##### Table of Contents

---

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549



---

FORM 10-K



---

(Mark One)

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

For the fiscal year ended December 31, 2006

OR



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

For the transition period from  to

Commission File No.: 0-25846



---

CCF Holding Company

(Exact Name of Registrant as Specified in its Charter)



---



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Georgia                                                        |  | 58-2173616                          
|(State or Other Jurisdiction of Incorporation or Organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|101 North Main Street Jonesboro, Georgia                       |  | 30236                               
|(Address of Principal Executive Offices)                       |  | (Zip Code)                          

(770) 478-8881

(Issuers Telephone Number, Including Area Code)



---

Securities registered pursuant to Section 12(b) of the Exchange Act:

Common Stock, par value $0.10 per share, listed on The NASDAQ Stock Market LLC

Securities registered pursuant to Section 12(g) of the Exchange Act: None.



---

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act.    Yes ̈No  x

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 ̈No  x

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  x    No ̈

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. ̈

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

Large accelerated filer ̈Accelerated filer ̈Non-accelerated filer   x

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

The aggregate market value of the registrants outstanding common stock held by nonaffiliates of the registrant as of June 30, 2006 was
approximately $28,800,000. There were 3,652,920 shares of the registrants common stock outstanding as of March 22, 2007.

DOCUMENTS INCORPORATED BY REFERENCE



|                                                            |  |                              
|----------------------------------------------------------- |  | -----------------------------
|Document                                                    |  | Parts Into Which Incorporated
|2006 Annual Report to Shareholders                          |  | Part II                      
|Proxy Statement for the 2007 Annual Meeting of Shareholders |  | Part III                     



---



---

##### Table of Contents

TABLE OF CONTENTS



|             |  |                                              |  |                                                                                                |  |   
|------------ |  | -------------------------------------------- |  | ---------------------------------------------------------------------------------------------- |  | --
|PART I       |  |                                              |  |                                                                                               
|             |  | Item 1.                                      |  | Description of Business                                                                        |  | 2 
|             |  | Item 1A.                                     |  | Risk Factors                                                                                   |  | 16
|             |  | Item 1B.                                     |  | Unresolved Staff Comments                                                                      |  | 18
|             |  | Item 2.                                      |  | Properties                                                                                     |  | 18
|             |  | Item 3.                                      |  | Legal Proceedings                                                                              |  | 20
|             |  | Item 4.                                      |  | Submission of Matters to a Vote of Security Holders                                            |  | 20
|             |  |                                             
|PART II      |  |                                              |  |                                                                                               
|             |  | Item 5.                                      |  | Market for Common Equity, Related Stockholder Matters and Issuer Purchasesof Equity Securities |  | 20
|             |  | Item 6.                                      |  | Selected Financial Data                                                                        |  | 21
|             |  | Item 7.                                      |  | Managements Discussion and Analysis or Plan of Operation                                      |  | 21
|             |  | Item 7A.                                     |  | Quantitative and Qualitative Disclosures About Market Risk                                     |  | 21
|             |  | Item 8.                                      |  | Financial Statements and Supplementary Data                                                    |  | 21
|             |  | Item 9.                                      |  | Changes in and Disagreements with Accountants on Accounting and FinancialDisclosure            |  | 22
|             |  | Item 9A.                                     |  | Controls and Procedures                                                                        |  | 22
|             |  | Item 9B.                                     |  | Other Information                                                                              |  | 22
|             |  |                                             
|PART III     |  |                                              |  |                                                                                               
|             |  | Item 10.                                     |  | Directors, Executive Officers and Corporate Governance                                         |  | 23
|             |  | Item 11.                                     |  | Executive Compensation                                                                         |  | 23
|             |  | Item 12.                                     |  | Security Ownership of Certain Beneficial Owners and Management and RelatedStockholder Matters  |  | 23
|             |  | Item 13.                                     |  | Certain Relationships and Related Transactions, and Director Independence                      |  | 25
|             |  | Item 14.                                     |  | Principal Accountant Fees and Services                                                         |  | 25
|             |  |                                             
|PART IV      |  |                                              |  |                                                                                               
|             |  | Item 15.                                     |  | Exhibits and Financial Statement Schedules                                                     |  | 25
|             |  |                                             
|SIGNATURES   |  |                                              |  |                                                                                               
|             |  |                                             
|Exhibit 21   |  | Subsidiaries of CCF Holding Company          |  |                                                                                               
|             |  |                                             
|Exhibit 23.1 |  | Consent of Thigpen, Jones, Seaton & Co. P.C. |  |                                                                                               
|             |  |                                             
|Exhibit 23.2 |  | Consent of Porter Keadle Moore LLP           |  |                                                                                               
|             |  |                                             
|Exhibit 31.1 |  | Certificate of Principal Executive Officer   |  |                                                                                               
|             |  |                                             
|Exhibit 31.2 |  | Certificate of Principal Financial Officer   |  |                                                                                               
|             |  |                                             
|Exhibit 32.1 |  | Certificate of Chief Executive Officer       |  |                                                                                               
|             |  |                                             
|Exhibit 32.2 |  | Certificate of Chief Financial Officer       |  |                                                                                               



---

##### Table of Contents

CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS

CCF Holding Company (the Company) may from time to time make written or oral forward-looking statements, including
statements contained in the Companys filings with the Securities and Exchange Commission (including this annual report on Form 10-K and the exhibits hereto), in its reports to shareholders and in other communications by the Company, which are
made in good faith by the Company pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements involve risks and uncertainties, such as statements of the Companys plans, objectives, expectations, estimates and intentions, that are subject to change based on various important factors, some of
which are beyond the Companys control. The following factors, among others, could cause the Companys financial performance to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such
forward-looking statements: the strength of the United States economy in general and the strength of the local economies in which the Company conducts operations; the effects of, and changes in, trade, monetary and fiscal policies and laws,
including interest rate policies of the Board of Governors of the Federal Reserve System; inflation; interest rate, market and monetary fluctuations; the timely development of and acceptance of new products and services of the Company and the
perceived overall value of these products and services by users, including the features, pricing and quality compared to competitors products and services; the willingness of users to substitute competitors products and services for the
Companys products and services; the success of the Company in gaining regulatory approval of its products and services, when required; the impact of changes in financial services laws and regulations, including laws concerning taxes,
banking, securities and insurance; technological changes and acquisitions; managing credit risk; changes in consumer spending and saving habits; the impact of war or terrorism; and the success of the Company at managing the risks involved in the
foregoing.

The Company cautions that the foregoing list of important factors is not exclusive. For further information regarding the risk
factors applicable to the Company, please see Risk Factors on page 14. The Company does not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the Company.



1



---

##### Table of Contents

PART I



|Item 1. | Description of Business
|------- | -----------------------

CCF Holding Company

CCF Holding Company (the Company) is a bank holding company incorporated under the laws of the State of Georgia. Heritage Bank (the
Bank) is a Georgia commercial bank that is a wholly owned subsidiary of the Company. CCF Capital Trust I and CCF Capital Trust II (the Trusts) are Delaware business trusts that are unconsolidated subsidiaries of the Company
formed in January 2002 and March 2004. The Trusts were formed for the purpose of issuing trust preferred securities and loaning the proceeds of such issuance to the Company. Prior to September 1998, the Company was a savings and loan holding company
and the Bank was a federally chartered savings bank. The Company was organized in 1995 in connection with the conversion of the Bank from a mutual to stock form of organization (the Conversion) in July 1995 and its operations currently
consist primarily of serving as the holding company of the Bank.

Heritage Bank

Heritage Bank, through its predecessors, commenced business in 1955. Prior to 1997, the Bank operated as a traditional savings and loan, attracting
deposit accounts from the general public and using these deposits, together with other funds, primarily to originate and invest in long-term conventional loans secured by single-family residential real estate. Since the early part of 1997, the Bank
began to offer more of the products and services of a commercial bank in order to compete on a broader scale in the highly competitive financial services industry. As a result, the Banks primary lending activities are in the form of commercial
loans rather than long-term conventional loans secured by residential real estate.

The Bank operates seven offices within its primary
market area in Clayton, Fayette and Henry Counties, Georgia. The market area is part of the Atlanta, Georgia Metropolitan Statistical Area. The Banks main office is located in Jonesboro, Georgia. An additional branch in Clayton County is
located in the city of Forest Park. There are two branches in Fayetteville, Georgia with one located on Jeff Davis Drive and the second on Highway 85 South, on an out parcel of a shopping center. In Henry County there are three branch locations,
Keys Ferry, Highway 20/81 and Eagles Landing. Twenty-four hour ATMs are located at each location. Each county has at least one location open until 6:00 p.m. on Fridays and on Saturday morning for the convenience of our customers. Internet
banking and bill payment services are available through the Banks website, www.heritagebank.com.

