##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D. C. 20549
 
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
1934.
 For the quarterly period ended: June 30, 2006
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
1934.
 For the transition period from  to
 Commission File Number: 000-51957
 FGBC BANCSHARES, INC.
  Georgia
    
    20 - 02743161(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification Number)
 101 Main Street, Franklin, Georgia 30217
 (678) 839-6870
 N/A
 o þ
  o o þ
 o þ




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##### 



INDEX
 PagePART I. FINANCIAL INFORMATION
    
    
    1Item 1. Consolidated Financial Statements
    
    
    1Consolidated Balance Sheets as of June 30, 2006 and December 31, 2005
    
    
    1Consolidated Statements of Operations and Comprehensive Income (Loss) for the
Three and Six Months Ended June 30, 2006 and 2005
    
    
    2Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 2006 and 2005
    
    
    4Notes to Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    10Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    14Item 4. Controls and Procedures
    
    
    16PART II. OTHER INFORMATION
    
    
    16Item 1. Legal Proceedings
    
    
    16Item 1A. Risk Factors
    
    
    16Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    16Item 3. Defaults Upon Senior Securities
    
    
    16Item 4. Submission of Matters to a Vote of Security Holders
    
    
    16Item 5. Other Information
    
    
    16Item 6. Exhibits
    
    
    17SIGNATURES
    
    
    17EX-31.1 CERTIFICATE OF CEO PURSUANT TO SECTION 302EX-31.2 CERTIFICATE OF CFO PURSUANT TO SECTION 302EX-32.1 CERTIFICATE OF CEO & CFO PURSUANT TO SECTION 906




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Consolidated Financial Statements
 FGBC BANCSHARES, INC. AND SUBSIDIARY
 
 CONSOLIDATED BALANCE SHEETS
JUNE 30, 2006 AND DECEMBER 31, 2005
 2006
    
    
    2005(Unaudited)AssetsCash and due from banks
    
    $
    4,460,790
    
    
    $
    3,464,489Interest bearing deposits in banks
    
    
    13,919
    
    
    
    63,907Federal funds sold
    
    
    24,866,000
    
    
    
    6,116,000Securities available for sale, at fair value
    
    
    43,053,104
    
    
    
    39,815,484Restricted equity securities, at cost
    
    
    1,342,700
    
    
    
    813,900Loans
    
    
    352,124,145
    
    
    
    264,064,167Less allowance for loan losses
    
    
    4,341,780
    
    
    
    3,193,806Loans, net
    
    
    347,782,365
    
    
    
    260,870,361Premises and equipment
    
    
    18,998,017
    
    
    
    13,181,114Other assets
    
    
    3,105,724
    
    
    
    2,365,191Total assets
    
    $
    443,622,620
    
    
    $
    326,690,446Liabilities and Stockholders EquityDepositsNoninterest-bearing
    
    $
    21,711,667
    
    
    $
    12,910,879Interest-bearing
    
    
    343,350,133
    
    
    
    245,880,698Total deposits
    
    
    365,061,800
    
    
    
    258,791,577Other borrowings
    
    
    15,000,000
    
    
    
    10,000,000Other liabilities
    
    
    1,746,755
    
    
    
    957,201Total liabilities
    
    
    381,808,555
    
    
    
    269,748,778Commitments and contingenciesStockholders equityCommon stock, par value $0; 100,000,000
shares authorized; 7,153,184 shares
issued and outstanding
    
    
    65,988,472
    
    
    
    60,783,189Accumulated deficit
    
    
    (3,059,606
    )
    
    
    (2,938,628
    )Accumulated other comprehensive loss
    
    
    (1,114,801
    )
    
    
    (902,893
    )Total stockholders equity
    
    
    61,814,065
    
    
    
    56,941,668Total liabilities and stockholders equity
    
    $
    443,622,620
    
    
    $
    326,690,446
 See Notes to Consolidated Financial Statements.




