Exhibit 13



CONTENTS



|                                                           |  |     
|---------------------------------------------------------- |  | ----
|Report of Independent Registered Public Accounting Firm    |  | F-2 
|                                                           | 
|Consolidated Balance Sheets                                |  | F-5 
|                                                           | 
|Consolidated Statements of Income                          |  | F-6 
|                                                           | 
|Consolidated Statements of Comprehensive Income            |  | F-7 
|                                                           | 
|Consolidated Statements of Changes in Shareholders Equity |  | F-8 
|                                                           | 
|Consolidated Statements of Cash Flows                      |  | F-9 
|                                                           | 
|Notes to Consolidated Financial Statements                 |  | F-10



F-1



---

MCNAIR, MCLEMORE,
MIDDLEBROOKS & CO., LLP

CERTIFIED PUBLIC ACCOUNTANTS

389 Mulberry Street  Post Office Box One  Macon, GA 31202

Telephone (478) 746-6277  Facsimile (478) 743-6858

www.mmmcpa.com



|                                        |  |  |  |  |  | 
|--------------------------------------- |  |  |  |  |  | 
|RALPH S. McLEMORE, SR., CPA (1902-1981)
|SIDNEY B. McNAIR, CPA (1913-1992)       |  |  |  |  |  | 

|                                |  |                              
|------------------------------- |  | -----------------------------
|                                | 
|SIDNEY E. MIDDLEBROOKS, CPA, PC |  | RICHARD A. WHITTEN, JR., CPA 
|RAY C. PEARSON, CPA             |  | ELIZABETH WARE HARDIN, CPA   
|J. RANDOLPH NICHOLS, CPA        |  | CAROLINE E. GRIFFIN, CPA     
|WILLIAM H. EPPS, JR., CPA       |  | RONNIE K. GILBERT, CPA       
|RAYMOND A. PIPPIN, JR., CPA     |  | RON C. DOUTHIT, CPA          
|JERRY A. WOLFE, CPA             |  | CHARLES A. FLETCHER, CPA     
|W. E. BARFIELD, JR., CPA        |  | MARJORIE HUCKABEE CARTER, CPA
|HOWARD S. HOLLEMAN, CPA         |  | BRYAN A. ISGETT, CPA         
|F. GAY McMICHAEL, CPA           |  | DAVID PASCHAL MUSE, JR., CPA 



March 4, 2008



REPORT OF INDEPENDENT

REGISTERED PUBLIC ACCOUNTING FIRM



The Board of Directors and Shareholders

Security Bank Corporation



We have audited the accompanying consolidated balance sheets of Security Bank Corporation and Subsidiaries as of December 31, 2007 and 2006
and the related consolidated statements of income, comprehensive income, changes in shareholders equity and cash flows for each of the years in the three-year period ended December 31, 2007. These financial statements are the
responsibility of the Companys management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.



We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for
our opinion.



In our opinion, the consolidated financial
statements referred to above present fairly, in all material respects, the financial position of Security Bank Corporation and Subsidiaries as of December 31, 2007 and 2006, and the results of their operations and their cash flows for each of
the years in the three-year period ended December 31, 2007 in conformity with accounting principles generally accepted in the United States of America.



We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Security Bank Corporation and
Subsidiaries internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO), and our report dated March 4, 2008 expressed an unqualified opinion on the effectiveness of internal control over financial reporting.



LOGO

McNair, McLemore, Middlebrooks & Co., LLP



F-2



---

MCNAIR, MCLEMORE,
MIDDLEBROOKS & CO., LLP

CERTIFIED PUBLIC ACCOUNTANTS

389 Mulberry Street  Post Office Box One  Macon, GA 31202

Telephone (478) 746-6277  Facsimile (478) 743-6858

www.mmmcpa.com



|                                        |  |  |  |  |  | 
|--------------------------------------- |  |  |  |  |  | 
|RALPH S. McLEMORE, SR., CPA (1902-1981)
|SIDNEY B. McNAIR, CPA (1913-1992)       |  |  |  |  |  | 

|                                |  |                              
|------------------------------- |  | -----------------------------
|                                | 
|SIDNEY E. MIDDLEBROOKS, CPA, PC |  | RICHARD A. WHITTEN, JR., CPA 
|RAY C. PEARSON, CPA             |  | ELIZABETH WARE HARDIN, CPA   
|J. RANDOLPH NICHOLS, CPA        |  | CAROLINE E. GRIFFIN, CPA     
|WILLIAM H. EPPS, JR., CPA       |  | RONNIE K. GILBERT, CPA       
|RAYMOND A. PIPPIN, JR., CPA     |  | RON C. DOUTHIT, CPA          
|JERRY A. WOLFE, CPA             |  | CHARLES A. FLETCHER, CPA     
|W. E. BARFIELD, JR., CPA        |  | MARJORIE HUCKABEE CARTER, CPA
|HOWARD S. HOLLEMAN, CPA         |  | BRYAN A. ISGETT, CPA         
|F. GAY McMICHAEL, CPA           |  | DAVID PASCHAL MUSE, JR., CPA 



March 4, 2008



REPORT OF INDEPENDENT

REGISTERED PUBLIC ACCOUNTING FIRM



The Board of Directors and Shareholders

Security Bank Corporation



We
have audited Security Bank Corporations internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO).Security Bank Corporations management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial
reporting in the accompanying Managements Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Companys internal control over financial reporting based on our audit.



We conducted our audit in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.



A companys internal control over financial reporting is a process
designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal
control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being
made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the companys assets
that could have a material effect on the financial statements.



F-3



---

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



In our opinion, Security Bank Corporation
maintained, in all material respects, effective internal control over financial reporting as of December 31, 2007, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO).



We have
also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements of Security Bank Corporation and Subsidiaries and our report dated March 4, 2008 expressed an
unqualified opinion.



LOGO

McNair, McLemore, Middlebrooks & Co., LLP



F-4



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SECURITY BANK CORPORATION AND SUBSIDIARIES



CONSOLIDATED BALANCE SHEETS

DECEMBER 31,



|                                                                                                                                                                                                                       |  |      |               |   |      |   |               |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ------------- | - | ---- | - | ------------- | -
|ASSETS                                                                                                                                                                                                                 |  |      |               |   |      |   |               |  
|                                                                                                                                                                                                                       |  | 2007 |               |   | 2006 |  
|Cash and Due from Banks                                                                                                                                                                                                |  | $    | 91,644,076    |   |      | $ | 63,244,659    |  
|Federal Funds Sold                                                                                                                                                                                                     |  |      | 6,612,421     |   |      |   | 93,658,733    |  
|Interest-Bearing Deposits With Other Banks                                                                                                                                                                             |  |      | 7,015,424     |   |      |   | 2,910,873     |  
|Investment Securities Available for Sale                                                                                                                                                                               |  |      | 296,156,062   |   |      |   | 221,178,460   |  
|Investment Securities Held to Maturity (Estimated Fair Value of $999,900 and $1,212,817 in 2007 and 2006, Respectively)                                                                                                |  |      | 1,000,000     |   |      |   | 1,239,988     |  
|Federal Home Loan Bank Stock                                                                                                                                                                                           |  |      | 8,242,500     |   |      |   | 7,521,200     |  
|Loans Held for Sale                                                                                                                                                                                                    |  |      | 7,604,869     |   |      |   | 8,877,523     |  
|Loans Receivable, Net of Unearned Income                                                                                                                                                                               |  |      | 2,182,312,584 |   |      |   | 1,901,100,980 |  
|Allowance for Loan Losses                                                                                                                                                                                              |  |      | (31,697,651   | ) |      |   | (22,335,852   | )
|                                                                                                                                                                                                                       |  |      |               |   |      |   |               |  
|                                                                                                                                                                                                                       |  |      | 2,150,614,933 |   |      |   | 1,878,765,128 |  
|Premises and Equipment                                                                                                                                                                                                 |  |      | 43,170,747    |   |      |   | 39,757,577    |  
|Long-Lived Assets Held for Sale                                                                                                                                                                                        |  |      |              |   |      |   | 884,921       |  
|Other Real Estate (Net of Allowance of $1,140,141and $36,760 in 2007 and 2006, Respectively)                                                                                                                           |  |      | 28,174,801    |   |      |   | 2,774,940     |  
|Goodwill                                                                                                                                                                                                               |  |      | 128,571,323   |   |      |   | 127,983,914   |  
|Core Deposit Intangible                                                                                                                                                                                                |  |      | 4,125,179     |   |      |   | 5,110,135     |  
|Accrued Interest Receivable                                                                                                                                                                                            |  |      | 24,253,809    |   |      |   | 18,865,864    |  
|Other Assets                                                                                                                                                                                                           |  |      | 35,884,487    |   |      |   | 21,297,190    |  
|                                                                                                                                                                                                                       |  |      |               |   |      |   |               |  
|Total Assets                                                                                                                                                                                                           |  | $    | 2,833,070,631 |   |      | $ | 2,494,071,105 |  
|                                                                                                                                                                                                                       |  |      |               |   |      |   |               |  
|                                                                                                                                                                                                                       |  |     
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                                                                                                   |  |      |               |   |      |   |               |  
|                                                                                                                                                                                                                       |  | 2007 |               |   | 2006 |  
|Deposits                                                                                                                                                                                                               |  |      |               |   |      |   |               |  
|Noninterest-Bearing                                                                                                                                                                                                    |  | $    | 158,758,602   |   |      | $ | 178,966,960   |  
|Interest-Bearing                                                                                                                                                                                                       |  |      | 2,139,946,216 |   |      |   | 1,791,960,108 |  
|                                                                                                                                                                                                                       |  |      |               |   |      |   |               |  
|                                                                                                                                                                                                                       |  |      | 2,298,704,818 |   |      |   | 1,970,927,068 |  
|Borrowed Money                                                                                                                                                                                                         |  |      |               |   |      |   |               |  
|Federal Funds Purchased and Securities Sold Under Agreement to Repurchase                                                                                                                                              |  |      | 68,416,696    |   |      |   | 50,917,281    |  
|Subordinated Debentures                                                                                                                                                                                                |  |      | 41,238,000    |   |      |   | 41,238,000    |  
|Other Borrowed Money                                                                                                                                                                                                   |  |      | 96,671,685    |   |      |   | 83,450,000    |  
|                                                                                                                                                                                                                       |  |      |               |   |      |   |               |  
|                                                                                                                                                                                                                       |  |      | 206,326,381   |   |      |   | 175,605,281   |  
|Other Liabilities                                                                                                                                                                                                      |  |      | 21,346,464    |   |      |   | 41,131,283    |  
|                                                                                                                                                                                                                       |  |     
|Commitments and Contingencies                                                                                                                                                                                          |  |      |               |   |      |   |               |  
|                                                                                                                                                                                                                       |  |     
|Shareholders Equity                                                                                                                                                                                                   |  |      |               |   |      |   |               |  
|Common Stock, Par Value $1 per Share; 50,000,000 Shares Authorized, 18,912,264 Shares Issued and Outstanding in 2007; 25,000,000 Shares
Authorized, 19,186,050 Shares Issued and 19,166,314 Shares Outstanding in 2006 |  |      | 18,912,264    |   |      |   | 19,186,050    |  
|Paid-In Capital                                                                                                                                                                                                        |  |      | 220,504,447   |   |      |   | 224,564,470   |  
|Retained Earnings                                                                                                                                                                                                      |  |      | 63,011,269    |   |      |   | 63,696,653    |  
|Restricted Stock  Unearned Compensation                                                                                                                                                                               |  |      | (39,485       | ) |      |   | (157,675      | )
|Accumulated Other Comprehensive Gain (Loss), Net of Taxes                                                                                                                                                              |  |      | 4,304,473     |   |      |   | (551,897      | )
|Treasury Stock (No Shares in 2007 and 19,736 Shares in 2006), at Cost                                                                                                                                                  |  |      |              |   |      |   | (330,128      | )
|                                                                                                                                                                                                                       |  |      |               |   |      |   |               |  
|                                                                                                                                                                                                                       |  |      | 306,692,968   |   |      |   | 306,407,473   |  
|                                                                                                                                                                                                                       |  |      |               |   |      |   |               |  
|Total Liabilities and Shareholders Equity                                                                                                                                                                             |  | $    | 2,833,070,631 |   |      | $ | 2,494,071,105 |  
|                                                                                                                                                                                                                       |  |      |               |   |      |   |               |  



The accompanying notes
are an integral part of these financial statements.



F-5



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SECURITY BANK CORPORATION AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF INCOME

FOR THE YEARS ENDED DECEMBER 31,



|                                                    |  |      |             |   |      |   |             |      |  |   |            |  
|--------------------------------------------------- |  | ---- | ----------- | - | ---- | - | ----------- | ---- |  | - | ---------- | -
|                                                    |  | 2007 |             |   | 2006 |   |             | 2005 | 
|Interest Income                                     |  |      |             |   |      |   |             |      |  |   |            |  
|Loans, Including Fees                               |  | $    | 180,015,547 |   |      | $ | 138,448,316 |      |  | $ | 72,972,140 |  
|Investment Securities                               |  |      |             |   |      |   |             |      |  |   |            |  
|Taxable                                             |  |      | 10,064,222  |   |      |   | 6,976,414   |      |  |   | 3,969,481  |  
|Tax Exempt                                          |  |      | 828,167     |   |      |   | 805,245     |      |  |   | 625,992    |  
|Federal Funds Sold and Deposits with Other Banks    |  |      | 1,931,847   |   |      |   | 1,851,628   |      |  |   | 624,517    |  
|                                                    |  |      |             |   |      |   |             |      |  |   |            |  
|                                                    |  |      | 192,839,783 |   |      |   | 148,081,603 |      |  |   | 78,192,130 |  
|                                                    |  |      |             |   |      |   |             |      |  |   |            |  
|Interest Expense                                    |  |      |             |   |      |   |             |      |  |   |            |  
|Deposits                                            |  |      | 93,873,563  |   |      |   | 60,738,990  |      |  |   | 23,727,533 |  
|Federal Funds Purchased and Repurchase Agreements   |  |      | 2,102,579   |   |      |   | 1,468,668   |      |  |   | 527,348    |  
|Subordinated Debentures                             |  |      | 3,168,479   |   |      |   | 3,146,993   |      |  |   | 1,241,605  |  
|Other Borrowed Money                                |  |      | 3,171,251   |   |      |   | 3,292,284   |      |  |   | 2,342,793  |  
|                                                    |  |      |             |   |      |   |             |      |  |   |            |  
|                                                    |  |      | 102,315,872 |   |      |   | 68,646,935  |      |  |   | 27,839,279 |  
|                                                    |  |      |             |   |      |   |             |      |  |   |            |  
|Net Interest Income                                 |  |      | 90,523,911  |   |      |   | 79,434,668  |      |  |   | 50,352,851 |  
|Provision for Loan Losses                           |  |      | 32,660,000  |   |      |   | 4,468,751   |      |  |   | 2,832,845  |  
|                                                    |  |      |             |   |      |   |             |      |  |   |            |  
|Net Interest Income After Provision for Loan Losses |  |      | 57,863,911  |   |      |   | 74,965,917  |      |  |   | 47,520,006 |  
|                                                    |  |      |             |   |      |   |             |      |  |   |            |  
|Noninterest Income                                  |  |      |             |   |      |   |             |      |  |   |            |  
|Service Charges on Deposits                         |  |      | 9,362,980   |   |      |   | 9,162,086   |      |  |   | 7,351,360  |  
|Other Service Charges, Commissions and Fees         |  |      | 4,243,908   |   |      |   | 4,543,676   |      |  |   | 4,466,438  |  
|Mortgage Origination and Related Fees               |  |      | 4,474,476   |   |      |   | 4,921,616   |      |  |   | 4,539,242  |  
|Securities Losses                                   |  |      | (2,713      | ) |      |   | (1,601,229  | )    |  |   | (5,598     | )
|Other                                               |  |      | 901,968     |   |      |   | 928,429     |      |  |   | 240,117    |  
|                                                    |  |      |             |   |      |   |             |      |  |   |            |  
|                                                    |  |      | 18,980,619  |   |      |   | 17,954,578  |      |  |   | 16,591,559 |  
|                                                    |  |      |             |   |      |   |             |      |  |   |            |  
|Noninterest Expenses                                |  |      |             |   |      |   |             |      |  |   |            |  
|Salaries and Employee Benefits                      |  |      | 35,060,987  |   |      |   | 32,376,768  |      |  |   | 22,811,591 |  
|Occupancy and Equipment                             |  |      | 6,188,576   |   |      |   | 5,622,248   |      |  |   | 3,832,756  |  
|Foreclosed Property                                 |  |      | 4,823,140   |   |      |   | 415,595     |      |  |   | 222,520    |  
|Office Supplies and Printing                        |  |      | 1,078,820   |   |      |   | 983,119     |      |  |   | 649,289    |  
|Telephone                                           |  |      | 1,138,589   |   |      |   | 1,066,389   |      |  |   | 829,133    |  
|Marketing Expenses                                  |  |      | 2,549,139   |   |      |   | 2,292,753   |      |  |   | 1,501,231  |  
|Professional Fees                                   |  |      | 3,425,945   |   |      |   | 2,262,505   |      |  |   | 1,480,927  |  
|Amortization-Core Deposit Intangible                |  |      | 984,956     |   |      |   | 903,200     |      |  |   | 262,327    |  
|Other                                               |  |      | 11,823,319  |   |      |   | 9,727,855   |      |  |   | 7,026,520  |  
|                                                    |  |      |             |   |      |   |             |      |  |   |            |  
|                                                    |  |      | 67,073,471  |   |      |   | 55,650,432  |      |  |   | 38,616,294 |  
|                                                    |  |      |             |   |      |   |             |      |  |   |            |  
|Income Before Income Taxes                          |  |      | 9,771,059   |   |      |   | 37,270,063  |      |  |   | 25,495,271 |  
|Income Taxes                                        |  |      | 3,183,514   |   |      |   | 13,878,090  |      |  |   | 9,310,338  |  
|                                                    |  |      |             |   |      |   |             |      |  |   |            |  
|Net Income                                          |  | $    | 6,587,545   |   |      | $ | 23,391,973  |      |  | $ | 16,184,933 |  
|                                                    |  |      |             |   |      |   |             |      |  |   |            |  
|Basic Earnings Per Share                            |  | $    | 0.35        |   |      | $ | 1.36        |      |  | $ | 1.31       |  
|                                                    |  |      |             |   |      |   |             |      |  |   |            |  
|Diluted Earnings Per Share                          |  | $    | 0.34        |   |      | $ | 1.33        |      |  | $ | 1.27       |  
|                                                    |  |      |             |   |      |   |             |      |  |   |            |  
|Cash Dividends Per Share                            |  | $    | 0.35        |   |      | $ | 0.30        |      |  | $ | 0.26       |  
|                                                    |  |      |             |   |      |   |             |      |  |   |            |  
|Weighted Average Shares Outstanding:                |  |      |             |   |      |   |             |      |  |   |            |  
|Basic                                               |  |      | 19,081,636  |   |      |   | 17,222,139  |      |  |   | 12,393,980 |  
|                                                    |  |      |             |   |      |   |             |      |  |   |            |  
|Diluted                                             |  |      | 19,225,069  |   |      |   | 17,564,990  |      |  |   | 12,736,545 |  
|                                                    |  |      |             |   |      |   |             |      |  |   |            |  



The
accompanying notes are an integral part of these financial statements.



