##### 



EXHIBIT 13
 SOUTHERN COMMUNITY
BANCSHARES, INC.
AND SUBSIDIARY
 CONSOLIDATED FINANCIAL REPORT
 DECEMBER 31, 2007




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##### 



SOUTHERN COMMUNITY BANCSHARES, INC.
AND SUBSIDIARY
 CONSOLIDATED FINANCIAL REPORT
DECEMBER 31, 2007
 TABLE OF CONTENTS
 PageREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
    
    
    1CONSOLIDATED FINANCIAL STATEMENTSConsolidated balance sheets
    
    
    2Consolidated statements of income (loss)
    
    
    3Consolidated statements of comprehensive income (loss)
    
    
    4Consolidated statements of shareholders equity
    
    
    5Consolidated statements of cash flows
    
    
    6-7Notes to consolidated financial statements
    
    
    8-32




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##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 To the Board of Directors  Southern Community Bancshares, Inc. and Subsidiary  Fayetteville, Georgia
 Southern Community Bancshares,
Inc. and subsidiary
   /s/ Mauldin & Jenkins, LLCAtlanta, GeorgiaApril 16, 2008 1




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##### 



SOUTHERN COMMUNITY BANCSHARES, INC.
AND SUBSIDIARY
 CONSOLIDATED BALANCE SHEETS
 As of December 31,2007
    
    
    2006AssetsCash and due from banks
    
    $
    4,090,218
    
    
    $
    5,029,384Interest bearing deposits in banks
    
    
    3,503,959
    
    
    
    741,012Federal funds sold
    
    
    26,039,000
    
    
    
    13,747,000Securities available for sale, at fair value
    
    
    58,196,916
    
    
    
    55,368,977Restricted equity securities, at cost
    
    
    3,282,000
    
    
    
    2,669,900Loans
    
    
    290,796,352
    
    
    
    293,223,692Less allowance for loan losses
    
    
    7,961,406
    
    
    
    3,051,229Loans, net
    
    
    282,834,946
    
    
    
    290,172,463Premises and equipment
    
    
    9,048,748
    
    
    
    9,372,877Foreclosed assets
    
    
    10,470,787
    
    
    
    196,134Other assets
    
    
    10,922,882
    
    
    
    9,036,508Total assets
    
    $
    408,389,456
    
    
    $
    386,334,255Liabilities and Shareholders EquityDepositsNoninterest-bearing
    
    $
    32,220,093
    
    
    $
    36,833,998Interest-bearing
    
    
    268,497,389
    
    
    
    254,955,724Total deposits
    
    
    300,717,482
    
    
    
    291,789,722Federal Home Loan Bank advances
    
    
    57,500,000
    
    
    
    44,500,000Securities sold under repurchase agreements
    
    
    14,573,847
    
    
    
    12,913,674Subordinated debentures
    
    
    10,929,000
    
    
    
    10,929,000Other liabilities
    
    
    1,680,798
    
    
    
    1,753,246Total liabilities
    
    
    385,401,127
    
    
    
    361,885,642Commitments and contingencies (Note 14)Shareholders equityCapital stock, no par value; 10,000,000 shares authorized;
2,593,874 and 2,592,894 shares issued and outstanding, respectively
    
    
    16,204,025
    
    
    
    16,171,236Retained earnings
    
    
    6,921,331
    
    
    
    8,816,424Accumulated other comprehensive loss
    
    
    (137,027
    )
    
    
    (539,047
    )Total shareholders equity
    
    
    22,988,329
    
    
    
    24,448,613Total liabilities and shareholders equity
    
    $
    408,389,456
    
    
    $
    386,334,255
 See Notes to Consolidated Financial Statements.
 2




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##### 



SOUTHERN COMMUNITY BANCSHARES, INC.
AND SUBSIDIARY
 CONSOLIDATED STATEMENTS OF INCOME (LOSS)
 Years Ended December 31,2007
    
    
    2006
    
    
    2005Interest incomeLoans, including fees
    
    $
    25,364,884
    
    
    $
    24,098,725
    
    
    $
    16,647,627Taxable securities
    
    
    2,160,226
    
    
    
    2,206,331
    
    
    
    1,726,004Nontaxable securities
    
    
    543,580
    
    
    
    529,776
    
    
    
    456,336Federal funds sold
    
    
    343,329
    
    
    
    429,142
    
    
    
    313,198Interest bearing deposits in banks
    
    
    110,920
    
    
    
    59,115
    
    
    
    33,478Total interest income
    
    
    28,522,939
    
    
    
    27,323,089
    
    
    
    19,176,643Interest expenseDeposits
    
    
    11,597,948
    
    
    
    10,345,029
    
    
    
    6,305,563Other borrowings
    
    
    3,914,659
    
    
    
    2,417,843
    
    
    
    1,466,637Total interest expense
    
    
    15,512,607
    
    
    
    12,762,872
    
    
    
    7,772,200Net interest income
    
    
    13,010,332
    
    
    
    14,560,217
    
    
    
    11,404,443Provision for loan losses
    
    
    6,417,895
    
    
    
    2,877,000
    
    
    
    1,415,660Net interest income after provision for loan losses
    
    
    6,592,437
    
    
    
    11,683,217
    
    
    
