**U.S.
        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, 2006**
 
 ** ̈**
              **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: 000-51287**
 
 
 
 **SouthCrest
        Financial Group, Inc.**
 **(Exact
        name of small business issuer as specified in its charter)**
 
 
 **Georgia**
              
              **58-2256460****(State
                  or other jurisdiction of****incorporation
                  or organization)**
              
              **(IRS
                  Employer****Identification
                  No.)**
 
 **600
        North Glynn Street**
 **Fayetteville,
        GA 30214**
 **(Address
        of principal executive offices)**
 
 **(770)-461-2781**
 **(Issuer’s
        telephone number)**
 
 
 **(Former
        name, former address and former fiscal year, if changed since last report)**
 
 
 Check
        whether the issuer (1) has filed all reports required to be filed by Section
        13
        or 15(d) of the Exchange Act during the past 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 a large accelerated filer, an
        accelerated filer or a non-accelerated filer. See definition of “accelerated
        filer and large accelerated filer” in Rule 12b-2 of the Exchange
        Act.
  Large
                  Accelerated Filer ̈
              
              Accelerated
                  Filer ̈
              
              Non-Accelerated
                  Filerx
 
 Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 of the Exchange Act). Yes £ No S
 
 State
        the
        number of shares outstanding of each of the issuer’s classes of common equity,
        as of November 14, 2006: 3,952,328.
  
  
  **SouthCrest
        Financial Group, Inc.**
 **And
        Subsidiaries** ****
 
 **INDEX**
 
 PagePart
                  I.
              FINANCIAL
                  INFORMATIONItem
                  1.
              Condensed
                  Consolidated Financial StatementsCondensed
                  Consolidated Balance Sheets - September 30, 2006 and
                  December 31, 2005
              1Condensed
                  Consolidated Statements of Income - Three and Nine
                  Months Ended September 30, 2006 and 2005
              2Condensed
                  Consolidated Statements of Comprehensive Income -
                  Three and Nine Months Ended September 30, 2006 and
                  2005
              3Condensed
                  Consolidated Statements of Cash Flows - Nine Months
                  Ended September 30, 2006 and 2005
              4Notes
                  to Condensed Consolidated Financial Statements
              6Item
                  2.
              Management’s
                  Discussion and Analysis of Financial Condition and
                  Results of Operations
              10Item
                  3.
              Quantitative
                  and Qualitative Disclosures about Market
                  Risk
              19Item
                  4.
              Controls
                  and Procedures
              19Part
                  II.
              OTHER
                  INFORMATION
              19Item
                  1.
              Legal
                  Proceedings
              19Item
                  1A.
              Risk
                  Factors
              19Item
                  2.
              Unregistered
                  Sales of Equity Securities and Use of
                  Proceeds
              20Item
                  3.
              Defaults
                  Upon Senior Securities
              20Item
                  4.
              Submission
                  of Matters To A Vote Of Security
                  Holders
              20Item
                  5.
              Other
                  Information
              20Item
                  6.
              Exhibits
              20Signatures
              21
 *Index*
 **PART
        I - FINANCIAL INFORMATION**
 **ITEM
        1. FINANCIAL STATEMENTS**
 **SouthCrest
        Financial Group, Inc. and
        Subsidiaries**
 **Condensed
        Consolidated Balance Sheets**
 **September
        30, 2006 and December 31, 2005**
 **(Unaudited)**
 **(In
        thousands, except share and per share data)**
 
 **September
                  30,**
              
              December
                  31,**Assets**
              
              **2006**
              
              2005*Cash
                  and due from banks
              
              **$**
              **11,355**
              
              $
              15,930Interest-bearing
                  deposits at other financial institutions
              
              
              **2,943**
              
              
              4,039Federal
                  funds sold
              
              
              **-**
              
              
              4,297Securities
                  available for sale
              
              
              **45,714**
              
              
              45,190Securities
                  held to maturity (fair value $71,188 and $76,894)
              
              
              **71,083**
              
              
              78,321Restricted
                  equity securities, at cost
              
              
              **2,136**
              
              
              2,270Loans
                  held for sale
              
              
              **671**
              
              
              305Loans,
                  net of unearned income
              
              
              **300,641**
              
              
              276,475Less
                  allowance for loan losses
              
              
              **3,818**
              
              
              3,477Loans,
                  net
              
              
              **296,823**
              
              
              272,998Premises
                  and equipment, net
              
              
              **13,542**
              
              
              11,255Goodwill
              
              
              **2,665**
              
              
              2,665Intangible
                  assets, net
              
              
              **3,646**
              
              
              4,248Other
                  assets
              
              
              **13,826**
              
              
              9,330**Total
                  assets**
              
              **$**
              **464,404**
              
              $
              450,848**Liabilities,
                  Redeemable Common Stock, and Stockholders'
                  Equity**Liabilities:Deposits:Noninterest-bearing
              
              **$**
              **60,168**
              
              $
              60,157Interest-bearing
              
              
              **330,636**
              
              
              317,743Total
                  deposits
              
              
              **390,804**
              
              
              377,900Federal
                  Home Loan Bank advances
              
              
              **10,165**
              
              
              15,275Federal
                  funds purchased
              
              
              **1,479**
              
              
              **-**Other
                  liabilities
              
              
              **4,349**
              
              
              3,233**Total
                  liabilities**
              
              
              **406,797**
              
              
              396,408Commitments
                  and contingenciesRedeemable
                  common stock held by ESOP
              
              
              **1,059**
              
              
              984Stockholders'
                  equityCommon
                  stock, par value $1; 10,000,000 shares authorized, 3,581,193 and
                  3,581,193
                  issued, respectively
              
              
              **3,581**
              
              
              3,581Additional
                  paid-in capital
              
              
              **40,918**
              
              
              40,846Retained
                  earnings
              
              
              **12,390**
              
              
              9,528Accumulated
                  other comprehensive loss
              
              
              **(341**
              **)**
              
              (499
              )**Total
                  stockholders' equity**
              
              
              **56,548**
              
              
              53,456**Total
                  liabilities, redeemable common stock, and stockholders'
                  equity**
              
              **$**
              **464,404**
              
              $
              450,848**See
                  Notes to Condensed Consolidated Financial
                  Statements.*****
                  Derived from audited consolidated financial
                  statements.**
  1
 *Index*
 
 **SouthCrest
        Financial Group, Inc. and
        Subsidiaries**
 **Condensed
        Consolidated Statements of Income**
 **For
        The Three and Nine Months Ended September 30, 2006 and
        2005**
 **(Unaudited)**
 **(In
        thousands, except share and per share data)**
  **Three
                  Months**
              
              **Nine
                  Months****2006**
              
              2005
              
              **2006**
              
              2005**Interest
                  income:**Loans
              
              **$**
              **5,980**
              
              $
              4,647
              
              **$**
              **16,695**
              
              $
              12,825Securities
                  - taxable
              
              
              **1,229**
              
              
              1,266
              
              
              **3,678**
              
              
              3,882Securities
                  - nontaxable
              
              
              **104**
              
              
              115
              
              
              **330**
              
              
              360Federal
                  funds sold
              
              
              **50**
              
              
              23
              
              
              **237**
              
              
              155Interest-bearing
                  deposits at other banks
              
              
              **46**
              
              
              44
              
              
              **134**
              
              
              115**Total
                  interest income**
              
              
              **7,409**
              
              
              6,095
              
              
              **21,074**
              
              
              17,337**Interest
                  expense:**Deposits
              
              
              **2,482**
              
              
              1,640
              
              
              **6,621**
              
              
              4,405Other
                  borrowings
              
              
              **186**
              
              
              44
              
              
              **507**
              
              
              60**Total
                  interest expense**
              
              
              **2,668**
              
              
              1,684
              
              
              **7,128**
              
              
              4,465**Net
                  interest income**
              
              
              **4,741**
              
              
              4,411
              
              
              **13,946**
              
              
              12,872**Provision
                  for loan losses**
              
              
              **267**
              
              
              246
              
              
              **508**
              
              
              519**Net
                  interest income after provision for loan losses**
              
              
              **4,474**
              
              
              4,165
              
              
              **13,438**
              
              
              12,353**Other
                  income:**Service
                  charges on deposit accounts
              
              
              **838**
              
              
              899
              
              
              **2,547**
              
              
              2,508Other
                  service charges and fees
              
              
              **301**
              
              
              244
              
              
              **850**
              
              
              720Impairment
                  charge on investments
              
              
              **-**
              
              
              -
              
              
              **-**
              
              
              (600
              )Gain
                  on sale of securities
              
              
              **-**
              
              
              320
              
              
              **-**
              
              
              320Net
                  gain on sale of loans
              
              
              **39**
              
              
              32
              
              
              **110**
              
              
              110Other
                  operating income
              
              
              **70**
              
              
              85
              
              
              **220**
              
              
              271**Total
                  other income**
              
              
              **1,248**
              
              
              1,580
              
              
              **3,727**
              
              
              3,329**Other
                  expenses:**Salaries
                  and employee benefits
              
