Exhibit 13EXHIBIT 13



SECURITY BANK CORPORATION AND SUBSIDIARIES

MACON, GEORGIA



CONSOLIDATED FINANCIAL STATEMENTS AS OF

DECEMBER 31, 2006 AND 2005 AND

REPORT OF INDEPENDENT ACCOUNTANTS



SECURITY BANK CORPORATION AND SUBSIDIARIES



CONTENTS



|                                                           |  |     
|---------------------------------------------------------- |  | ----
|Report of Independent Registered Public Accounting Firm    |  | F-2 
|                                                           | 
|Consolidated Balance Sheets                                |  | F-5 
|                                                           | 
|Consolidated Statements of Income                          |  | F-7 
|                                                           | 
|Consolidated Statements of Comprehensive Income            |  | F-8 
|                                                           | 
|Consolidated Statements of Changes in Stockholders Equity |  | F-9 
|                                                           | 
|Consolidated Statements of Cash Flows                      |  | F-10
|                                                           | 
|Notes to Consolidated Financial Statements                 |  | F-11



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 14, 2007



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, 2006 and 2005 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, 2006. 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, 2006 and 2005, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2006 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), the effectiveness of Security Bank Corporation and Subsidiaries internal control over financial reporting as of December 31, 2006,
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 14, 2007 expressed an unqualified opinion on
managements assessment of internal control over financial reporting and 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 14, 2007



REPORT OF INDEPENDENT

REGISTERED PUBLIC ACCOUNTING FIRM



The Board of Directors

Security Bank Corporation



We have audited managements assessment, included in the accompanying
Management Report on Internal Control over Financial Reporting, that Security Bank Corporation and Subsidiaries maintained effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal
Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. 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. Our responsibility is to express an opinion on managements assessment and an opinion on the effectiveness of 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, evaluating managements assessment, testing and evaluating the design and operating effectiveness of
internal control and 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



---

As indicated in the Management Report on Internal Control Over Financial Reporting, managements
assessment of and conclusion on the effectiveness of internal control Over financial reporting did not include the internal controls of assets and liabilities of Neighbors Bancshares, Inc. (Security Bank of North Fulton) acquired on March 31,
2006 or Homestead Bank (Security Bank of Gwinnett County) acquired on July 31, 2006, which are both included in the 2006 consolidated financial statements of Security Bank Corporation and constituted $532.1 million of total assets as of
December 31, 2006 and $3.2 million in revenues for the year then ended. Our audit of internal control over financial reporting of Security Bank Corporation and Subsidiaries also did not include an evaluation of the internal control over
financial reporting of Security Bank of North Fulton or Security Bank of Gwinnett County.



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, managements assessment that Security Bank Corporation and Subsidiaries maintained effective internal control over financial
reporting as of December 31, 2006 is fairly stated, in all material respects, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Also in our opinion, Security Bank Corporation and Subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal
ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.



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 14, 2007 expressed an unqualified opinion.



LOGO

`/s/`



McNair, McLemore, Middlebrooks & Co., LLP



F-4



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



CONSOLIDATED BALANCE SHEETS

DECEMBER 31,



|                                                                                                              |  |      |               |   |      |   |               |  
|------------------------------------------------------------------------------------------------------------- |  | ---- | ------------- | - | ---- | - | ------------- | -
|ASSETS                                                                                                        |  |      |               |   |      |   |               |  
|                                                                                                              |  | 2006 |               |   | 2005 |  
|Cash and Cash Equivalents                                                                                     |  |      |               |   |      |   |               |  
|Cash and Due from Banks                                                                                       |  | $    | 63,244,659    |   |      | $ | 69,380,188    |  
|Federal Funds Sold                                                                                            |  |      | 93,658,733    |   |      |   | 33,712,000    |  
|                                                                                                              |  |      |               |   |      |   |               |  
|                                                                                                              |  |      | 156,903,392   |   |      |   | 103,092,188   |  
|                                                                                                              |  |      |               |   |      |   |               |  
|Interest-Bearing Deposits With Other Banks                                                                    |  |      | 2,910,873     |   |      |   | 6,380,057     |  
|                                                                                                              |  |      |               |   |      |   |               |  
|Investment Securities                                                                                         |  |      |               |   |      |   |               |  
|Available for Sale, At Fair Value                                                                             |  |      | 221,178,460   |   |      |   | 143,662,487   |  
|Held to Maturity, At Cost (Fair Value of $1,212,817 and $353,741 at December 31, 2006 and 2005, Respectively) |  |      | 1,239,988     |   |      |   | 349,946       |  
|                                                                                                              |  |      |               |   |      |   |               |  
|                                                                                                              |  |      | 222,418,448   |   |      |   | 144,012,433   |  
|                                                                                                              |  |      |               |   |      |   |               |  
|Restricted Stocks, at Cost                                                                                    |  |      | 7,521,200     |   |      |   | 6,973,800     |  
|                                                                                                              |  |      |               |   |      |   |               |  
|Loans Held for Sale                                                                                           |  |      | 8,877,523     |   |      |   | 5,562,380     |  
|                                                                                                              |  |      |               |   |      |   |               |  
|Loans Receivable                                                                                              |  |      | 1,903,567,917 |   |      |   | 1,273,682,825 |  
|Allowance for Loan Losses                                                                                     |  |      | (22,335,852   | ) |      |   | (16,148,259   | )
|Unearned Interest and Fees                                                                                    |  |      | (2,466,937    | ) |      |   | (1,563,640    | )
|                                                                                                              |  |      |               |   |      |   |               |  
|                                                                                                              |  |      | 1,878,765,128 |   |      |   | 1,255,970,926 |  
|                                                                                                              |  |      |               |   |      |   |               |  
|Premises and Equipment                                                                                        |  |      | 39,757,577    |   |      |   | 29,602,189    |  
|                                                                                                              |  |      |               |   |      |   |               |  
|Long-Lived Assets Held for Sale                                                                               |  |      | 884,921       |   |      |   | 2,410,000     |  
|                                                                                                              |  |      |               |   |      |   |               |  
|Other Real Estate (Net of Allowance of $36,760 and $175,138 in 2006 and 2005, Respectively)                   |  |      | 2,774,940     |   |      |   | 2,394,224     |  
|                                                                                                              |  |      |               |   |      |   |               |  
|Goodwill                                                                                                      |  |      | 127,983,914   |   |      |   | 74,582,086    |  
|                                                                                                              |  |      |               |   |      |   |               |  
|Core Deposit Intangible (Net of Amortization of $1,436,533 and $533,333 in 2006 and 2005, Respectively)       |  |      | 5,110,135     |   |      |   | 4,687,006     |  
|                                                                                                              |  |      |               |   |      |   |               |  
|Other Assets                                                                                                  |  |      | 40,163,054    |   |      |   | 26,745,585    |  
|                                                                                                              |  |      |               |   |      |   |               |  
|Total Assets                                                                                                  |  | $    | 2,494,071,105 |   |      | $ | 1,662,412,874 |  
|                                                                                                              |  |      |               |   |      |   |               |  



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



F-5



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



CONSOLIDATED BALANCE SHEETS

DECEMBER 31,



|                                                                                                                                                           |  |      |               |   |      |   |               |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ------------- | - | ---- | - | ------------- | -
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                                       |  |      |               |   |      |   |               |  
|                                                                                                                                                           |  | 2006 |               |   | 2005 |  
|Deposits                                                                                                                                                   |  |      |               |   |      |   |               |  
|Noninterest-Bearing                                                                                                                                        |  | $    | 178,966,960   |   |      | $ | 156,697,897   |  
|Interest-Bearing                                                                                                                                           |  |      | 1,791,960,108 |   |      |   | 1,134,555,287 |  
|                                                                                                                                                           |  |      |               |   |      |   |               |  
|                                                                                                                                                           |  |      | 1,970,927,068 |   |      |   | 1,291,253,184 |  
|                                                                                                                                                           |  |      |               |   |      |   |               |  
|Borrowed Money                                                                                                                                             |  |      |               |   |      |   |               |  
|Federal Funds Purchased and Securities Sold Under Agreement to Repurchase                                                                                  |  |      | 50,917,281    |   |      |   | 43,875,620    |  
|Subordinated Debentures                                                                                                                                    |  |      | 41,238,000    |   |      |   | 41,238,000    |  
|Other Borrowed Money                                                                                                                                       |  |      | 83,450,000    |   |      |   | 87,027,000    |  
|                                                                                                                                                           |  |      |               |   |      |   |               |  
|                                                                                                                                                           |  |      | 175,605,281   |   |      |   | 172,140,620   |  
|                                                                                                                                                           |  |      |               |   |      |   |               |  
|Other Liabilities                                                                                                                                          |  |      | 41,131,283    |   |      |   | 19,714,198    |  
|                                                                                                                                                           |  |      |               |   |      |   |               |  
|Commitments and Contingencies                                                                                                                              |  |      |               |   |      |   |               |  
|                                                                                                                                                           |  |     
|Shareholders Equity                                                                                                                                       |  |      |               |   |      |   |               |  
|Common Stock, Par Value $1 per Share; Authorized 25,000,000 Shares, Issued 19,186,050 and 14,406,696 Shares as of December 31, 2006 and
2005, Respectively |  |      | 19,186,050    |   |      |   | 14,406,696    |  
|Paid-In Capital                                                                                                                                            |  |      | 224,564,470   |   |      |   | 121,480,964   |  
|Retained Earnings                                                                                                                                          |  |      | 63,696,653    |   |      |   | 45,569,642    |  
|Restricted Stock  Unearned Compensation                                                                                                                   |  |      | (157,675      | ) |      |   | (222,860      | )
|Accumulated Other Comprehensive Loss, Net of Benefit                                                                                                       |  |      | (551,897      | ) |      |   | (1,599,442    | )
|                                                                                                                                                           |  |      |               |   |      |   |               |  
|                                                                                                                                                           |  |      | 306,737,601   |   |      |   | 179,635,000   |  
|Treasury Stock (19,736 Shares), at Cost                                                                                                                    |  |      | (330,128      | ) |      |   | (330,128      | )
|                                                                                                                                                           |  |      |               |   |      |   |               |  
|                                                                                                                                                           |  |      | 306,407,473   |   |      |   | 179,304,872   |  
|                                                                                                                                                           |  |      |               |   |      |   |               |  
|Total Liabilities and Shareholders Equity                                                                                                                 |  | $    | 2,494,071,105 |   |      | $ | 1,662,412,874 |  
|                                                                                                                                                           |  |      |               |   |      |   |               |  





