
became a wholly-owned subsidiary of the Company as a result of the merger of
Maplesville Bancorp, Peachtree’s holding company, with
SouthCrest.  Peachtree maintains its main office in Maplesville,
Alabama and operates a branch office in Clanton, Alabama. Peachtree is a
full-service community bank providing banking services in its primary trade area
of Chilton County, Alabama. Such services include making real estate, commercial
and consumer loans, as well as providing deposit accounts such as checking,
money market, consumer certificates of deposit and IRA accounts.





2
 Table of Contents





Bank
of Chickamauga





Bank of Chickamauga was chartered in
1910 under the laws of the State of Georgia.  Chickamauga is
headquartered in Chickamauga, Walker County, Georgia and operates a total of two
full-service banking locations in north Georgia.  On July 1, 2007,
Chickamauga became a wholly-owned subsidiary of the Company as a result of a
share exchange between Chickamauga and SouthCrest.  Chickamauga
maintains its main office and an additional branch office in Chickamauga,
Georgia.  Chickamauga is a full-service community bank providing
banking services in its primary trade area of Walker County, Georgia, which
falls within the Chattanooga, Tennessee, MSA.  Such services include
making real estate, commercial and consumer loans, as well as providing deposit
accounts such as checking, money market, consumer certificates of deposit and
IRA accounts.





Business
Activities of the Company





Deposit
Services.  Deposits are a key component of the Banks’ business,
serving as a source of funding for lending as well as for increasing customer
account relationships.  The Banks offer a variety of deposit services,
including non-interest bearing checking accounts, interest bearing checking
accounts, money market accounts, savings accounts, and time deposits of
maturities ranging from three months to five years.  The primary
sources of deposits for the Banks are businesses and individuals in their
primary market areas.





Lending
Services.  The Banks’ lending business consists primarily of
making consumer loans to individuals, commercial loans to small and medium-sized
businesses and professional organizations, and secured real estate loans,
including residential and commercial construction loans, and first and second
mortgage loans for the acquisition and improvement of personal
residences.





Investment
Services.  The Company provides investment services through its
partnership with a full-service brokerage firm, and offering its customers
brokerage services for stocks, bonds, mutual funds, IRA's, 529 plans, retirement
plans, certificates of deposit, and insurance products.  The customer
base for this service consists of individual investors, small businesses, and
non-profit organizations.  This service is offered at the Bank of
Upson through its division operating under the trade name “SouthCrest
Investments” which was created in 1999 and has been in full service since
2001.  In 2005 FNB Polk began offering this service to its customers
under the trade name “SouthCrest Investment Services.”





Trust
Services.  SouthCrest also operates a full-service personal
trust department through Bank of Upson.  The trust department provides
estate analysis, consultation, estate and agency accounts, as well as non-profit
agency services.  All trust-related record-keeping, back-office, and
securities servicing is provided through a third-party.





Asset and
Liability Management.  The Banks manage their assets and
liabilities to provide adequate liquidity, and at the same time, to achieve the
maximum net interest rate margin.  These management functions are
conducted within the framework of written loan and investment
policies.  The banks attempt to maintain a balanced position between
rate sensitive assets and rate sensitive liabilities.





Market Area and
Competition.  The Company operates in a highly competitive
environment.  The Banks compete for deposits and loans with commercial
banks, savings and loan associations, credit unions, finance companies, mutual
funds, insurance companies and other financial entities operating locally and
elsewhere.  In addition, because the Gramm-Leach-Bliley Act now
permits banks, securities firms, and insurance companies to affiliate, a number
of larger financial institutions and other corporations offering a wider variety
of financial services than the Banks currently offer could enter our area and
aggressively compete in the markets that the Banks serve.  Many of
these competitors have





3
 Table of Contents





substantially
greater resources and lending limits than the Banks and may offer certain
services that they do not or cannot provide.




We
currently conduct business principally through the Banks’ fourteen branches in
their market areas of Fayette, Meriwether, Polk, Upson and Walker Counties,
Georgia and Chilton County, Alabama.  Based upon data available on the
FDIC website as of June 30, 2007, SouthCrest’s total deposits ranked 1st among
financial institutions in our market area, representing approximately 13.4% of
the total deposits in our market area.  The table below shows our
deposit market share collectively and by each Bank in the counties we serve
according to data from the FDIC website as of June 30,
2007.  Subsequent to June 30, 2007, Upson opened a second branch in
Fayette County that is not reflected in the tablebelow.




Market
            
            Number of
              Branches
            
            
            Our Market
              Deposits
            
            
            Total
              Market
              Deposits
            
            
            Ranking
            
            
            Market Share
              Percentage
              (%)(Dollar
      amounts in millions)UpsonFayette
      County
            
            
            1
            
            
            $
            7
            
            
            $
            1,855
            
            
            
            16
            
            
            
            0.4
            %Meriwether
      County
            
            
            3
            
            
            
            83
            
            
            
            221
            
            
            
            1
            
            
            
            37.7
            %Upson
      County
            
            
            2
            
            
            
            160
            
            
            
            361
            
            
            
            1
            
            
            
            44.2
            %Upson
      Total
            
            
            6
            
            
            
            250
            
            
            
            2,437
            
            
            
            4
            
            
            
            10.3
            %FNB
      PolkPolk
      County
            
            
            3
            
            
            
            144
            
            
            
            416
            
            
            
            1
            
            
            
            34.7
            %FNB
      Polk Total
            
            
            3
            
            
            
            144
            
            
            
            416
            
            
            
            1
            
            
            
            34.7
            %ChickamaugaWalker
      County
            
            
            2
            
            
            
            50
            
            
            
            459
            
            
            
            5
            
            
            
            10.9
            %Chickamauga
      Total
            
            
            2
            
            
            
            50
            
            
            
            459
            
            
            
            5
            
            
            
            10.9
            %Georgia
      Total
            
            
            11
            
            
            
            444
            
            
            
            3,312
            
            
            
            1
            
            
            
            13.4
            %PeachtreeChilton
      County
            
            
            2
            
            
            
            54
            
            
            
            406
            
            
            
            4
            
            
            
            13.4
            %Peachtree
      Total
            
            
            2
            
            
            
            54
            
            
            
            406
            
            
            
            4
            
            
            
            13.4
            %Alabama
      Total
            
            
            2
            
            
            
            54
            
            
            
            406
            
            
            
            4
            
            
            
            13.4
            %SouthCrest
            
            
            13
            
            
            $
            498
            
            
            $
            3,718
            
            
            
            1
            
            
            
            13.4
            %





Employees.  As
of December 31, 2007, the Company and the Banks had a total of 227 full-time
equivalent employees.  Certain executive officers of the Banks also
serve as officers of SouthCrest Financial Group, Inc.  We consider our
employee relations to be good, and we have no collective bargaining agreements
with any employees.





4
 Table of Contents





SUPERVISION
AND REGULATION




Both the
Company and the Banks are subject to extensive state and federal banking
regulations that impose restrictions on and provide for general regulatory
oversight of their operations.  These laws are generally intended to
protect depositors and not shareholders.  Legislation and regulations
authorized by legislation influence, among other things:




·
            how,
      when and where we may expand
geographically;




·
            into
      what product or service market we may
enter;




·
            how
      we must manage our assets; and




·
            under
      what circumstances money may or must flow between the parent bank holding
      company and a subsidiary bank.





Set forth
below is an explanation of the major pieces of legislation affecting our
industry and how that legislation affects our actions.  The following
summary is qualified by reference to the statutory and regulatory provisions
discussed.  Changes in applicable laws or regulations may have a
material effect on our business and prospects, and legislative changes and the
policies of various regulatory authorities may significantly affect our
operations.  We cannot predict the effect that fiscal or monetary
policies, or new federal or state legislation may have on our business and
earnings in the future.




SouthCrest
Financial Group, Inc.




Since the
Company owns all of the capital stock of Upson, FNB Polk, Peachtree and
Chickamauga, it is a bank holding company under the federal Bank Holding Company
Act of 1956.  As a result, we are primarily subject to the
supervision, examination and reporting requirements of the Bank Holding Company
Act and the regulations of the Federal Reserve.  As a bank holding
company located in Georgia, the Georgia Department of Banking and Finance also
regulates and monitors all significant aspects of our operations.




Acquisitions of
Banks.The Bank Holding Company
Act requires every bank holding company to obtain the Federal Reserve’s prior
approval before:




·
            acquiring
      direct or indirect ownership or control of any voting shares of any bank
      if, after the acquisition, the bank holding company will directly or
      indirectly own or control more than 5% of the bank’s voting
      shares;




·
            acquiring
      all or substantially all of the assets of any bank;
  or




·
            merging
      or consolidating with any other bank holding
  company.