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##### Table of Contents



FGBC BANCSHARES, INC. AND SUBSIDIARY
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
THREE MONTHS ENDED JUNE 30, 2006 AND 2005
AND SIX MONTHS ENDED JUNE 30, 2006 AND 2005
(Unaudited)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Interest incomeLoans
    
    $
    7,002,802
    
    
    $
    2,851,075
    
    
    $
    12,758,820
    
    
    $
    5,221,315Taxable securities
    
    
    438,188
    
    
    
    320,350
    
    
    
    816,196
    
    
    
    615,054Federal funds sold
    
    
    121,941
    
    
    
    51,969
    
    
    
    188,619
    
    
    
    107,792Total interest income
    
    
    7,562,931
    
    
    
    3,223,394
    
    
    
    13,763,635
    
    
    
    5,944,161Interest expenseDeposits
    
    
    3,242,511
    
    
    
    1,389,321
    
    
    
    5,755,925
    
    
    
    2,558,247Other borrowings
    
    
    175,131
    
    
    
    441
    
    
    
    301,423
    
    
    
    826Total interest expense
    
    
    3,417,642
    
    
    
    1,389,762
    
    
    
    6,057,348
    
    
    
    2,559,073Net interest income
    
    
    4,145,289
    
    
    
    1,833,632
    
    
    
    7,706,287
    
    
    
    3,385,088Provision for loan losses
    
    
    631,020
    
    
    
    280,143
    
    
    
    1,236,288
    
    
    
    369,380Net interest income after
provision for loan losses
    
    
    3,514,269
    
    
    
    1,553,489
    
    
    
    6,469,999
    
    
    
    3,015,708Other incomeService charges on deposit accounts
    
    
    338,494
    
    
    
    272,018
    
    
    
    622,603
    
    
    
    464,368Mortgage origination fees
    
    
    257,566
    
    
    
    128,864
    
    
    
    446,830
    
    
    
    234,237Other operating income
    
    
    32,879
    
    
    
    17,478
    
    
    
    46,924
    
    
    
    34,678Total other income
    
    
    628,939
    
    
    
    418,360
    
    
    
    1,116,357
    
    
    
    733,283Other expensesSalaries and employee benefits
    
    
    2,579,913
    
    
    
    829,747
    
    
    
    5,015,706
    
    
    
    1,566,345Occupancy and equipment expenses
    
    
    488,008
    
    
    
    174,835
    
    
    
    904,664
    
    
    
    324,817Other operating expenses
    
    
    1,017,157
    
    
    
    395,611
    
    
    
    1,786,964
    
    
    
    767,643Total other expenses
    
    
    4,085,078
    
    
    
    1,400,193
    
    
    
    7,707,334
    
    
    
    2,658,805Net income (loss) before
income taxes
    
    
    58,130
    
    
    
    571,656
    
    
    
    (120,978
    )
    
    
    1,090,186Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income (loss)
    
    
    58,130
    
    
    
    571,656
    
    
    
    (120,978
    )
    
    
    1,090,186Other comprehensive income (loss) :Unrealized gains (losses) on
securities
available-for-sale arising during
period
    
    
    (166,246
    )
    
    
    167,441
    
    
    
    (211,908
    )
    
    
    (847,753
    )Comprehensive income (loss)
    
    $
    (108,116
    )
    
    $
    739,097
    
    
    $
    (332,886
    )
    
    $
    242,433Basic earnings (losses) per share
    
    $
    0.01
    
    
    $
    0.15
    
    
    $
    (0.02
    )
    
    $
    0.30Diluted earnings per (losses) share
    
    $
    0.01
    
    
    $
    0.14
    
    
    $
    (0.02
    )
    
    $
    0.28Cash dividends per share
    
    $
    
    
    
    $
    -
    
    
    $
    
    
    
    $
    
 See Notes to Consolidated Financial Statements.
 2




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##### Table of Contents



FGBC BANCSHARES, INC. AND SUBSIDIARY
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2006 AND 2005
(Unaudited)
 2006
    
