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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549



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FORM 10-K/A

Amendment No. 1



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(Mark One)

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

For the fiscal year ended December 31, 2006

OR



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

For the transition period from to  to

Commission file number 000-51298



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ALTRUST FINANCIAL SERVICES, INC.

(Exact Name of Registrant as Specified in Its Charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Alabama                                                        |  | 63-0923450                          
|(State or Other Jurisdiction of Incorporation or Organization) |  | (I.R.S. Employer Identification No.)



|                                         |  |           
|---------------------------------------- |  | ----------
|811 2ndAvenue S.W., Cullman, Alabama     |  | 35055-4222
|(Address of Principal Executive Offices) |  | (Zip Code)

Registrants telephone number, including area code: (256) 737-7000



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Securities registered pursuant
to Section 12(b) of the Act: None

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

Common Stock, $0.01 par value

(Title of Class)



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

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes ̈No  x

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No ̈

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

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

Large Accelerated Filer ̈Accelerated Filer ̈Non-Accelerated Filer  x

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

The aggregate market value of Altrust Financial Services, Inc.s Common Stock, par value $.01 per share, held by non-affiliates, computed by
reference to the price at which the stock was last sold on March 2, 2007, was $37,744,320.

The number of shares outstanding of
Altrust Financial Services, Inc.s Common Stock, par value $.01 per share, as of March 1, 2007 was 5,485,625, of which no shares were held by Altrust Financial Services, Inc. as treasury stock.

DOCUMENTS INCORPORATED BY REFERENCE

The information
set forth under Items 10 through 14 of Part III of this Report were incorporated by reference from the registrants definitive proxy statement for its 2007 annual meeting of stockholders that was filed on April 3, 2007.



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EXPLANATORY NOTE

This Amendment No. 1 to the Annual Report on Form 10-K of Altrust Financial Services (Altrust) is being filed solely to include a signed form of the
Report of Independent Registered Public Accounting Firm from Dixon Hughes PLLC, which was inadvertently not included in Altrusts Form 10-K filed on April 3, 2007.

Except as described above, no other changes have been made to the original Form 10-K, and this Form 10-K/A does not amend, update, or change the financial statements or any other items or disclosures in the original
Form 10-K. Except for the change stated above, this Form 10-K/A does not reflect events occurring after the filing of the Form 10-K or modify or update those disclosures, including any exhibits to the Form 10-K affected by subsequent events.
Accordingly, this Form 10-K/A should be read in conjunction with our filings made with the Securities and Exchange Commission made subsequent to the filing of the original Form 10-K, including any amendments to those filings.



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ALTRUST FINANCIAL SERVICES, INC.

TABLE OF CONTENTS



|        |  |          |  |                                             |  |   
|------- |  | -------- |  | ------------------------------------------- |  | --
|        |  | Page    
|PART II |  |         
|        |  | Item 8:  |  | Financial Statements and Supplementary Data |  | 3 
|        | 
|PART IV |  |         
|        |  | Item 15: |  | Exhibits and Financial Statement Schedules  |  | 37
|        |  |          | 
|        |  |          |  | Signatures                                  |  |   



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IMPORTANT INFORMATION ABOUT THIS REPORT

In this report, the words the Company, we, us and our refer to the combined entities of Altrust Financial
Services, Inc. and its wholly owned subsidiaries, Peoples Bank of North Alabama, Southern Insurance of Cullman, Inc. and Southern Appraisal Services, Inc.

SPECIAL CAUTIONARY NOTICE

REGARDING FORWARD-LOOKING STATEMENTS

Certain of the statements made or incorporated by reference in this report, including those under Managements Discussion and Analysis of
Financial Condition and Results of Operations, and elsewhere, are forward-looking statements within the meaning of, and subject to the protections of, Section 27A of the Securities Act of 1933, as amended (the Securities
Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act).

Forward-looking
statements include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions, and future performance, and involve known and unknown risks, uncertainties and other factors, many
of which may be beyond our control, and which may cause the actual results, performance or achievements of the Company to be materially different from future results, performance or achievements expressed or implied by such forward-looking
statements.

All statements other than statements of historical fact are statements that may be forward-looking statements. You can
identify these forward-looking statements through our use of words such as may, will, anticipate, assume, should, indicate, would, believe,
contemplate, expect, estimate, continue, plan, point to, project, predict, could, intend, target,
potential, and other similar words and expressions of the future. These forward-looking statements may not be realized due to a variety of factors, including, without limitation:



| |  |  | the effects of future economic, business and market conditions;
| | - |  | ---------------------------------------------------------------



| |  |  | governmental monetary and fiscal policies, as well as legislative and regulatory changes, including changes in banking, securities and tax laws and regulations;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the risks of changes in interest rates on the levels, composition and costs of deposits, loan demand, and the values of loan collateral, securities, and interest
sensitive assets and liabilities;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | credit risks of borrowers;
| | - |  | --------------------------



| |  |  | the effects of competition from a wide variety of local, regional, national, and other providers of financial, investment, and insurance services;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the failure of assumptions underlying the establishment of allowances for loan losses and other estimates;
| | - |  | ----------------------------------------------------------------------------------------------------------



| |  |  | the risks of mergers, acquisitions and divestitures including, without limitation, the related time and costs of implementing such transactions, integrating
operations as part of these transactions and the possible failure to achieve expected gains, revenue growth or expense savings from such transactions;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | changes in accounting policies, rules and practices;
| | - |  | ----------------------------------------------------



| |  |  | changes in technology or products that may be more difficult or costly, or less effective, than anticipated;
| | - |  | ------------------------------------------------------------------------------------------------------------



| |  |  | the effects of war or other conflict, acts of terrorism or other catastrophic events that affect general economic, business and market conditions; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



1



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| |  |  | other factors and other information contained in this report and in other reports that the Company makes with the Securities and Exchange Commission (the
SEC) under the Exchange Act.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

All written or oral forward-looking statements that are made by or are
attributable to us are expressly qualified in their entirety by this cautionary notice. We have no obligation and do not undertake to update, revise or correct any of the forward-looking statements after the date of this report, or after the
respective dates on which such statements otherwise are made.



2



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|ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|------- | -------------------------------------------



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

BOARD OF DIRECTORS AND SHAREHOLDERS

ALTRUST FINANCIAL SERVICES, INC.

We have audited the accompanying
consolidated balance sheets of Altrust Financial Services, Inc. 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 consolidated 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. We were not engaged to perform an audit of the Companys internal control over
financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Companys internal controls over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements,
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 Altrust Financial Services,
Inc. and subsidiaries as of December 31, 2006 and 2005, and the results of their operations and their 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.

/s/ Dixon Hughes PLLC

Atlanta, Georgia

April 2, 2007





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ALTRUST FINANCIAL SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

December
31, 2006 and 2005



|                                                                                                                  |  |      |             |   |      |   |             |  
|----------------------------------------------------------------------------------------------------------------- |  | ---- | ----------- | - | ---- | - | ----------- | -
|                                                                                                                  |  | 2006 |             |   | 2005 |  
|ASSETS                                                                                                            |  |      |             |   |      |   |             |  
|Cash and due from banks                                                                                           |  | $    | 17,091,893  |   |      | $ | 19,899,481  |  
|Federal funds sold                                                                                                |  |      | 1,176,966   |   |      |   | 3,372,784   |  
|                                                                                                                  |  |      |             |   |      |   |             |  
|Cash and cash equivalents                                                                                         |  |      | 18,268,859  |   |      |   | 23,272,265  |  
|                                                                                                                  |  |     
|Investment securities available for sale                                                                          |  |      | 122,459,777 |   |      |   | 128,878,054 |  
|FHLB, Bankers Bank and other stock                                                                                |  |      | 4,459,658   |   |      |   | 4,835,758   |  
|Loans                                                                                                             |  |      | 246,810,492 |   |      |   | 211,989,052 |  
|Less: Allowance for loan losses                                                                                   |  |      | (2,630,128  | ) |      |   | (2,404,940  | )
|                                                                                                                  |  |      |             |   |      |   |             |  
|Net loans                                                                                                         |  |      | 244,180,364 |   |      |   | 209,584,112 |  
|                                                                                                                  |  |     
|Premises and equipment, net                                                                                       |  |      | 15,354,362  |   |      |   | 14,981,399  |  
|Accrued interest and dividends                                                                                    |  |      | 2,891,447   |   |      |   | 2,939,386   |  
|Other real estate owned                                                                                           |  |      | 1,110,684   |   |      |   | 1,231,093   |  
|Goodwill                                                                                                          |  |      | 4,716,947   |   |      |   | 4,716,947   |  
|Core deposit intangibles                                                                                          |  |      | 725,395     |   |      |   | 879,153     |  
|Cash surrender value of life insurance                                                                            |  |      | 9,301,187   |   |      |   | 9,026,370   |  
|Deferred tax asset                                                                                                |  |      | 1,268,149   |   |      |   | 1,649,880   |  
|Other assets                                                                                                      |  |      | 1,306,417   |   |      |   | 1,341,010   |  
|                                                                                                                  |  |      |             |   |      |   |             |  
|Total assets                                                                                                      |  | $    | 426,043,246 |   |      | $ | 403,335,427 |  
|                                                                                                                  |  |      |             |   |      |   |             |  
|LIABILITIES, REDEEMABLE COMMON STOCK, AND SHAREHOLDERS EQUITY                                                    |  |      |             |   |      |   |             |  
|                                                                                                                  |  |     
|Liabilities                                                                                                       |  |      |             |   |      |   |             |  
|Deposits                                                                                                          |  |      |             |   |      |   |             |  
|Noninterest-bearing                                                                                               |  | $    | 42,749,269  |   |      | $ | 42,424,752  |  
|Interest-bearing                                                                                                  |  |      | 263,886,657 |   |      |   | 229,650,622 |  
|                                                                                                                  |  |      |             |   |      |   |             |  
|Total deposits                                                                                                    |  |      | 306,635,926 |   |      |   | 272,075,374 |  
|                                                                                                                  |  |     
|Capitalized lease obligations                                                                                     |  |      | 2,600,425   |   |      |   | 2,960,445   |  
|Company guaranteed debt of ESOP                                                                                   |  |      |            |   |      |   | 1,726,762   |  
|Advances from the Federal Home Loan Bank                                                                          |  |      | 62,800,000  |   |      |   | 78,350,000  |  
|Federal funds purchased                                                                                           |  |      | 2,448,000   |   |      |   |            |  
|Accrued interest                                                                                                  |  |      | 1,412,954   |   |      |   | 749,000     |  
|Other liabilities                                                                                                 |  |      | 2,253,733   |   |      |   | 1,296,311   |  
|                                                                                                                  |  |      |             |   |      |   |             |  
|Total liabilities                                                                                                 |  |      | 378,151,038 |   |      |   | 357,157,892 |  
|                                                                                                                  |  |      |             |   |      |   |             |  
|Commitments and contingencies                                                                                     |  |      |             |   |      |   |             |  
|Redeemable common stock held by ESOP at fair market value                                                         |  |      | 12,836,264  |   |      |   | 8,232,727   |  
|                                                                                                                  |  |     
|Shareholders equity                                                                                              |  |      |             |   |      |   |             |  
|Common stock, par value $.01 per share, 10,000,000 shares authorized, 5,485,625 and 5,448,025 shares issued as of |  |      |             |   |      |   |             |  
|December 31, 2006 and 2005, respectively                                                                          |  |      | 54,856      |   |      |   | 54,480      |  
|Capital surplus                                                                                                   |  |      | 16,551,903  |   |      |   | 15,958,292  |  
|Retained earnings                                                                                                 |  |      | 19,765,289  |   |      |   | 25,596,039  |  
|Accumulated other comprehensive loss                                                                              |  |      | (1,316,104  | ) |      |   | (1,937,241  | )
|Unearned compensation related to ESOP debt                                                                        |  |      |            |   |      |   | (1,726,762  | )
|                                                                                                                  |  |      |             |   |      |   |             |  
|Total shareholders equity                                                                                        |  |      | 35,055,944  |   |      |   | 37,944,808  |  
|                                                                                                                  |  |      |             |   |      |   |             |  
|Total liabilities and shareholders equity                                                                        |  | $    | 426,043,246 |   |      | $ | 403,335,427 |  
|                                                                                                                  |  |      |             |   |      |   |             |  

See accompanying notes to consolidated financial statements.



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ALTRUST FINANCIAL SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

Years ended December 31, 2006, 2005, and 2004



|                                                    |  |      |            |   |      |   |            |  |   |           
|--------------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- |  | - | ----------
|                                                    |  | 2006 |            |   | 2005 |   | 2004      
|Interest income                                     |  |      |            |   |      |   |            |  |   |           
|Interest and fees on loans                          |  | $    | 17,902,898 |   |      | $ | 13,995,597 |  | $ | 13,245,457
|Taxable securities                                  |  |      | 4,443,351  |   |      |   | 4,633,710  |  |   | 3,327,209 
|Nontaxable securities                               |  |      | 911,994    |   |      |   | 747,532    |  |   | 286,199   
|Federal funds sold                                  |  |      | 217,329    |   |      |   | 316,038    |  |   | 120,792   
|Other interest and dividends                        |  |      | 232,271    |   |      |   | 265,785    |  |   | 103,893   
|                                                    |  |      |            |   |      |   |            |  |   |           
|Total interest income                               |  |      | 23,707,843 |   |      |   | 19,958,662 |  |   | 17,083,550
|                                                    |  |      |            |   |      |   |            |  |   |           
|Interest expense                                    |  |      |            |   |      |   |            |  |   |           
|Deposits                                            |  |      | 6,609,161  |   |      |   | 3,642,714  |  |   | 2,731,594 
|Borrowed funds                                      |  |      | 2,685,471  |   |      |   | 3,175.943  |  |   | 1,936,359 
|                                                    |  |      |            |   |      |   |            |  |   |           
|Total interest expense                              |  |      | 9,294,632  |   |      |   | 6,818,657  |  |   | 4,667,953 
|                                                    |  |      |            |   |      |   |            |  |   |           
|Net interest income                                 |  |      | 14,413,211 |   |      |   | 13,140,005 |  |   | 12,415,597
|                                                    |  |      |           
|Provision for loan losses                           |  |      | 368,981    |   |      |   | 113,500    |  |   | 426,460   
|                                                    |  |      |            |   |      |   |            |  |   |           
|Net interest income after provision for loan losses |  |      | 14,044,230 |   |      |   | 13,026,505 |  |   | 11,989,137
|                                                    |  |      |            |   |      |   |            |  |   |           
|Noninterest income                                  |  |      |            |   |      |   |            |  |   |           
|Service charges on deposits                         |  |      | 8,275,232  |   |      |   | 6,240,716  |  |   | 5,083,451 
|Insurance commissions                               |  |      | 225,938    |   |      |   | 224,743    |  |   | 235,714   
|Investment securities gains                         |  |      | (43,517    | ) |      |   |           |  |   | 8,438     
|Other operating income                              |  |      | 885,279    |   |      |   | 985,112    |  |   | 860,130   
|                                                    |  |      |            |   |      |   |            |  |   |           
|Total noninterest income                            |  |      | 9,386,449  |   |      |   | 7,450,571  |  |   | 6,187,733 
|                                                    |  |      |            |   |      |   |            |  |   |           
|Noninterest expense                                 |  |      |            |   |      |   |            |  |   |           
|Salaries and employee benefits                      |  |      | 6,615,923  |   |      |   | 5,936,368  |  |   | 6,165,286 
|Occupancy and equipment expense                     |  |      | 2,329,959  |   |      |   | 1,892,216  |  |   | 1,791,989 
|Professional services                               |  |      | 832,698    |   |      |   | 692,148    |  |   | 312,991   
|Core deposit intangible amortization                |  |      | 153,757    |   |      |   | 152,343    |  |   | 513,901   
|Other operating expenses                            |  |      | 4,590,707  |   |      |   | 5,230,896  |  |   | 4,478,688 
|                                                    |  |      |            |   |      |   |            |  |   |           
|Total noninterest expense                           |  |      | 14,523,044 |   |      |   | 13,903,971 |  |   | 13,262,855
|                                                    |  |      |            |   |      |   |            |  |   |           
|Income before income taxes                          |  |      | 8,907,635  |   |      |   | 6,573,105  |  |   | 4,914,015 
|                                                    |  |      |           
|Provision for income taxes                          |  |      | 2,856,998  |   |      |   | 1,675,797  |  |   | 1,550,509 
|                                                    |  |      |            |   |      |   |            |  |   |           
|Net income                                          |  | $    | 6,050,637  |   |      | $ | 4,897,308  |  | $ | 3,363,506 
|                                                    |  |      |            |   |      |   |            |  |   |           
|Earnings per share                                  |  |      |            |   |      |   |            |  |   |           
|Basic                                               |  | $    | 1.10       |   |      | $ | 0.94       |  | $ | 0.64      
|Diluted                                             |  | $    | 1.09       |   |      | $ | 0.93       |  | $ | 0.64      

See accompanying notes to consolidated financial statements.