Additionally,
the Bank Holding Company Act provides that the Federal Reserve may not approve
any of these transactions if it would result in or tend to create a monopoly,
substantially lessen competition or otherwise function as a restraint of trade,
unless the anticompetitive effects of the proposed transaction are clearly
outweighed by the public interest in meeting the convenience and needs of the
community to be served.  The Federal Reserve is also required to
consider the financial and managerial resources and future prospects of the bank
holding companies and banks concerned.  The Federal Reserve’s
consideration of financial resources generally focuses on capital adequacy,
which is discussed below.




Under the
Bank Holding Company Act, if we are adequately capitalized and adequately
managed, we or any other bank holding company located in Georgia may purchase a
bank located outside of





5
 Table of Contents









Change in Bank
Control.Subject
to various exceptions, the Bank Holding Company Act and the Change in Bank
Control Act, together with related regulations, require Federal Reserve approval
prior to any person or company acquiring “control” of a bank holding
company.  Control is conclusively presumed to exist if an individual
or company acquires 25% or more of any class of voting securities of the bank
holding company.  Control is rebuttably presumed to exist if a person
or company acquires 10% or more, but less than 25%, of any class of voting
securities and either:




·
            the
      bank holding company has registered securities under Section 12 of
      the Securities Act of 1934; or




·
            no
      other person owns a greater percentage of that class of voting securities
      immediately after the transaction.





Our
common stock is currently registered under Section 12 of the Securities Exchange
Act of 1934.  The regulations also provide a procedure for challenging
any rebuttable presumption of control.





Permitted
Activities. The Bank Holding Company
Act has generally prohibited a bank holding company from engaging in activities
other than banking or managing or controlling banks or other permissible
subsidiaries and from acquiring or retaining direct or indirect control of any
company engaged in any activities other than those determined by the Federal
Reserve to be closely related to banking or managing or controlling banks as to
be a proper incident thereto.Provisions of the
Gramm-Leach-Bliley Act have expanded the permissible activities of a bank
holding company that qualifies as a financial holding company.  Under
the regulations implementing the Gramm-Leach-Bliley Act, a financial holding
company may engage in additional activities that are financial in nature or
incidental or complementary to financial activity.  Those activities
include, among other activities, certain insurance and securities
activities.





To qualify to become a financial
holding company, the Banks and any other depository institution subsidiary of
the Company must be well capitalized and well managed and must have a Community
Reinvestment Act rating of at least “satisfactory.”  Additionally, the
Company must file an election with the Federal Reserve to become a financial
holding company and must provide the Federal Reserve with 30 days’ written
notice prior to engaging in a permitted financial activity. While the Company
meets the qualification standards applicable to financial holding companies, we
have not elected to become a financial holding company at this
time.





Support of
Subsidiary Institutions.  Under Federal Reserve policy, we are
expected to act as a source of financial strength for the Banks and to commit
resources to support the Banks.  This support may be required at times
when, without this Federal Reserve policy, we might not be inclined to provide
it.  In addition, any capital loans made by us to the Bank will be
repaid only after its deposits and various other obligations are repaid in
full.  In the unlikely event of our bankruptcy, any commitment by it
to a federal banking regulator to maintain the capital of the Banks will be
assumed by the bankruptcy trustee and entitled to a priority of
payment.





6
 Table of Contents





The
Banks





General. The Banks are subject
to extensive state and federal banking regulations that impose restrictions on
and provide for general regulatory oversight of our operations.  These
laws are generally intended to protect depositors and not
shareholders.  The following discussion describes the material
elements of the regulatory framework that applies to us.





Since
Upson and Chickamauga are commercial banks chartered under the laws of the State
of Georgia, they are primarily subject to the supervision, examination and
reporting requirements of the FDIC and the Georgia Department of Banking and
Finance.  The FDIC and Georgia Department of Banking and Finance
regularly examine each of Upson’s and Chickamauga’s operations and have the
authority to approve or disapprove mergers, the establishment of branches and
similar corporate actions.  Both regulatory agencies have the power to
prevent the continuance or development of unsafe or unsound banking practices or
other violations of law.





Since FNB
Polk is chartered as a national bank, it is primarily subject to the
supervision, examination and reporting requirements of the National Bank Act and
the regulations of the Office of the Comptroller of the Currency.  The
Office of the Comptroller of the Currency regularly examines FNB Polk’s
operations and has the authority to approve or disapprove mergers, the
establishment of branches and similar corporate actions.  The Office
of the Comptroller of the Currency also has the power to prevent the continuance
or development of unsafe or unsound banking practices or other violations of
law.





Since Peachtree is a commercial bank
chartered under the laws of the State of Alabama, it is primarily subject to the
supervision, examination and reporting requirements of the FDIC and the
Superintendent of Banking of the Alabama State Banking Department (the “Alabama
State Banking Department”).  The FDIC and the Superintendent regularly
examine Peachtree’s operations and have the authority to approve or disapprove
mergers, the establishment of branches and similar corporate
actions.  Both regulatory agencies also have the power to prevent the
continuance or development of unsafe or unsound banking practices or other
violations of law.





Because the Banks’ deposits are insured
by the FDIC to the maximum extent provided by law, they are also subject to
certain FDIC regulations.  The Banks are also subject to numerous
state and federal statutes and regulations that affect their business,
activities and operations.





Branching.Under current
Georgia law, each of Upson and Chickamauga may open branch offices throughout
Georgia with the prior approval of the Georgia Department of Banking and
Finance.  In addition, with prior regulatory approval, each of Upson
and Chickamauga may acquire branches of existing banks located in
Georgia.  National Banks are required by the National Bank Act to
adhere to branching laws applicable to state banks in the states in which they
are located.  Therefore, FNB Polk may open branch offices or acquire
branches of existing banks located in Georgia with the approval of the Office of
the Comptroller of the Currency.  Similarly, under current Alabama
law, Peachtree may open branch offices throughout Alabama, or acquire branches
of existing banks located in Alabama, with the prior approval of the Alabama
State Banking Department.  The Banks and any other national or
state-chartered bank generally may branch across state lines by merging with
banks in other states if allowed by the applicable states’ laws.  Both
Georgia and Alabama law, with limited exceptions, currently permit branching
across state lines through interstate mergers.





Under the
Federal Deposit Insurance Act, states may “opt-in” and allow out-of-state banks
to branch into their state by establishing a new start-up branch in the
state.  Currently, Alabama has opted in





7
 Table of Contents







Because
Alabama has elected to opt-in on a reciprocal basis, any out-of-state bank may
establish a new start-up branch in Alabama so long as that state’s banking law
would also allow Alabama banks to establish start-up branches in that
state.  Similarly, Peachtree may establish a new start-up branch in
any state that has elected to opt-in on a reciprocal basis.





Prompt Corrective
Action.The Federal
Deposit Insurance Corporation Improvement Act of 1991 establishes a system of
prompt corrective action to resolve the problems of undercapitalized financial
institutions.  Under this system, the federal banking regulators have
established five capital categories (well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized and critically
undercapitalized) in which all institutions are placed.  The federal
banking agencies have also specified by regulation the relevant capital levels
for each of the other categories.  At December 31, 2007, the Banks
qualified for the well-capitalized category.





Federal
banking regulators are required to take various mandatory supervisory actions
and are authorized to take other discretionary actions with respect to
institutions in the three undercapitalized categories.  The severity
of the action depends upon the capital category in which the institution is
placed.  Generally, subject to a narrow exception, the banking
regulator must appoint a receiver or conservator for an institution that is
critically undercapitalized.




FDIC Insurance
Assessments.The FDIC has adopted a risk-based assessment system for
insured depository institutions that takes into account the risks attributable
to different categories and concentrations of assets and
liabilities.  The system assesses higher rates on those institutions
that pose greater risks to the Deposit Insurance Fund (the
“DIF”).  The FDIC places each institution in one of four risk
categories using a two-step process based first on capital ratios (the capital
group assignment) and then on other relevant information (the supervisory group
assignment).  Within the lower risk category, Risk Category I, rates
will vary based on each institution’s CAMELS component ratings, certain
financial ratios, and long-term debt issuer ratings.




