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SECURITIES AND EXCHANGE COMMISSION  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
September 30, 2004[   ]
    
    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. 
  Georgia
    
    58-1640130(State of Incorporation)
    
    (I.R.S. Employer Identification No.)
 201 Maple Street
P.O. Box 280
Carrollton, Georgia 30112 
  (770) 832-3557 
  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 [ X ] No [  ] Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [ X ] 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 November 4, 2004Common Stock, $1.25 par value
    
    3,296,118




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WGNB CORP. INDEX TO FORM 10-Q Item Numberin Form 10-Q
    
    Description
    
    PagePart One
    
    Financial InformationItem 1.
    
    Financial Statements
    
    
    1Consolidated Balance Sheets at September 30, 2004 and December 31, 2003
    
    
    2Consolidated Statements of Earnings for Three Months Ended September 30, 2004 and September 30, 2003
    
    
    3Consolidated Statements of Comprehensive Income for Three Months Ended September 30, 2004 and September 30, 2003
    
    
    4Consolidated Statements of Earnings for Nine Months Ended September 30, 2004 and September 30, 2003
    
    
    5Consolidated Statements of Comprehensive Income for Nine Months Ended September 30, 2004 and September 30, 2003
    
    
    6Consolidated Statements of Cash Flows for Nine Months Ended September 30, 2004 and September 30, 2003
    
    
    7Notes to Consolidated Financial Statements
    
    
    9Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    12Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    16Item 4.
    
    Controls and Procedures
    
    
    16Part Two
    
    Other InformationItem 1.
    
    Legal Proceedings
    
    
    16Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    17Item 3.
    
    Defaults Upon Senior Securities
    
    
    17Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    17Item 5.
    
    Other Information
    
    
    17Item 6.
    
    Exhibits and Reports on Form 8-K
    
    
    17Signatures
    
    
    19EX-31.1 SECTION 302 CERTIFICATION OF THE CEOEX-31.2 SECTION 302 CERTIFICATION OF THE CFOEX-32.1 SECTION 906 CERTIFICATION OF THE CEOEX-32.2 SECTION 906 CERTIFICATION OF THE CFO




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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




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WGNB CORP. 
 Consolidated Balance Sheet
 September 30, 2004 For the Period EndedSeptember 30, 2004
    
    December 31, 2003(unaudited)
    
    (audited)AssetsCash and due from banks, including reserve requirements
of $100,000
    
    $
    18,546,567
    
    
    $
    15,564,312Federal funds sold
    
    
    8,117,642
    
    
    
    11,671,486Cash and cash equivalents
    
    
    26,664,209
    
    
    
    27,235,798Securities available for sale
    
    
    56,598,602
    
    
    
    55,276,742Securities held to maturity
    
    
    4,253,140
    
    
    
    4,250,000Loans, net
    
    
    342,302,415
    
    
    
    292,564,759Premises and equipment, net
    
    
    7,117,803
    
    
    
    6,762,895Accrued interest receivable
    
    
    2,007,289
    
    
    
    1,939,028Other assets
    
    
    5,793,712
    
    
    
    5,186,689$
    444,737,170
    
    
    $
    393,215,911Liabilities and Stockholders EquityDeposits:Demand
    
    $
    48,930,211
    
    
    $
    40,181,696Interest bearing demand
    
    
    134,406,806
    
    
    
    138,337,540Savings
    
    
    11,761,189
    
    
    
    11,215,937Time
    
    
    91,072,966
    
    
    
    82,537,712Time, over $100,000
    
    
    55,617,527
    
    
    
    31,043,295Total deposits
    
    
    341,788,699
    
    
    
    303,316,180Federal Home Loan Bank advances
    
    
    55,000,000
    
    
    
    45,000,000Accrued interest payable
    
    
    1,308,059
    
    
    
    1,028,269Other liabilities
    
    
    2,475,188
    
    
    
    1,782,200Total liabilities
    
    
    400,571,946
    
    
    
    351,126,649Stockholders equity:Common stock, $1.25 par value, 10,000,000 shares authorized;
3,296,118 and 3,306,452 shares issued and outstanding
    
    
    4,120,148
    
    
    
    4,133,065Additional paid-in capital
    
    
    4,939,439
    
    
    
    5,287,947Retained earnings
    
    
    33,744,203
    
    
    
    31,279,245Accumulated comprehensive income
    
    
    1,361,434
    
    
    
    1,389,005Total stockholders equity
    
    
    44,165,224
    
    
    
    42,089,262$
    444,737,170
    
    
    $
    393,215,911
 See accompanying notes to consolidated financial statements. 2




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WGNB CORP. 
 Consolidated Statements of Earnings
 For the Three Months Ended September 30, 2004 and 2003
(unaudited) For the Three Months EndedSeptember 30, 2004
    
    September 30, 2003Interest income:Interest and fees on loans
    
    $
    5,563,315
    
    
    $
    5,198,755Interest on federal funds sold
    
    
    62,448
    
    
    
    38,055Interest on investment securities:U.S. Government agencies
    
    
    246,551
    
    
    
    257,238State, county and municipal
    
    
    367,820
    
    
    
    328,468Other
    
    
    171,315
    
    
    
    130,649Total interest income
    
    
    6,411,449
    
    
    
