**UNITED
        STATES SECURITIES AND EXCHANGE COMMISSION**
 **Washington,
        D.C. 20549**
  
 **FORM
        10-KSB**
  **x**
                **ANNUAL
                    REPORT PURSUANT TO SECTION 13 or 15(d) OF**
                  **THE
                    SECURITIES EXCHANGE ACT OF
                    1934**
 
 **For
        the Fiscal Year Ended December 31, 2007**
 
 **OR**
  **o**
                **TRANSITION
                    REPORT PURSUANT TO SECTION 13 OR 15(d) OF**
                  **THE
                    SECURITIES EXCHANGE ACT OF
                    1934**
 
 Commission
        File Number 333-141191
 
 **PRO
        FINANCIAL HOLDINGS, INC.**
 (Exact
        name of registrant as specified in its charter)
 
 **Florida**
              
              **20-4625845**(State
                  or other jurisdiction
              
              (I.R.S.
                  Employerof
                  incorporation or organization)
              
              Identification
                  No.)
 
 **536
                  North Monroe St. Tallahassee, Florida**
              
              **32301**(Address
                  of principal executive offices)
              
              (Zip
                  Code)
 
 Registrant’s
        telephone number, including area code: **(850)
        383-8107**
 
 Securities
        registered pursuant to Section 12(b) of the Exchange Act: **None**
 Securities
        registered pursuant to Section 12(g) of the Exchange Act: **None**
 
 Check
        whether the issuer (1) 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 issuer was required to file such reports), and (2) has been subject
        to
        such filing requirements for the past 90 days. YES x NO o
 
 Check
        if
        disclosure of delinquent filers in response to Item 405 of Regulation S-B
        is not
        contained in this form, and no disclosure will be contained, to the best
        of
        issuer’s knowledge, in definitive proxy or information statements incorporated
        by reference in Part III of this Form 10-KSB or any amendment to this Form
        10-KSB. o
 
 The
        issuer’s revenues for its most recent fiscal year were $ 289,961.
 
 Indicate
        by check mark whether the issuer is an accelerated filer (as defined in Rule
        12b-2 of the Act). Yes o No x
 
 The
        aggregate market value of the Common Stock of the issuer held by non-affiliates
        of the issuer (935,500 shares) on March 3, 2008, was approximately $ 9,355,000.
        As of such date, no organized trading market existed for the Common Stock
        of the
        issuer. The aggregate market value was computed by reference the sale price
        of
        the Common Stock of the issuer at its last sales price of $10 per share.
        For the
        purposes of this response, directors, officers and holders of 5% or more
        of the
        issuer’s Common Stock are considered the affiliates of the issuer at that
        date.
  As
        of
        March 3, 2008, there were issued and outstanding 1,334,840 shares of the
        issuer’s Common Stock.
 
 DOCUMENTS
        INCORPORATED BY REFERENCE
  None
  
  **TABLE
        OF CONTENTS**
 
 PagePART
                  I
              
              1Item
                  1. Description of Business
              
              1Special Note Regarding Forward-Looking Statements
              
              1General
              
              1Critical Accounting Policies
              
              3Lending Activities
              
              3Deposit Activities
              
              5Investments
              
              6Correspondent Banking
              
              6Effect of Governmental Policies
              
              6Interest and Usury
              
              7Supervision and Regulation
              
              7Competition
              
              15Employees
              
              16Item
                  2. Description of Properties
              
              16Item
                  3. Legal Proceedings
              
              17Item
                  4. Submission of Matters to a Vote of Security Holders
              
              17PART
                  II
              
              17Item
                  5. Market for the Registrant’s Common Equity and Related Stockholder
                  Matters
              
              17Item
                  6. Management’s Discussion and Analysis
              
              19Item
                  7. Financial Statements
              
              39Item
                  8. Changes in and Disagreements with Accountants on Accounting
                  and
                  Financial Disclosure
              
              39Item
                  8A. Controls and Procedures
              
              40Item
                  8B. Other Information
              
              40PART
                  III
              
              40Item
                  9. Directors, Executive Officers, Promoters and Control Persons;
                  41
                  Compliance with Section 16(a) of the Exchange Act
              
              40Item
                  10. Executive Compensation
              
              45Item
                  11. Security Ownership of Certain Beneficial Owners and Management
                  and
                  Related Stockholder Matters
              
              46Item
                  12. Certain Relationships and Related Transactions
              
              47Item
                  13. Exhibits
              
              47Item
                  14. Principal Accountant Fees and Services
              
              48SIGNATURES
              
              49EXHIBIT
                  INDEX
              
              51
  1
 
 **PART
        I**
 
 **Item
        1.**  **Description of Business**
 
 **Forward-Looking
        Statements**
 
 Some
        of
        the statements in this Form 10-KSB discuss future expectations. There may
        also
        be statements regarding projections of results of operations or financial
        condition or state other “forward-looking” information. Those statements are
        subject to known and unknown risks, uncertainties and other factors that
        could
        cause the actual results to differ materially from those contemplated by
        the
        statements. We based the forward-looking information on various factors and
        numerous assumptions, which may or may not turn out to be correct.
 
 Important
        factors that may cause actual results to differ from those contemplated by
        forward-looking statements include, for example:
 
 The
        success or failure of our efforts to implement our business
        strategy;
 
 The
        effect of changing economic conditions, both nationally and in our local
        community;
 
 Changes
        in government regulations, tax and interest rates applicable to our business
        and
        similar matters;
 
 Our
        ability to attract and retain quality employees; and
 
 Other
        risks which may be described in our future filings with the SEC.
 
 We
        do not
        promise to update forward-looking information to reflect actual results or
        changes in assumptions or other factors that could affect those statements
        other
        than material changes to such information.
 
 **General**
 
 Pro
        Financial Holdings, Inc. (“Pro Financial”) was incorporated by the organizers of
        Pro Bank under the laws of the State of Florida on March 29, 2006, for the
        purpose of becoming a bank holding company by acquiring ProBank (the “Bank”)
        (Pro Financial and the Bank are collectively referred to as the “Company”). The
        Bank is a Florida state chartered commercial bank and is a full service
        commercial bank, providing a wide range of business and consumer financial
        services in our target marketplace, which is comprised primarily of Leon,
        Gadsden, Wakulla and Jefferson Counties in Florida. The Bank was formed by
        a
        group of business leaders, who believed that there was a significant demand
        for
        a locally-owned community bank.
 
 Under
        Federal Reserve Board regulations, Pro Financial is expected to be a source
        of
        financial strength to the Bank. Banking regulations require that the Bank
        maintain a minimum ratio of capital to assets. In the event that the Bank’s
        growth is such that this minimum ratio is not maintained, Pro Financial may
        borrow funds, subject to the capital adequacy guidelines of the Federal Reserve,
        and contribute them to the capital of the Bank and otherwise raise capital
        in a
        manner which is unavailable to the Bank under existing banking
        regulations.
  1
 
 The
        Bank
        commenced business operations on September 5, 2007 in Tallahassee, Florida.
        The
        Bank opened a branch office at 1812
        North Martin Luther King Blvd, in Tallahassee on October 25, 2007.
 
 The
        Bank's deposits are insured by the Federal Deposit Insurance Corporation
        up to
        applicable limits. The operations of the Bank are subject to the supervision
        and
        regulation of the FDIC and the Florida Office of Financial Regulation ("Florida
        Office").
 
 The
        Bank
        provides a range of consumer and commercial banking services to individuals,
        businesses and industries. The basic services offered by the Bank include:
        demand interest-bearing and non-interest-bearing accounts, money market deposit
        accounts, NOW accounts, time deposits, credit cards, direct deposits, notary
        services, night depository, cashier’s checks, savings bonds, bank drafts,
        automated teller services, bill pay, internet banking and drive-in tellers.
        In
        addition, the Bank makes secured and unsecured commercial, consumer, and
        real
        estate loans and issues stand-by letters of credit. The Bank provides automated
        teller machine (ATM) cards and is a member of the Plus, Presto, Pulse, and
        Star
        ATM network, thereby permitting customers to utilize the convenience of larger
        ATM networks. In addition to the foregoing services, the offices of the Bank
        provide customers with extended banking hours. The Bank does not have trust
        powers and, accordingly, no trust services are provided.
 
 The
        revenues of the Bank are primarily derived from interest on, and fees received
        in connection with, real estate and other loans, and from interest and dividends
        from investment and mortgage-backed securities, and short-term investments.
        The
        principal sources of funds for the Bank’s lending activities are its deposits,
        repayment of loans, and the sale and maturity of investment securities. The
        principal expenses of the Bank are the interest paid on deposits, and operating
        and general administrative expenses.
 
 As
        is the
        case with banking institutions generally, the Bank’s operations are materially
        and significantly influenced by general economic conditions and by related
        monetary and fiscal policies of financial institution regulatory agencies,
        including the Board of Governors of the Federal Reserve System (the “Federal
        Reserve”) and the Federal Deposit Insurance Corporation (“FDIC”). Deposit flows
        and costs of funds are influenced by interest rates on competing investments
        and
        general market rates of interest. Lending activities are affected by the
        demand
        for financing of real estate and other types of loans, which in turn is affected
        by the interest rates at which such financing may be offered and other factors
        affecting local demand and availability of funds. The Bank faces strong
        competition in the attraction of deposits (its primary source of lendable
        funds)
        and in the origination of loans. *See* “Competition.”
 
 The
        Company’s fiscal year ends December 31. This Form 10-KSB is also being used as
        the Bank’s Annual Disclosure Statement under Federal Deposit Insurance
        Corporation (“FDIC”) Regulations. This Form 10-KSB has not been reviewed or
        confirmed for accuracy or relevance by the FDIC or the Securities and Exchange
        Commission.
  2
 
 **Critical
        Accounting Policies**
 
 The
        Company’s financial condition and results of operations are sensitive to
        accounting measurements and estimates of matters that are inherently uncertain.
        When applying accounting policies in areas that are subjective in nature,
        the
        Company must use its best judgment to arrive at the carrying value of certain
        assets. The most critical accounting policy applied is related to the valuation
        of the loan portfolio.
 
 A
        variety
        of estimates impact carrying value of the loan portfolio including the
        calculation of the allowance for loan losses, valuation of underlying
        collateral, the timing of loan charge-offs and the amount and amortization
        of
        loan fees and deferred origination costs.
 
 The
        allowance for loan losses is the most difficult and subjective judgment.
        The
        allowance is established and maintained at a level that the Company believes
        is
        adequate to cover losses resulting from the inability of borrowers to make
        required payments on loans. Estimates for loan losses are arrived at by
        analyzing risks associated with specific loans and the loan portfolio, current
        trends in delinquencies and charge-offs, the views of regulators, changes
        in the
        size and composition of the loan portfolio and peer comparisons. The analysis
        also requires consideration of the economic climate and direction, change
        in the
        interest rate environment, which may impact a borrower’s ability to pay,
        legislation impacting the banking industry and economic conditions specific
        to
        its service area. Because the calculation of the allowance for loan losses
        relies on estimates and judgments relating to inherently uncertain events,
        results may differ from the Company’s estimates.
 
 The
        allowance for loan losses is also discussed as part of “Management's Discussion
        and Analysis – Classification
        of
        Assets & Potential Loan Problems” and in Note A-7 to the consolidated
        financial statements.
 
 **Lending
        Activities**
 
 The
        Bank
        offers a range of lending services, including real estate, consumer and
        commercial loans, to individuals and small businesses and other organizations
        that are located in or conduct a substantial portion of their business in
        the
        Bank’s market area. The Bank’s net loans at December 31, 2007 were $ 3.3
        million, or 15.9% of total assets. The interest rates charged on loans vary
        with
        the degree of risk, maturity, and amount of the loan, and are further subject
        to
        competitive pressures, money market rates, availability of funds, and government
        regulations. The Bank has no foreign loans or loans for highly leveraged
        transactions.
 
 The
        Bank’s loans are concentrated in five major areas: commercial real estate loans,
        residential real estate loans, construction, commercial loans (for equipment
        purchases, working capital and various other business purposes) and consumer
        loans. A majority of the Bank’s loans are made on a secured basis. As of
        December 31, 2007, approximately 69.0% of the Bank’s loan portfolio consisted of
        loans secured by real estate, of which approximately 64.7% of the total loan
        portfolio is secured by commercial properties. Risks of these types of loans
        include the general business conditions of the local economy and borrowers’
ability to conduct their businesses to generate sufficient profits to repay
        their loans under the agreed upon terms and conditions. Personal guarantees
        will
        be obtained from the principals of business borrowers and third parties to
        support the borrowers’ ability to service the debt and reduce the risk of
        non-payment. Commercial loans may be made at variable or fixed rates of
        interest. Commercial lines of credit are typically granted on a one-year
        basis,
        with loan covenants and monetary thresholds. Other commercial loans with
        terms
        or amortization schedules of longer than one year may carry interest rates
        which
        vary with the prime lending rate and will become payable in full and are
        generally refinanced in five years. Commercial loans not secured by real
        estate
        amounted to approximately 19.79% of the Bank’s total loan portfolio as of
        December 31, 2007.
  3
 
 The
        Bank’s real estate loans are secured by mortgages and consist primarily of loans
        to individuals and businesses for the purchase, improvement of or investment
        in
        real estate and for the construction of single-family residential units or
        the
        development of single-family residential building lots. These real estate
        loans
        may be made at fixed or variable interest rates. The Bank generally does
        not
        make fixed-rate commercial real estate loans for terms exceeding five years.
 
 The
        Bank’s consumer loan portfolio consists primarily of loans to individuals for
        various consumer purposes, but includes some business purpose loans which
        are
        payable on an interest only or installment basis. Consumer loans generally
        involve more risk than mortgage loans because the collateral for a defaulted
        loan may not provide an adequate source of repayment of the principal. This
        risk
        is due to the potential for damage to the collateral or other loss of value,
        and
        the fact that any remaining deficiency often does not warrant further collection
        efforts. The majority of these loans is for terms of less than five years
        and is
        secured by liens on various personal assets of the borrowers, but consumer
        loans
        may also be made on an unsecured basis. Consumer loans are made at fixed
        and
        variable interest rates, and are rarely based on more than a five-year
        amortization schedule.
 
 Loan
        originations are derived from a number of sources. Loan originations can
        be
        attributed to direct solicitation by the Bank’s board of directors referrals,
        loan officers, existing customers and borrowers, advertising, walk-in customers
        and, in some instances, referrals from brokers.
 
 Certain
        credit risks are inherent in making loans. These include prepayment risks,
        risks
        resulting from uncertainties in the future value of collateral, risks resulting
        from changes in economic and industry conditions, and risks inherent in dealing
        with individual borrowers. In particular, longer maturities increase the
        risk
        that economic conditions will change and adversely affect collectibility.
        The
        Bank attempts to minimize credit losses through various means. In particular,
        on
        larger credits, the Bank relies on the cash flow of a debtor as the primary
        source of repayment and secondarily on the value of the underlying collateral
        and cash flow of the guarantors. In addition, the Bank attempts to utilize
        shorter loan terms, between three to five years, in order to reduce the risk
        of
        a decline in the value of such collateral.
  4
 
 **Loan
        Loss Allowance**
 
 In
        considering the adequacy of our allowance for loan losses, the Bank has
        considered that as of December 31, 2007, approximately 64.7% of outstanding
        loans are in the commercial real estate loan category. At December 31, 2007,
        commercial loans including commercial real estate represented 84.4% of our
        loan
        portfolio. We believe that the real estate collateral securing our commercial
        real estate loans reduces the risk of loss inherently present in commercial
        loans.
 
 At
        December 31, 2007, our consumer loan portfolio consisted primarily of lines
        of
        credit and installment loans secured by automobiles and other consumer goods.
        We
        believe that the risk associated with these types of loans has been adequately
        provided for in the loan loss allowance.
 
 The
        Bank’s Board of Directors monitors the loan portfolio monthly in order to
        evaluate the adequacy of the allowance for loan losses. In addition to reviews
        by regulatory agencies, the Bank engages the services of outside consultants
        to
        assist in the evaluation of credit quality and loan administration. These
        professionals complement our internal system, which identifies potential
        problem
        credits as early as possible, categorizes the credits as to risk and includes
        a
        reporting process to monitor the progress of the credits.
 
 The
        allowance for loan losses is established through a provision for loan losses
        charged to expenses. Loans are to be charged off against the allowance when
        management believes the collectibility of principal is unlikely. The monthly
        provision for loan losses is based on one and a quarter percent of outstanding
        loans less loans held for sale plus any specifically reserved credit. In
        addition, loss experience will be monitored in establishing the provision
        until
        the Bank has historical loss and past due numbers to evaluate the peer group.
        During the year ended December 31, 2007, no loans were charged off against
        the
        allowance for loan losses.
 