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ALTRUST FINANCIAL SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Years ended December 31, 2006, 2005 and 2004



|                                                                                      |  |      |           |      |   |            |      |  |   |           |  
|------------------------------------------------------------------------------------- |  | ---- | --------- | ---- | - | ---------- | ---- |  | - | --------- | -
|                                                                                      |  | 2006 |           | 2005 |   |            | 2004 | 
|Net income                                                                            |  | $    | 6,050,637 |      | $ | 4,897,308  |      |  | $ | 3,363,506 |  
|                                                                                      |  |      |           |      |   |            |      |  |   |           |  
|Other comprehensive income, net of tax:                                               |  |      |           |      |   |            |      |  |   |           |  
|                                                                                      |  |      |          
|Current year holding gains (losses)on securities available for sale:                  |  |      |           |      |   |            |      |  |   |           |  
|Unrealized holding gains (losses) arising                                             |  |      |           |      |   |            |      |  |   |           |  
|during period, net of tax of $396,707, $(1,105,206) and $121,146, respectively        |  |      | 595,061   |      |   | (1,657,810 | )    |  |   | 235,166   |  
|                                                                                      |  |      |          
|Reclassification adjustment for (gains) and losses included in net income, net of tax |  |      |           |      |   |            |      |  |   |           |  
|                                                                                      |  |      | 26,076    |      |   |           |      |  |   | (5,063    | )
|                                                                                      |  |      |           |      |   |            |      |  |   |           |  
|Other comprehensive income (loss)                                                     |  |      | 621,137   |      |   | (1,657,810 | )    |  |   | 230,103   |  
|                                                                                      |  |      |           |      |   |            |      |  |   |           |  
|Comprehensive income                                                                  |  | $    | 6,671,774 |      | $ | 3,239,498  |      |  | $ | 3,593,609 |  
|                                                                                      |  |      |           |      |   |            |      |  |   |           |  

See accompanying notes to consolidated financial statements.



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ALTRUST FINANCIAL SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY

Years ended December 31, 2006, 2005 and 2004



|                                                                  |  |              |        |   |                 |   |            |                   |  |   |                                               |   |  |                                     |            |   |                |   |            |       |  |   |          |   |  |   |            |  
|----------------------------------------------------------------- |  | ------------ | ------ | - | --------------- | - | ---------- | ----------------- |  | - | --------------------------------------------- | - |  | ----------------------------------- | ---------- | - | -------------- | - | ---------- | ----- |  | - | -------- | - |  | - | ---------- | -
|                                                                  |  | Common Stock |        |   | Capital Surplus |   |            | Retained Earnings |  |   | Accumulated Other Comprehensive Income (Loss) |   |  | Unearned Compensation Re: ESOP
Debt |            |   | Treasury Stock |   |            | Total | 
|                                                                  |  |              |        |   |                 |  
|                                                                  |  |              |        |   |                 |  
|                                                                  |  |              |        |   |                 |  
|Balance, December 31, 2003                                        |  | $            | 55,466 |   |                 | $ | 16,759,733 |                   |  | $ | 21,546,532                                    |   |  | $                                   | (509,534   | ) |                | $ | (3,096,000 | )     |  | $ | (631,573 | ) |  | $ | 34,124,624 |  
|Issuance of 18,000 shares upon exercise of options                |  |              | 180    |   |                 |   | 152,820    |                   |  |   |                                              |   |  |                                     |           |   |                |   |           |       |  |   |         |   |  |   | 153,000    |  
|Purchase of 49,086 shares of treasury stock                       |  |              |       |   |                 |   |           |                   |  |   |                                              |   |  |                                     |           |   |                |   |           |       |  |   | (381,644 | ) |  |   | (381,644   | )
|Retirement of 129,353 shares of treasury stock                    |  |              | (1,293 | ) |                 |   | (988,931   | )                 |  |   |                                              |   |  |                                     |           |   |                |   |           |       |  |   | 990,224  |   |  |   |           |  
|Dividends ($.15 per share)                                        |  |              |        |   |                 |   |            |                   |  |   | (817,433                                      | ) |  |                                     |            |   |                |   |            |       |  |   |          |   |  |   | (817,433   | )
|Net change in unrealized gains (losses) on securities             |  |              |       |   |                 |   |           |                   |  |   |                                              |   |  |                                     | 230,103    |   |                |   |           |       |  |   |         |   |  |   | 230,103    |  
|Net income                                                        |  |              |       |   |                 |   |           |                   |  |   | 3,363,506                                     |   |  |                                     |           |   |                |   |           |       |  |   |         |   |  |   | 3,363,506  |  
|Change in fair value of allocated ESOP shares                     |  |              |       |   |                 |   |           |                   |  |   | (1,879,566                                    | ) |  |                                     |           |   |                |   |           |       |  |   |         |   |  |   | (1,879,566 | )
|Reduction of ESOP debt                                            |  |              |       |   |                 |   |           |                   |  |   |                                              |   |  |                                     |           |   |                |   | 550,027    |       |  |   |         |   |  |   | 550,027    |  
|                                                                  |  |              |        |   |                 |   |            |                   |  |   |                                               |   |  |                                     |            |   |                |   |            |       |  |   |          |   |  |   |            |  
|Balance, December 31, 2004                                        |  |              | 54,353 |   |                 |   | 15,923,622 |                   |  |   | 22,213,039                                    |   |  |                                     | (279,431   | ) |                |   | (2,545,973 | )     |  |   | (22,993  | ) |  |   | 35,342,617 |  
|Issuance of 16,800 shares upon exercise of options                |  |              | 168    |   |                 |   | 67,982     |                   |  |   |                                              |   |  |                                     |           |   |                |   |           |       |  |   |         |   |  |   | 68,150     |  
|Purchase of 1,200 shares of treasury stock                        |  |              |       |   |                 |   |           |                   |  |   |                                              |   |  |                                     |           |   |                |   |           |       |  |   | (10,360  | ) |  |   | (10,360    | )
|Retirement of 4,034 shares of treasury stock                      |  |              | (41    | ) |                 |   | (33,312    | )                 |  |   |                                              |   |  |                                     |           |   |                |   |           |       |  |   | 33,353   |   |  |   |           |  
|Dividends ($.24 per share)                                        |  |              |       |   |                 |   |           |                   |  |   | (1,305,443                                    | ) |  |                                     |           |   |                |   |           |       |  |   |         |   |  |   | (1,305,443 | )
|Net change in unrealized gains (losses) on securities             |  |              |       |   |                 |   |           |                   |  |   |                                              |   |  |                                     | (1,657,810 | ) |                |   |           |       |  |   |         |   |  |   | (1,657,810 | )
|Net income                                                        |  |              |       |   |                 |   |           |                   |  |   | 4,897,308                                     |   |  |                                     |           |   |                |   |           |       |  |   |         |   |  |   | 4,897,308  |  
|Change in fair value of allocated ESOP shares                     |  |              |       |   |                 |   |           |                   |  |   | (208,865                                      | ) |  |                                     |           |   |                |   |           |       |  |   |         |   |  |   | (208,865   | )
|Reduction of ESOP debt                                            |  |              |       |   |                 |   |           |                   |  |   |                                              |   |  |                                     |           |   |                |   | 819,211    |       |  |   |         |   |  |   | 819,211    |  
|                                                                  |  |              |        |   |                 |   |            |                   |  |   |                                               |   |  |                                     |            |   |                |   |            |       |  |   |          |   |  |   |            |  
|Balance, December 31, 2005                                        |  |              | 54,480 |   |                 |   | 15,958,292 |                   |  |   | 25,596,039                                    |   |  |                                     | (1,937,241 | ) |                |   | (1,726,762 | )     |  |   |         |   |  |   | 37,944,808 |  
|Issuance of 37,600 shares upon exercise of options                |  |              | 376    |   |                 |   | 186,399    |                   |  |   |                                              |   |  |                                     |           |   |                |   |           |       |  |   |         |   |  |   | 186,775    |  
|Tax benefit from exercise of options and dividends on ESOP shares |  | $            |       |   |                 | $ | 269,356    |                   |  | $ |                                              |   |  | $                                   |           |   |                | $ |           |       |  | $ |         |   |  | $ | 269,356    |  
|Dividends ($1.33 per share)                                       |  |              |       |   |                 |   |           |                   |  |   | (7,277,850                                    | ) |  |                                     |           |   |                |   |           |       |  |   |         |   |  |   | (7,277,850 | )
|Net change in unrealized gains (losses) on securities             |  |              |       |   |                 |   |           |                   |  |   |                                              |   |  |                                     | 621,137    |   |                |   |           |       |  |   |         |   |  |   | 621,137    |  
|Net income                                                        |  |              |       |   |                 |   |           |                   |  |   | 6,050,637                                     |   |  |                                     |           |   |                |   |           |       |  |   |         |   |  |   | 6,050,637  |  
|Change in fair value of allocated ESOP shares                     |  |              |       |   |                 |   |           |                   |  |   | (4,603,537                                    | ) |  |                                     |           |   |                |   |           |       |  |   |         |   |  |   | (4,603,537 | )
|Share based compensation                                          |  |              |       |   |                 |   | 137,856    |                   |  |   |                                              |   |  |                                     |           |   |                |   |           |       |  |   |         |   |  |   | 137,856    |  
|Reduction of ESOP debt                                            |  |              |       |   |                 |   |           |                   |  |   |                                              |   |  |                                     |           |   |                |   | 1,726,762  |       |  |   |         |   |  |   | 1,726,762  |  
|                                                                  |  |              |        |   |                 |   |            |                   |  |   |                                               |   |  |                                     |            |   |                |   |            |       |  |   |          |   |  |   |            |  
|Balance, December 31, 2006                                        |  | $            | 54,856 |   |                 | $ | 16,551,903 |                   |  | $ | 19,765,289                                    |   |  | $                                   | (1,316,104 | ) |                | $ |           |       |  | $ |         |   |  | $ | 35,055,944 |  
|                                                                  |  |              |        |   |                 |   |            |                   |  |   |                                               |   |  |                                     |            |   |                |   |            |       |  |   |          |   |  |   |            |  

See accompanying notes to consolidated financial statements.



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##### Table of Contents

ALTRUST FINANCIAL SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended December 31, 2006, 2005, and 2004



|                                                                                                           |  |      |             |   |      |   |             |      |  |   |              |  
|---------------------------------------------------------------------------------------------------------- |  | ---- | ----------- | - | ---- | - | ----------- | ---- |  | - | ------------ | -
|                                                                                                           |  | 2006 |             |   | 2005 |   |             | 2004 | 
|Cash flows from operating activities                                                                       |  |      |             |   |      |   |             |      |  |   |              |  
|Net income                                                                                                 |  | $    | 6,050,637   |   |      | $ | 4,897,308   |      |  | $ | 3,363,506    |  
|Adjustments to reconcile net income to net cash provided by operating activities Provision for loan losses |  |      | 368,981     |   |      |   | 113,500     |      |  |   | 426,460      |  
|Depreciation and amortization                                                                              |  |      | 1,593,874   |   |      |   | 1,357,240   |      |  |   | 1,511,867    |  
|Write-down of other real estate                                                                            |  |      | 10,000      |   |      |   |            |      |  |   |             |  
|Deferred tax (benefit) expense                                                                             |  |      | (32,360     | ) |      |   | 420,049     |      |  |   | (286,435     | )
|Share based compensation expense                                                                           |  |      | 137,856     |   |      |   |            |      |  |   |             |  
|(Gain) loss on sale of securities                                                                          |  |      | 43,517      |   |      |   |            |      |  |   | (8,438       | )
|Loss on disposition of other real estate                                                                   |  |      | 2,410       |   |      |   | 84,873      |      |  |   | 98,603       |  
|Loss on disposition of premises and equipment                                                              |  |      | 83,512      |   |      |   | 6,025       |      |  |   | 125,731      |  
|Increase in cash surrender value of life insurance                                                         |  |      | (274,817    | ) |      |   | (360,900    | )    |  |   | (339,593     | )
|(Increase) decrease in accrued interest and dividends receivable                                           |  |      | 47,939      |   |      |   | (702,286    | )    |  |   | (325,428     | )
|Increase in accrued interest payable                                                                       |  |      | 663,954     |   |      |   | 154,389     |      |  |   | 248,787      |  
|Net change in other assets, liabilities, and other operating activities                                    |  |      | 779,616     |   |      |   | (897,636    | )    |  |   | (193,910     | )
|                                                                                                           |  |      |             |   |      |   |             |      |  |   |              |  
|Net cash provided by operating activities                                                                  |  |      | 9,475,119   |   |      |   | 5,072,562   |      |  |   | 4,621,150    |  
|                                                                                                           |  |      |             |   |      |   |             |      |  |   |              |  
|Cash flows from investing activities                                                                       |  |      |             |   |      |   |             |      |  |   |              |  
|Net cash received in acquisition of branches                                                               |  |      |            |   |      |   |            |      |  |   | 6,625,831    |  
|Purchase of available for sale securities                                                                  |  |      | (8,221,669  | ) |      |   | (11,657,938 | )    |  |   | (100,166,564 | )
|Proceeds from maturities, calls and sales of available for sale securities                                 |  |      | 15,303,939  |   |      |   | 16,605,056  |      |  |   | 23,085,684   |  
|Net increase in loans                                                                                      |  |      | (35,128,551 | ) |      |   | (17,188,683 | )    |  |   | (11,753,729  | )
|Purchase of premises and equipment, net                                                                    |  |      | (1,569,875  | ) |      |   | (2,626,222  | )    |  |   | (914,973     | )
|Proceeds from the disposition of premises and equipment                                                    |  |      | 1,000       |   |      |   |            |      |  |   | 5,000        |  
|Proceeds from disposition of other real estate owned                                                       |  |      | 271,317     |   |      |   | 921,465     |      |  |   | 1,476,341    |  
|Purchase of life insurance on officers                                                                     |  |      |            |   |      |   |            |      |  |   | (1,000,000   | )
|Net (increase) decrease FHLB, Bankers                                                                      |  |      |             |   |      |   |             |      |  |   |              |  
|Bank and other stock                                                                                       |  |      | 376,100     |   |      |   | 538,500     |      |  |   | (4,496,166   | )
|                                                                                                           |  |      |             |   |      |   |             |      |  |   |              |  
|Net cash used in investing activities                                                                      |  |      | (28,967,739 | ) |      |   | (13,407,822 | )    |  |   | (87,138,576  | )
|                                                                                                           |  |      |             |   |      |   |             |      |  |   |              |  

See accompanying notes to consolidated financial statements.



