EXHIBIT 13.1

LOGO

CONSOLIDATED FINANCIAL REPORT

DECEMBER 31, 2007



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PIEDMONT COMMUNITY BANK GROUP, INC.

AND SUBSIDIARY

CONSOLIDATED FINANCIAL REPORT

December 31, 2007

TABLE OF
CONTENTS



|                                                                 |  |     
|---------------------------------------------------------------- |  | ----
|REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNT FIRM             |  | 1   
|                                                                 | 
|FINANCIAL STATEMENTS                                             |  |     
|                                                                 | 
|Consolidated balance sheets                                      |  | 2   
|Consolidated statements of income and other comprehensive income |  | 3   
|Consolidated statements of changes in shareholders equity       |  | 4   
|Consolidated statements of cash flows                            |  | 5   
|Notes to consolidated financial statements                       |  | 6-19



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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

Piedmont Community Bank Group, Inc. and
Subsidiary

Gray, Georgia

We have audited the consolidated
balance sheets of Piedmont Community Bank Group, Inc. and subsidiary as of December 31, 2007 and 2006, and the related consolidated statements of income and other comprehensive income, shareholders equity and cash flows for the years then
ended. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Piedmont Community Bank
Group, Inc. and subsidiary as of December 31, 2007 and 2006, and the results of their operations and their cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.

We were not engaged to examine managements assertion about the effectiveness of Piedmont Community Bank Group, Inc. and subsidiarys internal control over
financial reporting as of December 31, 2007 included under Item 8A Controls and Procedures in Piedmont Community Bank Group, Inc. and Subsidiarys Annual Report on Form 10-KSB and, accordingly, we do not express an opinion
thereon.

/s/ Mauldin & Jenkins, LLC

Atlanta, Georgia

March 31, 2008



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PIEDMONT COMMUNITY BANK GROUP, INC.

AND SUBSIDIARY

Consolidated Balance Sheets

December 31, 2007 and 2006



|                                                                                                                                                               |  |      |             |      |   |             |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ----------- | ---- | - | ----------- | -
|                                                                                                                                                               |  | 2007 |             | 2006 |  
|ASSETS                                                                                                                                                         |  |      |             |      |   |             |  
|Cash and due from banks                                                                                                                                        |  | $    | 1,570,492   |      | $ | 1,659,993   |  
|Interest-bearing deposits in banks                                                                                                                             |  |      | 2,764,112   |      |   | 1,584,000   |  
|Federal funds sold                                                                                                                                             |  |      | 6,113,000   |      |   | 3,762,000   |  
|Securities held to maturity, at cost (fair value of $1,977,994 and $636,543, respectively)                                                                     |  |      | 1,999,674   |      |   | 644,912     |  
|Securities available for sale, at fair value                                                                                                                   |  |      | 9,283,207   |      |   | 6,162,724   |  
|Restricted equity securities, at cost                                                                                                                          |  |      | 1,115,730   |      |   | 767,245     |  
|Loans, less allowance for loan losses of $1,849,044 and $1,235,044, respectively                                                                               |  |      | 176,185,526 |      |   | 117,692,476 |  
|Accrued interest receivable                                                                                                                                    |  |      | 1,920,920   |      |   | 1,376,236   |  
|Premises and equipment, net                                                                                                                                    |  |      | 7,541,387   |      |   | 6,831,779   |  
|Other real estate owned                                                                                                                                        |  |      | 241,821     |      |   |            |  
|Bank owned life insurance                                                                                                                                      |  |      | 3,512,212   |      |   |            |  
|Other assets                                                                                                                                                   |  |      | 792,860     |      |   | 562,674     |  
|                                                                                                                                                               |  |      |             |      |   |             |  
|Total assets                                                                                                                                                   |  | $    | 213,040,941 |      | $ | 141,044,039 |  
|                                                                                                                                                               |  |      |             |      |   |             |  
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                                           |  |      |             |      |   |             |  
|Deposits:                                                                                                                                                      |  |      |             |      |   |             |  
|Noninterest-bearing                                                                                                                                            |  | $    | 5,663,482   |      | $ | 5,187,150   |  
|Interest-bearing                                                                                                                                               |  |      | 174,772,117 |      |   | 106,897,692 |  
|                                                                                                                                                               |  |      |             |      |   |             |  
|Total deposits                                                                                                                                                 |  |      | 180,435,599 |      |   | 112,084,842 |  
|Accrued interest payable                                                                                                                                       |  |      | 947,614     |      |   | 941,498     |  
|Other borrowings                                                                                                                                               |  |      | 14,100,000  |      |   | 9,100,000   |  
|Federal funds purchased                                                                                                                                        |  |      |            |      |   | 1,977,500   |  
|Other liabilities                                                                                                                                              |  |      | 387,261     |      |   | 789,275     |  
|                                                                                                                                                               |  |      |             |      |   |             |  
|Total liabilities                                                                                                                                              |  |      | 195,870,474 |      |   | 124,893,115 |  
|                                                                                                                                                               |  |      |             |      |   |             |  
|Shareholders equity:                                                                                                                                          |  |      |             |      |   |             |  
|Common stock, (no par value, 2007), ($5.00 par value, 2006), 10,000,000 shares authorized; 1,630,734 and 1,630,762 shares issued and
outstanding, respectively |  |      | 16,089,274  |      |   | 6,794,840   |  
|Capital surplus                                                                                                                                                |  |      |            |      |   | 9,017,451   |  
|Undivided profits                                                                                                                                              |  |      | 1,073,576   |      |   | 405,061     |  
|Accumulated other comprehensive income (loss)                                                                                                                  |  |      | 7,617       |      |   | (66,428     | )
|                                                                                                                                                               |  |      |             |      |   |             |  
|Total shareholders equity                                                                                                                                     |  |      | 17,170,467  |      |   | 16,150,924  |  
|                                                                                                                                                               |  |      |             |      |   |             |  
|Total liabilities and shareholders equity                                                                                                                     |  | $    | 213,040,941 |      | $ | 141,044,039 |  
|                                                                                                                                                               |  |      |             |      |   |             |  

See accompanying report of independent registered public accounting firm

and notes to consolidated financial statements.



2



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PIEDMONT COMMUNITY BANK GROUP, INC.

AND SUBSIDIARY

Consolidated Statements of Income and Other Comprehensive
Income

Years Ended December 31, 2007 and 2006



|                                                                                                                               |  |      |            |      |   |           |  
|------------------------------------------------------------------------------------------------------------------------------ |  | ---- | ---------- | ---- | - | --------- | -
|                                                                                                                               |  | 2007 |            | 2006 |  
|Interest and dividend income:                                                                                                  |  |      |            |      |   |           |  
|Loans, including fees                                                                                                          |  | $    | 12,616,823 |      | $ | 7,958,505 |  
|Securities available for sale                                                                                                  |  |      | 426,389    |      |   | 255,901   |  
|Securities held to maturity                                                                                                    |  |      | 65,127     |      |   | 13,949    |  
|Interest-bearing deposits in banks                                                                                             |  |      | 159,748    |      |   | 77,087    |  
|Federal funds sold                                                                                                             |  |      | 141,155    |      |   | 48,344    |  
|Dividends                                                                                                                      |  |      | 48,659     |      |   | 31,616    |  
|                                                                                                                               |  |      |            |      |   |           |  
|                                                                                                                               |  |      | 13,457,901 |      |   | 8,385,402 |  
|                                                                                                                               |  |      |            |      |   |           |  
|Interest expense:                                                                                                              |  |      |            |      |   |           |  
|Deposits                                                                                                                       |  |      | 7,278,710  |      |   | 3,884,734 |  
|Other borrowings                                                                                                               |  |      | 545,721    |      |   | 435,364   |  
|                                                                                                                               |  |      |            |      |   |           |  
|                                                                                                                               |  |      | 7,824,431  |      |   | 4,320,098 |  
|                                                                                                                               |  |      |            |      |   |           |  
|Net interest income                                                                                                            |  |      | 5,633,470  |      |   | 4,065,304 |  
|Provision for loan losses                                                                                                      |  |      | 614,000    |      |   | 356,092   |  
|                                                                                                                               |  |      |            |      |   |           |  
|Net interest income after provision for loan losses                                                                            |  |      | 5,019,470  |      |   | 3,709,212 |  
|                                                                                                                               |  |      |            |      |   |           |  
|Noninterest income:                                                                                                            |  |      |            |      |   |           |  
|Service charges on deposit accounts                                                                                            |  |      | 106,468    |      |   | 83,601    |  
|Mortgage origination income                                                                                                    |  |      | 157,295    |      |   | 280,632   |  
|Other                                                                                                                          |  |      | 65,840     |      |   | 40,466    |  
|                                                                                                                               |  |      |            |      |   |           |  
|                                                                                                                               |  |      | 329,603    |      |   | 404,699   |  
|                                                                                                                               |  |      |            |      |   |           |  
|Noninterest expense:                                                                                                           |  |      |            |      |   |           |  
|Salaries and employee benefits                                                                                                 |  |      | 2,252,030  |      |   | 1,677,163 |  
|Equipment and occupancy                                                                                                        |  |      | 440,997    |      |   | 361,660   |  
|Other operating                                                                                                                |  |      | 1,502,372  |      |   | 929,054   |  
|                                                                                                                               |  |      |            |      |   |           |  
|                                                                                                                               |  |      | 4,195,399  |      |   | 2,967,877 |  
|                                                                                                                               |  |      |            |      |   |           |  
|Income before provision for income taxes and minority interest in net income of subsidiary                                     |  |      | 1,153,674  |      |   | 1,146,034 |  
|Provision for income taxes                                                                                                     |  |      | 484,733    |      |   | 410,581   |  
|                                                                                                                               |  |      |            |      |   |           |  
|Income before minority interest in net income of subsidiary                                                                    |  |      | 668,941    |      |   | 735,453   |  
|Minority interest in net income of subsidiary                                                                                  |  |      |           |      |   | (3,894    | )
|                                                                                                                               |  |      |            |      |   |           |  
|Net income                                                                                                                     |  |      | 668,941    |      |   | 731,559   |  
|Other comprehensive income (loss):                                                                                             |  |      |            |      |   |           |  
|Unrealized gain on securities available for sale arising during period, net of tax expense of $44,903 and $7,620, respectively |  |      | 74,045     |      |   | 26,562    |  
|                                                                                                                               |  |      |            |      |   |           |  
|Comprehensive income                                                                                                           |  | $    | 742,986    |      | $ | 758,121   |  
|                                                                                                                               |  |      |            |      |   |           |  
|Income per share:                                                                                                              |  |      |            |      |   |           |  
|Basic                                                                                                                          |  | $    | 0.41       |      | $ | 0.45      |  
|                                                                                                                               |  |      |            |      |   |           |  
|Diluted                                                                                                                        |  | $    | 0.40       |      | $ | 0.44      |  
|                                                                                                                               |  |      |            |      |   |           |  