 **Deposit
        Activities**
 
 Deposits
        are the major source of the Bank’s funds for lending and other investment
        activities. The Bank considers the majority of its regular savings, demand,
        NOW,
        certificates of deposit less than $100,000 and money market deposit accounts
        to
        be core deposits. These accounts comprised approximately 88.26% of the Bank’s
        total deposits at December 31, 2007. Generally, the Bank attempts to maintain
        the rates paid on its deposits at a competitive level. Time deposits of $100,000
        and over made up approximately 11.74% of the Bank’s total deposits at December
        31, 2007. The majority of the deposits of the Bank are generated from Leon
        County.
  5
  **Investments**
 
 The
        Bank
        invests a portion of its assets in U.S. Government agency obligations,
        mortgage-backed securities, and federal funds sold. The Bank’s investments are
        managed in relation to loan demand and deposit growth, and are generally
        used to
        provide for the investment of excess funds at minimal risks while providing
        liquidity to fund increases in loan demand or to offset fluctuations in
        deposits.
 
 With
        respect to the Bank’s investment portfolio, the Bank’s total portfolio may be
        invested in U.S. Treasury and general obligations of its agencies and
        bank-qualified municipal securities because such securities generally represent
        a minimal investment risk. Occasionally, the Bank may purchase certificates
        of
        deposit of national and state banks. Mortgage-backed securities generally
        have a
        shorter life than the stated maturity. Federal funds sold is the excess cash
        the
        Bank has available over and above daily cash needs. This money is invested
        on an
        overnight basis with approved correspondent banks.
 
 The
        Bank
        monitors changes in financial markets. In addition to investments for its
        portfolio, the Bank monitors its daily cash position to ensure that all
        available funds earn interest at the earliest possible date. A portion of
        the
        investment account is designated as secondary reserves and invested in liquid
        securities that can be readily converted to cash with minimum risk of market
        loss. These investments usually consist of U.S. Treasury obligations, U.S.
        government agencies and federal funds. The remainder of the investment account
        may be placed in investment securities of different type and longer maturity.
        Daily surplus funds are sold in the federal funds market for one business
        day.
        The Bank attempts to stagger the maturities of its securities so as to produce
        a
        steady cash-flow in the event the Bank needs cash, or economic conditions
        change
        to a more favorable rate environment.
 
 **Correspondent
        Banking**
 
 Correspondent
        banking involves one bank providing services to another bank which cannot
        provide that service for itself from an economic or practical standpoint.
        The
        Bank is required to purchase correspondent services offered by larger banks,
        including check collections, purchase of federal funds, security safekeeping,
        investment services, coin and currency supplies, overline and liquidity loan
        participations and sales of loans to or participation with correspondent
        banks.
 
 The
        Bank
        sells loan participations to correspondent banks with respect to loans which
        exceed the Bank’s lending limit.
 
 **Effect
        of Governmental Policies**
 
 The
        earnings and business of the Bank are and will be affected by the policies
        of
        various regulatory authorities of the United States, especially the Federal
        Reserve. The Federal Reserve, among other things, regulates the supply of
        credit
        and deals with general economic conditions within the United States. The
        instruments of monetary policy employed by the Federal Reserve for these
        purposes influence in various ways the overall level of investments, loans,
        other extensions of credit and deposits, and the interest rates paid on
        liabilities and received on assets.
  6
 
 **Interest
        and Usury**
 
 The
        Bank
        is subject to numerous state and federal statutes that affect the interest
        rates
        that may be charged on loans. These laws do not, under present market
        conditions, deter the Bank from continuing the process of originating
        loans.
 
 **Supervision
        and Regulation**
 
 Banks
        and
        their holding companies, and many of their affiliates, are extensively regulated
        under both federal and state law. The following is a brief summary of certain
        statutes, rules, and regulations affecting the Company and the Bank. This
        summary is qualified in its entirety by reference to the particular statutory
        and regulatory provisions referred to below and is not intended to be an
        exhaustive description of the statutes or regulations applicable to the business
        of the Company and the Bank. Supervision, regulation, and examination of
        banks
        by regulatory agencies are intended primarily for the protection of depositors,
        rather than shareholders.
 
 *Bank
        Holding Company Regulation.* The
        Holding Company is a bank holding company, registered with the Federal Reserve
        under the BHC Act. As such, the Company is subject to the supervision,
        examination and reporting requirements of the BHC Act and the regulations
        of the
        Federal Reserve. The BHC Act requires that a bank holding company obtain
        the
        prior approval of the Federal Reserve before (i) acquiring direct or indirect
        ownership or control of more than 5% of the voting shares of any bank, (ii)
        taking any action that causes a bank to become a subsidiary of the bank holding
        company, or (iii) merging or consolidating with any other bank holding
        company.
 
 The
        BHC
        Act further provides that the Federal Reserve may not approve any transaction
        that would result in a monopoly or would be in furtherance of any combination
        or
        conspiracy to monopolize or attempt to monopolize the business of banking
        in any
        section of the United States, or the effect of which may be substantially
        to
        lessen competition or to tend to create a monopoly in any section of the
        country, or that in any other manner would be in restraint of trade, unless
        the
        anticompetitive effects of the proposed transaction are clearly outweighed
        by
        the public interest in meeting the convenience and needs of the community
        to be
        served. The Federal Reserve is also required to consider the financial and
        managerial resources and future prospects of the bank holding companies and
        banks concerned and the convenience, and needs of the community to be served.
        Consideration of financial resources generally focuses on capital adequacy
        and
        consideration of convenience and needs issues includes the parties’ performance
        under the Community Reinvestment Act of 1977 (the “CRA”), both of which are
        discussed below.
 
 Banks
        are
        subject to the provisions of the CRA. Under the terms of the CRA, the
        appropriate federal bank regulatory agency is required, in connection with
        its
        examination of a bank, to assess such bank’s record in meeting the credit needs
        of the community served by that bank, including low- and moderate-income
        neighborhoods. The regulatory agency’s assessment of the bank’s record is made
        available to the public. Further, such assessment is required of any bank
        which
        has applied to:
  7
 
 ∙
              charter
                  a bank,
 ∙
              obtain
                  deposit insurance coverage for a newly chartered
                  institution,
 ∙
              establish
                  a new branch office that will accept
                  deposits,
 ∙
              relocate
                  an office, or
 ∙
                  merge
                      or consolidate with, or acquire the assets or assume the liabilities
                      of, a
                      federally regulated financial
                      institution
 
 In
        the
        case of a bank holding company applying for approval to acquire a bank or
        other
        bank holding company, the Federal Reserve will assess the record of each
        subsidiary bank of the applicant bank holding company, and such records may
        be
        the basis for denying the application.
 
 The
        BHC
        Act generally prohibits a bank holding company from engaging in activities
        other
        than banking, or managing or controlling banks or other permissible
        subsidiaries, and from acquiring or retaining direct or indirect control
        of any
        company engaged in any activities other than those activities determined
        by the
        Federal Reserve to be so closely related to banking or managing or controlling
        banks as to be a proper incident thereto. In determining whether a particular
        activity is permissible, the Federal Reserve must consider whether the
        performance of such an activity can reasonably be expected to produce benefits
        to the public, such as greater convenience, increased competition, or gains
        in
        efficiency that outweigh possible adverse effects, such as undue concentration
        of resources, decreased or unfair competition, conflicts of interest, or
        unsound
        banking practices. For example, factoring accounts receivable, acquiring
        or
        servicing loans, leasing personal property, conducting securities brokerage
        activities, performing certain data processing services, acting as agent
        or
        broker in selling credit life insurance and certain other types of insurance
        in
        connection with credit transactions, and certain insurance underwriting
        activities have all been determined by regulations of the Federal Reserve
        to be
        permissible activities of bank holding companies. Despite prior approval,
        the
        Federal Reserve has the power to order a holding company or its subsidiaries
        to
        terminate any activity or terminate its ownership or control of any subsidiary,
        when it has reasonable cause to believe that continuation of such activity
        or
        such ownership or control constitutes a serious risk to the financial safety,
        soundness, or stability of any bank subsidiary of that bank holding
        company.
 
 Gramm-Leach-Bliley
        Act .
        In
        1999, the Gramm-Leach-Bliley Act was enacted which reforms and modernizes
        certain areas of financial services regulation. The law permits the creation
        of
        new financial services holding companies that can offer a full range of
        financial products under a regulatory structure based on the principle of
        functional regulation. The legislation eliminates the legal barriers to
        affiliations among banks and securities firms, insurance companies, and other
        financial services companies. The law also provides financial organizations
        with
        the opportunity to structure these new financial affiliations through a holding
        company structure or a financial subsidiary. The new law reserves the role
        of
        the Federal Reserve Board as the supervisor for bank holding companies. At
        the
        same time, the law also provides a system of functional regulation which
        is
        designed to utilize the various existing federal and state regulatory bodies.
        The law also sets up a process for coordination between the Federal Reserve
        Board and the Secretary of the Treasury regarding the approval of new financial
        activities for both bank holding companies and national bank financial
        subsidiaries.
  8
 
 The
        law
        also includes a minimum federal standard of financial privacy. Financial
        institutions are required to have written privacy policies that must be
        disclosed to customers. The disclosure of a financial institution’s privacy
        policy must take place at the time a customer relationship is established
        and
        not less than annually during the continuation of the relationship. The act
        also
        provides for the functional regulation of bank securities activities. The
        law
        repeals the exemption that banks were afforded from the definition of “broker,”
and replaces it with a set of limited exemptions that allow the continuation
        of
        some historical activities performed by banks. In addition, the act amends
        the
        securities laws to include banks within the general definition of dealer.
        Regarding new bank products, the law provides a procedure for handling products
        sold by banks that have securities elements. In the area of the Community
        Reinvestment Act activities, the law generally requires that financial
        institutions address the credit needs of low-to-moderate income individuals
        and
        neighborhoods in the communities in which they operate. Bank regulators are
        required to take the Community Reinvestment Act ratings of a bank or of the
        bank
        subsidiaries of a holding company into account when acting upon certain branch
        and bank merger and acquisition applications filed by the institution. Under
        the
        law, financial holding companies and banks that desire to engage in new
        financial activities are required to have satisfactory or better Community
        Reinvestment Act ratings when they commence the new activity.
 
 Bank
        Regulation .
        The
        Bank is chartered under the laws of Florida and their deposits are insured
        by
        the FDIC to the extent provided by law. The Bank is subject to comprehensive
        regulation, examination and supervision by the FDIC and the Florida Office
        and
        to other laws and regulations applicable to banks. Such regulations include
        limitations on loans to a single borrower and to its directors, officers
        and
        employees; restrictions on the opening and closing of branch offices; the
        maintenance of required capital ratios; the granting of credit under equal
        and
        fair conditions; and the disclosure of the costs and terms of such credit.
        The
        Bank is examined periodically by the FDIC and the Florida Office, to whom
        it
        submits periodic reports regarding its financial condition and other matters.
        The FDIC and the Florida Office have a broad range of powers to enforce
        regulations under their jurisdiction, and to take discretionary actions
        determined to be for the protection and safety and soundness of banks, including
        the institution of cease and desist orders and the removal of directors and
        officers. The FDIC and the Florida Office also have the authority to approve
        or
        disapprove mergers, consolidations, and similar corporate actions.
 
 There
        are
        various statutory limitations on the ability of the Bank to pay dividends.
        The
        FDIC also has the general authority to limit the dividend payment by banks
        if
        such payment may be deemed to constitute an unsafe and unsound practice.
 
 Under
        federal law, federally insured banks are subject, with certain exceptions,
        to
        certain restrictions on any extension of credit to their parent holding
        companies or other affiliates, on investment in the stock or other securities
        of
        affiliates, and on the taking of such stock or securities as collateral from
        any
        borrower. In addition, banks are prohibited from engaging in certain tie-in
        arrangements in connection with any extension of credit or the providing
        of any
        property or service.
  9
 
 The
        Financial Institutions Reform, Recovery and Enforcement Act of 1989 (“FIRREA”)
        imposed major regulatory reforms, stronger capital standards for savings
        and
        loan associations and stronger civil and criminal enforcement provisions.
        FIRREA
        also provides that a depository institution insured by the FDIC can be held
        liable for any loss incurred by, or reasonably expected to be incurred by,
        the
        FDIC in connection with:
 
 ∙
              the
                  default of a commonly controlled FDIC insured depository institution;
                  or
 ∙
                  any
                      assistance provided by the FDIC to a commonly controlled FDIC
                      insured
                      institution in danger of
                      default
 
 The
        FDIC
        Improvement Act of 1991 (“FDICIA”) made a number of reforms addressing the
        safety and soundness of deposit insurance funds, supervision, accounting,
        and
        prompt regulatory action, and also implemented other regulatory improvements.
        Annual full-scope, on-site examinations are required of all insured depository
        institutions. The cost for conducting an examination of an institution may
        be
        assessed to that institution, with special consideration given to affiliates
        and
        any penalties imposed for failure to provide information requested. Insured
        state banks also are precluded from engaging as principal in any type of
        activity that is impermissible for a national bank, including activities
        relating to insurance and equity investments. The Act also recodified current
        law restricting extensions of credit to insiders under the Federal Reserve
        Act.
 
 Also
        important in terms of its effect on banks has been the deregulation of interest
        rates paid by banks on deposits and the types of deposit accounts that may
        be
        offered by banks. Most regulatory limits on permissible deposit interest
        rates
        and minimum deposit amounts expired several years ago. The effect of the
        deregulation of deposit interest rates generally has been to increase the
        costs
        of funds to banks and to make their costs of funds more sensitive to
        fluctuations in money market rates. A result of the pressure on banks interest
        margins due to deregulation has been a trend toward expansion of services
        offered by banks and an increase in the emphasis placed on fee or noninterest
        income.
 
 *Capital
        Requirements* *.* Bank
        regulatory agencies require financial institutions to maintain capital at
        adequate levels based on a percentage of assets and off balance sheet exposures,
        adjusted for risk weights ranging from 0% to 100%. Under the risk-based
        standard, capital is classified into two tiers. Tier 1 capital consists of
        common shareholders’ equity, excluding the unrealized gain (loss) on
        available-for-sale securities, minus certain intangible assets. Tier 2 capital
        consists of the general allowance for credit losses except for certain
        limitations. An institution’s qualifying capital base for purposes of its
        risk-based capital ratio consists of the sum of its Tier 1 and Tier 2 capital.
        The regulatory minimum requirements are 4% for Tier 1 and 8% for total
        risk-based capital. Bank holding companies and banks are also required to
        maintain capital at a minimum level based on total assets, which is known
        as the
        leverage ratio. The minimum requirement for the leverage ratio is 3%, but
        all
        but the highest rated institutions are required to maintain ratios 100 to
        200
        basis points above the minimum. At December 31, 2007 the Bank met all capital
        requirements to which they were subject.
 
 For
        additional information regarding the Company's capital ratios and requirements,
        see "Management's Discussion and Analysis - Capital Resources, Commitments
        and
        Capital Requirements" and notes to the consolidated financial
        statements.
  10
 
 FDICIA
        contains “prompt corrective action” provisions pursuant to which banks are to be
        classified into one of five categories based upon capital adequacy, ranging
        from
“well capitalized” to “critically undercapitalized” and which require (subject
        to certain exceptions) the appropriate federal banking agency to take prompt
        corrective action with respect to an institution which becomes “significantly
        undercapitalized” or “critically undercapitalized.”
 
 The
        FDIC
        has issued regulations to implement the “prompt corrective action” provisions of
        FDICIA. In general, the regulations define the five capital categories as
        follows:
 
 ∙
              an
                  institution is “well capitalized” if it has a total risk-based capital
                  ratio of 10% or greater, has a Tier 1 risk-based capital ratio
                  of 6% or
                  greater, has a leverage ratio of 5% or greater and is not subject
                  to any
                  written capital order or directive to meet and maintain a specific
                  capital
                  level for any capital measures;
 ∙
              an
                  institution is “adequately capitalized” if it has a total risk-based
                  capital ratio of 8% or greater, has a Tier 1 risk-based capital
                  ratio of
                  4% or greater, and has a leverage ratio of 4% or
                  greater;
 ∙
              an
                  institution is “undercapitalized” if it has a total risk-based capital
                  ratio of less than 8%, has a Tier 1 risk-based capital ratio that
                  is less
                  than 4% or has a leverage ratio that is less than
                  4%;
 ∙
              an
                  institution is “significantly undercapitalized” if it has a total
                  risk-based capital ratio that is less than 6%, a Tier 1 risk-based
                  capital
                  ratio that is less than 3% or a leverage ratio that is less than
                  3%;
                  and
 ∙
              an
                  institution is “critically undercapitalized” if its “tangible equity” is
                  equal to or less than 2% of its total
                  assets.
 
 The
        FDIC
        also, after an opportunity for a hearing, has authority to downgrade an
        institution from “well capitalized” to “adequately capitalized” or to subject an
“adequately capitalized” or “undercapitalized” institution to the supervisory
        actions applicable to the next lower category, for supervisory
        concerns.
 