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



F-6



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF INCOME

FOR THE YEARS ENDED DECEMBER 31,



|                                                    |  |      |             |   |      |   |            |      |  |   |            |  
|--------------------------------------------------- |  | ---- | ----------- | - | ---- | - | ---------- | ---- |  | - | ---------- | -
|                                                    |  | 2006 |             |   | 2005 |   |            | 2004 | 
|Interest Income                                     |  |      |             |   |      |   |            |      |  |   |            |  
|Loans, Including Fees                               |  | $    | 138,448,316 |   |      | $ | 72,972,140 |      |  | $ | 49,722,831 |  
|Federal Funds Sold                                  |  |      | 1,596,732   |   |      |   | 475,505    |      |  |   | 114,719    |  
|Deposits with Other Banks                           |  |      | 159,872     |   |      |   | 112,195    |      |  |   | 25,041     |  
|Investment Securities                               |  |      |             |   |      |   |            |      |  |   |            |  
|U. S. Treasury                                      |  |      |            |   |      |   | 20,123     |      |  |   | 39,773     |  
|U. S. Government Agencies                           |  |      | 6,524,613   |   |      |   | 3,734,343  |      |  |   | 3,160,028  |  
|State, County and Municipal                         |  |      | 805,245     |   |      |   | 625,992    |      |  |   | 710,653    |  
|Other Investments                                   |  |      | 546,825     |   |      |   | 251,832    |      |  |   | 153,294    |  
|                                                    |  |      |             |   |      |   |            |      |  |   |            |  
|                                                    |  |      | 148,081,603 |   |      |   | 78,192,130 |      |  |   | 53,926,339 |  
|                                                    |  |      |             |   |      |   |            |      |  |   |            |  
|Interest Expense                                    |  |      |             |   |      |   |            |      |  |   |            |  
|Deposits                                            |  |      | 60,738,990  |   |      |   | 23,727,533 |      |  |   | 11,701,538 |  
|Federal Funds Purchased                             |  |      | 1,468,668   |   |      |   | 527,348    |      |  |   | 144,625    |  
|Other Borrowed Money                                |  |      | 6,439,277   |   |      |   | 3,584,398  |      |  |   | 2,526,704  |  
|                                                    |  |      |             |   |      |   |            |      |  |   |            |  
|                                                    |  |      | 68,646,935  |   |      |   | 27,839,279 |      |  |   | 14,372,867 |  
|                                                    |  |      |             |   |      |   |            |      |  |   |            |  
|Net Interest Income                                 |  |      | 79,434,668  |   |      |   | 50,352,851 |      |  |   | 39,553,472 |  
|Provision for Loan Losses                           |  |      | 4,468,751   |   |      |   | 2,832,845  |      |  |   | 2,818,796  |  
|                                                    |  |      |             |   |      |   |            |      |  |   |            |  
|Net Interest Income After Provision for Loan Losses |  |      | 74,965,917  |   |      |   | 47,520,006 |      |  |   | 36,734,676 |  
|                                                    |  |      |             |   |      |   |            |      |  |   |            |  
|Noninterest Income                                  |  |      |             |   |      |   |            |      |  |   |            |  
|Service Charges on Deposits                         |  |      | 9,162,086   |   |      |   | 7,351,360  |      |  |   | 6,450,199  |  
|Other Service Charges, Commissions and Fees         |  |      | 4,552,209   |   |      |   | 4,477,742  |      |  |   | 3,306,114  |  
|Mortgage Banking Income                             |  |      | 4,921,616   |   |      |   | 4,539,242  |      |  |   | 4,930,747  |  
|Securities (Losses) Gains                           |  |      | (1,601,229  | ) |      |   | (5,598     | )    |  |   | 12,703     |  
|Losses on Foreclosed Property                       |  |      | (56,755     | ) |      |   | (82,587    | )    |  |   | (160,218   | )
|Other                                               |  |      | 928,429     |   |      |   | 240,117    |      |  |   | 114,062    |  
|                                                    |  |      |             |   |      |   |            |      |  |   |            |  
|                                                    |  |      | 17,906,356  |   |      |   | 16,520,276 |      |  |   | 14,653,607 |  
|                                                    |  |      |             |   |      |   |            |      |  |   |            |  
|Noninterest Expenses                                |  |      |             |   |      |   |            |      |  |   |            |  
|Salaries and Employee Benefits                      |  |      | 32,376,768  |   |      |   | 22,811,591 |      |  |   | 18,630,030 |  
|Occupancy and Equipment                             |  |      | 5,622,248   |   |      |   | 3,832,756  |      |  |   | 3,364,670  |  
|Office Supplies and Printing                        |  |      | 983,119     |   |      |   | 649,289    |      |  |   | 620,061    |  
|Telephone                                           |  |      | 1,066,389   |   |      |   | 829,133    |      |  |   | 407,532    |  
|Marketing Expenses                                  |  |      | 2,292,753   |   |      |   | 1,501,231  |      |  |   | 1,248,004  |  
|Professional Fees                                   |  |      | 2,262,505   |   |      |   | 1,480,927  |      |  |   | 1,118,446  |  
|Amortization-Core Deposit Intangible                |  |      | 903,200     |   |      |   | 262,327    |      |  |   | 171,162    |  
|Other                                               |  |      | 10,095,228  |   |      |   | 7,177,757  |      |  |   | 6,569,418  |  
|                                                    |  |      |             |   |      |   |            |      |  |   |            |  
|                                                    |  |      | 55,602,210  |   |      |   | 38,545,011 |      |  |   | 32,129,323 |  
|                                                    |  |      |             |   |      |   |            |      |  |   |            |  
|Income Before Income Taxes                          |  |      | 37,270,063  |   |      |   | 25,495,271 |      |  |   | 19,258,960 |  
|Income Taxes                                        |  |      | 13,878,090  |   |      |   | 9,310,338  |      |  |   | 6,940,241  |  
|                                                    |  |      |             |   |      |   |            |      |  |   |            |  
|Net Income                                          |  | $    | 23,391,973  |   |      | $ | 16,184,933 |      |  | $ | 12,318,719 |  
|                                                    |  |      |             |   |      |   |            |      |  |   |            |  
|Basic Earnings Per Share                            |  | $    | 1.36        |   |      | $ | 1.31       |      |  | $ | 1.10       |  
|                                                    |  |      |             |   |      |   |            |      |  |   |            |  
|Diluted Earnings Per Share                          |  | $    | 1.33        |   |      | $ | 1.27       |      |  | $ | 1.07       |  
|                                                    |  |      |             |   |      |   |            |      |  |   |            |  
|Weighted Average Shares Outstanding                 |  |      | 17,222,139  |   |      |   | 12,393,980 |      |  |   | 11,156,372 |  
|                                                    |  |      |             |   |      |   |            |      |  |   |            |  
|Dividends Per Share                                 |  | $    | 0.30        |   |      | $ | 0.26       |      |  | $ | 0.22       |  
|                                                    |  |      |             |   |      |   |            |      |  |   |            |  



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



F-7



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31,



|                                                     |  |      |            |   |      |   |            |      |  |   |            |  
|---------------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | ---- |  | - | ---------- | -
|                                                     |  | 2006 |            |   | 2005 |   |            | 2004 | 
|Net Income                                           |  | $    | 23,391,973 |   |      | $ | 16,184,933 |      |  | $ | 12,318,719 |  
|                                                     |  |      |            |   |      |   |            |      |  |   |            |  
|Other Comprehensive Income, Net of Tax               |  |      |            |   |      |   |            |      |  |   |            |  
|Gains (Losses) on Securities Arising During the Year |  |      | (9,266     | ) |      |   | (1,955,938 | )    |  |   | (525,679   | )
|Reclassification Adjustment                          |  |      | 1,056,811  |   |      |   | 3,695      |      |  |   | (8,384     | )
|                                                     |  |      |            |   |      |   |            |      |  |   |            |  
|Unrealized Gains (Losses) on Securities              |  |      | 1,047,545  |   |      |   | (1,952,243 | )    |  |   | (534,063   | )
|                                                     |  |      |            |   |      |   |            |      |  |   |            |  
|Comprehensive Income                                 |  | $    | 24,439,518 |   |      | $ | 14,232,690 |      |  | $ | 11,784,656 |  
|                                                     |  |      |            |   |      |   |            |      |  |   |            |  







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



F-8



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004



|                                                                                   |  |            |   |  |             |            |   |                 |   |             |                  |  |   |                                      |   |  |                                            |          |   |               |   |            |       |  |   |          |   |  |   |             |  
|---------------------------------------------------------------------------------- |  | ---------- | - |  | ----------- | ---------- | - | --------------- | - | ----------- | ---------------- |  | - | ------------------------------------ | - |  | ------------------------------------------ | -------- | - | ------------- | - | ---------- | ----- |  | - | -------- | - |  | - | ----------- | -
|                                                                                   |  | Shares     |   |  | CommonStock |            |   | Paid-In Capital |   |             | RetainedEarnings |  |   | RestrictedStock-UnearnedCompensation |   |  | AccumulatedOtherComprehensiveIncome (Loss) |          |   | TreasuryStock |   |            | Total | 
|Balance, December 31, 2003                                                         |  | 10,066,598 |   |  | $           | 10,066,598 |   |                 | $ | 41,579,766  |                  |  | $ | 23,676,374                           |   |  | $                                          | (104,037 | ) |               | $ | 886,864    |       |  | $ | (296,837 | ) |  | $ | 75,808,728  |  
|Shares Issued in Connection with Contingent Payments                               |  | 111,550    |   |  |             | 111,550    |   |                 |   | 1,632,425   |                  |  |   | (55,775                              | ) |  |                                            |          |   |               |   |            |       |  |   |          |   |  |   | 1,688,200   |  
|Stock Options Exercised                                                            |  | 124,034    |   |  |             | 124,034    |   |                 |   | 584,235     |                  |  |   | (62,017                              | ) |  |                                            |          |   |               |   |            |       |  |   |          |   |  |   | 646,252     |  
|Stock Based Compensation Awards                                                    |  |            |   |  |             |            |   |                 |   | 313,730     |                  |  |   |                                      |   |  |                                            |          |   |               |   |            |       |  |   |          |   |  |   | 313,730     |  
|Canceled Restricted Stock                                                          |  | (320       | ) |  |             | (320       | ) |                 |   | (4,002      | )                |  |   | 160                                  |   |  |                                            | 4,162    |   |               |   |            |       |  |   |          |   |  |   |            |  
|Amortization of Unearned Compensation                                              |  |            |   |  |             |            |   |                 |   |             |                  |  |   |                                      |   |  |                                            | 25,178   |   |               |   |            |       |  |   |          |   |  |   | 25,178      |  
|Cashless Exercise of Stock Options                                                 |  |            |   |  |             |            |   |                 |   |             |                  |  |   |                                      |   |  |                                            |          |   |               |   |            |       |  |   | (33,291  | ) |  |   | (33,291     | )
|Shares Issued in Connection with Stock Offering                                    |  | 1,352,400  |   |  |             | 1,352,400  |   |                 |   | 18,165,224  |                  |  |   | (676,200                             | ) |  |                                            |          |   |               |   |            |       |  |   |          |   |  |   | 18,841,424  |  
|Shares Issued in Connection with Employee Stock Purchase Plan                      |  | 5,284      |   |  |             | 5,284      |   |                 |   | 77,122      |                  |  |   | (2,642                               | ) |  |                                            |          |   |               |   |            |       |  |   |          |   |  |   | 79,764      |  
|Unrealized Loss on Securities Available for Sale, Net of Tax Benefit of $313,893   |  |            |   |  |             |            |   |                 |   |             |                  |  |   |                                      |   |  |                                            |          |   |               |   | (534,063   | )     |  |   |          |   |  |   | (534,063    | )
|Cash Dividends                                                                     |  |            |   |  |             |            |   |                 |   |             |                  |  |   | (2,483,659                           | ) |  |                                            |          |   |               |   |            |       |  |   |          |   |  |   | (2,483,659  | )
|Net Income                                                                         |  |            |   |  |             |            |   |                 |   |             |                  |  |   | 12,318,719                           |   |  |                                            |          |   |               |   |            |       |  |   |          |   |  |   | 12,318,719  |  
|                                                                                   |  |            |   |  |             |            |   |                 |   |             |                  |  |   |                                      |   |  |                                            |          |   |               |   |            |       |  |   |          |   |  |   |             |  
|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     |  
|Issuance of Restricted Stock                                                       |  | 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 in Connection with Employee Stock Purchase Plan                      |  | 9,671      |   |  |             | 9,671      |   |                 |   | 171,803     |                  |  |   | (1,917                               | ) |  |                                            |          |   |               |   |            |       |  |   |          |   |  |   | 179,557     |  
|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 Connection with Stock Offering                                    |  | 1,725,000  |   |  |             | 1,725,000  |   |                 |   | 34,216,300  |                  |  |   |                                      |   |  |                                            |          |   |               |   |            |       |  |   |          |   |  |   | 35,941,300  |  
|Shares Issued in Acquisitions                                                      |  | 2,863,893  |   |  |             | 2,863,893  |   |                 |   | 64,381,069  |                  |  |   |                                      |   |  |                                            |          |   |               |   |            |       |  |   |          |   |  |   | 67,244,962  |  
|Shares Issued in Connection with Employee Stock Purchase Plan                      |  | 13,514     |   |  |             | 13,514     |   |                 |   | 260,146     |                  |  |   |                                      |   |  |                                            |          |   |               |   |            |       |  |   |          |   |  |   | 273,660     |  
|Unrealized Gain on Securities Available for Sale, Net of Tax Expense 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 |  
|                                                                                   |  |            |   |  |             |            |   |                 |   |             |                  |  |   |                                      |   |  |                                            |          |   |               |   |            |       |  |   |          |   |  |   |             |  



