**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


Washington,
      D.C. 20549





**FORM
      10-Q**





x
            Quarterly
                Report pursuant to Section 13 or 15 (d) of the Securities Exchange
                Act of
                1934 for the quarterly period ended March 31,
                2008





o
            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: 000-30805




WGNB
                  CORP.(Exact
                  name of registrant as specified in its
                  charter)





Georgia
            
            58-1640130(State
                of Incorporation)
            
            (I.R.S.
                Employer Identification No.)




201
                Maple StreetP.O.
                Box 280Carrollton,
                Georgia 30112(Address
                of principal executive offices)





(770)
                832-3557(Registrant’s
                telephone number, including area
                code)





Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days. Yes ý 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. (Check
      one).





Large
      Accelerated filer  ̈ Accelerated
      filer  ̈    Non-accelerated
      filer ý





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





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





Class
            
            Outstanding
                at May 14, 2008Common
                Stock, $1.25 par value
            
            6,057,594







**WGNB
                CORP.****INDEX
                TO FORM
                10-Q****Item
                Number**
              **in
                Form 10-Q**
            
            **Description**
            
            **Page****Part
                One**
            
            **Financial
                Information**Item
                1.
            
            Financial
                StatementsConsolidated
                Balance Sheets as of March 31, 2008 and December 31, 2007
            
            2Consolidated
                Statements of Earnings for the Three Months ended March 31, 2008
                and March
                31, 2007
            
            3Consolidated
                Statements of Comprehensive Income for the Three Months ended March
                31,
                2008 and March 31, 2007
            
            4Consolidated
                Statements of Cash Flows for the Three Months ended March 31, 2008
                and
                March 31, 2007
            
            5Notes
                to Consolidated Financial Statements
            
            7Item
                2.
            
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations
            
            12Item
                3.
            
            Quantitative
                and Qualitative Disclosures About Market Risk
            
            20Item
                4T.
            
            Controls
                and Procedures
            
            20**Part
                Two**
            
            **Other
                Information**Item
                1.
            
            Legal
                Proceedings
            
            20Item
                1A.
            
            Risk
                Factors
            
            21Item
                2.
            
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            
            21Item
                3.
            
            Defaults
                Upon Senior Securities
            
            21Item
                4.
            
            Submission
                of Matters to a Vote of Security Holders
            
            21Item
                5.
            
            Other
                Information
            
            21Item
                6.
            
            Exhibits
            
            21Signatures
            
            22









**Part
      I - Financial Information**





**Item
      1.**   **Financial
      Statements**





The
      unaudited financial statements of WGNB Corp. (the “Company”) are set forth on
      the following pages. All adjustments have been made which, in the opinion of
      management, are necessary in order to make the financial statements not
      misleading.


1


**WGNB
      CORP.**


**Consolidated
      Balance Sheets**





**As
      of March 31, 2008 and December 31, 2007**




March
                31,
              2008
            
            December
                31,
              2007(unaudited)
            
            (audited)AssetsCash
                and cash due from banks
            
            $
            16,575,805
            
            
            6,004,621Interest-bearing
                funds in other banks
            
            
            6,296,213
            
            
            1,463,719Federal
                funds sold
            
            
            -
            
            
            18,377,000Cash
                and cash equivalents
            
            
            22,872,018
            
            
            25,845,340Securities
                available for sale
            
            
            118,557,095
            
            
            122,693,244Securities
                held to maturity, estimated fair valuesof
                $7,530,916 and $7,901,839
            
            
            7,530,916
            
            
            7,901,839Loans,
                net
            
            
            650,275,557
            
            
            645,738,663Premises
                and equipment, net
            
            
            18,109,706
            
            
            18,356,970Accrued
                interest receivable
            
            
            5,671,968
            
            
            5,927,168Cash
                surrender value of life insurance
            
            
            3,680,648
            
            
            3,639,550Goodwill
                and other intangibles, net
            
            
            29,317,542
            
            
            29,433,841Foreclosed
                property
            
            
            14,720,786
            
            
            10,313,331Other
                assets
            
            
            15,443,030
            
            
            13,814,577$
            886,179,266
            
            
            883,664,523Liabilities
                and Stockholders’ EquityDeposits:Demand
            
            $
            75,290,265
            
            
            67,614,983Interest
                bearing demand
            
            
            221,410,347
            
            
            220,137,199Savings
            
            
            19,646,023
            
            
            19,122,668Time
            
            
            170,769,975
            
            
            170,112,285Time,
                over $100,000
            
            
            215,966,536
            
            
            229,390,354Total
                deposits
            
            
            703,083,146
            
            
            706,377,489Federal
                Home Loan Bank advances
            
            
            52,000,000
            
            
            54,500,000Securities
                sold under repurchase agreements
            
            
            20,000,000
            
            
            20,000,000Junior
                subordinated debentures
            
            
            10,825,000
            
            
            10,825,000Federal
                funds purchased
            
            
            8,412,000
            
            
            -Accrued
                interest payable
            
            
            3,304,265
            
            
            3,990,807Other
                liabilities
            
            
            7,838,231
            
            
            7,820,335Total
                liabilities
            
            
            805,462,642
            
            
            803,513,631CommitmentsStockholders’
                equity:Common
                stock, $1.25 par value, 10,000,000 shares authorized; 6,057,594 shares
                issued and outstanding
            
            
            7,571,993
            
            
            7,571,993Additional
                paid-in capital
            
            
            30,249,981
            
            
            30,199,481Retained
                earnings
            
            
            42,345,414
            
            
            41,786,537Accumulated
                other comprehensive income
            
            
            549,236
            
            
            592,881Total
                stockholders’ equity
            
            
            80,716,624
            
            
            80,150,892$
            886,179,266
            
            
            883,664,523





*See
      accompanying notes to unaudited consolidated financial
      statements.*


2


**WGNB
      CORP.**


**Consolidated
      Statements of Earnings**





**For
      the Three Months Ended March 31, 2008 and 2007**


**(unaudited)**




2008
            
            2007Interest
                income:Interest
                and fees on loans
            
            $
            12,302,116
            
            
            10,828,594Interest
                on federal funds sold
            
            
            53,166
            
            
            73,097Interest
                on investment securities:U.S.
                Government sponsored enterprises
            
            
            664,771
            
            
            285,673State,
                county and municipal
            
            
            757,059
            
            
            362,351Other
            
            
            353,995
            
            
            341,787Total
                interest income
            
            
            14,131,107
            
            
            11,891,502Interest
                expense:Interest
                on deposits:Demand
            
            
            1,252,577
            
            
            1,397,921Savings
            
            
            47,211
            
            
            48,392Time
            
            
            4,739,121
            
            
            3,400,873Interest
                on FHLB and other borrowings
            
            
            780,197
            
            
            771,914Total
                interest expense
            
            
            6,819,106
            
            
            5,619,100Net
                interest income
            
            
            7,312,001
            
            
            6,272,402Provision
                for loan losses
            
            
            750,000
            
            
            375,000Net
                    interest income after provision for loan
                    losses
            
            
            6,562,001
            
            
            5,897,402Other
                income:Service
                charges on deposit accounts
            
            
            1,539,262
            
            
            954,689Mortgage
                origination fees
            
            
            117,047
            
            
            101,056Brokerage
                fees
            
            
            111,205
            
            
            155,801ATM
                network fees
            
            
            385,166
            
            
            206,455Gain
                on sale of securities available for sale
            
            
            46,923
            
            
            -Gain
                on sale of foreclosed property
            
            
            12,281
            
            
            -Miscellaneous
            
            
            222,797
            
            
            315,280Total
                other income
            
            
            2,434,681
            
            
            1,733,281Other
                expenses:Salaries
                and employee benefits
            
            
            3,626,366
            
            
            2,878,479Occupancy
            
            
            1,022,844
            
            
            661,571Other
                operating
            
            
            1,931,698
            
            
            1,156,882Total
                other expenses
            
            
            6,580,908
            
            
            4,696,932Earnings
                before income taxes
            
            
            2,415,774
            
            
            2,933,751Income
                taxes
            
            
            584,803
            
            
            953,347Net
                earnings
            
            $
            1,830,971
            
            
            1,980,404Basic
                earnings per share
            
            $
            .30
            
            
            .40Diluted
                earnings per share
            
            $
            .30
            
            
            .39Dividends
                declared per share
            
            $
            0.2100
            
            
            0.1967





*See
      accompanying notes to unaudited consolidated financial
      statements.*