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##### Table of Contents

ALTRUST FINANCIAL SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

Years ended December 31, 2006, 2005, and 2004



|                                                                 |  |      |             |   |      |   |             |      |  |   |             |  
|---------------------------------------------------------------- |  | ---- | ----------- | - | ---- | - | ----------- | ---- |  | - | ----------- | -
|                                                                 |  | 2006 |             |   | 2005 |   |             | 2004 | 
|Cash flows from financing activities                             |  |      |             |   |      |   |             |      |  |   |             |  
|Net (decrease) increase in non-interest bearing deposits         |  | $    | 324,517     |   |      | $ | 13,250,244  |      |  | $ | (17,417,607 | )
|Net increase in interest bearing deposits                        |  |      | 34,236,035  |   |      |   | 17,182,918  |      |  |   | 34,615,540  |  
|Net decrease in securities sold under agreement to repurchase    |  |      |            |   |      |   | (4,714,428  | )    |  |   | (282,402    | )
|Increase (decrease) in advances from FHLB                        |  |      | (15,550,000 | ) |      |   | (18,050,000 | )    |  |   | 96,400,000  |  
|Net (decrease) increase in federal funds purchased               |  |      | 2,448,000   |   |      |   |            |      |  |   | (10,573,383 | )
|Increase (decrease) in capital lease obligation                  |  |      | (360,020    | ) |      |   | 11,133      |      |  |   | 11,751      |  
|Dividends paid                                                   |  |      | (6,839,000  | ) |      |   | (1,305,443  | )    |  |   | (817,433    | )
|Excess tax benefit from share-based payment arrangements         |  |      | 42,907      |   |      |   |            |      |  |   |            |  
|Purchase of treasury stock                                       |  |      |            |   |      |   | (10,360     | )    |  |   | (381,644    | )
|Proceeds from sale of stock, net                                 |  |      | 186,775     |   |      |   | 68,150      |      |  |   | 153,000     |  
|                                                                 |  |      |             |   |      |   |             |      |  |   |             |  
|Net cash provided by financing activities                        |  |      | 14,489,214  |   |      |   | 6,432,214   |      |  |   | 101,707,822 |  
|                                                                 |  |      |             |   |      |   |             |      |  |   |             |  
|Net increase (decrease) in cash and cash equivalents             |  |      | (5,003,406  | ) |      |   | (1,903,046  | )    |  |   | 19,190,396  |  
|Cash and cash equivalents, beginning of year                     |  |      | 23,272,265  |   |      |   | 25,175,311  |      |  |   | 5,984,915   |  
|                                                                 |  |      |             |   |      |   |             |      |  |   |             |  
|Cash and cash equivalents, end of year                           |  | $    | 18,268,859  |   |      | $ | 23,272,265  |      |  | $ | 25,175,311  |  
|                                                                 |  |      |             |   |      |   |             |      |  |   |             |  
|Supplemental disclosures  cash and noncash                      |  |      |             |   |      |   |             |      |  |   |             |  
|                                                                 |  |      |            
|Interest paid                                                    |  | $    | 8,630,678   |   |      | $ | 6,664,268   |      |  | $ | 4,402,555   |  
|Income taxes paid                                                |  |      | 2,193,883   |   |      |   | 2,010,080   |      |  |   | 1,173,794   |  
|Loans transferred to foreclosed real estate                      |  |      | 163,318     |   |      |   | 429,590     |      |  |   | 1,780,164   |  
|Retirement of treasury stock                                     |  |      |            |   |      |   | 33,353      |      |  |   | 990,224     |  
|Fair value of noncash assets acquired in branch acquisitions     |  |      |            |   |      |   |            |      |  |   | 1,591,710   |  
|Fair value of noncash liabilities assumed in branch acquisitions |  |      |            |   |      |   |            |      |  |   | 8,217,541   |  
|Capitalized lease-purchase of branch facility                    |  |      |            |   |      |   | 375,000     |      |  |   |            |  

See accompanying notes to consolidated financial statements.



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##### Table of Contents

ALTRUST FINANCIAL SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2006, 2005, and 2004



NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of consolidation: The consolidated financial statements include the accounts of Altrust Financial Services, Inc. (the Company) and its wholly
owned subsidiaries, Peoples Bank of North Alabama (the Bank), Southern Insurance of Cullman, Inc. and Southern Appraisal Services, Inc. All significant inter-company balances and transactions have been eliminated in consolidation.

Nature of operations: The Company is a bank holding company headquartered in Cullman, Alabama, which through its subsidiary Peoples Bank of North
Alabama provides a full range of banking services to individual and corporate customers throughout central and north Alabama.

Use of Estimates: To
prepare financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts
reported in the financial statements and the disclosures provided, and future results could differ. The allowance for loan losses, valuation of foreclosed real estate, and fair values of financial instruments are particularly subject to change.

Cash, Due from Banks and Cash Flows: For purposes of reporting cash flows, cash and due from banks includes cash on hand, cash items in process of
collection and amounts due from banks. Cash flows from loans, federal funds sold, interest-bearing deposits in banks, FHLB, Bankers Bank and other stock, deposits, other borrowings and federal funds purchased are reported net.

The Bank is required to maintain reserve balances in cash or on deposit with the Federal Reserve Bank based on a percentage of deposits. The total of those reserve
balances were approximately $50,000 and $50,000 at December 31, 2006 and 2005, respectively.

Investment securities: Securities are classified
as available for sale when they might be sold before maturity. Unrealized holding gains and losses, net of tax, on securities available for sale are reported as a net amount in a separate component of shareholders equity until realized. Gains
and losses on the sale of securities available for sale are determined using the specific-identification method. The amortization of premiums and the accretion of discounts are recognized in interest income using methods approximating the interest
method over the period to maturity.

Declines in the fair value of individual available-for-sale securities below their cost that are other than temporary
result in write-downs of the individual securities to their fair value. The related write-downs are included in earnings as realized losses.

Investments in Equity Securities Carried at Cost: Investment in Federal Home Loan Bank (FHLB) stock, which is carried at cost because it can only be redeemed at par, is a required investment based on the Banks
membership and amount of borrowing with the FHLB. The Bank also carries certain other equity securities at cost, which approximates fair value.



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##### Table of Contents

ALTRUST FINANCIAL SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2006, 2005, and 2004



NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Loans: Loans are stated at unpaid principal balances, less the allowance for loan losses.

Interest on all loans is recognized as income based upon the applicable rate applied to the daily outstanding principal balance of the loans. Interest income generally is not recognized on specific impaired loans
unless the likelihood of further loss is remote. Interest payments received on such loans are generally applied as a reduction of the loan principal balance. Interest income on nonaccrual loans is recognized only to the extent of interest payments
received.

Allowance for loan losses: The allowance for loan losses is maintained at a level which, in managements judgment, is adequate to
absorb credit losses inherent in the loan portfolio. The amount of the allowance is based on managements evaluation of the collectibility of the loan portfolio, including the nature of the portfolio, credit concentrations, trends in historical
loss experience, specific impaired loans, economic conditions and other risks inherent in the portfolio. Allowances for impaired loans are generally determined based on collateral values or the present value of the estimated cash flows. The
allowance is increased by a provision for loan losses, which is charged to expense, and reduced by charge-offs, net of recoveries. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the
Companys allowance for losses on loans. Such agencies may require the Company to recognize adjustments to the allowance based on their judgments about information available to them at the time of their examination.

Foreclosed real estate: At the time of foreclosure, foreclosed real estate is recorded at fair value less cost to sell, which becomes the propertys new
basis. Any write downs based on the assets fair value at date of acquisition are charged to the allowance for loan losses. After foreclosure, these assets are carried at the lower of their new cost basis or fair value less cost to sell. Costs
incurred in maintaining foreclosed real estate and subsequent adjustments to the carrying amount of the property are included in other operating expenses.

Premises and equipment: Premises and equipment are stated at cost less accumulated depreciation. Expenditures for additions and major improvements that significantly extend the useful lives of the assets are capitalized. Expenditures
for repairs and maintenance are charged to expense as incurred. Assets which are disposed of are removed from the accounts and the resulting gains or losses are recorded in operations. Depreciation is calculated on a straight-line basis over the
assets useful lives, which range from 3 to 10 years for furniture, fixtures and equipment, while buildings and components range from 10 to 30 years.

Bank owned life insurance: The Company has purchased life insurance policies on certain key executives. Company owned life insurance is recorded at its cash surrender value, or the amount that can be realized.



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##### Table of Contents

ALTRUST FINANCIAL SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2006, 2005, and 2004



NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Goodwill and Other Intangible Assets: Goodwill results from prior business acquisitions and represents the excess of the purchase price over the fair value
of acquired tangible assets and liabilities and identifiable intangible assets. Other intangible assets consist of core deposit intangibles arising from whole bank and branch acquisitions and are determined by an independent consulting firm. They
are initially measured at fair value and then are amortized on an accelerated method considering estimated deposit account attrition, which ranges from seven to fifteen years. Goodwill is assessed at least annually for impairment and any such
impairment will be recognized in the period identified.

Income taxes: Income tax expense is the total of the current year income tax due or
refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax bases of assets and liabilities, computed using
enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized.

Long Term Assets: Premises
and equipment and other long-term assets are reviewed for impairment when events indicate their carrying amount may not be recoverable from future undiscounted cash flows. If impaired, the assets are recorded at fair value.

Earnings Per Common Share: Basic earnings per common share are net income divided by the weighted average number of common shares outstanding during the period.
Diluted earnings per common share include the dilutive effect of additional potential common shares issuable under stock options. Pursuant to the requirements of AICPA Statement of Position (SOP) 93-6, Employers Accounting for Employee
Stock Ownership Plans, the weighted average number of common shares outstanding during the period excludes common shares that are restricted and have not been released or committed to be released and allocated to plan participants of the
Employee Stock Ownership Plan. The number of common shares excluded for the periods of December 31, 2006, 2005, and 2004 were -0-, 211,997, and 275,289, respectively.

Employee stock ownership plan: The Company and its subsidiaries have an Employee Stock Ownership Plan (ESOP) which covers substantially all employees. Contributions to the ESOP are determined by the Board of
Directors.

Loan Commitments and Related Financial Instruments: Financial instruments, which include credit card arrangements, commitments to make
loans and standby letters of credit, are issued to meet customer financing needs. The face amount for these items represents the exposure to loss before considering customer collateral or ability to repay. Such financial instruments are recorded
when they are funded. Instruments such as stand by letters of credit are considered financial guarantees in accordance with FASB Interpretation No. 45. The fair value of these financial guarantees is not material.

Debt cancellation contracts: The Bank issues debt cancellation contracts on certain loans as an additional service product to its customers. The contracts
represent an agreement by the Bank to cancel the debt of the borrower upon said borrowers death. Contracts are limited to $30,000 per borrower. The Bank charges fees equivalent to that authorized by the state banking authorities, and sets
aside 100% of all fees as a reserve for potential claims. At various intervals the reserve is analyzed by management for adequacy with adjustments for estimated earned portions recorded into income. The reserve for debt cancellation contracts,
including amounts estimated as unearned, was $169,280 and $169,423 at December 31, 2006 and 2005, respectively.



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##### Table of Contents

ALTRUST FINANCIAL SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2006, 2005, and 2004



NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Debt cancellation contracts (Continued)

There were 851 contracts
outstanding at December 31, 2006 with total outstanding principal of $4,739,473 for an average loan size of $5,569. The following roll-forward shows the activity involved with this product and the reserve:



|                                         |  |                |     |   |      |   |      |  
|---------------------------------------- |  | -------------- | --- | - | ---- | - | ---- | -
|                                         |  | 2006           |     |   | 2005 |  
|                                         |  | (in thousands) |    
|Debt cancellation reserve  Beg. of Year |  | $              | 169 |   |      | $ | 199  |  
|Fees                                     |  |                | 85  |   |      |   | 68   |  
|Fees earned                              |  |                | (91 | ) |      |   | (106 | )
|Contracts paid out                       |  |                | (30 | ) |      |   | (30  | )
|Provision                                |  |                | 36  |   |      |   | 38   |  
|                                         |  |                |     |   |      |   |      |  
|Debt cancellation reserve  End of Year  |  | $              | 169 |   |      | $ | 169  |  
|                                         |  |                |     |   |      |   |      |  

Fair Value of Financial Instruments: Fair values of financial instruments are estimated using relevant
market information and other assumptions, as more fully disclosed in a separate note. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in
the absence of broad markets for particular items. Changes in assumptions or in market conditions could significantly affect the estimates.

Comprehensive income: Comprehensive income consists of net income and other comprehensive income. Other comprehensive income includes unrealized gains and losses on securities available for sale which are also recognized as a
separate component of equity.

Advertising: Advertising costs are expensed as incurred. Advertising expense for the years ended December 31,
2006, 2005 and 2004 was $319,231, $621,374, and $394,008, respectively.

Segments: Internal financial reporting is primarily reported and aggregated
in three lines of business: banking, mortgage insurance and appraisal services. Banking accounts for nearly 100% of revenues for the years presented.

Stock-Based Compensation: Effective January 1, 2006, the Company adopted Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment, (SFAS No. 123R) using the
modified prospective method. According to SFAS No. 123R, the total cost of the Companys share based awards is equal to the grant date fair value and recognized as expense on a straight line basis over the service periods of the awards.
For the year ended December 31, 2006 stock option expense of $137,856 was recorded in the income statement in net income. As of December 31, 2006, the Company had $381,970 of unrecognized stock option expense which will be recognized over
4.9 years.

As allowed under SFAS No. 123, the Company applied APB Opinion No. 25, Accounting for Stock Issued to Employees, and
related interpretations in accounting for its stock option plans prior to January 2006. Accordingly, no compensation expense was recognized for options granted with exercises prices equal to the fair market value of the Companys common stock
on the grant date.



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##### Table of Contents

ALTRUST FINANCIAL SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2006, 2005, and 2004



NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

The following illustrates the effect on net income available to common shareholders if the Company had applied the fair value recognition provisions of SFAS No. 123
to the years ended December 31, 2005 and 2004:



|                                                                                                       |  |                         |           |   |      |   |           |  
|------------------------------------------------------------------------------------------------------ |  | ----------------------- | --------- | - | ---- | - | --------- | -
|                                                                                                       |  | Year ended December 31, |          
|                                                                                                       |  | 2005                    |           |   | 2004 |  
|Net income, as reported                                                                                |  | $                       | 4,897,308 |   |      | $ | 3,363,506 |  
|Deduct: Total stock-based employee compensation based on fair value accounting for options, net of tax |  |                         | (84,595   | ) |      |   | (75,928   | )
|                                                                                                       |  |                         |           |   |      |   |           |  
|Pro forma net income                                                                                   |  | $                       | 4,812,713 |   |      | $ | 3,287,578 |  
|                                                                                                       |  |                         |           |   |      |   |           |  
|Earnings per share:                                                                                    |  |                         |           |   |      |   |           |  
|Basic  as reported                                                                                    |  | $                       | 0.94      |   |      | $ | 0.64      |  
|                                                                                                       |  |                         |           |   |      |   |           |  
|Basic  pro forma                                                                                      |  | $                       | 0.92      |   |      | $ | 0.63      |  
|                                                                                                       |  |                         |           |   |      |   |           |  
|Diluted  as reported                                                                                  |  | $                       | 0.93      |   |      | $ | 0.64      |  
|                                                                                                       |  |                         |           |   |      |   |           |  
|Diluted  pro forma                                                                                    |  | $                       | 0.91      |   |      | $ | 0.62      |  
|                                                                                                       |  |                         |           |   |      |   |           |  

Reclassifications: Certain items in prior year financial statements have been reclassified to conform to
the 2006 presentation with no change to net income or shareholders equity as previously reported.