    5,953,165Interest expense:Interest on deposits:Demand
    
    
    283,320
    
    
    
    204,987Savings
    
    
    11,028
    
    
    
    10,120Time
    
    
    1,067,512
    
    
    
    993,120Interest on FHLB and other borrowings
    
    
    550,667
    
    
    
    608,874Total interest expense
    
    
    1,912,527
    
    
    
    1,817,101Net interest income
    
    
    4,498,922
    
    
    
    4,136,064Provision for loan losses
    
    
    275,000
    
    
    
    75,000Net interest income after
provision for loan losses
    
    
    4,223,922
    
    
    
    4,061,064Other income:Service charges on deposit accounts
    
    
    1,039,458
    
    
    
    961,001Mortgage origination fees
    
    
    123,467
    
    
    
    241,550Miscellaneous
    
    
    304,742
    
    
    
    146,226Total other income
    
    
    1,467,667
    
    
    
    1,348,777Other expenses:Salaries and employee benefits
    
    
    2,075,185
    
    
    
    1,974,529Occupancy
    
    
    471,091
    
    
    
    491,368Other operating
    
    
    835,974
    
    
    
    782,412Total other expenses
    
    
    3,382,250
    
    
    
    3,248,309Earnings before income taxes
    
    
    2,309,339
    
    
    
    2,161,532Income taxes
    
    
    743,980
    
    
    
    722,039Net earnings
    
    $
    1,565,359
    
    
    $
    1,439,493Basic earnings per share
    
    $
    0.47
    
    
    $
    0.44Diluted net earnings per share
    
    $
    0.47
    
    
    $
    0.43Dividends declared per share
    
    $
    0.1975
    
    
    $
    0.1700
 See accompanying notes to consolidated financial statements. 3




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WGNB CORP. 
 Consolidated Statements of Comprehensive Income
 For the Three Months Ended September 30, 2004 and 2003
(unaudited) For the Three Months EndedSeptember 30, 2004
    
    September 30, 2003Net earnings
    
    $
    1,565,359
    
    
    $
    1,439,493Other comprehensive income (loss), net of tax:Unrealized gains (losses) on investment
securities available for sale:Unrealized gains (losses) arising during the period
    
    
    1,221,894
    
    
    
    (1,105,533
    )Associated (taxes) benefit
    
    
    (415,444
    )
    
    
    375,881Other comprehensive income (loss)
    
    
    806,450
    
    
    
    (729,652
    )Comprehensive income
    
    $
    2,371,809
    
    
    $
    709,841
 See accompanying notes to consolidated financial statements. 4




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WGNB CORP. 
 Consolidated Statements of Earnings
For the Nine Months Ended September 30, 2004 and 2003
(unaudited)
 For the Nine Months EndedSeptember 30, 2004
    
    September 30, 2003Interest income:Interest and fees on loans
    
    $
    16,032,934
    
    
    $
    15,393,736Interest on federal funds sold
    
    
    113,914
    
    
    
    161,598Interest on investment securities:U.S. Government agencies
    
    
    731,244
    
    
    
    825,612State, county and municipal
    
    
    1,084,275
    
    
    
    989,713Other
    
    
    495,775
    
    
    
    394,220Total interest income
    
    
    18,458,142
    
    
    
    17,764,879Interest expense:Interest on deposits:Demand
    
    
    802,060
    
    
    
    711,627Savings
    
    
    32,245
    
    
    
    43,308Time
    
    
    2,811,348
    
    
    
    3,163,087Interest on FHLB and other borrowings
    
    
    1,838,594
    
    
    
    1,826,624Total interest expense
    
    
    5,484,247
    
    
    
    5,744,646Net interest income
    
    
    12,973,895
    
    
    
    12,020,233Provision for loan losses
    
    
    625,000
    
    
    
    225,000Net interest income after
provision for loan losses
    
    
    12,348,895
    
    
    
    11,795,233Other income:Service charges on deposit accounts
    
    
    2,991,492
    
    
    
    2,693,633Mortgage origination fees
    
    
    388,183
    
    
    
    751,002Miscellaneous
    
    
    842,697
    
    
    
    739,373Total other income
    
    
    4,222,372
    
    
    
    4,184,008Other expenses:Salaries and employee benefits
    
    
    6,119,893
    
    
    
    5,758,729Occupancy
    
    
    1,466,804
    
    
    
    1,340,004Other operating
    
    
    2,754,197
    
    
    
    2,556,546Total other expenses
    
    
    10,340,894
    
    
    
    9,655,279Earnings before income taxes
    
    
    6,230,373
    
    
    
    6,323,962Income taxes
    
    
    1,882,719
    
    
    
    2,015,453Net earnings
    
    $
    4,347,654
    
    
    $
    4,308,509Net earnings per share
    
    $
    1.32
    
    
    $
    1.30Diluted net earnings per share
    
    $
    1.30
    
    
    $
    1.29Dividends declared per share
    
    $
    0.5700
    
    
    $
    0.4950
 See accompanying notes to consolidated financial statements. 5




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WGNB CORP. 
 Consolidated Statements of Comprehensive Income
 For the Nine Months Ended September 30, 2004 and 2003
(unaudited) For the Nine Months EndedSeptember 30, 2004
    