3


**WGNB
      CORP.**


**Consolidated
      Statements of Comprehensive Income**





**For
      the Three Months Ended March 31, 2008 and 2007**


**(unaudited)**





2008
            
            2007Net
                earnings
            
            $
            1,830,971
            
            
            1,980,404Other
                comprehensive income (loss), net of tax:Unrealized
                gains on investment securities available for sale:Unrealized
                gains arising during the period
            
            
            449,606
            
            
            92,050Associated
                taxes
            
            
            (152,866
            )
            
            (31,297
            )Reclassification
                adjustment for gain realized
            
            
            (46,923
            )
            
            -Associated
                taxes
            
            
            15,954
            
            
            -Change
                in fair value of derivatives for cash flow hedges:Decrease
                in fair value of derivatives for cash flowhedges
                arising during the period
            
            
            (468,812
            )
            
            -Associated
                tax benefit
            
            
            159,396
            
            
            -Other
                comprehensive (loss) income
            
            
            (43,645
            )
            
            60,753Comprehensive
                income
            
            $
            1,787,326
            
            $
            2,041,157





*See
      accompanying notes to unaudited consolidated financial
      statements.*


4





**WGNB
      CORP.**


**Consolidated
      Statements of Cash Flows**





**For
      the Three Months Ended March 31, 2008 and 2007**


**(unaudited)**




2008
            
            2007Cash
                flows from operating activities:Net
                earnings
            
            $
            1,830,971
            
            
            1,980,404Adjustments
                to reconcile net earnings to net cash provided by operating
                activities:Depreciation,
                amortization and accretion
            
            
            440,631
            
            
            219,864Provision
                for loan losses
            
            
            750,000
            
            
            375,000Loss/(gain)
                on disposal of premises and equipment
            
            
            87
            
            
            (5,070
            )Income
                from bank owned life insurance
            
            
            (41,098
            )
            
            -Gain
                on sale of securities available for sale
            
            
            (46,923
            )
            
            -Net
                gain on sale of foreclosed property
            
            
            (12,281
            )
            
            -Stock-based
                employee compensation expense
            
            
            50,500
            
            
            39,750Change
                in:Other
                assets
            
            
            (1,373,253
            )
            
            (418,602
            )Other
                liabilities
            
            
            (976,179
            )
            
            392,490Net
                cash provided by operating activities
            
            
            622,455
            
            
            2,583,836Cash
                flows from investing activities:Proceeds
                from the sale of available for sale securities
            
            
            4,981,120
            
            
            -Proceeds
                from maturities of securities available for sale
            
            
            4,623,559
            
            
            29,100,036Proceeds
                from maturities of securities held to maturity
            
            
            371,171
            
            
            70,415Purchases
                of securities available for sale
            
            
            (5,125,320
            )
            
            (27,882,887
            )Net
                change in loans
            
            
            (9,559,647
            )
            
            (24,678,128
            )Purchases
                of premises and equipment
            
            
            (178,601
            )
            
            (765,830
            )Proceeds
                from the sale of premises and equipment
            
            
            3,778
            
            
            5,070Proceeds
                from the sale of foreclosed property
            
            
            210,052
            
            
            -Capital
                expenditures for forclosed property
            
            
            (265,569
            )
            
            -Net
                cash used by investing activities
            
            
            (4,939,457
            )
            
            (24,151,324
            )Cash
                flows from financing activities:Net
                change in deposits
            
            
            (3,294,343
            )
            
            33,542,590Net
                change in federal funds purchased
            
            
            8,412,000
            
            
            (2,475,000
            )Repayment
                of Federal Home Loan Bank borrowings
            
            
            (2,500,000
            )
            
            -Dividends
                paid
            
            
            (1,273,977
            )
            
            (952,905
            )Proceeds
                from exercise of stock options
            
            
            -
            
            
            101,069Net
                cash provided by financing activities
            
            
            1,343,680
            
            
            30,215,754Change
                in cash and cash equivalents
            
            
            (2,973,322
            )
            
            8,648,266Cash
                and cash equivalents at beginning of period
            
            
            25,845,340
            
            
            13,233,448Cash
                and cash equivalents at end of period
            
            $
            22,872,018
            
            $
            21,881,714





*See
      accompanying notes to unaudited consolidated financial
      statements.*


5


**WGNB
      CORP.**


**Consolidated
      Statements of Cash Flows, continued**





**For
      the Three Months Ended March 31, 2008 and 2007**


**(unaudited)**




For
                the Three MonthsEnded
                March 31,2008
            
            2007Supplemental
                disclosure of cash flow information:Cash
                paid during the period for:Interest
            
            $
            7,505,648
            
            
            5,801,259Income
                taxes
            
            $
            -
            
            
            385,000Non-cash
                investing and financing activities:Transfer
                of loans to foreclosed property
            
            $
            10,363,996
            
            
            778,291Loans
                to facilitate the sale of foreclosed property
            
            $
            6,024,339
            
            
            -Change
                    in unrealized gains on securities available for sale, net of
                    tax
            
            $
            265,771
            
            
            60,753Change
                    in fair value of derivatives for cash flow hedges, net of
                    tax
            
            $
            (309,416
            )
            
            -Change
                in dividends payable
            
            $
            (1,883
            )
            
            30,760




*See
      accompanying notes to unaudited consolidated financial
      statements.*


6


**WGNB
      Corp.**





**Notes
      to Consolidated Financial Statements**





**(1)**  **Basis
      of Presentation**





The
      consolidated financial statements include the accounts of WGNB Corp. (the
“Company”) and its wholly-owned subsidiary, First National Bank of Georgia (the
“Bank”). All significant inter-company accounts have been eliminated in
      consolidation.





The
      accompanying unaudited interim consolidated financial statements reflect all
      adjustments which, in the opinion of management, are necessary to present fairly
      the Company’s financial position as of March 31, 2008, and the results of its
      operations and its cash flows for the three-month periods ended March 31,
      2008 and 2007. All such adjustments are normal and recurring in nature. The
      financial statements included herein should be read in conjunction with the
      consolidated financial statements and the related notes and the report of
      independent accountants included in the Company’s Annual Report on Form 10-K for
      fiscal year ended December 31, 2007 which included the results of operations
      for
      the years ended December 31, 2007, 2006 and 2005.





**(2)**  **Net
      Earnings Per Share**





Basic
      earnings per share is based on the weighted average number of common shares
      outstanding during the period while the effects of potential common shares
      outstanding during the period are included in diluted earnings per share. The
      average market price during the period is used to compute equivalent
      shares.





SFAS
      No.
      128, “Earnings Per Share,” requires that employee equity share options,
      non-vested shares and similar equity instruments granted to employees be treated
      as potential common shares in computing diluted earnings per share. Diluted
      earnings per share should be based on the actual number of options or shares
      granted and not yet forfeited, unless doing so would be anti-dilutive. The
      Company uses the “treasury stock” method for equity instruments granted in
      share-based payment transactions provided in SFAS No. 128 to determine diluted
      earnings per share.





Reconciliation
      of the amounts used in the computation of both “basic earnings per share” and
“diluted earnings per share” for the quarters ended March 31, 2008 and March 31,
      2007 are as follows:




For
                the three months ended March 31, 2008Net
                Earnings
            
            Common Shares
            
            Earnings
              per
                ShareBasic
                earnings per share
            
            $
            1,830,971
            
            
            6,057,594
            
            $
            0.30Effect
                of dilutive securities – stock options
            
            
            -
            
            
            3,567
            
            
            (0.00
            )Diluted
                earnings per share
            
            $
            1,830,971
            
            
            6,061,161
            
            $
            0.30




For
                the three months ended March 31, 2007Net
                Earnings
            
            Common Shares
            
            Earnings
              per
                ShareBasic
                earnings per share
            
            $
            1,980,404
            
            
            5,001,286
            
            $
            0.40Effect
                of dilutive securities – stock options
            
            
            -
            
            
            40,289
            
            
            (0.01
            )Diluted
                earnings per share
            
            $
            1,980,404
            
            
            5,041,575
            
            $
            0.39




The
      Company had 245,725 of anti-dilutive options outstanding as of March 31, 2008.
      There were no anti-dilutive options outstanding as of March 31,
      2007.




**(3)**  **Stock-based
      Compensation**





The
      Company accounts for its stock based employee benefit plans in accordance with
      SFAS No. 123 (revised 2004) (SFAS No. 123 (R)) “Share-Based Payment.”  SFAS
      No. 123 (R) addresses the accounting for share-based payment transactions in
      which the Company receives employee services in exchange for equity instruments
      of the Company. SFAS No. 123 (R) requires the Company to recognize as
      compensation expense the “grant date fair value” of stock options granted to
      employees in the statement of earnings using the fair-value-based method.