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



F-9



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31,



|                                                                                   |  |      |              |   |      |   |              |      |  |   |              |  
|---------------------------------------------------------------------------------- |  | ---- | ------------ | - | ---- | - | ------------ | ---- |  | - | ------------ | -
|                                                                                   |  | 2006 |              |   | 2005 |   |              | 2004 | 
|Cash Flows from Operating Activities                                               |  |      |              |   |      |   |              |      |  |   |              |  
|Net Income                                                                         |  | $    | 23,391,973   |   |      | $ | 16,184,933   |      |  | $ | 12,318,719   |  
|Adjustments to Reconcile Net Income to Net Cash Provided from Operating Activities |  |      |              |   |      |   |              |      |  |   |              |  
|Expensing of Stock Options                                                         |  |      | 525,946      |   |      |   | 478,427      |      |  |   | 313,730      |  
|Depreciation, amortization and accretion                                           |  |      | 2,058,435    |   |      |   | 917,760      |      |  |   | 2,353,716    |  
|Provision for Loan Losses                                                          |  |      | 4,468,751    |   |      |   | 2,832,845    |      |  |   | 2,818,796    |  
|Deferred Income Tax Expense (Benefit)                                              |  |      | 3,460,748    |   |      |   | (93,521      | )    |  |   | (58,245      | )
|Securities Losses (Gains)                                                          |  |      | 1,601,229    |   |      |   | 5,598        |      |  |   | (12,703      | )
|Loss on Sale of Other Real Estate                                                  |  |      | 56,755       |   |      |   | 82,587       |      |  |   | 160,218      |  
|Unrealized Loss on Other Real Estate                                               |  |      | 87,189       |   |      |   | 133,953      |      |  |   | 60,912       |  
|Loss on Disposal of Premises and Equipment                                         |  |      | 72,936       |   |      |   | 16,790       |      |  |   | 18,881       |  
|Loss (Gain) on Sale of Loans                                                       |  |      | (26,841      | ) |      |   | 390,140      |      |  |   | (38,931      | )
|Net Change in Loans Held for Sale                                                  |  |      | (3,315,143   | ) |      |   | 1,944,715    |      |  |   | 3,941,275    |  
|Payable to Rivoli BanCorp shareholders                                             |  |      |             |   |      |   | 4,220,026    |      |  |   |             |  
|Payable for Purchased Securities                                                   |  |      | 21,543,607   |   |      |   |             |      |  |   |             |  
|Change in assets and liabilities, net of effects of business combinations:         |  |      |              |   |      |   |              |      |  |   |              |  
|Other Assets                                                                       |  |      | (8,340,218   | ) |      |   | (2,909,629   | )    |  |   | (2,503,080   | )
|Other Liabilities                                                                  |  |      | (287,604     | ) |      |   | 2,037,200    |      |  |   | 2,279,895    |  
|                                                                                   |  |      |              |   |      |   |              |      |  |   |              |  
|Cash Provided by Operating Activities                                              |  |      | 45,297,763   |   |      |   | 26,241,824   |      |  |   | 21,653,183   |  
|                                                                                   |  |      |              |   |      |   |              |      |  |   |              |  
|Cash Flows from Investing Activities                                               |  |      |              |   |      |   |              |      |  |   |              |  
|Interest-Bearing Deposits with Other Banks                                         |  |      | 4,088,668    |   |      |   | (2,223,382   | )    |  |   | (2,325,945   | )
|Cash Received in Business Acquisition, Net                                         |  |      | 10,494,533   |   |      |   | 5,923,269    |      |  |   |             |  
|Purchase of Investment Securities Available for Sale                               |  |      | (136,632,348 | ) |      |   | (28,956,393  | )    |  |   | (47,018,829  | )
|Purchase of Investment Securities Held to Maturity                                 |  |      |             |   |      |   |             |      |  |   | (998,444     | )
|Proceeds from Disposition of Investment Securities                                 |  |      |              |   |      |   |              |      |  |   |              |  
|Available for Sale                                                                 |  |      | 90,119,664   |   |      |   | 23,671,842   |      |  |   | 39,208,727   |  
|Held to Maturity                                                                   |  |      | 1,097,813    |   |      |   | 1,035,500    |      |  |   | 5,000        |  
|Purchase of Restricted Stock, Net                                                  |  |      | 530,200      |   |      |   | 515,500      |      |  |   | (983,000     | )
|Loans to Customers, Net                                                            |  |      | (297,176,856 | ) |      |   | (157,036,912 | )    |  |   | (152,251,739 | )
|Purchase of Premises and Equipment and Software                                    |  |      | (4,624,921   | ) |      |   | (3,275,443   | )    |  |   | (3,558,675   | )
|Proceeds from Disposal of Premises and Equipment                                   |  |      |             |   |      |   | 18,840       |      |  |   | 4,567        |  
|Other Real Estate                                                                  |  |      | 5,294,225    |   |      |   | 3,019,386    |      |  |   | 4,225,228    |  
|Goodwill Resulting from Contingent Payments                                        |  |      | (1,144,002   | ) |      |   | (909,864     | )    |  |   | (2,016,532   | )
|Purchase of Bank Owned Life Insurance                                              |  |      | (4,000,000   | ) |      |   | (5,000,000   | )    |  |   |             |  
|Investment in Statutory Trust                                                      |  |      |             |   |      |   | (588,000     | )    |  |   |             |  
|                                                                                   |  |      |              |   |      |   |              |      |  |   |              |  
|Cash Used by Investing Activities                                                  |  |      | (331,953,024 | ) |      |   | (163,805,657 | )    |  |   | (165,709,642 | )
|                                                                                   |  |      |              |   |      |   |              |      |  |   |              |  
|Cash Flows from Financing Activities                                               |  |      |              |   |      |   |              |      |  |   |              |  
|Interest-Bearing Customer Deposits                                                 |  |      | 323,439,219  |   |      |   | 178,737,892  |      |  |   | 87,971,215   |  
|Noninterest-Bearing Customer Deposits                                              |  |      | 9,412,584    |   |      |   | 4,047,814    |      |  |   | 11,967,542   |  
|Dividends Paid                                                                     |  |      | (5,264,962   | ) |      |   | (3,271,320   | )    |  |   | (2,483,659   | )
|Federal Funds Purchased and Securities Sold Under Repurchase Agreements            |  |      | 5,041,661    |   |      |   | 13,328,155   |      |  |   | 13,461,513   |  
|Proceeds from Other Borrowed Money                                                 |  |      | 160,275,929  |   |      |   | 65,977,000   |      |  |   | 122,200,000  |  
|Repayments of Other Borrowed Money                                                 |  |      | (188,852,929 | ) |      |   | (82,485,516  | )    |  |   | (114,142,989 | )
|Proceeds from Issuance of Subordinated Debentures                                  |  |      |             |   |      |   | 19,588,000   |      |  |   |             |  
|Issuance of Common Stock in Connection with Stock Offering                         |  |      | 35,941,300   |   |      |   |             |      |  |   | 18,841,424   |  
|Issuance of Common Stock                                                           |  |      | 473,663      |   |      |   | 387,974      |      |  |   | 692,725      |  
|                                                                                   |  |      |              |   |      |   |              |      |  |   |              |  
|Cash Provided by Financing Activities                                              |  |      | 340,466,465  |   |      |   | 196,309,999  |      |  |   | 138,507,771  |  
|                                                                                   |  |      |              |   |      |   |              |      |  |   |              |  
|Net Increase (Decrease) in Cash and Cash Equivalents                               |  |      | 53,811,204   |   |      |   | 58,746,166   |      |  |   | (5,548,688   | )
|Cash and Cash Equivalents, Beginning                                               |  |      | 103,092,188  |   |      |   | 44,346,022   |      |  |   | 49,894,710   |  
|                                                                                   |  |      |              |   |      |   |              |      |  |   |              |  
|Cash and Cash Equivalents, Ending                                                  |  | $    | 156,903,392  |   |      | $ | 103,092,188  |      |  | $ | 44,346,022   |  
|                                                                                   |  |      |              |   |      |   |              |      |  |   |              |  



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



F-10



---

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 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 (formerly
Neighbors Bancshares, Inc.) located in Alpharetta, Georgia; Security Bank of Gwinnett County (formerly Homestead Bank) located in Suwanee, Georgia; and Fairfield Financial, a subsidiary of Security Bank of Bibb County, which has offices throughout
Georgia. All significant intercompany accounts have been eliminated.



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 inDebtand 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.



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



F-11



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



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.



Restricted Stocks, at Cost



Restricted stocks consist of Federal Home Loan Bank (FHLB) stock which is
required for every federally insured institution that utilizes their services. FHLB stock is considered restricted, as defined in SFAS No. 115; accordingly, the provisions of SFAS No. 115 are not applicable to these investments. 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



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.



When management believes there is sufficient doubt as to the collectibility of principal or interest on any loan, or generally when loans are 60 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. Any loan becoming 90 days past due will be placed on nonaccrual. 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.



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.



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 specific, general
and unallocated components. The specific component relates to loans that are classified as either doubtful, substandard or special mention. For such loans that are also classified as impaired, an allowance is established when the discounted cash
flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers



F-12



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



nonclassified loans and is based on historical loss experience adjusted for qualitative factors. An unallocated component is maintained to cover
uncertainties that could affect managements estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and
general losses in the portfolio.



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. Impairment is measured on a loan-by-loan basis for commercial and construction loans by
either the present value of expected future cash flows discounted at the loans effective interest rate, the loans obtainable 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 restricting
agreement.



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. The estimated useful lives and methods of depreciation are as follows:



|                        |  |               |  |              
|----------------------- |  | ------------- |  | -------------
|Description             |  | Life in Years |  | Method       
|Banking Premises        |  | 39            |  | Straight-Line
|Furniture and Equipment |  | 5-25          |  | Straight-Line



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 Income or
Expense.



Long-Lived Assets Held For Sale



At December 31, 2006, long-lived assets held for sale consist of land
and a building owned by one of the Companys subsidiary banks. At December 31, 2005, the balance consisted of premises and equipment that were acquired in a business combination. The assets were sold because the Company already owned
similar facilities nearby. These assets are carried at the lower of their fair value less cost to sell.



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.



F-13



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



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 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.



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



|     |  |        |           
|---- |  | ------ | ----------
|Year |  | Amount
|2007 |  | $      | 977,246   
|2008 |  |        | 877,401   
|2009 |  |        | 806,084   
|2010 |  |        | 806,084   
|2011 |  |        | 806,084   
|     |  |        |           
|     |  |        | $4,272,899
|     |  |        |           



The Company tests for
impairment in accordance with SFAS No. 142, Goodwill and Other Intangible Assets. Potential impairment of goodwill exists when the carrying value of a reporting unit exceeds its fair value. The fair value of each reporting unit is
computed using one or a combination of the following three methods: income, market value or cost method. The income method uses a discounted cash flow analysis to determine fair value by considering a reporting units capital structure and
applying a risk-adjusted discount rate to forecast earnings based on a capital asset pricing model. The market value method uses recent transaction analysis or publicly traded comparable analysis for similar assets and liabilities to determine fair
value.



The cost method assumes the net assets of a recent
business combination accounted for under the purchase method of accounting will be recorded at fair value if no event or circumstance has occurred triggering a decline in value. To the extent a reporting units carrying value exceeds its fair
value, an indication exists that the reporting units goodwill may be impaired, and a second step of impairment test will be performed.



In the second step, the implied fair value of the reporting units goodwill, determined by allocating the reporting units fair value to all of
its assets (recognized and unrecognized) and liabilities as if the reporting unit had been acquired in a business combination at the date of the impairment test. If the implied fair value of reporting unit goodwill is lower than its carrying value,
goodwill is impaired and is written down to the implied fair value. The loss recognized is limited to the carrying value of goodwill. Once an impairment loss is recognized, future increases in fair value will not result in the reversal of previously
recognized losses.



A summary of the changes in goodwill for
the years ended December 31, 2006, 2005 and 2004:



|                     |  |      |             |   |      |   |            |      |  |   |           
|-------------------- |  | ---- | ----------- | - | ---- | - | ---------- | ---- |  | - | ----------
|                     |  | 2006 |             |   | 2005 |   |            | 2004
|Beginning balance    |  | $    | 74,582,086  |   |      | $ | 28,579,479 |      |  | $ | 24,874,747
|Goodwill acquired    |  |      | 50,802,594  |   |      |   | 44,071,242 |      |  |   |          
|Contingent payments  |  |      | 4,817,991   |   |      |   | 3,272,760  |      |  |   | 3,704,732 
|Purchase adjustments |  |      | (2,218,757  | ) |      |   | (1,341,395 | )    |  |   |          
|                     |  |      |             |   |      |   |            |      |  |   |           
|Ending balance       |  | $    | 127,983,914 |   |      | $ | 74,582,086 |      |  | $ | 28,579,479
|                     |  |      |             |   |      |   |            |      |  |   |           



F-14



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



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.



Share-Based Payment



In December 2004, the Financial Accounting Standards Board (FASB) revised SFAS No. 123 (SFAS No. 123R). SFAS
No. 123R, Share-Based Payment, requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. Pro forma disclosure is no longer an
alternative to financial statement recognition. The Company adopted the provisions of SFAS No. 123R beginning January 1, 2006. Because the Company adopted the fair value method of recording stock-based compensation on January 1,
2002, the implementation of SFAS No. 123R did not have an impact on the Company.



Earnings per Share



SFAS No. 128,
Earnings per Share, establishes standards for computing and presenting basic and diluted earnings per share. Basic earnings per share is calculated and presented based on income available to common shareholders divided by the weighted average
number of shares outstanding during the reporting periods.



Basic earnings per share (EPS) excludes dilution and is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity.



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.



F-15



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Comprehensive Income



Accounting principles generally accepted in the United States (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 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 February 2006, the FASB issued SFAS No. 155, Accounting for
Certain Hybrid Financial Instruments  an amendment of FASB Statements No. 133 and 140. SFAS No. 155 simplifies accounting for certain hybrid instruments currently governed by SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, by allowing fair value remeasurement of hybrid instruments that contain an embedded derivative that otherwise would require bifurcation. SFAS No. 155 also eliminates the guidance in SFAS No. 133
Implementation Issue No. D1, Application of Statement 133 to Beneficial Interests in Securitized Financial Assets, which provides such beneficial interests are not subject to SFAS No. 133. SFAS No. 155 amends SFAS No. 140,
Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities  a Replacement of FASB Statement No. 125, by eliminating the restriction on passive derivative instruments that a qualifying
special-purpose entity may hold. SFAS No. 155 is effective for all financial instruments acquired or issued after the beginning of an entitys first fiscal year that begins after September 15, 2006. The Company does not expect the
adoption of this statement to have a material impact on our financial condition, results of operations or cash flows.



In March 2006, the FASB issued SFAS No. 156, Accounting for Servicing of Financial Assets  an amendment of FASB Statement No. 140.
SFAS No. 156 requires an entity to recognize a servicing asset or servicing liability each time it undertakes an obligation to service a financial asset by entering into a servicing contract in specific situations. Additionally, the servicing
asset or servicing liability shall be initially measured at fair value; however, an entity may elect the amortization method or fair value method for subsequent balance sheet reporting periods. SFAS No. 156 is effective
as of an entitys first fiscal year beginning January 1, 2007. Early adoption is permitted as of the beginning of an entitys fiscal year, provided the entity has not yet issued financial statements, including interim financial
statements, for any period of that fiscal year. As the Company presently has no servicing assets or liabilities, the adoption of this statement will likely have no impact on our financial condition, results of operations or cash flows.



F-16



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



In July 2006, the FASB released FASB Interpretation No. 48, Accounting for Uncertainty in
Income Taxes  an Interpretation of FASB Statement 109 (FIN 48). FIN 48 prescribes a comprehensive model for how a company should recognize, measure, present, and disclose in its financial
statements 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 is likely to cause greater volatility in
earnings as more items are recognized discretely within income tax expense. FIN 48 also revises disclosure requirements and introduces a prescriptive, annual, tabular roll-forward of the unrecognized tax benefits. FIN 48 is effective as of
the beginning of fiscal years that start after December 15, 2006. Management is currently evaluating the impact that FIN 48 will have on the Companys financial position and results of operations upon adoption.



In September 2006, the SEC released Staff Accounting Bulletin No. 108
(SAB 108) which established an approach that requires quantification of financial statement errors based on the effects of the error on each of the registrants financial statements and the related disclosures. Because SAB 108 is
not an official rule of the SEC, there is no effective date. However, registrants must begin to apply the provisions of SAB 108 no later than the annual financial statements for their first fiscal year ending after November 15, 2006. The
adoption of SAB 108 did not have a material impact on our financial condition, results of operations or cash flows.



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. The Statement requires companies to provide additional
information that will help investors and other users of financial statements to more easily understand the effect of the companys choice to use fair value on its earnings. It also requires entities to display the fair value of those assets and
liabilities for which the company has chosen to use fair value on the face of the balance sheet. The new Statement does not eliminate disclosure requirements included in other accounting standards, including requirements for disclosures about
fair value measurements included in FASB Statements No. 157, Fair Value Measurements, and No. 107, Disclosures about Fair Value of Financial Instruments. The Statement is effective as of the beginning of an entitys
first fiscal year beginning after November 15, 2007. Early adoption is permitted as of the beginning of the previous fiscal year provided that the entity makes that choice in the first 120 days of that fiscal year and also elects to apply
the provisions of the Statement. The Company does not expect the adoption of this statement to have a material impact on our financial condition, results of operations or cash flows.