    September 30, 2003Net earnings
    
    $
    4,347,654
    
    
    $
    4,308,509Other comprehensive loss, net of tax:Unrealized losses on investment
securities available for sale:Unrealized losses arising during the period
    
    
    (41,774
    )
    
    
    (60,756
    )Associated tax benefit
    
    
    14,203
    
    
    
    20,656Other comprehensive loss
    
    
    (27,571
    )
    
    
    (40,100
    )Comprehensive income
    
    $
    4,320,083
    
    
    $
    4,268,409
 See accompanying notes to consolidated financial statements. 6




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WGNB CORP. 
 Consolidated Statements of Cash Flows
 For the Nine Months Ended September 30, 2004 and 2003
(unaudited) For the Nine Months EndedSeptember 30, 2004
    
    September 30, 2003Cash flows from operating activities:Net earnings
    
    $
    4,347,654
    
    
    $
    4,308,509Adjustments to reconcile net earnings to net cash
provided by operating activities:Depreciation, amortization and accretion
    
    
    781,218
    
    
    
    795,976Provision for loan losses
    
    
    625,000
    
    
    
    225,000Benefit for deferred income taxes
    
    
    512,633
    
    
    
    252,606Loss on sale of other real estate
    
    
    52,312
    
    
    
    (Gain) loss on sale of premises and equipment
    
    
    (3,820
    )
    
    
    5,282Change in:Other assets
    
    
    (1,189,216
    )
    
    
    70,844Other liabilities
    
    
    395,772
    
    
    
    734,652Net cash provided by operating activities
    
    
    5,521,553
    
    
    
    6,392,869Cash flows from investing activities:Proceeds from maturities of securities available for sale
    
    
    8,968,584
    
    
    
    13,708,945Purchases of securities available for sale
    
    
    (9,481,579
    )
    
    
    (13,870,285
    )Purchase of securities held to maturity
    
    
    (1,010,000
    )
    
    
    Net change in loans
    
    
    (50,778,776
    )
    
    
    (20,339,465
    )Proceeds from sale of premises and equipment
    
    
    3,820
    
    
    
    1,920Purchases of premises and equipment
    
    
    (979,908
    )
    
    
    (1,549,595
    )Proceeds from sales of other real estate
    
    
    891,946
    
    
    
    Net cash used by investing activities
    
    
    (52,385,913
    )
    
    
    (22,048,480
    )Cash flows from financing activities:Net change in deposits
    
    
    38,472,519
    
    
    
    (9,375,344
    )Federal Home Loan Bank advances
    
    
    10,000,000
    
    
    
    Proceed from Federal Funds Purchased
    
    
    6,835,000
    
    
    
    Repayment of Federal Funds Purchased
    
    
    (6,835,000
    )
    
    
    Dividends paid
    
    
    (1,805,483
    )
    
    
    (1,586,866
    )Exercise of stock options
    
    
    204,414
    
    
    
    46,045Retirement of common stock
    
    
    (578,679
    )
    
    
    (154,532
    )Net cash provided (used) by financing activities
    
    
    46,292,771
    
    
    
    (11,070,697
    )Change in cash and cash equivalents
    
    
    (571,589
    )
    
    
    (26,726,308
    )Cash and cash equivalents at beginning of period
    
    
    27,235,798
    
    
    
    47,667,210Cash and cash equivalents at end of period
    
    $
    26,664,209
    
    
    $
    20,940,902
 See accompanying notes to consolidated financial statements. 7




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WGNB CORP.
Consolidated Statements of Cash Flows, continued For the Nine Months Ended September 30, 2004 and 2003
(unaudited) For the Nine Months EndedSeptember 30, 2004
    
    September 30, 2003Supplemental disclosure of cash flow information:Cash paid during the quarter for:Interest
    
    $
    5,204,457
    
    
    $
    5,803,289Income taxes
    
    
    1,684,700
    
    
    
    1,812,000Non-cash investing and financing activities:Transfer of loans to other real estate
    
    
    416,120
    
    
    
    552,778Change in unrealized gains on
securities available for sale, net of tax
    
    
    27,571
    
    
    
    40,100Change in dividends payable
    
    
    77,213
    
    
    
    51,325Satisfaction of other liability with issuance
of common stock
    
    
    12,840
    
    
    
    28,911
 See accompanying notes to consolidated financial statements. 8




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WGNB Corp. 
 Notes to Consolidated Financial Statements
 September 30, 2004
(unaudited)  (1)
    