New accounting pronouncements: In June
2006, the FASB issued FASB Interpretation No. 48 (FIN48), Accounting for Uncertainty in Income Taxes. FIN 48, which is effective for years beginning after December 15, 2006, applies to all tax positions within the scope
of SFAS 109. This statement requires a more-likely-than-not threshold for initial recognition of a tax benefit in the financial statements, and requires measurement of the amount of benefit to be recognized based upon the largest amount
of benefit that is greater than 50% likely of being realized upon ultimate settlement with the taxing authority. The cumulative effect of initially applying FIN 48 is recorded in opening retained earnings of the year of adoption. The impact of
implementation on the Companys financial statements is not expected to be material.

In September 2006, the FASB issued FAS 157, Fair Value
Measurements. FAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. FAS 157 is effective for financial statements issued
for fiscal years beginning after November 15, 2007. The impact of implementation on the Companys financial statements is not expected to be material.

In September 2006, the Emerging Issues Task Force (EITF) reached a final consensus on Issue 06-4, Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements. EITF
06-4 requires that for a split-dollar life insurance arrangement, an employer should recognize a liability for future benefits in accordance with FAS 106, Employers Accounting for Postretirement Benefits Other Than Pensions. Under the
guidance, the purchase of an endorsement type policy does not constitute a settlement since the policy does not qualify as nonparticipating because the policyholders are subject to the favorable and unfavorable experience of the insurance company.
EITF 06-4 is effective for fiscal years beginning after December 15, 2007. The impact of implementation on the Companys financial statements is not expected to be material.



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##### Table of Contents

ALTRUST FINANCIAL SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2006, 2005, and 2004



NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

In September 2006, the EITF reached a final consensus on Issue 06-5, Accounting for Purchases of Life Insurance. EITF 06-5 provides guidance on FASB Technical
Bulletin No. 85-4, Accounting for Purchases of Life Insurance. Under the guidance, the policyholder should consider any additional amounts included in the contractual terms of the policy in determining the amount that could be realized
under the insurance contract. In addition, the policyholder should also determine the amount that could be realized under the life insurance contract assuming the surrender of an individual-life by individual-life policy (or certificate by
certificate in a group policy). EITF 06-5 is effective for fiscal years beginning after December 15, 2006. The impact of implementation on the Companys financial statements is not expected to be material.

In September 2006, the FASB issued SFAS No. 158, Employers Accounting for Defined Benefit Pension and Other Postretirement Plans. SFAS 158 amends SFAS
87, Employers Accounting for Pensions, SFAS 88, Employers Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits, SFAS 106 Employers Accounting for Postretirement
Benefits Other Than Pensions and SFAS 132(R), Employers Disclosures about Pensions and Other Postretirement Benefits. SFAS 158 requires an employer to recognize the overfunded or underfunded status of a defined benefit
postretirement plan as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income. SFAS 158 is effective for fiscal years beginning
after December 15, 2006. The impact of implementation on the Companys financial statements will not be material.

In May 2005, the FASB issued
SFAS No. 154, Accounting Changes and Error Corrections. This statement replaces APB Opinion No. 20, Accounting Changes, and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements.
SFAS No. 154 changes the requirements for the accounting for and reporting of a voluntary change in accounting principle. SFAS No. 154 requires retrospective application to prior periods financial statements of changes in accounting
principles or error corrections, unless it is impractical to determine the period-specific effects or when a pronouncement includes specific transition provisions. This statement is effective for accounting changes and corrections of error made in
fiscal years beginning after December 15, 2005. The adoption of SFAS No. 154 (revised 2004) did not have a material impact on the Companys financial condition or results of operations of the Company.

In November 2005 The FASB issued FASB Staff Position No. FAS 115-1 and FAS 124-1, The Meaning of Other-Than-Temporary Impairment and Its Application
to Certain Investments (the FSP). This FSP addresses the determination of when an investment is considered impaired; whether the impairment is other than temporary; and how to measure an impairment loss. The FSP also addresses
accounting considerations subsequent to the recognition of an other-than-temporary impairment on a debt security, and requires certain disclosures about unrealized losses that have not been recognized as other-than-temporary impairments. The FSP
replaces the impairment guidance in EITF Issue No. 03-1 with references to existing authoritative literature concerning other-than-temporary determinations SFAS No. 115 and SEC Staff Accounting Bulletin 59. Under the FSP, impairment
losses must be recognized in earnings equal to the entire difference between the securitys cost and its fair value at the financial statement date, without considering partial recoveries subsequent to that date. The FSP also requires that an
investor recognize an other-than-temporary impairment loss when a decision to sell a security has been made and the investor does not expect the fair value of the security to fully recover prior to the expected time of sale. The FSP was effective
for reporting periods beginning after December 15, 2005. The application of the FSP did not have a material impact on the Companys financial condition or results of operations.



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##### Table of Contents

ALTRUST FINANCIAL SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2006, 2005, and 2004



NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

New Accounting Pronouncements (Continued)

In September 2006, the SEC
issued SAB No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements. SAB 108 provides interpretive guidance on how the effects of prior-year uncorrected
misstatements should be considered when quantifying misstatements in the current year financial statements. SAB 108 requires registrants to quantify misstatements using both an income statement and balance sheet approach and evaluate whether either
approach results in a misstatement that, when all relevant quantitative and qualitative factors are considered, is material. If prior year errors that had been previously considered immaterial now are considered material based on either approach, no
restatement is required so long as management properly applied its previous approach and all relevant facts and circumstances were considered. If prior years are not restated, the cumulative effect adjustment is recorded in opening accumulated
earnings as of the beginning of the fiscal year of adoption. SAB 108 is effective for fiscal years ending on or after November 15, 2006. The application of SAB 108 did not have a material impact on the Companys financial condition or
results of operations.

NOTE 2  INVESTMENT SECURITIES

Securities are summarized as follows:



|                                   |  |                |             |                        |   |                         |  |                      |           |  |   |            
|---------------------------------- |  | -------------- | ----------- | ---------------------- | - | ----------------------- |  | -------------------- | --------- |  | - | -----------
|2006                               |  | Amortized Cost |             | Gross Unrealized Gains |   | Gross Unrealized Losses |  | Estimated Fair Value
|                                   |  |                |            
|                                   |  |                |            
|Securities available for sale      |  |                |             |                        |   |                         |  |                      |           |  |   |            
|U.S. Government sponsored entities |  | $              | 32,491,305  |                        | $ | 2,494                   |  | $                    | 622,705   |  | $ | 31,871,094 
|Mortgage-backed securities         |  |                | 57,188,281  |                        |   | 59                      |  |                      | 1,486,995 |  |   | 55,701,345 
|Corporate bonds                    |  |                | 9,665,414   |                        |   |                        |  |                      | 21,493    |  |   | 9,643,921  
|State and municipal securities     |  |                | 25,308,285  |                        |   | 66,563                  |  |                      | 131,431   |  |   | 25,243,417 
|                                   |  |                |             |                        |   |                         |  |                      |           |  |   |            
|Totals                             |  | $              | 124,653,285 |                        | $ | 69,116                  |  | $                    | 2,262,624 |  | $ | 122,459,777
|                                   |  |                |             |                        |   |                         |  |                      |           |  |   |            
|                                   |  |                |             |                       
|2005                               |  | Amortized Cost |             | Gross Unrealized Gains |   | Gross Unrealized Losses |  | Estimated Fair Value
|                                   |  |                |            
|                                   |  |                |            
|Securities available for sale      |  |                |             |                        |   |                         |  |                      |           |  |   |            
|U.S. Government sponsored entities |  | $              | 29,982,970  |                        | $ |                        |  | $                    | 923,195   |  | $ | 29,059,775 
|Mortgage-backed securities         |  |                | 69,588,779  |                        |   | 84                      |  |                      | 1,960,813 |  |   | 67,628,050 
|Corporate bonds                    |  |                | 8,700,856   |                        |   |                        |  |                      | 53,827    |  |   | 8,647,029  
|State and municipal securities     |  |                | 23,834,183  |                        |   | 53,001                  |  |                      | 343,984   |  |   | 23,543,200 
|                                   |  |                |             |                        |   |                         |  |                      |           |  |   |            
|Totals                             |  | $              | 132,106,788 |                        | $ | 53,085                  |  | $                    | 3,281,819 |  | $ | 128,878,054
|                                   |  |                |             |                        |   |                         |  |                      |           |  |   |            



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ALTRUST FINANCIAL SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2006, 2005, and 2004



NOTE 2  INVESTMENT SECURITIES (CONTINUED)

Provided below is a summary of securities available-for-sale which were in an unrealized loss position at December 31, 2006 and 2005. Approximately 99% of the unrealized loss for 2006 was comprised of 74
securities in a continuous loss position for twelve months or more. The U.S. Government sponsored entities category of investments is comprised of 10 FHLB and FNMA bonds, all of which have been in an unrealized loss position for greater
than 12 months. The Bank has the ability and intent to hold these securities until such time as the value recovers or the securities mature. Further, the Bank believes the deterioration in value on these securities is attributable to changes in
market interest rates and not credit quality of the issuer.



|                                   |                     |                     |                        |                        |            |            |                   |                  |            |            |                   |                  |  |   |             |  |   |          
|---------------------------------- | ------------------- | ------------------- | ---------------------- | ---------------------- | ---------- | ---------- | ----------------- | ---------------- | ---------- | ---------- | ----------------- | ---------------- |  | - | ----------- |  | - | ---------
|                                   |                     | 2006               
|                                   | Less Than 12 Months |                     | 12 More Months or More |                        | Total     
|                                   | Fair value          |                     | Unrealized losses      |                        | Fair value |            | Unrealized losses |                  | Fair value |            | Unrealized losses
|                                   |                     |                     |                        |                        |           
|U.S. Government sponsored entities |                     | $                   |                       |                        | $          |           |                   | $                | 24,868,600 |            | $                 | 622,705          |  | $ | 24,868,600  |  | $ | 622,705  
|State, County, Municipal           |                     |                     | 5,703,707              |                        |            | 21,537     |                   |                  | 9,003,455  |            |                   | 109,894          |  |   | 14,707,162  |  |   | 131,431  
|Mortgage backed securities         |                     |                     | 1,033,400              |                        |            | 5,279      |                   |                  | 54,654,373 |            |                   | 1,481,716        |  |   | 55,687,773  |  |   | 1,486,995
|Corporate bonds                    |                     |                     |                       |                        |            |           |                   |                  | 4,143,921  |            |                   | 21,493           |  |   | 4,143,921   |  |   | 21,493   
|                                   |                     |                     |                        |                        |            |            |                   |                  |            |            |                   |                  |  |   |             |  |   |          
|                                   |                     | $                   | 6,737,107              |                        | $          | 26,816     |                   | $                | 92,670,349 |            | $                 | 2,235,808        |  | $ | 99,407,456  |  | $ | 2,262,624
|                                   |                     |                     |                        |                        |            |            |                   |                  |            |            |                   |                  |  |   |             |  |   |          
|                                   |                    
|                                   |                     | 2005               
|                                   |                     | Less Than 12 Months |                        | 12 More Months or More |            | Total     
|                                   |                     | Fair value          |                        | Unrealizedlosses       |            | Fair value |                   | Unrealizedlosses |            | Fair value |                   | Unrealizedlosses
|U.S. Government sponsored entities |                     | $                   | 2,959,027              |                        | $          | 34,057     |                   | $                | 26,100,748 |            | $                 | 889,138          |  | $ | 29,059,775  |  | $ | 923,195  
|State, County, Municipal           |                     |                     | 18,413,143             |                        |            | 302,043    |                   |                  | 2,259,746  |            |                   | 41,940           |  |   | 20,672,889  |  |   | 343,984  
|Mortgage backed Securities         |                     |                     | 28,875,774             |                        |            | 683,780    |                   |                  | 38,732,056 |            |                   | 1,277,034        |  |   | 67,607,830  |  |   | 1,960,813
|Asset backed Securities            |                     |                     | 2,996,250              |                        |            | 3,750      |                   |                  |           |            |                   |                 |  |   | 2,996,250   |  |   | 3,750    
|Corporate bonds                    |                     |                     | 1,165,779              |                        |            | 23,964     |                   |                  | 2,985,000  |            |                   | 26,113           |  |   | 4,150,779   |  |   | 50,077   
|                                   |                     |                     |                        |                        |            |            |                   |                  |            |            |                   |                  |  |   |             |  |   |          
|                                   |                     | $                   | 54,409,973             |                        | $          | 1,047,594  |                   | $                | 70,077,550 |            | $                 | 2,234,225        |  | $ | 124,487,523 |  | $ | 3,281,819
|                                   |                     |                     |                        |                        |            |            |                   |                  |            |            |                   |                  |  |   |             |  |   |          

Contractual maturities of securities available for sale at December 31, 2006 are shown below.



|                                       |  |            |            
|-------------------------------------- |  | ---------- | -----------
|                                       |  | Fair Value
|Due in one year or less                |  | $          | 1,376,263  
|Due after one year through five years  |  |            | 29,366,058 
|Due after five years through ten years |  |            | 13,885,316 
|Due after ten years                    |  |            | 22,130,795 
|Mortgage-backed securities             |  |            | 55,701,345 
|                                       |  |            |            
|Total                                  |  | $          | 122,459,777
|                                       |  |            |            

Sales of securities available for sale during 2006, 2005 and 2004 were $1,456,172, $0, and $14,433,438 and
resulted in gross realized losses of $43,517 in 2006 and gross realized gains of $0, and $8,438 in 2005 and 2004, respectively.

The carrying value of
investment securities pledged to secure public funds on deposit, advances from the Federal Home Loan Bank and for other purposes as required by law was approximately $91,043,216 and $105,580,380, at December 31, 2006 and 2005, respectively.



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ALTRUST FINANCIAL SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2006, 2005, and 2004



NOTE 2  INVESTMENT SECURITIES (CONTINUED)

Other investments include a restricted investment in Federal Home Loan Bank stock for membership requirement and to secure available lines of credit. The amount of investment in this stock was $3,631,900 and
$4,358,000 at December 31, 2006 and 2005, respectively. Other investments also include an investment in Alabama Bankers Bank stock of $350,000 at December 31, 2006, an investment in Bankers Bank stock of $457,758 at December 31, 2006
and 2005, and an investment in CBAA Services, Inc. of $20,000 at December 31, 2006 and 2005.

NOTE 3  LOANS

The composition of loans as of December 31, 2006 and 2005 is summarized as follows:



|                                       |  |      |             |   |      |   |             |  
|-------------------------------------- |  | ---- | ----------- | - | ---- | - | ----------- | -
|                                       |  | 2006 |             |   | 2005 |  
|Commercial, financial and agricultural |  | $    | 27,176,055  |   |      | $ | 28,195,787  |  
|Real estate  construction             |  |      | 21,888,044  |   |      |   | 20,904,142  |  
|Real estate  mortgage                 |  |      | 176,743,353 |   |      |   | 142,507,216 |  
|Consumer                               |  |      | 21,003,040  |   |      |   | 20,381,907  |  
|                                       |  |      |             |   |      |   |             |  
|Total                                  |  |      | 246,810,492 |   |      |   | 211,989,052 |  
|Less: Allowance for loan losses        |  |      | (2,630,128  | ) |      |   | (2,404,940  | )
|                                       |  |      |             |   |      |   |             |  
|Net loans                              |  | $    | 244,180,364 |   |      | $ | 209,584,112 |  
|                                       |  |      |             |   |      |   |             |  

Activity in the allowance for loan losses is as follows:



|                                           |  |      |           |   |      |   |           |      |  |   |           |  
|------------------------------------------ |  | ---- | --------- | - | ---- | - | --------- | ---- |  | - | --------- | -
|                                           |  | 2006 |           |   | 2005 |   |           | 2004 | 
|Balance, beginning of year                 |  | $    | 2,404,940 |   |      | $ | 2,500,923 |      |  | $ | 2,323,158 |  
|Loans charged off                          |  |      | (208,447  | ) |      |   | (273,116  | )    |  |   | (345,224  | )
|Recoveries on loans previously charged off |  |      | 64,654    |   |      |   | 63,633    |      |  |   | 96,529    |  
|Provision for loan losses                  |  |      | 368,981   |   |      |   | 113,500   |      |  |   | 426,460   |  
|                                           |  |      |           |   |      |   |           |      |  |   |           |  
|Balance, end of year                       |  | $    | 2,630,128 |   |      | $ | 2,404,940 |      |  | $ | 2,500,923 |  
|                                           |  |      |           |   |      |   |           |      |  |   |           |  

Impaired loans were as follows:



|                                                 |  |      |           |      |   |           |  |   |           
|------------------------------------------------ |  | ---- | --------- | ---- | - | --------- |  | - | ----------
|                                                 |  | 2006 |           | 2005 |   | 2004     
|Loans with allowance allocated                   |  | $    | 7,564,731 |      | $ | 5,182,531 |  | $ | 13,221,000
|Amount of allowance allocated                    |  |      | 814,867   |      |   | 697,454   |  |   | 1,158,505 
|Average balance during the year                  |  |      | 6,373,631 |      |   | 9,201,766 |  |   | 10,831,000
|Interest income not recognized during impairment |  |      | 173,073   |      |   | 120,068   |  |   | 124,858   

Impaired loans include restructured loans of $345,682 that were in compliance with modified terms as of
December 31, 2006. The effect on earnings of restructured loans was not significant for 2006, 2005, or 2004.