    9,988,783Other incomeService charges on deposit accounts
    
    
    962,584
    
    
    
    831,947
    
    
    
    615,705Gain on sale of securities available for sale
    
    
    
    
    
    
    39,614
    
    
    
    106,121Income from life insurance policy
    
    
    
    
    
    
    495,088
    
    
    
    Other operating income
    
    
    198,795
    
    
    
    282,808
    
    
    
    74,235Total other income
    
    
    1,161,379
    
    
    
    1,649,457
    
    
    
    796,061Other expensesSalaries and employee benefits
    
    
    6,012,610
    
    
    
    5,607,920
    
    
    
    4,479,416Equipment and occupancy expenses
    
    
    1,802,696
    
    
    
    1,669,284
    
    
    
    1,247,250Other operating expenses
    
    
    3,409,258
    
    
    
    2,781,488
    
    
    
    2,376,001Total other expenses
    
    
    11,224,564
    
    
    
    10,058,692
    
    
    
    8,102,667Net income before income taxes (benefit)
    
    
    (3,470,748
    )
    
    
    3,273,982
    
    
    
    2,682,177Income tax expense
    
    
    (1,575,655
    )
    
    
    778,365
    
    
    
    815,304Net income
    
    $
    (1,895,093
    )
    
    $
    2,495,617
    
    
    $
    1,866,873Basic earnings (losses) per share
    
    $
    (0.73
    )
    
    $
    0.96
    
    
    $
    0.72Diluted earnings (losses) per share
    
    $
    (0.73
    )
    
    $
    0.93
    
    
    $
    0.70Dividends declared per share
    
    $
    
    
    
    $
    
    
    
    $
    
 See Notes to Consolidated Financial Statements.
 3




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##### 



SOUTHERN COMMUNITY BANCSHARES, INC.
AND SUBSIDIARY
 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
 Years Ended December 31,2007
    
    
    2006
    
    
    2005Net income (loss)
    
    $
    (1,895,093
    )
    
    $
    2,495,617
    
    
    $
    1,866,873Other comprehensive income (loss):Unrealized holding gains (losses) on securities available for sale
arising during period, net of tax (benefits) of $246,399, $208,679
and $(328,957), respectively
    
    
    402,020
    
    
    
    340,479
    
    
    
    (536,720
    )Reclassification adjustment for gains realized in net income,
net of taxes of $0, $15,053 and 40,326, respectively
    
    
    
    
    
    
    (24,561
    )
    
    
    (65,795
    )Other comprehensive income (loss)
    
    
    402,020
    
    
    
    315,918
    
    
    
    (602,515
    )Comprehensive income (loss)
    
    $
    (1,493,073
    )
    
    $
    2,811,535
    
    
    $
    1,264,358
 See Notes to Consolidated Financial Statements.
 4




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##### 



SOUTHERN COMMUNITY BANCSHARES, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
 AccumulatedOther
    
    
    TotalCapital Stock
    
    
    Retained
    
    
    Comprehensive
    
    
    ShareholdersShares
    
    
    Amount
    
    
    Earnings
    
    
    Loss
    
    
    EquityBalance, December 31, 2004
    
    
    2,580,526
    
    
    $
    16,054,796
    
    
    $
    4,453,934
    
    
    $
    (252,450
    )
    
    $
    20,256,280Net income
    
    
    
    
    
    
    
    
    
    
    1,866,873
    
    
    
    
    
    
    $
    1,866,873Options exercised, net of repurchases
    
    
    6,135
    
    
    
    11,217
    
    
    
    
    
    
    
    
    
    
    $
    11,217Issuance of common stock
    
    
    420
    
    
    
    7,980
    
    
    
    
    
    
    
    
    
    
    $
    7,980Other comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (602,515
    )
    
    $
    (602,515
    )Balance, December 31, 2005
    
    
    2,587,081
    
    
    
    16,073,993
    
    
    
    6,320,807
    
    
    
    (854,965
    )
    
    
    21,539,835Net income
    
    
    
    
    
    
    
    
    
    
    2,495,617
    
    
    
    
    
    
    
    2,495,617Stock-based compensation
    
    
    
    
    
    
    42,273
    
    
    
    
    
    
    
    
    
    
    
    42,273Options exercised
    
    
    5,333
    
    
    
    45,010
    
    
    
    
    
    
    
    
    
    
    
    45,010Issuance of common stock
    
    
    480
    
    
    
    9,960
    
    
    
    
    
    
    
    
    
    
    
    9,960Other comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    315,918
    
    
    
    315,918Balance, December 31, 2006
    
    
    2,592,894
    
    
    
    16,171,236
    
    
    
    8,816,424
    
    
    
    (539,047
    )
    
    
    24,448,613Net loss
    
    
    
    
    
    
    
    
    
    
    (1,895,093
    )
    
    
    
    
    
    
    (1,895,093
    )Stock-based compensation
    
    
    
    
    
    
    26,468
    
    
    
    
    
    
    
    
    
    
    
    26,468Issuance of common stock
    
    
    980
    
    
    
    6,321
    
    
    
    
    
    
    
    
    
    
    
    6,321Other comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    402,020
    
    
    