    
    2005OPERATING ACTIVITIESNet income (loss)
    
    $
    (120,978
    )
    
    $
    1,090,186Adjustments to reconcile net income (loss) to net cash
provided by operating activities:Depreciation
    
    
    343,546
    
    
    
    221,494Provision for loan losses
    
    
    1,236,288
    
    
    
    369,380Amortization and accretion of securities
    
    
    55,018
    
    
    
    82,865Stock compensation expense
    
    
    14,357
    
    
    
    Increase in interest receivable
    
    
    (715,602
    )
    
    
    (236,896
    )Loss on sale of premises and equipment
    
    
    27,038
    
    
    
    Loss on sale of repossessions
    
    
    51,209
    
    
    
    Increase in interest payable
    
    
    199,399
    
    
    
    77,474Net other operating activities
    
    
    604,831
    
    
    
    (150,514
    )Net cash provided by operating activities
    
    
    1,695,106
    
    
    
    1,453,989INVESTING ACTIVITIESIncrease in interest bearing deposits in banks
    
    
    49,988
    
    
    
    Purchases of securities available for sale
    
    
    (8,501,185
    )
    
    
    (7,985,461
    )Proceeds from maturities of securities available for
sale
    
    
    4,996,639
    
    
    
    3,027,790Purchases of restricted equity securities
    
    
    (528,800
    )
    
    
    (363,900
    )Net increase in federal funds sold
    
    
    (18,750,000
    )
    
    
    (1,280,000
    )Net increase in loans
    
    
    (88,285,248
    )
    
    
    (30,314,558
    )Purchase of premises and equipment
    
    
    (6,200,087
    )
    
    
    (314,954
    )Proceeds from sale of repossessions
    
    
    46,140
    
    
    
    Proceeds from sale of premises and equipment
    
    
    12,600
    
    
    
    Net cash used in investing activities
    
    
    (117,159,953
    )
    
    
    (37,231,083
    )FINANCING ACTIVITIESNet increase in deposits
    
    
    106,270,223
    
    
    
    30,312,033Proceeds from other borrowings
    
    
    5,000,000
    
    
    
    16,000Net decrease in federal funds purchased
    
    
    
    
    
    
    (297,000
    )Proceeds from sale of common stock
    
    
    5,190,925
    
    
    
    6,566,612Cash paid for fractional shares
    
    
    
    
    
    
    (3,148
    )Net cash provided by financing activities
    
    
    116,461,148
    
    
    
    36,594,497Net increase in cash and due from banks
    
    
    996,301
    
    
    
    817,403Cash and due from banks, beginning of period
    
    
    3,464,489
    
    
    
    3,309,061Cash and due from banks, end of period
    
    $
    4,460,790
    
    
    $
    4,126,464SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATIONCash paid during period for:Interest
    
    $
    5,857,949
    
    
    $
    2,481,599Income taxes
    
    $
    21,303
    
    
    $
    
 See Notes to Consolidated Financial Statements.
 3




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##### Table of Contents



FGBC BANCSHARES, INC.
AND SUBSIDIARY
 
 
     Accounting for Stock Issued to Employees Accounting for Stock-Based Compensation Share-Based Payment
   4




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##### Table of Contents



Three Months
    
    
    Six MonthsEnded
    
    
    EndedJune 30,
    
    
    June 30,2005
    
    
    2005Net income, as reported
    
    $
    571,656
    
    
    $
    1,090,186Deduct: Total stock-based employee compensation
expense determined under fair value based
method for all awards
    
    
    (74,390
    )
    
    
    (148,780
    )Pro forma net income
    
    $
    497,266
    
    
    $
    941,406Earnings per share:Basic  as reported
    
    $
    0.15
    
    
    $
    0.30Basic  pro forma
    
    $
    0.13
    
    
    $
    0.26Diluted  as reported
    
    $
    0.14
    
    
    $
    0.28Diluted  pro forma
    
    $
    0.12
    
    
    $
    0.24
  Six Months EndedJune 30,2006
    
    2005Risk-free interest rate
    
    
    4.60
    %
    
    
    4.49
    %Expected life of the options
    
    7 years
    
    10 yearsExpected dividends (as a percentage
of the fair value of the stock)
    
