##### Table of Contents





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q





(Mark One)

|x | Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ---------------------------------------------------------------------------------

For the quarterly period ended: September 30, 2008



| ̈ | Transition report under Section 13 or 15(d) of the Exchange Act
|- | ---------------------------------------------------------------

For the transition period from  to

Commission file number: 0-25846





CCF HOLDING COMPANY

(Exact name of issuer as Specified in Its Charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Georgia                                                        |  | 58-2173616                          
|(State or Other Jurisdiction of Incorporation or Organization) |  | (I.R.S. Employer Identification No.)

101 North Main Street

Jonesboro, Georgia 30236

(Address of Principal Executive Offices)

(770) 478-8881

(Issuers Telephone Number)





Check whether the issuer
(1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or 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 whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of large accelerated filer, accelerated filer, and smaller reporting company in Rule 12b-2 of the Exchange Act.



|                        |  |                                                  |  |                           |  |  
|----------------------- |  | ------------------------------------------------ |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈                                                |  | Accelerated filer         |  |  ̈
|                        |  |                                                  | 
|Non-accelerated filer   |  |  ̈  (Do not check if a smaller reporting company) |  | Smaller reporting company |  | x

State the number of shares outstanding of each of the issuers classes of common equity, as
of the latest practicable date: At November 11, 2008, 3,607,717 shares of the registrants common stock were outstanding.

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









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##### Table of Contents

FORM 10-Q

INDEX



|                              |  |                                                                                       |  |                                                                                                                                   |  |     
|----------------------------- |  | ------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------- |  | ----
|                              |  |                                                                                       |  |                                                                                                                                   |  | Page
|PART I. FINANCIAL INFORMATION |  |                                                                                      
|                              |  |                                                                                      
|Item 1.                       |  | Financial Statements:                                                                 |  |                                                                                                                                  
|                              |  |                                                                                       | 
|                              |  |                                                                                       |  | Consolidated Balance Sheets as of September 30, 2008 (unaudited) and December 31, 2007 (audited)                                  |  | 1   
|                              |  |                                                                                       | 
|                              |  |                                                                                       |  | Consolidated Statements of Operations For the Three- and Nine- Months Ended September 30, 2008 and September 30, 2007 (unaudited) |  | 2   
|                              |  |                                                                                       | 
|                              |  |                                                                                       |  | Consolidated Statements of Cash Flows For the Nine-Months Ended September 30, 2008 and September 30, 2007 (unaudited)             |  | 3   
|                              |  |                                                                                       | 
|                              |  |                                                                                       |  | Notes to Unaudited Consolidated Financial Statements                                                                              |  | 4   
|                              |  |                                                                                      
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 8                                                                                                                                
|                              |  |                                                                                      
|Item 3.                       |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 13                                                                                                                               
|                              |  |                                                                                      
|Item 4.                       |  | Controls and Procedures                                                               |  | 13                                                                                                                               
|                              | 
|PART II. OTHER INFORMATION    |  |                                                                                      
|                              |  |                                                                                      
|Item 1.                       |  | Legal Proceedings                                                                     |  | 14                                                                                                                               
|                              |  |                                                                                      
|Item 1A.                      |  | Risk Factors                                                                          |  | 14                                                                                                                               
|                              |  |                                                                                      
|Item 2.                       |  | Unregistered Sales of Equity Securities and Use of Proceeds                           |  | 14                                                                                                                               
|                              |  |                                                                                      
|Item 3.                       |  | Defaults Upon Senior Securities                                                       |  | 14                                                                                                                               
|                              |  |                                                                                      
|Item 4.                       |  | Submission of Matters to a Vote of Security Holders                                   |  | 14                                                                                                                               
|                              |  |                                                                                      
|Item 5.                       |  | Other Information                                                                     |  | 14                                                                                                                               
|                              |  |                                                                                      
|Item 6.                       |  | Exhibits                                                                              |  | 14                                                                                                                               
|                              | 
|Signatures                    |  | 15                                                                                   
|                              | 
|Certificates                  |  |                                                                                      



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##### Table of Contents

PART I. FINANCIAL INFORMATION



|Item 1. | Financial Statements
|------- | --------------------

CCF
HOLDING COMPANY AND SUBSIDIARY

Consolidated Balance Sheets



|                                                                                                                                                       |  |                   |             |   |                  |            
|------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----------------- | ----------- | - | ---------------- | -----------
|                                                                                                                                                       |  | September 30,2008 |             |   | December 31,2007
|                                                                                                                                                       |  | (Unaudited)       |             |   | (Audited)       
|Assets                                                                                                                                                 |  |                   |             |   |                  |            
|Cash and due from banks                                                                                                                                |  | $                 | 11,866,652  |   |                  | 6,771,957  
|Interest-bearing deposits in other financial institutions                                                                                              |  |                   | 2,101,870   |   |                  | 877,457    
|Federal funds sold                                                                                                                                     |  |                   | 16,341,613  |   |                  |           
|                                                                                                                                                       |  |                   |             |   |                  |            
|Cash and cash equivalents                                                                                                                              |  |                   | 30,310,135  |   |                  | 7,649,414  
|                                                                                                                                                       |  |                  
|Investment securities available-for-sale                                                                                                               |  |                   | 66,728,594  |   |                  | 71,894,670 
|Certificates of deposit in other financial institutions                                                                                                |  |                   | 23,000,000  |   |                  |           
|Federal Home Loan Bank stock, at cost                                                                                                                  |  |                   | 759,800     |   |                  | 1,216,000  
|Loans, net                                                                                                                                             |  |                   | 308,562,926 |   |                  | 316,892,969
|Premises and equipment, net                                                                                                                            |  |                   | 7,366,846   |   |                  | 7,383,551  
|Accrued interest receivable                                                                                                                            |  |                   | 1,933,580   |   |                  | 2,554,514  
|Cash surrender value of life insurance                                                                                                                 |  |                   | 6,012,318   |   |                  | 5,763,825  
|Other assets owned                                                                                                                                     |  |                   | 8,905,444   |   |                  | 4,998,394  
|Other assets                                                                                                                                           |  |                   | 4,226,573   |   |                  | 4,427,500  
|                                                                                                                                                       |  |                   |             |   |                  |            
|Total assets                                                                                                                                           |  | $                 | 457,806,216 |   |                  | 422,780,837
|                                                                                                                                                       |  |                   |             |   |                  |            
|                                                                                                                                                       |  |                  
|Liabilities and Shareholders Equity                                                                                                                   |  |                   |             |   |                  |            
|Deposits:                                                                                                                                              |  |                   |             |   |                  |            
|Noninterest-bearing deposits                                                                                                                           |  | $                 | 35,361,156  |   |                  | 34,962,318 
|Interest-bearing demand deposits                                                                                                                       |  |                   | 124,241,806 |   |                  | 186,701,077
|Savings accounts                                                                                                                                       |  |                   | 4,840,629   |   |                  | 4,388,618  
|Time deposits less than $100,000                                                                                                                       |  |                   | 178,406,264 |   |                  | 80,088,123 
|Time deposits greater than $100,000                                                                                                                    |  |                   | 56,572,005  |   |                  | 40,243,246 
|                                                                                                                                                       |  |                   |             |   |                  |            
|Total deposits                                                                                                                                         |  |                   | 399,421,860 |   |                  | 346,383,382
|                                                                                                                                                       |  |                  
|Securities sold under agreement to repurchase                                                                                                          |  |                   | 17,795,020  |   |                  | 19,876,316 
|Federal Home Loan Bank advances                                                                                                                        |  |                   |            |   |                  | 10,000,000 
|Federal funds purchased                                                                                                                                |  |                   |            |   |                  | 2,132,000  
|Junior subordinated debentures                                                                                                                         |  |                   | 8,765,000   |   |                  | 8,765,000  
|Accrued interest payable and other liabilities                                                                                                         |  |                   | 2,050,930   |   |                  | 3,520,723  
|                                                                                                                                                       |  |                   |             |   |                  |            
|Total liabilities                                                                                                                                      |  |                   | 428,032,810 |   |                  | 390,677,421
|                                                                                                                                                       |  |                   |             |   |                  |            
|Commitments                                                                                                                                            |  |                   |             |   |                  |            
|Shareholders Equity:                                                                                                                                  |  |                   |             |   |                  |            
|Preferred stock, no par value; 1,000,000 shares authorized; none issued and outstanding                                                                |  |                   |            |   |                  |           
|Common stock, $.10 par value, 20,000,000 shares authorized; 3,607,717 issued and outstanding in 2008; 3,591,473 shares issued and outstanding
in 2007. |  |                   | 360,772     |   |                  | 359,147    
|Additional paid-in capital                                                                                                                             |  |                   | 9,075,119   |   |                  | 8,935,296  
|Retained earnings                                                                                                                                      |  |                   | 20,586,436  |   |                  | 22,198,567 
|Accumulated other comprehensive (loss) gain                                                                                                            |  |                   | (248,921    | ) |                  | 610,406    
|                                                                                                                                                       |  |                   |             |   |                  |            
|Total shareholders equity                                                                                                                             |  |                   | 29,773,406  |   |                  | 32,103,416 
|                                                                                                                                                       |  |                   |             |   |                  |            
|Total liabilities & shareholders equity                                                                                                               |  | $                 | 457,806,216 |   |                  | 422,780,837
|                                                                                                                                                       |  |                   |             |   |                  |            

