The following discussion of financial condition as of June 30, 2008 compared to December 31, 2007, and the results of operations for the three months and six months ended June 30, 2008 compared to the three months and six months ended June 30, 2007 should be read in conjunction with the condensed financial statements and accompanying footnotes appearing in this report.

Advisory Note Regarding Forward-Looking Statements

The statements contained in this report on Form 10-Q that are not historical facts are forward-looking statements subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995. We caution readers of this report that such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements to be materially different from those expressed or implied by such forward-looking statements. Although we believe that our expectations of future performance is based on reasonable assumptions within the bounds of our knowledge of our business and operations, there can be no assurance that actual results will not differ materially from our expectations.

Factors which could cause actual results to differ from expectations include, among other things:

† the challenges, costs and complications associated with the continued development of our branches;

† the potential that loan charge-offs may exceed the allowance for loan losses or that such allowance will be increased as a result of factors beyond our control;

† our dependence on senior management;

† competition from existing financial institutions operating in our market areas as well as the entry into such areas of new competitors with greater resources, broader branch networks and more comprehensive services;

† adverse conditions in the stock market, the public debt market, and other capital markets (including changes in interest rate conditions);

† the effect of any mergers, acquisitions or other transactions to which we or our subsidiary may from time to time be a party, including, without limitation, our ability to successfully integrate any businesses that we

acquire;

†          changes in deposit rates, the net interest margin, and funding
sources;

†          inflation, interest rate, market, and monetary fluctuations;

†          risks inherent in making loans including repayment risks and value of
collateral;

†          the strength of the United States economy in general and the strength

†          fluctuations in consumer spending and saving habits;

†          the demand for our products and services;

†          technological changes;

†          the challenges and uncertainties in the implementation of our
expansion and development strategies;

†          the ability to increase market share;

†          the adequacy of expense projections and estimates of impairment loss;

†          the impact of changes in accounting policies by the Securities and
Exchange Commission;

†          unanticipated regulatory or judicial proceedings;

†          the potential negative effects of future legislation affecting

† the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System;

† the timely development and acceptance of products and services, including products and services offered through alternative delivery channels such as the Internet;

† the impact on our business, as well as on the risks set forth above, of various domestic or international military or terrorist activities or conflicts;

† other factors described in this report and in other reports we have filed with the Securities and Exchange

Commission; and

† Our success at managing the risks involved in the foregoing.

Forward-looking statements speak only as of the date on which they are made. We undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made to reflect the occurrence of unanticipated events.

Executive Summary and Recent Developments

The Company's total assets at June 30, 2008, were approximately $979,573,000, which represented an increase of approximately $127,093,000 or 15% from December 31, 2007. Net earnings decreased 52% for the six months ended June 30, 2008 to $1,898,000 or $0.43 per diluted share compared to $3,941,000 or $0.90 per diluted share for the six months ended June 30, 2007.

On January 10, 2008, the Company declared its first dividend of $0.03 per share to all shareholders of record as of February 1, 2008. The Company announced a second quarter dividend of $0.03 per share to all shareholders of record as of May 1, 2008. While the dividends are small in comparison to overall earnings, the Company expects to continue to grow the Bank and wants to retain appropriate amounts of capital to facilitate that sustained growth. Any future determination relating to the Company declaring dividends will be made at the discretion of our Board of Directors and will depend on any statutory and regulatory limitations.

During the first quarter of 2008, the Company added a wealth management division in anticipation of increasing non-interest income. The Company has hired a seasoned financial advisor to provide financial services including retirement planning, estate planning and asset allocation strategies.

Management has developed a strategy for asset growth and expansion of its financial services through branching into selective markets in the South Georgia region, in the coastal Georgia region and in the northeast Florida region. In the South Georgia region, we have expanded our loan production office in Valdosta, Georgia into a full-service branch during the first quarter of 2008. Construction on a permanent branch location has now started and should be completed in early 2009. In the coastal Georgia region, we have started construction on our Pooler branch, near Savannah, Georgia. In the northeast Florida region, our Jacksonville branch opened December 3, 2007 in a temporary branch location and moved to its permanent location during the second quarter of 2008. Our senior management team in northeast Florida is looking at a possible second location in Duval County in hopes of increasing our presence in this region.