See accompanying report of independent registered public accounting firm

and notes to consolidated financial statements.



3



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PIEDMONT COMMUNTIY BANK GROUP, INC.

AND SUBSIDIARY

Consolidated Statements of Changes in Shareholders
Equity

Years Ended December 31, 2007 and 2006



|                                       |  |           |   |  |             |            |   |                |   |            |                                      |  |   |                                            |   |  |                          |         |   |  |   |            |  
|-------------------------------------- |  | --------- | - |  | ----------- | ---------- | - | -------------- | - | ---------- | ------------------------------------ |  | - | ------------------------------------------ | - |  | ------------------------ | ------- | - |  | - | ---------- | -
|                                       |  | Shares    |   |  | CommonStock |            |   | CapitalSurplus |   |            | (AccumulatedDeficit)UndividedProfits |  |   | AccumulatedOtherComprehensiveIncome
(loss) |   |  | TotalShareholdersEquity |        
|Balance, December 31, 2005             |  | 1,362,127 |   |  |             | 6,810,635  |   |                |   | 8,767,883  |                                      |  |   | (326,498                                   | ) |  |                          | (92,990 | ) |  |   | 15,159,030 |  
|Net income                             |  |          |   |  |             |           |   |                |   |           |                                      |  |   | 731,559                                    |   |  |                          |        |   |  |   | 731,559    |  
|Redemption of common stock             |  | (3,159    | ) |  |             | (15,795    | ) |                |   | (28,431    | )                                    |  |   |                                           |   |  |                          |        |   |  |   | (44,226    | )
|Stock based employee compensation cost |  |          |   |  |             |           |   |                |   | 277,999    |                                      |  |   |                                           |   |  |                          |        |   |  |   | 277,999    |  
|Other comprehensive income             |  |          |   |  |             |           |   |                |   |           |                                      |  |   |                                           |   |  |                          | 26,562  |   |  |   | 26,562     |  
|                                       |  |           |   |  |             |            |   |                |   |            |                                      |  |   |                                            |   |  |                          |         |   |  |   |            |  
|Balance, December 31, 2006             |  | 1,358,968 |   |  |             | 6,794,840  |   |                |   | 9,017,451  |                                      |  |   | 405,061                                    |   |  |                          | (66,428 | ) |  |   | 16,150,924 |  
|Net income                             |  |          |   |  |             |           |   |                |   |           |                                      |  |   | 668,941                                    |   |  |                          |        |   |  |   | 668,941    |  
|Formation of holding company           |  |          |   |  |             | 9,017,451  |   |                |   | (9,017,451 | )                                    |  |   |                                           |   |  |                          |        |   |  |   |           |  
|1.2 for 1 stock split                  |  | 271,766   |   |  |             |           |   |                |   |           |                                      |  |   | (426                                       | ) |  |                          |        |   |  |   | (426       | )
|Stock based employee compensation cost |  |          |   |  |             | 276,983    |   |                |   |           |                                      |  |   |                                           |   |  |                          |        |   |  |   | 276,983    |  
|Other comprehensive income             |  |          |   |  |             |           |   |                |   |           |                                      |  |   |                                           |   |  |                          | 74,045  |   |  |   | 74,045     |  
|                                       |  |           |   |  |             |            |   |                |   |            |                                      |  |   |                                            |   |  |                          |         |   |  |   |            |  
|Balance, December 31, 2007             |  | 1,630,734 |   |  | $           | 16,089,274 |   |                | $ |           |                                      |  | $ | 1,073,576                                  |   |  | $                        | 7,617   |   |  | $ | 17,170,467 |  
|                                       |  |           |   |  |             |            |   |                |   |            |                                      |  |   |                                            |   |  |                          |         |   |  |   |            |  

See accompanying report of independent registered public accounting firm

and notes to consolidated financial statements.



4



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PIEDMONT COMMUNITY BANK GROUP, INC.

AND SUBSIDIARY

Consolidated Statements of Cash Flows

Years Ended December 31, 2007 and 2006



|                                                                                  |  |      |             |   |      |   |             |  
|--------------------------------------------------------------------------------- |  | ---- | ----------- | - | ---- | - | ----------- | -
|                                                                                  |  | 2007 |             |   | 2006 |  
|Cash flow from operating activities:                                              |  |      |             |   |      |   |             |  
|Net income                                                                        |  | $    | 668,941     |   |      | $ | 731,559     |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |      |             |   |      |   |             |  
|Depreciation and amortization                                                     |  |      | 293,876     |   |      |   | 190,465     |  
|Provision for loan losses                                                         |  |      | 614,000     |   |      |   | 356,092     |  
|Increase in cash surrender value of life insurance                                |  |      | (12,212     | ) |      |   |            |  
|Share based compensation cost                                                     |  |      | 276,983     |   |      |   | 277,999     |  
|Deferred taxes                                                                    |  |      | (238,043    | ) |      |   | (156,532    | )
|Increase in accrued interest receivable                                           |  |      | (544,684    | ) |      |   | (721,993    | )
|Increase in accrued interest payable                                              |  |      | 6,116       |   |      |   | 545,405     |  
|Net other operating activities                                                    |  |      | (420,719    | ) |      |   | 267,204     |  
|                                                                                  |  |      |             |   |      |   |             |  
|Net cash flow provided by operating activities                                    |  |      | 644,258     |   |      |   | 1,490,199   |  
|                                                                                  |  |      |             |   |      |   |             |  
|Cash flow from investing activities:                                              |  |      |             |   |      |   |             |  
|Net increase in loans                                                             |  |      | (59,348,871 | ) |      |   | (38,761,826 | )
|Net increase in federal funds sold                                                |  |      | (2,351,000  | ) |      |   | (3,205,000  | )
|Net increase in interest-bearing deposits in banks                                |  |      | (1,180,112  | ) |      |   |            |  
|Purchases of restricted equity securities                                         |  |      | (348,485    | ) |      |   | (393,545    | )
|Purchases of securities available for sale                                        |  |      | (4,497,327  | ) |      |   | (1,001,529  | )
|Proceeds from maturities of securities available for sale                         |  |      | 1,473,395   |   |      |   | 315,727     |  
|Purchase of securities held to maturity                                           |  |      | (1,355,000  | ) |      |   | (451,723    | )
|Proceeds from maturities of securities held to maturity                           |  |      |            |   |      |   | 18,811      |  
|Purchase of bank owned life insurance                                             |  |      | (3,500,000  | ) |      |   |            |  
|Purchases of premises and equipment                                               |  |      | (999,190    | ) |      |   | (3,514,463  | )
|                                                                                  |  |      |             |   |      |   |             |  
|Net cash flow used in investing activities                                        |  |      | (72,106,590 | ) |      |   | (46,993,548 | )
|                                                                                  |  |      |             |   |      |   |             |  
|Cash flow from financing activities:                                              |  |      |             |   |      |   |             |  
|Net increase in deposits                                                          |  |      | 68,350,757  |   |      |   | 40,231,869  |  
|Payment of dividends on fractional shares                                         |  |      | (426        | ) |      |   |            |  
|Redemption of common stock                                                        |  |      |            |   |      |   | (44,226     | )
|Net (decrease) increase in Federal funds purchased                                |  |      | (1,977,500  | ) |      |   | 1,977,500   |  
|Proceeds from Federal Home Loan Bank advances                                     |  |      | 5,000,000   |   |      |   | 9,100,000   |  
|Repayment of Federal Home Loan Bank advances                                      |  |      |            |   |      |   | (5,000,000  | )
|                                                                                  |  |      |             |   |      |   |             |  
|Net cash flow provided by financing activities                                    |  |      | 71,372,831  |   |      |   | 46,265,143  |  
|                                                                                  |  |      |             |   |      |   |             |  
|Net increase (decrease) in cash and due from banks                                |  |      | (89,501     | ) |      |   | 761,794     |  
|Cash and due from banks at beginning of period                                    |  |      | 1,659,993   |   |      |   | 898,199     |  
|                                                                                  |  |      |             |   |      |   |             |  
|Cash and due from banks at end of period                                          |  | $    | 1,570,492   |   |      | $ | 1,659,993   |  
|                                                                                  |  |      |             |   |      |   |             |  
|Supplemental schedule of noncash investing and financing activities              |  |      |             |   |      |   |             |  
|Change in accumulated other comprehensive loss                                    |  | $    | (74,045     | ) |      | $ | 26,562      |  
|                                                                                  |  |      |             |   |      |   |             |  
|Transfer of loans to other real estate                                            |  | $    | (241,821    | ) |      | $ |            |  
|                                                                                  |  |      |             |   |      |   |             |  
|Supplemental disclosures of cash flow information  Cash paid for:                |  |      |             |   |      |   |             |  
|Interest                                                                          |  | $    | 7,818,315   |   |      | $ | 3,774,693   |  
|                                                                                  |  |      |             |   |      |   |             |  
|Income taxes                                                                      |  | $    | 1,211,258   |   |      | $ | 25,430      |  
|                                                                                  |  |      |             |   |      |   |             |  

