##### Table of Contents



United States
Securities and Exchange Commission
 Washington, D.C. 20549
 Form 10-KSB
 Annual Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
 For the fiscal year ended September 30, 2007
 Commission File Number: 000-25999
 WAKE FOREST BANCSHARES, INC.
 (Name of small business issuer in its charter)
 United States of America
    
    56-2131079(State or other jurisdiction of
    
    (IRS Employer Identification No.)incorporation)
 (Address of principal executive offices)
 (Issuers telephone number)
  (Title of Class)
 þ o
 o
 o þ
   Documents Incorporated by Reference.




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##### 



TABLE OF CONTENTS
 Part IITEM 1.
    
    Description of Business
    
    
    
    
    
    
    4ITEM 2.
    
    Description of Property
    
    
    
    
    
    
    27Item 3.
    
    Legal Proceedings
    
    
    
    
    
    
    27Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    
    
    
    
    27PART IIItem 5.
    
    Market for Common Equity and Related Stockholder Matters
    
    
    
    
    
    
    27Item 6.
    
    Management's Discussion and Analysis or Plan of Operation
    
    
    
    
    
    
    28Item 7.
    
    Financial Statements
    
    
    
    
    
    
    28Item 8.
    
    Changes In and Disagreements With Accountants on Accounting and Financial Disclosure
    
    
    
    
    
    
    28ITEM 8A.
    
    Controls and Procedures
    
    
    
    
    
    
    29ITEM 8B
    
    Other Information
    
    
    
    
    
    
    29PART IIIItem 9.
    
    Directors, Executive Officers, Promoters, Control Persons and Corporate Governance; Compliance  With Section 16(a) of the Exchange Act
    
    
    
    
    
    
    29Item 10.
    
    Executive Compensation
    
    
    
    
    
    
    29Item 11.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    
    
    
    
    29Item 12.
    
    Certain Relationships and Related Transactions, and Directors Independence
    
    
    
    
    
    
    29Item 13.
    
    Exhibits
    
    
    
    
    
    
    29Item 14.
    
    Principal Accountant Fees and Services
    
    
    
    
    
    
    31SIGNATURESExhibit 13.1Exhibit 14.1Exhibit 23.1Exhibit 31.1Exhibit 32.1




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##### Table of Contents



PART I
 FORWARD-LOOKING STATEMENTS
  
    
    the strength of the United States economy in general and the strength of the
local economies in which we conduct operations;
    
    the effects of, and changes in, trade, monetary and fiscal policies and laws,
including interest rate policies of the Federal Reserve Board;
    
    inflation, interest rate, market and monetary fluctuations;
    
    the timely development and acceptance of our new products and services and the
perceived overall value of these products and services by users, including the features,
pricing and quality compared to competitors products and services;
    
    the willingness of users to substitute our products and services for products and
services of our competitors;
    
    our success in gaining regulatory approval of our products and services, when
required;
    
    the impact of changes in financial services laws and regulations (including laws
concerning taxes, banking, securities and insurance);
    
    the impact of technological changes;
    
    changes in consumer spending and saving habits; and
    
    our success at managing the risks involved in the foregoing.
  3




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ITEM 1. DESCRIPTION OF BUSINESS
 General
       4




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Market Area and Competition
      Lending Activities
 Loan Portfolio Composition.
   5




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2007
    
    
    2006% of
    
    
    
    
    
    
    % ofAmount
    
    
    Total
    
    
    Amount
    
    
    Total(Dollars in Thousands)Type of loans:One- to four-family residential
    
    $
    25,467
    
    
    
    33.43
    %
    
    $
    24,256
    
    
    
    31.65
    %Multi-family residential
    
    
    354
    
    
    
    0.46
    
    
    
    427
    
    
    
    0.56Commercial real estate
    
    
    11,532
    
    
    
    15.14
    
    
    
    12,426
    
    
    
    16.21Land
    
    
    14,244
    
    
    
    18.70
    
    
    
    14,605
    
    
    
    19.06Residential construction
    
    
    33,388
    
    
    
    43.83
    
    
    
    36,900
    
    
    
    48.15Equity line mortgages
    
    
    1,886
    
    
    
    2.48
    
    
    
    2,328
    
    
    
    3.04Savings Account
    
    
    143
    
    
    
    0.19
    
    
    
    180
    
    
    
    0.2387,014
    
    
    
    114.23
    %
    
    
    91,122
    
    
    
    118.90
    %Less:Deferred loan fees
    
    
    106
    
    
    
    0.13
    %
    
    
    104
    
    
    
