##### Table of Contents

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-Q



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

For the quarterly period ended June 30, 2007



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

For the transition period from  to

Commission File Number 000-23261



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SECURITY BANK
CORPORATION

(Exact name of registrant as specified in its charter)



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|                                                             |  |                                     
|------------------------------------------------------------ |  | ------------------------------------
|GEORGIA                                                      |  | 58-2107916                          
|State or other jurisdiction of incorporation or organization |  | (I.R.S. Employer Identification No.)
|                                                             | 
|4219 Forsyth Road, Macon, Georgia                            |  | 31210                               
|(Address of principal executive offices)                     |  | (Zip Code)                          

Issuers Telephone Number (478) 722-6200

N/A

(Former name, former address
and former fiscal year, if changed since last report)



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

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

 ̈Large accelerated filer                    x  Accelerated filer ̈Non-accelerated filer

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

Indicate the number of shares
outstanding of each of the issuers classes of common equity, as of the latest practicable date:



|                              |  |                              
|----------------------------- |  | -----------------------------
|Class                         |  | Outstanding at August 8, 2007
|Common Stock, $1.00 par value |  | 19,215,186 shares            



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##### Table of Contents

SECURITY BANK CORPORATION AND SUBSIDIARIES

INDEX



|           |  |                                                                                                                                 |  |            
|---------- |  | ------------------------------------------------------------------------------------------------------------------------------- |  | -----------
|           |  |                                                                                                                                 |  | Page Number
|           |  |                                                                                                                                
|PART I     |  | Financial Information                                                                                                           |  |            
|           |  |                                                                                                                                
|           |  | ITEM 1 Financial Statements                                                                                                     |  |            
|           |  |                                                                                                                                
|           |  | Condensed Consolidated Balance Sheets at June 30, 2007 (unaudited) and December 31, 2006 (audited)                              |  | 1          
|           |  |                                                                                                                                
|           |  | Condensed Consolidated Statements of Income (unaudited) for the Three and Six Months Ended June 30, 2007 and 2006               |  | 2          
|           |  |                                                                                                                                
|           |  | Condensed Consolidated Statements of Comprehensive Income (unaudited) for the Three and Six Months Ended June 30, 2007 and 2006 |  | 3          
|           |  |                                                                                                                                
|           |  | Consolidated Statements of Changes in Shareholders Equity (unaudited) for the Six Months Ended June 30, 2007 and 2006          |  | 4          
|           |  |                                                                                                                                
|           |  | Condensed Consolidated Statements of Cash Flows (unaudited) for the Six Months Ended June 30, 2007 and 2006                     |  | 5          
|           |  |                                                                                                                                
|           |  | Notes to Condensed Consolidated Financial Statements (unaudited)                                                                |  | 6          
|           |  |                                                                                                                                
|           |  | ITEM 2 Managements Discussion and Analysis of Financial Condition and Results of Operations                                    |  | 14         
|           |  |                                                                                                                                
|           |  | ITEM 3 Quantitative and Qualitative Disclosures About Market Risk                                                               |  | 26         
|           |  |                                                                                                                                
|           |  | ITEM 4 Controls and Procedures                                                                                                  |  | 26         
|           |  |                                                                                                                                
|PART II    |  | Other Information                                                                                                               |  |            
|           |  |                                                                                                                                
|           |  | ITEM 1 Legal Proceedings                                                                                                        |  | 27         
|           |  |                                                                                                                                
|           |  | ITEM 1A Risk Factors                                                                                                            |  | 27         
|           |  |                                                                                                                                
|           |  | ITEM 2 Unregistered Sales of Equity Securities and Use of Proceeds                                                              |  | 27         
|           |  |                                                                                                                                
|           |  | ITEM 3 Defaults Upon Senior Securities                                                                                          |  | 27         
|           |  |                                                                                                                                
|           |  | ITEM 4 Submission of Matters to a Vote of Security Holders                                                                      |  | 27         
|           |  |                                                                                                                                
|           |  | ITEM 5 Other Information                                                                                                        |  | 28         
|           |  |                                                                                                                                
|           |  | ITEM 6 Exhibits                                                                                                                 |  | 29         
|           | 
|SIGNATURES |  | 30                                                                                                                             





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##### Table of Contents

PART I,
ITEM 1

Financial Information

SECURITY BANK CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)



|                                                                                                                          |  |                           |           |   |                             |   |           |  
|------------------------------------------------------------------------------------------------------------------------- |  | ------------------------- | --------- | - | --------------------------- | - | --------- | -
|                                                                                                                          |  | June 30, 2007 (unaudited) |           |   | December 31, 2006 (audited) |  
|ASSETS                                                                                                                    |  |                           |           |   |                             |   |           |  
|                                                                                                                          |  |                          
|Cash and Due From Banks                                                                                                   |  | $                         | 52,138    |   |                             | $ | 63,245    |  
|                                                                                                                          |  |                           |           |   |                             |   |           |  
|Federal Funds Sold                                                                                                        |  |                           | 72,707    |   |                             |   | 93,659    |  
|                                                                                                                          |  |                           |           |   |                             |   |           |  
|Interest-Bearing Deposits With Other Banks                                                                                |  |                           | 10,116    |   |                             |   | 2,911     |  
|                                                                                                                          |  |                           |           |   |                             |   |           |  
|Investment Securities                                                                                                     |  |                           | 211,199   |   |                             |   | 222,418   |  
|                                                                                                                          |  |                           |           |   |                             |   |           |  
|Other Investments, at Cost                                                                                                |  |                           | 7,986     |   |                             |   | 7,521     |  
|                                                                                                                          |  |                           |           |   |                             |   |           |  
|Loans Held for Sale                                                                                                       |  |                           | 9,052     |   |                             |   | 8,877     |  
|                                                                                                                          |  |                           |           |   |                             |   |           |  
|Loans Receivable, Net                                                                                                     |  |                           | 2,070,146 |   |                             |   | 1,878,765 |  
|                                                                                                                          |  |                           |           |   |                             |   |           |  
|Premises and Equipment                                                                                                    |  |                           | 40,134    |   |                             |   | 39,758    |  
|                                                                                                                          |  |                           |           |   |                             |   |           |  
|Long-Lived Assets Held for Sale                                                                                           |  |                           | 885       |   |                             |   | 885       |  
|                                                                                                                          |  |                           |           |   |                             |   |           |  
|Other Real Estate Owned                                                                                                   |  |                           | 19,229    |   |                             |   | 2,775     |  
|                                                                                                                          |  |                           |           |   |                             |   |           |  
|Goodwill                                                                                                                  |  |                           | 128,601   |   |                             |   | 127,984   |  
|                                                                                                                          |  |                           |           |   |                             |   |           |  
|Core Deposit Intangible, net                                                                                              |  |                           | 4,617     |   |                             |   | 5,110     |  
|                                                                                                                          |  |                           |           |   |                             |   |           |  
|Other Assets                                                                                                              |  |                           | 45,367    |   |                             |   | 40,163    |  
|                                                                                                                          |  |                           |           |   |                             |   |           |  
|Total Assets                                                                                                              |  | $                         | 2,672,177 |   |                             | $ | 2,494,071 |  
|                                                                                                                          |  |                           |           |   |                             |   |           |  
|                                                                                                                          |  |                          
|                                                                                                                          |  | June 30, 2007 (unaudited) |           |   | December 31, 2006 (audited) |  
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                      |  |                           |           |   |                             |   |           |  
|                                                                                                                          |  |                          
|Deposits                                                                                                                  |  | $                         | 2,161,078 |   |                             | $ | 1,970,927 |  
|                                                                                                                          |  |                           |           |   |                             |   |           |  
|Borrowed Money                                                                                                            |  |                           | 177,873   |   |                             |   | 175,605   |  
|                                                                                                                          |  |                           |           |   |                             |   |           |  
|Other Liabilities                                                                                                         |  |                           | 18,539    |   |                             |   | 41,131    |  
|                                                                                                                          |  |                           |           |   |                             |   |           |  
|Commitments and Contingencies                                                                                             |  |                           |           |   |                             |   |           |  
|                                                                                                                          |  |                          
|Shareholders Equity                                                                                                      |  |                           |           |   |                             |   |           |  
|Common Stock, Par Value $1 Per Share; Authorized 50,000,000 Shares, Issued 19,212,139 and 19,186,050 Shares, Respectively |  |                           | 19,212    |   |                             |   | 19,186    |  
|Paid-In Capital                                                                                                           |  |                           | 224,939   |   |                             |   | 224,565   |  
|Retained Earnings                                                                                                         |  |                           | 72,617    |   |                             |   | 63,697    |  
|Restricted Stock  Unearned Compensation                                                                                  |  |                           | (66       | ) |                             |   | (158      | )
|Accumulated Other Comprehensive Loss, Net of Tax                                                                          |  |                           | (2,015    | ) |                             |   | (552      | )
|                                                                                                                          |  |                           |           |   |                             |   |           |  
|                                                                                                                          |  |                           | 314,687   |   |                             |   | 306,738   |  
|Treasury Stock, 19,736 Shares, at Cost                                                                                    |  |                           |          |   |                             |   | (330      | )
|                                                                                                                          |  |                           |           |   |                             |   |           |  
|Total Shareholders Equity                                                                                                |  |                           | 314,687   |   |                             |   | 306,408   |  
|                                                                                                                          |  |                           |           |   |                             |   |           |  
|Total Liabilities and Shareholders Equity                                                                                |  | $                         | 2,672,177 |   |                             | $ | 2,494,071 |  
|                                                                                                                          |  |                           |           |   |                             |   |           |  

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



1



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##### Table of Contents

PART I, ITEM 1 (CONTINUED)

Financial Information

SECURITY BANK CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

(IN THOUSANDS, EXCEPT
PER SHARE AND SHARE AMOUNTS)



|                                                    |  |                             |            |                           |   |            |  |      |            |  |   |           
|--------------------------------------------------- |  | --------------------------- | ---------- | ------------------------- | - | ---------- |  | ---- | ---------- |  | - | ----------
|                                                    |  | Three Months Ended June 30, |            | Six Months Ended June 30,
|                                                    |  | 2007                        |            | 2006                      |   | 2007       |  | 2006
|Interest Income                                     |  |                             |            |                           |   |            |  |      |            |  |   |           
|Loans, Including Fees                               |  | $                           | 45,297     |                           | $ | 32,003     |  | $    | 88,237     |  | $ | 59,040    
|Investment Securities                               |  |                             | 2,426      |                           |   | 1,641      |  |      | 4,820      |  |   | 3,147     
|Federal Funds Sold and Other                        |  |                             | 452        |                           |   | 570        |  |      | 1,151      |  |   | 810       
|                                                    |  |                             |            |                           |   |            |  |      |            |  |   |           
|                                                    |  |                             | 48,175     |                           |   | 34,214     |  |      | 94,208     |  |   | 62,997    
|                                                    |  |                             |            |                           |   |            |  |      |            |  |   |           
|Interest Expense                                    |  |                             |            |                           |   |            |  |      |            |  |   |           
|Deposits                                            |  |                             | 22,760     |                           |   | 13,379     |  |      | 44,145     |  |   | 23,309    
|Subordinated Debentures                             |  |                             | 793        |                           |   | 772        |  |      | 1,581      |  |   | 1,543     
|FHLB Advances                                       |  |                             | 685        |                           |   | 704        |  |      | 1,343      |  |   | 1,761     
|Repurchase Agreements                               |  |                             | 342        |                           |   | 168        |  |      | 642        |  |   | 300       
|Federal Funds Purchased and Other                   |  |                             | 212        |                           |   | 119        |  |      | 337        |  |   | 299       
|                                                    |  |                             |            |                           |   |            |  |      |            |  |   |           
|                                                    |  |                             | 24,792     |                           |   | 15,142     |  |      | 48,048     |  |   | 27,212    
|                                                    |  |                             |            |                           |   |            |  |      |            |  |   |           
|Net Interest Income                                 |  |                             | 23,383     |                           |   | 19,072     |  |      | 46,160     |  |   | 35,785    
|                                                    |  |                             |            |                           |   |            |  |      |            |  |   |           
|Provision for Loan Losses                           |  |                             | 2,000      |                           |   | 739        |  |      | 3,260      |  |   | 1,369     
|                                                    |  |                             |            |                           |   |            |  |      |            |  |   |           
|Net Interest Income After Provision for Loan Losses |  |                             | 21,383     |                           |   | 18,333     |  |      | 42,900     |  |   | 34,416    
|                                                    |  |                             |            |                           |   |            |  |      |            |  |   |           
|Noninterest Income                                  |  |                             |            |                           |   |            |  |      |            |  |   |           
|Service Charges on Deposits                         |  |                             | 2,376      |                           |   | 2,335      |  |      | 4,474      |  |   | 4,439     
|Mortgage Origination and Related Fees               |  |                             | 1,271      |                           |   | 1,433      |  |      | 2,310      |  |   | 2,684     
|Securities Gains                                    |  |                             |           |                           |   |           |  |      | 2          |  |   |          
|Other                                               |  |                             | 956        |                           |   | 1,149      |  |      | 2,939      |  |   | 2,711     
|                                                    |  |                             |            |                           |   |            |  |      |            |  |   |           
|                                                    |  |                             | 4,603      |                           |   | 4,917      |  |      | 9,725      |  |   | 9,834     
|                                                    |  |                             |            |                           |   |            |  |      |            |  |   |           
|Noninterest Expense                                 |  |                             |            |                           |   |            |  |      |            |  |   |           
|Salaries and Employee Benefits                      |  |                             | 9,094      |                           |   | 7,804      |  |      | 18,645     |  |   | 15,566    
|Occupancy and Equipment                             |  |                             | 1,547      |                           |   | 1,459      |  |      | 3,035      |  |   | 2,755     
|Professional Fees                                   |  |                             | 680        |                           |   | 524        |  |      | 1,306      |  |   | 999       
|Marketing                                           |  |                             | 748        |                           |   | 651        |  |      | 1,360      |  |   | 1,171     
|Amortization-Core Deposit Intangible                |  |                             | 246        |                           |   | 221        |  |      | 493        |  |   | 420       
|Other                                               |  |                             | 4,082      |                           |   | 2,955      |  |      | 7,476      |  |   | 5,584     
|                                                    |  |                             |            |                           |   |            |  |      |            |  |   |           
|                                                    |  |                             | 16,397     |                           |   | 13,614     |  |      | 32,315     |  |   | 26,495    
|                                                    |  |                             |            |                           |   |            |  |      |            |  |   |           
|Income Before Income Taxes                          |  |                             | 9,589      |                           |   | 9,636      |  |      | 20,310     |  |   | 17,755    
|Income Taxes                                        |  |                             | 3,489      |                           |   | 3,546      |  |      | 7,424      |  |   | 6,525     
|                                                    |  |                             |            |                           |   |            |  |      |            |  |   |           
|Net Income                                          |  | $                           | 6,100      |                           | $ | 6,090      |  | $    | 12,886     |  | $ | 11,230    
|                                                    |  |                             |            |                           |   |            |  |      |            |  |   |           
|Basic Earnings Per Share                            |  | $                           | 0.32       |                           | $ | 0.36       |  | $    | 0.67       |  | $ | 0.72      
|                                                    |  |                             |            |                           |   |            |  |      |            |  |   |           
|Diluted Earnings Per Share                          |  | $                           | 0.31       |                           | $ | 0.36       |  | $    | 0.66       |  | $ | 0.71      
|                                                    |  |                             |            |                           |   |            |  |      |            |  |   |           
|Dividends Per Share                                 |  | $                           | 0.09       |                           | $ | 0.08       |  | $    | 0.18       |  | $ | 0.15      
|                                                    |  |                             |            |                           |   |            |  |      |            |  |   |           
|Weighted Average Common Shares Outstanding          |  |                             | 19,189,631 |                           |   | 16,578,004 |  |      | 19,176,467 |  |   | 15,512,286
|                                                    |  |                             |            |                           |   |            |  |      |            |  |   |           