See accompanying report of independent registered public accounting firm

and notes to consolidated financial statements.



5



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PIEDMONT COMMUNITY BANK GROUP, INC.

AND SUBSIDIARY

Notes to Consolidated Financial Statements

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNT POLICIES

Nature of
Business

Piedmont Community Bank Group, Inc. (the Company) is a one-bank holding company with respect to its wholly-owned subsidiary bank,
Piedmont Community Bank (the Bank). The Company was organized on April 26, 2006 and consummated the acquisition of all of the outstanding common stock of the Bank in exchange for 1,358,968 shares of $5 par value common stock on
February 7, 2007. In accounting for the transaction, the $5 par value common stock of the Bank became no par value common stock of the Company. The formation and reorganization was approved by the shareholders during the fourth quarter of 2006.

The Bank is a commercial bank headquartered in Gray, Jones County, Georgia. The Bank provides a full range of banking services in its primary market areas
of Jones, Bibb, Monroe, Houston, Greene, Baldwin, Putnam and the surrounding counties.

Basis of Presentation

In preparing the consolidated financial statements in accordance with accounting principles, generally accepted in the United States of America, management is required to
make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the balance sheet date and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates. The consolidated financial statements include the accounts of the Company and its subsidiary. Significant intercompany transactions and balances have been eliminated in consolidation.

Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses, deferred income
taxes, the valuation of foreclosed assets, determination of fair values of financial instruments and contingent assets and liabilities. The determination of the adequacy of the allowance for loan losses is based on estimates that are susceptible to
significant changes in the economic environment and market conditions. In connection with the determination of the estimated losses on loans and the valuation of foreclosed assets, management obtains independent appraisals for significant
collateral.

Cash, Due From Banks and Cash Flows

For
purposes of reporting cash flows, cash and due from banks include cash on hand, cash items in process of collection and amounts due from banks. Cash flows from interest bearing deposits in banks, loans, federal funds purchased and sold and deposits
are reported net.

Securities

Debt securities that
management has the positive intent and ability to hold to maturity are classified as held to maturity and recorded at amortized cost. Securities not classified as held to maturity are classified as available for sale and recorded at fair value with
unrealized gains and losses excluded from earnings and reported in accumulated other comprehensive (income) loss. Equity securities including restricted equity securities without a readily determinable fair value are classified as available for sale
and recorded at cost.

The amortization of premiums and accretion of discounts are recognized in interest income using a level yield method over the life
of the securities. Realized gains and losses, determined on the basis of the cost of specific securities sold, are included in earnings on the trade date. Declines in the fair value of securities below their cost that are deemed to be other than
temporary are reflected in earnings as realized losses.



6



---

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNT POLICIES (Continued)



Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more
frequently when economic or market concerns warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of
the issuer and (3) the intent and ability of the Bank to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recover in fair value.

Loans

Loans are reported at their outstanding principal balances less net deferred loan origination fees and costs
and the allowance for loan losses. Interest income is accrued on the outstanding principal balance. Loan origination fees, net of certain direct loan origination costs, are deferred and recognized as an adjustment of the related loan yield over the
life of the loan using the straight line method.

The accrual of interest on loans is discontinued when, in managements opinion, the borrower may be
unable to meet payments as they become due, unless the loan is well-secured. All interest accrued but not collected for loans that are placed on nonaccrual or charged off is reversed against interest income or charged-off, unless management believes
that the accrued interest is recoverable through the liquidation of collateral. Interest income on nonaccrual loans is recognized on the cash-basis or cost-recovery method, until the loans are returned to accrual status. Loans are returned to
accrual status when all the principal and interest amounts are brought current and future payments are reasonably assured.

A loan is considered impaired
when it is probable, based on current information and events, the Bank will be unable to collect all principal and interest payments due in accordance with the contractual terms of the loan agreement. Impaired loans are measured 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. The amount of impairment, if any,
and any subsequent changes are included in the allowance for loan losses. Interest on accruing impaired loans is recognized as long as such loans do not meet the criteria for nonaccrual status.

Allowance for Loan Losses

The allowance for loan losses is
established through a provision for loan losses charged to expense. Loan losses are charged against the allowance when management believes the collectability of the principal is unlikely. Subsequent recoveries are credited to the allowance.

The allowance is an amount that management believes will be adequate to absorb estimated losses relating to specifically identified loans, as well as
probable credit losses inherent in the balance of the loan portfolio, based on an evaluation of the collectability of existing loans and prior loss experience. This evaluation also takes into consideration such factors as changes in the nature and
volume of the loan portfolio, overall portfolio quality, review of specific problem loans, concentration and current economic conditions that may affect the borrowers ability to pay. This evaluation does not include the effects of expected
losses on specific loans or groups of loans that are related to future events or expected changes in economic conditions. While management uses the best information available to make its evaluation, future adjustments to the allowance may be
necessary if there are significant changes in economic conditions. In addition, regulatory agencies, as an integral part of their examination process, periodically review the Banks allowance for loan losses, and may require the Bank to make
additions to the allowance based on their judgment about information available to them at the time of their examinations.

The allowance consists of
specific, general and unallocated components. The specific component relates to loans that are identified as impaired. The general component covers non-impaired loans and is based on historical loss experience adjusted for qualitative factors. An
unallocated component is maintained to cover uncertainties that could affect managements estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in
the methodologies for estimating specific and general losses in the portfolio.



7



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NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNT POLICIES (Continued)



Premises and Equipment

Land is carried at cost. Premises and equipment are carried at cost less accumulated depreciation, computed principally by the straight-line method over the following estimated useful lives of the assets or the expected terms of the leases,
if shorter. Expected terms include lease option periods to the extent that the exercise of such options is reasonably assured.



|                        |  |            
|----------------------- |  | -----------
|Asset Type              |  | Useful Life
|Land improvements       |  | 15 years   
|Buildings               |  | 10-40 years
|Furniture and equipment |  | 3-10 years 
|Computer software       |  | 3 years    

Other Real Estate Owned

Other real estate owned represent properties acquired through or in lieu of loan foreclosure and is initially recorded at the lower of cost or fair value less estimated costs to sell. Any write-down to fair value at
the time of transfer to other real estate owned is charged to the allowance for loan losses. Costs of improvements are capitalized, whereas costs relating to holding other real estate owned and subsequent adjustments to the value are expensed.

Income Taxes

Deferred income tax assets and
liabilities are determined using the balance sheet method. Under this method, the net deferred tax asset or liability is determined based on the tax effects of the temporary differences between the book and tax basis of the various balance sheet
assets and liabilities and gives current recognition to changes in tax rates and laws. A valuation allowance is recorded for those deferred tax items for which it is more likely than not, that realization will not occur in the near term.

Bank Owned Life Insurance

During 2007, the Bank invested in
bank-owned life insurance (BOLI) as a source of funding for employee benefit expenses. BOLI involves the purchasing of life insurance by the Bank on certain employees. The Bank is the owner and beneficiary of the policies. Income from the increase
in cash surrender value of the policies is included on the income statements. The investment in BOLI totaled $3,512,212 million at December 31, 2007.