    0.13
    %Undisbursed portion of
loans in process
    
    
    9,549
    
    
    
    12.54
    
    
    
    13,341
    
    
    
    17.41Allowance for loan losses
    
    
    1,187
    
    
    
    1.56
    
    
    
    1,042
    
    
    
    1.3610,842
    
    
    
    14.23
    
    
    
    14,487
    
    
    
    18.90Total loans receivable, net
    
    $
    76,172
    
    
    
    100.00
    %
    
    $
    76,635
    
    
    
    100.00
    %
 Loan Maturity.
 At September 30, 2007SavingsResidential
    
    
    Residential
    
    
    Commercial
    
    
    
    
    
    
    Residential
    
    
    Equity Line
    
    
    Account1-4 Family
    
    
    Multi-family
    
    
    Real Estate
    
    
    Land
    
    
    Construction
    
    
    Mortgages
    
    
    Loans
    
    
    Total(In Thousands)Contractual maturity:One year or less
    
    $
    388
    
    
    $
    
    
    
    $
    1,335
    
    
    $
    5,249
    
    
    $
    33,388
    
    
    $
    
    
    
    $
    92
    
    
    $
    40,452After one year:1 to 3 years
    
    
    637
    
    
    
    
    
    
    
    799
    
    
    
    5,187
    
    
    
    
    
    
    
    
    
    
    
    51
    
    
    
    6,6743 to 5 years
    
    
    121
    
    
    
    
    
    
    
    65
    
    
    
    432
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6185 to 10 years
    
    
    751
    
    
    
    
    
    
    
    433
    
    
    
    757
    
    
    
    
    
    
    
    556
    
    
    
    
    
    
    
    2,49710 to 20 years
    
    
    6,959
    
    
    
    
    
    
    
    3,029
    
    
    
    2,619
    
    
    
    
    
    
    
    1,330
    
    
    
    
    
    
    
    13,937Over 20 years
    
    
    16,611
    
    
    
    354
    
    
    
    5,871
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,836Total after one year
    
    
    25,079
    
    
    
    354
    
    
    
    10,197
    
    
    
    8,995
    
    
    
    
    
    
    
    1,886
    
    
    
    51
    
    
    
    46,562Total amount due
    
    
    25,467
    
    
    
    354
    
    
    
    11,532
    
    
    
    14,244
    
    
    
    33,388
    
    
    
    1,886
    
    
    
    143
    
    
    
    87,014Undisbursed loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,549
    )
    
    
    
    
    
    
    
    
    
    
    (9,549
    )Loans outstanding
    
    $
    25,467
    
    
    $
    354
    
    
    $
    11,532
    
    
    $
    14,244
    
    
    $
    23,839
    
    
    $
    1,886
    
    
    $
    143
    
    
    $
    77,465
  6




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Due After September 30, 2008Fixed
    
    
    AdjustableRates
    
    
    Rates
    
    
    Total(Dollars in Thousands)One-to-four family residential
    
    $
    8,946
    
    
    $
    16,132
    
    
    $
    25,078Multi-family residential
    
    
    354
    
    
    
    
    
    
    
    354Commercial real estate
    
    
    201
    
    
    
    9,997
    
    
    
    10,198Land
    
    
    30
    
    
    
    8,965
    
    
    
    8,995Residential construction
    
    
    
    
    
    
    
    
    
    
    Equity line mortgages
    
    
    
    
    
    
    1,886
    
    
    
    1,886Savings account loans
    
    
    51
    
    
    
    
    
    
    
    51$
    9,582
    
    
    $
    36,980
    
    
    $
    46,562
 Origination, Purchase, Sale and Servicing of Loans.
 One- to Four-Family Mortgage Lending.
   7




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Construction Lending.
     8




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Commercial Real Estate Mortgage Lending
  Equity Lines and Commercial Lines of Credit
   9




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Other Mortgage Lending.
    Savings Account Loans
 Loan Approval Procedures and Authority
   10




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Asset Quality
 Non-Performing Loans
  Non-Accrual and Other Past Due Loans.
 At or For the YearEnded September 30,(Dollars in Thousands)
    
    2007
    
    
    2006Nonaccrual loans
    
    $
    596
    
    
    $
    666Accruing loans past due 90 days or more
    
    
    
    
    