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



2



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##### Table of Contents

PART I, ITEM 1 (CONTINUED)

Financial Information

SECURITY BANK CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

(DOLLARS
IN THOUSANDS)



|                                               |  |                             |        |   |                           |   |       |      |  |   |        |   |  |   |        |  
|---------------------------------------------- |  | --------------------------- | ------ | - | ------------------------- | - | ----- | ---- |  | - | ------ | - |  | - | ------ | -
|                                               |  | Three Months Ended June 30, |        |   | Six Months Ended June 30, |  
|                                               |  | 2007                        |        |   | 2006                      |   |       | 2007 |  |   | 2006   |  
|Net Income                                     |  | $                           | 6,100  |   |                           | $ | 6,090 |      |  | $ | 12,886 |   |  | $ | 11,230 |  
|                                               |  |                             |        |   |                           |   |       |      |  |   |        |   |  |   |        |  
|Other Comprehensive Income, Net of Income Tax  |  |                             |        |   |                           |   |       |      |  |   |        |   |  |   |        |  
|Losses on Securities Arising During the Period |  |                             | (1,894 | ) |                           |   | (664  | )    |  |   | (1,447 | ) |  |   | (1,106 | )
|Reclassification Adjustment                    |  |                             |       |   |                           |   |      |      |  |   | 1      |   |  |   |       |  
|                                               |  |                             |        |   |                           |   |       |      |  |   |        |   |  |   |        |  
|Unrealized Losses on Securities                |  |                             | (1,894 | ) |                           |   | (664  | )    |  |   | (1,446 | ) |  |   | (1,106 | )
|Unrealized Losses on Derivative Instruments    |  |                             | (17    | ) |                           |   |      |      |  |   | (17    | ) |  |   |       |  
|                                               |  |                             |        |   |                           |   |       |      |  |   |        |   |  |   |        |  
|Comprehensive Income                           |  | $                           | 4,189  |   |                           | $ | 5,426 |      |  | $ | 11,423 |   |  | $ | 10,124 |  
|                                               |  |                             |        |   |                           |   |       |      |  |   |        |   |  |   |        |  

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



3



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##### Table of Contents

PART I, ITEM 1 (CONTINUED)

Financial Information

SECURITY BANK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
(UNAUDITED)

FOR THE SIX MONTHS ENDED JUNE 30, 2007 AND 2006 (IN THOUSANDS)



|                                                              |  |        |   |  |             |        |   |                |   |         |                  |  |   |                                      |   |  |                                            |      |   |               |   |        |       |  |   |      |   |  |   |         |  
|------------------------------------------------------------- |  | ------ | - |  | ----------- | ------ | - | -------------- | - | ------- | ---------------- |  | - | ------------------------------------ | - |  | ------------------------------------------ | ---- | - | ------------- | - | ------ | ----- |  | - | ---- | - |  | - | ------- | -
|                                                              |  | Shares |   |  | CommonStock |        |   | Paid-InCapital |   |         | RetainedEarnings |  |   | RestrictedStock-UnearnedCompensation |   |  | AccumulatedOtherComprehensiveIncome (Loss) |      |   | TreasuryStock |   |        | Total | 
|Balance, December 31, 2005                                    |  | 14,407 |   |  | $           | 14,407 |   |                | $ | 121,480 |                  |  | $ | 45,570                               |   |  | $                                          | (223 | ) |               | $ | (1,599 | )     |  | $ | (330 | ) |  | $ | 179,305 |  
|Shares Issued in Connection with Contingent Payments          |  | 160    |   |  |             | 160    |   |                |   | 3,514   |                  |  |   |                                      |   |  |                                            |      |   |               |   |        |       |  |   |      |   |  |   | 3,674   |  
|Stock Options Exercised                                       |  | 10     |   |  |             | 10     |   |                |   | 120     |                  |  |   |                                      |   |  |                                            |      |   |               |   |        |       |  |   |      |   |  |   | 130     |  
|Stock Based Compensation Awards                               |  |        |   |  |             |        |   |                |   | 259     |                  |  |   |                                      |   |  |                                            |      |   |               |   |        |       |  |   |      |   |  |   | 259     |  
|Amortization of Unearned Compensation                         |  |        |   |  |             |        |   |                |   |         |                  |  |   |                                      |   |  |                                            | 33   |   |               |   |        |       |  |   |      |   |  |   | 33      |  
|Shares Issued in Connection with Stock Offering               |  | 1,725  |   |  |             | 1,725  |   |                |   | 34,216  |                  |  |   |                                      |   |  |                                            |      |   |               |   |        |       |  |   |      |   |  |   | 35,941  |  
|Shares Issued in Acquisition                                  |  | 1,233  |   |  |             | 1,233  |   |                |   | 29,352  |                  |  |   |                                      |   |  |                                            |      |   |               |   |        |       |  |   |      |   |  |   | 30,585  |  
|Shares Issued to Employee Stock Purchase Plan                 |  | 4      |   |  |             | 4      |   |                |   | 118     |                  |  |   |                                      |   |  |                                            |      |   |               |   |        |       |  |   |      |   |  |   | 122     |  
|Unrealized Loss on Securities Available for Sale              |  |        |   |  |             |        |   |                |   |         |                  |  |   |                                      |   |  |                                            |      |   |               |   | (1,106 | )     |  |   |      |   |  |   | (1,106  | )
|Cash Dividends                                                |  |        |   |  |             |        |   |                |   |         |                  |  |   | (2,393                               | ) |  |                                            |      |   |               |   |        |       |  |   |      |   |  |   | (2,393  | )
|Net Income                                                    |  |        |   |  |             |        |   |                |   |         |                  |  |   | 11,230                               |   |  |                                            |      |   |               |   |        |       |  |   |      |   |  |   | 11,230  |  
|                                                              |  |        |   |  |             |        |   |                |   |         |                  |  |   |                                      |   |  |                                            |      |   |               |   |        |       |  |   |      |   |  |   |         |  
|Balance, June 30, 2006                                        |  | 17,539 |   |  | $           | 17,539 |   |                | $ | 189,059 |                  |  | $ | 54,407                               |   |  | $                                          | (190 | ) |               | $ | (2,705 | )     |  | $ | (330 | ) |  | $ | 257,780 |  
|                                                              |  |        |   |  |             |        |   |                |   |         |                  |  |   |                                      |   |  |                                            |      |   |               |   |        |       |  |   |      |   |  |   |         |  
|Balance, December 31, 2006                                    |  | 19,186 |   |  | $           | 19,186 |   |                | $ | 224,565 |                  |  | $ | 63,697                               |   |  | $                                          | (158 | ) |               | $ | (552   | )     |  | $ | (330 | ) |  | $ | 306,408 |  
|Cumulative Effect of Change in Accounting Principle           |  |        |   |  |             |        |   |                |   |         |                  |  |   | (608                                 | ) |  |                                            |      |   |               |   |        |       |  |   |      |   |  |   | (608    | )
|Cashless exercise of stock options                            |  | 24     |   |  |             | 24     |   |                |   | (24     | )                |  |   |                                      |   |  |                                            |      |   |               |   |        |       |  |   |      |   |  |   |        |  
|Stock Options Exercised                                       |  | 3      |   |  |             | 3      |   |                |   | 44      |                  |  |   |                                      |   |  |                                            |      |   |               |   |        |       |  |   |      |   |  |   | 47      |  
|Stock Based Compensation Awards                               |  |        |   |  |             |        |   |                |   | 317     |                  |  |   |                                      |   |  |                                            |      |   |               |   |        |       |  |   |      |   |  |   | 317     |  
|Amortization of Unearned Compensation                         |  |        |   |  |             |        |   |                |   |         |                  |  |   |                                      |   |  |                                            | 32   |   |               |   |        |       |  |   |      |   |  |   | 32      |  
|Cancellation of Restricted Stock                              |  | (3     | ) |  |             | (3     | ) |                |   | (57     | )                |  |   |                                      |   |  |                                            | 60   |   |               |   |        |       |  |   |      |   |  |   |        |  
|Retirement of Treasury Shares                                 |  | (20    | ) |  |             | (20    | ) |                |   | (310    | )                |  |   |                                      |   |  |                                            |      |   |               |   |        |       |  |   | 330  |   |  |   |        |  
|Shares Issued in Acquisition                                  |  | 11     |   |  |             | 11     |   |                |   | 239     |                  |  |   |                                      |   |  |                                            |      |   |               |   |        |       |  |   |      |   |  |   | 250     |  
|Shares Issued in Connection with Employee Stock Purchase Plan |  | 11     |   |  |             | 11     |   |                |   | 165     |                  |  |   |                                      |   |  |                                            |      |   |               |   |        |       |  |   |      |   |  |   | 176     |  
|Unrealized Loss on Securities Available for Sale              |  |        |   |  |             |        |   |                |   |         |                  |  |   |                                      |   |  |                                            |      |   |               |   | (1,446 | )     |  |   |      |   |  |   | (1,446  | )
|Unrealized Loss on Derivative Instruments                     |  |        |   |  |             |        |   |                |   |         |                  |  |   |                                      |   |  |                                            |      |   |               |   | (17    | ))    |  |   |      |   |  |   | (17     | )
|Cash Dividends                                                |  |        |   |  |             |        |   |                |   |         |                  |  |   | (3,358                               | ) |  |                                            |      |   |               |   |        |       |  |   |      |   |  |   | (3,358  | )
|Net Income                                                    |  |        |   |  |             |        |   |                |   |         |                  |  |   | 12,886                               |   |  |                                            |      |   |               |   |        |       |  |   |      |   |  |   | 12,886  |  
|                                                              |  |        |   |  |             |        |   |                |   |         |                  |  |   |                                      |   |  |                                            |      |   |               |   |        |       |  |   |      |   |  |   |         |  
|Balance, June 30, 2007                                        |  | 19,212 |   |  | $           | 19,212 |   |                | $ | 224,939 |                  |  | $ | 72,617                               |   |  | $                                          | (66  | ) |               | $ | (2,015 | )     |  | $ |     |   |  | $ | 314,687 |  
|                                                              |  |        |   |  |             |        |   |                |   |         |                  |  |   |                                      |   |  |                                            |      |   |               |   |        |       |  |   |      |   |  |   |         |  

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



4



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##### Table of Contents

PART I, ITEM 1 (CONTINUED)

Financial Information

SECURITY BANK CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30

(UNAUDITED)

(DOLLARS IN THOUSANDS)



|                                                                             |  |      |          |   |      |   |          |  
|---------------------------------------------------------------------------- |  | ---- | -------- | - | ---- | - | -------- | -
|                                                                             |  | 2007 |          |   | 2006 |  
|Cash Flows from Operating Activities                                         |  |      |          |   |      |   |          |  
|Net Income                                                                   |  | $    | 12,886   |   |      | $ | 11,230   |  
|Adjustments to Reconcile Net Income to Net Cash Used by Operating Activities |  |      |          |   |      |   |          |  
|Expensing of Stock Options                                                   |  |      | 317      |   |      |   | 259      |  
|Depreciation, Amortization and Accretion                                     |  |      | 2,121    |   |      |   | 1,687    |  
|Provision for Loan Losses                                                    |  |      | 3,260    |   |      |   | 1,369    |  
|Securities Gains                                                             |  |      | (2       | ) |      |   |         |  
|Loss on Sale of Other Real Estate                                            |  |      | 109      |   |      |   | 22       |  
|Provision for Losses on Other Real Estate                                    |  |      | 25       |   |      |   | 106      |  
|Gain on Sale of Premises and Equipment                                       |  |      |         |   |      |   | (56      | )
|Gain on Sales of Loans                                                       |  |      | (235     | ) |      |   | (58      | )
|Net Change in Loans Held for Sale                                            |  |      | (174     | ) |      |   | (6,639   | )
|Change in Participations Payable                                             |  |      | 905      |   |      |   | (6,853   | )
|Payable for Purchased Securities                                             |  |      | (21,544  | ) |      |   |         |  
|Net Change in Other Assets                                                   |  |      | (3,140   | ) |      |   | (170     | )
|Net Change in Other Liabilities                                              |  |      | (2,353   | ) |      |   | (2,202   | )
|                                                                             |  |      |          |   |      |   |          |  
|                                                                             |  |      | (7,825   | ) |      |   | (1,305   | )
|                                                                             |  |      |          |   |      |   |          |  
|Cash Flows from Investing Activities                                         |  |      |          |   |      |   |          |  
|Interest-Bearing Deposits with Other Banks                                   |  |      | (7,205   | ) |      |   | 3,922    |  
|Purchase of Investment Securities Available for Sale                         |  |      | (46,528  | ) |      |   | (26,413  | )
|Proceeds from Disposition of Investment Securities                           |  |      |          |   |      |   |          |  
|Available for Sale                                                           |  |      | 55,578   |   |      |   | 16,879   |  
|Held to Maturity                                                             |  |      | 240      |   |      |   | 105      |  
|Other Investments, Net                                                       |  |      | (465     | ) |      |   | 9        |  
|Loans to Customers, Net                                                      |  |      | (211,882 | ) |      |   | (128,664 | )
|Premises and Equipment, Net                                                  |  |      | (1,671   | ) |      |   | (540     | )
|Purchase of Low Income Housing Tax Credits                                   |  |      | (3,659   | ) |      |   |         |  
|Proceeds from the Sale of Other Real Estate                                  |  |      | 2,274    |   |      |   | 2,048    |  
|Goodwill Resulting from Contingent Cash Payments                             |  |      |         |   |      |   | (1,144   | )
|Cash (Paid) Received in Business Acquisition, Net                            |  |      | (198     | ) |      |   | 5,983    |  
|Payment to Neighbors Bancshares Shareholders                                 |  |      |         |   |      |   | (1,592   | )
|Payment to Rivoli BanCorp Shareholders                                       |  |      |         |   |      |   | (4,220   | )
|                                                                             |  |      |          |   |      |   |          |  
|                                                                             |  |      | (213,516 | ) |      |   | (133,627 | )
|                                                                             |  |      |          |   |      |   |          |  
|Cash Flows from Financing Activities                                         |  |      |          |   |      |   |          |  
|Interest-Bearing Customer Deposits                                           |  |      | 197,691  |   |      |   | 165,075  |  
|Noninterest-Bearing Customer Deposits                                        |  |      | (7,543   | ) |      |   | 8,859    |  
|Dividends Paid                                                               |  |      | (3,358   | ) |      |   | (2,392   | )
|Federal Funds Purchased and Repurchase Agreements                            |  |      | 8,068    |   |      |   | (23,845  | )
|Borrowed Money, Net                                                          |  |      | (5,800   | ) |      |   | (15,800  | )
|Proceeds from Common Stock Offering                                          |  |      |         |   |      |   | 35,941   |  
|Issuance of Common Stock                                                     |  |      | 225      |   |      |   | 251      |  
|                                                                             |  |      |          |   |      |   |          |  
|                                                                             |  |      | 189,283  |   |      |   | 168,089  |  
|                                                                             |  |      |          |   |      |   |          |  
|Net (Decrease) Increase in Cash and Cash Equivalents                         |  |      | (32,058  | ) |      |   | 33,157   |  
|Cash and Cash Equivalents, Beginning                                         |  |      | 156,903  |   |      |   | 103,092  |  
|                                                                             |  |      |          |   |      |   |          |  
|Cash and Cash Equivalents, Ending                                            |  | $    | 124,845  |   |      | $ | 136,249  |  
|                                                                             |  |      |          |   |      |   |          |  