Segment Reporting



Reportable segments are business units, which offer different products and services and require different management and marketing strategies. Management
of Security Bank Corporation 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, 2006, 2005 and 2004 was $4,921,616, $4,539,242 and $4,930,747, respectively. Such income may fluctuate significantly with increases or decreases in mortgage rates.



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



F-17



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



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 and mortgage servicing rights.



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.



(2) Business Combinations



On July 31, 2000, Security Bank of Bibb County purchased the assets of
Group Financial Southeast (d.b.a. Fairfield Financial) in a business combination accounted for as a purchase. The assets were placed in a newly formed subsidiary of Security Bank of Bibb County incorporated as Fairfield Financial Services, Inc. The
Asset Purchase Agreement provided for additional contingent payments of purchase price for years ended 2001-2005 based on the earnings of Fairfield Financial. The additional payments were payable in cash and stock. Cash payments for 2005 equated to
20% of Fairfield Financials earnings for the year. Stock payments for 2005 were based on 80% of 2005 earnings utilizing a specific formula for determining number of shares. All additional payments of cash and stock have been charged to
goodwill. The contingent payment made in 2006 as a result of 2005 earnings was a combination of cash and stock totaling approximately $4,818,000.



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 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 and $91,165 of the
core deposit intangibles during the years ended December 31, 2006 and 2005, 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 $26,507 of the premises and equipment premium and $467,221 of the core deposit intangibles
during the year ended December 31, 2006.



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



F-18



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



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 $67,696 of the core deposit intangibles during the year ended December 31, 2006.



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 $40,838 of the core deposit intangibles during the year ended December 31, 2006.



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         |  |           | 25,855,128   |   |           |   | 21,938,766   |        |  |   | 26,336,487   |   |  |   | 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   | )
|                                            |  |           |              |   |           |   |              |        |  |   |              |   |  |   |              |  
|                                            |  | $         | 45,677,170   |   |           | $ | 33,080,985   |        |  | $ | 40,035,575   |   |  | $ | 31,017,933   |  
|                                            |  |           |              |   |           |   |              |        |  |   |              |   |  |   |              |  



Following are proforma
amounts assuming that the acquisitions were made on January 1, 2005:



|                   |  |              |             |      |   |            
|------------------ |  | ------------ | ----------- | ---- | - | -----------
|                   |  | December 31,
|                   |  | 2006         |             | 2005
|Interest Income    |  | $            | 160,826,792 |      | $ | 116,183,886
|Net Income         |  |              | 22,906,901  |      |   | 19,266,306 
|Earnings Per Share |  |              |             |      |   |            
|Basic              |  | $            | 1.24        |      | $ | 1.12       
|Diluted            |  | $            | 1.22        |      | $ | 1.10       



(3) Cash and Balances Due from
Depository Institutions



Components of cash and balances
due from depository institutions are as follows as of December 31:



|                                              |  |      |            |      |   |           
|--------------------------------------------- |  | ---- | ---------- | ---- | - | ----------
|                                              |  | 2006 |            | 2005
|Cash on Hand and Cash Items                   |  | $    | 10,596,278 |      | $ | 8,444,151 
|Noninterest-Bearing Deposits with Other Banks |  |      | 52,648,381 |      |   | 60,936,037
|                                              |  |      |            |      |   |           
|                                              |  | $    | 63,244,659 |      | $ | 69,380,188
|                                              |  |      |            |      |   |           



As of
December 31, 2006, the Banks had required deposits of approximately $13,885,000 with the Federal Reserve.



F-19



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



(4) Investment Securities



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



|                              |  |                |             |                       |   |                       |  |   |            |   |  |   |            
|----------------------------- |  | -------------- | ----------- | --------------------- | - | --------------------- |  | - | ---------- | - |  | - | -----------
|                              |  | Amortized Cost |             | Gross UnrealizedGains |   | GrossUnrealizedLosses |  |   | Fair Value
|Securities Available for Sale |  |                |             |                       |   |                       |  |   |            |   |  |   |            
|U.S. Government Agencies      |  |                |             |                       |   |                       |  |   |            |   |  |   |            
|Mortgage Backed               |  | $              | 133,183,059 |                       | $ | 162,379               |  | $ | (1,056,651 | ) |  | $ | 132,288,787
|Other                         |  |                | 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   |  |                |             |                       |   |                       |  |   |            |   |  |   |            
|State, County and Municipal   |  | $              | 1,239,988   |                       | $ |                      |  | $ | (27,171    | ) |  | $ | 1,212,817  
|                              |  |                |             |                       |   |                       |  |   |            |   |  |   |            
|                              |  | $              | 1,239,988   |                       | $ |                      |  | $ | (27,171    | ) |  | $ | 1,212,817  
|                              |  |                |             |                       |   |                       |  |   |            |   |  |   |            



Investment securities
as of December 31, 2005 are summarized as follows:



|                              |  |                |             |                        |   |                       |  |   |            |   |  |   |            
|----------------------------- |  | -------------- | ----------- | ---------------------- | - | --------------------- |  | - | ---------- | - |  | - | -----------
|                              |  | Amortized Cost |             | Gross Unrealized Gains |   | GrossUnrealizedLosses |  |   | Fair Value
|Securities Available for Sale |  |                |             |                        |   |                       |  |   |            |   |  |   |            
|U.S. Government Agencies      |  |                |             |                        |   |                       |  |   |            |   |  |   |            
|Mortgage Backed               |  | $              | 78,445,980  |                        | $ | 96,506                |  | $ | (1,829,014 | ) |  | $ | 76,713,472 
|Other                         |  |                | 47,105,886  |                        |   |                      |  |   | (916,009   | ) |  |   | 46,189,877 
|State, County and Municipal   |  |                | 19,864,652  |                        |   | 318,990               |  |   | (115,118   | ) |  |   | 20,068,523 
|Other Securities              |  |                | 690,614     |                        |   |                      |  |   |           |   |  |   | 690,614    
|                              |  |                |             |                        |   |                       |  |   |            |   |  |   |            
|                              |  | $              | 146,107,132 |                        | $ | 415,496               |  | $ | (2,860,141 | ) |  | $ | 143,662,487
|                              |  |                |             |                        |   |                       |  |   |            |   |  |   |            
|Securities Held to Maturity   |  |                |             |                        |   |                       |  |   |            |   |  |   |            
|State, County and Municipal   |  | $              | 349,946     |                        | $ | 3,795                 |  | $ |           |   |  | $ | 353,741    
|                              |  |                |             |                        |   |                       |  |   |            |   |  |   |            
|                              |  | $              | 349,946     |                        | $ | 3,795                 |  | $ |           |   |  | $ | 353,741    
|                              |  |                |             |                        |   |                       |  |   |            |   |  |   |            



Gross realized gains
on the disposition of investments totaled $0 in 2006 and 2005 and $12,703 in 2004. Gross realized losses on the disposition of investments totaled $1,601,229, $5,598 and $0 in 2006, 2005 and 2004, respectively.



Investment securities having a carrying value approximating $115,507,000 and
$73,545,000 as of December 31, 2006 and 2005, respectively, were pledged to secure public deposits and for other purposes.



The amortized cost and fair value of investment securities as of December 31, 2006, 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.



F-20



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



|                             |  |                    |             |                  |   |                |  |            |           |  |   |          
|---------------------------- |  | ------------------ | ----------- | ---------------- | - | -------------- |  | ---------- | --------- |  | - | ---------
|                             |  | Securities        
|                             |  | Available for Sale |             | Held to Maturity
|                             |  | Amortized Cost     |             | Fair Value       |   | Amortized Cost |  | Fair Value
|Due in One Year or Less      |  | $                  | 49,764,155  |                  | $ | 49,649,803     |  | $          | 239,988   |  | $ | 240,117  
|Due After One Year           |  |                    |             |                  |   |                |  |            |           |  |   |          
|Through Five Years           |  |                    | 17,120,840  |                  |   | 17,081,170     |  |            |          |  |   |         
|Due After Five Years         |  |                    |             |                  |   |                |  |            |           |  |   |          
|Through Ten Years            |  |                    | 19,029,884  |                  |   | 19,073,041     |  |            | 1,000,000 |  |   | 972,700  
|Due After Ten Years          |  |                    | 2,916,993   |                  |   | 2,895,045      |  |            |          |  |   |         
|                             |  |                    |             |                  |   |                |  |            |           |  |   |          
|                             |  |                    | 88,831,872  |                  |   | 88,699,059     |  |            | 1,239,988 |  |   | 1,212,817
|                             |  |                    |             |                  |   |                |  |            |           |  |   |          
|Mortgage Backed Securities   |  |                    | 133,183,059 |                  |   | 132,288,787    |  |            |          |  |   |         
|Marketable Equity Securities |  |                    | 190,614     |                  |   | 190,614        |  |            |          |  |   |         
|                             |  |                    |             |                  |   |                |  |            |           |  |   |          
|                             |  |                    | 133,373,673 |                  |   | 132, 479,401   |  |            |          |  |   |         
|                             |  |                    |             |                  |   |                |  |            |           |  |   |          
|                             |  | $                  | 222,205,545 |                  | $ | 221,178,460    |  | $          | 1,239,988 |  | $ | 1,212,817
|                             |  |                    |             |                  |   |                |  |            |           |  |   |          



Information pertaining
to securities with gross unrealized losses at December 31, 2006 and 2005 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 |                      
|                            |  | Fair Value          |            | GrossUnrealizedLosses |                      |          | Fair Value |       | GrossUnrealizedLosses |            |  | Fair Value |            | GrossUnrealizedLosses | 
|December 31, 2006           |  |                     |            |                       |                      |          |            |       |                       |            |  |            |            |                       |  |   |             |  |   |            |  
|Available for Sale          |  |                     |            |                       |                      |          |            |       |                       |            |  |            |            |                       |  |   |             |  |   |            |  
|U.S. Government Agencies    |  |                     |            |                       |                      |          |            |       |                       |            |  |            |            |                       |  |   |             |  |   |            |  
|Mortgage Backed             |  | $                   | 26,678,929 |                       | $                    | (74,473  | )          |       | $                     | 38,869,630 |  | $          | (982,178   | )                     |  | $ | 65,548,559  |  | $ | (1,056,651 | )
|Other                       |  |                     | 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 | )
|                            |  |                     |            |                       |                      |          |            |       |                       |            |  |            |            |                       |  |   |             |  |   |            |  



F-21



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



|                            |  |                     |            |                       |                      |          |            |       |                       |            |  |            |            |                       |  |   |             |  |   |            |  
|--------------------------- |  | ------------------- | ---------- | --------------------- | -------------------- | -------- | ---------- | ----- | --------------------- | ---------- |  | ---------- | ---------- | --------------------- |  | - | ----------- |  | - | ---------- | -
|                            |  | Less Than 12 Months |            |                       | 12 Months or Greater |          |            | Total |                      
|                            |  | Fair Value          |            | GrossUnrealizedLosses |                      |          | Fair Value |       | GrossUnrealizedLosses |            |  | Fair Value |            | GrossUnrealizedLosses | 
|December 31, 2005           |  |                     |            |                       |                      |          |            |       |                       |            |  |            |            |                       |  |   |             |  |   |            |  
|Available for Sale          |  |                     |            |                       |                      |          |            |       |                       |            |  |            |            |                       |  |   |             |  |   |            |  
|U.S. Government Agencies    |  |                     |            |                       |                      |          |            |       |                       |            |  |            |            |                       |  |   |             |  |   |            |  
|Mortgage Backed             |  | $                   | 33,730,462 |                       | $                    | (446,197 | )          |       | $                     | 39,070,247 |  | $          | (1,382,817 | )                     |  | $ | 72,800,709  |  | $ | (1,829,014 | )
|Other                       |  |                     | 24,436,182 |                       |                      | (271,201 | )          |       |                       | 20,755,509 |  |            | (644,808   | )                     |  |   | 45,191,691  |  |   | (916,009   | )
|State, County and Municipal |  |                     | 4,520,085  |                       |                      | (97,195  | )          |       |                       | 2,232,870  |  |            | (17,923    | )                     |  |   | 6,752,955   |  |   | (115,118   | )
|                            |  |                     |            |                       |                      |          |            |       |                       |            |  |            |            |                       |  |   |             |  |   |            |  
|                            |  | $                   | 62,686,729 |                       | $                    | (814,593 | )          |       | $                     | 62,058,626 |  | $          | (2,045,548 | )                     |  | $ | 124,745,355 |  | $ | (2,860,141 | )
|                            |  |                     |            |                       |                      |          |            |       |                       |            |  |            |            |                       |  |   |             |  |   |            |  



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 has occurred during the past two years. 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-22



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



(5) Loans Receivable



The composition of loans as of December 31 are:



|                                                                        |  |      |               |      |   |              
|----------------------------------------------------------------------- |  | ---- | ------------- | ---- | - | -------------
|                                                                        |  | 2006 |               | 2005
|Loans Secured by Real Estate                                            |  |      |               |      |   |              
|Construction and Land Development                                       |  | $    | 981,481,018   |      | $ | 517,372,508  
|Secured by Farmland (Including Farm Residential and Other Improvements) |  |      | 16,926,408    |      |   | 5,626,581    
|Secured by 1-4 Family Residential Properties                            |  |      | 223,517,575   |      |   | 199,071,867  
|Secured by Multifamily (5 or More) Residential Properties               |  |      | 30,083,708    |      |   | 18,365,815   
|Secured by Nonfarm Nonresidential Properties                            |  |      | 458,070,014   |      |   | 376,302,415  
|Commercial and Industrial Loans (U.S. Addresses)                        |  |      | 142,536,842   |      |   | 106,299,699  
|Agricultural Loans                                                      |  |      | 2,029,304     |      |   | 3,035,188    
|Loans to Individuals for Household, Family and Other                    |  |      |               |      |   |              
|Personal Expenditures                                                   |  |      |               |      |   |              
|Credit Cards and Related Plans                                          |  |      | 1,349,260     |      |   | 274,494      
|Other                                                                   |  |      | 47,573,788    |      |   | 47,334,258   
|                                                                        |  |      |               |      |   |              
|                                                                        |  | $    | 1,903,567,917 |      | $ | 1,273,682,825
|                                                                        |  |      |               |      |   |              



Loans by interest rate
type are:



|              |  |      |               |      |   |              
|------------- |  | ---- | ------------- | ---- | - | -------------
|              |  | 2006 |               | 2005
|Fixed Rate    |  | $    | 626,887,260   |      | $ | 532,928,212  
|Variable Rate |  |      | 1,276,680,657 |      |   | 740,754,613  
|              |  |      |               |      |   |              
|              |  | $    | 1,903,567,917 |      | $ | 1,273,682,825
|              |  |      |               |      |   |              



The Company
principally originates residential and commercial real estate 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,
2006 and 2005, approximately 89.8% and 87.7%, respectively, 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, 2006 and 2005, the Company had outstanding speculative loans of approximately $510.5 million and $210.2 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 51.6% of the loan portfolio, are made to finance land
development and residential and commercial construction. Mortgage loans secured by nonfarm, nonresidential properties, which are 24.1% 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 (29.5%) and office facilities (20.8%).