7





**WGNB
      Corp.**





**Notes
      to Consolidated Financial Statements, continued**





**(3)**  **Stock-based
      Compensation, continued**





The
      Company recognized $50,500 and $39,750 of stock-based employee compensation
      expense during the three months ended March 31, 2008 and 2007, respectively,
      associated with its stock option grants. The Company is recognizing the
      compensation expense for stock option grants with graded vesting schedules
      on a
      straight-line basis over the requisite service period of the award as permitted
      by SFAS No. 123 (R). As of March 31, 2008, there was $592,537 of unrecognized
      compensation expense related to stock option grants. The expense is expected
      to
      be recognized over the remaining average vesting period of five
      years.





The
      grant-date fair value of each option granted during the first quarters of 2008
      and 2007 was $3.37 and $6.39, respectively. The fair value of each option is
      estimated on the date of grant using the Black-Scholes Model. The following
      weighted average assumptions were used for grants in 2008 and 2007:





First Quarter 2008
            
            First Quarter 2007Dividend
                yield
            
            
            3.09
            %
            
            2.72
            %Expected
                volatility
            
            
            22
            %
            
            20
            %Risk-free
                interest rate
            
            
            3.50
            %
            
            4.83
            %Expected
                term
            
            
            6.5 years
            
            
            6.6 years





**(4)**  **Fair
      Value** ******




Effective
      January 1, 2008, the Company adopted Financial Accounting Standards Board
      (“FASB”) Statement No. 157, *Fair
      Value Measurements* (“SFAS
      No. 157”), which provides a framework for measuring fair value under generally
      accepted accounting principles. SFAS No. 157 applies to all financial
      instruments that are being measured and reported on a fair value basis.




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




Fair
      Value Hierarchy




Under
      SFAS No. 157, the Company groups assets and liabilities at fair value in three
      levels, based on the markets in which the assets and liabilities are traded
      and
      the reliability of the assumptions used to determine fair value. These levels
      are:




Level 1–
            Valuation
                is based upon quoted prices for identical instruments traded in active
                markets.




Level 2 –
            Valuation
                is based upon quoted prices for similar instruments in active markets,
                quoted prices for identical or similar instruments in markets that
                are not
                active, and model-based valuation techniques for which all significant
                assumptions are observable in the
                market.




Level 3 –
            Valuation
                is generated from model-based techniques that use at least one significant
                assumption not observable in the market. These unobservable assumptions
                reflect estimates of assumptions that market participants would use
                in
                pricing the asset or liability. Valuation techniques include use
                of option
                pricing models, discounted cash flow models and similar
                techniques.




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




8




**WGNB
      Corp.**




**Notes
      to Consolidated Financial Statements, continued**




**(4)**  **** **Fair
      Value, continued** ******




Securities
      Available for Sale




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




Loans




The
      Company does not record loans at fair value on a recurring basis. However,
      from
      time to time, a loan is considered impaired and an allowance for loan losses
      is
      established. Loans for which it is probable that payment of interest and
      principal will not be made in accordance with the contractual terms of the
      loan
      agreement are considered impaired. Once a loan is identified as individually
      impaired, management measures impairment in accordance with SFAS No. 114, *Accounting
      by Creditors for Impairment of a Loan* ,
      (“SFAS
      No. 114”). The fair value of impaired loans is estimated using one of
      several methods, including collateral value, market value of similar debt,
      enterprise value, liquidation value and discounted cash flows. Those impaired
      loans not requiring an allowance represent loans for which the fair value of
      the
      expected repayments or collateral exceed the recorded investments in such loans.
      At March 31, 2008, substantially all of the impaired loans were evaluated based
      on the fair value of the collateral. In accordance with SFAS No. 157, impaired
      loans where an allowance is established based on the fair value of collateral
      require classification in the fair value hierarchy. When the fair value of
      the
      collateral is based on an observable market price or a current appraised value,
      the Company records the impaired loan as nonrecurring Level 2. When an appraised
      value is not available or management determines the fair value of the collateral
      is further impaired below the appraised value and there is no observable market
      price, the Company records the impaired loan as nonrecurring Level
      3.




Foreclosed
      Assets




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




Goodwill
      and Other Intangible Assets




Goodwill
      and identified intangible assets are subject to impairment testing. A projected
      cash flow valuation method is used in the completion of impairment testing.
      This
      valuation method requires a significant degree of management judgment. In the
      event the projected undiscounted net operating cash flows are less than the
      carrying value, the asset is recorded at fair value as determined by the
      valuation model. As such, the Company classifies goodwill and other intangible
      assets subjected to nonrecurring fair value adjustments as Level 3.




9





**WGNB
      Corp.**




**Notes
      to Consolidated Financial Statements, continued**




**(4)**  **Fair
      Value, continued**




Derivative
      Financial Instruments




The
      Company uses interest rate swaps to manage interest rate risk. The valuation
      of
      these instruments is determined using widely accepted valuation techniques
      including discounted cash flow analysis on the expected cash flows of each
      derivative. This analysis reflects the contractual terms of the derivatives,
      including the period to maturity, and uses observable market-based inputs,
      including interest rate curves and implied volatilities. The fair values of
      interest rate swaps are determined using the market standard methodology of
      netting the discounted future fixed cash receipts and the discounted expected
      variable cash payments. The variable cash payments are based on an expectation
      of future interest rates (forward curves derived from observable market interest
      rate curves).




To
      comply
      with the provisions of SFAS No. 157, the Company incorporates credit valuation
      adjustments to appropriately reflect both its own nonperformance risk and the
      respective counterparty’s nonperformance risk in the fair value measurements. In
      adjusting the fair value of its derivative contracts for the effect of
      nonperformance risk, the Company has considered the impact of netting any
      applicable credit enhancements such as collateral postings, thresholds, mutual
      puts and guarantees.




Although
      the Company has determined that the majority of the inputs used to value its
      derivatives fall within Level 2 of the fair value hierarchy, the credit
      valuation adjustments associated with its derivatives utilize Level 3 inputs,
      such as estimates of current credit spreads to evaluate the likelihood of
      default by itself or the counterparties. However, as of March 31, 2008, the
      Company has assessed the significance of the impact of the credit valuation
      adjustments on the overall valuation of its derivative positions and has
      determined that the credit valuation adjustments are not significant to the
      overall valuation of its derivatives. As a result, the Company has determined
      that its derivative valuations in their entirety are classified in Level 2
      of
      the fair value hierarchy.


Deposits
        - Time, over $100,000
 
 The
        Company has fair value hedges on certain time deposits over $100,000.  In
        accordance with SFAS No. 133 "Accounting for Derivative Instruments and Hedging
        Activities" , the
        derivatives and the associated hedged items are recorded at their fair value
        on
        the Company's balance sheet.  The valuation of the hedged deposits is
        determined using widely accepted valuation techniques including discounted
        cash
        flow analysis on the expected cash flows of the deposits. This analysis reflects
        the contractual terms of the deposits, including the period to maturity,
        and
        uses observable market-based inputs, including interest rate curves.  The
        Company has determined that the fair value of the hedged time deposits over
        $100,000 fall within Level 2 of the fair value hierarchy.




Assets
      and Liabilities Recorded at Fair Value on a Recurring Basis




The
      table
      below presents the recorded amount of the Company’s assets and liabilities
      measured at fair value on a recurring basis as of March 31, 2008 aggregated
      by
      the level in the fair value hierarchy within which those measurements
      fall:




Description
            
            Level
                1
            
            Level 2
            
            Level
                3
            
            Balance
                at
              March 31, 2008AssetsSecurities
                available for sale
            
            $
            -
            
            
            118,557,095
            
            
            -
            
            
            118,557,095Derivative
                financial instruments - fair value hedge
            
            
            -
            
            
            1,212,168
            
            
            -
            
            
            1,212,168Total
            
            $
            -
            
            
            119,769,263
            
            
            -
            
            
            119,769,263LiabilitiesDeposits
                - Time, over $100,000
            
            $
            -
            
            
            37,431,614
            
            
            -
            
            
            37,431,614Derivative
                financial instruments - cash flow hedge
            
            
            -
            
            
            498,449
            
            
            -
            
            
            498,449Total
            
            $
            -
            
            
            37,930,063
            
            
            -
            
            
            37,930,063








10




**WGNB
      Corp.**




**Notes
      to Consolidated Financial Statements, continued**




**(4)**  **Fair
      Value, continued**




Assets
      Recorded at Fair Value on a Nonrecurring Basis




The
      Company may be required, from time to time, to measure certain assets at fair
      value on a nonrecurring basis in accordance with U.S. Generally Accepted
      Accounting Principles. These include assets that are measured at the lower
      of
      cost or market that were recognized at fair value below cost at the end of
      the
      period. The table below presents the Company’s assets measured at fair value on
      a nonrecurring basis as of March 31, 2008 by the level in the fair value
      hierarchy within which those measurments fall:




Description
            
            Level
                1
            
            Level 2
            
            Level
                3
            
            Balance
                at
              March 31, 2008AssetsLoans
            
            $
            -
            
            
            33,433,631
            
            
            -
            
            
            33,433,631Foreclosed
                property
            
            
            -
            
            
            14,720,786
            
            
            -
            
            
            14,720,786Total
            
            $
            -
            
            
            48,154,417
            
            
            -
            
            
            48,154,417





**(5)**  **Non-performing
      Assets**





Non-performing
      assets consist of foreclosed property, non-accrual loans and loans 90 days
      past
      due still accruing. The table below summarizes nonperforming
      assets:





March 31, 2008
            
            December 31, 2007Foreclosed
                property
            
            $
            14,720,786
            
            
            10,313,331Non-accrual
                loans
            
            
            34,635,138
            
            
            46,351,870Loans
                90 days past due still accruing
            
            
            5,176,850
            
            
            1,204,130Total
            
            $
            54,532,774
            
            
            57,869,331





Non-performing
      assets consist primarily of 16 residential real estate construction and
      acquisition and development properties ranging in balance from $1 million to
      $8
      million. All properties are being actively marketed for sale and management
      is
      continuously monitoring the properties for proper valuation.





**(6)**  **Recent
      Accounting Pronouncements**




Disclosures
      about Derivative Instruments and Hedging Activities





In
      March
      2008, the FASB issued SFAS No. 161, *Disclosures
      about Derivative Instruments and Hedging Activities* SFAS
      No.
      161 is an amendment to SFAS No. 133, *Accounting
      for Derivative Instruments and Hedging Activities* .
      The
      objective of SFAS No. 161 is to expand the disclosure requirements of SFAS
      No.
      133 with the intent to improve the financial reporting of how and why an entity
      uses derivative instruments and how derivative instruments and related hedged
      items affect an entity’s financial position, financial performance and cash
      flows. The statement is effective for financial statements issued for fiscal
      years beginning after November 15, 2008. The Company does not anticipate the
      new
      accounting principle will have a material effect on its financial position
      or
      results of operations.


*.*


11


**Item
      2.**  **Management’s Discussion and Analysis of Financial Condition and Results of
      Operations**





The
      following analysis compares the Company’s results of operations for the three
      month periods ended March 31, 2008 and 2007 and reviews important factors
      affecting the Company’s financial condition at March 31, 2008, compared to
      December 31, 2007. These comments should be read in conjunction with the
      Company’s consolidated financial statements and accompanying notes appearing in
      this Report.





**Cautionary
      Notice Regarding Forward-Looking Statements**





Certain
      of the statements made in this Report and in documents incorporated by reference
      herein, including matters discussed under the caption “Management’s Discussion
      and Analysis of Financial Condition and Results of Operations,” as well as oral
      statements made by the Company or its officers, directors or employees, may
      constitute forward-looking statements within the meaning of Section 21E of
      the
      Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such
      forward-looking statements are based on management’s beliefs, current
      expectations, estimates and projections about the financial services industry,
      the economy and about the Company and the Bank in general. The words “expect,”
“anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate” and similar
      expressions are intended to identify such forward-looking statements. Such
      forward-looking statements are not guarantees of future performance and are
      subject to risks, uncertainties and other factors that may cause the actual
      results, performance or achievements of the Company to differ materially from
      historical results or from any results expressed or implied by such
      forward-looking statements. The Company cautions readers that the following
      important factors, among others, could cause the Company’s actual results to
      differ materially from the forward-looking statements contained in this Report:





·  the
      effect of changes in laws and regulations, including federal and state banking
      laws and regulations, with which the Company or the Bank must comply, and the
      associated costs of compliance with such laws and regulations either currently
      or in the future as applicable;





·  the
      effect of changes in accounting policies, standards, guidelines or principles,
      as may be adopted by the regulatory agencies as well as by the Financial
      Accounting Standards Board;





·  the
      effect of changes in the Company’s organization, compensation and benefit plans;





·  the
      effect on the Company’s competitive position within its market area of the
      increasing consolidation within the banking and financial services industries,
      including the increased competition from larger regional and out-of-state
      banking organizations as well as non-bank providers of various financial
      services;





·  the
      effect of changes in interest rates;





·  the
      effect of changes in the business cycle and downturns in local, regional or
      national economies;





·  the
      matters described under Part I, Item 1A, “Risk Factors” in the Company’s Annual
      Report on Form 10-K for the fiscal year ended December 31, 2007.





The
      Company cautions that the foregoing list of important factors is not exclusive.
      The Company undertakes no obligation to publicly update or revise any
      forward-looking statements.





**Critical
      Accounting Policies**





The
      Company has established various accounting policies which govern the application
      of accounting principles generally accepted in the United States in the
      preparation of its financial statements. These significant accounting policies
      are described in the notes to the consolidated financial statements filed with
      the Company’s Annual Report on Form 10-K for the year ended December 31, 2007
      (the “2007 Notes”). Certain accounting policies involve significant judgments
      and assumptions by management which have a material impact on the carrying
      value
      of certain assets and liabilities; management considers these accounting
      policies to be critical accounting policies. The judgments and assumptions
      used
      by management are based on historical experience and other factors, which are
      believed to be reasonable under the circumstances. Because of the nature of
      the
      judgments and assumptions made by management, actual results could differ from
      these judgments and estimates which could have a material impact on the carrying
      value of assets and liabilities and the results of operations of the Company.
      All accounting policies are important, and all policies described in the 2007
      Notes should be reviewed for a greater understanding of how the Company’s
      financial performance is recorded and reported.


12




The
      Company believes the allowance for loan losses is a critical accounting policy
      that requires the most significant judgments and estimates used in the
      preparation of the Company’s consolidated financial statements. The allowance
      for loan losses represents management’s estimate of probable loan losses
      inherent in the loan portfolio. Calculation of the allowance for loan losses
      is
      a critical accounting estimate due to the significant judgment, assumptions
      and
      estimates related to the amount and timing of estimated losses, consideration
      of
      current and historical trends and the amount and timing of cash flows related
      to
      impaired loans. Please refer to the section of the Company’s Annual Report on
      10-K for the year ended December 31, 2007 entitled “Balance Sheet Overview -
      Provision and Allowance for Possible Loan and Lease Losses” and Note 1 and
      Note 4 to the 2007 Notes for a detailed description of the Company’s
      estimation processes and methodology related to the allowance for loan
      losses.





**Results
      of Operations**





*Overview*





Net
      earnings for the three months ended March 31, 2008 were $1.83 million which
      represented a decrease of $149 thousand, or 7.6 percent, when compared to the
      three months ended March 31, 2007. Net earnings per diluted share was $.30
      for
      the three months ended March 31, 2008 which represented a $.09 per share, or
      23.1 percent, reduction from the first quarter of 2007. Comparing the first
      quarter of 2008 to the first quarter of 2007, the decrease in earnings was
      most
      impacted by an increase in non-performing assets which includes non-accrual
      loans, foreclosed property and loans past due greater than 90 days still
      accruing. Secondly, the volume of revenues and expenses have increased due
      to
      our merger with First Haralson Corporation which was completed July 1,
      2007.





Revenue
      and expense attributable to First Haralson’s operations are included in our
      first quarter 2008 results, but not in our first quarter 2007 results as more
      fully discussed below. The earnings per share and diluted earnings per share
      calculation increased by the additional 1,055,149 shares we issued in the merger
      with First Haralson contributing to the 23.1 percent decline in earnings per
      share. The acquired loans of First Haralson did not contribute to our
      non-performing asset level for the first quarter of 2008. Rather, the revenues
      and expenses of First Haralson have performed as expected. The merger has not
      had a materially dilutive or accretive effect in the first nine months of
      operations. The quality of our credit portfolio is likely to have a continuing
      significant impact on earnings for the remainder of 2008.