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



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##### Table of Contents

PART I, ITEM 1 (CONTINUED)

Financial Information

SECURITY BANK CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS

(UNAUDITED)

(1) Basis of Presentation

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

The accompanying condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and therefore do not
include all information and footnotes necessary for a fair presentation of financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States. The condensed consolidated balance
sheet as of December 31, 2006, has been derived from audited financial statements. All adjustments consisting of normally recurring accruals that, in the opinion of management, are necessary for a fair presentation of the financial position and
results of operations for the periods covered by this Quarterly Report on Form 10-Q have been included. The accompanying condensed consolidated financial statements should be read in conjunction with the Security Bank Corporation consolidated
financial statements and related notes appearing in the Annual Report on Form 10-K for the year ended December 31, 2006.

Recently Adopted
Accounting Pronouncements

In February 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 155, Accounting for Certain Hybrid Financial Instrumentsan amendment of FASB Statements No. 133 and 140. SFAS No. 155 simplifies accounting for certain hybrid instruments
currently governed by SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, by allowing fair value remeasurement of hybrid instruments that contain an embedded derivative that otherwise would require bifurcation.
SFAS No. 155 also eliminates the guidance in SFAS No. 133 Implementation Issue No. D1, Application of Statement 133 to Beneficial Interests in Securitized Financial Assets, which provides such beneficial interests are not subject to
SFAS No. 133. SFAS No. 155 amends SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilitiesa Replacement of FASB Statement No. 125, by eliminating the restriction on
passive derivative instruments that a qualifying special-purpose entity may hold. SFAS No. 155 is effective for all financial instruments acquired or issued after January 1, 2007. The adoption of this statement did not have a material
impact on our financial condition, results of operations or cash flows.

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



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##### Table of Contents

PART I, ITEM 1 (CONTINUED)

Financial Information

(1) Basis of Presentation (Continued)

In July 2006, the FASB released FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxesan Interpretation of FASB
Statement 109 (FIN 48). FIN 48 prescribes a comprehensive model for how a company should recognize, measure, present, and disclose in its financial statements uncertain tax positions that the company has taken or
expects to take on a tax return (including a decision whether to file or not to file a return in a particular jurisdiction). Under FIN 48, the consolidated financial statements will reflect expected future tax consequences of such positions
presuming the taxing authorities full knowledge of the position and all relevant facts, but without considering time values. FIN 48 is likely to cause greater volatility in earnings as more items are recognized discretely within income
tax expense. FIN 48 also revises disclosure requirements and introduces a prescriptive, annual, tabular roll-forward of the unrecognized tax benefits. FIN 48 is effective as of the beginning of fiscal years that start after
December 15, 2006. The Company adopted the provisions of FIN 48 on January 1, 2007. As a result of the implementation of FIN 48, the Company recognized an increase in the liability for unrecognized tax benefits, which was accounted for as
a $607,789 reduction to the January 1, 2007 balance of retained earnings (for previous years) and tax expense of $69,695 for the six months ended June 30, 2007.

Recently Issued Accounting Pronouncements

In September 2006, the FASB released SFAS
No. 157, Fair Value Measurements. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS
No. 157 emphasizes that fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement would be determined based on the assumptions that market participants would use in pricing the asset or
liability. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. Management is presently evaluating the impact, if any, upon adoption.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, which establishes presentation and disclosure requirements designed to facilitate
comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. The Statement requires companies to provide additional information that will help investors and other users of financial
statements to more easily understand the effect of the companys choice to use fair value on its earnings. It also requires entities to display the fair value of those assets and liabilities for which the company has chosen to use fair value on
the face of the balance sheet. The new Statement does not eliminate disclosure requirements included in other accounting standards, including requirements for disclosures about fair value measurements included in FASB Statements No. 157,
Fair Value Measurements, and No. 107, Disclosures about Fair Value of Financial Instruments.The Statement is effective as of the beginning of an entitys first fiscal year beginning after November 15, 2007. Early
adoption is permitted as of the beginning of the previous fiscal year provided that the entity makes that choice in the first 120 days of that fiscal year and also elects to apply the provisions of the Statement. The Company is presently working to
determine the potential impact on its financial condition, results of operations and cash flows.

Segment Reporting

Reportable segments are business units, which offer different products and services and require different management and marketing strategies. Management
of the Company considers that all banking operations are essentially similar within each of its subsidiaries and that there are no reportable operating segments. However, fee income from mortgage loans originated and sold to investors included in
consolidated noninterest income for the six-month periods ended June 30, 2007 and 2006 was $2.3 million and $2.7 million, respectively. Such income may fluctuate significantly with increases or decreases in mortgage rates.

Reclassifications

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



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##### Table of Contents

PART I, ITEM 1 (CONTINUED)

Financial Information

(2) Business Combinations

On March 31, 2006, the Company completed its acquisition of Neighbors Bancshares, Inc., the parent company of Neighbors Bank, a community bank
located in Alpharetta, Georgia. The shareholders of Neighbors Bancshares, Inc. received $1.6 million in cash and 1.2 million shares of the Companys common stock in a business combination accounted for as a purchase. The excess of the
purchase price over book value has been allocated to goodwill and core deposit intangibles. The Company amortized $46,547 and $22,685, respectively, of the core deposit intangibles during the six months ended June 30, 2007 and 2006.

On July 31, 2006, the Company completed its acquisition of Homestead Bank, a community bank located in Suwanee, Georgia. Homestead Banks
shareholders received $10.7 million in cash and 1.6 million shares of the Companys common stock in a business combination accounted for as a purchase. The excess of the purchase price over book value has been allocated to goodwill and
core deposit intangibles. The Company amortized $49,005 of the core deposit intangibles during the six months ended June 30, 2007.

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



|                                            |  |           |          |   |           |   |          |  
|------------------------------------------- |  | --------- | -------- | - | --------- | - | -------- | -
|(Dollars in thousands)                      |  | Homestead |          |   | Neighbors |  
|Cash, Due from Banks and Federal Funds Sold |  | $         | 15,659   |   |           | $ | 9,556    |  
|Investment Securities                       |  |           | 29,671   |   |           |   | 5,209    |  
|Loans, Net                                  |  |           | 233,180  |   |           |   | 101,048  |  
|Premises and Equipment                      |  |           | 2,787    |   |           |   | 5,169    |  
|Core Deposit Intangible                     |  |           | 686      |   |           |   | 640      |  
|Goodwill Arising in the Acquisition         |  |           | 25,908   |   |           |   | 22,004   |  
|Other Assets                                |  |           | 1,191    |   |           |   | 2,655    |  
|Deposits                                    |  |           | (236,284 | ) |           |   | (110,822 | )
|Other Liabilities                           |  |           | (27,068  | ) |           |   | (2,313   | )
|                                            |  |           |          |   |           |   |          |  
|                                            |  | $         | 45,730   |   |           | $ | 33,146   |  
|                                            |  |           |          |   |           |   |          |  

Following are proforma amounts assuming that the acquisitions were made on January 1, 2006:



|                   |  |                            |        |                          |   |        |  |      |        |  |   |        
|------------------ |  | -------------------------- | ------ | ------------------------ | - | ------ |  | ---- | ------ |  | - | -------
|                   |  | Three Months EndedJune 30, |        | Six Months EndedJune 30,
|                   |  | 2007                       |        | 2006                     |   | 2007   |  | 2006
|Interest Income    |  | $                          | 48,175 |                          | $ | 39,763 |  | $    | 94,208 |  | $ | 106,782
|                   |  |                            |        |                         
|Net Income         |  |                            | 6,100  |                          |   | 6,979  |  |      | 12,886 |  |   | 13,402 
|                   |  |                            |        |                         
|Earnings Per Share |  |                            |        |                          |   |        |  |      |        |  |   |        
|Basic              |  | $                          | 0.32   |                          | $ | 0.38   |  | $    | 0.67   |  | $ | 0.61   
|Diluted            |  | $                          | 0.31   |                          | $ | 0.38   |  | $    | 0.66   |  | $ | 0.60   



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##### Table of Contents

PART I, ITEM 1 (CONTINUED)

Financial Information

(3) Investment Securities

Investment securities as of June 30, 2007 are summarized as follows:



|                              |  |                        |         |                      |   |                       |  |   |            |   |  |   |        
|----------------------------- |  | ---------------------- | ------- | -------------------- | - | --------------------- |  | - | ---------- | - |  | - | -------
|                              |  | AmortizedCost          |         | GrossUnrealizedGains |   | GrossUnrealizedLosses |  |   | Fair Value
|                              |  | (Dollars in Thousands)
|Securities Available for Sale |  |                        |         |                      |   |                       |  |   |            |   |  |   |        
|U.S. Government Agencies:     |  |                        |         |                      |   |                       |  |   |            |   |  |   |        
|Mortgage Backed               |  | $                      | 165,107 |                      | $ | 36                    |  | $ | (2,547     | ) |  | $ | 162,596
|Other                         |  |                        | 25,904  |                      |   |                      |  |   | (353       | ) |  |   | 25,551 
|State, County and Municipal   |  |                        | 20,291  |                      |   | 60                    |  |   | (293       | ) |  |   | 20,058 
|Other Securities              |  |                        | 1,970   |                      |   | 24                    |  |   |           |   |  |   | 1,994  
|                              |  |                        |         |                      |   |                       |  |   |            |   |  |   |        
|                              |  | $                      | 213,272 |                      | $ | 120                   |  | $ | (3,193     | ) |  | $ | 210,199
|                              |  |                        |         |                      |   |                       |  |   |            |   |  |   |        
|Securities Held to Maturity   |  |                        |         |                      |   |                       |  |   |            |   |  |   |        
|U.S. Government Agencies:     |  |                        |         |                      |   |                       |  |   |            |   |  |   |        
|Other                         |  | $                      | 1,000   |                      | $ |                      |  | $ | (42        | ) |  | $ | 958    
|                              |  |                        |         |                      |   |                       |  |   |            |   |  |   |        
|                              |  | $                      | 1,000   |                      | $ |                      |  | $ | (42        | ) |  | $ | 958    
|                              |  |                        |         |                      |   |                       |  |   |            |   |  |   |        

Unrealized holding losses, net of tax, on securities available for sale of $2.0 million have been
charged to shareholders equity as of June 30, 2007.

(4) Loans Receivable, Net

Loans are comprised of the following:



|                           |  |                        |           |   |                   |   |           |  
|-------------------------- |  | ---------------------- | --------- | - | ----------------- | - | --------- | -
|                           |  | June 30, 2007          |           |   | December 31, 2006 |  
|                           |  | (Dollars in Thousands) |          
|Real Estate-Construction   |  | $                      | 1,140,771 |   |                   | $ | 981,481   |  
|Real Estate-Other          |  |                        | 757,804   |   |                   |   | 728,598   |  
|Commercial                 |  |                        | 146,414   |   |                   |   | 142,537   |  
|Consumer                   |  |                        | 49,797    |   |                   |   | 48,923    |  
|Agricultural               |  |                        | 2,077     |   |                   |   | 2,029     |  
|                           |  |                        |           |   |                   |   |           |  
|                           |  |                        | 2,096,863 |   |                   |   | 1,903,568 |  
|Allowance for Loan Losses  |  |                        | (24,108   | ) |                   |   | (22,336   | )
|Unearned Interest and Fees |  |                        | (2,609    | ) |                   |   | (2,467    | )
|                           |  |                        |           |   |                   |   |           |  
|                           |  | $                      | 2,070,146 |   |                   | $ | 1,878,765 |  
|                           |  |                        |           |   |                   |   |           |  



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##### Table of Contents

PART I, ITEM 1 (CONTINUED)

Financial Information

(5) Allowance for Loan Losses

The following table presents the Companys loan loss experience on all loans for the three- and six-month periods ended June 30:



|                            |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|--------------------------- |  | -------------------------- | ------ | - | ------------------------ | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                            |  | Three Months EndedJune 30, |        |   | Six Months EndedJune 30, |  
|                            |  | 2007                       |        |   | 2006                     |   |        | 2007 |  |   | 2006   |  
|                            |  | (Dollars in Thousands)     |       
|Balance beginning of period |  | $                          | 23,336 |   |                          | $ | 17,812 |      |  | $ | 22,336 |   |  | $ | 16,148 |  
|                            |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Business Combination        |  |                            |       |   |                          |   |       |      |  |   |       |   |  |   | 1,232  |  
|                            |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Charge-Offs                 |  |                            | (1,428 | ) |                          |   | (552   | )    |  |   | (1,975 | ) |  |   | (979   | )
|Recoveries                  |  |                            | 200    |   |                          |   | 191    |      |  |   | 487    |   |  |   | 420    |  
|                            |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Net Charge-Offs             |  |                            | (1,228 | ) |                          |   | (361   | )    |  |   | (1,488 | ) |  |   | (559   | )
|                            |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Provision for Loan Losses   |  |                            | 2,000  |   |                          |   | 739    |      |  |   | 3,260  |   |  |   | 1,369  |  
|                            |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Balance end of period       |  | $                          | 24,108 |   |                          | $ | 18,190 |      |  | $ | 24,108 |   |  | $ | 18,190 |  
|                            |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  

(6) Deposits

Components of deposits are as follows:



|                        |  |                        |           |                   |   |          
|----------------------- |  | ---------------------- | --------- | ----------------- | - | ---------
|                        |  | June 30, 2007          |           | December 31, 2006
|                        |  | (Dollars in Thousands)
|Interest-Bearing Demand |  | $                      | 532,769   |                   | $ | 531,004  
|Demand                  |  |                        | 171,427   |                   |   | 178,967  
|Time, $100,000 and Over |  |                        | 918,845   |                   |   | 748,231  
|Other Time              |  |                        | 521,945   |                   |   | 496,538  
|Savings                 |  |                        | 16,092    |                   |   | 16,187   
|                        |  |                        |           |                   |   |          
|                        |  | $                      | 2,161,078 |                   | $ | 1,970,927
|                        |  |                        |           |                   |   |          

Brokered deposits are third-party time deposits placed by or through the assistance of a deposit
broker. As of June 30, 2007, the Company had $554.0 million in brokered deposits compared to $410.1 million at December 31, 2006.