See accompanying notes to unaudited consolidated financial statements.



1



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##### Table of Contents

CCF HOLDING COMPANY AND SUBSIDIARY

Consolidated Statements of Operations

(Unaudited)



|                                                                                 |  |                                 |            |                                |      |           |      |            |   |      |           
|-------------------------------------------------------------------------------- |  | ------------------------------- | ---------- | ------------------------------ | ---- | --------- | ---- | ---------- | - | ---- | ----------
|                                                                                 |  | Three-months EndedSeptember 30, |            | Nine-months EndedSeptember 30,
|                                                                                 |  | 2008                            |            |                                | 2007 |           | 2008 |            |   | 2007
|Interest and dividend income:                                                    |  |                                 |            |                                |      |           |      |            |   |      |           
|Interest and fees on loans                                                       |  | $                               | 4,835,794  |                                |      | 7,458,481 |      | 15,528,246 |   |      | 22,578,199
|Interest-bearing deposits in other financial institutions and federal funds sold |  |                                 | 71,883     |                                |      | 137,984   |      | 266,769    |   |      | 467,507   
|Interest and dividends on taxable investment securities                          |  |                                 | 972,070    |                                |      | 762,247   |      | 2,713,191  |   |      | 1,953,029 
|Interest on nontaxable investment securities                                     |  |                                 | 29,466     |                                |      | 45,999    |      | 118,658    |   |      | 138,019   
|                                                                                 |  |                                 |            |                                |      |           |      |            |   |      |           
|Total interest and dividend income                                               |  |                                 | 5,909,213  |                                |      | 8,404,711 |      | 18,626,864 |   |      | 25,136,754
|                                                                                 |  |                                 |            |                                |      |           |      |            |   |      |           
|Interest expense:                                                                |  |                                 |            |                                |      |           |      |            |   |      |           
|Deposit accounts                                                                 |  |                                 | 2,541,555  |                                |      | 3,287,583 |      | 7,556,946  |   |      | 9,794,784 
|Other borrowings                                                                 |  |                                 | 245,064    |                                |      | 512,335   |      | 894,794    |   |      | 1,473,503 
|                                                                                 |  |                                 |            |                                |      |           |      |            |   |      |           
|Total interest expense                                                           |  |                                 | 2,786,619  |                                |      | 3,799,918 |      | 8,451,740  |   |      | 11,268,287
|                                                                                 |  |                                 |            |                                |      |           |      |            |   |      |           
|Net interest income                                                              |  |                                 | 3,122,594  |                                |      | 4,604,793 |      | 10,175,124 |   |      | 13,868,467
|                                                                                 |  |                                 |            |                               
|Provision for loan losses                                                        |  |                                 | 2,250,000  |                                |      | 150,000   |      | 4,350,000  |   |      | 440,000   
|                                                                                 |  |                                 |            |                                |      |           |      |            |   |      |           
|Net interest income after provision for loan losses                              |  |                                 | 872,594    |                                |      | 4,454,793 |      | 5,825,124  |   |      | 13,428,467
|                                                                                 |  |                                 |            |                                |      |           |      |            |   |      |           
|Other income:                                                                    |  |                                 |            |                                |      |           |      |            |   |      |           
|Service charges on deposit accounts                                              |  |                                 | 408,951    |                                |      | 404,883   |      | 1,198,872  |   |      | 1,124,699 
|Gain on sale of securities available-for-sale                                    |  |                                 | 27,814     |                                |      | 316       |      | 91,284     |   |      | 316       
|Gain on sale of loans                                                            |  |                                 |           |                                |      | 12,550    |      | 6,546      |   |      | 63,225    
|Other                                                                            |  |                                 | 230,885    |                                |      | 240,894   |      | 1,854,081  |   |      | 702,627   
|                                                                                 |  |                                 |            |                                |      |           |      |            |   |      |           
|Total other income                                                               |  |                                 | 667,650    |                                |      | 658,643   |      | 3,150,783  |   |      | 1,890,867 
|                                                                                 |  |                                 |            |                                |      |           |      |            |   |      |           
|Other expenses:                                                                  |  |                                 |            |                                |      |           |      |            |   |      |           
|Salaries and employee benefits                                                   |  |                                 | 1,846,497  |                                |      | 1,937,930 |      | 5,654,368  |   |      | 5,943,379 
|Occupancy                                                                        |  |                                 | 658,259    |                                |      | 532,780   |      | 1,998,747  |   |      | 1,567,918 
|Loss on sale of real estate owned                                                |  |                                 | 506,655    |                                |      | 31,035    |      | 515,317    |   |      | 31,035    
|Real estate owned expenses                                                       |  |                                 | 149,414    |                                |      | 20,582    |      | 338,586    |   |      | 74,203    
|FDIC Insurance Premiums                                                          |  |                                 | 73,479     |                                |      | 10,796    |      | 215,372    |   |      | 32,411    
|Other                                                                            |  |                                 | 417,770    |                                |      | 584,501   |      | 2,507,796  |   |      | 2,147,841 
|                                                                                 |  |                                 |            |                                |      |           |      |            |   |      |           
|Total other expenses                                                             |  |                                 | 3,652,074  |                                |      | 3,117,624 |      | 11,230,186 |   |      | 9,796,787 
|                                                                                 |  |                                 |            |                                |      |           |      |            |   |      |           
|(Loss) earnings before income taxes                                              |  |                                 | (2,111,830 | )                              |      | 1,995,812 |      | (2,254,279 | ) |      | 5,522,547 
|                                                                                 |  |                                 |            |                               
|Income tax (benefit) expense                                                     |  |                                 | (749,425   | )                              |      | 687,480   |      | (822,750   | ) |      | 1,901,262 
|                                                                                 |  |                                 |            |                                |      |           |      |            |   |      |           
|Net (loss) earnings                                                              |  | $                               | (1,362,405 | )                              |      | 1,308,332 |      | (1,431,529 | ) |      | 3,621,285 
|                                                                                 |  |                                 |            |                                |      |           |      |            |   |      |           
|Basic (loss) earnings per share                                                  |  | $                               | (0.38      | )                              |      | 0.36      |      | (0.40      | ) |      | 0.99      
|                                                                                 |  |                                 |            |                                |      |           |      |            |   |      |           
|Diluted (loss) earnings per share                                                |  | $                               | (0.38      | )                              |      | 0.35      |      | (0.39      | ) |      | 0.95      
|                                                                                 |  |                                 |            |                                |      |           |      |            |   |      |           