    402,020Balance, December 31, 2007
    
    
    2,593,874
    
    
    $
    16,204,025
    
    
    $
    6,921,331
    
    
    $
    (137,027
    )
    
    $
    22,988,329
  5




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##### 



SOUTHERN COMMUNITY BANCSHARES, INC.
AND SUBSIDIARY
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Years Ended December 31,2007
    
    
    2006
    
    
    2005OPERATING ACTIVITIESNet income (loss)
    
    $
    (1,895,093
    )
    
    $
    2,495,617
    
    
    $
    1,866,873Adjustments to reconcile net income (loss) to net cash provided by operating activities
Depreciation
    
    
    730,511
    
    
    
    688,850
    
    
    
    580,413Provision for loan losses
    
    
    6,417,895
    
    
    
    2,877,000
    
    
    
    1,415,660Gain on sale of securities available for sale
    
    
    
    
    
    
    (39,614
    )
    
    
    (106,121
    )Deferred income taxes
    
    
    (2,051,848
    )
    
    
    240,221
    
    
    
    (310,663
    )Increase (decrease) in taxes payable
    
    
    (223,381
    )
    
    
    (612,165
    )
    
    
    332,351Increase in interest receivable
    
    
    278,630
    
    
    
    (556,109
    )
    
    
    (674,355
    )Increase in interest payable
    
    
    120,446
    
    
    
    361,546
    
    
    
    627,316Increase in cash surrender value of life insurance
    
    
    (184,848
    )
    
    
    (195,171
    )
    
    
    (32,547
    )Income from life insurance policy
    
    
    
    
    
    
    (495,088
    )
    
    
    Stock-based compensation
    
    
    26,468
    
    
    
    42,273
    
    
    
    (Gain) loss on sale of other real estate owned
    
    
    37,026
    
    
    
    
    
    
    
    (5,825
    )Net other operating activities
    
    
    (141,234
    )
    
    
    547,558
    
    
    
    337,394Net cash provided by operating activities
    
    
    3,114,572
    
    
    
    5,354,918
    
    
    
    4,030,496INVESTING ACTIVITIESDecrease (increase) in interest-bearing deposits in banks
    
    
    (2,762,947
    )
    
    
    (116,504
    )
    
    
    1,413,723Purchase of securities available for sale
    
    
    (8,041,321
    )
    
    
    (9,121,740
    )
    
    
    (12,862,135
    )Proceeds from maturities of securities available for sale
    
    
    5,861,801
    
    
    
    5,694,479
    
    
    
    4,539,422Proceeds from sales of securities available for sale
    
    
    
    
    
    
    1,998,225
    
    
    
    4,681,938Purchase of restricted equity securities
    
    
    (612,100
    )
    
    
    (778,200
    )
    
    
    (420,400
    )Decrease in cash surrender value of life insurance
    
    
    
    
    
    
    378,932
    
    
    
    Net decrease (increase) in federal funds sold
    
    
    (12,292,000
    )
    
    
    (11,140,000
    )
    
    
    15,771,000Net increase in loans
    
    
    (11,829,816
    )
    
    
    (42,292,348
    )
    
    
    (67,923,706
    )Purchase of bank owned life insurance
    
    
    
    
    
    
    
    
    
    
    (5,000,000
    )Net purchases of premises and equipment
    
    
    (409,368
    )
    
    
    (465,974
    )
    
    
    (2,399,117
    )Proceeds from sales of other real estate owned
    
    
    2,437,759
    
    
    
    
    
    
    
    281,292Net cash used in investing activities
    
    
    (27,647,992
    )
    
    
    (55,843,130
    )
    
    
    (61,917,983
    )FINANCING ACTIVITIESNet increase in deposits
    
    
    8,927,760
    
    
    
    30,150,516
    
    
    
    45,874,971Proceeds from issuance of capital stock
    
    
    6,321
    
    
    
    54,970
    
    
    
    19,197Proceeds from issuance of subordinated debentures-net
    
    
    
    
    
    
    5,000,000
    
    
    
    Net increase (decrease) in Federal Home Loan Bank advances
    
    
    13,000,000
    
    
    
    14,500,000
    
    
    
    6,000,000Net (decrease) increase in repurchase agreements
    
    
    1,660,173
    
    
    
    (249,412
    )
    
    
    8,410,172Net cash provided by financing activities
    
    
    23,594,254
    
    
    
    49,456,074
    
    
    
    60,304,340Net increase (decrease) in cash and due from banks
    
    
    (939,166
    )
    
    
    (1,032,138
    )
    
    
    2,416,853Cash and due from banks at beginning of period
    
    
    5,029,384
    
    
    
    6,061,522
    
    
    
    3,644,669Cash and due from banks at end of period
    
    $
    4,090,218
    
    
    $
    5,029,384
    
    
    $
    6,061,522
 See Notes to Consolidated Financial Statements.
 6




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##### 



SOUTHERN COMMUNITY BANCSHARES, INC.
AND SUBSIDIARY
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Years Ended December 31,2007
    
    
    2006
    
    
    2005SUPPLEMENTAL DISCLOSURECash paid for interest
    
    $
    15,392,161
    
    
    $
    12,401,326
    
    
    $
    7,144,884Cash paid for taxes
    
    $
    699,574
    
    
    $
    1,150,308
    
    
    $
    847,300NONCASH TRANSACTIONSForeclosed assets acquired in settlement of loans
    