Stock Compensation Plan

The Company has a stock-based employee/director compensation plan which is more fully described in Note 10.
Statement of Financial Accounting Standards (SFAS) No. 123(R) (revised 2004), Share-Based Payment requires an entity to recognize the cost of employee services received in share-based payment transactions and measure the cost on a
grant-date fair value of the award. That cost is recognized over the period during which an employee is required to provide service in exchange for the award.

Mortgage Origination Income

The Bank originates and processes mortgage loans for independent investors. These mortgage loans are handled
and closed by the independent investors. Mortgage origination income represents commissions paid by the investors and is recognized at date of loan closing.



8



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NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNT POLICIES (Continued)



Earning per Common Share

SFAS No. 128, Earnings Per Share, establishes standards for computing and presenting basic and diluted earnings per share. In this regard, the Company is required to report earnings per common share with and without the dilutive
effects of potential common stock issuances from instruments such as options, convertible securities and warrants on the face of the statements of income. Earnings per common share are based on the weighted average number of common shares
outstanding during the period while the effects of potential common shares outstanding during the period are included in diluted earnings per share. Presented below is a summary of the components used to calculate basic and diluted earnings per
common share.



|                                                                                                                                  |  |                          |           |      |   |          
|--------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------ | --------- | ---- | - | ---------
|                                                                                                                                  |  | Years Ended December 31,
|                                                                                                                                  |  | 2007                     |           | 2006
|Basic earnings per share:                                                                                                         |  |                          |           |      |   |          
|Weighted average common shares outstanding                                                                                        |  |                          | 1,630,742 |      |   | 1,630,866
|                                                                                                                                  |  |                          |           |      |   |          
|Net income                                                                                                                        |  | $                        | 668,941   |      | $ | 731,559  
|                                                                                                                                  |  |                          |           |      |   |          
|Basic earnings per share                                                                                                          |  | $                        | 0.41      |      | $ | 0.45     
|                                                                                                                                  |  |                          |           |      |   |          
|Diluted earnings per share:                                                                                                       |  |                          |           |      |   |          
|Weighted average common shares outstanding                                                                                        |  |                          | 1,630,742 |      |   | 1,630,866
|Net effect of the assumed exercise of stock options based on the treasury stock method using average market prices for the
period |  |                          | 25,151    |      |   | 29,669   
|                                                                                                                                  |  |                          |           |      |   |          
|Total weighted average common shares and common stock equivalents outstanding                                                     |  |                          | 1,655,893 |      |   | 1,660,535
|                                                                                                                                  |  |                          |           |      |   |          
|Net income                                                                                                                        |  | $                        | 668,941   |      | $ | 731,559  
|                                                                                                                                  |  |                          |           |      |   |          
|Diluted earnings per share                                                                                                        |  | $                        | 0.40      |      | $ | 0.44     
|                                                                                                                                  |  |                          |           |      |   |          

Options to purchase 380,705 shares of common stock at prices ranging from $11.67 to $13.75 per share were
outstanding during the year but were not included in the computation of diluted earnings per share for the quarter ended December 31, 2007 because the options exercise price was greater than the average market price of the common shares.

Comprehensive Income

Accounting principles generally
require recognized revenue, expenses, gains and losses be included in net income. Although certain changes in assets and liabilities, such as unrealized gains and losses on available for sale securities, are reported as a separate component of the
equity section of the balance sheet, such items, along with net income, are components of comprehensive income.

Recent Accounting Standards

In September 2006, the FASB issued Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes. FIN 48 provides
detailed guidance for the financial statement recognition, measurement, and disclosure of uncertain tax positions recognized in the financial statements. FIN 48 requires an entity to recognize the financial statement impact of a tax position when it
is more likely than not that the position will be sustained upon examination. If the tax position meets the more-likely-than-not recognition threshold, the tax effect is recognized at the largest amount of the benefit that is greater than 50% likely
of being realized upon ultimate settlement. Any difference between the tax position taken in the tax return and the tax position recognized in the financial statements using the criteria above results in the recognition of a liability in the
financial statements for the unrecognized benefit. Similarly, if a tax position fails to meet the more-likely-than-not recognition threshold, the benefit taken in a tax return will also result in the recognition of a liability in the financial
statements for the full amount of the unrecognized benefit. The new interpretation was effective for the Company for the year ended December 31, 2007. The adoption of this new accounting principle did not have a significant impact on the
Companys financial position, results of operations, or cash flows.



9



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NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNT POLICIES (Continued)



In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS No. 157).
SFAS No. 157 establishes a framework for measuring fair value and expands disclosures about fair value measurements. The changes to current practice resulting from the application of this statement relate to the definition of fair value, the
methods used to measure fair value, and the expanded disclosures about fair value measurements. SFAS No. 157 is effective for the fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. The Company
does not anticipate the adoption of this new accounting principle to have a material effect on its financial condition or results of operations. The adoption of this standard is not expected to have a material impact on the financial condition or
results of operation of the Company and the Company did not early implement.

In February 2007, the FASB issued SFAS No. 159, The Fair Value
Option for Financial Assets and Financial Liabilities, which permits entities to choose to measure many financial instruments and certain other items at fair value. The objective of SFAS No. 159 is to improve financial reporting by providing
entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. SFAS No. 159 is effective for financial
statements issued for fiscal years after November 15, 2007. The adoption of this standard is not expected to have a material impact on the financial condition or results of operation of the Company and the Company did not early implement.

NOTE 2. SECURITIES

The amortized cost and fair value
of securities are summarized as follows:



|                              |  |               |           |                      |   |                       |  |   |            |   |  |   |          
|----------------------------- |  | ------------- | --------- | -------------------- | - | --------------------- |  | - | ---------- | - |  | - | ---------
|                              |  | AmortizedCost |           | GrossUnrealizedGains |   | GrossUnrealizedLosses |  |   | Fair Value
|Available for Sale            |  |               |           |                      |   |                       |  |   |            |   |  |   |          
|December 31, 2007:            |  |               |           |                      |   |                       |  |   |            |   |  |   |          
|Government sponsored agencies |  | $             | 7,368,382 |                      | $ | 61,452                |  | $ | (5,161     | ) |  | $ | 7,424,673
|Mortgage-backed securities    |  |               | 1,902,588 |                      |   | 821                   |  |   | (44,875    | ) |  |   | 1,858,534
|                              |  |               |           |                      |   |                       |  |   |            |   |  |   |          
|                              |  | $             | 9,270,970 |                      |   | 62,273                |  |   | (50,036    | ) |  | $ | 9,283,207
|                              |  |               |           |                      |   |                       |  |   |            |   |  |   |          
|December 31, 2006:            |  |               |           |                      |   |                       |  |   |            |   |  |   |          
|Government sponsored agencies |  | $             | 4,537,792 |                      | $ | 1,927                 |  | $ | (53,272    | ) |  | $ | 4,486,447
|Mortgage-back securities      |  |               | 1,731,643 |                      |   |                      |  |   | (55,366    | ) |  |   | 1,676,277
|                              |  |               |           |                      |   |                       |  |   |            |   |  |   |          
|                              |  | $             | 6,359,435 |                      | $ | 1,927                 |  | $ | (108,638   | ) |  | $ | 6,162,724
|                              |  |               |           |                      |   |                       |  |   |            |   |  |   |          
|Held to Maturity              |  |               |           |                      |   |                       |  |   |            |   |  |   |          
|December 31, 2007:            |  |               |           |                      |   |                       |  |   |            |   |  |   |          
|State and county municipals   |  | $             | 1,999,674 |                      | $ | 1,390                 |  | $ | (23,070    | ) |  | $ | 1,977,994
|                              |  |               |           |                      |   |                       |  |   |            |   |  |   |          
|December 31, 2006:            |  |               |           |                      |   |                       |  |   |            |   |  |   |          
|State and county municipals   |  | $             | 644,912   |                      | $ | 1,896                 |  | $ | (10,265    | ) |  | $ | 636,543  
|                              |  |               |           |                      |   |                       |  |   |            |   |  |   |          

The market value of investment securities is based on quoted market values and is significantly affected by the
interest rate environment. At December 31, 2007 and 2006, all unrealized losses in the investment securities portfolio were for debt securities. These unrealized losses are considered temporary because of acceptable investment grades and our
ability to hold these securities until a market price recovery or maturity.