Capital
group assignments are made quarterly and an institution is assigned to one of
three capital categories: (1) well capitalized; (2) adequately capitalized;
and (3) undercapitalized.  These three categories are substantially
similar to the prompt corrective action categories described above, with the
“undercapitalized” category including institutions that are undercapitalized,
significantly undercapitalized and critically undercapitalized for prompt
corrective action purposes.  The FDIC also assigns an institution to
one of three supervisory subgroups based on a supervisory evaluation that the
institution’s primary federal banking regulator provides to the FDIC and
information that the FDIC determines to be relevant to the institution’s
financial condition and the risk posed to the deposit insurance
funds.  Assessments range from 5 to 43 cents per $100 of deposits,
depending on the institution’s capital group and supervisory
subgroup.  Institutions that are well capitalized will be charged a
rate between 5 and 7 cents per $100 of deposits.





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The FDIC
may terminate its insurance of deposits if it finds that the institution has
engaged in unsafe and unsound practices, is in an unsafe or unsound condition to
continue operations, or has violated any applicable law, regulation, rule, order
or condition imposed by the FDIC.




Community
Reinvestment Act.The Community Reinvestment Act requires
that, in connection with examinations of financial institutions within their
respective jurisdictions, the federal bank regulators shall evaluate the record
of each financial institution in meeting the credit needs of its local
community, including low and moderate-income neighborhoods.  These
facts are also considered in evaluating mergers, acquisitions and applications
to open a branch or facility.  Failure to adequately meet these
criteria could impose additional requirements and limitations on the
Banks.  Additionally, the Banks must publicly disclose the terms of
various Community Reinvestment Act-related agreements.




Allowance for
Loan and Lease Losses.The Allowance for Loan and Lease Losses
(the “ALLL”) represents one of the most significant estimates in the Bank’s
financial statements and regulatory reports.  Because of its
significance, the Banks have developed systems by which they develop, maintain
and document comprehensive, systematic and consistently applied processes for
determining the amounts of the ALLL and the provision for loan and lease
losses.  The Interagency Policy Statement on the Allowance for Loan
and Lease Losses, issued on December 13, 2006, encourages all banks to ensure
controls are in place to consistently determine the ALLL in accordance with
GAAP, the bank’s stated policies and procedures, management’s best judgment and
relevant supervisory guidance.  Consistent with supervisory guidance,
the Banks maintain a prudent and conservative, but not excessive, ALLL, that is
at a level appropriate to cover estimated credit losses on individually
evaluated loans determined to be impaired as well as estimated credit losses
inherent in the remainder of the loan and lease portfolio.  The Banks’
estimates of credit losses reflect consideration of all significant factors that
affect the collectibility of the portfolio as of the evaluation
date.  See “Management’s Discussion and Analysis – Critical Accounting
Policies.”





Commercial Real
Estate Lending.  The Banks’ lending operations may be subject
to enhanced scrutiny by federal banking regulators based on their concentrations
of commercial real estate loans.  On December 6, 2006, the federal
banking regulators issued final guidance to remind financial institutions of the
risk posed by commercial real estate (“CRE”) lending
concentrations.  CRE loans generally include land development,
construction loans and loans secured by multifamily property, and nonfarm,
nonresidential real property where the primary source of repayment is derived
from rental income associated with the property.





Other
Regulations.Interest and other charges collected or contracted for by
the Banks are subject to state usury laws and federal laws concerning interest
rates.  The Banks’ loan operations are also subject to federal laws
applicable to credit transactions, such as the:




·
            Truth-In-Lending
      Act, governing disclosures of credit terms to consumer
      borrowers;




·
            Home
      Mortgage Disclosure Act of 1975, requiring financial institutions to
      provide information to enable the public and public officials to determine
      whether a financial institution is fulfilling its obligation to help meet
      the housing needs of the community it
serves;




·
            Equal
      Credit Opportunity Act, prohibiting discrimination on the basis of race,
      creed or other prohibited factors in extending
  credit;




·
            Fair
      Credit Reporting Act of 1978, as amended by the Fair and Accurate Credit
      Transactions Act, governing the use and provision of information to credit
      reporting agencies, certain identity theft protections, and certain credit
      and other disclosures;





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·
            Fair
      Debt Collection Act, governing the manner in which consumer debts may be
      collected by collection agencies;




·
            Soldiers’
      and Sailors’ Civil Relief Act of 1940, as amended by the Servicemembers’
      Civil Relief Act, governing the repayment terms of, and property rights
      underlying, secured obligations of persons currently on active duty with
      the United States military;




·
            Talent
      Amendment in the 2007 Defense Authorization Act, establishing a 36% annual
      percentage rate ceiling, which includes a variety of charges including
      late fees, for consumer loans to military service members and their
      dependents; and




·
            rules
      and regulations of the various federal banking regulators charged with the
      responsibility of implementing these federal
  laws.





The
Banks’ deposit operations are subject to federal laws applicable to depository
accounts, such as the:




·
            Truth-In-Savings
      Act, requiring certain disclosures for consumer deposit
      accounts;




·
            Right
      to Financial Privacy Act, which imposes a duty to maintain confidentiality
      of consumer financial records and prescribes procedures for complying with
      administrative subpoenas of financial
records;




·
            Electronic
      Funds Transfer Act and Regulation E issued by the Federal Reserve to
      implement that act, which govern automatic deposits to and withdrawals
      from deposit accounts and customers’ rights and liabilities arising from
      the use of automated teller machines and other electronic banking
      services; and




·
            rules
      and regulations of the various federal banking regulators charged with the
      responsibility of implementing these federal
  laws.





Capital
Adequacy





The Company and the Banks are required
to comply with the capital adequacy standards established by the Federal
Reserve, in the case of the Company, the FDIC, in the case of Upson, Peachtree
and Chickamauga, and the Office of the Comptroller of the Currency, in the case
of FNB Polk.  The Federal Reserve has established a risk-based and a
leverage measure of capital adequacy for bank holding companies.  The
Banks are also subject to risk-based and leverage capital requirements adopted
by their respective federal agency, both of which are substantially similar to
those adopted by the Federal Reserve for bank holding companies.





The
risk-based capital standards are designed to make regulatory capital
requirements more sensitive to differences in risk profiles among banks and bank
holding companies, to account for off-balance-sheet exposure, and to minimize
disincentives for holding liquid assets.  Assets and off-balance-sheet
items, such as letters of credit and unfunded loan commitments, are assigned to
broad risk categories, each with appropriate risk weights.  The
resulting capital ratios represent capital as a percentage of total
risk-weighted assets and off-balance-sheet items.




The minimum guideline for the ratio of
total capital to risk-weighted assets is 8%.  Total capital consists
of two components; Tier 1 Capital and Tier 2 Capital.  Tier 1 Capital
generally consists of common stockholders’ equity, minority interests in the
equity accounts of consolidated subsidiaries, qualifying noncumulative perpetual
preferred stock, and a limited amount of qualifying cumulative perpetual
preferred stock, less goodwill and other specified intangible
assets.  Tier 1 Capital must equal at least 4% of risk-weighted
assets.  Tier 2 Capital generally consists of subordinated debt, other
preferred





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In
addition, the Federal Reserve has established minimum leverage ratio guidelines
for bank holding companies.  These guidelines provide for a minimum
ratio of Tier 1 Capital to average assets, less goodwill and other specified
intangible assets, of 3% for bank holding companies that meet specified
criteria, including having the highest regulatory rating and implementing the
Federal Reserve’s risk-based capital measure for market risk.  All
other bank holding companies generally are required to maintain a leverage ratio
of at least 4%.The
guidelines also provide that bank holding companies experiencing internal growth
or making acquisitions will be expected to maintain strong capital positions
substantially above the minimum supervisory levels without reliance on
intangible assets.  The Federal Reserve considers the leverage ratio
and other indicators of capital strength in evaluating proposals for expansion
or new activities.




Failure
to meet capital guidelines could subject a bank or bank holding company to a
variety of enforcement remedies, including issuance of a capital directive, the
termination of deposit insurance by the FDIC, a prohibition on accepting
brokered deposits and certain other restrictions on its business.  As
described above, significant additional restrictions can be imposed on
FDIC-insured depository institutions that fail to meet applicable capital
requirements.  See “The Banks – Prompt Corrective Action”
above.




See Note
14 in the “Notes to Consolidated Financial Statements” for the capital ratios of
SouthCrest, Upson, FNB Polk, Peachtree and Chickamauga.