    
    Total non-performing loans
    
    $
    596
    
    
    $
    666Allowance for loan losses
    
    $
    1,187
    
    
    $
    1,042Real estate owned, net
    
    $
    1,004
    
    
    $
    1,004Ratios:Non-accrual loans to total loans
    
    
    0.77
    %
    
    
    0.86
    %Non-performing loans to total loans
    
    
    0.77
    %
    
    
    0.86
    %Non-performing loans and real estate owned to total assets
    
    
    1.49
    %
    
    
    1.60
    %Allowance for loan losses to:Non-accrual loans
    
    
    199.37
    %
    
    
    156.44
    %Non-performing loans
    
    
    199.37
    %
    
    
    156.44
    %Total loans
    
    
    1.54
    %
    
    
    1.34
    %Contractual interest income that would have
been recognized on nonaccrual loans
    
    $
    26
    
    
    $
    11Actual interest income recognized
    
    
    
    
    
    
    Interest income not recognized
    
    $
    26
    
    
    $
    11
  11




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Classified Assets
       12




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Allowance for Loan Losses
  Real Estate Owned.
   13




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For the Year Ended September 30,2006
    
    
    2005Allowance for loan losses:
    
    (Dollars in Thousands)Balance at beginning of year
    
    $
    1,042
    
    
    $
    850Provision for loan losses
    
    
    165
    
    
    
    192Charge-offs
    
    
    (20
    )
    
    
    Recoveries
    
    
    
    
    
    
    Balance at end of year
    
    $
    1,187
    
    
    $
    1,042Ratio of net charge-offs to average loans outstanding
    
    
    0.03
    %
    
    
    0.00
    %Accruing loans past due 90 days or more
    
    $
    
    
    
    $
    Allowance for losses on real estate owned:Balance at beginning of year
    
    $
    
    
    
    $
    Provision for loan losses
    
    
    
    
    
    
    Charge-offs
    
    
    
    
    
    
    Recoveries
    
    
    
    
    
    
    Balance at end of year
    
    $
    
    
    
    $
    
  2007
    
    
    2006Percent of
    
    
    
    
    
    
    
    
    
    
    Percent ofPercent of
    
    
    Loans in
    
    
    
    
    
    
    Percent of
    
    
    Loans inAllowance
    
    
    Each
    
    
    
    
    
    
    Allowance
    
    
    EachAllowance
    
    
    to Total
    
    
    Category to
    
    
    Allowance
    
    
    to Total
    
    
    Category toAmount
    
    
    Allowance
    
    
    Total Loans
    
    
    Amount
    
    
    Allowance
    
    
    Total Loans(Dollars in Thousands)Mortgage loans:One-to-four family residential
    
    $
    170
    
    
    
    14.32
    %
    
    
    32.78
    %
    
    $
    150
    
    
    
    14.40
    %
    
    
    31.09
    %Multi-family residential
    
    
    5
    
    
    
    0.42
    
    
    
    0.46
    
    
    
    7
    
    
    
    0.67
    
    
    
    0.55Commercial real estate
    
    
    175
    
    
    
    14.74
    
    
    
    14.91
    
    
    
    155
    
    
    
    14.88
    
    
    
    16.00Land
    
    
    180
    
    
    
    15.16
    
    
    
    18.41
    
    
    
    155
    
    
    
    14.88
    
    
    
    18.80Residential construction
    
    
    632
    
    
    
    53.24
    
    
    
    30.82
    
    
    
    550
    
    
    
    52.78
    
    
    
    30.33Equity line mortgages
    
    
    25
    
    
    
    2.11
    
    
    
    2.44
    
    
    
    25
    
    
    
    2.40
    
    
    
    3.00Total mortgage loans
    
    
    1,187
    
    
    
    100.00
    
    
    
    99.82
    
    
    
    1,042
    
    
    
    100.00
    
    
    
    99.77Savings account loans
    
    
    
    
    
    
    
    
    
    
    0.18
    
    
    
    
    
    
    
    
    
    
    
    0.23Total allowance for loan losses
    
    $
    1,187
    
    
    
    100.00
    %
    
    
    100.00
    %
    
    $
    1,042
    
    
    
    100.00
    %
    
    
    100.00
    %
 Investment Activities
   14




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For the Year EndedSeptember 302007
    
    
    2006(In Thousands)Amortized cost at beginning of period
    
    $
    23,273
    
    
    $
    21,821Purchases/(Maturities or Sales), net
    
    
    3,507
    
    
    
    1,452Premium and discount amortization, net
    
    
    
    
    
    
    Amortized cost at end of period
    
    
    26,780
    
    
    
    23,273Net unrealized gain (1)
    
    
    492
    
    
    
    533Total securities, net
    
    $
    27,272
    
    
    $
    23,806
 (1)
    
