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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 September 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)                          

(478) 722-6200

(Registrants Telephone Number, Including Area Code)

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 November 8, 2007
|Common Stock, $1.00 par value |  | 18,906,546 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 September 30, 2007 (unaudited) and December 31, 2006 (audited)                               |  | 1          
|           |  |                                                                                                                                      
|           |  | Condensed Consolidated Statements of Income (unaudited) for the Three and Nine Months Ended September 30, 2007 and 2006               |  | 2          
|           |  |                                                                                                                                      
|           |  | Condensed Consolidated Statements of Comprehensive Income (unaudited) for the Three and Nine Months Ended September 30, 2007 and 2006 |  | 3          
|           |  |                                                                                                                                      
|           |  | Consolidated Statements of Changes in Shareholders Equity (unaudited) for the Nine Months Ended September 30, 2007 and 2006          |  | 4          
|           |  |                                                                                                                                      
|           |  | Condensed Consolidated Statements of Cash Flows (unaudited) for the Nine Months Ended September 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                                                                     |  | 29         
|           |  |                                                                                                                                      
|           |  | ITEM 4 Controls and Procedures                                                                                                        |  | 30         
|           |  |                                                                                                                                      
|PART II    |  | Other Information                                                                                                                     |  |            
|           |  |                                                                                                                                      
|           |  | ITEM 1 Legal Proceedings                                                                                                              |  | 31         
|           |  |                                                                                                                                      
|           |  | ITEM 1A Risk Factors                                                                                                                  |  | 31         
|           |  |                                                                                                                                      
|           |  | ITEM 2 Unregistered Sales of Equity Securities and Use of Proceeds                                                                    |  | 32         
|           |  |                                                                                                                                      
|           |  | ITEM 3 Defaults Upon Senior Securities                                                                                                |  | 32         
|           |  |                                                                                                                                      
|           |  | ITEM 4 Submission of Matters to a Vote of Security Holders                                                                            |  | 32         
|           |  |                                                                                                                                      
|           |  | ITEM 5 Other Information                                                                                                              |  | 32         
|           |  |                                                                                                                                      
|           |  | ITEM 6 Exhibits                                                                                                                       |  | 33         
|           | 
|SIGNATURES |  | 34                                                                                                                                   



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##### Table of Contents

PART I. FINANCIAL INFORMATION



|ITEM 1. | Financial Statements
|------- | --------------------

SECURITY BANK CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)



|                                                                                                                                                                                                                                |  |                                |           |   |                             |   |           |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------ | --------- | - | --------------------------- | - | --------- | -
|                                                                                                                                                                                                                                |  | September 30, 2007 (unaudited) |           |   | December 31, 2006 (audited) |  
|ASSETS                                                                                                                                                                                                                          |  |                                |           |   |                             |   |           |  
|Cash and Due From Banks                                                                                                                                                                                                         |  | $                              | 45,362    |   |                             | $ | 63,245    |  
|                                                                                                                                                                                                                                |  |                                |           |   |                             |   |           |  
|Federal Funds Sold                                                                                                                                                                                                              |  |                                | 51,566    |   |                             |   | 93,659    |  
|                                                                                                                                                                                                                                |  |                                |           |   |                             |   |           |  
|Interest-Bearing Deposits With Other Banks                                                                                                                                                                                      |  |                                | 7,163     |   |                             |   | 2,911     |  
|                                                                                                                                                                                                                                |  |                                |           |   |                             |   |           |  
|Investment Securities                                                                                                                                                                                                           |  |                                | 219,865   |   |                             |   | 222,418   |  
|                                                                                                                                                                                                                                |  |                                |           |   |                             |   |           |  
|Other Investments, at Cost                                                                                                                                                                                                      |  |                                | 7,829     |   |                             |   | 7,521     |  
|                                                                                                                                                                                                                                |  |                                |           |   |                             |   |           |  
|Loans Held for Sale                                                                                                                                                                                                             |  |                                | 8,867     |   |                             |   | 8,877     |  
|                                                                                                                                                                                                                                |  |                                |           |   |                             |   |           |  
|Loans Receivable, Net                                                                                                                                                                                                           |  |                                | 2,138,080 |   |                             |   | 1,878,765 |  
|                                                                                                                                                                                                                                |  |                                |           |   |                             |   |           |  
|Premises and Equipment                                                                                                                                                                                                          |  |                                | 42,246    |   |                             |   | 39,758    |  
|                                                                                                                                                                                                                                |  |                                |           |   |                             |   |           |  
|Long-Lived Assets Held for Sale                                                                                                                                                                                                 |  |                                |          |   |                             |   | 885       |  
|                                                                                                                                                                                                                                |  |                                |           |   |                             |   |           |  
|Other Real Estate Owned                                                                                                                                                                                                         |  |                                | 23,891    |   |                             |   | 2,775     |  
|                                                                                                                                                                                                                                |  |                                |           |   |                             |   |           |  
|Goodwill                                                                                                                                                                                                                        |  |                                | 128,571   |   |                             |   | 127,984   |  
|                                                                                                                                                                                                                                |  |                                |           |   |                             |   |           |  
|Core Deposit Intangible, net                                                                                                                                                                                                    |  |                                | 4,371     |   |                             |   | 5,110     |  
|                                                                                                                                                                                                                                |  |                                |           |   |                             |   |           |  
|Other Assets                                                                                                                                                                                                                    |  |                                | 46,175    |   |                             |   | 40,163    |  
|                                                                                                                                                                                                                                |  |                                |           |   |                             |   |           |  
|Total Assets                                                                                                                                                                                                                    |  | $                              | 2,723,986 |   |                             | $ | 2,494,071 |  
|                                                                                                                                                                                                                                |  |                                |           |   |                             |   |           |  
|                                                                                                                                                                                                                                |  |                               
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                                                                                                            |  |                                |           |   |                             |   |           |  
|Deposits                                                                                                                                                                                                                        |  | $                              | 2,191,100 |   |                             | $ | 1,970,927 |  
|                                                                                                                                                                                                                                |  |                                |           |   |                             |   |           |  
|Borrowed Money                                                                                                                                                                                                                  |  |                                | 203,383   |   |                             |   | 175,605   |  
|                                                                                                                                                                                                                                |  |                                |           |   |                             |   |           |  
|Other Liabilities                                                                                                                                                                                                               |  |                                | 17,467    |   |                             |   | 41,131    |  
|                                                                                                                                                                                                                                |  |                                |           |   |                             |   |           |  
|Commitments and Contingencies                                                                                                                                                                                                   |  |                                |           |   |                             |   |           |  
|                                                                                                                                                                                                                                |  |                               
|Shareholders Equity                                                                                                                                                                                                            |  |                                |           |   |                             |   |           |  
|Common Stock, par value $1 per share; 50,000,000 shares authorized, 18,889,227 shares issued and outstanding at September 30, 2007;
25,000,000 shares authorized, 19,186,050 shares issued and outstanding at December 31, 2006 |  |                                | 18,889    |   |                             |   | 19,186    |  
|Paid-In Capital                                                                                                                                                                                                                 |  |                                | 220,825   |   |                             |   | 224,565   |  
|Retained Earnings                                                                                                                                                                                                               |  |                                | 71,539    |   |                             |   | 63,697    |  
|Restricted Stock  Unearned Compensation                                                                                                                                                                                        |  |                                | (53       | ) |                             |   | (158      | )
|Accumulated Other Comprehensive Income (Loss), Net of Tax                                                                                                                                                                       |  |                                | 836       |   |                             |   | (552      | )
|                                                                                                                                                                                                                                |  |                                |           |   |                             |   |           |  
|                                                                                                                                                                                                                                |  |                                | 312,036   |   |                             |   | 306,738   |  
|Treasury Stock, 19,736 Shares, at Cost                                                                                                                                                                                          |  |                                |          |   |                             |   | (330      | )
|                                                                                                                                                                                                                                |  |                                |           |   |                             |   |           |  
|Total Shareholders Equity                                                                                                                                                                                                      |  |                                | 312,036   |   |                             |   | 306,408   |  
|                                                                                                                                                                                                                                |  |                                |           |   |                             |   |           |  
|Total Liabilities and Shareholders Equity                                                                                                                                                                                      |  | $                              | 2,723,986 |   |                             | $ | 2,494,071 |  
|                                                                                                                                                                                                                                |  |                                |           |   |                             |   |           |  

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



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##### Table of Contents

SECURITY BANK CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

(IN THOUSANDS, EXCEPT
PER SHARE AND SHARE AMOUNTS)



|                                                    |  |                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|--------------------------------------------------- |  | ------------------------------- | ---------- | - | ------------------------------ | - | ---------- | ---- |  | - | ---------- | - |  | - | ---------- | -
|                                                    |  | Three Months EndedSeptember 30, |            |   | Nine Months EndedSeptember 30, |  
|                                                    |  | 2007                            |            |   | 2006                           |   |            | 2007 |  |   | 2006       |  
|Interest Income                                     |  |                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Loans, Including Fees                               |  | $                               | 46,351     |   |                                | $ | 38,027     |      |  | $ | 134,588    |   |  | $ | 97,067     |  
|Investment Securities                               |  |                                 | 2,844      |   |                                |   | 2,091      |      |  |   | 7,664      |   |  |   | 5,238      |  
|Federal Funds Sold and Other                        |  |                                 | 448        |   |                                |   | 551        |      |  |   | 1,599      |   |  |   | 1,361      |  
|                                                    |  |                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|                                                    |  |                                 | 49,643     |   |                                |   | 40,669     |      |  |   | 143,851    |   |  |   | 103,666    |  
|                                                    |  |                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Interest Expense                                    |  |                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Deposits                                            |  |                                 | 24,841     |   |                                |   | 17,349     |      |  |   | 68,986     |   |  |   | 40,658     |  
|Subordinated Debentures                             |  |                                 | 799        |   |                                |   | 805        |      |  |   | 2,380      |   |  |   | 2,348      |  
|FHLB Advances                                       |  |                                 | 654        |   |                                |   | 605        |      |  |   | 1,997      |   |  |   | 2,366      |  
|Repurchase Agreements                               |  |                                 | 392        |   |                                |   | 226        |      |  |   | 1,034      |   |  |   | 526        |  
|Federal Funds Purchased and Other                   |  |                                 | 176        |   |                                |   | 97         |      |  |   | 513        |   |  |   | 396        |  
|                                                    |  |                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|                                                    |  |                                 | 26,862     |   |                                |   | 19,082     |      |  |   | 74,910     |   |  |   | 46,294     |  
|                                                    |  |                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Net Interest Income                                 |  |                                 | 22,781     |   |                                |   | 21,587     |      |  |   | 68,941     |   |  |   | 57,372     |  
|                                                    |  |                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Provision for Loan Losses                           |  |                                 | 9,400      |   |                                |   | 1,226      |      |  |   | 12,660     |   |  |   | 2,595      |  
|                                                    |  |                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Net Interest Income After Provision for Loan Losses |  |                                 | 13,381     |   |                                |   | 20,361     |      |  |   | 56,281     |   |  |   | 54,777     |  
|                                                    |  |                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Noninterest Income                                  |  |                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Service Charges on Deposits                         |  |                                 | 2,356      |   |                                |   | 2,387      |      |  |   | 6,830      |   |  |   | 6,826      |  
|Mortgage Banking Income                             |  |                                 | 1,170      |   |                                |   | 1,231      |      |  |   | 3,480      |   |  |   | 3,915      |  
|Securities Losses                                   |  |                                 | (5         | ) |                                |   | (270       | )    |  |   | (3         | ) |  |   | (270       | )
|Other                                               |  |                                 | 739        |   |                                |   | 1,638      |      |  |   | 3,678      |   |  |   | 4,349      |  
|                                                    |  |                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|                                                    |  |                                 | 4,260      |   |                                |   | 4,986      |      |  |   | 13,985     |   |  |   | 14,820     |  
|                                                    |  |                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Noninterest Expense                                 |  |                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Salaries and Employee Benefits                      |  |                                 | 8,852      |   |                                |   | 8,497      |      |  |   | 27,497     |   |  |   | 24,063     |  
|Occupancy and Equipment                             |  |                                 | 1,559      |   |                                |   | 1,396      |      |  |   | 4,594      |   |  |   | 4,151      |  
|Professional Fees                                   |  |                                 | 971        |   |                                |   | 639        |      |  |   | 2,277      |   |  |   | 1,638      |  
|Marketing                                           |  |                                 | 664        |   |                                |   | 548        |      |  |   | 2,024      |   |  |   | 1,722      |  
|Amortization-Core Deposit Intangible                |  |                                 | 246        |   |                                |   | 237        |      |  |   | 739        |   |  |   | 657        |  
|Other                                               |  |                                 | 4,427      |   |                                |   | 3,115      |      |  |   | 11,903     |   |  |   | 8,696      |  
|                                                    |  |                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|                                                    |  |                                 | 16,719     |   |                                |   | 14,432     |      |  |   | 49,034     |   |  |   | 40,927     |  
|                                                    |  |                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Income Before Income Taxes                          |  |                                 | 922        |   |                                |   | 10,915     |      |  |   | 21,232     |   |  |   | 28,670     |  
|Income Taxes                                        |  |                                 | 347        |   |                                |   | 3,975      |      |  |   | 7,771      |   |  |   | 10,500     |  
|                                                    |  |                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Net Income                                          |  | $                               | 575        |   |                                | $ | 6,940      |      |  | $ | 13,461     |   |  | $ | 18,170     |  
|                                                    |  |                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Basic Earnings Per Share                            |  | $                               | 0.03       |   |                                | $ | 0.38       |      |  | $ | 0.70       |   |  | $ | 1.10       |  
|                                                    |  |                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Diluted Earnings Per Share                          |  | $                               | 0.03       |   |                                | $ | 0.37       |      |  | $ | 0.69       |   |  | $ | 1.08       |  
|                                                    |  |                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Dividends Per Share                                 |  | $                               | 0.088      |   |                                | $ | 0.075      |      |  | $ | 0.263      |   |  | $ | 0.225      |  
|                                                    |  |                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Weighted Average Common Shares Outstanding          |  |                                 | 19,075,958 |   |                                |   | 18,635,741 |      |  |   | 19,142,901 |   |  |   | 16,564,881 |  
|                                                    |  |                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  