    Basis of PresentationThe consolidated financial statements include the accounts of WGNB Corp.
(the Company) and its wholly-owned subsidiary, West Georgia National Bank
(the Bank). All significant inter-company accounts have been eliminated in
consolidation. In some cases, certain prior period amounts have been
reclassified to conform with current year presentation.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 September 30, 2004, and the
results of its operations and its cash flows for the nine-month period then
ended. All such adjustments are normal and recurring in nature. The
financial statements included herein should be read in conjunction with
consolidated financial statements and the related notes and the report of
independent accountants included in the Companys Annual report to
Stockholders on Form 10-K for the year ended December 31, 2003, which
included the results of operations for the years ended December 31, 2003,
2002 and 2001.Critical Accounting PoliciesThe Companys accounting policies are fundamental to understanding
managements discussion and analysis of results of operations and financial
condition. Some of the Companys accounting policies require significant
judgment regarding valuation of assets and liabilities and/or significant
interpretation of specific accounting guidance. A description of the
Companys significant accounting policies can be found in Note 1 of the Notes
to Consolidated Financial Statements in the Companys Annual Report to
Shareholders for the year ended December 31, 2003.Many of the Companys assets and liabilities are recorded using various
valuation techniques that require significant judgment as to recoverability.
The collectibility of loans is reflected through the Companys estimate of
the allowance for loan losses. The Company performs periodic detailed
reviews of its loan portfolio in order to assess adequacy of the allowance
for loan losses in light of anticipated risks and loan losses. In addition,
investment securities available for sale are reflected at their estimated
fair value in the consolidated financial statements. Such amounts are based
on either quoted market prices or estimated values derived by using dealer
quotes and market comparisons.Stock Compensation PlansSFAS No. 123, Accounting for Stock-Based Compensation, encourages all
entities to adopt a fair value based method of accounting for employee stock
compensation plans, whereby compensation cost is measured at the grant date
based on the value of the award and is recognized over the service period,
which is usually the vesting period. However, it also allows an entity to
continue to measure compensation cost for those plans using the intrinsic
value based method of accounting prescribed by Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees, whereby
compensation cost is the excess, if any, of the quoted market price of the
stock at the grant date (or other measurement date) over the amount an
employee must pay to acquire the stock. Stock options issued under the
Companys stock option plan have no intrinsic value at the grant date, and
under Opinion No. 25 no compensation cost is recognized for them. The
Company has elected to continue with the accounting methodology in Opinion
No. 25 and, as a result, has provided proforma disclosures of net income and
earnings per share and other disclosures, as if the fair value based method
of accounting had been applied. Had compensation cost for the plan been
determined based upon the fair value of the options at the grant dates, the
Companys net earnings per share for the year to date and quarters ended
September 30, 2004 and 2003 would have been reduced to the proforma amounts
indicated below: 9




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WGNB Corp.
Notes to Consolidated Financial Statements September 30, 2004
(unaudited)  (1)
    
    Basis of Presention, continued For the three months ended September 30,2004
    
    2003Net earnings
    
    As reported
    
    $
    1,565,359
    
    
    
    1,439,493Proforma
    
    $
    1,565,359
    
    
    
    1,439,493Net earnings per share
    
    As reported
    
    $
    0.47
    
    
    
    0.44Proforma
    
    $
    0.47
    
    
    
    0.44Diluted earnings per share
    
    As reported
    
    $
    0.47
    
    
    
    0.43Proforma
    
    $
    0.47
    
    
    
    0.43
 For the nine months ended September 30,2004
    
    2003Net earnings
    
    As reported
    
    $
    4,347,654
    
    
    
    4,308,509Proforma
    
    $
    4,252,900
    
    
    
    4,158,795Net earnings per share
    
    As reported
    
    $
    1.32
    
    
    
    1.30Proforma
    
    $
    1.29
    
    
    
    1.26Diluted earnings per share
    
    As reported
    
    $
    1.30
    
    
    
    1.29Proforma
    
    $
    1.27
    
    
    
    1.24
  The fair value of each option is estimated on the date of the grant using the
Black-Scholes Model. The following weighted average assumptions were used
for grants in 2004 and 2003, respectively: dividend yield of 2.43 percent and
2.41 percent, risk free interest rates of 4.12 percent and 4.90 percent,
respectively, and an expected life of 10 years. For disclosure purposes, the
Company immediately recognized the expense associated with the option grants
assuming that all awards will vest. The compensation expense included in the
proforma results was determined based on the fair value of the option at the
time of grant multiplied by the number of options granted net of tax effect.
No options were granted in the third quarters of 2004 or 2003.(2)
    
    Net Earnings Per ShareBasic 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 year is used to compute
equivalent shares.Reconciliation of the amounts used in the computation of both basic earnings
per share and diluted earnings per share for the periods ended September
30, 2004 and September 30, 2003 are as follows: 10




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WGNB Corp.
Notes to Consolidated Financial Statements September 30, 2004
(unaudited)  (2)
    
    Net Earnings Per Share, continued For the quarter ended September 30, 2004EarningsNet Earnings
    
    Common Shares
    
    per ShareBasic earnings per share
    
    $
    1,565,359
    
    
    
    3,296,793
    
    
    $
    0.47Effect of dilutive securities  Stock Options
    
    
    
    
    
    
    50,594
    
    
    
    (0.00
    )Diluted earnings per share
    
    $
    1,565,359
    
    
    
    3,347,387
    
    
    $
    0.47
 For the quarter ended September 30, 2003EarningsNet Earnings
    
    Common Shares
    
    per ShareBasic earnings per share
    
    $
    1,439,493
    
    
    
    3,307,827
    
    
    $
    0.44Effect of dilutive securities  Stock Options
    
    
    
    
    
    
    44,237
    
    
    
    (0.01
    )Diluted earnings per share
    
    $
    1,439,493
    
    
    
    3,352,064
    
    
    $
    0.43
 For the nine months ended September 30, 2004EarningsNet Earnings
    
    Common Shares
    
    per ShareBasic earnings per share
    
    $
    4,347,654
    
    
    