Payment
of Dividends





The
Company is a legal entity separate and distinct from the Banks.  The
principal sources of the Company’s cash flow, including cash flow to pay
dividends to its shareholders, are dividends that the Banks pay to their sole
shareholder, the Company.  Statutory and regulatory limitations apply
to the Banks’ payment of dividends.  If, in the opinion of the federal
banking regulator, any of our Banks were engaged in or about to engage in an
unsafe or unsound practice, the federal banking regulator could require, after
notice and a hearing, that it stop or refrain from engaging in the questioned
practice.  The federal banking agencies have indicated that paying
dividends that deplete a depository institution’s capital base to an inadequate
level would be an unsafe and unsound banking practice.  Under the
Federal Deposit Insurance Corporation Improvement Act of 1991, a depository
institution may not pay any dividend if payment would cause it to become
undercapitalized or if it already is undercapitalized.  Moreover, the
federal agencies have issued policy statements that provide that bank holding
companies and insured banks should generally only pay dividends out of current
operating earnings.  See “The Banks—Prompt Corrective
Action.”





The
Georgia Department of Banking and Finance also regulates each of Upson’s and
Chickamauga’s dividend payments and must approve dividend payments by either
bank that would exceed 50% of their respective net incomes for the prior
year.  Our payment of dividends may also be affected or limited by
other factors, such as the requirement to maintain adequate capital above
regulatory guidelines.





The
Alabama State Banking Department also regulates Peachtree’s dividend payments
and must approve dividend payments that would exceed 50% of Peachtree’s net
income for the prior year.  Our payment of dividends may also be
affected or limited by other factors, such as the requirement to maintain
adequate capital above regulatory guidelines.  Under Alabama law, a
bank may not pay a dividend in excess of 90% of its net earnings until the
bank’s surplus is equal to at least 20% of its capital.





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FNB Polk
is required by federal law to obtain prior approval of the OCC for payments of
dividends if the total of all dividends declared by the Bank in any year will
exceed (1) the total of the FNB Polk’s net profits for that year, plus
(2) the FNB Polk’s retained net profits of the preceding two years, less
any required transfers to surplus.





The
payment of dividends by the Company and the Banks may also be affected by other
factors, such as the requirement to maintain adequate capital above regulatory
guidelines.  At December 31, 2007, the Banks could each pay cash
dividends without prior regulatory approval, subject to the limitations
described herein.





Restrictions
on Transactions with Affiliates





The Company and the Banks are subject
to the provisions of Section 23A of the Federal Reserve Act.  Section
23A places limits on the amount of:




·
            a
      bank’s loans or extensions of credit to
  affiliates;




·
            a
      bank’s investment in affiliates;




·
            assets
      a bank may purchase from affiliates, except for real and personal property
      exempted by the Federal Reserve;




·
            loans
      or extensions of credit made by a bank to third parties collateralized by
      the securities or obligations of affiliates;
and




·
            a
      bank’s guarantee, acceptance or letter of credit issued on behalf of an
      affiliate.





The total amount of the above
transactions is limited in amount, as to any one affiliate, to 10% of a bank’s
capital and surplus and, as to all affiliates combined, to 20% of a bank’s
capital and surplus.  In addition to the limitation on the amount of
these transactions, each of the above transactions must also meet specified
collateral requirements.  The Banks must also comply with other
provisions designed to avoid the taking of low-quality assets.





The Company and the Banks are also
subject to the provisions of Section 23B of the Federal Reserve Act which, among
other things, prohibit an institution from engaging in the above transactions
with affiliates unless the transactions are on terms substantially the same, or
at least as favorable to the institution or its subsidiaries, as those
prevailing at the time for comparable transactions with nonaffiliated
companies.





The Banks
are also subject to restrictions on extensions of credit to its executive
officers, directors, principal shareholders and their related
interests.  These extensions of credit (1) must be made on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with third parties, and
(2) must not involve more than the normal risk of repayment or present
other unfavorable features.





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Proposed
Legislation and Regulatory Action





New
regulations and statutes are regularly proposed that contain wide-ranging
changes to the structures, regulations and competitive relationships of
financial institutions operating or doing business in the United
States.  We cannot predict whether or in what form any proposed
regulation or statute will be adopted or the extent to which our business may be
affected by any new regulation or statute.





Effect
of Governmental Monetary Policies




Our
earnings are affected by domestic economic conditions and the monetary and
fiscal policies of the United States government and its agencies.  The
Federal Reserve’s monetary policies have had, and are likely to continue to
have, an important impact on the operating results of commercial banks through
its power to implement national monetary policy in order, among other things, to
curb inflation or combat a recession.  The monetary policies of the
Federal Reserve affect the levels of bank loans, investments and deposits
through its control over the issuance of United States government securities,
its regulation of the discount rate applicable to member banks and its influence
over reserve requirements to which member banks are subject.  We
cannot predict the nature or impact of future changes in monetary and fiscal
policies.





ITEM 1A.
            RISK
      FACTORS





An investment in our common stock
involves risks.  If any of the following risks or other risks, which
have not been identified or which we may believe are immaterial or unlikely,
actually occur, our business, financial condition and results of operations
could be harmed.  In such a case, the trading price of our common
stock could decline, and you may lose all or part of your
investment.  The risks discussed below also include forward-looking
statements, and our actual results may differ substantially from those discussed
in these forward-looking statements.





Risks
Related to Our Business.





We could suffer loan losses from a
decline in credit quality.





We could sustain losses if borrowers,
guarantors and related parties fail to perform in accordance with the terms of
their loans. We have adopted underwriting and credit monitoring procedures and
policies, including the establishment and review of the allowance for credit
losses that we believe are appropriate to minimize this risk by assessing the
likelihood of nonperformance, tracking loan performance and diversifying our
credit portfolio.  These policies and procedures, however, may not
prevent unexpected losses that could materially adversely affect our results of
operations.





Our net interest income could be
negatively affected by the Federal Reserve’s recent interest rate adjustments,
as well as by competition in our market area.





As a
financial institution, our earnings are significantly dependent upon our net
interest income, which is the difference between the interest income that we
earn on interest-earning assets, such as investment securities and loans, and
the interest expense that we pay on interest-bearing liabilities, such as
deposits and borrowings. Therefore, any change in general market interest rates,
including changes resulting from changes in the Federal Reserve’s fiscal and
monetary policies, affects us more than non-financial institutions and can have
a significant effect on our net interest income and total income. Our assets and
liabilities may react differently to changes in overall market rates or
conditions because there may be mismatches between the repricing or maturity
characteristics of the assets and liabilities. As a




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In
response to the dramatic deterioration of the subprime, mortgage, credit and
liquidity markets, the Federal Reserve recently has taken action on six
occasions to reduce interest rates by a total of 300 basis points since
September 2007, which likely will reduce our net interest income during the
first half of 2008 and the foreseeable future. Any reduction in our net interest
income will negatively affect our business, financial condition, liquidity,
operating results, cash flows and/or the price of our securities. Additionally,
in 2008, we expect to have continued margin pressure given these interest rate
reductions, along with elevated levels of non-performing assets.





An economic downturn, especially one
affecting our market areas, could adversely affect our financial condition,
results of operations or cash flows.





Our success depends upon the growth in
population, income levels, deposits and housing starts in our primary market
areas.  If the communities in which we operate do not grow, or if
prevailing economic conditions locally or nationally are unfavorable, our
business may not succeed. Unpredictable economic conditions may have an adverse
effect on the quality of our loan portfolio and our financial performance.
Economic recession over a prolonged period or other economic problems in our
market areas could have a material adverse impact on the quality of the loan
portfolio and the demand for our products and services.  Future
adverse changes in the economies in our market areas may have a material adverse
effect on our financial condition, results of operations or cash
flows.  Further, the banking industry in Georgia is affected by
general economic conditions such as inflation, recession, unemployment and other
factors beyond our control.  As a community bank, we are less able to
spread the risk of unfavorable local economic conditions than larger or more
regional banks. Moreover, we cannot give any assurance that we will benefit from
any market growth or favorable economic conditions in our primary market areas
even if they do occur.





In
addition to considering the financial strength and cash flow characteristics of
borrowers, we often secure loans with real estate collateral.  The
real estate collateral in each case provides an alternate source of repayment in
the event of default by the borrower and may deteriorate in value during the
time the credit is extended.  The market value of the real estate
securing our loans as collateral has been adversely affected by the slowing
economy and unfavorable changes in economic conditions in our market areas and
could be further adversely affected in the future.





As of
December 31, 2007, approximately 82% of our loans receivable were secured by
real estate. Any sustained period of increased payment delinquencies,
foreclosures or losses caused by the adverse market and economic conditions,
including the downturn in the real estate market, in our markets will adversely
affect the value of our assets, revenues, results of operations and financial
condition. Currently, we are experiencing such an economic downturn, and if it
continues, our operations could be further adversely affected.





Most of our loans are concentrated in
our primary market area.  Consequently, a decline in local economic
conditions may have a proportionally greater effect on our earnings and capital
than on the earnings and capital of larger financial institutions whose real
estate loan portfolios are geographically diverse.