The
      detrimental impact of non-performing assets will likely reduce earnings through
      the remainder of 2008 and possibly into 2009 as the residential real estate
      downturn continues. We have maintained an aggressive loan review and problem
      loan evaluation process. We recognized additional non-performing assets in
      the
      first quarter of 2008. However, the related increase in loan loss provision
      ($6.4 million), charged-off interest ($182 thousand) and charge-down of
      foreclosed property ($363 thousand) was taken in the fourth quarter of 2007
      as a
      material subsequent event in our fourth quarter 2007. In addition to this
      recognition, we are likely to experience further write-downs as our borrowers’
financial condition continues to be weakened by the carrying costs of
      residential real estate developments without sufficient sales. There are many
      uncertainties in terms of the credit quality of our residential construction
      and
      development portfolio, but the three most critical issues facing us are: (i)
      the
      length of time our borrowers can remain in operation and service their debt
      given little or no sales volume; (ii) the extent real estate values further
      decline during any period of loan workout, through foreclosure and eventual
      sale; and (iii) the impact that associated charge-offs will have on our earnings
      and capital.





Non-performing
      assets total $54.5 million, or 8.0 percent of total loans including foreclosed
      property, or 6.2 percent of total assets, as of March 31, 2008. The $54.5
      million in non-performing assets was comprised primarily of 16 loan
      relationships ranging in outstanding balances from $1 million to $8 million.
      The
      residential real estate construction and acquisition and development portfolio
      not including impaired and non-accrual loans was $106.4 million as of March
      31,
      2008, comprised primarily of 30 loan relationships ranging in balance from
      $1
      million to $8 million. The allowance for loan and lease loss totaled $13.1
      million, or 1.98 percent of total loans. Non-performing assets were $58.3
      million, or 8.8 percent of total loans plus foreclosed property, or 6.6 percent
      of total assets, as of December 31, 2007. While we are encouraged by the
      reduction in non-performing assets and interest in foreclosed property, there
      can be no assurance that the amount will not increase if the economy
      continues to weaken.


13





Since
      the
      third quarter of 2007 we have sold $6.2 million of foreclosed property for
      minimal gain or loss. The carrying values of properties had been written down
      to
      fair value less cost to sell through previous charge-offs. We believe our
      valuation process has to date yielded accurate market values based on our recent
      sales efforts. However, we continue to hold real estate assets that are likely
      to be sold in the future. Each valuation or estimation of collectability that
      management performs in the impairment process of a loan or foreclosure of a
      property is generally based upon 85 percent of a current appraisal. In some
      cases, we have discounted the current appraisals where we have become concerned
      with values on a specific property. Improved property (a lot with a residence),
      for example, has a more determinable value since sales for comparison purposes
      are typically more recent. Developed or undeveloped lots, in contrast, require
      more judgment on the part of management as the excess supply of residential
      lots, fewer sales for comparative purposes and more frequent distressed sales
      of
      these types of properties make valuation more difficult.





Net
      interest income increased $1.04 million, or 16.6 percent, comparing the first
      quarter periods of 2008 and 2007. This was our most significant increase when
      comparing the first quarter periods of 2008 and 2007 and is attributable to
      the
      acquired interest-bearing assets and liabilities of First Haralson and effective
      balance sheet management. Year to date average earning assets grew from $571
      million as of March 31, 2007 to over $800 million on March 31, 2008, an increase
      of $229 million, or 40.3 percent. This increase was also primarily attributable
      to the First Haralson merger which added approximately $190 million of earning
      assets to the Company.





Total
      non-interest income increased $701 thousand, or 40.5 percent.. The increase
      in
      non-interest income was primarily attributable to a $585 thousand, 61.2 percent,
      increase in service charges on deposit accounts. Miscellaneous income increased
      by $145 thousand, or 27.9 percent, from the first quarter of 2007 to the first
      quarter of 2008. The increase in service charges on deposit accounts as well
      as
      miscellaneous expense also were attributable to the addition of First Haralson’s
      revenues to the Company





Total
      non-interest expense increased $1.88 million, or 40.1 percent, comparing the
      first quarter of 2008 with that of 2007. This increase was primarily
      attributable to salaries and employee benefits which increased by $748 thousand,
      or 26.0 percent, comparing the first quarter of 2008 to 2007. Occupancy and
      other operating expenses increased by $361 thousand, or 54.6 percent, and $775
      thousand, or 67.0 percent, respectively, from the same periods. There were
      no
      significant non-recurring items which materially affected the financial
      condition or the net earnings of the Company with the exception of a $171
      thousand increase in expenditures related to the collection of loans and the
      maintenance of foreclosed property. As was the case with net interest income
      and
      non-interest income, most of the increase in non-interest expense was
      attributable to the addition of First Haralson’s expenses to the Company’s
      operations.





*Net
      Interest Income*





Net
      interest income increased by $1.0 million, or 16.6 percent, in the first quarter
      of 2008 compared to the first quarter of 2007. Total interest income for the
      first quarter of 2008 increased by $2.2 million, or 18.8 percent, while total
      interest expense increased by $1.2 million, or 21.4 percent. Average
      interest-earning assets outstanding in the first quarter of 2008 totaled $800.5
      million compared to average interest-earning assets outstanding of $570.6
      million in the first quarter of 2007. This resulted in an average
      interest-bearing asset increase of $229.9 million, or 40.3 percent, since the
      first quarter of 2007. Comparing the first quarter of 2008 to 2007,
      non-interest-bearing deposits, interest-bearing deposits and borrowings
      increased by $249.9 million, or 46.3 percent.





The
      large
      increase in interest-earning assets and interest-bearing liabilities was
      primarily attributable to the merger with First Haralson. Effective July 1,
      2007
      we acquired $189.5 million of earning assets which included $9.2 million of
      Federal funds sold, $42.3 million of available-for-sale securities and $138.0
      million of total loans. At the same time, we assumed $180.8 million of deposits
      and $7.5 million in advances from the Federal Home Loan Bank for a total of
      $188.3 million. Aside from the merger, we continued to grow organically. Average
      earning assets have grown organically by approximately $40.4 million and average
      non-interest-bearing and interest-bearing liabilities have grown by $61.6
      million since the first quarter of 2007.





Net
      interest income for the Company has increased because of growth in
      interest-bearing assets and liabilities. However, the net interest margin has
      decreased due to the impact of non-performing assets and a series of short-term
      interest rate decreases imposed by the Federal Reserve in the fourth quarter
      of
      2007 and the first quarter of 2008. The year-to-date average yield on earning
      assets has decreased by 129 basis points in the first quarter of 2008 (7.27
      percent in 2008 from 8.56 percent in 2007), while the first quarter average
      cost
      of funds has decreased by 85 basis points (3.38 percent in 2008 from 4.23
      percent in 2007). The net interest margin for the first quarter of 2008 was
      3.86
      percent, a decrease of 70 basis points, compared to 4.56 percent for the first
      quarter of 2007.


14





The
      net
      interest margin has decreased more as a result of the increase in our
      non-performing assets than because of interest rate cuts. The first quarter
      2008
      average yield (exclusive of loan fees) on loans was 7.27 percent compared to
      8.56 percent for the first quarter of 2007. We reversed $306 thousand of
      interest on impaired loans in the first quarter of 2008. Without this reversal
      of interest, our average yield on loans for the first quarter of 2008 would
      have
      been 7.35 percent. Included in the average balance of our loans are non-accrual
      loans having an average balance in the amount of $29.7 million. Subtracting
      the
      average balance of non-accrual loans from average loans, the average yield
      on
      loans would have been 7.70 percent. If one reduces the average balance of loans
      by the average balance of foreclosed property ($14.7 million), the yield on
      loans would have been 7.88 percent. Ignoring the impact of charged-off interest,
      non-accrual loans and foreclosed property, our net interest margin would have
      been 4.28 percent in the first quarter of 2008 which is only 28 basis points
      less than the net interest margin in the first quarter of 2007.





Our
      net
      interest margin has also decreased as a result of lower loan production. Loan
      fees are generated by loan originations. Since loan originations have decreased
      in the first quarter of 2008 compared to the first quarter 2007, the yield
      contribution of loan fees to interest-bearing assets has likewise decreased.
      In
      the first quarter of 2007, loan fees added 35 basis points to the earning asset
      yield compared 26 basis points in the first quarter of 2008. The reduction
      in
      loan fees resulted in a decrease in the net interest margin of 8 basis points.





We
      have
      been successful in reducing the Bank’s cost of funds to similar decreases in
      asset yields. This is largely due to strategies implemented by the Bank’s Asset
      and Liability Management Committee. In late 2006, we entered into a hedging
      strategy in anticipation of the possibility of declining rates. We swapped
      the
      fixed interest rates on $41.2 million of brokered deposits to floating interest
      rates on September 19, 2006. The hedging contract resulted in a reduction in
      interest expense of $210 thousand in the first quarter of 2008. In addition,
      approximately 39 percent of the Bank’s interest-bearing liabilities are
      comprised of transaction accounts. These accounts are not contractually tied
      to
      a fixed interest rate. We have the ability to control the cost of those funds
      as
      long as we remain competitive. Management believes it has successfully
      controlled the cost of funds thereby allowing asset yields to respond to
      decreases in market interest rates. The change in market interest rates has
      had
      a reduced impact on our net interest margin.