F-6



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31,



|                                                                |  |      |            |      |   |            |      |  |   |            |  
|--------------------------------------------------------------- |  | ---- | ---------- | ---- | - | ---------- | ---- |  | - | ---------- | -
|                                                                |  | 2007 |            | 2006 |   |            | 2005 | 
|Net Income                                                      |  | $    | 6,587,545  |      | $ | 23,391,973 |      |  | $ | 16,184,933 |  
|                                                                |  |      |            |      |   |            |      |  |   |            |  
|Other Comprehensive Income, Net of Tax                          |  |      |            |      |   |            |      |  |   |            |  
|Unrealized Gains (Losses) on Securities Arising During the Year |  |      | 1,622,366  |      |   | (9,266     | )    |  |   | (1,955,938 | )
|Reclassification Adjustment                                     |  |      | 1,763      |      |   | 1,056,811  |      |  |   | 3,695      |  
|                                                                |  |      |            |      |   |            |      |  |   |            |  
|Unrealized Gains (Losses) on Securities                         |  |      | 1,624,129  |      |   | 1,047,545  |      |  |   | (1,952,243 | )
|Unrealized Gains on Effective Cash Flow Hedge                   |  |      | 3,232,241  |      |   |           |      |  |   |           |  
|                                                                |  |      |            |      |   |            |      |  |   |            |  
|                                                                |  |      | 4,856,370  |      |   | 1,047,545  |      |  |   | (1,952,243 | )
|                                                                |  |      |            |      |   |            |      |  |   |            |  
|Comprehensive Income                                            |  | $    | 11,443,915 |      | $ | 24,439,518 |      |  | $ | 14,232,690 |  
|                                                                |  |      |            |      |   |            |      |  |   |            |  







The accompanying notes are an integral part of these financial statements.



F-7



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005



|                                                                                                 |  |            |   |  |             |            |   |                |   |             |                  |  |   |                                      |   |  |                                            |          |   |               |   |            |       |  |   |          |   |  |   |             |  
|------------------------------------------------------------------------------------------------ |  | ---------- | - |  | ----------- | ---------- | - | -------------- | - | ----------- | ---------------- |  | - | ------------------------------------ | - |  | ------------------------------------------ | -------- | - | ------------- | - | ---------- | ----- |  | - | -------- | - |  | - | ----------- | -
|                                                                                                 |  | Shares     |   |  | CommonStock |            |   | Paid-InCapital |   |             | RetainedEarnings |  |   | RestrictedStock-UnearnedCompensation |   |  | AccumulatedOtherComprehensiveIncome (Loss) |          |   | TreasuryStock |   |            | Total | 
|Balance, December 31, 2004                                                                       |  | 11,659,546 |   |  | $           | 11,659,546 |   |                | $ | 62,348,500  |                  |  | $ | 32,714,960                           |   |  | $                                          | (74,697  | ) |               | $ | 352,801    |       |  | $ | (330,128 | ) |  | $ | 106,670,982 |  
|Shares Issued in Connection with Contingent Payments                                             |  | 114,028    |   |  |             | 114,028    |   |                |   | 2,305,882   |                  |  |   | (57,014                              | ) |  |                                            |          |   |               |   |            |       |  |   |          |   |  |   | 2,362,896   |  
|Stock Options Exercised                                                                          |  | 20,000     |   |  |             | 20,000     |   |                |   | 186,500     |                  |  |   |                                      |   |  |                                            |          |   |               |   |            |       |  |   |          |   |  |   | 206,500     |  
|Stock-Based Compensation Awards                                                                  |  |            |   |  |             |            |   |                |   | 478,427     |                  |  |   |                                      |   |  |                                            |          |   |               |   |            |       |  |   |          |   |  |   | 478,427     |  
|Restricted Stock Issued                                                                          |  | 9,156      |   |  |             | 9,156      |   |                |   | 190,856     |                  |  |   |                                      |   |  |                                            | (200,012 | ) |               |   |            |       |  |   |          |   |  |   |            |  
|Amortization of Unearned Compensation                                                            |  |            |   |  |             |            |   |                |   |             |                  |  |   |                                      |   |  |                                            | 51,849   |   |               |   |            |       |  |   |          |   |  |   | 51,849      |  
|Shares Issued in Acquisitions                                                                    |  | 2,594,295  |   |  |             | 2,594,295  |   |                |   | 55,798,996  |                  |  |   |                                      |   |  |                                            |          |   |               |   |            |       |  |   |          |   |  |   | 58,393,291  |  
|Shares Issued to Employee Stock Purchase Plan                                                    |  | 9,671      |   |  |             | 9,671      |   |                |   | 171,803     |                  |  |   | (1,917                               | ) |  |                                            |          |   |               |   |            |       |  |   |          |   |  |   | 179,557     |  
|Change in Net Unrealized Loss on Securities Available for Sale, Net of Tax Benefit of $1,029,572 |  |            |   |  |             |            |   |                |   |             |                  |  |   |                                      |   |  |                                            |          |   |               |   | (1,952,243 | )     |  |   |          |   |  |   | (1,952,243  | )
|Cash Dividends                                                                                   |  |            |   |  |             |            |   |                |   |             |                  |  |   | (3,271,320                           | ) |  |                                            |          |   |               |   |            |       |  |   |          |   |  |   | (3,271,320  | )
|Net Income                                                                                       |  |            |   |  |             |            |   |                |   |             |                  |  |   | 16,184,933                           |   |  |                                            |          |   |               |   |            |       |  |   |          |   |  |   | 16,184,933  |  
|                                                                                                 |  |            |   |  |             |            |   |                |   |             |                  |  |   |                                      |   |  |                                            |          |   |               |   |            |       |  |   |          |   |  |   |             |  
|Balance, December 31, 2005                                                                       |  | 14,406,696 |   |  |             | 14,406,696 |   |                |   | 121,480,964 |                  |  |   | 45,569,642                           |   |  |                                            | (222,860 | ) |               |   | (1,599,442 | )     |  |   | (330,128 | ) |  |   | 179,304,872 |  
|Shares Issued in Connection with Contingent Payments                                             |  | 159,892    |   |  |             | 159,892    |   |                |   | 3,514,097   |                  |  |   |                                      |   |  |                                            |          |   |               |   |            |       |  |   |          |   |  |   | 3,673,989   |  
|Stock Options Exercised                                                                          |  | 17,055     |   |  |             | 17,055     |   |                |   | 185,948     |                  |  |   |                                      |   |  |                                            |          |   |               |   |            |       |  |   |          |   |  |   | 203,003     |  
|Stock-Based Compensation Awards                                                                  |  |            |   |  |             |            |   |                |   | 525,946     |                  |  |   |                                      |   |  |                                            |          |   |               |   |            |       |  |   |          |   |  |   | 525,946     |  
|Amortization of Unearned Compensation                                                            |  |            |   |  |             |            |   |                |   |             |                  |  |   |                                      |   |  |                                            | 65,185   |   |               |   |            |       |  |   |          |   |  |   | 65,185      |  
|Shares Issued in Acquisitions                                                                    |  | 2,863,893  |   |  |             | 2,863,893  |   |                |   | 64,381,069  |                  |  |   |                                      |   |  |                                            |          |   |               |   |            |       |  |   |          |   |  |   | 67,244,962  |  
|Shares Issued in Connection with Stock Offering                                                  |  | 1,725,000  |   |  |             | 1,725,000  |   |                |   | 34,216,300  |                  |  |   |                                      |   |  |                                            |          |   |               |   |            |       |  |   |          |   |  |   | 35,941,300  |  
|Shares Issued to Employee Stock Purchase Plan                                                    |  | 13,514     |   |  |             | 13,514     |   |                |   | 260,146     |                  |  |   |                                      |   |  |                                            |          |   |               |   |            |       |  |   |          |   |  |   | 273,660     |  
|Change in Net Unrealized Gain on Securities Available for Sale, Net of Income Taxes of $370,015  |  |            |   |  |             |            |   |                |   |             |                  |  |   |                                      |   |  |                                            |          |   |               |   | 1,047,545  |       |  |   |          |   |  |   | 1,047,545   |  
|Cash Dividends                                                                                   |  |            |   |  |             |            |   |                |   |             |                  |  |   | (5,264,962                           | ) |  |                                            |          |   |               |   |            |       |  |   |          |   |  |   | (5,264,962  | )
|Net Income                                                                                       |  |            |   |  |             |            |   |                |   |             |                  |  |   | 23,391,973                           |   |  |                                            |          |   |               |   |            |       |  |   |          |   |  |   | 23,391,973  |  
|                                                                                                 |  |            |   |  |             |            |   |                |   |             |                  |  |   |                                      |   |  |                                            |          |   |               |   |            |       |  |   |          |   |  |   |             |  
|Balance, December 31, 2006                                                                       |  | 19,186,050 |   |  |             | 19,186,050 |   |                |   | 224,564,470 |                  |  |   | 63,696,653                           |   |  |                                            | (157,675 | ) |               |   | (551,897   | )     |  |   | (330,128 | ) |  |   | 306,407,473 |  
|Cumulative Effect of Change in Accounting Principle                                              |  |            |   |  |             |            |   |                |   |             |                  |  |   | (607,789                             | ) |  |                                            |          |   |               |   |            |       |  |   |          |   |  |   | (607,789    | )
|Cashless Exercise of Stock Options                                                               |  | 33,044     |   |  |             | 33,044     |   |                |   | (32,995     | )                |  |   |                                      |   |  |                                            |          |   |               |   |            |       |  |   |          |   |  |   | 49          |  
|Stock Options Exercised                                                                          |  | 18,000     |   |  |             | 18,000     |   |                |   | 126,660     |                  |  |   |                                      |   |  |                                            |          |   |               |   |            |       |  |   |          |   |  |   | 144,660     |  
|Stock-Based Compensation Awards                                                                  |  |            |   |  |             |            |   |                |   | 239,244     |                  |  |   |                                      |   |  |                                            |          |   |               |   |            |       |  |   |          |   |  |   | 239,244     |  
|Restricted Stock Cancelled                                                                       |  | (2,747     | ) |  |             | (2,747     | ) |                |   | (57,261     | )                |  |   |                                      |   |  |                                            | 60,008   |   |               |   |            |       |  |   |          |   |  |   |            |  
|Amortization of Unearned Compensation                                                            |  |            |   |  |             |            |   |                |   |             |                  |  |   |                                      |   |  |                                            | 58,182   |   |               |   |            |       |  |   |          |   |  |   | 58,182      |  
|Retirement of Treasury Shares                                                                    |  | (19,736    | ) |  |             | (19,736    | ) |                |   | (310,392    | )                |  |   |                                      |   |  |                                            |          |   |               |   |            |       |  |   | 330,128  |   |  |   |            |  
|Shares Issued in Acquisition                                                                     |  | 11,394     |   |  |             | 11,394     |   |                |   | 238,606     |                  |  |   |                                      |   |  |                                            |          |   |               |   |            |       |  |   |          |   |  |   | 250,000     |  
|Shares Issued to Employee Stock Purchase Plan                                                    |  | 20,959     |   |  |             | 20,959     |   |                |   | 305,182     |                  |  |   |                                      |   |  |                                            |          |   |               |   |            |       |  |   |          |   |  |   | 326,141     |  
|Shares Repurchased                                                                               |  | (334,700   | ) |  |             | (334,700   | ) |                |   | (4,569,067  | )                |  |   |                                      |   |  |                                            |          |   |               |   |            |       |  |   |          |   |  |   | (4,903,767  | )
|Change in Net Unrealized Gain on Securities Available for Sale, Net of Income Taxes of $874,531  |  |            |   |  |             |            |   |                |   |             |                  |  |   |                                      |   |  |                                            |          |   |               |   | 1,624,129  |       |  |   |          |   |  |   | 1,624,129   |  
|Unrealized Gain on Effective Cash Flow Hedging Derivative, Net of Income Taxes of $748,835       |  |            |   |  |             |            |   |                |   |             |                  |  |   |                                      |   |  |                                            |          |   |               |   | 3,232,241  |       |  |   |          |   |  |   | 3,232,241   |  
|Cash Dividends                                                                                   |  |            |   |  |             |            |   |                |   |             |                  |  |   | (6,665,140                           | ) |  |                                            |          |   |               |   |            |       |  |   |          |   |  |   | (6,665,140  | )
|Net Income                                                                                       |  |            |   |  |             |            |   |                |   |             |                  |  |   | 6,587,545                            |   |  |                                            |          |   |               |   |            |       |  |   |          |   |  |   | 6,587,545   |  
|                                                                                                 |  |            |   |  |             |            |   |                |   |             |                  |  |   |                                      |   |  |                                            |          |   |               |   |            |       |  |   |          |   |  |   |             |  
|Balance, December 31, 2007                                                                       |  | 18,912,264 |   |  | $           | 18,912,264 |   |                | $ | 220,504,447 |                  |  | $ | 63,011,269                           |   |  | $                                          | (39,485  | ) |               | $ | 4,304,473  |       |  | $ |         |   |  | $ | 306,692,968 |  
|                                                                                                 |  |            |   |  |             |            |   |                |   |             |                  |  |   |                                      |   |  |                                            |          |   |               |   |            |       |  |   |          |   |  |   |             |  



The accompanying notes
are an integral part of these financial statements.



F-8



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31,



|                                                                                   |  |      |              |   |      |   |              |      |  |   |              |  
|---------------------------------------------------------------------------------- |  | ---- | ------------ | - | ---- | - | ------------ | ---- |  | - | ------------ | -
|                                                                                   |  | 2007 |              |   | 2006 |   |              | 2005 | 
|Cash Flows from Operating Activities                                               |  |      |              |   |      |   |              |      |  |   |              |  
|Net Income                                                                         |  | $    | 6,587,545    |   |      | $ | 23,391,973   |      |  | $ | 16,184,933   |  
|Adjustments to Reconcile Net Income to Net Cash Provided from Operating Activities |  |      |              |   |      |   |              |      |  |   |              |  
|Stock-Based Compensation                                                           |  |      | 239,244      |   |      |   | 525,946      |      |  |   | 478,427      |  
|Depreciation, Amortization and Accretion                                           |  |      | 4,396,038    |   |      |   | 2,058,435    |      |  |   | 917,760      |  
|Provision for Loan Losses                                                          |  |      | 32,660,000   |   |      |   | 4,468,751    |      |  |   | 2,832,845    |  
|Deferred Income Tax (Benefit) Expense                                              |  |      | (4,079,636   | ) |      |   | 3,460,748    |      |  |   | (93,521      | )
|Securities Losses                                                                  |  |      | 2,713        |   |      |   | 1,601,229    |      |  |   | 5,598        |  
|Loss (Gain) on Sale of Other Real Estate                                           |  |      | 711,475      |   |      |   | 14,776       |      |  |   | (39,724      | )
|Provision for Other Real Estate Losses                                             |  |      | 1,232,201    |   |      |   | 41,979       |      |  |   | 122,311      |  
|Loss on Disposal of Premises and Equipment                                         |  |      | 19,652       |   |      |   | 72,936       |      |  |   | 16,790       |  
|Loss (Gain) on Sale of Loans                                                       |  |      | (107,107     | ) |      |   | (26,841      | )    |  |   | 390,140      |  
|Net Change in Loans Held for Sale                                                  |  |      | 1,272,654    |   |      |   | (3,315,143   | )    |  |   | 1,944,715    |  
|Payable to Rivoli BanCorp Shareholders                                             |  |      |             |   |      |   |             |      |  |   | 4,220,026    |  
|Payable for Purchased Securities                                                   |  |      | (21,543,607  | ) |      |   | 21,543,607   |      |  |   |             |  
|Net Change in Accrued Income Taxes                                                 |  |      | (2,811,856   | ) |      |   | (1,157,796   | )    |  |   | (2,353,387   | )
|Decrease in Other Assets                                                           |  |      | (3,874,311   | ) |      |   | (6,996,035   | )    |  |   | (107,955     | )
|Increase in Other Liabilities                                                      |  |      | 5,371        |   |      |   | 1,976,356    |      |  |   | 2,991,715    |  
|                                                                                   |  |      |              |   |      |   |              |      |  |   |              |  
|Cash Provided by Operating Activities                                              |  |      | 14,710,376   |   |      |   | 47,660,921   |      |  |   | 27,510,673   |  
|                                                                                   |  |      |              |   |      |   |              |      |  |   |              |  
|Cash Flows from Investing Activities                                               |  |      |              |   |      |   |              |      |  |   |              |  
|Interest-Bearing Deposits with Other Banks                                         |  |      | (4,104,551   | ) |      |   | 4,088,668    |      |  |   | (2,223,382   | )
|Cash (Paid) Received in Business Acquisition, Net                                  |  |      | (198,166     | ) |      |   | 10,494,533   |      |  |   | 5,923,269    |  
|Purchase of Investment Securities Available for Sale                               |  |      | (147,350,617 | ) |      |   | (136,632,348 | )    |  |   | (28,956,393  | )
|Proceeds from Disposition of Investment Securities                                 |  |      |              |   |      |   |              |      |  |   |              |  
|Available for Sale                                                                 |  |      | 75,255,493   |   |      |   | 90,119,664   |      |  |   | 23,671,842   |  
|Held to Maturity                                                                   |  |      | 240,000      |   |      |   | 1,097,813    |      |  |   | 1,035,500    |  
|Sale (Purchase) of Restricted Stock, Net                                           |  |      | (721,300     | ) |      |   | 530,200      |      |  |   | 515,500      |  
|Loans to Customers, Net of Repayments                                              |  |      | (353,026,161 | ) |      |   | (299,540,014 | )    |  |   | (158,256,081 | )
|Purchase of Premises and Equipment and Software                                    |  |      | (6,527,576   | ) |      |   | (4,624,921   | )    |  |   | (3,275,443   | )
|Proceeds from Disposal of Premises and Equipment                                   |  |      | 1,442,663    |   |      |   |             |      |  |   | 18,840       |  
|Proceeds from Sales of Other Real Estate                                           |  |      | 21,348,299   |   |      |   | 5,294,225    |      |  |   | 3,019,386    |  
|Purchase of Bank Owned Life Insurance                                              |  |      |             |   |      |   | (4,000,000   | )    |  |   | (5,000,000   | )
|Purchase of Low Income Housing Tax Credits                                         |  |      | (7,044,902   | ) |      |   |             |      |  |   |             |  
|Other, Net                                                                         |  |      | (68,374      | ) |      |   | (1,144,002   | )    |  |   | (1,547,544   | )
|                                                                                   |  |      |              |   |      |   |              |      |  |   |              |  
|Cash Used by Investing Activities                                                  |  |      | (420,755,192 | ) |      |   | (334,316,182 | )    |  |   | (165,074,506 | )
|                                                                                   |  |      |              |   |      |   |              |      |  |   |              |  
|Cash Flows from Financing Activities                                               |  |      |              |   |      |   |              |      |  |   |              |  
|Interest-Bearing Customer Deposits                                                 |  |      | 347,986,108  |   |      |   | 323,439,219  |      |  |   | 178,737,892  |  
|Noninterest-Bearing Customer Deposits                                              |  |      | (20,211,181  | ) |      |   | 9,412,584    |      |  |   | 4,047,814    |  
|Dividends Paid                                                                     |  |      | (6,665,140   | ) |      |   | (5,264,962   | )    |  |   | (3,271,320   | )
|Federal Funds Purchased and Securities Sold Under Repurchase Agreements            |  |      | 17,499,415   |   |      |   | 5,041,661    |      |  |   | 13,328,155   |  
|Proceeds from Other Borrowed Money                                                 |  |      | 178,500,000  |   |      |   | 160,275,929  |      |  |   | 65,977,000   |  
|Repayments of Other Borrowed Money                                                 |  |      | (165,278,315 | ) |      |   | (188,852,929 | )    |  |   | (82,485,516  | )
|Proceeds from Issuance of Subordinated Debentures                                  |  |      |             |   |      |   |             |      |  |   | 19,588,000   |  
|Issuance of Common Stock                                                           |  |      | 470,801      |   |      |   | 36,414,963   |      |  |   | 387,974      |  
|Purchase of Common Stock                                                           |  |      | (4,903,767   | ) |      |   |             |      |  |   |             |  
|                                                                                   |  |      |              |   |      |   |              |      |  |   |              |  
|Cash Provided by Financing Activities                                              |  |      | 347,397,921  |   |      |   | 340,466,465  |      |  |   | 196,309,999  |  
|                                                                                   |  |      |              |   |      |   |              |      |  |   |              |  
|Net Increase (Decrease) in Cash and Cash Equivalents                               |  |      | (58,646,895  | ) |      |   | 53,811,204   |      |  |   | 58,746,166   |  
|Cash and Cash Equivalents, Beginning                                               |  |      | 156,903,392  |   |      |   | 103,092,188  |      |  |   | 44,346,022   |  
|                                                                                   |  |      |              |   |      |   |              |      |  |   |              |  
|Cash and Cash Equivalents, Ending                                                  |  | $    | 98,256,497   |   |      | $ | 156,903,392  |      |  | $ | 103,092,188  |  
|                                                                                   |  |      |              |   |      |   |              |      |  |   |              |  



The accompanying notes
are an integral part of these financial statements.