Information pertaining to securities with gross unrealized losses, aggregated
by investment category and length of time individual securities have been in a continuous loss position, follows:



|                              |  |                     |         |                  |                   |         |            |       |                  |           |  |            |          |                  |  |   |           |  |   |          |  
|----------------------------- |  | ------------------- | ------- | ---------------- | ----------------- | ------- | ---------- | ----- | ---------------- | --------- |  | ---------- | -------- | ---------------- |  | - | --------- |  | - | -------- | -
|                              |  | Less than 12 Months |         |                  | 12 Months or More |         |            | Total |                 
|                              |  | Fair Value          |         | UnrealizedLosses |                   |         | Fair Value |       | UnrealizedLosses |           |  | Fair Value |          | UnrealizedLosses | 
|December 31, 2007:            |  |                     |         |                  |                   |         |            |       |                  |           |  |            |          |                  |  |   |           |  |   |          |  
|Government sponsored agencies |  | $                   |        |                  | $                 |        |            |       | $                | 1,205,484 |  | $          | (16,456  | )                |  | $ | 1,205,484 |  | $ | (16,456  | )
|State and county municipals   |  |                     | 490,000 |                  |                   | (10,000 | )          |       |                  | 1,285,180 |  |            | (13,070  | )                |  |   | 1,775,180 |  |   | (23,070  | )
|Mortgage-backed securities    |  |                     |        |                  |                   |        |            |       |                  | 1,202,916 |  |            | (33,580  | )                |  |   | 1,202,916 |  |   | (33,580  | )
|                              |  |                     |         |                  |                   |         |            |       |                  |           |  |            |          |                  |  |   |           |  |   |          |  
|                              |  | $                   | 490,000 |                  | $                 | (10,000 | )          |       | $                | 3,693,580 |  | $          | (63,106  | )                |  | $ | 4,183,580 |  | $ | (73,106  | )
|                              |  |                     |         |                  |                   |         |            |       |                  |           |  |            |          |                  |  |   |           |  |   |          |  
|December 31, 2006:            |  |                     |         |                  |                   |         |            |       |                  |           |  |            |          |                  |  |   |           |  |   |          |  
|Government sponsored agencies |  | $                   | 499,300 |                  | $                 | (336    | )          |       | $                | 3,230,633 |  | $          | (52,936  | )                |  | $ | 3,729,933 |  | $ | (53,272  | )
|State and county municipals   |  |                     | 245,000 |                  |                   | (5,000  | )          |       |                  | 187,985   |  |            | (5,265   | )                |  |   | 432,985   |  |   | (10,265  | )
|Mortgage-backed securities    |  |                     |        |                  |                   |        |            |       |                  | 1,431,618 |  |            | (55,366  | )                |  |   | 1,431,618 |  |   | (55,366  | )
|                              |  |                     |         |                  |                   |         |            |       |                  |           |  |            |          |                  |  |   |           |  |   |          |  
|                              |  | $                   | 744,300 |                  | $                 | (5,366  | )          |       | $                | 4,850,236 |  | $          | (113,567 | )                |  | $ | 5,594,536 |  | $ | (118,903 | )
|                              |  |                     |         |                  |                   |         |            |       |                  |           |  |            |          |                  |  |   |           |  |   |          |  



10



---

The amortized cost and fair value of debt securities available for sale as of December 31, 2007 by contractual
maturity are shown below. Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.



|                           |  |                    |           |                  |   |               |  |           |           |  |   |          
|-------------------------- |  | ------------------ | --------- | ---------------- | - | ------------- |  | --------- | --------- |  | - | ---------
|                           |  | Available for Sale |           | Held to Maturity
|                           |  | AmortizedCost      |           | FairValue        |   | AmortizedCost |  | FairValue
|Due in one year or less    |  | $                  | 1,001,811 |                  | $ | 996,650       |  | $         |          |  | $ |         
|Due from one to five years |  |                    | 3,032,344 |                  |   | 3,058,348     |  |           | 173,250   |  |   | 171,430  
|Due from five to ten years |  |                    | 1,336,727 |                  |   | 1,358,475     |  |           | 201,424   |  |   | 202,814  
|Due after ten years        |  |                    | 1,997,500 |                  |   | 2,011,200     |  |           | 1,625,000 |  |   | 1,603,750
|Mortgage backed securities |  |                    | 1,902,588 |                  |   | 1,858,534     |  |           |          |  |   |         
|                           |  |                    |           |                  |   |               |  |           |           |  |   |          
|                           |  | $                  | 9,270,970 |                  | $ | 9,283,207     |  | $         | 1,999,674 |  | $ | 1,977,994
|                           |  |                    |           |                  |   |               |  |           |           |  |   |          

There were no sales of securities for the years ended December 31, 2007 and 2006.

Investment securities with a carrying amount of $1,512,629 and $652,152 at December 31, 2007 and 2006, respectively, were pledged as collateral on public deposits
and for other purposes as required by law.

NOTE 3. LOANS

The composition of loans is summarized as follows:



|                               |  |              |             |   |      |   |             |  
|------------------------------ |  | ------------ | ----------- | - | ---- | - | ----------- | -
|                               |  | December 31, |            
|                               |  | 2007         |             |   | 2006 |  
|Commercial                     |  | $            | 19,031,997  |   |      | $ | 6,946,346   |  
|Real estate  construction     |  |              | 37,310,324  |   |      |   | 25,002,006  |  
|Real estate  mortgage         |  |              | 19,212,502  |   |      |   | 12,846,584  |  
|Real estate  commercial       |  |              | 100,505,031 |   |      |   | 72,088,049  |  
|Consumer installment and other |  |              | 1,993,067   |   |      |   | 2,108,892   |  
|                               |  |              |             |   |      |   |             |  
|                               |  |              | 178,052,921 |   |      |   | 118,991,877 |  
|Deferred loan fees             |  |              | (18,351     | ) |      |   | (64,357     | )
|Allowance for loan losses      |  |              | (1,849,044  | ) |      |   | (1,235,044  | )
|                               |  |              |             |   |      |   |             |  
|Loans, net                     |  | $            | 176,185,526 |   |      | $ | 117,692,476 |  
|                               |  |              |             |   |      |   |             |  

Changes in the allowance for loan losses are as follow:



|                                           |  |              |           |      |   |           |  
|------------------------------------------ |  | ------------ | --------- | ---- | - | --------- | -
|                                           |  | December 31, |          
|                                           |  | 2007         |           | 2006 |  
|Balance, beginning of year                 |  | $            | 1,235,044 |      | $ | 878,845   |  
|Provision for loan losses                  |  |              | 614,000   |      |   | 356,092   |  
|Loans charged off                          |  |              |          |      |   | (1,567    | )
|Recoveries of loans previously charged off |  |              |          |      |   | 1,674     |  
|                                           |  |              |           |      |   |           |  
|Balance, end of year                       |  | $            | 1,849,044 |      | $ | 1,235,044 |  
|                                           |  |              |           |      |   |           |  



11



---

The following is a summary of information pertaining to impaired loans, nonaccrual loans and loans past due 90 days or
more:



|                                                            |  |                                           |           |      |   |  
|----------------------------------------------------------- |  | ----------------------------------------- | --------- | ---- | - | -
|                                                            |  | As of and for the Years EndedDecember 31,
|                                                            |  | 2007                                      |           | 2006
|Impaired loans with a valuation allowance                   |  | $                                         | 2,812,672 |      | $ | 
|Impaired loans without a valuation allowance                |  |                                           | 1,531,912 |      |   | 
|                                                            |  |                                           |           |      |   |  
|Total impaired loans                                        |  | $                                         | 4,344,584 |      | $ | 
|                                                            |  |                                           |           |      |   |  
|Valuation allowance related to impaired loans               |  | $                                         | 104,752   |      | $ | 
|Total nonaccrual loans                                      |  | $                                         | 128,113   |      | $ | 
|Total loans past due ninety days or more and still accruing |  | $                                         | 200,253   |      | $ | 
|Average investment in impaired loans                        |  | $                                         | 29,399    |      | $ | 
|Interest income recognized on impaired loans                |  | $                                         |          |      | $ | 

In the ordinary course of business, the Bank has granted loans to certain related parties, including executive
officers, directors and their affiliates. The interest rates on these loans were substantially the same as rates prevailing at the time of the transaction and repayment terms are customary for the type of loan. Changes in related party loans for the
year ended December 31, 2007 are as follows:



|                           |  |   |            |  
|-------------------------- |  | - | ---------- | -
|Balance, beginning of year |  | $ | 3,601,420  |  
|Advances                   |  |   | 1,254,039  |  
|Repayments                 |  |   | (1,575,324 | )
|                           |  |   |            |  
|Balance, end of year       |  | $ | 3,280,135  |  
|                           |  |   |            |  

NOTE 4. PREMISES AND EQUIPMENT

Premises and equipment is summarized as follows:



|                                          |  |              |           |   |      |   |           |  
|----------------------------------------- |  | ------------ | --------- | - | ---- | - | --------- | -
|                                          |  | December 31, |          
|                                          |  | 2007         |           |   | 2006 |  
|Land and land improvements                |  | $            | 3,475,218 |   |      | $ | 3.468,058 |  
|Buildings                                 |  |              | 3,101,282 |   |      |   | 2,749,091 |  
|Furniture and equipment                   |  |              | 1,606,507 |   |      |   | 1,012,799 |  
|Computer software                         |  |              | 253,191   |   |      |   | 207,059   |  
|                                          |  |              |           |   |      |   |           |  
|                                          |  |              | 8,436,198 |   |      |   | 7,437,007 |  
|Accumulated depreciation and amortization |  |              | (894,811  | ) |      |   | (605,228  | )
|                                          |  |              |           |   |      |   |           |  
|                                          |  | $            | 7,541,387 |   |      | $ | 6,831,779 |  
|                                          |  |              |           |   |      |   |           |  

Depreciation expense for the years ended December 31, 2007 and 2006 was $289,583 and $190,463, respectively.
Subsequent to December 31, 2007 the Company entered into a contract for the construction of a branch totaling

Pursuant to the terms of noncancelable
lease agreements in effect at December 31, 2007, pertaining to banking premises and equipment, future minimum rent commitments under various operating leases are as follows:



|                         |  |        |       
|------------------------ |  | ------ | ------
|Years Ended December 31, |  | Amount
|2008                     |  | $      | 29,495
|2009                     |  |        | 9,832 
|                         |  |        |       
|                         |  | $      | 39,327
|                         |  |        |       

The leases contain options to extend for periods from two to four years. The cost of such rentals is not included
above. Total rent expense for the years ended December 31, 2007 and 2006 amounted to $27,518 and $19,844, respectively.