    The net unrealized gain at September 30, 2007 and 2006 relates to available for sale
securities in accordance with Statement of Financial Accounting Standards (SFAS) No. 115.
The net unrealized gain is presented in order to reconcile the Amortized Cost of the
Associations securities portfolio to the Carrying Cost, as reflected in the Statements of
Financial Condition.
  At September 30,2007
    
    
    2006Amortized
    
    
    
    
    
    
    AmortizedCost
    
    
    Fair Value
    
    
    Cost
    
    
    Fair Value(In Thousands)Held to maturity:Other debt securities
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Total held to maturity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Available-for-Sale:Debt securities
    
    
    1,500
    
    
    
    1,519
    
    
    
    
    
    
    
    Equity securities (1)
    
    
    8
    
    
    
    481
    
    
    
    8
    
    
    
    541Total available-for-sale
    
    
    1,508
    
    
    
    2,000
    
    
    
    8
    
    
    
    541Short-term certificates of deposit
    
    
    4,158
    
    
    
    4,158
    
    
    
    990
    
    
    
    990FHLB Overnight deposits
    
    
    20,923
    
    
    
    20,923
    
    
    
    22,077
    
    
    
    22,077Federal Home Loan Bank Stock
    
    
    191
    
    
    
    191
    
    
    
    198
    
    
    
    198Total investments, net (2)
    
    $
    26,780
    
    
    $
    27,272
    
    
    $
    23,273
    
    
    $
    23,806
 (1)
    
    Equity securities consist of FHLMC common stock.(2)
    
    The difference between Amortized Cost and Fair Value represents net unrealized gains at
September 30, 2007 and 2006 on available for sale securities in accordance with SFAS No. 115.
 Sources of Funds
 General
 Deposits
  15




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For the Year Ended September 30,2007
    
    
    2006(In Thousands)Total deposits at beginning of period
    
    $
    83,978
    
    
    $
    80,905Net (decrease) before interest credited
    
    
    (1,322
    )
    
    
    704Interest credited
    
    
    3,003
    
    
    
    2,369Total deposits at end of period
    
    $
    85,659
    
    
    $
    83,978
  WeightedAmount
    
    
    Average Rate(Dollars in Thousands)Maturity Period:Within three months
    
    $
    2,790
    
    
    
    4.87
    %After three but within six months
    
    
    5,212
    
    
    
    5.14After six but within twelve months
    
    
    7,522
    
    
    
    5.02After twelve months
    
    
    11,022
    
    
    
    4.78Total
    
    $
    26,546
    
    
    
    4.93
    %
  At September 30,2007
    
    
    2006Percent
    
    
    Weighted
    
    
    
    
    
    
    Percent
    
    
    Weightedof Total
    
    
    Average
    
    
    
    
    
    
    of Total
    
    
    AverageAmount
    
    
    Deposits
    
    
    Rate
    
    
    Amount
    
    
    Deposits
    
    
    Rate(Dollars in Thousands)Passbook accounts
    
    $
    2,512
    
    
    
    2.93
    %
    
    
    1.75
    %
    
    $
    2,703
    
    
    
    3.22
    %
    
    
    2.00
    %MMDA accounts
    
    
    21,224
    
    
    
    24.78
    %
    
    
    4.04
    %
    
    
    22,290
    
    
    
    26.54
    %
    
    
    4.38
    %NOW accounts
    
    
    2,524
    
    
    
    2.95
    %
    
    
    1.67
    %
    
    
    2,229
    
    
    
    2.65
    %
    
    
    1.80
    %Noninterest-bearing accounts
    
    
    1,082
    
    
    
    1.26
    %
    
    
    0.00
    %
    
    
    1,753
    
    
    
    2.09
    %
    
    
    0.00
    %Certificate accounts
    
    
    58,317
    
    
    
    68.08
    %
    
    
    4.79
    %
    
    
    55,003
    
    
    
    65.50
    %
    
    
    4.38
    %Totals
    
    $
    85,659
    
    
    
    100.00
    %
    
    
    4.45
    %
    
    $
    83,978
    
    
    
    100.00
    %
    
    
    4.14
    %
  16




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September 30,2007
    
    
    2006Maturity Period

    
    Dollars in Thousands2007
    
    
    $
    
    
    
    $
    35,2632008
    
    
    
    35,318
    
    
    
    9,2752009
    
    
    
    13,783
    
    
    
    2,0892010
    
    
    
    7,407
    
    
    
    7,6022011
    
    
    
    841
    
    
    
    7742012
    
    
    
    968
    
    
    