*Non-Interest
      Income and Expense*





Non-interest
      income increased by $701 thousand, or 40.5 percent, when comparing the first
      quarter of 2008 to first quarter of 2007. Service charge income increased by
      $585 thousand, or 61.2 percent, when comparing the first quarters 2008 and
      2007.
      This increase is primarily attributable to the addition of First Haralson’s
      customer base. Prior to the merger, First Haralson was averaging approximately
      $180 thousand per month in service charges on deposit accounts which would
      result in an increase of approximately $540 thousand for the quarter. The
      remainder of the increase in service charges on deposit accounts is attributable
      to growth in the number of deposit accounts since the merger.





Mortgage
      fee income increased by $16 thousand, or 15.8 percent, from first quarter 2007
      to first quarter 2008. Mortgage origination volume has finally begun to increase
      after three years of decline. The mortgage origination volume that the Company
      is experiencing generally results from home purchases and a small amount of
      refinance activity. Although the increase was not large, management is
      encouraged that it is continuing to increase, particularly in light of the
      potential of a continuing weakening of the residential real estate market in
      the
      Company’s market area.





During
      the first quarter of 2008, the brokerage division generated $111 thousand in
      brokerage fees which represented a $45 thousand, or 28.6 percent decrease,
      compared to the first quarter of 2007. The brokerage division had reached a
      cumulative breakeven point by the end of 2007. However, the activity in the
      department has decreased significantly due to the volatility and uncertainty
      in
      the stock market.





ATM
      network fees increased by $179 thousand, or 86.6%. Again, the majority of the
      increase was attributable to the revenue contribution of First Haralson’s
      operations. Before the merger, First Haralson’s average ATM network fees were
      approximately $53 thousand per month which would account for approximately
      $159
      thousand of the increase in ATM network fees. In addition, we recorded a gain
      on
      the sale of securities in the amount of $47 thousand in the first quarter of
      2008. We consider this gain non-recurring in nature. The sale of securities
      was
      part of a strategy to reposition the investment portfolio for interest rate
      risk
      purposes and involved the sale of $5.0 million of shorter term investment
      securities to reposition that portion of the portfolio to longer term.
      Miscellaneous income decreased by $92 thousand, or 29.3% comparing the first
      quarter of 2008 to the first quarter of 2007. We received a distribution of
      $118
      thousand from a business development partnership in which we are a member in
      the
      first quarter of 2007 which was non-recurring in nature.


15




When
      comparing total non-interest expense for the three month periods ended March
      31,
      2008 with that of 2007, we experienced an increase of $1.9 million, or 40.1
      percent. This increase includes a $748 thousand, or 26.0 percent, increase
      in
      salaries and benefits. Salaries and benefits were expected to increase to a
      larger extent as a result of the merger. However, because of the elevated loan
      loss provision, charged-off interest and charged down foreclosed property the
      Company experienced in the last quarter of 2007 and the first quarter of 2008,
      our bonus and profit sharing accruals were $412 thousand less in the first
      quarter of 2008 than they were in the first quarter of 2007.





As
      of
      March 31, 2008, we had 273 full time equivalent employees compared to 184 full
      time equivalent employees at March 31, 2007. We have added 81 full time
      equivalent employees (for an increase of 43.5%) as a result of the First
      Haralson merger. The additional employee count in the first quarter of 2008
      accounted for nearly all of the increase in salaries and benefits from the
      first
      quarter of 2007. In addition to the First Haralson acquisition, we added two
      staff members as a result of the commercial loan production office we opened
      in
      July 2007 and we added five staff members to operate our second Banco De
      Progreso location in Coweta County in December 2007. Two other commercial
      lenders (one in our Bowdon market and the other in our Bremen market) have
      been
      added since the first quarter of 2007.





Occupancy
      expense in the first quarter of 2008 increased $361 thousand, or 54.6 percent,
      when compared to the first quarter of 2007. The increase in occupancy expense
      was primarily attributable to the merger. We added [five] branches and First
      Haralson’s main office to our locations. The increase in depreciation
      attributable to the added fixed assets accounted for $136 thousand of the
      increase. Maintenance of our branch system and banking equipment increased
      by
      $82 thousand from the first quarter of 2007 to 2008. Our telephone system has
      been upgraded to accommodate the entire branch system. Telephone expense has
      increased by $72 thousand from the first quarter of 2007 to the first quarter
      of
      2008. However, we expect that telephone expense will be reduced significantly
      for the remainder of 2008 as we migrate to one telephone system. The remainder
      of the increase is attributable to utilities, insurance and property
      taxes.





Other
      operating expense increased by $775 thousand, or 67.0 percent, from the first
      quarter of 2007 to the first quarter of 2008. We now are amortizing a core
      deposit premium of $143 thousand in the first quarter of 2008 which did not
      occur in the first quarter of 2007. Other operating expense includes expense
      to
      collect and administer loans and expense to maintain and manage foreclosed
      property. These expenses have increased by $128 thousand, or 69.7 percent.
      ATM
      network expense also increased by $98 thousand, while ATM revenue which is
      included in miscellaneous income increased by $179 thousand, from 2007 to 2008.
      Supplies and postage related to maintaining a larger customer base have
      increased by $74 thousand, or 43.3 percent. The remaining $332 thousand increase
      is attributable to: (i) professional fees related to audit and accounting,
      software consulting and maintenance; (ii) deposit insurance and regulatory
      fees
      resulting from our larger deposit base; (iii) directors fees resulting from
      our
      expanded board; and (iv) approximately twenty other line items that are included
      in other operating expenses.




*Income
      Taxes*





Income
      tax expense for the first three months of each year was $585 thousand in 2008
      and $953 thousand in 2007. The effective tax rates for each of the periods
      ended
      March 31, 2008 and 2007 were 24.2 percent and 32.5 percent, respectively. The
      effective tax rate has decreased due to the increase in tax advantaged income
      such as interest on municipal securities and tax credits as a percentage of
      total income.





*Provision
      and Allowance for Loan Losses*





The
      adequacy of the allowance for loan losses is determined through management’s
      informed judgment concerning the amount of risk inherent in the Bank’s loan and
      lease portfolios. This judgment is based on such factors as the change in levels
      of non-performing and past due loans and leases, historical loan loss
      experience, borrowers’ financial condition, concentration of loans to specific
      borrowers and industries, estimated values of underlying collateral, and current
      and prospective economic conditions. Management has taken an aggressive approach
      to identification and recognition of potential problem loans. In addition,
      management is attempting to recognize impairment of a loan and to continue
      to
      analyze and evaluate current market values for collateral on impaired loans.
      W hile
      uncertainty prevails in assessing loan quality and collateral valuations, a
      formal allowance for loan loss adequacy test is performed quarterly and updates
      are performed each month end. Specific amounts of loss are estimated on problem
      loans and historical loss percentages are applied to the balance of the
      portfolio using certain portfolio stratifications. Additionally, the evaluation
      takes into consideration such factors as changes in the nature and volume of
      the
      loan portfolio, current economic conditions, regulatory examination results,
      and
      the existence of loan concentrations.


16




Through
      our problem loan identification program, we strive to identify those loans
      that
      exhibit weakness and classify them on a classified and criticized loan list.
      Management has elected to meet with lenders and credit staff more often and
      in
      greater detail than it may have in a more stable credit quality period. Special
      attention is given to construction and land development loans in order to
      accurately evaluate the exposure to loan loss of this portfolio. This migration
      analysis assigns historical loss amounts to pools of loans according to
      classifications of risk ratings to calculate a general allowance to the overall
      portfolio. In cases where significant weaknesses exist in a specific loan,
      a
      specific reserve is assigned to such loan.





