UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
(Fee Required)
For the Fiscal Year Ended		December 31, 2001
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
(No Fee Required)
For the Transition Period from _________________ to _______________________
Commission File Number	000-23261
SNB BANCSHARES, INC
(Exact Name of Registrant as Specified in its Charter)
GEORGIA 58-2107916
State or Other Jurisdiction of Incorporation or Oorganization (I.R.S. Employer Identification No.)
2910 RIVERSIDE DRIVE MACON, GEORGIA 31204
(Address of Principal Executive Offices) (Zip Code)
Issuer's Telephone Number		(478)722-6200
Securities Registered Under Section 12(b) of the Exchange Act: NONE
Securities Registered Under Section 12(g) of the Exchange Act:
COMMON STOCK, $1.00 PAR VALUE
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. X Yes No
Check if there is no disclosure of delinquent filers in response to Items 405 of Regulation S-K in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ]
State the aggregate market value of the voting stock held by nonaffiliates computed by reference to the price at which the stock was sold, or the average bid and asked prices of such stock, as of a specified date within the past 60 days. $51,606,426 Based on Prices as of March 8, 2002.
State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date.
3,372,969 shares of $1.00 par value common stock as of March 8, 2002.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Proxy Statement for the annual meeting of stockholders on April 25, 2002 are incorporated by reference into Part III.

~~Part~~UNITED ISTATES

~~Item~~SECURITIES 1AND EXCHANGE COMMISSION

~~BUSINESS~~Washington, DC 20549

~~General~~Form 10-K

~~SNB~~x ~~Bancshares,~~ANNUAL ~~Inc.~~REPORT ~~(SNB)~~PURSUANT isTO aSECTION ~~Georgia~~13 ~~corporation~~OR ~~formed to act as a bank holding company for Security Bank of Bibb County~~ 15(~~"SB-Bibb"~~d) ~~under~~OF ~~the~~THE ~~Federal~~SECURITIES ~~Bank~~EXCHANGE ~~Holding~~ACT ~~Company~~OF Act of 1956, as amended, and the bank holding company laws of Georgia. SNB was incorporated on February 10, 1994 at the instruction of management of SB-Bibb. At a special meeting of the shareholders of SB-Bibb on August 2, 1994, the shareholders of SB-Bibb voted in favor of a plan of reorganization and agreement of merger pursuant to which SB-Bibb became a wholly-owned subsidiary of SNB. The reorganization was effective on September 30, 1994, as a result of which the shares of common stock of SB-Bibb then issued and outstanding were converted into shares of the common stock of SNB. SB-Bibb has operated as a wholly-owned subsidiary of SNB since that time, although the functions and business of SB-Bibb, its Board of Directors, staff and physical office locations underwent no changes as a result of the reorganization.1934

OnFor ~~August 8, 1998, SNB acquired a 100 percent interest in Crossroads Bancshares, Inc.,~~ the ~~parent~~fiscal ~~holding~~year ~~company~~ended ~~of Security Bank of Houston County (formerly Crossroads Bank of Georgia) ("SB-Houston") in Perry and Warner Robins~~December 31, ~~Georgia.~~2008 The two companies merged in a pooling of interests stock swap transaction and, accordingly, all prior financial information shown below has been restated as if this business combination had always existed. The parent company of SB-Houston was subsequently dissolved. SB-Houston now operates as a wholly-owned subsidiary of SNB.

OnOR July 31, 2000, SB-Bibb purchased the assets of Group Financial Southeast (dba Fairfield Financial) in a business combination accounted for as a purchase. The assets were placed in a newly formed subsidiary of SB-Bibb incorporated as Fairfield Financial Services, Inc. ("Fairfield"). The purchase transaction involved a combination of SNB stock and cash consideration. Fairfield is a well-established real estate mortgage lending company with a number of production locations throughout Georgia and the Southeast, including offices in Macon, Columbus, Warner Robins, Richmond Hill, Stockbridge, Fayetteville and St. Simons Island. The Company functions as a subsidiary of SB-Bibb.

~~History~~¨ ~~and~~TRANSITION ~~Business~~REPORT ofPURSUANT ~~the~~TO ~~Subsidiaries~~SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

~~Substantially~~For ~~all of~~ the ~~business~~transition ofperiod ~~SNB is conducted through its two subsidiary banks. A brief description of each Bank's history and business operations is discussed below.~~from to

SBCommission File No. 000-~~BIBB~~23261

~~SB-Bibb~~SECURITY isBANK aCORPORATION state-chartered bank which engages in the commercial banking business primarily in Bibb County, Georgia. SB-Bibb commenced operations on November 4, 1988. The Bank now operates six full-service and one limited-service banking offices in Macon, Georgia. On March 1, 1999, the Bank converted its banking charter from a national to a state charter and changed its name from Security National Bank to Security Bank of Bibb County.

1(Exact Name of Registrant Specified in Its Charter)

Part I (Continued)


Georgia		58-2107916
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

4219 Forsyth Road Macon, Georgia		31210
(Address of Principal Executive Offices)		(Zip Code)

~~Item 1~~ (~~Continued~~478) 722-6200

~~The~~Registrant’s ~~Bank~~Telephone ~~offers a full range of deposit products~~Number, ~~lending~~Including ~~services~~Area (including a specialized mortgage division), internet banking, automated teller machines, safe deposit boxes, credit cards, night depositories and other services for the convenience of its customers. No trust services are currently offered. The Bank provides its own data processing services.Code

~~With~~Securities ~~its~~registered ~~purchase~~pursuant ~~of Fairfield during 2000, SB-Bibb expanded its mortgage division~~ to ~~include~~Section 12(b) ~~a number~~ of ~~production locations throughout Georgia and~~ the ~~Southeast.~~Act:

As of December 31, 2001, SB-Bibb had total assets of $370.9 million, total deposits of $264.4 million and total stockholders' equity of $29.6 million. Net income amounted to $3.2 million for the year ended December 31, 2001.


Title of each class		Name of each exchange on which registered
Common Stock, $1 par value per share		Nasdaq Global Select Market

~~SB-HOUSTON~~Securities registered pursuant to Section 12(g) of the Act: None

~~SB-Houston~~Indicate ~~commenced~~by ~~operation~~check inmark ~~1987~~whether asthe aregistrant ~~state-chartered~~is ~~bank~~a ~~in Perry, Houston County, Georgia. The Bank currently operates four full~~well-~~service~~known ~~facilities~~seasoned inissuer ~~Houston~~as ~~County,~~defined ~~having added two full-service branches~~ in ~~Warner~~Rule ~~Robins,~~405 ~~Georgia.~~of ~~SB-Houston's main office is located at 1208 Washington Street, Perry, Georgia. The Bank established its fourth full-service office during~~ the ~~first~~Securities ~~quarter of 2000~~Act. Yes ¨ No x ~~This office is located on Houston Lake Road in Warner Robins.~~

~~SB-Houston~~Indicate ~~operates~~by acheck ~~full-service~~mark ~~commercial~~if ~~banking~~the ~~business~~registrant ~~and~~is ~~provides~~not arequired ~~wide~~to ~~range~~file ofreports ~~banking~~pursuant ~~services,~~to ~~including~~Section 13 ~~checking~~or ~~and~~Section 15(d) ~~savings accounts, a broad range~~ of certificates of deposit, agricultural, consumer, commercial and real estate loans, internet banking, safe deposit boxes, credit cards, night depositories and 24-hour automated teller machines. SB-Houston's customers reside mainly in the ~~Houston County area~~Exchange Act. Yes ¨ No x ~~trust services are currently offered. Data services are provided by SB-Bibb.~~

AsIndicate ofby ~~December~~check ~~31,~~mark ~~2001,~~whether ~~SB-Houston~~the ~~had~~registrant ~~total~~(1) has ~~assets~~filed ofall ~~$133.7~~reports ~~million,~~required ~~total~~to ~~deposits~~be offiled ~~$111.8~~by ~~million,~~Section 13 ~~and~~or ~~stockholders'~~15(d) ~~equity~~ of ~~$10.1~~the ~~million.~~Exchange ~~Net~~Act ~~income~~during the preceding 12 months (or for such shorter period that the ~~year~~registrant ~~ended~~was ~~December~~required 31to file such reports), ~~2001~~and ~~totaled~~(2) has ~~$1.5~~been ~~million~~subject to such filing requirements for the past 90 days. Yes x No ¨

~~Market~~Indicate ~~Area~~by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

~~SNB~~Indicate ~~primarily~~by ~~serves~~check ~~the~~mark ~~residents~~whether ofthe ~~Bibb~~registrant ~~and~~is ~~Houston~~a ~~Counties,~~large accelerated ~~with estimated populations of 155~~filer,~~500~~ ~~and~~an ~~89,200,~~accelerated ~~respectively~~filer, ~~as of 2001. SNB also conducts business to~~ a ~~lesser~~non-accelerated ~~extent in the surrounding counties of Jones~~filer, ~~Monroe,~~or ~~Twiggs,~~a ~~Crawford,~~smaller ~~Peach~~reporting ~~and Wilkinson~~company. ~~The~~See ~~loan~~the ~~portfolio~~definitions isof ~~concentrated~~“large inaccelerated ~~various commercial~~filer,” ~~real~~“accelerated ~~estate~~filer” and ~~consumer~~“smaller ~~loans~~reporting tocompany” ~~individuals and entities located~~ in ~~middle~~Rule ~~Georgia,~~12b-2 ~~and the ultimate collectiblity~~ of the ~~loans~~Exchange ~~and future growth of the Company are largely dependent upon economic conditions in the middle Georgia area~~Act. ~~The~~(Check ~~Company's~~one): agricultural loans are negligible. The economy of the middle Georgia area has been generally favorable in recent years, although population growth has been moderate at best. Robins Air Force Base, located in Houston County, is a major employer in the area, which has survived national base closure mandates and expanded in size in recent years.

~~The~~ Large ~~acquisition~~accelerated offiler ¨ Accelerated ~~Fairfield~~filer x ~~during 2001 brings a number of well established mortgage production offices to SB-Bibb. Fairfield is primarily engaged in residential real estate mortgage lending in the state of Georgia.~~

2 Non-accelerated filer ¨ Smaller reporting company ¨

~~Part~~ (Do Inot ~~(Continued~~check if a smaller reporting company)

~~Item~~Indicate 1by check mark whether the registrant is a shell company (~~Continued~~as defined in Rule 12b-2 of the Exchange Act of 1934). Yes ¨ No x

~~Competition~~The aggregate market value of the voting stock held by nonaffiliates computed by reference to the price at which the stock was sold, or the average bid and asked prices of such stock, as of June 30, 2008: $107,100,683 based on stock price of $5.86 as reported on the Nasdaq Global Select Market.

The ~~financial~~number ~~services~~of ~~industry~~shares inoutstanding ~~the~~of ~~middle~~each ~~Georgia~~of ~~area~~the ~~is highly competitive. SNB'~~registrant’s ~~subsidiary~~classes ~~banks~~of common ~~compete actively with national and state chartered banks~~stock, ~~savings~~as ~~and~~of ~~loan associations and credit unions for loans and deposits. In addition,~~ the ~~Banks~~latest ~~compete~~practicable ~~with~~date ~~other~~was ~~financial service institutions~~23, ~~including brokers and dealers~~267,807 ~~insurance~~shares ~~companies and finance companies, all~~ of ~~which~~$1.00 ~~actively~~par ~~engage~~value incommon ~~marketing~~stock ~~various~~as ~~types~~ of ~~loans~~February 19, ~~deposits and other services~~2009. ~~Management believes that competitive pricing and personalized service will provide it with a method to compete effectively in the middle Georgia area.~~

~~Employees~~DOCUMENTS INCORPORATED BY REFERENCE

AsSpecifically identified portions of ~~December~~our ~~31,~~definitive ~~2001,~~Proxy Statement for the ~~Company~~2009 ~~had~~Annual ~~224~~Meeting ~~employees~~of onShareholders a(the ~~full~~Proxy Statement) to be filed pursuant to Rule 14a-~~time~~6 ~~equivalent~~of ~~basis.~~the ~~SNB~~Securities ~~considers~~Exchange ~~its~~Act ~~relationship~~of ~~with~~1934, ~~its~~as ~~employees~~amended, toare beincorporated ~~excellent~~by reference into Part III of this Annual Report on Form 10-K.

SupervisionTable andof Regulation Contents

~~Bank~~Table ~~holding companies and banks are regulated under both federal and state law. The following is a brief summary~~ of ~~certain~~Contents ~~statutes and rules and regulations affecting the Company, the Bank, and, to a more limited extent, the Company's subsidiaries.~~

This summary is qualified in its entirety by reference to the particular statute and regulatory provision referred to and is not intended to be an exhaustive description of the statutes or regulations applicable to the business of the Company and its subsidiaries. The scope of regulation and permissible activities of the Company and its subsidiaries is subject to change by future federal and state legislation. Supervision, regulation and examination of the Company and the Bank by the bank regulatory agencies are intended primarily for the protection of depositors rather than shareholders of the Company.


PART I
	Forward-Looking Statement Disclosure		1

	Item 1	Business	3

	Item 1A	Risk Factors	17

	Item 1B	Unresolved Staff Comments	25

	Item 2	Properties	25

	Item 3	Legal Proceedings	25

	Item 4	Submission of Matters to a Vote of Security Holders	25

PART II

	Item 5	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	26

	Item 6	Selected Financial Data	28

	Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30

	Item 7A	Quantitative and Qualitative Disclosures about Market Risk	68

	Item 8	Financial Statements and Supplementary Data	68

	Item 9	Changes In and Disagreements with Accountants on Accounting and Financial Disclosure	68

	Item 9A	Controls and Procedures	68

	Item 9B	Other Information	69

PART III

	Item 10	Directors, Executive Officers and Corporate Governance	70

	Item 11	Executive Compensation	70

	Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	70

	Item 13	Certain Relationships and Related Transactions, and Director Independence	70

	Item 14	Principal Accountant Fees and Services	70

PART IV

	Item 15	Exhibits and Financial Statement Schedules	71

	Signatures		72

	Index to Exhibits		73

RegulationTable of the CompanyContents

~~SNB~~Forward isLooking aStatement ~~registered~~Disclosure holding company under the Federal Bank Holding Company Act and the Georgia Bank Holding Company Act and is regulated under such Act by the Federal Reserve and by the Georgia Department of Banking and Finance (the "Georgia Department@), respectively. As a bank holding company, the Company is required to file annual reports with the Federal Reserve and the Georgia Department and provide such additional information as the applicable regulator may require pursuant to the Federal and Georgia Bank Holding Company Acts. The Federal Reserve and the Georgia Department may also conduct examinations of the Company to determine whether the Company is in compliance with Bank Holding Company Acts and regulations promulgated thereunder.

InThis ~~addition,~~Annual ~~the~~Report ~~Federal~~on ~~Bank~~Form ~~Holding~~10-K ~~Company~~contains ~~Act~~or ~~requires~~incorporates ~~every~~by ~~bank~~reference statements ~~holding~~that ~~company~~are to“forward-looking ~~obtain~~statements” within the ~~prior~~meaning ~~approval~~of Section 27A of the ~~Federal~~Securities ~~Reserve~~Act ~~before:~~of ~~(1)~~1933, ~~acquiring~~as ~~direct~~amended or(the ~~indirect~~Securities ~~ownership~~Act) orand ~~control~~Section 21E of ~~more~~the ~~than~~Securities 5Exchange ~~percent~~Act of 1934, as amended (the ~~voting~~Exchange Act). ~~shares~~Forward-looking statements discuss future expectations, describe future plans and strategies, contain projections of ~~any~~results ~~bank;~~of ~~(2)~~operations ~~acquiring~~or ~~all~~of financial condition or ~~substantially~~state ~~all~~other offorward-looking information. Forward-looking statements are generally identifiable by the ~~assets~~use of aforward-looking ~~bank;~~terminology ~~and~~such ~~(3)~~as ~~before~~“anticipate,” ~~merging~~“assume,” or“believe,” ~~consolidating~~“continue,” ~~with~~“could,” ~~another~~“would,” ~~bank~~“endeavor,” ~~holding~~“estimate,” “expect,” ~~company~~“forecast,” “goal,” “intend,” “may,” “objective,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will” and other similar words and expressions of future intent.

3Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements. Factors that could cause actual results and performance to differ from those expressed in our forward-looking statements we make or incorporate by reference in this Annual Report on Form 10-K include, but are not limited to:

~~Part~~• Ithe ~~(Continued)~~effects of the current global economic crisis, including, without limitation, the dramatic deterioration of real estate values, the subprime mortgage, credit and liquidity markets, as well as the Federal Reserve’s actions with respect to interest rates, may lead to a further deterioration in credit quality, thereby requiring increases in our provision for loan losses, or a reduced demand for credit, which would reduce earning assets;

~~Item~~• 1possible ~~(Continued)~~changes in trade, monetary and fiscal policies, as well as legislative and regulatory changes, including changes in accounting standards and banking, securities and tax laws and regulations and governmental intervention in the U.S. financial system, as well as changes affecting financial institutions’ ability to lend and otherwise do business with consumers;

~~The~~• ~~Georgia Department requires similar approval prior to~~ the ~~acquisition~~imposition of ~~any~~enforcement additional banks from every Georgia bank holding company. A Georgia bank holding company is generally prohibited from acquiring ownership or control of 5 percent or more of the voting shares of a bank unless the bank being acquired is either a bank for purposes of the Federal Bank Holding Company Actorders, orcapital adirectives ~~federal~~ or ~~state~~other ~~savings~~enforcement ~~and~~actions ~~loan association or savings bank or federal savings bank whose deposits are insured~~ by ~~the~~our Federal Savings and Loan Insurance Corporation and such bank has been in existence and continuously operating as a bank for a period of five years or more prior to the date of application to the Department for approval of such acquisition.regulators;

~~The~~• ~~Federal~~our ~~Reserve~~ability ~~(pursuant~~ to ~~regulation~~manage ~~and~~negative ~~published~~developments ~~statements)~~and ~~has~~disruptions ~~maintained~~in ~~that~~the acredit ~~bank~~and ~~holding~~lending ~~company~~markets, ~~must~~including ~~serve~~the asimpact ~~a source~~ of ~~financial strength to its subsidiary banks. In adhering to~~ the ~~Federal~~ongoing ~~Reserve~~credit ~~policy,~~crisis ~~the~~on ~~Company~~our ~~may~~business beand ~~required~~on ~~to provide financial support to~~ the ~~Bank~~businesses atof aour ~~time~~customers ~~when,~~as ~~absent~~well ~~such~~as ~~Federal~~other ~~Reserve policy, the Company may not deem it advisable to provide such assistance. Similarly, the Federal Reserve also monitors the~~ financial ~~performance~~institutions ~~and prospects of nonbank subsidiaries~~ with anwhich ~~inspection~~we ~~process~~have tocommercial ~~ascertain whether such nonbanking subsidiaries enhance or detract from the Company's ability to serve as a source of strength for the Bank.~~relationships;

~~Capital~~• ~~Requirements~~the continuation of the recent unprecedented volatility in the credit markets;

~~The~~• ~~holding~~possible ~~company~~changes isin ~~subject to regulatory capital requirements imposed by~~ the ~~Federal~~quality ~~Reserve~~or ~~applied~~composition onof aour ~~consolidated~~loans ~~basis~~or ~~with~~investment ~~the~~portfolios, ~~banks~~including ~~owned~~further byadverse ~~the~~developments ~~holding company. Bank holding companies must have capital (as defined~~ in the ~~rules)~~real ~~equal~~estate ~~to eight (8) percent of risk-weighted assets. The risk weights assigned to assets are based primarily on credit risk. For example~~markets, ~~securities with an unconditional guarantee by~~ the ~~United~~borrowers’ ~~States~~industries ~~government~~or ~~are~~in ~~assigned~~ the ~~least~~repayment ~~risk~~ability ~~category. A risk weight~~ of 50individual ~~percent~~borrowers isor assigned to loans secured by owner-occupied one-to-four family residential mortgages. The aggregate amount of assets assigned to each risk category is multiplied by the risk weight assigned to that category to determine the weighted values, which are added together to determine total risk-weighted assets.issuers;

~~The~~• ~~Federal~~increases ~~Reserve~~in ~~also~~our ~~requires~~nonperforming ~~the~~assets, ~~maintenance~~or ofour ~~minimum~~inability ~~capital leverage ratios~~ to berecover ~~used in tandem with the risk-based guidelines in assessing the overall capital adequacy of bank holding companies. The guidelines define capital as either Tier 1 (primarily shareholder equity)~~ or ~~Tier~~absorb ~~2 (certain debt instruments and a portion of the allowance for loan~~ losses). ~~Tier~~created 1by ~~capital~~such ~~for~~nonperforming banking organizations includes common equity, minority interest in the equity accounts of consolidated subsidiaries, qualifying noncumulative perpetual preferred stock and qualifying cumulative perpetual preferred stock. (Cumulative perpetual preferred stock is limited to 25 percent of Tier 1 capital.) Tier 1 capital excludes goodwill; amounts of mortgage servicing assets~~, nonmortgage servicing assets, and purchased credit card relationships that, in the aggregate, exceed 100 percent of Tier 1 capital~~; nonmortgage servicing assets and purchased credit card relationships that in the aggregate, exceed 25 percent of Tier 1 capital; all other identifiable intangible assets; and deferred tax assets that are dependent upon future taxable income, net of their valuation allowance, in excess of certain limitations.