              
              **1,920**
              
              
              1,862
              
              
              **5,873**
              
              
              5,353Equipment
                  and occupancy expenses
              
              
              **426**
              
              
              415
              
              
              **1,179**
              
              
              1,163Amortization
                  of intangibles
              
              
              **192**
              
              
              206
              
              
              **602**
              
              
              757Other
                  operating expenses
              
              
              **1,029**
              
              
              1,034
              
              
              **3,143**
              
              
              3,058**Total
                  other expenses**
              
              
              **3,567**
              
              
              3,517
              
              
              **10,797**
              
              
              10,331**Income
                  before income taxes**
              
              
              **2,155**
              
              
              2,228
              
              
              **6,368**
              
              
              5,351**Income
                  tax expense**
              
              
              **706**
              
              
              715
              
              
              **2,087**
              
              
              1,661**Net
                  income**
              
              **$**
              **1,449**
              
              $
              1,513
              
              **$**
              **4,281**
              
              $
              3,690**Basic
                  and diluted earnings per share**
              
              **$**
              **0.41**
              
              $
              0.42
              
              **$**
              **1.20**
              
              $
              1.03**Dividends
                  per share**
              
              **$**
              **0.125**
              
              $
              0.120
              
              **$**
              **0.375**
              
              $
              0.360**Basic
                  and diluted average shares outstanding**
              
              
              **3,581,193**
              
              
              3,571,257
              
              
              **3,581,193**
              
              
              3,571,455
 
 **See
        Notes to Condensed Consolidated Financial Statements.**
  2
 *Index*
  **SouthCrest
        Financial Group, Inc. and
        Subsidiaries**
 **Condensed
        Consolidated Statements of Comprehensive Income**
 **For
        The Three and Nine Months Ended September 30, 2006 and
        2005**
 **(Unaudited)**
 **(In
        thousands)**
 
 **Three
                  Months**
              
              **Nine
                  Months****2006**
              
              2005
              
              **2006**
              
              2005**Net
                  income**
              
              **$**
              **1,449**
              
              $
              1,513
              
              **$**
              **4,281**
              
              $
              3,690**Other
                  comprehensive income:**Reclassification
                  adjustment for gains included in net income, net of tax of $-0-,
                  $146,
                  $-0-, and $146
              
              
              **-**
              
              
              174
              
              
              **-**
              
              
              174Unrealized
                  holding gains (losses) on securities available for sale arising
                  during the
                  period, net of taxes of $194, $(269), $95, and $(43)
              
              
              **324**
              
              
              (447
              )
              
              **158**
              
              
              (72
              )**Comprehensive
                  income**
              
              **$**
              **1,773**
              
              $
              1,240
              
              **$**
              **4,439**
              
              $
              3,792**See
                  Notes to Condensed Consolidated Financial
                  Statements.**
 
 3
 *Index*
 
 **SouthCrest
        Financial Group, Inc. and Subsidiaries**
 **Condensed
        Consolidated Statements of Cash Flows**
 **For
        The Nine Months Ended September 30, 2006 and 2005**
 **(Unaudited)**
 **(In
        thousands)**
 
 **2006**
              
              2005**OPERATING
                  ACTIVITIES**Net
                  income
              
              **$**
              **4,281**
              
              $
              3,690Adjustments
                  to reconcile net income to net cash provided by operating
                  activities:Depreciation
              
              
              **584**
              
              
              579Amortization
                  of intangibles
              
              
              **602**
              
              
              757Other
                  amortization
              
              
              **180**
              
              
              284Provision
                  for loan losses
              
              
              **508**
              
              
              519Impairment
                  loss on investment securities
              
              
              **-**
              
              
              600Gain
                  on sale of securities available for sale
              
              
              **-**
              
              
              (320
              )Stock
                  compensation expense
              
              
              **72**
              
              
              -Deferred
                  income taxes
              
              
              **(354**
              **)**
              
              (509
              )Income
                  on bank-owned life insurance
              
              
              **(197**
              **)**
              
              (111
              )Increase
                  in interest receivable
              
              
              **(316**
              **)**
              
              (177
              )Increase
                  (decrease) in income taxes payable
              
              
              **(9**
              **)**
              
              -Increase
                  in interest payable
              
              
              **676**
              
              
              209Net
                  gain on sale of loans
              
              
              **(110**
              **)**
              
              (110
              )Originations
                  of mortgage loans held for sale
              
              
              **(11,473**
              **)**
              
              (8,878
              )Proceeds
                  from sales of mortgage loans held for sale
              
              
              **11,217**
              
              
              9,275Other
                  assets and liabilities, net
              
              
              **232**
              
              
              597Net
                  cash provided by operating activities
              
              
              **5,893**
              
              
              6,405**INVESTING
                  ACTIVITIES**Purchases
                  of securities held to maturity
              
              
              **-**
              
              
              (8,667
              )Proceeds
                  from maturities of securities held to maturity
              
              
              **7,153**
              
              
              13,043Purchases
                  of securities available for sale
              
              
              **(4,195**
              **)**
              
              (13,001
              )Proceeds
                  from maturities of securities available for sale
              
              
              **3,772**
              
              
              6,377Procees
                  from sales of securities available for sale
              
              
              **-**
              
              
              1,794Proceeds
                  from redemption of restricted equity securities
              
              
              **134**
              
              
              -Purchases
                  of restricted equity securities
              
              
              **-**
              
              
              (1,113
              )Net
                  decrease in interest-bearing deposits in banks
              
              
              **1,096**
              
              
              586Net
                  decrease in federal funds sold
              
              
              **4,297**
              
              
              5,691Net
                  increase in loans
              
              
              **(24,699**
              **)**
              
              (34,269
              )Purchase
                  of premises and equipment
              
              
              **(2,871**
              **)**
              
              (2,437
              )Proceeds
                  from sale of other real estate owned
              
              
              **517**
              
              
              126Purchase
                  of life insurance contracts
              
              
              **(3,601**
              **)**
              
              -Net
                  cash used in investing activities
              
              
              **(18,397**
              **)**
              
              (31,870
              )**See
                  Notes to Condensed Consolidated Financial
                  Statements.**
  4
 *Index*
 
 **SouthCrest
        Financial Group, Inc. and
        Subsidiaries**
 **Condensed
        Consolidated Statements of Cash Flows (continued)**
 **For
        The Nine Months Ended September 30, 2006 and 2005**
 **(Unaudited)**
 **(In
        thousands)**
 
 **2006**
              
              2005**FINANCING
                  ACTIVITIES**Net
                  increase in deposits
              
              **$**
              **12,904**
              
              $
              17,702Principal
                  repayments on Federal Home Loan Bank advances
              
              
              **(5,110**
              **)**
              
              (110
              )Increases
                  in Federal Home Loan Bank advances
              
              
              **-**
              
              
              10,000Net
                  increase in federal funds purchased
              
              
              **1,479**
              
              
              -Proceeds
                  from other borrowings
              
              
              **-**
              
              
              1,500Principal
                  repayments on other borrowings
              
              
              **-**
              
              
              (1,500
              )Purchase
                  of treasury stock
              
              
              **-**
              
              
              (58
              )Dividends
                  paid
              
              
              **(1,344**
              **)**
              
              (1,286
              )Net
                  cash provided by financing activities
              
              
              **7,929**
              
              
              26,248Net
                  increase (decrease) in cash and due from banks
              
              
              **(4,575**
              **)**
              
              783Cash
                  and due from banks at beginning of year
              
              
              **15,930**
              
              
              9,814Cash
                  and due from banks at end of period
              
              **$**
              **11,355**
              
              $
              10,597**SUPPLEMENTAL
                  DISCLOSURES**Cash
                  paid for:Interest
              
              **$**
              **6,452**
              
              $
              2,651Income
                  taxes
              
              
              **2,449**
              
              
              1,165**NONCASH
                  TRANSACTIONS**Principal
                  balances of loans transferred to other real estate owned
              
              **$**
              **441**
              
              $
              183Increase
                  in redeemable common stock held by ESOP
              
              
              **75**
              
              
              139Unrealized
                  gain on securities available for sale, net
              
              
              **158**
              
              
              102**See
                  Notes to Condensed Consolidated Financial
                  Statements.**
  5
 *Index*
 