The
      allowance for loan losses at March 31, 2008 was $13.1 million, or 1.98 percent
      of total loans, compared to $6.0 million, or 1.21 percent of loans, at March
      31,
      2007 and $12.4 million, or 1.88 percent of total loans, at December 31, 2007.
      Management believes that the allowance for loan losses is adequate to absorb
      risk of loss identified in the loan portfolio as of March 31, 2008. Changes
      in
      the allowance for loan losses for the three month period ended March 31, 2008
      compared to March 31, 2007 are as follows:





**Allowance
      for Loan Loss**




**For the Three Months Ended March 31,****2008**
            
            **2007**Balance
                at beginning of period
            
            $
            12,422,428
            
            $
            5,748,355Charge-offs:Commercial,
                financial and agricultural
            
            
            47,853
            
            
            28,088Real
                estate – construction
            
            
            4,998
            
            
            12,540Real
                estate – mortgage
            
            
            11,425
            
            
            78,434Consumer
                loans
            
            
            85,974
            
            
            26,022Total
                charge-offs
            
            
            150,250
            
            
            145,084Recoveries:Commercial,
                financial and agricultural
            
            
            11,645
            
            
            -Real
                estate – construction
            
            
            62,320
            
            
            -Real
                estate – mortgage
            
            
            1,471
            
            
            2,381Consumer
                loans
            
            
            44,434
            
            
            28,257Total
                recoveries
            
            
            119,870
            
            
            30,638Net
                (charge-offs) recoveries
            
            
            (30,380
            )
            
            (114,446
            )Provision
                for loan losses
            
            
            750,000
            
            
            375,000Balance
                at end of period
            
            $
            13,142,048
            
            $
            6,008,909Ratio
                    of net (charge-offs) recoveries during the period to average
                    loans
                    outstanding
            
            
            <(0.01
            )%
            
            (0.02
            )%Ratio
                of allowance to total loans
            
            
            1.98
            %
            
            1.21
            %





*Non-Performing
      Assets and Past Due Loans*





Non-performing
      assets, comprised of foreclosed property, non-accrual loans and loans for which
      payments are more than 90 days past due, totaled $54.5 million at March 31,
      2008, compared to $6.2 million at March 31, 2007 and $57.9 million at December
      31, 2007. Non-performing assets as a percentage of total loans and foreclosed
      property owned at March 31, 2008, March 31, 2007 and December 31, 2007 were
      8.02
      percent, 1.26 percent and 8.82 percent, respectively. From March 31, 2007 to
      March 31, 2008 foreclosed property increased $12.6 million, non-accrual loans
      increased $34.1 million and loans for which payments are more than 90 days
      past
      due increased $1.5 million.





In
      recognition of the potential impact of the residential real estate downturn,
      management began to raise the credit standards for those borrowers. The
      suddenness and the severity with which the downturn came in the last quarter
      of
      2007 and the first quarter of 2008 was, however, more than anticipated. The
      impact that sub-prime mortgage lending had on the absorption rate of home sales
      in the market area was also unanticipated. When sub-prime lenders began to
      experience credit quality problems related to increased rates in the adjustable
      sub-prime market, that type of lending ceased. Further, as homes that were
      built
      and lots were developed to meet the sub-prime and conforming mortgage demand
      came to market, not only had the sub-prime demand decreased sharply, but homes
      which were subject to sub prime lending began emerging back on the market in
      foreclosure. This resulted in a (by some estimates) 28 to 36 month supply of
      homes for sale in the market and a five to six year supply of developed lots.
      The declining demand for housing is now being further exasperated by a downturn
      in the national economy, rising energy prices and a volatile stock market.


17




The
      excess of supply of residential property and floundering national and local
      economy has had a negative impact on our residential construction and
      development borrowers. They are experiencing much longer than expected sales
      time and, therefore, the holding period and expense of the homes or residential
      lots was much higher than expected. As time passes, the borrowers have been
      paying the interest and ownership carry on the properties, but have diminished
      their financial capacity to continue to hold the property. Thus, we have been
      experiencing an increased number of past due loans which has led to impairment
      of the loan and possible foreclosure for some borrowers. In addition, some
      borrowers may file for protection under bankruptcy laws which can further
      lengthen the collection period of the loan. Approximately 80% of the total
      amount of non-performing assets as of March 31, 2008 was made up of sixteen
      loan
      relationships with balances of $2 million to $7 million per
      relationship.





Management
      has performed impairment analyses on each troubled loan relationship and
      continues to focus on the credit quality of its residential construction and
      development loan portfolio. The impairment analysis entails evaluating the
      net
      realizable value of the properties which were held as collateral for the loans.
      The properties are re-appraised and those new appraisals are evaluated by
      management. Generally, there is greater uncertainty in real estate values in
      times of a market downturn. As expected, the updated values came in at less
      than
      the original appraisal and, therefore, led management to suspend the accrual
      of
      interest and in certain instances charge-down the balance of the impaired loans.
      As part of its evaluation of the collectability of the impaired asset,
      management must continue to make value judgments on the properties or loans
      through updated appraisals and its knowledge of the market. There can be no
      assurance that residential real estate values will not continue to decline
      or
      that more loans will become impaired, thereby causing more potential suspension
      of accrued interest or further charge-down of loans.





Management’s
      most critical priority is disposing and maximizing the net realizable value
      of
      the non-performing assets. Management will be considering multiple avenues
      to
      reduce non-performing assets. The holding period of non-performing assets must
      be minimized as these assets bear a cost to carry for us in both interest carry
      and maintenance and real estate taxes. We believe that the ultimate outcome
      of
      this cycle of economic downturn is the largest uncertainty management faces
      over
      the next twelve months. We also believe we are in a market that has high
      historical and projected population and income growth potential.





**Financial
      Condition**





*Overview*





Total
      assets were $886.2 million at March 31, 2008, an increase of $2.5 million,
      or
      0.3 percent, from December 31, 2007. During the first quarter of 2008, total
      loans increased $5.2 million, or 0.8 percent, and total deposits decreased
      $3.3
      million, or 0.5 percent. Loan demand in the Bank’s market area has decreased
      considerably compared to historical levels. In the first quarter of 2008, we
      funded our loan growth with liquidity that was on the balance sheet.




*Assets
      and Funding*





At
      March
      31, 2008, earning assets totaled $760.6 million, a decrease of $6.6 million,
      or
      0.9 percent, from December 31, 2007. Both periods were hampered by the high
      level of non-performing assets described elsewhere in this report. The annual
      growth in earning assets from March 31, 2007 to March 31, 2008 was $184.9
      million, or 32.1 percent. The mix of interest earning assets at the end of
      first
      quarter 2008 is very similar to that of our 2007 fiscal year end. Total loans
      to
      total deposits was 94.6 percent and 93.4 percent as of March 31, 2008 and
      December 31, 2007, respectively. Management intends to remain more liquid in
      2008 as uncertainty prevails in the banking industry. Additionally, we expect
      lower than historical loan growth and asset growth in 2008.


18





At
      March
      31, 2008, interest-bearing liabilities decreased $5.1 million, or 0.7 percent,
      when compared to December 31, 2007 but increased $214.2 million, or 43.4
      percent, since March 31, 2007. Non-interest bearing demand accounts increased
      by
      $7.7 million, or 11.4 percent, interest-bearing demand accounts increased by
      $1.3 million, or 0.6 percent, and total time deposits decreased by $12.8
      million, or 3.2 percent, comparing March 31, 2008 to December 31, 2007. At
      March
      31, 2008, deposits represented 87.3 percent and Federal Home Bank advances,
      securities sold under repurchase and the junior subordinated debentures
      represented 12.7 percent of interest-bearing liabilities, respectively, compared
      to 88.2 percent and 11.8 percent, respectively, as of December 31, 2007.





Major
      classifications of loans at March 31, 2008 and December 31, 2007 are summarized
      as follows:





**Loan**
            
            **March 31, 2008**
            
            **December 31, 2007**Commercial,
                financial and agricultural
            
            $
            60,823,174
            
            $
            63,038,467Real
                Estate – mortgage
            
            
            337,947,733
            
            
            313,836,443Real
                Estate – construction
            
            
            225,956,124
            
            
            242,216,730Consumer
            
            
            40,432,464
            
            
            40,872,282Total
            
            $
            665,159,495
            
            $
            659,963,922Unearned
                loan fees
            
            
            (1,741,890
            )
            
            (1,802,831
            )Allowance
                for loan losses
            
            
            (13,142,048
            )
            
            (12,422,428
            )Net
                Loans
            
            $
            650,275,557
            
            $
            645,738,663





**Liquidity
      and Capital Resources**





Net
      cash
      provided by operating activities totaled $357 thousand for the three months
      ended March 31, 2008. Net cash used by investing activities totaled $4.7
      million, which consisted primarily of $15.6 million cash used to fund loans,
      $4.5 million of net proceeds from sales, maturities and additional purchases
      of
      available-for-sale investment securities and $6.2 million in proceeds from
      the
      sale of foreclosed property. Net cash provided by financing activities totaled
      $1.3 million for the three months ended March 31, 2008, which primarily
      consisted of a $3.3 million decrease in deposits, $8.4 million in proceeds
      from
      federal funds purchased and repayment of Federal Home Loan Bank borrowings
      in
      the amount of $2.5 million. The net decrease in cash and cash equivalents for
      the period ended March 31, 2008 was $3.0 million.