4• our ability to effectively manage interest rate risk and other market risk, credit risk and operational risk;

~~Part~~• Ichanges ~~(Continued)~~in the interest rate yield curve such as flat, inverted or steep yield curves, or changes in the interest rate environment that impact interest margins and may impact prepayments on the mortgage-backed securities portfolio;

~~Item~~• 1our ~~(Continued)~~ability to manage fluctuations in the value of assets and liabilities and off-balance sheet exposure so as to maintain sufficient capital and liquidity to support our business;

~~Effective~~• ~~June 30, 1998,~~ the ~~Board~~failure ~~has established a minimum ratio~~ of ~~Tier~~our 1assumptions ~~capital~~underlying tothe ~~total~~establishment ~~assets~~ of ~~3.0~~allowances ~~percent~~ for ~~strong~~loan ~~bank~~losses ~~holding companies (rated composite A1@ under the BOPEC rating system of bank holding companies),~~ and ~~for bank holding companies that have implemented the Board=s risk-based capital measure for market risk. For all~~ other ~~bank holding companies~~estimates, ~~the~~or ~~minimum~~dramatic ~~ratio~~changes ofin ~~Tier~~those 1underlying ~~capital~~assumptions toor ~~total~~judgments ~~assets~~in isfuture ~~4.0 percent. Banking organizations with supervisory~~periods, ~~financial~~that, ~~operational,~~in oreither ~~managerial weaknesses~~case, asrender ~~well as organizations that are anticipating or experiencing significant growth, are expected to maintain capital ratios well above~~ the ~~minimum~~allowance ~~levels. Higher capital ratios may be required~~ for ~~any~~loan ~~bank~~losses ~~holding~~inadequate ~~company if warranted by its particular circumstances~~ or ~~risk~~require ~~profile.~~that ~~Bank~~further ~~holding~~provisions ~~companies~~for ~~are~~loan ~~required~~losses tobe ~~hold capital commensurate with the level and nature of the risks, including the volume and severity of problem loans, to which they are exposed.~~made;

~~At December 31, 2001, SNB exceeded the minimum Tier~~ 1, ~~risk-based and leverage ratios. The table which follows sets forth certain capital information for SNB as of December 31, 2001.~~

CAPITAL ADEQUACY ($ in Thousands)
	December 31, 2001
	Amount	Percent
Leverage Ratio
Actual	$33,323,558	7.66%
Minimum Required (1)	17,402,620	4.00%
Risked-Based Capital:
Tier 1 Capital
Actual	33,323,558	8.02%
Minimum Required	16,612,809	4.00%
Total Capital
Actual	37,422,298	9.00%
Minimum Required	33,225,619	8.00%

~~(1)~~• ~~Represents~~unexpected ~~the~~outcomes ~~minimum~~of ~~requirement.~~existing ~~Institutions that are contemplating acquisitions~~ or ~~anticipating~~new ~~or experiencing significant growth may be required to maintain a substantially higher leverage ratio.~~litigation;

5• our ability to keep pace with technological changes;

~~Part~~• Iour ~~(Continued)~~ability to develop competitive new products and services in a timely manner and the acceptance of such products and services by our customers and potential customers;

~~Item~~• 1the ~~(Continued)~~risks of merger, acquisitions and divestitures, including without limitation, the costs of integrating our operations, potential customer loss and deposit attrition and the failure to achieve expected gains, revenue growth and expense savings from a transaction;

~~The~~• ~~Riegle-Neal~~the ~~Interstate~~threat ~~Banking~~or occurrence of war or acts of terrorism and ~~Branching~~the ~~Efficiency~~existence ~~Act~~or exacerbation of general geopolitical instability and uncertainty;

~~Prior~~• tomanagement’s ~~the~~ability enactment of the Interstate Banking and Branching Efficiency Act of 1994 (the "Riegle-Neal Act"), interstate expansion of bank holding companies was prohibited, unless such acquisition was specifically authorized by a statute of the state in which the target bank was located. Pursuant to ~~the~~develop ~~Riegle-Neal Act, effective September 29, 1995, an adequately capitalized~~ and ~~adequately~~execute ~~managed~~plans ~~holding company may acquire a bank across state lines, without regard~~ to ~~whether~~effectively ~~such~~respond ~~acquisition is permissible under state law. A bank holding company is considered~~ to beunexpected ~~"adequately~~changes; ~~capitalized" if it meets all applicable federal regulatory capital standards.~~and

~~While~~• ~~the~~other ~~Riegle-Neal~~factors ~~Act~~and ~~precludes~~information acontained ~~state~~in ~~from~~this ~~entirely~~Annual ~~insulating~~Report ~~its~~on ~~banks~~Form ~~from acquisition by an out~~10-~~of-state~~K ~~holding~~and ~~company,~~other areports ~~state may still provide~~ that awe ~~bank~~file ~~may~~with ~~not be acquired by an out-of-state company unless~~ the ~~bank~~Securities ~~has~~and ~~been~~Exchange inCommission ~~existence for a specified number of years, not to exceed five years. Additionally, the Federal Reserve is directed not to approve an application for the acquisition of a bank across state lines if:~~ (iSEC) ~~the~~under ~~applicant bank holding company, including all affiliated insured depository institutions, controls, or after~~ the ~~acquisition~~Exchange would control, more than ten (10) percent of the total amount of deposits of all insured depository institutions in the United States (the "ten percent concentration limit") or (ii) the acquisition would result in the holding company controlling thirty (30) percent or more of the total deposits of insured depository institutions in any state in which the holding company controlled a bank or branch immediately prior to the acquisition (the "thirty percent concentration limit")Act. ~~States may waive the thirty percent concentration limit, or may make the limits more or less restrictive, so long as they do not discriminate against out-of-state bank holding companies.~~

The ~~Riegle-Neal~~cautionary ~~Act~~statements in ~~also~~this ~~provides~~Annual ~~that,~~Report ~~beginning~~ on ~~June~~Form 1,10-K ~~1997,~~also ~~banks~~identify ~~located~~important infactors ~~different states may merge~~ and ~~operate~~possible ~~the~~events ~~resulting~~that ~~institution~~involve asrisk aand ~~bank~~uncertainties ~~with~~that ~~interstate~~could ~~branches.~~cause ~~However,~~our aactual ~~state~~results ~~may~~to ~~(i)~~differ ~~prevent~~materially ~~interstate~~from ~~branching~~those ~~through~~contained ~~mergers~~in bythe ~~passing~~forward-looking astatements. ~~law~~These forward-looking ~~prior~~statements tospeak ~~June~~only 1,as ~~1997 that expressly prohibits mergers involving out-~~of~~-state~~ ~~banks,~~the ordate ~~(ii)~~on ~~permit~~which ~~such~~the ~~merger~~statements ~~transactions~~were ~~prior~~made. toWe ~~June~~do 1not intend, ~~1997.~~and ~~Under~~undertake ~~the~~no ~~Riegle-Neal Act~~obligation, anto ~~interstate~~update ~~merger~~or ~~transaction~~revise ~~may~~any ~~involve~~forward-looking ~~the~~statements ~~acquisition~~contained ofin athis ~~branch~~Annual ofReport anon ~~insured~~Form ~~bank~~10-K, ~~without~~whether ~~the~~as ~~acquisition~~a result of ~~the~~differences ~~bank~~in ~~itself~~actual results, ~~but~~changes ~~only~~in ifassumptions ~~the~~or ~~law~~changes ~~of the state~~ in ~~which~~other ~~the~~factors ~~branch~~affecting issuch ~~located~~statements, ~~permits~~except ~~this~~as ~~type~~required ofby ~~transaction~~law.

~~Under~~Readers ~~the~~should ~~Riegle-Neal~~carefully ~~Act,~~review aall ~~state~~disclosures ~~may~~we ~~impose~~file ~~certain conditions on a branch of an out-of-state bank resulting~~ from antime interstate merger so long as such conditions do not have the effect of discriminating against out-of-state banks or bank holding companies, other than on the basis of a requirement of nationwide reciprocal treatment. The ten (10) percent concentration limit and the thirty (30) percent concentration limit described above, as well as the rights of the states to ~~modify~~time orwith ~~waive~~ the ~~thirty (30) percent concentration limit, apply to interstate bank mergers in the same manner as they apply to the acquisition of out-of-state banks~~SEC.

AUnless ~~bank~~indicated ~~resulting~~otherwise, ~~from~~references ~~an interstate merger transaction may retain and operate any office that any bank involved~~ in ~~the~~this ~~transaction~~Annual ~~was~~Report ~~operating~~on ~~immediately~~Form ~~before~~10-K ~~the~~to ~~transaction.~~“we,” ~~After completion of the transaction~~“us,” “our,” ~~the~~“SBKC” ~~resulting bank may establish~~ or ~~acquire~~the ~~additional~~“Company” ~~branches~~refer atto ~~any~~Security ~~location~~Bank ~~where~~Corporation ~~any~~and ~~bank~~its ~~involved~~consolidated insubsidiaries, ~~the~~Security ~~transaction~~Interim ~~could~~Holding ~~have~~Corporation, ~~established~~Security orBank ~~acquired~~of aBibb ~~branch.~~County, ~~The~~Security ~~Riegle-Neal~~Bank ~~Act~~of ~~also~~Houston ~~provides~~County, ~~that~~Security ~~the~~Bank ~~appropriate~~of Jones ~~federal~~County, ~~banking~~Security ~~agency~~Bank ~~may~~of ~~approve~~North anMetro, ~~application~~Security byBank aof ~~bank~~North toFulton ~~establish~~ and ~~operate~~Security anBank ~~interstate~~of ~~branch~~Gwinnett inCounty. ~~any~~Together, ~~state~~the ~~that~~consolidated ~~has~~subsidiary inbanks ~~effect~~are areferred ~~law that expressly permits all out-of-state banks~~ to ~~establish~~as ~~and~~“the ~~operate such a branch~~Banks.”

PartTable Iof (Continued)Contents

~~Item~~Part 1I ~~(Continued)~~

InItem ~~response to the Riegle-Neal Act, effective June~~ 1, 1997, Georgia permitted interstate branching, although only through merger and acquisition. In addition, Georgia law provides that a bank may not be acquired by an out-of-state company unless the bank has been in existence for five years. Georgia has also adopted the thirty percent concentration limit, but permits state regulators to waive it on a case-by-case basis.BUSINESS

~~The~~General ~~Gramm-Leach-Bliley Act of 1999~~

~~The~~Overview. We ~~Gramm-Leach-Bliley~~are ~~Act~~a ~~(the~~Georgia ~~"GLB~~corporation ~~Act")~~and ~~dramatically~~a ~~increases~~multi-bank ~~the~~holding ~~ability~~company ofheadquartered ~~eligible~~in ~~banking~~Macon, ~~organizations~~Georgia. toSince ~~affiliate~~our ~~with~~formation ~~insurance~~on February 10, ~~securities~~1994, ~~and~~we ~~other~~have ~~financial~~made ~~firms~~several strategic acquisitions and ~~insured~~have expanded ~~depository~~our ~~institutions.~~market ~~The~~presence ~~GLB~~throughout ~~Act~~Middle ~~permits~~Georgia, ~~eligible~~as ~~banking~~well ~~organizations~~as to ~~engage~~the innorthern ~~activities~~metropolitan area of Atlanta, Georgia, and to ~~affiliate~~the southeastern coastal region of Georgia. We provide a wide variety of community banking services through our six banking subsidiaries with ~~nonbank~~a ~~firms~~substantial ~~engaged~~portion of our business being drawn from Bibb, Houston and Jones counties and in ~~activities~~the ~~that~~northern ~~are~~metropolitan ~~financial~~area of Atlanta in ~~nature~~the orState ~~incidental~~of toGeorgia. ~~such~~At ~~financial~~December 31, ~~activities~~2008, ~~and~~we ~~also~~had ~~includes~~total ~~some~~assets ~~additional~~of approximately ~~activities~~$2.85 ~~that~~billion, ~~are~~total ~~complementary~~deposits toof ~~such~~approximately ~~financial~~$2.44 ~~activities~~billion and total shareholders’ equity of approximately $84.7 million.

~~The~~Our ~~definition~~Subsidiary ofBanks. Substantially ~~activities~~all ~~that~~of ~~are~~our ~~financial~~business ~~in nature~~ is ~~handled~~conducted bythrough ~~the~~our ~~GLB~~six ~~Act~~state-chartered insubsidiary ~~two ways~~banks. ~~First,~~The names ~~there~~and istotal aassets ~~laundry~~at ~~list of activities that are designated as financial in nature. Second~~December 31, ~~the~~2008 ~~authorization~~ of ~~new activities as financial in nature or incidental to a financial activity requires a consultative process between~~ the ~~Federal~~Banks ~~Reserve Board and the Secretary of the Treasury with each having the authority to veto proposals of the other. The Federal Reserve Board has the discretion to determine what activities~~ are ~~complementary~~as tofollows: ~~financial activities.~~

The precise scope of the authority to engage in these new financial activities, however, depends on the type of banking organization, whether it is a holding company, a subsidiary of a national bank, or a national bank's direct conduct. The GLB Act repealed two sections of the Glass-Stegall Act, Sections 20 and 32, which restricted affiliations between securities firms and banks. The GLB Act authorizes two types of banking organizations to engage in expanded securities activities. The GLB Act authorizes a new type of bank holding company called a financial holding company to have a subsidiary company that engages in securities underwriting and dealing without limitation as to the types of securities involved. The GLB Act also permits a national bank to control a financial subsidiary that can engage in many of the expanded securities activities permitted for financial holding companies. However, additional restrictions apply to national bank financial subsidiaries.


	Assets (In thousands)
Security Bank of Bibb County	$	1,233,441
Security Bank of Jones County		438,517
Security Bank of Gwinnett County		346,624
Security Bank of Houston County		381,904
Security Bank of North Metro		237,147
Security Bank of North Fulton		197,773

~~Since~~The ~~the~~Banks ~~Bank~~each ~~Holding~~operate as ~~Company~~a ~~Act~~separate oflegal ~~1956,~~entity ~~and~~under ~~subsequent amendments, federal law has limited~~ the ~~types~~corporate umbrella of ~~activities~~Security ~~that~~Bank ~~are~~Corporation. ~~permitted~~As ~~for~~ a ~~bank holding company~~result, ~~and~~each itBank has ~~also~~its ~~limited~~own ~~the~~board ~~types~~ of ~~companies~~directors ~~that~~and amanagement ~~bank~~team ~~holding~~comprised ~~company~~of ~~can~~individuals ~~control.~~known ~~The~~in ~~GLB Act retains~~ the ~~bank~~local ~~holding~~community ~~company~~in ~~regulatory~~which ~~framework,~~each ~~but~~Bank ~~adds~~operates. aWe provide ~~new~~significant ~~provision~~assistance ~~that~~and ~~authorizes~~oversight ~~enlarged~~to ~~authority for~~ the ~~new~~Banks ~~financial~~in ~~holding~~areas ~~company~~such ~~form~~as ofbudgeting, ~~organization~~marketing, tohuman ~~engage~~resource inmanagement, ~~any~~credit ~~activity~~administration, ofoperations aand ~~financial nature or incidental thereto~~funding. AIn ~~new~~order ~~Section~~to ~~4(k)~~manage ofexpenses ~~the~~and ~~Bank~~consolidate ~~Holding~~our ~~Company~~operations, ~~Act~~we ~~provides~~have ~~that~~applied with athe ~~financial~~Federal ~~holding~~Deposit ~~company~~Insurance ~~may~~Corporation ~~engage~~(FDIC) inand ~~any~~the ~~activity,~~Georgia ~~and~~Department ~~may~~of ~~acquire~~Banking and ~~retain~~Finance ~~shares~~(the ofGeorgia ~~any~~Department) ~~company~~to ~~engaged~~consolidate inour ~~any~~six ~~activity,~~banking ~~that~~charters. ~~the~~See ~~Federal~~“Significant ~~Reserve~~Developments” ~~Board,~~ in ~~coordination~~Item 7, “Management’s ~~with~~Discussion ~~the~~and ~~Secretary~~Analysis of ~~the~~Financial ~~Treasury,~~Condition ~~determines~~and byResults ~~regulation~~of orOperations” ~~order to be financial~~ in ~~nature~~this orAnnual ~~incidental~~Report toon ~~such~~Form ~~financial~~10-K ~~activities,~~for ora ismore ~~complementary~~detailed ~~to financial activities~~discussion.

Security Real Estate Services, Inc. In addition to our traditional banking services, we have operated Security Real Estate Services, Inc. (SRES) (formerly Fairfield Financial Services, Inc.), an interim real estate development lender and wholly owned subsidiary of Security Bank of Bibb County. Effective July 15, 2008, we changed the name of Fairfield Financial Services, Inc. to Security Real Estate Services, Inc. Through 2007, we offered land acquisition and development and construction loans from SRES, but SRES no longer offers these loans. SRES continued to originate residential mortgage loans until the fourth quarter of 2008, when we contracted with Envoy Mortgage, an independent residential mortgage company based in Houston, Texas, to offer mortgage loans to our customers. As part of the agreement, all employees of SRES’s traditional residential mortgage origination business were retained by Envoy Mortgage and continue to originate mortgages in the Company’s offices. Prior to the agreement with Envoy Mortgage, SRES closed approximately $111.3 million in residential mortgages in 2008. For the year ended December 31, 2008, SRES posted a net loss of approximately $61.4 million. This net loss resulted primarily from a provision for loan losses of $69.2 million and a goodwill impairment charge of $15.7 million. Approximately 20% of SRES’s 2008 gross revenue was a product of its traditional residential mortgage origination business, with the remaining 80% derived from its interim real estate and real estate development lending activities.

~~Part~~3 ~~I (Continued)~~

ItemTable 1of (Continued)Contents

~~The~~CFS ~~GLB~~Wealth ~~Act~~Management. We ~~also~~acquired ~~amends~~CFS ~~the~~Wealth ~~Bank~~Management, ~~Holding~~LLC ~~Company~~(CFS), ~~Act~~an investment tomanagement ~~prescribe~~and ~~eligibility~~financial ~~criteria~~planning ~~for~~firm ~~financial~~based ~~holding~~in ~~companies,~~Macon ~~defines~~in ~~the~~February ~~scope~~2007. ofCFS ~~activities~~was ~~permitted~~a ~~for~~wholly ~~bank~~owned ~~holding~~subsidiary ~~companies~~of ~~that~~Security doBank ~~not~~Corporation ~~become~~until ~~financial~~February ~~holding companies~~2008, ~~and~~when ~~establishes~~it ~~consequences~~was ~~for~~sold ~~financial~~back ~~holding~~to ~~companies~~the ~~that~~original ~~cease~~owner. toThe ~~maintain~~entity’s ~~the~~assets ~~status~~and ~~needed~~results of operations were not material to ~~qualify~~the asCompany’s aconsolidated financial ~~holding company~~statements.

~~There~~Correspondent ~~are three special criteria to qualify for the enlarged activities and affiliation~~Banking. We ~~First,~~formed ~~all~~a ~~the~~Correspondent ~~depository~~Banking ~~institutions~~division in ~~the~~March ~~bank~~2007 ~~holding~~to ~~company~~expand ~~organization~~lending ~~must~~services beto ~~well-capitalized.~~other ~~Second,~~financial ~~all of the depository~~ institutions. The ofdivision ~~the~~specializes ~~bank~~in ~~holding~~credit ~~company~~lines for ~~must~~other becommercial ~~well~~banks, ~~managed.~~warehouse ~~Third~~lending, ~~the~~loans ~~bank~~to ~~holding~~directors ~~company must have filed a declaration~~ of ~~intent~~other ~~with~~banks ~~the Federal Reserve Board stating that it intends to exercise the expanded authority under the GLB Act~~ and ~~certify~~participation toloans. At ~~the~~December 31, ~~Federal~~2008, ~~Reserve~~Correspondent ~~Board~~Banking ~~that the bank holding company's depository institutions meet the well-capitalized and well-~~managed ~~criteria. The GLB Act also requires the bank to achieve~~ a ~~rating~~loan ofportfolio ~~satisfactory or better in meeting community credit needs at the most recent examination~~ of ~~such~~$60.5 ~~institution under the Community Reinvestment Act~~million.

~~Once~~Security aInterim ~~bank~~Holding ~~holding~~Corporation. We ~~company~~formed Security ~~has~~Interim ~~filed~~Holding aCorporation ~~declaration~~(SBKC ofInterim) ~~its intent to be a financial holding company, as long as there is no action by the Federal Reserve Board giving notice that it is not eligible, the company may proceed to engage~~ in ~~the~~April ~~activities~~2008 ~~and~~for ~~enter into~~ the ~~affiliations~~purpose ~~under~~of ~~the~~raising ~~large~~capital ~~authority conferred~~ by ~~the~~issuing ~~GLB Act's amendments to the Bank Holding Company Act~~$40.0 ~~The~~million ~~holding~~of ~~company~~subordinated ~~does~~notes ~~not need prior approval from the Federal Reserve Board~~ to ~~engage~~investors. inSBKC ~~activities~~Interim ~~that~~is ~~the~~a ~~GLB~~wholly ~~Act~~owned ~~identifies~~subsidiary asof ~~financial~~Security inBank ~~nature~~Corporation orand ~~that the Federal Reserve Board~~ has ~~determined to be financial in nature or incidental thereto by order or regulation~~no operations.