See accompanying notes to unaudited consolidated financial statements



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CCF HOLDING COMPANY AND SUBSIDIARY

Consolidated Statements of Cash Flows

(Unaudited)



|                                                                                           |  |                                |             |   |      |             |  
|------------------------------------------------------------------------------------------ |  | ------------------------------ | ----------- | - | ---- | ----------- | -
|                                                                                           |  | Nine-months EndedSeptember 30, |            
|                                                                                           |  | 2008                           |             |   | 2007 |            
|Cash flows from operating activities:                                                      |  |                                |             |   |      |             |  
|Net (loss) earnings                                                                        |  | $                              | (1,431,529  | ) |      | 3,621,285   |  
|Adjustments to reconcile net (loss) earnings to net cash provided by operating activities: |  |                                |             |   |      |             |  
|Provision for loan losses                                                                  |  |                                | 4,350,000   |   |      | 440,000     |  
|Depreciation, amortization, and accretion, net                                             |  |                                | 530,626     |   |      | 541,088     |  
|Net gain on sale of loans                                                                  |  |                                | (6,546      | ) |      | (4,442      | )
|Net loss/write-down on real estate owned                                                   |  |                                | 515,317     |   |      | 31,035      |  
|Net loss (gain) on sale of premises and equipment                                          |  |                                | 1,208       |   |      | (350        | )
|Net gain on sale of securities available-for-sale                                          |  |                                | (91,284     | ) |      | (316        | )
|Increase in cash surrender value of life insurance                                         |  |                                | (248,493    | ) |      | (236,505    | )
|Change in:                                                                                 |  |                                |             |   |      |             |  
|Accrued interest receivable and other assets                                               |  |                                | 1,329,003   |   |      | (863,843    | )
|Accrued interest payable and other liabilities                                             |  |                                | (1,170,325  | ) |      | 2,031,799   |  
|                                                                                           |  |                                |             |   |      |             |  
|Net cash provided by operating activities                                                  |  |                                | 3,777,977   |   |      | 5,559,751   |  
|                                                                                           |  |                                |             |   |      |             |  
|Cash flows from investing activities:                                                      |  |                                |             |   |      |             |  
|Proceeds from maturities and calls of investment securities available-for-sale             |  |                                | 27,364,010  |   |      | 6,906,445   |  
|Proceeds from sale of investment securities available-for-sale                             |  |                                | 2,609,605   |   |      | 4,499,140   |  
|Purchases of investment securities available-for-sale                                      |  |                                | (25,466,823 | ) |      | (30,470,851 | )
|Purchases of certificates of deposit at other financial institutions                       |  |                                | (23,000,000 | ) |      |            |  
|Purchase of Federal Home Loan Bank stock                                                   |  |                                | (562,500    | ) |      | (38,500     | )
|Federal Home Loan Bank Stock Redemption                                                    |  |                                | 1,018,700   |   |      | 225,000     |  
|Proceeds from sales of real estate owned                                                   |  |                                | 5,095,545   |   |      | 690,957     |  
|Net decrease (increase) in loans                                                           |  |                                | (9,387,053  | ) |      | 5,470,196   |  
|Proceeds from sale of loans                                                                |  |                                | 3,845,730   |   |      | 3,384,239   |  
|Proceeds from sales of premises and equipment                                              |  |                                | 102,000     |   |      |            |  
|Purchases of premises and equipment                                                        |  |                                | (1,120,062  | ) |      | (598,191    | )
|                                                                                           |  |                                |             |   |      |             |  
|Net cash used in investing activities                                                      |  |                                | (19,500,848 | ) |      | (9,931,565  | )
|                                                                                           |  |                                |             |   |      |             |  
|Cash flows from financing activities:                                                      |  |                                |             |   |      |             |  
|Net change in deposits                                                                     |  |                                | 53,038,477  |   |      | (5,380,632  | )
|Net change in securities sold under agreements to repurchase                               |  |                                | (2,081,296  | ) |      | 12,811,529  |  
|Repayments of Federal Home Loan Bank borrowings                                            |  |                                | (10,000,000 | ) |      | (5,000,000  | )
|Repayments of Federal Funds purchased                                                      |  |                                | (2,132,000  | ) |      |            |  
|Dividends paid                                                                             |  |                                | (539,748    | ) |      | (930,119    | )
|Retirement of common stock                                                                 |  |                                | (23,562     | ) |      | (286,588    | )
|Proceeds from exercise of stock options                                                    |  |                                | 121,721     |   |      | 383,894     |  
|                                                                                           |  |                                |             |   |      |             |  
|Net cash provided by financing activities                                                  |  |                                | 38,383,592  |   |      | 1,598,084   |  
|                                                                                           |  |                                |             |   |      |             |  
|Increase (decrease) in cash and cash equivalents                                           |  |                                | 22,660,721  |   |      | (2,773,730  | )
|Cash and cash equivalents at beginning of period                                           |  | $                              | 7,649,414   |   |      | 24,488,519  |  
|                                                                                           |  |                                |             |   |      |             |  
|Cash and cash equivalents at end of period                                                 |  | $                              | 30,310,135  |   |      | 21,714,789  |  
|                                                                                           |  |                                |             |   |      |             |  
|Supplemental disclosure of cash flow information:                                          |  |                                |             |   |      |             |  
|Interest paid                                                                              |  | $                              | 7,663,664   |   |      | 11,043,012  |  
|                                                                                           |  |                                |             |   |      |             |  
|Income taxes paid                                                                          |  | $                              | 155,000     |   |      | 2,171,000   |  
|                                                                                           |  |                                |             |   |      |             |  
|Transfers from Loans to Other Real Estate Owned                                            |  | $                              | 9,527,912   |   |      | 2,424,859   |  
|                                                                                           |  |                                |             |   |      |             |  

See accompanying notes to unaudited consolidated financial statements.