    
    0
    %
    
    
    0
    %Expected volatility
    
    
    20
    %
    
    
    N/AWeighted-average grant date fair value
    
    $
    4.30
    
    
    $
    4.39
  5




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##### Table of Contents



Six Months EndedJune 30, 2006Weighted-averageExerciseNumber
    
    PriceUnder option, beginning of period
    
    
    839,806
    
    
    $
    8.64Granted
    
    
    38,800
    
    
    
    12.50Exercised
    
    
    
    
    
    
    Forfeited
    
    
    (6,270
    )
    
    
    12.50Under option, end of period
    
    
    872,336
    
    
    
    8.79Exercisable at end of period
    
    
    283,789
    
    
    
    5.91
   Options Outstanding
    
    Options ExercisableWeighted-
    
    Weighted-
    
    
    
    
    
    Weighted-average
    
    Average
    
    
    
    
    
    AverageRange of Exercise
    
    
    
    
    
    Contractual
    
    Exercise
    
    
    
    
    
    ExercisePrices
    
    Number
    
    Life in Years
    
    Price
    
    Number
    
    Price$5.65 - $7.06
    
    
    459,973
    
    
    6.33 years
    
    $
    5.66
    
    
    
    269,303
    
    
    $
    5.65$8.82 - $12.50
    
    
    412,363
    
    
    9.09 years
    
    
    12.28
    
    
    
    14,486
    
    
    
    10.64872,336
    
    
    7.64 years
    
    $
    8.79
    
    
    
    283,789
    
    
    $
    5.91
   6




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##### Table of Contents



Three Months Ended June 30,2006
    
    
    2005Basic earnings per share:Weighted average common shares outstanding
    
    
    7,098,433
    
    
    
    3,803,485Net income
    
    $
    58,130
    
    
    $
    571,656Basic earnings per share
    
    $
    0.01
    
    
    $
    0.15Diluted earnings per share:Weighted average common shares outstanding
    
    
    7,098,433
    
    
    
    3,803,485Net effect of the assumed exercise of stock
options based on the treasury stock method
using average market prices for the year
    
    
    252,889
    
    
    
    267,198Total weighted average common shares and
common stock equivalents outstanding
    
    
    7,351,322
    
    
    
    4,070,683Net income
    
    $
    58,130
    
    
    $
    571,656Diluted earnings (losses) per share
    
    $
    0.01
    
    
    $
    0.14
 Six Months Ended June 30,2006
    
    
    2005Basic earnings (losses) per share:Weighted average common shares outstanding
    
    
    6,970,461
    
    
    
    3,656,043Net income (loss)
    
    $
    (120,978
    )
    
    $
    1,090,186Basic earnings (losses) per share
    
    $
    (0.02
    )
    
    $
    0.30Diluted earnings (losses) per share:Weighted average common shares outstanding
    
    
    6,970,461
    
    
    
    3,656,043Net effect of the assumed exercise of stock
options based on the treasury stock method
using average market prices for the year
    
    
    
    
    
    
    265,458Total weighted average common shares and
common stock equivalents outstanding
    
    
    6,970,461
    
    
    
    3,921,501Net income (loss)
    
    $
    (120,978
    )
    
    $
    1,090,186Diluted earnings (losses) per share
    
    $
    (0.02
    )
    
    $
    0.28
 7




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Critical Accounting Policies
    Liquidity and Capital Resources
   ActualRegulatoryMinimumConsolidated
    
    Bank
    
    RequirementLeverage capital ratio
    
    
    15.22
    %
    
    
    14.90
    %
    
    
    4.00
    %Risk-based capital ratios:Tier I capital
    
    
    17.18
    
    
    
    16.83
    
    
    
    4.00Total capital
    
    
    18.37
    
    
    