Nonperforming loans were as follows:



|                                        |  |      |           |      |   |          
|--------------------------------------- |  | ---- | --------- | ---- | - | ---------
|                                        |  | 2006 |           | 2005
|Loans past due 90 days still on accrual |  | $    |          |      | $ | 51,057   
|Nonaccrual loans                        |  |      | 2,494,345 |      |   | 1,046,449
|                                        |  |      |           |      |   |          
|Total                                   |  | $    | 2,494,345 |      | $ | 1,097,506
|                                        |  |      |           |      |   |          



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ALTRUST FINANCIAL SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2006, 2005, and 2004



NOTE 3  LOANS (CONTINUED)

In the ordinary course of business, the Company has granted loans to certain related parties, including directors, executive officers, and their affiliates. The interest rates on these loans were substantially the
same as rates prevailing at the time of the transaction and repayment terms are customary for the type of loan. Changes in related party loans for the year ended December 31, 2006 are as follows:



|                           |  |   |             |  
|-------------------------- |  | - | ----------- | -
|Balance, beginning of year |  | $ | 13,381,340  |  
|Advances                   |  |   | 3,138,216   |  
|Repayments                 |  |   | (10,285,426 | )
|                           |  |   |             |  
|Balance, end of year       |  | $ | 6,234,130   |  
|                           |  |   |             |  

NOTE 4  PREMISES AND EQUIPMENT

Premises and equipment are summarized as follows:



|                         |  |      |            |   |      |   |            |  
|------------------------ |  | ---- | ---------- | - | ---- | - | ---------- | -
|                         |  | 2006 |            |   | 2005 |  
|Land                     |  | $    | 4,741,587  |   |      | $ | 4,671,870  |  
|Buildings                |  |      | 9,461,450  |   |      |   | 9,297,231  |  
|Furniture and equipment  |  |      | 6,873,099  |   |      |   | 5,696,654  |  
|Automobiles              |  |      | 188,477    |   |      |   | 188,477    |  
|Leasehold improvements   |  |      | 543,426    |   |      |   | 445,833    |  
|Construction in process  |  |      | 14,210     |   |      |   | 154,021    |  
|                         |  |      |            |   |      |   |            |  
|                         |  |      | 21,822,249 |   |      |   | 20,454,086 |  
|Accumulated depreciation |  |      | (6,467,887 | ) |      |   | (5,472,687 | )
|                         |  |      |            |   |      |   |            |  
|Total                    |  | $    | 15,354,362 |   |      | $ | 14,981,399 |  
|                         |  |      |            |   |      |   |            |  

The above schedule includes land and building covered by a capitalized lease obligation in connection with the
acquisition of the Marshall County branches in 2002. Under the terms of the agreement, the Company is to pay sixty monthly payments of $14,000 beginning June 1, 2002 and the balance of $2,621,543 on June 1, 2007. As of December 31,
2006 the capitalized lease is summarized as follows:



|                                     |  |   |           |  
|------------------------------------ |  | - | --------- | -
|Total payments remaining             |  | $ | 2,691,543 |  
|Amount representing interest         |  |   | (91,118   | )
|                                     |  |   |           |  
|Balance capitalized lease obligation |  | $ | 2,600,425 |  
|                                     |  |   |           |  

The provisions for depreciation charged to occupancy and equipment expense for the years ended December 31,
2006, 2005 and 2004 were $1,112,400, $810,197, and $691,636 respectively.



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ALTRUST FINANCIAL SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2006, 2005, and 2004



NOTE 4  PREMISES AND EQUIPMENT (CONTINUED)

The Bank leases land and building space under noncancellable operating leases. Future minimum lease payments under noncancellable operating leases are summarized as follows:



|     |  |   |        
|---- |  | - | -------
|2007 |  | $ | 128,010
|2008 |  |   | 56,008 
|2009 |  |   | 32,608 
|2010 |  |   | 25,208 
|2011 |  |   | 2,968  
|     |  |   |        
|     |  | $ | 244,802
|     |  |   |        

For the years ended December 31, 2006, 2005 and 2004, annual rental expense on operating leases was $189,442,
$215,505, and $197,100, respectively.

NOTE 5  GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

Goodwill is no longer amortized and is periodically
evaluated for impairment. No impairment was recognized in 2006 or in 2005.

Core deposit and other intangibles

Core deposit intangibles had a gross carrying amount of $3,053,069 for years ended 2006 and 2005 and accumulated amortization of $2,327,674 and $2,173,916 for the same
periods, respectively. Aggregate amortization expense was $153,758 for year ended 2006, $152,343 for year ended 2005, and $513,901 for year ended 2004.

Estimated amortization expense for each of the next five years is as follows:



|     |  |   |        
|---- |  | - | -------
|2007 |  | $ | 152,343
|2008 |  |   | 152,343
|2009 |  |   | 120,481
|2010 |  |   | 97,829 
|2011 |  |   | 97,829 
|     |  |   |        
|     |  | $ | 620,825
|     |  |   |        

NOTE 6  DEPOSITS

Deposits at year-end were as follows:



|                           |  |      |             |      |   |            
|-------------------------- |  | ---- | ----------- | ---- | - | -----------
|                           |  | 2006 |             | 2005
|Noninterest-bearing demand |  | $    | 42,749,269  |      | $ | 42,424,752 
|Interest bearing checking  |  |      | 96,605,953  |      |   | 99,165,130 
|Savings                    |  |      | 24,911,891  |      |   | 27,425,792 
|Time, less than $100,000   |  |      | 83,068,917  |      |   | 68,094,072 
|Time, $100,000 and over    |  |      | 59,299,896  |      |   | 34,965,628 
|                           |  |      |             |      |   |            
|Total                      |  | $    | 306,635,926 |      | $ | 272,075,374
|                           |  |      |             |      |   |            



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ALTRUST FINANCIAL SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2006, 2005, and 2004



NOTE 6  DEPOSITS (CONTINUED)

The scheduled maturities of time deposits at December 31, 2006 are as follows:



|                                  |  |                  |            |                   |   |            |  |   |            
|--------------------------------- |  | ---------------- | ---------- | ----------------- | - | ---------- |  | - | -----------
|                                  |  | $100,000 or more |            | Less than$100,000 |   | Total     
|Three months or less              |  | $                | 23,196,800 |                   | $ | 22,458,788 |  | $ | 45,655,588 
|Over three through twelve         |  |                  | 31,973,270 |                   |   | 51,850,093 |  |   | 83,823,363 
|Over one year through three years |  |                  | 1,683,815  |                   |   | 5,440,543  |  |   | 7,124,358  
|Over three years                  |  |                  | 2,446,011  |                   |   | 3,319,493  |  |   | 5,765,504  
|                                  |  |                  |            |                   |   |            |  |   |            
|Total                             |  | $                | 59,299,896 |                   | $ | 83,068,917 |  | $ | 142,368,813
|                                  |  |                  |            |                   |   |            |  |   |            

NOTE 7  BORROWINGS

Advances from the Federal Home Loan Bank at December 31, 2006 and 2005 are summarized as follows:



|                     |  |         |            |              |    |              |      |  
|-------------------- |  | ------- | ---------- | ------------ | -- | ------------ | ---- | -
|2006 Type of advance |  | Balance |            | # ofAdvances |    | WeightedRate |     
|Convertible          |  | $       | 31,800,000 |              | 6  |              | 3.51 | %
|Variable rate        |  |         | 2,000,000  |              | 1  |              | 5.56 | %
|Fixed rate           |  |         | 29,000,000 |              | 8  |              | 3.78 | %
|                     |  |         |            |              |    |              |      |  
|                     |  | $       | 62,800,000 |              | 15 |              | 3.70 | %
|                     |  |         |            |              |    |              |      |  



|                     |  |         |            |              |    |              |      |  
|-------------------- |  | ------- | ---------- | ------------ | -- | ------------ | ---- | -
|2005 Type of advance |  | Balance |            | # ofAdvances |    | WeightedRate |     
|Convertible          |  | $       | 31,800,000 |              | 6  |              | 3.51 | %
|Variable rate        |  |         | 8,000,000  |              | 1  |              | 4.44 | %
|Fixed rate           |  |         | 38,550,000 |              | 11 |              | 3.02 | %
|                     |  |         |            |              |    |              |      |  
|                     |  | $       | 78,350,000 |              | 18 |              | 3.19 | %
|                     |  |         |            |              |    |              |      |  

Scheduled maturities of FHLB advances over the next five years and thereafter are as follows:



|           |  |             |            |          |   |           |  |       |            |  |   |           
|---------- |  | ----------- | ---------- | -------- | - | --------- |  | ----- | ---------- |  | - | ----------
|Year       |  | Convertible |            | Variable |   | Fixed     |  | Total
|2007       |  | $           |           |          | $ | 2,000,000 |  | $     | 9,500,000  |  | $ | 11,500,000
|2008       |  |             |           |          |   |          |  |       | 4,000,000  |  |   | 4,000,000 
|2009       |  |             | 5,500,000  |          |   |          |  |       | 15,500,000 |  |   | 21,000,000
|2010       |  |             |           |          |   |          |  |       |           |  |   |          
|2011       |  |             |           |          |   |          |  |       |           |  |   |          
|Thereafter |  |             | 26,300,000 |          |   |          |  |       |           |  |   | 26,300,000
|           |  |             |            |          |   |           |  |       |            |  |   |           
|Total      |  | $           | 31,800,000 |          | $ | 2,000,000 |  | $     | 29,000,000 |  | $ | 62,800,000
|           |  |             |            |          |   |           |  |       |            |  |   |           



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ALTRUST FINANCIAL SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2006, 2005, and 2004



NOTE 7  BORROWINGS (CONTINUED)

The fixed rate advances with maturities in 2009 include $12,500,000 of principal reducing credits requiring annual payments of principal.

The advances are collateralized by securities with a fair value of $70,753,840 and by a blanket lien on the Companys 1-4 family mortgage loans and real estate loans. Qualifying real estate loans eligible as
collateral for borrowings from the Federal Home Loan Bank amounted to approximately $78,000,000 as of December 31, 2006.

Federal Funds Purchased

In addition to the above, at December 31, 2006 and 2005, the Company had available lines of credit totaling approximately $30,000,000 with various
financial institutions for borrowing on a short-term basis, with no balance outstanding in 2005 and $2,448,000 at December 31, 2006. These lines are subject to annual renewals with varying interest rates.

NOTE 8  STOCK OPTIONS

Effective January 1, 2006, the
Company adopted Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment, (SFAS No. 123R) which was issued by the Financial Accounting Standards Board in December 2004. SFAS
No. 123R revises SFAS No. 123 Accounting for Stock Based Compensation (SFAS 123), and supersedes APB No. 25, Accounting for Stock Issued to Employees, (APB No. 25) and its related
interpretations. SFAS No. 123R requires recognition of the cost of employee services received in exchange for an award of equity instruments in the financial statements over the period the employee is required to perform the services in
exchange for the award (presumptively the vesting period). SFAS No. 123R also requires measurement of the cost of employee services received in exchange for an award based on the grant-date fair value of the award. SFAS No. 123R also
amends SFAS No. 95 Statement of Cash Flows, to require that excess tax benefits be reported as financing cash inflows, rather than as a reduction of taxes paid, which is included within operating cash flows.

The Company adopted SFAS No. 123R using the modified prospective application as permitted under SFAS No. 123R. Accordingly, prior period amounts have not been
restated. Under this application, the Company is required to record compensation expense for all awards granted after the date of adoption and for the unvested portion of previously granted awards that remain outstanding at the date of adoption.

Prior to the adoption of SFAS No. 123R, the Company used the intrinsic value method as prescribed by APB No. 25 and thus recognized no
compensation expense for options granted with exercise prices equal to the fair market value of the Companys common stock on the date of grant.

The
Company has a qualified stock option plan for key employees (the employee plan) and has reserved 250,000 shares of common stock. Options are granted at the fair market value of the Companys common stock on the date of grant. All
options under the employee plan expire ten years from the date of grant and vest after five years. At December 31, 2006, 193,200 options were available for grant.

The Company also has non-qualified stock option plans for directors (the director plans) and has reserved 750,000 shares of common stock. Options are granted at fair market value. All options under these
plans expire ten years from the date of grant and vest after five years. At December 31, 2006, 629,200 options were available for grant.



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ALTRUST FINANCIAL SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2006, 2005, and 2004



NOTE 8  STOCK OPTIONS (CONTINUED)

The Company also had an employee and director plan that was implemented in 1995. Under that plan, a total of 520,000 shares were reserved of which 272,000 were issued and were outstanding at December 31, 2004.
This plan was replaced by a new plan for 2004 as noted above.