 **SOUTHCREST
        FINANCIAL GROUP, INC. AND SUBSIDIARIES**
 **Notes
        to Condensed Consolidated Financial Statements**
 **(Unaudited)**
  **NOTE
        1 — NATURE OF BUSINESS AND BASIS OF PRESENTATION**
  SouthCrest
        Financial Group, Inc. (“SouthCrest” or the “Company”) is a bank holding company
        whose principal activity is the ownership and management of its wholly owned
        subsidiary banks, Bank of Upson (“Upson”) and The First National Bank of Polk
        County (“FNB Polk”). Both banks are commercial banks that provide a full range
        of banking services within their primary market areas. Upson is headquartered
        in
        Thomaston, Upson County, Georgia with six branches located in Thomaston,
        Fayetteville, Manchester, Warm Springs and Luthersville, Georgia, serving
        its
        primary market area of Upson, Fayette, Meriwether and the surrounding counties.
        FNB Polk is located in Cedartown, Polk County, Georgia with two branches
        in
        Cedartown, Georgia and one branch in Rockmart, Georgia. FNB Polk primarily
        serves the market area of Polk County.
  The
        accompanying unaudited condensed consolidated financial statements of the
        Company have been prepared in accordance with generally accepted accounting
        principles for interim financial information. Accordingly, they do not include
        all the information and notes required by generally accepted accounting
        principles for complete financial statements. In the opinion of management,
        all
        adjustments (consisting of normal recurring adjustments) considered necessary
        for a fair presentation have been included. Operating results for the
        three-month and nine month periods ended September 30, 2006 are not necessarily
        indicative of the results that may be expected for the year ended
        December 31, 2006. For further information, refer to the financial
        statements and notes included in the Company's consolidated financial statements
        and notes thereto for the year ended December 31, 2005 included in the
        Company’s annual report on Form 10-KSB (Registration
        No. 000-51287).
  The
        consolidated financial statements include the accounts of the Company and
        its
        wholly-owned subsidiaries, Bank of Upson and The First National Bank of Polk
        County. All significant inter-company accounts and transactions have been
        eliminated in consolidation. Certain reclassifications to prior year balance
        sheets and income statements have been made to conform to current
        classifications. These reclassifications have no impact on net income or
        stockholders’ equity reported for the previous year.
  **NOTE
        2 — EARNINGS PER COMMON SHARE**
  Basic
        earnings per share is computed by dividing net income available to common
        stockholders by the weighted average number of shares outstanding during
        the
        period. Diluted earnings per share would be computed by dividing net income
        by
        the sum of the weighted-average number of shares of common stock outstanding
        and
        dilutive potential common shares, such as outstanding stock options. Dilutive
        potential common shares are calculated in accordance with the treasury stock
        method, which assumes that proceeds from the exercise of all options are
        used to
        repurchase common stock at market value. The amount of shares remaining after
        the proceeds are exhausted represents the potentially dilutive effect of
        the
        securities.
  In
        December, 2005, the Company granted 183,500 options under the SouthCrest
        Financial Group, Inc. 2005 Stock Incentive Plan. For the three- and nine-month
        periods ended September 30, 2006, these options were nondilutive. There were
        no
        potential common shares outstanding at or during the period ended September
        30,
        2005. The weighted average number of shares outstanding were 3,581,193 and
        3,571,257 for the three-month periods ended September 30, 2006 and 2005,
        respectively, and 3,581,193 and 3,571,455 for the nine-month periods ended
        September 30, 2006 and 2005, respectively **.**
  **NOTE
        3 — STOCK BASED COMPENSATION**
  Effective
        January 1, 2006, the Company adopted SFAS No. 123 (revised 2004), “Share-Based
        Payment,” (“SFAS No. 123R”) which was issued by the Financial Accounting
        Standards Board (“FASB”) in December 2004. SFAS No. 123R revises SFAS No. 123
“Accounting for Stock Based Compensation,” and supersedes APB No. 25,
“Accounting for Stock Issued to Employees,” (APB No. 25) and its related
        interpretations. SFAS No. 123R requires recognition of the cost of employee
        services received in exchange for an award of equity instruments in the
        financial statements over the period the employee is required to perform
        the
        services in exchange for the award (presumptively the vesting period). SFAS
        No.
        123R also requires measurement of the cost of employee services received
        in
        exchange for an award based on the grant-date fair value of the award. SFAS
        No.
        123R also amends SFAS No. 95 “Statement of Cash Flows,” to require that excess
        tax benefits be reported as financing cash inflows, rather than as a reduction
        of taxes paid, which is included within operating cash flows.
 
 The
        Company adopted SFAS No. 123R using the modified prospective application
        as
        permitted under SFAS No. 123R. Accordingly, prior period amounts have not
        been
        restated. Under this application, the Company is required to record compensation
        expense for all awards granted after the date of adoption and for the unvested
        portion of previously granted awards that remain outstanding at the date
        of
        adoption.
  6
 *Index*
  Prior
        to
        the adoption of SFAS No. 123R, the Company used the intrinsic value method
        as
        prescribed by APB No. 25 and thus recognized no compensation expense for
        options
        granted with exercise prices equal to the fair market value of the Company’s
        common stock on the date of grant.
 
 At
        September 30, 2006, the Company maintained one share-based compensation plan,
        the SouthCrest Financial Group, Inc. 2005 Stock Incentive Plan (the “Plan”),
        approved at the Company’s annual shareholders’ meeting held on May 12, 2005. The
        only grant of options under this Plan was made in December, 2005. The
        compensation cost that has been charged against income for the Plan during
        the
        three and nine month periods ending September 30, 2006 was $23,770 and $71,310,
        respectively. The Company recorded no deferred tax benefit in 2006 because
        all
        of the compensation cost was related to incentive (tax qualifying) stock
        options.
 
 The
        Plan
        provides for up to 549,000 shares of common stock to be awarded in the form
        of
        stock options. Options are granted at the fair market value of the Company’s
        common stock on the date of grant. All options under the Plan expire ten
        years
        from the date of grant. At December 31, 2005 183,500 options had been granted.
        Of these options, 104,000 were not tax qualifying and were fully vested on
        the
        date of grant, while 79,500 options were tax qualifying and vest over 60
        months.
        At September 30, 2006, 365,500 options were available for grant.
 
 The
        fair
        market value of each option award is estimated on the date of grant using
        the
        Black-Scholes option pricing model. The Company did not grant options during
        the
        three and nine month periods ended September 30, 2006.
 
 A
        summary
        of option activity under the Plan as of September 30, 2006, and changes during
        the nine month period ended September 30, 2006 is presented below:
 
 Shares
              
              Weighted
                Average
                Exercise
                Price
              
              Weighted
                Average
                Remaining
                Contractual
                Term
              
              Aggregate
                Intrinsic
                ValueOutstanding
                  at December 31, 2005
              
              
              183,500
              
              $
              23.45Options
                  granted
              
              
              -
              
              
              -Options
                  exercised
              
              
              -
              
              
              -Options
                  forfeited
              
              
              -
              
              
              -Outstanding
                  at September 30, 2006
              
              
              183,500
              
              $
              23.45
              
              
              9.25
              
              $
              238,500Exercisable
                  at September 30, 2006
              
              
              104,000
              
              $
              23.45
              
              
              9.25
              
              $
              135,200
 
 For
        the
        quarter ended September 30, 2006, no options were exercised or became fully
        vested.
  As
        of
        September 30, 2006, there was $404,100 of total unrecognized compensation
        cost
        related to non-vested share-based compensation arrangements. That cost is
        expected to be recognized over a weighted-average period of 4.25
        years.
 
 The
        adoption of SFAS 123R and its fair value compensation cost recognition
        provisions are different from the nonrecognition provisions under SFAS 123
        and
        the intrinsic value method for compensation cost allowed under APB 25. The
        effect (increase/(decrease)) of the adoption of SFAS 123R for the three and
        nine
        month periods ending September 30, 2006 is as follows:
 
 Three
                  Months
              
              Nine
                  MonthsIncome
                  before income tax expense
              
              $
              (23,770
              )
              $
              (71,310
              )Net
                  Income
              
              $
              (23,770
              )
              $
              (71,310
              )Cash
                  flow from operating activities
              
              $
              -0-
              
              $
              -0-Cash
                  flow from financing activities
              
              $
              -0-
              
              $
              -0-Basic
                  earnings per share
              
              $
              (0.01
              )
              $
              (0.02
              )Diluted
                  earnings per share
              
              $
              (0.01
              )
              $
              (0.02
              )
  7
 *Index*
  There
        were no stock options outstanding as of September 30, 2005.
  **NOTE
        4 — LOANS RECEIVABLE**
  The
        composition of loans at September 30, 2006 and December 31, 2005 is summarized
        as follows:
  *(dollars
                  in thousands)*
              
              **September
                  30, 2006**
              
              December
                  31, 2005Commercial,
                  financial, and agricultural
              
              **$**
              **19,442**
              
              $
              19,841Real
                  estate - construction
              
              
              **56,733**
              
              
              52,122Real
                  estate - mortgage
              
              
              **188,489**
              
              
              169,555Consumer
              
              
              **29,747**
              
              
              31,567Other
              
              
              **6,400**
              
              
              3,554**300,811**
              
              
              276,639Unearned
                  income
              
              
              **(170**
              **)**
              
              (164
              )Allowance
                  for loan losses
              
              
              **(3,818**
              **)**
              
              (3,477
              )Loans,
                  net
              
              **$**
              **296,823**
              
              $
              272,998
  **NOTE
        5 — NEW ACCOUNTING PRONOUNCEMENTS**
  In
        November 2005, the FASB issued Staff Position (FSP) FAS 115-1 and FAS 124-1, *the
        Meaning of Other-Than-Temporary Impairment and Its Application to Certain
        Investments,* which
        amends SFAS No. 115, *Accounting
        for Certain Investments in Debt and Equity Securities,* and
        No. 124, *Accounting
        for Certain Investments Held by Not-for-Profit Organizations,* and APB
        Opinion No. 18, *The
        Equity Method of Accounting for Investments in Common Stock.* This FSP
        addresses the determination as to when an investment is considered impaired,
        whether the impairment is other than temporary, and the measurement of an
        impairment loss. FSP FAS 115-1 and FAS 124-1 also includes accounting
        considerations subsequent to the recognition of an other-than-temporary
        impairment and requires certain disclosures about unrealized losses that
        have
        not been recognized as other-than-temporary impairments. The guidance in
        this
        FSP is effective for reporting periods beginning after December 15, 2005.
        The adoption of FSP FAS 115-1 and FAS 124-1 did not have a material impact
        on
        the Company’s financial condition or results of operations.
  In
        May
        2005, the FASB issued SFAS No. 154, *Accounting
        Changes and Error Corrections.* This
        statement replaces APB Opinion No. 20, *Accounting
        Changes* and
        SFAS
        No. 3, *Reporting
        Accounting Changes in Interim Financial Statements.* SFAS
        No. 154 changes the requirements for the accounting for and reporting of a
        voluntary change in accounting principle. SFAS No. 154 requires
        retrospective application to prior periods for changes in accounting principles
        or error corrections, unless it is impractical to determine the period-specific
        effects or when a pronouncement includes specific transition provisions.
        This
        Statement is effective for accounting changes and corrections of errors made
        in
        fiscal years beginning after December 15, 2005. The adoption of SFAS
        No. 154 (revised 2004) did not have a material impact on the financial
        condition or results of operations of the Company.
 