 Generally,
        FDICIA requires that an “undercapitalized” institution must submit an acceptable
        capital restoration plan to the appropriate federal banking agency within
        45
        days after the institution becomes “undercapitalized” and the agency must take
        action on the plan within 60 days. The appropriate federal banking agency
        may
        not accept a capital restoration plan unless, among other requirements, each
        company having control of the institution has guaranteed that the institution
        will comply with the plan until the institution has been adequately capitalized
        on average during each of the three consecutive calendar quarters and has
        provided adequate assurances of performance. The aggregate liability under
        this
        provision of all companies having control of an institution is limited to
        the
        lesser of:
 
 ∙
              5%
                  of the institution’s total assets at the time the institution becomes
                  “undercapitalized” or
 ∙
              the
                  amount which is necessary, or would have been necessary, to bring
                  the
                  institution into compliance with all capital standards applicable
                  to the
                  institution as of the time the institution fails to comply with
                  the plan
                  filed pursuant to FDICIA.
  11
 
 An
        “undercapitalized” institution may not acquire an interest in any company or any
        other insured depository institution, establish or acquire additional branch
        offices or engage in any new business unless the appropriate federal banking
        agency has accepted its capital restoration plan, the institution is
        implementing the plan, and the agency determines that the proposed action
        is
        consistent with and will further the achievement of the plan, or the appropriate
        Federal banking agency determines the proposed action will further the purpose
        of the “prompt corrective action” sections of FDICIA.
 
 If
        an
        institution is “critically undercapitalized,” it must comply with the
        restrictions described above. In addition, the appropriate Federal banking
        agency is authorized to restrict the activities of any “critically
        undercapitalized” institution and to prohibit such an institution, without the
        appropriate Federal banking agency’s prior written approval, from:
 
 ∙
              entering
                  into any material transaction other than in the usual course of
                  business;
 ∙
                  engaging
                      in any covered transaction with affiliates (as defined in Section
                      23A(b)
                      of the Federal Reserve
                      Act);
 ∙
              paying
                  excessive compensation or bonuses;
                  and
 ∙
                  paying
                      interest on new or renewed liabilities at a rate that would
                      increase the
                      institution’s weighted average costs of funds to a level significantly
                      exceeding the prevailing rates of interest on insured deposits
                      in the
                      institution’s normal market
                      areas.
 
 The
        “prompt corrective action” provisions of FDICIA also provide that in general no
        institution may make a capital distribution if it would cause the institution
        to
        become “undercapitalized.” Capital distributions include cash (but not stock)
        dividends, stock purchases, redemptions, and other distributions of capital
        to
        the owners of an institution.
 
 Additionally,
        FDICIA requires, among other things, that:
 ∙
              only
                  a “well capitalized” depository institution may accept brokered deposits
                  without prior regulatory approval
                  and
 ∙
              the
                  appropriate federal banking agency annually examine all insured
                  depository
                  institutions, with some exceptions for small, “well capitalized”
                  institutions and state-chartered institutions examined by state
                  regulators. FDICIA also contains a number of consumer banking provisions,
                  including disclosure requirements and substantive contractual limitations
                  with respect to deposit accounts.
 
 As
        of
        December 31, 2007, the Bank met the capital requirements of a “well capitalized”
institution. Bank holding companies are not subject to "prompt corrective
        action" of FDICIA.
 
 The
        FDIC
        has proposed revising its risk-based capital requirements to ensure that
        such
        requirements provide for explicit consideration by commercial banks of interest
        rate risk. Under the proposed rule, a bank’s interest rate risk exposure would
        be quantified using either the measurement system set forth in the proposal
        or
        the bank’s internal model for measuring such exposure, if such model is
        determined to be adequate by the bank’s examiner. If the dollar amount of a
        bank’s interest rate risk exposure, as measured by either measurement system,
        exceeds 1% of the bank’s total assets, the bank would be required under the
        proposed rule to hold additional capital equal to the dollar amount of the
        excess. It is anticipated that the regulatory agencies will issue a revised
        proposed rule for further public comment. Pending issuance of such revised
        proposal, the Bank’s management cannot determine what effect, if any, an
        interest rate risk component would have on the capital of the
        Bank.
  12
 
 Enforcement
        Powers .
        Congress has provided the federal bank regulatory agencies with an array
        of
        powers to enforce laws, rules, regulations and orders. Among other things,
        the
        agencies may require that institutions cease and desist from certain activities,
        may preclude persons from participating in the affairs of insured depository
        institutions, may suspend or remove deposit insurance, and may impose civil
        money penalties against institution-affiliated parties for certain violations.
 
 Maximum
        Legal Interest Rates .
        Like
        the laws of many states, Florida law contains provisions on interest rates
        that
        may be charged by banks and other lenders on certain types of loans. Numerous
        exceptions exist to the general interest limitations imposed by Florida law.
        The
        relative importance of these interest limitation laws to the financial
        operations of the Bank will vary from time to time, depending on a number
        of
        factors, including conditions in the money markets, the costs and availability
        of funds, and prevailing interest rates.
 
 Bank
        Branching .
        Banks
        in Florida are permitted to branch state wide. Such branch banking, however,
        is
        subject to prior approval by the FDIC and the Florida Office. Any such approval
        would take into consideration several factors, including the bank’s level of
        capital, the prospects and economics of the proposed branch office, and other
        conditions deemed relevant by the FDIC and the Florida Office for purposes
        of
        determining whether approval should be granted to open a branch
        office.
 
 Change
        of Control .
        Federal
        law restricts the amount of voting stock of a bank holding company and a
        bank
        that a person may acquire without the prior approval of banking regulators.
        The
        overall effect of such laws is to make it more difficult to acquire a bank
        holding company and a bank by tender offer or similar means than it might
        be to
        acquire control of another type of corporation. Consequently, shareholders
        of
        the Bank may be less likely to benefit from the rapid increases in stock
        prices
        that may result from tender offers or similar efforts to acquire control
        of
        other companies. Federal law also imposes restrictions on acquisitions of
        stock
        in a bank holding company and a state bank. Under the federal Change in Bank
        Control Act and the regulations thereunder, a person or group must give advance
        notice to the Federal Reserve before acquiring control of any bank holding
        company (such as the Company). Upon receipt of such notice, the Federal Reserve
        may approve or disapprove the acquisition. The Change in Bank Control Act
        creates a rebuttable presumption of control if a member or group acquires
        a
        certain percentage or more of a bank holding company’s or state bank’s voting
        stock, or if one or more other control factors set forth in the Act are present.
 
 Interstate
        Banking .
        The
        Riegle-Neal Interstate Banking and Branching Efficiency Act of 1996, provides
        for nationwide interstate banking and branching. Under the law, interstate
        acquisitions of banks or bank holding companies in any state by bank holding
        companies in any other state will be permissible one year after enactment.
        Interstate branching and consolidation of existing bank subsidiaries in
        different states is permissible. Florida has a law that allows out-of-state
        bank
        holding companies (located in states that allow Florida bank holding companies
        to acquire banks and bank holding companies in that state) to acquire Florida
        banks and Florida bank holding companies. The law essentially provides for
        out-of-state entry by acquisition only (and not by interstate branching)
        and
        requires the acquired Florida bank to have been in existence for at least
        two
        years.
  13
 
 Sarbanes-Oxley
        Act of 2002 .
        In
        2002, the Sarbanes-Oxley Act of 2002 was enacted. The Securities and Exchange
        Commission (the “SEC”) has promulgated certain regulations pursuant to the Act
        that will continue to impose additional implementing or clarifying regulations
        as necessary in furtherance of the Act. The passage of the Act and the
        regulations implemented by the SEC subject publicly-traded companies to
        additional and more extensive reporting regulations and disclosure. Compliance
        with the Act and corresponding regulations will increase the Company’s
        expenses.
 
 Effect
        of Governmental Policies .
        The
        earnings and businesses of the Bank are affected by the policies of various
        regulatory authorities of the United States, especially the Federal Reserve.
        The
        Federal Reserve, among other things, regulates the supply of credit and deals
        with general economic conditions within the United States. The instruments
        of
        monetary policy employed by the Federal Reserve for those purposes influence
        in
        various ways the overall level of investments, loans, other extensions of
        credit, and deposits, and the interest rates paid on liabilities and received
        on
        assets.
 
 **USA
        Patriot Act**
 
 The
        terrorist attacks in September 2001, have led to the adoption of the *Providing
        Appropriate Tools Required to Intercept and Obstruct Terrorism Act of
        2001* ,
        commonly known as the *USA
        Patriot Act* .
        Part of
        the *USA
        Patriot Act* is the *International
        Money Laundering Abatement and financial Anti-Terrorism Act of
        2001* .
        This
        act requires the Secretary of the Treasury, in consultation with the heads
        of
        other government agencies, to adopt special measures applicable to financial
        institutions. These measures include enhanced recordkeeping and reporting
        requirements for certain financial transactions that are of primary money
        laundering concern, due diligence requirements concerning the beneficial
        ownership of certain types of accounts, and restrictions or prohibitions
        on
        certain types of accounts with foreign financial institutions. Among its
        other
        provision, this law requires each financial institution to: (i) establish
        an anti-laundering program; (ii) establish due diligence policies,
        procedures and controls with respect to private banking accounts and
        correspondent banking accounts involving foreign individuals and certain
        foreign
        banks; and (iii) avoid establishing, maintaining, administering, or
        managing correspondent accounts in the United States for, or on behalf of,
        a
        foreign bank that does not have a physical presence in this country. In
        addition, the law contains a provision encouraging cooperation among financial
        institutions, regulatory authorities and law enforcement authorities with
        respect to individuals, entities and organizations engaged in, or reasonably
        suspected of engaging in, terrorist acts or money laundering activities.
        The law
        expands the circumstances under which funds in a bank account may be forfeited
        and requires covered financial institutions to respond under certain
        circumstances to requests for information from federal banking agencies within
        120 hours.
  14
 
 **Other
        Laws**
 
 The
        Bank’s loans will also be subject to federal laws applicable to credit
        transactions, such as the following (including the rules and regulations
        of
        various federal agencies charged with the responsibility of implementing
        such
        federal laws):
 
 Ø
              *Federal
                  Truth-in-Lending Act*-
                  governs disclosures of credit terms to consumer
                  borrowers;
  Ø
              *Home
                  Mortgage Disclosure Act*-
                  requires financial institutions to provide information to enable
                  public
                  officials to determine whether a financial institution is fulfilling
                  its
                  obligations to meet the housing needs of the community it
                  serves;
  Ø
              *Equal
                  Credit Opportunity Act*-
                  prohibits discrimination on the basis of race, creed or other prohibitive
                  factors in extending credit;
  Ø
              *Real
                  Estate Settlement Procedures Act*-
                  requires lenders to disclose certain information regarding the
                  nature and
                  cost of real estate settlements, and prohibits certain lending
                  practices,
                  as well as limits escrow account amounts in real estate transactions;
                  and
  Ø
              *Fair
                  Credit Reporting Act*-
                  governs the manner in which consumer debts may be collected by
                  collection
                  agencies.
  The
        Company and the Bank’s operations are also subject to the:
 
 Ø
              *Right
                  to Financial Privacy Act*-
                  imposes a duty to maintain confidentiality of consumer financial
                  records
                  and prescribes procedures for complying with administrative subpoenas
                  of
                  financial record; and
  Ø
              *Electronic
                  Funds Transfer Act and Regulation E*-
                  governs automatic deposits to, and withdrawals from, deposit accounts
                  and
                  customer’s rights and liabilities arising from the use of debit cards,
                  automated teller machines and other electronic banking
                  services.
  **Liquidity**
 
 A
        Florida-chartered commercial bank is expected to maintain an adequate liquidity
        reserve. The liquidity reserve may consist of cash on hand, cash on demand
        deposit with correspondent banks and other investments and short-term marketable
        securities, such as federal funds sold and United States securities or
        securities guaranteed by the United States.
 
 **Competition**
 
 The
        Company encounters strong competition both in making loans and in attracting
        deposits. The deregulation of the banking industry and the widespread enactment
        of state laws which permit multi-bank holding companies as well as an increasing
        level of interstate banking have created a highly competitive environment
        for
        commercial banking. In one or more aspects of its business, the Company competes
        with other commercial banks, savings and loan associations, credit unions,
        finance companies, mutual funds, insurance companies, brokerage and investment
        banking companies, and other financial intermediaries. Most of these
        competitors, some of which are affiliated with bank holding companies, have
        substantially greater resources and lending limits, and may offer certain
        services that the Company does not currently provide. In addition, many of
        the
        Company’s non-bank competitors are not subject to the same extensive federal
        regulations that govern bank holding companies and federally insured banks.
        Recent federal and state legislation has heightened the competitive environment
        in which financial institutions must conduct their business, and the potential
        for competition among financial institutions of all types has increased
        significantly.
  15
 
 To
        compete, the Company relies upon specialized services, responsive handling
        of
        customer needs, and personal contacts by its officers, directors, and staff.
        Large multi-branch banking competitors tend to compete primarily by rate
        and the
        number and location of branches while smaller, independent financial
        institutions tend to compete primarily by rate and personal service.
  **Employees**
 
 As
        of
        December 31, 2007, the Company and the Bank collectively had 21 full-time
        employees (including executive officers) and 1 part-time employee. The employees
        are not represented by a collective bargaining unit. The Company considers
        relations with employees to be good.
 
 **Item
        2.**  **Description of Properties**
 
 The
        following table sets forth information on the Bank’s offices as of December 31,
        2007.
 
 **Location**
              
              **Facility**
                **Status**Headquarters
                  & Main Office
              
              Leased
                  by BankMLK
                  Boulevard Branch Office
              
              Leased
                  by Bank
 
 The
        Bank’s main office is located at 536 N. Monroe St. in an existing 20,000 sq. ft.
        building in Tallahassee, Florida formerly known locally as the “Moon Jewelers
        Building.” The Bank initially leased 5,000 sq. ft. for a term of 5-years, of
        which 2,500 sq. ft. is for lobby space and 2,500 sq. ft. is for office quarters
        and back room operations. The location has a full service lobby; walk up
        ATM in
        front of the building, and one drive-thru lane located in the rear of the
        building. The Bank has an option to renew the lease for another 5-year term.
        The
        Bank also has an option to expand its operations into as much as 11,000 sq.
        ft.
        over the initial 5-year term, and the option to purchase the building during
        the
        third year for $2.9 million, during the fourth year for $3.2 million, and
        during
        the fifth year for $3.5 million.
 
 The
        Bank
        opened its first branch office at 1812 North Martin Luther King Blvd. shortly
        after the opening of the main office. The Bank also leases this location
        for
        5-years with options to renew the lease for two additional 5-year periods.
        The
        Bank does not have an option to buy this facility. This location includes
        a
        1,377 sq. ft lobby and six drive-thru lanes including a drive-up ATM in one
        of
        the six drive-thru lanes.
  16
 
 **Item
        3.**  **Legal Proceedings**
 
 As
        of
        December 31, 2007, neither the Company nor the Bank was a party to any legal
        proceedings.
 
 **Item
        4.**  **Submission of Matters to a Vote of Security Holders**
 
 None
 
 **PART
        II**
 
 **Item
        5.**  **Market for the Registrant’s Common Equity and Related Stockholder
        Matters**
 
 There
        is
        no public market for the Common Stock and only isolated, privately negotiated
        sales of Common Stock have occurred since the Bank opened for business in
        September 2007, and Pro Financial became a bank holding company by acquiring
        the
        Bank on that same date. There is no established public trading market for
        the
        Common Stock and, historically, the shares of Common Stock have been inactively
        traded. Management of the Company is aware of certain transactions in its
        Common
        Stock, although the trading prices and number of shares transferred in all
        transactions are not known. The last known sale of stock occurred at $10.00
        per
        share. On January 2, 2008, Pro Financial had approximately 247shareholders
        of
        record.
 
 Neither
        the Bank nor Pro Financial has paid any cash dividends on the shares of Common
        Stock. Pro Financial does not intend to pay dividends for the foreseeable
        future. If at any time the Board of Directors of Pro Financial determines
        to pay
        dividends, such payment will depend upon several factors including Pro
        Financial’s earnings, financial condition and capital needs, the impact of
        legislation and regulations as then in effect or as may be proposed, economic
        conditions, and such other factors as the Board may deem relevant. Further,
        dividend payments by Pro Financial are restricted by statute. Pro Financial’s
        ability to make dividend payments also is subject to Pro Financial and the
        Bank
        meeting on a continuing basis all of their capital requirements and achieving
        and continuing profitable operations. There can be no assurance that future
        capital or earnings of the Bank will support dividend payments. No assurance
        can
        be given that dividends will be paid or, if paid, what the amount of dividends
        will be or whether such dividends, once paid, will continue.
 