    3,303,337
    
    
    $
    1.32Effect of dilutive securities  Stock Options
    
    
    
    
    
    
    50,594
    
    
    
    (0.02
    )Diluted earnings per share
    
    $
    4,347,654
    
    
    
    3,353,931
    
    
    $
    1.30
 For the nine months ended September 30, 2003EarningsNet Earnings
    
    Common Shares
    
    per ShareBasic earnings per share
    
    $
    4,308,509
    
    
    
    3,308,637
    
    
    $
    1.30Effect of dilutive securities  Stock Options
    
    
    
    
    
    
    44,237
    
    
    
    (0.01
    )Diluted earnings per share
    
    $
    4,308,509
    
    
    
    3,352,874
    
    
    $
    1.29
  (3)
    
    Contingent LiabilitiesVarious legal actions and proceedings are pending or are threatened against
the Company and its subsidiaries, some of which seek relief or damages in
amounts that are substantial. These actions and proceedings arise in the
ordinary course of the Companys business. After consultation with legal
counsel, management believes that the aggregate liability, if any, resulting
from such pending and threatened actions and proceedings will not have a
material adverse effect on the Companys financial condition. 11




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Item 2. Managements Discussion and Analysis of Results of Operations and Financial Condition The following analysis compares WGNB Corp.s results of operations for the
quarter and nine month periods ended September 30, 2004 and 2003 and reviews
the important factors affecting WGNB Corp.s financial condition at September
30, 2004 compared to December 31, 2003. These comments should be read in
conjunction with the Companys consolidated financial statements and the
accompanying notes appearing elsewhere in this Report. Forward Looking Statements This Report may contain certain forward-looking statements including
statements concerning plans, objectives, future events or performance and
assumptions and other statements that are not statements of historical fact.
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: (i) the effect of changes
in laws and regulations, including federal and state banking laws and
regulations, with which the Company and its subsidiaries must comply, and the
associated costs of compliance with such laws and regulations either currently
or in the future as applicable; (ii) the effect of changes in accounting
policies and practices, as may be adopted by the regulatory agencies as well as
by the Financial Accounting Standards Board, or of changes in the Companys
organization, compensation and benefit plans; (iii) 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; (iv) the effect of changes
in interest rates; and (v) the effect of changes in the business cycle and
downturns in local, regional or national economies. The Company cautions that
the foregoing list of important factors is not exclusive. Results of Operations Overview Net earnings for the nine months ended September 30, 2004 were $4.35
million, an increase of $39 thousand, or 0.9 percent, compared to the nine
months ended September 30, 2003. The net earnings per diluted common share was
$1.30, which was $0.01 more than the same period in 2003. Net earnings for the
third quarter ended September 30, 2004 were $1.57 million compared to $1.44
million for the third quarter of 2003, an increase of 8.7 percent. Until the
third quarter of 2004, the current years earnings trailed that of 2003. The
primary reason for the lower earnings was reduced mortgage fee income in 2004.
However, earnings have recovered considerably over the past four months due to
loan growth and a concerted effort by management to reduce the Companys
overhead. The Companys diluted earnings per share for the first three
quarters of 2004 were $0.39, $0.44 and $0.47, respectively. Earning for the
remainder of 2004 are expected to be slightly more than the first three
quarters as loan growth continues to increase the Companys net interest
income. Net Interest Income The Companys 2004 year-to-date net interest income exceeded that of the
same period in 2003 by $954 thousand, or 7.9 percent. In that same time
period, average loans outstanding increased by $37.3 million or 13.1 percent.
The year-to-date average yield on earning assets declined 34 basis points, from
6.71 percent as of September 30, 2003 to 6.37 percent as of September 30, 2004.
The year-to-date average cost of funds decreased 29 basis points during the
same time period, from 2.25 percent to 1.96 percent. Interest income was up
$693 thousand, while interest expense was down $260 thousand, comparing the
nine month periods ended September 30, 2004 and 2003. The year-to-date net
interest margin for the two periods are very similar. The year-to-date net
interest margin was 4.52 percent in 2004 compared to 4.59 percent in 2003. For
the remainder of 2004, the average balance and yield on loans is expected to
increase as higher loan balances work into average balances and recent market
interest rate increases impact yields. If the Company is able to contain its
cost of funds, the net interest margin and net interest income should increase.
An additional factor in the increase in interest income is increased loan
fees. Loan fees through September 30, 2004 were $1.24 million, an increase of
$101 thousand, or 8.8 percent, from the same period in 2003. Comparing the third quarter ended September 30, 2004 with that of 2003,
net interest income increased $363 thousand, or 8.8 percent. Over 38 percent
of the total increase in net interest income is attributable to the third
quarter alone. This momentum should carry to the fourth quarter as loan demand
remains robust. In the first quarter of 2004, total loans grew by $23.2
million. In the second quarter of 2004, total loans grew by $14.1 million and
in the third quarter, total loans grew by $12.5 million. 12