The Bank is subject to examination
and comprehensive regulation by the Georgia Department of Banking and Finance (the GDBF) and the Federal Deposit Insurance Corporation (FDIC) and its deposits are federally insured by the Deposit Insurance Fund of the FDIC.
The Bank is a member of, and owns capital stock in, the Federal Home Loan Bank (FHLB) of Atlanta, which is one of the 12 regional banks in the FHLB System. The Company also is subject to state of Georgia and federal regulation.

The Bank attracts deposits from the general public and uses such deposits primarily to invest in and originate commercial, residential and
consumer loans and, to a lesser extent, to invest in investment securities. The principal sources of funds for the Banks lending activities are deposits, FHLB borrowings, borrowings from correspondent banks and the amortization, repayment, and
maturity of loans and investment securities. Principal sources of income are interest on loans and investment securities and fees paid to the Bank for its services. The Banks principal expenses are interest paid on deposits and, to a lesser
degree, personnel related expenses.

Market Area and Competition

Market Area. The following statistical data is based on information found on the chamber websites of Clayton, Fayette and Henry Counties as well as data from the Atlanta Regional Commission and the U.S.
Census Bureau.



2



---

##### Table of Contents

The Banks primary market area includes all of Clayton, Fayette and Henry County, Georgia. The
majority of the Banks deposits come from the market area, although it attracts some deposit and loan business from neighboring counties and metro Atlanta. The major industries for the tri-county area include airline, manufacturing,
construction and retail services.

The Banks main office is located in Jonesboro, Georgia approximately 20 miles south of Atlanta.
Hartsfield-Jackson Atlanta International Airport, one of the worlds busiest, Clayton State College and University, which serves more than 6,000 students, The Georgia State Archives, and the Southeast Division of the National Archives, are also
located in Clayton County. According to 2005 Census estimates, Clayton County is the fifth most populous county in the state as well as the fifth most populous county in the 10-county Atlanta region. The population of Clayton County grew
14.4% from 2000 to 2006 while total employment decreased by 4.17% from 2000 to 2005.

The 2005 Census estimated that Henry County was the
10th most populous county in Georgia and the 7th fastest-growing county in the nation since 2000. At 323 square miles, Henry is the 5th largest county in the 10-county Atlanta region. The population of Henry County grew 48.2% from 2000 to 2006
while total employment increased by 32.7% from 2000 to 2005. Henry County continues to be a primary center of growth activity in Georgia.

Fayette County is the 20th most populous county in Georgia and the 9th most populous in the 10-county Atlanta region. The population of Fayette County grew 13.6% from 2000 to 2006 while total employment increased by 14.8% from 2000 to 2005.

The table below shows our deposit market share in Clayton, Henry, and Fayette counties as of June 30, 2006.



|        |  |                   |  |                                           |  |                                             |  |         |  |             
|------- |  | ----------------- |  | ----------------------------------------- |  | ------------------------------------------- |  | ------- |  | ------------
|County  |  | Number ofBranches |  | Our MarketDeposit $$$(Dollars inMillions) |  | Total MarketDeposit $$$(Dollars inMillions) |  | Ranking |  | Market Share
|Clayton |  | 2                 |  | 172,546                                   |  | 1,585,869                                   |  | 4/12    |  | 10.88%      
|Henry   |  | 3                 |  | 71,935                                    |  | 1,995,880                                   |  | 10/20   |  | 3.60%       
|Fayette |  | 2                 |  | 104,219                                   |  | 1,792,692                                   |  | 7/16    |  | 5.81%       

The Bank announced in late 2006 that it would be expanding its offices because of the success of
its Commercial Lending Group. Our Service Center facility is at capacity and we are continuing to grow. Because our Commercial Lending Group in Clayton County is a significant part of that growth, the Company seeks to take steps to enable this group
to be even more successful. The office expansion will move six existing staff members from the Banks Service Center facility on Stockbridge Highway to its downtown Jonesboro offices, currently used by the Banks senior management, and
provide room for an additional six new employees. These new locations will allow the support functions to better serve the infrastructure that has been built in Clayton County.

The Banks senior management team will move to a new office near Eagles Landing in Henry County, which will be part of a new branch office that will
replace the existing Eagles Landing branch. The move is expected to take place in the first quarter of 2008 and does not affect the remaining 40 employees who will continue to work at Heritage Banks Service Center facility.

Heritage Bank was named the 2006 Business of the Year by the Clayton County Chamber of Commerce. In addition, for the sixth consecutive
year, the Company was named to the Atlanta Journal-Constitutions Top 100 Best Businesses in Georgia for 2006, ranking 69th.

Competition. The Bank operates in a competitive environment, competing for deposits and/or loans with commercial banks, thrifts and other financial entities. Principal competitors include other small community commercial banks
(such as Community Capital Bank, Southern Community Bank, First State Bank, The Bank of Georgia, First Bank Financial Services, and McIntosh State Bank) and larger institutions with branches in the Banks



3



---

##### Table of Contents

market area such as SunTrust, Wachovia, RBC Centura, Bank of America, and Peachtree National Bank (a division of Synovus). Numerous de novo banks have been
formed in the Banks market area. Also the mergers and consolidations that have occurred in the Banks market area require the Bank to compete with banks with greater resources. However, Heritage Bank is the oldest independent bank in
Clayton County. The de novo banks are limited in their funding strategies because they typically do not have access to wholesale funding. This has the effect of running up deposit rates as the new banks compete for funds in the market area.

The Bank strives to position itself to take advantage of every opportunity available to it. The Bank has restructured its daily functions
and responsibilities to maximize its product sales opportunities with specific focus in the areas of business development, commercial lending and credit administration. We feel that by emphasizing these areas we will continue to improve our
responsiveness to our existing customers and to develop new relationships. We believe that successful business development starts with employees who really care about customers. We focus on taking time to determine accounts and services that best
serve our customers needs and, as always, looking for options to better serve those needs.

The Bank continues to be a participant of
Partners in Education in our tri-county area. The Banks mission statement is Committed to the Future of the Communities We Serve through a Tradition of Excellence. We stand by this mission statement by having our officers and
employees support and participate in many events. The Banks employees, officers and directors represent the Bank on many boards and local civic and charitable organizations.

Lending Activities

General.As of December 31, 2006, the Bank had approximately
$338 million in loans outstanding, which represented 79% of the Companys total assets of $426 million. The Banks principal lending activities have been the origination of adjustable and fixed rate loans to small business customers. At
December 31, 2006, the loan portfolio consisted of variable rate loans totaling $285 million, or 84%, of the loan portfolio, with the remaining loans of $53 million, or 16%, fixed rate. Commercial and residential real estate is the primary form
of collateral for the loan portfolio with approximately $304 million, or 90%, of loans outstanding secured in this manner. Consumer loans, secured by collateral other than residential real estate account for $9 million, or 3%, of loans outstanding.
The remaining $25 million, or 7%, of loans outstanding are commercial loans secured by equipment and related non-real estate collateral.

One- to Four-Family Residential Mortgage Loans. The Banks residential real estate lending activity consists of the origination of one- to four-family, owner-occupied, residential mortgage loans secured by property
located in the Banks primary market area. The Bank originates adjustable-rate and fixed-rate residential, mortgage loans through a broker relationship with Taylor, Bean & Whitaker. The residential mortgage loans reflected on the
balance sheet are primarily loans that have been on the balance sheet of the Bank for more than five years and have paid as agreed during that time. In addition, home equity lines of credit, HELOC, are offered to consumers on variable
rate terms. Of the $8 million in residential real estate reflected in the loan charts, approximately $6 million are HELOCs at variable rate financing.

Construction, Acquisition and Development Lending. The Bank engages in construction lending involving loans to qualified borrowers for construction of one- to four-family residential properties and, on a
limited basis, for commercial properties. These loans are primarily to local builders and almost all of the Banks construction loan properties are located in the Banks market area and nearby counties.

The Bank makes construction loans to builders on a speculative and pre-sale basis. Construction loans on one- to four family properties are limited to a
maximum loan-to-value ratio of 80% on presales and 75% on speculative (unsold properties) and have a maximum maturity of 12 months, after which the loan can be renewed for up to an additional 12 months. Construction loans on nonresidential
properties are generally limited to a maximum loan-to-value ratio of 75% and also have a maximum maturity of 12 months after which the loan can be converted to a permanent mortgage loan.



4



---

##### Table of Contents

Construction loan proceeds are disbursed in increments as construction progresses and only after a Bank
representative makes a physical inspection of the project. At December 31, 2006, the Bank had $54 million in outstanding construction loans secured by unsold properties.