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



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##### Table of Contents

SECURITY BANK CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

(DOLLARS
IN THOUSANDS)



|                                              |  |                                 |       |                                |   |       |  |   |        |   |  |   |        |  
|--------------------------------------------- |  | ------------------------------- | ----- | ------------------------------ | - | ----- |  | - | ------ | - |  | - | ------ | -
|                                              |  | Three Months EndedSeptember 30, |       | Nine Months EndedSeptember 30, |  
|                                              |  | 2007                            |       | 2006                           |   | 2007  |  |   | 2006   |  
|Net Income                                    |  | $                               | 575   |                                | $ | 6,940 |  | $ | 13,461 |   |  | $ | 18,170 |  
|                                              |  |                                 |       |                                |   |       |  |   |        |   |  |   |        |  
|Other Comprehensive Income, Net of Income Tax |  |                                 |       |                                |   |       |  |   |        |   |  |   |        |  
|Gains on Securities Arising During the Period |  |                                 | 1,440 |                                |   | 1,058 |  |   | (5     | ) |  |   | (48    | )
|Reclassification Adjustment                   |  |                                 | 3     |                                |   | 178   |  |   | 2      |   |  |   | 178    |  
|                                              |  |                                 |       |                                |   |       |  |   |        |   |  |   |        |  
|Unrealized Gains (Losses) on Securities       |  |                                 | 1,443 |                                |   | 1,236 |  |   | (3     | ) |  |   | 130    |  
|Unrealized Gains on Derivative Instruments    |  |                                 | 1,408 |                                |   |      |  |   | 1,391  |   |  |   |       |  
|                                              |  |                                 |       |                                |   |       |  |   |        |   |  |   |        |  
|Comprehensive Income                          |  | $                               | 3,426 |                                | $ | 8,176 |  | $ | 14,849 |   |  | $ | 18,300 |  
|                                              |  |                                 |       |                                |   |       |  |   |        |   |  |   |        |  

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



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##### Table of Contents

SECURITY BANK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
(UNAUDITED)

FOR THE NINE MONTHS ENDED SEPTEMBER 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                              |  | 17     |   |  |             | 17     |   |                |   | 186     |                  |  |   |                                      |   |  |                                            |      |   |               |   |        |       |  |   |      |   |  |   | 203     |  
|Stock Based Compensation Awards                      |  |        |   |  |             |        |   |                |   | 392     |                  |  |   |                                      |   |  |                                            |      |   |               |   |        |       |  |   |      |   |  |   | 392     |  
|Amortization of Unearned Compensation                |  |        |   |  |             |        |   |                |   |         |                  |  |   |                                      |   |  |                                            | 49   |   |               |   |        |       |  |   |      |   |  |   | 49      |  
|Shares Issued in Connection with Stock Offering      |  | 1,725  |   |  |             | 1,725  |   |                |   | 34,216  |                  |  |   |                                      |   |  |                                            |      |   |               |   |        |       |  |   |      |   |  |   | 35,941  |  
|Shares Issued in Acquisition                         |  | 2,864  |   |  |             | 2,864  |   |                |   | 65,186  |                  |  |   |                                      |   |  |                                            |      |   |               |   |        |       |  |   |      |   |  |   | 68,050  |  
|Shares Issued to Employee Stock Purchase Plan        |  | 8      |   |  |             | 8      |   |                |   | 179     |                  |  |   |                                      |   |  |                                            |      |   |               |   |        |       |  |   |      |   |  |   | 187     |  
|Unrealized Gain on Securities Available for Sale     |  |        |   |  |             |        |   |                |   |         |                  |  |   |                                      |   |  |                                            |      |   |               |   | 130    |       |  |   |      |   |  |   | 130     |  
|Cash Dividends                                       |  |        |   |  |             |        |   |                |   |         |                  |  |   | (3,828                               | ) |  |                                            |      |   |               |   |        |       |  |   |      |   |  |   | (3,828  | )
|Net Income                                           |  |        |   |  |             |        |   |                |   |         |                  |  |   | 18,170                               |   |  |                                            |      |   |               |   |        |       |  |   |      |   |  |   | 18,170  |  
|                                                     |  |        |   |  |             |        |   |                |   |         |                  |  |   |                                      |   |  |                                            |      |   |               |   |        |       |  |   |      |   |  |   |         |  
|Balance, September 30, 2006                          |  | 19,181 |   |  | $           | 19,181 |   |                | $ | 225,153 |                  |  | $ | 59,912                               |   |  | $                                          | (174 | ) |               | $ | (1,469 | )     |  | $ | (330 | ) |  | $ | 302,273 |  
|                                                     |  |        |   |  |             |        |   |                |   |         |                  |  |   |                                      |   |  |                                            |      |   |               |   |        |       |  |   |      |   |  |   |         |  
|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                   |  | 31     |   |  |             | 31     |   |                |   | (31     | )                |  |   |                                      |   |  |                                            |      |   |               |   |        |       |  |   |      |   |  |   |        |  
|Stock Options Exercised                              |  | 3      |   |  |             | 3      |   |                |   | 44      |                  |  |   |                                      |   |  |                                            |      |   |               |   |        |       |  |   |      |   |  |   | 47      |  
|Stock Based Compensation Awards                      |  |        |   |  |             |        |   |                |   | 708     |                  |  |   |                                      |   |  |                                            |      |   |               |   |        |       |  |   |      |   |  |   | 708     |  
|Amortization of Unearned Compensation                |  |        |   |  |             |        |   |                |   |         |                  |  |   |                                      |   |  |                                            | 45   |   |               |   |        |       |  |   |      |   |  |   | 45      |  
|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 to Employee Stock Purchase Plan        |  | 16     |   |  |             | 16     |   |                |   | 236     |                  |  |   |                                      |   |  |                                            |      |   |               |   |        |       |  |   |      |   |  |   | 252     |  
|Shares Repurchased                                   |  | (335   | ) |  |             | (335   | ) |                |   | (4,569  | )                |  |   |                                      |   |  |                                            |      |   |               |   |        |       |  |   |      |   |  |   | (4,904  | )
|Unrealized Loss on Securities Available for Sale     |  |        |   |  |             |        |   |                |   |         |                  |  |   |                                      |   |  |                                            |      |   |               |   | (3     | )     |  |   |      |   |  |   | (3      | )
|Unrealized Gain on Derivative Instruments            |  |        |   |  |             |        |   |                |   |         |                  |  |   |                                      |   |  |                                            |      |   |               |   | 1,391  |       |  |   |      |   |  |   | 1,391   |  
|Cash Dividends                                       |  |        |   |  |             |        |   |                |   |         |                  |  |   | (5,011                               | ) |  |                                            |      |   |               |   |        |       |  |   |      |   |  |   | (5,011  | )
|Net Income                                           |  |        |   |  |             |        |   |                |   |         |                  |  |   | 13,461                               |   |  |                                            |      |   |               |   |        |       |  |   |      |   |  |   | 13,461  |  
|                                                     |  |        |   |  |             |        |   |                |   |         |                  |  |   |                                      |   |  |                                            |      |   |               |   |        |       |  |   |      |   |  |   |         |  
|Balance, September 30, 2007                          |  | 18,889 |   |  | $           | 18,889 |   |                | $ | 220,825 |                  |  | $ | 71,539                               |   |  | $                                          | (53  | ) |               | $ | 836    |       |  | $ |     |   |  | $ | 312,036 |  
|                                                     |  |        |   |  |             |        |   |                |   |         |                  |  |   |                                      |   |  |                                            |      |   |               |   |        |       |  |   |      |   |  |   |         |  

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



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##### Table of Contents

SECURITY BANK CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

FOR THE NINE MONTHS ENDED SEPTEMBER 30

(DOLLARS IN THOUSANDS)



|                                                                                          |  |      |          |   |      |   |          |  
|----------------------------------------------------------------------------------------- |  | ---- | -------- | - | ---- | - | -------- | -
|                                                                                          |  | 2007 |          |   | 2006 |  
|Cash Flows from Operating Activities                                                      |  |      |          |   |      |   |          |  
|Net Income                                                                                |  | $    | 13,461   |   |      | $ | 18,170   |  
|Adjustments to Reconcile Net Income to Net Cash Provided (Used) from Operating Activities |  |      |          |   |      |   |          |  
|Stock Options                                                                             |  |      | 708      |   |      |   | 392      |  
|Depreciation, Amortization and Accretion                                                  |  |      | 3,295    |   |      |   | 2,806    |  
|Provision for Loan Losses                                                                 |  |      | 12,660   |   |      |   | 2,595    |  
|Securities Losses                                                                         |  |      | 3        |   |      |   | 270      |  
|Loss on Sale of Other Real Estate                                                         |  |      | 461      |   |      |   | 67       |  
|Provision for Losses on Other Real Estate                                                 |  |      | 49       |   |      |   | 93       |  
|Gain on Sale of Premises and Equipment                                                    |  |      | (3       | ) |      |   | (25      | )
|Gain on Sales of Loans                                                                    |  |      | (152     | ) |      |   | (39      | )
|Net Change in Loans Held for Sale                                                         |  |      | 10       |   |      |   | (3,384   | )
|Payable for Purchased Securities                                                          |  |      | (21,544  | ) |      |   |         |  
|Net Change in Other Assets                                                                |  |      | (9,459   | ) |      |   | (2,996   | )
|Net Change in Other Liabilities                                                           |  |      | (2,475   | ) |      |   | (981     | )
|                                                                                          |  |      |          |   |      |   |          |  
|                                                                                          |  |      | (2,986   | ) |      |   | 16,968   |  
|                                                                                          |  |      |          |   |      |   |          |  
|Cash Flows from Investing Activities                                                      |  |      |          |   |      |   |          |  
|Interest-Bearing Deposits with Other Banks                                                |  |      | (4,252   | ) |      |   | 2,814    |  
|Purchase of Investment Securities Available for Sale                                      |  |      | (64,931  | ) |      |   | (55,824  | )
|Sales of Investment Securities Available for Sale                                         |  |      | 3,995    |   |      |   | 7,318    |  
|Proceeds from Maturities and Calls of Investment Securities                               |  |      |          |   |      |   |          |  
|Available for Sale                                                                        |  |      | 63,676   |   |      |   | 23,023   |  
|Held to Maturity                                                                          |  |      | 240      |   |      |   | 105      |  
|Other Securities, Net                                                                     |  |      | (307     | ) |      |   | 652      |  
|Loans to Customers, Net                                                                   |  |      | (300,105 | ) |      |   | (184,992 | )
|Purchase of Premises and Equipment                                                        |  |      | (4,687   | ) |      |   | (5,833   | )
|Sale of Premises and Equipment                                                            |  |      | 1,181    |   |      |   | 2,710    |  
|Purchase of Investment Tax Credits                                                        |  |      | (3,695   | ) |      |   |         |  
|Proceeds from sale of Other Real Estate                                                   |  |      | 13,762   |   |      |   | 3,515    |  
|Goodwill Resulting from Contingent Cash Payments                                          |  |      |         |   |      |   | (1,144   | )
|Payment to Rivoli BanCorp Stockholders                                                    |  |      |         |   |      |   | (4,220   | )
|Cash (Paid) Received in Business Acquisition, Net                                         |  |      | (198     | ) |      |   | 11,520   |  
|                                                                                          |  |      |          |   |      |   |          |  
|                                                                                          |  |      | (295,321 | ) |      |   | (200,356 | )
|                                                                                          |  |      |          |   |      |   |          |  
|Cash Flows from Financing Activities                                                      |  |      |          |   |      |   |          |  
|Interest-Bearing Customer Deposits                                                        |  |      | 237,392  |   |      |   | 191,071  |  
|Noninterest-Bearing Customer Deposits                                                     |  |      | (17,221  | ) |      |   | 3,575    |  
|Dividends Paid                                                                            |  |      | (5,011   | ) |      |   | (3,828   | )
|Federal Funds Purchased and Repurchase Agreements                                         |  |      | 31,077   |   |      |   | (8,057   | )
|Borrowed Money, Net                                                                       |  |      | (3,300   | ) |      |   | (31,277  | )
|Proceeds from Common Stock Offering                                                       |  |      |         |   |      |   | 35,941   |  
|Issuance of Common Stock                                                                  |  |      | 299      |   |      |   | 389      |  
|Purchase of Common Stock                                                                  |  |      | (4,904   | ) |      |   |         |  
|                                                                                          |  |      |          |   |      |   |          |  
|                                                                                          |  |      | 238,332  |   |      |   | 187,814  |  
|                                                                                          |  |      |          |   |      |   |          |  
|Net Increase (Decrease) in Cash and Cash Equivalents                                      |  |      | (59,975  | ) |      |   | 4,426    |  
|Cash and Cash Equivalents, Beginning                                                      |  |      | 156,903  |   |      |   | 103,092  |  
|                                                                                          |  |      |          |   |      |   |          |  
|Cash and Cash Equivalents, Ending                                                         |  | $    | 96,928   |   |      | $ | 107,518  |  
|                                                                                          |  |      |          |   |      |   |          |  