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##### Table of Contents



Non-Interest Income and Expense Non-interest income for the first nine months of 2004 increased $38
thousand, or 0.9 percent, when compared to the first nine months of 2003.
Service charges on deposit accounts increased $298 thousand, or 11.1 percent,
through the third quarter of 2004 compared to the nine month year-to-date
amount for 2003. This increase was due primarily to increased income from
non-sufficient funds charges generated by a higher volume of accounts. The
primary reason for the slowing growth of non- interest income is the sharp
decline in mortgage origination fees. Mortgage origination fees are
approximately half what they were in 2003. The refinance volume experienced in
earlier periods has substantially halted since the third quarter of 2003. The
Companys mortgage origination volume consists primarily of new and resale home
financing as mortgage interest rates remain historically low. While mortgage
rates are up from forty year lows, they are still favorable to home purchases.
The housing market in the Companys market area is robust and should remain
steady through the remainder of 2004 into 2005 Miscellaneous income increased
by $103 thousand, or 14.0 percent, when comparing the nine months ended 2004
with that of 2003. Non-interest income for the third quarter ended September 30, 2004
increased $119 thousand, or 8.8 percent, when compared to the third quarter
ended September 30, 2003. The increase was attributable to service charges on
deposit accounts increasing $78 thousand, or 8.2 percent, mortgage origination
fee income decreasing $118 thousand, or 48.9 percent, and miscellaneous income
increasing $159 thousand, or 108.4 percent. The increase in miscellaneous
income is primarily due to write downs in foreclosed property and repossessed
assets which took place in the third quarter of 2003. Non-interest expense increased $686 thousand, or 7.1 percent, for the
three quarters ended September 30, 2004 compared to the same period in 2003.
Salaries and employee benefits accounted for $361 thousand or 53 percent of the
increase. Salaries accounted for $188 of the increase and employee benefits
accounted for $173 of the increase. Moreover, while salaries have increased
4.9 percent, benefits have increased 8.9 percent. This is attributable to
rising group health insurance cost, a trend that does not appear to be
subsiding. The Bank has maintained its full time equivalent employee count
relatively flat at 149 as of September 30, 2004, compare to 146 in September of
2003 while growing its assets $65.4 million. Occupancy expenses for year-to-date 2004 increased $127 thousand, or 9.5
percent, from the same period in 2003. This increase is primarily attributable
to increased depreciation expense related to upgrading the Banks main office,
operations center, Villa Rica and First Tuesday Mall branches. In addition,
the Bank has purchased and placed in service a significant number of
replacement personal computers due to antiquation. Its total depreciation
expense has increased $57 thousand comparing the nine-month periods ended
September 30, 2004 with that of 2003. The increase in depreciation and
occupancy expense is not expected to decline in the immediate future as the
Company intends to open its new Mirror Lake facility in early 2005. Total other operating expenses for this period increased $198 thousand, or
7.7 percent. Approximately $80 thousand of the increase in other operating
expenses is attributable to other professional fees, including those related to
executive coaching and reorganization and realignment of executive and senior
management subsequent to the retirement of the Banks former president.
Additionally, the Company continues to incur increased accounting and legal
fees related to compliance with provisions of the Sarbanes-Oxley Act of 2002
(Sarbanes-Oxley), and related requirements of the Securities Exchange
Commission and NASDAQ. The price of being a public company is expected to
continue to increase as the Company prepares for compliance with Section 404 of
Sarbanes-Oxley. That provision requires the Company to document and test its
internal control procedures related to financial reporting by December 31,
2005. Comparing non-interest expense for the third quarter of 2004 to the third
quarter of 2003, similar factors and trends hold true. Total non-interest
expense increased $134 thousand, or 4.1 percent, comparing the third quarters
ended 2004 and 2003. Salaries and benefits accounted for $101 thousand of the
increase and other operating expenses accounted for $54 thousand of the
increase. Occupancy expenses actually declined $20 thousand which was
attributable to the uncapitalizable cost related to the renovation of the
Banks main office and branch facilities in the last half of 2003. As stated
above, occupancy expense is expected to increase after 2004 with the opening of
the Mirror Lake facility in early 2005. Income Taxes Income tax expense for the nine months ended September 30, 2004 was $1.88
million compared to $2.02 million for the same period in 2003. The effective
tax rate for the period ended September 30, 2004 was 30.2 percent compared to
31.9 percent for the same period in 2003. The reduced marginal rate is due to
the purchase of federal and state tax credits and reduced state taxes related
to interest income from tax free investment securities. 13