    $
    58,317
    
    
    $
    55,003
 Borrowings
 Personnel
   REGULATION
 General
    17




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Federal Savings Association Regulation
 Activity Powers.
 Loans-to-One-Borrower Limitations.
 Qualified Thrift Lender Test.
 
    
    specified liquid assets up to 20% of total assets;
    
    goodwill and other intangible assets; and
    
    the value of property used to conduct business.
   Capital Requirements.
 (1)
    
    a tangible capital ratio requirement of 1.5% of tangible capital to adjusted
total assets;(2)
    
    a leverage ratio requirement of 3% of core capital to such adjusted total assets
for savings associations that have been assigned the highest composite rating under the
Uniform Financial Institutions Ratings System and 4% or more for savings associations
that have not been assigned the highest composite rating; and(3)
    
    a risk-based capital ratio requirement of 8% of core and supplementary capital to
total risk-weighted assets, provided that the amount of supplementary capital used to
satisfy this requirement may not exceed 100% of core capital.
  18




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Community Reinvestment Act.
  
    
    a lending test, to evaluate the institutions record of making loans in its
assessment areas;
    
    an investment test, to evaluate the institutions record of investing in
community development projects, affordable housing, and programs benefiting low or
moderate income individuals and businesses in its assessment area or a broader area that
includes its assessment areas; and
    
    a service test, to evaluate the institutions delivery of services through its
retail banking channels and the extent and innovativeness of its community development
service.
  Transactions with Affiliates.
 Loans to Insiders.
  19




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Enforcement.
 Standards for Safety and Soundness.
  Limitation on Capital Distributions.
  
    
    the Association would be undercapitalized following the distribution;
    
    the proposed capital distribution raises safety and soundness concerns; or
    
    the capital distribution would violate a prohibition contained in any statute,
regulation or agreement.
 Liquidity.
 Prompt Corrective Action Regulations.
 
    
    well-capitalized;
    
    adequately capitalized;
    
    undercapitalized;
    
    significantly undercapitalized; or
    
    critically undercapitalized.
  20




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Insurance of Deposit Accounts
    Federal Home Loan Bank System.
  Federal Reserve System.
  21




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Prohibitions Against Tying Arrangements.
 Anti-Money Laundering and Customer Identification
   
    
    Establishment of anti-money laundering programs;
    
    Establishment of a program specifying procedures for obtaining identifying
information from customers seeking to open new accounts, including verifying the
identity of customers within a reasonable period of time;
    
    Establishment of enhanced due diligence policies, procedures and controls designed to detect and report money laundering; and
    
    Prohibitions on correspondent accounts for foreign shell banks (foreign banks
that do not have a physical presence in any country) and compliance with recordkeeping
obligations with respect to correspondent accounts of foreign banks.
   Privacy Protection.
  22




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Holding Company Regulation
  Restrictions Applicable to the Company.
 
    
    furnishing or performing management services for a savings institution subsidiary
of such holding company;
    
    conducting an insurance agency or escrow business;
    
    holding, managing, or liquidating assets owned or acquired from a savings
institution subsidiary of such company;
    
    holding or managing properties used or occupied by a savings institution subsidiary of such company;
    
    acting as trustee under a deed of trust;
    
    purchasing, holding or disposing of stock acquired in connection with a qualified
stock issuance if the purchase of such stock by such holding company is approved by the
Director of the OTS;
    
    any activity that the FRB, by regulation, has determined to be permissible for
bank holding companies under
Section 4(c)(8) of the BHCA, subject to receipt of the
OTSs prior approval;
    
    any activity in which multiple savings and loan holding companies were authorized
by regulation to directly engage on March 5, 1987, subject to compliance with the prior
notice requirements applicable to such activities; and
    
    any activity permissible for financial holding companies under Section 4(k) of
the BHCA.
  
    
    lending, exchanging, transferring, investing for others or safeguarding money or securities;
    
    insurance activities or providing and issuing annuities, and acting as principal, agent or broker;
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
    
    financial, investment or economic advisory services;
    
    issuing or selling instruments representing interests in pools of assets that a
bank is permitted to hold directly;
    
    underwriting, dealing in or making a market in securities;
    
    activities previously determined by the FRB to be closely related to banking;
    
    activities that bank holding companies are permitted to engage in outside of the U.S.;
    
    merchant banking activities; and
    
    portfolio investments made by an insurance company.
   Restrictions Applicable to Activities of Mutual Holding Companies.
 