 In
        June
        2006, the FASB issued FASB Interpretation No. 48 (FIN 48), *Accounting
        for Uncertainty in Income Taxes* . 
        FIN 48, which is effective for years beginning after December 15, 2006, applies
        to all “tax positions” within the scope of SFAS 109.  This statement
        requires a “more-likely-than-not” threshold for initial recognition of a tax
        benefit in the financial statements, and requires measurement of the amount
        of
        benefit to be recognized based upon the largest amount of benefit that is
        greater than 50% likely of being realized upon ultimate settlement with the
        taxing authority.  The cumulative effect of initially applying FIN 48 is
        recorded in opening retained earnings of the year of adoption.  The Company
        is currently in the process of evaluating the impact of the implementation
        of
        FIN 48 on the Company’s financial statements.
  In
        September 2006, the Staff of the Securities and Exchange Commission issued
        Staff
        Accounting Bulletin 108 (“SAB 108”).  This SAB provides guidance on
        consideration of the effects of prior year misstatements in quantifying current
        year misstatements for purposes of a materiality assessment, requiring the
        use
        of both the “rollover” and “iron curtain” approaches.  SAB 108 is effective
        for years ending on or after November 15, 2006.  Upon initial application,
        if an issuer decides that there are material errors in prior (or current)
        financial statements using the new approach, then the issuer may either restate
        the prior periods or record a cumulative effect adjustment to the beginning
        of
        the year in which SAB 108 was adopted.  The adoption of this guidance will
        not have a material effect on the Company’s financial condition or results of
        operations.
  In
        September 2006, the FASB issued SFAS No. 157, *Fair
        Value Measurements* (“SFAS
        No. 157”).  This statement provides enhanced guidance for using fair value
        to measure assets and liabilities and is applicable whenever other standards
        require or permit assets and liabilities to be measured at fair value. 
This statement does not expand the use of fair value in any new
        circumstances.  This statement is effective for years beginning after
        November 15, 2007.  The adoption of SFAS No. 157 will not have a material
        impact on the Company’s financial condition or results of
        operations.
  8
 *Index*
  In
        September 2006, the FASB reached consensus on the guidance provided by
        Emerging Issues Task Force Issue 06-4 (“EITF 06-4”), *Accounting
        for Deferred Compensation and Postretirement Benefit Aspects of Endorsement
        Split-Dollar Life Insurance Arrangements* .
        The
        guidance is applicable to endorsement split-dollar life insurance arrangements,
        whereby the employer owns and controls the insurance policy, that are associated
        with a postretirement benefit. EITF 06-4 requires that for a split-dollar
        life
        insurance arrangement within the scope of the Issue, an employer should
        recognize a liability for future benefits in accordance with FAS No. 106
        (if, in substance, a postretirement benefit plan exists) or Accounting
        Principles Board Opinion No. 12 (if the arrangement is, in substance, an
        individual deferred compensation contract) based on the substantive agreement
        with the employee. EITF 06-4 is effective for fiscal years beginning after
        December 15, 2007. The Company is currently evaluating the impact the
        adoption of the standard will have on the Company’s results of operations or
        financial condition.
  **NOTE
        6 — IMPAIRMENT OF SECURITIES**
  In
        the
        quarter ended March 31, 2005, the Company recorded an impairment charge of
        $600,000 on $2.5 million of Federal Home Loan Mortgage Corporation (“Freddie
        Mac”) and Federal National Mortgage Association (“Fannie Mae”) perpetual
        preferred stock. The reclassification of an unrealized mark-to-market loss
        on
        these securities to an other-than-temporary impairment charge was based upon
        a
        detailed impairment analysis of these securities. Losses on the securities
        were
        previously recognized in the equity section of the balance sheet.
  **NOTE
        7 — SUBSEQUENT EVENT**
  On
        October 31, 2006 the Company completed the acquisition of Maplesville Bancorp,
        the parent company of Peachtree Bank, a $65 million bank headquartered in
        Maplesville, Alabama and which has a branch office in Clanton, Alabama. As
        a
        result of the acquisition, Peachtree Bank became a wholly owned subsidiary
        of
        the Company. Under the terms of the agreement, Maplesville Bancorp shareholders
        will receive a total of 371,135 shares of SouthCrest stock and $7.55 million
        in
        cash. The merger will be accounted for under the purchase method of accounting.
        Accordingly, assets and liabilities of Peachtree Bank and its results of
        operations will only be recorded in the consolidated financial statements
        of the
        Company prospectively from the date of merger. The Company estimates that
        goodwill of approximately $6.7 million will be recorded in connection with
        the
        merger.
  Prior
        to
        the merger, on October 17, 2006 the Company obtained a $5.5 million line
        of
        credit for the purpose of providing funds needed in order to complete the
        merger
        with Maplesville Bancorp. The line carries a variable interest rate of Prime
        minus 50 basis points. The line is available for a period of twelve years
        and is
        secured by the common stock of the Company’s subsidiary banks. Interest is
        payable quarterly, with any principal balance outstanding after year two
        subject
        to a ten year amortization. The agreement contains restrictions concerning
        the
        maintenance of certain minimum capital levels and regulatory capital ratios,
        allowance for loan losses, and profitability ratios. After the merger was
        completed, funds advanced under the line were repaid from dividends paid
        to the
        Company from its subsidiary banks. While the line has been paid in full,
        it will
        remain outstanding for its full term.
  9
 *Index*
  **SOUTHCREST
        FINANCIAL GROUP, INC. AND SUBSIDIARIES**
 
 **ITEM
        2. Management’s Discussion and Analysis of Financial Condition
        and Results of Operations**
 
 The
        following is management’s discussion and analysis of certain significant factors
        which have affected the financial position and operating results of SouthCrest
        Financial Group, Inc. and its bank subsidiaries, Bank of Upson and the First
        National Bank of Polk County during the period included in the accompanying
        consolidated financial statements. The purpose of this discussion is to focus
        on
        information about our financial condition and results of operations that
        are not
        otherwise apparent from our consolidated financial statements. Reference
        should
        be made to those statements and the selected financial data presented elsewhere
        in this report for an understanding of the following discussion and
        analysis.
 
 **Forward
        Looking Statements**
 
 Some
        of the statements in this Report, including, without limitation, matters
        discussed under the caption “Management’s Discussion and Analysis of Financial
        Condition and Results of Operation,” of SouthCrest Financial Group, Inc. are
“forward-looking statements” within the meaning of the federal securities
        laws.  Forward-looking statements include statements about the
        competitiveness of the banking industry, potential regulatory obligations,
        our
        entrance and expansion into other markets, integration of recently acquired
        banks, pending or proposed acquisitions, our other business strategies, our
        expectations with respect to our allowance for loan losses and impaired loans,
        anticipated capital expenditures for our operations center, and other statements
        that are not historical facts.  When we use words like “anticipate”,
“believe”, “intend”, “expect”, “estimate”, “could”, “should”, “will”, and
        similar expressions, you should consider them as identifying forward-looking
        statements, although we may use other phrasing.  These forward-looking
        statements involve risks and uncertainties and are based on our beliefs and
        assumptions, and on the information available to us at the time that these
        disclosures were prepared.  Factors that may cause actual results to differ
        materially from those expressed or implied by such forward-looking statements
        include, among others, the following possibilities: (1) competitive pressures
        among depository and other financial institutions may increase significantly;
        (2) changes in the interest rate environment may reduce margins; (3) general
        economic conditions may be less favorable than expected, resulting in, among
        other things, a deterioration in credit quality and/or a reduction in demand
        for
        credit; (4) legislative or regulatory changes, including changes in accounting
        standards may adversely affect the businesses in which we are engaged; (5)
        costs
        or difficulties related to the integration of our businesses, may be greater
        than expected; (6) deposit attrition, customer loss or revenue loss following
        acquisitions may be greater than expected; (7) competitors may have greater
        financial resources and develop products that enable such competitors to
        compete
        more successfully than us; and (8) adverse changes may occur in the equity
        markets.
 
 Many
        of
        such factors are beyond our ability to control or predict, and readers are
        cautioned not to put undue reliance on such forward-looking statements.  We
        disclaim any obligation to update or revise any forward-looking statements
        contained in this Report, whether as a result of new information, future
        events
        or otherwise.
 
 **Critical
        Accounting Estimates**
 
 We
        have
        adopted various accounting policies that govern the application of accounting
        principles generally accepted in the United States in the preparation of our
        financial statements. Our significant accounting policies are described in
        the
        notes to the consolidated financial statements for the year ended December
        31,
        2005 included in our Form 10-KSB (Registration No. 000-51287). Certain
        accounting policies involve significant judgments and assumptions by us that
        have a material impact on the carrying value of certain assets and liabilities.
        We consider these accounting judgments and assumptions to be our critical
        accounting estimates. The judgments and assumptions we use are based on
        historical experience and other factors, which we believe to be reasonable
        under
        the circumstances. Because of the nature of the judgments and assumptions
        we
        make, actual results could differ from these judgments and estimates which
        could
        have a material impact on our carrying values of assets and liabilities and
        our
        results of operations.
 
 We
        believe the allowance for loan losses is a critical accounting estimate that
        requires the most significant judgments and assumptions used in preparation
        of
        our consolidated financial statements. Because the allowance for loan losses
        is
        replenished through a provision for loan losses that is charged against
        earnings, our subjective determinations regarding the allowance affect our
        earnings directly. Refer to the portion of this discussion that addresses
        our
        allowance for loan losses for a description of our processes and methodology
        for
        determining our allowance for loan losses.
 