Total
      stockholders’ equity at March 31, 2008 was 9.1 percent of total assets, equal to
      9.1 percent at December 31, 2007. Total stockholders’ equity increased by $566
      thousand primarily due to an increase in retained earnings of $558 thousand.
      However, assets also increased which caused the percentage of capital to remain
      the same.





At
      March
      31, 2008, WGNB Corp. was in compliance with various regulatory capital
      requirements administered by federal banking agencies. The following is a table
      representing WGNB Corp.’s consolidated Tier-1, tangible capital, and risk-based
      capital:





**March
                31, 2008**
            ********
            ****
            **Actual**
            ****
            ****
            ****
            **Required**
            ****
            ****
            ****
            **Excess**
            ****
            
            ********
            ****
            **Amount**
            ****
            **%**
            ****
            **Amount**
            ****
            **%**
            ****
            **Amount**
            ****
            **%**Total
                capital (to risk-weighted assets)
            
            $
            69,798
            
            
            10.33
            %
            $
            54,070
            
            
            8.00
            %
            $
            15,728
            
            
            2.33
            %Tier
                1 capital (to risk-weighted assets)
            
            
            61,349
            
            
            9.08
            %
            
            27,035
            
            
            4.00
            %
            
            34,314
            
            
            5.08
            %Tier
                1 capital (to average assets)
            
            
            61,349
            
            
            7.05
            %
            
            34,790
            
            
            4.00
            %
            
            26,559
            
            
            3.05
            %





*Off
      Balance Sheet Risk*





Through
      the operations of the Bank, the Company has made contractual commitments to
      extend credit in the ordinary course of its business activities. These
      commitments are legally binding agreements to lend money to the Bank’s customers
      at predetermined interest rates for a specified period of time. At March 31,
      2008, the Bank had issued commitments to extend credit of $86,149,000 through
      various types of commercial lending arrangements and additional commitments
      through standby letters of credit of $10,079,000. The Bank evaluates each
      customer’s creditworthiness on a case-by-case basis. The amount of collateral
      obtained, if deemed necessary by the Bank upon extension of credit, is based
      on
      its credit evaluation of the borrower. Collateral varies but may include
      accounts receivable, inventory, property, plant and equipment, commercial and
      residential real estate. The Bank manages the credit risk on these commitments
      by subjecting them to normal underwriting and risk management processes. Because
      the letters of credit generally have fixed expiration dates and many will expire
      without being drawn upon, the total commitment level does not necessarily
      represent future cash requirements. If needed to fund these outstanding
      commitments, the Bank has the ability to liquidate Federal funds sold or
      securities available-for-sale or on a short-term basis to borrow and purchase
      Federal funds from other financial institutions.


19




**Item
      3. Quantitative and Qualitative Disclosures About Market Risk**





Market
      risk is the risk of loss from adverse changes in market prices and interest
      rates. The Company’s market risk arises primarily from interest rate risk
      inherent in its lending and deposit-taking activities. The Company has little
      or
      no risk related to trading accounts, commodities or foreign
      exchanges.





Interest
      rate risk, which encompasses price risk, is the exposure of a banking
      organization’s financial condition and earnings ability to adverse movements in
      interest rates. The measurement of market risk associated with financial
      instruments is meaningful only when all related and offsetting on-and
      off-balance sheet transactions are aggregated, and the resulting net positions
      are identified. Disclosures about the fair value of financial instruments as
      of
      December 31, 2007, which reflected changes in market prices and rates, can
      be
      found in the Company’s Annual Report on Form 10-K for the year ended December
      31, 2007 under the section entitled “Management’s
      Discussion and Analysis of Financial Condition and Results of Operation -
      Asset/Liability Management.”





Management
      actively monitors and manages the Company’s interest rate risk exposure. The
      primary objective in managing interest rate risk is to limit, within established
      guidelines, the adverse impact of changes in interest rates on the Company’s net
      interest income and capital, while adjusting the Company’s asset-liability
      structure to obtain the maximum yield versus cost spread on that structure.
      Management relies primarily on its asset-liability structure to control interest
      rate risk. However, a sudden and substantial increase in interest rates borne
      by
      assets and liabilities do not change at the same speed, to the same extent,
      or
      on the same basis. Management believes that there have been no significant
      changes in the Company’s market risk exposure since December 31,
      2007.





**Item
      4T. Controls and Procedures**





The
      Company maintains disclosure controls and procedures, as defined in Rule
      13a-15(e) promulgated under the Securities Exchange Act of 1934 (the “Exchange
      Act”), that are designed to ensure that information required to be disclosed in
      the reports that the Company files or submits under the Exchange Act is
      recorded, processed, summarized and reported within the time periods specified
      in the rules and forms of the Securities and Exchange Commission and that such
      information is accumulated and communicated to the Company’s management,
      including its Chief Executive and Chief Financial Officers, as appropriate,
      to
      allow timely decisions regarding required disclosure. The Company carried out
      an
      evaluation, under the supervision and with the participation of its management,
      including its Chief Executive and Chief Financial Officers, of the effectiveness
      of the design and operation of its disclosure controls and procedures as of
      the
      end of the period covered by this Report. Based on the evaluation of these
      disclosure controls and procedures, the Chief Executive and Chief Financial
      Officers of the Company concluded that the Company’s disclosure controls and
      procedures were effective as of the end of the period covered by this
      Report.





There
      were no changes in the Company’s internal control over financial reporting
      during the Company’s fiscal quarter ended March 31, 2008 that have materially
      affected, or are reasonably likely to materially effect, the Company’s internal
      control over financial reporting.





**Part
      II – Other Information**





**Item
      1.**  **Legal
      Proceedings**





While
      the
      Company and its subsidiaries are from time to time party to various legal
      proceedings arising from the ordinary course of business, management believes
      that there are no proceedings of material risk threatened or
      pending.




20





**Item
      1A.**  **Risk
      Factors**





There
      have been no material changes to the risk factors affecting the Company from
      those set forth in the Company’s Annual Report on Form 10-K for the fiscal year
      ended December 31, 2007.





**Item
      2.**  **Unregistered
      Sales of Equity Securities and Use of Proceeds**





(a)
            Not
                applicable.





(b)
            Not
                applicable





(c)
            There
                were no issuer purchases of equity securities during the period covered
                by
                this Report.





During
      the first quarter of 2008, the Company declared quarterly cash dividends
      amounting to 21 cents per share which were paid on April 4, 2008. The
      declaration of future dividends is within the discretion of the Board of
      Directors and will depend, among other things, upon business conditions,
      earnings, the financial condition of the Bank and the Company, and regulatory
      requirements.





**Item
      3.**  **Defaults
      Upon Senior Securities**





Not
      applicable.





**Item
      4.**  **Submission
      of Matters to a Vote of Security Holders**





Not
      applicable.





**Item
      5.**  **Other
      Information**





Not
      applicable.





**Item
      6.**  **Exhibits**





(a)
            The
                following exhibits are filed as part of this
                Report:





3.1
            Amended
                and Restated Articles of Incorporation (Incorporated by reference
                to
                Exhibit 3.1 to the Company’s Registration Statement on Form 10-SB filed
                June 14, 2000 (the “Form 10-SB”).





3.2
            Amended
                and Restated Bylaws (Incorporated by reference to Exhibit 3.2 to
                the Form
                10-SB).





4.1
            See
                exhibits 3.1 and 3.2 for provisions of Company’s Articles of Incorporation
                and Bylaws Defining the Rights of
                Shareholders.





4.2
            Specimen
                certificate representing shares of Common Stock (Incorporated by
                reference
                to Exhibit 4.2 to the Form 10-SB).





31.1
            Certification
                of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002.





31.2
            Certification
                of Chief Financial Officer pursuant to Section 302 of the Sarbanes
                Oxley
                Act of 2002.





32.1
            Certification
                of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
                Act of 2002.





32.2
            Certification
                of Chief Financial Officer pursuant to Section 906 of the Sarbanes
                Oxley
                Act of 2002.


21


**SIGNATURES**





In
      accordance with the requirements of the Securities Exchange Act of 1934, the
      Company has caused this Report to be signed on its behalf by the undersigned,
      thereunto duly authorized.




Dated:
      May 15, 2008




WGNB
                CORP.By:
            /s/
              H. B. Lipham, IIIH.
                B. Lipham, IIIChief
                Executive Officer(Principal
                Executive Officer)By:
            /s/
              Steven J. HaackSteven
                J. HaackSecretary
                and Treasurer(Principal
                Financial Officer)




22