    
    investing in the stock of a savings institution;
    
    acquiring a mutual association through the merger of such association into a
savings institution subsidiary of such holding company or an interim savings institution
subsidiary of such holding company;
    
    merging with or acquiring another holding company, one of whose subsidiaries is a
savings institution;
    
    investing in a corporation the capital stock of which is available for purchase
by a savings institution under federal law or under the law of any state where the
subsidiary savings institution or association is located; and
    
    the permissible activities described above for non-grandfathered savings and loan
holding companies.
  Restrictions Applicable to All Savings and Loan Holding Companies.
 
    
    acquiring control (as defined under the HOLA) of another savings institution (or
a holding company parent) without prior OTS approval;
    
    acquiring or retaining, with certain exceptions, more than 5% of a non-subsidiary
savings association or holding company, or a non-subsidiary company engaged in
activities other than those permitted by the HOLA;
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
    
    acquiring through merger, consolidation or purchase of assets, another savings
institution or a holding company thereof, or acquiring all or substantially all of the
assets of such institution (or a holding company) without prior OTS approval; or
    
    acquiring control of any depository institution not insured by the FDIC (except
through a merger with and into the holding companys savings institution subsidiary that
is approved by the OTS).
  
    
    in the case of certain emergency acquisitions approved by the FDIC;
    
    if such holding company controls a savings institution subsidiary that operated a
home or branch office in such additional state as of March 5, 1987; or
    
    if the laws of the state in which the savings institution to be acquired is
located specifically authorize a savings institution chartered by that state to be
acquired by a savings institution chartered by the state where the acquiring savings
institution or savings and loan holding company is located or by a holding company that
controls such a state chartered association.
 Federal Securities Laws
  North Carolina Corporation Law
  FEDERAL AND STATE TAXATION
 Federal Taxation
 General.
  Bad Debt Reserves.
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Distributions.
  Corporate Alternative Minimum Tax.
  Dividends Received Deduction.
 State Taxation
  
 ITEM 2. DESCRIPTION OF PROPERTY
  Net BookLeased or
    
    
    Date
    
    
    Value atOwned
    
    
    Acquired
    
    
    September 30, 2007(In Thousands)Main Office
302 S. Brooks Street
Wake Forest, NC 27587
    
    Owned
    
    
    1961
    
    
    
    $297
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ITEM 3. LEGAL PROCEEDINGS
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 PART II
 
 ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
     Number of securitiesto be issued upon
    
    
    Weighted-average
    
    
    Number of securitiesexercise of
    
    
    exercise price of
    
    
    remaining available foroutstanding options,
    
    
    outstanding options,
    
    
    future issuance underPlan Category
    
    warrants and rights
    
    
    warrants and rights
    
    
    equity compensation plansEquity compensation
plans approved by
security holders
    
    
    
    
    
    $
    
    
    
    
    14,030Equity compensation
plans not approved by
security holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    
    
    
    $
    
    
    
    
    (1)14,030
 (1)
    
    Reflects 13,500 shares reserved for future grant under the Companys Option
Plan. This also reflects 530 shares reserved for future awards under the Companys
Recognition and Retention Plan which are held by the RRP Trust.
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ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
  
 ITEM 7. FINANCIAL STATEMENTS
  Page(s) inAnnual Report
    
    
    Report of Independent Registered Public Accounting Firm
    
    
    16
    
    
    Consolidated Statements of Financial Condition,
September 30, 2007 and 2006
    
    
    17
    
    
    Consolidated Statements of Income, Years Ended
September 30, 2007 and 2006
    
    
    18
    
    
    Consolidated Statements of Stockholders Equity,
Years Ended September 30, 2007 and 2006
    
    
    19-20
    
    
    Consolidated Statements of Cash Flows,
Years Ended September 30, 2007 and 2006
    
    
    21-22
    
    
    Notes to Consolidated Financial Statements
    
    
    23-35
 
 ITEM 8.
    
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 8A. CONTROLS AND PROCEDURES
   
 ITEM 8B. OTHER INFORMATION
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PART III
 
 ITEM 9.
    
    DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE GOVERNANCE;
COMPLIANCE WITH SECTION 16(A) OF THE ACT
  
 ITEM 10. EXECUTIVE COMPENSATION
  
 ITEM 11.
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
  
 ITEM 12.
    