    18.02
    
    
    
    8.00
 Off-Balance Sheet Risk
  8




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##### Table of Contents



June 30,2006(Dollars in Thousands)Commitments to extend credit
    
    $
    65,053Letters of credit
    
    
    406$
    65,459
   Financial Condition
  June 30,
    
    
    December 31,2006
    
    
    2005(Dollars in Thousands)Cash and due from banks
    
    $
    4,461
    
    
    $
    3,464Interest-bearing deposits in banks
    
    
    14
    
    
    
    64Federal funds sold
    
    
    24,866
    
    
    
    6,116Securities
    
    
    43,053
    
    
    
    39,815Loans, net
    
    
    347,782
    
    
    
    260,870Premises and equipment
    
    
    18,998
    
    
    
    13,181Other assets
    
    
    4,448
    
    
    
    3,180$
    443,622
    
    
    $
    326,690Deposits
    
    $
    365,062
    
    
    $
    258,791Other borrowings
    
    
    15,000
    
    
    
    10,000Other liabilities
    
    
    1,746
    
    
    
    957Stockholders equity
    
    
    61,814
    
    
    
    56,942$
    443,622
    
    
    $
    326,690
  9




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##### Table of Contents



Results of Operations for the Three and Six Months Ended June 30, 2006 and 2005
  Three Months EndedJune 30,2006
    
    
    2005(Dollars in Thousands)Interest income
    
    $
    7,563
    
    
    $
    3,223Interest expense
    
    
    3,418
    
    
    
    1,390Net interest income
    
    
    4,145
    
    
    
    1,833Provision for loan losses
    
    
    631
    
    
    
    280Other income
    
    
    629
    
    
    
    419Other expense
    
    
    4,085
    
    
    
    1,400Pretax income
    
    
    58
    
    
    
    572Income taxes
    
    
    0
    
    
    
    0Net income
    
    $
    58
    
    
    $
    572
 Six Months EndedJune 30,2006
    
    
    2005(Dollars in Thousands)Interest income
    
    $
    13,763
    
    
    $
    5,944Interest expense
    
    
    6,057
    
    
    
    2,559Net interest income
    
    
    7,706
    
    
    
    3,385Provision for loan losses
    
    
    1,236
    
    
    
    369Other income
    
    
    1,117
    
    
    
    733Other expense
    
    
    7,707
    
    
    
    2,659Pretax income
    
    
    (120
    )
    
    
    1,090Income taxes
    
    
    0
    
    
    
    0Net income
    
    $
    (120
    )
    
    $
    1,090
   10




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##### Table of Contents



June 30,2006
    
    2005(Dollars in Thousands)Nonaccrual loans
    
    $
    744
    
    
    $
    165Loans contractually past due ninety days or more as to interest
or principal payments and still accruing
    
    
    0
    
    
    
    0Restructured loans
    
    
    0
    
    
    
    0Potential problem loans
    
    
    0
    
    
    
    0Interest income that would have been recorded on non-accrual
and restructured loans under original terms
    
    
    73
    
    
    
    16Interest income that was recorded on non-accrual and restructured loans
    
    
    53
    
    
    
    9
      Six Months EndedJune 30,2006
    
    
    2005(Dollars in Thousands)Average amount of loans outstanding
    
    $
    309,583
    
    
    $
    148,719Balance of allowance for loan losses at beginning of period
    
    $
    3,194
    
    
    $
    1,705Loans charged offCommercial and financial
    
    $
    (36
    )
    
    $
    (2
    )Real estate mortgage
    
    
    (0
    )
    
    
    (42
    )Installment
    
    
    (72
    )
    
    
    (36
    )(108
    )
    
    
    (80
    )
 11




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##### Table of Contents



Six Months EndedJune 30,2006
    
    
    2005(Dollars in Thousands)Loans recoveredCommercial and financial
    
    
    2
    
    
    
    0Real estate mortgage
    
    
    0
    
    
    
    0Installment
    
    
    18
    
    
    