Financial Condition



The composition of assets and liabilities for the Company is as follows:



                                            June 30,       December 31,
                                              2008             2007           $ Change      % Change
Assets:
Cash and due from banks                   $ 10,120,217    $    8,059,524    $  2,060,693        25.57 %
Federal funds sold                          16,670,000        11,350,000       5,320,000        46.87 %
Securities available for sale               85,247,666        74,387,100      10,860,566        14.60 %
Loans, net of unearned income              792,617,742       697,145,715      95,472,027        13.69 %
Cash surrender value of life insurance      12,195,900         4,442,044       7,753,856       174.56 %
Goodwill and other intangible assets        22,625,825        22,806,983        (181,158 )      -0.79 %
Total assets                               979,572,502       852,479,064     127,093,438        14.91 %
Liabilities:
Deposits                                   835,300,198       705,231,923     130,068,275        18.44 %
FHLB advances                               36,500,000        40,500,000      (4,000,000 )      -9.88 %
Accrued expenses and other liabilities       1,736,782         1,908,156        (171,374 )      -8.98 %

Loan to Deposit Ratio                            94.89 %           98.85 %

One significant change in the composition of assets was the increase in loans of $95.5 million due to continued growth of the Company. We were able to generate loan growth by increasing loan growth in all regions with the majority of the increase in the middle Georgia region. Another significant change in the composition of assets was the $7.8 million increase in the cash surrender value of life insurance. The majority of the increase is due to the Company's purchase of $7.5 million additional life insurance policies on several senior bank officers. The most significant change in the composition of liabilities was the increase in deposits, especially time deposits, to fund loan growth. Time deposits, including wholesale and core deposits, are our principal source of funds for loans and investing in securities.

Because of our strong loan demand, we have chosen to obtain a portion of our deposits from outside our market. Our wholesale time deposits represented 49.0% of our deposits as of June 30, 2008 when compared to 40.2% of our deposits as of December 31, 2007. The Company's Fund Management Policy allows for the ratio of wholesale deposits to total deposits to be 60%. The Company has been successful in replacing maturing brokered deposits and does not expect to experience significant disintermediation as the brokered deposits mature.

Investment Securities

Securities in our portfolio totaled $85.2 million at June 30, 2008, compared to $74.4 million at December 31, 2007. The most significant growth in the securities portfolio has resulted from the purchase of $19.1 million in mortgage backed securities that have been offset by $8.6 million in U.S. Government Sponsored Enterprises securities being called. At June 30, 2008, the securities portfolio had unrealized net losses of approximately $579 thousand.

The following table shows the carrying value of the investment securities at June 30, 2008 and December 31, 2007.

                                         June 30,     December 31,
                                           2008           2007
                                           (Amounts in Thousands)
Securities available for sale:
U. S. Government Sponsored Enterprises   $  18,839   $       27,493
U. S. Treasury Securities                      253              254
State, County and Municipal                 24,416           21,346
Mortgage-backed Securities                  40,339           23,844
Other Investments                            1,401            1,450
Total                                    $  85,248   $       74,387

Loans

Our loan demand continues to be strong. Total loans increased $95.5 million or 14% from December 31, 2007 to June 30, 2008. The increase in loans in 2008 is attributable to our branching efforts along with the lending efforts of our senior management lending team. The following table presents a summary of the loan portfolio by category.

                                                    June 30,     December 31,
                                                      2008           2007
                                                      (Amounts in Thousands)

Commercial                                          $  77,999   $       69,079
Real estate - commercial                              301,120          259,070
Real estate - construction                            324,844          292,152
Real estate - mortgage                                 81,006           67,898
Obligations of political subdivisions in the U.S.         298              290
Consumer                                                7,837            8,934
Total Loans                                           793,104          697,423
Less:
Unearned loan fees                                       (486 )           (277 )
Allowance for loan losses                              (9,734 )         (8,879 )
Loans, net                                          $ 782,884   $      688,267

Asset Quality

Management considers asset quality to be of primary importance. Management has a credit administration and loan review process, which monitor, control and measure our credit risk, standardized credit analyses and our comprehensive credit policy. As a result, management believes they have a good understanding of the asset quality, an established warning and early detection system regarding the loans and a comprehensive analysis of the allowance for loan losses.

The following table presents a summary of changes in the allowance for loan losses for the three and six-month periods ended June 30, 2008 and 2007.

                Analysis of Changes in Allowance for Loan Losses



                                              Three Months Ended June 30,           Six Months Ended June 30,
                                                2008               2007               2008              2007
                                                                   (Amounts in Thousands)
Balance beginning of period                $         9,158    $         8,830    $        8,879    $        7,258
Loans charged-off                                     (453 )              (17 )            (585 )            (546 )
Recoveries                                              83                202                92               219
Net charge-offs                                       (370 )              185              (493 )            (327 )
Provision for loan losses                              946                148             1,348               592
Allowance from purchase acquisition                      -                  -                 -             1,640
Balance end of period                      $         9,734    $         9,163    $        9,734    $        9,163

Total Loans:
At period end                              $       792,618    $       635,489    $      792,618    $      635,489
Average                                            758,009            631,237           731,324           619,282