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
  
 ITEM 13. EXHIBITS
 2.1
    
    Plan of Reorganization (Incorporated by reference to Exhibit 2.1 of
the Companys Registration Statement on Form 8-A, filed with the SEC on May 7,
1999).3.1
    
    Federal Stock Charter of the Company (Incorporated by reference to
Exhibit 3.1 of the Companys Registration Statement on Form 8-A filed with the
SEC on May 7, 1999).3.2
    
    Bylaws of the Company (Incorporated by reference to Exhibit 3.2 of
the Companys Registration Statement on Form 8-A filed with the SEC on May 7,
1999 ).4.3
    
    Common Stock Certificate of the Company (Incorporated by reference
to Exhibit 4.3 of the Companys Registration Statement on Form 8-A filed with the
SEC on May 7, 1999).10.2 (a)
    
    Employment Agreement with Robert C. White, President and Chief Executive
Officer, December 26, 2002 (Incorporated by reference to Exhibit 10.2 of the
Companys Form 10-KSB for the fiscal year ended September 30, 2002, filed with
the SEC on December 26, 2002).10.2 (b)
    
    Amended and Restated Employment Agreement with Robert C. White, President and
Chief Executive Officer (Incorporated by reference to the Companys Form 8-K
filed with the SEC on September 20, 2007).10.3 (a)
    
    Employment Agreement with Billy B. Faulkner, Vice President (Incorporated by
reference to Exhibit 10.3 of the Companys Form 10-KSB for the fiscal year ended
September 30, 2002, filed with the SEC on December 26, 2002).
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10.3 (b)
    
    Amended and Restated Employment Agreement with Billy B. Faulkner, Vice
President, (Incorporated by reference to the Companys Form 8-K filed with the
SEC on September 20, 2007).10.4 (a)
    
    Employee Stock Ownership Plan of Wake Forest Federal Savings & Loan
Association (Incorporated by reference to Exhibit 10.4 of the Companys Form
10-KSB for the fiscal year ended September 30, 1999 filed with the SEC on
December 28, 1999).10.4 (b)
    
    Amendment No. 1 to the Employee Stock Ownership Plan of Wake Forest Federal
Savings & Loan Association (Incorporated by reference to Exhibit 10.4(b) of the
Companys Form 10-KSB for the fiscal year ended September 30, 2003 filed with the
SEC on December 29, 2003).10.4 (c)
    
    Amendments No. 2 to the Employee Stock Ownership Plan of Wake Forest Federal
Savings & Loan Association (Incorporated by reference to Exhibit 10.4(c) of the
Companys Form 10-KSB for the fiscal year ended September 30, 2003 filed with the
SEC on December 29, 2003).10.4 (d)
    
    Amendment No. 3 to the Employee Stock Ownership Plan of Wake Forest Federal
Savings & Loan Association (Incorporated by reference to Exhibit 10.4(d) of the
Companys Form 10-KSB for the fiscal year ended September 30, 2003 filed with the
SEC on December 29, 2003).10.4 (e)
    
    Amendment No.4 to the Employee Stock Ownership Plan of Wake Forest Federal
Savings & Loan Association (Incorporated by reference to Exhibit 10.4(e) of the
Companys Form 8-K filed with the SEC on August 19, 2005.)10.5
    
    Wake Forest Federal Savings & Loan Association 1997 Recognition and
Retention Plan (Incorporated by reference to the Companys Form S-8 filed with
the SEC on July 27, 1999).10.6
    
    Wake Forest Federal Savings & Loan Association 1997 Stock Option
Plan (Incorporated by reference to the Companys Form S-8 filed with SEC on July
27, 1999).10.7 (a)
    
    Amended and Restated Retirement Plan for Board Members of Wake Forest Federal
Savings & Loan Association (incorporated by reference to the Companys Form 8-K
filed with the SEC on December 22, 2005).10.7 (b)
    
    Amended and Restated Retirement Plan for Board Members of Wake Forest Federal
Savings & Loan Association: Amended and Restated Section III, Articles 3.2, 3.3,
and 3.5.13.1
    
    2006 Annual Report to Stockholders.14.1
    
    Code of Ethics.21.1
    
    Subsidiaries of the Registrant (Incorporated by reference to Part 1  General and Reorganization).23.1
    
    Independent Auditors Consent.31.1
    
    Rule 13a-14(a) / 15d-14(a) Certifications.32.1
    
    Section 1350 Certifications.
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ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
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SIGNATURES
  WAKE FOREST BANCSHARES, INC.
(Registrant)Date: December 20, 2007
    By:
    /s/ Robert C. WhiteRobert C. WhitePresident and Chief Executive Officer  /s/ Robert C. White

Robert C. White 
President , Chief Executive Officer and Director
(Principal Executive and Financial Officer)
    