 The
        consolidated financial statements include certain accounting and disclosures
        that require management to make estimates about fair values. Estimates of
        fair
        value are used in the accounting for securities available for sale, loans
        held
        for sale, intangible assets, and acquisition purchase accounting adjustments.
        Estimates of fair values are used in disclosures regarding securities held
        to
        maturity, stock compensation, commitments, and the fair values of financial
        instruments. Fair values are estimated using relevant market information
        and
        other assumptions such as interest rates, credit risk, prepayments and other
        factors. The fair values of financial instruments are subject to change as
        influenced by market conditions.
  10
 *Index*
  **Financial
        Condition**
 
 During
        the nine months ended September 30, 2006, our total assets increased $13.6
        million to total assets of $464.4 million at September 30, 2006. During this
        period, total loans increased $24.2 million, or 8.7%, while loans held for
        sale
        increased $366,000. The increase in loans was due to the Company’s continued
        focus on loan growth. Securities available for sale increased $0.5 million
        while
        securities held to maturity decreased $7.2 million. Federal funds sold declined
        $4.3 million. Other assets increased $4.4 million as a result of a purchase
        of
        life insurance policies totaling $3.6 million in the first quarter. These
        policies were purchased in connection with new deferred compensation
        arrangements.
 
 Deposits
        increased $12.9 million or 3.4% while Federal Home Loan Bank advances decreased
        $5.1 million. At September 30, 2006 we had purchased $1.5 million in federal
        funds. During the current year, the Company has used cash flows from the
        increases in deposits along with maturities of securities in the held to
        maturity portfolio to fund the increases in our loan portfolio and to reduce
        our
        advances at the Federal Home Loan Bank. The Company monitors the growth in
        its
        loan portfolio and changes in its deposit levels, and seeks to maintain a
        proper
        mix of types, maturities, and interest rates. We believe that our cash flows
        and
        liquidity levels are adequate to support the Company’s loan growth.
 
 Our
        total
        stockholders’ equity has increased by $3.1 million since December 31, 2005,
        primarily due to net income for the year to date, net of dividends paid to
        shareholders. In addition, the Company experienced a $158,000 reduction in
        the
        unrealized losses on securities available for sale, net of deferred taxes.
  **Loan
        Portfolio** *.* The
        following table presents various categories of loans contained in First National
        Bank of Polk County and Bank of Upson's loan portfolios as of September 30,
        2006
        and December 31, 2005:
  *(dollars
                  in thousands)*
              
              **September
                  30, 2006**
              
              December
                  31, 2005Commercial,
                  financial, and agricultural
              
              **$**
              **19,442**
              
              $
              19,841Real
                  estate - construction
              
              
              **56,733**
              
              
              52,122Real
                  estate - mortgage
              
              
              **188,489**
              
              
              169,555Consumer
              
              
              **29,747**
              
              
              31,567Other
              
              
              **6,400**
              
              
              3,554**300,811**
              
              
              276,639Unearned
                  income
              
              
              **(170**
              **)**
              
              (164
              )Allowance
                  for loan losses
              
              
              **(3,818**
              **)**
              
              (3,477
              )Loans,
                  net
              
              **$**
              **296,823**
              
              $
              272,998
 
 **Nonaccrual,
        Past Due and Restructured Loans** *.* The
        following table presents various categories of nonaccrual, past due and
        restructured loans in the Banks’ loan portfolios as of September 30, 2006 and
        December 31, 2005:
 
 **September
                  30,**
              
              **December
                  31,*****(Dollars
                  in thousands)***
              
              **2006**
              
              **2005**Nonaccrual
                  loans
              
              $
              847
              
              $
              232Loans
                  past due 90 days or more and still accruing
              
              $
              344
              
              $
              549Loans
                  restructured under troubled debt
              
              $
              6
              
              $
              153
 
 Nonaccrual
        loans decreased $185,000 during the quarter ended September 30, 2006 decreasing
        from $1,032,000 to $847,000. At September 30, 2006 nonaccrual loans included
        $386,000 in loans to one borrower secured by various rental properties for
        which
        the Company has allocated $193,000 in reserves. Additionally, nonaccrual
        loans
        includes approximately $413,000 in loans secured by single family dwellings
        for
        which the Company believes there is limited risk of loss. In total, the Company
        has recorded a valuation allowance of $260,000 related to nonaccrual loans
        at
        September 30, 2006.
 
 Information
        regarding impaired loans as of September 30, 2006 and December 31, 2005 are
        as
        follows:
  11
 *Index*
  
 **September
                  30,**
              
              **December
                  31,***(Dollars
                  in thousands)*
              
              **2006**
              
              **2005**Impaired
                  loans without a valuation allowance
              
              $
              -
              
              $
              -Impaired
                  loans with valuation allowances of $260 and $35,
                  respectively
              
              $
              847
              
              $
              232Average
                  investment in impaired loans for the period
              
              $
              704
              
              $
              323
 
 **Summary
        of Loan Loss Experience.** ** An
        analysis of SouthCrest’s loan loss experience is included in the following table
        for the periods ended September 30, 2006 and 2005 (dollars in
        thousands):
 
 **Analysis
        of Allowance for Loan Losses**
 **For
        The Three and Nine Months Ended September 30,**
 ***(Dollars
        in thousands)***
 
 **Three
                  Months**
              
              **Nine
                  Months****2006**
              
              **2005**
              
              **2006**
              
              **2005**Balance
                  at beginning of period
              
              $
              3,759
              
              $
              3,253
              
              $
              3,477
              
              $
              3,161ChargeoffsCommercial
                  loans
              
              
              34
              
              
              31
              
              
              34
              
              
              31Real
                  estate - construction
              
              
              -
              
              
              -
              
              
              -
              
              
              -Real
                  estate - mortgage
              
              
              78
              
              
              -
              
              
              79
              
              
              11Consumer
              
              
              132
              
              
              137
              
              
              275
              
              
              424Other
              
              
              50
              
              
              57
              
              
              109
              
              
              141Total
                  Chargeoffs
              
              
              294
              
              
              225
              
              
              497
              
              
              607RecoveriesCommercial
                  loans
              
              
              5
              
              
              -
              
              
              5
              
              
              2Real
                  estate - construction
              
              
              (5
              )
              
              -
              
              
              -
              
              
              -Real
                  estate - mortgage
              
              
              2
              
              
              -
              
              
              6
              
              
              -Consumer
              
              
              69
              
              
              77
              
              
              241
              
              
              223Other
              
              
              15
              
              
              22
              
              
              78
              
              
              75Total
                  recoveries
              
              
              86
              
              
              99
              
              
              330
              
              
              300Net
                  (chargeoffs) recoveries
              
              
              (208
              )
              
              (126
              )
              
              (167
              )
              
              (307
              )Additions
                  charged to operations
              
              
              267
              
              
              246
              
              
              508
              
              
              519Balance
                  at end of period
              
              $
              3,818
              
              $
              3,373
              
              $
              3,818
              
              $
              3,373Annualized
                  ratio of net chargeoffs during the period to average loans outstanding
                  during the period
              
              
              0.28
              %
              
              0.20
              %
              
              0.08
              %
              
              0.17
              %
  **Allowance
        for Loan Losses.** The
        allowance for loan losses as of September 30, 2006 was $3,818,000 compared
        to
        $3,477,000 at December 31, 2005 and $3,373,000 at September 30, 2005. As a
        percentage of gross loans, the allowance for loan losses was 1.27% at September
        30, 2006 compared to 1.26% as of December 31, 2005 and 1.28% at September
        30, 2005. The provision for loan losses during the nine-month period ended
        September 30, 2006 of $508,000 was the result of management's assessment
        of
        risks inherent in the loan portfolio. Management’s estimate of the allowance for
        loan losses utilizes a loan grading system to assign a risk grade to each
        loan
        based on factors such as the quality of collateral securing a loan, the
        financial condition of the borrower and the payment history of each loan.
        Based
        on net charge-off history experienced for each category within the loan
        portfolio, as well as general economic factors affecting the lending market,
        management assigns an estimated allowance range for each risk grade within
        each
        of the loan categories. Management then estimates the required allowance,
        which
        may also include a portion that is not allocated to a specific category of
        the
        loan portfolio, but which management deems is necessary based on the overall
        risk inherent in the loan portfolio. The estimation of the allowance may
        change
        due to fluctuations in the factors noted above as well as changes in the
        trends
        of net charge-offs, past due loans, and general economic conditions of the
        markets served by the Company’s subsidiary banks.
  12
 *Index*
  Management
        considers the allowance for loan losses to be adequate; however, there can
        be no
        assurance that charge-offs in future periods will not exceed the allowance
        for
        loan losses or that additional provisions of the allowance will not be required.
  **Results
        of Operations For The Three and Nine Months Ended September 30, 2006 and
        2005**
  Net
        income for the three-month period ended September 30, 2006 amounted to
        $1,446,000, or $0.41 basic and diluted earnings per share, compared to net
        income of $1,513,000 or $0.42 basic and diluted earnings per share for the
        same
        three-month period in 2005, an decrease of $64,000, or 4.2%. For the nine
        month
        periods, net income was $4,281,000, or $1.20 basic and diluted earnings per
        share, compared to net income of $3,690,000 or $1.03 basic and diluted earnings
        per share for the same nine-month period in 2005, an increase of $591,000.
  **Net
        Interest Income** *.* Net
        interest income represents the difference between interest received on interest
        earning assets and interest paid on interest bearing liabilities.
  Net
        interest income for the three months ended September 30, 2006 increased $330,000
        or 7.5% over the same period in 2005. The primary reason for the increase
        in net
        interest income is the growth in the average balance of the loan portfolio
        of
        $38.2 million during the quarter ended September 30, 2006 compared to the
        same
        period in 2005. This growth, along with an increase in the average yield
        on
        loans from 7.21% in 2005 to 8.07% in 2006, resulted in a $1.3 million increase
        in interest income earned on loans in 2006 over 2005. Increases in the prime
        interest rate, resulting from Federal Reserve increases in the discount rate,
        contributed to the increase in the loan yield for the 2006 period compared
        to
        2005. The portion of total earning assets comprised by loans increased from
        64.8% for the 2005 period to 69.7% for 2006. This change in the mix of our
        earning assets contributed to the 85 basis point increase in the average
        yield
        on earning assets as loans earn a higher rate of interest than investment
        securities and other earning assets.
  The
        average cost of funds increased 98 basis points to 3.09% for the three months
        ended September 30, 2006 compared to the same 2005 period. The Company has
        funded the growth in its loan portfolio with borrowed funds, primarily Federal
        Home Loan Bank advances, and with certificates of deposit. These sources
        of
        funds typically carry higher rates of interest than other sources of funds
        such
        as checking and money market accounts. In addition, interest rates on these
        funds have increased over last year as a result of increases in the Federal
        Reserve discount rate, and in case of certificates of deposits, competition
        from
        other banks for such funds.
  These
        changes resulted in the net yield on earning assets increasing 3 basis points
        from 4.43% for the quarter ended September 30, 2005 to 4.46% for the same
        period
        in 2006. The net interest spread decreased from 4.01% in 2005 to 3.88% in
        2006.
  The
        following presents, for the three month periods ended September 30, 2006
        and
        2005, the main components of interest earning assets and interest bearing
        liabilities and related interest income and expense and effective yields
        and
        cost of funds.
  13
 *Index*
  Average
        Consolidated Balance Sheets and Net Interest Income Analysis
 For
        the
        Three Months Ended September 30,
 *(Dollars
        in thousands)*
  Average
                  Balances (1)
              