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##### Table of Contents

CCF HOLDING COMPANY AND SUBSIDIARY

Notes to Consolidated Financial Statements

(Unaudited)



|1. | Basis of Presentation
|-- | ---------------------

The consolidated financial statements for
the three and nine-month periods ended September 30, 2008 and 2007 are not audited and reflect all adjustments (consisting only of normal recurring accruals) which are, in the opinion of management, necessary for a fair presentation of the
financial position, operating results, and cash flows for the interim periods. Accordingly, they do not include all information and disclosures required by generally accepted accounting principles for complete financial statements.

The results of operations for the three and nine-month periods ended September 30, 2008 are not necessarily indicative of the results for the entire year ended
December 31, 2008.



|2. | Accounting Policies
|-- | -------------------

Reference is made to the accounting policies
of CCF Holding Company (the Company) described in the notes to the consolidated financial statements contained in the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2007, filed with the Securities
and Exchange Commission.



|3. | Reclassification
|-- | ----------------

Certain amounts in the prior period financial
statements have been reclassified to conform to the presentation used in the current period unaudited consolidated financial statements.



|4. | Earnings (loss) per share
|-- | -------------------------

Basic earnings (loss) per share are
based on the weighted average number of common shares outstanding during the period while the effects of potential shares outstanding during the period are included in diluted earnings per share. The reconciliation of the amounts used in the
computation of both basic earnings (loss) per share and diluted earnings (loss) per share for each period is presented as follows:

For the three-months ended September 30, 2008



|                                 |  |          |            |   |              |           |                 |   |       |  
|-------------------------------- |  | -------- | ---------- | - | ------------ | --------- | --------------- | - | ----- | -
|                                 |  | Net Loss |            |   | CommonShares |           | Per ShareAmount |  
|Basic (loss) earnings per share  |  | $        | (1,362,405 | ) |              | 3,603,148 |                 | $ | (0.38 | )
|Effect of dilutive common stock: |  |          |            |   |              |           |                 |   |       |  
|Stock options                    |  |          |            |   |              | 5,318     |                 |   |      |  
|                                 |  |          |            |   |              |           |                 |   |       |  
|Diluted earnings per share       |  | $        | (1,362,405 | ) |              | 3,608,466 |                 | $ | (0.38 | )
|                                 |  |          |            |   |              |           |                 |   |       |  

For the three-months ended September 30, 2007



|                                 |  |              |           |              |           |                 |   |       |  
|-------------------------------- |  | ------------ | --------- | ------------ | --------- | --------------- | - | ----- | -
|                                 |  | Net Earnings |           | CommonShares |           | Per ShareAmount |  
|Basic earnings per share         |  | $            | 1,308,332 |              | 3,645,841 |                 | $ | 0.36  |  
|Effect of dilutive common stock: |  |              |           |              |           |                 |   |       |  
|Stock options                    |  |              |           |              | 126,855   |                 | $ | (0.01 | )
|                                 |  |              |           |              |           |                 |   |       |  
|Diluted earnings per share       |  | $            | 1,308,332 |              | 3,772,696 |                 | $ | 0.35  |  
|                                 |  |              |           |              |           |                 |   |       |  



4



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##### Table of Contents

For the nine-months ended September 30, 2008



|                                  |  |          |            |   |              |           |                 |   |       |  
|--------------------------------- |  | -------- | ---------- | - | ------------ | --------- | --------------- | - | ----- | -
|                                  |  | Earnings |            |   | CommonShares |           | Per ShareAmount |  
|Basic (loss) earnings per share   |  | $        | (1,431,529 | ) |              | 3,603,030 |                 | $ | (0.40 | )
|Effect of dilutive common stock:  |  |          |            |   |              |           |                 |   |       |  
|Stock options                     |  |          |           |   |              | 21,803    |                 | $ | (0.01 | )
|                                  |  |          |            |   |              |           |                 |   |       |  
|Diluted (loss) earnings per share |  | $        | (1,431,529 | ) |              | 3,624,833 |                 | $ | (0.39 | )
|                                  |  |          |            |   |              |           |                 |   |       |  

For the nine-months ended September 30, 2007



|                                 |  |          |           |              |           |                 |   |       |  
|-------------------------------- |  | -------- | --------- | ------------ | --------- | --------------- | - | ----- | -
|                                 |  | Earnings |           | CommonShares |           | Per ShareAmount |  
|Basic earnings per share         |  | $        | 3,621,285 |              | 3,645,826 |                 | $ | 0.99  |  
|Effect of dilutive common stock: |  |          |           |              |           |                 |   |       |  
|Stock options                    |  |          |          |              | 150,100   |                 | $ | (0.04 | )
|                                 |  |          |           |              |           |                 |   |       |  
|Diluted earnings per share       |  | $        | 3,621,285 |              | 3,795,926 |                 | $ | 0.95  |  
|                                 |  |          |           |              |           |                 |   |       |  



|5. | Dividends Payable
|-- | -----------------

As reported in the Companys Current Report
on Form 8-K filed on July 7, 2008, the Company has suspended dividend payments at this time.



|6. | Loans
|-- | -----

During the quarter ended September 30, 2008,
nonperforming loans increased $2.7 million over the quarter ended June 30, 2008. Specific allocations in the loan loss reserve increased approximately $400,000 to $3.8 million, during the quarter ended September 30, 2008. The activity in
the reserve is as follows:

For the three-month period ended September 30, 2008:



|                                              |  |   |            |  
|--------------------------------------------- |  | - | ---------- | -
|Balance at beginning of period, June 30, 2008 |  | $ | 4,994,342  |  
|Provision for loan losses                     |  |   | 2,250,000  |  
|Loan charge-offs                              |  |   | (1,097,197 | )
|Loan recoveries                               |  |   | 25,070     |  
|                                              |  |   |            |  
|Balance at end of period, September 30, 2008  |  | $ | 6,172,215  |  
|                                              |  |   |            |  

For the nine-month period ended September 30, 2008:



|                                                  |  |   |            |  
|------------------------------------------------- |  | - | ---------- | -
|Balance at beginning of period, December 31, 2007 |  | $ | 4,081,029  |  
|Provision for loan losses                         |  |   | 4,350,000  |  
|Loan charge-offs                                  |  |   | (2,445,126 | )
|Loan recoveries                                   |  |   | 186,312    |  
|                                                  |  |   |            |  
|Balance at end of period, September 30, 2008      |  | $ | 6,172,215  |  
|                                                  |  |   |            |  



|7. | Fair Value
|-- | ----------

The Company utilizes fair value measurements to record
fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Securities available-for-sale and derivatives are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be
required to record at fair value other assets on a nonrecurring basis, such as loans held for sale, loans held for investment and certain other assets. These nonrecurring fair value adjustments typically involve application of lower of cost or
market accounting or write-downs of individual assets.