 The
        primary source of funds for payment of dividends by Pro Financial will be
        dividends received from the Bank. Payments by the Bank to Pro Financial are
        limited by law and regulations of the bank regulatory authorities. There
        are
        various statutory and contractual limitations on the ability of the Bank
        to pay
        dividends to Pro Financial. The FDIC and the Florida Office also have the
        general authority to limit the dividends paid by banks if such payment may
        be
        deemed to constitute an unsafe and unsound practice. Under Florida law
        applicable to banks and subject to certain limitations, after charging off
        bad
        debts, depreciation and other worthless assets, if any, the board of directors
        of a bank may declare a dividend of up to the bank’s aggregate net income for
        the current year combined with any retained earnings for the preceding two
        years
        as the board shall deem to be appropriate and, with the approval of the Florida
        Office, may declare a dividend from retained earnings for prior years. No
        dividends may be paid at a time when a bank’s net earnings from the preceding
        two years is a loss, or which would cause the capital accounts of the bank
        to
        fall below the minimum amount required by law, regulation, order, or any
        written
        agreement with the Florida Office or a federal regulatory
        agency.
  17
 
 Florida
        law applicable to companies (including the Company) provides that dividends
        may
        be declared and paid only if, after giving it effect, (i) the company is
        able to
        pay its debts as they become due in the usual course of business, and (ii)
        the
        company’s total assets would be greater than the sum of its total liabilities
        plus the amount that would be needed if the company were to be dissolved
        at the
        time of the dividend to satisfy the preferential rights upon dissolution
        of
        shareholders whose preferential rights are superior to those receiving the
        dividend.
 
 The
        Bank
        did not repurchase any of its shares in 2007.
 
 As
        of
        February 29, 2008:
 
 Ø
              200,000
                  shares of Company stock were reserved for issuance upon the exercise
                  of
                  outstanding stock options and 1,334,840 shares of Company stock
                  were
                  reserved for issuance upon the exercise of outstanding stock purchase
                  warrants.
 
 Ø
              The
                  Company had no intention of making any public offering of Company
                  stock.
  18


**Item
                6.**
              **Management’s
                  Discussion and Analysis**
 
 **SELECTED
        FINANCIAL DATA**
 
 The
        following table presents selected financial data for the Company. The data
        for
        the fiscal year 2007 is derived from audited financial statements of the
        Company. The selected financial data should be read in conjunction with,
        and are
        qualified in their entirety by, the financial statements and the notes thereto
        and the other information included elsewhere herein. Selected financial data
        for
        the organizational phase in 2006 and 2007 prior to the bank opening was
        immaterial and therefore not presented.
 
 **SELECTED
        CONSOLIDATED FINANCIAL DATA AT DECEMBER 31, 2007 OR FOR THE YEAR ENDED DECEMBER
        `31, 2007**
 **($
        in thousands, except per share amounts)**
 
 **2007**
              
              **2006**Total
                  assets
              
              $
              24,170
              
              $
              0Loans,
                  net
              
              
              3,810
              
              
              0Cash
                  and cash equivalents
              
              
              11,509
              
              
              0Securities
              
              
              6,364
              
              
              0Deposits
              
              
              11,620
              
              
              0Borrowed
                  funds
              
              
              101
              
              
              0Stockholders'
                  equity
              
              
              12,399
              
              
              0Interest
                  income
              
              $
              390
              
              
              0Interest
                  expense
              
              
              (94
              )
              
              0Net
                  interest income
              
              
              296
              
              
              0Provision
                  for loan losses
              
              
              (72
              )
              
              0Net
                  interest income after provision for loan losses
              
              
              224
              
              
              0Noninterest
                  income
              
              
              21
              
              
              0Noninterest
                  expense
              
              
              1,450
              
              
              237Loss
                  before income tax benefit
              
              
              (1,205
              )
              
              (237
              )Income
                  tax benefit
              
              
              534
              
              
              0Net
                  loss
              
              
              (671
              )
              
              (237
              )Basic
                  and diluted loss per share
              
              $
              (1.21
              )
              
              0
  19
  **SELECTED
        CONSOLIDATED FINANCIAL RATIOS**
 **AND
        OTHER DATA AS OF DECEMBER 31, 2007:**
  Return
                  on average assets
              
              
              (8.67
              %)Return
                  on average equity
              
              
              (12.78
              %)Dividend
                  payout ratio
              
              
              N/AAverage
                  equity to average assets
              
              
              67.87
              %Total
                  equity to total assets
              
              
              51.3
              %Yield
                  on average earning assets (1)
              
              
              5.52
              %Net
                  interest margin
              
              
              4.10
              %Nonperforming
                  assets to total assets (2)
              
              
              0.24
              %Nonperforming
                  loans to total loans
              
              
              0.16
              %Allowance
                  for loan losses to gross loans
              
              
              1.85
              %Noninterest
                  expenses to average assets
              
              
              18.67
              %Operating
                  efficiency ratio (3)
              
              
              464.31
              %Net
                  interest income to noninterest expenses
              
              
              19.88
              %Total
                  shares outstanding
              
              
              1,334,840Book
                  value per common share outstanding
              
              $
              9.29Number
                  of banking offices (all full-service)
              
              
              2
  
 (1)
              Reflects
                  interest income as a percent of average interest earning
                  assets.
 (2)
              Non-performing
                  loans consist of nonaccrual loans and accruing loans contractually
                  past
                  due ninety days or more.
 (3)
              Noninterest
                  expense divided by the sum of net interest income plus noninterest
                  income.
  20
  **General**
 
 Pro
        Financial was incorporated on March 29, 2006 for the purpose of operating
        as a
        one-bank holding company. Pro Financial currently owns 100% of the outstanding
        shares of the Bank (collectively, the “Company”). Pro Financial’s only business
        is the ownership and operation of the Bank. The Bank is a Florida-chartered
        commercial bank which opened for business on September 5, 2007. The Bank’s
        deposits are insured by the Federal Deposit Insurance Corporation. The Bank
        provides community banking services to business and individuals from its
        banking
        offices located in Tallahassee, Florida and the surrounding area.
 
 The
        Bank's deposits are insured by the Bank Insurance Fund of the Federal Deposit
        Insurance Corporation up to applicable limits. The operations of the Bank
        are
        subject to the supervision and regulation of the FDIC and the Florida Office
        of
        Financial Regulation.
 
 Historically,
        the Bank's market area has been served both by large banks headquartered
        out of
        state as well as a number of community banks offering a higher level of personal
        attention, recognition and service. The large banks have generally applied
        a
        transactional business approach, based upon volume considerations, to the
        market
        while community banks have traditionally offered a more service relationship
        approach. Recent mergers and acquisitions have created an opportunity for
        the
        Bank. The Bank’s strategic focus is to exploit this opportunity by catering to
        the “displaced bank customer” in this marketplace.
 
 The
        Bank
        provides a range of consumer and commercial banking services to individuals,
        businesses and industries. The basic services offered by the Bank include:
        demand interest bearing and noninterest bearing accounts, money market deposit
        accounts, NOW accounts, time deposits, safe deposit services, credit cards,
        debit cards, direct deposits, notary services, night depository, cashier’s
        checks, savings bonds, bank drafts, automated teller services, drive-in tellers,
        bill pay, internet banking and the full range of consumer loans, both
        collateralized and uncollateralized. In addition, the Bank makes secured
        and
        unsecured commercial and real estate loans and issues stand-by letters of
        credit. The Bank provides automated teller machine (ATM) cards and is a member
        of the Plus, Presto, Pulse and Star ATM network thereby permitting customers
        to
        utilize the convenience of the Bank’s ATM network and Star member machines both
        nationwide and internationally. The Bank does not have trust powers and,
        accordingly, no trust services are provided.
 
 The
        Bank’s target market is owner occupied and non owner occupied commercial real
        estate, small businesses, developers, consumers and professionals. The small
        business customer (typically a commercial entity with sales of $5 million
        or
        less) has the opportunity to generate significant revenue for banks yet is
        generally underserved by large bank competitors. These customers generally
        can
        afford profitability opportunities more than the average retail
        customer.
 
 The
        Bank
        has actively pursued its targeted market for deposits, particularly the small
        businesses and professionals. In today’s environment, the product of every
        system itself becomes a sales tool. Recognizing that fact, the Bank endeavors
        to
        offer current technology to the marketplace. Such technology includes debit
        cards, internet banking and voice response account information systems. The
        goal
        is to provide a “high tech - high touch” experience.
  21
  The
        Bank
        has capitalized upon its market strategy to grow in its 4-months of operation.
        As of December 31, 2007, the Bank had grown to approximately $20.8 million
        in
        total assets, $11.6 million in deposits, and $3.3 million in net loans since
        opening in September 2007. The Bank attributes its successful growth to its
        location in a dynamic growth area and its focus on its targeted market.
 
 The
        revenues of the Bank are primarily derived from interest on, and fees received
        in connection with, real estate and other loans, from interest and dividends
        from investment securities, service charge income generated from demand accounts
        and ATM fees, and other services. The principal sources of funds for the
        Bank’s
        lending activities are its deposits, loan repayments, and proceeds from
        investment securities. The principal expenses of the Bank are the interest
        paid
        on deposits, and operating and general administrative expenses.
 
 **Lending
        Activities**
 
 The
        Bank’s loans are concentrated in commercial and real estate loans. A majority
        of
        the Bank’s loans are made on a secured basis, and, as of December 31, 2007,
        approximately 69.0% of the loan portfolio consisted of loans secured by first
        or
        second mortgages on residential or commercial real estate.
 
 The
        Bank’s real estate loans are secured by mortgages and consist primarily of loans
        to individuals and businesses for the purchase, construction of, improvement
        of
        or investment in real estate, or for various other consumer and business
        purposes (whether or not related to the real estate securing them). The Bank
        also engages in lending to individuals and builders for the construction
        of
        single-family residences. These real estate loans may be made at fixed or
        variable interest rates. The Bank generally makes commercial real estate
        loans
        repayable in monthly installments based on up to a 20-year amortization schedule
        which become payable in full for terms generally five years or less. The
        Bank’s
        residential real estate loans generally are repayable in monthly installments
        based on up to a 30-year amortization schedule with variable interest rates.
        Fixed rate residential loans are available and are subsequently sold on the
        secondary market.
 
 The
        Bank
        also makes non-real estate commercial loans which include loans to individuals
        and small-to-medium sized businesses and professionals located primarily
        in
        Leon, Gadsden, Wakulla and Jefferson Counties for working capital, equipment
        purchases, and various other business purposes. A majority of these commercial
        loans are secured by inventory, equipment or similar assets, but these loans
        may
        also be made on an unsecured basis. Commercial loans may be made at variable
        or
        fixed rates of interest; typically, those loans which will have terms or
        amortization schedules of longer than one year will carry interest rates
        which
        vary with the prime lending rate and are generally refinanced or become payable
        in full in three to five years.
 
 The
        Bank’s installment loan portfolio consists primarily of loans to individuals for
        various consumer purposes, but includes some business purpose loans made
        to
        individuals which are payable on an interest only or installment basis. The
        majority of these loans are for terms of less than five years and are secured
        by
        liens on various personal assets of the borrowers, but installment loans
        also
        may be made on an unsecured basis. Installment loans are made at fixed and
        variable interest rates, and may be made based on up to a ten-year amortization
        schedule, depending on the collateral provided
  22
  For
        additional information regarding the Bank’s loan portfolio, *see* “Page
        25
        Loan Portfolio” and “Page 26 Lending Activities" and footnote C to the
        consolidated financial statements.
 
 **Liquidity**
  Liquidity
        management involves the ability to meet the cash flow requirements of customers
        who may be either depositors wanting to withdraw their funds or borrowers
        needing assurance that sufficient funds will be available to meet their credit
        needs. In the ordinary course of business, the Bank’s cash flows are generated
        from interest and fee income, as well as from loan repayments, the sale,
        repayments or maturity of securities available-for-sale. In addition to cash
        and
        due from banks, the Bank considers all securities available-for-sale and
        federal
        funds sold as primary sources of asset liquidity. Many factors affect the
        ability to accomplish these liquidity objectives successfully, including
        the
        economic environment, the asset/liability mix within the balance sheet, as
        well
        as the Bank’s reputation in the community. The Bank’s principal sources of funds
        are net increases in deposits, principal and interest payments on loans and
        proceeds from sales, calls and maturities of securities. The Bank used its
        capital resources primarily to fund existing and continuing loan commitments
        and
        to purchase securities. At December 31, 2007, the Bank had commitments to
        originate loans totaling $916,000, and had issued no standby letters of credit.
        At December 31, 2007, the Bank also had commitments to extend credit under
        the
        undisbursed portion of outstanding lines of credit of $1.2 million. Scheduled
        maturities of certificates of deposit during the twelve months following
        December 31, 2007 totaled $2 million. Management believes that the Bank has
        adequate resources to fund all its commitments, that substantially all of
        its
        existing commitments will be funded in the subsequent twelve months and,
        if so
        desired, that it can adjust the rates on certificates of deposit and other
        deposit accounts to retain deposits in a changing interest rate
        environment.
 
 **Capital
        Resources, Commitments and Capital Requirements**
 
 The
        Company’s principal sources of funds are those generated by the Bank, including
        net increases in deposits and other borrowings, principal and interest payments
        on loans, and proceeds from maturities of investment securities.
 
 The
        Company uses its capital resources principally to fund existing and continuing
        loan commitments and to purchase investment securities. Off-balance sheet
        commitments to extend credit, which amounted to $916,000 at December 31,
        2007,
        represent legally binding agreements to lend to customers with fixed expiration
        dates or other termination clauses. Since many commitments are expected to
        expire without being funded, committed amounts do not necessarily represent
        future cash requirements.
 
  23
  The
        following table summarizes the Company’s contractual obligations, including
        certain on-balance sheet and off-balance sheet obligations, at December 31,
        2007
        (in thousands):
 
 **Payments
                  Due by Period****Less**
              
              
              
              
              
              **More****Than
                  1**
              
              **1-3**
              
              **3-5**
              
              **Than
                  5****Contractual
                  Obligations**
              
              **Total**
              
              **Year**
              
              **Years**
              
              **Years**
              
              **Years**Time
                  deposit maturities
              
              $
              2,029
              
              $
              2,028
              
              $
              1
              
              $
              -
              
              $
              -Other
                  borrowings
              
              
              101
              
              
              101
              
              
              -
              
              
              -
              
              
              -Loan
                  commitments
              
              
              916
              
              
              916
              
              
              -
              
              
              -
              
              
              -Standby
                  letters of credit
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Undisbursed
                  line of credit loans
              
              
              1,188
              
              
              1,188
              
              
              -
              
              
              -
              
              
              -Total
              
              $
              4,234
              
              $
              4,233
              
              $
              1
              
              $
              -
              
              $
              -
 
 Management
        believes that the Company has adequate resources to fund all its commitments,
        that substantially all of its existing commitments will be funded within
        12
        months and, if so desired, that the Company can adjust the rates and terms
        on
        time deposits and other deposit accounts to retain or obtain new deposits
        in a
        changing interest rate environment.
 
 The
        Company’s stockholders’ equity was $12.4 million at December 31, 2007,
        representing 51.24% of total assets.
 
 The
        federal banking regulatory authorities have adopted certain “prompt corrective
        action” rules with respect to depository institutions. The rules establish five
        capital tiers: “well capitalized,” “adequately capitalized,” “undercapitalized,”
“significantly undercapitalized,” and “critically undercapitalized.” The various
        federal banking regulatory agencies have adopted regulations to implement
        the
        capital rules by, among other things, defining the relevant capital measures
        for
        the five capital categories. An institution is deemed to be “well capitalized”
if it has a total risk-based capital ratio of 10% or greater, a Tier 1
        risk-based capital ratio of 6% or greater, and a Tier 1 leverage ratio of
        5% or
        greater and is not subject to a regulatory order, agreement, or directive
        to
        meet and maintain a specific capital level. At December 31, 2007, the Bank
        met
        the capital ratios of a “well capitalized” financial institution with a total
        risk-based capital ratio of 110.83% Tier 1 risk-based capital ratio of 109.95%,
        and a Tier 1 leverage ratio of 43.73%. Depository institutions which fall
        below
        the “adequately capitalized” category generally are prohibited from making any
        capital distribution, are subject to growth limitations, and are required
        to
        submit a capital restoration plan. There are a number of requirements and
        restrictions that may be imposed on institutions treated as “significantly
        undercapitalized” and, if the institution is “critically undercapitalized,” the
        banking regulatory agencies have the right to appoint a receiver or
        conservator.
  24
 
 The
        following table summarizes the regulatory capital levels and ratios for the
        Bank:
 
 **Regulatory****Requirement****For
                  Well****Actual**
              
              **Capitalized****Bank
                  Ratios**
              
              **Bank*****At
                  December 31, 2007:***Total
                  capital to risk-weighted assets
              
              
              110.83
              %
              
              10.0
              %Tier
                  I capital to risk-weighted assets
              
              
              109.95
              %
              
              6.0
              %Tier
                  I capital to average assets - leverage ratio
              
              
              43.73
              %
              
              5.0
              %
 
 **Loan
        Portfolio**
 
 A
        significant source of the Bank’s income is the interest earned on its loan
        portfolio. At December 31, 2007, the Bank’s total assets were $20.8 million and
        its net loans receivable were $3.3 million or 15.87% of total assets and
        28.45%
        of total deposits.
 