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



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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 in consolidation.

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. 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.

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 $124,631 for the nine months ended September 30, 2007.



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##### Table of Contents

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. SFAS
No. 159 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. SFAS No. 159 does not eliminate disclosure requirements included in other accounting
standards, including requirements for disclosures about fair value measurements included in SFAS No. 157, Fair Value Measurements, and SFAS No. 107, Disclosures about Fair Value of Financial Instruments.SFAS No. 159 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 has decided not to elect early adoption as permitted by SFAS No. 159. Management is presently working to determine the potential impact of SFAS
No. 159 on the Companys financial condition, results of operations and cash flows.

In June 2007, the FASB ratified an Emerging
Issues Task Force (EITF) consensus regarding Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards, which becomes effective for the Company on January 1, 2008. Management has not completed its review of this new
guidance, but expects the effect upon implementation will not be material to the Companys consolidated financial statements.

In
addition, the FASB has recently issued several proposals to amend, supersede or interpret existing accounting standards that may impact the Companys financial statements at a later date:



| |  |  | Proposed amendment to SFAS No. 128, Earnings per Share;
| | - |  | -------------------------------------------------------



| |  |  | Proposed replacement of SFAS No. 141, Business Combinations; and
| | - |  | ----------------------------------------------------------------



| |  |  | Proposed replacement of Accounting Research Bulletin No. 51, Consolidated Financial Statements, Including Accounting and Reporting for Noncontrolling
Interests
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

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

Segment Reporting

Reportable segments are business units, which offer different products and services and require different management and marketing strategies. Management of the Company considers that all banking operations are
essentially similar within each of its subsidiaries and that there are no reportable operating segments. However, fee income from mortgage loans originated and sold to investors included in consolidated noninterest income for the nine-month periods
ended September 30, 2007 and 2006 was $3.5 million and $3.9 million, respectively. Such income may fluctuate significantly with increases or decreases in mortgage rates and overall demand for borrowing.

Reclassifications

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



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(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. The excess of the purchase price over book value has been allocated to goodwill and core deposit intangibles. The Company amortized
$69,413 and $45,095, respectively, of the core deposit intangibles during the nine months ended September 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. The excess of the purchase price over book value has been allocated to goodwill and core deposit intangibles. The Company amortized $73,508 and $16,335, respectively, of the core deposit intangibles during the nine months ended
September 30, 2007 and 2006.

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



|                                            |  |                        |          |   |           |   |          |  
|------------------------------------------- |  | ---------------------- | -------- | - | --------- | - | -------- | -
|                                            |  | Homestead              |          |   | Neighbors |  
|                                            |  | (Dollars in thousands) |         
|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         |  |                        | 25,879   |   |           |   | 22,004   |  
|Other Assets                                |  |                        | 1,191    |   |           |   | 2,655    |  
|Deposits                                    |  |                        | (236,284 | ) |           |   | (110,822 | )
|Other Liabilities                           |  |                        | (27,068  | ) |           |   | (2,313   | )
|                                            |  |                        |          |   |           |   |          |  
|                                            |  | $                      | 45,701   |   |           | $ | 33,146   |  
|                                            |  |                        |          |   |           |   |          |  

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



|                   |  |                                               |        |                                |   |        |  |      |         |  |   |        
|------------------ |  | --------------------------------------------- | ------ | ------------------------------ | - | ------ |  | ---- | ------- |  | - | -------
|                   |  | Three Months EndedSeptember 30,               |        | Nine Months EndedSeptember 30,
|                   |  | 2007                                          |        | 2006                           |   | 2007   |  | 2006
|                   |  | (Dollars in thousands, except per share data)
|Interest Income    |  | $                                             | 49,643 |                                | $ | 42,558 |  | $    | 143,851 |  | $ | 117,478
|                   |  |                                               |        |                               
|Net Income         |  |                                               | 575    |                                |   | 5,938  |  |      | 13,461  |  |   | 17,684 
|                   |  |                                               |        |                               
|Earnings Per Share |  |                                               |        |                                |   |        |  |      |         |  |   |        
|Basic              |  | $                                             | 0.03   |                                | $ | 0.32   |  | $    | 0.70    |  | $ | 0.99   
|Diluted            |  | $                                             | 0.03   |                                | $ | 0.31   |  | $    | 0.69    |  | $ | 0.97   



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(3) Investment Securities

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



|                              |  |                        |         |                      |   |                       |  |   |            |   |  |   |        
|----------------------------- |  | ---------------------- | ------- | -------------------- | - | --------------------- |  | - | ---------- | - |  | - | -------
|                              |  | AmortizedCost          |         | GrossUnrealizedGains |   | GrossUnrealizedLosses |  |   | Fair Value
|                              |  | (Dollars in Thousands)
|Securities Available for Sale |  |                        |         |                      |   |                       |  |   |            |   |  |   |        
|U.S. Government Agencies:     |  |                        |         |                      |   |                       |  |   |            |   |  |   |        
|Mortgage Backed               |  | $                      | 170,467 |                      | $ | 229                   |  | $ | (986       | ) |  | $ | 169,710
|Other                         |  |                        | 26,561  |                      |   | 151                   |  |   | (38        | ) |  |   | 26,674 
|State, County and Municipal   |  |                        | 20,612  |                      |   | 80                    |  |   | (153       | ) |  |   | 20,539 
|Other Securities              |  |                        | 1,964   |                      |   |                      |  |   | (22        | ) |  |   | 1,942  
|                              |  |                        |         |                      |   |                       |  |   |            |   |  |   |        
|                              |  | $                      | 219,604 |                      | $ | 460                   |  | $ | (1,199     | ) |  | $ | 218,865
|                              |  |                        |         |                      |   |                       |  |   |            |   |  |   |        
|Securities Held to Maturity   |  |                        |         |                      |   |                       |  |   |            |   |  |   |        
|U.S. Government Agencies:     |  |                        |         |                      |   |                       |  |   |            |   |  |   |        
|Other                         |  | $                      | 1,000   |                      | $ |                      |  | $ | (16        | ) |  | $ | 984    
|                              |  |                        |         |                      |   |                       |  |   |            |   |  |   |        
|                              |  | $                      | 1,000   |                      | $ |                      |  | $ | (16        | ) |  | $ | 984    
|                              |  |                        |         |                      |   |                       |  |   |            |   |  |   |        

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



|                              |  |                        |         |                      |   |                       |  |   |            |   |  |   |        
|----------------------------- |  | ---------------------- | ------- | -------------------- | - | --------------------- |  | - | ---------- | - |  | - | -------
|                              |  | AmortizedCost          |         | GrossUnrealizedGains |   | GrossUnrealizedLosses |  |   | Fair Value
|                              |  | (Dollars in Thousands)
|Securities Available for Sale |  |                        |         |                      |   |                       |  |   |            |   |  |   |        
|U.S. Government Agencies:     |  |                        |         |                      |   |                       |  |   |            |   |  |   |        
|Mortgage Backed               |  | $                      | 133,183 |                      | $ | 162                   |  | $ | (1,056     | ) |  | $ | 132,289
|Other                         |  |                        | 67,048  |                      |   |                      |  |   | (220       | ) |  |   | 66,828 
|State, County and Municipal   |  |                        | 19,993  |                      |   | 250                   |  |   | (148       | ) |  |   | 20,095 
|Other Securities              |  |                        | 1,981   |                      |   |                      |  |   | (15        | ) |  |   | 1,966  
|                              |  |                        |         |                      |   |                       |  |   |            |   |  |   |        
|                              |  | $                      | 222,205 |                      | $ | 412                   |  | $ | (1,439     | ) |  | $ | 221,178
|                              |  |                        |         |                      |   |                       |  |   |            |   |  |   |        
|Securities Held to Maturity   |  |                        |         |                      |   |                       |  |   |            |   |  |   |        
|State, County and Municipal   |  | $                      | 1,240   |                      | $ |                      |  | $ | (27        | ) |  | $ | 1,213  
|                              |  |                        |         |                      |   |                       |  |   |            |   |  |   |        
|                              |  | $                      | 1,240   |                      | $ |                      |  | $ | (27        | ) |  | $ | 1,213  
|                              |  |                        |         |                      |   |                       |  |   |            |   |  |   |        

Unrealized holding losses, net of tax, on securities available for sale of $0.8 million and $0.6
million are included in shareholders equity as of September 30, 2007 and December 31, 2006, respectively.



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##### Table of Contents

(4) Loans Receivable, Net

Loans receivable are comprised of the following:



|                           |  |                        |           |   |                   |   |           |  
|-------------------------- |  | ---------------------- | --------- | - | ----------------- | - | --------- | -
|                           |  | September 30, 2007     |           |   | December 31, 2006 |  
|                           |  | (Dollars in Thousands) |          
|Real Estate-Construction   |  | $                      | 1,167,968 |   |                   | $ | 981,481   |  
|Real Estate-Other          |  |                        | 789,018   |   |                   |   | 728,598   |  
|Commercial                 |  |                        | 150,994   |   |                   |   | 142,537   |  
|Consumer                   |  |                        | 56,442    |   |                   |   | 48,923    |  
|Agricultural               |  |                        | 3,383     |   |                   |   | 2,029     |  
|                           |  |                        |           |   |                   |   |           |  
|                           |  |                        | 2,167,805 |   |                   |   | 1,903,568 |  
|Allowance for Loan Losses  |  |                        | (27,132   | ) |                   |   | (22,336   | )
|Unearned Interest and Fees |  |                        | (2,593    | ) |                   |   | (2,467    | )
|                           |  |                        |           |   |                   |   |           |  
|                           |  | $                      | 2,138,080 |   |                   | $ | 1,878,765 |  
|                           |  |                        |           |   |                   |   |           |  

(5) Allowance for Loan Losses

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



|                            |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|--------------------------- |  | ------------------------------- | ------ | - | ------------------------------ | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                            |  | Three Months EndedSeptember 30, |        |   | Nine Months EndedSeptember 30, |  
|                            |  | 2007                            |        |   | 2006                           |   |        | 2007 |  |   | 2006   |  
|                            |  | (Dollars in Thousands)          |       
|Balance beginning of period |  | $                               | 24,108 |   |                                | $ | 18,190 |      |  | $ | 22,336 |   |  | $ | 16,148 |  
|Business Combination        |  |                                 |       |   |                                |   | 2,850  |      |  |   |       |   |  |   | 4,082  |  
|Charge-Offs                 |  |                                 | (6,690 | ) |                                |   | (1,002 | )    |  |   | (8,665 | ) |  |   | (1,981 | )
|Recoveries                  |  |                                 | 314    |   |                                |   | 213    |      |  |   | 801    |   |  |   | 633    |  
|Provision for Loan Losses   |  |                                 | 9,400  |   |                                |   | 1,226  |      |  |   | 12,660 |   |  |   | 2,595  |  
|                            |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|Balance end of period       |  | $                               | 27,132 |   |                                | $ | 21,477 |      |  | $ | 27,132 |   |  | $ | 21,477 |  
|                            |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  

(6) Deposits

Components of deposits are as follows:



|                        |  |                        |           |                   |   |          
|----------------------- |  | ---------------------- | --------- | ----------------- | - | ---------
|                        |  | September 30, 2007     |           | December 31, 2006
|                        |  | (Dollars in Thousands)
|Interest-Bearing Demand |  | $                      | 518,501   |                   | $ | 531,004  
|Demand                  |  |                        | 161,749   |                   |   | 178,967  
|Time, $100,000 and Over |  |                        | 975,853   |                   |   | 748,231  
|Other Time              |  |                        | 519,791   |                   |   | 496,538  
|Savings                 |  |                        | 15,206    |                   |   | 16,187   
|                        |  |                        |           |                   |   |          
|                        |  | $                      | 2,191,100 |                   | $ | 1,970,927
|                        |  |                        |           |                   |   |          

Brokered deposits are third-party time deposits placed by or through the assistance of a deposit
broker. As of September 30, 2007, the Company had $597.3 million in brokered deposits compared to $410.1 million at December 31, 2006.