The Bank also from time to time will make construction loans to owner/borrowers that have either fixed or adjustable rates and are underwritten in
accordance with the same terms and requirements as the Banks permanent mortgages on existing properties, except that the builder must qualify as an approved contractor by the Bank, and the loans provide for disbursement of loan proceeds in
stages during the construction period. An approved contractor is one who has been approved by the Bank and whose credit, financial statements, and experience have been reviewed and approved by the Bank. Borrowers are typically required to pay
accrued interest on the outstanding balance monthly during the construction phase. At December 31, 2006, there was $232,000 outstanding in construction loans to owner/borrowers.

The Bank originated $127.7 million and $129.0 million in construction loans on one- to four-family properties during the fiscal years ended
December 31, 2006 and December 31, 2005, respectively.

Acquisition and development loans totaled $56 million at
December 31, 2006. These loans are primarily to local developers and are also located in the Banks immediate market area, including the nearby counties. The acquisition and development loans have maturities of up to 24 months. The
proceeds of the development loans are disbursed in increments as progress is made on the projects and following an inspection by a Bank representative. These loans are made at 75% or less of discounted appraised value.

Commercial Loans. The Banks commercial loans, which include loans secured by commercial real estate, represent a growing portion of
its lending activities. At December 31, 2006, outstanding commercial loans amounted to $304 million, or 90% of total loans outstanding. At December 31, 2006, the largest commercial loan had a balance of $6 million and was secured by an
apartment complex. The Bank sold participations of $2.2 million on this loan, which left a net balance of $3.8 million on the Banks books at December 31, 2006.

Most of the Banks commercial lending activities are in loans secured by commercial properties. Such loans consist primarily of permanent loans secured by small office buildings, apartment buildings, churches,
shopping centers and convenience stores. Loans secured by commercial real estate are generally originated in amounts up to 75% of the appraised value of the property. An independent appraiser, who has been previously approved by the Banks
senior credit officer, determines such appraised value. Commercial real estate loans are generally originated on an adjustable-rate basis with the interest rate adjusting annually and have terms of up to 25 years.

Consumer and Other Installment Loans. Consumer loans consist of savings account loans, personal secured and unsecured loans, automobile
loans, watercraft loans, recreational vehicle loans and home improvement loans. Substantially all of the Banks consumer loans have fixed rates of interest except personal lines of credit. At December 31, 2006, 97% of these loans were
fixed rate. Home equity lines of credit, discussed above in the residential mortgage section, are also offered to consumers at variable rate financing.

Loan Underwriting Risks. Construction financing is generally considered to involve a higher degree of risk of loss than long-term financing on improved, occupied real estate. Risk of loss on a
construction loan is dependent largely upon the accuracy of the initial estimate of the propertys value at completion of construction or development and the estimated cost (including interest) of construction and time to completion.
During the construction phase, a number of factors could result in delays and cost overruns. If the estimate of construction costs proves to be inaccurate, it may be necessary for the Bank to advance funds beyond the amount originally committed to
permit completion of the construction. If the estimate of value proves to be inaccurate, the Bank may be confronted, at or prior to the maturity of the loan, with collateral having a value which is insufficient to assure full repayment. As a result,
construction lending often involves the disbursement of substantial funds with repayment dependent, in part, on the success of the project. If the Bank is forced to foreclose on a property prior to or at completion due to a default, there can be no
assurance that the Bank will be able to recover all of the unpaid balance of, and accrued interest on, the loan as well as related foreclosure and holding costs. The Bank has sought to lessen this risk by limiting construction lending to qualified
borrowers in the Banks market area, by limiting the number of construction loans outstanding at any time, and by requiring a Bank representative to inspect properties under construction prior to disbursement of funds.



5



---

##### Table of Contents

Loans secured by commercial real estate generally involve a greater degree of risk than one- to
four-family mortgage loans and carry larger loan balances. This increased credit risk is a result of several factors, including the concentration of principal in a limited number of loans and borrowers, the effects of general economic conditions on
income producing properties, and the difficulty of evaluating and monitoring these types of loans. Furthermore, the repayment of loans secured by commercial real estate is typically dependent upon the successful operation or management of the
related project or company. If the cash flow from the project or company is reduced, the borrowers ability to repay the loan may be impaired. The Bank seeks to reduce these risks in a variety of ways, including limiting the size of such loans,
analyzing the financial condition of the borrower, accurately assessing the quality of the collateral and assessing the quality of the management of the applicable business operated on the property securing the loan. The Bank also obtains personal
guarantees and appraisals on each property.

Consumer loans entail greater credit risk than do residential mortgage loans, particularly in
the case of consumer loans that are unsecured or secured by assets that depreciate rapidly. In such cases, repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment for the outstanding loan and the
remaining deficiency often does not warrant further substantial collection efforts against the borrower. In particular, amounts realizable on the sale of repossessed automobiles and motor homes may be significantly reduced based upon the condition
of the collateral and the lack of demand for used collateral.

Loan Approval Process.The Banks Board of
Directors has granted various levels of lending authority to the Banks loan officers. Loans exceeding an officers individual authority must be submitted to the Officer Loan Committee. This committee, comprised of the President and three
executive vice presidents of the Bank, has a relational lending limit of $1,000,000 for secured and unsecured loans. Loan relationships greater than $1,000,000 must be approved by the Senior Loan Committee, which is comprised of the entire Board of
Directors of the Bank. The Banks legal lending limit is $4,500,000.

Loan Purchases and Sales. Generally, if the Bank
determines that loan sales are desirable for interest rate risk management or other purposes, the Bank may sell loans. The Bank has a brokerage relationship with Taylor, Bean & Whitaker; therefore all new mortgage loans are closed with
servicing released and without recourse. From time to time, the Bank also sells commercial loan participations. Generally, the Bank sells participations in commercial loans in cases where the loan, if booked in its entirety, would exceed the legal
lending limit of the Bank. The Banks loan purchases are generally commercial, commercial real estate and construction loan participations from community bank sources. These loans have various terms and maturities from one to five years. The
purchased loans are subject to the same credit standards and fall under the same approval guidelines that loans originated by our lending staff meet.



6



---

##### Table of Contents

The table below indicates the Banks origination and sales of loans during the periods indicated.



|                                                    |  |                         |          |   |      |   |          |  
|--------------------------------------------------- |  | ----------------------- | -------- | - | ---- | - | -------- | -
|                                                    |  | Year Ended December 31, |         
|                                                    |  | 2006                    |          |   | 2005 |  
|                                                    |  | (Dollars in Thousands)  |         
|Total gross loans receivable at beginning of period |  | $                       | 283,861  |   |      | $ | 260,343  |  
|                                                    |  |                         |          |   |      |   |          |  
|Loans originated:                                   |  |                         |          |   |      |   |          |  
|Residential (1-4 family) mortgage                   |  |                         |         |   |      |   |         |  
|Commercial, primarily real estate mortgage          |  |                         | 268,489  |   |      |   | 253,760  |  
|Real estate construction                            |  |                         | 127,264  |   |      |   | 129,231  |  
|Consumer and other installment                      |  |                         | 7,459    |   |      |   | 7,460    |  
|                                                    |  |                         |          |   |      |   |          |  
|Total loans originated                              |  |                         | 403,212  |   |      |   | 390,451  |  
|                                                    |  |                         |          |   |      |   |          |  
|Loans sold:                                         |  |                         |          |   |      |   |          |  
|Residential (1-4 family)                            |  |                         | (482     | ) |      |   | (205     | )
|Commercial                                          |  |                         | (26,177  | ) |      |   | (26,154  | )
|                                                    |  |                        
|Loans purchased                                     |  |                         | 11,760   |   |      |   | 7,390    |  
|                                                    |  |                        
|Other loan activity:                                |  |                         |          |   |      |   |          |  
|Loan principal repayments                           |  |                         | (334,237 | ) |      |   | (347,964 | )
|                                                    |  |                         |          |   |      |   |          |  
|Total gross loans receivable at end of period       |  | $                       | 337,937  |   |      | $ | 283,861  |  
|                                                    |  |                         |          |   |      |   |          |  

Deposit Products and Services

The Bank offers a full range of deposit services to commercial customers and individual consumers. Products include transaction accounts such as checking accounts, NOW accounts, money market accounts and repurchase
accounts as well as savings and certificates of deposit accounts. The interest rates paid and the service charges applied to these accounts are competitive with other products offered in the market area.