5



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##### Table of Contents

Fair Value Hierarchy

Effective January 1, 2008, the Company early adopted Statement of Financial Accounting Standards No. 157, Fair Value Measurements (SFAS 157). In September 2006, the Financial Accounting Standards Board issued SFAS 157,
which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Under SFAS 157, the Company groups assets and liabilities at fair value in three levels, based on the markets in which
the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:



|        |  |                                                                                                                                                                                                                                                                                                                                                                                   
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Level 1 |  | Valuation is based upon quoted prices for identical instruments traded in active markets.                                                                                                                                                                                                                                                                                         
|        | 
|Level 2 |  | Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation
techniques for which all significant assumptions are observable in the market.                                                                                                      
|        | 
|Level 3 |  | Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions
that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.

Following is a description of valuation methodologies used for assets and liabilities recorded at fair value.

Investment Securities Available-for-Sale

Investment
securities available-for-sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other
model-based valuation techniques such as the present value of future cash flows, adjusted for the securitys credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level 1 securities include those traded on an
active exchange, such as the New York Stock Exchange, U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter markets and money market funds. Level 2 securities include mortgage-backed securities issued by
government sponsored entities, municipal bonds and corporate debt securities. Securities classified as Level 3 include asset-backed securities in less liquid markets.

Loans

The Company does not record loans at fair value on a recurring basis. However, from time to time, a loan is
considered impaired and an allowance for loan losses is established. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Once
a loan is identified as individually impaired, management measures impairment in accordance with SFAS 114, Accounting by Creditors for Impairment of a Loan, (SFAS 114). The fair value of impaired loans is estimated using one of several
methods, including collateral value, market value of similar debt, enterprise value, liquidation value and discounted cash flows. Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or
collateral exceed the recorded investments in such loans. At September 30, 2008, substantially all of the total impaired loans were evaluated based on the fair value of the collateral. In accordance with SFAS 157, impaired loans where an
allowance is established based on the fair value of collateral require classification in the fair value hierarchy. When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the
impaired loan as nonrecurring Level 2. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Company records the
impaired loan as nonrecurring Level 3.

Derivative Assets and Liabilities

Substantially all derivative instruments held or issued by the Company for risk management are traded in over-the-counter markets where quoted market prices are not readily available. For those derivatives, the
Company measures fair value using market data estimates received from the counterparty. The Company classifies derivatives instruments held or issued for risk management or customer-initiated activities as Level 2.



6



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##### Table of Contents

Other Real Estate Assets

Other real estate assets are adjusted to fair value upon transfer of the loans to other real estate owned. Subsequently, other real estate assets are carried at the lower of carrying value or fair value. Fair value is based upon independent
market prices, appraised values of the collateral, or managements estimation of the value of the collateral. When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the
foreclosed asset as nonrecurring Level 2. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Company records
the other real estate asset as nonrecurring Level 3.

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

The table below presents the recorded amount of assets and liabilities measured at fair value on a recurring basis as of September 30, 2008.



|                                         |  |       |      |         |   |         |  |         |      |  |   |  
|---------------------------------------- |  | ----- | ---- | ------- | - | ------- |  | ------- | ---- |  | - | -
|(in millions) September 30, 2008         |  | Total |      | Level 1 |   | Level 2 |  | Level 3
|Investment securities available-for-sale |  | $     | 66.7 |         |   |        |  | $       | 66.7 |  |   | 
|Derivative assets                        |  |       |     |         |   |        |  |         |     |  |   | 
|                                         |  |       |      |         |   |         |  |         |      |  |   |  
|Total assets at fair value               |  | $     | 66.7 |         | $ |        |  | $       | 66.7 |  | $ | 
|                                         |  |       |      |         |   |         |  |         |      |  |   |  
|Derivative liabilities                   |  | $     |     |         | $ |        |  | $       |     |  | $ | 
|                                         |  |       |      |         |   |         |  |         |      |  |   |  
|Total liabilities at fair value          |  | $     |     |         | $ |        |  | $       |     |  | $ | 
|                                         |  |       |      |         |   |         |  |         |      |  |   |  

Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis

The Company may be required, from time to time, to measure certain assets at fair value on a nonrecurring basis in accordance with U.S. generally accepted accounting
principles. These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period. Assets measured at fair value on a nonrecurring basis are included in the table below.



|                                  |  |       |      |         |   |         |  |         |      |  |   |  
|--------------------------------- |  | ----- | ---- | ------- | - | ------- |  | ------- | ---- |  | - | -
|(in millions) September 30, 2008  |  | Total |      | Level 1 |   | Level 2 |  | Level 3
|Loans with Allocations in Reserve |  | $     | 29.8 |         | $ |        |  | $       | 29.8 |  | $ | 
|Other Real Estate Owned           |  |       | 8.9  |         |   |        |  |         | 8.9  |  |   | 
|                                  |  |       |      |         |   |         |  |         |      |  |   |  
|Total assets at fair value        |  | $     | 38.7 |         | $ |        |  | $       | 38.7 |  | $ | 
|                                  |  |       |      |         |   |         |  |         |      |  |   |  
|Total liabilities at fair value   |  | $     |     |         | $ |        |  | $       |     |  | $ | 
|                                  |  |       |      |         |   |         |  |         |      |  |   |  



|8. | Recent Accounting Pronouncements
|-- | --------------------------------

Other accounting standards that
have been issued or proposed by the Financial Accounting Standards Board and other standard setting entities that do not require adoption until a future date are not expected to have a material impact on the Companys consolidated financial
statements upon adoption.



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##### Table of Contents

|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------

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

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

The Company cautions that these important factors are not
exclusive. The Company does not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the Company.