~~The~~Our ~~GLB~~Market ~~Act~~Area retains the basic structure of the Bank Holding Company Act. Thus, a bank holding company that is not eligible for the expanded powers of a financial holding company is now subject to the amended Section 4(c)(8) of the Bank Holding Company Act which freezes the activities that are authorized and defined as closely related to banking activities. Under this Section a bank holding company is not eligible for the expanded activities permitted under new Section 4(k) and is limited to those specific activities previously approved by the Federal Reserve Board.

~~The~~We ~~GLB~~provide ~~Act~~a ~~also~~wide ~~addresses~~variety ~~the~~of ~~consequences~~community ~~when~~banking aservices ~~financial~~through ~~holding~~21 ~~company~~full service ~~that~~banking ~~has~~and ~~exercised~~loan ~~the~~production ~~expanded~~offices. ~~authority~~A ~~fails~~substantial toportion ~~maintain~~of ~~its~~our ~~eligibility~~business tois bedrawn afrom ~~financial~~the ~~holding~~Middle ~~company.~~Georgia ~~The~~counties ~~Federal~~of ~~Reserve~~Bibb, ~~Board~~Houston ~~may~~and ~~impose~~Jones. ~~such~~We ~~limitations~~believe onwe are the ~~conduct~~market orleader ~~activities~~among ofcommunity abanks ~~noncompliant~~based ~~financial~~in ~~holding~~Middle ~~company~~Georgia orand ~~any~~we ~~affiliate~~have historically ofgained ~~that~~market ~~company~~share asat the ~~Board~~expense ~~determines~~of toour besuper-regional ~~appropriate under the circumstances~~ and ~~consistent~~national ~~with~~competitors ~~the~~in ~~purpose~~these ofcore ~~the Act~~markets.

~~The~~Several ~~GLB~~years ~~Act~~ago, iswe ~~essentially~~made a ~~dramatic~~strategic ~~liberalization~~decision ofto expand into other markets in the ~~restrictions~~State ~~placed~~of onGeorgia. ~~banks~~In January 2003, ~~especially~~we ~~bank~~expanded ~~holding~~our ~~companies,~~market ~~regarding~~presence by opening a de novo banking office in the ~~areas~~city of ~~financial~~Brunswick, ~~businesses~~which is located on the southeastern coast of Georgia in ~~which~~Glynn ~~they~~County. ~~are~~This ~~allowed~~banking office provides diversification outside of our Middle Georgia market and allows us to ~~compete~~take advantage of opportunities presented by the Glynn County area, which is situated midway between Savannah, Georgia and Jacksonville, Florida. In addition, we opened a de novo branch on St. Simons Island, Georgia in 2005.

8In May 2005, we made our initial entry into the metro Atlanta market by acquiring SouthBank (now Security Bank of North Metro), a community bank located in Woodstock, Georgia. In March and July 2006, we made additional entries into the metro Atlanta market with the acquisitions of Neighbors Bancshares, Inc. (now Security Bank of North Fulton) and Homestead Bank (now Security Bank of Gwinnett County), community banks located in Alpharetta and Suwanee, Georgia, respectively.

~~Part~~In Iaddition, ~~(Continued)~~due primarily to the operations of SRES, approximately 12.6% of our total loan portfolio is from loans originated in areas outside our Georgia markets, as illustrated in the following table:

Item 1 (Continued)


	% of Loan Portfolio
Middle Georgia	37.4	%
Metropolitan Atlanta, Georgia	30.7
All Other Georgia	9.8
Coastal Georgia	9.5
Florida	9.3
Alabama	1.6
South Carolina	1.2
Other States	0.5

Total	100.0	%

~~Regulation~~4 ~~of the Banks~~

AsTable state-charteredof banks, the Banks are examined and regulated by the Federal Deposit Insurance Corporation ("FDIC") and the Georgia Department.Contents

~~The~~Competition major functions of the FDIC with respect to insured banks include paying depositors to the extent provided by law in the event an insured bank is closed without adequately providing for payment of the claim of depositors, acting as a receiver of state banks placed in receivership when so appointed by state authorities, and preventing the continuance or development of unsound and unsafe banking practices. In addition, the FDIC also approves conversions, mergers, consolidations, and assumption of deposit liability transactions between insured banks and noninsured banks or institutions to prevent capital or surplus diminution in such transactions where the resulting, continued or assumed bank is an insured nonmember state bank.

~~Subsidiary~~There ~~banks~~is ofsignificant acompetition ~~bank~~within ~~holding~~the ~~company~~financial ~~are~~services ~~subject~~industry in general as well as with respect to ~~certain~~the ~~restrictions~~particular ~~imposed~~financial services provided by the ~~Federal~~Company ~~Bank~~and ~~Holding~~the ~~Company~~Banks. ~~Act~~Within onour ~~any~~markets, ~~extension~~the ofBanks ~~credit~~compete todirectly ~~the~~with ~~bank~~major ~~holding~~banking ~~company~~institutions of comparable or ~~any~~larger ofsize ~~its~~and ~~subsidiaries~~resources, onas ~~investment~~well inas ~~the~~with ~~stock~~various or other ~~securities~~smaller ~~thereof~~banking organizations. The Banks also have numerous local and onnational ~~the~~nonbank ~~taking~~competitors, ofincluding ~~such~~savings ~~stock~~and orloan ~~securities~~associations, ascredit ~~collateral~~unions, ~~for~~mortgage ~~loans~~companies, topersonal ~~any~~and ~~borrower.~~commercial Infinance ~~addition~~companies, ainvestment ~~bank~~brokerage ~~holding~~and ~~company~~financial advisory firms, and ~~its~~mutual ~~subsidiaries~~fund ~~are~~companies. ~~prohibited~~Entities ~~from~~that deliver ~~engaging~~financial inservices ~~certain~~and ~~tie-in~~access ~~arrangements~~to infinancial ~~connection~~products ~~with~~and ~~any~~transactions ~~extension~~exclusively through the Internet are another source of ~~credit~~competition. orTechnological ~~provision~~advances have also allowed the Banks and other financial institutions to provide electronic and Internet-based services that enhance the value of ~~any~~traditional ~~property~~financial orproducts. Continued consolidation within the financial services industry will most likely change the nature and intensity of competition that we face, but can also create opportunities for us to demonstrate and exploit competitive advantages.

~~The~~According ~~Georgia~~to ~~Department~~the ~~regulates~~FDIC ~~all~~deposit ~~areas~~data as of June 30, 2008, in the ~~banks'~~combined ~~banking~~markets ~~operations~~of Bibb, ~~including~~Jones ~~mergers~~and Houston Counties, ~~establishment~~our three core counties of ~~branches~~operation, ~~loans~~bank and thrift deposits totaled approximately $5.23 billion. Our deposits accounted for 33% of the combined deposit base for these three counties, ~~interest~~which ~~rates~~ranked us first in overall market share and ~~reserves~~first in market share of any community bank based in these counties. ~~The~~Approximately 41% of this deposit base was controlled by super-regional and national institutions, including BB&T, Bank ~~must~~of ~~have~~America, ~~the~~SunTrust ~~approval~~Bank, Wachovia Bank, Colonial Bank and CB&T Bank of Middle Georgia (Synovus). Despite the ~~Commissioner~~considerable toresources ~~pay~~that ~~cash~~these competitors ~~dividends~~possess, ~~unless~~we athave ~~the~~achieved ~~time~~a significant market share in each of ~~such~~these ~~payment:~~counties. Our expanded banking presence in Glynn County is still developing; however, our market share at June 30, 2008 decreased to 4.5% from 4.8% at June 30, 2007. Our deposit market share in metropolitan Atlanta is not yet meaningful.

~~(i)~~Lending ~~the~~Services ~~total classified assets at the most recent examination of such banks do not exceed 80 percent of Tier 1 capital plus Allowance for Loan Losses as reflected at such examination;~~

~~(ii)~~Through the ~~aggregate~~Banks, ~~amount~~we offer a range of ~~dividends~~lending ~~declared~~services, orincluding ~~anticipated~~real toestate-construction, bereal ~~declared~~estate inmortgage, ~~the~~commercial, ~~calendar~~financial ~~year~~and ~~does~~agricultural ~~not~~and ~~exceed~~consumer 50loans. ~~percent~~Our ofloans ~~the~~receivable, net ~~profits~~of unearned interest, ~~after~~at December 31, ~~taxes~~2008 ~~but~~were ~~before~~approximately ~~dividends~~$1.98 billion, ~~for~~or approximately 74.3% of total earning assets. The interest rates charged on loans vary with the ~~previous~~degree ~~calendar~~of ~~year;~~risk, maturity and amount of the loan and are further subject to competitive pressures, money market rates, availability of funds and government regulations.

~~(iii)~~Types ~~the ratio~~ of ~~Tier~~Loans. We 1offer ~~Capital~~the tofollowing ~~Adjusted~~types ~~Total~~of ~~Assets~~loans ~~shall~~(which ~~not~~are bebased ~~less~~on ~~than~~FDIC ~~six~~Call (6Report classifications): ~~percent.~~

~~The~~• ~~Banks~~Construction, ~~are~~Land ~~also~~and ~~subject~~Land toDevelopment. ~~State~~Our construction loan portfolio consists of ~~Georgia~~loans ~~banking~~for non-agricultural, residential and ~~usury~~commercial ~~laws~~construction ~~restricting~~and ~~the~~land ~~amount~~development ofprojects. ~~interest~~Loans ~~which~~made itto ~~may~~residential ~~charge~~builders inare ~~making~~made against presales as well as on a speculative basis where the house has not been pre-sold. Commercial construction loans for residential or ~~other~~retail ~~extensions~~properties are typically backed by pre-lease and/or pre-sale requirements prior to loan funding. Also, all contractor customers (residential or commercial) are required to meet stringent underwriting standards that focus on: experience, years of successful operation, high personal credit scores and significant unencumbered personal and corporate liquidity. Loans are made within regulatory loan-to-value guidelines with additional collateral occasionally required as necessary to protect our interests. Progress reports are maintained on each loan and appropriate progress is required prior to funding. As of December 31, 2008, these loans represented approximately 50.2% of our portfolio.

~~Expansion~~• ~~through~~Real ~~Branching,~~Estate ~~Merger~~Mortgage. Our real estate mortgage loans consist of residential loans to individuals intended to be held in our loan portfolio. In prior years they also included residential loans to individuals intended for resale. These loans are generally made on the basis of the borrower’s ability to repay the loan from his or ~~Consolidation~~her employment and other income and are secured by residential real estate. Other real estate mortgage loans may include loans where the primary reasons for the loans are for commercial,

~~With~~5 ~~respect to expansion, the Banks were previously prohibited from establishing branch offices or facilities outside of the county in which their main office was located, except:~~

a.Table inof adjacent counties in certain situations, orContents

b.financial byor ~~means~~agricultural ofpurposes ~~merger~~or loans made to individuals for personal, family or ~~consolidation~~household ~~with~~purposes abut ~~bank~~are ~~which~~secured ~~has~~by ~~been~~real inestate. ~~existence~~As ~~for~~of atDecember ~~least~~31, ~~five~~2008, ~~years~~these loans represented approximately 38.8% of our portfolio.

9• Commercial, Financial and Agricultural. We make commercial loans to qualified businesses in our market area. This portion of our portfolio consists primarily of commercial and industrial loans for the financing of accounts receivable, inventory, property, plant and equipment. Because we make these loans based on the borrower’s demonstrated ability to repay out of cash flow from his or her business, and because we know the customers to whom these loans are made, we consider these loans to be of high quality. Although large loans of this nature might otherwise be assumed to carry additional risk, our loans are typically well-collateralized and our exposure to any one borrower is limited because we focus on overall relationships. Under our risk rating system, credit grades with higher intrinsic risk profiles limit the amount that can be loaned into any one borrowing relationship, thereby limiting our exposure to riskier credits and applying larger loan loss allocations to the credit. As of December 31, 2008, these loans represented approximately 8.0% of our portfolio.

~~Part~~• IConsumer. ~~(Continued)~~This portfolio consists principally of installment loans to individuals for personal, family and household purposes. These loans entail a high degree of risk due to the typically highly depreciable nature of any underlying collateral and collectibility risks resulting from the borrower’s insolvency or bankruptcy. To mitigate this risk, we perform a thorough credit and financial analysis of the borrower and seek adequate collateral for the loan. As of December 31, 2008, these loans represented approximately 3.0% of our portfolio.

~~Item~~We 1originate ~~(Continued)~~loans with a variety of terms, including fixed and floating or variable rates, and a variety of maturities. Although we offer a variety of loans, we emphasize the use of real estate as collateral. As of December 31, 2008, approximately 89.0% of our loan portfolio, regardless of type, was secured by real estate.

InOther ~~addition,~~Products inand ~~the~~Services case of a merger or consolidation, the acquiring bank must have been in existence for at least 24 months prior to the merger. However, effective July 1, 1996, Georgia permits the subsidiary bank(s) of any bank holding company then engaged in the banking business in the state of Georgia to establish, de novo, upon receipt of required regulatory approval, an aggregate of up to three additional branch banks in any county within the state of Georgia. Effective July 1, 1998, this same Georgia law permits, with required regulatory approval, the establishment of de novo branches in an unlimited number of counties within the state of Georgia by the subsidiary bank(s) of bank holding companies then engaged in the banking business in the state of Georgia. This law may result in increased competition in the Banks' market area.

~~Capital~~We ~~Requirements~~provide a full range of additional retail and commercial banking products and services, including checking, savings and money market accounts; certificates of deposit; credit cards; individual retirement accounts; safe-deposit boxes; money orders; electronic funds transfer services; travelers’ checks and automatic teller machine access. We do not currently offer trust or fiduciary services.

~~The~~Employees FDIC adopted risk-based capital guidelines that went into effect on December 31, 1990 for all FDIC insured state chartered banks that are not members of the Federal Reserve System. Beginning December 31, 1992, all banks were required to maintain a minimum ratio of total capital to risk weighted assets of eight (8) percent of which at least four (4) percent must consist of Tier 1 capital. Tier 1 capital of state chartered banks (as defined by the regulation) generally consists of: (i) common stockholders' equity; (ii) qualifying noncumulative perpetual preferred stock and related surplus; and (iii) minority interests in the equity accounts of consolidated subsidiaries. In addition, the FDIC adopted a minimum ratio of Tier 1 capital to total assets of banks, referred to as the leverage capital ratio of three (3) percent if the FDIC determines that the institution is not anticipating or experiencing significant growth and has well-diversified risk, including no undue interest rate exposure, excellent asset quality, high liquidity, good earnings and, in general, is considered a strong banking organization, rated Composite "1" under the Uniform Financial Institutions Rating System (the CAMEL rating system) established by the Federal Financial Institutions Examination Council. All other financial institutions are required to maintain a leverage ratio of four (4) percent.

~~Effective~~As ~~October~~of 1December 31, ~~1998~~2008, ~~the~~we had ~~FDIC~~405 ~~amended~~employees ~~its~~on ~~risk-based and leverage capital rules as follows: (1) all servicing assets and purchase credit card relationships ("PCCRs") that are included in capital are each subject to~~ a ~~ninety~~full-time ~~(90)~~equivalent ~~percent~~basis. None of ~~fair value limitation (also known as a "ten (10) percent haircut"); (2)~~ the ~~aggregate~~employees ~~amount~~are ofrepresented ~~all~~by ~~servicing~~any ~~assets~~unions ~~and~~or ~~PCCRs~~similar ~~included~~groups, ~~in capital cannot excess 100 percent of Tier I capital; (3) the aggregate amount of nonmortgage servicing assets ("NMSAs")~~ and ~~PCCRS~~we ~~included~~have innot ~~capital~~experienced ~~cannot~~any ~~exceed~~type ~~25 percent~~ of ~~Tier~~strike 1or ~~capital;~~labor ~~and~~dispute. ~~(4)~~We ~~all~~consider ~~other~~our ~~intangible~~relationship ~~assets~~with ~~(other~~employees ~~than~~to ~~qualifying PCCRS) must~~ be ~~deducted from Tier 1 capital~~good.

~~Amounts~~Seasonality of servicing assets and PCCRs in excess of the amounts allowable must be deducted in determining Tier 1 capital. Interest-only strips receivable, whether or not in security form, are not subject to any regulatory capital limitation under the amended rule.

10We do not consider our business to be seasonal in nature.

~~Part~~Supervision Iand ~~(Continued)~~Regulation

~~Item~~Bank 1Holding ~~(Continued)~~Company Regulation

~~FDIC~~General ~~Insurance Assessments~~

~~The~~We ~~Federal~~are ~~Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"), enacted in December, 1991, provided for~~ a ~~number~~bank ofholding ~~reforms~~company ~~relating~~within to the ~~safety~~meaning ~~and soundness~~ of the ~~deposit~~Bank ~~insurance~~Holding ~~system,~~Company ~~supervision~~Act of ~~domestic~~1956, ~~and~~as ~~foreign~~amended ~~depository institutions and improvement of accounting standards~~(BHCA). ~~One~~As ~~aspect~~a ofbank holding ~~the~~company ~~Act~~registered ~~is the requirement that banks will have to meet certain safety and soundness standards. In order to comply~~ with the ~~Act, the~~ Federal Reserve ~~and~~under the ~~FDIC~~BHCA ~~implemented regulations defining operational~~ and ~~managerial~~the ~~standards~~Georgia ~~relating~~Department tounder ~~internal~~the ~~controls,~~Financial ~~loan~~Institutions ~~documentation,~~Code ~~credit~~of ~~underwriting~~Georgia, ~~interest~~we ~~rate~~are ~~exposure,~~subject ~~asset~~to ~~growth~~supervision, ~~director~~examination and ~~officer~~reporting ~~compensation,~~by ~~fees~~the ~~and~~Federal ~~benefits,~~Reserve ~~asset quality, earnings~~ and ~~stock~~the ~~valuation~~Georgia Department.

~~The~~6 regulations provide for a risk-based premium system which requires higher assessment rates for banks which the FDIC determines pose greater risks to the Bank Insurance Fund ("BIF"). Under the regulations, banks pay an assessment depending upon risk classification.

ToTable arrive at risk-based assessments, the FDIC places each bank in one of nine risk categories using a two-step process based on capital ratios and on other relevant information. Each bank is assigned to one of three groups: (i) well capitalized, (ii) adequately capitalized, or (iii) under capitalized, based on its capital ratios. The FDIC also assigned each bank to one of three subgroups based upon an evaluation of the risk posed by the bank. The three subgroups include (i) banks that are financially sound with only a few minor weaknesses, (ii) banks with weaknesses which, if not corrected, could result in significant deterioration of the bank and increased risk to the BIF, and (iii) those banks that pose a substantial probability of loss to the BIF unless corrective action is taken. FDICIA imposes progressively more restrictive constraints on operations management and capital distributions depending on the category in which an institution is classified. Contents

~~Under~~Our ~~FDICIA,~~activities ~~insurance~~are oflimited ~~deposits~~to ~~may~~banking, bemanaging ~~terminated~~or bycontrolling ~~the~~banks, ~~FDIC~~furnishing ~~upon~~services ato ~~finding~~or performing ~~that~~services ~~the~~for ~~institution~~bank ~~has~~subsidiaries, ~~engaged~~or engaging in ~~unsafe~~any ~~and~~other ~~unsound~~activity ~~practices,~~that isthe inFederal anReserve ~~unsafe~~determines orto ~~unsound~~be ~~condition~~so toclosely ~~continue~~related ~~operations~~to banking, or ~~has~~managing ~~violated~~or ~~any~~controlling ~~applicable law~~banks, ~~regulation,~~as ~~rule,~~to ~~order~~be ora ~~condition~~proper ~~imposed~~incident byto ~~the~~these ~~FDIC~~activities.

11We are required to file with the Federal Reserve and the Georgia Department periodic reports and any additional information as they may require. The Federal Reserve and Georgia Department will also regularly examine us and may examine our bank or other subsidiaries.

~~Part~~Activity ILimitations ~~(Continued)~~

~~Item~~The 1BHCA ~~(Continued)~~requires prior Federal Reserve approval for, among other things:

~~Community~~• ~~Reinvestment~~the ~~Act~~acquisition by a bank holding company of direct or indirect ownership or control of more than 5% of the voting shares or substantially all of the assets of any bank or bank holding company, or

~~The~~• ~~Company~~a ~~and~~merger ~~the~~or ~~Banks~~consolidation ~~are subject to the provisions~~ of ~~the Community Reinvestment Act of 1977, as amended (the "CRA") and the federal banking agencies' regulations issued thereunder. Under the CRA, all banks and thrifts have~~ a ~~continuing~~bank ~~and~~holding ~~affirmative~~company ~~obligation, consistent~~ with ~~its~~another ~~safe~~bank ~~and~~holding ~~sound operation to help meet the credit needs for their entire communities, including low- and moderate-income neighborhoods~~company. The CRA does not establish specific lending requirements or programs for financial institutions, nor does it limit an institution's discretion to develop the types of products and services that it believes are best suited to its particular community, consistent with the CRA.

~~The~~Similar ~~CRA~~requirements ~~requires~~are aimposed depository institution's primary federal regulator, in connection with its examination of the institution, to assess the institution's record of assessing and meeting the credit needs of the community served by ~~that institution, including low- and moderate-income neighborhoods. The regulatory agency's assessment of~~ the ~~institution's~~Georgia ~~record is made available to the public~~Department. In the case of a bank holding company applying for approval to acquire a bank or other bank holding company, the Federal Reserve will assess the records of each subsidiary depository institution of the applicant bank holding company, and such records may be the basis for denying the application.