              Yields
                  / Rates
              
              Income
                  / Expense
              
              Increase
              
              Change
                  Due to2006
              
              2005
              
              2006
              
              2005
              
              2006
              
              2005
              
              (Decrease)
              
              Rate
              
              Volume**Assets**Loans,
                  including fee income
              
              $
              293,949
              
              $
              255,713
              
              
              8.07
              %
              
              7.21
              %
              $
              5,980
              
              $
              4,647
              
              $
              1,333
              
              $
              591
              
              $
              742Taxable
                  securities
              
              
              110,174
              
              
              118,963
              
              
              4.43
              %
              
              4.22
              %
              
              1,229
              
              
              1,266
              
              
              (37
              )
              
              284
              
              
              (321
              )Nontaxable
                  securities
              
              
              11,114
              
              
              12,022
              
              
              3.71
              %
              
              3.80
              %
              
              104
              
              
              115
              
              
              (11
              )
              
              (3
              )
              
              (8
              )Federal
                  funds sold
              
              
              3,639
              
              
              3,488
              
              
              5.45
              %
              
              2.62
              %
              
              50
              
              
              23
              
              
              27
              
              
              26
              
              
              1Interest
                  bearing deposits in banks
              
              
              3,117
              
              
              4,711
              
              
              5.85
              %
              
              3.71
              %
              
              46
              
              
              44
              
              
              2
              
              
              76
              
              
              (74
              )Total
                  earning assets
              
              
              421,993
              
              
              394,897
              
              
              6.97
              %
              
              6.12
              %
              
              7,409
              
              
              6,095
              
              
              1,314
              
              
              974
              
              
              340Cash
                  and due from banks
              
              
              11,694
              
              
              10,052Allowance
                  for loan losses
              
              
              (3,793
              )
              
              (3,278
              )Other
                  assets
              
              
              31,729
              
              
              29,722Total
              
              $
              461,623
              
              $
              431,393**Liabilities
                  and Equity**Interest
                  bearing demand(2)
              
              $
              112,526
              
              $
              118,152
              
              
              1.77
              %
              
              1.14
              %
              $
              503
              
              $
              340
              
              $
              163
              
              $
              268
              
              $
              (105
              )Savings
              
              
              32,440
              
              
              37,805
              
              
              0.59
              %
              
              0.54
              %
              
              48
              
              
              51
              
              
              (3
              )
              
              22
              
              
              (25
              )Certificates
                  of deposit
              
              
              183,588
              
              
              156,093
              
              
              4.17
              %
              
              3.17
              %
              
              1,931
              
              
              1,249
              
              
              682
              
              
              438
              
              
              244Total
                  interest bearing deposits
              
              
              328,554
              
              
              312,050
              
              
              3.00
              %
              
              2.09
              %
              
              2,482
              
              
              1,640
              
              
              842
              
              
              728
              
              
              114Borrowed
                  funds
              
              
              14,128
              
              
              3,866
              
              
              5.22
              %
              
              4.52
              %
              
              186
              
              
              44
              
              
              142
              
              
              8
              
              
              134Total
                  interest bearing liabilities
              
              
              342,682
              
              
              315,916
              
              
              3.09
              %
              
              2.11
              %
              
              2,668
              
              
              1,684
              
              
              984
              
              
              736
              
              
              248Noninterest
                  bearing demand deposits
              
              
              58,914
              
              
              58,439Other
                  liabilities
              
              
              3,020
              
              
              3,828Redeemable
                  common stock held by ESOP
              
              
              1,038
              
              
              478Shareholders'
                  equity
              
              
              55,969
              
              
              52,732Total
              
              $
              461,623
              
              $
              431,393Net
                  interest income
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              4,741
              
              $
              4,411
              
              $
              330
              
              $
              238
              
              $
              92Net
                  interest yield on earning assets
              
              
              
              
              
              
              
              
              4.46
              %
              
              4.43
              %Net
                  interest spread
              
              
              
              
              
              
              
              
              3.88
              %
              
              4.01
              %
  (1)
              Daily
                  averages. Loans include nonaccrual
                  loans.
 (2)
              Includes
                  money market accounts
  For
        the
        nine months ended September 30, 2006,
        net
        interest income increased $1,074,000 or 8.3% over the same period in 2005.
        The
        primary reason for the increase in net interest income is the growth in the
        average balance of the loan portfolio of $43.5 million for during the nine
        months ended September 30, 2006 compared to the same period in 2005. The
        average
        yield on loans increased from 7.12% in 2005 to 7.85% in 2006. As a result
        of the
        loan growth and the increase in yields, interest income on loans increased
        $3.9
        million in 2006 over 2005. The average yield on earning assets increased
        78
        basis points to 6.76%, as the portion of total earning assets comprised by
        loans
        increased from 62.1% for the 2005 period to 68.2% for 2006. The average cost
        of
        funds increased 89 basis points to 2.83%. This increase is primarily the
        result
        of rate increases along with the Company’s increased utilization of Federal Home
        Loan Bank advances and certificates of deposits to fund its loan growth.
  14
 *Index*
  For
        the
        nine months ended September 30, 2006, the net yield on earning assets increased
        3 basis points, increasing from 4.44% for the period ended September 30,
        2005 to
        4.47% for the same period in 2006. The net interest spread decreased from
        4.04%
        in 2005 to 3.93% in 2006. The following presents, for the nine month periods
        ended September 30, 2006 and 2005, the main components of interest earning
        assets and interest bearing liabilities and related interest income and expense
        and effective yields and cost of funds.
  Average
        Consolidated Balance Sheets and Net Interest Income Analysis
 For
        the
        Nine Month Periods Ended September 30,
 *(Dollars
        in thousands)*
 
 Average
                  Balances (1)
              
              Yields
                  / Rates
              
              Income
                  / Expense
              
              Increase
              
              Change
                  Due to2006
              
              2005
              
              2006
              
              2005
              
              2006
              
              2005
              
              (Decrease)
              
              Rate
              
              Volume**Assets**Loans,
                  including fee income
              
              $
              284,307
              
              $
              240,804
              
              
              7.85
              %
              
              7.12
              %
              $
              16,695
              
              $
              12,825
              
              $
              3,870
              
              $
              1,401
              
              $
              2,469Taxable
                  securities
              
              
              111,866
              
              
              121,780
              
              
              4.40
              %
              
              4.26
              %
              
              3,678
              
              
              3,882
              
              
              (204
              )
              
              184
              
              
              (388
              )Nontaxable
                  securities
              
              
              11,468
              
              
              12,439
              
              
              3.85
              %
              
              3.87
              %
              
              330
              
              
              360
              
              
              (30
              )
              
              (1
              )
              
              (29
              )Federal
                  funds sold
              
              
              5,927
              
              
              7,824
              
              
              5.35
              %
              
              2.65
              %
              
              237
              
              
              155
              
              
              82
              
              
              147
              
              
              (65
              )Interest
                  bearing deposits in banks
              
              
              3,451
              
              
              4,837
              
              
              5.19
              %
              
              3.18
              %
              
              134
              
              
              115
              
              
              19
              
              
              74
              
              
              (55
              )Total
                  earning assets
              
              
              417,019
              
              
              387,684
              
              
              6.76
              %
              
              5.98
              %
              
              21,074
              
              
              17,337
              
              
              3,737
              
              
              1,805
              
              
              1,932Cash
                  and due from banks
              
              
              11,844
              
              
              10,583Allowance
                  for loan losses
              
              
              (3,679
              )
              