Comparison of Financial Condition at September 30, 2008 and December 31, 2007

Assets - The Companys
total assets increased $35.0 million, or 8.3%, between December 31, 2007, and September 30, 2008. Loans receivable, net of deferred fees, decreased $6.3 million, or 2.0%, to $314.7 million at September 30, 2008, from $321.0 million at
December 31, 2007. The Companys loan production for the quarter ended September 30, 2008 totaled $22.1 million with $20.0 million in commercial loans, $1.6 million in constructions loans and $483,000 in consumer loans. For the
nine-month period ended September 30, 2008, loan production totaled $49.7 million, with $41.1 million in commercial loans, $5.3 million in construction loans and $3.3 million in consumer loans. This production did not fully offset repayments
and reclassification of loans to real estate owned ($9.5 million) resulting in a net decline in outstanding balances. Commercial loans, including commercial real estate loans, increased $15.8 million, or 7.5%, however, this growth was offset by net
reductions in construction, acquisition and development and lot loans ($21.2 million) and consumer loans ($1.1 million). Draws for construction loans decreased from $19.9 million during the first nine-months of 2007 to $5.1 million during the first
nine-months of 2008. In general, economic activity has declined in 2008.

Cash and cash equivalents increased $10.0 million during the quarter, primarily
in federal funds and due from bank balances. For the nine-month period, cash and cash equivalents increased $22.7 million, which includes increases of $16.3 million in federal funds sold and $5.0 million in due from bank balances.

Certificates of deposits held in other financial institutions totaling $23.0 million, increased for the quarter $4.0 million and for the nine-month period by $23.0
million. This increase was the result of a planned increase in deposit account balances to increase liquidity on the balance sheet of Heritage Bank (the Bank).



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##### Table of Contents

Investment securities totaled $66.7 million, a decrease of $5.2 million, or 7.2%, over a balance of $71.9 million at
December 31, 2007. Several matured and called bonds were not replaced during the nine-month period. These funds were instead invested in the more liquid federal funds sold investment.

Other assets owned increased $3.9 million in the nine-month period ended September 30, 2008, from $5.0 million at December 31, 2007 to $8.9 million at
September 30, 2008. In the three-month period ended September 30, 2008, other assets owned increased $1.3 million. (See page 11 for further discussion.)

During the nine-month period, sales of other real estate have totaled $5.1 million. Current holdings are detailed below in the discussion of operating results. Net losses on the sales of other real estate and additional write-downs totaled
$515,000 for the nine-month period.

Liabilities - Total deposits increased during the three months ended September 30, 2008 to $399.4 million, an
increase of $27.1 million, or 7.3%, from $372.3 million at June 30, 2008. Transaction accounts (which include non-interest bearing demand deposit accounts, NOW accounts and money market accounts) decreased $18.3 million, or 10.3%, to $159.6
million, from $177.9 million at June 30, 2008. Time deposits increased $45.7 million, or 24.2% during the three-month period from $189.2 million at June 30, 2008, to $235.0 million at September 30, 2008. For the nine-month period
ended September 30, 2008, time deposits increased $114.6 million, or 95.3%. Locally generated certificates of deposit account for $43.8 million of the increase in time accounts for the nine-month period. As rates have declined, the Company has
noted that depositors are returning to fixed rate time accounts.

In furtherance of the Banks strategy to increase liquidity on the balance sheet,
during the nine-month period the Bank purchased a total of $69.0 million in brokered deposits and deposits generated through an online service. These deposits have maturities of twelve and fifteen months, an average rate of 4.17% at
September 30, 2008, and represent 17.4% of total deposits. At September 30, 2008, the brokered deposits were held in short term assets including $23 million in certificates of deposit with maturities less than one year; $15 million in
bullet agency bonds maturing in the first quarter of 2009; and $16 million in federal funds sold. The remaining funds were used to pay off balances in Federal Home Loan Bank advances and federal funds purchased at year end.

Repurchase accounts, used by small businesses as a cash management tool, decreased $2.1 million, or 10.0%, during the nine-month period ended September 30, 2008
with balances of $17.8 million at September 30, 2008 as compared to $19.9 million at December 31, 2007. For the three-month period ended September 30, 2008, repurchase accounts decreased $3.6 million, or 17.0%.

Shareholders Equity - Shareholders equity decreased $2.3 million, from $32.1 million at December 31, 2007, to $29.8 million at September 30, 2008.
This decrease was the result of the change in fair value of available-for-sale investment securities portfolio and the change in the fair value of the cash flow hedge, which when combined totaled $859,000. Further, retained earnings, which declined
$1.6 million during the nine-month period, were affected by the Companys net loss of $1.4 million through September 30, 2008, and cash dividends of $181,000 paid to shareholders in April 2008. The decline in retained earnings and
accumulated other comprehensive income were partially offset by net cash received of $121,000, for the exercise of stock options partially offset by the retirement of employee stock ownership plan (ESOP) shares as several former
employees chose to cash out of the plan. The ratio of shareholders equity as a percentage of total assets was 6.5% at September 30, 2008 and 7.6% at December 31, 2007. Book value per share decreased from $8.94 at
December 31, 2007, to $8.25 at September 30, 2008.

Comparison of Operating Results for the Three- and Nine-months Ended September 30,
2008 and September 30, 2007

Operating Results - The Company had a net loss of $1.36 million for the three-month period ended September 30,
2008, compared to net earnings of $1.31 million in the same three-month period in 2007. For the nine-month period the Company had a net loss of $1.43 million, as compared to earnings of $3.62 million for the period ended September 30, 2007.



9



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##### Table of Contents

The reduction in earnings year over year is primarily the result of the reduction of the margin as the federal funds rate
was decreased by 325 basis points, which created an immediate corresponding decrease in prime rate (see discussion under Net Interest Income below). The decline in earnings was further compounded by an increase in non-performing loans,
expenses related to other real estate owned, and an increase in the provision for loan losses.

There are two nonrecurring items in the year to date income
statement. During the quarter ended June 30, 2008, the Company realized a pre-tax gain of approximately $1 million as a result of the sale of a prime floor, included in Other Income for the nine-month period. The first quarter ended
March 31, 2008, included a pre-tax loss related to a deposit fraud of $923,000, included in Other Expenses for the nine-month period.

Pretax earnings for the nine-month period ended September 30, 2008, exclusive of the two one-time items noted above, were impacted by the following:



| | 1) | non-performing loans have increased $4.3 million since December 31, 2007; the related charges to interest income totaled $320,000;
| | -- | ----------------------------------------------------------------------------------------------------------------------------------



| | 2) | expenses related to other real estate owned totaled $338,000 and the net loss on sales and write-downs of other real estate owned totaled $515,000 for the nine-month period ended
September 30, 2008; and
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3) | the loan loss reserve provision of $4.4 million during the nine-month period, represented an increase of $3.9 million over the nine-months ended September 30, 2007, which had
provision expense of $440,000.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Net Interest Income - Net interest income for the three-month period ended September 30, 2008, decreased
$1.5 million, or 32.2%, from $4.6 million in 2007, to $3.1 million in 2008. For the nine-month period, net interest income declined $3.7 million, or 26.6%, from $13.9 million at September 30, 2007 to $10.2 million at September 30, 2008.
The net interest margin declined during the third quarter of 2008 to 3.06%, down 27 basis points from 3.33% for the quarter ended June 30, 2008, and down 146 basis points from 4.52% for the quarter ended September 30, 2007.