Investment Activities

The Bank invests in specified
short-term securities, mortgage-backed securities, certain other investments and the common stock of the Federal Home Loan Bank (FHLB) of Atlanta. The Banks mortgage-backed securities portfolio consists of participation
certificates issued by the Federal National Mortgage Association (FNMA) and Federal Home Loan Mortgage Corporation (FHLMC) which are secured by interests in pools of conventional mortgages originated by other financial
institutions. Bank qualified municipal bonds are included in the Banks investment portfolio. The Banks equity investment in the FHLB of Atlanta is a requirement of membership and allows the Bank to borrow from the FHLB of Atlanta at
favorable overnight and long-term rates. During the year ended December 31, 2006, the Company did not sell any securities. During the year ended December 31, 2005, the Company sold $2.5 million of available for sale investment securities.

Personnel

As of December 31,
2006, the Bank had 109 full-time and 19 part-time employees. The Company does not have any employees other than officers who also are employees of the Bank. A collective bargaining group does not represent the Banks or the Companys
employees.

Website Address

Our
corporate website address is www.heritagebank.com. From this website, select the About Us link followed by selecting Investor Relations and SEC Filings links. This is a direct link to our filings with the
Securities and Exchange Commission (SEC), including but not limited to our quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to these reports. These reports are accessible soon after we file them with the
SEC.



7



---

##### Table of Contents

Supervision and Regulation

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

CCF Holding Company

Because it owns all of the capital stock of the Bank, the Company is a bank holding company under the
federal Bank Holding Company Act of 1956 (the Bank Holding Company Act). 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 GDBF 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 Georgia. Conversely, an adequately capitalized and adequately managed bank holding company located outside of Georgia may purchase a bank located inside of Georgia. In each case, however,
restrictions may be placed on the acquisition of a bank that has only been in existence for a limited amount of time or will result in specified concentrations of deposits. Currently, Georgia law prohibits acquisitions of banks that have been
chartered for less than three years. Because the Bank has been chartered for more than three years, this restriction would not limit our ability to sell.

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 the 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 a 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 Exchange Act of 1934; or
| | - |  | --------------------------------------------------------------------------------------------------------------



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

The regulations provide a procedure for challenging any rebuttable presumption of control.



8



---

##### Table of Contents

Permitted Activities. A bank holding company is generally permitted under the Bank Holding
Company Act, to engage in, or acquire direct or indirect control of more than 5% of the voting shares of any company engaged in, the following activities:



| |  |  | banking or managing or controlling banks; and
| | - |  | ---------------------------------------------



| |  |  | any activity that the Federal Reserve determines to be so closely related to banking as to be a proper incident to the business of banking.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------

Activities that the Federal Reserve has found to be so closely related to banking as to be a proper incident to the
business of banking include:



| |  |  | factoring accounts receivable;
| | - |  | ------------------------------



| |  |  | making, acquiring, brokering or servicing loans and usual related activities;
| | - |  | -----------------------------------------------------------------------------



| |  |  | leasing personal or real property;
| | - |  | ----------------------------------



| |  |  | operating a non-bank depository institution, such as a savings association;
| | - |  | ---------------------------------------------------------------------------



| |  |  | trust company functions;
| | - |  | ------------------------



| |  |  | financial and investment advisory activities;
| | - |  | ---------------------------------------------



| |  |  | conducting discount securities brokerage activities;
| | - |  | ----------------------------------------------------



| |  |  | underwriting and dealing in government obligations and money market instruments;
| | - |  | --------------------------------------------------------------------------------



| |  |  | providing specified management consulting and counseling activities;
| | - |  | --------------------------------------------------------------------



| |  |  | performing selected data processing services and support services;
| | - |  | ------------------------------------------------------------------



| |  |  | acting as agent or broker in selling credit life insurance and other types of insurance in connection with credit transactions; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------



| |  |  | performing selected insurance underwriting activities.
| | - |  | ------------------------------------------------------

Despite prior approval, the Federal Reserve may order a bank holding company or its subsidiaries to terminate any of these activities or to terminate its ownership or control of any subsidiary when it has reasonable
cause to believe that the bank holding companys continued ownership, activity or control constitutes a serious risk to the financial safety, soundness or stability of it or any of its bank subsidiaries.

In addition to the permissible bank holding company activities listed above, the Financial Services Modernization Act of 1999, or the Gramm-Leach-Bliley
Act, revised and expanded the provisions of the Bank Holding Company Act by permitting a bank holding company to qualify and elect to become 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. The following activities are considered financial in nature:



| |  |  | lending, trust and other banking activities;
| | - |  | --------------------------------------------



| |  |  | insuring, guaranteeing or indemnifying against loss or harm, or providing and issuing annuities and acting as principal, agent or broker for these purposes, in any
state;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | providing financial, investment or advisory services;
| | - |  | -----------------------------------------------------



| |  |  | issuing or selling instruments representing interests in pools of assets permissible for a bank to hold directly;
| | - |  | -----------------------------------------------------------------------------------------------------------------



| |  |  | underwriting, dealing in or making a market in securities;
| | - |  | ----------------------------------------------------------



| |  |  | other activities that the Federal Reserve may determine to be so closely related to banking or managing or controlling banks as to be a proper incident to managing
or controlling banks;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | foreign activities permitted outside of the United States if the Federal Reserve has determined them to be usual in connection with banking operations abroad;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | merchant banking through securities or insurance affiliates; and
| | - |  | ----------------------------------------------------------------



| |  |  | insurance company portfolio investments.
| | - |  | ----------------------------------------

On December 18, 2006, the SEC and the Federal Reserve issued joint proposed rules, which would implement the broker exception for banks under Section 3(a)(4) of the Exchange Act of 1934 and would be adopted as part of
the Gramm-Leach-Bliley Act. The proposed rules would implement the statutory exceptions that allow a bank, subject to certain conditions, to continue to conduct securities transactions for the Banks customers as part of its trust and
fiduciary, custodial and deposit sweep functions, and to refer customers to a securities broker-dealer pursuant to a networking arrangement with the broker-dealer.



9



---

##### Table of Contents

To qualify to become a financial holding company, the Bank 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, we would be required to file an election with the Federal Reserve to become a
financial holding company and provide the Federal Reserve with 30 days written notice prior to engaging in a permitted financial activity. While we meet 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 Bank and to commit resources to support the Bank. 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 us to a federal banking regulator to maintain the capital of the
Bank will be assumed by the bankruptcy trustee and entitled to a priority of payment.

Heritage Bank

Because the Bank is a commercial bank chartered under the laws of the State of Georgia, it is primarily subject to the supervision, examination and
reporting requirements of the FDIC and the GDBF. The FDIC and the GDBF regularly examine the Bank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 Banks deposits are insured by the FDIC to the maximum extent provided by law, it is also
subject to certain FDIC regulations. The Bank is also subject to numerous state and federal statutes and regulations that affect its business, activities and operations.

Branching.Under Georgia law, the Bank may open branch offices throughout Georgia with the prior approval of the GDBF. In addition, with prior regulatory approval, the Bank may acquire branches of existing
banks located in Georgia. The Bank 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. Georgia law, with limited exceptions,
currently permits 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, Georgia has not opted-in to this provision. Therefore, interstate merger is the only method through which a
bank located outside of Georgia may branch into Georgia. This provides a limited barrier of entry into the Georgia banking market, which protects us from an important segment of potential competition. However, because Georgia has elected not to
opt-in, our ability to establish a new start-up branch in another state may be limited. Many states that have elected to opt-in have done so on a reciprocal basis, meaning that an out-of-state bank may establish a new start-up branch only if its
home state has also elected to opt-in. Consequently, until Georgia changes its election, the only way we will be able to branch into states that have elected to opt-in on a reciprocal basis will be through interstate merger.

Prompt Corrective Action.The Federal Deposit Insurance Corporation Improvement Act of 1991 (the FDIC Improvement Act) 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 regulators have also specified by regulation the relevant capital levels for each of the other categories. As
of December 31, 2006, the Bank 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.

An institution that is categorized as undercapitalized, significantly undercapitalized, or critically undercapitalized is required to submit an acceptable capital restoration plan to its appropriate federal banking



10



---

##### Table of Contents

regulators. A bank holding company must guarantee that a subsidiary depository institution meets its capital restoration plan, subject to various
limitations. The controlling holding companys obligation to fund a capital restoration plan is limited to the lesser of 5% of an undercapitalized subsidiarys assets at the time it became undercapitalized or the amount required to meet
regulatory capital requirements. An undercapitalized institution is also generally prohibited from increasing its average total assets, making acquisitions, establishing any branches or engaging in any new line of business, except under an accepted
capital restoration plan or with FDIC approval. The regulations also establish procedures for downgrading an institution to a lower capital category based on supervisory factors other than capital.

FDIC Insurance AssessmentsThe 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.

In
addition, the FDIC imposes assessments to help pay off the $780 million in annual interest payments on the $8 billion Financing Corporation bonds issued in the late 1980s as part of the government rescue of the thrift industry. This assessment rate
is adjusted quarterly and is set at 1.22 cents per $100 of deposits for the first quarter of 2007.