Opening new offices may not result in
increased assets or revenues for us.





The investment necessary for branch
expansion may negatively impact our efficiency ratio.  There is a risk
that we will be unable to manage our growth, as the process of opening new
branches may





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Our
business strategy includes the continuation of growth plans, and our financial
condition and results of operations could be negatively affected if we fail to
grow or fail to manage our growth effectively.





We intend to continue pursuing a growth
strategy for our business. Our prospects must be considered in light of the
risks, expenses and difficulties frequently encountered by companies in growth
stages of development. We cannot assure you we will be able to expand our market
presence in our existing markets or successfully enter new markets or that any
such expansion will not adversely affect our results of
operations.  Failure to manage our growth effectively could have a
material adverse effect on our business, financial condition, results of
operations, or future prospects, and could adversely affect our ability to
successfully implement our business strategy.  Also, if our growth
occurs more slowly than anticipated or declines, our results of operations could
be materially adversely affected.





Our ability to grow successfully will
depend on a variety of factors including the continued availability of desirable
business opportunities, the competitive responses from other financial
institutions in our market areas and our ability to manage our growth. While we
believe we have the management resources and internal systems in place to manage
our future growth, there can be no assurance that growth opportunities will be
available or growth will be managed successfully.





Our plans for future expansion depend,
in some instances, on factors beyond our control, and an unsuccessful attempt to
achieve growth could have a material adverse effect on our business, financial
condition, results of operations and future prospects.





We expect to continue to engage in new
branch expansion in the future.  We may also seek to acquire other
financial institutions, or parts of those institutions.  Expansion
involves a number of risks, including:




•
            the
      time and costs of evaluating new markets, hiring experienced local
      management and opening new offices;




•
            the
      time lags between these activities and the generation of sufficient assets
      and deposits to support the costs of the
  expansion;




•
            we
      may not be able to finance an acquisition without diluting the interests
      of our existing shareholders;




•
            in
      the event of an acquisition, costs or difficulties related to the
      integration of our businesses may be greater than expected, and we may
      experience deposit attrition, customer loss or revenue loss that is
      greater than expected




•
            the
      diversion of our management’s attention to the negotiation of a
      transaction may detract from their business
  productivity;




•
            we
      may enter into new markets where we lack experience;
  and




•
            we
      may introduce new products and services with which we have no prior
      experience into our business.





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If we fail to retain our key employees,
our growth and profitability could be adversely affected.





Our success is, and is expected to
remain, highly dependent on our Chairman, Daniel Brinks, and President and CEO,
Larry Kuglar.   This is particularly true because, as a community
bank, we depend on our management team’s ties to the community to generate
business for us. Our growth will continue to place significant demands on our
management, and the loss of any such person’s services may have an adverse
effect upon our growth and profitability.  In addition, loss of key
loan officers can also adversely affect our loan growth, which may adversely
impact future profitability.





Our recent results may not be
indicative of our future results, and may not provide guidance to assess the
risk of an investment in our common stock.





We may not be able to sustain our
historical rate of growth or may not even be able to grow our business at
all.  In addition, our recent and rapid growth may distort some of our
historical financial ratios and statistics.  In the future, we may not
have the benefit of several recently favorable factors, such as a generally
increasing interest rate environment, a strong residential and commercial
mortgage market or the ability to find suitable expansion opportunities. Various
factors, such as economic conditions, regulatory and legislative considerations
and competition, may also impede or prohibit our ability to expand our market
presence.  If we experience a significant decrease in our historical
rate of growth, our results of operations and financial condition may be
adversely affected due to a high percentage of our operating costs being fixed
expenses.





Competition from other financial
institutions may adversely affect our profitability.





The banking business is highly
competitive, and we experience strong competition from many other financial
institutions. We compete with commercial banks, credit unions, savings and loan
associations, mortgage banking firms, consumer finance companies, securities
brokerage firms, insurance companies, money market funds and other financial
institutions, which operate in our primary market areas and
elsewhere.  Presently 35 banks serve our market area with a total of
99 branches.





We compete with these institutions both
in attracting deposits and in making loans.  In addition, we have to
attract our customer base from other existing financial institutions and from
new residents. Many of our competitors are well-established and much larger
financial institutions. While we believe we can and do successfully compete with
these other financial institutions in our markets, we may face a competitive
disadvantage as a result of our smaller size and lack of geographic
diversification.





Although we compete by concentrating
our marketing efforts in our primary market area with local advertisements,
personal contacts and greater flexibility in working with local customers, we
can give no assurance that this strategy will be successful.





As a community bank, we have different
lending risks than larger banks.





We provide services to our local
communities.  Our ability to diversify our economic risks is limited
by our own local markets and economies.  We lend primarily to small to
medium-sized businesses, and, to a lesser extent, individuals which may expose
us to greater lending risks than those of banks lending to larger,
better-capitalized businesses with longer operating histories.





We manage our credit exposure through
careful monitoring of loan applicants and loan concentrations in particular
industries, and through loan approval and review procedures. We have established
an evaluation process designed to determine the adequacy of our allowance for
loan losses. While this evaluation process uses historical and other objective
information, the classification of loans





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Our directors and executive officers
own a significant portion of our common stock and can influence stockholder
decisions.





Our directors and executive officers,
as a group, beneficially owned approximately 23% of our fully diluted
outstanding common stock as of December 31, 2007.  As a result of
their ownership, the directors and executive officers have the ability, if they
voted their shares in concert, to influence the outcome of all matters submitted
to our stockholders for approval, including the election of
directors.





Risks
Related to our Industry





Current trends in the mortgage loan
markets may adversely affect our credit quality and profitability.




Since the
beginning of 2007, the market has seen several subprime lenders and hedge funds
that had invested in loans supported by real estate collateral declare
bankruptcy and discontinue operations, while other lenders have continued to put
in place more stringent underwriting criteria.  Recent losses on
mortgage-backed investment securities recorded by some larger financial
institutions have resulted in reduced valuations, demand and liquidity for these
securities.




These
challenges have affected the mortgage loan marketplace by increasing the
borrower’s cost of funds for loans supported by real estate.  More
stringent loan underwriting standards continue to reduce the number of real
estate borrowers who can find financing in the marketplace, and this continues
to reduce the number of properties sold and refinanced.  The number of
residential properties on the market has continued to increase, and in certain
markets, including our own, there has been increasing downward pressure on the
selling prices of new and existing homes and also in the sales market values of
existing properties, which are utilized as comparisons in valuing real estate
collateral.  This affects the ability of some borrowers, particularly
those in construction and development, to sell the properties securing their
loans, which in turn makes it difficult for them to make the scheduled
repayments on those loans. The
impact of the described changes in the economy as a whole, and the real estate
marketplace specifically, has had a negative effect on our ability to grow our
loan levels and on the values of the collateral underlying our
loans.  These changes could limit growth in interest income and could
also cause an increase in expenses associated with collecting on loans,
foreclosing on real estate collateral, and selling properties that have already
been foreclosed.  The potential impact on the Company will depend on
the duration and depth of the real estate market downturn, which will also be
affected by the financial market’s response to correcting the problems that have
affected the market, including providing accommodations to borrowers in default
or who are experiencing financial difficulty.





Changes in monetary policies may have
an adverse effect on our business, financial condition and results of
operations.





Our financial condition and results of
operations are affected by credit policies of monetary authorities, particularly
the Federal Reserve.  Actions by monetary and fiscal authorities,
including the Federal Reserve, could have an adverse effect on our deposit
levels, loan demand or business and earnings.





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Our
ability to pay dividends is limited and we may be unable to pay future
dividends.  As a result, capital appreciation, if any, of our common
stock may be your sole opportunity for gains on your investment for the
foreseeable future.





We cannot make assurances that we will
have the ability to continuously pay dividends in the future.  Any
future determination relating to dividend policy will be made at the discretion
of our Board of Directors and will depend on a number of factors, including our
future earnings, capital requirements, financial condition, future prospects,
regulatory restrictions and other factors that our Board of Directors may deem
relevant.  The holders of our common stock are entitled to receive
dividends when, and if declared by our Board of Directors out of funds legally
available for that purpose.  As part of our consideration to pay cash
dividends, we intend to retain adequate funds from future earnings to support
the development and growth of our business.  In addition, our ability
to pay dividends is restricted by federal policies and
regulations.  It is the policy of the Federal Reserve that bank
holding companies should pay cash dividends on common stock only out of net
income available over the past year and only if prospective earnings retention
is consistent with the organization’s expected future needs and financial
condition.  Further, our principal source of funds to pay dividends is
cash dividends that we receive from our subsidiary banks.