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##### Table of Contents

(7) Borrowed Money

Borrowed money is comprised of the following:



|                                                     |  |                        |         |                  |   |        
|---------------------------------------------------- |  | ---------------------- | ------- | ---------------- | - | -------
|                                                     |  | September 30, 2007     |         | December 31,2006
|                                                     |  | (Dollars in Thousands)
|Federal Home Loan Bank Advances                      |  | $                      | 70,150  |                  | $ | 83,450 
|Subordinated Debentures (trust preferred securities) |  |                        | 41,238  |                  |   | 41,238 
|Federal Funds Purchased                              |  |                        | 43,431  |                  |   | 25,917 
|Securities Sold Under Agreement to Repurchase        |  |                        | 38,564  |                  |   | 25,000 
|Advances Under Revolving Line of Credit              |  |                        | 10,000  |                  |   |       
|                                                     |  |                        |         |                  |   |        
|Total Borrowed Money                                 |  | $                      | 203,383 |                  | $ | 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 $71,000 for the nine months ended September 30, 2007 and 2006. The interest expense paid to the trusts totaled $2,380,000 and $2,348,000 for the nine months ended
September 30, 2007 and 2006.

(8) Stock Compensation Plans

A summary of option transactions for the nine months ended September 30, 2007 follows:



|                                             |  |                  |  |                               |       |                         |   |                                          |  |     
|-------------------------------------------- |  | ---------------- |  | ----------------------------- | ----- | ----------------------- | - | ---------------------------------------- |  | ----
|                                             |  | Number of Shares |  | WeightedAverage ExercisePrice |       | AggregateIntrinsicValue |   | Weighted-averageRemainingContractualLife
|Outstanding, December 31, 2006               |  | 767,667          |  | $                             | 13.20 |                         |   |                                          |  |     
|Granted                                      |  | 1,235,000        |  |                               | 20.87 |                         |   |                                          |  |     
|Forfeited                                    |  |                 |  |                               |       |                         |   |                                          |  |     
|Exercised                                    |  | 84,994           |  |                               | 11.01 |                         |   |                                          |  |     
|                                             |  |                  |  |                               |       |                         |   |                                          |  |     
|Outstanding, September 30, 2007              |  | 1,917,673        |  | $                             | 18.24 |                         | $ | 849,901                                  |  | 8.17
|                                             |  |                  |  |                               |       |                         |   |                                          |  |     
|Eligible to be Exercised, September 30, 2007 |  | 552,984          |  | $                             | 13.84 |                         | $ | 556,987                                  |  | 5.59
|                                             |  |                  |  |                               |       |                         |   |                                          |  |     

During the nine months ended September 30, 2007, the Company issued 1,165,000 incentive stock
options to management and 70,000 nonqualified stock options to directors. The incentive stock options issued to the named executive officers vest over a three-year period based upon achieving diluted earnings per share growth of 12% to 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 incentive stock options issued to other members of management, as amended, do not
include a performance-based component and cliff-vest on December 31, 2010. 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

(9) Earnings Per Share

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



|                                                            |  |                                  |            |                                 |   |            |  |      |            |  |   |           
|----------------------------------------------------------- |  | -------------------------------- | ---------- | ------------------------------- | - | ---------- |  | ---- | ---------- |  | - | ----------
|                                                            |  | Three Months Ended September 30, |            | Nine Months Ended September 30,
|                                                            |  | 2007                             |            | 2006                            |   | 2007       |  | 2006
|Basic Earnings Per Share                                    |  |                                  |            |                                 |   |            |  |      |            |  |   |           
|Net Income Per Common Share                                 |  | $                                | 0.03       |                                 | $ | 0.38       |  | $    | 0.70       |  | $ | 1.10      
|Weighted Average Common Shares                              |  |                                  | 19,075,958 |                                 |   | 18,635,741 |  |      | 19,142,901 |  |   | 16,564,881
|Diluted Earnings Per Share                                  |  |                                  |            |                                 |   |            |  |      |            |  |   |           
|Net Income Per Common and Common Equivalent Share           |  | $                                | 0.03       |                                 | $ | 0.37       |  | $    | 0.69       |  | $ | 1.08      
|Weighted Average Common Shares and Common Stock Equivalents |  |                                  | 19,184,272 |                                 |   | 18,971,126 |  |      | 19,359,809 |  |   | 16,900,239

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 $15.1015 and $17.6401 and $22.3377 and $22.4842 for the three- and nine-month periods ended September 30, 2007 and 2006, respectively.
The Companys stock is quoted on the Nasdaq Global Select Market under the symbol SBKC.

(10) Regulatory Capital Matters

Quantitative measures established by regulation to ensure capital adequacy require the Company and the Banks to maintain minimum amounts and ratios of
Total and Tier I capital to risk-weighted assets, and of Tier I capital to average assets. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken,
could have a direct material effect on the Companys financial position and operations. Management believes, as of September 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 September 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) |  | 9.24                 | % |  | 10.38               | % |  | 8.68           | %
|Security Bank of Bibb County             |  | 9.10                 | % |  | 10.35               | % |  | 8.91           | %
|Security Bank of Houston County          |  | 8.96                 | % |  | 10.21               | % |  | 8.02           | %
|Security Bank of Jones County            |  | 10.62                | % |  | 11.62               | % |  | 8.70           | %
|Security Bank of North Metro             |  | 9.12                 | % |  | 10.36               | % |  | 8.56           | %
|Security Bank of North Fulton            |  | 9.57                 | % |  | 10.81               | % |  | 8.91           | %
|Security Bank of Gwinnett County         |  | 9.35                 | % |  | 10.11               | % |  | 9.00           | %

(11) 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 the current prime rate. 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.



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##### Table of Contents

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 September 30, 2007, the interest rate swap had a fair value of $2.1 million which was included in other assets. Amounts reported in accumulated other comprehensive income related to the interest rate swap will be reclassified to
interest income as interest payments are received on the Companys variable-rate loan assets.

As of September 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.



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##### Table of Contents

|ITEM 2. | 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 nine-month periods ended September 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 and the Annual Report on Form 10-K for the year ended December 31, 2006.

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, including real estate markets, 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

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 (and its wholly-owned subsidiary Fairfield Financial Services, Inc.), 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 first quarter of 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 as a separate legal entity 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 September 30, 2007, we had 524 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 September 30, 2007, total assets were $2.72 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 cash and due from banks.



15



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##### Table of Contents

Assets

The
composition of assets is as follows:



|                                           |  |                        |           |                   |   |           |  |   |          |   |  |        |  
|------------------------------------------ |  | ---------------------- | --------- | ----------------- | - | --------- |  | - | -------- | - |  | ------ | -
|                                           |  | September 30, 2007     |           | December 31, 2006 |   | $ Change  |  |   | % Change |  
|                                           |  | (Dollars in thousands) |          
|Cash and Due From Banks                    |  | $                      | 45,362    |                   | $ | 63,245    |  | $ | (17,883  | ) |  | -28.3  | %
|Federal Funds Sold                         |  |                        | 51,566    |                   |   | 93,659    |  |   | (42,093  | ) |  | -44.9  | %
|Interest-Bearing Deposits With Other Banks |  |                        | 7,163     |                   |   | 2,911     |  |   | 4,252    |   |  | 146.1  | %
|Investment Securities                      |  |                        | 219,865   |                   |   | 222,418   |  |   | (2,553   | ) |  | -1.2   | %
|Other Investments, at Cost                 |  |                        | 7,829     |                   |   | 7,521     |  |   | 308      |   |  | 4.1    | %
|Loans Held For Sale                        |  |                        | 8,867     |                   |   | 8,877     |  |   | (10      | ) |  | -0.1   | %
|Loans Receivable, Net                      |  |                        | 2,138,080 |                   |   | 1,878,765 |  |   | 259,315  |   |  | 13.8   | %
|Premises and Equipment                     |  |                        | 42,246    |                   |   | 39,758    |  |   | 2,488    |   |  | 6.3    | %
|Long-Lived Assets Held For Sale            |  |                        |          |                   |   | 885       |  |   | (885     | ) |  | -100.0 | %
|Other Real Estate Owned                    |  |                        | 23,891    |                   |   | 2,775     |  |   | 21,116   |   |  | 760.9  | %
|Goodwill                                   |  |                        | 128,571   |                   |   | 127,984   |  |   | 587      |   |  | 0.5    | %
|Core Deposit Intangible, net               |  |                        | 4,371     |                   |   | 5,110     |  |   | (739     | ) |  | -14.5  | %
|Other Assets                               |  |                        | 46,175    |                   |   | 40,163    |  |   | 6,012    |   |  | 15.0   | %
|                                           |  |                        |           |                   |   |           |  |   |          |   |  |        |  
|                                           |  | $                      | 2,723,986 |                   | $ | 2,494,071 |  | $ | 229,915  |   |  | 9.22   | %
|                                           |  |                        |           |                   |   |           |  |   |          |   |  |        |  

Cash and Cash Equivalents

See the Condensed Consolidated Statement of Cash Flows for a detail of the sources and uses of cash and cash equivalents during the nine months ended
September 30, 2007 and 2006.

Investment Securities

The composition of the investment securities portfolio reflects our investment strategy of maintaining an appropriate level of liquidity while providing a relatively stable source of revenue. The investment securities
portfolio also provides a balance to interest rate risk and credit risk in other categories of the balance sheet while providing a vehicle for the investment of available funds, furnishing liquidity, and supplying securities to pledge as required
collateral for certain deposits.

Compared to December 31, 2006, investment securities remained relatively consistent, as the balance
decreased $2.6 million or 1.2%. At September 30, 2007 and December 31, 2006, the securities portfolio accounted for approximately 8.1% and 8.9% of total assets, respectively.

The investment securities portfolio primarily consists of U.S. Government agency securities, U.S. Government sponsored agency mortgage-backed securities,
non-agency mortgage-backed securities, and municipal securities. Mortgage-backed securities rely on the underlying pools of mortgage loans to provide a cash flow of principal and interest. The actual maturities of these securities will differ from
the contractual maturities because loans underlying the securities may prepay. Decreases in interest rates will generally cause an acceleration of prepayment levels. In a declining interest rate environment, we may not be able to reinvest the
proceeds from these prepayments in assets that have comparable yields. In a rising rate environment, the opposite occurs. Prepayments tend to slow and the weighted average life extends. This is referred to as extension risk, which can lead to lower
levels of liquidity due to the delay of timing of cash receipts and can result in the holding of a below market yielding asset for a longer time period.



16



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##### Table of Contents

Loans Receivable, Net

Loans receivable, net increased due to the continuing growth in our loan portfolio, particularly in real estate-construction loans. Approximately $158.0 million of the increase relates to the middle and coastal
Georgia markets (Bibb, Houston, Jones and Glynn counties) and the remainder is attributable to the growth of loans in the metropolitan Atlanta market. Market conditions have restrained the pace of new real estate project financing in the
metropolitan Atlanta market, so we have slowed the growth of our loan portfolios in this market when compared with previous quarters.