 The
        Bank’s primary market area consists of Tallahassee, Florida and the surrounding
        counties (consisting primarily of Leon, Gadsden, Wakulla and Jefferson
        Counties). The Bank’s market area’s economic base is diversified. Significant
        industries include 3 universities, state and city government, agribusiness
        and
        manufacturing, service enterprises, technology and information concerns.
        Adverse
        conditions in any one or more of the industries operating in such markets
        or a
        slow-down in general economic conditions could have an adverse effect on
        the
        Bank.
 
 Lending
        activities are conducted pursuant to a written policy which has been adopted
        by
        the Bank. Each loan officer has defined lending authority beyond which loans,
        depending upon their type and size, must be reviewed and approved by a loan
        committee comprised of certain officers and directors of the Bank.
 
 The
        composition of the Bank’s loan portfolio as of December 31, 2007 was as follows
        ($ in thousands):
  ****
              ****
              
              
              **%
                  of****Amount**
              
              **Total**
              ****Commercial
                  real estate
              
              $
              1,889
              
              
              56
              %Residential
                  real estate and home equity
              
              
              144
              
              
              4
              %Construction
              
              
              311
              
              
              9
              %Commercial
                  loans
              
              
              669
              
              
              20
              %Consumer
              
              
              384
              
              
              11
              %Total
                  loans
              
              
              3,397
              
              
              100
              %Less:
                  Allowance for loan losses
              
              
              (72
              )Deferred
                  loan costs, net
              
              
              14Loans
                  receivable, net
              
              $
              3,311
  25
  ***Maturities
        of Loans.*** The
        following table shows the contractual maturities of the Bank's loan portfolio
        at
        December 31, 2007. Loans with scheduled maturities (based on only contract
        term)
        are reported in the maturity category in which the payment is due. Demand
        loans
        with no stated maturity and overdrafts, if any, are reported in the "due
        one
        year or less" category. Loans that have adjustable rates are shown as amortizing
        to final maturity rather than when the interest rates are next subject to
        change. The table does not include prepayment or scheduled principal repayments.
        (in thousands)
 
 **Due
                  in**
              
              **Due
                  After**
              
              **Due****1
                  Year**
              
              **1
                  to**
              
              **After****Type
                  of Loan**
              
              **or
                  Less**
              
              **5
                  Years**
              
              **5
                  Years**
              
              **Total**Commercial
              
              $
              580
              
              $
              224
              
              $
              -
              
              $
              804Consumer
              
              
              380
              
              
              4
              
              
              -
              
              
              384Real
                  estate
              
              
              298
              
              
              1,841
              
              
              71
              
              
              2,209Total
              
              $
              1,258
              
              $
              2,069
              
              $
              71
              
              $
              3,397
  For
        the
        above loans due after one year or more, the following is a presentation of
        an
        analysis of sensitivities to changes in interest rates at December 31, 2007
        (in
        thousands):
 
 **Fixed**
              
              **Floating****Interest**
              
              **Interest****Type
                  of Loan**
              
              **Rate**
              
              **Rate**
              
              **Total**Commercial
              
              $
              100
              
              $
              704
              
              $
              804Consumer
              
              
              320
              
              
              64
              
              
              384Real
                  estate
              
              
              1,841
              
              
              369
              
              
              2,209Total
              
              $
              2,260
              
              $
              1,137
              
              $
              3,397
 
 **Loan
        Quality**
 
 Management
        seeks to maintain a high quality of loans through sound underwriting and
        lending
        practices. As of December 31, 2007 approximately 69%, of the total loan
        portfolio was collateralized by commercial and residential real estate
        mortgages. The level of non-performing loans and real estate owned also is
        relevant to the credit quality of a loan portfolio. As of December 31, 2007
        there were no non-performing loans (those 90 days or more past
        due).
  The
        commercial real estate mortgage loans in the Bank’s portfolio consist of fixed
        and adjustable-interest rate loans which were originated at prevailing market
        interest rates. The Bank’s policy has been to originate commercial real estate
        mortgage loans predominantly in its primary market area. Commercial real
        estate
        mortgage loans are generally made in amounts up to 80% of the appraised value
        of
        the property securing the loan and entail significant additional risks compared
        to residential mortgage loans. In making commercial real estate loans, the
        Bank
        primarily considers the net operating income generated by the real estate
        to
        support the debt service, the financial resources and income level and
        managerial expertise of the borrower and/or guarantor, the marketability
        and
        inventory value of the collateral and the Bank’s lending experience with the
        borrower.
  26
  Unlike
        residential mortgage loans, which generally are made on the basis of the
        borrower’s ability to make repayment from his employment and other income and
        which are collateralized by real property whose value tends to be more readily
        ascertainable, commercial loans typically are underwritten on the basis of
        the
        borrower’s ability to make repayment from the cash flow of his business and
        generally are collateralized by business assets, such as accounts receivable,
        equipment and inventory. As a result, the availability of funds for the
        repayment of commercial loans may be substantially dependent on the success
        of
        the business itself, which is subject to adverse conditions in the economy.
        The
        collateral underlying the loans may depreciate over time, cannot be appraised
        with as much precision as residential real estate, and may fluctuate in value
        based on the success of the business.
 
 The
        Bank
        makes consumer and personal loans on a collateralized and noncollateralized
        basis. These loans are often collateralized by automobiles, recreational
        vehicles and mobile homes. Consumer and personal loans also are generated
        by the
        Bank. Such loans generally have a term of 60 months or less.
 
 Loan
        concentrations are defined as amounts loaned to a number of borrowers engaged
        in
        similar activities which would cause them to be similarly impacted by economic
        or other conditions. The Bank, on a routine basis, monitors these concentrations
        in order to consider adjustments in its lending practices to reflect economic
        conditions, loan to deposit ratios, and industry trends. As of December 31,
        2007
        loans collateralized with mortgages on real estate represented 69.09% of
        the
        loan portfolio and were to borrowers in varying activities and
        businesses.
 
 The
        Loan
        Committee of the Board of Directors of the Bank concentrates its efforts
        and
        resources, and that of its senior management and lending officers, on loan
        review and underwriting procedures. Internal controls include ongoing reviews
        of
        loans made to monitor documentation and the existence and valuations of
        collateral. In addition, management of the Bank has established a review
        process
        with the objective of identifying, evaluating, and initiating necessary
        corrective action for marginal loans. The goal of the portfolio maintenance
        process is to address classified and non-performing loans as early as
        possible.
 
 **Classification
        of Assets and Potential Problem Loans**
 
 Generally,
        interest on loans accrues and is credited to income based upon the principal
        balance outstanding. It is management’s policy to discontinue the accrual of
        interest income and classify a loan as non-accrual when principal or interest
        is
        past due 90 days or more unless, in the determination of management, the
        principal and interest on the loan are well collateralized and in the process
        of
        collection, or when in the opinion of management, principal or interest is
        not
        likely to be paid in accordance with the terms of the obligation. Consumer
        installment loans are generally charged-off after 90 days of delinquency
        unless
        adequately collateralized and in the process of collection. Loans are not
        returned to accrual status until principal and interest payments are brought
        current and future payments appear reasonably certain. Interest accrued and
        unpaid at the time a loan is placed on nonaccrual status is charged against
        interest income.
 
 Real
        estate acquired by the Bank as a result of foreclosure or by deed in lieu
        of
        foreclosure is classified as other real estate owned (“OREO”). OREO properties
        are recorded at the lower of cost or fair value less estimated selling costs,
        and the estimated loss, if any, is charged to the allowance for credit losses
        at
        the time it is transferred to OREO. Further write-downs in OREO are recorded
        at
        the time management believes additional deterioration in value has occurred
        and
        are charged to noninterest expense. As of December 31, 2007 the Company had
        no
        OREO.
  27
  The
        Bank
        has adopted Statements of Financial Accounting Standards No. 114 and 118.
        These
        Statements address the accounting by creditors for impairment of certain
        loans
        and generally require the Bank to identify loans, for which the Bank probably
        will not receive full repayment of principal and interest, as impaired loans.
        The Statements require that impaired loans be valued at the present value
        of
        expected future cash flows, discounted at the loan’s effective interest rate, or
        at the observable market price of the loan, or the fair value of the underlying
        collateral if the loan is collateral dependent. The Bank has implemented
        the
        Statements by including in its quarterly review of the adequacy of the allowance
        for credit losses, to also identify and value impaired loans in accordance
        with
        guidance in the Statements. One loan, in the amount of $60,000 was deemed
        to be
        impaired under the Bank’s policy at December 31, 2007.
 
 ***Classified
        Assets.*** Federal
        regulations and the Bank's policy require the classification of loans and
        other
        assets, such as debt and equity securities, considered to be of lesser quality
        as "substandard", "doubtful" or "loss" assets. An asset would be considered
        "substandard" if it is inadequately protected by the current net worth and
        paying capacity of the obligator or of the collateral pledged, if any.
        "Substandard" assets include those characterized by the "distinct possibility"
        that the institution will sustain "some loss" if the deficiencies are not
        corrected. Assets that would be classified as "doubtful" have all of the
        weaknesses inherent in those classified "substandard," with the added
        characteristic that the weaknesses present make "collection or liquidation
        in
        full", on the basis of currently existing facts, conditions, and values,
        "highly
        questionable and improbable." Assets that would be classified as "loss" are
        those considered "uncollectible" and of such little value that their continuance
        as assets without the establishment of a specific loss reserve is not warranted.
        In addition, the Bank's policies require that assets which do not currently
        expose the insured institution to sufficient risk to warrant classification
        as
        substandard but possess other weaknesses are designated "special mention"
        by
        management.
 
 If
        an
        asset is classified, the estimated fair value of the asset would be determined
        and if that value is loss than the then carrying value of the asset, the
        difference would be established as a specific reserve. If an asset is classified
        as loss, the amount of the asset classified as loss would be reserved. General
        reserves or general valuation allowances represent loss allowances which
        have
        been established to recognize the inherent risk associated with lending
        activities but, unlike specific reserves, are not allocated to particular
        assets.
 
 At
        December 31, 2007, there was only one loan, in the amount of $60,000, classified
        as "special mention". No loans were classified as “substandard”, "doubtful" or
        "loss" at December 31, 2007. There were no concentration of loans exceeding
        10%
        of total loans which has not been disclosed as a category of loans.
  ***Allowance
        for Loan Losses.*** The
        allowance for loan losses is established as losses are estimated to have
        occurred through a provision for loan losses charged to income. Loan losses
        are
        charged against the allowance when management believes the uncollectibility
        of a
        loan balance is confirmed. Subsequent recoveries, if any, are credited to
        the
        allowance.
  28
  The
        allowance for loan losses is evaluated on a regular basis by management and
        is
        based upon management’s periodic review of the collectibility of the loans in
        light of historical experience in the industry, the nature and volume of
        the
        loan portfolio, adverse situations that may affect the borrower’s ability to
        repay, estimated value of any underlying collateral, prevailing economic
        conditions and industry standards. This evaluation is inherently subjective
        as
        it requires estimates that are susceptible to significant revision as more
        information becomes available.
 
 A
        loan is
        considered impaired when, based on current information and events, it is
        probable that the Company will be unable to collect the scheduled payments
        of
        principal or interest when due according to the contractual terms of the
        loan
        agreement. Factors considered by management in determining impairment include
        payment status, collateral value, and the probability of collecting scheduled
        principal and interest payments when due. Loans that experience insignificant
        payment delays and payment shortfalls generally are not classified as impaired.
        Management determines the significance of payment delays and payment shortfalls
        on a case-by-case basis, taking into consideration all of the circumstances
        surrounding the loan and the borrower, including the length of the delay,
        the
        reasons for the delay, the borrower’s prior payment record, and the amount of
        the shortfall in relation to the principal and interest owed. Impairment
        is
        measured on a loan by loan basis for commercial loans by either the present
        value of expected future cash flows discounted at the loan’s effective interest
        rate, the loan’s obtainable market price, or the fair value of the collateral if
        the loan is collateral dependent.
 
 Large
        groups of smaller balance homogeneous loans are collectively evaluated for
        impairment. Accordingly, the Company does not separately identify individual
        consumer and residential loans for impairment disclosures.
 
 The
        provision for loan losses totaled approximately $72,000 for the year ended
        December 31, 2007 and there were no loans charged-off during this period.
        Considering the nature of the Bank’s loan portfolio, management believes that
        the allowance for loan losses at December 31, 2007 was adequate.
 
 The
        activity in the Bank’s allowance for loan losses for the year ended December 31,
        2007 from the commencement of banking activities on September 5, 2007 was
        the
        current year provision of $ 72,000. There were no loans charged off during
        2007.
  29
  At
        December 31, 2007 the Bank's general allowance for possible loan losses by
        type
        of loan was allocated by using peer group averages and actual loss experiences
        of peers, as follows: (in thousands)
  **%****of
                  Loans****to
                  Total****Amount**
              
              ******Loans**At
                  the end of year allocated to:Commercial
              
              $
              38
              
              
              52.78
              %Commercial
                  real estate
              
              
              23
              
              
              31.94
              %Residential
                  real estate
              
              
              1
              
              
              1.39
              %Home
                  equity
              
              
              1
              
              
              1.39
              %Construction
              
              
              4
              
              
              5.56
              %Consumer
              
              
              5
              
              
              6.94
              %Total
              
              $
              72
              
              
              100.00
              %
  **Investment
        Securities**
 
 The
        Bank’s investment portfolio has been classified as Available for Sale with no
        securities classified as Held to Maturity. The following table sets forth
        the
        carrying amount of the Bank’s investment portfolio at December 31, 2007 ($ in
        thousands):
 
 ***Available
                  for Sale-***Mortgage-backed
                  securities
              
              $
              5,346U.S.
                  Government agency securities
              
              
              1,000Total
                  securities held to maturity
              
              $
              6,364Federal
                  Home Loan Bank stock
              
              $
              16Federal
                  funds sold
              
              $
              8,099Interest-earning
                  deposits
              
              $
              -
 
 The
        Bank's mortgage-backed securities consist of ten securities issued either
        by the
        Federal National Mortgage Association ("FNMA") or Federal Home Loan Mortgage
        Corporation (“FHLMC”).
  30
  The
        carrying amount and weighted average yields for investments at December 31,
        2007
        are shown below ($ in thousands):
 
 **U.S.****Government**
              
              
              
              **Weighted****Mortgage**
              
              **Agency**
              
              
              
              **Average****Maturing
                  In**
              
              **Backed**
              
              **Securities**
              
              **Total**
              
              **Yields
                  (1)**After
                  1 through 5 years
              
              $
              3,142
              
              $
              -
              
              $
              3,142
              
              
              4.67
              %After
                  5 through 10 years
              
              
              2,213
              
              
              1,000
              
              
              3,213
              
              
              4.93
              %After
                  10 years
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              %Total
              
              $
              5,355
              
              $
              1,000
              
              $
              6,355
              
              
              4.80
              %
 
 (1)
        All
        securities are listed at actual yield and not on a tax equivalent basis.
        No
        securities are tax exempt.
 
 The
        Bank
        has adopted Statement of Financial Accounting Standards No. 115 (“FAS 115"),
        which requires companies to classify investments securities, including
        mortgage-backed securities as either held-to-maturity or available-for-sale.
        Securities classified as held-to-maturity are carried at amortized cost.
        Securities classified as available-for-sale are reported at fair value, with
        unrealized gains and losses, net of tax effect, reported as a separate component
        of stockholders’ equity. As of December 31, 2007, none of the Bank’s securities
        were classified as available-for-sale.
 
 **Deposit
        Activities**
 
 Deposits
        are the major source of the Bank’s funds for lending and other investment
        purposes. Deposits are attracted principally from within the Bank’s primary
        market area through the offering of a broad variety of deposit instruments
        including checking accounts, money market accounts, regular savings accounts,
        term certificate accounts (including “jumbo” certificates in denominations of
        $100,000 or more) and retirement savings plans. The distribution by type
        of the
        Bank’s deposit accounts as of December 31, 2007, was as follows ($ in
        thousands):
 
 **%
                  of****Amount**
              
              **Deposits**Noninterest-bearing
                  deposits
              
              $
              3,402
              
              
              29.25
              %Money-market
                  accounts
              
              
              5,422
              
              
              46.62
              %NOW
              
              
              683
              
              
              5.87
              %Savings
              
              
              93
              
              
              0.81
              %Subtotal
              
              $
              9,600
              
              
              82.55
              %Time
                  deposits:1.00-1.99%
              
              
              -
              
              
              -2.00-2.99%
              
              
              -
              
              
              -3.00-3.99%
              
              
              -
              
              
              -4.00-4.99%
              
              
              2,029
              
              
              17.45
              %5.00-5.99%
              
              
              -
              
              
              -Total
                  time deposits
              
              $
              2,029
              
              
              17.45
              %Total
                  deposits
              
              $
              11,620
              
              
              100.00
              %
  31
  Maturity
        terms, service fees and withdrawal penalties are established by the Bank
        on a
        periodic basis. The determination of rates and terms is predicated on funds
        acquisition and liquidity requirements, rates paid by competitors, growth
        goals
        and federal regulations.
 