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 banking 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 Bank. Additionally, we 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 Bank has developed a system by which it develops, maintains and
documents a comprehensive, systematic and consistently applied process 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 Bank maintains a prudent and conservative, but not excessive, ALLL, that is at a level that is 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 Banks estimate of credit losses reflects consideration of all significant factors that affect the collectibility of the portfolio as of the
evaluation date. See the section captioned Managements Discussion and Analysis  Critical Accounting Policies in the Companys 2006 Annual Report to Shareholders.



11



---

##### Table of Contents

Commercial Real Estate Lending. The Banks lending operations may be subject to
enhanced scrutiny by federal banking regulators based on its concentration 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. The guidance prescribes the following guidelines for its examiners to help identify institutions that are potentially exposed to significant CRE risk and may warrant greater
supervisory scrutiny:



| |  |  | total reported loans for construction, land development and other land represent 100% or more of the institutions total capital, or
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------



| |  |  | total commercial real estate loans represent 300% or more of the institutions total capital, and the outstanding balance of the institutions commercial
real estate loan portfolio has increased by 50% or more during the prior 36 months.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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



| |  |  | 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;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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 Banks 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;
| | - |  | ----------------------------------------------------------------------------------



12



---

##### Table of Contents

| |  |  | 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 Bank are
required to comply with the capital adequacy standards established by the Federal Reserve, in the case of the Company, and the FDIC, in the case of the Bank. The Federal Reserve has established a risk-based and a leverage measure of capital adequacy
for bank holding companies. The Bank is also subject to risk-based and leverage capital requirements adopted by the FDIC, 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 stock and hybrid capital, and a limited amount of loan loss reserves. The total
amount of Tier 2 Capital is limited to 100% of Tier 1 Capital. At December 31, 2006, our ratio of total capital to risk-weighted assets was 11.2% and our ratio of Tier 1 Capital to risk-weighted assets was 9.7%.

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%. At December 31, 2006, our leverage ratio was 9.2%. 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 Prompt Corrective Action above.



13



---

##### Table of Contents

Payment of Dividends

The Company is a legal entity separate and distinct from the Bank. The principal sources of the Companys cash flow, including cash flow to pay dividends to its shareholders, are dividends that the Bank pays to
the Company as its sole shareholder. Statutory and regulatory limitations apply to the Banks payment of dividends to the Company as well as to the Companys payment of dividends to its shareholders.

The Bank is required to obtain prior approval of the GDBF if the total of all dividends declared by the Bank in any year will exceed 50% of the
Banks net income for the prior year. The payment of dividends by the Company and the Bank may also be affected by other factors, such as the requirement to maintain adequate capital above regulatory guidelines. At December 31, 2006, the
Bank could pay cash dividends without prior regulatory approval.

If, in the opinion of the federal banking regulator, the Bank was engaged
in or about to engage in unsafe or unsound practice, the federal banking regulator could require, after notice and a hearing, that the Bank stop or refrain from engaging in the practice it considers unsafe or unsound. The federal banking regulators
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 FDIC Improvement Act, 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 banking regulators have issued policy statements that provide that bank holding companies and insured banks should generally only pay
dividends out of current operating earnings.

Restrictions on Transactions with Affiliates

The Company and the Bank 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 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 Bank must also comply with
other provisions designed to avoid the taking of low-quality assets.

The Company and the Bank 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 Bank is
also subject to restrictions on extensions of credit to their 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.

Privacy

Financial institutions are required to
disclose their policies for collecting and protecting confidential information. Customers generally may prevent financial institutions from sharing nonpublic personal financial information with nonaffiliated third parties except under narrow
circumstances, such as the processing of



14



---

##### Table of Contents

transactions requested by the consumer or when the financial institution is jointly sponsoring a product or service with a nonaffiliated third party.
Additionally, financial institutions generally may not disclose consumer account numbers to any nonaffiliated third party for use in telemarketing, direct mail marketing or other marketing to consumers.

Anti-Terrorism and Money Laundering Legislation

The
Bank is subject to the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the USA PATRIOT Act) as it amended the Bank Secrecy Act and the rules and regulations of the Office of
Foreign Assets Control (OFAC). These statutes and related rules and regulations impose requirements and limitations on specific financial transactions and account relationships, intended to guard against money laundering and terrorism financing. The
Bank has established a customer identification program pursuant to Section 326 of the USA PATRIOT Act and the Bank Secrecy Act, and otherwise has implemented policies and procedures to comply with the foregoing rules.

Federal Deposit Insurance Reform

On
February 8, 2006, President Bush signed the Federal Deposit Insurance Reform Act of 2005 (the FDIRA). Among other things, FDIRA changes the federal deposit insurance system by:



| |  |  | raising the coverage level for qualifying retirement accounts to $250,000, subject to future indexing;
| | - |  | ------------------------------------------------------------------------------------------------------



| |  |  | authorizing the FDIC and the National Credit Union Administration to index deposit insurance coverage for inflation, for standard accounts and qualifying retirement
accounts, every five years beginning April 1, 2007;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | prohibiting undercapitalized financial institutions from accepting employee benefit plan deposits;
| | - |  | --------------------------------------------------------------------------------------------------



| |  |  | merging the Bank Insurance Fund and Savings Association Insurance Fund into a new Deposit Insurance Fund (the DIF); and
| | - |  | -----------------------------------------------------------------------------------------------------------------------



| |  |  | providing credits to financial institutions that capitalized the FDIC prior to 1996 to offset future assessment premiums.
| | - |  | -------------------------------------------------------------------------------------------------------------------------

FDIRA also authorizes the FDIC to revise the current risk-based assessment system, subject to notice and comment and caps the amount of the DIF at 1.50%
of domestic deposits. The FDIC must issue cash dividends, awarded on a historical basis, for the amount of the DIF over the 1.50% ratio. Additionally, if the DIF exceeds 1.35% of domestic deposits at year-end, the FDIC must issue cash dividends,
awarded on a historical basis, for half of the amount of the excess.

Financial Services Regulatory Relief Act

President Bush signed the Financial Services Regulatory Relief Act of 2006 (Regulatory Relief Act) into law on October 13, 2006. The
Regulatory Relief Act repeals certain reporting requirements regarding loans to bank executive officers and principal shareholders. These changes have eliminated the statutory requirements for (1) executive officers to report to the Board of
Directors when the executive officer becomes indebted to another institution in an aggregate amount that is greater than the amount the officer could borrow from his or her own institution; (2) the Bank to report all credits made to executive
officers since the previous report of condition; and (3) executive officers and principal shareholders to report to the Board when the executive officer or principal shareholder becomes indebted to a correspondent bank.

The Regulatory Relief Act increased the size of a bank eligible for 18-month (rather than annual) examinations from $250 million to $500 million. The
Regulatory Relief Act amends the privacy rules of Gramm-Leach-Bliley to clarify that CPAs are not required to notify their customers of privacy and disclosure policies as long as they are subject to state law restraints on disclosure of
non-public personal information without customer approval. Finally, the Regulatory Relief Act requires that the federal banking regulators develop model privacy notice forms and provides that banks adopting the model forms will be afforded a
regulatory safe harbor under the disclosure requirements of Gramm-Leach-Bliley.



15



---

##### Table of Contents

Proposed Legislation and Regulatory Action

New regulations and statutes are regularly proposed that contain wide-ranging proposals for altering the structures, regulations and competitive
relationships of financial institutions operating and 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

The Banks 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. Neither the Company nor the Bank can 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.

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 profitability is vulnerable to interest rate fluctuations.

Our profitability depends substantially upon our net interest income. Net interest income is the difference between the interest earned on assets, such as loans and investment securities, and the interest paid for
liabilities, such as savings and time deposits. Market interest rates for loans, investments and deposits are highly sensitive to many factors beyond our control. Recently, interest rate spreads have generally narrowed due to changing market
conditions, policies of various government and regulatory authorities and competitive pricing pressures, and we cannot predict whether these rate spreads will narrow even further. This narrowing of interest rate spreads could adversely affect our
financial condition and results of operations. In addition, we cannot predict whether interest rates will continue to remain at present levels. Changes in interest rates may cause significant changes, up or down, in our net interest income.
Depending on our portfolio of loans and investments, our results of operations may be adversely affected by changes in interest rates.

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.



16



---

##### Table of Contents

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.

If the value of real estate in our core market were to decline materially, a
significant portion of our loan portfolio could become under-collateralized, which could have a material adverse effect on our business, financial condition and results of operations.

With most of our loans concentrated in commercial loans, primarily secured by real estate, a decline in local economic conditions could adversely affect
the values of our real estate collateral. Consequently, a decline in local economic conditions may have a 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.