As a percentage of average loans
(annualized):
Net charge-offs                                       0.20 %            -0.12 %            0.13 %            0.11 %
Provision for loan losses                             0.50 %             0.09 %            0.37 %            0.19 %
Allowance as a percentage of period end
loans                                                 1.23 %             1.44 %            1.23 %            1.44 %
Allowance as a percentage of
non-performing loans                                244.71 %           285.81 %          244.71 %          285.81 %

Management believes that the allowance for loan losses at June 30, 2008 is adequate to absorb losses inherent in the loan portfolio. This assessment involves uncertainty and judgment; therefore, the adequacy of the allowance for loan losses cannot be determined with precision and may be subject to change in future periods. In addition, bank regulatory authorities, as part of their periodic examination of the Bank, may require adjustments to the provision for loan losses in future periods if, in their opinion, the results of their review warrant such additions.

Nonperforming assets consist of non-accrual loans, accruing loans 90 days past due, repossessed assets and other real estate owned. The following summarizes non-performing assets:

                                   June 30,      December 31,
                                     2008            2007
Accruing loans 90 days past due   $     2,955   $      504,783
Non-accrual loans                   3,975,028        4,276,950
Repossessed assets                     15,000                -
Other real estate                   3,837,671          758,787
Total non-performing assets       $ 7,830,654   $    5,540,520

Nonperforming assets increased $2,290,134 or 41.33% from December 31, 2007 to June 30, 2008. In April 2008, management placed two loans with a balance of approximately $2.8 million on non-accrual that were secured by 708 acres of land and timber appraised at approximately $6.0 million. Management is continuously monitoring these loans in order to minimize any losses.

On July 25, 2008, management placed one loan with a balance of approximately $5.5 million on non-accrual that is secured by a condominium complex and other commercial real estate property appraised at approximately $7.3 million. The loan is not reflected

in the table above. Management is continuously monitoring this loan in order to minimize any losses.

At June 30, 2008, the Company's other real estate consisted of the following:

                                             Number of Properties    June 30, 2008
1-4 Family residential properties                               4   $     2,593,410
Construction & land development properties                     10         1,244,261
Total                                                          14   $     3,837,671

All properties are being actively marketed for sale and management is continuously monitoring these properties in order to minimize any losses.

The Company's policy is to place loans on non-accrual status when it appears that the collection of interest in accordance with the terms of the loan is doubtful. Any loan which becomes 90 days past due as to principal or interest is automatically placed on non-accrual. Exceptions are allowed for 90-day past due loans when such loans are well secured and in process of collection. Other Real Estate is defined as real estate acquired as salvage on uncollectible loans. At the time of foreclosure, an appraisal is obtained on the real estate. The amount charged to Other Real Estate will be the lower of appraised value or recorded investment in the loan satisfied. The recorded investment is the unpaid balance of the loan, increased by accrued and uncollected interest, unamortized premium, finance charges, and loan acquisition costs, if any, and decreased by previous direct write down and unamortized discount. Any excess of the recorded investment in the loan satisfied over the appraised value of the property must be charged to allowance for loan losses.

Goodwill

The Company reviews its goodwill for impairment annually, or more frequently if circumstances indicate that goodwill has been impaired. During the last three quarters, the Company's stock price has traded below its per-share book value and it has also fallen below tangible book value for a short period of time. Management believes that the low stock price is more indicative of uncertainty about the economic cycle rather than the value of the Company's underlying business. Although the Company has not performed a complete goodwill impairment assessment, management does not believe that goodwill is impaired. The current economic environment has resulted in lower earnings due mainly to the effect of the Federal Reserve's action in lowering short-term rates starting in the second quarter of 2007. Management believes that the value of the Company's business remains intact and that earnings will return to past levels when the economic environment recovers. The Company will complete a full goodwill impairment assessment during the fourth quarter of 2008.

Deposits

Total deposits at June 30, 2008 were $835.3 million, an increase of $130.1 million, or 18%, from December 31, 2007. Total non-interest bearing demand deposit accounts of $50.3 million increased $4.2 million, or 9%, and interest bearing demand and savings accounts of $126.0 million increased $7.2 million, or 6%, resulting mainly from our branching efforts and our emphasis on increasing core deposits.

Total time deposits as of June 30, 2008 were $659.0 million, an increase of $118.7 million, or 22%, from December 31, 2007. Total retail time deposits at June 30, 2008 decreased approximately $6.5 million, or 3% of total time deposits, from December 31, 2007 due to competitive rates drawing customers to other financial institutions. The weighted average rates paid for retail time deposits for the three and six months ended June 30, 2008 were 4.52% and 4.79%, respectively, compared to 5.24% and 5.08% for the three and six months ended June 30, 2007, respectively. Total wholesale deposits at June 30, 2008 increased approximately $125.1 million, or 44% of total time deposits, from December 31, 2007 resulting mainly from our need to fund our loan growth during the second quarter. The weighted average rates paid for wholesale deposits for the three and six months ended June 30, 2008 were 4.21% and 4.56%, respectively, compared to 5.25% and 5.23% for the three and six months ended June 30, 2007, respectively.