 FDIC
        regulations limit the ability of certain insured depository institutions
        to
        accept, renew, or rollover deposits by offering rates of interest which are
        significantly higher than the prevailing rates of interest on deposits offered
        by other insured depository institutions having the same type of charter in such
        depository institutions’ normal market area. Under these regulations, “well
        capitalized” depository institutions may accept, renew, or roll over deposits at
        such rates without restriction, “adequately capitalized” depository institutions
        may accept, renew or roll over deposits at such rates with a waiver from
        the
        FDIC (subject to certain restrictions on payments of rates), and
“undercapitalized” depository institutions may not accept, renew or roll over
        deposits at such rates. The regulations contemplate that the definitions
        of
“well capitalized,” “adequately capitalized” and “undercapitalized” will be the
        same as the definitions adopted by the agencies to implement the prompt
        corrective action provisions of applicable law. *See* “Supervision
        and Regulation -- Capital Requirements.” As of December 31, 2007, the Bank met
        the definition of a “well capitalized” depository institution.
 
 The
        Bank
        does not have a concentration of deposits from any one source, the loss of
        which
        would have a material adverse effect on the Bank. Management believes that
        substantially all of the Bank’s depositors are residents in its primary market
        area.
 
 Time
        deposits of $100,000 and over, public fund deposits and other large deposit
        accounts tend to be short-term in nature and more sensitive to changes in
        interest rates than other types of deposits and, therefore, may be a less
        stable
        source of funds. In the event that existing short-term deposits are not renewed,
        the resulting loss of the deposited funds could adversely affect the Bank’s
        liquidity. In a rising interest rate market, such short-term deposits may
        prove
        to be a costly source of funds because their short-term nature facilitates
        renewal at increasingly higher interest rates, which may adversely affect
        the
        Bank’s earnings. However, the converse is true in a falling interest-rate market
        where such short-term deposits are more favorable to the Bank.
 
 As
        of
        December 31, 2007, time deposits of $100,000 and over mature as follows ($
        in
        thousands):
 
 Due
                  in three months or less
              
              $
              -Due
                  from three months to six months
              
              
              -Due
                  from six months to one year
              
              
              1,365Due
                  over one year
              
              
              -Total
              
              $
              1,365
 
 Borrowings
 
 During
        2005, the Company entered into short-term borrowing arrangements with customers
        consisting of securities sold under repurchase agreements. The agreements
        are on
        a demand basis and call for the payment of interest based on the federal
        funds
        rate.
  32
  The
        following summarizes these borrowings as of December 31, 2007 ($ in
        thousands):
 
 Balance
                  outstanding at year-end
              
              $
              101Average
                  balance outstanding during the year
              
              $
              410Maximum
                  amount outstanding at any month-end during year
              
              $
              4,398Average
                  interest rate paid
              
              
              3.5
              %
 
 The
        Bank
        also had an agreement with the Independent Bankers Bank of Florida to borrow
        funds under a line of credit but had not drawn any advances as of December
        31,
        2007.
  **Results
        of Operations**
 
 Net
        interest income, which constitutes the principal source of income for the
        Bank,
        represents the excess of interest income on interest-earning assets over
        interest expense on interest-bearing liabilities. The principal interest-earning
        assets are federal funds sold, investment securities and loans receivable.
        Interest-bearing liabilities primarily consist of time deposits,
        interest-bearing checking accounts (“NOW accounts”), savings deposits and
        money-market accounts. Funds attracted by these interest-bearing liabilities
        are
        invested in interest-earning assets. Accordingly, net interest income depends
        upon the volume of average interest-earning assets and average interest-bearing
        liabilities and the interest rates earned or paid on them.
 
 The
        following table sets forth, at December 31, 2007, information regarding (i)
        the
        total dollar amount of interest and dividend income of the Company from
        interest-earning assets and the resultant average yields; (ii) the total
        dollar
        amount of interest expense on interest-bearing liabilities and the resultant
        average costs; (iii) net interest income; (iv) interest-rate spread; and
        (v) net
        interest margin; and (vi) weighted average yields and rates at December 31,
        2007. Yields and costs were derived by dividing annualized income or expense
        by
        the average balance of assets or liabilities. There were no non-accrual loans,
        out of period items or tax exempt income for the period indicated. The yields
        and costs include fees which are considered to constitute adjustments to
        yields.
  (in
                  thousands)**Interest**
              
              **Average****Average**
              
              **and**
              
              **Yield/****Balance**
              
              **Dividends**
              
              **Rate**Interest-earning
                  assets:Loans
              
              $
              2,580
              
              
              200
              
              
              7.75
              %Securities
              
              
              3,916
              
              
              204
              
              
              5.21
              %Other
                  (1)
              
              
              11,254
              
              
              576
              
              
              5.11
              %Total
                  interest-earning assets
              
              $
              17,750
              
              
              980
              
              
              5.52
              %Noninterest-earning
                  assetsTotal
                  assets
              
              $
              2,137Interest-bearing
                  liabilities:Savings,
                  NOW and MMKT
              
              
              5,184
              
              
              159
              
              
              3.07
              %Time
                  deposits < $100,000
              
              
              417
              
              
              15
              
              
              3.60
              %Time
                  deposits > $100,000
              
              
              1,263
              
              
              54
              
              
              4.29
              %Borrowings
              
              
              536
              
              
              25
              
              
              4.66
              %Total
                  interest-bearing liabilities
              
              
              7,400
              
              
              253
              
              
              3.42
              %Noninterest-bearing
                  deposits
              
              
              3,368Noninterest-bearing
                  liabilities
              
              
              30Stockholders'
                  equity
              
              
              9,089Total
                  liabilities and stockholders' equity
              
              $
              19,887Net
                  earning assets
              
              $
              10,350Net
                  interest income
              
              
              
              
              $
              7273.17
              %Interest-rate
                  spread4.10
              %Net
                  interest margin (2)Ratio
                  of average interest-earning assets to average interest-bearing
                  liabilities
              
              
              240
              %
  33
  (1)
        Other
        interest-earning assets included Federal funds sold and Federal Home Loan
        Bank
        stock.
 (2)
        Net
        interest margin is net interest income annualized divided by total
        interest-earning assets.
  **Discussion
        of Results of Operations for 2007**
 
 General
 
 The
        Bank’s net loss was $761,000 or ($0.77) per share, for the year ended December
        31, 2007.
 
 The
        Company’s future performance will depend on a number of factors outside of our
        control. Some of our borrowers may not repay loans that we make to them.
        If a
        significant number of loans are not repaid, it will have an adverse effect
        on
        our earnings and overall financial condition. The determination of an
        appropriate level of loan loss allowance is an inherently difficult process
        and
        is based on numerous assumptions. As a result, our allowance for loan losses
        may
        not be adequate to cover actual losses, and future provision for loan losses
        may
        adversely affect our earnings. Furthermore, a prolonged economic downturn
        or
        recession in our target markets would result in operating losses, impaired
        liquidity and the erosion of capital. A variety of factors could cause such
        an
        economic dislocation or recession, including adverse developments in the
        industries in these areas. Also, a significant portion of our loan portfolio
        is
        secured by real estate located in our market areas. If real estate prices
        decline in our markets, the value of the real estate collateral securing
        our
        loans could be reduced. Such a reduction in the value of our collateral could
        increase the number of non-performing loans and adversely affect our financial
        performance.
 
 To
        support our effort to reach profitability, we are attempting to make loans
        and
        obtain low cost funding sources, to increase our earning asset base and net
        interest income. We will need to reach a significant level of net interest
        income in order to offset the non-interest expenses we incur for such things
        as
        salaries, occupancy, data processing, professional services and advertising.
        We
        will spend the same amount on many of these items, regardless of the amount
        of
        net-interest income we receive. Therefore, it is important for us to reach
        a
        certain asset size in order to reach profitability. In addition to pursuing
        loan
        and deposit growth, we are also utilizing a branch network. We currently
        operate
        two offices. These facilities are expected to enable us to serve and acquire
        more loan and deposit customers. The opening of these offices and their
        continued operation required, and will continue to require, us to spend more
        money on salaries, rent and advertising. Until the new branches can produce
        enough net interest income to offset their incremental contribution to our
        non-interest expenses, they could have the effect of increasing our net
        losses.
  34
  Net
        interest income
 
 The
        Bank’s net interest income was $193,000 for the year ended December 31, 2007.
        During the year ended December 31, 2007, interest income on loans was $50
        on
        average balances of $2.58 million. During the same period, interest income
        on
        investments and interest bearing cash equivalents was $243,000 on average
        balances of $15.17 million. During the year ending December 31, 2007, interest
        expense on interest bearing liabilities was $99,000 on average interest bearing
        liabilities of $7.4 million.
 
 Provision
        for Loan Losses
 
 The
        provision for loan losses is charged to earnings to bring the allowance for
        loan
        losses to a level deemed appropriate by management and is based upon historical
        experience, the volume and type of lending conducted by the Bank, the amounts
        of
        non-performing loans, general economic conditions, particularly as they relate
        to the Bank’s market area, and other factors related to the collectibility of
        the Bank’s loan portfolio. For the year ended December 31, 2007 the provision
        for loan losses was $72,000, or 2.13% of total loans receivable.
 
 Noninterest
        Income
 
 Noninterest
        income is primarily composed of deposit service charges, insufficient funds
        fees, and loan origination fees for loans originated for third parties.
        Noninterest income was $8,000 for the year ended December 31, 2007. These
        fees
        were primarily attributable insufficient funds fees for deposits.
 
 Noninterest
        Expenses
 
 During
        the year ended December 31, 2007, noninterest expense was $1.45 million.
        Salaries and employee benefits were $829,000 due to the number of employees
        at
        the Bank commensurate with the growth of the Bank. Occupancy expense was
        $202,000, data processing expense was $17,000 and professional service fees
        were
        $26,000 during the year ended December 31, 2007.
 
 Deferred
        Income Tax Credit
 
 During
        the year ended December 31, 2007 the income tax credit was $536,000. The
        blended
        income tax rate in effect for the Bank is 37%, the statutory federal income
        tax
        rate of 33.5%, and Florida State income tax rate of 3.5%.
 
 Based
        on
        the Company's current earnings forecast and/or budget, the losses that generated
        the deferred tax asset are only temporary and taxable income is projected
        in the
        near future which would utilize and support the reversal of the valuation
        allowance initially established. Based on this positive evidence it is more
        likely than not that the deferred tax asset will be utilized.
  35
  **Asset/Liability
        Management**
 
 A
        principal objective of the Company’s asset/liability management strategy is to
        minimize its exposure to changes in interest rates by matching the maturity
        and
        repricing horizons of interest-earning assets and interest-bearing liabilities.
        This strategy is overseen in part through the direction of the Bank's Asset
        and
        Liability Committee ("ALCO") which establishes policies and monitors results
        to
        control interest rate sensitivity.
 
 Management
        evaluates interest rate risk and then formulates guidelines regarding asset
        generation and repricing, funding sources and pricing, and off-balance sheet
        commitments in order to maintain interest rate risk within target levels
        for the
        appropriate level of risk which are determined by the ALCO. The ALCO uses
        internally generated reports to measure the Bank’s interest rate sensitivity.
        From these reports, the ALCO can estimate the net earnings effect of various
        interest rate scenarios.
 
 As
        a part
        of the Company’s interest rate risk management policy, the ALCO examines the
        extent to which its assets and liabilities are “interest rate sensitive” and
        monitors the Bank’s interest rate sensitivity “gap.” An asset or liability is
        considered to be interest rate sensitive if it will reprice or mature within
        the
        time period analyzed, usually one year or less. The interest rate sensitivity
        gap is the difference between interest-earning assets and interest-bearing
        liabilities scheduled to mature or reprice within such time period. A gap
        is
        considered positive when the amount of interest rate sensitive assets exceeds
        the amount of interest rate sensitive liabilities. A gap is considered negative
        when the amount of interest rate sensitive liabilities exceeds interest rate
        sensitive assets. During a period of rising interest rates, a negative gap
        would
        tend to adversely affect net interest income, while a positive gap would
        tend to
        result in an increase in net interest income. During a period of falling
        interest rates, a negative gap would tend to result in an increase in net
        interest income, while a positive gap would tend to adversely affect net
        interest income. If the repricing of each bank’s assets and liabilities were
        equally flexible and moved concurrently, the impact of any increase or decrease
        in interest rates on net interest income would be minimal.
 
 A
        simple
        interest rate “gap” analysis by itself may not be an accurate indicator of how
        net interest income will be affected by changes in interest rates. Accordingly,
        the ALCO also evaluates how the repayment of particular assets and liabilities
        is impacted by changes in interest rates. Income associated with
        interest-earning assets and costs associated with interest-bearing liabilities
        may not be affected uniformly by changes in interest rates. In addition,
        the
        magnitude and duration of changes in interest rates may have a significant
        impact on net interest income. For example, although certain assets and
        liabilities may have similar maturities or period of repricing, they may
        react
        in different degrees to changes in market interest rates. Interest rates
        on
        certain types of assets and liabilities fluctuate in advance of changes in
        general market interest rates, while interest rates on other types may lag
        behind changes in general market rates. In addition, certain assets, such
        as
        adjustable rate mortgage loans, have features (generally referred to as
“interest rate caps”) which limit changes in interest rates on a short-term
        basis and over the life of the asset. In the event of a change in interest
        rates, prepayment (on loans) and early withdrawal (of deposit accounts) levels
        also could deviate significantly from those assumed in calculating the interest
        rate gap. The ability of many borrowers to service their debts also may decrease
        in the event of an interest rate increase.
 
 Currently
        the Company has not entered into any interest rate swaps or similar hedging
        instruments in connection with its asset/liability management and the Company
        does not expect to use interest rate swaps in its operations. Further discussion
        on off-balance-sheet arrangements can be found in Note 11 of the Notes to
        Consolidated Financial Statements. The Company's exposure to credit loss
        in the
        event of nonperformance by the other party to the financial instrument for
        commitments to extend credit, unused lines of credit and standby letters
        of
        credit is represented by the contractual amount of those instruments. The
        Company uses the same credit policies in making commitments as it does for
        on-balance sheet instruments. The Company also did not have any significant
        interest rate lock commitments at December 31, 2007.
  36
  Management’s
        strategy is to maintain a balanced interest rate risk position to protect
        its
        net interest margin from market fluctuations.
 
 Principal
        among the Company’s asset/liability management strategies has been the emphasis
        on managing its interest rate sensitive liabilities in a manner designed
        to
        attempt to reduce the Company’s exposure during periods of fluctuating interest
        rates. Management believes that the type and amount of the Company’s interest
        rate sensitive liabilities may reduce the potential impact that a rise in
        interest rates might have on the Company’s net interest income. The Company
        seeks to maintain a core deposit base by providing quality services to its
        customers without significantly increasing its cost of funds or operating
        expenses. Management anticipates that these accounts will continue to comprise
        a
        significant portion of the Company’s total deposit base. The Company also
        maintains a portfolio of liquid assets in order to reduce its overall exposure
        to changes in market interest rates. The Company also maintains a “floor,” or
        minimum rate, on certain of its floating or prime based loans. These floors
        allow the Company to continue to earn a higher rate when the floating rate
        falls
        below the established floor rate. All interest rate caps and floors are clearly
        and closely related to the loan agreement and therefore not bifurcated and
        valued separately.
  