Risk Elements
and Allowance for Loan Losses (ALL)

Nonperforming assets consist of nonaccrual loans and other real estate owned, which is real
estate acquired through foreclosure. Largely as a result of deteriorating conditions in the residential real estate market in our metropolitan Atlanta market, nonperforming assets increased significantly to $65.4 million or 2.4% of total assets at
September 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 the dates indicated:



|                           |  |                        |        |              |   |               |  |                  |        |  |   |       
|-------------------------- |  | ---------------------- | ------ | ------------ | - | ------------- |  | ---------------- | ------ |  | - | ------
|                           |  | September 30,2007      |        | June 30,2007 |   | March 31,2007 |  | December 31,2006
|                           |  | (Dollars in Thousands)
|Nonaccrual Loans           |  | $                      | 41,492 |              | $ | 35,450        |  | $                | 39,139 |  | $ | 34,401
|Other Real Estate Owned    |  |                        | 23,891 |              |   | 19,229        |  |                  | 3,403  |  |   | 2,775 
|                           |  |                        |        |              |   |               |  |                  |        |  |   |       
|Total Nonperforming Assets |  | $                      | 65,383 |              | $ | 54,679        |  | $                | 42,542 |  | $ | 37,176
|                           |  |                        |        |              |   |               |  |                  |        |  |   |       

Nonaccrual loans increased by $6.0 million or 17% and by $7.1 million or 21% during the three and
nine months ended September 30, 2007, respectively. There was significant movement within these loans during the quarter as $6.7 million of nonaccrual loans were charged-off, $14.8 million went into foreclosure and $32.9 million of loans went
on nonaccrual status. Additionally, $4.1 million of nonaccrual loans were sold during the quarter. The ten largest nonaccrual loans comprise $28.9 million or 69.6% of the total and eight of the ten loans are collateralized by residential real
estate.

Other real estate owned increased by $4.7 million and by $21.1 million during the three and nine months ended September 30,
2007, respectively. During the third quarter of 2007, new foreclosures were completed on $14.8 million of real estate and $9.9 million of real estate was sold. The ten largest properties account for $20.3 million or 85.0% of the total and each is a
residential real estate development or construction property 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 and residential lots has increased, residential construction and acquisition and development
activity has slowed considerably. Some of our customers that are builders and developers have been significantly impacted by this current weak environment in the residential housing market 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.

Our management assesses the adequacy of the ALL prior to the end of each calendar quarter. This assessment includes procedures to estimate
the allowance and test the adequacy and appropriateness of the resulting balance. The ALL consists of two components: (1) an allocated amount representative of specifically identified credit exposure and exposures that are readily predictable
by historical or comparative experience; and (2) an amount due to stress factors that are representative of inherent loss related to various economic factors and characteristics of our companys loan portfolio that is not as readily
identifiable. Even though the ALL is composed of two components, the entire ALL is available to absorb any credit losses.



17



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##### Table of Contents

We establish the allocated amount separately for three tiers:



| |  |  | impaired loans with specific allocations based on collateral exposure;
| | - |  | ----------------------------------------------------------------------



| |  |  | loans based on five different credit ratings (watch list, other assets specifically mentioned, impaired, doubtful and loss) with allocations based on historical
losses, adjusted for environmental or stress factors, per rating category; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the rest of the loan portfolio with allocations based on historical losses, adjusted for environmental or stress factors, in the total portfolio.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------

We base the allocation for unique loans primarily on risk rating grades assigned to each of these loans as a result of
our loan management and internal loan review processes. We then assign each risk-rating grade a loss ratio, which is determined based on the experience of management, discussions with banking regulators and our internal loan review process (which is
maintained at the holding company level).

The amount due to stress factors is particularly subjective and does not lend itself to exact
mathematical calculation. The amount due to stress represents estimated inherent credit losses, which may exist, but have not yet been identified, as of the balance sheet date. In estimating the third tier amount, we apply three stress factors. The
first stress factor consists of economic factors including such matters as changes in the local or national economy, the depth or experience in the lending staff, any concentrations of credit (such as commercial real estate) in any particular
industry group, and new banking laws or regulations. The second stress factor is based on the credit grade of the loans in our unsecured consumer loan portfolio. The third stress factor represents potential exposure as a result of the aggregate
speculative real estate loans in the company. After we assess applicable factors, we evaluate the remaining amount based on our managements experience.

We then test the resulting ALL balance by comparing the balance in the ALL with historical trends and peer information. Our management then evaluates the result of the procedures performed, including the result of our
testing, and makes a conclusion regarding the appropriateness of the balance of the ALL in its entirety.

In assessing the adequacy of the
ALL, we also rely on an ongoing independent credit administration review process. We undertake this process both to ascertain whether there are loans in the portfolio whose credit quality has weakened over time and to assist in our overall
evaluation of the risk characteristics of the entire loan portfolio. Our credit administration review process includes the judgment of management, the input of our internal loan review function, and reviews that may have been conducted by bank
regulatory agencies as part of their usual examination process.

Other Assets

Other assets increased due to the purchase of approximately $3.7 million in low income housing tax credits and the inclusion of the fair value
(approximately $2.1 million at September 30, 2007) of an interest rate swap agreement entered into during 2007.

Liabilities

The composition of liabilities is as follows:



|                  |  |                        |           |                  |   |           |  |   |          |   |  |       |  
|----------------- |  | ---------------------- | --------- | ---------------- | - | --------- |  | - | -------- | - |  | ----- | -
|                  |  | September 30,2007      |           | December 31,2006 |   | $ Change  |  |   | % Change |  
|                  |  | (Dollars in thousands) |          
|Deposits          |  | $                      | 2,191,100 |                  | $ | 1,970,927 |  | $ | 220,173  |   |  | 11.2  | %
|Borrowed Money    |  |                        | 203,383   |                  |   | 175,605   |  |   | 27,778   |   |  | 15.8  | %
|Other Liabilities |  |                        | 17,467    |                  |   | 41,131    |  |   | (23,664  | ) |  | -57.5 | %
|                  |  |                        |           |                  |   |           |  |   |          |   |  |       |  
|                  |  | $                      | 2,411,950 |                  | $ | 2,187,663 |  | $ | 224,287  |   |  | 10.3  | %
|                  |  |                        |           |                  |   |           |  |   |          |   |  |       |  

Deposits

The increase in total deposits is primarily attributable to an increase of $187.2 million in brokered certificates of deposit. Further discussion of our use of brokered and wholesale certificates of deposit is
included in the Liquiditysection of this discussion.



18



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##### Table of Contents

Borrowed Money

The increase in borrowed money is related to a $31.1 million increase in federal funds purchased and securities sold under agreement to repurchase and a $10.0 million draw on a revolving line of credit. This increase
was offset by a $13.3 million decrease in Federal Home Loan Bank Advances, which fluctuates as needed to meet our funding needs.

Other Liabilities

Other liabilities decreased primarily due to the payment of an accrued liability of $21.5 million related to purchased securities.

Equity

On August 2, 2007,
the Companys Board of Directors authorized a stock repurchase plan to acquire up to 1.2 million shares of the Companys common stock for one year at a price of $16.50 or less per share.

At September 30, 2007, total equity was $312.0 million or 11.5% of total assets compared to $306.4 million or 12.3% 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, the addition of the fair value of an interest rate swap agreement, net of income taxes, offset by the repurchase
of 334,700 shares of common stock under the stock repurchase plan discussed above.

Results of Operations

Net Income

Net income for the three- and
nine-month periods ended September 30, 2007 was $0.6 million or $0.03 diluted earnings per share and $13.5 million or $0.69 diluted earnings per share, respectively, compared to $6.9 million or $0.37 diluted earnings per share and $18.2 million
or $1.08 diluted earnings per share in the same periods of the preceding year. The decrease in net income for the nine-month period ended September 30, 2007 is primarily attributable to increases of $10.1 million in the provision for loan
losses and $8.1 million in noninterest expense offset by an increase in our net interest income of $11.6 million.

Net Interest Income

The net interest margin of the Company was 3.81% for the three-month period ended September 30, 2007 compared to 4.47% for the
same three-month period of the preceding year. The decrease in net interest margin is due largely to a 50 basis point increase in the cost of time deposits. In addition, the increase in the yield on interest-earning assets was reduced by
approximately 39 basis points as a result of the increase in nonperforming assets. Total interest income increased to $49.8 million for the three-month period ended September 30, 2007, from $40.8 million during the comparable prior year period.
The increase is the result of growth in the Companys loan portfolio and investment securities combined with an increase of 56 basis points in the yield on securities compared to the three-month period ended September 30, 2006. Total
interest expense increased to $26.9 million for the 2007 period from $19.1 million for the 2006 period. The increase is the result of an increase in interest bearing deposits combined with an increase of 50 basis points in those deposits.



19



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##### Table of Contents

The following table represents the effective yields and costs of funds for the three-month periods ended
September 30, 2007 and 2006, including tax-equivalent adjustments of $110,000 and $107,000 respectively:



|                                                                          |  |                        |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|------------------------------------------------------------------------- |  | ---------------------- | --------- | -------------- | ---- | ------------- |  | ---- | --------------- |  | --------------- | --------- | ------------ | - | ------ |  | ---- | -
|                                                                          |  | 2007                   |           |                | 2006 |              
|                                                                          |  | AverageBalances        |           | Income/Expense |      | Yields/ Rates |  |      | AverageBalances |  | Income/ Expense |           | Yields/Rates |  
|                                                                          |  | (Dollars in thousands) |          
|Assets                                                                    |  |                        |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Interest-Earning Assets                                                   |  |                        |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Loans Receivable                                                          |  | $                      | 2,123,612 |                | $    | 46,232        |  | 8.64 | %               |  | $               | 1,697,108 |              | $ | 37,901 |  | 8.86 | %
|Loans Held for Sale                                                       |  |                        | 6,367     |                |      | 119           |  | 7.42 |                 |  |                 | 7,015     |              |   | 127    |  | 7.18 |  
|Investment Securities - Taxable                                           |  |                        | 199,898   |                |      | 2,639         |  | 5.24 |                 |  |                 | 163,336   |              |   | 1,990  |  | 4.83 |  
|Investment Securities - Tax-Exempt, Tax Equivalent Basis                  |  |                        | 20,481    |                |      | 315           |  | 6.10 |                 |  |                 | 19,955    |              |   | 208    |  | 4.14 |  
|Interest-Bearing Deposits With Other Banks                                |  |                        | 8,059     |                |      | 109           |  | 5.37 |                 |  |                 | 3,481     |              |   | 50     |  | 5.70 |  
|Federal Funds Sold                                                        |  |                        | 23,719    |                |      | 315           |  | 5.25 |                 |  |                 | 34,594    |              |   | 476    |  | 5.46 |  
|Other Interest-Earning Assets                                             |  |                        | 1,238     |                |      | 24            |  | 7.69 |                 |  |                 | 1,238     |              |   | 24     |  | 7.69 |  
|                                                                          |  |                        |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Total Interest-Earning Assets                                             |  |                        | 2,383,374 |                |      | 49,753        |  | 8.28 |                 |  |                 | 1,926,727 |              |   | 40,776 |  | 8.40 |  
|Noninterest-Earning Assets                                                |  |                        | 264,926   |                |      |               |  |      |                 |  |                 | 230,570   |              |   |        |  |      |  
|                                                                          |  |                        |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Total Assets                                                              |  | $                      | 2,648,300 |                |      |               |  |      |                 |  | $               | 2,157,297 |              |   |        |  |      |  
|                                                                          |  |                        |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Liabilities and Shareholders Equity                                      |  |                        |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Interest-Bearing Liabilities                                              |  |                        |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Interest-Bearing Deposits                                                 |  |                        |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Interest-Bearing Demand and Savings                                       |  | $                      | 544,389   |                | $    | 5,115         |  | 3.73 |                 |  | $               | 486,099   |              | $ | 4,302  |  | 3.51 |  
|Time Deposits                                                             |  |                        | 1,472,744 |                |      | 19,725        |  | 5.31 |                 |  |                 | 1,080,456 |              |   | 13,047 |  | 4.79 |  
|                                                                          |  |                        |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Total Interest-Bearing Deposits                                           |  |                        | 2,017,133 |                |      | 24,840        |  | 4.89 |                 |  |                 | 1,566,555 |              |   | 17,349 |  | 4.39 |  
|                                                                          |  |                        |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Borrowings                                                                |  |                        |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|FHLB Advances                                                             |  |                        | 48,340    |                |      | 656           |  | 5.38 |                 |  |                 | 48,689    |              |   | 606    |  | 4.94 |  
|Subordinated Debentures                                                   |  |                        | 41,238    |                |      | 799           |  | 7.69 |                 |  |                 | 41,238    |              |   | 804    |  | 7.74 |  
|Advances under line of credit                                             |  |                        | 2,804     |                |      | 50            |  | 7.07 |                 |  |                 |          |              |   |       |  |     |  
|Federal Funds Purchased and Securities Sold Under Agreement to Repurchase |  |                        | 41,946    |                |      | 517           |  | 4.89 |                 |  |                 | 26,036    |              |   | 323    |  | 4.92 |  
|                                                                          |  |                        |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Total Borrowings                                                          |  |                        | 134,328   |                |      | 2,022         |  | 5.97 |                 |  |                 | 115,963   |              |   | 1,733  |  | 5.93 |  
|                                                                          |  |                        |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Total Interest-Bearing Liabilities                                        |  |                        | 2,151,461 |                |      | 26,862        |  | 4.95 |                 |  |                 | 1,682,518 |              |   | 19,082 |  | 4.50 |  
|Noninterest-Bearing Liabilities                                           |  |                        | 180,779   |                |      |               |  |      |                 |  |                 | 190,842   |              |   |        |  |      |  
|Shareholders Equity                                                      |  |                        | 316,060   |                |      |               |  |      |                 |  |                 | 283,937   |              |   |        |  |      |  
|                                                                          |  |                        |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Total Liabilities and Shareholders Equity                                |  | $                      | 2,648,300 |                |      |               |  |      |                 |  | $               | 2,157,297 |              |   |        |  |      |  
|                                                                          |  |                        |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Interest Rate Spread                                                      |  |                        |           |                |      |               |  | 3.33 | %               |  |                 |           |              |   |        |  | 3.90 | %
|                                                                          |  |                        |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Net Interest Income                                                       |  |                        |           |                | $    | 22,891        |  |      |                 |  |                 |           |              | $ | 21,694 |  |      |  
|                                                                          |  |                        |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  
|Net Interest Margin                                                       |  |                        |           |                |      |               |  | 3.81 | %               |  |                 |           |              |   |        |  | 4.47 | %
|                                                                          |  |                        |           |                |      |               |  |      |                 |  |                 |           |              |   |        |  |      |  