    $
    13,309,438
    
    
    $
    196,134
    
    
    $
    275,467Financed sales of foreclosed assets
    
    $
    560,000
    
    
    $
    
    
    
    $
    
 See Notes to Consolidated Financial Statements.
 7




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##### 



SOUTHERN COMMUNITY BANCSHARES, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Nature of Business
  Basis of Presentation and Accounting Estimates
    Cash, Due From Banks and Cash Flows
   8




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##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 Securities
  Loans
    9




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 Allowance for Loan Losses
   Premises and Equipment
  Buildings and improvements
    
    15-40 yearsFurniture and equipment
    
    3-10 years
 Foreclosed Assets
  10




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##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
   Income Taxes
  Profit-Sharing Plan
  Stock Compensation Plans
  11




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##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 Stock Compensation Plans (Continued)
    December 31, 2005Net earnings
    
    As reported
    
    $
    1,866,873Effect of grants
    
    
    (13,639
    )Proforma
    
    $
    1,853,234Basic earnings per share
    
    As reported
    
    $
    0.72Proforma
    
    $
    0.72Diluted earnings per share
    
    As reported
    
    $
    0.70Proforma
    
    $
    0.69
 Earnings Per Share
  12




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 Comprehensive Income (Loss)
   Recent Accounting Standards
 Fair Value Measurements.
 The Fair Value Option for
Financial Assets and Financial Liabilities  Including an Amendment of FASB Statement
No. 115. Accounting for Certain Investments in Debt and Equity Securities
 13




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 Recent Accounting Standards (Continued)
 Business
Combinations.
 Noncontrolling Interests in
Consolidated Financial Statements  An Amendment of ARB No. 51.
 NOTE 2. SECURITIES
  Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueDecember 31, 2007:U.S. Government
sponsored agencies
    
    $
    24,954,899
    
    
    $
    90,183
    
    
    $
    (32,862
    )
    
    $
    25,012,220State and municipal securities
    
    
    13,810,849
    
    
    
    56,991
    
    
    
    (150,624
    )
    
    
    13,717,216Corporate bonds
    
    
    1,879,670
    
    
    
    13,820
    
    
    
    
    
    
    
    1,893,490Mortgage-backed securities
    
    
    17,772,510
    
    
    
    68,052
    
    
    
    (266,572
    )
    
    
    17,573,990$
    58,417,928
    
    
    $
    229,046
    
    
    $
    (450,058
    )
    
    $
    58,196,916December 31, 2006:U.S. Government
sponsored agencies
    
    $
    23,948,923
    
    
    $
    
    
    
    $
    (384,790
    )
    
    $
    23,564,133State and municipal securities
    
    
    13,450,877
    
    
    
    87,748
    
    
    
    (94,025
    )
    
    
    13,444,600Corporate bonds
    
    
    1,880,118
    
    
    
    3,612
    
    
    
    (12,630
    )
    
    
    1,871,100Mortgage-backed securities
    
    
    16,958,490
    
    
    
    18,575
    
    
    
    (487,921
    )
    
    
    16,489,144$
    56,238,408
    
    
    $
    109,935
    
    
    $
    (979,366
    )
    
    $
    55,368,977
 14




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##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 2. SECURITIES (Continued)
   Amortized
    
    
    FairCost
    
    
    ValueDue in less than one year
    
    $
    2,497,490
    
    
    $
    2,479,700Due from one to five years
    
    
    4,323,845
    
    
    
    4,312,082Due from five to ten years
    
    
    5,567,538
    
    
    
    5,559,050Due after ten years
    
    
    28,256,545
    
    
    
    28,272,094Mortgage-backed securities
    
    
    17,772,510
    
    
    
    17,573,990$
    58,417,928
    
    
    $
    58,196,916
  Years Ended December 31,2007
    
    
    2006
    
    
    2005Gross gains
    
    $
    
    
    
    $
    39,614
    
    
    $
    116,433Gross losses
    
    
    
    
    
    
    
    
    
    
    (10,312
    )Net realized gains
    
    $
    
    
    
    $
    39,614
    
    
    $
    106,121
  15




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 2. SECURITIES (Continued)
 Less Than 12 Months
    
    
    12 Months or MoreDescription of Securities:
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedDecember 31, 2007
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesU.S. Government sponsored agencies
    
    $
    
    
    
    $
    
    
    
    $
    4,461,375
    
    
    $
    (32,862
    )State and municipal securities
    
    
    2,554,473
    
    
    
    (47,794
    )
    
    
    4,922,202
    
    
    
    (102,830
    )Mortgage-backed securities
    
    
    
    
    
    
    
    
    
    
    10,812,210
    
    
    
    (266,572
    )Corporate bonds
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    -Total temporarily impaired securities
    
    $
    2,554,473
    
    
    $
    (47,794
    )
    
    $
    20,195,787
    
    
    $
    (402,264
    )December 31, 2006U.S. Government sponsored agencies
    
    $
    2,955,387
    
    
    $
    (8,007
    )
    
    $
    20,608,746
    
    
    $
    (376,783
    )State and municipal securities
    
    
    3,768,478
    
    
    