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##### Table of Contents



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
Companys loan portfolio. This judgment is based on such factors as the change
in levels of non-performing and past due loans, 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. The allowance for loan losses at
September 30, 2004 was $4.0 million, or 1.17 percent, of total loans compared
to $3.5 million, or 1.18 percent, of total loans at December 31, 2003.
Management believes that the allowance for loan losses is adequate to absorb
possible loss in the loan portfolio. The provision for loan losses has
increased from September 30, 2003 to September 30, 2004 due to any potential
loss on $54 million of loan growth since September 30, 2003. Non-Performing Assets and Past Due Loans Non-performing assets, comprised of real estate owned, non-accrual loans
and loans for which payments are more than 90 days past due, totaled $2.2
million at September 30, 2004 compared to $2.4 million at September 30, 2003.
Non-performing assets expressed as a percentage of total loans and real estate
owned at September 30, 2004 and September 30, 2003 were 0.6 percent and 0.8
percent, respectively. The Company has an independent loan review function. All loans are placed
in loan grade categories, which are consistent with those used by the Banks
regulators. All loans are constantly monitored by the loan officer and the
loan review function for credit quality, consistency and accuracy. Through
this grading process, the Bank assures the timely recognition of credit risks.
In general, as credit risk increases, the level of the allowance for loan loss
will also increase. A formal allowance for loan loss adequacy test is performed at 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. Managements judgment in determining the adequacy of the allowance is
based on evaluations of the collectability of loans. These evaluations take
into consideration such factors as changes in the nature and volume of the loan
portfolio, current economic conditions that may affect the borrowers ability
to pay, overall portfolio quality, and review of specific problem loans. In
determining the adequacy of the allowance for loan losses, management uses a
loan grading system that rates loans in eight different categories. Grades
five though eight, which represent criticized or classified loans, are assigned
allocations of loss based on managements estimate of potential loss that is
generally based on historical losses and/or collateral deficiencies. Loans
graded one through four are stratified by type and allocated loss ranges based
on historical loss experience for the strata. The combination of these results
are compared monthly to the recorded allowance for loan losses and material
differences are adjusted by increasing or decreasing the provision for loan
losses. Loans deemed to be impaired are evaluated individually to measure the
probable loss, if any, in the credit. Management uses an internal loan
reviewer who is independent of the lending function to challenge and
corroborate the loan grading system and provide additional analysis in
determining the adequacy of the allowance for loan losses and the future
provisions for estimated loan losses. Management believes that the allowance for loan losses is adequate. While
management uses available information to recognize losses on loans, future
additions to the allowance may be necessary based on changes in economic
conditions and a change in the borrowers ability to repay. In addition,
regulators, as an integral part of their examination process, periodically
review the Companys allowance for loan losses. Such regulators may require
the Company to recognize additions to the allowance based on their judgments of
information available to them at the time of their examination. Management of
the Company realizes the importance of maintaining an adequate allowance for
loan losses. Through a professional loan review function and effective loan
officer identification program, management is recognizing weaknesses in the
loan portfolio in a timely manner. Early identification of deteriorating
credit attributes allows management to take a proactive role in documenting an
established plan to enhance the Companys position and minimize the potential
for loss. Through the problem loan identification program outlined above, management
is able to identify those loans that exhibit weakness and classify them on a
classified and criticized loan list. The Companys 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 loans in addition to the general allowance. The Company also
evaluates the risks associated with concentrations in credit. If it is
necessary to assign an allowance related to concentrations of credit, the
Company adds a specific reserve related to such risks. Management is unaware
of any known trends, events or uncertainties that will have, or that are
reasonably likely to have, a material effect on liquidity, capital 14




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##### Table of Contents



resources or operations. Financial Condition Overview Total assets were $445 million at September 30, 2004, an increase of $51.5
million, or 13.1 percent, from December 31, 2003. Assets and Funding The balance sheet has grown significantly since December 31, 2003. At
September 30, 2004, earning assets totaled $417 million which represents an
increase of $48.7 million or 13.2 percent since December 31, 2003. This is the
biggest dollar increase in earning assets in a nine-month period the Company
has experienced in its almost 60 year history. Most of the increase in
interest earning assets was attributable to loans. Total loans have grown
$50.3 million, or 17.0 percent, since December 31, 2003. If one measures loan
growth over a one year period from September 30, 2003 to 2004, total loans have
grown $54.0 million, or 18.5 percent. At September 30, 2004, interest-bearing liabilities had increased $39.7
million, or 12.9 percent, compared to those at December 31, 2003.
Non-interest-bearing demand deposits increased $8.7 million, or 21.8 percent,
for the nine months ended September 30, 2004. Interest bearing demand deposits
decreased $3.9 million, or 2.8 percent, and certificates of deposit increased
$33.1 million, or 29.2 percent. As of December 31, 2003, transaction and
savings accounts constituted 62.6 percent and certificates of deposits
accounted for 37.4 percent of the Banks total deposits. Those same
percentages for the period ended September 30, 2004 were 57.1 percent for
transaction and savings accounts and 42.9 percent certificates of deposit. At
September 30, 2004, deposits represented 84.2 percent of interest-bearing
liabilities, and Federal Home Loan Bank advances represented 15.8 percent of
the total. Liquidity and Capital Resources Net cash provided by operating activities totaled $5.5 million for the
nine months ended September 30, 2004. Net cash used by investing activities
totaled $52.4 million and consisted primarily of a $50.8 million increase in
loans outstanding. The increase in loans was funded by existing cash on the
balance sheet and increases in certificates of deposit. Net cash generated by
financing activities was $46.3 million, a result of an increase in total
deposits of $38.5 million which was made up primarily of a $33.1 million
increase in certificates of deposit and a $10 million increase in Federal Home
Loan Bank Advances. The net decrease in cash and cash equivalents as of
September 30, 2004 was $572 thousand. Total stockholders equity at September 30, 2004 was 9.9 percent of total
assets compared to 10.7 percent at December 31, 2003. The decrease in the
capital percentage is attributed to the Companys decrease in common stock and
additional paid in capital of $361 thousand as a result of the Companys stock
buy back program currently in place, an increase in retained earnings of $2.5
million and a $51.5 million increase in total assets when compared to those at
December 31, 2003. At September 30, 2004, WGNB Corp. was in compliance with various
regulatory capital requirements administered by federal and state banking
agencies. The following is a table representing WGNB Corp.s consolidated
Tier-1, tangible capital, and risk-based capital. September 30, 2004Actual
    