 [Table
        follows this page]
  37
  The
        following table sets forth certain information relating to the Company’s
        interest-earning assets and interest-bearing liabilities at December 31,
        2007
        that are estimated to mature or are scheduled to reprice within the period
        shown
        ($ in thousands):
 
 **Over****Under
                  3**
              
              **3
                  to 12**
              
              **1-5**
              
              **Five****Months**
              
              **Months**
              
              **Years**
              
              **Years**
              
              **Total**Interest-earning
                  deposits
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Federal
                  funds sold
              
              
              10,631
              
              
              -
              
              
              -
              
              
              -
              
              
              10,631Loans
                  (1)
              
              
              394
              
              
              994
              
              
              2,351
              
              
              71
              
              
              3,810Securities
                  (2)
              
              
              -
              
              
              -
              
              
              3,142
              
              
              3,213
              
              
              6,355Total
                  rate-sensitive assets (earning assets)
              
              $
              11,025
              
              
              994
              
              
              5,493
              
              
              3,284
              
              
              20,796Money
                  market (3)
              
              
              5,422
              
              
              -
              
              
              -
              
              
              -
              
              
              5,422Savings
                  and NOW deposits (3)
              
              
              776
              
              
              -
              
              
              -
              
              
              -
              
              
              776Time
                  deposits (3)
              
              
              -
              
              
              2,028
              
              
              1
              
              
              -
              
              
              2,029Other
                  borrowings
              
              
              101
              
              
              -
              
              
              -
              
              
              -
              
              
              101Total
                  rate-sensitive liabilities
              
              $
              6,299
              
              
              2,028
              
              
              1
              
              
              -
              
              
              8,328Gap
                  (repricing differences)
              
              $
              4,726
              
              
              (1,034
              )
              
              5,492
              
              
              3,284
              
              
              12,468Cumulative
                  Gap
              
              $
              4,726
              
              
              3,692
              
              
              9,184
              
              
              12,468Cumulative
                  Gap/total assets
              
              
              19.55
              %
              
              15.28
              %
              
              40.00
              %
              
              51.58
              %Cumulative
                  Gap/total earning assets
              
              
              22.70
              %
              
              17.73
              %
              
              44.12
              %
              
              59.95
              %Total
                  assets
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              24,170Total
                  earning assets
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              20.796
  
 (1)
              In
                  preparing the table above, adjustable-rate loans were included
                  in the
                  period in which the interest rates are next scheduled to adjust
                  rather
                  than in the period in which the loans mature. Fixed-rate loans
                  were
                  scheduled according to their contractual maturities.
 
 (2)
              Securities
                  were scheduled based on their remaining maturity or repricing frequency.
                  Fixed-rate mortgage-backed securities are scheduled ratably over
                  five
                  years. Includes FHLB stock grouped in over five years.
 
 (3)
              Excludes
                  noninterest-bearing deposit accounts. Money-market, NOW, and savings
                  deposits are scheduled based on FDICIA studies on nonmaturity deposits.
                  All other time deposits were scheduled through the maturity
                  dates.
 
 38


**Selected
      Quarterly Results** (in
      thousands)





**2007****First**
            
            **Second**
            
            **Third**
            
            **Fourth****Quarter**
            
            **Quarter**
            
            **Quarter**
            
            **Quarter**Interest
                income
            
            $
            -
            
            
            -
            
            
            132
            
            
            256Interest
                expense
            
            
            4
            
            
            16
            
            
            30
            
            
            51Net
                interest income
            
            
            (4
            )
            
            (16
            )
            
            102
            
            
            205Provision
                for loan losses
            
            
            -
            
            
            -
            
            
            1
            
            
            71Noninterest
                income
            
            
            -
            
            
            6
            
            
            -
            
            
            17Noninterest
                expense
            
            
            125
            
            
            349
            
            
            369
            
            
            839Earnings
                before income taxes
            
            
            (129
            )
            
            (359
            )
            
            (268
            )
            
            (686
            )Net
                earnings
            
            
            (129
            )
            
            (359
            )
            
            99
            
            
            (521
            )Basic
                earnings per common
            
            
            (.10
            )
            
            (.27
            )
            
            .07
            
            
            (.39
            )Basic
                earnings per diluted share
            
            
            (.08
            )
            
            (.23
            )
            
            .06
            
            
            (.34
            )





**Impact
      of Inflation and Changing Prices**




The
      financial statements and related financial data concerning the Company presented
      in this 10-KSB have been prepared in accordance with accounting principles
      generally accepted in the United States of America, which require the
      measurement of financial position and operating results in terms of historical
      dollars without considering changes in the relative purchasing power of money
      over time due to inflation. The primary impact of inflation on the operations
      of
      the Company is reflected in increased operating costs. Unlike most industrial
      companies, virtually all of the assets and liabilities of a financial
      institution are monetary in nature. As a result, changes in interest rates
      have
      a more significant impact on the performance of a financial institution than
      do
      the effects of changes in the general rate of inflation and changes in prices.
      Interest rates do not necessarily move in the same direction or in the same
      magnitude as the prices of goods and services.





**Item
      7.**  **Financial
      Statements**





The
      financial statements of the Company at December 31, 2007 and for the year ended
      December 31, 2007 and for the period from March 29, 2006 (date of organization)
      to December 31, 2007 are set forth in this Form 10-KSB as Exhibit
      13.1.





**Item
      8.**  **Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure**





None


39


**Item 8A.** **Controls
      And Procedures** ****




(a) **** Disclosure
      Controls and Procedures




This
      annual report does not include a report of management’s assessment regarding
      internal control over financial reporting or an attestation report of the
      company’s registered public accounting firm due to a transition period
      established by rules of the Securities and Exchange Commission for newly public
      companies.




**Item
      8B.**  **Other
      Information**





Not
      applicable.





**PART
      III**





**Item
              9.**
            **Directors,
                Executive Officers, Promoters and Control Persons; Compliance with****Section 16(a) of the Exchange
                Act**





Directors
      of the Company and the Bank serve one-year terms and therefore stand for
      re-election each year. There are no known family relationships between any
      of
      the director nominees. Each of the following persons have been nominated to
      serve as directors of the Company for the fiscal year 2008. Each
      of
      our directors, other than Mr. Robinson, satisfies the criteria for director
      independence under the listing standards applicable to companies listed on
      The
      Nasdaq.





***Kathleen
      B. Atkins-Gunter.*** ****** Mrs.
      Atkins-Gunter is 64 years old, and lives in Tallahassee with her husband Bill
      Gunter. She was one of the original organizers of the Bank and she has served
      as
      a director of the Company and the Bank since their formation. She has been
      President of Atkins Management & Consulting, Inc., Tallahassee, Florida
      since 1998. She is currently President of Two Blondes Liquors & Gifts,
      L.L.C., Panacea, Florida, and is a Contract Consultant to Rogers, Gunter, Vaughn
      Insurance, Inc., Tallahassee, Florida. Prior to forming Atkins Management &
Consulting in 1998, she served as the Senior Vice President & Chief
      Operating Officer of Gulf Atlantic Insurance Company, Gulf Premium Finance
      Company, and Gulf Atlantic Insurance Services, Inc., all of Tallahassee,
      Florida. From 1970 to 1991 she was employed by Rogers-Atkins Insurance, Inc.
      serving as Executive Vice President of Operations. She served on the Board
      of
      Directors of First Bank of Tallahassee from 1995 to 1999 where she served a
      term
      as Vice Chairman of the Board. She has also served on the SouthTrust Bank
      Regional Advisory Board in Tallahassee. She currently serves as an officer,
      director or member of a number of local and statewide organizations, including
      The Governor’s Club Facilities Committee; the Florida State University Seminole
      Boosters Board of Directors; the Westcott Lakes At SouthWood Board of Directors;
      the Tallahassee Memorial Hospital Foundation Board of Directors; the Wakulla
      County Chamber of Commerce Board of Directors and the Florida Association of
      Insurance Agents.


40


***Edward
      W. Dougherty, Jr.*** Mr.
      Dougherty is 51 years old, and lives in Tallahassee with his wife and three
      children. He was one of the original organizers of the Bank and he has served
      as
      a director of the Company and the Bank since their formation. Since 1992, he
      has
      been a shareholder in the Igler & Dougherty law firm located in Tallahassee,
      Florida. He has represented financial institutions in complex financial
      transactions and regulatory matters and in the litigation of those issues
      arising out of those complex transactions and matters in court and in the
      administrative forum. He graduated from the University of Notre Dame with a
      Bachelor of Arts degree in 1978 and from Florida State University College of
      Law
      with a Juris Doctor degree (with honors) in 1981. He has practiced law in
      Tallahassee since being admitted to the Florida Bar in 1982.





***Christopher
      E. Diamantis.*** Mr.
      Diamantis is 39 years old and lives in Tallahassee with his wife and two
      children. He is being nominated to serve as a director for the first time.
      He
      has served as Chairman and Chief Executive Officer of Integrated Financial
      Settlements, Inc. (“IFS”) since 1992. IFS generates more than $100 million in
      annual revenue. IFS is the holding company for four structured settlement
      consulting firms which collectively originate approximately $2.0 billion in
      annual sales representing approximately 32% of market share in the structured
      settlement industry. He also serves as a director of the Gabor Agency, Inc.,
      a
      60-year-old Tallahassee company specializing in investment and insurance
      planning for public employers and universities. Mr. Diamantis graduated Cum
      Laude from Florida State University in 1990 with a B.S. degree in Finance.
      He is
      a Chartered Life Underwriter and a Certified Structured Settlement Consultant.
      He is a member of the Board of Governors of the FSU College of Business, a
      member of the Board of Directors and the incoming President of the National
      Structured Settlements Trade Association, and a member of Citi Private Bank
      Client Advisory Board.





***Javier
      I. Escobar, II, M.D.*** ****** Dr.
      Escobar, is 39 years old, and lives in Tallahassee with his wife and 3 children.
      He was one of the original organizers of the Bank and he has served as a
      director of the Company and the Bank since their formation. He has been the
      Medical Director of the Bixler Emergency Center, Emergency Medical Services
      and
      the Chest Pain Center, all at Tallahassee Memorial Hospital since 2003. Prior
      to
      that he was an attending physician at the Bixler Emergency Center at the
      Tallahassee Memorial Hospital from 1999 to 2003. He is a Clinical Assistant
      Professor at the Florida State University College of Medicine, the Medical
      Director of LifeNet Air Ambulance, and the Medical Director for the Professional
      Service Educators in Tallahassee. He currently serves on several medical boards
      and committees in Tallahassee and surrounding areas. He graduated from The
      University of California at Los Angeles in 1991 with a B.S. degree and from
      the
      University of Connecticut School of Medicine in 1995. He interned and completed
      his residency in Emergency Medicine at the University of Florida
      Shands/Jacksonville, Florida.





***Michael
      W. Forsthoefel, M.D.*** Dr.
      Forsthoefel is 53 years old, and lives in Tallahassee with his wife Jana
      Forsthoefel, M.D. and their eight children. He was one of the original
      organizers of the Bank and he has served as a director of the Company and the
      Bank since their formation. He currently practices Internal Medicine with
      Southern Medical Group, P.A. where he has been a shareholder since 1983. He
      is a
      Clinical Assistant Professor at the Florida State University College of
      Medicine, where he received the Class of 2006 Outstanding Clinical Professor
      Award. He is a member of the Tallahassee Memorial HealthCare Board of Directors,
      is currently the Chairman of the Board, and is a member of the Board’s Executive
      Committee. He graduated from the University of Louisville in 1975 with Highest
      Distinction, and with a Bachelor of Arts in Chemistry. He received his Doctorate
      of Medicine, and his Master’s of Science in Biochemistry from the University of
      Louisville, School of Medicine in 1979. He completed his residency in Internal
      Medicine at the VA Medical Center, Emory University Affiliated Hospitals in
      Atlanta, Georgia in 1982. He received his Diplomat, Internal Medicine from
      the
      American Board of Internal Medicine in 1982, and added Qualifications in
      Geriatric Medicine in 2000. He has been a member of the Rotary Club of
      Tallahassee since 1986, where he has co-chaired the Rotary Ethics and Business
      Award committee for the last seven years since its inception. He has also served
      on several boards and committees in the Tallahassee medical community.


41





***Roger
      K. Hobbs.*** **** Mr.
      Hobbs
      is 39 years old and has lived in Tallahassee since 1993 with his wife Denise
      and
      son Trevor. He was one of the original organizers of the Bank and he has served
      as a director of the Company and the Bank since their formation. He has served
      as President & COO of The Twin Action Group since moving to Tallahassee in
      1993. Twin Action owns the Cabot Lodge at Thomasville Road and a large amount
      of
      commercial and residential property in Northeast Tallahassee. He also is the
      President and Owner of RK Development of Tallahassee, Inc. who has and continues
      to play a major role in the final developments of Killearn Lakes and Golden
      Eagle. He enjoys his continued practice in philanthropy and vacationing when
      his
      time allows for it. He is a co-owner of Twin Action Realty, Inc., a Tallahassee
      area real estate brokerage firm. He is a current member of the Board of
      Directors of Seminole Boosters, Inc., and graduated from The University of
      Utah
      with a B.S. Degree in Economics in 1991.





***Steven
      M. Leoni.*** Mr.
      Leoni is 39 years old and was born in North Miami Beach, Florida. He is being
      nominated to serve as a director for the first time. He moved to Tallahassee
      to
      attend Florida State University at the age of 17. He graduated from FSU in
      1990
      with a Bachelor of Science degree with a major in Real Estate and Business
      Administration. He met his wife Christine while attending FSU and currently
      lives in Tallahassee with Christine and their 3 children. Mr. Leoni has served
      as President of Leoni Properties, Inc., a full service development and
      construction company since 1989. This company manages, owns, and has built
      several real estate properties, which are primarily located in the Tallahassee
      area. He also serves as President, Chairman, and Managing Member of more than
      50
      businesses. He manages, owns, and operates luxury student housing facilities,
      conventional housing properties, shopping centers, and other commercial real
      estate properties. He also owns a travel agency and is currently involved in
      a
      general aviation fixed based operations project being built at the Tallahassee
      Regional Airport. He is a licensed Florida Real Estate Broker.





***Allen
      R. Moayad.*** ** Mr.
      Moayad is 45 years old and was born in Tehran, Iran. He lives in Tallahassee
      with his wife Patricia and their two children. He was one of the original
      organizers of the Bank and he has served as a director of the Company and the
      Bank since their formation. Mr. Moayad left Iran when he was 12 years old to
      study in England. After attending boarding schools in England and graduating
      from Shiplake College Henley-On Thames, he came to the United States in 1981
      to
      visit family, and decided to stay in Tallahassee to continue his education.
      He
      graduated from Tallahassee Community College with an AA degree in 1983 and
      from
      Florida State University in 1985 with a BS degree in communications. He
      graduated from the Thomas M. Cooley Law School, in 1989 with a Juris Doctor
      degree and was admitted to the Florida Bar in 1990. Mr. Moayad practiced law
      full time in Tallahassee from 1990 until 2002, when he elected to take
      sabbatical and attend to family and other personal business, which includes
      both
      real estate investments and international trading activities in the middle
      east.
      In September 2005 he formed the Genesis International Group, LLC of which he
      currently serves as President. He has maintained an “of counsel” relationship
      with the law firm of Igler & Dougherty, P.A. since June
      2006.


42


***B.
      Bryan Robinson.*** Mr.
      Robinson is 52 years old, and lives in Tallahassee with his youngest son Brody.
      He was one of the original organizers of the Bank and he has served as a
      director of the Company and the Bank since their formation. Mr. Robinson has
      served in various positions in the financial institution field for 26 years,
      most recently as Senior Vice President and Chief Financial Officer of First
      Capital Bank in Marianna, Florida from 2005 to 2006. Prior to that he served
      as
      Executive Vice President and Chief Financial Officer of Premier Bank in
      Tallahassee, Florida from 1995 to 2005. He currently serves as the President
      and
      Chief Executive Officer of Pro Financial Holdings, Inc. and is the proposed
      President and Chief Executive Officer of ProBank (in organization). He graduated
      from Florida State University in 1978 with a Bachelor of Science degree with
      a
      major in Accounting and a minor in Finance. He also received his Masters Degree
      in Banking from the LSU Masters School of Banking in November 2004. He has
      been
      a past member and director of the Tallahassee Lions Club.





***Peter
      S. Rosen.*** Mr.
      Rosen is 39 years old and has lived in Tallahassee since 1986. He was one of
      the
      original organizers of the Bank and he has served as a director of the Company
      and the Bank since their formation. He has owned and operated Benchmark
      Construction company since 1989. During that time the company built more than
      100 homes ranging in price from $100,000 to $1.5 Million, as well as built
      and
      or renovated over 1,000,000 sq. ft. of commercial office space. He formed
      Cornerstone Realty in 1994 and currently serves as President and Broker of
      the
      company. He is currently the owner and developer of nine Tallahassee apartment
      and/or shopping center properties with a total value in excess of $75 Million.
      He is a Florida Certified Building Contractor and a Licensed Florida Real Estate
      Broker. He graduated from Florida State University in 1990 with a Bachelor
      of
      Science degree with a major in Real Estate and Business Administration and
      a
      minor in Finance.