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##### Table of Contents

PART I, ITEM 1 (CONTINUED)

Financial Information

(7) Borrowed Money

Borrowed money is comprised of the following:



|                                                                                                                                                                                                                                                                                                                                                                       |  |                        |         |                  |   |        
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------- | ------- | ---------------- | - | -------
|                                                                                                                                                                                                                                                                                                                                                                       |  | June 30, 2007          |         | December 31,2006
|                                                                                                                                                                                                                                                                                                                                                                       |  | (Dollars in Thousands)
|Advances under the Blanket Agreement for Advances and Security Agreement with the Federal Home Loan Bank (FHLB) have maturities in
varying amounts through January 3, 2011 and interest rates ranging from 3.50% to 5.92%. Residential first mortgage loans, commercial real estate loans, and investment securities are pledged as collateral for the FHLB advances |  | $                      | 77,650  |                  | $ | 83,450 
|                                                                                                                                                                                                                                                                                                                                                                       |  |                       
|Subordinated Debentures (trust preferred securities) have a maturity of 30 years and are redeemable after five years with certain
exceptions. At June 30, 2007, the securities had interest rates ranging from 6.45% to 8.81%                                                                                                                                        |  |                        | 41,238  |                  |   | 41,238 
|                                                                                                                                                                                                                                                                                                                                                                       |  |                       
|Federal Funds Purchased                                                                                                                                                                                                                                                                                                                                                |  |                        | 28,509  |                  |   | 25,917 
|                                                                                                                                                                                                                                                                                                                                                                       |  |                       
|Securities Sold Under Agreement to Repurchase                                                                                                                                                                                                                                                                                                                          |  |                        | 30,476  |                  |   | 25,000 
|                                                                                                                                                                                                                                                                                                                                                                       |  |                        |         |                  |   |        
|Total Borrowed Money                                                                                                                                                                                                                                                                                                                                                   |  | $                      | 177,873 |                  | $ | 175,605
|                                                                                                                                                                                                                                                                                                                                                                       |  |                        |         |                  |   |        

In connection with the issuance of trust preferred securities, the Company formed trust
subsidiaries. The interest income received from the Companys trusts totaled $47,198 and $47,142 for the six months ended June 30, 2007 and 2006. The interest expense paid to the trusts totaled $1,581,147 and $1,543,114 for the six months
ended June 30, 2007 and 2006.

(8) Stock Compensation Plans

A summary of option transactions for the six months ended June 30, 2007 follows:



|                                        |  |                  |  |                               |       |                         |   |                                          |  |     
|--------------------------------------- |  | ---------------- |  | ----------------------------- | ----- | ----------------------- | - | ---------------------------------------- |  | ----
|                                        |  | Number of Shares |  | WeightedAverage ExercisePrice |       | AggregateIntrinsicValue |   | Weighted-averageRemainingContractualLife
|Outstanding, December 31, 2006          |  | 767,667          |  | $                             | 13.20 |                         |   |                                          |  |     
|Granted                                 |  | 1,225,000        |  |                               | 20.92 |                         |   |                                          |  |     
|Forfeited                               |  |                 |  |                               |      |                         |   |                                          |  |     
|Exercised                               |  | 54,994           |  |                               | 10.20 |                         |   |                                          |  |     
|                                        |  |                  |  |                               |       |                         |   |                                          |  |     
|Outstanding, June 30, 2007              |  | 1,937,673        |  | $                             | 18.17 |                         | $ | 4,785,175                                |  | 8.35
|                                        |  |                  |  |                               |       |                         |   |                                          |  |     
|Eligible to be Exercised, June 30, 2007 |  | 526,644          |  | $                             | 13.45 |                         | $ | 3,502,523                                |  | 5.49
|                                        |  |                  |  |                               |       |                         |   |                                          |  |     

During the six months ended June 30, 2007, the Company issued 1,155,000 performance based
incentive stock options to management and 70,000 nonqualified stock options to directors. The incentive stock options vest over a three year period based upon achieving diluted earnings per share growth of 12%  15% annually and on average for
the three year period. The vested options become exercisable over the three year period beginning on the first anniversary of the grant date. The nonqualified stock options vest and become exercisable over a five-year period and do not include a
performance based component.



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##### Table of Contents

PART I, ITEM 1 (CONTINUED)

Financial Information

(9) Supplemental Cash Flow Information

Noncash investing activities for the six months ended June 30 are as follows:



|                                                    |  |                        |        |      |   |      
|--------------------------------------------------- |  | ---------------------- | ------ | ---- | - | -----
|                                                    |  | 2007                   |        | 2006
|                                                    |  | (Dollars in Thousands)
|Acquisition of real estate through loan foreclosure |  | $                      | 18,964 |      | $ | 1,599
|                                                    |  |                        |        |      |   |      
|Unrealized loss on investment securities            |  | $                      | 2,046  |      | $ | 1,894
|                                                    |  |                        |        |      |   |      



|(10) | Earnings Per Share
|---- | ------------------

The following presents
earnings per share for the three and six months ended June 30, 2007 and 2006:



|                                                            |  |                             |            |                           |   |            |  |      |            |  |   |           
|----------------------------------------------------------- |  | --------------------------- | ---------- | ------------------------- | - | ---------- |  | ---- | ---------- |  | - | ----------
|                                                            |  | Three Months Ended June 30, |            | Six Months Ended June 30,
|                                                            |  | 2007                        |            | 2006                      |   | 2007       |  | 2006
|Basic Earnings Per Share                                    |  |                             |            |                           |   |            |  |      |            |  |   |           
|Net Income Per Common Share                                 |  | $                           | 0.32       |                           | $ | 0.36       |  | $    | 0.67       |  | $ | 0.72      
|Weighted Average Common Shares                              |  |                             | 19,189,631 |                           |   | 16,578,004 |  |      | 19,176,467 |  |   | 15,512,286
|Diluted Earnings Per Share                                  |  |                             |            |                           |   |            |  |      |            |  |   |           
|Net Income Per Common and Common Equivalent Share           |  | $                           | 0.31       |                           | $ | 0.36       |  | $    | 0.66       |  | $ | 0.71      
|Weighted Average Common Shares and Common Stock Equivalents |  |                             | 19,463,979 |                           |   | 16,910,380 |  |      | 19,463,427 |  |   | 15,850,641

The assumed exercise of stock options is included in the diluted earnings per share computation
using the treasury stock method and assuming an average market price for Security Bank Corporation stock of $19.9730 and $20.4404 and $22.3179 and $22.5685 for the three- and six-month periods ended June 30, 2007 and 2006, respectively. The
Companys stock is quoted on the NASDAQ Global Select Market under the symbol SBKC.

(11) Regulatory Capital Matters

Quantitative measures established by regulation to ensure capital adequacy require the Company to maintain minimum amounts and ratios of total and Tier I
capital to risk-weighted assets, and of Tier I capital to average assets. The amounts and ratios as defined in regulations are presented hereafter. Management believes, as of June 30, 2007, the Company meets all capital adequacy requirements to
which it is subject and is classified as well capitalized under the regulatory framework for prompt corrective action. In the opinion of management, there are no conditions or events since prior notification of capital adequacy from the regulators
that have changed the institutions category.

The Companys and the Banks actual ratios as of June 30, 2007 are as
follows:



|                                         |  |                      |  |                     |  |               
|---------------------------------------- |  | -------------------- |  | ------------------- |  | --------------
|                                         |  | Tier 1 Capital Ratio |  | Total Capital Ratio |  | Leverage Ratio
|Minimum Capital Adequacy                 |  | 4.00%                |  | 8.00%               |  | 4.00%         
|Well Capitalized                         |  | 6.00%                |  | 10.00%              |  | 5.00%         
|                                         |  |                      | 
|Security Bank Corporation (Consolidated) |  | 9.83%                |  | 10.89%              |  | 9.33%         
|Security Bank of Bibb County             |  | 9.22%                |  | 10.33%              |  | 9.00%         
|Security Bank of Houston County          |  | 9.62%                |  | 10.66%              |  | 8.55%         
|Security Bank of Jones County            |  | 11.30%               |  | 12.36%              |  | 9.31%         
|Security Bank of North Metro             |  | 9.50%                |  | 10.62%              |  | 9.20%         
|Security Bank of North Fulton            |  | 9.67%                |  | 10.57%              |  | 9.28%         
|Security Bank of Gwinnett County         |  | 9.50%                |  | 10.48%              |  | 9.63%         



12



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##### Table of Contents

PART I, ITEM 1 (CONTINUED)

Financial Information

(12) Derivative Financial Instruments

On June 29, 2007 the Company executed an interest rate swap. The Companys objective in using the derivative is to add stability to interest
income and to manage our exposure to adverse changes in interest rates. The interest rate swap has a notional amount of $100.0 million, receives a fixed rate of 8.145%, and pays Prime. The interest rate swap effectively converts the variable
interest receipts on $100.0 million of prime-based loans to fixed at 8.145% plus any credit spread, if applicable, over the life of the agreement. The interest rate swap has a maturity date of July 1, 2010.

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

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

Based on the Companys assessments both at inception and throughout the life of the hedging
relationship, it is probable that there will be sufficient prime-based interest receipts through the maturity date of the swap. The Company uses the Hypothetical Derivative Method described in SFAS No. 133 Implementation Issue No.
G7, Cash Flow Hedges: Measuring the Ineffectiveness of a Cash Flow Hedge under Paragraph 30(b) When the Shortcut Method Is Not Applied, for quarterly prospective and retrospective assessments of hedge effectiveness, as well as for
measurements of hedge ineffectiveness. The effective portion of changes in the fair value of the derivative is initially reported in other comprehensive income (outside of earnings) and subsequently reclassified to earnings (interest income on
loans for the hedging relationship described above) when the hedged transactions affect earnings. Ineffectiveness resulting from the hedge, if any, will be recorded as a gain or loss in the consolidated statement of income and comprehensive
income as part of noninterest income. The Company also monitors the risk of counterparty default on an ongoing basis.

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

At
June 30, 2007 the interest rate swap had a fair value of ($17,251) which was included in other liabilities. Amounts reported in accumulated other comprehensive income related to the interest rate swap will be reclassified to interest income as
interest payments are received on the Companys variable-rate loan assets.

As of June 30, 2007, no derivatives were designated
as fair value hedges or hedges of net investments in foreign operations. Additionally, the Company does not use derivatives for trading or speculative purposes.

(13) Subsequent Events

On August 7, 2007, the Company and First Commerce Community Bankshares
(FCCB), a bank holding company located in Douglasville, Georgia, entered into a mutual termination agreement, which terminated the merger agreement signed by both parties on April 9, 2007. Both boards of directors of the Company and
FCCB determined that terminating the merger agreement and acquisition was in the best interests of each of their respective corporations and shareholders. There were no penalties incurred by the parties in connection with the termination agreement.

On August 2, 2007, the Companys board of directors authorized a stock repurchase program. The program calls for a repurchase of up
to 1,200,000 shares of the Companys outstanding common stock. Based on the Companys current outstanding shares of 19.2 million, the repurchase program represents 6.3% of total shares outstanding and will be funded through internal cash
and borrowings at the holding company level. The repurchases will be made from time to time by the Company in the open market as conditions allow and the repurchase plan will be open for one year unless shortened or extended by the board of
directors. All repurchases of the Companys common stock will be structured to comply with Securities and Exchange Commission Rule 10b-18 and all shares repurchased under this program will be retired. The number, price and timing of the
repurchases will be at the Companys sole discretion and the program may be re-evaluated periodically, depending on market conditions, liquidity needs and other factors.



13



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##### Table of Contents

PART I, ITEM 2

Financial Information

SECURITY BANK CORPORATION AND SUBSIDIARIES

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

The following narrative presents managements discussion and analysis of Security Bank Corporation and its subsidiaries financial condition and results of operations as of and for the three- and six-month
periods ended June 30, 2007 and 2006. The historical financial statements of Security Bank Corporation are set forth elsewhere herein. This discussion should be read in conjunction with those financial statements and the other financial
information included in this Quarterly Report on Form 10-Q.

Forward-Looking Statements

This Quarterly Report includes forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of
the Securities Exchange Act of 1934, as amended. Forward-looking statements discuss future expectations, describe future plans and strategies, contain projections of results of operations or of financial condition or state other forward-looking
information. Forward-looking statements are generally identifiable by the use of forward-looking terminology such as anticipate, believe, continue, could, would, endeavor,
estimate, expect, forecast, goal, intend, may, objective, potential, predict, project, seek, should,
will and other similar words and expressions of future intent.