    
    
    
    
    Required
    
    
    
    
    
    ExcessAmount
    
    %
    
    Amount
    
    %
    
    Amount
    
    %Total capital (to risk-
weighted assets)
    
    $
    46,846
    
    
    
    12.99
    %
    
    $
    28,840
    
    
    
    8.00
    %
    
    $
    18,006
    
    
    
    4.99
    %Tier 1 capital (to risk-
weighted assets)
    
    
    42,804
    
    
    
    11.87
    %
    
    
    14,420
    
    
    
    4.00
    %
    
    
    28,384
    
    
    
    7.87
    %Tier 1 capital (to average
assets)
    
    
    42,804
    
    
    
    9.72
    %
    
    
    17,620
    
    
    
    4.00
    %
    
    
    25,184
    
    
    
    5.72
    %
 15




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Off Balance Sheet Risks 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
September 30, 2004, the Bank had issued commitments to extend credit of $57.6
million through various types of commercial lending arrangements and additional
commitments through standby letters of credit of $8.5 million. The Company
evaluates each customers credit worthiness on a case-by-case basis. The
amount of collateral obtained, if deemed necessary by the Company 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 Company
manages the credit risk on these commitments by subjecting them to normal
underwriting and risk management processes. 
 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 and 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 resulting net positions
are identified. Disclosures about the fair value of financial instruments as
of December 31, 2003, which reflected changes in market prices and rates, can
be found in the Companys Annual Report to Stockholders on Form 10-K for the
year ended December 31, 2003 under 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 control interest rate risk. However, a sudden and
substantial increase in interest rates may not have proportional impact on
interest sensitive assets and liabilities. Management believes that there have
been no significant changes in the Companys market risk exposure since
December 31, 2003. 
 Item 4. 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 September 30, 2004 that
have materially affected, or are reasonably likely to materially affect, the
Companys internal control over financial reporting. 
 Part II  Other Information 
 Item 1. Legal Proceedings There are no material, pending legal proceedings to which the Company or
any of its subsidiaries is a party or of which any of their property is the
subject. For further information, see Note 3 of Notes to Consolidated
Financial Statements of this Quarterly Report on Form 10-Q. 16




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##### Table of Contents



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds (a) None (b) The Company has previously reported the completion of a registered
public offering pursuant to which it sold 200,000 shares of its Common Stock at
a purchase price of $24.00 per share. The net proceeds from the offering
(which was completed in April 2002) of $4,766,454 have not yet been used by the
Company but continue to remain invested in corporate bonds, trust preferred
securities and federal funds. (c) Issuer Purchases of Equity Securities (c) Total Number ofShares Purchased as
    
    (d) Dollar Value of(a) Total Number
    
    
    
    
    
    Part of Publicly
    
    Shares that May Yet Beof Shares
    
    (b) Average Price
    
    Announced Plans or
    
    Purchased Under thePurchased
    
    Paid per Share
    
    Programs
    
    Plans or ProgramsJuly 1, 2004 through
July 30, 2004
    
    
    10,000
    (1)
    
    
    29.50
    
    
    
    10,000
    
    
    $
    536,309August 1, 2004 through
August 30, 2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    536,309Sept 1, 2004 through
Sept 30, 2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    536,309Total
    
    
    10,000
    
    
    
    29.50
    
    
    
    10,000
    
    
    $
    536,309
 (1) In 1996, the Board of Directors approved a Stock Repurchase Plan of up to
$2 million of the Companys Common Stock. During 2001, the Board of Directors
approved the repurchase of an additional $1 million, for a total of $3 million
available for repurchase under this Plan. The shares were authorized to be
purchased, from time to time, in open market transactions or privately
negotiated transactions. The repurchase program is being effected from time to
time, based on our evaluation of market conditions and other factors. The
Company has used and plans to continue to use existing cash to fund the
repurchases. All of the shares repurchased during the three months ended
September 30, 2004 were purchased in open market transactions through this
program. During the third quarter of 2004, the Company declared and paid quarterly
cash dividends amounting to $0.1975 per share. 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 None 
 Item 5. Other Information None. 
 Item 6. Exhibits and Reports on Form 8-K  (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). 17




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##### Table of Contents



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).4.3
    
    Rights Agreement dated as of February 12, 1997 between the
Company and SunTrust Bank, Atlanta (Incorporated by reference to
Exhibit 4.3 to the Form 10-SB).31.1
    
    Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes Oxley Act of 200232.1
    
    Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes Oxley Act of 2002  (b)
    
    Reports on Form 8-K On July 6, 2004, the Company furnished a current report on Form 8-K to
disclose under Item 12 the issuance of its press release announcing the
Companys results of operations for the quarterly period ended June 30, 2004. 18




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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: November 12, 2004WGNB CORP.By:
    /s/ L. Leighton AlstonL. Leighton AlstonPresident and CEOBy:
    /s/ Steven J. HaackSteven J. HaackTreasurerPrincipal Financial Officer
 19