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.



F-23



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Nonaccrual loans totaled $34,401,159 and $6,997,169 as of December 31, 2006 and 2005, respectively. There were no investments in loans past due 90 days
or more and still accruing interest at December 31, 2006 and 2005. Foregone interest on nonaccrual loans approximated $2,065,883 in 2006, $351,170 in 2005 and $326,900 in 2004.



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



|                                   |  |      |            |   |      |   |           |  
|---------------------------------- |  | ---- | ---------- | - | ---- | - | --------- | -
|                                   |  | 2006 |            |   | 2005 |  
|Total Investment in Impaired Loans |  | $    | 19,391,479 |   |      | $ | 1,488,571 |  
|Allowance for Impaired Loan Losses |  |      | (2,218,862 | ) |      |   | (228,116  | )
|                                   |  |      |            |   |      |   |           |  
|Net Investment                     |  | $    | 17,172,617 |   |      | $ | 1,260,455 |  
|                                   |  |      |            |   |      |   |           |  
|Average Investment                 |  | $    | 8,612,714  |   |      | $ | 2,378,128 |  
|                                   |  |      |            |   |      |   |           |  
|Income Recognized During the Year  |  | $    | 1,105,862  |   |      | $ | 65,322    |  
|                                   |  |      |            |   |      |   |           |  
|Income Collected During the Year   |  | $    | 1,153,281  |   |      | $ | 28,445    |  
|                                   |  |      |            |   |      |   |           |  



(6) Allowance for Loan Losses



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



|                                                |  |      |            |   |      |   |            |      |  |   |            |  
|----------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | ---- |  | - | ---------- | -
|                                                |  | 2006 |            |   | 2005 |   |            | 2004 | 
|Balance, Beginning                              |  | $    | 16,148,259 |   |      | $ | 10,902,783 |      |  | $ | 9,407,421  |  
|Provision Charged to Operating Expenses         |  |      | 4,468,751  |   |      |   | 2,832,845  |      |  |   | 2,818,796  |  
|Loans Charged-off                               |  |      | (3,125,699 | ) |      |   | (1,715,615 | )    |  |   | (2,050,588 | )
|Loan Recoveries                                 |  |      | 762,541    |   |      |   | 496,446    |      |  |   | 727,154    |  
|Business Combination, Homestead Bank            |  |      | 2,850,000  |   |      |   |           |      |  |   |           |  
|Business Combination, Neighbors Bancshares, Inc |  |      | 1,232,000  |   |      |   |           |      |  |   |           |  
|Business Combination, Rivoli BanCorp            |  |      |           |   |      |   | 2,211,415  |      |  |   |           |  
|Business Combination, SouthBank                 |  |      |           |   |      |   | 1,420,385  |      |  |   |           |  
|                                                |  |      |            |   |      |   |            |      |  |   |            |  
|Balance, Ending                                 |  | $    | 22,335,852 |   |      | $ | 16,148,259 |      |  | $ | 10,902,783 |  
|                                                |  |      |            |   |      |   |            |      |  |   |            |  



(7) Derivative Financial
Instruments



SFAS No. 149, Amendment of Statement
No. 133 on Derivative Instruments and Hedging Activities requires that all derivatives be recognized as assets or liabilities in the balance sheet and measured at fair value. Loan commitments related to the origination or acquisition of
mortgage loans held for sale must be accounted for as derivative instruments.



The Company enters into commitments to originate loans whereby the interest rate on the loan is determined prior to funding (rate lock commitments). Rate lock commitments on mortgage loans that are intended to be sold
are considered to be derivatives. Accordingly, such commitments, along with related fees received from potential borrowers, are to be recorded at fair value in derivative assets or liabilities, with changes in fair value recorded in the net gain or
loss on sale of mortgage loans. Fair value is based on fees currently charged to enter into similar agreements, and for fixed-rate commitments also considers the difference between current levels of interest rates and the committed rates. The
Company has not recorded rate lock commitments as derivative assets or liabilities as of December 31, 2006 as the effects did not have a material effect upon the consolidated financial statements.



F-24



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



(8) Premises and Equipment



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



|                                  |  |      |             |   |      |   |             |  
|--------------------------------- |  | ---- | ----------- | - | ---- | - | ----------- | -
|                                  |  | 2006 |             |   | 2005 |  
|Land                              |  | $    | 13,447,499  |   |      | $ | 7,444,922   |  
|Building                          |  |      | 23,409,668  |   |      |   | 17,528,127  |  
|Leasehold Improvements            |  |      | 1,270,542   |   |      |   | 1,307,158   |  
|Furniture, Fixtures and Equipment |  |      | 14,145,899  |   |      |   | 12,158,503  |  
|Construction in Progress          |  |      | 709,791     |   |      |   | 2,274,740   |  
|                                  |  |      |             |   |      |   |             |  
|                                  |  |      | 52,983,399  |   |      |   | 40,713,450  |  
|Accumulated Depreciation          |  |      | (13,225,822 | ) |      |   | (11,111,261 | )
|                                  |  |      |             |   |      |   |             |  
|                                  |  | $    | 39,757,577  |   |      | $ | 29,602,189  |  
|                                  |  |      |             |   |      |   |             |  



Depreciation charged
to operations totaled $2,268,306 in 2006, $1,594,123 in 2005 and $1,421,692 in 2004.



Certain bank facilities are leased under various operating leases. Rental expense was $726,510 in 2006, $479,336 in 2005 and $421,900 in 2004.



Future minimum rental commitments under noncancelable leases are:



|           |  |        |          
|---------- |  | ------ | ---------
|Year       |  | Amount
|2007       |  | $      | 708,984  
|2008       |  |        | 641,305  
|2009       |  |        | 410,469  
|2010       |  |        | 371,178  
|2011       |  |        | 581,759  
|Thereafter |  |        | 327,456  
|           |  |        |          
|           |  | $      | 3,041,151
|           |  |        |          



(9) Income Taxes



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



|                                   |  |      |            |      |   |           |      |  |   |           |  
|---------------------------------- |  | ---- | ---------- | ---- | - | --------- | ---- |  | - | --------- | -
|                                   |  | 2006 |            | 2005 |   |           | 2004 | 
|Current Federal Expense            |  | $    | 8,864,997  |      | $ | 8,377,319 |      |  | $ | 6,288,118 |  
|Deferred Federal Expense (Benefit) |  |      | 3,460,748  |      |   | (93,521   | )    |  |   | (58,245   | )
|                                   |  |      |            |      |   |           |      |  |   |           |  
|                                   |  |      | 12,325,745 |      |   | 8,283,798 |      |  |   | 6,229,873 |  
|Current State Tax Expense          |  |      | 1,552,345  |      |   | 1,026,540 |      |  |   | 710,368   |  
|                                   |  |      |            |      |   |           |      |  |   |           |  
|                                   |  | $    | 13,878,090 |      | $ | 9,310,338 |      |  | $ | 6,940,241 |  
|                                   |  |      |            |      |   |           |      |  |   |           |  



F-25



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Federal income tax expense of $12,325,745 in 2006, $8,283,798 in 2005 and $6,229,873 in 2004 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 presented hereafter:



|                                     |  |      |            |   |      |   |           |      |  |   |           |  
|------------------------------------ |  | ---- | ---------- | - | ---- | - | --------- | ---- |  | - | --------- | -
|                                     |  | 2006 |            |   | 2005 |   |           | 2004 | 
|Statutory Federal Income Taxes       |  | $    | 13,044,522 |   |      | $ | 8,923,345 |      |  | $ | 6,548,047 |  
|Tax-Exempt Interest                  |  |      | (329,695   | ) |      |   | (253,905  | )    |  |   | (268,631  | )
|Interest Expense Disallowance        |  |      | 42,693     |   |      |   | 6,885     |      |  |   | 13,290    |  
|Premiums on Officers Life Insurance |  |      | (95,076    | ) |      |   | (9,042    | )    |  |   | (8,336    | )
|Meal and Entertainment Disallowance  |  |      | 34,416     |   |      |   | 31,287    |      |  |   | 24,901    |  
|State Deduction                      |  |      | (349,833   | ) |      |   | (317,017  | )    |  |   | (294,928  | )
|Other                                |  |      | (21,282    | ) |      |   | (97,755   | )    |  |   | 215,530   |  
|                                     |  |      |            |   |      |   |           |      |  |   |           |  
|Actual Federal Income Taxes          |  | $    | 12,325,745 |   |      | $ | 8,283,798 |      |  | $ | 6,229,873 |  
|                                     |  |      |            |   |      |   |           |      |  |   |           |  



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:



|                                                             |  |      |            |   |      |   |            |  
|------------------------------------------------------------ |  | ---- | ---------- | - | ---- | - | ---------- | -
|                                                             |  | 2006 |            |   | 2005 |  
|Deferred Tax Assets                                          |  |      |            |   |      |   |            |  
|Allowance for Loan Losses                                    |  | $    | 7,817,547  |   |      | $ | 5,284,989  |  
|Georgia Occupation and License Tax Credits                   |  |      | 53,581     |   |      |   | 53,581     |  
|Other Real Estate Owned                                      |  |      | 14,564     |   |      |   | 61,196     |  
|Deferred Compensation                                        |  |      | 373,620    |   |      |   | 305,954    |  
|Net Operating Loss Carryforward                              |  |      | 109,504    |   |      |   | 419,782    |  
|Nonqualified Stock Options                                   |  |      |           |   |      |   | 965,886    |  
|Other                                                        |  |      | 199,281    |   |      |   | 9,841      |  
|                                                             |  |      |            |   |      |   |            |  
|                                                             |  |      | 8,568,097  |   |      |   | 7,101,229  |  
|                                                             |  |      |            |   |      |   |            |  
|Deferred Tax Liabilities                                     |  |      |            |   |      |   |            |  
|Premises and Equipment                                       |  |      | (972,190   | ) |      |   | (856,142   | )
|Securities Accretion                                         |  |      | (55,280    | ) |      |   | (59,648    | )
|Goodwill                                                     |  |      | (1,127,166 | ) |      |   | (615,658   | )
|Core Deposit Intangible                                      |  |      | (1,912,438 | ) |      |   | (1,734,433 | )
|Acquisition Related Fair Value Adjustment                    |  |      | (768,237   | ) |      |   | (815,390   | )
|Other                                                        |  |      | (106,017   | ) |      |   | (62,766    | )
|                                                             |  |      |            |   |      |   |            |  
|                                                             |  |      | (4,941,328 | ) |      |   | (4,144,037 | )
|                                                             |  |      |            |   |      |   |            |  
|                                                             |  |      | 3,626,769  |   |      |   | 2,957,192  |  
|Deferred Tax Asset on Unrealized Securities Gains and Losses |  |      | 475,188    |   |      |   | 845,202    |  
|                                                             |  |      |            |   |      |   |            |  
|Net Deferred Tax Asset                                       |  | $    | 4,101,957  |   |      | $ | 3,802,394  |  
|                                                             |  |      |            |   |      |   |            |  



F-26



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



(10) Deposits



The aggregate amount of overdrawn deposit accounts reclassified as loan balances totaled $2,010,122 and $915,262 as of December 31, 2006 and 2005,
respectively.



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



|                        |  |      |               |      |   |              
|----------------------- |  | ---- | ------------- | ---- | - | -------------
|                        |  | 2006 |               | 2005
|Interest-Bearing Demand |  | $    | 531,003,846   |      | $ | 398,472,549  
|Savings                 |  |      | 16,186,950    |      |   | 20,786,006   
|Time, $100,000 and Over |  |      | 748,230,734   |      |   | 393,942,986  
|Other Time              |  |      | 496,538,578   |      |   | 321,353,746  
|                        |  |      |               |      |   |              
|                        |  | $    | 1,791,960,108 |      | $ | 1,134,555,287
|                        |  |      |               |      |   |              



The aggregate amount
of short-term certificates of deposit with a minimum denomination of $100,000 approximated $699,499,962 and $345,159,000 on December 31, 2006 and 2005, respectively.