Our ability to predict results or the actual effect of future
plans or strategies is inherently uncertain. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth
in the forward-looking statements. Factors that could cause actual results and performance to differ from those expressed in our forward-looking statements we make or incorporate by reference in this Quarterly Report include, but are not limited to:



| |  |  | our ability to effectively manage interest rate risk and other market risk, credit risk and operational risk;
| | - |  | -------------------------------------------------------------------------------------------------------------



| |  |  | our ability to manage fluctuations in the value of assets and liabilities and off-balance sheet exposure so as to maintain sufficient capital and liquidity to
support our business;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our ability to expand into new markets;
| | - |  | ---------------------------------------



| |  |  | possible changes in the quality or composition of our loans or investment portfolios, including adverse developments in the real estate markets, the borrowers
industries or in the repayment ability of individual borrowers or issuers;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our ability to keep pace with technological changes;
| | - |  | ----------------------------------------------------



| |  |  | our ability to develop competitive new products and services in a timely manner and the acceptance of such products and services by our customers and potential
customers;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the cost and other effects of material contingencies;
| | - |  | -----------------------------------------------------



| |  |  | further easing of restrictions on participants in the financial services industry, such as banks, securities brokers and dealers, investment companies, credit
unions and finance companies, may increase competitive pressures and affect our ability to preserve our customer relationships and margins;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | possible changes in general economic and business conditions in the United States in general and in the larger region and communities we serve in particular may
lead to a deterioration in credit quality, thereby requiring increases in our provision for credit losses, or a reduced demand for credit, thereby reducing earning assets;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the threat or occurrence of war or acts of terrorism and the existence or exacerbation of general geopolitical instability and uncertainty; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | possible changes in trade, monetary and fiscal policies, laws, and regulations, and other activities of governments, agencies, and similar organizations, including
changes in accounting standards.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The cautionary statements in this Quarterly Report also identify important factors and
possible events that involve risk and uncertainties that could cause our actual results to differ materially from those contained in the forward-looking statements. We do not intend, and undertake no obligation, to update or revise any
forward-looking statements contained in this Quarterly Report, whether as a result of differences in actual results, changes in assumptions or changes in other factors affecting such statements.



14



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##### Table of Contents

PART I, ITEM 2 (CONTINUED)

Financial Information

Forward-Looking Statements (Continued)

Readers should carefully review all disclosures we file from time to time with the Securities and Exchange Commission (SEC).

Unless indicated otherwise, references in this Quarterly Report to we, us, our, SBKC or the
Company refer to Security Bank Corporation and its consolidated subsidiaries, Security Bank of Bibb County, Security Bank of Houston County, Security Bank of Jones County, Security Bank of North Metro, Security Bank of North Fulton and
Security Bank of Gwinnett County (collectively, the Banks) and CFS Wealth Management, LLC.

Overview

Security Bank Corporation was incorporated on February 10, 1994 for the purpose of becoming a bank holding company. We are subject to extensive
federal and state banking laws and regulations, including the Bank Holding Company Act of 1956 and the bank holding company laws of Georgia. We own six subsidiary banksSecurity Bank of Bibb County, Security Bank of Houston County, Security
Bank of Jones County, Security Bank of North Metro, Security Bank of North Fulton and Security Bank of Gwinnett County. We also own Fairfield Financial Services, Inc., an interim real estate and development lender and traditional mortgage
originator, which functions as an operating subsidiary of Security Bank of Bibb County. The Banks are also subject to various federal and state banking laws and regulations. In addition, during the six months ended June 30, 2007, we completed
the acquisition of CFS Wealth Management, LLC, an independent investment management and financial planning firm in Macon, Georgia.

The
Banks each operate autonomously under the corporate umbrella of Security Bank Corporation. As a result, each bank has its own board of directors and management comprised of persons known in the local community in which each bank operates. We provide
significant assistance and oversight to the Banks in the areas such as budgeting, marketing, human resource management, credit administration, operations and funding. This allows us to maintain efficient centralized reporting and policies while
maintaining local decision-making capabilities.

As of June 30, 2007, we had 526 employees on a full-time equivalent basis.

Like most financial institutions, our profitability depends largely upon net interest income, which is the difference between the interest
received on earning assets, such as loans and investment securities, and the interest paid on interest-bearing liabilities, principally deposits and borrowings. Our results of operations are also affected by our provision for loan losses;
noninterest expenses, such as salaries, employee benefits and occupancy expenses; and noninterest income, such as mortgage loan fees and service charges on deposit accounts.

Financial Condition

At June 30, 2007, total assets were $2.67 billion compared to $2.49 billion
at December 31, 2006. The increase in total assets compared to December 31, 2006 is primarily due to increases in loan volumes, mainly in real estate-construction loans, and other real estate owned, offset by decreases in federal funds
sold and investment securities.

Cash and Cash Equivalents

Cash and due from banks decreased by $11.1 million or 17.6% to $52.1 million at June 30, 2007 from $63.2 million at December 31, 2006. Federal funds sold decreased by $21.0 million to $72.7 million at
June 30, 2007 from $93.7 million at December 31, 2006. See the Condensed Consolidated Statement of Cash Flows for a detail of the sources and uses of cash and cash equivalents during the six months ended June 30, 2007 and 2006.

Interest-Bearing Deposits with Other Banks

Interest-bearing deposits with other banks increased by $7.2 million to $10.1 million from $2.9 million at December 31, 2006. The increase is due largely to the receipt of an advance of $5.7 million from the
Federal Home Loan Bank (FHLB) at the end of the quarter.



15



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##### Table of Contents

PART I, ITEM 2 (CONTINUED)

Financial Information

Financial Condition (Continued)

Investment Securities

Investment securities
have decreased by $11.2 million or 5.0% since December 31, 2006 when investment securities totaled $222.4 million. As of June 30, 2007, investment securities were $211.2 million. The decrease is due primarily to the maturities and paydowns
of available for sale securities offset by purchases of additional securities during the six-month period ended June 30, 2007. Our investment in securities continues to be largely comprised of mortgage-backed securities.

Loans Receivable, Net

Loans receivable, net
were $2.1 billion at June 30, 2007, an increase of $191.4 million or 10.2% (20.4% on an annualized basis) from $1.88 billion at December 31, 2006. We continue to experience growth in our loan portfolio, particularly in real
estate-construction loans.

Nonperforming Assets

Nonperforming assets were $54.7 million or 2.0% of total assets at June 30, 2007 compared to $37.2 million or 1.5% of total assets at December 31, 2006.

The following table presents our nonperforming assets as of June 30, 2007:



|                           |  |                        |        |               |   |                  |  |   |       
|-------------------------- |  | ---------------------- | ------ | ------------- | - | ---------------- |  | - | ------
|                           |  | June 30,2007           |        | March 31,2007 |   | December 31,2006
|                           |  | (Dollars in Thousands)
|Nonaccrual Loans           |  | $                      | 35,450 |               | $ | 39,139           |  | $ | 34,401
|                           |  |                        |       
|Other Real Estate Owned    |  |                        | 19,229 |               |   | 3,403            |  |   | 2,775 
|                           |  |                        |        |               |   |                  |  |   |       
|Total Nonperforming Assets |  | $                      | 54,679 |               | $ | 42,542           |  | $ | 37,176
|                           |  |                        |        |               |   |                  |  |   |       

Nonaccrual loans increased $1.1 million or 3.0% to $35.5 million from $34.4 million at
December 31, 2006. When compared to March 31, 2007, nonaccrual loans decreased by 9.4%. There was significant movement within these loans during the quarter as approximately $11.7 million of nonaccrual loans moved out of this
classification due to improvement, charge-off or foreclosure and approximately $8.0 million of loans went on nonaccrual status. The new nonaccrual loans are primarily comprised of 4 loans totaling approximately $7.0 million that are secured by
single family residential developments in metropolitan Atlanta, Georgia.

Other real estate owned at June 30, 2007 totaled $19.2
million, an increase of $16.5 million since December 31, 2006. During the quarter ended June 30, 2007, other real estate owned increased $15.8 million, due primarily to new foreclosures on $17.1 million of real estate collateral. Now that
we have been able to secure ownership of these properties, we are working expeditiously to sell them to credit-worthy buyers. Seven properties account for $15.0 million or 88.2% of the total. These properties are primarily residential real estate
developments or construction properties located predominantly in metropolitan Atlanta, Georgia.

The downturn in the national residential
housing market has affected our market areas, especially in the metropolitan Atlanta, Georgia market. As the inventory of unsold homes has increased, residential construction and acquisition and development activity is slowing considerably. Some of
our builders and developers have been significantly impacted by this slowdown and as a result are not performing on their loans. We believe we are taking the appropriate actions to resolve these nonperforming assets. However, due to the condition
and future uncertainty of the housing markets and the economy, we cannot predict when the level of nonperforming assets will decline.



16



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##### Table of Contents

PART I, ITEM 2 (CONTINUED)

Financial Information

Financial Condition (Continued)

Other Assets

Other assets increased $5.2
million or 13.0% from $40.2 million at December 31, 2006 to $45.4 million at June 30, 2007. The increase is primarily attributable to the purchase of approximately $3.7 million in low income housing tax credits. The remainder of the
increase is spread over various accounts.

Deposits

Total deposits increased $190.2 million or 9.6% from $1.97 billion at December 31, 2006 to $2.16 billion at June 30, 2007. The increase is primarily attributable to an increase of $143.9 million in brokered
certificates of deposit and an increase of $54.2 million in warehouse certificates of deposit greater than $100,000, offset by a decrease of $7.9 million in various other deposit categories. Further discussion of our use of brokered and wholesale
certificates of deposit is included in the liquidity and capital adequacy section of this discussion.

Borrowed Money

Borrowed money totaled $177.9 million as of June 30, 2007, an increase of 1.29% since December 31, 2006 when borrowed money totaled $175.6
million. Borrowings from the FHLB amounted to $77.7 million or 43.7% of total borrowed money as of June 30, 2007. Federal funds purchased and securities sold under agreement to repurchase increased by $8.1 million to meet funding needs. Junior
subordinated debentures issued in connection with trust preferred securities were unchanged at June 30, 2007 with a balance of $41.2 million.

Other Liabilities

Other liabilities decreased $22.6 million or 54.9% to $18.5 million from December 31, 2006
when the balance totaled $41.1 million. The decrease is primarily due to the payment of an accrued liability of $21.5 million related to purchased securities.

Equity

At June 30, 2007, total equity was $314.7 million or 11.78% of total assets compared to $306.4 million
or 12.29% of total assets as of December 31, 2006. The increase in equity is due primarily to the retention of net income during the period, net of dividends paid.

Results of Operations

Net Income

Net income for the three- and six-month periods ended June 30, 2007 was $6.1 million or $0.31 diluted earnings per share and $12.9 million or $0.66
diluted earnings per share, respectively, compared to $6.1 million or $0.36 diluted earnings per share and $11.2 million or $0.71 in the same periods of the preceding year. The increase in net income for the six-month period ended June 30, 2007
is primarily attributable to an increase of 29% in our net interest income, reduced by increases of 138% in provision for loan losses and 22% in noninterest expense.

Net Interest Income

The net interest margin of the Company was 4.11% for the three-month
period ended June 30, 2007 compared to 4.52% for the same three-month period of the preceding year. The decrease in net interest margin is due largely to an 82 basis point increase in interest-bearing liabilities resulting primarily from
significant growth of 90 basis points in costs of deposits during the period. The increase in the yield on interest-earning assets was reduced by approximately 22 basis points as a result of the increase in nonperforming assets. Total interest
income increased to $48.2 million for the three-month period ended June 30, 2007, from $34.2 million during the comparable prior year period. The increase is the result of growth in the Companys loan portfolio and an increase in the yield
from loans of 27 basis points compared to the three-month period ended June 30, 2006.



17



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##### Table of Contents

PART I, ITEM 2 (CONTINUED)

Financial Information

Results of Operations (Continued)

Net Interest Income (Continued)

Total
interest expense increased to $24.8 million for the three-month period ended June 30, 2007, compared to $15.1 million for the same period in 2006. The increase results from the increase of 36% in interest-bearing liabilities and an 82 basis
point increase in the cost of those liabilities.

The following table represents the effective yields and costs of funds for the
three-month periods ended June 30, 2007 and 2006, including tax-equivalent adjustments of $112,000 and $99,000, respectively:



|                                                                          |  |                 |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|------------------------------------------------------------------------- |  | --------------- | --------- | -------------- | ---- | ------------- |  | ---- | --------------- |  | --------------- | --------- | ------------ | - | ------ |  | ---- | -
|                                                                          |  | 2007            |           |                | 2006 |              
|(Dollars in thousands)                                                    |  | AverageBalances |           | Income/Expense |      | Yields/ Rates |  |      | AverageBalances |  | Income/ Expense |           | Yields/Rates |  
|Assets                                                                    |  |                 |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Interest-Earning Assets                                                   |  |                 |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Loans Receivable                                                          |  | $               | 2,052,273 |                | $    | 45,138        |  | 8.82 | %               |  | $               | 1,494,812 |              | $ | 31,865 |  | 8.55 | %
|Loans Held for Sale                                                       |  |                 | 8,728     |                |      | 156           |  | 7.17 |                 |  |                 | 8,011     |              |   | 138    |  | 6.91 |  
|                                                                          |  |                 |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Total Loans                                                               |  |                 | 2,061,001 |                |      | 45,294        |  | 8.81 |                 |  |                 | 1,502,823 |              |   | 32,003 |  | 8.54 |  
|                                                                          |  |                 |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Investment Securities                                                     |  |                 |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Taxable                                                                   |  |                 | 174,720   |                |      | 2,218         |  | 5.09 |                 |  |                 | 131,835   |              |   | 1,446  |  | 4.40 |  
|Tax-Exempt, Tax Equivalent Basis                                          |  |                 | 20,311    |                |      | 320           |  | 6.32 |                 |  |                 | 19,707    |              |   | 295    |  | 6.00 |  
|                                                                          |  |                 |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Total Investment Securities                                               |  |                 | 195,031   |                |      | 2,538         |  | 5.22 |                 |  |                 | 151,542   |              |   | 1,741  |  | 4.61 |  
|                                                                          |  |                 |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Interest-Bearing Deposits With Other Banks                                |  |                 | 3,835     |                |      | 51            |  | 5.33 |                 |  |                 | 2,277     |              |   | 32     |  | 5.64 |  
|                                                                          |  |                 |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Federal Funds Sold                                                        |  |                 | 29,207    |                |      | 380           |  | 5.22 |                 |  |                 | 42,314    |              |   | 511    |  | 4.84 |  
|                                                                          |  |                 |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Other Interest-Earning Assets                                             |  |                 | 1,238     |                |      | 24            |  | 7.78 |                 |  |                 | 1,238     |              |   | 26     |  | 8.42 |  
|                                                                          |  |                 |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Total Interest-Earning Assets                                             |  |                 | 2,290,312 |                |      | 48,287        |  | 8.46 |                 |  |                 | 1,700,194 |              |   | 34,313 |  | 8.09 |  
|                                                                          |  |                 |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Noninterest-Earning Assets                                                |  |                 | 238,830   |                |      |               |  |      |                 |  |                 | 206,606   |              |   |        |  |      |  
|                                                                          |  |                 |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Total Assets                                                              |  | $               | 2,529,142 |                |      |               |  |      |                 |  | $               | 1,906,800 |              |   |        |  |      |  
|                                                                          |  |                 |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Liabilities and Shareholders Equity                                      |  |                 |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Interest-Bearing Liabilities                                              |  |                 |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Interest-Bearing Deposits                                                 |  |                 |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Interest-Bearing Demand and Savings                                       |  | $               | 537,322   |                | $    | 4,837         |  | 3.61 |                 |  | $               | 431,529   |              | $ | 3,266  |  | 3.04 |  
|Time Deposits                                                             |  |                 | 1,350,602 |                |      | 17,923        |  | 5.32 |                 |  |                 | 928,919   |              |   | 10,111 |  | 4.37 |  
|                                                                          |  |                 |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Total Interest-Bearing Deposits                                           |  |                 | 1,887,924 |                |      | 22,760        |  | 4.84 |                 |  |                 | 1,360,448 |              |   | 13,377 |  | 3.94 |  
|                                                                          |  |                 |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Other Interest-Bearing Liabilities                                        |  |                 |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|FHLB Advances                                                             |  |                 | 51,039    |                |      | 685           |  | 5.38 |                 |  |                 | 61,255    |              |   | 721    |  | 4.72 |  
|Subordinated Debentures                                                   |  |                 | 41,238    |                |      | 793           |  | 7.71 |                 |  |                 | 41,238    |              |   | 772    |  | 7.51 |  
|Federal Funds Purchased and Securities Sold Under Agreement to Repurchase |  |                 | 43,682    |                |      | 554           |  | 5.09 |                 |  |                 | 23,230    |              |   | 272    |  | 4.70 |  
|                                                                          |  |                 |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Total Other Interest-Bearing Liabilities                                  |  |                 | 135,959   |                |      | 2,032         |  | 5.99 |                 |  |                 | 125,723   |              |   | 1,765  |  | 5.63 |  
|                                                                          |  |                 |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Total Interest-Bearing Liabilities                                        |  |                 | 2,023,883 |                |      | 24,792        |  | 4.91 |                 |  |                 | 1,486,171 |              |   | 15,142 |  | 4.09 |  
|                                                                          |  |                 |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Noninterest-Bearing Liabilities and Shareholders Equity                  |  |                 |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Noninterest-Bearing Liabilities                                           |  |                 | 191,382   |                |      |               |  |      |                 |  |                 | 184,898   |              |   |        |  |      |  
|Shareholders Equity                                                      |  |                 | 313,877   |                |      |               |  |      |                 |  |                 | 235,731   |              |   |        |  |      |  
|                                                                          |  |                 |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Total Noninterest-Bearing Liabilities and Shareholders Equity            |  |                 | 505,259   |                |      |               |  |      |                 |  |                 | 420,629   |              |   |        |  |      |  
|                                                                          |  |                 |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Total Liabilities and Shareholders Equity                                |  | $               | 2,529,142 |                |      |               |  |      |                 |  | $               | 1,906,800 |              |   |        |  |      |  
|                                                                          |  |                 |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Interest Rate Spread                                                      |  |                 |           |                |      |               |  | 3.55 | %               |  |                 |           |              |   |        |  | 4.00 | %
|                                                                          |  |                 |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Net Interest Income                                                       |  |                 |           |                | $    | 23,495        |  |      |                 |  |                 |           |              | $ | 19,171 |  |      |  
|                                                                          |  |                 |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Net Interest Margin                                                       |  |                 |           |                |      |               |  | 4.11 | %               |  |                 |           |              |   |        |  | 4.52 | %
|                                                                          |  |                 |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  