Other pertinent information related to the options follows:



|                                                          |  |         |   |      |                               |       |        |         |   |                               |   |        |  |         |                               |  |   |     
|--------------------------------------------------------- |  | ------- | - | ---- | ----------------------------- | ----- | ------ | ------- | - | ----------------------------- | - | ------ |  | ------- | ----------------------------- |  | - | ----
|                                                          |  | 2006    |   | 2005 |                               | 2004 
|                                                          |  | Number  |   |      | Weighted-AverageExercisePrice |       | Number |         |   | Weighted-AverageExercisePrice |   | Number |  |         | Weighted-AverageExercisePrice
|Under option, beginning of year                           |  | 429,600 |   |      | $                             | 7.96  |        | 372,600 |   |                               | $ | 7.56   |  | 306,800 |                               |  | $ | 7.26
|Granted at market price                                   |  | 20,000  |   |      |                               | 11.80 |        | 73,800  |   |                               |   | 9.40   |  | 83,800  |                               |  |   | 8.00
|Exercised                                                 |  | (37,600 | ) |      |                               | 4.97  |        | (16,800 | ) |                               |   | 4.06   |  | (18,000 | )                             |  |   | 4.45
|                                                          |  |         |   |      |                               |       |        |         |   |                               |   |        |  |         |                               |  |   |     
|Under option, end of year                                 |  | 412,000 |   |      |                               | 8.48  |        | 429,600 |   |                               |   | 7.96   |  | 372,600 |                               |  |   | 7.56
|                                                          |  |         |   |      |                               |       |        |         |   |                               |   |        |  |         |                               |  |   |     
|Exercisable, end of year                                  |  | 121,800 |   |      |                               | 8.10  |        | 125,800 |   |                               |   | 7.07   |  | 104,000 |                               |  |   | 6.18
|                                                          |  |         |   |      |                               |       |        |         |   |                               |   |        |  |         |                               |  |   |     
|Weighted-average fair value of options issued at the year |  |         |   |      | $                             | 3.06  |        |         |   |                               | $ | 2.29   |  |         |                               |  | $ | 2.53
|                                                          |  |         |   |      |                               |       |        |         |   |                               |   |        |  |         |                               |  |   |     

At December 31, 2006, the 412,000 options outstanding had a range of exercise prices of $7.60 to $11.80 per
share and the weighted average remaining contractual life for those options was 6.2 years. Information pertaining to options outstanding at December 31, 2006 is as follows:



|                         |  |                     |  |                                            |  |                                 |       |                          |   |                    |  |                                            |  |                                 |  |   |     
|------------------------ |  | ------------------- |  | ------------------------------------------ |  | ------------------------------- | ----- | ------------------------ | - | ------------------ |  | ------------------------------------------ |  | ------------------------------- |  | - | ----
|Options Outstanding      |  | Options Exercisable
|Range of Exercise Prices |  | NumberOutstanding   |  | Average Remaining Contractual Life (years) |  | Weighted Average Exercise Price |       | Range of Exercise Prices |   | Number Outstanding |  | Average Remaining Contractual Life (years) |  | Weighted Average Exercise Price
|$7.60 -$8.45             |  | 259,400             |  | 5.4                                        |  | $                               | 7.96  |                          | $ | 7.60 - $8.15       |  | 49,600                                     |  | 1.7                             |  | $ | 7.81
|$8.50 -$9.40             |  | 132,600             |  | 7.5                                        |  |                                 | 9.00  |                          |   | $8.18 - $8.45      |  | 72,200                                     |  | 4.0                             |  |   | 8.29
|$9.50 -$11.80            |  | 20,000              |  | 9.5                                        |  |                                 | 11.80 |                          | $ | 8.50 - $11.80      |  |                                           |  |                                |  |   |    
|                         |  |                     |  |                                            |  |                                 |       |                          |   |                    |  |                                            |  |                                 |  |   |     
|                         |  | 412,000             |  | 6.2                                        |  | $                               | 8.48  |                          |   |                    |  | 121,800                                    |  | 3.1                             |  | $ | 8.10
|                         |  |                     |  |                                            |  |                                 |       |                          |   |                    |  |                                            |  |                                 |  |   |     

The total aggregate intrinsic value of options (which is the amount by which the stock price exceeded the exercise
price of the options) exercised during the years ended December 31, 2006 and 2005, was $177,472 and $89,712, respectively. The total fair value of shares vesting during the years ended December 31, 2006 and 2005, was $137,856 and $128,175,
respectively. As of December 31, 2006, there was $381,970 of total unrecognized compensation cost related to non-vested share-based compensation arrangements, which is expected to be recognized over a weighted-average period of 2.1 years.

The adoption of SFAS 123R and its fair value compensation cost recognition provisions are different from the nonrecognition provisions under SFAS 123 and
the intrinsic value method for compensation cost allowed under APB 25. The effect (increase/(decrease)) of the adoption of SFAS 123R is as follows:



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##### Table of Contents

ALTRUST FINANCIAL SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2006, 2005, and 2004



NOTE 8  STOCK OPTIONS (CONTINUED)



|                                     |  |                                             |          |  
|------------------------------------ |  | ------------------------------------------- | -------- | -
|                                     |  | For the twelvemonths endedDecember 31, 2006 |         
|Net income before income tax expense |  | $                                           | (137,856 | )
|Net income                           |  | $                                           | (94,949  | )
|                                     | 
|Cash flow from operating activities  |  | $                                           | 137,856  |  
|Cash flow from financing activities  |  | $                                           | 42,907   |  
|                                     | 
|Basic earnings per share             |  | $                                           | (.02     | )
|Diluted earnings per share           |  | $                                           | (.02     | )

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model
with the following weighted-average assumptions:



|                                                             |  |         |   |  |         |   |  |         |  
|------------------------------------------------------------ |  | ------- | - |  | ------- | - |  | ------- | -
|                                                             |  | 2006    |   |  | 2005    |   |  | 2004    |  
|Dividend yield (as a percent of the fair value of the stock) |  | 2.37    | % |  | 2.40    | % |  | .63     | %
|Expected life                                                |  | 7 years |   |  | 7 years |   |  | 7 years |  
|Expected volatility                                          |  | 22.00   | % |  | 22.00   | % |  | 22.00   | %
|Risk-free interest rate                                      |  | 5.07    | % |  | 4.52    | % |  | 3.87    | %

NOTE 9  REGULATORY CAPITAL MATTERS

The Bank is subject to dividend restrictions set forth by the Alabama State Banking Department. Under such restrictions, the Bank may not, without the prior approval of the Alabama State Banking Department, declare
dividends in excess of the sum of the current years earnings plus the retained earnings from the prior two years. The dividends as of December 31, 2006, that the Bank could declare, without the approval of the Alabama State Banking
Department amounted to approximately $5,242,000.

The Company (on a consolidated basis) and the Bank are subject to various regulatory capital requirements
administered by the state and federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possible additional discretionary actions by regulators, that if undertaken, could have a direct material effect
on the Bank and the Companys consolidated financial statements. Under regulatory capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines involving
quantitative measures of the Banks assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Banks capital amounts and classification under the prompt corrective guidelines are also
subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Prompt corrective action provisions are not applicable to bank holding companies.



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ALTRUST FINANCIAL SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2006, 2005, and 2004



NOTE 9  REGULATORY CAPITAL MATTERS (CONTINUED)

Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios (set forth in the table
below) of total risk-based capital and Tier 1 capital to risk-weighted assets (as defined in the regulations), and Tier 1 capital to adjusted total assets (as defined). Management believes, as of December 31, 2006, that the Company and the Bank
meet all capital adequacy requirements to which it is subject.

As of December 31, 2006, the most recent notification from the Federal Deposit
Insurance Corporation, categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To remain categorized as well capitalized, the Bank will have to maintain minimum total risk-based, Tier 1 risk-based, and
Tier 1 leverage ratios as disclosed in the table below. There are no conditions or events since the most recent notification that management believes have changed the Banks category.



|                                                  |  |        |        |       |                             |   |        |                                                                          |        |  |     |        |  |       |        |  |      |  
|------------------------------------------------- |  | ------ | ------ | ----- | --------------------------- | - | ------ | ------------------------------------------------------------------------ | ------ |  | --- | ------ |  | ----- | ------ |  | ---- | -
|                                                  |  | Actual |        |       | For CapitalAdequacyPurposes |   |        | Minimum To BeWell CapitalizedUnder the PromptCorrective ActionProvisions |       
|                                                  |  | Amount |        | Ratio |                             |   | Amount |                                                                          | Ratio  |  |     | Amount |  | Ratio |       
|As of December 31, 2006:                          |  |        |        |       |                             |   |        |                                                                          |        |  |     |        |  |       |        |  |      |  
|Total Risk-Based Capital(to risk-weighted assets) |  | $      | 45,814 |       | 15.82                       | % |        | $                                                                        | 23,166 |  | 8.0 | %      |  | $     | 28,958 |  | 10.0 | %
|Tier 1 Capital(to risk-weighted assets)           |  |        | 43,184 |       | 14.91                       | % |        |                                                                          | 11,583 |  | 4.0 | %      |  |       | 17,375 |  | 6.0  | %
|Tier 1 Capital(to average total assets)           |  |        | 43,184 |       | 10.33                       | % |        |                                                                          | 16,714 |  | 4.0 | %      |  |       | 20,893 |  | 5.0  | %
|                                                  |  |        |        |       |                             |  
|As of December 31, 2005:                          |  |        |        |       |                             |   |        |                                                                          |        |  |     |        |  |       |        |  |      |  
|Total Risk-Based Capital(to risk-weighted assets) |  | $      | 44,737 |       | 17.07                       | % |        | $                                                                        | 20,961 |  | 8.0 | %      |  | $     | 26,201 |  | 10.0 | %
|Tier 1 Capital(to risk-weighted assets)           |  |        | 42,332 |       | 16.16                       | % |        |                                                                          | 10,481 |  | 4.0 | %      |  |       | 15,721 |  | 6.0  | %
|Tier 1 Capital(to average total assets)           |  |        | 42,332 |       | 10.76                       | % |        |                                                                          | 15,740 |  | 4.0 | %      |  |       | 19,675 |  | 5.0  | %
|                                                  |  |        |        |       |                             |  
|As of December 31, 2004:                          |  |        |        |       |                             |   |        |                                                                          |        |  |     |        |  |       |        |  |      |  
|Total Risk-Based Capital(to risk-weighted assets) |  | $      | 40,386 |       | 16.71                       | % |        | $                                                                        | 19,335 |  | 8.0 | %      |  | $     | 24,169 |  | 10.0 | %
|Tier 1 Capital(to risk-weighted assets            |  |        | 37,885 |       | 15.68                       | % |        |                                                                          | 9,667  |  | 4.0 | %      |  |       | 14,501 |  | 6.0  | %
|Tier 1 Capital(to average total assets)           |  |        | 37,885 |       | 9.78                        | % |        |                                                                          | 15,492 |  | 4.0 | %      |  |       | 19,365 |  | 5.0  | %

In addition, the Alabama Superintendent of Banking has further required the Bank to maintain a Tier 1 Leverage
Ratio of at least 7%, as a condition to a previous branches acquisition transaction and this requirement is still in effect. The Bank is in compliance with this requirement as of December 31, 2006.

The capital ratios for the consolidated holding company do not materially differ from those shown above and thus are not shown separately.



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ALTRUST FINANCIAL SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2006, 2005, and 2004



NOTE 10  OTHER OPERATING INCOME AND EXPENSES

The major components of other operating income and expense included in noninterest income and noninterest expense are as follows:



|                                                              |  |                          |           |      |   |           |  |   |          
|------------------------------------------------------------- |  | ------------------------ | --------- | ---- | - | --------- |  | - | ---------
|                                                              |  | Years ended December 31,
|                                                              |  | 2006                     |           | 2005 |   | 2004     
|Other Operating Income:                                       |  |                          |           |      |   |           |  |   |          
|Increase in cash surrender value of bank owned life insurance |  | $                        | 274,817   |      | $ | 360,900   |  | $ | 339,593  
|Other                                                         |  |                          | 610,462   |      |   | 624,212   |  |   | 520,537  
|                                                              |  |                          |           |      |   |           |  |   |          
|Total                                                         |  | $                        | 885,279   |      | $ | 985,112   |  | $ | 860,130  
|                                                              |  |                          |           |      |   |           |  |   |          
|Other Operating Expenses:                                     |  |                          |           |      |   |           |  |   |          
|Postage                                                       |  | $                        | 365,405   |      | $ | 290,859   |  | $ | 234,126  
|Telephone                                                     |  |                          | 716,200   |      |   | 758,569   |  |   | 581,482  
|ATM expense                                                   |  |                          | 451,772   |      |   | 524,095   |  |   | 408,875  
|Federal Reserve charges                                       |  |                          | 304,822   |      |   | 295,783   |  |   | 276,179  
|Supplies                                                      |  |                          | 277,823   |      |   | 250,582   |  |   | 273,748  
|Advertising                                                   |  |                          | 319,231   |      |   | 621,374   |  |   | 394,008  
|Overdraft losses                                              |  |                          | 532,832   |      |   | 855,752   |  |   | 545,555  
|Other                                                         |  |                          | 1,622,622 |      |   | 1,633,882 |  |   | 1,764,715
|                                                              |  |                          |           |      |   |           |  |   |          
|Total                                                         |  | $                        | 4,590,707 |      | $ | 5,230,896 |  | $ | 4,478,688
|                                                              |  |                          |           |      |   |           |  |   |          

NOTE 11  INCOME TAXES

The components of income tax expense (benefit) are as follows:



|                   |  |      |           |   |      |   |           |  |   |           |  
|------------------ |  | ---- | --------- | - | ---- | - | --------- |  | - | --------- | -
|                   |  | 2006 |           |   | 2005 |   | 2004      | 
|Current:           |  |      |           |   |      |   |           |  |   |           |  
|Federal            |  | $    | 2,584,268 |   |      | $ | 1,184,973 |  | $ | 1,657,414 |  
|State              |  |      | 305,090   |   |      |   | 70,775    |  |   | 179,530   |  
|Deferred:          |  |      |           |   |      |   |           |  |   |           |  
|Federal            |  |      | (23,347   | ) |      |   | 368,575   |  |   | (247,070  | )
|State              |  |      | (9,013    | ) |      |   | 51,474    |  |   | (39,365   | )
|                   |  |      |           |   |      |   |           |  |   |           |  
|Income tax expense |  | $    | 2,856,998 |   |      | $ | 1,675,797 |  | $ | 1,550,509 |  
|                   |  |      |           |   |      |   |           |  |   |           |  

The Companys total income tax expense differs from the amounts computed by applying the Federal income tax
statutory rates to income before income taxes. A reconciliation of the differences is as follows:



|                                         |  |        |           |   |                     |      |   |        |   |           |                     |  |      |        |  |   |                     |   |  |      |  
|---------------------------------------- |  | ------ | --------- | - | ------------------- | ---- | - | ------ | - | --------- | ------------------- |  | ---- | ------ |  | - | ------------------- | - |  | ---- | -
|                                         |  | 2006   |           |   | 2005                |      |   | 2004   |  
|                                         |  | Amount |           |   | % ofPre-taxEarnings |      |   | Amount |   |           | % ofPre-taxEarnings |  |      | Amount |  |   | % ofPre-taxEarnings |  
|Tax at statutory federal rate:           |  | $      | 3,028,596 |   |                     | 34.0 |   |        | $ | 2,234,856 |                     |  | 34.0 |        |  | $ | 1,670,765           |   |  | 34.0 |  
|Effect on rate of:                       |  |        |           |   |                     |      |   |        |   |           |                     |  |      |        |  |   |                     |   |  |      |  
|Tax-exempt securities                    |  |        | (310,078  | ) |                     | (3.4 | ) |        |   | (254,161  | )                   |  | (3.8 | )      |  |   | (97,308             | ) |  | (2.0 | )
|Tax-exempt loan interest                 |  |        | (29,365   | ) |                     | (0.3 | ) |        |   | (20,688   | )                   |  | (0.3 | )      |  |   | (9,901              | ) |  | (0.2 | )
|State income tax, net of Federal benefit |  |        | 195,411   |   |                     | 2.2  |   |        |   | 80,684    |                     |  | 1.2  |        |  |   | 92,509              |   |  | 1.9  |  
|Interest expense disallowance            |  |        | 40,596    |   |                     | 0.4  |   |        |   | 26,151    |                     |  | 0.4  |        |  |   | 8,425               |   |  | 0.2  |  
|Bank owned life insurance                |  |        | (93,438   | ) |                     | (1.0 | ) |        |   | (122,706  | )                   |  | (1.9 | )      |  |   | (115,462            | ) |  | (2.3 | )
|Other                                    |  |        | 25,276    |   |                     | 0.2  |   |        |   | (268,339  | )                   |  | (4.1 | )      |  |   | 1,481               |   |  | 0.0  |  
|                                         |  |        |           |   |                     |      |   |        |   |           |                     |  |      |        |  |   |                     |   |  |      |  
|Effective income tax and rate            |  | $      | 2,856,998 |   |                     | 32.1 |   |        | $ | 1,675,797 |                     |  | 25.5 |        |  | $ | 1,550,509           |   |  | 31.6 |  
|                                         |  |        |           |   |                     |      |   |        |   |           |                     |  |      |        |  |   |                     |   |  |      |  



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ALTRUST FINANCIAL SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2006, 2005, and 2004



NOTE 11  INCOME TAXES (CONTINUED)

The components of the net deferred tax asset are as follows:



|                                                       |  |      |           |   |      |   |           |  
|------------------------------------------------------ |  | ---- | --------- | - | ---- | - | --------- | -
|                                                       |  | 2006 |           |   | 2005 |  
|Net unrealized losses on securities available for sale |  | $    | 877,404   |   |      |   | 1,291,494 |  
|Depreciation                                           |  |      | (542,138  | ) |      |   | (421,458  | )
|Allowance for loan losses                              |  |      | 798,157   |   |      |   | 719,746   |  
|Reserve for debt cancellation                          |  |      | 19,945    |   |      |   | 17,873    |  
|Other                                                  |  |      | 114,781   |   |      |   | 42,225    |  
|                                                       |  |      |           |   |      |   |           |  
|Total                                                  |  | $    | 1,268,149 |   |      | $ | 1,649,880 |  
|                                                       |  |      |           |   |      |   |           |  

Management of the Company believes its net deferred tax asset is recoverable.