F-9



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



(1) Summary of
Significant Accounting Policies



Nature of Operations



Security Bank Corporation (the Company) provides a full range of retail
and commercial banking services for consumers and small to medium size businesses in central and coastal Georgia, and in the north metropolitan Atlanta area. Lending and investing activities are funded primarily by out of market deposits and
deposits gathered through its retail branch office network.



The success of the Company is dependent, to a certain extent, upon the economic conditions in the geographic markets it serves. No assurance can be given that the current economic conditions will continue. Adverse changes in the economic
conditions in these geographic markets would likely have a material adverse effect on the Companys results of operations and financial condition. The operating results of the Company depend primarily on its net interest income. Accordingly,
operations are subject to risks and uncertainties surrounding the exposure to changes in the interest rate environment.



The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America and to general
practices within the banking industry. The following is a description of those policies the Company follows in preparing and presenting its consolidated financial statements.



Principles of Consolidation and Basis of Presentation



The consolidated financial statements of the Company include Security Bank Corporation and its wholly owned subsidiaries, Security Bank of
Bibb County located in Macon, Georgia; Security Bank of Houston County located in Perry, Georgia; Security Bank of Jones County located in Gray, Georgia; Security Bank of North Metro located in Woodstock, Georgia; Security Bank of North Fulton
located in Alpharetta, Georgia; Security Bank of Gwinnett County located in Suwanee, Georgia and Fairfield Financial Services, Inc., a subsidiary of Security Bank of Bibb County, which has offices throughout Georgia. The consolidated financial
statements also include CFS Wealth Management, LLC, an investment management and planning firm acquired in February 2007. All significant intercompany accounts have been eliminated in consolidation.



The Company has three additional wholly owned subsidiaries, Security Bank
Corporation Statutory Trust I, which it formed in 2002, Rivoli BanCorp Capital Trust I, formed in 2002, and Security Bank Corporation Statutory Trust II, which it formed in 2005. The trusts are special purpose subsidiaries organized for the sole
purpose of issuing trust preferred securities. These subsidiaries are not consolidated as a result of the implementation of FASB Interpretation No. (FIN) 46R, Consolidation of Variable Interest Entities. The Companys investments in
these subsidiaries are included in other assets in the consolidated balance sheets.



Certain reclassifications have been made to prior year amounts to conform to the current year presentation.



Investment Securities



Investment securities are recorded under Statement of Financial Accounting Standards (SFAS) No. 115,Accounting for Certain Investments in Debt
and Equity Securities, whereby securities are classified as trading, available for sale or held to maturity. Securities that are held principally for resale in the near term are classified as trading. Trading securities are carried at fair
value, with realized and unrealized gains and losses included in noninterest income. Securities acquired with both the intent and ability to be held to maturity are classified as held to maturity and reported at amortized cost. All other securities
not classified as trading or held to maturity are considered available for sale.



F-10



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Securities available for sale are reported at estimated fair value. Unrealized gains and losses on
securities available for sale are excluded from earnings and are reported, net of deferred taxes, in accumulated other comprehensive income, a component of shareholders equity. Declines in the fair value of held to maturity and available for
sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses. In estimating other than temporary impairment losses, management considers (1) the length of time and the extent to which
the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any
anticipated recovery in fair value. Gains and losses from sales of securities available for sale are computed using the specific identification method. This caption includes securities, which may be sold to meet liquidity needs arising from
unanticipated deposit and loan fluctuations, changes in regulatory capital requirements, or unforeseen changes in market conditions.



Federal Home Loan Bank Stock



Federal Home Loan Bank (FHLB) stock is required for every federally insured institution that utilizes their services. The FHLB stock is reported in the
financial statements at cost. Dividend income is recognized when earned.



Loans Held for Sale



Loans held for sale are
reported at the lower of cost or market value on an aggregate loan portfolio basis. Gains or losses realized on the sales of loans are recognized at the time of sale and are determined by the difference between the net sales proceeds and the
carrying value of the loans sold. Gains and losses on sales of the loans are included in noninterest income.



Loans Receivable, Net of Unearned Income



Loans that the Company has the ability and intent to hold for the foreseeable future or until maturity are recorded at their principal amount outstanding, net of unearned interest and fees. Interest income on loans is
recognized using the effective interest method. Loan origination fees and costs are deferred and recognized as adjustments to income over the life of the related loans. Unearned income is amortized to income using the interest method.



When management believes there is sufficient doubt as to the collectibility
of principal or interest on any loan, or generally when loans are 90 days or more past due, the accrual of applicable interest is discontinued and the loan is designated as nonaccrual, unless the loan is well secured and in the process of
collection. Management reviews past due loans on a monthly basis and will place certain loans on nonaccrual status at 60 days in certain circumstances. Interest payments received on nonaccrual loans are either applied against principal or reported
as income, according to managements judgment as to the collectibility of principal. Loans are returned to an accrual status when factors indicating doubtful collectibility on a timely basis no longer exist.



The Company monitors and reviews delinquent loans on a monthly basis to
ensure that problem loans and losses are addressed in a timely manner. When it has been determined that a loan cannot be collected in whole or in part, the uncollectible portion will be charged-off.



Allowance for Loan Losses



The allowance for loan losses is established as losses are estimated to have
occurred through a provision for loan losses charged to earnings. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the
allowance.



F-11



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SECURITY BANK CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The allowance for loan losses is evaluated on a regular basis by management and is based upon
managements periodic review of the collectibility of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrowers ability to repay, estimated value of any
underlying collateral and prevailing economic conditions. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revisions as more information becomes available.



The allowance consists of a specific component and a general component. The
specific component relates to specific individual loans that are classified as impaired. The general component covers all other loans and is based on historical loss experience adjusted for several qualitative factors related to the economy, the
loan portfolio characteristics and the current level of risk in the portfolio as measured by management. A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the
scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting
scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls
on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrowers prior payment record and the amount of the shortfall
in relation to the principal and interest owed. Specific allowances on impaired loans are measured by either the present value of expected future cash flows discounted at the loans effective interest rate, the loans observable market
price or the fair value of the collateral if the loan is collateral dependent. Large groups of smaller balance homogenous loans are collectively evaluated for impairment. Accordingly, the Company does not separately identify individual consumer and
residential loans for payment disclosures, unless such loans are the subject of a restructuring agreement.



Derivative Financial Instruments



SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended and interpreted, establishes accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities. As required by SFAS No. 133, the Company records all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives
depends on the intended use of the derivative and the resulting designation. Derivatives used to hedge the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. To qualify
for hedge accounting, the Company must comply with the detailed rules and strict documentation requirements at the inception of the hedge, and hedge effectiveness is assessed at inception and periodically throughout the life of each hedging
relationship.



In 2007, the Company executed an interest rate
swap that is designated as a cash flow hedge of the overall changes in cash flows on the first prime-based interest payments received by the Company each calendar month during the term of the hedge that, in aggregate for each period, are interest
payments on principal from specified portfolios equal to the notional amount of the swap.



Based on the Companys assessments both at inception and throughout the life of the hedging relationship, it is probable that there will be sufficient prime-based interest receipts through the maturity date of
the swap. The Company uses the Hypothetical Derivative Method described in SFAS No. 133 Implementation Issue No. G7, Cash Flow Hedges: Measuring the Ineffectiveness of a Cash Flow Hedge under Paragraph 30(b) When the Shortcut
Method Is Not Applied, for quarterly prospective and retrospective assessments of hedge effectiveness, as well as for measurements of hedge ineffectiveness. The effective portion of changes in the fair value of the



F-12



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SECURITY BANK CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



derivative is initially reported in other comprehensive income (outside of earnings) and subsequently reclassified to earnings (interest income on
loans for the hedging relationship described above) when the hedged transactions affect earnings. Ineffectiveness resulting from the hedge, if any, will be recorded as a gain or loss in the consolidated statement of income and comprehensive
income as part of noninterest income. The Company also monitors the risk of counterparty default on an ongoing basis.



Prepayments in hedged loan portfolios are treated in a manner consistent with the guidance in Statement No. 133 Implementation Issue No. G25, Cash
Flow Hedges:Using the First-Payments-Received Technique in Hedging the Variable Interest Payments on a Group of Non-Benchmark-Rate-Based Loans, which allows the designated forecasted transactions to be the variable prime-rate-based
interest payments on a rolling portfolio of prepayable interest-bearing loans using the first-payments-received technique, thereby allowing interest payments from loans that prepay to be replaced with interest payments from new loan originations.



Premises and Equipment



Premises and equipment are recorded at acquisition cost less accumulated
depreciation.



Depreciation is charged to operations over the
estimated useful lives of the assets. Banking Premises and Furniture and Equipment are depreciated over periods of 39 years and between five and 25 years, respectively under the straight-line method of depreciation.



Maintenance and repairs are expensed as incurred and improvements are
capitalized. When property and equipment are retired or sold, the cost and accumulated depreciation are removed from the respective accounts and any gain or loss is reflected in Other Noninterest Income.



Long-Lived Assets Held For Sale



At December 31, 2006, long-lived assets held for sale consisted of land
and a building owned by one of the Companys subsidiary banks. The assets were sold in 2007 because the subsidiary bank moved to a new location.



Other Real Estate



Other real estate generally represents real estate acquired through foreclosure and is initially recorded at the lower of cost or estimated market value
at the date of acquisition. An allowance for estimated losses is recorded when a subsequent decline in value occurs.



Intangible Assets



Intangible assets include goodwill and core deposit intangibles resulting from Company acquisitions. Core deposit intangibles are amortized on a
straight-line basis over an estimated useful life of either five or seven years and evaluated for impairment whenever events or changes in circumstance indicate the carrying value of the assets may not be recoverable. Goodwill represents the excess
of the cost of an acquisition over the fair value of the net assets acquired. Goodwill is not amortized but tested for impairment annually or at any time an event occurs or circumstances change that may trigger a decline in value. Examples of such
events or circumstances include adverse change in legal factors, business climate, unanticipated competition, change in regulatory environment, or loss of key personnel.



F-13



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



A summary of core deposit intangible assets as of December 31, 2007 and 2006:



|                               |  |      |            |   |      |   |            |  
|------------------------------ |  | ---- | ---------- | - | ---- | - | ---------- | -
|                               |  | 2007 |            |   | 2006 |  
|Gross Carrying Amount          |  | $    | 6,546,668  |   |      | $ | 6,546,668  |  
|Less: Accumulated Amortization |  |      | (2,421,489 | ) |      |   | (1,436,533 | )
|                               |  |      |            |   |      |   |            |  
|Net Carrying Amount            |  | $    | 4,125,179  |   |      | $ | 5,110,135  |  
|                               |  |      |            |   |      |   |            |  



The estimated
aggregate amortization expense for each of the next five years is:



|     |  |        |          
|---- |  | ------ | ---------
|Year |  | Amount
|2008 |  | $      | 877,402  
|2009 |  |        | 806,084  
|2010 |  |        | 806,084  
|2011 |  |        | 806,084  
|2012 |  |        | 714,921  
|     |  |        |          
|     |  | $      | 4,010,575
|     |  |        |          



A summary of the
changes in goodwill for the years ended December 31, 2007, 2006 and 2005:



|                     |  |      |             |      |   |             |      |  |   |            |  
|-------------------- |  | ---- | ----------- | ---- | - | ----------- | ---- |  | - | ---------- | -
|                     |  | 2007 |             | 2006 |   |             | 2005 | 
|Beginning Balance    |  | $    | 127,983,914 |      | $ | 74,582,086  |      |  | $ | 28,579,479 |  
|Goodwill Acquired    |  |      | 450,000     |      |   | 50,802,594  |      |  |   | 44,071,242 |  
|Contingent Payments  |  |      |            |      |   | 4,817,991   |      |  |   | 3,272,760  |  
|Purchase Adjustments |  |      | 137,409     |      |   | (2,218,757  | )    |  |   | (1,341,395 | )
|                     |  |      |             |      |   |             |      |  |   |            |  
|Ending Balance       |  | $    | 128,571,323 |      | $ | 127,983,914 |      |  | $ | 74,582,086 |  
|                     |  |      |             |      |   |             |      |  |   |            |  



Securities Sold Under Agreement to
Repurchase



The Company sells securities under agreements
to repurchase. These repurchase agreements are treated as borrowings. The obligations to repurchase securities sold are reflected as a liability and the securities underlying the agreements continue to be reflected as assets in the consolidated
balance sheets.



Stock-Based Compensation



Compensation cost is recognized for stock option and restricted stock awards
issued to employees. Compensation cost is measured as the fair value of these awards on their date of grant. A Black-Scholes model is used to estimate the fair value of stock options, while the market price of the Companys common stock at the
date of grant is used to estimate the fair value of restricted stock awards. Compensation cost is recognized over the required service period, generally defined as the vesting period for stock option awards and the restriction period for restricted
stock awards.



Advertising Costs



Advertising costs are expensed as incurred.



F-14



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SECURITY BANK CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Earnings per Share



The objective of basic earnings per share (EPS) is to measure the performance of the Company over the reporting period. Basic EPS is computed by
dividing income available to common shareholders (which is the same as net income for the Company) by the weighted-average number of common shares outstanding during the period. The objective of diluted EPS is to measure the performance of the
Company while giving effect to all dilutive potential common shares that were outstanding during the period. Diluted EPS includes the number of additional shares that would have been outstanding if the dilutive potential common shares had been
issued as well as the effect on income resulting from the assumed conversion of potential common shares. Diluted EPS does not include the conversion or exercise of shares that would have an antidilutive effect on earnings per share.



Off-Balance Sheet Credit Related Financial Instruments



In the ordinary course of business, the Company has entered into commitments
to extend credit, commercial letters of credit and standby letters of credit. Such financial instruments are recorded when they are funded.



Income Taxes



The provision for income taxes is based on income and expense reported for financial statement purposes after adjustment for permanent differences such as
tax-exempt income. Deferred income tax assets and liabilities result from differences between assets and liabilities measured for financial reporting purposes and for income tax return purposes.



Deferred tax assets and liabilities are recognized based on future tax
consequences attributable to differences arising from the financial statement carrying values of assets and liabilities and their tax bases. The differences relate primarily to depreciable assets (use of different depreciation methods for financial
statement and income tax purposes) and allowance for loan losses (use of the allowance method for financial statement purposes and the direct write-off method for tax purposes). Subsequent changes in the tax laws will require adjustment to these
assets and liabilities with the cumulative effect included in the current years income tax provision. The Company and its subsidiaries file a consolidated federal income tax return. Each subsidiary pays its proportional share of federal income
taxes to the Company based on its taxable income.



In July
2006, the FASB released FIN No. 48, Accounting for Uncertainty in Income Taxesan Interpretation of FASB Statement 109. FIN 48 prescribes a comprehensive model for how a company should recognize, measure, present and
disclose uncertain tax positions that the company has taken or expects to take on a tax return (including a decision whether to file or not to file a return in a particular jurisdiction). Under FIN 48, the consolidated financial statements will
reflect expected future tax consequences of such positions presuming the taxing authorities full knowledge of the position and all relevant facts, but without considering time values. FIN 48 also revises disclosure requirements and
introduces a prescriptive, annual, tabular roll-forward of the unrecognized tax benefits. The Company adopted the provisions of FIN 48 on January 1, 2007 and as a result recognized an increase in the liability for unrecognized tax benefits,
which was accounted for as a $607,789 reduction to the January 1, 2007 balance of retained earnings (for previous years).



Comprehensive Income



Accounting principles generally accepted in the United States of America (GAAP) require that recognized revenue, expenses, gains and losses be included in
net income. Certain changes in assets and liabilities, such as unrealized gains and losses on securities available for sale, represent equity changes from economic events of the period other than transactions with owners and are not reported in the
consolidated statements of income but as a



F-15



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



separate component of the equity section of the consolidated balance sheets. Such items are considered components of other comprehensive income. SFAS
No. 130, Reporting Comprehensive Income, requires the presentation in the consolidated financial statements of net income and all items of other comprehensive income as total comprehensive income.



Statement of Cash Flows



For purposes of reporting cash flows, cash and cash equivalents include cash and due from banks and federal funds sold.



Transfers of Financial Assets



Transfers of financial assets are accounted for as sales, when control over
the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking
advantage of that right) to pledge or exchange the transferred assets and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.



Recently Issued Accounting Pronouncements



In September 2006, the FASB released SFAS No. 157, Fair Value
Measurements. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS No. 157 emphasizes that fair value
is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement would be determined based on the assumptions that market participants would use in pricing the asset or liability. SFAS No. 157 becomes
effective for the Company on January 1, 2008. Presently, the Company carries investment securities available for sale and its interest rate swap (included in other assets) at fair value and the adoption of SFAS No. 157 will impact the
carrying value of these assets, but the Company does not believe the impact will be material to the financial condition of the Company.