During the nine-month period ended September 30, 2008, the yield on earning assets of 6.06% for the period, represented a decrease of 225 basis points, from 8.31%
for the nine-month period ended September 30, 2007. For the nine-month period ended September 30, 2008, the cost of funding of 3.04% represented a decrease of 102 basis points from 4.06% at September 30, 2007. Average loans
outstanding declined $20.7 million during the twelve-month period, from $334.0 million at September 30, 2007, to $313.3 million at September 30, 2008.

The decline in the net interest margin for the nine-month period ended September 30, 2008 was due primarily to the decrease of 325 basis points in the federal funds target rate, compounded by a reduction in interest income as
non-performing loans increased and outstanding loan balances declined. During the increasing rate cycle through 2006, the rates paid on deposit accounts did not increase at the same pace as interest charged on loan accounts. As a result, the rate of
interest paid on some deposit accounts could not be adjusted downward to match the decline in prime rate experienced during the first nine-months of 2008.

Interest expense decreased $1.0 million, or 26.7%, from $3.8 million in the quarter ended September 30, 2007, to $2.8 million for the quarter ended September 30, 2008. For the nine-month period ended September 30, 2008,
interest expense declined $2.8 million, or 25.0%, as rates paid on deposit accounts were lowered. The majority of the Banks certificates of deposit have maturities of twelve-months, indicating that the majority of the time deposits will
re-price over the twelve months following the last federal funds change. The repricing of fixed rate time deposits lags the repricing of floating rate assets causing a negative impact on the margin. The average rate paid for deposits decreased 57
basis points, from 3.65% for the period ended September 30, 2007, to 3.08% for the period ended September 30, 2008. Certain competitors in the Banks local markets are offering interest rates on time accounts that are higher than what
historical trends would dictate, which has created pressure to adjust rates upward in order to attract and retain these deposit accounts. Future periods will be affected as this pressure continues to require an upward adjustment in rates paid.

Provision for Loan Losses - The Banks provision for loan losses for the three-month period ended September 30, 2008, was $2.25 million, as
compared to a provision of $150,000 for the three-month period ended



10



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##### Table of Contents

September 30, 2007. For the nine-month period ended September 30, 2008, the provision was $4.35 million as compared to $440,000 for the nine-month
period ended September 30, 2007. The loan loss reserve balance at September 30, 2008, was $6.21 million, or 1.96% of loans outstanding. For the period ended September 30, 2007, the loan loss reserve was $4.1 million, or 1.27% of loans
outstanding. Specific allocations in the reserve for non-performing loans total $3.8 million at September 30, 2008. Based on the Banks internal calculation management believes the allowance for loan losses is adequate. Management will
continue to monitor and adjust the allowance provision as necessary during the year based on growth in the loan portfolio, loss experience, workout of non-performing loans, financial condition of borrowers, and continued monitoring of local economic
conditions, as well as any other external factors.

During the quarter ended September 30, 2008, nonperforming assets increased $3.9 million over the
quarter ended June 30, 2008. Nonperforming assets at September 30, 2008 totaling $30.7 million were comprised of $8.9 million in other real estate and $21.8 million in non-accrual loans.

Other real estate totaling $8.9 million includes:



| |  |  | $1.6 million secured by 22.5 acres of commercial property in Fulton County, Georgia;
| | - |  | ------------------------------------------------------------------------------------



| |  |  | $4.6 million secured by 31 completed new construction single family detached homes located in Fayette County, Henry County, Butts County, Newton County, Clayton
County and Spalding County, Georgia;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | $187,000 secured by rental properties located in Spalding County, Georgia; and commercial property in Clayton County, Georgia;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------



| |  |  | $1.6 million in residential lots located in Bibb County, Carroll County, Troup County, Henry County, Coweta County, DeKalb County, Rockdale County, and Clayton
County Georgia;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | $97,000 secured by three partially completed single family detached homes located in Henry County Georgia; and
| | - |  | --------------------------------------------------------------------------------------------------------------



| |  |  | $837,500 secured by a partially completed development with 58 lots, located in Bibb County Georgia.
| | - |  | ---------------------------------------------------------------------------------------------------

The Bank has in place the program it believes will maximize the value of its real estate owned while continuing to sell these properties in a reasonable time period. For
the nine-month period ending September 30, 2008, thirty-one properties have been sold, netting $5.1 million.

Non-accrual loans totaling $21.8
million, or 6.9% of total loans, include:



| |  |  | $2.3 million in loans secured by new construction single family detached homes in various stages of completion;
| | - |  | ---------------------------------------------------------------------------------------------------------------



| |  |  | $7.5 million in loans secured by developed vacant lots;
| | - |  | -------------------------------------------------------



| |  |  | $4.2 million of commercial loans, primarily secured by commercial real estate located in Henry County, Clayton County, and Fayette County, Georgia. One of these
loans, totaling $1.4 million is current and performing as of the report date. Due to a technical issue with the renewal it appeared as non-accrual at quarter end;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | $861,000 secured by land located in Coweta County and Newton County Georgia;
| | - |  | ----------------------------------------------------------------------------



| |  |  | $6.2 million secured by developed property in Henry County, Georgia;
| | - |  | --------------------------------------------------------------------



| |  |  | $493,000 in loans secured by personal property and commercial equipment; and
| | - |  | ----------------------------------------------------------------------------



| |  |  | $218,000 of unsecured commercial loans resulting from deficiency balances arranged with borrowers during the workout process. These loans are reserved for in the
Banks loan loss reserve and are rated accordingly.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Interest has been reversed on all of these loans, with the loss of interest
reflected in the current earnings numbers reported. Many of the loans are beyond 90 days delinquent. The Bank is handling these loans through several avenues including pursuing guarantors rather than foreclosure in situations where management
believes the guarantors have assets worth pursuing, working with borrowers to liquidate the underlying collateral, and, in some situations, foreclosure.

Other Income - Total other income was $668,000 for the quarter ended September 30, 2008. Service charge income accounted for $409,000 of the total other income for the quarter. During the quarter, gains on sales of



11



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##### Table of Contents

investment securities of $28,000 were recognized. For the nine-month period, service charges increased $74,000, or 6.6%, from $1.125 million at
September 30, 2007 to $1.199 million at September 30, 2008.