    1320
    
    
    
    13Net charge-offs
    
    
    (88
    )
    
    
    (67
    )Additions to allowance charged to operating expense during period
    
    
    1,236
    
    
    
    370Balance of allowance for loan losses at end of period
    
    $
    4,342
    
    
    $
    2,008Ratio of net loans charged off during the period to
average loans outstanding
    
    
    .03
    %
    
    
    .04
    %
     
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
   12




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##### Table of Contents



Analysis of Interest Sensitivity
As of June 30, 2006
(Dollars in Thousands)
 0 - 3
    
    3 - 12
    
    Over 1Months
    
    Months
    
    Year
    
    TotalInterest-earning assets:Interest-bearing deposits in banks
    
    
    14
    
    
    
    0
    
    
    
    0
    
    
    
    14Securities
    
    
    4,478
    
    
    
    8,888
    
    
    
    29,687
    
    
    
    43,053FHLB stock
    
    
    1,343
    
    
    
    0
    
    
    
    0
    
    
    
    1,343Federal funds sold
    
    
    24,866
    
    
    
    0
    
    
    
    0
    
    
    
    24,866Loans
    
    
    229,944
    
    
    
    38,990
    
    
    
    83,190
    
    
    
    352,124Total interest-earning assets
    
    
    260,645
    
    
    
    47,878
    
    
    
    112,877
    
    
    
    421,400Interest-bearing liabilities:Interest-bearing demand deposits
    
    
    66,032
    
    
    
    0
    
    
    
    0
    
    
    
    66,032Savings and money markets
    
    
    49,909
    
    
    
    0
    
    
    
    0
    
    
    
    49,909Time deposits
    
    
    28,311
    
    
    
    124,540
    
    
    
    74,558
    
    
    
    227,409Federal Home Loan Bank borrowings
    
    
    0
    
    
    
    0
    
    
    
    15,000
    
    
    
    15,000Total interest-bearing liabilities
    
    
    144,252
    
    
    
    124,540
    
    
    
    89,558
    
    
    
    358,350Interest rate sensitivity gap
    
    
    116,393
    
    
    
    (76,662
    )
    
    
    23,319
    
    
    
    63,050Cumulative interest rate sensitivity gap
    
    
    116,393
    
    
    
    39,731
    
    
    
    63,050Interest rate sensitivity gap ratio
    
    
    1.81
    
    
    
    .38
    
    
    
    1.26Cumulative interest rate sensitivity gap ratio
    
    
    1.81
    
    
    
    1.15
    
    
    
    1.18
   13




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##### Table of Contents



Item 4. Controls and Procedures
  
 PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  (1)
    
    Proposal One  Election of Six Class II Directors
 Name
    
    Votes For
    
    Votes Against/AbstainWyche T. Green, III
    
    
    4,611,973
    
    
    
    7,594Dennis H. McDowell
    
    
    4,600,306
    
    
    
    19,261Jackie L. Reed
    
    
    4,611,973
    
    
    
    7,594Carl R. Sewell, Jr.
    
    
    4,611,973
    
    
    
    7,594Gleamer L. Smith, Jr.
    
    
    4,611,973
    
    
    
    7,594David G. Sorrell
    
    
    4,611,973
    
    
    
    7,594
 (2)
    
    Proposal Two  Amendment of Articles of Incorporation Increasing the Number of
Outstanding Shares to 100,000,000
 Votes For
    
    Votes Against
    
    Abstain4,532,254
    
    
    90,801
    
    
    
    11,932
 
 Item 5. Other Information
  14




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##### Table of Contents



Item 6. Exhibits
  31.1
    
    Certificate of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Certificate of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    Certificate of CEO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 SIGNATURES
  FGBC BANCSHARES, INC.Date: August 11, 2006
    
    /s/ Jackie L. Reed

Jackie L. ReedPresident and CEODate: August 11, 2006
    
    /s/ Teresa L. Martin

Teresa L. MartinChief Financial Officer
 15