As of December 31, 2006, the scheduled maturities of certificates of deposit are as follows:



|                    |  |        |              
|------------------- |  | ------ | -------------
|Year                |  | Amount
|2007                |  | $      | 1,136,067,408
|2008                |  |        | 52,963,257   
|2009                |  |        | 24,489,187   
|2010                |  |        | 17,405,988   
|2011 and Thereafter |  |        | 13,843,472   
|                    |  |        |              
|                    |  | $      | 1,244,769,312
|                    |  |        |              



Brokered deposits are
third-party time deposits placed by or through the assistance of a deposit broker. As of December 31, 2006 and 2005, the Company had $410,109,000 and $242,821,384, respectively, in brokered deposits. The brokered deposits, which are included in
Time, $100,000 and Over, were issued at a weighted average rate of 5.29% and mature at various times through 2011.



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



Securities sold under agreement 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:



|                                          |  |      |            |   |      |   |            |  
|----------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | -
|                                          |  | 2006 |            |   | 2005 |  
|Average Balance During the Year           |  | $    | 18,512,832 |   |      | $ | 6,868,170  |  
|Average Interest Rate During the Year     |  |      | 4.52       | % |      |   | 2.99       | %
|Maximum Month-End Balance During the Year |  | $    | 30,309,230 |   |      | $ | 15,218,620 |  
|Balance as of December 31                 |  | $    | 25,917,281 |   |      | $ | 15,218,620 |  



F-27



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Mortgage backed securities underlying the agreements as of December 31 are:



|                     |  |      |            |      |   |           
|-------------------- |  | ---- | ---------- | ---- | - | ----------
|                     |  | 2006 |            | 2005
|Carrying Value       |  | $    | 31,457,644 |      | $ | 15,481,320
|Estimated Fair Value |  |      | 31,457,644 |      |   | 15,483,416



The Companys
subsidiary banks maintain overnight borrowing lines for federal funds purchased through various correspondent banks that collectively amounted to $25,000,000 and $28,657,000 as of December 31, 2006 and 2005, respectively.



(12) Other Borrowed Money



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



|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |      |            |      |   |           
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ---------- | ---- | - | ----------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  | 2006 |            | 2005
|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 3.19% 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,
2006, lending collateral value was $137,124,773 of which $53,674,773 was available.                                                   |  | $    | 83,450,000 |      | $ | 85,427,000
|Advances under the revolving line of credit with The Bankers Bank mature July 20, 2007 with interest rates on $14,000,000 at Prime minus
100 basis points and $3,000,000 at Prime minus 50 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, 2006, the Company had availability under the revolving line of credit totaling $17,000,000. |  |      |           |      |   |          
|Line of credit for $2,000,000 with Thomasville National Bank. Interest is due quarterly and is based on the Wall Street prime rate. The line
matures on March 6, 2007 and is secured by 100 shares of common stock of Security Bank of North Metro and a pledged investment security.                                                                                                                                                                                                                                       |  |      |           |      |   | 1,600,000 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |      |            |      |   |           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  | $    | 83,450,000 |      | $ | 87,027,000
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |      |            |      |   |           



Per an agreement with
the Federal Reserve Bank of Atlanta, the Company will not borrow more than $4,000,000 under the line of credit with the Bankers Bank without prior approval.



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



|           |  |        |           
|---------- |  | ------ | ----------
|Year       |  | Amount
|2007       |  | $      | 13,450,000
|2008       |  |        | 60,000,000
|2009       |  |        |          
|2010       |  |        | 5,000,000 
|2011       |  |        | 5,000,000 
|Thereafter |  |        |          
|           |  |        |           
|           |  | $      | 83,450,000
|           |  |        |           



F-28



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



(13) 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, 2006, the floating-rate securities had an 8.62% interest rate, which resets quarterly at the three-month LIBOR rate
plus 3.25%. At December 31, 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 which 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, 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 5 years with certain exceptions. At
December 31, 2006, these floating rate securities had an 8.82% interest rate. The interest rate resets quarterly at the three-month LIBOR rate plus 3.45%. At December 31, 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 $95,023, $36,817, and $26,635 for the years ended
December 31, 2006, 2005 and 2004, respectively. The interest expense paid to the trusts totaled $3,146,993, $1,241,605 and $902,373 for the years ended December 31, 2006, 2005 and 2004, respectively.



(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 2.5% to 4%, depending on years of service and position within the
Company. Expense under the plan was $1,425,090 in 2006, $935,851 in 2005 and $806,718 in 2004.



Security Bank of North Metro maintained its own 401(k) retirement plan for its employees through December 31, 2005. Employees could defer up to 15% of their total compensation. In 2005, the Bank began making
matching contributions equal to 50% of each employees contribution up to 6% of the employees compensation. The matching contribution vests at a rate of 20% per year. Expense under the plan was $17,204 for the seven months ended
December 31, 2005. Beginning January 1, 2006, the employees of the Bank began participating in the Companys 401(k) Savings Incentive and Profit Sharing Plan.



Beginning July 1, 2006, the employees of Security Bank of North Fulton began participating in the Companys 401(k)
Savings Incentive and Profit Sharing Plan.



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.



F-29



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



(15) 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 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, 2006 and 2005, the following financial instruments were outstanding whose approximate contract amounts represent credit risk:



|                              |  |                 |             |      |   |            
|----------------------------- |  | --------------- | ----------- | ---- | - | -----------
|                              |  | Contract Amount
|                              |  | 2006            |             | 2005
|Loan Commitments              |  | $               | 458,920,000 |      | $ | 393,805,000
|Standby Letters of Credit     |  |                 | 8,722,000   |      |   | 6,716,000  
|Performance Letters of Credit |  |                 | 12,111,000  |      |   | 7,261,000  



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.



(16) Stock Compensation Plans



Adoption of SFAS No. 123



Effective January 1, 2002, the Company adopted the fair value method of recording stock-based
compensation contained in SFAS No. 123, Accounting for Stock-Based Compensation,which is considered the preferable accounting method for stock-based employee compensation.Historically the Company had applied the intrinsic value
method permitted under SFAS No. 123, as defined in Accounting Principles Board Opinion 25 (APB 25),
Accounting for Stock Issued to Employees,in accounting for stock-based compensation plans.



F-30



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Accordingly, no compensation expense has been recognized for the Companys stock option plans prior to January 1, 2002. In adopting SFAS
No. 123, the Company elected to apply SFAS No. 123 prospectively to all new awards. Accordingly, stock option expense totaling $525,946, $478,427 and $313,730 as of December 31, 2006, 2005 and 2004, respectively, was recorded to
Salaries and Employee Benefits. Stock-based compensation awards granted in previous years will continue to be accounted for under APB 25.



If compensation expense for stock options issued prior to 2002 were determined on the basis of SFAS No. 123, net income and earnings per share would
have been reduced as shown in the proforma information presented hereafter:



|                           |  |      |            |      |   |            |  |   |           
|-------------------------- |  | ---- | ---------- | ---- | - | ---------- |  | - | ----------
|                           |  | 2006 |            | 2005 |   | 2004      
|Net Income                 |  |      |            |      |   |            |  |   |           
|As Reported                |  | $    | 23,391,973 |      | $ | 16,184,933 |  | $ | 12,318,719
|                           |  |      |            |      |   |            |  |   |           
|Proforma                   |  | $    | 23,391,973 |      | $ | 16,179,397 |  | $ | 12,262,683
|                           |  |      |            |      |   |            |  |   |           
|Basic Earnings Per Share   |  |      |            |      |   |            |  |   |           
|As Reported                |  | $    | 1.36       |      | $ | 1.31       |  | $ | 1.10      
|                           |  |      |            |      |   |            |  |   |           
|Proforma                   |  | $    | 1.36       |      | $ | 1.31       |  | $ | 1.10      
|                           |  |      |            |      |   |            |  |   |           
|Diluted Earnings Per Share |  |      |            |      |   |            |  |   |           
|As Reported                |  | $    | 1.33       |      | $ | 1.27       |  | $ | 1.07      
|                           |  |      |            |      |   |            |  |   |           
|Proforma                   |  | $    | 1.33       |      | $ | 1.27       |  | $ | 1.07      
|                           |  |      |            |      |   |            |  |   |           



Proforma information
includes only the effects of incentive stock option awards which were granted in May 1996, May 1999, September 1999 and August 2000 and is based on utilization of the Black-Scholes option pricing model to estimate the fair value of the
options at the grant date. Significant assumptions used for options granted in those years are:



|                        |  |       |   |  |       |   |  |       |  
|----------------------- |  | ----- | - |  | ----- | - |  | ----- | -
|                        |  | 2000  |   |  | 1999  |   |  | 1996  |  
|Dividend Yield          |  | 2.12  | % |  | 1.63  | % |  | 2.11  | %
|Risk-Free Interest Rate |  | 5.44  | % |  | 6.48  | % |  | 6.34  | %
|Expected Term in Years  |  | 5     |   |  | 5     |   |  | 5     |  
|Expected Volatility     |  | 13.14 | % |  | 31.73 | % |  | 38.72 | %



Stock Option Plans



The Companys 1999 Stock Incentive Plan, the 2002 Incentive Stock
Option Plan and the 2004 Omnibus Stock Ownership and Long Term Incentive Plan (collectively, the Plans), all of which were shareholder-approved, provide for the grant of tax-qualified or incentive stock options, restricted stock grants,
stock appreciation rights and performance units to the Companys employees. Option 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. Below is a
summary of the provisions of each of the plans.



The 1999 Stock
Incentive Plan provides for the grant of tax-qualified incentive stock options for up to 250,000 shares of the Companys common stock to certain officers. The options vest over a five-year period beginning on the first anniversary of the grant
date and will expire ten years following the grant date. At December 31, 2006, 121,000 shares were outstanding, all of which were vested.



F-31



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The 2002 Incentive Stock Option Plan provides for the grant of tax-qualified incentive stock options
for up to 440,000 shares of the Companys common stock to certain officers. The options were divided into two tiers. Both Tier 1 and Tier 2 options 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 date of the 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 ten years following the grant date. At December 31, 2006, 204,500 shares were outstanding, 72,190 of which were vested.



The 2004 Omnibus Stock Ownership and Long Term Incentive Plan provides for the grant of up to a total of 600,000 incentive stock options, restricted
stock grants, stock appreciation rights and performance units. As of December 31, 2006, the only awards granted under the 2004 Plan have been performance-based incentive stock options which vest upon achievement of specific pre-established
levels of Company performance over a three-year performance cycle. The options were divided into two tiers. Both Tier 1 options and Tier 2 options 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 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. The options
will expire ten years following the grant date. At December 31, 2006, 442,167 shares were outstanding, 244,552 of which were vested.



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.



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



|                        |  |       |   |  |       |   |  |       |  
|----------------------- |  | ----- | - |  | ----- | - |  | ----- | -
|                        |  | 2006  |   |  | 2005  |   |  | 2004  |  
|Dividend Yield          |  | 1.14  | % |  | 1.10  | % |  | 1.40  | %
|Risk-Free Interest Rate |  | 4.51  | % |  | 3.63  | % |  | 3.14  | %
|Expected Term in Years  |  | 10    |   |  | 10    |   |  | 10    |  
|Expected Volatility     |  | 15.08 | % |  | 24.74 | % |  | 22.85 | %



F-32



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



A summary of stock option activity for the year ended December 31, 2006 is presented below:



|                                            |  |                                      |  |                               |       |                         |   |                                          |  |     
|------------------------------------------- |  | ------------------------------------ |  | ----------------------------- | ----- | ----------------------- | - | ---------------------------------------- |  | ----
|                                            |  | Shares Under Incentive Stock Options |  | WeightedAverage ExercisePrice |       | AggregateIntrinsicValue |   | Weighted-averageRemainingContractualLife
|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 |                         | $ | 1,952,648                                |  | 6.14
|                                            |  |                                      |  |                               |       |                         |   |                                          |  |     
|Eligible to be Exercised, December 31, 2006 |  | 437,742                              |  | $                             | 12.76 |                         | $ | 1,111,310                                |  | 5.76
|                                            |  |                                      |  |                               |       |                         |   |                                          |  |     



The weighted average
grant date fair value of options granted during the years ended December 31, 2006, 2005 and 2004 was $6.95, $7.12 and $4.73, respectively. The aggregate intrinsic value of options exercised during the years ended December 31, 2006, 2005
and 2004 was $35,363, $53,200 and $185,338, respectively. The fair value of options vested during the years ended December 31, 2006, 2005 and 2004 was $631,629, $117,820 and $75,552, respectively.



Cash received from share option exercises totaled $203,033 during the year
ended December 31, 2006. The Company issues shares upon exercise of share options from newly issued shares that have been reserved for the various plans.