18



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##### Table of Contents

PART I, ITEM 2 (CONTINUED)

Financial Information

Results of Operations (Continued)

Net Interest Income (Continued)

The following
table provides a detailed analysis of the changes in interest income and interest expense due to changes in rate and volume for the three months ended June 30, 2007 compared to the three months ended June 30, 2006. Changes in the average
balances outstanding for interest earning assets and interest bearing liabilities are volume changes and changes in the interest rates earned and paid on such assets and liabilities are rate changes. Changes resulting from a combination of changes
in volume and rate have been included in the rate changes.



|                                                             |                        |                           |        |   |      |   |        |           |  |   |        |  
|------------------------------------------------------------ | ---------------------- | ------------------------- | ------ | - | ---- | - | ------ | --------- |  | - | ------ | -
|                                                             |                        | Changes From 2006 to 2007 |       
|Rate/Volume Analysis                                         |                        | Volume                    |        |   | Rate |   |        | NetChange | 
|                                                             | (Dollars in Thousands) |                          
|Interest Income                                              |                        |                           |        |   |      |   |        |           |  |   |        |  
|Loans, Net                                                   |                        | $                         | 11,887 |   |      | $ | 1,404  |           |  | $ | 13,291 |  
|                                                             |                        |                           |        |   |      |   |        |           |  |   |        |  
|Investment Securities                                        |                        |                           |        |   |      |   |        |           |  |   |        |  
|Taxable                                                      |                        |                           | 470    |   |      |   | 302    |           |  |   | 772    |  
|Tax-Exempt                                                   |                        |                           | 9      |   |      |   | 16     |           |  |   | 25     |  
|                                                             |                        |                           |        |   |      |   |        |           |  |   |        |  
|Total Investment Securities                                  |                        |                           | 479    |   |      |   | 318    |           |  |   | 797    |  
|                                                             |                        |                           |        |   |      |   |        |           |  |   |        |  
|Interest-Bearing Deposits With Other Banks                   |                        |                           | 22     |   |      |   | (3     | )         |  |   | 19     |  
|                                                             |                        |                           |        |   |      |   |        |           |  |   |        |  
|Federal Funds Sold                                           |                        |                           | (158   | ) |      |   | 27     |           |  |   | (131   | )
|                                                             |                        |                           |        |   |      |   |        |           |  |   |        |  
|Other Interest-Earning Assets                                |                        |                           |       |   |      |   | (2     | )         |  |   | (2     | )
|                                                             |                        |                           |        |   |      |   |        |           |  |   |        |  
|Total Interest Income                                        |                        |                           | 12,230 |   |      |   | 1,744  |           |  |   | 13,974 |  
|                                                             |                        |                           |        |   |      |   |        |           |  |   |        |  
|Interest Expense                                             |                        |                           |        |   |      |   |        |           |  |   |        |  
|Interest-Bearing Demand and Savings Deposits                 |                        |                           | 801    |   |      |   | 770    |           |  |   | 1,571  |  
|                                                             |                        |                           |        |   |      |   |        |           |  |   |        |  
|Time Deposits                                                |                        |                           | 4,590  |   |      |   | 3,222  |           |  |   | 7,812  |  
|                                                             |                        |                           |        |   |      |   |        |           |  |   |        |  
|Funds Purchased and Securities Under Agreement to Repurchase |                        |                           | 239    |   |      |   | 43     |           |  |   | 282    |  
|                                                             |                        |                           |        |   |      |   |        |           |  |   |        |  
|Subordinated Debentures                                      |                        |                           |       |   |      |   | 21     |           |  |   | 21     |  
|                                                             |                        |                           |        |   |      |   |        |           |  |   |        |  
|FHLB Advances                                                |                        |                           | (120   | ) |      |   | 84     |           |  |   | (36    | )
|                                                             |                        |                           |        |   |      |   |        |           |  |   |        |  
|Total Interest Expense                                       |                        |                           | 5,510  |   |      |   | 4,140  |           |  |   | 9,650  |  
|                                                             |                        |                           |        |   |      |   |        |           |  |   |        |  
|Net Interest Income                                          |                        | $                         | 6,720  |   |      | $ | (2,396 | )         |  | $ | 4,324  |  
|                                                             |                        |                           |        |   |      |   |        |           |  |   |        |  

The net interest margin of the Company was 4.16% for the six-month period ended June 30, 2007
compared to 4.53% for the same six-month period of the preceding year. The decrease in net interest margin is due largely to a 97 basis point increase in the cost of interest-bearing liabilities offset by a 53 basis point increase in the yield on
interest-earning assets compared to the six-month period ended June 30, 2006. The increase in the yield on interest-earning assets was reduced by approximately 18 basis points as a result of the increase in nonperforming assets. Total interest
income increased to $94.2 million for the six-month period ended June 30, 2007, from $63.0 million during the comparable prior year period. The increase is the result of growth in the Companys loan portfolio and an increase of 49 basis
points in the yield on loans compared to the six-month period ended June 30, 2006.



19



---

##### Table of Contents

PART I, ITEM 2 (CONTINUED)

Financial Information

Results of Operations (Continued)

Net Interest Income (Continued)

Total
interest expense increased to $48.0 million for the six-month period ended June 30, 2007, compared to $27.2 million for the same period in 2006. The increase results from the increase of 41% in interest-bearing liabilities and a 97 basis point
increase in the cost of those liabilities.

The following table represents the effective yields and costs of funds for the six-month
periods ended June 30, 2007 and 2006, including tax-equivalent adjustments of $223,000 and $202,000, respectively:



|                                                                  |  |                 |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|----------------------------------------------------------------- |  | --------------- | --------- | -------------- | ---- | ------------- |  | ---- | --------------- |  | --------------- | --------- | ------------ | - | ------ |  | ---- | -
|                                                                  |  | 2007            |           |                | 2006 |              
|(Dollars in thousands)                                            |  | AverageBalances |           | Income/Expense |      | Yields/ Rates |  |      | AverageBalances |  | Income/ Expense |           | Yields/Rates |  
|Assets                                                            |  |                 |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Interest-Earning Assets                                           |  |                 |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Loans Receivable                                                  |  | $               | 2,001,849 |                | $    | 88,006        |  | 8.87 | %               |  | $               | 1,415,242 |              | $ | 58,815 |  | 8.38 | %
|Loans Held for Sale                                               |  |                 | 6,654     |                |      | 229           |  | 6.94 |                 |  |                 | 6,613     |              |   | 225    |  | 6.86 |  
|                                                                  |  |                 |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Total Loans                                                       |  |                 | 2,008,503 |                |      | 88,235        |  | 8.86 |                 |  |                 | 1,421,855 |              |   | 59,040 |  | 8.37 |  
|                                                                  |  |                 |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Investment Securities                                             |  |                 |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Taxable                                                           |  |                 | 174,250   |                |      | 4,406         |  | 5.10 |                 |  |                 | 127,229   |              |   | 2,756  |  | 4.37 |  
|Tax-Exempt, Tax Equivalent Basis                                  |  |                 | 20,392    |                |      | 638           |  | 6.31 |                 |  |                 | 19,804    |              |   | 593    |  | 6.04 |  
|                                                                  |  |                 |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Total Investment Securities                                       |  |                 | 194,642   |                |      | 5,044         |  | 5.23 |                 |  |                 | 147,033   |              |   | 3,349  |  | 4.59 |  
|                                                                  |  |                 |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Interest-Bearing Deposits With Other Banks                        |  |                 | 3,589     |                |      | 97            |  | 5.45 |                 |  |                 | 2,834     |              |   | 73     |  | 5.19 |  
|                                                                  |  |                 |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Federal Funds Sold                                                |  |                 | 38,409    |                |      | 1,008         |  | 5.29 |                 |  |                 | 29,224    |              |   | 690    |  | 4.76 |  
|                                                                  |  |                 |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Other Interest-Earning Assets                                     |  |                 | 1,238     |                |      | 47            |  | 7.66 |                 |  |                 | 1,238     |              |   | 47     |  | 7.66 |  
|                                                                  |  |                 |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Total Interest-Earning Assets                                     |  |                 | 2,246,381 |                |      | 94,431        |  | 8.48 |                 |  |                 | 1,602,184 |              |   | 63,199 |  | 7.95 |  
|                                                                  |  |                 |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Noninterest-Earning Assets                                        |  |                 | 239,095   |                |      |               |  |      |                 |  |                 | 188,365   |              |   |        |  |      |  
|                                                                  |  |                 |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Total Assets                                                      |  | $               | 2,485,476 |                |      |               |  |      |                 |  | $               | 1,790,549 |              |   |        |  |      |  
|                                                                  |  |                 |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Liabilities and Shareholders Equity                              |  |                 |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Interest-Bearing Liabilities                                      |  |                 |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Interest-Bearing Deposits                                         |  |                 |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Interest-Bearing Demand and Savings                               |  | $               | 529,867   |                | $    | 9,436         |  | 3.59 |                 |  | $               | 410,159   |              | $ | 5,714  |  | 2.81 |  
|Time Deposits                                                     |  |                 | 1,323,090 |                |      | 34,709        |  | 5.29 |                 |  |                 | 850,570   |              |   | 17,594 |  | 4.17 |  
|                                                                  |  |                 |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Total Interest-Bearing Deposits                                   |  |                 | 1,852,957 |                |      | 44,145        |  | 4.80 |                 |  |                 | 1,260,729 |              |   | 23,308 |  | 3.73 |  
|                                                                  |  |                 |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Other Interest-Bearing Liabilities                                |  |                 |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|FHLB Advances                                                     |  |                 | 50,620    |                |      | 1,346         |  | 5.36 |                 |  |                 | 78,284    |              |   | 1,808  |  | 4.66 |  
|Subordinated Debentures                                           |  |                 | 41,238    |                |      | 1,581         |  | 7.73 |                 |  |                 | 41,238    |              |   | 1,543  |  | 7.55 |  
|Funds Purchased and Securities Sold Under Agreement to Repurchase |  |                 | 38,947    |                |      | 976           |  | 5.05 |                 |  |                 | 23,916    |              |   | 553    |  | 4.66 |  
|                                                                  |  |                 |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Total Other Interest-Bearing Liabilities                          |  |                 | 130,805   |                |      | 3,903         |  | 6.02 |                 |  |                 | 143,438   |              |   | 3,904  |  | 5.49 |  
|                                                                  |  |                 |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Total Interest-Bearing Liabilities                                |  |                 | 1,983,762 |                |      | 48,048        |  | 4.88 |                 |  |                 | 1,404,167 |              |   | 27,212 |  | 3.91 |  
|                                                                  |  |                 |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Noninterest-Bearing Liabilities and Shareholders Equity          |  |                 |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Noninterest-Bearing Liabilities                                   |  |                 | 190,416   |                |      |               |  |      |                 |  |                 | 177,259   |              |   |        |  |      |  
|Shareholders Equity                                              |  |                 | 311,298   |                |      |               |  |      |                 |  |                 | 209,123   |              |   |        |  |      |  
|                                                                  |  |                 |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Total Noninterest-Bearing Liabilities and Shareholders Equity    |  |                 | 501,714   |                |      |               |  |      |                 |  |                 | 386,382   |              |   |        |  |      |  
|                                                                  |  |                 |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Total Liabilities and Shareholders Equity                        |  | $               | 2,485,476 |                |      |               |  |      |                 |  | $               | 1,790,549 |              |   |        |  |      |  
|                                                                  |  |                 |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Interest Rate Spread                                              |  |                 |           |                |      |               |  | 3.60 | %               |  |                 |           |              |   |        |  | 4.04 | %
|                                                                  |  |                 |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Net Interest Income                                               |  |                 |           |                | $    | 46,383        |  |      |                 |  |                 |           |              | $ | 35,987 |  |      |  
|                                                                  |  |                 |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Net Interest Margin                                               |  |                 |           |                |      |               |  | 4.16 | %               |  |                 |           |              |   |        |  | 4.53 | %
|                                                                  |  |                 |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  