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 September 30, 2007 compared to the three months ended September 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.



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##### Table of Contents

|                                                                     |  |                           |       |   |      |   |        |            |  |   |       |  
|-------------------------------------------------------------------- |  | ------------------------- | ----- | - | ---- | - | ------ | ---------- |  | - | ----- | -
|                                                                     |  | Changes From 2006 to 2007 |      
|Rate/Volume Analysis                                                 |  | Volume                    |       |   | Rate |   |        | Net Change | 
|                                                                     |  | (Dollars in Thousands)    |      
|Interest Income                                                      |  |                           |       |   |      |   |        |            |  |   |       |  
|Loans, Net                                                           |  | $                         | 9,503 |   |      | $ | (1,179 | )          |  | $ | 8,324 |  
|Investment Securities - Taxable                                      |  |                           | 445   |   |      |   | 204    |            |  |   | 649   |  
|Investment Securities - Tax-Exempt                                   |  |                           | 5     |   |      |   | 102    |            |  |   | 107   |  
|Interest-Bearing Deposits With Other Banks                           |  |                           | 66    |   |      |   | (7     | )          |  |   | 59    |  
|Federal Funds Sold                                                   |  |                           | (150  | ) |      |   | (12    | )          |  |   | (162  | )
|Other Interest-Earning Assets                                        |  |                           |      |   |      |   |       |            |  |   |      |  
|                                                                     |  |                           |       |   |      |   |        |            |  |   |       |  
|Total Interest Income                                                |  |                           | 9,869 |   |      |   | (892   | )          |  |   | 8,977 |  
|                                                                     |  |                           |       |   |      |   |        |            |  |   |       |  
|Interest Expense                                                     |  |                           |       |   |      |   |        |            |  |   |       |  
|Interest-Bearing Demand and Savings Deposits                         |  |                           | 516   |   |      |   | 297    |            |  |   | 813   |  
|Time Deposits                                                        |  |                           | 4,737 |   |      |   | 1,941  |            |  |   | 6,678 |  
|Federal Funds Purchased and Securities Under Agreement to Repurchase |  |                           | 197   |   |      |   | (3     | )          |  |   | 194   |  
|Subordinated Debentures                                              |  |                           |      |   |      |   | (5     | )          |  |   | (5    | )
|Advances under line of credit                                        |  |                           | 50    |   |      |   |       |            |  |   | 50    |  
|FHLB Advances                                                        |  |                           | (4    | ) |      |   | 54     |            |  |   | 50    |  
|                                                                     |  |                           |       |   |      |   |        |            |  |   |       |  
|Total Interest Expense                                               |  |                           | 5,496 |   |      |   | 2,284  |            |  |   | 7,780 |  
|                                                                     |  |                           |       |   |      |   |        |            |  |   |       |  
|Net Interest Income                                                  |  | $                         | 4,373 |   |      | $ | (3,176 | )          |  | $ | 1,197 |  
|                                                                     |  |                           |       |   |      |   |        |            |  |   |       |  

The net interest margin of the Company was 4.04% for the nine-month period ended
September 30, 2007 compared to 4.51% for the same nine-month period of the preceding year. The decrease in net interest margin is due largely to a 78 basis point increase in the cost of interest-bearing liabilities offset by a 29 basis point
increase in the yield on interest-earning assets compared to the nine-month period ended September 30, 2006. The increase in the yield on interest-earning assets was reduced by approximately 25 basis points as a result of the increase in
nonperforming assets. Total interest income increased to $144.2 million for the nine-month period ended September 30, 2007, from $104.0 million during the comparable prior year period. The increase is the result of 35% growth in average loan
portfolio and 32% growth in average investment securities (taxable). Additionally, loan yields and investment yields (taxable) increased by 23 basis points and 41 basis points, respectively, in 2007 as compared to 2006.

Total interest expense increased to $74.9 million for the nine-month period ended September 30, 2007, compared to $46.3 million for the same period
in 2006. The increase results from the increase of 40% in interest-bearing deposits and an 84 basis point increase in the cost of those deposits.



21



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##### Table of Contents

The following table represents the effective yields and costs of funds for the nine-month periods ended
September 30, 2007 and 2006, including tax-equivalent adjustments of $334,000 and $308,000, respectively:



|                                                                          |  |                        |           |                |      |               |  |      |                 |  |                 |           |              |   |         |  |      |  
|------------------------------------------------------------------------- |  | ---------------------- | --------- | -------------- | ---- | ------------- |  | ---- | --------------- |  | --------------- | --------- | ------------ | - | ------- |  | ---- | -
|                                                                          |  | 2007                   |           |                | 2006 |              
|                                                                          |  | AverageBalances        |           | Income/Expense |      | Yields/ Rates |  |      | AverageBalances |  | Income/ Expense |           | Yields/Rates |  
|                                                                          |  | (Dollars in thousands) |          
|Assets                                                                    |  |                        |           |                |      |               |  |      |                 |  |                 |           |              |   |         |  |      |  
|Interest-Earning Assets                                                   |  |                        |           |                |      |               |  |      |                 |  |                 |           |              |   |         |  |      |  
|Loans Receivable                                                          |  | $                      | 2,042,883 |                | $    | 134,240       |  | 8.79 | %               |  | $               | 1,510,230 |              | $ | 96,714  |  | 8.56 | %
|Loans Held for Sale                                                       |  |                        | 6,557     |                |      | 348           |  | 7.10 |                 |  |                 | 6,748     |              |   | 352     |  | 6.97 |  
|Investment Securities - Taxable                                           |  |                        | 182,893   |                |      | 7,044         |  | 5.15 |                 |  |                 | 139,397   |              |   | 4,947   |  | 4.74 |  
|Investment Securities - Tax-Exempt, Tax Equivalent Basis                  |  |                        | 20,422    |                |      | 954           |  | 6.25 |                 |  |                 | 19,855    |              |   | 600     |  | 4.04 |  
|Interest-Bearing Deposits With Other Banks                                |  |                        | 5,095     |                |      | 206           |  | 5.41 |                 |  |                 | 3,052     |              |   | 124     |  | 5.43 |  
|Federal Funds Sold                                                        |  |                        | 33,459    |                |      | 1,322         |  | 5.28 |                 |  |                 | 31,034    |              |   | 1,166   |  | 5.02 |  
|Other Interest-Earning Assets                                             |  |                        | 1,238     |                |      | 71            |  | 7.67 |                 |  |                 | 1,238     |              |   | 71      |  | 7.67 |  
|                                                                          |  |                        |           |                |      |               |  |      |                 |  |                 |           |              |   |         |  |      |  
|Total Interest-Earning Assets                                             |  |                        | 2,292,547 |                |      | 144,185       |  | 8.41 |                 |  |                 | 1,711,554 |              |   | 103,974 |  | 8.12 |  
|Noninterest-Earning Assets                                                |  |                        | 247,800   |                |      |               |  |      |                 |  |                 | 202,617   |              |   |         |  |      |  
|                                                                          |  |                        |           |                |      |               |  |      |                 |  |                 |           |              |   |         |  |      |  
|Total Assets                                                              |  | $                      | 2,540,347 |                |      |               |  |      |                 |  | $               | 1,914,171 |              |   |         |  |      |  
|                                                                          |  |                        |           |                |      |               |  |      |                 |  |                 |           |              |   |         |  |      |  
|Liabilities and Shareholders Equity                                      |  |                        |           |                |      |               |  |      |                 |  |                 |           |              |   |         |  |      |  
|Interest-Bearing Liabilities                                              |  |                        |           |                |      |               |  |      |                 |  |                 |           |              |   |         |  |      |  
|Interest-Bearing Deposits                                                 |  |                        |           |                |      |               |  |      |                 |  |                 |           |              |   |         |  |      |  
|Interest-Bearing Demand and Savings                                       |  | $                      | 534,761   |                | $    | 14,551        |  | 3.64 |                 |  | $               | 435,750   |              | $ | 10,016  |  | 3.07 |  
|Time Deposits                                                             |  |                        | 1,373,523 |                |      | 54,434        |  | 5.30 |                 |  |                 | 928,040   |              |   | 30,641  |  | 4.41 |  
|                                                                          |  |                        |           |                |      |               |  |      |                 |  |                 |           |              |   |         |  |      |  
|Total Interest-Bearing Deposits                                           |  |                        | 1,908,284 |                |      | 68,985        |  | 4.83 |                 |  |                 | 1,363,790 |              |   | 40,657  |  | 3.99 |  
|                                                                          |  |                        |           |                |      |               |  |      |                 |  |                 |           |              |   |         |  |      |  
|Borrowings                                                                |  |                        |           |                |      |               |  |      |                 |  |                 |           |              |   |         |  |      |  
|FHLB Advances                                                             |  |                        | 49,852    |                |      | 1,997         |  | 5.36 |                 |  |                 | 68,310    |              |   | 2,413   |  | 4.72 |  
|Subordinated Debentures                                                   |  |                        | 41,238    |                |      | 2,380         |  | 7.72 |                 |  |                 | 41,238    |              |   | 2,348   |  | 7.61 |  
|Advances under line of credit                                             |  |                        | 945       |                |      | 50            |  | 7.07 |                 |  |                 |          |              |   |        |  |     |  
|Federal Funds Purchased and Securities Sold Under Agreement to Repurchase |  |                        | 39,957    |                |      | 1,498         |  | 5.01 |                 |  |                 | 24,630    |              |   | 876     |  | 4.76 |  
|                                                                          |  |                        |           |                |      |               |  |      |                 |  |                 |           |              |   |         |  |      |  
|Total Borrowings                                                          |  |                        | 131,992   |                |      | 5,925         |  | 6.00 |                 |  |                 | 134,178   |              |   | 5,637   |  | 5.62 |  
|                                                                          |  |                        |           |                |      |               |  |      |                 |  |                 |           |              |   |         |  |      |  
|Total Interest-Bearing Liabilities                                        |  |                        | 2,040,276 |                |      | 74,910        |  | 4.91 |                 |  |                 | 1,497,968 |              |   | 46,294  |  | 4.13 |  
|Noninterest-Bearing Liabilities                                           |  |                        | 187,168   |                |      |               |  |      |                 |  |                 | 181,844   |              |   |         |  |      |  
|Shareholders Equity                                                      |  |                        | 312,903   |                |      |               |  |      |                 |  |                 | 234,359   |              |   |         |  |      |  
|                                                                          |  |                        |           |                |      |               |  |      |                 |  |                 |           |              |   |         |  |      |  
|Total Liabilities and Shareholders Equity                                |  | $                      | 2,540,347 |                |      |               |  |      |                 |  | $               | 1,914,171 |              |   |         |  |      |  
|                                                                          |  |                        |           |                |      |               |  |      |                 |  |                 |           |              |   |         |  |      |  
|Interest Rate Spread                                                      |  |                        |           |                |      |               |  | 3.50 | %               |  |                 |           |              |   |         |  | 3.99 | %
|                                                                          |  |                        |           |                |      |               |  |      |                 |  |                 |           |              |   |         |  |      |  
|Net Interest Income                                                       |  |                        |           |                | $    | 69,275        |  |      |                 |  |                 |           |              | $ | 57,680  |  |      |  
|                                                                          |  |                        |           |                |      |               |  |      |                 |  |                 |           |              |   |         |  |      |  
|Net Interest Margin                                                       |  |                        |           |                |      |               |  | 4.04 | %               |  |                 |           |              |   |         |  | 4.51 | %
|                                                                          |  |                        |           |                |      |               |  |      |                 |  |                 |           |              |   |         |  |      |  