In addition to considering the financial strength and cash flow characteristics of borrowers, we often secure
loans with real estate collateral. At December 31, 2006, approximately 90% of our loans had real estate as a primary or secondary component of 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. If we are required to liquidate the collateral securing a loan to satisfy the debt during a period of reduced real estate values, our earnings and
capital could be adversely affected.

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 as part of our general growth strategy, including the expansion of the Eagles Landing branch to include offices for the executive group. We may
also seek to acquire other financial institutions, or parts of those institutions, though we have no present plans in that regard. 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;
| | - |  | ---------------------------------------------------------------------------------------------------------



| |  |  | 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.
| | - |  | ----------------------------------------------------------------------------------------------------

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 executive management team. 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.

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. According to the FDIC, as of June 30, 2006, 12 banks serve Clayton County with a total of 40 branches, 16 banks serve Fayette County with a total of 47 branches, and 20 banks serve Henry County with a total of 54 branches.



17



---

##### Table of Contents

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.

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 Board of Governors of the Federal Reserve System (Federal Reserve Board). Our subsidiary bank is primarily regulated by the FDIC and the GDBF. Our compliance with
Federal Reserve Board, FDIC and GDBF 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.

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 Board. Actions by monetary and fiscal authorities, including the Federal Reserve Board, could have an adverse effect on our deposit levels, loan demand or
business and earnings.

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 and cost of corporate governance, reporting and disclosure practices. As a result, we may experience greater compliance costs.



|Item 1B. | Unresolved Staff Comments
|-------- | -------------------------

There are no
written comments from the Commission staff regarding our periodic or current reports under the Act which remain unresolved.



|Item 2. | Properties
|------- | ----------

The Company utilizes the offices
of the Bank. The Bank operates from its main office and six branch offices. In 2006, the Bank sold one parcel of undeveloped real property with a book value of $401,000. This vacant lot on Highway 19&41 South in Lovejoy, Georgia had previously
been held as a possible future branch location.



18



---

##### Table of Contents

Main Office.

The Banks main office is located at 101 North Main Street, Jonesboro, Georgia 30236. The building is on a leased land site. This lease is a 30-year land lease expiring in 2027. The main office, originally built in 1968 underwent
extensive renovations in 2004.

The net book value of the building and equipment as of December 31, 2006, was $1,170,740 and $239,000,
respectively.

The Bank obtains rental income through the leasing of space in its main building and its Towne Center office (described
below). During the fiscal years ended December 31, 2006 and December 31, 2005, such rental income was $41,000 and $39,000, respectively.

Service Center.

The Banks Service Center is located at 242 East Stockbridge Road, Jonesboro, Georgia 30236. The
center is located in a facility leased by the Bank. The net book value of the leasehold improvements and equipment at December 31, 2006, was $199,319 and $449,042, respectively.

Fayetteville Office.

The Banks Fayetteville office is located at 440 North Jeff Davis Drive,
Fayetteville, Georgia 30214.

This property is owned by the Bank. The net book value of the land, building, and equipment at 440 North Jeff
Davis Drive location as of December 31, 2006, was $267,000, $862,000, and $136,000, respectively.

Forest Park Office.

The Banks Forest Park office is located at 822 Main Street (formally 4895 Evans Drive), Forest Park, Georgia 30298.

This property is owned by the Bank. The net book value of the land, building, and equipment at 822 Main Street as of December 31, 2006, was $79,000,
$571,000, and $123,000, respectively.

McDonough Office.

The Banks McDonough office is located at 203 Keys Ferry Street, McDonough, Georgia 30253. In addition to this property, the Bank previously owned a lot on Georgia Highway 20/81 in Henry County. The Bank
initially purchased this property for future expansion but sold the property to a group of investors in December 2002. In January 2003, the Company entered into a long-term lease agreement with the purchasers of the property and opened a branch
facility in August 2003 which is described below under Heritage Plaza Office.

The McDonough office property is owned by the Bank. The net
book value of the land, building, and equipment at 203 Keys Ferry Street as of December 31, 2006, was $335,000, $754,000, and $90,000, respectively.

Towne Center Office

The Banks Towne Center Office is located at 855 Glenn Street South in Fayetteville, Georgia
20253. This office opened in November 2001.

This property is owned by the Bank. The net book value of the land, building and equipment on
December 31, 2006 was $527,000, $652,000, and $126,000, respectively.



19



---

##### Table of Contents

Heritage Plaza Office

The Banks Heritage Plaza Office is located at 860 Highway 20/81 West in McDonough, Georgia 30253. This office opened in August 2003. The office is located in a building leased by the Bank.

The net book value of the leasehold improvements and equipment on December 31, 2006 was $134,000, and $118,000, respectively.

Eagles Landing Office

The Banks Eagles Landing
Office is located at 1040 Eagles Landing Parkway, Suite 101, Pinnacle 200 Building in Stockbridge, Georgia. This office opened in July 2004. The office is located in space leased by the Bank.

The net book value of the leasehold improvements and equipment on December 31, 2006 was $97,000, and $151,000, respectively.



|Item 3. | Legal Proceedings
|------- | -----------------

The Company and the Bank,
from time to time, are party to ordinary routine litigation, which arises in the normal course of business, such as claims to enforce liens, condemnation proceedings on properties in which the Bank holds security interests, claims involving the
making and servicing of real property loans, and other issues incident to the business of the Company and the Bank. In the opinion of management, no material loss is expected from any of such pending claims or lawsuits.



|Item 4. | Submission of Matters to a Vote of Security Holders
|------- | ---------------------------------------------------

No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year ended December 31, 2006.

PART II



|Item 5. | Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
|------- | -----------------------------------------------------------------------------------------------

The information contained under the section captioned Stock Market Information in the Companys 2006 Annual Report to Shareholders (the
Annual Report) included as Exhibit 13 to this Annual Report on Form 10-K is incorporated herein by reference.



|                               |  |                                |  |                            |  |                                                                              |  |                                                                                                         
|------------------------------ |  | ------------------------------ |  | -------------------------- |  | ---------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------
|Period                         |  | Total Numberof SharesPurchased |  | AveragePrice Paidper Share |  | Total Number ofShares Purchased asPart of PubliclyAnnounced Plans orPrograms |  | Maximum Number (orApproximate DollarValue) of Shares that MayYet Be Purchased Underthe
Plans or Programs
|October 1  October 31, 2006   |  |                               |  |                           |  |                                                                             |  |                                                                                                        
|November 1  November 30, 2006 |  |                               |  |                           |  |                                                                             |  |                                                                                                        
|December 1  December 31, 2006 |  |                               |  |                           |  |                                                                             |  |                                                                                                        
|Total                          |  |                               |  |                           |  |                                                                             |  |                                                                                                        



20



---

##### Table of Contents

|Item 6. | Selected Financial Data
|------- | -----------------------

The information
contained in the section captioned Selected Financial and Other Data in the Annual Report is incorporated herein by reference.



|Item 7. | Managements Discussion and Analysis or Plan of Operation
|------- | ---------------------------------------------------------

The information contained in the section captioned Managements Discussion and Analysis of Financial Condition and Results of Operations in the Annual Report is incorporated herein by reference.



|Item 7A. | Quantitative and Qualitative Disclosures About Market Risk
|-------- | ----------------------------------------------------------

Market risk is the risk of loss from adverse changes in market prices and interest rates. Our market risk arises principally from interest rate risk inherent in our lending, deposit, and borrowing activities. Although
we manage certain other risks, such as credit quality and liquidity risk, in the normal course of business we consider interest rate risk to be our most significant market risk and the risk that could potentially have the largest material effect on
our financial condition and results of operations. We do not maintain a trading portfolio or deal in international instruments, and therefore, other types of market risks, such as foreign currency risk and commodity price risk, do not arise in the
normal course of our business activities.