20



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##### Table of Contents

PART I, ITEM 2 (CONTINUED)

Financial Information

Results of Operations (Continued)

Net Interest Income (Continued)

The following
table provides a detailed analysis of the changes in interest income and interest expense due to changes in rate and volume for the six months ended June 30, 2007 compared to the six months ended June 30, 2006. Changes in the average
balances outstanding for interest earning assets and interest bearing liabilities are volume changes and changes in the interest rates earned and paid on such assets and liabilities are rate changes. Changes resulting from a combination of changes
in volume and rate have been included in the rate changes.



|                                                             |                        |                           |        |   |      |   |        |           |  |   |        |  
|------------------------------------------------------------ | ---------------------- | ------------------------- | ------ | - | ---- | - | ------ | --------- |  | - | ------ | -
|                                                             |                        | Changes From 2006 to 2007 |       
|Rate/Volume Analysis                                         |                        | Volume                    |        |   | Rate |   |        | NetChange | 
|                                                             | (Dollars in Thousands) |                          
|Interest Income                                              |                        |                           |        |   |      |   |        |           |  |   |        |  
|Loans, Net                                                   |                        | $                         | 24,360 |   |      | $ | 4,835  |           |  | $ | 29,195 |  
|                                                             |                        |                           |        |   |      |   |        |           |  |   |        |  
|Investment Securities                                        |                        |                           |        |   |      |   |        |           |  |   |        |  
|Taxable                                                      |                        |                           | 1,019  |   |      |   | 631    |           |  |   | 1,650  |  
|Tax-Exempt                                                   |                        |                           | 18     |   |      |   | 27     |           |  |   | 45     |  
|                                                             |                        |                           |        |   |      |   |        |           |  |   |        |  
|Total Investment Securities                                  |                        |                           | 1,037  |   |      |   | 658    |           |  |   | 1,695  |  
|                                                             |                        |                           |        |   |      |   |        |           |  |   |        |  
|Interest-Bearing Deposits With Other Banks                   |                        |                           | 19     |   |      |   | 5      |           |  |   | 24     |  
|                                                             |                        |                           |        |   |      |   |        |           |  |   |        |  
|Federal Funds Sold                                           |                        |                           | 217    |   |      |   | 101    |           |  |   | 318    |  
|                                                             |                        |                           |        |   |      |   |        |           |  |   |        |  
|Other Interest-Earning Assets                                |                        |                           |       |   |      |   |       |           |  |   |       |  
|                                                             |                        |                           |        |   |      |   |        |           |  |   |        |  
|Total Interest Income                                        |                        |                           | 25,633 |   |      |   | 5,599  |           |  |   | 31,232 |  
|                                                             |                        |                           |        |   |      |   |        |           |  |   |        |  
|Interest Expense                                             |                        |                           |        |   |      |   |        |           |  |   |        |  
|Interest-Bearing Demand and Savings Deposits                 |                        |                           | 1,668  |   |      |   | 2,054  |           |  |   | 3,722  |  
|                                                             |                        |                           |        |   |      |   |        |           |  |   |        |  
|Time Deposits                                                |                        |                           | 9,774  |   |      |   | 7,341  |           |  |   | 17,115 |  
|                                                             |                        |                           |        |   |      |   |        |           |  |   |        |  
|Funds Purchased and Securities Under Agreement to Repurchase |                        |                           | 348    |   |      |   | 75     |           |  |   | 423    |  
|                                                             |                        |                           |        |   |      |   |        |           |  |   |        |  
|Subordinated Debentures                                      |                        |                           |       |   |      |   | 38     |           |  |   | 38     |  
|                                                             |                        |                           |        |   |      |   |        |           |  |   |        |  
|FHLB Advances                                                |                        |                           | (639   | ) |      |   | 177    |           |  |   | (462   | )
|                                                             |                        |                           |        |   |      |   |        |           |  |   |        |  
|Total Interest Expense                                       |                        |                           | 11,151 |   |      |   | 9,685  |           |  |   | 20,836 |  
|                                                             |                        |                           |        |   |      |   |        |           |  |   |        |  
|Net Interest Income                                          |                        | $                         | 14,482 |   |      | $ | (4,086 | )         |  | $ | 10,396 |  
|                                                             |                        |                           |        |   |      |   |        |           |  |   |        |  

Provision for Loan Losses

We establish a provision for loan losses, which is charged to operations, in order to maintain the allowance for loan losses at a level, which is deemed
to be appropriate by management. The amount of this provision is based upon an assessment of prior loss experience, the volume and type of lending presently being conducted by the Company, industry standards, past due loans, economic conditions of
the Companys market area and other factors related to the collectibility of our loan portfolio.



21



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##### Table of Contents

PART I, ITEM 2 (CONTINUED)

Financial Information

Results of Operations (Continued)



|                                                 |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|------------------------------------------------ |  | -------------------------- | ------ | - | ------------------------ | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                                 |  | Three Months EndedJune 30, |        |   | Six Months EndedJune 30, |  
|                                                 |  | 2007                       |        |   | 2006                     |   |        | 2007 |  |   | 2006   |  
|                                                 |  | (Dollars in Thousands)     |       
|Balance, beginning of period                     |  | $                          | 23,336 |   |                          | $ | 17,812 |      |  | $ | 22,336 |   |  | $ | 16,148 |  
|                                                 |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Business Combination, Neighbors Bancshares, Inc. |  |                            |       |   |                          |   |       |      |  |   |       |   |  |   | 1,232  |  
|                                                 |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Charge-Offs                                      |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Commercial, Financial and Agricultural           |  |                            | (191   | ) |                          |   | (148   | )    |  |   | (389   | ) |  |   | (282   | )
|Real Estate  Mortgage                           |  |                            | (935   | ) |                          |   | (83    | )    |  |   | (1,058 | ) |  |   | (122   | )
|Consumer                                         |  |                            | (302   | ) |                          |   | (321   | )    |  |   | (528   | ) |  |   | (575   | )
|                                                 |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|                                                 |  |                            | (1,428 | ) |                          |   | (552   | )    |  |   | (1,975 | ) |  |   | (979   | )
|Recoveries                                       |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Commercial, Financial and Agricultural           |  |                            | 86     |   |                          |   | 32     |      |  |   | 155    |   |  |   | 70     |  
|Real Estate  Mortgage                           |  |                            | 7      |   |                          |   |       |      |  |   | 18     |   |  |   | 42     |  
|Consumer                                         |  |                            | 107    |   |                          |   | 159    |      |  |   | 314    |   |  |   | 308    |  
|                                                 |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|                                                 |  |                            | 200    |   |                          |   | 191    |      |  |   | 487    |   |  |   | 420    |  
|Net Charge-Offs                                  |  |                            | (1,228 | ) |                          |   | (361   | )    |  |   | (1,488 | ) |  |   | (559   | )
|                                                 |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Provision for Loan Losses                        |  |                            | 2,000  |   |                          |   | 739    |      |  |   | 3,260  |   |  |   | 1,369  |  
|                                                 |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Balance, end of period                           |  | $                          | 24,108 |   |                          | $ | 18,190 |      |  | $ | 24,108 |   |  | $ | 18,190 |  
|                                                 |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  

We incurred net charge-offs of $1.2 million and $1.5 million and $0.4 million and $0.6 million
during the three- and six-month periods ended June 30, 2007 and 2006, respectively. The allowance for loan losses on June 30, 2007 was at 1.15% of loans receivable compared to 1.18% at December 31, 2006.

Although management utilizes its best judgment in providing for inherent losses, there can be no assurance that we will not have to increase our
provision for loan losses in the future as a result of future increases in the loan portfolio and nonperforming loans or for other reasons which could adversely affect our results of operations. In addition, various regulatory agencies, as an
integral part of their examination process, periodically review the allowance for loan losses. Such agencies may require us to recognize additions to the allowance for loan losses based on their judgments of information that is available to them at
the time of their examination.

Noninterest Income and Expense

Noninterest income for the three-months ended June 30, 2007 totaled $4.6 million compared to $4.9 million for the prior year period. The decrease is related to decreases in mortgage origination and related fees
and other noninterest income of $162,000 and $193,000, respectively. The decrease in mortgage origination and related fees is related to a decrease in mortgage loan production; specifically, the number of mortgage loans closed decreased from 416 for
the quarter ended June 30, 2006 compared to 339 for the quarter ended June 30, 2007.The volume of interim construction lending also declined compared to the quarter ended June 30, 2006, which was the primary driver for the decrease in
other noninterest income.

Noninterest expenses increased 20% to $16.4 million for the second quarter of 2007. The increase is primarily
attributable to a $1.3 million increase in salaries and benefits, which is the direct result of the Companys organic growth and growth from the acquisition of Homestead Bank during 2006 and a $1.1 million increase in other noninterest expense.
The increase in other noninterest expense is related to increased costs with respect to foreclosed property expense ($532,000) due to the foreclosure of real estate collateral (see Nonperforming Assets section herein), directors
fees ($177,000) due to the addition of the Homestead Bank board of directors during the period and software amortization ($138,000) resulting from the purchase of software during the period. The remainder of the increase is spread over various
expense categories.



22



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##### Table of Contents

PART I, ITEM 2 (CONTINUED)

Financial Information

Results of Operations (Continued)

Noninterest income for the six months ended June 30, 2007 totaled $9.7 million, which is consistent with the $9.8 million recognized in the
comparable prior period.

Noninterest expenses increased $5.8 million or 22% for the six months ended June 30, 2007 over the same
period in 2006. The primary driver of this increase was the increase in salaries and employee benefits of $3.1million resulting from the additional employees from our acquisitions since the second quarter of 2006 and a $1.9 million increase in other
noninterest expense. The increase in other noninterest expense is related to increased costs with respect to foreclosed property expense ($718,000) due to the foreclosure of real estate collateral (see Nonperforming Assets section
herein) and professional fees ($307,000) and directors fees ($337,000) resulting from the acquisition of Homestead Bank during the period. The remainder of the increase is spread over various expense categories.

Income Taxes

Income tax expense totaled $3.5
million for the three-month periods ended June 30, 2007 and 2006. The effective tax rates for the 2007 and 2006 periods were approximately 36% and 37%, respectively.

Income tax expense totaled $7.4 million for the six-month period ended June 30, 2007, compared to $6.5 million for the same period ended June 30, 2006. These amounts resulted in the effective tax rates of
approximately 37% for 2007 and 2006. The effective tax rate has historically been at or just below the maximum corporate federal and state income tax rates due to the relatively small percentage of tax-free investments carried on the consolidated
balance sheets.

Income tax expense for the three months ended March 31, 2007 and six months ended June 30, 2007 includes
adjustments of $33,053 and $69,695, respectively, related to the adoption of FIN 48.

Liquidity and Capital Adequacy

The Federal Reserve Board measures capital adequacy for bank holding companies by using a risk-based capital framework and by monitoring compliance with
minimum leverage ratio guidelines. The minimum ratio of total risk-based capital to risk-adjusted assets is 8%, of which 4% must be Tier 1 capital. Our total risk-based capital ratio was 10.89% at June 30, 2007. Our Tier 1 risk-based capital
ratio was 9.83% at June 30, 2007.

In addition, the Federal Reserve Board has established minimum leverage ratio guidelines for bank
holding companies. Those guidelines provide for a minimum leverage ratio of 3% for financial institutions that meet certain criteria, including that they maintain the highest regulatory rating. All other financial institutions are required to
maintain a leverage ratio of 4%. Our leverage ratio was 9.33% at June 30, 2007.

The Federal Deposit Insurance Corporation Improvement
Act (FDICIA) established minimum capital requirements for all depository institutions and established five capital tiers: well capitalized, adequately capitalized, under-capitalized,
significantly under-capitalized and critically under-capitalized. FDICIA imposes significant restrictions on the operations of a bank that is not at least adequately capitalized. A depository institutions capital tier
will depend upon where its capital levels are in relation to various other capital measures that include a risk-based capital measure, a leverage ratio capital measure and other factors. Under regulations adopted, for an institution to be well
capitalized, it must have a total risk-based capital ratio of at least 10%, a Tier 1 risk-based capital ratio of at least 6% and a Tier 1 leverage ratio of at least 5%. Also, the institution may not be subject to any specific capital order or
directive. At June 30, 2007, each of the Banks met the capital requirements to be well capitalized.

Primarily through the
actions of the Banks, we engage in liquidity management to ensure adequate cash flow for deposit withdrawals, credit commitments and repayments of borrowed funds. Liquidity needs are met through loan repayments, net interest and fee income and the
sale or maturity of existing assets. In addition, liquidity is continuously provided through the acquisition of new deposits, the renewal of maturing deposits and external borrowings. Management monitors deposit flow and evaluates alternate pricing
structures to retain and grow deposits as needed. To the extent needed to fund loan demand, traditional local deposit funding sources are supplemented by the use of FHLB borrowings, brokered deposits and other wholesale deposit sources outside our
immediate market area, including an Internet-based national CD service. Management has found that most non-relationship oriented retail CDs are interchangeable with wholesale funding sources such as brokered deposits and national market CDs and
alternates between these sources depending on the relative cost.



23



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##### Table of Contents

PART I, ITEM 2 (CONTINUED)

Financial Information

Results of Operations (Continued)

Our Asset/Liability Management Committee (ALCO) meets weekly to discuss liquidity-related issues such as loan pipelines, deposit pricing and
upcoming deposit maturities, among others. Through various asset/liability management strategies, we maintain a balance among goals of liquidity, safety and earnings potential. The Banks monitor internal policies that are consistent with regulatory
liquidity guidelines.

The investment portfolio provides a ready means to raise cash if liquidity needs arise. As of June 30, 2007 and
December 31, 2006, we held $210.2 million and $221.2 million, respectively, in bonds (excluding other investments) at current market value in our Available for Sale portfolio. We purchase only marketable investment grade bonds. Although $101.9
million of our bond portfolio is encumbered as pledges to secure various public funds deposits, repurchase agreements and for other purposes, management can restructure and free up investment securities for sale if required to meet liquidity needs.

Management continues to emphasize programs to generate local core deposits as our primary funding source. The stability of our core
deposit base is an important factor in our liquidity position. A heavy percentage of the deposit base is comprised of accounts of individuals and small businesses with comprehensive banking relationships and limited volatility.

At June 30, 2007 and December 31, 2006, the Banks had $918.8 million and $748.2 million, respectively, in certificates of deposit of $100,000
or more. These larger deposits represented 46% and 42% of respective total interest-bearing deposits. Management seeks to monitor and control the use of these larger certificates, which tend to be more volatile in nature, to ensure an adequate
supply of funds as needed. Relative interest costs to attract local core relationships are compared to market rates of interest on various external deposit sources to help minimize our overall cost of funds.