Environmental liability associated with
lending activities could result in losses.





In the course of our business, we may
foreclose on and take title to properties securing our loans.  If
hazardous substances are discovered on any of these properties, we may be liable
to governmental entities or third parties for the costs of remediation of the
hazard, as well as for personal injury and property damage.  Many
environmental laws can impose liability regardless of whether we knew of, or
were responsible for, the contamination.  In addition, if we arrange
for the disposal of hazardous or toxic substances at another site, we may be
liable for the costs of cleaning up and removing those substances from the site,
even if we neither own nor operate the disposal site.  Environmental
laws may require us to incur substantial expenses and may materially limit the
use of properties that we acquire through foreclosure, reduce their value or
limit our ability to sell them in the event of a default on the loans they
secure.  In addition, future laws or more stringent interpretations or
enforcement policies with respect to existing laws may increase our exposure to
environmental liability.





We are subject to extensive regulation
that could limit or restrict our activities and impose financial requirements or
limitations on the conduct of our business, which limitations or restrictions
could adversely affect our profitability.





As a bank holding company, we are
primarily regulated by the Federal Reserve.  Our subsidiary banks are
regulated by the FDIC, the Georgia Department of Banking and Finance, the
Alabama State Banking Department and the OCC. Our compliance with these
regulations is costly and may limit our growth and restrict certain of our
activities, including payment of dividends, mergers and acquisitions,
investments, loans and interest rates charged, interest rates paid on deposits
and locations of offices. We are also subject to capital requirements of our
regulators.





The laws and regulations applicable to
the banking industry could change at any time, and we cannot predict the effects
of these changes on our business and profitability.  Because
government regulation greatly affects the business and financial results of all
commercial banks and bank holding companies, our cost of compliance could
adversely affect our ability to operate profitably.





The Sarbanes-Oxley Act of 2002, the
related rules and regulations promulgated by the SEC that currently apply to us
and the related exchange rules and regulations, have increased the scope,
complexity





18
 Table of Contents







ITEM 1B.
            UNRESOLVED
      STAFF COMMENTS





Not
Applicable.





ITEM 2.
            PROPERTIES





SouthCrest
maintains its executive offices in leased office space at 600 North Glynn
Street, Suite B, Fayetteville, Georgia.





Bank of
Upson's main banking office is located at 108 South Church Street, Thomaston,
Georgia  30286.  In 2005, Upson began rebuilding this
facility, enlarging it from approximately 16,000 square feet to 26,000 square
feet.  This project was completed in 2007.  Bank of Upson's
operations center is located at 210A West Main Street, Thomaston,
Georgia  30286.  In 2007, Bank of Upson began building a new
operations center in Thomaston, Georgia.  Bank of Upson also owns
banking offices at the following locations:  (i) 943 North Church
Street, Thomaston, Georgia  30286, (ii) 406 West Main Street,
Manchester, Georgia  31816, (iii) 121 Broad Street, Warm Springs,
Georgia 31830, and (iv) 14 North Main Street, Luthersville,
Georgia  30251.  Bank of Upson leases two branches in
Fayette County, Georgia, at 600 North Glynn Street, Fayetteville,
Georgia  30214, and 105 St. Stephens Court, Suite
A,  Tyrone, Georgia 30290.  Bank of Upson’s offices in
Manchester, Warm Springs, and Luthersville, Georgia are located within
Meriwether County, Georgia and do business as Meriwether Bank &
Trust.  The offices in Fayetteville and Tyrone, Georgia are located in
Fayette County and do business as SouthCrest Bank.  Bank of Upson owns
17 ATMs, which are located within Upson, Fayette, and Meriwether
Counties.





The First
National Bank of Polk County's main office is at 967 North Main Street,
Cedartown, Georgia.  The main office was built in 1991 and occupies
26,500 square feet.  FNB Polk also owns and operates a full-service
downtown branch at 117 West Avenue, Cedartown, Georgia.  The branch
occupies 10,000 square feet.  In 1973, FNB Polk opened a full-service
Rockmart branch at 131 West Elm Street, Rockmart, Georgia.  The branch
has been enlarged from 4,200 square feet to approximately 9,200 square feet in
project completed in 2005 at a cost of $895,000.





Peachtree
Bank’s main office is at 9411 Highway 22, Maplesville, Alabama.  The
main office was built in 1961 and occupies 4,200 square
feet.  Peachtree also owns and operates a full service branch located
at 1501 North 17th Street
in Clanton, Alabama.  This branch was built in 1994 and occupies 3,500
square feet.





Bank of
Chickamauga’s main office is at 201 Gordon Street, Chickamauga,
Georgia.  The main office was built in 1910 and occupies 12,000
square feet.  Chickamauga also owns and operates a full service branch
located at 112 Lafayette Road, Chickamauga, Georgia.  This branch was
established in 1974 and occupies 2,300 square feet.





ITEM 3.
            LEGAL
      PROCEEDINGS





There are
no material pending legal proceedings to which the Company is a party or of
which any of its properties are subject, nor are there material proceedings
known to the Company to be contemplated by any governmental
authority.   Additionally, the Company is unaware of any material
proceedings, pending or contemplated, in which any existing or proposed
director, officer or affiliate, or any principal




19
 Table of Contents








ITEM 4.
            SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY
HOLDERS





No matter
was submitted during the fourth quarter of the fiscal year ended December 31,
2007 to a vote of shareholders of SouthCrest Financial Group, Inc., through the
solicitation of proxies or otherwise.




PART
II





ITEM 5.
            MARKET
      FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
      PURCHASES OF EQUITY SECURITIES





In December, 2004 our common stock
began trading in the over-the-counter market under the symbol
“SCSG.”  The development of an
active secondary market requires the existence of an adequate number of willing
buyers and sellers.  Historically, the reported trading volume would
indicate a lack of activity in the secondary market for the Company’s common
stock.  The lack of activity in the secondary market for the Company’s
common stock may materially impact a shareholder’s ability to promptly sell
Company common stock at a price acceptable to the selling
shareholder.





The
following table sets forth the high and low bid information for transactions in
our common stock for the previous two years on the Nasdaq Over-the-Counter
Bulletin Board.  These quotations reflect inter-dealer prices, without
retail mark-up, mark-down or commission and may not necessarily represent actual
transactions.





2007
            
            
            2006High
            
            
            Low
            
            
            High
            
            
            LowFirst
      Quarter
            
            $
            24.80
            
            
            $
            23.02
            
            
            $
            24.00
            
            
            $
            21.50Second
      Quarter
            
            $
            25.50
            
            
            $
            23.00
            
            
            $
            24.50
            
            
            $
            23.50Third
      Quarter
            
            $
            23.50
            
            
            $
            21.40
            
            
            $
            26.00
            
            
            $
            22.20Fourth
      Quarter
            
            $
            22.00
            
            
            $
            19.50
            
            
            $
            25.50
            
            
            $
            22.80





On
March 31, 2008, the Company had approximately 565 shareholders of record of
our common stock.





The
Company generally declares a dividend on the first business day of each quarter,
to be paid on the last business day of that month, with the record date normally
being two weeks prior to the payment date.  The table below shows the
quarterly dividends paid during 2007 and 2006.





2007
            
            
            2006First
      Quarter
            
            $
            0.130
            
            
            $
            0.125Second
      Quarter
            
            
            0.130
            
            
            
            0.125Third
      Quarter
            
            
            0.130
            
            
            
            0.125Fourth
      Quarter
            
            
            0.130
            
            
            
            0.125





The
principal source of the Company’s cash flow, including cash flow to pay
dividends to its shareholders, is dividends that the Bank pays to the Company as
its sole shareholder.  Statutory and




20
 Table of Contents








The table
below sets forth information regarding purchases of the Company’s common stock
by the Company and the Company’s Employee Stock Ownership Plan whose trustees
are executive officers of the Company.  All shares were purchased in
open market transactions.





Period
            
            Total Number
              of Shares
              Purchased
            
            
            Average
              Price Paid
              Per Share
            
            
            Total Number of Shares
              Purchased as Part of
              Publicly Announced
              Plans or Programs
            
            
            Maximum Number of
              Shares that May Yet
              Be Purchased Under
              the Plans or ProgramsOctober
      2007
            
            
            -
            
            
            $
            -
            
            
            
            -
            
            
            
            -November
      2007
            
            
            36,680
            
            
            $
            21.91
            
            
            
            -
            
            
            
            -December
      2007
            
            
            -
            
            
            $
            -
            
            
            
            -
            
            
            
            -Total
            
            
            36,680
            
            
            $
            21.91
            
            
            
            -
            
            
            
            -








ITEM 6.
            SELECTED
      FINANCIAL DATA





Pursuant to the revised disclosure
requirements for smaller reporting companies effective February 4, 2008, no
disclosure under this Item is required.