              (3,219
              )Other
                  assets
              
              
              29,663
              
              
              27,404Total
              
              $
              454,847
              
              $
              422,452**Liabilities
                  and Equity**Interest
                  bearing demand(2)
              
              $
              112,579
              
              $
              116,586
              
              
              1.60
              %
              
              0.98
              %
              $
              1,348
              
              $
              858
              
              $
              490
              
              $
              539
              
              $
              (49
              )Savings
              
              
              34,447
              
              
              37,207
              
              
              0.59
              %
              
              0.50
              %
              
              151
              
              
              140
              
              
              11
              
              
              27
              
              
              (16
              )Certificates
                  of deposit
              
              
              175,638
              
              
              152,611
              
              
              3.90
              %
              
              2.98
              %
              
              5,122
              
              
              3,407
              
              
              1,715
              
              
              1,152
              
              
              563Total
                  interest bearing deposits
              
              
              322,664
              
              
              306,404
              
              
              2.74
              %
              
              1.92
              %
              
              6,621
              
              
              4,405
              
              
              2,216
              
              
              1,718
              
              
              498Borrowed
                  funds
              
              
              13,496
              
              
              1,720
              
              
              5.02
              %
              
              4.66
              %
              
              507
              
              
              60
              
              
              447
              
              
              5
              
              
              442Total
                  interest bearing liabilities
              
              
              336,160
              
              
              308,124
              
              
              2.83
              %
              
              1.94
              %
              
              7,128
              
              
              4,465
              
              
              2,663
              
              
              1,723
              
              
              940Noninterest
                  bearing demand deposits
              
              
              60,521
              
              
              58,144Other
                  liabilities
              
              
              2,263
              
              
              3,865Redeemable
                  common stock held by ESOP
              
              
              1,012
              
              
              478Shareholders'
                  equity
              
              
              54,891
              
              
              51,841Total
              
              $
              454,847
              
              $
              422,452Net
                  interest income
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              13,946
              
              $
              12,872
              
              $
              1,074
              
              $
              82
              
              $
              992Net
                  interest yield on earning assets
              
              
              
              
              
              
              
              
              4.47
              %
              
              4.44
              %Net
                  interest spread
              
              
              
              
              
              
              
              
              3.93
              %
              
              4.04
              %
 
 (1)
              Daily
                  averages. Loans includes nonaccrual
                  loans.
 (2)
              Includes
                  money market accounts
  **Other
        Income** *.* Total
        other income for the three-month period ended September 30, 2006 amounted
        to
        $1,248,000, compared to $1,580,000 for the same period in 2005, a decrease
        of
        $332,000. The decline from 2005 relates primarily to $320,000 in gains on
        sale
        of securities available for sale. Excluding the impact of these gains, other
        income for the 2006 period would have been consistent with 2005, declining
        $12,000 from 2005. Service charges (including NSF and overdraft charges)
        on
        deposit accounts declined $61,000, or 6.8% due to a $54,000 decrease in NSF
        and
        overdraft charges. Other service charges and fees increased $57,000 or 23.4%
        of
        which $42,000 relates to increased transaction fee income from debit cards.
  15
 *Index*
  For
        the
        nine month period ended September 30, 2006, total other income was $3,727,000
        compared to $3,329,000 in 2005, an increase of $398,000. This increase is
        principally due to an impairment charge recorded in the first quarter of
        2005 in
        the amount of $600,000 net of the securities gains of $320,000 recorded in
        the
        third quarter of 2005. The impairment charge in 2005 was recognized on $2.5
        million of Federal Home Loan Mortgage Corporation (“Freddie Mac”) and Federal
        National Mortgage Association (“Fannie Mae”) perpetual preferred stock. The
        reclassification of an unrealized mark-to-market loss on these securities
        to an
        other-than-temporary charge was based upon a detailed impairment analysis
        of
        these securities. Previous losses on the securities were recognized in the
        equity section of the balance sheet. The Company’s conclusion considered the
        duration and severity of the unrealized loss, the financial condition and
        near-term prospects of the issuers, and the likelihood of the market value
        of
        these instruments increasing to our initial cost basis within a reasonable
        period of time. Net of these two items, other income for the nine months
        ended
        September 30, 2006 would have increased $118,000 over the same period last
        year.
  Service
        charges (including NSF and overdraft charges) on deposit accounts were $838,000
        for the three-month period in 2006 compared to $899,000 for the same period
        in
        2005, a decrease of $61,000, or 6.8%, but for the year to date period have
        increased $39,000 or 1.6% to $2,547,000. For the three month period, the
        decline
        is primarily due to a $54,000 decrease in NSF and overdraft charges. For
        the
        year to date period, NSF and overdraft fees increased $34,000 over the same
        period in 2005. Other service charges and fees increased $57,000 to $301,000
        for
        the quarter and $130,000 to $850,000 for the nine-month period primarily
        due to
        increases in debit card fees. Increased fee income from debit cards accounted
        for $42,000 of the increase for the quarter and $89,000 of the increase for
        the
        year to date.
  The
        gain
        on sale of loans for the three month period was $39,000 in 2006 compared
        to
        $32,000 a year ago, and $110,000 for the nine month period in both 2006 and
        2005. Upson originated and sold mortgage loans totaling $4.2 million during
        the
        third quarter of 2006 without recourse compared with $3.0 million for the
        third
        quarter of 2005, and $11.1 million during the nine month period ended September
        30, 2006 compared with $9.2 million for the same period in 2005.
  **Other
        Expenses.** Other
        expenses for the three-month period ended September 30, 2006 amounted to
        $3,567,000 compared to $3,517,000 for the same period in 2005, an increase
        of
        $50,000 or 1.4%. For the nine months ended September 30, 2006, other expenses
        grew $466,000, or 4.5%, to $10,797,000.
  The
        largest component of other expenses is salaries and employee benefits, which
        increased $58,000, or 3.1% for the quarter and $520,000 or 9.7% for the nine
        month period. Costs related to the expensing of stock options (described
        below)
        totaled $24,000 and $71,000 for the quarter and year to date, respectively.
        Incentive expense declined $18,000 for the three month period but increased
        $177,000 for the year to date due to increased profitability. Benefit costs
        increased $14,000 for the quarter and $101,000 for the year to date. The
        increase for the year is attributable to higher medical costs, which increased
        $42,000, and higher retirement costs, which increased $39,000.
  Effective
        January 1, 2006, the Company adopted SFAS No. 123R “Share-Based Payment.” SFAS
        No. 123R requires recognition of the cost of employee services received in
        exchange for an award of equity instruments in the financial statements over
        the
        period the employee is required to perform the services in exchange for the
        award (presumptively the vesting period). The Company adopted SFAS No. 123R
        using the modified prospective application as permitted under SFAS No. 123R.
        Accordingly, prior period amounts have not been restated. Under this
        application, the Company is required to record compensation expense for all
        awards granted after the date of adoption and for the unvested portion of
        previously granted awards that remain outstanding at the date of adoption.
        Prior
        to the adoption of SFAS No. 123R, the Company used the intrinsic value method
        as
        prescribed by APB No. 25 and thus recognized no compensation expense for
        options
        granted with exercise prices equal to the fair market value of the Company’s
        common stock on the date of grant. The compensation cost that was charged
        against income for our stock option plans for the three and nine months ended
        September 30, 2006 was $23,770 and $71,310, respectively. No options were
        outstanding at or for the three- and nine-month periods ended September 30,
        2005. The total compensation cost related to nonvested awards not yet recognized
        at September 30, 2006 is $404,100 which will be recognized over the weighted
        average period of approximately 4.25 years. See “Note 3 - Stock Compensation
        Plans” in the notes to condensed consolidated financial statements for further
        information.
  For
        the
        nine month period ended September 30, 2006, amortization of intangibles declined
        $155,000, or 20.5% due to reductions in the amount of scheduled amortization
        of
        the core deposit intangible asset recorded in connection with the merger
        with
        First Polk Bankshares, Inc. Occupancy expenses increased $11,000 for the
        quarter. For the year to date, other operating expenses increased $85,000
        of
        which $30,000 relates to higher data processing charges and $87,000 relates
        to
        costs associated with disposal of foreclosed property.
  16
 *Index*
  **Income
        Taxes.** The
        Company recorded income taxes totaling $706,000 and $715,000 for the three-month
        periods ending September 30, 2006 and 2005, respectively. Effective tax rates
        for the periods were 32.8% and 32.1%, respectively. For the nine-month periods,
        taxes totaled $2,087,000 and $1,661,000 for 2006 and 2005, respectively,
        with
        effective tax rates of 32.8% and 31.0%. Tax-exempt interest income and income
        on
        bank-owned life insurance are the primary reasons that the Company’s effective
        tax rates are less than the statutory tax rate of 34%. While the Company’s
        pretax income has increased in 2006, the amounts of tax-exempt income mentioned
        above have declined, resulting in higher effective tax rates in 2006 than
        in
        2005. Additionally, in 2005 the Company was able to utilize approximately
        $37,000 in certain state income tax credits.
  **Liquidity
        and Capital Resources**
 
 Liquidity
        is our ability to meet deposit withdrawals immediately while also providing
        for
        the credit needs of our customers. We monitor our liquidity resources on
        an
        ongoing basis. State and Federal regulatory authorities also monitor our
        liquidity on a periodic basis. As of September 30, 2006, we believe our
        liquidity, as determined under guidelines established by regulatory authorities
        and internal policies, was satisfactory.
 