In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, which establishes
presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. Among its other provisions, SFAS No. 159 permits companies
to elect to measure certain eligible items at fair value. Subsequent unrealized gains and losses on those items will be reported in earnings. Upfront costs and fees related to those items will be reported in earnings as incurred and not deferred.
SFAS No. 159 becomes effective for the Company on January 1, 2008. Presently, the Company has elected to not use the fair value option on any of its eligible items; therefore SFAS No. 159 will have no impact on the Companys
financial condition, results of operations or cash flows.



In
September 2006, the FASB ratified an Emerging Issues Task Force (EITF) consensus regarding Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements (Issue No. 06-04),
which becomes effective for the Company on January 1, 2008. The Company will record a cumulative effect of a change in accounting principle of $93,061 to retained earnings as a result of the adoption of this consensus.



In June 2007, the FASB ratified an EITF consensus regarding Accounting for
Income Tax Benefits of Dividends on Share-Based Payment Awards (Issue No. 06-11), which becomes effective for the Company on January 1, 2008. The Company does not currently pay dividends on nonvested share-based payment awards;
therefore this new guidance will have no effect on the Companys consolidated financial statements.



F-16



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



In December 2007, the FASB issued SFAS No. 141 (R), Business Combinations, which replaces
SFAS No. 141. SFAS No. 141 (R) retains the fundamental requirements that the acquisition method of accounting be used for all business combinations and that an acquirer is identified for each business combination. The scope of SFAS
No. 141 (R) is broader than SFAS No. 141, which applied only to business combinations in which control was obtained by transferring consideration. By applying the same method of accounting, the acquisition method, to all transactions
and other events in which one entity obtains control over one or more other businesses, the FASB believes that SFAS No. 141 (R) will improve the comparability of the information about business combinations provided in financial reports.
SFAS No. 141(R) is effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. Management will evaluate the impact, if any,
upon adoption.



In December 2007, the FASB issued SFAS
No. 160, Noncontrolling Interests in Consolidated Financial Statements- an amendment of ARB No. 51.SFAS No. 160 amends Accounting Research Bulletin (ARB) No. 51 to establish accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS No. 160 clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in
the consolidated financial statements. The Statement changes the way the consolidated income statement is presented; it requires consolidated net income to be reported at amounts that include the amounts attributable to both the parent and the
noncontrolling interest. SFAS No. 160 also requires disclosure, on the face of the consolidated statement of income, of the amounts of consolidated net income attributable to the parent and to the noncontrolling interest. SFAS No. 160 is
effective for the Company on January 1, 2008. Presently, the Company has no subsidiaries that would be accounted for under SFAS No. 160.



A variety of other proposed or otherwise potential accounting standards are currently under study by standard-setting organizations and various regulatory
agencies. Because of the tentative and preliminary nature of these proposed standards, management has not determined whether implementation of such proposed standards would be material to the Companys consolidated financial statements.



Segment Reporting



Reportable segments are business units, which offer different products and
services and require different management and marketing strategies. Management of the Company considers that all banking operations are essentially similar within each of its subsidiaries and that there are no reportable operating segments. However,
fee income from mortgage loans originated and sold to investors included in consolidated noninterest income for the years ended December 31, 2007, 2006 and 2005 was $4,474,476, $4,921,616 and $4,539,242, respectively. Such income may fluctuate
significantly with changes in mortgage rates and overall demand for borrowing.



Risks and Uncertainties



In the normal course
of its business, the Company encounters two significant types of risk: economic and regulatory. There are three main components of economic risk: interest rate risk, credit risk and market risk. The Company is subject to interest rate risk to the
degree that its interest-bearing liabilities mature or reprice at different speeds, or on different indices, than its interest-earning assets. Credit risk is the risk of default on the Companys loan portfolio that results from borrowers
inability or unwillingness to make contractually required payments. Market risk reflects changes in the value of collateral underlying loans receivable, the valuation of real estate held by the Company, and the valuation of loans held for sale,
investments and mortgage-backed securities available for sale.



F-17



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



At times, the Company may have cash and cash equivalents at financial institutions in excess of
insured limits. The Company places its cash and cash equivalents with high credit quality financial institutions whose credit rating is monitored by management to minimize credit risk.



The Company is subject to the regulations of various government agencies. These regulations can and do change significantly
from period to period. The Company also undergoes periodic examinations by the regulatory agencies, which may subject it to further changes with respect to asset valuations, amounts of required loss allowances and operating restrictions resulting
from the regulators judgments based on information available to them at the time of their examination.



The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could vary from these estimates.
Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, the valuation of real estate acquired in connection with foreclosures or in satisfaction of
loans and the valuation of deferred tax assets and the impairment of goodwill.



(2) Business Combinations



On
February 21, 2007, the Company completed the acquisition of CFS Wealth Management LLC, an independent investment management and financial planning firm in Macon, Georgia. The consideration was $200,000 in cash and common stock of $250,000. CFS
Wealth Management functions as a wholly owned subsidiary of the Company.



On July 31, 2006, the Company completed its acquisition of Homestead Bank, a community bank located in Suwanee, Georgia. Homestead Banks shareholders received $10,676,900 in cash and 1,631,560 shares of the
Companys common stock in a business combination accounted for as a purchase. The excess of the purchase price over book value has been allocated to goodwill and core deposit intangibles. The Company amortized $98,010 and $40,838 of the core
deposit intangibles during the years ended December 31, 2007 and 2006, respectively.



On March 31, 2006, the Company completed its acquisition of Neighbors Bancshares, Inc., the parent company of Neighbors Bank, a community bank located in Alpharetta, Georgia. The shareholders of Neighbors
Bancshares, Inc. received $1,592,039 in cash and 1,232,333 shares of the Companys common stock in a business combination accounted for as a purchase. The excess of the purchase price over book value has been allocated to goodwill and core
deposit intangibles. The Company amortized $92,280 and $67,696 of the core deposit intangibles during the years ended December 31, 2007 and 2006, respectively.



On December 31, 2005, the Company acquired Rivoli BanCorp, Inc., the parent of Rivoli Bank & Trust. Rivoli
BanCorp was a community bank holding company located in Macon, Georgia. The shareholders of Rivoli BanCorp received $4,220,026 in cash and 1,472,995 shares of the Companys common stock in a business combination accounted for as a purchase. In
January 2006, Rivoli Bank was merged into Security Bank of Bibb County. The excess of the purchase price over book value has been allocated to goodwill, the fair value of premises and equipment and core deposit intangibles. The Company amortized
$28,829 and $26,507 of the premises and equipment premium and $467,221 of the core deposit intangibles during the years ended December 31, 2007 and 2006, respectively.



On May 31, 2005, the Company acquired SouthBank, a community bank located in Woodstock, Georgia. The shareholders of
SouthBank received $9,659,994 in cash and 1,121,372 common shares of the Companys



F-18



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



common stock. The excess of the purchase price over book value has been allocated to goodwill and the fair value of core deposit intangibles. The Company
amortized $156,283, $156,283 and $91,165 of the core deposit intangibles during the years ended December 31, 2007, 2006 and 2005, respectively.



Following is a condensed balance sheet showing fair values of the assets acquired and the liabilities assumed as of the date of acquisition:



|                                            |  |           |              |   |           |   |              |        |  |   |              |   |  |   |              |  
|------------------------------------------- |  | --------- | ------------ | - | --------- | - | ------------ | ------ |  | - | ------------ | - |  | - | ------------ | -
|                                            |  | Homestead |              |   | Neighbors |   |              | Rivoli |  |   | SouthBank    |  
|Cash, Due from Banks and Federal Funds Sold |  | $         | 15,659,400   |   |           | $ | 9,555,848    |        |  | $ | 9,255,842    |   |  | $ | 12,677,273   |  
|Investment Securities                       |  |           | 29,671,163   |   |           |   | 5,209,362    |        |  |   | 24,323,276   |   |  |   | 14,051,844   |  
|Loans, Net                                  |  |           | 233,179,868  |   |           |   | 101,048,365  |        |  |   | 161,764,935  |   |  |   | 107,837,573  |  
|Premises and Equipment                      |  |           | 2,786,537    |   |           |   | 5,168,924    |        |  |   | 8,005,934    |   |  |   | 2,902,522    |  
|Core Deposit Intangible                     |  |           | 686,071      |   |           |   | 640,257      |        |  |   | 3,270,550    |   |  |   | 1,093,981    |  
|Goodwill Arising in the Acquisition         |  |           | 25,878,717   |   |           |   | 22,004,332   |        |  |   | 26,337,031   |   |  |   | 17,283,373   |  
|Other Assets                                |  |           | 1,190,870    |   |           |   | 2,655,346    |        |  |   | 2,713,519    |   |  |   | 1,061,923    |  
|Deposits                                    |  |           | (236,284,136 | ) |           |   | (110,821,970 | )      |  |   | (148,480,435 | ) |  |   | (118,110,954 | )
|Other Liabilities                           |  |           | (27,067,731  | ) |           |   | (2,313,913   | )      |  |   | (47,154,533  | ) |  |   | (7,779,602   | )
|                                            |  |           |              |   |           |   |              |        |  |   |              |   |  |   |              |  
|                                            |  | $         | 45,700,759   |   |           | $ | 33,146,551   |        |  | $ | 40,036,119   |   |  | $ | 31,017,933   |  
|                                            |  |           |              |   |           |   |              |        |  |   |              |   |  |   |              |  



Following are pro
forma amounts assuming that the acquisitions were included in consolidated earnings for the full years of 2007, 2006 and 2005:



|                   |  |      |             |      |   |             |  |   |            
|------------------ |  | ---- | ----------- | ---- | - | ----------- |  | - | -----------
|                   |  | 2007 |             | 2006 |   | 2005       
|Interest Income    |  | $    | 192,839,783 |      | $ | 160,826,792 |  | $ | 116,183,886
|Net Income         |  |      | 6,587,545   |      |   | 22,906,901  |  |   | 19,266,306 
|Earnings Per Share |  |      |             |      |   |             |  |   |            
|Basic              |  | $    | 0.35        |      | $ | 1.24        |  | $ | 1.12       
|Diluted            |  | $    | 0.34        |      | $ | 1.22        |  | $ | 1.10       



(3) Investment Securities



Investment securities as of December 31, 2007 are
summarized as follows:



|                              |  |               |             |                      |   |                       |  |   |           |   |  |   |            
|----------------------------- |  | ------------- | ----------- | -------------------- | - | --------------------- |  | - | --------- | - |  | - | -----------
|                              |  | AmortizedCost |             | GrossUnrealizedGains |   | GrossUnrealizedLosses |  |   | FairValue
|Securities Available for Sale |  |               |             |                      |   |                       |  |   |           |   |  |   |            
|Mortgage Backed               |  | $             | 212,800,147 |                      | $ | 1,842,079             |  | $ | (492,061  | ) |  | $ | 214,150,165
|U.S. Government Agencies      |  |               | 59,537,851  |                      |   | 436,117               |  |   | (28,464   | ) |  |   | 59,945,504 
|State, County and Municipal   |  |               | 20,210,159  |                      |   | 238,322               |  |   | (211,202  | ) |  |   | 20,237,279 
|Other Securities              |  |               | 1,958,318   |                      |   |                      |  |   | (135,204  | ) |  |   | 1,823,114  
|                              |  |               |             |                      |   |                       |  |   |           |   |  |   |            
|                              |  | $             | 294,506,475 |                      | $ | 2,516,518             |  | $ | (866,931  | ) |  | $ | 296,156,062
|                              |  |               |             |                      |   |                       |  |   |           |   |  |   |            
|Securities Held to Maturity   |  |               |             |                      |   |                       |  |   |           |   |  |   |            
|U.S. Government Agencies      |  | $             | 1,000,000   |                      | $ |                      |  | $ | (100      | ) |  | $ | 999,900    
|                              |  |               |             |                      |   |                       |  |   |           |   |  |   |            



F-19



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Investment securities as of December 31, 2006 are summarized as follows:



|                              |  |               |             |                      |   |                       |  |   |            |   |  |   |            
|----------------------------- |  | ------------- | ----------- | -------------------- | - | --------------------- |  | - | ---------- | - |  | - | -----------
|                              |  | AmortizedCost |             | GrossUnrealizedGains |   | GrossUnrealizedLosses |  |   | FairValue 
|Securities Available for Sale |  |               |             |                      |   |                       |  |   |            |   |  |   |            
|Mortgage Backed               |  | $             | 133,183,059 |                      | $ | 162,379               |  | $ | (1,056,651 | ) |  | $ | 132,288,787
|U.S. Government Agencies      |  |               | 67,048,385  |                      |   | 69                    |  |   | (219,976   | ) |  |   | 66,828,478 
|State, County and Municipal   |  |               | 19,993,347  |                      |   | 249,899               |  |   | (147,524   | ) |  |   | 20,095,722 
|Other Securities              |  |               | 1,980,754   |                      |   |                      |  |   | (15,281    | ) |  |   | 1,965,473  
|                              |  |               |             |                      |   |                       |  |   |            |   |  |   |            
|                              |  | $             | 222,205,545 |                      | $ | 412,347               |  | $ | (1,439,432 | ) |  | $ | 221,178,460
|                              |  |               |             |                      |   |                       |  |   |            |   |  |   |            
|Securities Held to Maturity   |  |               |             |                      |   |                       |  |   |            |   |  |   |            
|U.S. Government Agencies      |  | $             | 1,000,000   |                      | $ |                      |  | $ | (27,300    | ) |  | $ | 972,700    
|State, County and Municipal   |  |               | 239,988     |                      |   | 129                   |  |   |           |   |  |   | 240,117    
|                              |  |               |             |                      |   |                       |  |   |            |   |  |   |            
|                              |  | $             | 1,239,988   |                      | $ | 129                   |  | $ | (27,300    | ) |  | $ | 1,212,817  
|                              |  |               |             |                      |   |                       |  |   |            |   |  |   |            



The Company recognized
gross realized gains on the disposition of investments of $2,050, $0 and $0 during 2007, 2006 and 2005. Gross realized losses on the disposition of investments totaled $4,763, $1,601,229 and $5,598 in 2007, 2006 and 2005, respectively.



Investment securities having a carrying value of $140,159,379 and
$115,506,709 as of December 31, 2007 and 2006, respectively, were pledged to secure public deposits and for other purposes.



The amortized cost and fair value of investment securities as of December 31, 2007, by contractual maturity, are presented hereafter. Expected
maturities will differ from contractual maturities because issuers have the right to call or prepay obligations with or without call or prepayment penalties.



|                                       |  |                    |             |                  |   |               |  |           |           |  |   |        
|-------------------------------------- |  | ------------------ | ----------- | ---------------- | - | ------------- |  | --------- | --------- |  | - | -------
|                                       |  | Securities        
|                                       |  | Available for Sale |             | Held to Maturity
|                                       |  | AmortizedCost      |             | FairValue        |   | AmortizedCost |  | FairValue
|Due in One Year or Less                |  | $                  | 36,052,892  |                  | $ | 36,026,042    |  | $         |          |  | $ |       
|Due After One Year Through Five Years  |  |                    | 10,093,921  |                  |   | 10,171,821    |  |           |          |  |   |       
|Due After Five Years Through Ten Years |  |                    | 27,573,322  |                  |   | 28,087,141    |  |           | 1,000,000 |  |   | 999,900
|Due After Ten Years                    |  |                    | 7,795,579   |                  |   | 7,530,279     |  |           |          |  |   |       
|                                       |  |                    |             |                  |   |               |  |           |           |  |   |        
|                                       |  |                    | 81,515,714  |                  |   | 81,815,283    |  |           | 1,000,000 |  |   | 999,900
|                                       |  |                    |             |                  |   |               |  |           |           |  |   |        
|Mortgage Backed Securities             |  |                    | 212,800,147 |                  |   | 214,150,165   |  |           |          |  |   |       
|Marketable Equity Securities           |  |                    | 190,614     |                  |   | 190,614       |  |           |          |  |   |       
|                                       |  |                    |             |                  |   |               |  |           |           |  |   |        
|                                       |  |                    | 212,990,761 |                  |   | 214,340,779   |  |           |          |  |   |       
|                                       |  |                    |             |                  |   |               |  |           |           |  |   |        
|                                       |  | $                  | 294,506,475 |                  | $ | 296,156,062   |  | $         | 1,000,000 |  | $ | 999,900
|                                       |  |                    |             |                  |   |               |  |           |           |  |   |        



F-20



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Information pertaining to securities with gross unrealized losses at December 31, 2007 and 2006
aggregated by investment category and length of time that individual securities have been in a continuous loss position, follows:



|                            |  |                     |            |                       |                      |          |           |       |                       |            |  |           |          |                       |  |   |            |  |   |          |  
|--------------------------- |  | ------------------- | ---------- | --------------------- | -------------------- | -------- | --------- | ----- | --------------------- | ---------- |  | --------- | -------- | --------------------- |  | - | ---------- |  | - | -------- | -
|                            |  | Less Than 12 Months |            |                       | 12 Months or Greater |          |           | Total |                      
|                            |  | FairValue           |            | GrossUnrealizedLosses |                      |          | FairValue |       | GrossUnrealizedLosses |            |  | FairValue |          | GrossUnrealizedLosses | 
|December 31, 2007           |  |                     |            |                       |                      |          |           |       |                       |            |  |           |          |                       |  |   |            |  |   |          |  
|Available for Sale:         |  |                     |            |                       |                      |          |           |       |                       |            |  |           |          |                       |  |   |            |  |   |          |  
|Mortgage Backed             |  | $                   | 10,828     |                       | $                    | (14      | )         |       | $                     | 32,774,879 |  | $         | (492,047 | )                     |  | $ | 32,785,707 |  | $ | (492,061 | )
|U.S. Government Agencies    |  |                     | 36,947,133 |                       |                      | (28,464  | )         |       |                       |           |  |           |         |                       |  |   | 36,947,133 |  |   | (28,464  | )
|State, County and Municipal |  |                     | 4,057,416  |                       |                      | (150,018 | )         |       |                       | 4,359,634  |  |           | (61,184  | )                     |  |   | 8,417,050  |  |   | (211,202 | )
|Other Securities            |  |                     | 1,132,500  |                       |                      | (135,204 | )         |       |                       |           |  |           |         |                       |  |   | 1,132,500  |  |   | (135,204 | )
|                            |  |                     |            |                       |                      |          |           |       |                       |            |  |           |          |                       |  |   |            |  |   |          |  
|                            |  | $                   | 42,147,877 |                       | $                    | (313,700 | )         |       | $                     | 37,134,513 |  | $         | (553,231 | )                     |  | $ | 79,282,390 |  | $ | (866,931 | )
|                            |  |                     |            |                       |                      |          |           |       |                       |            |  |           |          |                       |  |   |            |  |   |          |  



|                            |  |                     |            |                       |                      |          |           |       |                       |            |  |           |            |                       |  |   |             |  |   |            |  
|--------------------------- |  | ------------------- | ---------- | --------------------- | -------------------- | -------- | --------- | ----- | --------------------- | ---------- |  | --------- | ---------- | --------------------- |  | - | ----------- |  | - | ---------- | -
|                            |  | Less Than 12 Months |            |                       | 12 Months or Greater |          |           | Total |                      
|                            |  | FairValue           |            | GrossUnrealizedLosses |                      |          | FairValue |       | GrossUnrealizedLosses |            |  | FairValue |            | GrossUnrealizedLosses | 
|December 31, 2006           |  |                     |            |                       |                      |          |           |       |                       |            |  |           |            |                       |  |   |             |  |   |            |  
|Available for Sale:         |  |                     |            |                       |                      |          |           |       |                       |            |  |           |            |                       |  |   |             |  |   |            |  
|Mortgage Backed             |  | $                   | 26,678,929 |                       | $                    | (74,473  | )         |       | $                     | 38,869,630 |  | $         | (982,178   | )                     |  | $ | 65,548,559  |  | $ | (1,056,651 | )
|U.S. Government Agencies    |  |                     | 48,704,960 |                       |                      | (84,271  | )         |       |                       | 13,097,019 |  |           | (135,705   | )                     |  |   | 61,801,979  |  |   | (219,976   | )
|State, County and Municipal |  |                     | 4,749,561  |                       |                      | (98,831  | )         |       |                       | 2,432,179  |  |           | (48,693    | )                     |  |   | 7,181,740   |  |   | (147,524   | )
|Other Securities            |  |                     | 1,020,000  |                       |                      | (15,281  | )         |       |                       |           |  |           |           |                       |  |   | 1,020,000   |  |   | (15,281    | )
|                            |  |                     |            |                       |                      |          |           |       |                       |            |  |           |            |                       |  |   |             |  |   |            |  
|                            |  | $                   | 81,153,450 |                       | $                    | (272,856 | )         |       | $                     | 54,398,828 |  | $         | (1,166,576 | )                     |  | $ | 135,552,278 |  | $ | (1,439,432 | )
|                            |  |                     |            |                       |                      |          |           |       |                       |            |  |           |            |                       |  |   |             |  |   |            |  



Management evaluates
securities for other-than-temporary impairment on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been
less than cost, (2) the financial condition and near-term prospects of the issuer and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in
fair value.