    (11,405
    )
    
    
    3,688,303
    
    
    
    (82,620
    )Mortgage-backed securities
    
    
    897,897
    
    
    
    (7,964
    )
    
    
    12,768,165
    
    
    
    (479,957
    )Corporate bonds
    
    
    987,370
    
    
    
    (12,630
    )
    
    
    
    
    
    
    Total temporarily impaired securities
    
    $
    8,609,132
    
    
    $
    (40,006
    )
    
    $
    37,065,214
    
    
    $
    (939,360
    )
   16




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 3. LOANS
  December 31,2007
    
    
    2006Commercial
    
    $
    22,576,161
    
    
    $
    19,569,280Real estate  construction
    
    
    162,477,693
    
    
    
    168,719,930Real estate  mortgage
    
    
    101,779,185
    
    
    
    101,169,298Consumer installment and other
    
    
    4,163,703
    
    
    
    4,194,848290,996,742
    
    
    
    293,653,356Deferred loan fees
    
    
    (200,390
    )
    
    
    (429,664
    )Allowance for loan losses
    
    
    (7,961,406
    )
    
    
    (3,051,229
    )Loans, net
    
    $
    282,834,946
    
    
    $
    290,172,463
  Years Ended December 31,2007
    
    
    2006
    
    
    2005Balance, beginning of year
    
    $
    3,051,229
    
    
    $
    3,000,956
    
    
    $
    2,016,557Provision for loan losses
    
    
    6,417,895
    
    
    
    2,877,000
    
    
    
    1,415,660Loans charged off
    
    
    (1,597,796
    )
    
    
    (2,946,914
    )
    
    
    (456,593
    )Recoveries of loans previously charged off
    
    
    90,078
    
    
    
    120,187
    
    
    
    25,332Balance, end of year
    
    $
    7,961,406
    
    
    $
    3,051,229
    
    
    $
    3,000,956
 17




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 3. LOANS (Continued)
  As of and for the Years EndedDecember 31,2007
    
    
    2006
    
    
    2005Impaired loans without a valuation allowance
    
    $
    25,632,936
    
    
    $
    
    
    
    $
    Impaired loans with a valuation allowance
    
    
    14,635,048
    
    
    
    1,034,310
    
    
    
    6,348,580Total impaired loans
    
    $
    40,267,984
    
    
    $
    1,034,310
    
    
    $
    6,348,580Valuation allowance related to impaired loans
    
    $
    4,662,340
    
    
    $
    223,034
    
    
    $
    1,123,148Average investment in impaired loans
    
    $
    10,839,795
    
    
    $
    4,485,068
    
    
    $
    4,687,575Interest income recognized on impaired loans
    
    $
    1,627,758
    
    
    $
    102,546
    
    
    $
    192,925Nonaccrual loans
    
    $
    19,615,251
    
    
    $
    406,341
    
    
    $
    2,538,834Loans past due ninety days or more and still
accruing interest
    
    $
    4,898,584
    
    
    $
    1,266,803
    
    
    $
    464
  Balance, beginning of year
    
    $
    11,062,678Advances
    
    
    6,516,759Repayments
    
    
    (5,969,204
    )Balance, end of year
    
    $
    11,610,233
 NOTE 4. PREMISES AND EQUIPMENT
  December 31,2007
    
    
    2006Land and improvements
    
    $
    2,418,527
    
    
    $
    2,120,748Buildings
    
    
    5,704,754
    
    
    
    5,923,758Furniture and equipment
    
    
    4,100,737
    
    
    
    3,796,40612,224,018
    
    
    
    11,840,912Accumulated depreciation
    
    
    (3,175,270
    )
    
    
    (2,468,035
    )$
    9,048,748
    
    
    $
    9,372,877
 18




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 4. PREMISES AND EQUIPMENT (Continued)
 Leases
    2008
    
    $
    337,7592009
    
    
    256,0122010
    
    
    216,0122011
    
    
    216,0122012
    
    
    216,012Thereafter
    
    
    648,036$
    1,889,843
 NOTE 5. BANK OWNED LIFE INSURANCE
  NOTE 6. DEPOSITS
  2008
    
    $
    205,589,9882009
    
    
    7,977,2032010
    
    
    2,365,5422011
    
    
    1,118,2572012
    
    
    71,861$
    217,122,851
   19




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 7. SECURITIES SOLD UNDER REPURCHASE AGREEMENTS
  NOTE 8. FEDERAL HOME LOAN BANK ADVANCES
  2007
    
    
    2006Advance with interest due quarterly at 3.44% and principal due on March 10, 2015.
    
    $
    
    
    
    $
    10,000,000Advance with interest due quarterly at 5.06% and principal due on December 21, 2007.
    
    
    
    
    
    
    10,000,000Advance with interest due quarterly at 4.44% and principal due on May 5, 2008.
    
    
    5,000,000
    
    
    
    5,000,000Advance with interest due quarterly at 4.44% and principal due on May 5, 2008.
    
    
    5,000,000
    
    
    
    5,000,000Advance with variable interest (4.86% at December 31, 2007) maturing on March 27,
2008.
    
    
    7,500,000
    
    
    
    7,500,000Advance with interest due quarterly at 4.10% and principal due on November 8, 2016.
    