Other Expenses - Other expenses, net of real estate owned related costs, totaled
$3.0 million for the quarter ended September 30, 2008; a decrease of $236,000 from the quarter ended June 30, 2008. Salaries and employee benefits expenses decreased $91,000 for the quarter ended September 30, 2008, to $1.8 million,
as compared to $1.9 million during the same quarter in 2007. For the nine-month period, salaries and benefits expenses decreased $161,000. Annual salary increases for the nine-month period were offset by a reduction in the accrual for bonuses of
$450,000. Occupancy expenses increased $125,000, or 23.6%, from $533,000 for the three-months ended September 30, 2007, to $658,000 for the three-months ended September 30, 2008. For the nine-month period ended September 30, 2008,
occupancy expenses increased $431,000, or 27.5%. These increases are due to the rent expense for the new leased facility at Eagles Landing. Miscellaneous other expenses, net of the deposit fraud discussed earlier, increased $619,000, or 27.1%, from
$2.3 million at September 30, 2007 to $3.6 million at September 30, 2008. The increase is due to real estate owned expenses, which increased $749,000 for the nine-month period and the Federal Deposit Insurance Corporation
(FDIC) deposit insurance fund charges, which increased $106,000 over the nine-months ended September 30, 2007 as the assessments were raised to increase the funds balance nationally. These increases were partially offset by
the remaining miscellaneous expenses, which decreased $236,000, for the nine-month period ended September 30, 2008.

Liquidity - The Banks
short-term liquidity was 19.5% as of September 30, 2008. The Bank is required to maintain minimum levels of liquid assets as defined by the Georgia Department of Banking and Finance and FDIC regulations. The Bank adjusts its liquidity level as
appropriate to meet its asset/liability objectives. The primary sources of funds are deposits, amortization and prepayments of loans and mortgage-backed securities, maturity of investments, and funds provided from operations. As an alternative to
supplement liquidity needs, the Bank has the ability to borrow from the Federal Home Loan Bank of Atlanta and other correspondent banks. These commitments totaled $50.3 million at September 30, 2008, with no funds drawn. In addition, during the
nine-month period the Bank purchased a total of $69.0 million in brokered deposits and deposits generated through an online service. Scheduled loan amortization and maturing investment securities are a relatively predictable source of funds,
however, deposit flow and loan prepayments are greatly influenced by, among other things, market interest rates, economic conditions, and competition. The Banks liquidity, represented by cash, cash equivalents, and unpledged securities
available-for-sale, is a product of its operating, investing, and financing activities.

Capital Ratios - Quantitative measures established by regulation
to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios of total and Tier 1 capital to risk-weighted assets, and of Tier 1 capital to average assets. As of September 30, 2008, the most recent
notification from the FDIC categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. Management is not aware of any conditions or events since that notification that have changed the Banks capital
category.

As of September 30, 2008, total risk based capital ratios were 11.35% for the Bank and 12.11% for the consolidated company. The ratio of
Tier 1 capital to risk weighted assets was 10.09% for the Bank and 10.58% for the consolidated company. The Tier 1 capital to average asset ratio (leverage ratio) was 8.02% for the Bank and 8.53% for the consolidated company.

Recent Regulatory Events - On October 14, 2008, after receiving a recommendation from the boards of the FDIC and the Federal Reserve, and consulting with the
President, Secretary Paulson signed the systemic risk exception to the FDIC Act, enabling the FDIC to temporarily provide a 100% guarantee of the unsecured senior debt of all FDIC-insured institutions and their holding companies, as well as deposits
in non-interest bearing transaction deposit accounts under a Temporary Liquidity Guarantee Program. Coverage under the Temporary Liquidity Guarantee Program is available for 30 days without charge and thereafter at a cost of 75 basis points per
annum for senior unsecured debt and 10 basis points per annum for non-interest bearing transaction deposits. All institutions are covered automatically under the Temporary Liquidity Guarantee Program until the opt out deadline of December 5,
2008. The Company currently intends to remain in the Temporary Liquidity Guarantee Program.



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##### Table of Contents

|Item 3. | Quantitative and Qualitative Disclosures about Market Risk
|------- | ----------------------------------------------------------

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



|Item 4. | Controls and Procedures
|------- | -----------------------

Within the 90-day period prior to the date
of this report, the Company, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of the
Companys disclosure controls and procedures as defined in Exchange Act Rule 13a  15(e). The design of any system of controls and procedures is based in part upon certain assumptions about the likelihood of future events. There can be no
assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure
controls and procedures are effective as of September 30, 2008 in ensuring that material information relating to the Company, including our consolidated subsidiaries, is made known to them by others within those entities, particularly during
the period in which this quarterly report was being prepared. There were no significant changes in our internal controls or in other factors during the fiscal quarter ended September 30, 2008 that have materially affected or are reasonable
likely to materially affect these controls subsequent to the date of the evaluation.



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##### Table of Contents

PART II. OTHER INFORMATION



|Item 1. | Legal Proceedings
|------- | -----------------

None.



|Item 1A. | Risk Factors
|-------- | ------------

You should carefully consider the factors discussed
in Part I, Item 1. Description of Business under the heading Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2007, which could materially affect our business, financial condition or future
results. The risks described in our Annual Report on Form 10-K are not the only risks facing the Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect
our business, financial condition and/or operating results.



|Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds
|------- | -----------------------------------------------------------



| | (a) | Not applicable.
| | --- | ---------------



| | (b) | Not applicable.
| | --- | ---------------



| | (c) | The following table sets forth the Companys repurchases of its common equity during the third quarter of 2008:
| | --- | ---------------------------------------------------------------------------------------------------------------



|                                       |  |                                |  |                          |  |                                                                              |  |                                                                                                         
|-------------------------------------- |  | ------------------------------ |  | ------------------------ |  | ---------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------
|Period                                 |  | Total Numberof SharesPurchased |  | AveragePricePaidperShare |  | Total Number ofShares Purchased asPart of PubliclyAnnounced Plans orPrograms |  | Maximum Number (orApproximate DollarValue) of Shares that MayYet Be Purchased Underthe
Plans or Programs
|July 1, through July 31, 2008          |  |                               |  |                         |  |                                                                             |  |                                                                                                        
|August 1 through August 31, 2008       |  |                               |  |                         |  |                                                                             |  |                                                                                                        
|September 1 through September 30, 2008 |  |                               |  |                         |  |                                                                             |  |                                                                                                        
|Total                                  |  |                               |  |                         |  |                                                                             |  |                                                                                                        



|Item 3. | Defaults Upon Senior Securities
|------- | -------------------------------

None.



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

None



|Item 5. | Other Information
|------- | -----------------

None.



|Item 6. | Exhibits
|------- | --------



|     |  |                                                                                                                                                   
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------
|31.1 |  | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                               
|     | 
|31.2 |  | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                               
|     | 
|32.1 |  | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|     | 
|32.2 |  | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



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CCF HOLDING COMPANY AND SUBSIDIARY

SIGNATURES

In accordance with the
requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

CCF HOLDING COMPANY



|                        |  |     |  |                                               
|----------------------- |  | --- |  | ----------------------------------------------
|Date: November 14, 2008 |  | BY: |  | /s/ David B. Turner                           
|                        |  |     |  | David B. Turner                               
|                        |  |     |  | President and Chief Executive Officer         
|                        |  |    
|Date: November 14, 2008 |  | BY: |  | /s/ Mary Jo Rogers                            
|                        |  |     |  | Mary Jo Rogers                                
|                        |  |     |  | Sr. Vice President and Chief Financial Officer



15