NOTE 12  COMMITMENTS AND CONTINGENCIES

Loan Commitments

The Company is a party to 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, credit card arrangements, and standby letters of credit. Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount
recognized in the balance sheets. A summary of the Banks commitments and contingent liabilities is approximately as follows:



|                             |  |      |            |      |   |           
|---------------------------- |  | ---- | ---------- | ---- | - | ----------
|                             |  | 2006 |            | 2005
|Commitments to extend credit |  | $    | 27,138,000 |      | $ | 21,155,000
|Credit card arrangements     |  |      | 2,175,000  |      |   | 2,173,000 
|Standby letters of credit    |  |      | 2,412,000  |      |   | 2,598,000 

Commitments to extend credit, credit card arrangements, commercial letters of credit and standby letters of credit
all include exposure to some credit loss in the event of nonperformance of the customer. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet financial instruments.

Because these instruments have fixed maturity dates, and because many of them expire without being drawn upon, they do not generally present any significant liquidity
risk to the Bank.

Contingencies

In the normal course
of business, the Company is involved in various legal proceedings. In the opinion of management, any liability resulting from such proceedings would not have a material effect on the Companys financial statements



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2006, 2005, and 2004



NOTE 13  CONCENTRATIONS OF CREDIT

The Company originates primarily commercial, residential, and consumer loans to customers in the Banks market area. The ability of the majority of the Companys customers to honor their contractual loan
obligations is dependent on the economy in this area.

The Companys loan portfolio is primarily concentrated in loans secured by real estate of which
a substantial portion is secured by real estate in the Companys primary market area. In addition, a substantial portion of the other real estate owned is located in that same market. Accordingly, the ultimate collectibility of the loan
portfolio and the recovery of the carrying amount of other real estate owned are susceptible to changes in market conditions in the Companys primary market area.

NOTE 14  EMPLOYEE STOCK OWNERSHIP PLAN

The Company has adopted an Employee Stock Ownership Plan (the
ESOP) which enables eligible employees of the Bank to own Company common stock.

The ESOP is a noncontributory plan that provides retirement
and disability benefits for eligible employees, and death benefits. Employees who are credited with one thousand hours of service in any twelve-month period or who have completed three consecutive months of service may become participants in the
Plan.

Benefits under the Plan depend upon a participants years of credited service with the Company or the Bank and the annual allocation of
employer contributions based upon the ratio that the compensation of the participant bears to the total compensation of all participants. A participant is 20% vested in their accrued benefits after completion of three years of service. Vesting
increases 20% per year for the next four years with the participant becoming fully vested upon completion of seven years of service.

During 1999, the
ESOP borrowed $5,212,856 from an unrelated financial institution. The funds were used to acquire 661,950 shares (after stock split) of the Companys stock. The Company, as plan sponsor, guaranteed the loan, and in accordance with generally
accepted accounting principles accounted for the aforementioned leveraged transaction by recording the debt of the ESOP as a liability and recorded an offsetting reduction of equity. As debt principal was paid, these accounts were correspondingly
reduced.

The shares pledged against the ESOP loan were held in escrow. The restricted shares were released based upon a formula calculation of principal
and interest paid as a percentage of the total principal and interest to be paid under terms of the loan agreement; however, the lender could not hold more fair market value collateral than the outstanding loan principal. Dividends paid on
unallocated shares are expensed as compensation.

In accordance with the ESOP, the Company is expected to honor the rights of participants to liquidate
their ownership of the common stock in the event of termination. To the extent that allocated shares of common stock held by the ESOP are not readily traded, a sponsor must reflect the maximum cash obligation related to those securities outside of
stockholders equity to liabilities. As of December 31, 2006 and 2005, the allocated shares held by the ESOP were 1,087,819 and 875,822 respectively, with a fair value and maximum cash obligation of $12,836,264 and $8,232,727 respectively.



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ALTRUST FINANCIAL SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2006, 2005, and 2004



NOTE 14  EMPLOYEE STOCK OWNERSHIP PLAN (CONTINUED)

The following summarizes the applicable activity and balances regarding the ESOP:



|                                 |  |      |         |      |   |         |  |   |        
|-------------------------------- |  | ---- | ------- | ---- | - | ------- |  | - | -------
|                                 |  | 2006 |         | 2005 |   | 2004   
|ESOP expense:                    |  |      |         |      |   |         |  |   |        
|Amount representing compensation |  | $    | 735,254 |      | $ | 617,073 |  | $ | 648,128
|Amount representing interest     |  |      | 7,592   |      |   | 99,729  |  |   | 88,596 
|                                 |  |      |         |      |   |         |  |   |        
|Total                            |  | $    | 742,846 |      | $ | 716,802 |  | $ | 736,724
|                                 |  |      |         |      |   |         |  |   |        

The accrued and unpaid contribution amounts were $451,463, $617,069, and $620,631 at December 31, 2006, 2005
and 2004, respectively.



|                          |  |      |            |   |      |   |           |      |  |   |           |  
|------------------------- |  | ---- | ---------- | - | ---- | - | --------- | ---- |  | - | --------- | -
|                          |  | 2006 |            |   | 2005 |   |           | 2004 | 
|ESOP obligation:          |  |      |            |   |      |   |           |      |  |   |           |  
|Balance beginning of year |  | $    | 1,726,762  |   |      | $ | 2,545,973 |      |  | $ | 3,096,000 |  
|Principal reductions      |  |      | (1,726,762 | ) |      |   | (819,211  | )    |  |   | (550,027  | )
|                          |  |      |            |   |      |   |           |      |  |   |           |  
|Balance at end of year    |  | $    |           |   |      | $ | 1,726,762 |      |  | $ | 2,545,973 |  
|                          |  |      |            |   |      |   |           |      |  |   |           |  

The indebtedness described above is included in liabilities and as a reduction of equity. As guarantor of the ESOP
loan, the Company was subject to certain restrictive covenants (financial and other). For 2005, any covenant non-compliance issues that may have existed were resolved by the final payoff of the ESOP debt in January 2006 as discussed below.

The entire balance of the ESOP debt was paid off on January 31, 2006. This was facilitated through application of the Companys 2005 ESOP
compensation contribution, regular 2005 and first quarter 2006 dividends, and a special one-time $1 per share cash dividend declared and paid in January of 2006. In the first quarter of 2006, this resulted in an approximate $2 million increase to
the balance sheet presentation of the redeemable common stock held by the ESOP at fair market value, relating to the allocation to Plan participants of the remaining 211,997 unallocated shares in the ESOP Trust. Additionally, shareholders
equity was increased in 2006 by a credit to unearned compensation related to ESOP debt of $1,726,762, previously reflected as contra equity. Because of tax benefits relating to the payment of cash dividends to the ESOP Trust, the net effect of
recording compensation expense for the fair value of the ESOP shares released in 2006 was not material to 2006 operations.



|                              |  |          |   |  |         |   |  |         |  
|----------------------------- |  | -------- | - |  | ------- | - |  | ------- | -
|                              |  | 2006     |   |  | 2005    |   |  | 2004    |  
|Summary of restricted shares: |  |          |   |  |         |   |  |         |  
|Held in escrow at beginning   |  | 211,997  |   |  | 275,289 |   |  | 343,071 |  
|Shares released               |  | (211,997 | ) |  | (63,292 | ) |  | (67,782 | )
|                              |  |          |   |  |         |   |  |         |  
|Balance at end of year        |  |         |   |  | 211,997 |   |  | 275,289 |  
|                              |  |          |   |  |         |   |  |         |  



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ALTRUST FINANCIAL SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2006, 2005, and 2004



NOTE 15  EARNINGS PER SHARE

A reconciliation of the numerators and denominators of the earnings per common share and earnings per common share assuming dilution computations are presented below.



|                                                                                                                                                  |  |      |           |      |   |           |  |   |          
|------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | --------- | ---- | - | --------- |  | - | ---------
|                                                                                                                                                  |  | 2006 |           | 2005 |   | 2004     
|Basic Earnings Per Share:                                                                                                                         |  |      |           |      |   |           |  |   |          
|Net income                                                                                                                                        |  | $    | 6,050,637 |      | $ | 4,897,308 |  | $ | 3,363,506
|Weighted average common shares outstanding                                                                                                        |  |      | 5,483,046 |      |   | 5,228,039 |  |   | 5,237,248
|                                                                                                                                                  |  |      |           |      |   |           |  |   |          
|Basic earnings per share                                                                                                                          |  | $    | 1.10      |      | $ | .94       |  | $ | .64      
|                                                                                                                                                  |  |      |           |      |   |           |  |   |          
|Diluted Earnings Per Share:                                                                                                                       |  |      |           |      |   |           |  |   |          
|Net income                                                                                                                                        |  | $    | 6,050,637 |      | $ | 4,897,308 |  | $ | 3,363,506
|Weighted average common shares outstanding                                                                                                        |  |      | 5,483,046 |      |   | 5,228,039 |  |   | 5,237,248
|Add: Dilutive effects of assumed conversions and exercises of stock options based on the treasury method using average market prices for the
year |  |      | 49,940    |      |   | 59,246    |  |   | 40,685   
|                                                                                                                                                  |  |      |           |      |   |           |  |   |          
|Weighted average common and dilutive potential common shares outstanding                                                                          |  |      | 5,532,986 |      |   | 5,287,285 |  |   | 5,277,933
|                                                                                                                                                  |  |      |           |      |   |           |  |   |          
|Diluted earnings per share                                                                                                                        |  | $    | 1.09      |      | $ | .93       |  | $ | .64      
|                                                                                                                                                  |  |      |           |      |   |           |  |   |          



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ALTRUST FINANCIAL SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2006, 2005, and 2004



NOTE 16  RELATED PARTY TRANSACTIONS

Loans

As more fully described in Note 3, the Bank made loans to related parties during 2006 and 2005 which amounted
to $6,234,130 and $13,381,340 at December 31, 2006 and 2005, respectively.

Deposits

Deposits from related parties held by the Bank at December 31, 2006 amounted to $2,667,417.

Leases

The Bank has a lease agreement with a director for the lease of a branch facility. The lease is of comparable
terms and conditions as would be from an independent party. The lease is on a month-to-month basis with monthly rental payments of $1,400.

The Bank has a
lease agreement with Walker Brothers, Ltd., an affiliated business of certain directors, for the lease of an operations facility. The lease is of comparable terms and conditions as would be from an independent party. The lease is for three years
with monthly rental payments of $1,680. The Bank also leases additional space for this facility from Walker Brothers, Ltd., on a month to month basis with monthly rental payments of $1,040.

Construction

During 2006, 2005 and 2004, the Bank contracted with
Walker Brothers, Ltd., for the construction and remodeling of facilities and miscellaneous supplies. Total amounts paid to this related party during 2006, 2005 and 2004 amounted to $23,170, $78,645, and $375,586, respectively.

Appraisal evaluation services

During 2006, 2005 and 2004, the Bank
utilized the services of a real estate firm owned by a former directors family member for evaluations on loans secured by real estate and not requiring independent certification. The former director is an employee of the firm and performs the
evaluations. The total amount paid during 2004 was $13,046. No amounts were paid in 2006 and 2005. Additionally, Southern Appraisal Services, Inc. (one of the companys subsidiaries) paid this former director $10,311, $16,160, and $6,765 during
2006, 2005 and 2004, respectively, in fees and expenses for appraisal services.

NOTE 17  SEGMENT INFORMATION

In addition to banking, the Company is engaged in other areas of operation through its non-bank subsidiaries offering services and products to enhance and compliment its
banking operations. Southern Insurance of Cullman, Inc. acts as an agent for obtaining title insurance for the Banks real estate loan customers and to offer various services to the Banks customers. Southern Appraisal Services, Inc.
provides real estate appraisal services.

The Companys non-bank subsidiaries do not meet the quantitative threshold for disclosure on a separate
basis. The combined revenue of these subsidiaries for 2006, 2005 and 2004 was less than 3% of consolidated revenues each year and has been included in non-interest income. The combined expenses of these subsidiaries for 2006, 2005 and 2004 was less
than approximately 3% of consolidated expenses and has been included in non-interest expense.



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ALTRUST FINANCIAL SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2006, 2005, and 2004



NOTE 18  FAIR VALUES OF FINANCIAL INSTRUMENTS

The fair value of a financial instrument is the current amount that would be exchanged between willing parties, other than in a forced liquidation. Fair value is best
determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Companys various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates
using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an
immediate settlement of the instrument. SFAS No. 107, Disclosures about Fair Values of Financial Instruments,excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements. Accordingly, the
aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company.

The following methods and assumptions were
used by the Company in estimating its fair value disclosures for financial instruments.

Cash and cash equivalents: The carrying amounts reported in the
consolidated statements of financial condition for cash and cash equivalents approximate those assets fair values.

Investment securities: Fair
values for investment securities are based on quoted market prices, where available. If a quoted market price is not available, fair value is based on quoted market prices of comparable instruments.

Other investments: Fair values for other investments are considered to be their cost as they are redeemed at par value.

Loans, net: For variable-rate loans that reprice frequently and with no significant change in credit risk, fair value is based on carrying amounts. The fair value of
other loans (for example, fixed rate commercial real estate, mortgage loans, and industrial loans) is estimated using discounted cash flow analysis, based on interest rates currently being offered for loans with similar terms to borrowers of similar
credit quality. Loan fair value estimates include judgments regarding future expected loss experience and risk characteristics. Fair value for impaired loans is estimated using discounted cash flow analysis, or underlying collateral values, where
applicable.

Accrued interest and dividends receivable: The carrying amount of accrued interest and dividends receivable approximates its fair value.

Cash surrender value of life insurance: The carrying amount of bank owned life insurance approximates its fair value.

Deposits: The fair value disclosed for demand deposits is, by definition, equal to the amount payable on demand at the reporting date (that is, their carrying amounts).
The carrying amounts of variable-rate, fixed-term money market accounts approximate their fair values. Fair values for certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently offered on
certificates to a schedule of aggregated expected monthly maturities on time deposits.

Accrued interest payable: The carrying amount of accrued interest
payable approximates its fair value.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2006, 2005, and 2004



NOTE 18  FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)

Federal funds purchased, FHLB advances, debt of ESOP and the capitalized lease obligation: The carrying amounts for the short-term portions of these borrowings
approximate their fair values. The long term portions are estimated using a discounted cash flow calculation that applies interest rates currently available for similar terms.

Loan commitments: Fair values of the Companys off-balance sheet financial instruments are based on fees currently charged to enter into similar agreements. Since the majority of the Companys other
off-balance sheet instruments consist of nonfee-producing, variable-rate commitments, the Company has determined they do not have a distinguishable fair value.