~~The~~A ~~evaluation~~bank ~~system~~holding ~~used~~company tomay ~~judge~~acquire andirect ~~institution's~~or ~~CRA~~indirect ~~performance~~ownership ~~consists~~or control of voting ~~three~~shares ~~tests:~~of ~~(1)~~any acompany ~~lending~~that ~~test;~~is ~~(2)~~engaged andirectly ~~investment~~or ~~test;~~indirectly ~~and~~in ~~(3)~~banking aor ~~service~~managing ~~test~~or controlling banks or performing services for its authorized subsidiaries. ~~Each~~A ofbank ~~these~~holding ~~tests~~company ~~will~~may bealso ~~applied~~engage byin or acquire an interest in a company that engages in activities that the ~~institution's~~Federal ~~primary~~Reserve ~~federal~~has ~~regulator~~determined ~~taking~~by ~~into~~regulation ~~account~~or ~~such~~order ~~factors~~to be so closely related to banking as: ~~(i)~~to ~~demographic~~be ~~data~~a ~~about~~proper ~~the~~incident ~~community;~~to ~~(ii)~~these ~~the~~activities. ~~institution's~~The ~~capacity~~Federal ~~and~~Reserve ~~constraints;~~normally ~~(iii)~~requires ~~the~~some ~~institution's~~form ~~product~~of ~~offerings~~notice ~~and~~or ~~business~~application ~~strategy;~~to engage ~~and~~in ~~(iv)~~or ~~data~~acquire oncompanies engaged in such activities. Under the ~~prior~~BHCA, ~~performance~~we will generally be prohibited from engaging in or acquiring direct or indirect control of more than 5% of the ~~institution~~voting ~~and~~shares ~~similarly-situated~~of ~~lenders~~any company engaged in activities other than those referred to above.

InThe ~~addition,~~BHCA permits a ~~financial~~bank ~~institution~~holding company ~~will~~located ~~have~~in ~~the~~one ~~option~~state ofto ~~having~~lawfully ~~its~~acquire ~~CRA~~a ~~performance~~bank ~~evaluated~~located ~~based~~in onany aother ~~strategic~~state, ~~plan~~subject ~~of up~~ to ~~five~~deposit-percentage, ~~years~~aging inrequirements ~~length~~and ~~that~~other itrestrictions. ~~had~~The ~~developed~~Riegle-Neal inInterstate ~~cooperation~~Banking ~~with~~and ~~local~~Branching ~~community~~Efficiency ~~groups.~~Act Inalso ~~order~~generally toprovides that benational ~~rated~~and ~~under~~state-chartered abanks ~~strategic plan~~may, ~~the~~subject ~~institution~~to ~~will~~applicable bestate ~~required~~law, tobranch ~~obtain~~interstate ~~the~~through ~~prior~~acquisitions ~~approval~~ of ~~its~~banks ~~federal~~in ~~regulator~~other states.

~~The~~Under ~~interagency~~the ~~CRA~~Gramm-Leach-Bliley ~~regulations~~Act, ~~provide~~bank holding companies that anare ~~institution~~well-capitalized ~~evaluated~~and ~~under~~well-managed aand ~~given~~meet ~~test~~other ~~will~~conditions ~~receive~~can ~~one~~elect ofto ~~five~~become “financial ~~ratings~~holding ~~for~~companies.” ~~the~~As ~~test:~~financial ~~(1)~~holding ~~outstanding;~~companies, ~~(2)~~they ~~high~~and ~~satisfactory;~~their ~~(3)~~subsidiaries ~~low~~are ~~satisfactory;~~permitted ~~(4)~~to ~~needs~~acquire or engage in activities that are deemed to ~~improve;~~be ~~and~~financial ~~(5)~~in ~~substantial~~nature ~~noncompliance.~~or Ancomplementary ~~institution~~to ~~will~~such ~~receive~~activities aby ~~certain~~the ~~number~~Federal Reserve, ofsuch ~~points~~as ~~for~~insurance ~~its~~underwriting, ~~rating~~securities onunderwriting ~~each~~and ~~test~~distribution, travel agency activities, broad insurance agency activities and ~~the~~merchant ~~points~~banking. ~~are~~Financial ~~combined~~holding companies continue to ~~produce~~be ansubject to the overall ~~composite~~oversight ~~rating.~~and supervision ~~Evidence~~of the Federal Reserve, but the Gramm-Leach-Bliley Act applies the concept of ~~discriminatory~~functional orregulation ~~other~~to ~~illegal~~the ~~credit~~activities ~~practices~~conducted by subsidiaries. For example, insurance activities would ~~adversely~~be ~~affect~~subject anto ~~institution's~~supervision ~~overall~~and ~~rating~~regulation by state insurance authorities. ~~Each~~While ofwe ~~SNB's~~have ~~subsidiary~~not ~~banks~~elected ~~received~~to become a ~~"high~~financial ~~satisfactory"~~holding ~~CRA~~company ~~rating~~in asorder ato ~~result~~exercise ofthe ~~their~~broader ~~last~~activity ~~CRA~~powers ~~examination~~provided by the Gramm-Leach-Bliley Act, we may elect to do so in the future.

~~Proposed~~Limitations ~~Legislation~~on Acquisitions of Bank Holding Companies

~~Legislation~~As isa ~~regularly~~general ~~considered~~proposition, ~~and~~other ~~adopted~~companies byseeking ~~both~~to ~~the~~acquire ~~United~~control ~~States~~of ~~Congress~~a bank ~~and~~or bank holding company would require the ~~Georgia~~approval ~~General~~of ~~Assembly~~the Federal Reserve under the BHCA. ~~Such~~In ~~legislation~~addition, ~~could~~individuals ~~result~~or ingroups ~~regulatory~~of ~~changes~~individuals ~~and~~seeking ~~changes~~to inacquire ~~competitive~~control ~~relationships~~of ~~for~~a ~~banks~~bank ~~and~~or bank holding ~~companies~~company would need to file a prior notice with the Federal Reserve (which the Federal Reserve may disapprove under certain circumstances) under the Change in Bank Control Act. ~~The~~Control ~~effect~~is conclusively presumed to exist if an individual or company acquires 25% or more of ~~such~~any ~~legislation~~class onof voting securities of the ~~business~~bank ofor bank holding company. Control may exist under the ~~Company~~Change ~~and~~in Bank Control Act if the ~~Banks~~individual ~~cannot~~or becompany ~~predicted.~~acquires 10% or more of any class of voting securities of the

127

PartTable Iof (Continued)Contents

~~Item~~ bank 1or ~~(Continued)~~bank holding company. A company may be presumed to have control under the BHCA if it acquires 5% or more of any class of voting securities of the bank or bank holding company. When the facts warrant, presumptions of control may be rebutted with approval from the Federal Reserve.

~~Monetary~~Source ~~Policy~~of Financial Strength

~~The~~Federal ~~results~~Reserve ofpolicy ~~operations~~requires ofa ~~the~~bank ~~Company~~holding ~~and~~company ~~the~~to ~~Banks~~act ~~are~~as ~~affected~~a bysource ~~credit policies~~ of ~~monetary~~financial ~~authorities,~~strength ~~particularly~~and ~~the~~to ~~Federal~~take ~~Reserve.~~measures ~~The~~to ~~instruments~~preserve ofand ~~monetary~~protect ~~policy~~bank subsidiaries ~~employed by the Federal Reserve include open market operations~~ in ~~U.S.~~situations ~~Government~~where ~~securities,~~additional ~~changes~~investments in ~~the~~a ~~discount~~troubled ~~rate on member~~ bank ~~borrowings, changes in reserve requirements against member bank deposits and limitations on interest rates which member banks~~ may ~~pay~~not onotherwise ~~time~~be ~~and savings deposits~~warranted. In ~~view~~addition, ofif ~~the~~a ~~changing~~bank ~~conditions~~holding incompany ~~the~~has ~~foreign~~more ~~and~~than ~~national~~one ~~economy,~~bank asor ~~well~~thrift assubsidiary, ~~the~~each ~~effect~~ of ~~policies~~the ~~and~~bank ~~actions~~holding ~~taken~~company’s bysubsidiary depository ~~monetary~~institutions ~~and~~are ~~fiscal~~responsible ~~authorities,~~for ~~including~~any ~~the~~losses ~~Federal~~to ~~Reserve,~~the noFDIC ~~prediction can be made~~ as toa ~~possible~~result ~~future~~of ~~changes~~an inaffiliated ~~interest~~depository ~~rates,~~institution’s ~~deposit levels, loan demand or the business and earnings of the Company~~failure.

~~Item~~As 2a result, a bank holding company may be required to loan money to its subsidiaries in the form of capital notes or other instruments that qualify as capital of the subsidiary bank under regulatory rules. However, any loans from the bank holding company to those subsidiary banks will likely be unsecured and subordinated to that bank’s depositors and perhaps to other creditors of that bank. In the event of the Company’s bankruptcy, any commitment by the Company to a bank regulatory agency to maintain the capital of a subsidiary bank at a certain level would be assumed by the bankruptcy trustee and entitled to priority of payment.

~~PROPERTIES~~Bank Regulation

~~SNB's~~Our ~~subsidiaries,~~Banks ~~SB-Bibb~~are ~~and~~subject ~~SB-Houston,~~to ~~owned~~regulation ~~ten~~under ~~full-service~~federal and ~~one~~state ~~limited-service~~law. ~~banking~~The following ~~locations~~discussion assets offorth ~~December~~some ~~31,~~of ~~2001.~~the ~~Leased~~elements ~~properties~~of ~~include~~the ~~one~~bank ~~stand~~regulatory ~~alone~~framework ~~ATM~~applicable ~~machine~~to ~~and~~our ~~night~~Banks ~~depository~~ and ~~SB-Bibb's~~certain ~~operations~~of ~~center,~~our ~~which~~subsidiaries. ~~houses~~The ~~its~~regulatory ~~in-house~~framework ~~data~~is ~~processing~~intended ~~facility~~primarily ~~and~~for ~~operational~~the ~~support~~protection ~~functions.~~of ~~Fairfield~~depositors ~~Financial~~and ~~Services,~~the ~~Inc.,~~FDIC’s Deposit aInsurance ~~subsidiary~~Fund ofand ~~SB-Bibb,~~not ~~leases~~for athe ~~number~~protection of ~~mortgage~~our ~~production~~shareholders ~~offices throughout Georgia~~ and ~~the Southeast~~creditors. ~~The~~To ~~net~~the ~~book~~extent ~~value~~that ofthe ~~all~~following ~~facilities~~information ~~including~~describes ~~furniture,~~statutory ~~fixtures~~ and ~~equipment~~regulatory ~~totaled $11~~provisions,~~508,000~~ asit ofis ~~December~~qualified ~~31,~~in ~~2001.~~its ~~Management~~entirety ~~considers~~by ~~that~~reference ~~its~~to ~~properties~~the ~~are~~particular ~~well~~statutory and ~~maintained~~regulatory provisions.

~~Item~~General 3

~~LEGAL~~The ~~PROCEEDINGS~~Banks are commercial banks chartered under the laws of the State of Georgia, and as such are subject to supervision, regulation and examination by the Georgia Department. The Banks are members of the FDIC, and their deposits are insured by the FDIC’s Deposit Insurance Fund up to the amount permitted by law. The FDIC and the Georgia Department routinely examine the Banks and monitor and regulate all of the Banks’ operations, including such things as the adequacy of reserves, the quality and documentation of loans, the payments of dividends, the capital adequacy, the adequacy of systems and controls, credit underwriting and asset liability management, compliance with laws and the establishment of branches. Interest and other charges collected or contracted for by the Banks are subject to state usury laws and certain federal laws concerning interest rates. The Banks file periodic reports with the FDIC and Georgia Department.

~~The~~Transactions ~~Company~~with Affiliates and ~~its~~Insiders subsidiaries may become parties to various legal proceedings arising from the normal course of business. As of December 31, 2001, there are no material pending legal proceedings to which SNB or its subsidiaries are a party or of which any of its property is the subject.

~~Item~~The 4Company is a legal entity separate and distinct from the Banks. Various legal restrictions limit the Banks’ abilities to lend or otherwise supply funds to the Company and other non-bank subsidiaries of the Company, all of which are deemed to be “affiliates” of the Banks for the purposes of these restrictions. The Company and the Banks are subject to Section 23A of the Federal Reserve Act. Section 23A defines “covered transactions,” which include extensions of credit, and limits a bank’s covered transactions with any single affiliate to 10% of such bank’s capital and surplus and with all affiliates to 20% of such bank’s capital and surplus. All covered and exempt transactions between a bank and its affiliates must be on terms and conditions consistent with safe and sound banking practices, and banks and their subsidiaries are prohibited from purchasing low-quality assets from the bank’s affiliates. Finally, Section 23A requires that all of a bank’s extensions of credit to an affiliate be secured by collateral in amounts ranging from 100% to 130% of the loan amount,

~~SUBMISSION~~8 ~~OF MATTERS TO A VOTE OF SECURITY HOLDERS~~

NoTable matters were submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this report.Contents

~~Part~~ depending IIon the nature of the collateral. The Company and the Banks are also subject to Section 23B of the Federal Reserve Act, which generally limits covered and other transactions between a bank and its affiliates to terms and under circumstances, including credit standards, that are substantially the same or at least as favorable to the bank as prevailing at the time for transactions with unaffiliated companies.

~~Item~~The 5Banks are also restricted in the loans that they may make to our or their executive officers, directors, or any owner of 10% or more of their stock or the stock of the Company, and certain entities affiliated with any such person. Amounts of such loans are subject to various limits, depending on the purpose of the loan, and certain Bank board approvals may be necessary.

~~MARKET~~Dividends ~~FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS~~

~~SNB~~The ~~common~~Company is ~~stock~~a islegal ~~quoted~~entity onseparate and distinct from the ~~NASDAQ~~Banks. ~~Stock~~The ~~Market~~principal ~~under~~sources of the ~~symbol~~Company’s ~~"SNBJ."~~cash ~~Prior~~flow toare ~~December 1,~~dividends ~~1997,~~and ~~SNB~~management ~~common~~fees ~~stock~~that ~~was~~the ~~not~~Banks ~~traded~~pay onto ~~any~~the ~~public~~Company. ~~market~~Statutory orand ~~exchange,~~regulatory ~~although~~limitations ~~certain~~apply ~~brokerage~~to ~~firms~~the ~~made~~Banks’ apayment of ~~market~~dividends ~~for~~to ~~its~~the ~~common~~Company ~~stock.~~as ~~The~~well ~~following~~as ~~table~~to ~~sets~~the ~~forth~~Company’s ~~the~~payment ~~high,~~of ~~low~~dividends ~~and~~to ~~close~~its ~~sale~~shareholders. ~~prices~~The ~~per~~Banks ~~share~~are ofrequired to pay fees to the ~~common~~Company ~~stock~~for asthose ~~reported~~services onthat the ~~NASDAQ~~Company ~~Stock~~provides ~~Market,~~to the Banks and ~~the~~those ~~dividends~~fees ~~declared~~must ~~per~~satisfy ~~share~~the requirements ~~for~~of Section 23B of the ~~periods~~Federal ~~indicated~~Reserve Act, discussed above.

13A variety of federal and state laws and regulations affect the ability of the Bank and the Company to pay dividends. A depository institution may not pay any dividend if payment would cause it to become undercapitalized or if it already is undercapitalized. The federal bank regulatory authorities may prevent the payment of a dividend if they determine that the payment would be an unsafe and unsound banking practice. As a rule, the amount of a dividend may not exceed the sum of year-to-date net income and of retained net income in the immediately previous two years without specific regulatory approval. Additionally, the federal agencies have issued policy statements to the effect that bank holding companies and insured banks should generally only pay dividends out of current operating earnings. Regulations promulgated by the Georgia Department also limit the Bank’s payment of dividends. Upon receiving a request from the Federal Reserve Bank of Atlanta, our Board of Directors approved a resolution in February 2008 stating that we will not declare or pay any dividends to our shareholders and we will not incur additional debt at the holding company without prior written approval of the Federal Reserve Bank of Atlanta. Due to the financial condition of the Company and the Banks and the uncertainty in the economy, our Board of Directors reduced our dividend in the second quarter of 2008 and suspended our dividend altogether in the third quarter of 2008.

~~Part~~Enforcement IIPolicies ~~(Continued)~~and Actions

~~Item~~Federal 5law ~~(Continued)~~gives the Federal Reserve and FDIC substantial powers to enforce compliance with laws, rules and regulations. Banks or individuals may be ordered to cease and desist from violations of law or other unsafe or unsound practices. The agencies have the power to impose civil money penalties against individuals or institutions of up to $1 million per day for certain egregious violations. Persons who are affiliated with depository institutions can be removed from any office held in that institution and banned from participating in the affairs of any financial institution. The banking regulators frequently employ the enforcement authorities provided in federal law.

Year Ended December 31, 2001	High	Low	Close	Dividend Per Share
Fourth Quarter	$17.00	$14.10	$14.67	$0.080
Third Quarter	16.00	13.50	14.00	0.080
Second Quarter	16.00	12.75	14.50	0.080
First Quarter	15.25	12.75	14.25	0.070

Capital Regulations

Year Ended December 31, 2000
Fourth Quarter	$14.00	$12.36	$13.00	$0.070
Third Quarter	15.25	12.00	12.88	0.070
Second Quarter	16.25	12.00	15.00	0.070
First Quarter	16.50	13.13	15.50	0.065

The federal bank regulatory authorities have adopted capital guidelines for banks and bank holding companies. In general, the authorities measure the amount of capital an institution holds against its assets. There are three major capital tests: (1) the Total Capital ratio (the total of Tier 1 Capital and Tier 2 Capital measured against risk-adjusted assets), (2) the Tier 1 Capital ratio (Tier 1 Capital measured against risk-adjusted assets) and (3) the leverage ratio (Tier 1 Capital measured against total assets) (i.e., non-risk-weighted).

As9 ~~of March 11, 2002 the Company had approximately 1,185 shareholders of record.~~

ForTable a discussion on dividend restrictions, refer to Item 1, Business-Regulation of the Banks.Contents

~~Item~~Tier 61 Capital consists of common equity, retained earnings and a limited amount of qualifying preferred stock, less goodwill, certain core deposit intangibles and certain deferred tax assets. Tier 2 Capital consists of non-qualifying preferred stock, qualifying subordinated, perpetual, and/or mandatory convertible debt, term subordinated debt and intermediate term preferred stock and up to 45% of the pretax unrealized holding gains on available-for-sale equity securities with readily determinable market values that are prudently valued, and a limited amount of any loan loss allowance.

~~SELECTED~~Except ~~FINANCIAL~~when ~~DATA~~calculating the leverage ratio, assets are generally weighted for risk. Certain assets, such as cash and U.S. government securities, have a zero risk weighting. Others, such as commercial and consumer loans, have a 100% risk weighting. Risk weightings are also assigned for off-balance sheet items such as loan commitments. The various items are multiplied by the appropriate risk-weighting to determine risk-adjusted assets for the capital calculations.

~~Refer~~Based toon ~~page~~the 16foregoing, institutions are assigned to one of five capital categories – “Well Capitalized,” “Adequately Capitalized,” “Undercapitalized,” “Significantly Undercapitalized,” and “Critically Undercapitalized.” These categories are discussed below in the ~~Management's~~“Prompt ~~Discussion~~Corrective Action” Section. At December 31, 2008, two of our six Banks (Jones County and ~~Analysis~~Houston ~~for~~County) exceeded the ~~table~~Tier 1 leverage, Tier 1 risk-based and total risk-based capital ratios to qualify as “well capitalized.” The other four of ~~selected~~our ~~financial~~Banks ~~data~~(Bibb County, North Metro, North Fulton and Gwinnett County) qualified as “undercapitalized” under current regulatory capital guidelines. Please see below for ~~each~~further discussion of these categories and their impact on our operations. Additionally, as of December 31, 2008, the ~~past~~holding ~~five~~company ~~years~~had Tier 1 Capital and Total Capital of approximately 5.14% and 8.60%, respectively, of risk-weighted assets and a leverage ratio of Tier 1 Capital to total average assets of approximately 3.72%.

~~Item~~In 72004, the Basel Committee on Banking Supervision published a set of risk-based capital standards (“Basel II”) in order to update the existing international capital standards that had been put in place in 1988 (“Basel I”). Basel II adopts a three-pillar framework comprised of minimum capital requirements, supervisory assessment of capital adequacy and market discipline. Basel II provides several options for determining capital requirements for credit and operational risk. In December 2007, the federal banking agencies adopted a final rule implementing Basel II’s advanced approach. Compliance with the final rule is mandatory only for “core banks” – U.S. banking organizations with over $250 billion in banking assets or on-balance-sheet foreign exposures of at least $10 billion. Other qualified U.S. banking organizations may elect, but are not required, to comply with the final rule; provided that their primary federal supervisor does not determine its application to be inappropriate for the bank. In July of 2008, to address the potential competitive inequalities resulting from multiple risk-based capital systems, the federal banking agencies agreed to issue a proposed rule that would provide non-core banks with the option to adopt an approach consistent with Basel II’s standardized approach. At this time, non-core banks must use the existing Basel I risk-based capital rules. Our Banks are not required, and have not elected, to comply with the final rule.