 If
        needed, we have the ability on a short-term basis to borrow and purchase
        Federal
        funds from other financial institutions. At September 30, 2006, we had available
        to us additional federal funds lines of credit totaling $21.0 million in
        place
        with three banks and $44.6 million of available funds on our line of credit
        with
        the Federal Home Loan Bank of Atlanta.
 
 At
        September 30, 2006, our capital ratios were adequate based on regulatory
        minimum
        capital requirements. The minimum capital requirements and the actual capital
        ratios on a consolidated and bank-only basis are as follows:
 
 Minimum
                Required
              
              Minimum
                Required
                to
                  be Well
                Capitalized
              
              Consolidated
              
              Upson
              
              PolkRisk-based
                  capital ratiosTotal
                  risk based capital
              
              
              8.00
              %
              
              10.00
              %
              
              16.78
              %
              
              14.06
              %
              
              21.38
              %Tier
                  1
              
              
              4.00
              %
              
              6.00
              %
              
              15.60
              %
              
              12.94
              %
              
              20.13
              %Tier
                  1 leverage ratio
              
              
              4.00
              %
              
              5.00
              %
              
              11.01
              %
              
              9.69
              %
              
              12.82
              %
 
 These
        ratios may decline as asset growth continues, but are expected to continue
        to
        exceed minimum regulatory requirements.
  In
        the
        second quarter of 2005, Bank of Upson began a project to rebuild its main
        office
        in Thomaston, Georgia. This project will replace substantially all of its
        current facility, increasing its size from 16,000 to 26,000 square feet.
        The
        first phase of construction was completed in July 2006 with the final phase
        to
        be completed in the fourth quarter of 2006. Total cost of the project is
        expected to be between $5.25 million and $5.75 million. Through September
        30,
        2006, approximately $4.5 million had been disbursed for the
        project.
  Other
        than the items described above, we are not aware of any trends, demands,
        commitments, events or uncertainties that will result, or are reasonably
        likely
        to result, in our liquidity increasing or decreasing in any material
        way.
 
 **Off-Balance
        Sheet Arrangements**
 
 We
        are a
        party to financial instruments with off-balance sheet risk in the normal
        course
        of business to meet the financing needs of our customers. These financial
        instruments include commitments to extend credit and standby letters of credit.
        Such commitments involve, to varying degrees, elements of credit risk and
        interest rate risk in excess of the amount recognized in the balance sheets.
 
 Our
        exposure to credit loss in the event of nonperformance by the other party
        to the
        financial instrument for commitments to extend credit and standby letters
        of
        credit is represented by the contractual amount of those instruments. We
        use the
        same credit policies in making commitments and conditional obligations as
        we do
        for on-balance sheet instruments. A summary of our commitments as of September
        30, 2006 and December 31, 2005 are as follows (dollars in thousands):
 
 *(dollars
                  in thousands)*
              
              **September
                  30, 2006**
              
              December
                  31, 2005Commitments
                  to extend credit
              
              **$**
              **39,210**
              
              $
              36,529Credit
                  card commitments
              
              
              **9,248**
              
              
              8,329Commercial
                  letters of credit
              
              
              **646**
              
              
              272**$**
              **49,104**
              
              $
              45,130
  17
 *Index*
 
 Commitments
        to extend credit are agreements to lend to a customer as long as there is
        no
        violation of any condition established in the contract. Since many of the
        commitments are expected to expire without being drawn upon, the total
        commitment amounts do not necessarily represent future cash requirements.
 
 Commercial
        letters of credit are conditional commitments issued by us to guarantee the
        performance of a customer to a third party. Those letters of credit are
        primarily issued to support public and private borrowing arrangements. The
        credit risk involved in issuing letters of credit is essentially the same
        as
        that involved in extending loans to customers. Collateral is required in
        instances which we deem necessary.
  18
 *Index*
  **ITEM
        3. Quantitative and Qualitative Disclosures about Market
        Risk**
  Pursuant
        to Instruction 1 to Item 305(c) of Regulation S-K, no response to this item
        is
        required until after December 31, 2006.
  **ITEM
        4. Controls and Procedures**
  As
        of the
        end of the period covered by this Quarterly Report on Form 10-Q, our principal
        executive officer and principal financial officer have evaluated the
        effectiveness of our “disclosure controls and procedures” (“Disclosure
        Controls”). Disclosure Controls, as defined in Rule 13a-15(e) of the Securities
        Exchange Act of 1934, as amended (the “Exchange Act”), are procedures that are
        designed with the objective of ensuring that information required to be
        disclosed in our reports filed under the Exchange Act, such as this Quarterly
        Report, is recorded, processed, summarized and reported within the time periods
        specified in the Securities and Exchange Commission’s rules and forms.
        Disclosure Controls are also designed with the objective of ensuring that
        such
        information is accumulated and communicated to our management, including
        the CEO
        and CFO, as appropriate to allow timely decisions regarding required disclosure.
 
 Our
        management, including the CEO and CFO, does not expect that our Disclosure
        Controls will prevent all error and all fraud. A control system, no matter
        how
        well conceived and operated, can provide only reasonable, not absolute,
        assurance that the objectives of the control system are met. Further, the
        design
        of a control system must reflect the fact that there are resource constraints,
        and the benefits of controls must be considered relative to their costs.
        Because
        of the inherent limitations in all control systems, no evaluation of controls
        can provide absolute assurance that all control issues and instances of fraud,
        if any, within the company have been detected. These inherent limitations
        include the realities that judgments in decision-making can be faulty, and
        that
        breakdowns can occur because of simple error or mistake. The design of any
        system of controls also is based in part upon certain assumptions about the
        likelihood of future events, and there can be no assurance that any design
        will
        succeed in achieving its stated goals under all potential future conditions.
 
 Based
        upon their controls evaluation, our CEO and CFO have concluded that our
        Disclosure Controls are effective at a reasonable assurance level.
 
 There
        have been no changes in our internal controls over financial reporting during
        our third fiscal quarter that have materially affected, or are reasonably
        likely
        to materially affect, our internal control over financial
        reporting.
 ****
 **PART
        II - OTHER INFORMATION**
 
 **Item
                  1.**
              **Legal
                  Proceedings**
 
 The
        Company and its subsidiaries are subject to claims and suits arising in the
        ordinary course of business. In the opinion of management, the ultimate
        resolution of these pending claims and legal proceedings will not have a
        material adverse effect on the Company’s results of operations.
 
 **Item1A.**
              **Risk
                  Factors**
 
 As
        disclosed in Note 7 of the Notes to Condensed Consolidated Financial Statements,
        SouthCrest completed its acquisition of Maplesville Bancorp on October 31,
        2006.
        If SouthCrest does not successfully integrate Maplesville into its business,
        SouthCrest may not realize the expected benefits from its acquisition of
        Maplesville. SouthCrest may encounter unforeseen expenses, as well as
        difficulties and complications in integrating Maplesville’s operations with its
        overall operations. SouthCrest expects that it be able to maintain most of
        Maplesville’s key customers and personnel and integrate Maplesville’s systems
        and procedures with those of SouthCrest with a minimal amount of costs and
        diversion of management time and attention. If SouthCrest is unable to integrate
        Maplesville in a timely manner or experiences disruptions with Maplesville’s
        customer relationships, the anticipated benefits of the acquisition of
        Maplesville may not be realized and SouthCrest’s results of operations may be
        adversely affected.
 
 In
        addition to the other information set forth in this report, you should carefully
        consider the factors discussed in Part I, "Item 1. Business" under the heading
        "Risk Factors" in our Annual Report on Form 10-KSB for the year ended December
        31, 2005, which could materially affect our business, financial condition
        or
        future results. The risks described in our Annual Report on Form 10-KSB are
        not
        the only risks facing our Company. Additional risks and uncertainties not
        currently known to us or that we currently deem to be immaterial also may
        materially adversely affect our business, financial condition and/or operating
        results.
  19
 *Index*
  **Item
                  2.**
              ******Unregistered
                  Sales of Equity Securities and Use of
                  Proceeds**
 
 The
        Company made no repurchases of its common stock during the quarter ended
        September 30, 2006.
  **Item3.**
              **Defaults
                  upon Senior Securities**
 
 None.
 
 **Item4.**
              **Submission
                  of Matters to a Vote of Security
                  Holders**
 
 None.
 
 **Item
                  5.**
              **Other
                  Information**
 
 None.
 
 **Item
                  6.**
              **Exhibits**
 
 Exhibits
 
 Exhibit
                  No. 31.1
              Chief
                  Executive Officer Certification Pursuant to Rule
                  13a-14(a)/15d-14(a)
 
 Exhibit
                  No. 31.2
              Chief
                  Financial Officer Certification Pursuant to Rule
                  13a-14(a)/15d-14(a)
 
 Exhibit
                  No. 32.1
              Chief
                  Executive Officer Certification Pursuant to 18
                  U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002
 
 Exhibit
                  No. 32.2
              Chief
                  Financial Officer Certification Pursuant to 18
                  U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002
  20
 *Index*
 
 **SIGNATURES**
 
 In
        accordance with the requirements of the Exchange Act, the registrant caused
        this
        report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 SOUTHCREST
        FINANCIAL GROUP, INC .
 (Registrant)
 
 DATE:
                  November 14, 2006
              BY:
              
              /s/
                  Larry T. KuglarLarry
                  T. Kuglar.President
                  and Chief Executive OfficerDATE:
                  November 14, 2006
              BY:
              
              /s/
                  Douglas J. HerthaDouglas
                  J. HerthaSenior
                  Vice President, Chief Financial Officer
 
  21