Quantitative information about the Companys market risk at December 31, 2006 is as
follows (in thousands):

Interest Rate Risk: Income Sensitivity Summary



|                             |  |                               |        |    |         |   |        |           |  |   |        |  
|---------------------------- |  | ----------------------------- | ------ | -- | ------- | - | ------ | --------- |  | - | ------ | -
|                             |  | Down 200 BP                   |        |    | Current |   |        | Up 200 BP | 
|                             |  | (Dollar amounts in thousands) |       
|Net interest income          |  | $                             | 18,206 |    |         | $ | 18,722 |           |  | $ | 19,284 |  
|$ change net interest income |  | $                             | (516   | )  |         | $ | 0      |           |  | $ | 562    |  
|% change net interest income |  |                               | (2.8   | )% |         |   | 0.0    | %         |  |   | 2.9    | %

The Company has adopted an asset/liability management program to monitor the Companys
interest rate sensitivity and to ensure that the Company is competitive in the loan and deposit markets. Management seeks to manage the relationship between interest-sensitive assets and liabilities in order to protect against wide interest rate
fluctuations, including those resulting from inflation. The Company purchased a $50 million interest rate floor at 7.0% prime in September 2006. Additionally, the information contained in the section captioned Managements Discussion and
Analysis of Financial Condition and Results of OperationsAsset and Liability Management in our Annual Report is incorporated herein by reference.



|Item 8. | Financial Statements and Supplementary Data
|------- | -------------------------------------------

The following report and statements are included in the financial statement section of the Annual Report and are incorporated herein by reference:



| | 1. | Report of Thigpen, Jones, Seaton & Co. P.C.
| | -- | -------------------------------------------



| | 2. | Report of Porter Keadle Moore, LLP.
| | -- | -----------------------------------



| | 3. | CCF Holding Company and Subsidiary
| | -- | ----------------------------------



21



---

##### Table of Contents

| | (a) | Consolidated Balance Sheets at December 31, 2006 and December 31, 2005
| | --- | ----------------------------------------------------------------------



| | (b) | Consolidated Statements of Earnings for the years ended December 31, 2006, 2005 and 2004
| | --- | ----------------------------------------------------------------------------------------



| | (c) | Consolidated Statements of Comprehensive Income for the years ended December 31, 2006, 2005 and 2004
| | --- | ----------------------------------------------------------------------------------------------------



| | (d) | Consolidated Statements of Stockholders Equity for the years ended December 31, 2006, 2005 and 2004
| | --- | ----------------------------------------------------------------------------------------------------



| | (e) | Consolidated Statements of Cash Flows for the years ended December 31, 2006, 2005 and 2004
| | --- | ------------------------------------------------------------------------------------------



| | (f) | Notes to Consolidated Financial Statements
| | --- | ------------------------------------------



|Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
|------- | ------------------------------------------------------------------------------------

None.



|Item 9A. | Controls and Procedures
|-------- | -----------------------

Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002, 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 our principal executive officer and principal financial
officer, as appropriate to allow timely decisions regarding required disclosure.

Our management, including our principal executive officer
and principal financial officer, 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 this evaluation, our Chief
Executive Officer and Chief Financial Officer concluded that such disclosure controls and procedures are adequate to ensure that material information relating to the Company, including its consolidated subsidiary, that is required to be included in
its periodic filings with the Securities Exchange Commission, is timely made known to them.



|Item 9B. | Other Information
|-------- | -----------------

On December 21,
2006, the Compensation Committee of the Board of Directors of the Company increased the annual salary of its named executive officers as follows:



|                    |  |        |        
|------------------- |  | ------ | -------
|Officer             |  | Salary
|David B. Turner     |  | $      | 190,550
|                    |  |        |        
|Leonard A. Moreland |  | $      | 190,550
|                    |  |        |        
|John Westervelt     |  | $      | 140,000
|                    |  |        |        
|John C. Bowdoin     |  | $      | 128,750
|                    |  |        |        
|Mary Jo Rogers      |  | $      | 105,000
|                    |  |        |        



22



---

##### Table of Contents

PART III



|Item 10. | Directors, Executive Officers and Corporate Governance
|-------- | ------------------------------------------------------

The information required by this item regarding our directors and executive officers is incorporated herein by reference to the section captioned Proposal One  Election of Directors in the
Companys definitive proxy statement for the Companys 2007 Annual Meeting of Shareholders (the Proxy Statement). The information required by this item regarding our Section 16 beneficial ownership reporting compliance is
incorporated herein by reference to the section captioned Section 16(a) Beneficial Ownership Reporting Compliance in the Proxy Statement.

The Company has adopted a Code of Business Conduct and Ethics that is applicable to all of our executive officers and employees. The Code of Business Conduct and Ethics is posted on the Companys web site at
www.heritagebank.com. A copy of the Code of Business Conduct and Ethics may be obtained without charge upon written request addressed to the Secretary of the Company, 101 North Main Street, Jonesboro, Georgia 30236.

The information required by this item regarding our Audit Committee is incorporated herein by reference to the section captioned Proposal One
 Election of Directors  Audit Committee and  Report of the Audit Committee in the Proxy Statement, The Audit Committee has at least one financial expert, Roy V. Hall, who is also an independent director and the Chairman of
the Audit Committee.

There have been no material changes to the procedures by which shareholders may recommend nominees to the
Companys board of directors.



|Item 11. | Executive Compensation
|-------- | ----------------------

The information
required by this item is incorporated herein by reference to the section captioned Compensation in the Proxy Statement.

(a)
Compensation Committee Interlocks and Insider Participation

The information regarding the Compensation Committee is incorporated herein by
reference to the section captioned Proposal One  Election of Directors  Compensation Committee Interlocks and Insider Participation.

(b) Compensation Committee Report

The information regarding the Compensation Committee report is
incorporated herein by reference to the section captioned Compensation  Compensation Committee Report in the Proxy Statement.



|Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|-------- | ----------------------------------------------------------------------------------------------

(a) Security Ownership of Certain Beneficial Owners

The information required by this item is incorporated herein by reference to the section captioned Proposal One  Election of Directors in the Proxy Statement.

(b) Security Ownership of Management

The
information required by this item is incorporated herein by reference to the section captioned Proposal One  Election of Directors in the Proxy Statement.

(c) Changes in Control

The Company knows
of no arrangements, including any pledge by any person of securities of the Company, the operation of which may at a subsequent date result in a change in control of the Company.



23



---

##### Table of Contents

(d) Securities Authorized for Issuance Under Equity Compensation Plans



24



---

##### Table of Contents

The following table outlines our securities authorized for issuance under equity compensation plans as of
December 31, 2006.



|                                                           |  |                                                                                           |  |                                                                            |      |                                                                                                                                           |  
|---------------------------------------------------------- |  | ----------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------- | ---- | ----------------------------------------------------------------------------------------------------------------------------------------- | -
|Plan Category                                              |  | (A) Number ofsecurities to beissued uponexercise ofoutstandingoptions, warrantsand rights |  | (B) Weighted-average exerciseprice ofoutstandingoptions,warrants andrights |      | (C) Number of securitiesremaining available forfuture issuance underequity compensationplans (excludingsecurities reflected incolumn (A))
|Equity compensation plans approved by security holders     |  | 314,065                                                                                   |  | $                                                                          | 9.10 |                                                                                                                                           | 
|Equity compensation plans not approved by security holders |  |                                                                                          |  |                                                                            |     |                                                                                                                                           | 
|Total                                                      |  | 314,065                                                                                   |  | $                                                                          | 9.10 |                                                                                                                                           | 



|Item 13. | Certain Relationships and Related Transactions, and Director Independence
|-------- | -------------------------------------------------------------------------

(a) Transactions with Related Persons

The information required by this item is incorporated herein by
reference to the section captioned Certain Relationships and Related Transactions in the Proxy Statement.

(b) Review, Approval
or Ratification of Transactions with Related Persons

The information required by this item is incorporated herein by reference to
the section captioned Certain Relationships and Related Transactions in the Proxy Statement.

(c) Director Independence

Each of John B. Lee, John Mitchell, Charles Tucker, Roy Hall and Stephen Boswell are independent for the purposes of The
Nasdaq Stock Market listing standards. The information regarding the independence of committee members is incorporated herein by reference to the section captioned Proposal One  Election of Directors in the Proxy Statement.



|Item 14. | Principal Accountant Fees and Services
|-------- | --------------------------------------

Information regarding principal accountant fees and services is incorporated herein by reference to the section captioned Proposal One  Election of Directors  Independent Auditors in the Proxy Statement.

PART IV



|Item 15. | Exhibits and Financial Statement Schedules
|-------- | ------------------------------------------

(a) (1) The list of all financial statements is included at Item 8.

(a) (2) The financial statement
schedules are either included in the financial statements or are not applicable.

(a) (3) Exhibits are either filed or attached
as part of this Annual Report on Form 10-K or incorporated herein by reference.