    December 20, 2007

Date/s/ Howard L. Brown

Howard L. Brown -Chairman of the Board
and Director
    
    December 20, 2007

Date/s/  John D. Lyon

John D. Lyon - Director
    
    December 20, 2007

Date/s/ Rodney M. Privette

Rodney M. Privette - Director
    
    December 20, 2007

Date/s/ Anna O. Sumerlin

Anna O. Sumerlin - Director
    
    December 20, 2007

Date




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/s/ Harold R. Washington

Harold R. Washington - Director
    
    December 20, 2007

Date/s/  R.W. Wilkinson, III

R.W. Wilkinson, III - Vice-Chairman and Director
    
    December 20, 2007

Date/s/ Leelan A. Woodlief

Leelan A. Woodlief - Director
    
    December 20, 2007

Date/s/ William S. Wooten

William S. Wooten - Director
    
    December 20, 2007

Date




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EXHIBIT INDEX
 2.1
    
    Plan of Reorganization
    
    *3.1
    
    Federal Stock Charter of the Company
    
    *3.2
    
    Bylaws of the Company
    
    *4.3
    
    Common Stock Certificate of the Company
    
    *10.2(a)
    
    Employment Agreement with Robert C. White, President and Chief
Executive Officer
    
    +10.2(b)
    
    Amended and Restated Employment Agreement with Robert C. White,
President and Chief Executive Officer, September 17, 2007
(Incorporated by reference to the Companys Form 8-K filed with the
SEC on September 20, 2007).
    
    ++++++10.3(a)
    
    Employment Agreement with Billy B. Faulkner, Vice President
    
    +10.3(b)
    
    Amended and Restated Employment Agreement with Billy B. Faulkner,
Vice President (incorporated by reference to the Companys Form 8-K
filed with the SEC on September 20, 2007).
    
    ++++++10.4(a)
    
    Employee Stock Ownership Plan of Wake Forest Federal Savings & Loan
Association
    
    **10.4(b)
    
    Amendment No. 1 to the Employee Stock Ownership Plan of Wake Forest
Federal Savings & Loan Association
    
    +++10.4(c)
    
    Amendment No. 2 to the Employee Stock Ownership Plan of Wake Forest
Federal Savings & Loan Association
    
    +++10.4(d)
    
    Amendment No. 3 to the Employee Stock Ownership Plan of Wake Forest
Federal Savings & Loan Association
    
    +++10.4(e)
    
    Amendment No. 4 to the Employee Stock Ownership Plan of Wake Forest
Federal Savings & Loan Association
    
    ++++10.5
    
    Wake Forest Federal Savings & Loan Association 1997 Recognition and
Retention Plan
    
    ***10.6
    
    Wake Forest Federal Savings & Loan Association 1997 Stock Option Plan
    
    ***10.7(a)
    
    Amended and restated Retirement
Plan for Board Members of Wake Forest Federal Savings & Loan Association
    
    +++++10.7(b)
    
    Amended and Restated Retirement Plan for Board Members of Wake
Forest Federal Savings & Loan Association: Amended and Restated
Section III, Articles 3.2, 3.3, and 3.5.
    
    ++++++




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13.1
    
    2007 Annual Report to Stockholders
    
    Filed herewith14.1
    
    Code of Ethics
    
    Filed herewith21.1
    
    Subsidiaries of the Registrant
    
    ++23.1
    
    Independent Auditors Consent
    
    Filed herewith31.1
    
    Rule 13a-14(a) / 15d-14(a) Certifications
    
    Filed herewith32.1
    
    Section 1350 Certifications
    
    Filed herewith




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*
    
    Incorporated by reference to the Companys Registration Statement on Form 8-A, filed
with the SEC on May 7, 1999.**
    
    Incorporated by reference the Companys Form 10-KSB for the fiscal year ended
September 30, 1999 filed with the SEC on December 28, 1999.****
    
    Incorporated by reference to the Companys Form S-8 filed with the SEC on July 27,
1999.+
    
    Incorporated by reference to the Companys Form 10-KSB for the fiscal year ended
September 30, 2002, filed with the SEC on December 26, 2002.++
    
    Incorporated by reference to Part 1  General and Reorganization.+++
    
    Incorporated by reference to the Companys Form 10-KSB for the fiscal year ended
September 30, 2003, filed with the SEC on December 29, 2003.++++
    
    Incorporated by reference to the Companys Form 8-K filed with the SEC on August 19, 2005.+++++
    
    Incorporated by reference to the Companys Form 8-K filed the SEC on December 22, 2005.++++++
    
    Incorporated by reference to the Companys Form 8-K filed with the SEC on September 20,
2007.