(17) Supplemental Cash Flow Information



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



|                 |  |      |            |      |   |            |  |   |           
|---------------- |  | ---- | ---------- | ---- | - | ---------- |  | - | ----------
|                 |  | 2006 |            | 2005 |   | 2004      
|Interest Expense |  | $    | 76,190,768 |      | $ | 30,664,500 |  | $ | 15,016,129
|                 |  |      |            |      |   |            |  |   |           
|Income Taxes     |  | $    | 13,818,900 |      | $ | 9,704,500  |  | $ | 6,806,700 
|                 |  |      |            |      |   |            |  |   |           



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



|                                                  |  |      |             |   |      |   |             |      |  |   |          
|------------------------------------------------- |  | ---- | ----------- | - | ---- | - | ----------- | ---- |  | - | ---------
|                                                  |  | 2006 |             |   | 2005 |   |             | 2004
|Acquisitions of Real Estate Through Foreclosure   |  | $    | 5,818,886   |   |      | $ | 3,421,973   |      |  | $ | 2,373,329
|                                                  |  |      |             |   |      |   |             |      |  |   |          
|Acquisition, Net of Cash Acquired                 |  |      |             |   |      |   |             |      |  |   |          
|Common Stock Issued                               |  | $    | 65,465,670  |   |      | $ | 58,393,291  |      |  | $ |         
|Cash Received, Less Cash Paid                     |  |      | (10,494,533 | ) |      |   | (5,923,269  | )    |  |   |         
|Liabilities Assumed                               |  |      | 378,487,031 |   |      |   | 321,525,524 |      |  |   |         
|                                                  |  |      |             |   |      |   |             |      |  |   |          
|Fair Value of Assets Acquired, Including Goodwill |  | $    | 433,458,168 |   |      | $ | 373,995,546 |      |  | $ |         
|                                                  |  |      |             |   |      |   |             |      |  |   |          
|Goodwill Resulting from Contingent Payment        |  |      |             |   |      |   |             |      |  |   |          
|Common Stock Issued                               |  | $    | 3,673,989   |   |      | $ | 2,362,896   |      |  | $ | 1,688,199
|Cash Paid                                         |  |      | 1,144,002   |   |      |   | 909,864     |      |  |   | 2,016,533
|                                                  |  |      |             |   |      |   |             |      |  |   |          
|Total Goodwill                                    |  | $    | 4,817,991   |   |      | $ | 3,272,760   |      |  | $ | 3,704,732
|                                                  |  |      |             |   |      |   |             |      |  |   |          
|Unrealized (Gain) Loss on Investment Securities   |  | $    | (1,417,560  | ) |      | $ | 2,981,815   |      |  | $ | 814,777  
|                                                  |  |      |             |   |      |   |             |      |  |   |          



F-33



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



(18) Earnings per Share



The following presents earnings per share for the years ended December 31, 2006, 2005 and 2004:



|                                                                                         |  |                 |            |                          |            |     |   |     
|---------------------------------------------------------------------------------------- |  | --------------- | ---------- | ------------------------ | ---------- | --- | - | ----
|                                                                                         |  | IncomeNumerator |            | CommonShares Denominator |            | EPS
|December 31, 2006                                                                        |  |                 |            |                          |            |     |   |     
|                                                                                         |  |                 |           
|Basic EPS                                                                                |  |                 |            |                          |            |     |   |     
|Income Available to Common Shareholders                                                  |  | $               | 23,391,973 |                          | 17,222,139 |     | $ | 1.36
|                                                                                         |  |                 |            |                          |            |     |   |     
|Dilutive Effect of Potential Common Stock                                                |  |                 |            |                          |            |     |   |     
|Stock Options and Restricted Stock                                                       |  |                 |            |                          | 342,851    |     |   |     
|                                                                                         |  |                 |            |                          |            |     |   |     
|Diluted EPS                                                                              |  |                 |            |                          |            |     |   |     
|Income Available to Common Shareholders After Assumed Conversions of Dilutive Securities |  | $               | 23,391,973 |                          | 17,564,990 |     | $ | 1.33
|                                                                                         |  |                 |            |                          |            |     |   |     
|December 31, 2005                                                                        |  |                 |            |                          |            |     |   |     
|                                                                                         |  |                 |           
|Basic EPS                                                                                |  |                 |            |                          |            |     |   |     
|Income Available to Common Shareholders                                                  |  | $               | 16,184,933 |                          | 12,393,980 |     | $ | 1.31
|                                                                                         |  |                 |            |                          |            |     |   |     
|Dilutive Effect of Potential Common Stock                                                |  |                 |            |                          |            |     |   |     
|Stock Options and Restricted Stock                                                       |  |                 |            |                          | 342,565    |     |   |     
|                                                                                         |  |                 |            |                          |            |     |   |     
|Diluted EPS                                                                              |  |                 |            |                          |            |     |   |     
|Income Available to Common Shareholders After Assumed Conversions of Dilutive Securities |  | $               | 16,184,933 |                          | 12,736,545 |     | $ | 1.27
|                                                                                         |  |                 |            |                          |            |     |   |     
|December 31, 2004                                                                        |  |                 |            |                          |            |     |   |     
|                                                                                         |  |                 |           
|Basic EPS                                                                                |  |                 |            |                          |            |     |   |     
|Income Available to Common Shareholders                                                  |  | $               | 12,318,719 |                          | 11,156,372 |     | $ | 1.10
|                                                                                         |  |                 |            |                          |            |     |   |     
|Dilutive Effect of Potential Common Stock                                                |  |                 |            |                          |            |     |   |     
|Stock Options                                                                            |  |                 |            |                          | 326,458    |     |   |     
|                                                                                         |  |                 |            |                          |            |     |   |     
|Diluted EPS                                                                              |  |                 |            |                          |            |     |   |     
|Income Available to Common Shareholders After Assumed Conversions of Dilutive Securities |  | $               | 12,318,719 |                          | 11,482,830 |     | $ | 1.07
|                                                                                         |  |                 |            |                          |            |     |   |     



F-34



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



(19) 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 $47,963,120 as of December 31, 2006 and $36,290,596 as of December 31, 2005. 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.



|                                                 |  |      |             |   |      |   |             |  
|------------------------------------------------ |  | ---- | ----------- | - | ---- | - | ----------- | -
|                                                 |  | 2006 |             |   | 2005 |  
|Balance, Beginning                               |  | $    | 36,290,596  |   |      | $ | 35,340,799  |  
|New Loans                                        |  |      | 57,078,535  |   |      |   | 28,476,316  |  
|Repayments                                       |  |      | (48,270,416 | ) |      |   | (36,047,496 | )
|Business Combination, Homestead Bank             |  |      |            |   |      |   |            |  
|Business Combination, Neighbors Bancshares, Inc. |  |      | 2,864,405   |   |      |   |            |  
|Business Combination, Rivoli BanCorp             |  |      |            |   |      |   | 804,508     |  
|Business Combination, SouthBank                  |  |      |            |   |      |   | 7,716,469   |  
|                                                 |  |      |             |   |      |   |             |  
|Balance, Ending                                  |  | $    | 47,963,120  |   |      | $ | 36,290,596  |  
|                                                 |  |      |             |   |      |   |             |  



Deposits from related
parties held by the Company at December 31, 2006 and 2005 totaled approximately $73,390,712 and $46,913,000, respectively.



Fairfield Financial originated $4,517,600 in mortgage loans to related parties during 2006.



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, 2006 and 2005.



(20) Fair Value of
Financial Instruments



SFAS No. 107, Disclosures
about Fair Value of Financial Instruments, requires disclosure of fair value information about financial instruments, whether or not recognized on the face of the balance sheet, for which it is practicable to estimate that value. The assumptions
used in the estimation of the fair value of Security Bank Corporation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.



Cash and Short-Term Investments - For cash, due from banks and federal funds sold, the carrying amount is a
reasonable estimate of fair value.



Investment
Securities - Fair values for investment securities are based on quoted market prices.



Loans - 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-35



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Deposit Liabilities - 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.



Letters of Credit - Because letters of
credit are made using variable rates, the contract value 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:



|                                         |  |                |           |                      |   |                |  |                     |           |  |   |          
|---------------------------------------- |  | -------------- | --------- | -------------------- | - | -------------- |  | ------------------- | --------- |  | - | ---------
|                                         |  | 2006           |           | 2005                
|                                         |  | CarryingAmount |           | Estimated Fair Value |   | CarryingAmount |  | EstimatedFair Value
|                                         |  | (in Thousands)
|Assets                                   |  |                |           |                      |   |                |  |                     |           |  |   |          
|Cash and Short-Term Investments          |  | $              | 156,903   |                      | $ | 156,903        |  | $                   | 103,092   |  | $ | 103,092  
|Interest-Bearing Deposits                |  |                | 2,911     |                      |   | 2,911          |  |                     | 6,380     |  |   | 6,380    
|Investment Securities Available for Sale |  |                | 221,178   |                      |   | 221,178        |  |                     | 143,662   |  |   | 143,662  
|Investment Securities Held to Maturity   |  |                | 1,240     |                      |   | 1,213          |  |                     | 350       |  |   | 354      
|Restricted Stocks                        |  |                | 7,521     |                      |   | 7,521          |  |                     | 6,974     |  |   | 6,974    
|Loans Receivable                         |  |                | 1,903,568 |                      |   | 1,894,581      |  |                     | 1,273,683 |  |   | 1,263,672
|Loans Held for Sale                      |  |                | 8,878     |                      |   | 8,878          |  |                     | 5,562     |  |   | 5,565    
|Liabilities                              |  |                |           |                      |   |                |  |                     |           |  |   |          
|Deposits                                 |  |                | 1,970,927 |                      |   | 1,972,999      |  |                     | 1,291,253 |  |   | 1,290,018
|Borrowed Money                           |  |                | 134,367   |                      |   | 134,430        |  |                     | 130,903   |  |   | 130,530  
|Subordinated Debentures                  |  |                | 41,238    |                      |   | 39,636         |  |                     | 41,238    |  |   | 41,238   
|Unrecognized Financial Instruments       |  |                |           |                      |   |                |  |                     |           |  |   |          
|Letters of Credit                        |  |                |          |                      |   | 20,833         |  |                     |          |  |   | 13,977   
|Unfulfilled Loan Commitments             |  |                |          |                      |   | 458,920        |  |                     |          |  |   | 393,805  



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.



(21) Regulatory Capital Matters



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.



F-36



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The Company is 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 must meet specific capital guidelines that involve quantitative measures of the Companys assets, liabilities and certain
off-balance sheet items as calculated under regulatory accounting practices. The Companys 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 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, 2006, the Company meets all capital adequacy requirements to which it is subject and is 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 Well Capitalized 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 | %      |  | $     | 206,796 |  | 10.00 | %
|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 | %      |  |       | 124,078 |  | 6.00  | %
|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 | %      |  |       | 111,946 |  | 5.00  | %
|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  | %



F-37



---

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, 2005                |  |                |         |       |                             |   |        |                                                               |         |  |      |        |  |       |         |  |       |  
|Total Capital to Risk-Weighted Assets  |  |                |         |       |                             |   |        |                                                               |         |  |      |        |  |       |         |  |       |  
|Consolidated                           |  | $              | 156,126 |       | 11.27                       | % |        | $                                                             | 110,849 |  | 8.00 | %      |  | $     | 138.562 |  | 10.00 | %
|Bibb                                   |  |                | 69,641  |       | 10.88                       | % |        |                                                               | 51,210  |  | 8.00 | %      |  |       | 64,012  |  | 10.00 | %
|Houston                                |  |                | 22,236  |       | 10.54                       | % |        |                                                               | 16,871  |  | 8.00 | %      |  |       | 21,089  |  | 10.00 | %
|Jones                                  |  |                | 27,124  |       | 13.48                       | % |        |                                                               | 16,099  |  | 8.00 | %      |  |       | 20,124  |  | 10.00 | %
|North Metro                            |  |                | 16,575  |       | 11.12                       | % |        |                                                               | 11,927  |  | 8.00 | %      |  |       | 14,909  |  | 10.00 | %
|Rivoli                                 |  |                | 17,730  |       | 9.74                        | % |        |                                                               | 14,559  |  | 8.00 | %      |  |       | 18,198  |  | 10.00 | %
|Tier I Capital to Risk-Weighted Assets |  |                |         |       |                             |   |        |                                                               |         |  |      |        |  |       |         |  |       |  
|Consolidated                           |  |                | 140,268 |       | 10.12                       | % |        |                                                               | 55,425  |  | 4.00 | %      |  |       | 83,137  |  | 6.00  | %
|Bibb                                   |  |                | 62,618  |       | 9.78                        | % |        |                                                               | 25,605  |  | 4.00 | %      |  |       | 38,407  |  | 6.00  | %
|Houston                                |  |                | 19,708  |       | 9.35                        | % |        |                                                               | 8,436   |  | 4.00 | %      |  |       | 12,654  |  | 6.00  | %
|Jones                                  |  |                | 24,605  |       | 12.23                       | % |        |                                                               | 8,050   |  | 4.00 | %      |  |       | 12,074  |  | 6.00  | %
|North Metro                            |  |                | 14,998  |       | 10.06                       | % |        |                                                               | 5,964   |  | 4.00 | %      |  |       | 8,946   |  | 6.00  | %
|Rivoli                                 |  |                | 15,519  |       | 8.53                        | % |        |                                                               | 7,279   |  | 4.00 | %      |  |       | 10,919  |  | 6.00  | %
|Tier I Capital to Average Assets       |  |                |         |       |                             |   |        |                                                               |         |  |      |        |  |       |         |  |       |  
|Consolidated                           |  |                | 140,268 |       | 9.72                        | % |        |                                                               | 57,728  |  | 4.00 | %      |  |       | 72,160  |  | 5.00  | %
|Bibb                                   |  |                | 62,618  |       | 9.79                        | % |        |                                                               | 25,584  |  | 4.00 | %      |  |       | 31,980  |  | 5.00  | %
|Houston                                |  |                | 19,708  |       | 8.46                        | % |        |                                                               | 9,323   |  | 4.00 | %      |  |       | 11,654  |  | 5.00  | %
|Jones                                  |  |                | 24,605  |       | 9.41                        | % |        |                                                               | 10,461  |  | 4.00 | %      |  |       | 13,077  |  | 5.00  | %
|North Metro                            |  |                | 14,998  |       | 9.30                        | % |        |                                                               | 6,450   |  | 4.00 | %      |  |       | 8,062   |  | 5.00  | %
|Rivoli                                 |  |                | 15,519  |       | 8.77                        | % |        |                                                               | 7,076   |  | 4.00 | %      |  |       | 8,845   |  | 5.00  | %



(22) 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, 2006 and 2005, the liability under this
plan totaled $253,794 and $225,124, respectively. Provisions charged to operations totaled $28,670 in 2006, $26,077 in 2005 and $23,468 in 2004. The contracts were initially funded through the purchase of three life insurance contracts. The cash
value of the life insurance contracts totaled $309,933 and $297,045 as of December 31, 2006 and 2005, respectively.