22



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##### Table of Contents

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 nine months ended September 30, 2007 compared to the nine months ended September 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                                                           |  | $                         | 34,070 |   |      | $ | 3,453  |           |  | $ | 37,523 |  
|Investment Securities - Taxable                                      |  |                           | 1,544  |   |      |   | 552    |           |  |   | 2,096  |  
|Investment Securities - Tax-Exempt                                   |  |                           | 17     |   |      |   | 337    |           |  |   | 354    |  
|Interest-Bearing Deposits With Other Banks                           |  |                           | 83     |   |      |   | (1     | )         |  |   | 82     |  
|Federal Funds Sold                                                   |  |                           | 91     |   |      |   | 65     |           |  |   | 156    |  
|Other Interest-Earning Assets                                        |  |                           |       |   |      |   |       |           |  |   |       |  
|                                                                     |  |                           |        |   |      |   |        |           |  |   |        |  
|Total Interest Income                                                |  |                           | 35,805 |   |      |   | 4,406  |           |  |   | 40,211 |  
|                                                                     |  |                           |        |   |      |   |        |           |  |   |        |  
|Interest Expense                                                     |  |                           |        |   |      |   |        |           |  |   |        |  
|Interest-Bearing Demand and Savings Deposits                         |  |                           | 2,276  |   |      |   | 2,259  |           |  |   | 4,535  |  
|Time Deposits                                                        |  |                           | 14,708 |   |      |   | 9,085  |           |  |   | 23,793 |  
|Federal Funds Purchased and Securities Under Agreement to Repurchase |  |                           | 545    |   |      |   | 77     |           |  |   | 622    |  
|Subordinated Debentures                                              |  |                           |       |   |      |   | 32     |           |  |   | 32     |  
|Advances under line of credit                                        |  |                           | 50     |   |      |   |       |           |  |   | 50     |  
|FHLB Advances                                                        |  |                           | (652   | ) |      |   | 236    |           |  |   | (416   | )
|                                                                     |  |                           |        |   |      |   |        |           |  |   |        |  
|Total Interest Expense                                               |  |                           | 16,927 |   |      |   | 11,689 |           |  |   | 28,616 |  
|                                                                     |  |                           |        |   |      |   |        |           |  |   |        |  
|Net Interest Income                                                  |  | $                         | 18,878 |   |      | $ | (7,283 | )         |  | $ | 11,595 |  
|                                                                     |  |                           |        |   |      |   |        |           |  |   |        |  

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 that 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.



23



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|                                           |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|------------------------------------------ |  | ------------------------------- | ------ | - | ------------------------------ | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                           |  | Three Months EndedSeptember 30, |        |   | Nine Months EndedSeptember 30, |  
|                                           |  | 2007                            |        |   | 2006                           |   |        | 2007 |  |   | 2006   |  
|                                           |  | (Dollars in Thousands)          |       
|Balance, beginning of period               |  | $                               | 24,108 |   |                                | $ | 18,190 |      |  | $ | 22,336 |   |  | $ | 16,148 |  
|                                           |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|Business Combination, Homestead, Inc.      |  |                                 |       |   |                                |   | 2,850  |      |  |   |       |   |  |   | 2,850  |  
|Business Combination, Neighbors Bancshares |  |                                 |       |   |                                |   |       |      |  |   |       |   |  |   | 1,232  |  
|                                           |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|Charge-Offs                                |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|Commercial, Financial and Agricultural     |  |                                 | (105   | ) |                                |   | (180   | )    |  |   | (494   | ) |  |   | (462   | )
|Real Estate  Mortgage                     |  |                                 | (6,094 | ) |                                |   | (514   | )    |  |   | (7,152 | ) |  |   | (636   | )
|Consumer                                   |  |                                 | (491   | ) |                                |   | (308   | )    |  |   | (1,019 | ) |  |   | (883   | )
|                                           |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|                                           |  |                                 | (6,690 | ) |                                |   | (1,002 | )    |  |   | (8,665 | ) |  |   | (1,981 | )
|Recoveries                                 |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|Commercial, Financial and Agricultural     |  |                                 | 48     |   |                                |   | 40     |      |  |   | 203    |   |  |   | 110    |  
|Real Estate  Mortgage                     |  |                                 | 5      |   |                                |   | 3      |      |  |   | 23     |   |  |   | 45     |  
|Consumer                                   |  |                                 | 261    |   |                                |   | 170    |      |  |   | 575    |   |  |   | 478    |  
|                                           |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|                                           |  |                                 | 314    |   |                                |   | 213    |      |  |   | 801    |   |  |   | 633    |  
|Net Charge-Offs                            |  |                                 | (6,376 | ) |                                |   | (789   | )    |  |   | (7,864 | ) |  |   | (1,348 | )
|                                           |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|Provision for Loan Losses                  |  |                                 | 9,400  |   |                                |   | 1,226  |      |  |   | 12,660 |   |  |   | 2,595  |  
|                                           |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|Balance, end of period                     |  | $                               | 27,132 |   |                                | $ | 21,477 |      |  | $ | 27,132 |   |  | $ | 21,477 |  
|                                           |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  

We incurred net charge-offs of $6.4 million and $7.9 million and $0.8 million and $1.3 million
during the three- and nine-month periods ended September 30, 2007 and 2006, respectively. The allowance for loan losses on September 30, 2007 was at 1.25% of loans receivable compared to 1.18% at December 31, 2006. The increase in
charge-offs in 2007 resulted from the increased levels of nonperforming assets.

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

The composition of noninterest income for the third quarters of 2007 and 2006 is as follows:



|                            |  |                                 |       |   |      |   |       |          |  |   |          |   |  |       |  
|--------------------------- |  | ------------------------------- | ----- | - | ---- | - | ----- | -------- |  | - | -------- | - |  | ----- | -
|                            |  | Three Months EndedSeptember 30, |       |   |      |   |       |          | 
|                            |  | 2007                            |       |   | 2006 |   |       | $ Change |  |   | % Change |  
|                            |  | (Dollars In Thousands)          |      
|Service Charges on Deposits |  | $                               | 2,356 |   |      | $ | 2,387 |          |  | $ | (31      | ) |  | -1.3  | %
|Mortgage Banking Income     |  |                                 | 1,170 |   |      |   | 1,231 |          |  |   | (61      | ) |  | -5.0  | %
|Securities Losses           |  |                                 | (5    | ) |      |   | (270  | )        |  |   | 265      |   |  | 98.2  | %
|Other                       |  |                                 | 739   |   |      |   | 1,638 |          |  |   | (899     | ) |  | -54.9 | %
|                            |  |                                 |       |   |      |   |       |          |  |   |          |   |  |       |  
|                            |  | $                               | 4,260 |   |      | $ | 4,986 |          |  | $ | (726     | ) |  | -14.6 | %
|                            |  |                                 |       |   |      |   |       |          |  |   |          |   |  |       |  



24



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##### Table of Contents

Noninterest income for the third quarter of 2007 decreased by $726,000 or 14.6% primarily due to:



| |  |  | a decrease of 47% in the level of investment securities sold during the quarter, resulting in a smaller loss on sale;
| | - |  | ---------------------------------------------------------------------------------------------------------------------



| |  |  | losses on sales of other real estate owned of $375,000 during 2007;
| | - |  | -------------------------------------------------------------------



| |  |  | a decline of $365,000 in revenue from interim lending and development loans originated by Fairfield Financial. Due to the significant slowdown in residential
real estate in several markets combined with the increase in nonperforming assets, loan production in development lending at Fairfield Financial has not maintained the pace seen in prior years; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | in 2006, the Company realized a gain of $278,000 on the early payoff of several FHLB advances. There were no such transactions during 2007.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------

The composition of noninterest income for the nine-month periods of 2007 and 2006 is as follows:



|                            |  |                                |        |   |      |   |        |          |  |   |          |   |  |       |  
|--------------------------- |  | ------------------------------ | ------ | - | ---- | - | ------ | -------- |  | - | -------- | - |  | ----- | -
|                            |  | Nine Months EndedSeptember 30, |        |   |      |   |        |          | 
|                            |  | 2007                           |        |   | 2006 |   |        | $ Change |  |   | % Change |  
|                            |  | (Dollars In Thousands)         |       
|Service Charges on Deposits |  | $                              | 6,830  |   |      | $ | 6,826  |          |  | $ | 4        |   |  | 0.1   | %
|Mortgage Banking Income     |  |                                | 3,480  |   |      |   | 3,915  |          |  |   | (435     | ) |  | -11.1 | %
|Securities Losses           |  |                                | (3     | ) |      |   | (270   | )        |  |   | 267      |   |  | 98.9  | %
|Other                       |  |                                | 3,678  |   |      |   | 4,349  |          |  |   | (671     | ) |  | -15.4 | %
|                            |  |                                |        |   |      |   |        |          |  |   |          |   |  |       |  
|                            |  | $                              | 13,985 |   |      | $ | 14,820 |          |  | $ | (835     | ) |  | -5.6  | %
|                            |  |                                |        |   |      |   |        |          |  |   |          |   |  |       |  

Noninterest income for the nine months ended September 30, 2007 decreased by $835,000 or 5.6%
compared to the 2006 period. The primary reasons for this decrease include:



| |  |  | decrease of 11.1% in mortgage banking income resulting from a decrease of 13% in loan volume;
| | - |  | ---------------------------------------------------------------------------------------------



| |  |  | decrease of $618,000 in revenue for interim lending and development loans originated at Fairfield Financial as discussed above;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------



| |  |  | increase of $442,000 in losses on sales of other real estate owned;
| | - |  | -------------------------------------------------------------------



| |  |  | a decrease in the level of investment securities sold during the year resulting in a smaller loss on sale as discussed above; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------



| |  |  | as discussed above, in 2006, the Company realized a gain of $278,000 on the early payoff of several FHLB advances, and there were no such transactions during
2007.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



25



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##### Table of Contents

Noninterest Expense

The composition of noninterest expense for the third quarters of 2007 and 2006 is as follows:



|                                     |  |                                 |        |      |   |          |  |          |       |  |      |  
|------------------------------------ |  | ------------------------------- | ------ | ---- | - | -------- |  | -------- | ----- |  | ---- | -
|                                     |  | Three Months EndedSeptember 30, |        |      |   |          | 
|                                     |  | 2007                            |        | 2006 |   | $ Change |  | % Change |      
|                                     |  | (Dollars In Thousands)          |       
|Salaries and Employee Benefits       |  | $                               | 8,852  |      | $ | 8,497    |  | $        | 355   |  | 4.2  | %
|Occupancy and Equipment              |  |                                 | 1,559  |      |   | 1,396    |  |          | 163   |  | 11.7 | %
|Professional Fees                    |  |                                 | 971    |      |   | 639      |  |          | 332   |  | 52.0 | %
|Marketing                            |  |                                 | 664    |      |   | 548      |  |          | 116   |  | 21.2 | %
|Amortization-Core Deposit Intangible |  |                                 | 246    |      |   | 237      |  |          | 9     |  | 3.8  | %
|Other                                |  |                                 | 4,427  |      |   | 3,115    |  |          | 1,312 |  | 42.1 | %
|                                     |  |                                 |        |      |   |          |  |          |       |  |      |  
|                                     |  | $                               | 16,719 |      | $ | 14,432   |  | $        | 2,287 |  | 15.8 | %
|                                     |  |                                 |        |      |   |          |  |          |       |  |      |  