~~MANAGEMENT'S~~Prompt ~~DISCUSSION~~Corrective ~~AND~~Action ~~ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION~~

~~SUMMARY~~The federal bank regulatory authorities must take “prompt corrective action” in respect of depository institutions that do not meet minimum capital requirements. Under these regulations, a bank will be:

~~The~~• ~~following~~“well ~~discussion~~capitalized” ~~reviews~~if ~~the~~it ~~results~~has a Total Capital ratio of ~~operations~~10% ~~and~~or ~~assesses~~greater, ~~the~~a ~~financial~~Tier ~~condition~~1 Capital ratio of ~~SNB~~6% ~~Bancshares~~or greater, ~~Inc.~~a ~~("SNB",~~leverage ratio of 5% or ~~the~~better ~~"Company")~~– inor ~~Macon,~~4% ~~Georgia~~in ~~for~~certain ~~each~~circumstances of– ~~the~~and ~~five~~is ~~most~~not ~~recent~~subject ~~years~~to ~~ended~~any ~~December~~written 31agreement, ~~2001.~~order, ~~This~~capital ~~discussion~~directive, ~~should~~or beprompt ~~read~~corrective inaction ~~conjunction~~directive ~~with~~by ~~the~~a ~~Company's~~federal ~~consolidated~~bank ~~financial~~regulatory ~~statements~~agency to meet and ~~accompanying~~maintain ~~notes.~~a specific capital level for any capital measure;

14• “adequately capitalized” if it has a Total Capital ratio of 8% or greater, a Tier 1 Capital ratio of 4% or greater, and a leverage ratio of 4% or greater – or 3% in certain circumstances – and is not well capitalized;

~~Part~~10 II

ItemTable 7of (Continued)Contents

~~SNB~~• is“undercapitalized” aif ~~Georgia~~it ~~corporation~~has ~~formed to act as~~ a ~~bank~~Total ~~holding~~Capital ~~company~~ratio ~~for Security Bank~~ of ~~Bibb~~less ~~County~~than ~~(formerly Security National Bank) ("SB-Bibb") under the federal Bank Holding Company Act of 1956~~8%, ~~as amended, and the bank holding company laws of Georgia. SNB was incorporated on February 10, 1994 at the instruction of management of SB-Bibb. At~~ a ~~special~~Tier ~~meeting~~1 ofCapital ~~the~~ratio ~~shareholders~~ of ~~SB-Bibb~~less onthan ~~August~~4% 2,– ~~1994,~~or ~~the~~3% ~~shareholders of SB-Bibb voted~~ in ~~favor~~certain of a plan of reorganization and agreement of merger pursuant to which SB-Bibb became a wholly-owned subsidiary of SNB. The reorganization was effective on September 30, 1994, as a result of which the shares of common stock of SB-Bibb then issued and outstanding were converted into shares of the common stock of SNB. SB-Bibb has operated as a wholly-owned subsidiary of SNB since that time, although the functions and business of SB-Bibb, its Board of Directors, staff and physical office locations underwent no changes as a result of the reorganization.circumstances;

~~SB-Bibb~~• is“significantly aundercapitalized” ~~state-chartered~~if ~~bank~~it ~~that~~has ~~engages~~a inTotal ~~the~~Capital ~~commercial~~ratio ~~banking~~of ~~business~~less ~~primarily~~than in6% ~~Bibb~~or ~~County,~~a ~~Georgia.~~Tier ~~SB-Bibb~~1 ~~commenced~~Capital ~~operations~~ratio onof ~~November~~less 4,than ~~1988. The bank operates six full-service banking offices and one limited-service office in Macon~~3%, ~~Georgia.~~or ~~On March 1, 1999, the bank converted its banking charter from~~ a ~~national~~leverage toratio aof ~~state~~less ~~charter,~~than ~~and~~3%; ~~changed its name from Security National Bank to Security Bank of Bibb County.~~or

On• ~~August~~“critically 8,undercapitalized” 1998, SNB acquired a 100% interest in Crossroads Bancshares, Inc., the parent holding company of Crossroads Bank of Georgia in Perry and Warner Robins, Georgia. The two companies merged in a pooling of interests stock swap transaction and, accordingly, all prior financial information shown below has been restated as if ~~this~~its ~~business~~tangible ~~combination~~equity ~~had~~is ~~always~~equal ~~existed. The parent company of Crossroads Bank was subsequently dissolved. On June 3, 1999, Crossroads Bank changed its name~~ to ~~Security~~or ~~Bank~~less ofthan ~~Houston~~2% ~~County ("SB-Houston") and now operates as a wholly-owned subsidiary~~ of ~~SNB,~~average ~~with~~quarterly ~~four~~tangible ~~full-service banking offices in Perry and Warner Robins~~assets.

OnThe ~~July~~regulations ~~31,~~also ~~2000,~~establish ~~SB-Bibb~~procedures ~~purchased~~for ~~the~~“downgrading” ~~assets~~an institution ofto ~~Group~~a ~~Financial~~lower ~~Southeast~~capital ~~(dba~~category ~~Fairfield~~based ~~Financial)~~on insupervisory afactors ~~business~~other ~~combination~~than ~~accounted~~capital. ~~for~~Specifically, as a ~~purchase.~~federal ~~The~~bank ~~assets~~regulatory ~~were~~agency ~~placed~~may, inafter anotice ~~newly~~and ~~formed~~an ~~subsidiary~~opportunity offor ~~SB-Bibb~~a ~~incorporated as Fairfield Financial Services~~hearing, ~~Inc.~~reclassify ~~("Fairfield").~~a ~~The~~well ~~purchase~~capitalized ~~transaction~~institution ~~involved~~as aadequately capitalized ~~combination~~and ofmay ~~SNB~~require ~~stock~~an ~~and~~adequately ~~cash~~capitalized ~~consideration.~~institution ~~Fairfield~~or isan aundercapitalized ~~well-established~~institution ~~real~~to ~~estate~~comply ~~mortgage~~with ~~lending~~supervisory ~~company~~actions ~~with~~as aif ~~number~~it ofwere ~~production~~in ~~locations~~the ~~throughout~~next ~~Georgia~~lower ~~and~~category if the ~~Southeast,~~institution ~~including~~is ~~offices~~operating in ~~Macon,~~an ~~Columbus,~~unsafe ~~Warner~~or ~~Robins,~~unsound ~~Richmond~~condition ~~Hill,~~or engaging ~~Stockbridge,~~in ~~Fayetteville~~an ~~and~~unsafe ~~St.~~or ~~Simons~~unsound ~~Island~~practice. The ~~Company~~FDIC ~~functions~~may asnot, however, reclassify a ~~subsidiary~~significantly ofundercapitalized ~~SB-Bibb~~institution as critically undercapitalized.

~~Substantially~~Federal ~~all~~law ofgenerally prohibits a depository institution from making any capital distribution, including the ~~business~~payment of ~~SNB~~a isdividend ~~conducted~~or ~~through~~paying any management fee to its ~~two~~holding ~~subsidiary~~company ~~banks.~~if ~~Both~~the ~~banks~~depository ~~offer~~institution would be undercapitalized as a ~~full~~result. ~~range~~Adequately ofcapitalized ~~lending~~depository ~~services~~institutions ~~including~~may not accept brokered deposits absent a waiver from the ~~specialized~~FDIC. ~~Fairfield~~Undercapitalized ~~mortgage~~depository institutions ~~subsidiary,~~may ~~deposit~~not ~~products,~~accept ~~internet~~brokered ~~banking~~deposits, ~~automated~~are ~~teller~~subject ~~machines~~to growth limitations, ~~safe~~are ~~deposit~~required ~~boxes,~~to ~~credit~~submit ~~cards~~a capital restoration plan for approval and are subject to restrictions on interest paid on deposits. For a capital restoration plan to be acceptable, ~~night~~the ~~depositories~~depository institution’s parent holding company must guarantee that the institution will comply with such capital restoration plan. The aggregate liability of the parent holding company is limited to the lesser of 5% of the depository institution’s total assets at the time it became undercapitalized, and ~~other~~the ~~services~~amount ~~for~~necessary to bring the ~~convenience~~institution ofinto ~~its~~compliance ~~customers~~with applicable capital standards. If a depository institution fails to submit an acceptable plan, it ~~who~~is ~~mainly~~treated ~~reside~~as inif ~~Bibb~~it ~~and~~is ~~Houston~~significantly ~~Counties~~undercapitalized. AsIf ofthe ~~December~~controlling 31holding company fails to fulfill its obligations under this law and files, ~~2001~~or has filed against it, ~~SNB~~a ~~had~~petition ~~224~~under ~~employees~~the onfederal Bankruptcy Code, the FDIC claim related to the holding company’s obligations would be entitled to a ~~full-time~~priority ~~equivalent~~in ~~basis~~such bankruptcy proceeding over third party creditors of the bank holding company.

~~The~~Significantly ~~following~~undercapitalized ~~table~~depository ~~illustrates~~institutions ~~selected~~may ~~key~~be ~~financial~~subject ~~data~~to a number of ~~SNB~~requirements ~~for~~and ~~each~~restrictions, including orders to sell sufficient voting stock to become adequately capitalized, requirements to reduce total assets, and cessation of receipt of deposits from correspondent banks. Critically undercapitalized institutions are subject to the ~~past~~appointment ~~five~~of ~~years~~a receiver or conservator.

15The guidelines also provide that institutions experiencing internal growth or making acquisitions will be expected to maintain strong capital positions substantially above the minimum supervisory levels without significant reliance on intangible assets. Higher capital may be required in individual cases, depending upon a bank or bank holding company’s risk profile. All bank holding companies and banks are expected to hold capital commensurate with the level and nature of their risks, including the volume and severity of their problem loans. Lastly, the Federal Reserve’s guidelines indicate that the Federal Reserve will continue to consider a “Tangible Tier 1 Leverage Ratio,” calculated by deducting all intangibles, in evaluating proposals for expansion or new activity.

~~Part~~Cross-Default IILiability

~~Item~~Under 7the Federal Deposit Insurance Act (~~Continued~~FDIA), an insured depository institution that is under common control with another insured depository institution is generally liable for (1) any loss incurred, or reasonably anticipated to be incurred, by the FDIC in connection with the default of the commonly controlled institution or (2) any assistance provided by the FDIC to any commonly controlled institution that is in danger of default. The term “default” is defined to mean the appointment of a conservator or receiver for such institution and “in danger of default” is defined generally as the existence of certain conditions indicating that a “default” is likely to occur

TABLE 1
SELECTED FIVE YEAR FINANCIAL DATA
(Dollars in thousands, except per share data and number of shares)
		Years Ended December 31,
	2001	2000	1999	1998	1997
INCOME STATEMENT
Interest Income	$33,608	$27,035	$20,402	$18,630	$16,969
Interest Expense	16,586	13,106	8,427	7,895	7,345
Net Interest Income	17,022	13,929	11,975	10,735	9,624
Provision for Loan Losses	1,912	1,292	736	636	505
Other Income	11,147	5,354	3,072	2,558	1,830
Other Expense	19,397	12,655	9,537	8,947	7,119
Income Before Tax	6,860	5,336	4,774	3,710	3,830
Income Taxes	2,518	1,857	1,529	1,383	1,223
Net Income	$ 4,342	$ 3,479	$ 3,245	$ 2,327	$ 2,607
PER SHARE (a)
Earnings Per Common Share
Basic	$1.29	$1.04	$0.97	$0.73	$0.88
Diluted	1.29	1.03	0.96	0.69	0.80
Cash Dividends Paid	0.31	0.28	0.26	0.22	0.16
Weighted Average Shares	3,372,969	3,354,145	3,340,624	3,185,014	2,950,611
RATIOS
Return on Average Assets	1.00%	1.09%	1.27%	1.04%	1.30%
Return on Average Equity	13.05%	12.01%	12.08%	9.41%	12.17%
Dividend Payout Ratio	24.08%	26.53%	26.25%	30.26%	17.95%
Average Equity to Average Assets	7.63%	9.06%	10.52%	11.08%	10.65%
Net Interest Margin	4.23%	4.79%	5.21%	5.34%	5.42%
BALANCE SHEET
(at end of period)
Assets	$ 504,762	$ 410,230	$ 283,483	$ 253,006	$ 216,393
Investment Securities	51,041	51,498	45,087	39,301	41,233
Loans Held for Sale	41,166	13,215	1,761	3,121	1,181
Loans, Net of Unearned Income	378,139	305,264	205,668	176,041	144,304
Reserve for Loan Losses	4,099	3,003	2,327	2,070	1,861
Deposits	375,065	311,577	237,418	217,778	188,807
Borrowed Funds	90,418	64,057	15,824	6,408	2,648
Stockholders' Equity	34,777	31,071	27,472	25,736	22,750
Shares Outstanding	3,372,969	3,372,969	3,340,624	3,340,624	2,970,274

AllTable perof share amounts have been calculated to apply SFAS 128 - "Earnings Per Share".Contents

16 in the absence of regulatory assistance. Thus, if applicable, one of our Banks could incur liability to the FDIC pursuant to this statutory provision in the event of the default of another bank or insured depository institution that we own or control. Such liability is subordinated in right of payment to deposit liabilities, secured obligations, any other general or senior liability, and any obligation subordinated to depositors or other general creditors, other than obligations owed to any affiliate of the depository institution (with certain exceptions) and any obligations to shareholders in such capacity. The Company currently controls six banks, and this provision applies to us.

~~Part~~Standards IIfor Safety and Soundness

~~Item~~The 7FDIA requires the federal bank regulatory agencies to prescribe, by regulation or guideline, operational and managerial standards for all insured depository institutions relating to: (~~Continued~~1) internal controls, information systems and internal audit systems; (2) loan documentation; (3) credit underwriting; (4) interest rate risk exposure; and (5) asset growth. The agencies also must prescribe standards for asset quality, earnings and stock valuation, as well as standards for compensation, fees and benefits. The federal bank regulatory authorities have adopted regulations and Interagency Guidelines Prescribing Standards for Safety and Soundness (Safety and Soundness Guidelines) to implement these required standards. The Safety and Soundness Guidelines set forth the standards that the federal bank regulatory authorities use to identify and address problems at insured depository institutions before capital becomes impaired. Under the regulations, if the FDIC determines that the bank fails to meet any standards prescribed by the Safety and Soundness Guidelines, the agency may require the bank to submit to the agency an acceptable plan to achieve compliance with the standard, as required by the FDIC. The final regulations establish deadlines for the submission and review of such safety and soundness compliance plans.

~~The~~Deposit ~~following~~Insurance ~~tables~~Assessments ~~present condensed average balance sheets for the periods indicated, and the percentages of each of these categories to total average assets for each period.~~

TABLE 2
AVERAGE BALANCE SHEETS
(In Thousands)		Years Ended December 31
		2001	%	2000	%	1999	%
ASSETS
Cash and Due From Banks		$ 14,581	3.3%	$ 12,756	4.0%	$ 12,192	4.8%
Time Deposits-Other Banks		972	0.2%	967	0.3%	20	0.0%
Federal Funds Sold		2,845	0.7%	6,031	1.9%	4,204	1.6%
Taxable Investment Securities		34,869	8.0%	33,930	10.6%	30,029	11.8%
Nontaxable Investments Securities		7,846	1.8%	9,116	2.9%	7,640	3.0%
Market Adjustment-Securities		839	0.2%	(619)	(0.2%)	(162)	(0.1%)
Loans, Net of Interest		341,995	78.5%	244,177	76.4%	189,306	74.1%
Loans Held for Sale		17,878	4.1%	2,365	0.7%	2,462	1.0%
Allowance for Loan Losses		(3,479)	(0.8%)	(2,569)	(0.8%)	(2,233)	(0.9%)
Bank Premises and Equipment		10,049	2.3%	8,641	2.7%	7,993	3.1%
Other Real Estate		1,818	0.4%	270	0.1%	426	0.2%
Other Assets		5,701	1.3%	4,727	1.5%	3,534	1.4%
TOTAL ASSETS		$435,914	100.0%	$319,792	100.0%	$255,411	100.0%
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest-Bearing	$ 55,960		12.8%	$ 45,518	14.2%	$ 39,414	15.4%
Interest-Bearing	278,901		64.0%	211,216	66.0%	177,779	69.6%
Federal Funds Purchased and
Repurchase Agreements Sold	10,498		2.4%	7,278	2.3%	4,518	1.8%
Demand Notes-US Treasury	972		0.2%	849	0.3%	676	0.3%
Other Borrowed Money and FHLB	52,270		12.0%	25,158	7.9%	3,340	1.3%
Obligations under Capital Leases	50		0.0%	105	0.0%	159	0.1%
Other Liabilities	3,982		0.9%	698	0.2%	2,663	1.0%
Total Liabilities	402,633		92.4%	290,822	90.9%	228,549	89.5%
Common Stock	3,373		0.8%	3,345	1.0%	3,341	1.3%
Surplus	12,967		3.0%	12,725	4.0%	12,613	4.9%
Undivided Profits	16,941		3.9%	12,900	4.0%	10,908	4.3%
Total Stockholders' Equity	33,281		7.6%	28,970	9.1%	26,862	10.5%
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY	$435,914		100.0%	$319,792	100.0%	$255,411	100.0%

The FDIC insures the Banks’ deposits and thus the Banks are subject to FDIC deposit insurance assessments. The FDIC utilizes a risk-based deposit insurance premium scheme to determine the assessment rates for insured depository institutions. Each financial institution is assigned to one of three capital groups, well capitalized, adequately capitalized, or undercapitalized.

The FDIC uses a risk-based assessment system that assigns insured depository institutions to one of four risk categories based on the institution’s capital evaluation and supervisory evaluation. The new premium rate structure imposes a minimum assessment of from 12 to 14 cents for every $100 of domestic deposits on institutions that are assigned to the lowest risk category. This category is expected to encompass substantially all insured institutions, including the Banks. A one time assessment credit was available to offset up to 100% of the 2007 assessment and up to 90% of subsequent annual assessments through 2010. For institutions assigned to higher risk categories, the premium that took effect in 2009 ranges from 17 to 50 cents per $100 of deposits.

~~Part~~The IIFDIC also collects a deposit-based assessment from insured financial institutions on behalf of The Financing Corporation (FICO). The funds from these assessments are used to service debt issued by FICO in its capacity as a financial vehicle for the Federal Savings & Loan Insurance Corporation. The FICO assessment rate is set quarterly and in 2008 ranged from 1.10 cents to 1.14 cents per $100 of assessable deposits. For the first quarter of 2009, the FICO assessment rate is 1.14 cents per $100 of assessable deposits.

~~Item~~Effective 7November 21, 2008 and until December 31, 2009, the FDIC expanded deposit insurance limits for certain accounts under the Temporary Liquidity Guarantee Program. Provided an institution has not opted out of the program, the FDIC will fully guarantee funds deposited in non-interest bearing transaction accounts, including (~~Continued~~i) Interest on Lawyer Trust Accounts or IOLTA accounts, and (ii) negotiable order of withdrawal or NOW accounts with rates no higher than 0.50 percent if the institution has committed to maintain the interest rate at or below that rate. In conjunction with the increased deposit insurance coverage, insurance assessments also increase. None of our Banks have opted out of the program.

~~Consolidated~~12 total assets of $504.8 million at December 31, 2001 were up by $94.5 million, or 23.0 percent, over total assets at December 31, 2000. Total assets of $410.2 million at December 31, 2000 were up by $126.7 million, or 44.7 percent, over total consolidated assets at December 31, 1999. On average the balance sheet grew by 36.3 percent during 2001 and 25.2 percent during 2000. These growth rates are significantly higher than the economic growth statistics for the Company's middle Georgia market area. Assets of the Fairfield mortgage lending unit stood at $140.6 million at December 31, 2001, a 190.9 percent increase over assets of $48.3 million at December 31, 2000. In addition to the growth in the Fairfield subsidiary, SNB's strong growth trends are attributed to continued industry consolidations and restructuring efforts of the larger super regional banks in the area, SNB's broader coverage of the geographic area through its expanded branch network, and the synergies among the Bank subsidiaries and the mortgage unit.

LoansTable of Contents

~~The~~Mortgage ~~Banks'~~Banking ~~loan~~Regulation portfolio constitutes the major interest-earning asset of SNB. To analyze prospective loans, management assesses the Company's objectives for both credit quality and interest rate pricing to determine whether to extend a loan and the appropriate rate of interest for each loan. The loan portfolio is concentrated in various commercial, real estate and consumer loans to individuals and entities located in middle Georgia and in other Georgia markets where the Fairfield mortgage subsidiary operates loan offices. Accordingly, the ultimate collectibility of the loans is largely dependent upon economic conditions in these Georgia markets.