    
    7,000,000
    
    
    
    7,000,000Advance with interest due quarterly at 4.49% and principal due on May 18, 2012.
    
    
    8,000,000
    
    
    
    Advance with interest due quarterly at 4.69% and principal due on June 21, 2012.
    
    
    10,000,000
    
    
    
    Advance with interest due quarterly at 4.40% and principal due on March 12, 2012.
    
    
    15,000,000
    
    
    
    $
    57,500,000
    
    
    $
    44,500,000
  NOTE 9. SUBORDINATED DEBENTURES
   20




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 9. SUBORDINATED DEBENTURES (Continued)
        21




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 9. SUBORDINATED DEBENTURES (Continued)
  NOTE 10. EMPLOYEE BENEFIT PLAN
  NOTE 11. STOCK COMPENSATION PLAN
   22




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 11. STOCK COMPENSATION PLAN (Continued)
 Stock option activity for the years endedDecember 31, 2007, 2006, and 2005Weighted AverageWeighted Average
    
    
    Remaining
    
    
    AggregateOption Price Per
    
    
    Contractual Term
    
    
    IntrinsicShares
    
    
    Share
    
    
    (in years)
    
    
    ValueOutstanding, December 31, 2004
    
    
    213,538
    
    
    $
    6.94Granted during the period
    
    
    2,000
    
    
    
    21.38Forfeited during the period
    
    
    
    
    
    
    Exercised during the period
    
    
    (6,135
    )
    
    
    6.89Outstanding, December 31, 2005
    
    
    209,403
    
    
    
    7.08Granted during the period
    
    
    4,500
    
    
    
    19.00Forfeited during the period
    
    
    
    
    
    
    Exercised during the period
    
    
    (5,333
    )
    
    
    8.44Outstanding, December 31, 2006
    
    
    208,570
    
    
    
    7.30Granted during the period
    
    
    2,750
    
    
    
    22.00Forfeited during the period
    
    
    
    
    
    
    Exercised during the period
    
    
    
    
    
    
    Outstanding, December 31, 2007
    
    
    211,320
    
    
    $
    7.49
    
    
    
    3.92
    
    
    $
    Number of shares exercisable
    
    
    206,319
    
    
    $
    7.08
    
    
    
    3.78
    
    
    $
    
    23




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 11. STOCK COMPENSATION PLAN (Continued)
 2007
    
    2006Dividend yield
    
    
    0.00
    %
    
    
    0.00
    %Expected volatility
    
    
    15.00
    %
    
    
    28.00
    %Risk free interest rate
    
    
    4.67
    %
    
    
    4.77
    %Expected term
    
    6 years
    
    10 years
 NOTE 12. INCOME TAXES (BENEFITS)
  Years Ended December 31,2007
    
    
    2006
    
    
    2005Current
    
    $
    476,193
    
    
    $
    538,144
    
    
    $
    1,125,967Deferred
    
    
    (2,051,848
    )
    
    
    240,221
    
    
    
    (310,663
    )$
    (1,575,655
    )
    
    $
    778,365
    
    
    $
    815,304
  Years Ended December 31,2007
    
    
    2006
    
    
    2005Income tax (benefit) at statutory federal rate
    
    $
    (1,180,055
    )
    
    $
    1,113,154
    
    
    $
    913,965Tax-exempt interest
    
    
    (184,355
    )
    
    
    (179,727
    )
    
    
    (154,844
    )Disallowed interest
    
    
    34,999
    
    
    
    31,355
    
    
    
    16,968Life insurance income
    
    
    (62,848
    )
    
    
    (245,754
    )
    
    
    State tax
    
    
    (199,435
    )
    
    
    34,857
    
    
    
    38,514Other items
    
    
    16,039
    
    
    
    24,480
    
    
    
    701Income tax expense (benefit)
    
    $
    (1,575,655
    )
    
    $
    778,365
    
    
    $
    815,304
 24




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 12. INCOME TAXES (BENEFITS) (Continued)
 Years Ended December 31,2007
    
    
    2006
    
    
    2005Deferred tax assets:Loan loss reserves
    
    $
    2,541,722
    
    
    $
    724,932
    
    
    $
    999,539Preopening and organization expenses
    
    
    
    
    
    
    2,783
    
    
    
    12,325Deferred loan fees
    
    
    75,619
    
    
    
    162,137
    
    
    
    112,301Nonaccrual loans
    
    
    327,145
    
    
    
    8,453
    
    
    
    30,676Other real estate owned
    
    
    5,603
    
    
    
    
    
    
    
    Securities available for sale
    
    
    83,985
    
    
    
    330,384
    
    
    
    524,011$
    3,034,074
    
    
    $
    1,228,689
    
    
    $
    1,678,852Deferred tax liabilities:Depreciation
    
    
    355,779
    
    
    
    355,843
    
    
    
    339,875Cash basis adjustment for income tax reporting purposes
    
    
    
    
    
    
    
    
    
    
    32,282$
    355,779
    
    
    $
    355,843
    
    
    $
    372,157Net deferred tax assets
    
    $
    2,678,295
    
    
    $
    872,846
    
    
    $
    1,306,695
 NOTE 13. EARNINGS (LOSSES) PER SHARE
  Years Ended December 31,2007
    