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 $1,207,144 and $1,166,691 as of December 31, 2006 and 2005, respectively. Liabilities accrued under the plan totaled $655,638 and $642,612 as of December 31, 2006 and
2005, respectively. Provisions charged to operations totaled $13,026 in 2006, $8,297 in 2005 and $45,696 in 2004. No benefits have been paid as of December 31, 2006.



F-38



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



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, which is included in
other assets. The cash value of the life insurance contracts totaled $5,316,603 and $5,094,545 as of December 31, 2006 and 2005, respectively. Liabilities accrued under the SERP totaled $116,370 and $32,130 as of December 31, 2006 and
2005, respectively. Provisions charged to operations totaled $84,240 in 2006 and $32,130 in 2005. No benefits have been paid as of December 31, 2006.



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, which is included in other assets. The cash value of the life insurance contracts totaled $4,029,984 as of December 31, 2006. Liabilities accrued under the SERP totaled $41,684 as of
December 31, 2006. Provisions charged to operations totaled $41,684 in 2006. No benefits have been paid as of December 31, 2006.



(23) 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 which may be subject to restricted stock awards is 10,000. During 2003, all 10,000 shares were issued under this plan. 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, 2006, 1,920 shares vested. As of December 31, 2006, a total of
5,840 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, 2006, 1,831 shares vested.



(24) 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.



F-39



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



(25) Financial Information of Security Bank Corporation (Parent Only)



The parent companys balance sheets as of December 31, 2006 and
2005 and the related statements of income and comprehensive income and cash flows for the years then ended are as follows:



SECURITY BANK CORPORATION (PARENT ONLY)



BALANCE SHEETS

DECEMBER 31,



|                                                                                                               |  |      |             |   |      |   |             |  
|-------------------------------------------------------------------------------------------------------------- |  | ---- | ----------- | - | ---- | - | ----------- | -
|ASSETS                                                                                                         |  |      |             |   |     
|                                                                                                               |  | 2006 |             |   | 2005 |  
|Cash                                                                                                           |  | $    | 13,879,195  |   |      | $ | 9,072,757   |  
|Securities                                                                                                     |  |      | 190,614     |   |      |   | 190,614     |  
|Bank Premises and Equipment, Net                                                                               |  |      | 1,048,010   |   |      |   | 274,347     |  
|Investment in Subsidiaries, at Equity                                                                          |  |      | 333,719,677 |   |      |   | 217,722,411 |  
|Prepaid Expenses                                                                                               |  |      | 121,044     |   |      |   | 64,053      |  
|Trust Preferred Placement Fee, Net                                                                             |  |      | 466,000     |   |      |   | 484,000     |  
|Income Tax Benefit                                                                                             |  |      |            |   |      |   | 144,283     |  
|Other                                                                                                          |  |      | 310,277     |   |      |   | 161,116     |  
|                                                                                                               |  |      |             |   |      |   |             |  
|Total Assets                                                                                                   |  | $    | 349,734,817 |   |      | $ | 228,113,581 |  
|                                                                                                               |  |      |             |   |      |   |             |  
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                           |  |      |             |   |      |   |             |  
|Liabilities                                                                                                    |  |      |             |   |      |   |             |  
|Income Tax Payable                                                                                             |  | $    | 266,703     |   |      | $ |            |  
|Payable to Rivoli Shareholders                                                                                 |  |      |            |   |      |   | 4,220,026   |  
|Other                                                                                                          |  |      | 1,822,641   |   |      |   | 1,750,683   |  
|                                                                                                               |  |      |             |   |      |   |             |  
|                                                                                                               |  |      | 2,089,344   |   |      |   | 5,970,709   |  
|                                                                                                               |  |      |             |   |      |   |             |  
|Other Borrowed Money                                                                                           |  |      |            |   |      |   | 1,600,000   |  
|                                                                                                               |  |      |             |   |      |   |             |  
|Subordinated Debentures                                                                                        |  |      | 41,238,000  |   |      |   | 41,238,000  |  
|                                                                                                               |  |      |             |   |      |   |             |  
|Shareholders Equity                                                                                           |  |      |             |   |      |   |             |  
|Common Stock, Par Value $1 Per Share; Authorized 25,000,000                                                    |  |      |             |   |      |   |             |  
|Shares, Issued and Outstanding 19,186,050 and 14,406,696 Shares as of December 31, 2006 and 2005, Respectively |  |      | 19,186,050  |   |      |   | 14,406,696  |  
|Paid-In Capital                                                                                                |  |      | 224,564,470 |   |      |   | 121,480,964 |  
|Retained Earnings                                                                                              |  |      | 63,696,653  |   |      |   | 45,569,642  |  
|Restricted Stock  Unearned Compensation                                                                       |  |      | (157,675    | ) |      |   | (222,860    | )
|Accumulated Other Comprehensive Loss, Net of Tax                                                               |  |      | (551,897    | ) |      |   | (1,599,442  | )
|                                                                                                               |  |      |             |   |      |   |             |  
|                                                                                                               |  |      | 306,737,601 |   |      |   | 179,635,000 |  
|Treasury Stock (19,736 Shares), at Cost                                                                        |  |      | (330,128    | ) |      |   | (330,128    | )
|                                                                                                               |  |      |             |   |      |   |             |  
|                                                                                                               |  |      | 306,407,473 |   |      |   | 179,304,872 |  
|                                                                                                               |  |      |             |   |      |   |             |  
|Total Liabilities and Shareholders Equity                                                                     |  | $    | 349,734,817 |   |      | $ | 228,113,581 |  
|                                                                                                               |  |      |             |   |      |   |             |  



F-40



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



SECURITY BANK CORPORATION (PARENT ONLY)



STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31,



|                                                                       |  |      |            |   |      |   |            |      |  |   |            |  
|---------------------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | ---- |  | - | ---------- | -
|                                                                       |  | 2006 |            |   | 2005 |   |            | 2004 | 
|Income                                                                 |  |      |            |   |      |   |            |      |  |   |            |  
|Dividends from Subsidiaries                                            |  | $    | 6,450,000  |   |      | $ | 4,500,000  |      |  | $ | 1,476,635  |  
|Interest and Dividends                                                 |  |      | 96,927     |   |      |   | 38,549     |      |  |   | 806        |  
|Management Fees                                                        |  |      | 1,711,815  |   |      |   | 1,405,891  |      |  |   | 1,184,980  |  
|                                                                       |  |      |            |   |      |   |            |      |  |   |            |  
|                                                                       |  |      | 8,258,742  |   |      |   | 5,944,440  |      |  |   | 2,662,421  |  
|                                                                       |  |      |            |   |      |   |            |      |  |   |            |  
|Expenses                                                               |  |      |            |   |      |   |            |      |  |   |            |  
|Salaries and Employee Benefits                                         |  |      | 4,951,321  |   |      |   | 3,944,127  |      |  |   | 2,713,166  |  
|Occupancy and Equipment                                                |  |      | 57,276     |   |      |   | 50,899     |      |  |   | 38,848     |  
|Interest                                                               |  |      | 3,192,936  |   |      |   | 1,609,340  |      |  |   | 979,289    |  
|Other                                                                  |  |      | 2,018,305  |   |      |   | 1,456,164  |      |  |   | 1,014,968  |  
|                                                                       |  |      |            |   |      |   |            |      |  |   |            |  
|                                                                       |  |      | 10,219,838 |   |      |   | 7,060,530  |      |  |   | 4,746,271  |  
|                                                                       |  |      |            |   |      |   |            |      |  |   |            |  
|Loss Before Taxes and Equity in Undistributed Earnings of Subsidiaries |  |      | (1,961,096 | ) |      |   | (1,116,090 | )    |  |   | (2,083,850 | )
|Income Tax Benefit                                                     |  |      | 3,055,157  |   |      |   | 1,978,432  |      |  |   | 1,148,925  |  
|                                                                       |  |      |            |   |      |   |            |      |  |   |            |  
|Income (Loss) Before Equity in Undistributed Earnings of Subsidiaries  |  |      | 1,094,061  |   |      |   | 862,342    |      |  |   | (934,925   | )
|Equity in Undistributed Earnings of Subsidiaries                       |  |      | 22,297,912 |   |      |   | 15,322,591 |      |  |   | 13,253,644 |  
|                                                                       |  |      |            |   |      |   |            |      |  |   |            |  
|Net Income                                                             |  |      | 23,391,973 |   |      |   | 16,184,933 |      |  |   | 12,318,719 |  
|                                                                       |  |      |            |   |      |   |            |      |  |   |            |  
|Other Comprehensive Income, Net of Tax                                 |  |      |            |   |      |   |            |      |  |   |            |  
|Losses on Securities Arising During the Year                           |  |      | (9,266     | ) |      |   | (1,955,938 | )    |  |   | (525,679   | )
|Reclassification Adjustment                                            |  |      | 1,056,811  |   |      |   | 3,695      |      |  |   | (8,384     | )
|                                                                       |  |      |            |   |      |   |            |      |  |   |            |  
|Unrealized Gains (Losses) on Securities                                |  |      | 1,047,545  |   |      |   | (1,952,243 | )    |  |   | (534,063   | )
|                                                                       |  |      |            |   |      |   |            |      |  |   |            |  
|Comprehensive Income                                                   |  | $    | 24,439,518 |   |      | $ | 14,232,690 |      |  | $ | 11,784,656 |  
|                                                                       |  |      |            |   |      |   |            |      |  |   |            |  



F-41



---

SECURITY BANK CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



SECURITY BANK CORPORATION (PARENT ONLY)



STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31



|                                                           |  |      |             |   |      |   |             |      |  |   |             |  
|---------------------------------------------------------- |  | ---- | ----------- | - | ---- | - | ----------- | ---- |  | - | ----------- | -
|                                                           |  | 2006 |             |   | 2005 |   |             | 2004 | 
|Cash Flows from Operating Activities                       |  |      |             |   |      |   |             |      |  |   |             |  
|Net Income                                                 |  | $    | 23,391,973  |   |      | $ | 16,184,933  |      |  | $ | 12,318,719  |  
|Adjustments to Reconcile Net Income to Net                 |  |      |             |   |      |   |             |      |  |   |             |  
|Cash Provided (Used) by Operating Activities               |  |      |             |   |      |   |             |      |  |   |             |  
|Deferred Income Taxes                                      |  |      | (2,731      | ) |      |   | (12,510     | )    |  |   | (7,181      | )
|Depreciation and Amortization                              |  |      | 143,732     |   |      |   | 119,621     |      |  |   | 72,808      |  
|Stock Option Expense                                       |  |      | 525,946     |   |      |   | 478,427     |      |  |   | 313,730     |  
|Equity in Undistributed Earnings of Subsidiaries           |  |      | (22,297,912 | ) |      |   | (15,322,591 | )    |  |   | (13,253,644 | )
|Payable to Rivoli BanCorp Shareholders                     |  |      |            |   |      |   | 4,220,026   |      |  |   |            |  
|Increase (Decrease) in Other                               |  |      | (375,593    | ) |      |   | (820,649    | )    |  |   | (137,130    | )
|                                                           |  |      |             |   |      |   |             |      |  |   |             |  
|                                                           |  |      | 1,385,415   |   |      |   | 4,847,257   |      |  |   | (692,698    | )
|                                                           |  |      |             |   |      |   |             |      |  |   |             |  
|Cash Flows from Investing Activities                       |  |      |             |   |      |   |             |      |  |   |             |  
|Investment in Statutory Trust                              |  |      |            |   |      |   | (588,000    | )    |  |   |            |  
|Capital Infusion in Subsidiaries                           |  |      | (10,450,000 | ) |      |   | (750,000    | )    |  |   | (11,550,000 | )
|Sale (Purchase) of Premises and Equipment                  |  |      | (955,966    | ) |      |   | 53,302      |      |  |   | (27,643     | )
|Purchase of Investments                                    |  |      |            |   |      |   |            |      |  |   | (670,614    | )
|Payment for Business Combinations                          |  |      | (18,397,001 | ) |      |   | (13,975,457 | )    |  |   |            |  
|                                                           |  |      |             |   |      |   |             |      |  |   |             |  
|                                                           |  |      | (29,802,967 | ) |      |   | (15,260,151 | )    |  |   | (12,248,257 | )
|                                                           |  |      |             |   |      |   |             |      |  |   |             |  
|Cash Flows from Financing Activities                       |  |      |             |   |      |   |             |      |  |   |             |  
|Dividends Paid                                             |  |      | (5,264,962  | ) |      |   | (3,271,320  | )    |  |   | (2,483,659  | )
|Issuance of Common Stock                                   |  |      | 4,147,652   |   |      |   | 2,748,953   |      |  |   | 2,380,915   |  
|Issuance of Common Stock in Connection with Stock Offering |  |      | 35,941,300  |   |      |   |            |      |  |   | 18,841,424  |  
|Note Payable                                               |  |      | (1,600,000  | ) |      |   |            |      |  |   | (6,500,000  | )
|Subordinated Debt                                          |  |      |            |   |      |   | 19,588,000  |      |  |   |            |  
|                                                           |  |      |             |   |      |   |             |      |  |   |             |  
|                                                           |  |      | 33,223,990  |   |      |   | 19,065,633  |      |  |   | 12,238,680  |  
|                                                           |  |      |             |   |      |   |             |      |  |   |             |  
|Net Increase (Decrease) in Cash                            |  |      | 4,806,438   |   |      |   | 8,652,739   |      |  |   | (702,275    | )
|Cash, Beginning                                            |  |      | 9,072,757   |   |      |   | 420,018     |      |  |   | 1,122,293   |  
|                                                           |  |      |             |   |      |   |             |      |  |   |             |  
|Cash, Ending                                               |  | $    | 13,879,195  |   |      | $ | 9,072,757   |      |  | $ | 420,018     |  
|                                                           |  |      |             |   |      |   |             |      |  |   |             |  



(26) Subsequent Events



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 in the amount of $250,000. CFS Wealth Management will function as
a wholly owned subsidiary of the Company.



F-42