12



---

NOTE 5. DEPOSITS

The
aggregate amount of time deposits in denominations of $100,000 or more at December 31, 2007 and 2006 was $40,782,596 and $32,700,155. The scheduled maturities of time deposits at December 31, 2007 are as follows:



|                    |  |   |            
|------------------- |  | - | -----------
|2008                |  | $ | 102,147,555
|2009                |  |   | 10,248,886 
|2010                |  |   | 1,858,094  
|2011                |  |   | 1,149,796  
|2012                |  |   | 1,042,785  
|2013 and thereafter |  |   | 99,000     
|                    |  |   |            
|                    |  | $ | 116,546,116
|                    |  |   |            

The Bank had brokered deposits of $16,495,000 and $9,354,000 at December 31, 2007 and 2006, respectively.

NOTE 6. OTHER BORROWINGS

Federal Home Loan Bank
(FHLB) advances as of December 31, 2007 and 2006 are summarized as follows:



|                  |  |                 |  |              |            |      |   |          
|----------------- |  | --------------- |  | ------------ | ---------- | ---- | - | ---------
|                  |  |                 |  | December 31,
|                  |  | Maturity Date   |  | 2007         |            | 2006
|4.20% Fixed rate  |  | October 3, 2016 |  | $            | 9,100,000  |      | $ | 9,100,000
|4.286% Fixed rate |  | March 9, 2012   |  |              | 3,000,000  |      |   |         
|4.82% Fixed rate  |  | June 29, 2012   |  |              | 1,000,000  |      |   |         
|                  |  |                 |  |              |            |      |   |          
|                  |  |                 |  | $            | 13,100,000 |      | $ | 9,100,000
|                  |  |                 |  |              |            |      |   |          

The advances from the FHLB are secured by certain qualifying loans of $23,894,886 and FHLB stock of $843,400.

Advances on a line of credit as of December 31, 2007 and 2006 are summarized as follows:



|                                                        |  |                    |  |              |           |      |   |  
|------------------------------------------------------- |  | ------------------ |  | ------------ | --------- | ---- | - | -
|                                                        |  |                    |  | December 31,
|                                                        |  | Maturity Date      |  | 2007         |           | 2006
|Prime minus 0.75% floating (6.50% at December 31, 2007) |  | September 12, 2008 |  |              | 1,000,000 |      |   | 
|                                                        |  |                    |  |              |           |      |   |  
|                                                        |  |                    |  | $            | 1,000,000 |      | $ | 
|                                                        |  |                    |  |              |           |      |   |  

In addition, the Bank has available unused lines of credit with various financial institutions totaling
$12,500,000 at December 31, 2007.

NOTE 7. INCOME TAXES

Income taxes consist of the following:



|             |  |                          |          |   |      |   |          |  
|------------ |  | ------------------------ | -------- | - | ---- | - | -------- | -
|             |  | Years Ended December 31, |         
|             |  | 2007                     |          |   | 2006 |  
|Current      |  | $                        | 722,776  |   |      | $ | 567,113  |  
|Deferred     |  |                          | (238,043 | ) |      |   | (156,532 | )
|             |  |                          |          |   |      |   |          |  
|Income taxes |  | $                        | 484,733  |   |      | $ | 410,581  |  
|             |  |                          |          |   |      |   |          |  

The Companys income tax differs from the amounts computed by applying the federal income tax statutory rates
to income before income taxes. A reconciliation of the differences as of December 31, 2007 and 2006 is as follows:



|                                        |  |                          |         |   |      |   |         |  
|--------------------------------------- |  | ------------------------ | ------- | - | ---- | - | ------- | -
|                                        |  | Years Ended December 31, |        
|                                        |  | 2007                     |         |   | 2006 |  
|Tax provision at federal statutory rate |  | $                        | 392,249 |   |      | $ | 388,328 |  
|Tax-free income                         |  |                          | (19,075 | ) |      |   | (4,743  | )
|Disallowed interest expense             |  |                          | 4,557   |   |      |   | 1,034   |  
|Incentive stock compensation            |  |                          | 43,877  |   |      |   | 38,491  |  
|State income tax                        |  |                          | 29,500  |   |      |   | 19,117  |  
|Other items, net                        |  |                          | 33,625  |   |      |   | (31,646 | )
|                                        |  |                          |         |   |      |   |         |  
|Income taxes                            |  | $                        | 484,733 |   |      | $ | 410,581 |  
|                                        |  |                          |         |   |      |   |         |  



13



---

The components of deferred taxes are as follows:



|                                     |  |              |         |      |   |        
|------------------------------------ |  | ------------ | ------- | ---- | - | -------
|                                     |  | December 31,
|                                     |  | 2007         |         | 2006
|Deferred income tax assets:          |  |              |         |      |   |        
|Loan loss reserves                   |  | $            | 658,554 |      | $ | 426,856
|Preopening and organization expenses |  |              | 12,473  |      |   | 19,387 
|Non-qualified stock compensation     |  |              | 118,009 |      |   | 62,185 
|Securities available for sale        |  |              |        |      |   | 40,283 
|                                     |  |              |         |      |   |        
|                                     |  |              | 789,036 |      |   | 548,711
|                                     |  |              |         |      |   |        
|Deferred income tax liabilities:     |  |              |         |      |   |        
|Depreciation                         |  |              | 148,962 |      |   | 103,667
|Securities available for sale        |  |              | 4,620   |      |   |       
|Other items                          |  |              |        |      |   | 2,730  
|                                     |  |              |         |      |   |        
|                                     |  |              | 153,582 |      |   | 106,397
|                                     |  |              |         |      |   |        
|Net deferred income taxes            |  | $            | 635,454 |      | $ | 442,314
|                                     |  |              |         |      |   |        

NOTE 8. COMMITMENTS AND CONTINGENCIES

Loan Commitments

The Bank is a party to financial instruments with off-balance sheet risk in the normal course of
business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. They involve, to varying degrees, elements of credit risk and interest rate risk in excess of the
amount recognized in the balance sheets. The majority of all commitments to extend credit and standby letters of credit are variable rate instruments.

The
Banks exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. The Bank
uses the same credit policies in making commitments as it does for on-balance sheet instruments. A summary of the Banks commitments is as follow:



|                            |  |              |            |      |   |           
|--------------------------- |  | ------------ | ---------- | ---- | - | ----------
|                            |  | December 31,
|                            |  | 2007         |            | 2006
|Commitment to extend credit |  | $            | 33,158,000 |      | $ | 30,576,000
|Letters of credit           |  |              | 20,000     |      |   | 20,000    
|                            |  |              |            |      |   |           
|                            |  | $            | 33,178,000 |      | $ | 30,596,000
|                            |  |              |            |      |   |           

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any
condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash requirements. The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on managements credit evaluation for the party. Collateral held
varies, but may include property and equipment, residential real estate and income-producing commercial properties.

Standby letters of credit are
conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements. The credit risk involved in issuing letters of credit
is essentially the same as that involved in extending loans to customers. Collateral held varies as specified above and is required in instances which the Bank deems necessary.

At December 31, 2007 and 2006, the carrying amount of liabilities related to the Banks obligation to perform under standby letters of credit was insignificant. The Bank has not been required to perform on
any standby letters of credit, and the Bank has not incurred any losses on standby letters of credit for the years ended December 31, 2007 and 2006.

Contingencies

In the normal course of business, the Company is involved in various legal proceedings. In the opinion of management, any
liability resulting from such proceedings would not have a material effect on the Companys financial statements.



14



---

NOTE 9. CONCENTRATIONS OF CREDIT

The Bank originates primarily commercial, residential and consumer loans to customers in its primary market area. The ability of the majority of the Banks customers to honor their contractual loan obligations is
dependent on the economy in these areas. Eighty-eight percent of the Banks loan portfolio is secured by real estate, of which a substantial portion is secured by real estate in the Banks market area.

The Bank, as a matter of policy, does not generally extend credit to any single borrower or group of related borrowers in excess of 25% of the Banks statutory
capital or approximately $4,272,000.