The increase of 15.8% in noninterest expense during the three months ended September 30, 2007
is due primarily to the following:



| |  |  | increase in salaries, benefits and related payroll taxes of $1.3 million due to the addition of a correspondent banking division, the acquisition of
Homestead Bank, normal salary increases and overall growth in the Company, offset by a reduction in the accrual for bonus plan payments of $779,000 as a result of the Companys decreased financial performance in 2007;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an increase in professional fees (legal and audit) of $332,000 due to the services performed on the terminated merger agreement with First Commerce Community
Bancshares and the audit services performed on Security Bank of Gwinnett County which we acquired during the third quarter of 2006;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an increase of $711,845 or 81% in foreclosed property expense as a result of the increase in nonperforming assets during 2007 (see Risk Elements
section herein);
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | increase of $105,000 in directors fees due to annual fee increases and the addition of the Security Bank of Gwinnett County board; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------



| |  |  | overall growth of the Company, which is spread over various expense categories.
| | - |  | -------------------------------------------------------------------------------

The composition of noninterest expense for the nine-month periods of 2007 and 2006 is as follows:



|                                     |  |                                |        |      |   |          |  |          |       |  |      |  
|------------------------------------ |  | ------------------------------ | ------ | ---- | - | -------- |  | -------- | ----- |  | ---- | -
|                                     |  | Nine Months EndedSeptember 30, |        |      |   |          | 
|                                     |  | 2007                           |        | 2006 |   | $ Change |  | % Change |      
|                                     |  | (Dollars In Thousands)         |       
|Salaries and Employee Benefits       |  | $                              | 27,497 |      | $ | 24,063   |  | $        | 3,434 |  | 14.3 | %
|Occupancy and Equipment              |  |                                | 4,594  |      |   | 4,151    |  |          | 443   |  | 10.7 | %
|Professional Fees                    |  |                                | 2,277  |      |   | 1,638    |  |          | 639   |  | 39.0 | %
|Marketing                            |  |                                | 2,024  |      |   | 1,722    |  |          | 302   |  | 17.5 | %
|Amortization-Core Deposit Intangible |  |                                | 739    |      |   | 657      |  |          | 82    |  | 12.5 | %
|Other                                |  |                                | 11,903 |      |   | 8,696    |  |          | 3,207 |  | 36.9 | %
|                                     |  |                                |        |      |   |          |  |          |       |  |      |  
|                                     |  | $                              | 49,034 |      | $ | 40,927   |  | $        | 8,107 |  | 19.8 | %
|                                     |  |                                |        |      |   |          |  |          |       |  |      |  



26



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##### Table of Contents

The increase of 19.8% in noninterest expense during the nine months ended September 30, 2007 is due primarily to the
following:



| |  |  | increase in salaries, benefits and related payroll taxes of $4.1 million due to the reasons discussed above, offset by a reduction in the accrual for bonus plan
payments of $871,000;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | for the reasons discussed above, an increase in professional fees (legal and audit) of $639,000;
| | - |  | ------------------------------------------------------------------------------------------------



| |  |  | increase of $1.4 million in foreclosed property expense as a result of the increase in nonperforming assets during 2007 (see Risk Elements
section herein);
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | increase of $441,000 in directors fees due to reasons discussed above; and
| | - |  | --------------------------------------------------------------------------



| |  |  | overall growth of the Company, which is spread over various expense categories.
| | - |  | -------------------------------------------------------------------------------

Income Taxes

Income tax expense totaled $0.3 million and $4.0 million for the three-month
periods ended September 30, 2007 and 2006, respectively. The effective tax rates for the third quarters of 2007 and 2006 were approximately 37.6% and 36.4%, respectively.

Income tax expense totaled $7.8 million for the nine-month period ended September 30, 2007, compared to $10.5 million for the same period ended
September 30, 2006. These amounts resulted in effective tax rates of approximately 36.6% 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 and nine
months ended September 30, 2007 includes approximately $55,000 and $125,000, respectively, related to the adoption of FIN 48.

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 10.38% at September 30, 2007.
Our Tier 1 risk-based capital ratio was 9.24% at September 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 8.68% at September 30, 2007.

The Federal Deposit
Insurance Corporation Improvement Act (FDICIA) established minimum capital requirements for all depository institutions and imposes significant restrictions on the operations of a bank that is not at least adequately capitalized (as
defined). 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 September 30, 2007, each of the Banks met the capital requirements to be well capitalized.

Liquidity

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.



27



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##### Table of Contents

Our Asset/Liability Management Committee (ALCO) meets 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 September 30, 2007 and December 31, 2006, we held $218.9 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 $115.9 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 September 30, 2007 and December 31, 2006, the Banks had $975.9 million and $748.2
million, respectively, in certificates of deposit of $100,000 or more. These larger deposits represented 48% 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 September 30, 2007 and December 31, 2006, the Banks reported $597.3 million, or 27% 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.

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 September 30, 2007 and December 31, 2006 approximated $453.3 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 $9.6 million as
of September 30, 2007 and $8.7 million as of December 31, 2006 and commitments under performance standby letters of credit of $9.7 million and $12.1 million for the corresponding periods.



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In addition, we may 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 September 30, 2007, we were party to one 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.

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.



|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 allowance for loan losses. See Risk Elements and Allowance 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 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 September 30, 2007 and using actual pricing experience immediately preceding the projection, our simulation model projected a net interest margin of 3.74% for the
twelve-month period ending September 30, 2008. This compares to a net interest margin of 3.81% for the three months ended September 30, 2007. Assuming a 100 basis-point rise in rates over market levels at September 30, 2007, the net
interest margin is projected to be 4.01% for the 12-month horizon. The net interest margin is projected to be 4.10% and 4.19% for a 200 and 300 basis-point rise in rates, respectively, over the same measurement period. The net interest margin is
projected to be 3.84%, 3.75% and 3.67% for a 100, 200 and 300 basis-point fall in rates, respectively. The consensus Blue Chip Economic Forecast at September 30, 2007 predicts the yield curve will steepen modestly over the next several
quarters. Accordingly, we are closely monitoring the estimated effects of these forecasted rates.



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|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.



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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 the risk factor listed
below and other information set forth in this Quarterly Report on Form 10-Q, the risk factors discussed in Item 1A to Part I 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.

Given recent developments in the mortgage and residential housing market, we are adding the following risk factors:

Current and anticipated
deterioration in the housing market and the homebuilding industry may lead to increased loss severities and further worsening of delinquencies and nonperforming assets in our loan portfolios. Consequently, our results of operations may be adversely
impacted.

Recently, the housing and the residential mortgage markets have experienced a variety of difficulties and changed economic
conditions. If market conditions continue to deteriorate, they may lead to additional valuation adjustments on our loan portfolios and real estate owned as we continue to reassess the market value of our loan portfolio, the loss severities of loans
in default, and the net realizable value of real estate owned. The homebuilding industry has experienced a significant and sustained decline in demand for new homes and an oversupply of new and existing homes available for sale in various markets,
including the markets in which we lend. Our customers that are builders and developers face a greater difficulty in selling their homes in markets where these trends are more pronounced. Consequently, we may face increased delinquencies and
nonperforming assets as these builders and developers are forced to default on our loans, and our results of operations may be adversely impacted as a result.

Our net interest income could be negatively affected by the Federal Reserves recent interest rate adjustments, as well as by competition in our primary market area.

As a financial institution, our earnings are significantly dependent upon our net interest income, which is the difference between the interest income
that we earn on interest-earning assets, such as investment securities and loans, and the interest expense that we pay on interest-bearing liabilities, such as deposits and borrowings. In response to the dramatic deterioration of the subprime,
mortgage, credit and liquidity markets, the Federal Reserve recently has taken action on two occasions to reduce interest rates by a total of 75 basis points, which likely will reduce our net interest income during the fourth quarter of 2007 and the
foreseeable future. This reduction in net interest income likely will be exacerbated by the high level of competition that we face in our markets, which requires us to offer more attractive interest rates to borrowers, both on loans and deposits,
and to rely upon out-of-market funding sources. Any reduction in our net interest income will negatively affect our business, financial condition, liquidity, operating results, cash flows and/or the price of our securities.



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



| | (a) | Sale of Unregistered Equity Securities
| | --- | --------------------------------------

None



| | (b) | Issuer Repurchases of Equity Securities
| | --- | ---------------------------------------

The
following table summarizes the Companys repurchases of its common stock during the quarter ended September 30, 2007:



|                                       |  |                                |  |                            |       |                                                                              |         |                                                                              |        
|-------------------------------------- |  | ------------------------------ |  | -------------------------- | ----- | ---------------------------------------------------------------------------- | ------- | ---------------------------------------------------------------------------- | -------
|Period                                 |  | Total Numberof SharesPurchased |  | Average PricePaidPer Share |       | Total Number ofShares Purchasedas Part ofPublicly-AnnouncedPlans or Programs |         | Maximum Number of Shares That May Yet
bePurchased underthe Plans or Programs
|July 1, 2007  July 31, 2007           |  |                               |  |                            |      |                                                                              |        |                                                                              |       
|August 1, 2007  August 31, 2007       |  | 253,400                        |  | $                          | 14.88 |                                                                              | 253,400 |                                                                              | 946,600
|September 1, 2007  September 30, 2007 |  | 81,300                         |  |                            | 13.93 |                                                                              | 81,300  |                                                                              | 865,300
|                                       |  |                                |  |                            |       |                                                                              |         |                                                                              |        
|Total                                  |  | 334,700                        |  | $                          | 14.65 |                                                                              | 334,700 |                                                                              | 865,300
|                                       |  |                                |  |                            |       |                                                                              |         |                                                                              |        

On August 2, 2007, the Companys Board of Directors Authorized a stock repurchase plan
to acquire up to 1.2 million shares of the Companys common stock for one year at a price of $16.50 or less per share. As of September 30, 2007, the Company had repurchased 334,700 shares under this authorization.



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

None.



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

None.



|ITEM 5. | Other Information
|------- | -----------------

On November 8, 2007,
Security Bank Corporation (the Company) notified The Nasdaq Stock Market, Inc. (Nasdaq) that the Company failed to comply with the audit committee composition requirements under Rule 4350(d)(2) of Nasdaqs Marketplace
Rules because the Company inadvertently appointed an audit committee member who did not meet the criteria for independence as defined under Nasdaq Rule 4200(a)(15). The director was not employed by the Company at the time of his appointment to the
audit committee, but had been employed by the Company within three years of his appointment and therefore did not meet the independence criteria. As a result, the Company is subject to the procedures specified in Nasdaq Rule 4350(m) whereby the
Company must provide prompt notification of any material noncompliance with the requirements of Nasdaq Rule 4350. Upon discovering this inadvertent error, the director promptly resigned his position on the audit committee. Upon his resignation, the
Companys audit committee was fully compliant with the audit committee composition requirements of Nasdaq Rule 4350(d)(2).



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|ITEM 6. | Exhibits
|------- | --------

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



|      |  |                                                                                                                                                                                                                                                                                                      
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1   |  | Amended and Restated Articles of Incorporation (incorporated by reference as Exhibit 3.1 to the registrants Form 10-Q (Commission File No. 000-23261), filed on August 8,
2007).                                                                                                                    
|      | 
|3.2*  |  | Amended and Restated Bylaws                                                                                                                                                                                                                                                                          
|      | 
|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  |  | 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).                                                                                                                               
|      | 
|10.2  |  | 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).                                                                                                                             
|      | 
|10.3  |  | 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).                                                       
|      | 
|10.4  |  | 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).                                                 
|      | 
|10.5  |  | 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).                                                  
|      | 
|10.6  |  | 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).                                                                                                                   
|      | 
|10.7  |  | 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).
|      | 
|10.8  |  | 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).                                                                                                   
|      | 
|10.9  |  | 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).                                                                                                    
|      | 
|10.10 |  | 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).                                                                                                        
|      | 
|10.11 |  | 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).                                                                                                     
|      | 
|10.12 |  | First Modification to Note and Stock Pledge Agreement with The Bankers Bank dated July 20, 2007 (incorporated by reference as Exhibit 10.13 to the registrants Form 10-Q (Commission
File No. 000-23261), filed on August 8, 2007).                                                                 
|      | 
|10.13 |  | Renewal of the Line of Credit Agreement with Thomasville National Bank dated March 22, 2007 (incorporated by reference as Exhibit 10.14 to the registrants Form 10-Q (Commission File
No. 000-23261), filed on August 8, 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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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: November 8, 2007                              
|                                                    
|/s/ James R. McLemore                               
|James R. McLemore                                   
|Executive Vice President and Chief Financial Officer
|(Principal Financial and Accounting Officer)        
|Date: November 8, 2007                              



34