AtSRES ~~December~~has ~~31,~~been ~~2001~~regulated ~~and~~as ~~2000,~~a ~~loans~~“notificant” ~~and~~by ~~loans~~the ~~held~~Georgia ~~for~~Department ~~sale,~~as ~~net~~it ofis ~~unearned~~a ~~income,~~wholly ofowned ~~$419.3~~subsidiary ~~million and $318.5 million, respectively, amounted to 83.1 percent and 77.6 percent~~ of ~~total~~a federally ~~assets,~~insured ~~and 111~~bank.8 ~~percent~~It ~~and~~has ~~102.2~~also ~~percent~~been ofqualified ~~deposits.~~as ~~Loans~~a ~~amounted~~Federal toNational ~~90.1~~Mortgage ~~percent~~Association of(Fannie ~~all~~Mae) ~~funding sources from interest-bearing liabilities at December 31, 2001~~ and ~~84.8~~Federal ~~percent~~Home atLoan ~~December~~Mortgage ~~31,~~Corporation ~~2000.~~(Freddie ~~The~~Mac) ~~loan~~seller/servicer ~~portfolio grew by 31.7 percent from December 31, 2000 to December 31, 2001. The most significant increases were in real estate construction loans~~ and ~~mortgage~~must ~~loans~~meet ~~held for sale through~~ the ~~activities~~requirements of ~~the~~such ~~Fairfield~~corporations ~~mortgage~~and ~~subsidiary. The Company's mortgage activity was brisk during 2001 due to an attractive mortgage interest rate environment. Mortgage refinancing volume accounted for a large portion~~ of the various ~~2001~~private ~~growth~~parties ~~trends.~~with ~~The~~which ~~average~~it ~~yields~~conducts ~~generated~~business, byincluding ~~interest~~warehouse lenders and ~~fees~~those ~~from~~private ~~the~~entities ~~entire loan portfolio amounted~~ to ~~8.57~~which ~~percent~~it ~~during~~sells ~~2001,~~mortgage ~~compared to 9~~loans.75 ~~percent~~In ~~during~~November ~~2000~~2008, ~~and~~SRES ~~9.38~~ceased ~~percent~~originating ~~during~~single ~~1999.~~family ~~SNB's~~residential ~~reserve~~mortgage ~~for loan losses as a percentage of outstanding~~ loans ~~and~~when ~~loans~~SRES ~~held~~outsourced this ~~for~~function ~~sale amounted~~ to ~~0.98~~Envoy ~~percent at December 31, 2001, compared to 0~~Mortgage.94 ~~percent and 1.12 percent at December 31, 2000 and 1999, respectively.~~

18Anti-Tying Restrictions

~~Part~~Under IIamendments to BHCA and Federal Reserve regulations, a bank is prohibited from engaging in certain tying or reciprocity arrangements with its customers. In general, a bank may not extend credit, lease, sell property, or furnish any services or fix or vary the consideration for these on the condition that (1) the customer obtain or provide some additional credit, property, or services from or to the bank, the bank holding company or subsidiaries thereof or (2) the customer may not obtain some other credit, property, or services from a competitor, except to the extent reasonable conditions are imposed to assure the soundness of the credit extended. Certain arrangements are permissible: a bank may offer combined-balance products and may otherwise offer more favorable terms if a customer obtains two or more traditional bank products; and certain foreign transactions are exempt from the general rule. A bank holding company or any bank affiliate also is subject to anti-tying requirements in connection with electronic benefit transfer services.

~~Item~~Regulatory 7Examination ~~(Continued)~~

~~The~~Federal ~~following~~and ~~table~~state ~~presents~~banking ~~the~~agencies ~~amount~~require ofus ~~loans~~and ~~outstanding~~our bysubsidiary ~~category,~~Banks ~~both~~to prepare annual reports on financial condition and to conduct an annual audit of financial affairs in ~~dollars~~compliance with minimum standards and procedures. Our Banks, and in ~~percentages~~some ofcases ~~the~~us ~~total~~and ~~portfolio~~our nonbank affiliates, atmust ~~the~~undergo ~~end~~regular ofon-site examinations ~~each~~by their appropriate banking agency. The cost of ~~the~~examinations ~~past~~may ~~five~~be ~~years~~assessed against the examined institution.

TABLE 3
LOANS BY TYPE
(In Thousands)	December 31,
	2001	2000	1999	1998	1997
Commercial, Financial and Agricultural	$ 44,102	$ 44,805	$ 44,194	$ 37,906	$ 34,798
Real Estate-Construction	134,940	62,328	16,199	17,606	6,943
Real Estate-Mortgage
Mortgage Loans Held for Sale	41,166	13,215	1,761	3,121	1,181
Other Mortgage	179,032	176,472	127,819	103,159	88,027
Loans to Individuals	20,241	21,831	17,577	17,502	14,683
Total Loans	419,481	318,651	207,550	179,294	145,632
Unearned Income	(175)	(172)	(120)	(132)	(147)
Total Net Loans	$419,306	$318,479	$207,430	$179,162	$145,485
Percentage of Total Portfolio
Commercial, Financial and Agricultural	10.5%	14.1%	21.3%	21.2%	23.9%
Real Estate-Construction	32.2%	19.6%	7.8%	9.8%	4.8%
Real Estate-Mortgage:
Mortgage Loans Held for Sale	9.8%	4.1%	0.9%	1.7%	0.8%
Other Mortgage	42.7%	55.4%	61.6%	57.6%	60.5%
Loans to Individuals	4.8%	6.9%	8.5%	9.8%	10.1%
Total Loans	100.0%	100.1%	100.1%	100.1%	100.1%
Unearned Income	0.0%	(0.1%)	(0.1%)	(0.1%)	(0.1%)
Total Net Loans	100.0%	100.0%	100.0%	100.0%	100.0%

Community Reinvestment Act

19The Banks are subject to the provisions of the Community Reinvestment Act of 1977, as amended (the CRA), and the federal bank regulatory agencies’ related regulations. Under the CRA, all banks and thrifts have a continuing and affirmative obligation, consistent with safe and sound operation, to help meet the credit needs for their entire communities, including low – and moderate-income neighborhoods. The CRA requires a depository institution’s primary federal regulator, in connection with its examination of the institution or its evaluation of certain regulatory applications, to assess the institution’s record in assessing and meeting the credit needs of the community served by that institution, including low- and moderate-income neighborhoods. The regulatory agency’s assessment of the institution’s record is made available to the public.

~~Part~~Current IICRA regulations rate institutions based on their actual performance in meeting community credit needs. Following the most recent CRA examinations which occurred during 2004, 2005, 2007 and 2008, each of the Banks received a “satisfactory” rating.

~~Item~~Privacy 7and ~~(Continued)~~Data Security

The ~~following~~Gramm-Leach-Bliley ~~table~~Act ~~provides~~imposed ~~information~~new requirements on ~~the~~financial institutions ~~maturity~~with ~~distribution~~respect ofto ~~selected~~consumer ~~categories~~privacy. The statute generally prohibits disclosure of consumer information to non-affiliated third parties unless the ~~loan~~consumer ~~portfolio~~has been given the opportunity to object and ~~certain~~has ~~interest~~not ~~sensitivity~~objected ~~data~~to assuch ofdisclosure. Financial ~~December~~institutions 31are further required to disclose their privacy policies to consumers annually. Financial institutions, ~~2001~~however, will be required to comply with state law if it is more protective of consumer privacy than the Gramm-Leach-Bliley Act. The statute also directed federal regulators, including the Federal Reserve and the FDIC, to

TABLE 4
LOAN MATURITY DISTRIBUTION AND INTEREST SENSITIVITY
(In Thousands)
	December 31, 2001
	One Year or Less	Over One Year Through Five Years	Over Five Years	Total
Selected Loan Categories
Commercial, Financial and Agricultural	$21,598	$18,791	$3,713	$44,102
Real Estate-Construction	114,699	20,241	0	134,940
Total	$136,297	$39,032	$3,713	$179,042
Loans Shown Above Due After One Year
Having Predetermined Interest Rates				$25,648
Having Floating Interest Rates				17,098
Total				$42,746

InvestmentTable Securitiesof Contents

~~The~~ prescribe ~~investment~~standards ~~securities~~for ~~portfolio~~the issecurity ~~another~~of ~~major~~consumer ~~interest-earning~~information. ~~asset~~The ~~and~~Company ~~consists of debt~~ and ~~equity~~our ~~securities~~Banks ~~categorized~~are assubject ~~either Available for Sale or Held~~ to ~~Maturity.~~such ~~These~~standards, ~~securities~~as ~~provide~~well ~~SNB~~as ~~with~~standards afor ~~source~~notifying consumers ofin ~~liquidity~~the ~~and~~event ~~a stable source~~ of ~~income. The investment portfolio provides~~ a ~~resource~~security ~~to help balance interest rate risk and credit risk related to the loan portfolio~~breach.

AsConsumer of December 31, 2001, the securities portfolio amounted to $51.0 million, or 10.1% of total assets, compared to $51.5 million, or 12.6% of assets at December 31, 2000. Over recent years, the shrinkage in the size of the securities portfolio relative to total assets indicates that a higher proportion of earning assets have been deployed into the loan portfolio rather than in investment securities to produce greater yields. Several securities were sold during the year 2001 to obtain liquid funds for use in loan production and to capitalize on favorable market values. For December 31, 2001, net gains on the sale of securities were $100,596, compared to $5,816 for 2000 and ($1,913) for 1999.Regulations

~~The~~Activities ~~average~~of ~~tax~~the ~~equivalent~~Banks ~~yield~~are onsubject ~~the~~to ~~portfolio~~a ~~was~~variety ~~6.38%~~of statutes ~~for~~and ~~the~~regulations ~~year~~designed ~~2001~~to ~~versus~~protect ~~6.66~~consumers, ~~percent~~including inthe ~~2000~~Fair ~~and~~Credit ~~6.36~~Reporting ~~percent~~Act in(FCRA), ~~1999.~~Equal ~~During~~Credit ~~the~~Opportunity ~~year~~Act ~~2001~~(ECOA), ~~the~~Truth-in-Lending ~~investment~~Act ~~securities~~(TILA), ~~portfolio~~Home ~~represented~~Mortgage ~~10.7~~Disclosure ~~percent~~Act of(HMDA) ~~average~~and ~~earning~~the ~~assets~~Fair ~~and~~Debt ~~10.0~~Collection ~~percent~~Practices ofAct (FDCPA). ~~average~~Interest ~~total~~and ~~assets.~~other ~~During~~charges ~~2000,~~collected ~~the~~or ~~portfolio~~contracted ~~averaged~~for ~~14.3~~by ~~percent~~the ofBanks ~~earning~~are ~~assets~~also ~~and~~subject ~~13.3~~to ~~percent~~state ofusury ~~total~~laws ~~assets.~~and ~~This~~certain ~~decrease~~other isfederal ~~attributable~~laws toconcerning ~~increased~~interest ~~mortgage~~rates. ~~and~~The ~~commercial~~Banks’ loan ~~activity~~operations ~~from~~are ~~the~~also ~~Fairfield~~subject ~~merger~~to federal laws and regulations ~~general~~applicable ~~growth~~to incredit ~~overall~~transactions. ~~loans~~Together, atthese ~~the~~laws ~~two~~and ~~subsidiary~~regulations ~~banks.~~include provisions:

20• governing disclosures of credit terms to consumer borrowers;

~~Part~~• IIrequiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves;

~~Item~~• 7prohibiting ~~(Continued)~~discrimination on the basis of race, creed, or other prohibited factors in extending credit;

At• ~~December~~governing ~~31, 2001,~~ the ~~major~~use ~~portfolio components, based on amortized or accreted cost, included 4.5 percent in U. S. Treasury securities, 72.4 percent in U. S. agency obligations, 16.0 percent in state, county~~ and ~~municipal~~provision ~~bonds, and 7.0 percent in stock~~ of ~~the~~information ~~Federal~~to ~~Home~~credit ~~Loan~~reporting ~~Bank.~~agencies; On December 31, 2001, the market value of the total bond portfolio as a percentage of the amortized book value was 102.0 percent, up from 100.7 percent a year earlier. As of December 31, 2001, the entire investment securities portfolio had gross unrealized gains of $1,014,642 and gross unrealized losses of ($26,656), for a net unrealized gain of $987,986. As of December 31, 2000, the portfolio had a net unrealized gain of $338,630. In accordance with SFAS No. 115, stockholders' equity included net unrealized gains of $605,679 for December 31, 2001 and net unrealized gains of $195,498 for December 31, 2000 recorded on the Available for Sale portfolio, net of deferred tax effects. No trading account has been established by SNB and none is anticipated.

~~The~~• ~~following~~governing ~~table summarizes~~ the ~~Available~~manner ~~for~~in ~~Sale~~which ~~and~~consumer ~~Held~~debts tomay ~~Maturity~~be ~~investment~~collected ~~securities~~by ~~portfolios~~collection ~~as of December 31, 2001, 2000, and 1999~~agencies. ~~Available for Sale securities are shown at fair value, while Held to Maturity securities are shown at amortized or accreted cost.~~

TABLE 5
INVESTMENT SECURITIES
(In Thousands)	December 31
	2001	2000	1999
Securities Available for Sale
U. S. Treasury	$ 2,360	$ 1,036	$ 998
U. S. Government Agencies
Mortgage-Backed	17,118	11,527	10,945
Other	10,157	27,663	22,973
State, County and Municipal	6,389	6,055	5,662
Other Investments (FHLB)	3,533	3,234	1,598
	$39,556	$49,515	$42,176
Securities Held to Maturity
U. S. Treasury	$ 0	$ 0	$ 0
U. S. Government Agencies
Mortgage-Backed	0	0	0
Other	9,708	0	0
State, County and Municipal	1,778	1,983	2,911
Other Investments (FHLB)	0	0	0
	$11,486	$ 1,983	$ 2,911
Total Investment Securities
U. S. Treasury	$ 2,360	$ 1,036	$ 998
U. S. Government Agencies
Mortgage-Backed	17,118	11,527	10,945
Other	19,865	27,663	22,973
State, County and Municipal	8,167	8,038	8,573
Other Investments (FHLB)	3,533	3,234	1,598
	$51,041	$51,498	$45,087

As a result of the turmoil in the residential real estate and mortgage lending markets, there are several legislative and regulatory initiatives currently under discussion at both the federal and state levels that could, if adopted, alter the terms of existing mortgage loans, impose restrictions on future mortgage loan originations, diminish lenders’ rights against delinquent borrowers or otherwise change the ways in which lenders make residential mortgage loans. If made final, any or all of these proposals could have a negative effect on our mortgage lending operations, our ability to sell mortgage loans into the secondary market or our ability to proceed against delinquent borrowers.

21The deposit operations of the Banks are also subject to laws and regulations that:

~~Part~~• IIrequire the Banks to adequately disclose interest rates and other terms of consumer deposit accounts;

~~Item~~• 7require ~~(Continued)~~escheatment of unclaimed funds to the appropriate state agencies after the passage of certain statutory timeframes;

~~The~~• ~~following~~impose ~~tables~~a ~~illustrate~~duty the contractual maturities and weighted average yields of investment securities held at December 31, 2001. Expected maturities will differ from contractual maturities because certain issuers have the right to ~~call~~maintain ~~or prepay obligations with or without call or prepayment penalties. No prepayment assumptions have been estimated in~~ the ~~table.~~confidentiality ~~The weighted average yields are calculated on the basis~~ of ~~the~~consumer ~~amortized~~financial ~~cost~~records and ~~effective~~prescribe ~~yields~~procedures ~~of each security weighted~~ for ~~the~~complying ~~scheduled~~with ~~maturity~~administrative subpoenas of ~~each~~financial ~~security.~~records; ~~The yield on state, county~~ and ~~municipal securities is computed on a taxable equivalent basis using a statutory federal income tax rate of 34 percent.~~

TABLE 6
MATURITIES OF INVESTMENT SECURITIES AND AVERAGE YIELDS
(In Thousands)
	Investment Securities
	Held to Maturity			Available for Sale
December 31, 2001	Amortized Cost	Average Yield	Fair Value	Amortized Cost	Average Yield	Fair Value
U.S. Treasury
Within 1 Year	$ 0	0.00%	$0	$ 506	4.04%	$ 512
1 to 5 Years	0	0.00%	0	1,766	5.65%	1,847
5 to 10 Years	0	0.00%	0	0	0.00%	0
More Than 10 Years	0	0.00%	0	0	0.00%	0
	$ 0	0.00%	$0	$ 2,272	5.29%	$ 2,359
Mortgage-Backed
Government Agencies
Within 1 Year	$ 0	0.00%	$0	$ 0	0.00%	$ 0
1 to 5 Years	0	0.00%	0	0	0.00%	0
5 to 10 Years	0	0.00%	0	0	0.00%	0
More Than 10 Years	0	0.00%	0	16,865	6.39%	17,118
	$ 0	0.00%	$0	$16,865	6.39%	$17,118
Other U.S. Government Agencies
Within 1 Year	$9,708	4.25%	$9,708	$ 1,000	5.87%	$ 1,014
1 to 5 Years	0	0.00%	0	6,523	5.95%	6,797
5 to 10 Years	0	0.00%	0	2,194	7.22%	2,344
More Than 10 Years	0	0.00%	0	0	5.52%	0
	$9,708	4.25%	$9,708	$ 9,717	6.23%	$10,155

•

govern automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services.

22Anti-Money Laundering and Anti-Terrorism Legislation

~~Part~~In IIthe wake of the tragic events of September 11th, on October 26, 2001, the President signed the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act of 2001. Under the USA PATRIOT Act, financial institutions are subject to prohibitions against specified financial transactions and account relationships as well as enhanced due diligence and customer identification standards in their dealings with foreign financial institutions and foreign customers. For example, the enhanced due diligence policies, procedures, and controls generally require financial institutions to take reasonable steps:

~~Item~~• 7to ~~(Continued)~~conduct enhanced scrutiny of account relationships to guard against money laundering and report any suspicious transaction;

~~TABLE~~14 ~~6 (Continued) MATURITIES OF INVESTMENT SECURITIES AND AVERAGE YIELDS (In Thousands)~~

	Investment Securities
	Held to Maturity			Available for Sale
December 31, 2001	Amortized Cost	Average Yield	Fair Value	Amortized Cost	Average Yield	Fair Value
State, County and Municipal
Within 1 Year	$374	7.63%	$381	$ 985	7.58%	$ 1,003
1 to 5 Years	1,064	7.47%	1,112	2,493	7.72%	2,569
5 to 10 Years	340	7.57%	355	1,328	6.86%	1,374
More Than 10 Years	0	0.00%	0	1,445	7.27%	1,445
	$1,778	7.52%	$1,848	$ 6,251	7.41%	$ 6,391
Other Investments (FHLB)
Within 1 Year	$ 0	0.00%	$ 0	$ 0	0.00%	$ 0
1 to 5 Years	0	0.00%	0	0	0.00%	0
5 to 10 Years	0	0.00%	0	0	0.00%	0
More Than 10 Years	0	0.00%	0	3,533	6.11%	3,533
	$ 0	0.00%	$ 0	$ 3,533	6.11%	$ 3,533
Total Securities
Within 1 Year	$10,082	4.38%	$10,089	$2,491	6.17%	$2,529
1 to 5 Years	1,064	7.47%	1,112	10,782	6.31%	11,213
5 to 10 Years	340	7.57%	355	3,522	7.08%	3,718
More Than 10 Years	0	0.00%	0	21,843	6.40%	22,096
	$11,486	4.76%	$11,556	$38,638	6.42%	$39,556

As• ofto ~~December~~ascertain ~~31,~~the ~~2001~~identity ~~and~~of ~~2000,~~the ~~SNB~~nominal ~~had~~and nobeneficial ~~holdings~~owners of, ~~securities~~and ~~of a single issuer in which~~ the ~~aggregate~~source ~~book value and aggregate market value~~ of ~~the~~funds ~~securities~~deposited ~~exceeded~~into, ~~ten~~each ~~percent~~account ofas ~~stockholders'~~needed ~~equity,~~to ~~with~~guard ~~the~~against ~~exception~~money oflaundering U.and S.report ~~Government~~any ~~Agency~~suspicious ~~securities.~~transactions;

~~Other~~• ~~Assets~~to ascertain for any foreign bank, the shares of which are not publicly traded, the identity of the owners of the foreign bank, and the nature and extent of the ownership interest of each such owner; and

~~SNB~~• ~~holds additional earning assets in overnight Federal Funds Sold. Due~~ to ~~liquidity~~ascertain ~~needs~~whether ~~from~~any ~~strong~~foreign ~~loan~~bank ~~demand,~~provides ~~these~~correspondent ~~balances~~accounts ~~amounted~~ to ~~only~~other ~~$1,000~~foreign atbanks ~~December 31, 2001. Fed Funds Sold balances were $4.4 million at December 31, 2000. Balances in the Company's nonearning assets are comprised of cash~~ and ~~correspondent bank balances~~, ~~premises~~if ~~and equipment~~so, foreclosed real estate, income receivable on loans and investments and other miscellaneous assets. Management works to minimize nonearning-asset balances in order to maximize profit potential. Nonearning assets represented 7.6 percent of the ~~balance~~identity ~~sheet as~~ of ~~December~~those ~~31,~~foreign ~~2001,~~banks and ~~9.5~~related ~~percent~~due asdiligence ~~of December 31, 2000~~information.

23The USA PATRIOT Act also requires financial institutions to establish anti-money laundering programs.

~~Part~~In IIaddition, federal agencies have adopted rules increasing the cooperation and information sharing between financial institutions, regulators and law enforcement authorities regarding individuals, entities and organizations engaged in, or reasonably suspected based on credible evidence of engaging in, terrorist acts or money laundering activities. Any financial institution complying with these rules will not be deemed to have violated the privacy provisions of the Gramm-Leach-Bliley Act, as discussed above.

~~Item~~Commercial Real 7Estate ~~(Continued)~~Lending and Concentrations

~~Deposits~~In December 2006, the federal bank regulatory agencies released Guidance on Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices (the Guidance). The Guidance, which was issued in response to the agencies’ concern that rising commercial real estate (CRE) concentrations might expose institutions to unanticipated earnings and capital volatility in the event of adverse changes in the commercial real estate market, reinforces existing regulations and guidelines for real estate lending and loan portfolio management.