The unrealized losses relate principally to the
increase in short-term market interest rates that occurred since the securities were purchased. The fair value is expected to recover as the securities approach their maturity date or repricing date or if market yields for such investments decline.
In analyzing an issuers financial condition, management considers whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred and the results of reviews of the
issuers financial condition. As management has the ability to hold debt securities until maturity, or for the foreseeable future if classified as available for sale, no declines are deemed to be other than temporary.



F-21



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



(4) Loans Receivable, Net of Unearned Income



The composition of loans receivable as of December 31 consisted of the following:



|                                                             |  |      |               |   |      |   |               |  
|------------------------------------------------------------ |  | ---- | ------------- | - | ---- | - | ------------- | -
|                                                             |  | 2007 |               |   | 2006 |  
|Loans Secured by Real Estate:                                |  |      |               |   |      |   |               |  
|Construction and Land Development                            |  | $    | 1,165,718,674 |   |      | $ | 981,481,018   |  
|Nonfarm Nonresidential Properties                            |  |      | 504,367,938   |   |      |   | 458,070,014   |  
|1-4 Family Residential Properties                            |  |      | 246,339,883   |   |      |   | 223,517,575   |  
|Farmland (Including Farm Residential and Other Improvements) |  |      | 18,717,389    |   |      |   | 16,926,408    |  
|Multifamily (5 or More) Residential Properties               |  |      | 24,785,563    |   |      |   | 30,083,708    |  
|Commercial and Industrial Loans (U.S. Addresses)             |  |      | 161,910,536   |   |      |   | 142,536,842   |  
|Agricultural Loans                                           |  |      | 1,224,523     |   |      |   | 2,029,304     |  
|Consumer                                                     |  |      | 61,757,039    |   |      |   | 48,923,048    |  
|                                                             |  |      |               |   |      |   |               |  
|                                                             |  |      | 2,184,821,545 |   |      |   | 1,903,567,917 |  
|Unearned Interest and Fees                                   |  |      | (2,508,961    | ) |      |   | (2,466,937    | )
|                                                             |  |      |               |   |      |   |               |  
|                                                             |  | $    | 2,182,312,584 |   |      | $ | 1,901,100,980 |  
|                                                             |  |      |               |   |      |   |               |  



Loans by interest rate
type are:



|              |  |      |               |      |   |              
|------------- |  | ---- | ------------- | ---- | - | -------------
|              |  | 2007 |               | 2006
|Fixed Rate    |  | $    | 742,731,791   |      | $ | 626,887,260  
|Variable Rate |  |      | 1,442,089,754 |      |   | 1,276,680,657
|              |  |      |               |      |   |              
|              |  | $    | 2,184,821,545 |      | $ | 1,903,567,917
|              |  |      |               |      |   |              



The Company
principally originates loans throughout its market area that primarily consists of Bibb, Houston and Jones Counties and the northern metropolitan area of Atlanta in the state of Georgia. As of December 31, 2007 and 2006, approximately 90% of
the Companys loan portfolio was secured by real estate. These loans are well collateralized and, in managements opinion, do not pose an unacceptable level of credit risk. The Company does make speculative loans to borrowers in that the
collateral property has not been pre-sold or pre-leased. While these loans are inherently riskier due to the fact that the borrower may not be able to sell or lease the property as intended, the Company only makes these loans to established
customers with a good history of prior developments. At December 31, 2007 and 2006, the Company had outstanding speculative loans of approximately $711.2 million and $510.5 million, respectively.



The largest components of the Companys loan portfolio are the
construction and land development loans and mortgage loans secured by nonfarm, nonresidential properties. Real estate construction and land development loans, which are 53.4% of the loan portfolio, are made to finance land development and
residential and commercial construction. Mortgage loans secured by nonfarm, nonresidential properties, which are 23.1% of the portfolio, are loans made to finance the purchase or development of commercial properties such as hotels, motels, shopping
centers, timber holdings, office buildings and convenience stores. Of the total, the largest collateral types are retail facilities (35.7%) and office facilities (23.9%).



Nonaccrual loans are loans for which principal and interest are doubtful of collection in accordance with original loan
terms and for which accruals of interest have been discontinued due to payment delinquency. Nonaccrual loans totaled $50,634,875 and $34,401,159 as of December 31, 2007 and 2006, respectively. Loans past due 90 days or more and still accruing
interest were $242,000 and zero at December 31, 2007 and 2006,



F-22



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



respectively. Foregone interest on nonaccrual loans approximated $6,984,245 in 2007, $2,065,883 in 2006 and $351,170 in 2005.



Impaired loans included in total loans above as of December 31 are
summarized as follows:



|                                    |  |      |            |   |      |   |            |  
|----------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | -
|                                    |  | 2007 |            |   | 2006 |  
|Total Investment in Impaired Loans  |  | $    | 35,123,668 |   |      | $ | 22,853,985 |  
|Allowance Related to Impaired Loans |  |      | (2,852,061 | ) |      |   | (794,308   | )
|                                    |  |      |            |   |      |   |            |  
|Net Investment                      |  | $    | 32,271,607 |   |      | $ | 22,059,677 |  
|                                    |  |      |            |   |      |   |            |  
|Average Investment                  |  | $    | 34,559,271 |   |      | $ | 13,247,378 |  
|                                    |  |      |            |   |      |   |            |  
|Income Recognized During the Year   |  | $    | 1,579,878  |   |      | $ | 1,002,773  |  
|                                    |  |      |            |   |      |   |            |  
|Income Collected During the Year    |  | $    | 2,050,033  |   |      | $ | 1,174,928  |  
|                                    |  |      |            |   |      |   |            |  



At December 31, 2007
and 2006, impaired loans that have not been specifically allocated a portion of the allowance for loan losses totaled $27,771,840 and $16,534,723, respectively.



(5) Allowance for Loan Losses



Activity in the allowance for loan losses is summarized below for the years ended December 31:



|                                        |  |      |             |   |      |   |            |      |  |   |            |  
|--------------------------------------- |  | ---- | ----------- | - | ---- | - | ---------- | ---- |  | - | ---------- | -
|                                        |  | 2007 |             |   | 2006 |   |            | 2005 | 
|Balance, Beginning                      |  | $    | 22,335,852  |   |      | $ | 16,148,259 |      |  | $ | 10,902,783 |  
|Provision Charged to Operating Expenses |  |      | 32,660,000  |   |      |   | 4,468,751  |      |  |   | 2,832,845  |  
|Loans Charged-off                       |  |      | (24,417,718 | ) |      |   | (3,125,699 | )    |  |   | (1,715,615 | )
|Loan Recoveries                         |  |      | 1,119,517   |   |      |   | 762,541    |      |  |   | 496,446    |  
|Business Combinations                   |  |      |            |   |      |   | 4,082,000  |      |  |   | 3,631,800  |  
|                                        |  |      |             |   |      |   |            |      |  |   |            |  
|Balance, Ending                         |  | $    | 31,697,651  |   |      | $ | 22,335,852 |      |  | $ | 16,148,259 |  
|                                        |  |      |             |   |      |   |            |      |  |   |            |  



(6) Derivative Financial
Instruments



On June 29, 2007 the Company executed an
interest rate swap. The Companys objective in using the derivative is to add stability to interest income and to manage its exposure to adverse changes in interest rates. The interest rate swap has a notional amount of $100,000,000, receives a
fixed rate of 8.145%, and pays the current prime rate. The interest rate swap effectively converts the variable interest receipts on $100,000,000 of prime-based loans to fixed rate loans at 8.145% plus any credit spread, if applicable, over the life
of the agreement. The interest rate swap has a maturity date of July 1, 2010.



At December 31, 2007, the interest rate swap had a fair value of $3,981,076 which was included in other assets. Amounts reported in accumulated other comprehensive income related to the interest rate swap will be
reclassified to interest income as interest payments are received on the Companys variable-rate loan assets. The Company recognized interest income of $251,069 for the year ended December 31, 2007 related to the interest rate swap
accounted for as a cash flow hedge.



Gains and losses on
derivatives that are reclassified from accumulated other comprehensive income to current period earnings are included in net interest income. As of December 31, 2007, $910,006, net of taxes, of the deferred net gains on derivatives that are
recorded in accumulated other comprehensive income are expected to be reclassified to interest income in the next 12 months as net settlements are made.



F-23



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



As of December 31, 2007, no derivatives were designated as fair value hedges or hedges of net
investments in foreign operations. Additionally, the Company does not use derivatives for trading or speculative purposes.



(7) Premises and Equipment



Premises and equipment are comprised of the following as of December 31:



|                                  |  |      |             |   |      |   |             |  
|--------------------------------- |  | ---- | ----------- | - | ---- | - | ----------- | -
|                                  |  | 2007 |             |   | 2006 |  
|Land                              |  | $    | 15,094,416  |   |      | $ | 13,447,499  |  
|Building                          |  |      | 25,539,437  |   |      |   | 23,409,668  |  
|Furniture, Fixtures and Equipment |  |      | 14,443,187  |   |      |   | 14,145,899  |  
|Leasehold Improvements            |  |      | 1,690,381   |   |      |   | 1,270,542   |  
|Construction in Progress          |  |      | 1,272,295   |   |      |   | 709,791     |  
|                                  |  |      |             |   |      |   |             |  
|                                  |  |      | 58,039,716  |   |      |   | 52,983,399  |  
|Accumulated Depreciation          |  |      | (14,868,969 | ) |      |   | (13,225,822 | )
|                                  |  |      |             |   |      |   |             |  
|                                  |  | $    | 43,170,747  |   |      | $ | 39,757,577  |  
|                                  |  |      |             |   |      |   |             |  



Depreciation charged
to operations totaled $2,449,879 in 2007, $2,268,306 in 2006 and $1,594,123 in 2005.



Certain bank facilities are leased under various operating leases. Rental expense was $901,067 in 2007, $726,510 in 2006 and $479,336 in 2005. Future minimum rental commitments under noncancelable leases are:



|           |  |        |          
|---------- |  | ------ | ---------
|Year       |  | Amount
|2008       |  | $      | 901,121  
|2009       |  |        | 1,060,821
|2010       |  |        | 1,003,230
|2011       |  |        | 937,671  
|2012       |  |        | 813,846  
|Thereafter |  |        | 3,937,903
|           |  |        |          
|           |  | $      | 8,654,592
|           |  |        |          



(8) Income Taxes



The components of income tax expense for the years ended December 31
are as follows:



|                                   |  |      |            |   |      |   |            |  |   |           |  
|---------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- |  | - | --------- | -
|                                   |  | 2007 |            |   | 2006 |   | 2005       | 
|Current Federal Expense            |  | $    | 7,263,150  |   |      | $ | 8,864,997  |  | $ | 8,377,319 |  
|Deferred Federal Expense (Benefit) |  |      | (4,079,636 | ) |      |   | 3,460,748  |  |   | (93,521   | )
|                                   |  |      |            |   |      |   |            |  |   |           |  
|                                   |  |      | 3,183,514  |   |      |   | 12,325,745 |  |   | 8,283,798 |  
|Current State Tax Expense          |  |      |           |   |      |   | 1,552,345  |  |   | 1,026,540 |  
|                                   |  |      |            |   |      |   |            |  |   |           |  
|                                   |  | $    | 3,183,514  |   |      | $ | 13,878,090 |  | $ | 9,310,338 |  
|                                   |  |      |            |   |      |   |            |  |   |           |  



F-24



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Federal income tax expense in 2007, 2006 and 2005 is less than the income taxes computed by applying
the federal statutory rate of 35% to income before income taxes. The reasons for the differences are as follows:



|                                       |  |      |           |   |      |   |            |      |  |   |           |  
|-------------------------------------- |  | ---- | --------- | - | ---- | - | ---------- | ---- |  | - | --------- | -
|                                       |  | 2007 |           |   | 2006 |   |            | 2005 | 
|Statutory Federal Income Taxes         |  | $    | 3,419,871 |   |      | $ | 13,044,522 |      |  | $ | 8,923,345 |  
|Tax-Exempt Interest                    |  |      | (315,760  | ) |      |   | (329,695   | )    |  |   | (253,905  | )
|Interest Expense Disallowance          |  |      | 43,171    |   |      |   | 42,693     |      |  |   | 6,885     |  
|Cash Surrender Value of Life Insurance |  |      | (145,014  | ) |      |   | (114,787   | )    |  |   | (56,127   | )
|Meal and Entertainment Disallowance    |  |      | 47,046    |   |      |   | 34,416     |      |  |   | 31,287    |  
|State Deduction                        |  |      |          |   |      |   | (349,833   | )    |  |   | (317,017  | )
|Other                                  |  |      | 134,200   |   |      |   | (1,571     | )    |  |   | (50,670   | )
|                                       |  |      |           |   |      |   |            |      |  |   |           |  
|Actual Federal Income Taxes            |  | $    | 3,183,514 |   |      | $ | 12,325,745 |      |  | $ | 8,283,798 |  
|                                       |  |      |           |   |      |   |            |      |  |   |           |  



The components of the
net deferred tax asset included in other assets in the accompanying consolidated balance sheets as of December 31 are as follows:



|                                                   |  |      |            |      |   |          
|-------------------------------------------------- |  | ---- | ---------- | ---- | - | ---------
|                                                   |  | 2007 |            | 2006
|Deferred Tax Assets                                |  |      |            |      |   |          
|Allowance for Loan Losses                          |  | $    | 10,960,473 |      | $ | 7,817,547
|Georgia Occupation and License Tax Credits         |  |      |           |      |   | 53,581   
|Low Income Housing Tax Credits                     |  |      | 68,304     |      |   |         
|Other Real Estate Owned                            |  |      | 404,649    |      |   | 14,564   
|Deferred Compensation                              |  |      | 481,711    |      |   | 373,620  
|Nonaccrual Interest                                |  |      | 526,916    |      |   |         
|Net Operating Loss Carryforward                    |  |      |           |      |   | 109,504  
|Unrealized Losses on Securities Available For Sale |  |      |           |      |   | 475,188  
|Other                                              |  |      | 38,653     |      |   | 199,281  
|                                                   |  |      |            |      |   |          
|                                                   |  |      | 12,480,706 |      |   | 9,043,285
|                                                   |  |      |            |      |   |          



|                                                  |  |   |            |   |  |   |            |  
|------------------------------------------------- |  | - | ---------- | - |  | - | ---------- | -
|Deferred Tax Liabilities                          |  |   |            |   |  |   |            |  
|Premises and Equipment                            |  |   | (798,844   | ) |  |   | (972,190   | )
|Securities Accretion                              |  |   | (61,619    | ) |  |   | (55,280    | )
|Goodwill                                          |  |   | (1,637,757 | ) |  |   | (1,127,166 | )
|Core Deposit Intangible                           |  |   | (1,444,098 | ) |  |   | (1,912,438 | )
|Acquisition Related Fair Value Adjustment         |  |   | (750,733   | ) |  |   | (768,237   | )
|Unrealized Gains on Securities Available For Sale |  |   | (577,357   | ) |  |   |           |  
|Unrealized Gains on Cash Flow Hedges              |  |   | (748,835   | ) |  |   |           |  
|Other                                             |  |   | (74,891    | ) |  |   | (106,017   | )
|                                                  |  |   |            |   |  |   |            |  
|                                                  |  |   | (6,094,134 | ) |  |   | (4,941,328 | )
|                                                  |  |   |            |   |  |   |            |  
|Net Deferred Tax Asset                            |  | $ | 6,386,572  |   |  | $ | 4,101,957  |  
|                                                  |  |   |            |   |  |   |            |  



F-25



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The Company adopted the provisions of FIN 48 on January 1, 2007 and as a result recognized an
increase in the liability for unrecognized tax benefits, which was accounted for as a $607,789 reduction to the January 1, 2007 balance of retained earnings (for previous years). A reconciliation of the beginning and ending amount of
unrecognized tax benefits is as follows:



|                                                             |  |   |        
|------------------------------------------------------------ |  | - | -------
|Balance at January 1, 2007                                   |  | $ | 607,789
|Additions based on tax positions related to the current year |  |   |       
|Additions for tax positions of prior years                   |  |   |       
|Reductions for tax positions of prior years                  |  |   |       
|Settlements                                                  |  |   |       
|                                                             |  |   |        
|Balance, Ending                                              |  | $ | 607,789
|                                                             |  |   |        



The Companys
federal income tax return is open and subject to examination from the 2004 tax return and forward.



The Company does not recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses due to
immateriality. During the years ended December 31, 2007, 2006 and 2005, the Company recognized zero in interest and penalties. The Company had accrued zero for the payment of interest and penalties at December 31, 2007 and 2006,
respectively.



(9) Deposits



The aggregate amount of overdrawn deposit accounts reclassified as loan
balances totaled $1,074,956 and $2,010,122 as of December 31, 2007 and 2006, respectively.



Components of interest-bearing deposits as of December 31 are as follows:



|                        |  |      |               |      |   |              
|----------------------- |  | ---- | ------------- | ---- | - | -------------
|                        |  | 2007 |               | 2006
|Interest-Bearing Demand |  | $    | 543,420,353   |      | $ | 531,003,846  
|Savings                 |  |      | 14,739,293    |      |   | 16,186,950   
|Time, $100,000 and Over |  |      | 1,035,642,955 |      |   | 748,230,734  
|Other Time              |  |      | 546,143,615   |      |   | 496,538,578  
|                        |  |      |               |      |   |              
|                        |  | $    | 2,139,946,216 |      | $ | 1,791,960,108
|                        |  |      |               |      |   |              



The aggregate amount
of short-term certificates of deposit with a minimum denomination of $100,000 totaled $856,309,954 and $699,499,962 on December 31, 2007 and 2006, respectively.