The carrying amounts and estimated fair values of the Companys financial instruments as of December 31, 2006 and 2005 are as follows:



|                                          |  |                |         |            |   |                |  |            |         |  |   |        
|----------------------------------------- |  | -------------- | ------- | ---------- | - | -------------- |  | ---------- | ------- |  | - | -------
|                                          |  | 2006           |         | 2005      
|                                          |  | CarryingAmount |         | Fair Value |   | CarryingAmount |  | Fair Value
|                                          |  | (In thousands)
|Financial assets                          |  |                |         |            |   |                |  |            |         |  |   |        
|Cash and cash equivalents                 |  | $              | 18,269  |            | $ | 18,269         |  | $          | 23,272  |  | $ | 23,272 
|Investment securities                     |  |                | 122,460 |            |   | 122,460        |  |            | 128,878 |  |   | 128,878
|Other investments                         |  |                | 4,460   |            |   | 4,460          |  |            | 4,836   |  |   | 4,836  
|Loans, net                                |  |                | 244,180 |            |   | 244,141        |  |            | 209,584 |  |   | 207,105
|Accrued interest and dividends receivable |  |                | 2,891   |            |   | 2,891          |  |            | 2,939   |  |   | 2,939  
|Cash surrender value of life insurance    |  |                | 9,301   |            |   | 9,301          |  |            | 9,026   |  |   | 9,026  
|                                          |  |                |         |            |   |                |  |            |         |  |   |        
|Total financial assets                    |  | $              | 401,561 |            | $ | 401,522        |  | $          | 378,535 |  | $ | 376,056
|                                          |  |                |         |            |   |                |  |            |         |  |   |        
|Financial liabilities                     |  |                |         |            |   |                |  |            |         |  |   |        
|Deposits                                  |  | $              | 306,636 |            | $ | 306,442        |  | $          | 272,075 |  | $ | 272,354
|FHLB advances                             |  |                | 62,800  |            |   | 62,597         |  |            | 78,350  |  |   | 78,209 
|Capitalized lease obligation              |  |                | 2,600   |            |   | 2,600          |  |            | 2,960   |  |   | 2,960  
|Debt of ESOP                              |  |                |        |            |   |               |  |            | 1,727   |  |   | 1,727  
|Federal funds purchased                   |  |                | 2,448   |            |   | 2,448          |  |            |        |  |   |       
|Accrued interest payable                  |  |                | 1,413   |            |   | 1,413          |  |            | 749     |  |   | 749    
|                                          |  |                |         |            |   |                |  |            |         |  |   |        
|Total financial liabilities               |  | $              | 375,897 |            | $ | 375,500        |  | $          | 355,861 |  | $ | 355,999
|                                          |  |                |         |            |   |                |  |            |         |  |   |        



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ALTRUST FINANCIAL SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2006, 2005, and 2004



NOTE 19  BUSINESS COMBINATION

On September 22, 2003, the Company entered into an Acquisition Agreement with THE BANK, an Alabama banking corporation, whereby the Company acquired a branch operation in Morris, Alabama. The
transaction was approved by the regulatory agencies and closed on February 6, 2004. The Company paid a deposit premium of 9% for the branch, which resulted in the Company recording intangible assets of $738,038. The identifiable intangible
asset associated with the fair value of the core deposit base, as determined by an independent consulting firm, was determined to be $45,102 and is being amortized as expense on a straight-line method over a seven-year period. The remaining
intangible asset of $692,936 has been classified as goodwill, and thus will not be systematically amortized, but rather will be subject to an annual impairment test. The amortization of the identifiable intangible asset is included in the
accompanying Consolidated Statements of Income beginning on the acquisition date of February 6, 2004. The operating results of these branches would be immaterial to the results of the Company and therefore pro forma results of operations have
not been presented.

The following table summarizes the fair value of assets acquired and liabilities assumed at the date of acquisition.



|                        |  |   |          
|----------------------- |  | - | ---------
|Cash                    |  | $ | 6,625,831
|Loans, net              |  |   | 717,240  
|Premises and equipment  |  |   | 131,000  
|Goodwill                |  |   | 692,936  
|Core deposit intangible |  |   | 45,102   
|Other assets            |  |   | 5,432    
|                        |  |   |          
|Total assets acquired   |  | $ | 8,217,541
|                        |  |   |          
|Deposits                |  | $ | 8,217,041
|Other liabilities       |  |   | 500      
|                        |  |   |          
|Total liabilities       |  | $ | 8,217,541
|                        |  |   |          



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ALTRUST FINANCIAL SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2006, 2005, and 2004



NOTE 20  PARENT COMPANY CONDENSED FINANCIAL STATEMENTS

Balance Sheets

Years ended December 31, 2006 and 2005



|                                                          |  |      |            |      |   |           
|--------------------------------------------------------- |  | ---- | ---------- | ---- | - | ----------
|                                                          |  | 2006 |            | 2005
|Assets                                                    |  |      |            |      |   |           
|Cash and due from banks                                   |  | $    | 7,368      |      | $ | 3,607     
|Investment in subsidiaries                                |  |      | 47,915,445 |      |   | 47,826,679
|Other assets                                              |  |      | 644,139    |      |   | 250,680   
|                                                          |  |      |            |      |   |           
|Total assets                                              |  | $    | 48,566,952 |      | $ | 48,080,966
|                                                          |  |      |            |      |   |           
|Liabilities and shareholders equity                      |  |      |            |      |   |           
|Liabilities                                               |  |      |            |      |   |           
|Company guaranteed debt of ESOP                           |  | $    |           |      | $ | 1,726,762 
|Due to subsidiaries                                       |  |      | 235,895    |      |   | 138,971   
|Other liabilities                                         |  |      | 438,848    |      |   | 37,698    
|                                                          |  |      |            |      |   |           
|Total liabilities                                         |  |      | 674,743    |      |   | 1,903,431 
|                                                          |  |     
|Redeemable common stock held by ESOP at fair market value |  |      | 12,836,264 |      |   | 8,232,727 
|Shareholders equity                                      |  |      | 35,055,944 |      |   | 37,944,808
|                                                          |  |      |            |      |   |           
|Total liabilities and shareholders equity                |  | $    | 48,566,952 |      | $ | 48,080,966
|                                                          |  |      |            |      |   |           

Statements of Income

Years ended December 31, 2006, 2005, and 2004



|                                                                                |  |      |           |   |      |   |           |      |  |   |           |  
|------------------------------------------------------------------------------- |  | ---- | --------- | - | ---- | - | --------- | ---- |  | - | --------- | -
|                                                                                |  | 2006 |           |   | 2005 |   |           | 2004 | 
|Income                                                                          |  |      |           |   |      |   |           |      |  |   |           |  
|Dividends from subsidiaries                                                     |  | $    | 6,336,603 |   |      | $ | 1,437,045 |      |  | $ | 1,043,819 |  
|                                                                                |  |      |           |   |      |   |           |      |  |   |           |  
|Expense                                                                         |  |      |           |   |      |   |           |      |  |   |           |  
|Other expenses                                                                  |  |      | 456,927   |   |      |   | 352,446   |      |  |   | 59,656    |  
|                                                                                |  |      |           |   |      |   |           |      |  |   |           |  
|Total expenses                                                                  |  |      | 456,927   |   |      |   | 352,446   |      |  |   | 59,656    |  
|                                                                                |  |      |           |   |      |   |           |      |  |   |           |  
|Income before income taxes and equity in undistributed earnings of subsidiaries |  |      | 5,879,676 |   |      |   | 1,084,599 |      |  |   | 984,163   |  
|Income tax expense                                                              |  |      | (125,961  | ) |      |   | (294,034  | )    |  |   | (23,562   | )
|                                                                                |  |      |           |   |      |   |           |      |  |   |           |  
|Income before equity in undistributed earnings of subsidiaries                  |  |      | 6,050,637 |   |      |   | 1,378,633 |      |  |   | 1,007,725 |  
|Equity in undistributed earnings of subsidiaries                                |  |      |          |   |      |   | 3,518,675 |      |  |   | 2,355,781 |  
|                                                                                |  |      |           |   |      |   |           |      |  |   |           |  
|NET INCOME                                                                      |  | $    | 6,050,637 |   |      | $ | 4,897,308 |      |  | $ | 3,363,506 |  
|                                                                                |  |      |           |   |      |   |           |      |  |   |           |  



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ALTRUST FINANCIAL SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2006, 2005, and 2004



NOTE 20  PARENT COMPANY CONDENSED FINANCIAL STATEMENTS (CONTINUED)

Statements of Cash Flows

Years ended December 31, 2006, 2005,
and 2004



|                                                                                                                          |  |      |            |   |      |   |            |      |  |   |            |  
|------------------------------------------------------------------------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | ---- |  | - | ---------- | -
|                                                                                                                          |  | 2006 |            |   | 2005 |   |            | 2004 | 
|Cash flows from operating activities                                                                                      |  |      |            |   |      |   |            |      |  |   |            |  
|Net income                                                                                                                |  | $    | 6,050,637  |   |      | $ | 4,897,308  |      |  | $ | 3,363,506  |  
|Adjustments to reconcile net income to net cash provided by operating activities Undistributed net income of subsidiaries |  |      |           |   |      |   | (3,518,675 | )    |  |   | (2,355,781 | )
|Subsidiary dividends in excess of earnings                                                                                |  |      | 670,227    |   |      |   |           |      |  |   |           |  
|Tax benefit on dividends on unallocated ESOP shares                                                                       |  |      | 226,449    |   |      |   |           |      |  |   |           |  
|Deferred tax provision                                                                                                    |  |      |           |   |      |   | 16,153     |      |  |   | 27,136     |  
|Decrease (increase) in other assets                                                                                       |  |      | (393,459   | ) |      |   | (240,883   | )    |  |   | 72,986     |  
|Increase (decrease) in other liabilities                                                                                  |  |      | 59,225     |   |      |   | (24,876    | )    |  |   | (141,563   | )
|                                                                                                                          |  |      |            |   |      |   |            |      |  |   |            |  
|Net cash provided by operating activities                                                                                 |  |      | 6,613,079  |   |      |   | 1,129,027  |      |  |   | 966,284    |  
|                                                                                                                          |  |      |            |   |      |   |            |      |  |   |            |  
|Cash flows from investing activities                                                                                      |  |      |            |   |      |   |            |      |  |   |            |  
|Purchase of treasury stock                                                                                                |  |      |           |   |      |   | (10,360    | )    |  |   | (381,644   | )
|                                                                                                                          |  |      |            |   |      |   |            |      |  |   |            |  
|Net cash used in investing activities                                                                                     |  |      |           |   |      |   | (10,360    | )    |  |   | (381,644   | )
|                                                                                                                          |  |      |            |   |      |   |            |      |  |   |            |  
|Cash flows from financing activities                                                                                      |  |      |            |   |      |   |            |      |  |   |            |  
|Proceeds from sale of stock                                                                                               |  |      | 186,775    |   |      |   | 68,150     |      |  |   | 153,000    |  
|Tax benefit from exercise of stock options                                                                                |  |      | 42,907     |   |      |   |           |      |  |   |           |  
|Dividends paid                                                                                                            |  |      | (6,839,000 | ) |      |   | (1,305,442 | )    |  |   | (817,433   | )
|                                                                                                                          |  |      |            |   |      |   |            |      |  |   |            |  
|Net cash used in financing activities                                                                                     |  |      | (6,609,318 | ) |      |   | (1,237,292 | )    |  |   | (664,433   | )
|                                                                                                                          |  |      |            |   |      |   |            |      |  |   |            |  
|Net increase (decrease) in cash and cash equivalents                                                                      |  |      | 3,761      |   |      |   | (118,625   | )    |  |   | (79,793    | )
|                                                                                                                          |  |      |           
|Cash and cash equivalents, beginning of year                                                                              |  |      | 3,607      |   |      |   | 122,232    |      |  |   | 202,025    |  
|                                                                                                                          |  |      |            |   |      |   |            |      |  |   |            |  
|Cash and cash equivalents, end of year                                                                                    |  | $    | 7,368      |   |      | $ | 3,607      |      |  | $ | 122,232    |  
|                                                                                                                          |  |      |            |   |      |   |            |      |  |   |            |  



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PART IV



|ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
|-------- | -------------------------------------------



|(a) | The following documents are filed as part of this report:
|--- | ---------------------------------------------------------



| | (1) | Financial StatementsPlease refer to Item 8 of this report.
| | --- | -----------------------------------------------------------



| | (2) | Financial Statements Schedules All schedules are omitted as the required information is inapplicable or the information is presented in the financial statements or the related
notes set forth in Item 8 of this report.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (3) | A list of the exhibits required by Item 601 of Regulation S-K to be filed as a part of this report is shown on the Exhibit Index filed herewith.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
as amended, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Cullman, State of Alabama, on October 31, 2007.



ALTRUST FINANCIAL SERVICES, INC.By:

/s/ J. Robin CummingsJ. Robin CummingsPresident and Chief Executive Officer


This offering statement has been signed by the following persons in the capacities and on the date
indicated.



By:

/s/ J. Robin CummingsJ. Robin CummingsPresident, Chief Executive Officer and DirectorBy:

/s/ Lionel PowellLionel PowellChief Financial Officer and Chief Accounting OfficerBy:

/s/ Whit DrakeWhit DrakeDirectorBy:

/s/ N. Jasper EstesN. Jasper EstesDirectorBy:

/s/ Alan WalkerAlan WalkerDirectorBy:

/s/ Terry WalkerTerry WalkerDirectorBy:

/s/ Terry WalkerTim WalkerDirectorBy:

/s/ Brian WitcherBrian WitcherDirector




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##### Table of Contents

EXHIBIT INDEX



|              |  |                                                                                                                                                                                                                                       
|------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit       |  | Description                                                                                                                                                                                                                           
|Exhibit   3.1 |  | Copy of the Companys Restated Articles of Incorporation (filed as Exhibit 3.1 to the Companys Form 10, filed with the SEC on May 2, 2005, as amended (Commission file number
0-51298)(the Form 10) and incorporated by reference).
|              | 
|Exhibit   3.2 |  | Copy of the Companys Bylaws (filed as Exhibit 3.2 to the Form 10 and incorporated by reference).                                                                                                                                     
|              | 
|Exhibit   4.1 |  | Form of Common Stock Certificate (filed as Exhibit 4.1 to the Form 10 and incorporated by reference).                                                                                                                                 
|              | 
|Exhibit 10.1  |  | Altrust Financial Services, Inc. 2004 Long Term Incentive Plan (filed as Exhibit 10.1 to the Form 10 and incorporated by reference).*                                                                                                 
|              | 
|Exhibit 10.2  |  | Altrust Financial Services, Inc. 2004 Stock Option Plan for Outside Directors (filed as Exhibit 10.2 to the Form 10 and incorporated by reference).*                                                                                  
|              | 
|Exhibit 10.3  |  | Altrust Financial Services, Inc. Savings and Employee Stock Ownership Plan (filed as Exhibit 10.3 to the Form 10 and incorporated by reference).*                                                                                     
|              | 
|Exhibit 10.4  |  | Altrust Financial Services, Inc. Director Compensation Arrangement (filed as Exhibit 10.4 to the Form 10 and incorporated by reference)*                                                                                              
|              | 
|Exhibit 10.5  |  | Altrust Financial Services, Inc. Named Executive Officer Compensation (filed as Exhibit 10.5 to the Form 10 and incorporated by reference).*                                                                                          
|              | 
|Exhibit 16.1  |  | Letter re Change in Certifying Accountant from Carr, Riggs & Ingram, LLC (field as Exhibit 16.1 to the Form 10 and incorporated by reference)                                                                                         
|              | 
|Exhibit 21.1  |  | Subsidiaries of Altrust Financial Services, Inc. (filed as Exhibit 21.1 to the Form 10 and incorporated by reference)                                                                                                                 
|              | 
|Exhibit 23.1  |  | Consent of Dixon Hughes PLLC                                                                                                                                                                                                          
|              | 
|Exhibit 31.1  |  | Certification by the Companys Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                            
|              | 
|Exhibit 31.2  |  | Certification by the Companys Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                            
|              | 
|Exhibit 32.1  |  | Certification by the Companys Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                          

---

|* | denotes management contract or compensatory plan or arrangement.
|- | ----------------------------------------------------------------