    
    2006
    
    
    2005Net income (loss)
    
    $
    (1,895,093
    )
    
    $
    2,495,617
    
    
    $
    1,866,873Weighted average number of common shares outstanding
    
    
    2,592,897
    
    
    
    2,588,952
    
    
    
    2,585,687Effect of dilutive options
    
    
    
    
    
    
    87,241
    
    
    
    91,991Weighted average number of common shares
outstanding used to calculate dilutive earnings
(losses) per share
    
    
    2,592,897
    
    
    
    2,676,193
    
    
    
    2,677,678
 25




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 14. COMMITMENTS AND CONTINGENCIES
 Loan Commitments
   December 31,2007
    
    
    2006Commercial letters of credit
    
    $
    1,104,165
    
    
    $
    1,196,305Commitments to extend credit
    
    
    42,184,532
    
    
    
    64,853,280$
    43,288,697
    
    
    $
    66,049,585
   Contingencies
  NOTE 15. CONCENTRATIONS OF CREDIT
  26




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 15. CONCENTRATIONS OF CREDIT (Continued)
   NOTE 16. REGULATORY MATTERS
     27




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 16. REGULATORY MATTERS (Continued)
 To Be WellFor Capital
    
    
    Capitalized UnderAdequacy
    
    
    Prompt CorrectiveActual
    
    
    Purposes
    
    
    Action ProvisionsAmount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio(Dollars in Thousands)December 31, 2007:Total Capital to Risk Weighted AssetsConsolidated
    
    $
    36,344
    
    
    
    10.78
    %
    
    $
    26,971
    
    
    
    8
    %
    
    $
    N/A
    
    
    
    N/ASouthern Community Bank
    
    $
    33,535
    
    
    
    9.96
    %
    
    $
    26,932
    
    
    
    8
    %
    
    $
    33,666
    
    
    
    10
    %Tier I Capital to Risk Weighted AssetsConsolidated
    
    $
    31,533
    
    
    
    9.35
    %
    
    $
    13,490
    
    
    
    4
    %
    
    $
    N/A
    
    
    
    N/ASouthern Community Bank
    
    $
    29,281
    
    
    
    8.70
    %
    
    $
    13,463
    
    
    
    4
    %
    
    $
    20,194
    
    
    
    6
    %Tier I Capital to Average AssetsConsolidated
    
    $
    31,533
    
    
    
    7.85
    %
    
    $
    16,068
    
    
    
    4
    %
    
    $
    N/A
    
    
    
    N/ASouthern Community Bank
    
    $
    29,281
    
    
    
    7.29
    %
    
    $
    16,066
    
    
    
    4
    %
    
    $
    20,083
    
    
    
    5
    %December 31, 2006:Total Capital to Risk Weighted AssetsConsolidated
    
    $
    38,968
    
    
    
    11.62
    %
    
    $
    26,832
    
    
    
    8
    %
    
    $
    N/A
    
    
    
    N/ASouthern Community Bank
    
    $
    35,171
    
    
    
    10.51
    %
    
    $
    26,782
    
    
    
    8
    %
    
    $
    33,478
    
    
    
    10
    %Tier I Capital to Risk Weighted AssetsConsolidated
    
    $
    33,288
    
    
    
    9.92
    %
    
    $
    13,391
    
    
    
    4
    %
    
    $
    N/A
    
    
    
    N/ASouthern Community Bank
    
    $
    32,120
    
    
    
    9.59
    %
    
    $
    13,391
    
    
    
    4
    %
    
    $
    20,087
    
    
    
    6
    %Tier I Capital to Average AssetsConsolidated
    
    $
    33,288
    
    
    
    8.67
    %
    
    $
    15,365
    
    
    
    4
    %
    
    $
    N/A
    
    
    
    N/ASouthern Community Bank
    
    $
    32,120
    
    
    
    8.36
    %
    
    $
    15,365
    
    
    
    4
    %
    
    $
    19,207
    
    
    
    5
    %
 28




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 17. FAIR VALUE OF FINANCIAL INSTRUMENTS
 Disclosures about Fair Value of Financial
Instruments,
  Cash, Due From Banks, Interest-bearing Deposits in Banks and Federal Funds Sold:
 Securities:
 Loans:
 Deposits:
 Repurchase Agreements and Federal Home Loan Bank Advances:
 29




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 17. FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
 Subordinated Debentures:
 Accrued Interest:
 Off-Balance Sheet Instruments:
  December 31, 2007
    
    December 31, 2006Carrying
    
    Fair
    
    Carrying
    
    FairAmount
    
    Value
    
    Amount
    
    ValueFinancial assets:Cash, due from banks, interest-bearing
deposits in banks, and federal funds sold
    
    $
    33,633,177
    
    
    $
    33,633,177
    
    
    $
    19,517,396
    
    
    $
    19,517,396Securities
    
    
    61,478,916
    
    
    
    61,478,916
    
    
    
    58,038,877
    
    
    
    58,038,877Loans, net
    
    
    282,834,946
    
    
    
    284,956,779
    
    
    
    290,172,463
    
    
    
    288,681,615Accrued interest receivable
    
    
    2,051,301
    
    
    
    2,051,301
    
    
    