As of December 31, 2007, the scheduled maturities of certificates of deposit are as follows:



|                    |  |        |              
|------------------- |  | ------ | -------------
|Year                |  | Amount
|2008                |  | $      | 1,322,210,358
|2009                |  |        | 186,432,863  
|2010                |  |        | 51,373,463   
|2011                |  |        | 15,738,002   
|2012 and Thereafter |  |        | 6,031,884    
|                    |  |        |              
|                    |  | $      | 1,581,786,570
|                    |  |        |              



F-26



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Brokered deposits are third-party time deposits placed by or through the assistance of a deposit
broker. As of December 31, 2007 and 2006, the Company had $673,028,313 and $410,109,000, respectively, in brokered deposits. The brokered deposits, which are included in Time, $100,000 and Over and Other Time, were issued at a weighted average
rate of 5.28% and mature at various times through 2012.



(10) Federal Funds
Purchased and Securities Sold Under Agreement to Repurchase



Securities sold under agreements to repurchase mature daily. Mortgage backed securities sold under repurchase agreements are held and segregated by the investment safekeeping agent. Investments are identified as subject to the repurchase
agreement and may be substituted by the Banks, subject to agreement by the buyer.



Information concerning securities sold under agreements to repurchase is summarized as follows:



|                                          |  |      |            |   |      |   |            |  
|----------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | -
|                                          |  | 2007 |            |   | 2006 |  
|Average Balance During the Year           |  | $    | 30,665,872 |   |      | $ | 18,512,832 |  
|Average Interest Rate During the Year     |  |      | 4.64       | % |      |   | 4.52       | %
|Maximum Month-End Balance During the Year |  | $    | 41,853,225 |   |      | $ | 30,309,230 |  
|Balance as of December 31                 |  | $    | 34,939,696 |   |      | $ | 25,917,281 |  



Mortgage backed
securities underlying the agreements had carrying and estimated fair values of $42,243,942 and $31,457,644 at December 31, 2007 and 2006, respectively.



The Companys subsidiary banks maintain overnight borrowing lines for federal funds purchased through various correspondent banks. Borrowings
outstanding under these agreements collectively amounted to $33,477,000 and $25,000,000 as of December 31, 2007 and 2006, respectively.



(11) Other Borrowed Money



Other borrowed money is comprised of the following as of December 31:



|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |      |            |      |   |           
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ---------- | ---- | - | ----------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  | 2007 |            | 2006
|Advances under the Blanket Agreement for Advances and Security Agreement with the Federal Home Loan Bank (FHLB) have maturities in varying
amounts through January 3, 2011, and interest rates ranging from 3.50% to 5.92%. Residential first mortgage loans, commercial real estate loans and investment securities are pledged as collateral for the FHLB advances. At December 31,
2007, lending collateral value was $108,804,003 of which $31,604,003 was available.                                     |  | $    | 77,171,685 |      | $ | 83,450,000
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |     
|Revolving line of credit with Silverton Bank (formerly The Bankers Bank, N.A.) that matures July 20, 2009. Interest is due quarterly and
is based on the Prime Rate minus 100 basis points. All shares of stock owned by the Company in Security Bank of Bibb County, Security Bank of Houston County and Security Bank of Jones County are pledged as collateral on the revolving line of credit.
At December 31, 2007, the Company had availability under the revolving line of credit totaling $4,500,000. |  |      | 17,500,000 |      |   |          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |     
|Line of credit for $2,000,000 with Thomasville National Bank. Interest is due quarterly and is based on the Prime Rate. The line matures on
March 21, 2008 and is secured by 100 shares of common stock of Security Bank of North Metro                                                                                                                                                                                                                                                                       |  |      | 2,000,000  |      |   |          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |      |            |      |   |           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  | $    | 96,671,685 |      | $ | 83,450,000
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |      |            |      |   |           



F-27



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The revolving line of credit with Silverton Bank contains several debt covenants which are to be met
either by the Company or the individual Banks. The covenants specify minimum amounts with respect to capital ratios, return on average assets, allowance for loan losses as a percentage of loans and classified loans. At December 31, 2007, the
Company failed two of these covenants: (1) minimum return on assets of 0.90% for any fiscal year and (2) total of assets classified as substandard, doubtful or loss should not exceed 45% of Tier 1capital plus the allowance for loan losses.
The Company has a cure period of six months to regain compliance with these covenants. If the Company does not regain compliance at the end of the cure period, the lender has the right to call the line of credit due and payable in full
at that time.



Maturities of borrowed money for each of the
next five years and thereafter are as follows:



|           |  |        |           
|---------- |  | ------ | ----------
|Year       |  | Amount
|2008       |  | $      | 55,500,000
|2009       |  |        | 31,200,000
|2010       |  |        | 4,971,685 
|2011       |  |        | 5,000,000 
|2012       |  |        |          
|Thereafter |  |        |          
|           |  |        |           
|           |  | $      | 96,671,685
|           |  |        |           



(12) Subordinated Debentures (Trust
Preferred Securities)



During the fourth quarter of 2002,
the Company issued $18,000,000 in trust preferred securities with a maturity of 30 years which are redeemable after five years with certain exceptions. At December 31, 2007, the floating-rate securities had an 8.11% interest rate, which resets
quarterly at the three-month LIBOR rate plus 3.25%. At December 31, 2007 and 2006, the Companys investment in this subsidiary was $557,000.



In December 2005, the Company issued $19,000,000 in trust preferred securities with a maturity of 30 years that are redeemable after five years with
certain exceptions. During the first five years, the interest rate is fixed at 6.46%. Beginning in the sixth year, the issue converts to a floating interest rate equal to the three-month LIBOR rate plus 1.40%. At December 31, 2007 and 2006, the
Companys investment in this subsidiary was $588,000.



In
connection with the acquisition of Rivoli BanCorp, the Company assumed $3,000,000 in trust preferred securities. The trust preferred securities have a maturity of 30 years and are redeemable after five years with certain exceptions. At
December 31, 2007, these floating rate securities had an 8.32% interest rate. The interest rate resets quarterly at the three-month LIBOR rate plus 3.45%. At December 31, 2007 and 2006, the Companys investment in this subsidiary was
$93,000.



Each of the trust preferred securities is recorded as
Subordinated Debentures on the consolidated balance sheets. These securities qualify as Tier 1 capital for regulatory capital purposes, subject to certain limitations.



The interest income received from the Companys trusts totaled $94,582, $95,023, and $36,817 for the years ended December 31,
2007, 2006 and 2005, respectively. The interest expense paid to the trusts totaled $3,168,479, $3,146,993 and $1,241,605 for the years ended December 31, 2007, 2006 and 2005, respectively.



(13) Commitments and Contingencies



Credit-Related Financial Instruments. The Company is a party to
credit related financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, standby letters of credit and
commercial letters of credit. Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the



F-28



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



amount recognized in the consolidated balance sheets. The Companys exposure to credit loss is represented by the contractual amount of these
commitments. The Company follows the same credit policies in making commitments as it does for on-balance sheet instruments.



At December 31, 2007 and 2006, the following financial instruments were outstanding whose approximate contract amounts represent credit risk:



|                              |  |                 |             |      |   |            
|----------------------------- |  | --------------- | ----------- | ---- | - | -----------
|                              |  | Contract Amount
|                              |  | 2007            |             | 2006
|Loan Commitments              |  | $               | 430,786,775 |      | $ | 458,923,155
|Standby Letters of Credit     |  |                 | 9,393,286   |      |   | 8,721,612  
|Performance Letters of Credit |  |                 | 5,505,050   |      |   | 12,111,495 



Commitments to extend
credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The
commitments for equity lines of credit may expire without being drawn upon. Therefore, the total commitment amounts do not necessarily represent future cash requirements. The amount of collateral obtained, if it is deemed necessary by the Company,
is based on managements credit evaluation of the customer.



Unfunded commitments under commercial lines of credit, revolving credit lines and overdraft protection agreements are commitments for possible future extensions of credit to existing customers. These lines of credit are uncollateralized and
usually do not contain a specified maturity date and may not be drawn upon to the total extent to which the Company is committed.



Standby and performance letters of credit are conditional lending commitments issued by the Company to guarantee the performance of a customer to a third
party. Those letters of credit are primarily issued to support public and private borrowing arrangements. Essentially all letters of credit issued have expiration dates within one year. The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loan facilities to customers.



Legal Contingencies. In the ordinary course of business, there are various legal proceedings pending against the Company. The aggregate liabilities, if any, arising from such proceedings would not, in the
opinion of management, have a material adverse effect on the Companys consolidated financial position.



Employment Agreements. The Company has entered into employment agreements with each of its four executive officers. The agreements are for an
initial term ending December 18, 2010. Beginning on that date, and on each anniversary thereafter, the term of each agreement automatically will extend for additional one-year periods unless either party gives prior notice of non-renewal. In
the event of a change in control of the Company, the term of each agreement automatically will extend for an additional three years following the change in control. If, within three years following a change in control (within one year prior
to the consummation of such change in control), the executive incurs a separation of service either (i) by employer other than for cause (excluding a termination by reason of the executives death or disability) or (ii) by the
executive for good reason, the executive will be entitled to:



| |  |  | accrued salary and benefits;
| | - |  | ----------------------------



| |  |  | a cash severance amount equal to the product of 2.99 times the executives base amount as defined in Section 280G (b)(3) of the Internal
Revenue Code;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | continuation of health and welfare benefits for a period of 18 months; and
| | - |  | --------------------------------------------------------------------------



| |  |  | a cash payment for certain amounts vested under the Companys employee retirement plans.
| | - |  | ----------------------------------------------------------------------------------------



F-29



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



(14) 401(k) Savings Incentive and Profit Sharing Plan



The Company sponsors a 401(k) Savings Incentive and Profit Sharing Plan.
Employees must be 21 years of age and may begin to contribute at the first open enrollment following a three-month probationary period. Upon achieving one year of service, the employee is eligible to receive quarterly matching contributions from the
Company and annual discretionary profit sharing based on years of service. The Company matches the employees contributions up to 6%. The discretionary profit sharing varies from 1.25% to 1.75%, depending on years of service and position within
the Company and operating results. Expense under the plan was $1,434,609 in 2007, $1,425,090 in 2006 and $935,851 in 2005.



Security Bank of Gwinnett County maintained its own 401(k) retirement plan for its employees through December 31, 2006. Beginning July 31, 2006,
the Bank began making matching contributions equal to 100% of each employees contribution up to 6% of the employees compensation. The matching contribution vests based on years of participation in the plan. Expense under the plan was
$30,000 for the five months ended December 31, 2006. Beginning January 1, 2007, the employees of the Bank began participating in the Companys 401(k) Savings Incentive and Profit Sharing Plan.



(15) Share-Based Compensation Plans



The Company maintains several share-based compensation plans, all of which
have been shareholder-approved. These plans provide for the grant of tax-qualified or incentive stock options, nonqualified stock options, restricted stock grants, stock appreciation rights and performance units to the Companys employees.
Awards are granted with an exercise price equal to fair value, which equals the closing price of the Companys common stock on the date of grant. Some awards vest over time and some vest according to meeting specified performance targets.
Certain awards under the plans provide for accelerated vesting if there is a change in control of the Company (as defined). The compensation expense that has been charged against income for these plans was $239,244, $525,946 and $478,427 for 2007,
2006 and 2005, respectively.



Below is a summary of the
provisions of each of the plans.



The 1999 Stock Incentive Plan
provides for the grant of incentive stock options for up to 312,500 shares of the Companys common stock. The options vest over a five-year period beginning on the first anniversary of the grant date and will expire 10 years following the grant
date. The Company has granted 253,500 incentive stock options under this plan at a weighted average exercise price of $7.34 per share. At December 31, 2007, 68,000 shares were outstanding, all of which were vested.



The 2002 Incentive Stock Option Plan provides for the grant of incentive
stock options for up to 440,000 shares of the Companys common stock. During 2002 and 2003, the Company granted 242,000 performance based incentive stock options under this plan at a weighted average exercise price of $10.13 per share. The
options were divided into two tiers, both of which vested over a three-year period beginning on the date of grant, with one-sixth of the options vesting each year on the anniversary of the date of grant if the Company achieved an annual EPS growth
target of 12% for Tier 1 and 15% for Tier 2. The remaining 50% of the Tier 1 and Tier 2 options vested at the end of the third year if the Companys average EPS growth over the three-year period exceeded 12% for Tier 1 and 15% for Tier 2.
Vested options become exercisable over a three-year period beginning on the first anniversary grant date except for executive officers of the Company. For these officers, the vested options become exercisable over a ten-year period beginning on the
first anniversary date of the grant in accordance with the following schedule: 7.5% for years 1-3, 12% for years 4-9, and 5.5% in year 10. The options will expire 10 years following the grant date. In 2007, the Company granted 195,000 incentive
stock options under this plan at a weighted average exercise price of $20.92 per share. These options cliff-vest on December 31, 2010, subject to the recipients being employees in good standing on that date. At December 31, 2007, 359,975
shares were outstanding, 59,230 of which were vested.



F-30



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The 2004 Omnibus Stock Ownership and Long Term Incentive Plan provides for the grant of up to a total
of 600,000 shares of common stock. During 2004 through 2006, the Company granted 466,000 performance based incentive stock options under this plan at a weighted average exercise price of $16.03 per share. The options were divided into two tiers,
both of which vest over a three-year period beginning on the date of grant, with one-sixth of the options vesting each year on the anniversary of the grant date if the Company achieved an annual EPS growth target of 12% for Tier 1 and 15% for Tier
2. The remaining 50% of the options vested at the end of the third year on the anniversary of the date of grant if the Companys average EPS growth over the three-year period exceeded 12% for Tier 1 and 15% for Tier 2. The vested options become
exercisable over a three-year period beginning on the first anniversary date of the grant date. In 2007, the Company granted 160,000 incentive stock options under this plan at a weighted average exercise price of $20.92 per share. These options
cliff-vest on December 31, 2010, subject to the recipients being employees in good standing on that date. The options will expire ten years following the grant date. At December 31, 2007, 549,864 shares were outstanding, 385,524 of which
were vested.



The 2007 Omnibus Long Term Incentive Plan
provides for the grant of up to a total of 1,000,000 shares of common stock. In 2007, the Company granted 300,000 performance-based incentive stock options under this plan to its executive officers at an average exercise price of $20.92 per share.
These options vest upon achievement of specific earnings per share growth over a three-year performance cycle. The options were divided into two tiers, both of which vest over a three-year period beginning on the date of grant, with one-sixth of the
options vesting each year on the anniversary of the date of grant if the Company achieves an annual EPS growth target of 12% for Tier 1 and 12.01%-15% for Tier 2. The remaining 50% of the options vest at the end of the third year on the anniversary
of the date of grant if the Companys average EPS growth over the three-year period exceeded 12% for Tier 1 and 12.01%-15% for Tier 2. The vested options become exercisable over a three-year period beginning on the first anniversary date of the
grant date. Also in 2007, the Company granted 510,000 incentive stock options under this plan at a weighted average exercise price of $20.79 per share. These options cliff-vest on December 31, 2010, subject to the recipients being employees in
good standing on that date. Finally, in 2007 the Company also granted 105,000 nonqualified stock options under this plan to certain advisory directors of one of our subsidiary banks at a weighted average exercise price of $17.10 per share. The
nonqualified options vest over a five year period beginning on the first anniversary of the grant date. At December 31, 2007, 830,000 shares were outstanding, none of which were vested. All options will expire ten years following the grant
date.



The Company estimates, at the date of grant, the fair
values for the options granted using a Black-Scholes option pricing model. Historical data is used to estimate option exercises and employee terminations in determining the expected term in years for stock options. Expected volatility is calculated
based on the historical volatility of the Companys common stock. The risk-free interest rate is based on U.S. Treasury securities in effect at the date of the grant of the stock options. The dividend yield is calculated based on historic
annual dividend payments.



The Company applied the following
weighted average assumptions to stock option grants made in the following periods:



|                        |  |       |   |  |       |   |  |       |  
|----------------------- |  | ----- | - |  | ----- | - |  | ----- | -
|                        |  | 2007  |   |  | 2006  |   |  | 2005  |  
|Dividend Yield          |  | 1.58  | % |  | 1.14  | % |  | 1.10  | %
|Risk-Free Interest Rate |  | 4.66  | % |  | 4.51  | % |  | 3.63  | %
|Expected Term in Years  |  | 6.49  |   |  | 10    |   |  | 10    |  
|Expected Volatility     |  | 32.60 | % |  | 15.08 | % |  | 24.74 | %



F-31



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



A summary of stock option activity for the years ended December 31, 2007, 2006 and 2005 is
presented below:



|                                            |  |                                    |  |                              |       |                         |   |                                          |  |     
|------------------------------------------- |  | ---------------------------------- |  | ---------------------------- | ----- | ----------------------- | - | ---------------------------------------- |  | ----
|                                            |  | Shares UnderIncentive StockOptions |  | WeightedAverageExercisePrice |       | AggregateIntrinsicValue |   | Weighted-averageRemainingContractualLife
|Outstanding, December 31, 2004              |  | 801,000                            |  | $                            | 12.90 |                         |   |                                          |  |     
|Granted                                     |  | 15,000                             |  |                              | 20.09 |                         |   |                                          |  |     
|Forfeited                                   |  |                                   |  |                              |      |                         |   |                                          |  |     
|Exercised                                   |  | 20,000                             |  |                              | 10.33 |                         |   |                                          |  |     
|                                            |  |                                    |  |                              |       |                         |   |                                          |  |     
|Outstanding, December 31, 2005              |  | 796,000                            |  |                              | 13.10 |                         |   |                                          |  |     
|Granted                                     |  | 13,000                             |  |                              | 22.75 |                         |   |                                          |  |     
|Forfeited                                   |  | 24,278                             |  |                              | 15.89 |                         |   |                                          |  |     
|Exercised                                   |  | 17,055                             |  |                              | 11.90 |                         |   |                                          |  |     
|                                            |  |                                    |  |                              |       |                         |   |                                          |  |     
|Outstanding, December 31, 2006              |  | 767,667                            |  |                              | 13.20 |                         |   |                                          |  |     
|Granted                                     |  | 1,270,000                          |  |                              | 20.55 |                         |   |                                          |  |     
|Forfeited                                   |  | 116,834                            |  |                              | 20.25 |                         |   |                                          |  |     
|Exercised                                   |  | 112,994                            |  |                              | 10.21 |                         |   |                                          |  |     
|                                            |  |                                    |  |                              |       |                         |   |                                          |  |     
|Outstanding, December 31, 2007              |  | 1,807,839                          |  | $                            | 18.10 |                         | $ | 55,440                                   |  | 7.99
|                                            |  |                                    |  |                              |       |                         |   |                                          |  |     
|Eligible to be Exercised, December 31, 2007 |  | 512,754                            |  | $                            | 14.12 |                         | $ | 55,440                                   |  | 5.46
|                                            |  |                                    |  |                              |       |                         |   |                                          |  |     



The weighted average
fair value of options granted during the years ended December 31, 2007, 2006 and 2005 was $3.17, $6.95 and $7.12, respectively. The aggregate intrinsic value of options exercised during the years ended December 31, 2007, 2006 and 2005 was
$789,997, $172,135 and $251,000, respectively. The fair value of options vested during the years ended December 31, 2007, 2006 and 2005 was $1,787,170, $631,629 and $117,820, respectively.