Results of Operations

General

The Company's results of operations are determined by its ability to effectively manage interest income and expense, to minimize loan and investment losses, to generate noninterest income and to control noninterest expense. Since interest rates are determined by market forces and economic conditions beyond the control of the Company, the ability to generate interest income is dependent upon the Bank's ability to obtain an adequate spread between the rate earned on earning assets and the rate paid on interest-bearing liabilities.

The following table shows the significant components of net earnings:

                                      Six Months Ended
                                          June 30,
                                     2008           2007        $ Change     % Change
Interest and Dividend Income     $ 27,903,694   $ 28,672,131   $  (768,437 )    -2.68 %
Interest Expense                   15,660,486     14,953,192       707,294       4.73 %
Net Interest Income                12,243,208     13,718,939    (1,475,731 )   -10.76 %
Provision for Loan Losses           1,348,000        592,000       756,000     127.70 %
Net Earnings                        1,897,992      3,941,480    (2,043,488 )   -51.85 %
Net Earnings Per Diluted Share   $       0.43   $       0.90         (0.47 )   -52.22 %




                                      Three Months Ended
                                           June 30,
                                      2008           2007         $ Change     % Change
Interest and Dividend Income      $ 13,477,725   $ 14,806,161   $ (1,328,436 )    -8.97 %
Interest Expense                     7,511,928      7,741,613       (229,685 )    -2.97 %
Net Interest Income                  5,965,797      7,064,548     (1,098,751 )   -15.55 %
Provision for Loan Losses              946,000        148,000        798,000     539.19 %
Net Earnings                           708,276      2,058,222     (1,349,946 )   -65.59 %
Net Earnings Per Diluted Shares   $       0.16   $       0.46          (0.30 )   -65.22 %

Net Interest Income

Our primary source of income is interest income from loans and investment securities. Our profitability depends largely on net interest income, which is the difference between the interest received on interest-earning assets and the interest paid on deposits, borrowings, and other interest-bearing liabilities. Net interest income decreased $1.5 million, or 11%, for the six months ended June 30, 2008 compared to the six months ended June 30, 2007. Net interest income decreased $1.1 million, or 16%, for the second quarter of 2008 compared to the same period in 2007.

Total interest and dividend income for the three and six months ended June 30, 2008 decreased $1.3 million, or 9%, and $768 thousand, or 3%, respectively, when compared to the three and six months ended June 30, 2007, primarily due to the effect of the Federal Reserve decreasing the federal funds rate, which affects a majority of the interest rates for our loans. The average loan and loan held for sale portfolios for the three and six months ended June 30, 2008 increased approximately $125.4 million, or 20%, and $111.3 million, or 18%, respectively, when compared to average loan and loan held for sale portfolios for the three and six months ended June 30, 2007. Additionally, the average yield on loans decreased during the three and six months ended June 30, 2008 to 6.56% and 7.08%, respectively, compared to an average yield of 8.75% and 8.60% for the three and six months ended June 30, 2007, respectively.

Total interest expense for the three months ended June 30, 2008 decreased $230 thousand, or 3%, when compared to the three months ended June 30, 2007. Total interest expense for the six months ended June 30, 2008 increased $707 thousand, or 5%, when compared to the six months ended June 30, 2007. Two factors impact interest expense:

average balances of deposit and borrowing portfolios and average rates paid on each. Average deposit balances increased approximately $126.0 million and $108.3 million when comparing the three and six months ended June 30, 2008 to the three and six months ended June 30, 2007. The average rate paid on the deposit portfolios for the three months ended June 30, 2008 decreased to 3.89% from 4.78% when compared to the three months ended June 30, 2007. The average rate paid on the deposits for the six months ended June 30, 2008 decreased to 4.20% from 4.68% when compared to the six months ended June 30, 2007. Average borrowing balances increased approximately $9.0 million and $8.1 million when comparing the three and six months ended June 30, 2008 to the three and six months ended June 30, 2007, respectively. Average interest rates paid on borrowings were 3.54% and 5.41% for the three and six months ended June 30, 2008, respectively, compared to 4.00% and 5.32% for the three and six months ended June 30, 2007, respectively.

The banking industry uses two key ratios to measure relative profitability of net interest income, which are net interest spread and net interest margin. The interest rate spread measures the difference between the average yield on earning assets and the average rate paid on interest-bearing liabilities. The interest rate spread eliminates the impact of non-interest-bearing funding sources and gives a direct perspective on the effect of market interest rate movements. The net interest margin is an indication of the profitability of our . . .