NOTE 10. STOCK OPTIONS

The Company has a Stock Option Plan (Plan) that offers stock options to key employees and directors to encourage continued employment by facilitating their purchase of an equity interest in the Company. The options granted under
the Plan may either be incentive stock options or non-qualified stock options as specified in the option agreement. These options are granted at the discretion of the Board of Directors at an exercise price at least equal to the fair market value of
the common stock on the date of the grant. The options have a term of ten years from the date of grant and vest ratably over varying vesting periods. A total of 383,502 shares have been reserved under the Plan.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes-Merton option-pricing model with the weighted-average assumptions listed in
the table below. Expected volatility is based on expected volatility of similar entities. Expected dividends are based on anticipated dividends over the expected life and the market price of the Companys stock price at grant date. Historical
data is used to estimate option exercises and employee terminations within the valuation mode. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The
expected life of the options granted is estimated based on the short-cut method. There were no stock options granted during the year ended December 31, 2007. The following assumptions were used for the year ended December 31, 2006.



|                                                                    |  |      |           |  
|------------------------------------------------------------------- |  | ---- | --------- | -
|                                                                    |  | 2006 |          
|Weighted-average risk-free interest rate                            |  |      | 4.71      | %
|Expected life of the options                                        |  |      | 6.5 years |  
|Expected dividends (as a percentage of the fair value of the stock) |  |      | 1.10      | %
|Expected volatility                                                 |  |      | 17.34     | %
|Weighted-average grant date fair value                              |  | $    | 3.67      |  

A summary of activity of the Companys Stock Plan is as follows:



|                                 |  |         |  |                                |      
|-------------------------------- |  | ------- |  | ------------------------------ | -----
|                                 |  | 2007   
|                                 |  | Number  |  | Weighted-AverageExercise Price
|Outstanding at beginning of year |  | 380,705 |  | $                              | 11.68
|Granted                          |  |        |  |                                |      
|Exercised                        |  |        |  |                                |      
|Forfeited/Expired                |  |        |  |                                |      
|                                 |  |         |  |                                |      
|Outstanding at end of year       |  | 380,705 |  |                                | 11.68
|                                 |  |         |  |                                |      
|Options exercisable at year-end  |  | 199,732 |  |                                | 11.67
|                                 |  |         |  |                                |      

The weighted-average fair value of options granted during the year ended December 31, 2007 and 2006 was $-0-
and $3.06, respectively.



15



---

Information pertaining to options outstanding December 31, 2007 as follows:



|                    |  |                                          |  |                               |       |                         |   |                   |  |                               |  |   |      
|------------------- |  | ---------------------------------------- |  | ----------------------------- | ----- | ----------------------- | - | ----------------- |  | ----------------------------- |  | - | -----
|Options Outstanding |  | Options Exercisable                     
|Number Outstanding  |  | Weighted-Averageremainingcontractuallife |  | Weighted-Averageexerciseprice |       | AggregateIntrinsicValue |   | Numberexercisable |  | Weighted-averageexerciseprice
|380,705             |  | 7.78                                     |  | $                             | 11.67 |                         | $ | -0-               |  | 199,732                       |  | $ | 11.67

As of December 31, 2007, the weighted-average remaining contractual life of the options outstanding was 7.78
years.



|                                      |  |                |   |  |                                      |     
|------------------------------------- |  | -------------- | - |  | ------------------------------------ | ----
|                                      |  | Numberofshares |   |  | Weighted-AverageGrant Date FairValue
|Non-vested options, December 31, 2006 |  | 271,666        |   |  | $                                    | 3.78
|Granted                               |  |               |   |  | $                                    |    
|Vested                                |  | (90,693        | ) |  | $                                    | 3.78
|Forfeited/Expired                     |  |               |   |  | $                                    |    
|                                      |  |                |   |  |                                      |     
|Non-vested options, December 31, 2007 |  | 180,973        |   |  | $                                    | 3.78
|                                      |  |                |   |  |                                      |     

There were no options exercised during the years ended December 31, 2007 and 2006. The total fair value of
options vested during the years ended December 31, 2007 and 2006 was $342,674 and $104,275, respectively.

The compensation cost charged against
income for the years ended December 31, 2007 and 2006 was $332,398 and $277,999, respectively. Income tax benefits recognized for the years ended December 31, 2007 and 2006 was $67,005 and $62,185, respectively.

At December 31, 2007, there was approximately $317,000 of unrecognized compensation cost related to stock-based payments, which is expected to be recognized over a
weighted-average period of 0.73 years.

NOTE 11. REGULATION MATTERS

The Bank is subject to certain restrictions on the amount of dividends that may be declared without prior regulator approval. At December 31, 2007, approximately $346,000 of retained earnings were available for
dividend declaration without regulatory approval.

The Company and Bank are subject to various capital requirements administered by the Federal banking
agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possible additional discretionary regulatory actions by regulators that, if undertaken, could have a direct material effect on the Company and Banks
consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and Bank must meet specific capital guidelines that involve quantitative measures of their assets,
liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Company and Banks capital classification is also subject to qualitative judgments by the regulators about components, risk weighting, and
other factors.

Quantitative measures established by regulation to ensure capital adequacy requires the Bank to maintain minimum amounts and ratios (set
forth in the table below) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier I capital (as defined) to average assets (as defined). Management believes, as of December 31, 2007 and
2006, that the Company and Bank met all capital adequacy requirements to which they are subject.

As of December 31, 2007, the most recent
notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum total risk-baked,
Tier I risk-based and Tier I leverage ratios as set forth in the following table. There are no conditions or events since that notification that management believes have changed the institutions category. Prompt corrective action provisions
are not applicable to bank holding companies.



16



---

The Banks actual capital amounts (in thousands) and ratios are presented in the following table.



|                                         |  |        |        |       |                   |   |        |                                                                |        |  |      |        |  |       |        |  |      |  
|---------------------------------------- |  | ------ | ------ | ----- | ----------------- | - | ------ | -------------------------------------------------------------- | ------ |  | ---- | ------ |  | ----- | ------ |  | ---- | -
|                                         |  | Actual |        |       | AdequacyPurposes: |   |        | To Be WellCapitalized UnderPrompt CorrectiveAction Provisions: |       
|                                         |  | Amount |        | Ratio |                   |   | Amount |                                                                | Ratio  |  |      | Amount |  | Ratio |       
|As of December 31, 2007:                 |  |        |        |       |                   |   |        |                                                                |        |  |      |        |  |       |        |  |      |  
|Total Capital (to Risk Weighted Assets)  |  |        |        |       |                   |   |        |                                                                |        |  |      |        |  |       |        |  |      |  
|Consolidated                             |  | $      | 19,012 |       | 9.6               | % |        | $                                                              | 15,838 |  | 8.00 | %      |  | $     | 19,797 |  | 10.0 | %
|Bank                                     |  | $      | 20,000 |       | 10.1              | % |        | $                                                              | 15,837 |  | 8.0  | %      |  | $     | 19,796 |  | 10.0 | %
|Tier I Capital (to Risk Weighted Assets) |  |        |        |       |                   |   |        |                                                                |        |  |      |        |  |       |        |  |      |  
|Consolidated                             |  | $      | 17,163 |       | 8.7               | % |        | $                                                              | 7,919  |  | 4.0  | %      |  | $     | 11,878 |  | 6.0  | %
|Bank                                     |  | $      | 18,151 |       | 9.2               | % |        | $                                                              | 7,918  |  | 4.0  | %      |  | $     | 11,877 |  | 6.0  | %
|Tier I Capital (to Average Assets)       |  |        |        |       |                   |   |        |                                                                |        |  |      |        |  |       |        |  |      |  
|Consolidated                             |  | $      | 17,163 |       | 8.7               | % |        | $                                                              | 7,220  |  | 4.0  | %      |  | $     | 9,025  |  | 5.0  | %
|Bank                                     |  | $      | 18,151 |       | 9.2               | % |        | $                                                              | 7,917  |  | 4.0  | %      |  | $     | 9,896  |  | 5.0  | %
|                                         |  |        |        |       |                   |  
|As of December 31, 2006: (Bank Only)     |  |        |        |       |                   |   |        |                                                                |        |  |      |        |  |       |        |  |      |  
|Total Capital (to Risk Weighted Assets)  |  | $      | 17,452 |       | 12.8              | % |        | $                                                              | 10,873 |  | 8.0  | %      |  | $     | 13,591 |  | 10.0 | %
|Tier I Capital (to Risk Weighted Assets) |  | $      | 16,217 |       | 11.9              | % |        | $                                                              | 5,436  |  | 4.0  | %      |  | $     | 8,154  |  | 6.0  | %
|Tier I Capital (to Average Assets)       |  | $      | 16,217 |       | 12.8              | % |        | $                                                              | 5,085  |  | 4.0  | %      |  | $     | 6,356  |  | 5.0  | %

NOTE 12. FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair value of a financial instrument is the current amount that would be exchanged between willing parties, other than in a forced liquidation. Fair value is best determined based upon quoted market prices.
However, in many instances, there are no quoted market prices for the Companys various financial instruments. In cases where quoted market prices are not available, fair value is based on discounted cash flows or other valuation techniques.
These techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. FASB
Statement No. 107, Disclosures about Fair Value of Financial Instruments, excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented
may not necessarily represent the underlying fair value of the Company.