    2,329,931
    
    
    
    2,329,931Financial liabilities:Deposits
    
    
    300,717,482
    
    
    
    307,713,852
    
    
    
    291,789,722
    
    
    
    291,691,853Securities sold under
repurchase agreements
    
    
    14,573,847
    
    
    
    14,573,847
    
    
    
    12,913,674
    
    
    
    12,913,674Federal Home Loan Bank advances
    
    
    57,500,000
    
    
    
    61,707,270
    
    
    
    44,500,000
    
    
    
    43,068,286Subordinated debentures
    
    
    10,929,000
    
    
    
    10,929,000
    
    
    
    10,929,000
    
    
    
    10,929,000Accrued interest payable
    
    
    1,600,571
    
    
    
    1,600,571
    
    
    
    1,480,125
    
    
    
    1,480,125
 NOTE 18. SUPPLEMENTAL FINANCIAL DATA
  Years Ended December 31,2007
    
    2006
    
    2005Professional fees
    
    $
    547,722
    
    
    $
    242,731
    
    
    $
    302,290Data processing expense
    
    
    476,874
    
    
    
    414,287
    
    
    
    305,331
 30




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 19. PARENT COMPANY FINANCIAL INFORMATION
  CONDENSED BALANCE SHEETS
 As of December 31,2007
    
    
    2006AssetsCash
    
    $
    2,392,394
    
    
    $
    3,107,996Investment in subsidiary
    
    
    30,786,216
    
    
    
    31,580,895Securities available for sale
    
    
    329,000
    
    
    
    329,000Other assets
    
    
    454,170
    
    
    
    400,174Total assets
    
    $
    33,961,780
    
    
    $
    35,418,065Subordinated debentures
    
    $
    10,929,000
    
    
    $
    10,929,000Other liabilities
    
    
    44,451
    
    
    
    40,452Total liabilities
    
    
    10,973,451
    
    
    
    10,969,452Shareholders equity
    
    
    22,988,329
    
    
    
    24,448,613Total liabilities and shareholders equity
    
    $
    33,961,780
    
    
    $
    35,418,065
 CONDENSED STATEMENTS OF INCOME
 Year Ended December 31,2007
    
    
    2006
    
    
    2005IncomeInterest income
    
    $
    25,324
    
    
    $
    19,209
    
    
    $
    10,549Total income
    
    
    25,324
    
    
    
    19,209
    
    
    
    10,549ExpensesInterest expense
    
    
    841,154
    
    
    
    637,832
    
    
    
    350,049Expenses, other
    
    
    298,484
    
    
    
    271,767
    
    
    
    213,242Total expenses
    
    
    1,139,638
    
    
    
    909,599
    
    
    
    563,291Loss before income tax benefits and equity in undistributed income (loss) of subsidiary
    
    
    (1,114,314
    )
    
    
    (890,390
    )
    
    
    (552,742
    )Income tax benefits
    
    
    (415,920
    )
    
    
    (322,283
    )
    
    
    (210,042
    )Loss before equity in undistributed income of subsidiary
    
    
    (698,394
    )
    
    
    (568,107
    )
    
    
    (342,700
    )Equity in undistributed income (loss) of subsidiary
    
    
    (1,196,699
    )
    
    
    3,063,724
    
    
    
    2,209,573Net income (loss)
    
    $
    (1,895,093
    )
    
    $
    2,495,617
    
    
    $
    1,866,873
 31




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 19. PARENT COMPANY FINANCIAL INFORMATION (Continued)
 CONDENSED STATEMENTS OF CASH FLOWS
 Year Ended December 31,2007
    
    
    2006
    
    
    2005OPERATING ACTIVITIESNet income (loss)
    
    $
    (1,895,093
    )
    
    $
    2,495,617
    
    
    $
    1,866,873Adjustments to reconcile net income (loss) to net cash used in operating activities:Undistributed (income) of subsidiary
    
    
    1,196,699
    
    
    
    (3,063,724
    )
    
    
    (2,209,573
    )Other operating activities
    
    
    (23,528
    )
    
    
    (18,450
    )
    
    
    (52,854
    )Net cash used in operating activities
    
    
    (721,922
    )
    
    
    (586,557
    )
    
    
    (395,554
    )INVESTING ACTIVITIESCapital infusion in subsidiary
    
    
    
    
    
    
    (2,500,000
    )
    
    
    (5,000,000
    )Net cash used in investing activities
    
    
    
    
    
    
    (2,500,000
    )
    
    
    (5,000,000
    )FINANCING ACTIVITIESProceeds from issuance of subordinated debentures
    
    
    
    
    
    
    5,000,000
    
    
    
    Proceeds from issuance of capital stock
    
    
    6,321
    
    
    
    54,970
    
    
    
    19,197Net cash provided by financing activities
    
    
    6,321
    
    
    
    5,054,970
    
    
    
    19,197Net increase (decrease) in cash
    
    
    (715,601
    )
    
    
    1,968,413
    
    
    
    (5,376,357
    )Cash at beginning of year
    
    
    3,107,996
    
    
    
    1,139,583
    
    
    
    6,515,940Cash at end of year
    
    $
    2,392,395
    
    
    $
    3,107,996
    
    
    $
    1,139,583
 32