The total nonvested options outstanding under the Companys various
share-based compensation plans are 1,295,085 at December 31, 2007. Of those options, 1,045,085 will vest upon the fulfillment of a service condition and 250,000 will vest when certain performance conditions are met. At December 31, 2007,
there was $1.8 million of unrecognized compensation cost related to nonvested stock options. The cost is expected to be recognized over a weighted-average period of 3.2 years.



Cash received from share option exercises totaled $144,660, $203,033 and $206,500 during the years ended December 31,
2007, 2006 and 2005, respectively. The Company issues shares upon exercise of share options from newly issued shares that have been reserved for the various plans.



F-32



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



(16) Supplemental Cash Flow Information



Cash payments for the following were made during the years ended December 31:



|                 |  |      |             |      |   |            |  |   |           
|---------------- |  | ---- | ----------- | ---- | - | ---------- |  | - | ----------
|                 |  | 2007 |             | 2006 |   | 2005      
|Interest Expense |  | $    | 105,665,189 |      | $ | 76,190,768 |  | $ | 30,664,500
|Income Taxes     |  | $    | 9,330,400   |      | $ | 13,818,900 |  | $ | 9,704,500 



Noncash investing
activities for the years ended December 31 are as follows:



|                                                  |  |      |            |   |      |   |             |      |  |   |             |  
|------------------------------------------------- |  | ---- | ---------- | - | ---- | - | ----------- | ---- |  | - | ----------- | -
|                                                  |  | 2007 |            |   | 2006 |   |             | 2005 | 
|Acquisitions of Real Estate Through Foreclosure   |  | $    | 48,623,463 |   |      | $ | 5,818,886   |      |  | $ | 3,421,973   |  
|                                                  |  |      |            |   |      |   |             |      |  |   |             |  
|Acquisition, Net of Cash Acquired                 |  |      |            |   |      |   |             |      |  |   |             |  
|Common Stock Issued                               |  | $    | 250,000    |   |      | $ | 65,465,670  |      |  | $ | 58,393,291  |  
|Cash Received, Less Cash Paid                     |  |      | 198,166    |   |      |   | (10,494,533 | )    |  |   | (5,923,269  | )
|Liabilities Assumed                               |  |      |           |   |      |   | 378,487,031 |      |  |   | 321,525,524 |  
|                                                  |  |      |            |   |      |   |             |      |  |   |             |  
|Fair Value of Assets Acquired, Including Goodwill |  | $    | 448,166    |   |      | $ | 433,458,168 |      |  | $ | 373,995,546 |  
|                                                  |  |      |            |   |      |   |             |      |  |   |             |  
|Goodwill Resulting from Contingent Payment        |  |      |            |   |      |   |             |      |  |   |             |  
|Common Stock Issued                               |  | $    |           |   |      | $ | 3,673,989   |      |  | $ | 2,362,896   |  
|Cash Paid                                         |  |      |           |   |      |   | 1,144,002   |      |  |   | 909,864     |  
|                                                  |  |      |            |   |      |   |             |      |  |   |             |  
|Total Goodwill                                    |  | $    |           |   |      | $ | 4,817,991   |      |  | $ | 3,272,760   |  
|                                                  |  |      |            |   |      |   |             |      |  |   |             |  
|Unrealized (Gain) Loss on Investment Securities   |  | $    | (2,498,660 | ) |      | $ | (1,417,560  | )    |  | $ | 2,981,815   |  
|                                                  |  |      |            |   |      |   |             |      |  |   |             |  



(17) Earnings per Share



The following presents earnings per share for the years
ended December 31, 2007, 2006 and 2005:



|                                                                                            |  |      |            |      |   |            |  |   |           
|------------------------------------------------------------------------------------------- |  | ---- | ---------- | ---- | - | ---------- |  | - | ----------
|                                                                                            |  | 2007 |            | 2006 |   | 2005      
|Numerator:                                                                                  |  |      |            |      |   |            |  |   |           
|Basic Earnings Per Share, Net Income Available to Common Shareholders                       |  | $    | 6,587,545  |      | $ | 23,391,973 |  | $ | 16,184,933
|                                                                                            |  |      |            |      |   |            |  |   |           
|Denominator:                                                                                |  |      |            |      |   |            |  |   |           
|Basic Earnings Per ShareWeighted Average Shares Outstanding                                |  |      | 19,081,636 |      |   | 17,222,139 |  |   | 12,393,980
|Effect of Dilutive Securities:                                                              |  |      |            |      |   |            |  |   |           
|Stock Options and Restricted Stock                                                          |  |      | 143,433    |      |   | 342,851    |  |   | 342,565   
|                                                                                            |  |      |            |      |   |            |  |   |           
|Diluted Earnings Per ShareWeighted Average Shares Outstanding and Common Stock Equivalents |  |      | 19,225,069 |      |   | 17,564,990 |  |   | 12,736,545
|                                                                                            |  |      |            |      |   |            |  |   |           
|Earnings Per ShareBasic                                                                    |  | $    | 0.35       |      | $ | 1.36       |  | $ | 1.31      
|                                                                                            |  |      |            |      |   |            |  |   |           
|Earnings Per ShareDiluted                                                                  |  | $    | 0.34       |      | $ | 1.33       |  | $ | 1.27      
|                                                                                            |  |      |            |      |   |            |  |   |           



F-33



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



(18) Related Party Transactions



The aggregate balance of direct and indirect loans to directors, executive officers or principal holders of equity securities of the
Company was $74,954,332 as of December 31, 2007 and $47,963,120 as of December 31, 2006. All such loans were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable
transactions with other persons and do not involve more than a normal risk of collectibility. A summary of activity of related party loans is presented hereafter.



|                                                 |  |      |             |   |      |   |             |  
|------------------------------------------------ |  | ---- | ----------- | - | ---- | - | ----------- | -
|                                                 |  | 2007 |             |   | 2006 |  
|Balance, Beginning                               |  | $    | 47,963,120  |   |      | $ | 36,290,596  |  
|New Loans                                        |  |      | 61,780,816  |   |      |   | 57,078,535  |  
|Repayments                                       |  |      | (34,789,604 | ) |      |   | (48,270,416 | )
|Business Combination, Neighbors Bancshares, Inc. |  |      |            |   |      |   | 2,864,405   |  
|                                                 |  |      |             |   |      |   |             |  
|Balance, Ending                                  |  | $    | 74,954,332  |   |      | $ | 47,963,120  |  
|                                                 |  |      |             |   |      |   |             |  



Deposits from related
parties held by the Company at December 31, 2007 and 2006 totaled approximately $59,975,496 and $73,390,712, respectively.



Fairfield Financial originated $1,225,932 and $4,517,600 in mortgage loans to related parties during 2007 and 2006, respectively.



Fairfield Financial leases office space from a director. Payments made under
the lease agreements totaled $76,800 during each of the years ended December 31, 2007 and 2006.



(19) Fair Value of Financial Instruments



The assumptions used in the estimation of the fair value of the Companys financial instruments are detailed below. Where quoted prices are not available, fair values are based on estimates using discounted cash
flows and other valuation techniques. The use of discounted cash flows can be significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. The following disclosures should not be considered a
surrogate of the liquidation value of the Company, but rather a good-faith estimate of the increase or decrease in value of financial instruments held by the Company since purchase, origination or issuance.



Due to the short maturity of some of the Companys assets and
liabilities, there are several financial instruments whose fair value equals or closely approximates carrying value. Such financial instruments are reported in the following balance sheet captions: cash and due from banks, federal funds sold,
interest-bearing deposits with other banks and FHLB stock. Fair value of securities available for sale equals the balance sheet value. As of December 31, 2007, the fair value of an interest rate swap agreement was an asset of $3,981,076. Fair
values for off-balance sheet, credit-related financial instruments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties credit standing. The fees
associated with these instruments are not material.



The
following methods and assumptions were used by the Company to estimate the fair value of its financial instruments:



Loans Receivable, Net of Unearned Income - The fair value of fixed rate loans is estimated by discounting the future cash flows using the current
rates at which similar loans would be made to borrowers with similar credit ratings. For variable rate loans, the carrying amount is a reasonable estimate of fair value.



Loans Held for Sale - The fair value for loans held for sale is determined on the basis of open commitments from independent buyers
for committed loans.



F-34



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Deposits - The fair value of demand deposits, savings accounts and certain money market
deposits is the amount payable on demand at the reporting date. The fair value of fixed maturity certificates of deposit is estimated by discounting the future cash flows using the rates currently offered for deposits of similar remaining
maturities.



Borrowed Money- The fair value of
Federal Home Loan Bank advances with fixed rates is determined by discounting the future cash flows using the current rates at which similar fixed rate advances would be made to borrowers. For variable rate advances, the carrying amount is a
reasonable estimate of fair value.



Subordinated Debentures-The fair value of Subordinated Debentures that currently have a fixed rate is determined by discounting the future cash flows using the current rates for similar borrowings maintained by the Company. For the Subordinated
Debentures that currently have variable rates, the carrying amount is a reasonable estimate of fair value.



The carrying amount and estimated fair values of the Companys financial instruments as of December 31 are as follows:



|                                         |  |                |  |                     |  |                |  |                    
|---------------------------------------- |  | -------------- |  | ------------------- |  | -------------- |  | -------------------
|                                         |  | 2007           |  | 2006               
|                                         |  | CarryingAmount |  | EstimatedFair Value |  | CarryingAmount |  | Estimated FairValue
|Assets                                   |  |                |  |                     |  |                |  |                    
|Loans Receivable, Net of Unearned Income |  | 2,182,312,584  |  | 2,187,732,738       |  | 1,901,100,980  |  | 1,892,114,171      
|Loans Held for Sale                      |  | 7,604,869      |  | 7,608,646           |  | 8,877,523      |  | 8,877,726          
|Liabilities                              |  |                |  |                     |  |                |  |                    
|Deposits                                 |  | 2,298,704,818  |  | 2,305,842,906       |  | 1,970,927,068  |  | 1,972,999,242      
|Borrowed Money                           |  | 165,088,381    |  | 165,327,891         |  | 134,367,281    |  | 134,430,303        
|Subordinated Debentures                  |  | 41,238,000     |  | 39,753,861          |  | 41,238,000     |  | 39,635,690         



Fair value estimates
are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the entire
holdings of a particular financial instrument. Because no market exists for a significant portion of the Companys financial instruments, fair value estimates are based on many judgments. These estimates are subjective in nature and involve
uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.



Fair value estimates are based on existing on and off-balance sheet financial instruments without attempting to estimate the
value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Significant assets and liabilities that are not considered financial instruments include the mortgage banking operation,
brokerage network, deferred income taxes and premises and equipment. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered
in the estimates.



(20) Regulatory Matters



The Company and the Banks are subject to various regulatory capital
requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary, actions by regulators that, if undertaken, could have a direct material
effect on the Companys consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Banks must meet specific capital guidelines that involve quantitative
measures of the Companys assets, liabilities and certain off-balance sheet items as



F-35



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



calculated under regulatory accounting practices. The Companys and the Banks capital amounts and classification are also subject to qualitative
judgments by the regulators about components, risk weightings and other factors.



Quantitative measures established by regulation to ensure capital adequacy require the Company and the Banks to maintain minimum amounts and ratios of total and Tier I capital to risk-weighted assets, and of Tier I
capital to average assets. The amounts and ratios as defined in regulations are presented hereafter. Management believes, as of December 31, 2007, the Company and the Banks meet all capital adequacy requirements to which they are subject and
the Banks are classified as well capitalized under the regulatory framework for prompt corrective action. In the opinion of management, there are no conditions or events since prior notification of capital adequacy from the regulators
that have changed the institutions category.



|                                       |  |                |         |       |                             |   |        |                                                               |         |  |      |        |  |       |         |  |       |  
|-------------------------------------- |  | -------------- | ------- | ----- | --------------------------- | - | ------ | ------------------------------------------------------------- | ------- |  | ---- | ------ |  | ----- | ------- |  | ----- | -
|                                       |  | Actual         |         |       | For CapitalAdequacyPurposes |   |        | To Be WellCapitalized UnderPrompt CorrectiveAction Provisions |        
|                                       |  | Amount         |         | Ratio |                             |   | Amount |                                                               | Ratio   |  |      | Amount |  | Ratio |        
|                                       |  | (In Thousands) |        
|As of December 31, 2007                |  |                |         |       |                             |   |        |                                                               |         |  |      |        |  |       |         |  |       |  
|Total Capital to Risk-Weighted Assets  |  |                |         |       |                             |   |        |                                                               |         |  |      |        |  |       |         |  |       |  
|Consolidated                           |  | $              | 238,806 |       | 9.97                        | % |        | $                                                             | 191,635 |  | 8.00 | %      |  |       | N/A     |  | N/A   |  
|Bibb                                   |  |                | 113,968 |       | 10.13                       | % |        |                                                               | 89,974  |  | 8.00 | %      |  | $     | 112,467 |  | 10.00 | %
|Houston                                |  |                | 27,631  |       | 10.27                       | % |        |                                                               | 21,517  |  | 8.00 | %      |  |       | 26,896  |  | 10.00 | %
|Jones                                  |  |                | 29,665  |       | 10.36                       | % |        |                                                               | 22,910  |  | 8.00 | %      |  |       | 28,637  |  | 10.00 | %
|North Metro                            |  |                | 19,483  |       | 10.12                       | % |        |                                                               | 15,396  |  | 8.00 | %      |  |       | 19,245  |  | 10.00 | %
|North Fulton                           |  |                | 17,311  |       | 10.51                       | % |        |                                                               | 13,173  |  | 8.00 | %      |  |       | 16,466  |  | 10.00 | %
|Gwinnett                               |  |                | 35,315  |       | 10.17                       | % |        |                                                               | 27,783  |  | 8.00 | %      |  |       | 34,729  |  | 10.00 | %
|Tier I Capital to Risk-Weighted Assets |  |                |         |       |                             |   |        |                                                               |         |  |      |        |  |       |         |  |       |  
|Consolidated                           |  |                | 209,693 |       | 8.75                        | % |        |                                                               | 95,818  |  | 4.00 | %      |  |       | N/A     |  | N/A   |  
|Bibb                                   |  |                | 99,907  |       | 8.88                        | % |        |                                                               | 44,987  |  | 4.00 | %      |  |       | 67,480  |  | 6.00  | %
|Houston                                |  |                | 24,260  |       | 9.02                        | % |        |                                                               | 10,758  |  | 4.00 | %      |  |       | 16,138  |  | 6.00  | %
|Jones                                  |  |                | 26,578  |       | 9.28                        | % |        |                                                               | 11,455  |  | 4.00 | %      |  |       | 17,182  |  | 6.00  | %
|North Metro                            |  |                | 17,066  |       | 8.87                        | % |        |                                                               | 7,698   |  | 4.00 | %      |  |       | 11,547  |  | 6.00  | %
|North Fulton                           |  |                | 15,362  |       | 9.33                        | % |        |                                                               | 6,586   |  | 4.00 | %      |  |       | 9,879   |  | 6.00  | %
|Gwinnett                               |  |                | 31,469  |       | 9.06                        | % |        |                                                               | 13,892  |  | 4.00 | %      |  |       | 20,838  |  | 6.00  | %
|Tier I Capital to Average Assets       |  |                |         |       |                             |   |        |                                                               |         |  |      |        |  |       |         |  |       |  
|Consolidated                           |  |                | 209,693 |       | 8.03                        | % |        |                                                               | 104,496 |  | 4.00 | %      |  |       | N/A     |  | N/A   |  
|Bibb                                   |  |                | 99,907  |       | 8.17                        | % |        |                                                               | 48,909  |  | 4.00 | %      |  |       | 61,136  |  | 5.00  | %
|Houston                                |  |                | 24,260  |       | 7.83                        | % |        |                                                               | 12,397  |  | 4.00 | %      |  |       | 15,497  |  | 5.00  | %
|Jones                                  |  |                | 26,578  |       | 7.72                        | % |        |                                                               | 13,776  |  | 4.00 | %      |  |       | 17,220  |  | 5.00  | %
|North Metro                            |  |                | 17,066  |       | 8.55                        | % |        |                                                               | 7,982   |  | 4.00 | %      |  |       | 9,977   |  | 5.00  | %
|North Fulton                           |  |                | 15,362  |       | 8.98                        | % |        |                                                               | 6,839   |  | 4.00 | %      |  |       | 8,549   |  | 5.00  | %
|Gwinnett                               |  |                | 31,469  |       | 8.90                        | % |        |                                                               | 14,138  |  | 4.00 | %      |  |       | 17,673  |  | 5.00  | %