The following methods and assumptions were used by the Company in estimating the
fair value of its financial instruments:

Cash and due from banks and interest bearing deposits with other banks: Fair value equals the carrying value of
such assets.

Investment securities and investment securities available for sale: Fair values for investment securities are based on bond accounting
reports.

Loans: For variable rate loans, those repricing within six months or less, fair values are based on carrying values. Fixed rate commercial loans,
other installment loans, and certain real estate mortgage loans were valued using discounted cash flows. The discount rates used to determine the present value of these loans were based on interest rates currently being charged by the bank on
comparable loans as to credit risk term.

Deposit liabilities: The fair values of demand deposits are, as required by FAS107, equal to the carrying value
of such deposits. Demand deposits include non-interest-bearing demand deposits, savings accounts, NOW accounts, and money market demand accounts. Discounted cash flaws are used to value fixed rate term deposits. The discount rate used is based on
interest rates currently being offered by the bank on comparable deposits as to amount and term.

Short term borrowings: The carrying values of federal
funds purchased, securities sold under agreements to repurchase and other short-term borrowings approximate their carrying values.

FHLB and other
Borrowings: The fair value of fixed rate borrowings are estimated using discounted cash flows, based on current incremental borrowing rates for similar types of borrowing arrangements. The carrying amount on variable rate borrowings approximates
their fair value. The fair value of convertible GHLB Borrowings is based on FHLB of Atlantas estimate.



17



---

Accrued Interest: The carrying amount of accrued interest approximates their fair value.

Off-Balance Sheet Instruments: Loan commitments are negotiated at current market rates and are relatively short-term in nature. Therefore, the estimated value of loan
commitments approximates the fees charged.

The carrying amount and estimated fair values of the Companys financial instruments are as follows:



|                                                                                |  |                |         |            |   |                |  |            |         |  |   |        
|------------------------------------------------------------------------------- |  | -------------- | ------- | ---------- | - | -------------- |  | ---------- | ------- |  | - | -------
|                                                                                |  | December 31,  
|                                                                                |  | 2007           |         | 2006      
|                                                                                |  | CarryingAmount |         | Fair Value |   | CarryingAmount |  | Fair Value
|                                                                                |  | (In Thousands)
|Financial assets:                                                               |  |                |         |            |   |                |  |            |         |  |   |        
|Cash, due from banks, interest-bearing deposits in banks and federal funds sold |  | $              | 10,448  |            | $ | 10,448         |  | $          | 7,006   |  | $ | 7,006  
|Securities                                                                      |  |                | 12,399  |            |   | 12,377         |  |            | 7,575   |  |   | 7,567  
|Loans                                                                           |  |                | 176,186 |            |   | 176,916        |  |            | 117,692 |  |   | 117,339
|Accrued interest receivable                                                     |  |                | 1,921   |            |   | 1,921          |  |            | 1,376   |  |   | 1,376  
|Financial liabilities:                                                          |  |                |         |            |   |                |  |            |         |  |   |        
|Deposits                                                                        |  |                | 180,436 |            |   | 180,669        |  |            | 112,085 |  |   | 112,051
|Federal funds purchased                                                         |  |                |        |            |   |               |  |            | 1,978   |  |   | 1,978  
|Other borrowings                                                                |  |                | 14,100  |            |   | 14,569         |  |            | 11,078  |  |   | 11,054 
|Accrued interest payable                                                        |  |                | 948     |            |   | 948            |  |            | 941     |  |   | 941    
|Unrecognized financial instruments-                                             |  |                |         |            |   |                |  |            |         |  |   |        
|Commitments to extend credit and standby letters of credit                      |  |                | 33,178  |            |   | 295            |  |            | 30,467  |  |   | 284    

NOTE 13. SUPPLEMENTAL FINANCIAL DATA

Components of other operating expense are as follows:



|                         |  |                          |           |      |   |        
|------------------------ |  | ------------------------ | --------- | ---- | - | -------
|                         |  | Years Ended December 31,
|                         |  | 2007                     |           | 2006
|Data processing          |  | $                        | 177,793   |      | $ | 163,695
|Professional services    |  |                          | 303,716   |      |   | 110,269
|All other operating      |  |                          | 1,020,863 |      |   | 578,453
|                         |  |                          |           |      |   |        
|Other operating expenses |  | $                        | 1,502,372 |      | $ | 929,054
|                         |  |                          |           |      |   |        

NOTE 14. PARENT COMPANY FINANCIAL INFORMATION

The following information presents the condensed balance sheet as of December 31, 2007 and statements of income and cash flows of Piedmont Community Bank Group, Inc. for the period ended December 31, 2007.



|                                           |  |      |           
|------------------------------------------ |  | ---- | ----------
|                                           |  | 2007
|Assets                                     |  |      |           
|Investment in subsidiary                   |  | $    | 18,158,452
|Other assets                               |  |      | 14,182    
|                                           |  |      |           
|Total assets                               |  | $    | 18,172,634
|                                           |  |      |           
|Liabilities                                |  |      |           
|Note payable                               |  | $    | 1,000,000 
|Other liabilities                          |  |      | 2,167     
|                                           |  |      |           
|Total liabilities                          |  |      | 1,002,167 
|Shareholders equity                       |  |      | 17,170,467
|                                           |  |      |           
|Total liabilities and shareholders equity |  | $    | 18,172,634
|                                           |  |      |           



18



---

|                                                                                |  |      |         |  
|------------------------------------------------------------------------------- |  | ---- | ------- | -
|                                                                                |  | 2007 |        
|Income                                                                          |  |      |         |  
|Dividends from subsidiary                                                       |  | $    | 35,840  |  
|                                                                                |  |      |         |  
|Total income                                                                    |  |      | 35,840  |  
|                                                                                |  |      |         |  
|Expenses                                                                        |  |      |         |  
|Interest on other borrowings                                                    |  |      | 2,167   |  
|Other expense                                                                   |  |      | 35,415  |  
|                                                                                |  |      |         |  
|Total expenses                                                                  |  |      | 37,582  |  
|                                                                                |  |      |         |  
|Loss before income tax benefit and equity in undistributed income of subsidiary |  |      | (1.742  | )
|Income tax benefit                                                              |  |      | 14,182  |  
|                                                                                |  |      |         |  
|Income before equity in undistributed income of subsidiary                      |  |      | 12,440  |  
|Equity in undistributed income of subsidiary                                    |  |      | 512,400 |  
|                                                                                |  |      |         |  
|Net income                                                                      |  | $    | 524,840 |  
|                                                                                |  |      |         |  

The consolidated net income of Piedmont Community Bank Group, Inc. includes the income of the Bank, prior to the
business combination, of $120,701. The net income of the parent company only includes the net income of the Bank subsequent to the business combination.



|                                                                                 |  |      |            |  
|-------------------------------------------------------------------------------- |  | ---- | ---------- | -
|                                                                                 |  | 2007 |           
|Operating activities                                                             |  |      |            |  
|Net income                                                                       |  | $    | 524,840    |  
|Adjustment to reconcile net income to net cash provided by operating activities: |  |      |            |  
|Undistributed income of subsidiary                                               |  |      | (512,400   | )
|Other operating activities                                                       |  |      | (12,015    | )
|                                                                                 |  |      |            |  
|Net cash provided by operating activities                                        |  |      | 425        |  
|                                                                                 |  |      |            |  
|Investing activities                                                             |  |      |            |  
|Capital injection into subsidiary                                                |  |      | (1,000,000 | )
|                                                                                 |  |      |            |  
|Net cash provided by financing activities                                        |  |      | (1,000,000 | )
|                                                                                 |  |      |            |  
|Financing activities                                                             |  |      |            |  
|Proceeds from note payable                                                       |  |      | 1,000,000  |  
|Repayment of note payable                                                        |  |      | (425       | )
|                                                                                 |  |      |            |  
|Net cash provided by financing activities                                        |  |      | (1,000,425 | )
|                                                                                 |  |      |            |  
|Net increase in cash                                                             |  |      |           |  
|Cash at beginning of period                                                      |  |      |           |  
|                                                                                 |  |      |            |  
|Cash at end of period                                                            |  | $    |           |  
|                                                                                 |  |      |            |  

NOTE 15. STOCK SPLIT

On April 19, 2007, the Board of Directors of Piedmont Community Bank Group, Inc. declared a 1.2 for 1 stock split payable on May 10, 2007 to shareholders of record as of April 30, 2007. As a part of the split, each
shareholder received an additional one share of common stock for each five shares of common stock owned. All per share amounts in all periods have been retroactively adjusted for this split as if it occurred in the first year presented.

NOTE 16. STOCK OFFERING

On September 9, 2007, the Company
filed a Registration Statement of Form SB-2 to register up to 600,000 shares of its common stock for sale in a public offering. The commencement of the proposed sale to the public is as soon as possible after the Registration Statement Becomes
effective. The Company intends to use the proceeds of the offering for general corporate purposes, including the opening of new branches and working capital to expand our business.



19