Local market deposit sources have not been sufficient to fund our strong loan growth trends over the past five years. As a result, the Banks supplemented
deposit sources with brokered deposits and Internet-based certificates of deposit. As of June 30, 2007 and December 31, 2006, the Banks reported $554.0 million, or 26% of total deposits and $410.1 million or 21% of total deposits,
respectively, in brokered certificates of deposit attracted by external third parties. Additionally, the Banks use external wholesale or Internet services to obtain out-of-market certificates of deposit at competitive interest rates when funding is
needed.

To plan for contingent sources of funding not satisfied by both local and out-of-market deposit balances, we have established
multiple borrowing sources to augment their funds management. We have a line of credit with The Bankers Bank, and borrowing capacity also exists through the membership in the FHLB program. The Banks have also established overnight borrowing for
Federal Funds Purchased through various correspondent banks. Management believes the various funding sources discussed above are adequate to meet our liquidity needs in the future without any material adverse impact on operating results.



24



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##### Table of Contents

PART I, ITEM 2 (CONTINUED)

Financial Information

Results of Operations (Continued)

Off-Balance Sheet Arrangements

The Company,
in the normal course of business, is a party to financial instruments with off-balance sheet risk to meet the financing needs of our customers. These financial instruments primarily include unfulfilled loan commitments and standby letters of credit.
Our exposure to credit loss in the event of nonperformance by the counter party to the financial instrument for unfulfilled loan commitments and standby letters of credit is represented by the contractual notional amount of those instruments. We use
the same credit policies in making commitments and conditional obligations as we do for on-balance sheet transactions.

Unfulfilled loan
commitments are arrangements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.
Historically, many commitments expire without being drawn upon; therefore, the following total commitment amounts are not necessarily indicative of future funding requirements. Unfulfilled loan commitments as of June 30, 2007 and
December 31, 2006 approximated $461.7 million and $458.9 million, respectively.

Standby letters of credit are conditional commitments
issued by us to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers, and letters of credit are collateralized when
deemed necessary. We have commitments under financial standby letters of credit of $9.4 million as of June 30, 2007 and $8.7 million as of December 31, 2006 and commitments under performance standby letters of credit of $8.4 million and
$12.1 million for the corresponding periods.

Critical Accounting Estimates

The accounting principles we follow and our methods of applying these principles conform with accounting principles generally accepted in the United
States and with general practices within the banking industry. In connection with the application of those principles, we have made judgments and estimates which, in the case of the determination of our allowance for loan losses (ALL),
goodwill and stock-based compensation have been critical to the determination of our financial position and results of operations. See Provision for Loan Losses section included herein and Critical Accounting Policies section included
in our Annual Report on Form 10-K for the year ended December 31, 2006.



25



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##### Table of Contents

PART I, ITEM 3

Quantitative and Qualitative Disclosures About Market Risk

Our financial performance is impacted by, among other factors, interest rate risk and credit risk. To mitigate credit risk, we rely on a loan review
process and the provision for loan losses. See Provision for Loan Losses herein.

The management of interest rate risk is the
primary goal of our ALCO Committee. We attempt to achieve consistent growth in net interest income while limiting volatility from changes in interest rates. Management seeks to accomplish this goal by balancing the maturity and repricing
characteristics of various assets and liabilities. ALCO meets regularly and has responsibility for approving asset/liability management policies, formulating and implementing strategies to improve balance sheet positioning and/or earnings, and
reviewing our interest rate sensitivity.

To help us manage fluctuations in our net interest income, we use simulation modeling to estimate
the impact on net interest income of both the current level of market interest rates and for changes to the current level of market interest rates. We measure the projected changes in market interest rates in terms of rate shifts of plus
or minus 100, 200 and 300 basis points over the current levels of market interest rates. We assume rate shifts occur ratably over a 12-month measurement horizon. We then use a new set of market interest rates to derive pricing for maturing or
repricing assets and liabilities. We base projected pricing for maturing and repricing assets and liabilities upon market interest rates and actual pricing experience over the period immediately preceding the projection period.

Using the level of market interest rates at June 30, 2007 and using actual pricing experience immediately preceding the projection, our simulation
model projected a net interest margin of 4.03% for the twelve-month period ending June 30, 2008. This compares to a net interest margin of 4.11% for the three months ended June 30, 2007. Assuming a 100 basis-point rise in rates over market
levels at June 30, 2007, the net interest margin is projected to be 4.16% for the 12-month horizon. The net interest margin is projected to be 4.26% and 4.38% for a 200 and 300 basis-point rise in rates, respectively, over the same measurement
period. The net interest margin is projected to be 3.94%, 3.83% and 3.73% for a 100, 200 and 300 basis-point fall in rates, respectively. The consensus Blue Chip Economic Forecast at June 30, 2007 predicts the yield curve will remain flat
through 2008. Accordingly, we are closely monitoring the estimated effects of these forecasted rates.

We also use a cumulative gap
analysis model that seeks to measure the repricing differentials, or gap, between rate-sensitive assets and liabilities over various time horizons. At June 30, 2007, this gap analysis indicated that we had a liability-sensitive balance sheet
over a one-year time horizon with cumulative rate-sensitive assets amounting to 93% of cumulative rate-sensitive liabilities. Management believes that our current degree of interest rate risk is acceptable in the current interest rate environment.

In addition, we use off-balance sheet contracts that are considered derivative financial instruments. Derivative financial instruments can
be a cost and capital effective means of modifying the repricing characteristics of on-balance sheet assets and liabilities. At June 30, 2007, we were party to an interest rate swap contract under which we pay a variable rate and receive a
fixed rate. The interest rate swap contract has a total notional amount of $100.0 million and is designated as a cash flow hedge of our prime based loan portfolio. The change in fair value of cash flow hedges is recognized in other comprehensive
income.

Management believes that the risk associated with using derivative financial instruments to mitigate interest rate risk
sensitivity is minimal and should not have any material unintended impact on the financial condition or results of operations.

PART I, ITEM 4

Controls and Procedures

As of the end of the period covered by this Quarterly Report on Form 10-Q, our Chief Executive Officer and Chief Financial Officer evaluated the
effectiveness of our disclosure controls and procedures in accordance with Rule 13a-15 under the Securities Exchange Act of 1934. Based on their evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that our disclosure
controls and procedures are effective.

There were no changes in our internal controls over financial reporting during the fiscal quarter
covered by this quarterly report that materially affected, or are reasonably likely to materially affect the Companys internal control over financial reporting subsequent to the date of this evaluation.



26



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##### Table of Contents

PART II

Other Information



|ITEM 1 | 
|------ | 

Legal Proceedings

In the ordinary course of business, we are sometimes a party to litigation. We are not currently a party to any litigation that management believes, if
determined adversely to us, would have a material adverse effect on our results of operations, financial condition or cash flows.



|ITEM 1A | 
|------- | 

Risk Factors

In addition to other information set forth in this Quarterly Report on Form 10-Q, the risk factors discussed in Item 1A to Part 1 of our Annual
Report on Form 10-K for the year ended December 31, 2006 contain valuable information concerning factors that 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

None.



|ITEM 3 | 
|------ | 

Defaults Upon Senior Securities

None.



|ITEM 4 | 
|------ | 

Submission of Matters to a Vote of Security Holders

The annual shareholders meeting of the Company was held on May 10, 2007. At the annual meeting, the following matters were
submitted to a vote:

(I) Proposal 001-P  Election of Directors



|                          |  |            |  |         
|------------------------- |  | ---------- |  | --------
|                          |  | For        |  | Withheld
|Benjamin W. Griffith, III |  | 16,526,992 |  | 952,689 
|Ruthie G. McMichael       |  | 16,826,811 |  | 652,870 
|Ben G. Porter             |  | 17,003,835 |  | 475,846 
|H. Averett Walker         |  | 17,188,993 |  | 290,688 
|Larry C. Walker           |  | 17,158,318 |  | 321,363 
|James R. Williams         |  | 17,264,491 |  | 215,190 



27



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##### Table of Contents

PART II (CONTINUED)

Other Information

ITEM 4

Submission of Matters to a Vote of Security Holders (Continued)

The terms of office of the following directors continued after the Annual
Meeting of Shareholders:



|                       |  |             
|---------------------- |  | ------------
|Name                   |  | TermExpiring
|Edward M. Beckham, II  |  | 2008        
|Alford C. Bridges      |  | 2008        
|Frank H. Childs, Jr.   |  | 2009        
|Thad G. Childs, Jr.    |  | 2008        
|Robert T. Mullis       |  | 2009        
|T. Kevin Reece         |  | 2009        
|John W. Ramsey         |  | 2008        
|Robert M. Stalnaker    |  | 2008        
|H. Cullen Talton, Jr.  |  | 2009        
|Joe E. Timberlake, III |  | 2009        
|Richard W. White       |  | 2008        

(II) Other Proposals



|                                                                |  |            |  |           |  |         |  |               
|--------------------------------------------------------------- |  | ---------- |  | --------- |  | ------- |  | --------------
|                                                                |  | For        |  | Against   |  | Abstain |  | BrokerNon-Vote
|Proposal 002-M  Approve Amendment to Articles of Incorporation |  | 16,166,519 |  | 1,200,158 |  | 113,004 |  |              
|Proposal 003-M  2007 Omnibus Long-Term Incentive Plan          |  | 12,221,957 |  | 2,201,043 |  | 115,598 |  | 2,941,083     
|Proposal 004-M  Ratification of Auditors                       |  | 17,291,529 |  | 59,500    |  | 128,652 |  |              

ITEM 5

Other Information

None.



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##### Table of Contents

PART II (CONTINUED)

Other Information



|ITEM 6 | EXHIBITS
|------ | --------

(a) The following is a list of exhibits including
items incorporated by reference



|      |   |  |                                                                                                                                                                                                                                                                                                      
|----- | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |  
|3.1   | * |  | Amended and Restated Articles of Incorporation.                                                                                                                                                                                                                                                      
|      |  
|3.2   |   |  | Bylaws (incorporated by reference to Exhibit 3.2 to registrants Registration Statement on Form S-4 (File No. 333-49977), filed with the Commission on April 13,
1998).                                                                                                                              
|      |  
|4.1   |   |  | See Exhibits 3.1 and 3.2 for provisions of Articles of Incorporation and Bylaws, as amended, which define the rights of its shareholders.                                                                                                                                                            
|      |  
|4.2   |   |  | Form of Stock Certificate (incorporated herein by reference as Exhibit 4.1 to the registrants Registration Statement on Form S-4 (File No. 333-49977), filed with the Commission on
April 13, 1998).                                                                                                
|      |  
|10.1  |   |  | 1996 Incentive Stock Option Plan (incorporated by reference as Exhibit 10(c) to the registrants Form SB-2 (File No. 333-11371), filed with the Commission on September 4, 1996).                                                                                                                    
|      |  
|10.2  |   |  | 1999 Incentive Stock Option Plan (incorporated by reference as Appendix to the registrants Definitive Proxy Statement (File No. 000-23261), filed on March 30,
1999).                                                                                                                               
|      |  
|10.3  |   |  | 2002 Incentive Stock Option Plan (incorporated by reference as Appendix A to the registrants Definitive Proxy Statement (File No. 000-23261), filed on March 15,
2002).                                                                                                                             
|      |  
|10.4  |   |  | Employment Agreement with H. Averett Walker dated January 1, 2002 (incorporated herein by reference as Exhibit 10.4 to the registrants Registration Statement on Form S-4 (File No.
333-103554), filed with the Commission on March 3, 2003).                                                       
|      |  
|10.5  |   |  | Employment Agreement with Richard A. Collinsworth dated January 1, 2002 (incorporated herein by reference as Exhibit 10.5 to the registrants Registration Statement on Form S-4
(File No. 333-103554), filed with the Commission on March 3, 2003).                                                 
|      |  
|10.6  |   |  | Employment Agreement with James R. McLemore, Jr. dated December 1, 2002 (incorporated herein by reference as Exhibit 10.6 to the registrants Registration Statement on Form S-4
(File No. 333-103554) filed with the Commission on March 3, 2003).                                                  
|      |  
|10.7  |   |  | Asset Purchase Agreement (Fairfield Financial) (incorporated by reference as Exhibit 10.7 to the registrants Form 10-Q/A (Commission File No. 000-23261), filed on May 22, 2006).                                                                                                                   
|      |  
|10.8  |   |  | Employment Agreement between Security Bank Corporation, Security Interim Bank and Thad G. Childs, Jr. dated May 30, 2003 (incorporated herein by reference as Exhibit 10.8 to the
registrants Registration Statement on Form S-4 (File No. 333-103554), filed with the Commission on March 3, 2003).
|      |  
|10.9  |   |  | 2003 Restricted Stock Bonus Plan (incorporated by reference as Exhibit 4.1 to the registrants Registration Statement on Form S-8 (File No. 333-116592), filed with the Commission
June 17, 2004).                                                                                                   
|      |  
|10.10 |   |  | 2004 Omnibus Stock Ownership and Long Term Incentive Plan (incorporated by reference as Appendix B to the registrants Definitive Proxy Statement (File No. 000-23261), filed on
March 25, 2004).                                                                                                    
|      |  
|10.11 |   |  | 2004 Employee Stock Purchase Plan (incorporated by reference as Appendix D to the registrants Definitive Proxy Statement (File No. 000-23261), filed with the Commission on
March 25, 2004).                                                                                                        
|      |  
|10.12 |   |  | 2007 Omnibus Long-Term Incentive Plan (incorporated by reference as Appendix C to the registrants Definitive Proxy Statement (File No. 000-23261) filed with the Commission on March 28,
2007).                                                                                                     
|      |  
|10.13 | * |  | First Modification to Note and Stock Pledge Agreement with The Bankers Bank dated July 20, 2007.                                                                                                                                                                                                     
|      |  
|10.14 | * |  | Renewal of the Line of Credit Agreement with Thomasville National Bank dated March 22, 2007.                                                                                                                                                                                                         
|      |  
|31.1  | * |  | Certificate of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                
|      |  
|31.2  | * |  | Certificate of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                
|      |  
|32.1  | * |  | Certificate of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                    



|* | Filed herewith
|- | --------------



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##### Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Security Bank
Corporation has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.





|                                                    
|----------------------------------------------------
|SECURITY BANK CORPORATION                           
|                                                    
|                                                    
|/s/ H. Averett Walker                               
|                                                    
|H. Averett Walker                                   
|President and Chief Executive Officer               
|(Principal Executive Officer)                       
|Date: August 8, 2007                                
|                                                    
|                                                    
|/s/ James R. McLemore                               
|                                                    
|James R. McLemore                                   
|Executive Vice President and Chief Financial Officer
|(Principal Financial and Accounting Officer)        
|Date: August 8, 2007                                



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