ITEM 7.
            MANAGEMENT’S
      DISCUSSION AND ANALYSIS





The
response to this item is included in the section of the same title contained in
the Company's 2007 Annual Report to Shareholders and is incorporated herein by
reference.  See Exhibit 13.1.





ITEM 7A.
            QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK





Pursuant to the revised disclosure
requirements for smaller reporting companies effective February 4, 2008, no
disclosure under this Item is required.





ITEM
      8.
            FINANCIAL
      STATEMENTS





The
response to this item is included in the section of the same title contained in
the Company's 2007 Annual Report to Shareholders and is incorporated herein by
reference.  See Exhibit 13.2.





ITEM 9.
            CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE




Not Applicable.





21
 Table of Contents





ITEM 9A(T).
            CONTROLS
      AND PROCEDURES





Disclosure
Controls





As of the end of the period covered by
this Annual Report on Form 10-K, our principal executive officer and principal
financial officer have evaluated the effectiveness of our “disclosure controls
and procedures” (“Disclosure Controls”).  Disclosure Controls, as
defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), are procedures that are designed with the objective of
ensuring that information required to be disclosed in our reports filed under
the Exchange Act, such as this Annual Report, is recorded, processed, summarized
and reported within the time periods specified in the Securities and Exchange
Commission’s rules and forms.  Disclosure Controls are also designed
with the objective of ensuring that such information is accumulated and
communicated to our management, including the CEO and CFO, as appropriate to
allow timely decisions regarding required disclosure.





Our management, including the CEO and
CFO, does not expect that our Disclosure Controls will prevent all error and all
fraud.  A control system, no matter how well conceived and operated,
can provide only reasonable, not absolute, assurance that the objectives of the
control system are met.  Further, the design of a control system must
reflect the fact that there are resource constraints, and the benefits of
controls must be considered relative to their costs.  Because of the
inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if
any, within the company have been detected.  These inherent
limitations include the realities that judgments in decision-making can be
faulty, and that breakdowns can occur because of simple error or
mistake.  The design of any system of controls also is based in part
upon certain assumptions about the likelihood of future events, and there can be
no assurance that any design will succeed in achieving its stated goals under
all potential future conditions.





Based upon their controls evaluation,
our CEO and CFO have concluded that our Disclosure Controls are effective at a
reasonable assurance level.





Management’s
Report on Internal Control Over Financial Reporting





Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f)
under the Securities Exchange Act of 1934.  Our internal control over
financial reporting is a process designed to provide reasonable assurance that
assets are safeguarded against loss from unauthorized use or disposition,
transactions are executed in accordance with appropriate management
authorization and accounting records are reliable for the preparation of
financial statements in accordance with generally accepted accounting
principles.





Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements.  Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.





Management
assessed the effectiveness of our internal control over financial reporting as
of December 31, 2007.  Management based this assessment on
criteria for effective internal control over financial reporting described in
Internal Control—Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission.  Management’s assessment included an evaluation
of the design of our internal control over financial reporting and testing of
the operational effectiveness of its internal control over financial
reporting.  Management reviewed the results of its assessment with the
Audit Committee of our Board of Directors.





22
 Table of Contents





Based on
this assessment, management believes that SouthCrest Financial Group, Inc.
maintained effective internal control over financial reporting as of
December 31, 2007.





This
annual report does not include an attestation report of the Company’s registered
public accounting firm regarding internal control over financial
reporting.  Management’s report was not subject to attestation by the
company’s registered public accounting firm pursuant to temporary rules of the
Securities and Exchange Commission that permit the Company to provide only
management’s report in this annual report.





Changes
to Internal Control Over Financial Reporting





There
have been no significant changes in our internal control over financial
reporting during the fourth fiscal quarter ended December 31, 2007 that have
materially affected, or are reasonably likely to materially affect, our internal
controls over financial reporting.





ITEM 9B.
            OTHER
      INFORMATION





Not Applicable.








PART
III





ITEM 10.
            DIRECTORS,
      EXECUTIVE OFFICERS, AND CORPORATE
GOVERNANCE





The
response to this Item is partially included in the Company’s Proxy Statement for
the Annual Meeting of Shareholders to be held May 15, 2008 under the headings
“Proposal One: Election of Directors,” “Executive Officers,” and “Section 16(a)
Beneficial Ownership Reporting Compliance” and is incorporated herein by
reference.





The Company has adopted a code of
ethics that applies to its principal executive, financial and accounting
officers.  A copy of the code of ethics may be obtained, without
charge, upon written request addressed to SouthCrest Financial Group, Inc., 600
North Glynn Street, Suite B, Fayetteville, Georgia  30214,
Attention:Chief Financial
Officer.  The request may be delivered by letter to the address set
forth above or by fax to the attention of the Company’s Chief Financial Officer
at (770) 461-2701.





ITEM 11.
            EXECUTIVE
      COMPENSATION





The
response to this Item is included in the Company’s Proxy Statement for the
Annual Meeting of Shareholders to be held May 15, 2008 under the headings
“Proposal One: Election of Directors – Director Compensation” and “Executive
Compensation” and is incorporated herein by reference.





ITEM 12.
            SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS





The
response to this Item is partially included in the Company’s Proxy Statement for
the Annual Meeting of Shareholders to be held May 15, 2008 under the heading
“Management Stock Ownership” and is incorporated herein by
reference.





23
 Table of Contents





The table
below sets forth information regarding shares of the Company’s common stock
authorized for issuance under the 2005 Stock Incentive Plan as of December 31,
2007.  The 2005 Stock Incentive Plan was approved by the Shareholders
on May 12, 2005.





Number
      of securities
                to
      be issued upon
                exercise
      of
                outstanding
      options
            
            
            Weighted-average
                exercise
      price of
                outstanding
                options
            
            
            Number
      of shares
                remaining
      available for
                future
      issuance under
                the
      Plan (excludes
                outstanding
      options)Equity
      compensation plans approved by security holders
            
            
            191,400
            
            
            $
            23.44
            
            
            
            357,600Equity
      compensation plans not approved by security holders
            
            
            --
            
            
            
            --
            
            
            
            --Total
            
            
            191,400
            
            
            $
            23.44
            
            
            
            357,600








ITEM 13.
            CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
      INDEPENDENCE





The response to this Item is included
in the Company’s Proxy Statement for the Annual Meeting of Shareholders to be
held May 15, 2008 under the headings “Proposal One: Election of Directors –
Director Independence” and “Related Party Transactions” and is incorporated
herein by reference.





ITEM 14.
            PRINCIPAL
      ACCOUNTANT FEES AND SERVICES





The
response to this Item is included in the Company’s Proxy Statement for the
Annual Meeting of Shareholders to be held May 15, 2008 under the heading “Audit
Committee Matters” and is incorporated herein by reference.





24
 Table of Contents





PART
IV





ITEM
      15.
            EXHIBITS AND FINANCIAL
      STATEMENT SCHEDULES





Number
            
            Exhibit3.1
            
            Articles
      of Incorporation13.2
            
            Amended
      and Restated Bylaws 13.3
            
            Amendment
      to Bylaws 24.1
            
            See
      Exhibits 3.1, and 3.2 for provisions of the Articles of Incorporation and
      Bylaws defining rights of holders of the Common Stock10.1
            
            Lease
      Contract, dated September 14, 1993, between Truitt A. Mallory and Bank of
      Upson 110.2
            
            Agreement
      and Plan of Share Exchange with Bank of Chickamauga 310.3*
            
            Employment
      Agreement with Daniel W. Brinks 410.4*
            
            Salary
      Continuation Agreement with Daniel W. Brinks 510.5*
            
            Joint
      Beneficiary Designation Agreement with Daniel W. Brinks 510.6*
            
            Employment
      Agreement with Larry T. Kuglar 610.7*
            
            Salary
      Continuation Agreement with Larry T. Kuglar 510.8*
            
            Joint
      Beneficiary Designation Agreement with Larry T. Kuglar 510.9*
            
            Employment
      Agreement with Douglas J. Hertha 610.10*
            
            Salary
      Continuation Agreement with Douglas J. Hertha 510.11*
            
            Joint
      Beneficiary Designation Agreement with Douglas J. Hertha 510.12*
            
            Employment
      Agreement with Harvey N. Clapp 710.13*
            
            Executive
      Salary Continuation Agreement with Harvey N. Clapp 710.14*
            
            Employment
      Agreement with Trae Dorough10.15*
            
            Salary
      Continuation Agreement with Trae Dorough10.16*
            
            Joint
      Beneficiary Designation Agreement with Trae Dorough10.17*
            
            SouthCrest
      Financial Group, Inc. 2005 Stock Incentive Plan 810.18*
            
            Form
      of Incentive Stock Option under the SouthCrest Financial Group, Inc. 2005
      Stock Incentive Plan 510.19*
            