~~Deposits~~The ~~are~~Company ~~SNB's~~believes ~~primary~~that ~~liability~~the ~~and~~Guidance ~~funding~~is ~~source.~~applicable ~~Total~~to ~~deposits~~it asand ofthat ~~December~~it ~~31,~~has ~~2001~~a ~~were~~concentration ~~$375.1~~in ~~million,~~CRE uploans ~~20.4~~as ~~percent~~defined ~~from $311.6 million at December 31, 2000. Average deposits~~ in ~~2001~~the ~~were $334~~Guidance.9 ~~million, up 30.4 percent from $256.7 million during 2000.~~ The ~~average~~Company ~~cost of deposits, with noninterest checking accounts factored in, was 4.11 percent during 2001, down from 4.26 percent during 2000~~ and upits ~~from~~Board ~~3.69~~of ~~percent~~Directors ~~for~~have ~~1999.~~discussed ~~SNB~~the ~~seeks~~Guidance ~~to set competitive deposit rates in its local markets to retain~~ and ~~grow~~believe ~~market~~that ~~share in its geographic regions as~~ the Company'’s underwriting ~~principal funding source. As growth in local market deposit sources proved insufficient to fund 2001 loan demand~~policy, ~~SNB's~~management ~~Banks~~information ~~supplemented deposit sources with brokered deposits. As of December 31~~systems, ~~2001~~independent ~~the~~credit ~~Banks~~administration ~~reported~~process ~~$34.9~~and ~~million,~~monthly ormonitoring ~~9.3 percent~~ of ~~total~~real ~~deposits,~~estate inloan ~~brokered~~concentrations ~~certificates~~sufficiently ofaddress ~~deposit attracted by external third parties at a weighted average rate of 4.26 percent during~~ the ~~year~~Guidance. ~~Additionally, the banks use external bulletin board or internet services to obtain out-of-market certificates of deposit at competitive market rates when funding is needed.~~

OnAllowance ~~an average basis~~ for ~~the~~Loan ~~year 2001, 16.7 percent of deposits were held in noninterest-bearing checking accounts, 21.7 percent were in lower yielding interest bearing transaction~~ and ~~savings~~Lease ~~accounts,~~Losses ~~and~~(ALLL) 61.6 percent were in time certificates with higher yields. Comparable average deposit mix percentages during 2000 were 17.7 percent, 23.7 percent and 58.5 percent, respectively. The highest rate of growth in average deposits during 2001 occurred in large certificates of $100,000 or more, which increased by 106.3 percent, or $34.2 million.

In December 2006, the federal bank regulatory agencies released the Interagency Policy Statement on the Allowance for Loan and Lease Losses, which revises and replaces the banking agencies’ 1993 policy statement on the ALLL. The ~~following~~revised ~~tables~~statement ~~reflect~~was ~~average~~issued ~~balances~~to ensure consistency with generally accepted accounting principles (GAAP) and more recent supervisory guidance. The Company and its Board of ~~deposit~~Directors ~~categories~~have ~~for~~discussed the ~~years~~revised ~~2001~~statement and believe that our ALLL methodology is comprehensive, ~~2000~~systematic, and ~~1999~~that it is consistently applied across the Company. We believe our management information systems, independent credit administration process, policies and procedures are sufficient to address the guidance.

TABLE 7
AVERAGE DEPOSITS
(In Thousands)		Years Ended December 31
	2001	%	2000	%	1999	%
Noninterest-Bearing
Demand Deposits	$ 55,960	16.7%	$ 45,518	17.7%	$ 39,414	18.1%
Interest-Bearing Demand Deposits	30,338	9.1%	21,148	8.2%	19,456	9.0%
Money Market Accounts	35,167	10.5%	33,332	13.0%	32,151	14.8%
Savings Deposits	7,207	2.2%	6,444	2.5%	6,465	3.0%
Time Deposits of $100,000 or More	66,384	19.8%	32,177	12.5%	26,525	12.2%
Other Time Deposits	139,805	41.8%	118,116	46.0%	93,182	42.9%
	$334,861	100.0%	$256,735	100.0%	$217,193	100.0%

Proposed Legislation and Regulatory Action

~~The~~New ~~following~~regulations ~~table~~and ~~summarizes~~statutes are regularly adopted that contain wide-ranging proposals for altering the ~~maturities~~structures, ofregulations, ~~time~~and ~~deposits~~competitive relationships of ~~$100~~financial institutions. Included among current proposals are discussions around re-structuring the regulatory framework in which we and our subsidiary Banks operate. Further,~~000~~ ornewly ~~more~~enacted legislation such as the Emergency Economic Stabilization Act of ~~December~~2008 ~~31,~~(EESA) ~~2001~~and the American Recovery and Reinvestment Act of 2009 (ARRA), ~~2000~~direct regulators to adopt rules surrounding, and ~~1999~~to implement, a wide-range of initiatives that will significantly impact the financial services industry. We cannot predict whether or in what form any proposed regulation or statute will be adopted or the extent to which our business may be affected by any new regulation or statute.

2415

PartTable IIof Contents

~~Item~~Fiscal 7and ~~(Continued)~~Monetary Policy

TABLE 8
MATURITY DISTRIBUTION OF TIME DEPOSITS OF $100,000 OR MORE
(In Thousands)
		December 31
As of the End of Period		2001	2000	1999
	3 Months or Less	$21,152	$ 8,726	$10,531
	Over 3 Months through 6 Months	14,585	6,532	9,198
	Over 6 Months through 12 Months	35,115	19,577	5,146
	Over 12 Months	14,670	2,204	7,025
		$85,522	$37,039	$31,900

Banking is a business that depends on interest rate differentials. In general, the difference between the interest paid by a bank on its deposits and its other borrowings, and the interest received by a bank on its loans and securities holdings, constitutes the major portion of a bank’s earnings. Thus, our earnings and growth will be subject to the influence of economic conditions generally, both domestic and foreign, and also to the monetary and fiscal policies of the United States and its agencies, particularly the Federal Reserve. The Federal Reserve regulates the supply of money through various means, including open market dealings in United States government securities, the discount rate at which banks may borrow from the Federal Reserve, and the reserve requirements on deposits.

~~Borrowed~~These ~~Money~~policies have a direct effect on the amount of our loans and deposits and on the interest rates charged on loans and paid on deposits, with the result that federal policies may have a material effect on our earnings. Policies that are directed toward changing the supply of money and credit and raising or lowering interest rates may have an effect on our earnings. We cannot predict the conditions in the national and international economies and money markets, the actions and changes in policy by monetary and fiscal authorities, or their effect on the Company or the Banks.

~~Other interest~~Sarbanes-~~bearing~~Oxley ~~sources~~Act of ~~funds~~2002 at December 31, 2001 totaled $90.4 million. The major component was $70.9 million in various advances from the Federal Home Loan Bank of Atlanta ("FHLB") under two separate programs. FHLB balances at December 31, 2001 represent the highest aggregate indebtedness to FHLB for the year. The first program entails Blanket Agreements for Advances and Security Agreements with the FHLB, under which SNB's Banks have pledged residential first mortgage loans and investment securities as collateral to secure available lines of credit totaling $42.5 million, $42.0 of which was outstanding as of December 31, 2001. These advances have maturities in varying amounts through March 2011 and interest rates ranging from 1.85 percent to 4.55 percent. The second program allows for up to $40.0 million in advances to SNB's Banks under a Warehouse Line secured by the Company's loans held for sale. At December 31, 2001, $28.9 million in borrowings under the Warehouse Line was outstanding at an interest rate of 2.25 percent. Total outstanding advances from the FHLB averaged $48.6 million during the year 2001, with an average interest cost of 4.48 percent. For the year 2000, FHLB advances averaged $25.2 million with an average interest cost of 6.60 percent. FHLB borrowings have been used more extensively during 2001 to supplement traditional deposit sources and provide an additional funding source for higher activity levels in mortgage lending.

~~SNB~~We ~~carried~~are arequired ~~$6.0~~to ~~million~~comply ~~outstanding~~with ~~note~~various ~~balance~~corporate atgovernance ~~December~~and ~~31,~~financial reporting ~~2001~~requirements under athe ~~line~~Sarbanes-Oxley Act of ~~credit~~2002, ~~with~~as ~~The~~well ~~Bankers~~as ~~Bank~~rules inand ~~Atlanta~~regulations adopted by the SEC, ~~Georgia.~~the ~~This~~Public ~~$10.0~~Company ~~million~~Accounting ~~line~~Oversight isBoard ~~secured~~and ~~with~~Nasdaq. ~~the~~In ~~common~~particular, ~~stock~~we ofare ~~SB-Bibb~~required asto ~~collateral,~~include management and ~~carries~~independent aauditor reports ~~floating~~on ~~interest~~internal ~~rate~~controls ofas ~~prime~~part ~~minus~~this 50Annual ~~basis~~Report ~~points.~~on ~~The~~Form ~~average~~10-K ~~balance~~pursuant to Section 404 of ~~debt~~the ~~under~~Sarbanes-Oxley ~~this~~Act. ~~line~~We ofhave ~~credit~~evaluated ~~was~~our ~~$3.7~~controls, ~~million~~including ~~for~~compliance with the ~~year~~SEC ~~2001~~rules aton aninternal ~~average~~controls, ~~rate~~and have and expect to continue to spend significant amounts of ~~6.23~~time ~~percent.~~and ~~Proceeds~~money ~~from~~on ~~line~~compliance ~~advances~~with ~~were~~these ~~used~~rules. ~~principally~~Our failure to ~~infuse~~comply ~~additional~~with ~~capital~~these tointernal ~~the~~control ~~SB-Bibb~~rules ~~Bank~~may materially adversely affect our reputation, ability to ~~maintain~~obtain ~~adequate~~the ~~capital~~necessary ~~levels~~certifications ~~during~~to financial ~~peak~~statements, ~~growth~~and ~~periods.~~the Anvalues ~~additional~~of $4our securities.0 ~~million~~The ~~was~~assessments ~~available~~of ~~against~~financial ~~this~~reporting ~~credit~~controls ~~line~~as atof December 31, ~~2001~~2008 are included elsewhere in this Annual Report on Form 10-K with no material weaknesses reported.

AsAvailable ofInformation December 31, 2001, the SB-Bibb Bank had $6.7 million in securities sold under agreements to repurchase. These instruments mature daily and are sold to larger commercial customers of the Bank. Mortgage backed securities sold under these agreements are identified, held and segregated by the investment safekeeping agent. The average balance of these instruments during 2001 was $6.2 million at an average interest rate of 3.36 percent, up from $3.5 million in 2000 at an average rate of 5.94 percent. The maximum month-end balance during the year was $9.0 million in 2001 and $4.5 million in 2000.

25Our filings with the SEC, including our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to these reports, are accessible free of charge at our website at www.securitybank.net as soon as reasonably practicable after filing with the SEC. By making this reference to our website, we do not intend to incorporate into this report any information contained in the website, and the website should not be considered part of this report.

~~Part~~Additionally, IIour corporate governance guidelines, codes of conduct and ethics, charters of our committees of the Board of Directors, as well as information regarding our director nominating process and our procedures for shareholders to communicate with our Board of Directors are available on our website. We will furnish copies of all of the above information free of charge upon request to our Secretary.

~~Item~~The 7SEC ~~(Continued)~~maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers, including the Company, that file electronically with the SEC.

~~Overnight~~16 federal funds purchased amounted to $6.6 million at December 31, 2001, up from $5.2 million at December 31, 2000. Average balances in federal funds purchased were $4.3 million in 2001 at rates averaging 4.00%, and $3.7 million in 2000 at rates averaging 6.21%. Demand Notes to the U. S. Treasury of $0.2 million at December 31, 2001 represented accumulated federal tax deposit payments through the Treasury Department's note option program. These Treasury deposit balances averaged $1.0 million during 2001, with an average interest cost of 2.83%, versus $0.8 million on average in 2000 at a rate of 4.84 percent. A small capital lease obligation amounted to $29,998 at year-end 2001.

OtherTable interest bearing sources of funds at December 31, 2000 totaled $64.1 million, up from $15.8 million at December 31, 1999. Of the 2000 year-end balance, $40.5 million consisted of FHLB notes under the Blanket Agreement, $11.9 million was borrowed under the FHLB's Warehouse Line, $5.2 million was in federal funds purchased, $3.5 million was in securities sold under agreements to repurchase, $2.0 million consisted of notes payable to The Bankers Bank, $0.9 million was in treasury, tax and loan note balances, and $0.1 million was in capital lease obligations.Contents

~~Reliance~~Item on1A ~~other~~RISK borrowed money as a nondeposit funding source increased on average from $33.4 million during 2000 to $63.8 million during 2001. The principal increase occurred in the use of FHLB notes to match against the Company's growing loan volumes and the Fairfield mortgage production. The cost of all nondeposit borrowed money components averaged 4.43 percent in 2001, down from 6.48 percent in 2000.FACTORS

~~Other~~In ~~Liabilities~~addition to the other information contained in or incorporated by reference into this Annual Report on Form 10-K and the exhibits hereto, the following risk factors should be considered carefully in evaluating our business. The risks disclosed below, either alone or in combination, could materially adversely affect our business, financial condition or results of operations. Additional risks not presently known to us, or that we currently deem immaterial, may also adversely affect our business, financial condition or results of operations. Further, to the extent that any of the information contained in this Annual Report on Form 10-K constitutes forward-looking statements, the risk factors set forth below also are cautionary statements identifying important factors that could cause our actual results to differ materially from those expressed in any forward-looking statements made by or on behalf of us.

~~Other~~Turmoil ~~liabilities~~in ofthe ~~$4.5~~real ~~million~~estate markets atand ~~December~~the ~~31,~~tightening ~~2001~~of ~~and~~credit ~~$3.5~~have ~~million~~adversely ataffected ~~December~~the ~~31,~~financial ~~2000~~services ~~consist~~industry ofand ~~interest~~will ~~payable~~likely oncontinue ~~deposits~~to ~~and~~adversely ~~borrowed~~affect ~~funds~~our business, ~~federal~~financial ~~income~~condition ~~taxes payable~~ and ~~other~~results ~~accrued~~of ~~but unpaid expenses~~operations.

~~Liquidity~~Beginning in the third quarter of 2007, there were well-publicized developments in the credit, liquidity and real estate markets, beginning with a decline in the sub-prime mortgage lending market, which later extended to the markets for collateralized mortgage obligations, mortgage-backed securities and the lending markets generally. This dramatic decline in the real estate markets, with falling home prices and increasing foreclosures and unemployment, which continued throughout 2008 and into 2009, has negatively affected the credit performance of loans secured by real estate and resulted in significant write-downs of asset values by banks and other financial institutions. These write-downs have caused many banks and financial institutions to seek additional capital, to reduce or eliminate dividends, to merge with other financial institutions and, in some cases, to fail. As a result, many lenders and institutional investors have reduced or ceased providing credit to borrowers, including other financial institutions, which, in turn, has led to a global credit crisis.

~~SNB,~~This ~~primarily~~market ~~through~~turmoil ~~the~~and credit ~~actions~~crisis ofhave ~~its~~resulted ~~subsidiary banks, engages~~ in ~~liquidity~~an ~~management~~increased tolevel ~~ensure adequate cash flow for deposit withdrawals, credit commitments and repayments~~ of ~~borrowed~~commercial ~~funds. Needs are met through loan repayments, net interest~~ and ~~fee~~consumer ~~income~~delinquencies, ~~and~~lack ~~the sale or maturity~~ of ~~existing~~consumer ~~assets. In addition~~confidence, ~~liquidity~~increased ismarket ~~continuously~~volatility ~~provided through the acquisition of new deposits, the renewal of maturing deposits,~~ and ~~external~~widespread ~~borrowings.~~reduction Management monitors deposit flow and evaluates alternate pricing structures to retain and grow deposits as needed. To the extent needed to fund loan demand, traditional local deposit funding sources are supplemented by the use of ~~FHLB~~business ~~borrowings, brokered deposits, and other sources outside the Company's immediate market area. High volumes and~~ activity in mortgage and construction lending at the Fairfield subsidiary since its acquisition in 2000 have required higher levels of sophistication and tracking to ensure adequate liquidity throughout the Companygenerally. The ~~falling~~resulting ~~interest~~economic ~~rate environment during 2001 accelerated both new and refinancing mortgage activity, placing added~~ pressure on consumers ~~prudent~~and ~~liquidity~~businesses ~~management.~~and ~~More~~lack ~~liquidity~~of ~~measurement~~confidence ~~tools~~in ~~have been developed for use on a consolidated basis. Internal policies have been updated to monitor~~ the ~~use~~financial ofmarkets ~~various~~has ~~core~~adversely ~~and~~affected ~~noncore~~our ~~funding sources~~business, ~~and~~financial tocondition ~~balance ready access with risk~~ and ~~cost.~~results ~~Through various asset/liability management strategies, a balance is maintained among goals~~ of ~~liquidity,~~operations ~~safety~~ and ~~earnings~~likely ~~potential.~~will ~~Internal~~continue ~~policies~~to ~~that~~result ~~are~~in ~~consistent~~credit ~~with~~losses ~~regulatory liquidity guidelines are monitored~~ and ~~enforced~~write-downs byin the ~~banks~~future.

26There can be no assurance that recently enacted legislation will stabilize the U.S. financial system.

~~Part~~On IIOctober 3, 2008, President Bush signed into law the EESA. The legislation was the result of a proposal by the U.S. Department of Treasury (the Treasury) in response to the financial crises affecting the banking system and financial markets and threats to investment banks and other financial institutions. Pursuant to the EESA, the Treasury has the authority to spend up to $700 billion to purchase equity in financial institutions, and purchase mortgages, mortgage-backed securities and certain other financial instruments from financial institutions for the purpose of stabilizing and providing liquidity to the U.S. financial markets. On October 14, 2008, the Treasury announced a program under the EESA pursuant to which it would purchase senior preferred stock and warrants to purchase common stock from participating financial institutions (the “Capital Purchase Program”). On November 21, 2008, the FDIC adopted a Final Rule with respect to its Temporary Liquidity Guarantee Program pursuant to which the FDIC will guarantee certain “newly-issued unsecured debt” of banks and certain holding companies and also guarantee, on an unlimited basis, non-interest bearing bank transaction accounts. On February 10, 2009, Treasury Secretary Geithner announced a new stimulus plan, the Financial Stability Plan, which is intended, among other things, to create a public-private investment fund used to purchase distressed assets, create a consumer and business lending initiative, provide further capital assistance to financial institutions, stem foreclosures and restructure mortgages.

~~Item~~Each 7of ~~(Continued)~~these programs was implemented to help stabilize and provide liquidity to the financial system. There can be no assurance, however, as to the actual impact that the EESA, the ARRA, the FDIC programs, the

~~The~~17 investment portfolio provides a ready means to raise cash without loss if liquidity needs arise. As of December 31, 2001, SNB held $35.1 million in bonds (excluding FHLB stock), at amortized or accreted cost, in the Available for Sale portfolio. At December 31, 2000, the Available for Sale bond amounted to $46.8 million. Only marketable investment grade bonds are purchased. Although most of the Banks' bond portfolios are encumbered as pledges to secure various public funds deposits, repurchase agreements, and for other purposes, management can restructure and free up investment securities for a sale if required to meet liquidity needs.

ManagementTable continually monitors the relationship of loans to deposits as it relates to SNB's liquidity posture. SNB had ratios of loans and loans for sale to deposits of 111.8 percent as of December 31, 2001 and 102.2 percent at December 31, 2000. The purchase of the Fairfield mortgage company has increased management's emphasis on maintaining adequate resources for liquidity. Management employs alternative funding sources when deposit balances will not meet loan demands. The ratio of loans and loans for sale to all funding sources at December 31, 2001 and 2000 were 90.1 percent and 84.8 percent, respectively. Management continues to emphasize programs to generate local core deposits as the Company's primary funding source. The stability of the Banks' core deposit base is an important factor in the SNB's liquidity position. A heavy percentage of the deposit base is comprised of accounts of individuals and small businesses with comprehensive banking relationships and limited volatility.Contents

At Financial ~~December~~Stability ~~31,~~Plan ~~2001~~or ~~and~~any ~~2000,~~other ~~the~~governmental ~~Banks~~program ~~had~~will ~~$85.5~~have ~~million~~on ~~and~~the ~~$37~~financial markets.0 ~~million~~The infailure ~~certificates~~ of ~~deposit~~the ~~of $100~~EESA,~~000~~ orthe ~~more.~~ARRA, ~~These~~the ~~larger~~FDIC, ~~deposits~~the ~~represented~~Financial Stability ~~22.8~~Plan ~~percent~~or ~~and~~other ~~11.9~~governmental ~~percent~~programs ~~of respective total deposits. Management seeks~~ to ~~monitor~~stabilize ~~and control~~ the ~~use~~financial ofmarkets ~~these~~and ~~larger~~a ~~certificates,~~continuation ~~which~~or ~~tend~~worsening ~~to be more volatile in nature, to ensure an adequate supply~~ of ~~funds~~current asfinancial ~~needed.~~market ~~Relative~~conditions ~~interest~~likely ~~costs~~will tomaterially ~~attract~~and ~~local~~adversely ~~core~~affect ~~relationships~~our ~~are~~business, ~~compared~~financial tocondition, ~~market~~results ~~rates~~ of operations, ~~interest~~access ~~on various external deposit sources~~ to ~~help~~credit ~~minimize~~and the ~~Company's~~trading ~~overall~~price ~~cost~~ of ~~funds~~our common stock.