25



---

##### Table of Contents

|      |  |                                                                                                                                                                                                                                                                                                                  
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1   |  | Articles of Incorporation of CCF Holding Company (incorporated by reference to exhibit 3(i) of the Registrants Quarterly Report on Form 10-QSB for the quarterly period ended
September 30, 1998)                                                                                                               
|      | 
|3.2   |  | Bylaws of CCF Holding Company (incorporated by reference to exhibit 3.2 of the Registrants Annual Report on Form 10-KSB for the fiscal year ended December 31, 1997)                                                                                                                                            
|      | 
|10.1  |  | Management Stock Bonus Plan (incorporated by reference to the Registrants proxy statement for the annual meeting of stockholders held January 23, 1996 as filed with the Commission on
December 15, 1995)*                                                                                                      
|      | 
|10.2  |  | 1995 Stock Option Plan (incorporated by reference to the Registrants proxy statement for the annual meeting of stockholders held January 23, 1996 as filed with the Commission on
December 15, 1995)*                                                                                                           
|      | 
|10.3  |  | 2000 Stock Option Plan (incorporated by reference to the Registrants proxy statement for the annual meeting of stockholders held April 26, 2000 as filed with the Commission on
March 22, 2000)*                                                                                                                
|      | 
|10.4  |  | Supplemental Retirement Plans and related Split Dollar Insurance Plans for executives (incorporated by reference to exhibit 10.5 to the Registrants Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1999)*                                                                                  
|      | 
|10.5  |  | Employment Agreement with David B. Turner, dated January 1, 2003 (incorporated by reference to exhibit 10.5(e) of the Registrants Annual Report on Form 10-KSB for the fiscal year
ended December 31, 2002)*                                                                                                    
|      | 
|10.6  |  | Employment Agreement with Leonard A. Moreland, dated January 1, 2003 (incorporated by reference to exhibit 10.6(e) of the Registrants Annual Report on Form 10-KSB for the fiscal year
ended December 31, 2002)*                                                                                                
|      | 
|10.7  |  | Change in Control Severance Agreement with Dick Florin, dated January 1, 2003 (incorporated by reference to exhibit 10.7(d) of the Registrants Annual Report on Form 10-KSB for the
fiscal year ended December 31, 2002)*                                                                                       
|      | 
|10.8  |  | Change in Control Severance Agreement with Jack Bowdoin, dated January 1, 2003 (incorporated by reference to exhibit 10.8(c) of the Registrants Annual Report on Form 10-KSB for the
fiscal year ended December 31, 2002)*                                                                                      
|      | 
|10.9  |  | Change in Control Severance Agreement with John Westervelt, dated January 1, 2003 (incorporated by reference to exhibit 10.9(c) of the Registrants Annual Report on Form 10-KSB for the
fiscal year ended December 31, 2002)*                                                                                   
|      | 
|10.10 |  | Change in Control Severance Agreement with Edith Stevens, dated January 1, 2003 (incorporated by reference to exhibit 10.10(c) of the Registrants Annual Report on Form 10-KSB for the
fiscal year ended December 31, 2002)*                                                                                    
|      | 
|10.11 |  | Change in Control Severance Agreement with Mary Jo Rogers, dated January 1, 2003 (incorporated by reference to exhibit 10.11(c) of the Registrants Annual Report on Form 10-KSB for the
fiscal year ended December 31, 2002)*                                                                                   
|      | 
|10.12 |  | Change in Control Severance Agreement with C.T. Segers, dated January 1, 2003 (incorporated by reference to exhibit 10.12(b) of the Registrants Annual Report on Form 10-KSB for the
fiscal year ended December 31, 2002)*                                                                                      
|      | 
|10.13 |  | Amended and Restated Trust Agreement dated as of March 30, 2004, by and among the Company, as Depositor, Wilmington Trust Company, as Property and Delaware Trustee (incorporated by
reference to exhibit 10.1 of the Registrants Quarterly Report on Form 10-QSB for the quarterly period ended March 31, 2004)
|      | 
|10.14 |  | Guarantee Agreement dated as of March 30, 2004, by and between the Company, as Guarantor, and Wilmington Trust Company, as Guarantee Trustee (incorporated by reference to exhibit
10.2 of the Registrants Quarterly Report on Form 10-QSB for the quarterly period ended March 31, 2004)                       
|      | 
|10.15 |  | Junior Subordinated Indenture dated as of March 30, 2004, by and between the Company and Wilmington Trust Company, as Trustee (incorporated by reference to exhibit 10.3 of the
Registrants Quarterly Report on Form 10-QSB for the quarterly period ended March 31, 2004)                                      
|      | 
|10.16 |  | Change in Control Severance Agreement with Kathy Zovlonsky, dated August 2, 2004 (incorporated by reference to exhibit 10.1 of the Registrants Quarterly Report on Form 10-QSB for
the quarterly period ended September 30, 2004)*                                                                              



26



---

##### Table of Contents

|      |  |                                                                                                                                                                                                      
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      | 
|10.17 |  | Supplemental Executive Retirement Benefits Agreement dated as of January 1, 2006 (incorporated by reference to exhibit 10.17 to the Registrants Current Report on Form 8-K, filed on
June 23, 2006).
|      | 
|10.18 |  | Endorsement Method Split-Dollar Agreement, dated as of January 1, 2006 (incorporated by reference to exhibit 10.18 to the Registrants Current Report on Form 8-K, filed on
June 23, 2006).          
|      | 
|10.19 |  | CCF Holding Company 2007 Stock Incentive Plan.                                                                                                                                                       
|      | 
|13    |  | Annual Report to Shareholders for the fiscal year ended December 31, 2006 (only those portions incorporated by reference in this document are deemed filed)                                          
|      | 
|14    |  | Code of Business Conduct and Ethics (incorporated by reference to exhibit 14 of the Registrants Annual Report on Form 10-KSB for the fiscal year ended December 31,
2004)                           
|      | 
|21    |  | Subsidiaries of the Registrant                                                                                                                                                                       
|      | 
|23.1  |  | Consent of Thigpen, Jones, Seaton & Co. P.C.                                                                                                                                                         
|      | 
|23.2  |  | Consent of Porter Keadle Moore LLP                                                                                                                                                                   
|      | 
|24    |  | Power of Attorney (see signature page herein)                                                                                                                                                        
|      | 
|31.1  |  | Certification of Principal Executive Officer                                                                                                                                                         
|      | 
|31.2  |  | Certification of Principal Financial Officer                                                                                                                                                         
|      | 
|32.1  |  | 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 2002.                                                    
|      | 
|32.2  |  | 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.                                                    

---

|* | The indicated exhibits are management contracts or compensatory plans or arrangements required to be filed or incorporated by reference herein.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------

Exhibits to this Annual Report on Form 10-K are attached or incorporated by reference as stated above.



27



---

##### Table of Contents

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized:



|                      |  |                     |  |                                                                                  
|--------------------- |  | ------------------- |  | ---------------------------------------------------------------------------------
|                      |  | CCF HOLDING COMPANY
|                      |  |                    
|Dated: March 29, 2007 |  | By:                 |  | /s/ David B. Turner                                                              
|                      |  |                     |  | David B. Turner                                                                  
|                      |  |                     |  | President, Chief Executive Officer, and Director
(Duly Authorized Representative)

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 David B. Turner and Leonard A. Moreland, and each of them, 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 and each of them, 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 he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of the, or their or his substitutes, may lawfully do or
cause to be done by virtue hereof.

In accordance with the Exchange Act, this report has been signed below by the following persons on
behalf of the registrant and in the capacities indicated on March 29, 2007.



|    |  |                                                                                |  |     |  |                                                                                               
|--- |  | ------------------------------------------------------------------------------ |  | --- |  | ----------------------------------------------------------------------------------------------
|By: |  | /s/ David B. Turner                                                            |  | By: |  | /s/ John B. Lee, Jr.                                                                          
|    |  | David B. Turner                                                                |  |     |  | John B. Lee, Jr.                                                                              
|    |  | President, Chief Executive Officer, and Director
(Principal Executive Officer) |  |     |  | Chairman of the Board                                                                         
|    |  |                                                                                | 
|By: |  | /s/ Edwin S. Kemp, Jr.                                                         |  | By: |  | /s/ Charles S. Tucker                                                                         
|    |  | Edwin S. Kemp, Jr.                                                             |  |     |  | Charles S. Tucker                                                                             
|    |  | Secretary, Treasurer and Director                                              |  |     |  | Director                                                                                      
|    |  |                                                                                | 
|By: |  | /s/ John T. Mitchell                                                           |  | By: |  | /s/ Mary Jo Rogers                                                                            
|    |  | John T. Mitchell                                                               |  |     |  | Mary Jo Rogers                                                                                
|    |  | Director                                                                       |  |     |  | Senior Vice President and Chief Financial Officer
(Principal Accounting and Financial Officer)
|    |  |                                                                                | 
|By: |  | /s/ Roy V. Hall                                                                |  | By: |  | /s/ Leonard A. Moreland                                                                       
|    |  | Roy V. Hall                                                                    |  |     |  | Leonard A. Moreland                                                                           
|    |  | Director                                                                       |  |     |  | Executive Vice President and Director                                                         
|    |  |                                                                                | 
|By: |  | /s/ Stephen E. Boswell                                                         |  |     |  |                                                                                               
|    |  | Stephen E. Boswell                                                             |  |     |  |                                                                                               
|    |  | Director                                                                       |  |     |  |                                                                                               



28