            Form
      of Nonqualified Stock Option under the SouthCrest Financial Group, Inc.
      2005 Stock Incentive Plan 513.1
            
            Excerpts
      from the SouthCrest Financial Group, Inc. 2007 Annual Report to
      Shareholders – Management’s Discussion and
  Analysis







*
                  Indicates
      a compensatory plan or contract.
 1
                  Incorporated
      by reference to the Registration Statement on Form S-4 (Registration
      No. 333-112845), as filed with the SEC on February 13,
      2004.
 2
                  Incorporated
      by reference to the Current Report on Form 8-K dated October 31,
      2006.
 3
                  Incorporated
      by reference to the Current Report on Form 8-K dated February 23,
      2007.
 4
                  Incorporated
      by reference to the Current Report on Form 8-K dated September 30,
      2004.
 5
                  Incorporated
      by reference to the Annual Report on Form 10-K for the year ended December
      31, 2006.
 6
                  Incorporated
      by reference to the Current Report on Form 8-K dated February 15,
      2005.
 7
                  Incorporated
      by reference to the Current Report on Form 8-K dated October 31,
      2006.
 8
                  Incorporated
      by reference to the Annual Report on Form 10-KSB for the year ended
      December 31,
2004.




25
 Table of Contents




Number
            
            Exhibit13.2
            
            Excerpts
      from the SouthCrest Financial Group, Inc. 2007 Annual Report to
      Shareholders – Consolidated Financial Statements21.1
            
            Subsidiaries
      of the Registrant23.1
            
            Consent
      of Dixon Hughes PLLC24.1
            
            Power
      of Attorney (appears on the signature pages to the Annual Report on
      Form 10-K)31.1
            
            Certification
      of Principal Executive Officer pursuant to Rule 13a-14(a) of the Exchange
      Act31.2
            
            Certification
      of Principal Financial Officer pursuant to Rule 13a-14(a) of the Exchange
      Act32.1
            
            Certification
      of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of
  200232.2
            
            Certification
      of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of
  2002


26
 Table of Contents




SIGNATURES





Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the Company has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.





SOUTHCREST
      FINANCIAL GROUP, INC.By:
            /s/ Larry T. KuglarLarry
      T. KuglarChief
      Executive OfficerDate:
            March
      31, 2008







POWER
OF ATTORNEY





KNOW ALL MEN BY THESE
PRESENTS, that each person whose signature appears on the signature page
to this Report constitutes and appoints Daniel W. Brinks and Larry T. Kuglar,
his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place, and stead, in
any and all capacities, to sign any and all amendments to this Report, and to
file the same, with all exhibits hereto, and other documents in connection
herewith with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as they might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or their substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.





Pursuant
to the requirements of the Securities Exchange Act of 1934, this Report has been
signed below by the following persons on behalf of the Company and in the
capacities and on the dates indicated.





Signature
              
              Title
              
              Date/s/ Daniel W. Brinks
              
              Chairman
      and Chief Operating
              
              March
      31, 2008Daniel
      W. Brinks
              
              Officer/s/ Larry T. Kuglar
              
              Director,
      President and Chief
              
              March
      31, 2008Larry
      T. Kuglar
              
              Executive
      Officer
                (Principal
      Executive Officer)/s/ Douglas J. Hertha
              
              Senior
      Vice President and
              
              March
      31, 2008Douglas
      J. Hertha
              
              Chief
      Financial Officer
                (Principal
      Financial and Accounting Officer)
  Table of Contents
  Signature
              
              Title
              
              Date/s/ Richard T. Bridges
              
              Director
              
              March
      31, 2008Richard
      T. Bridges/s/ Harvey N. Clapp
              
              Director
              
              March
      31, 2008Harvey
      N. Clapp/s/ Joan B. Cravey
              
              Director
              
              March
      31, 2008Joan
      B. Cravey/s/ Zack D. Cravey, Jr..
              
              Director
              
              March
      31, 2008Zack
      D. Cravey, Jr/s/ Dr. Warren Patrick
              
              Director
              
              March
      31, 2008Dr.
      Warren Patrick/s/ Michael D. McRae
              
              Director
              
              March
      31, 2008Michael
      D. McRae/s/ Harold W. Wyatt, Jr.
              
              Director
              
              March
      31, 2008Harold
      W. Wyatt, Jr.




Table of Contents





EXHIBIT INDEX





Number
            
            Exhibit3.1
            
            Articles
      of Incorporation 13.2
            
            Amended
      and Restated Bylaws 13.3
            
            Amendment
      to Bylaws 24.1
            
            See
      Exhibits 3.1, and 3.2 for provisions of the Articles of Incorporation and
      Bylaws defining rights of holders of the Common Stock10.1
            
            Lease
      Contract, dated September 14, 1993, between Truitt A. Mallory and Bank of
      Upson 110.2
            
            Agreement
      and Plan of Share Exchange with Bank of Chickamauga 310.3*
            
            Employment
      Agreement with Daniel W. Brinks 410.4*
            
            Salary
      Continuation Agreement with Daniel W. Brinks 510.5*
            
            Joint
      Beneficiary Designation Agreement with Daniel W. Brinks 510.6*
            
            Employment
      Agreement with Larry T. Kuglar 610.7*
            
            Salary
      Continuation Agreement with Larry T. Kuglar 510.8*
            
            Joint
      Beneficiary Designation Agreement with Larry T. Kuglar 510.9*
            
            Employment
      Agreement with Douglas J. Hertha 610.10*
            
            Salary
      Continuation Agreement with Douglas J. Hertha 510.11*
            
            Joint
      Beneficiary Designation Agreement with Douglas J. Hertha 510.12*
            
            Employment
      Agreement with Harvey N. Clapp 710.13*
            
            Executive
      Salary Continuation Agreement with Harvey N. Clapp 710.14*
            
            Employment
      Agreement with Trae Dorough10.15*
            
            Salary
      Continuation Agreement with Trae Dorough10.16*
            
            Joint
      Beneficiary Designation Agreement with Trae Dorough10.17*
            
            SouthCrest
      Financial Group, Inc. 2005 Stock Incentive Plan 810.18*
            
            Form
      of Incentive Stock Option under the SouthCrest Financial Group, Inc. 2005
      Stock Incentive Plan 510.19*
            
            Form
      of Nonqualified Stock Option under the SouthCrest Financial Group, Inc.
      2005 Stock Incentive Plan 513.1
            
            Excerpts
      from the SouthCrest Financial Group, Inc. 2007 Annual Report to
      Shareholders – Management’s Discussion and
  Analysis







*
              Indicates
      a compensatory plan or contract.
 1
              Incorporated
      by reference to the Registration Statement on Form S-4 (Registration
      No. 333-112845), as filed with the SEC on February 13,
      2004.
 2
              Incorporated
      by reference to the Current Report on Form 8-K dated October 31,
      2006.
 3
              Incorporated
      by reference to the Current Report on Form 8-K dated February 23,
      2007.
 4
              Incorporated
      by reference to the Current Report on Form 8-K dated September 30,
      2004.
 5
              Incorporated
      by reference to the Annual Report on Form 10-K for the year ended December
      31, 2006.
 6
              Incorporated
      by reference to the Current Report on Form 8-K dated February 15,
      2005.
 7
              Incorporated
      by reference to the Current Report on Form 8-K dated October 31,
      2006.
 8
              Incorporated
      by reference to the Annual Report on Form 10-KSB for the year ended
      December 31, 2004.




Table of Contents




13.2
            
            Excerpts
      from the SouthCrest Financial Group, Inc. 2007 Annual Report to
      Shareholders – Consolidated Financial Statements21.1
            
            Subsidiaries
      of the Registrant23.1
            
            Consent
      of Dixon Hughes PLLC24.1
            
            Power
      of Attorney (appears on the signature pages to the Annual Report on
      Form 10-K)31.1
            
            Certification
      of Principal Executive Officer pursuant to Rule 13a-14(a) of the Exchange
      Act31.2
            
            Certification
      of Principal Financial Officer pursuant to Rule 13a-14(a) of the Exchange
      Act32.1
            
            Certification
      of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of
  200232.2
            
            Certification
      of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of
  2002