***James
      S. Sauls.*** Mr.
      Sauls is 39 years old and lives in Tallahassee with his wife Shannon and their
      two children. He was one of the original organizers of the Bank and he has
      served as a director of the Company and the Bank since their formation. Mr.
      Sauls is a native of Tallahassee. He has served as the President of Benchmark
      Asset Management, Inc., d.b.a. Benchmark Property Management, LLC since July
      2003. He previously served as a Managing Member of Benchmark Property
      Management, LLC from May 1999 to July 2003. He served as Vice-President and
      Chief Operating Officer of Coastal Property Services, Inc. in Tallahassee from
      1990 to 1998. He is currently the Managing Member of SHS Maintenance, LLC,
      SHS
      Realty, LLC, and SHS Management, LLC. The main purpose of these companies is
      the
      operation of multi-family housing and real estate sales in Tallahassee, Florida.
      In addition, he is an owner and developer of several multi-family and other
      real
      estate projects located in the Tallahassee area. He graduated from Florida
      State
      University in 1994 with a B.S. degree in Accounting. He is a Florida Real Estate
      Broker, and he received his Community Association Managers License from the
      Florida Department of Professional Regulation in 2005.





***Josh
      R. Simmons, M.D.*** Dr.
      Simmons is 33 years old, and lives in Tallahassee, where he was born, with
      his
      wife Dr. Kate Simmons, M.D. He was one of the original organizers of the Bank
      and he has served as a director of the Company and the Bank since their
      formation. He has been employed by Bixler Emergency Center as an Emergency
      Medicine Physician at Tallahassee Memorial Hospital since 2004, following the
      completion of his residency in Emergency Medicine at the Carolinas Medical
      Center. He also serves as a Clinical Professor of Emergency Medicine at the
      Florida State University College of Medicine. He graduated from Stanford
      University with a B.S. Degree in 1997 and the University of Virginia School
      of
      Medicine in 2001.


43


***Ernest
      Sims, III.*** Mr. Sims
      is 23 years old and is a resident of Tallahassee. He is being nominated to
      serve
      as a director for the first time. He is a strong-side linebacker for the Detroit
      Lions. Mr.
      Sims
      attended North Florida Christian High School in Tallahassee, beginning his
      football career there by earning a varsity letter on the high school football
      team while only in the eighth grade. He led his team to four state championships
      from 1998-2001. Coming out of North Florida Christian High School Sims was
      considered by most college football publications to be one of the best high
      school football players, and the best linebacker, in the country. Rivals.com,
      a
      high school football recruiting service named Sims the number one overall high
      school football player in the country ahead of Reggie Bush. Sims chose to play
      for Florida State over Auburn, Florida, Georgia, Miami, Michigan, Oklahoma,
      Oregon, Tennessee, and Southern California. In 2003, as a true freshman at
      Florida State, Sims played in every single game. He finished ninth on the team
      in tackles and was one of the teams top special teams performers. In 2004,
      his
      sophomore year, Sims played in all 12 games. In 2004, Sims was named to the
      second All-ACC team and ESPN named Sims to their first team All-American team.
      Sims' had a productive junior year season, starting all 13 games, including
      the
      Orange Bowl. In January of 2006, Sims announced that he would forgo his senior
      season in lieu of entering the professional football draft. Sims was selected
      as
      ninth overall in the first round of the 2006 NFL Draft by the Detroit
      Lions.





***M.
      Steven Turner.*** Mr.
      Turner is 66 years old, and lives with his wife in Tallahassee. He was one of
      the original organizers of the Bank and he has served as a director of the
      Company and the Bank since their formation. He is the Managing Partner in the
      Tallahassee office of Broad and Cassel and has served on the Firm’s Executive
      Committee for 19 years. He is the Chairperson of the Firm’s Appellate Practice
      Group and a member of the Governmental Relations Practice Group. Before entering
      private practice, Mr. Turner served as a federal district court law clerk,
      an
      Air Force JAG officer, a Florida Special Assistant Attorney General, and an
      agency general counsel. Since entering private practice in 1972, Mr. Turner
      has
      served as trial and appellate counsel in a broad range of matters, including
      class actions and cases involving federal, state, and local governments. Mr.
      Turner is experienced in state and federal court trials, administrative
      proceedings, and commercial arbitrations, and is a Master of the Bench member
      of
      the Stafford American Inns of Court. Mr. Turner has made numerous appearances
      before the Florida Supreme Court, Florida’s District Courts of Appeal, and the
      Eleventh Circuit U.S. Court of Appeals. He graduated from Duke University,
      in
      Durham, North Carolina, in 1963 with a B.A. degree and from the University
      of
      Florida College of Law in Gainesville, Florida in 1965 with a Doctor of
      Jurisprudence.





***Stephen
      R. Winn.*** Mr. Winn
      is 63 years old and lives in Tallahassee with his wife. He is being nominated
      to
      serve as a director for the first time. He has three children and five
      grandchildren. He currently serves as Executive Director of the Florida
      Osteopathic Medical Association, a position he has held since 1984. He is
      President of Stephen R. Winn & Associates, a Tallahassee-based governmental
      and public relations company. He currently serves as a legislative and
      governmental consultant to the Florida Society of Hearing & Healthcare
      Professionals, GlaxoSmithKline Pharmaceutical Company, KeProSouth, Sun Coast
      Hospital Health System, the American Diabetes Association, and the Florida
      Alcohol and Drug Abuse Association. He is a member of the Florida Health
      Insurance Study Advisory Council; the Republican Presidential Task Force, the
      American Osteopathic Association and the Association of Osteopathic State
      Executive Directors. He is also a member of the University Club, FSU Golden
      Chiefs, and the FSU Alumni Association. He was one of the founding members
      of
      the First Bank of Tallahassee, and served as Chairman of the Board of Directors
      from 1993-1994. He is a Past Chairman of the Board of Directors of the
      Tallahassee Community College Foundation. He graduated from Florida State
      University in 1967 with a B.S. Degree in Hotel and Restaurant Management. He
      served in the U.S. Army as a First Lieutenant.


44


Non-Director
      Executive Officer





***Erin
      B. Sjostrom.*** Mrs.
      Sjostrom is 42 years old, and lives in Tallahassee with her husband and two
      sons. She has been in the banking and the financial services fields for 15
      years. Her experience has ranged from commercial and corporate lending to Credit
      Administration and Risk Management. She currently serves as the Executive Vice
      President for ProBank as the Senior Lender and Credit Administrator, where
      she
      is responsible for all aspects of lending and asset quality within the Bank.
      She
      previously served as the Director of the Florida Retirement System in the
      Department of Management Services, where she was responsible for the
      administration of the $100 billion trust fund and the fourth largest public
      pension plan in the United States. She earned her bachelor’s degree in
      management with a concentration in finance from Tulane University. She has
      been
      appointed by both Governors Jeb Bush and Charlie Crist for terms on the Florida
      Prepaid College Board, where she will serve until June 30, 2009. She is also
      a
      member of Leadership Tallahassee and Sunrise Rotary.





Compliance
      with Section 16(a) of the Securities Exchange Act of 1934





The
      Company does not have securities registered pursuant to Section 12 of the
      Securities Exchange Act of 1934. Therefore its directors, officers and
      beneficial owners of 10% or more of the Company’s securities were not required
      to file Section 16(a) forms.




[Table
      follows on the next page]


45




**2007
      Summary Compensation Table**


**Name
                  and**
                **Principal
                  Position**
              
              **Year**
              
              **Salary**
              
              **Bonus**
              
              **Option**
                **Awards**
              
              **All
                  Other****(1)**
                **Compensation**
              
              **Total**B.
                  Bryan Robinson
                Pro
                  Financial/Bank CEO/President
              
              
              2007
                2006
              
              
              120,069
                51,192
              
              
              -
                -
              
              
              
              
              
              18,359
                5,586
              
              
              138,428
                56,778Erin
                  B. Sjostrom******(2)**
                Pro
                  Financial/ Bank EVP
              
              
              2007
              
              
              88,846
              
              
              -
              
              
              
              
              
              14,587
              
              
              103,433





(1)
            Includes
                club dues, health and dental insurance, and car
                allowance.


(2)
            Mrs.
                Sjostrom joined Pro Financial and the Bank organizers in March, 2007,
                therefore the compensation reported is only for a portion of 2007.





**Item
              11.**
            **Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters**





**Name**
            
            **No.
                of Shares ***Kathleen
                B Atkins-Gunter
            
            
            5,000Christopher
                E Diamantis**
            
            
            40,000Edward
                W Doughtery, Jr
            
            
            20,000Javier
                I Escobar, II MD
            
            
            51,000Michael
                W Forsthoefel, MD
            
            
            20,000Roger
                K Hobbs
            
            
            25,000Steven
                M Leoni**
            
            
            22,000Allen
                R Moayad
            
            
            30,000B
                Bryan Robinson
            
            
            10,000Peter
                S Rosen
            
            
            45,840James
                S Sauls
            
            
            52,000Joshua
                R Simmons, MD
            
            
            21,500Ernest
                Sims, III**
            
            
            25,000M
                Stephen Turner
            
            
            22,000Stephen
                R Winn**
            
            
            10,000Total
                (15 people)
            
            
            **399,340**





*
      Includes shares for which the named person:





o
            Has
                sole voting and investment power;


o
            Has
                shared voting and investment power;
                or


o
            Holds
                in an IRA or other retirement plan.





**
      Not a
      current director but nominated to serve as a director for the coming
      year


46


**Item
      12.**  **Certain
      Relationships and Related Transactions**





The
      Bank
      had the following outstanding loans to Pro Financial’s and the Bank’s directors
      and executive officers in amounts in excess of $60,000 in the aggregate for
      each
      director or executive officer:





**Largest
                Amount**
            
            **Amount
                Outstanding****Maturity**
            
            **Outstanding**
            
            **At**
            
            
            
            **Interest****Name**
            
            **Date
                of Loan**
            
            **in
                2007**
            
            **December
                31, 2007**
            
            **Loan
                Type**
            
            **Rate**Twin
                Action Properties*
            
            
            11/01/07
            
            $
            N/A
            
            $
            1,232,389
            
            
            CRE
            
            
            7%
                - BankTwin
                Action Properties*
            
            
            11/01/07
            
            $
            N/A
            
            
            498,157
            
            
            CRE
            
            
            7%
                - ProfinancialRoger
                K Hobbs
            
            
            12/12/07
            
            $
            N/A
            
            
            85
            
            
            Personal
                LOC
            
            
            PrimeKevin
                Stout
            
            
            09/27/07
            
            $
            N/A
            
            
            10,021
            
            
            Business
            
            
            Prime
                + .5%$
            N/A
            
            $
            1,740,652


*
      Roger
      K. Hobbs





**Item
      13.**  **Exhibits**





Exhibits
      marked with an (a) were filed with the Form SB-2 filed with the Securities
      and
      Exchange Commission March 9, 2007 File No. 333-141191.





(a)
            3.1
            Articles
                of Incorporation(a)
            3.2
            Bylaws(a)
            4.1
            Specimen
                Common Stock Certificate(a)
            4.2
            Warrant
                Plan(a)
            4.3
            Warrant
                Certificates(a)
            10.1
            Employment
                Agreement with B. Bryan Robinson(a)
            10.2
            Employee
                Stock Option Plan(a)
            10.3
            Director
                Stock Option Plan(a)
            10.4
            Lease
                for Main Office13.1
            Financial
                Statements21.1
            Schedule
                of Subsidiaries31.1
            Certification
                of Chief Executive Officer required by Rule 13a-14(a)/15d-14(a) under
                the
                Exchange Act31.2
            Certification
                of Chief Financial Officer required by Rule 13a-14(a)/15d-14(a) under
                the
                Exchange Act32.1
            Certification
                of Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as
                adopted
                pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.32.2
            Certification
                of Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as
                adopted
                pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.


47


**Item
      14.**  **Principal
      Accountant Fees and Services**





James
      D.A. Holley & Co. P.A. ,
      audited
      the Company’s financial statements from inception to December 31, 2006 and for
      the fiscal year ended December 31, 2007. They also performed the reviews for
      the
      quarters ended June 30, and September 30, 2007.





Fees
      related to services performed by James
      D.A. Holley & Co. in
      2007
      and 2006 were as follows:





2007
            
            2006Audit
                Fees (1)
            
            $
            7,355
            
            $
            -0-Audit-Related
                Fees
            
            
            -0-
            
            
            -0-Tax
                Fees (2)
            
            
            -0-
            
            
            -0-Total
            
            $
            7,355
            
            $
            -0-





(1)
            Audit
                fees represent fees for professional services provided in connection
                with
                the audit of our financial statements and review of our quarterly
                financial statements. The Audit Committee must pre-approve audit
                related
                and non-audit services not prohibited by law to be performed by the
                Companies independent auditors. The Audit Committee pre-approved
                all audit
                related and non-audit services in
                2007.





The
                Audit Committee has reviewed Pro Financial’s audited financial statements
                as of, and for, the fiscal year ended December 31, 2007, and met
                with both
                management and Pro Financial’s independent auditors to discuss those
                financial statements. Management has represented to the Audit Committee
                that the financial statements were prepared in accordance with accounting
                principles generally accepted in the United States of
                America.





The
                Audit Committee has received from, and discussed with James D.A.
                Holley
                & Co. P.A.,the
                written disclosure and the letter required by Independence Standards
                Board
                Standard No. 1*(Independence
                Discussions with Audit Committees)*.
                These items relate to that firm’s independence from Pro Financial. The
                Audit Committee has also discussed with James D.A. Holley & Co.
                P.A.,any
                matters required to be discussed by Statement on Auditing Standards
                No. 61*(Communication
                with Audit Committees)*.





Based
                on the reviews and discussions referred to above, the Audit Committee
                recommended to the Board that Pro Financial’s audited financial statements
                be included in the Company’s Annual Report on Form 10-K for the fiscal
                year ended December 31, 2007, and filed with the Securities and Exchange
                Commission.





(2)  Tax fees
      principally included tax advice, tax planning and tax return
      preparation.


48





**SIGNATURES**





Pursuant
      to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
      1934, the Registrant has caused this report to be duly signed on its behalf
      by
      the undersigned, thereunto duly authorized, in the City of Tallahassee, State
      of
      Florida, on the 27th day of March, 2008.





**PRO
                FINANCIAL HOLDING, INC.***/s/
                B. Bryan Robinson*B.
                Bryan RobinsonPresident
                and Chief Executive Officer*/s/
                Billie M. Watson*Billie
                M. Watson(Principal
                Accounting Officer)


49


Pursuant
      to the requirements of the Securities Exchange Act of 1934, this report has
      been
      signed below by the following persons on behalf of the Registrant and in their
      capacities and on March 25, 2007.




Signature*/s/
                B. Bryan Robinson*B.
                Bryan Robinson
            
            President
                and Chief Executive Officer*/s/
                Roger K. Hobbs*
            
            Director
                and Co-Chairperson of the BoardRoger
                K. Hobbs*/s/
                Peter S. Rosen*
            
            Director
                and Co-Chairperson of the BoardPeter
                S. Rosen*/s/
                Edward W. Dougherty, Jr.*
            
            DirectorEdward
                W. Dougherty, Jr.*/s/
                Kathleen B. Atkins-Gunter*
            
            DirectorKathleen
                B. Atkins-Gunter*/s/
                Thomas E. Napier*
            
            DirectorThomas
                E. NapierDirector*Javier
                I Escobar, II MD**/s/
                Michael W. Forsthoefel, MD*
            
            DirectorMichael
                W. Forsthoefel, MD*/s/
                Arthur Wimberley*
            
            DirectorArthur
                Wimberley*/s/
                James S. Sauls*
            
            DirectorJames
                S. Sauls*/s/
                Joshua R. Simmons, MD*
            
            DirectorJoshua
                R. Simmons, MD*/s/
                Allen R. Moayad*
            
            DirectorAllen
                R. Moayad*/s/
                M. Stephen Turner*
            
            DirectorM.
                Stephen Turner




Pro
      Financial Services, Inc.


Form
      10-KSB


For
      Fiscal Year Ending December 31, 2007


50





EXHIBIT
      INDEX





Exhibits
      marked with an (a) were filed with the Form SB-2 filed with the Securities
      and
      Exchange Commission March 9, 2007 File No. 333-141191.





ExhibitNo.
            
            Exhibit(a)
            3.1
            Articles
                of Incorporation(a)
            3.2
            Bylaws(a)
            4.1
            Specimen
                Common Stock Certificate(a)
            4.2
            Warrant
                Plan(a)
            4.3
            Warrant
                Certificates(a)
            10.1
            Employment
                Agreement with B. Bryan Robinson(a)
            10.2
            Employee
                Stock Option Plan(a)
            10.3
            Director
                Stock Option Plan(a)
            10.4
            Lease
                for Main Office13.1
            Financial
                Statements21.1
            Schedule
                of Subsidiaries31.1
            Certification
                of Chief Executive Officer required by Rule 13a-14(a)/15d-14(a) under
                the
                Exchange Act31.2
            Certification
                of Chief Financial Officer required by Rule 13a-14(a)/15d-14(a) under
                the
                Exchange Act32.1
            Certification
                of Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as
                adopted
                pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.32.2
            Certification
                of Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as
                adopted
                pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.


51