F-36



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



|                                       |  |                |         |       |                             |   |        |                                                               |         |  |      |        |  |       |        |  |       |  
|-------------------------------------- |  | -------------- | ------- | ----- | --------------------------- | - | ------ | ------------------------------------------------------------- | ------- |  | ---- | ------ |  | ----- | ------ |  | ----- | -
|                                       |  | Actual         |         |       | For CapitalAdequacyPurposes |   |        | To Be WellCapitalized UnderPrompt CorrectiveAction Provisions |        
|                                       |  | Amount         |         | Ratio |                             |   | Amount |                                                               | Ratio   |  |      | Amount |  | Ratio |       
|                                       |  | (In Thousands) |        
|As of December 31, 2006                |  |                |         |       |                             |   |        |                                                               |         |  |      |        |  |       |        |  |       |  
|Total Capital to Risk-Weighted Assets  |  |                |         |       |                             |   |        |                                                               |         |  |      |        |  |       |        |  |       |  
|Consolidated                           |  | $              | 239,578 |       | 11.59                       | % |        | $                                                             | 165,437 |  | 8.00 | %      |  |       | N/A    |  | N/A   |  
|Bibb                                   |  |                | 100,806 |       | 10.65                       | % |        |                                                               | 75,754  |  | 8.00 | %      |  | $     | 94,692 |  | 10.00 | %
|Houston                                |  |                | 25,541  |       | 10.65                       | % |        |                                                               | 19,186  |  | 8.00 | %      |  |       | 23,983 |  | 10.00 | %
|Jones                                  |  |                | 29,524  |       | 12.63                       | % |        |                                                               | 18,698  |  | 8.00 | %      |  |       | 23,373 |  | 10.00 | %
|North Metro                            |  |                | 19,219  |       | 10.96                       | % |        |                                                               | 14,033  |  | 8.00 | %      |  |       | 17,541 |  | 10.00 | %
|North Fulton                           |  |                | 17,625  |       | 11.37                       | % |        |                                                               | 12,406  |  | 8.00 | %      |  |       | 15,508 |  | 10.00 | %
|Gwinnett                               |  |                | 32,938  |       | 10.45                       | % |        |                                                               | 25,206  |  | 8.00 | %      |  |       | 31,508 |  | 10.00 | %
|Tier I Capital to Risk-Weighted Assets |  |                |         |       |                             |   |        |                                                               |         |  |      |        |  |       |        |  |       |  
|Consolidated                           |  |                | 217,242 |       | 10.51                       | % |        |                                                               | 82,718  |  | 4.00 | %      |  |       | N/A    |  | N/A   |  
|Bibb                                   |  |                | 90,627  |       | 9.57                        | % |        |                                                               | 37,877  |  | 4.00 | %      |  |       | 56,815 |  | 6.00  | %
|Houston                                |  |                | 22,827  |       | 9.52                        | % |        |                                                               | 9,593   |  | 4.00 | %      |  |       | 14,390 |  | 6.00  | %
|Jones                                  |  |                | 26,691  |       | 11.42                       | % |        |                                                               | 9,349   |  | 4.00 | %      |  |       | 14,024 |  | 6.00  | %
|North Metro                            |  |                | 17,284  |       | 9.85                        | % |        |                                                               | 7,016   |  | 4.00 | %      |  |       | 10,525 |  | 6.00  | %
|North Fulton                           |  |                | 16,116  |       | 10.39                       | % |        |                                                               | 6,203   |  | 4.00 | %      |  |       | 9,305  |  | 6.00  | %
|Gwinnett                               |  |                | 29,773  |       | 9.45                        | % |        |                                                               | 12,603  |  | 4.00 | %      |  |       | 18,905 |  | 6.00  | %
|Tier I Capital to Average Assets       |  |                |         |       |                             |   |        |                                                               |         |  |      |        |  |       |        |  |       |  
|Consolidated                           |  |                | 217,242 |       | 9.70                        | % |        |                                                               | 89,557  |  | 4.00 | %      |  |       | N/A    |  | N/A   |  
|Bibb                                   |  |                | 90,627  |       | 9.09                        | % |        |                                                               | 39,890  |  | 4.00 | %      |  |       | 49,863 |  | 5.00  | %
|Houston                                |  |                | 22,827  |       | 7.98                        | % |        |                                                               | 11,447  |  | 4.00 | %      |  |       | 14,309 |  | 5.00  | %
|Jones                                  |  |                | 26,691  |       | 9.22                        | % |        |                                                               | 11,582  |  | 4.00 | %      |  |       | 14,477 |  | 5.00  | %
|North Metro                            |  |                | 17,284  |       | 8.63                        | % |        |                                                               | 8,013   |  | 4.00 | %      |  |       | 10,016 |  | 5.00  | %
|North Fulton                           |  |                | 16,116  |       | 10.01                       | % |        |                                                               | 6,437   |  | 4.00 | %      |  |       | 8,047  |  | 5.00  | %
|Gwinnett                               |  |                | 29,773  |       | 9.81                        | % |        |                                                               | 12,146  |  | 4.00 | %      |  |       | 15,182 |  | 5.00  | %



As of
December 31, 2007 and 2006, the Banks had required deposits of approximately $12,660,000 and $13,885,000, respectively, with the Federal Reserve. The amount of dividends payable to the parent company from the subsidiary banks is limited by
various banking regulatory agencies. Upon prior approval by regulatory authorities, the banks may pay cash dividends to the parent company in excess of regulatory limitations. In 2008, at the request of the Federal Reserve Bank of Atlanta, our Board
of Directors passed a resolution that we will not declare or pay any dividends to our shareholders without prior written approval of the Federal Reserve Bank of Atlanta.



(21) Deferred Compensation Plans



Security Bank of Houston County maintains a deferred compensation plan under which certain officers may elect to defer, until termination, retirement,
death or unforeseeable emergency a portion of current compensation. The plan is created in accordance with Internal Revenue Code Section 457. Interest is paid on such deferrals at a rate that is determined annually. The participants are general
creditors of the Bank with respect to amounts deferred and interest additions. As of December 31, 2007 and 2006, the liability under this plan totaled $203,823 and $253,794, respectively. Provisions charged to operations totaled $11,148 in
2007, $28,670 in 2006 and $26,077 in 2005. The contracts were initially funded through the purchase of three life insurance contracts. The cash value of the life insurance contracts totaled $301,866 and $309,933 as of December 31, 2007 and
2006,



F-37



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



respectively, and is included in other assets in the consolidated balance sheets. During the years ended December 31, 2007, 2006 and 2005, benefits of
$61,119, $0 and $0, respectively, were paid under the plan.



Security Bank of Jones County maintains a deferred compensation plan covering certain members of management through individual deferred compensation contracts. In accordance with the terms of the contracts, the Bank is committed to pay the
individuals deferred compensation over a period of 15 years, beginning at age 65. In the event of the individuals death before age 65, a lump sum payment is made to the individuals beneficiary within 60 days of the date of death. The
contracts were initially funded through the purchase of life insurance with immediate cash value vesting in the amount of $885,783, which is included in other assets. The cash value of the life insurance contracts totaled $1,239,232 and $1,207,144
as of December 31, 2007 and 2006, respectively, and is included in other assets in the consolidated balance sheets. Liabilities accrued under the plan totaled $685,788 and $655,638 as of December 31, 2007 and 2006, respectively. Provisions
charged to operations totaled $30,150 in 2007, $13,026 in 2006 and $8,297 in 2005. No benefits have been paid as of December 31, 2007.



In 2005, Security Bank of Bibb County commenced a Supplemental Executive Retirement Plan (SERP) covering its executive officers (who are also the
executive officers of Security Bank Corporation) through individual contracts. Under this SERP, the Bank is committed to pay the individuals an annual benefit of 65% of final average compensation (as defined), provided, however, that this benefit
will increase from 65% to 75% if consolidated net income growth over the initial five plan years averages 12% or more or the Company undergoes a change of control. The annual retirement benefit is reduced by other benefits such as Social Security,
401(k), and benefits from prior plans. The benefit will be paid over a period of 15 years beginning at age 65. If the individual dies before age 65, the amount of the annual benefit will be calculated and distributed to the individuals
beneficiary for a period of 15 years.



The SERP was initially
funded through the purchase of life insurance with immediate cash value vesting in the amount of $5,000,000. The cash value of the life insurance contracts totaled $5,538,300 and $5,316,603 as of December 31, 2007 and 2006, respectively, and is
included in other assets in the consolidated balance sheets. Liabilities accrued under the SERP totaled $277,686 and $116,370 as of December 31, 2007 and 2006, respectively. Provisions charged to operations totaled $161,316 in 2007 and $84,240
in 2006. No benefits have been paid as of December 31, 2007.



In 2006, Security Bank of Gwinnett County commenced a SERP covering its executive officers through individual contracts. Under this plan, the Bank is committed to pay the individuals an annual benefit of 65% of final average compensation
(as defined) reduced by other benefits such as Social Security, 401(k), and benefits from prior plans. The benefit will be paid over a period of 15 years beginning at age 65. If the individual dies before age 65, the amount of the annual benefit
will be calculated and distributed to the individuals beneficiary for a period of 15 years.



The SERP was initially funded through the purchase of life insurance with immediate cash value vesting in the amount of $4,000,000. The cash value of the
life insurance contracts totaled $4,205,312 and $4,029,984 as of December 31, 2007 and 2006, respectively, and is included in other assets in the consolidated balance sheets. Liabilities accrued under the SERP totaled $209,021 and $41,684 as of
December 31, 2007 and 2006. Provisions charged to operations totaled $167,337 and $41,684 in 2007 and 2006, respectively. No benefits have been paid as of December 31, 2007.



F-38



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SECURITY BANK CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



(22) Restricted Stock-Unearned Compensation



In 2003, the board of directors adopted a restricted stock grant plan which awards certain executive officers common shares
of the Company. The maximum number of shares that be granted under this plan is 10,000. During 2003, all 10,000 shares were issued. The shares are recorded at fair market value (on the grant date) as a separate component of shareholders
equity. The cost of these shares is being amortized against earnings using the straight-line method over the five-year restriction period. During the year ended December 31, 2007, 1,920 shares vested. As of December 31, 2007, a total of
7,760 shares were vested.



In May 2005, 9,156 shares were
issued in connection with the SouthBank acquisition. The shares are recorded at fair market value (on the date granted) as a separate component of shareholders equity. The cost of these shares is being amortized against earnings using the
straight-line method over the five-year restriction period. During the year ended December 31, 2007, 1,831 shares vested. As of December 31, 2007, a total of 3,662 shares were vested. Also, 2,747 shares were cancelled during the year ended
December 31, 2007.



(23) Stock Split



In May 2005, the board of directors approved a two-for-one split of the
Companys common stock, payable on May 27, 2005 in the form of a 100% stock dividend to shareholders of record on May 16, 2005. All share and per share amounts have been adjusted for the stock split.



(24) Condensed Financial Information of Security Bank Corporation (Parent Only)



The parent companys balance sheets as of
December 31, 2007 and 2006 and the related statements of income and cash flows for the years then ended are as follows:



SECURITY BANK CORPORATION (PARENT ONLY)



CONDENSED BALANCE SHEETS

DECEMBER
31,



|                                           |  |      |             |      |   |            
|------------------------------------------ |  | ---- | ----------- | ---- | - | -----------
|ASSETS                                     |  |      |             |      |   |            
|                                           |  | 2007 |             | 2006
|Cash                                       |  | $    | 3,219,850   |      | $ | 13,879,195 
|Investment Securities                      |  |      | 190,614     |      |   | 190,614    
|Loans Receivable, Net of Allowance         |  |      | 11,917,987  |      |   |           
|Premises and Equipment, Net                |  |      | 1,063,465   |      |   | 1,048,010  
|Investment in Subsidiaries, at Equity      |  |      | 352,954,459 |      |   | 333,719,677
|Trust Preferred Placement Fee, Net         |  |      | 448,000     |      |   | 466,000    
|Other                                      |  |      | 357,792     |      |   | 431,321    
|                                           |  |      |             |      |   |            
|Total Assets                               |  | $    | 370,152,167 |      | $ | 349,734,817
|                                           |  |      |             |      |   |            
|LIABILITIES AND SHAREHOLDERS EQUITY       |  |      |             |      |   |            
|Other Borrowed Money                       |  | $    | 19,500,000  |      | $ |           
|Subordinated Debentures                    |  |      | 41,238,000  |      |   | 41,238,000 
|Accrued Expenses and Other Payables        |  |      | 2,721,199   |      |   | 2,089,344  
|                                           |  |      |             |      |   |            
|Total Liabilities                          |  |      | 63,459,199  |      |   | 43,327,344 
|                                           |  |      |             |      |   |            
|Shareholders Equity                       |  |      | 306,692,968 |      |   | 306,407,473
|                                           |  |      |             |      |   |            
|Total Liabilities and Shareholders Equity |  | $    | 370,152,167 |      | $ | 349,734,817
|                                           |  |      |             |      |   |            



F-39



---

SECURITY BANK CORPORATION (PARENT ONLY)



CONDENSED STATEMENTS OF INCOME

FOR THE YEARS ENDED DECEMBER 31,



|                                                                                |  |      |            |      |   |            |      |  |   |            |  
|------------------------------------------------------------------------------- |  | ---- | ---------- | ---- | - | ---------- | ---- |  | - | ---------- | -
|                                                                                |  | 2007 |            | 2006 |   |            | 2005 | 
|Income                                                                          |  |      |            |      |   |            |      |  |   |            |  
|Dividends from Subsidiaries                                                     |  | $    | 10,213,000 |      | $ | 6,450,000  |      |  | $ | 4,500,000  |  
|Management Fees                                                                 |  |      | 2,420,422  |      |   | 1,711,815  |      |  |   | 1,405,891  |  
|Interest and Dividends                                                          |  |      | 330,758    |      |   | 96,927     |      |  |   | 38,549     |  
|                                                                                |  |      |            |      |   |            |      |  |   |            |  
|                                                                                |  |      | 12,964,180 |      |   | 8,258,742  |      |  |   | 5,944,440  |  
|                                                                                |  |      |            |      |   |            |      |  |   |            |  
|Expenses                                                                        |  |      |            |      |   |            |      |  |   |            |  
|Salaries and Employee Benefits                                                  |  |      | 4,504,065  |      |   | 4,951,321  |      |  |   | 3,944,127  |  
|Provision for Loan Losses                                                       |  |      | 382,013    |      |   |           |      |  |   |           |  
|Professional Fees                                                               |  |      | 1,484,643  |      |   | 602,250    |      |  |   | 425,237    |  
|Interest                                                                        |  |      | 3,441,340  |      |   | 3,192,936  |      |  |   | 1,609,340  |  
|Other                                                                           |  |      | 1,564,605  |      |   | 1,473,331  |      |  |   | 1,081,826  |  
|                                                                                |  |      |            |      |   |            |      |  |   |            |  
|                                                                                |  |      | 11,376,666 |      |   | 10,219,838 |      |  |   | 7,060,530  |  
|                                                                                |  |      |            |      |   |            |      |  |   |            |  
|Income (Loss) Before Taxes and Equity in Undistributed Earnings of Subsidiaries |  |      | 1,587,514  |      |   | (1,961,096 | )    |  |   | (1,116,090 | )
|Income Tax Benefit                                                              |  |      | 3,217,821  |      |   | 3,055,157  |      |  |   | 1,978,432  |  
|                                                                                |  |      |            |      |   |            |      |  |   |            |  
|Income Before Equity in Undistributed Earnings of Subsidiaries                  |  |      | 4,805,335  |      |   | 1,094,061  |      |  |   | 862,342    |  
|Equity in Undistributed Earnings of Subsidiaries                                |  |      | 1,782,210  |      |   | 22,297,912 |      |  |   | 15,322,591 |  
|                                                                                |  |      |            |      |   |            |      |  |   |            |  
|Net Income                                                                      |  | $    | 6,587,545  |      | $ | 23,391,973 |      |  | $ | 16,184,933 |  
|                                                                                |  |      |            |      |   |            |      |  |   |            |  



F-40



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SECURITY BANK CORPORATION AND SUBSIDIARIES



SECURITY BANK CORPORATION (PARENT ONLY)



CONDENSED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31



|                                                                                  |  |      |             |   |      |   |             |      |  |   |             |  
|--------------------------------------------------------------------------------- |  | ---- | ----------- | - | ---- | - | ----------- | ---- |  | - | ----------- | -
|                                                                                  |  | 2007 |             |   | 2006 |   |             | 2005 | 
|Cash Flows from Operating Activities                                              |  |      |             |   |      |   |             |      |  |   |             |  
|Net Income                                                                        |  | $    | 6,587,545   |   |      | $ | 23,391,973  |      |  | $ | 16,184,933  |  
|Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: |  |      |             |   |      |   |             |      |  |   |             |  
|Deferred Income Taxes                                                             |  |      | (7,309      | ) |      |   | (2,731      | )    |  |   | (12,510     | )
|Depreciation and Amortization                                                     |  |      | 161,141     |   |      |   | 143,732     |      |  |   | 119,621     |  
|Provision for Loan Losses                                                         |  |      | 382,013     |   |      |   |            |      |  |   |            |  
|Stock-Based Compensation                                                          |  |      | 239,244     |   |      |   | 525,946     |      |  |   | 478,427     |  
|Equity in Undistributed Earnings of Subsidiaries                                  |  |      | (1,782,210  | ) |      |   | (22,297,912 | )    |  |   | (15,322,591 | )
|Payable to Rivoli BanCorp Shareholders                                            |  |      |            |   |      |   |            |      |  |   | 4,220,026   |  
|Other, net                                                                        |  |      | 3,621,766   |   |      |   | (375,593    | )    |  |   | (820,649    | )
|                                                                                  |  |      |             |   |      |   |             |      |  |   |             |  
|                                                                                  |  |      | 9,202,190   |   |      |   | 1,385,415   |      |  |   | 4,847,257   |  
|                                                                                  |  |      |             |   |      |   |             |      |  |   |             |  
|Cash Flows from Investing Activities                                              |  |      |             |   |      |   |             |      |  |   |             |  
|Investment in Statutory Trust                                                     |  |      |            |   |      |   |            |      |  |   | (588,000    | )
|Capital Infusion in Subsidiaries                                                  |  |      | (15,705,000 | ) |      |   | (10,450,000 | )    |  |   | (750,000    | )
|Sale (Purchase) of Premises and Equipment                                         |  |      | (58,478     | ) |      |   | (955,966    | )    |  |   | 53,302      |  
|Purchase of Loans Receivable                                                      |  |      | (12,300,000 | ) |      |   |            |      |  |   |            |  
|Payment for Business Combinations                                                 |  |      | (200,000    | ) |      |   | (18,397,001 | )    |  |   | (13,975,453 | )
|                                                                                  |  |      |             |   |      |   |             |      |  |   |             |  
|                                                                                  |  |      | (28,263,478 | ) |      |   | (29,802,967 | )    |  |   | (15,260,151 | )
|                                                                                  |  |      |             |   |      |   |             |      |  |   |             |  
|Cash Flows from Financing Activities                                              |  |      |             |   |      |   |             |      |  |   |             |  
|Dividends Paid                                                                    |  |      | (6,665,140  | ) |      |   | (5,264,962  | )    |  |   | (3,271,320  | )
|Purchase of Common Stock                                                          |  |      | (4,903,767  | ) |      |   |            |      |  |   |            |  
|Issuance of Common Stock                                                          |  |      | 470,850     |   |      |   | 40,088,952  |      |  |   | 2,748,953   |  
|Other Borrowed Money                                                              |  |      | 19,500,000  |   |      |   | (1,600,000  | )    |  |   |            |  
|Subordinated Debt                                                                 |  |      |            |   |      |   |            |      |  |   | 19,588,000  |  
|                                                                                  |  |      |             |   |      |   |             |      |  |   |             |  
|                                                                                  |  |      | 8,401,943   |   |      |   | 33,223,990  |      |  |   | 19,065,633  |  
|                                                                                  |  |      |             |   |      |   |             |      |  |   |             |  
|Net (Decrease) Increase in Cash                                                   |  |      | (10,659,345 | ) |      |   | 4,806,438   |      |  |   | 8,652,739   |  
|Cash, Beginning                                                                   |  |      | 13,879,195  |   |      |   | 9,072,757   |      |  |   | 420,018     |  
|                                                                                  |  |      |             |   |      |   |             |      |  |   |             |  
|Cash, Ending                                                                      |  | $    | 3,219,850   |   |      | $ | 13,879,195  |      |  | $ | 9,072,757   |  
|                                                                                  |  |      |             |   |      |   |             |      |  |   |             |  



(25) Subsequent Events



On February 11, 2008, the Company commenced a $35
million rights offering to subscribe for shares of the Companys common stock to its shareholders to improve its capital and liquidity position. In conjunction with the rights offering, the Company entered into a standby purchase agreement with
two shareholders, one of whom is a director of the Company and the other is a director of a subsidiary bank, pursuant to which they agreed to backstop the rights offering by agreeing to purchase up to $18 million of common stock in the offering. The
Company expects to utilize the proceeds of the transaction to repay borrowings under its holding company line of credit, to maintain its various bank subsidiaries at a well-capitalized regulatory level, to provide flexibility to work through problem
assets and for general corporate purposes.



F-41