ToOn ~~compensate~~October ~~for~~14, ~~liquidity~~2008, ~~pressures~~the ~~not~~Treasury ~~satisfied~~announced bythat ~~current~~as ~~deposit~~a ~~balances,~~part of the ~~Company~~EESA, ~~and~~it ~~its~~will ~~subsidiaries~~offer ~~have~~to ~~established~~qualifying ~~multiple~~U.S. ~~borrowing~~banking ~~sources~~organizations tothe ~~augment~~opportunity ~~their~~to ~~funds~~issue ~~management.~~and ~~The~~sell ~~parent~~preferred ~~company~~stock ~~has~~to anthe ~~unsecured~~Treasury ~~line~~on ofwhat ~~credit,~~may ~~and~~be ~~borrowing~~considered ~~capacity~~attractive ~~also~~terms under ~~exists~~the ~~through~~TARP ~~the~~Capital ~~membership~~Purchase ofProgram. ~~the~~In ~~Banks~~conjunction inwith the ~~Federal~~purchase ~~Home~~of ~~Loan~~preferred ~~Bank~~stock, ~~program.~~the AtTreasury ~~December~~will ~~31,~~receive ~~2001,~~warrants ~~the~~to ~~Company~~purchase ~~had~~common astock ~~total~~with ofan ~~$15.6~~aggregate ~~million~~market ~~available~~price onequal ~~these~~to ~~lines~~15% ~~above~~of the ~~currently~~preferred ~~outstanding~~stock ~~borrowings~~investment. ~~Additionally,~~Participating financial ~~the~~institutions ~~Banks~~will ~~have~~be ~~established~~required ~~borrowing~~to ~~lines~~adopt ~~for~~the ~~federal~~Treasury’s ~~funds~~standards ~~through~~for ~~correspondent~~executive ~~banks,~~compensation and ~~have~~corporate ~~access~~governance tofor ~~third~~the ~~party~~period ~~deposit~~during ~~brokers~~which ~~and~~the ~~national~~Treasury CDholds ~~markets~~equity ~~for~~issued ~~deposit~~under ~~gathering~~the ifTARP ~~needed~~Capital Purchase Program. ~~Management~~The ~~believes~~Company ~~that~~has applied ~~the~~to ~~various~~participate ~~funding~~but ~~sources~~its ~~discussed~~participation ~~above~~will ~~are~~be ~~adequate~~subject to ~~meet~~our regulator’s recommendation, the ~~Company'~~Treasury’s ~~liquidity~~approval, ~~needs~~the inexecution ~~the~~of ~~future~~definitive ~~without~~agreements ~~any~~and ~~material~~standard ~~adverse~~closing ~~impact~~conditions. onThere ~~operating~~can ~~results.~~be ~~Interest~~no ~~rates~~assurance ~~have~~that ~~stabilized~~the Company’s atapplication awill ~~low~~be ~~level~~approved ~~after~~or ~~eleven~~that ~~consecutive~~the ~~prime~~Company ~~rate~~will ~~cuts~~receive ~~during~~funds ~~2001,~~under ~~from~~the ~~9.50~~TARP ~~percent~~Capital atPurchase ~~January~~Program. 1In addition, ~~2001~~if the Company’s application was to ~~4.75~~be ~~percent~~approved atand ~~December~~it ~~31,~~participates ~~2001.~~in ~~Mortgage~~the ~~refinancing~~TARP ~~and~~Capital ~~other~~Purchase ~~loan~~Program, the ~~activity~~Company iswill ~~expected~~issue preferred stock and warrants to ~~slow~~purchase ~~somewhat~~common ~~during~~stock ~~2002~~to the Treasury, which ~~should~~will ~~lessen~~have ~~future~~a ~~liquidity~~dilutive ~~needs~~effect on the Company’s current shareholders.

27We expect to be subject to a formal enforcement action with regulatory authorities, and, when it occurs, we expect such action to place significant restrictions on our operations.

~~Part~~Under IIapplicable laws, the Federal Reserve Board, as our primary federal regulator, the FDIC as the Banks’ deposit insurer, and the Georgia Department, as the Banks’ chartering authority, have the ability to impose substantial sanctions, restrictions and requirements on us and the Banks if they determine, upon examination or otherwise, violations of laws with which we must comply, or weaknesses or failures with respect to general standards of safety and soundness. Applicable law prohibits disclosure of specific examination findings by the institution although formal enforcement actions are routinely disclosed by the regulatory authorities. We could be subject to the issuance of a formal enforcement action and our regulatory authorities could issue a cease and desist order, primarily due to the high level of nonperforming assets of the Banks and the resulting impact on our financial condition. These actions generally require certain corrective steps, impose limits on activities, prescribe lending parameters and require additional capital to be raised. In many cases, policies must be revised by the institution and submitted to the regulatory authority for approval within time frames prescribed by the regulatory authorities. Failure to adhere to the requirements of the actions, once issued, can result in more severe restrictions. Generally, these enforcement actions can be lifted only after subsequent examinations substantiate complete correction of the underlying issues.

~~Item~~Our 7independent ~~(Continued)~~registered public accountants have expressed substantial doubt about our ability to continue as a going concern.

~~Capital~~Our ~~Resources~~independent registered public accountants in their audit report for fiscal year 2008 have expressed substantial doubt about our ability to continue as a going concern. Continued operations depend on our ability to meet our existing debt obligations and ~~Dividends~~the financing or other capital required to do so may not be available or may not be available on reasonable terms. The potential lack of sources of liquidity raises substantial doubt about our ability to continue as a going concern for the foreseeable future. Our audited financial statements were prepared under the assumption that we will continue our operations on a going concern basis, which contemplates the realization of assets and the discharge of liabilities in the normal course of business. Our financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern. If we cannot continue as a going concern, our shareholders will lose some or all of their investment in the Company.

~~SNB~~18 has always placed emphasis on maintaining an adequate capital base to support the Company's activities in a safe manner, and continues to exceed all minimum regulatory capital requirements as shown in Table 9 below. SNB's equity capital of $34.8 million at December 31, 2001 amounts to 6.9 percent of total assets, compared to 7.6 percent at December 31, 2000, and 9.7 percent at December 31, 1999. On average, the equity capital was 7.6 percent of assets during 2001, compared to 9.1 percent for 2000 and 10.5 percent for 1999. The downward trend in the capital ratios reflect the Company's strong balance sheet growth pattern, which has been most pronounced during the past two years.

DuringTable the years 2000 and 2001, SNB's parent holding company has incurred external debt at a correspondent bank to obtain capital infusions for the SB-Bibb Bank. A total of $6.0 million has been infused downward to the lead bank to help support exceptional growth trends caused by the Fairfield acquisition and favorable local economic conditions. Capital levels at the SB-Houston Bank have been self-supporting through earnings retention.Contents

InWe ~~July~~are ~~2000,~~heavily ~~32,345~~regulated new shares of SNB stock were issued in connection with the purchase acquisition of Fairfield Financial Services, Inc., producing $0.4 million in additional capital. In August 1998, 846,743 new shares of the Company's common stock were issued for the pooling of interests stock swap merger with Crossroads Bancshares, Inc. Additionally, 1998 marked the expiration of the outstanding stock warrants held by ~~the~~federal ~~Company's organizing directors~~ and ~~executive~~state ~~officers.~~agencies, ~~During 1997~~ and ~~1998,~~future ~~the~~legislation ~~holders~~or ~~completed~~changes ~~the~~in ~~exercise~~laws ofand ~~449,700~~regulations ~~warrants,~~may affect ~~generating~~our acompetitive ~~total~~position ofand ~~$1.5~~financial ~~million in new capital~~outlook. ~~There are no remaining founders' warrants outstanding.~~

~~Capital~~We are heavily regulated at the federal and state levels. inThis ~~1996~~regulation is designed primarily to protect depositors, federal deposit insurance funds and ~~1997~~the ~~reflect~~banking ansystem ~~influx~~as ofa $5whole, not shareholders.4 ~~million~~Congress inand ~~proceeds~~state ~~from~~legislatures and federal and state regulatory agencies continually review banking laws, regulations and policies for possible changes. Given the ~~issuance~~current economic crisis, Congress is likely to consider additional proposals to substantially change the financial institution regulatory system and to expand or contract the powers of ~~new~~banking ~~stock~~institutions inand ~~two~~bank ~~different~~holding ~~events~~companies. InChanges ~~September~~to ~~1996~~statutes, ~~SNB~~regulations ~~issued~~or aregulatory ~~stock~~policies, ~~offering~~including ~~for~~interpretation ~~the~~and ~~sale~~implementation of ~~340~~statutes,~~700~~ ~~new~~regulations ~~shares~~or policies, could affect us in substantial and unpredictable ways. If enacted, such legislation could increase or decrease the cost of doing business, limit or expand our permissible activities, or affect the ~~Company's~~competitive ~~common~~balance ~~stock.~~among ~~The~~banks, ~~issue~~savings associations, ~~which~~credit ~~generated~~unions, $3and other financial institutions.6 ~~million~~We incannot predict whether new ~~capital,~~legislation ~~was~~will ~~fully~~be ~~subscribed~~enacted and, ~~successfully~~if ~~completed~~enacted, bythe ~~February~~effect ~~1997.~~that Atit, ~~the~~or ~~beginning~~any regulations, would have on our business, financial condition, or results of operations. ~~1996~~Also, ~~SNB~~if ~~issued~~we ando ~~additional~~not ~~203~~comply with laws,~~500~~ ~~shares~~regulations ofor ~~its~~policies, ~~common~~we ~~stock~~could receive regulatory sanctions, ~~primarily~~including tomonetary ~~newly~~penalties ~~elected~~that ~~directors~~may ~~and~~have ~~executive~~a ~~officers~~material ofimpact ~~the~~on ~~Company.~~our ~~This~~financial ~~action~~condition ~~produced~~and ~~$1.8~~results ~~million~~of inoperations, ~~new~~and ~~capital~~cause damage to our reputation.

~~Principal~~Changes ~~uses of the Company's capital base~~ in ~~recent~~accounting ~~years~~policies ~~have~~and ~~been~~practices, ~~(a) sustaining the capital adequacy of the Banks~~ as ~~they~~may ~~continue~~be adopted toby ~~grow at a steady pace, (b) expanding~~ the ~~Company's~~regulatory ~~presence in Macon and middle Georgia with more physical locations and improved delivery systems~~agencies, ~~(c) expanding into contiguous Houston County through~~ the ~~merger~~Financial ~~with~~Accounting ~~SB-Houston~~Standards ~~and development of a mortgage loan division~~Board, ~~(d)~~or ~~acquiring~~other ~~Fairfield~~authoritative ~~to broaden the Company's mortgage services markets~~bodies, ~~and~~could ~~(e)~~materially ~~enhancing~~impact ~~corporate~~our ~~infrastructure~~financial ~~support systems to manage SNB's multi-bank environment~~statements. ~~Additional acquisitions may occur in the future.~~

28Our accounting policies and methods are fundamental to how we record and report our financial condition and results of operations. From time to time, the regulatory agencies, the Financial Accounting Standards Board and other authoritative bodies change the financial accounting and reporting standards that govern the preparation of our financial statements. These changes can be hard to predict and can materially impact how we record and report our financial condition and results of operations.

~~Part~~The IINASDAQ may not extend the temporary relief for stocks trading below $1 per share.

~~Item~~In 7October ~~(Continued)~~2008, the NASDAQ Stock Market temporarily suspended its listing requirement that requires companies to have a minimum bid price of $1 per share through April 20, 2009. NASDAQ rules classify a security as “deficient” if it has a closing bid price of less than $1 per share for thirty consecutive business days. Once deficient, issuers have an automatic 180-day period to regain compliance by having a closing bid price of at least $1 per share for 10 consecutive business days, and can receive an additional 180 days if all other listing requirements are met. If we do not meet this standard and the NASDAQ Stock Market does not continue its suspension of this listing requirement, liquidity in our stock could be materially and adversely affected.

~~Regulators~~We ~~use~~are asubject ~~risk-adjusted calculation~~ to ~~aid~~reimbursement ~~them in their determination~~ of ~~capital adequacy by weighting assets based on~~ the ~~degree~~FDIC ofunder ~~risk~~its ~~associated with on~~“cross-guarantee” ~~and off-balance sheet assets~~provisions. The majority of these risk-weighted assets for the Company are on-balance sheet assets in the form of loans. Small portions of risk-weighted assets are considered off-balance sheet assets comprised of letters of credit and loan commitments. Capital is categorized as either core (Tier 1) capital or supplementary (Tier 2) capital. Tier 1 capital consists primarily of stockholders' equity minus any intangible assets, while Tier 2 capital can consist of the reserve for loan losses up to certain limits, certain short term and other preferred stock and certain debt instruments.

~~Current~~The ~~regulatory~~“cross-guarantee” ~~standards~~provisions ~~require~~of ~~bank~~the ~~holding~~FDIC ~~companies~~require toinsured ~~maintain~~depository ainstitutions ~~minimum~~under ~~risk~~common ~~based~~control ~~capital~~to reimburse ~~ratio~~the ofFDIC ~~qualifying~~for ~~total~~any ~~capital~~loss tosuffered ~~risk~~by ~~weighted~~the ~~assets~~Deposit ofInsurance ~~8.0~~Fund ~~percent,~~(DIF) ~~with~~as ata ~~least~~result ~~4.0 percent~~ of the ~~capital~~default ~~consisting~~ of ~~Tier 1 capital, and~~ a ~~Tier~~commonly 1controlled ~~leverage~~insured ~~ratio~~depository ofinstitution ator ~~least~~for ~~4.0~~any ~~percent.~~assistance ~~Additionally,~~provided by the ~~regulatory~~FDIC ~~agencies~~to ~~define~~ a ~~well-capitalized~~commonly ~~bank~~controlled asinsured ~~one~~depository institution ~~that~~in ~~has~~danger ~~a Tier 1 leverage ratio~~ of ~~at least 5~~default.0 ~~percent,~~The aFDIC ~~Tier~~may 1decline ~~capital~~to ~~ratio~~enforce ofthe atcross-guarantee ~~least~~provisions ~~6.0~~if ~~percent,~~it ~~and~~determines that a ~~total~~waiver ~~risk~~is ~~based~~in ~~capital~~the ~~ratio~~best interest of atthe ~~least 10 percent~~DIF. AsThe ofFDIC’s ~~December~~claim ~~31,~~for ~~2001,~~damages ~~SNB~~is ~~had~~superior ato ~~Tier~~claims 1of ~~leverage~~shareholders ~~ratio~~ of ~~7.66~~the insured ~~percent,~~depository ainstitution ~~Tier~~or 1its ~~capital~~holding ~~ratio~~company ofbut ~~8.02~~is ~~percent,~~subordinate ~~and~~to aclaims ~~total risk based capital ratio~~ of ~~9.00~~depositors, ~~percent.~~secured ~~The~~creditors ~~Company's~~and ~~total~~holders ~~risk~~of ~~based~~subordinated ~~capital~~debt ~~ratio~~(other ~~has~~than ~~fallen~~affiliates) ~~below~~of the ~~10.0~~commonly ~~percent~~controlled ~~well-capitalized~~insured ~~status~~depository ~~at year-end 2001 (9~~institutions.00 ~~percent)~~The reimbursement ~~and~~of ~~2000 (9.75 percent). Due to continuing strong growth trends in~~ the ~~balance~~FDIC ~~sheet,~~under ~~management~~its is“cross-guarantee” ~~currently~~provisions ~~assessing~~could ~~strategies~~materially toand ~~produce~~adversely ~~more~~affect ~~Tier~~our 1liquidity and~~/or~~ ~~Tier~~financial ~~2 capital in the near future to assure adequate capital going forward~~position.

~~The~~19 ~~following table demonstrates capital ratio calculations as of December 31, 2001 and 2000.~~

TABLE 9
CAPITAL RATIOS
(In Thousands)
		December 31
As of End of Period		2001	2000
Tier 1 Capital
Stockholders' Equity		$ 34,172	$ 30,875
Less Intangible Assets		848	947
	Total Tier 1 Capital	33,324	29,928
Tier 2 Capital
Eligible Portion of Reserve for Loan Losses		4,098	3,003
Subordinated and Other Qualifying Debt		0	0
	Total Tier 2 Capital	4,098	3,003
Total Risk Based Capital		$ 37,422	$ 32,931
Total Net Risk Weighted Assets		$415,800	$337,788

29An inability to improve our regulatory capital position could adversely affect our operations and future prospects.

~~Part~~Our IIsuccess as a financial institution is dependent on our ability to raise sufficient capital or reduce our assets to improve our regulatory capital position. At December 31, 2008, four of our subsidiary Banks were classified as “undercapitalized,” which restricts our operations. As a result of our capital levels, there are several restrictions that our regulators can place on us: (1) our loans to one borrower limit may be reduced, which affects the size of the loans that we can originate and also requires us to sell, participate, or refuse to renew loans that exceed our lower loans to one borrower limit, any of which could negatively impact our earnings; (2) we cannot renew, accept or rollover brokered deposits; (3) we must obtain prior regulatory approval to undertake any branch expansion activities; (4) we will pay higher insurance premiums to the FDIC, which will reduce our earnings; (5) we will be subject to growth restrictions and limits on capital distributions; (6) the undercapitalized Banks are prohibited from making capital distributions to us; and (7) we will be required to file a capital restoration plan with the FDIC and Georgia Department. If we are unable to raise sufficient amounts of capital, our financial condition and future prospects will be materially and adversely affected.

~~Item~~The 7unprecedented ~~(Continued)~~deterioration of the real estate market and our national economy likely will result in further increases in our non-performing assets and allowance for loan losses, and make it more difficult for us to recover our losses with respect to defaulted loans and will continue to adversely affect our business, cash flows, financial condition and results of operations.

~~TABLE~~Recessionary 9conditions ~~(Continued)~~in ~~CAPITAL~~the ~~RATIOS~~broader ~~(In~~economy ~~Thousands)~~have and could further adversely affect the financial capacity of businesses and individuals in our market area. This has and could further, among other consequences, increase the credit risk inherent in the current loan portfolio, restrain new loan demand from creditworthy borrowers and prompt us to further tighten our underwriting criteria, and reduce the liquidity in our customer base and the level of deposits that they maintain. These economic conditions could also delay the correction of the imbalance of supply and demand in certain residential real estate markets.

	Regulatory
	Requirement
		Well	December 31
	Minimum	Capitalized	2001	2000
Total Risk Based Capital Ratio	8.0%	10.0%	9.0%	9.7%
Tier 1 Capital Ratio	4.0%	6.0%	8.0%	8.9%
Tier 1 Capital to Average Assets	4.0%	5.0%	7.7%	9.4%

The impact of the deteriorating economy and real estate markets on our financial results could include continued high levels of problem credits, provisions for credit losses and expenses associated with loan collection efforts. We may also be required to replace deposits with higher-cost sources of funds and we may be unable to produce growth in earning assets. Noninterest income from sources that are dependent on financial transactions and market valuations could also be reduced.

~~Cash~~We ~~dividends~~regularly ofreassess $1our loan portfolio,~~045,620,~~ orthe $creditworthiness of our borrowers and the sufficiency of our allowance for loan losses.31 ~~per~~In light ~~weighted~~of ~~average~~these ~~common~~market ~~share~~conditions, ~~were~~our ~~declared~~allowance ~~and~~for ~~paid~~loan ~~during~~losses ~~2001,~~increased upto ~~from~~3.00% ~~$923~~at December 31,~~200,~~ or2008 $from 1.2845% ~~per~~of ~~share~~loans ~~during~~at ~~2000~~December 31, 2007. We made a provision for loan losses of approximately $128.1 million and charged-off approximately $~~851~~100.3 million in loans for the year ended December 31,~~862~~ 2008, orwhich $was significantly higher than in previous periods.26 ~~per~~While ~~share~~financial institutions generally do not charge-off impairment on loans until foreclosure, we believe we have taken an aggressive approach and charged-off the balances based upon the current downturn in ~~1999~~the economy and real estate market. The ~~ratios~~increase ofin ~~cash~~the ~~dividends~~allowance ~~paid~~for loan losses reflects increases in and downgrades to ~~net~~criticized ~~income~~or ~~for~~classified loans ~~these~~and ~~years~~non-performing ~~were~~assets ~~24.1~~(which ~~percent,~~is ~~26.5~~comprised ~~percent~~of non-accrual loans and ~~26.3~~other ~~percent~~real estate owned by us as a result of foreclosures), ~~respectively.~~primarily ~~Since~~in the ~~commencement~~residential oftract ~~cash~~development ~~dividend~~and ~~payments~~construction category that are experiencing slower than projected sales and/or increases in ~~1992,~~loan ~~the~~to ~~Company's~~value ~~Board~~ratios ofarising ~~Directors~~from ~~has~~declines ~~consistently~~in ~~declared~~residential home and ~~paid~~land ~~dividends~~prices onin aour ~~quarterly~~lending ~~basis~~markets.

OnWe ~~June~~will 1,likely ~~1996~~experience further increases in classified loans and non-performing assets in the foreseeable future, aas ~~100~~well ~~percent~~as ~~stock~~related ~~split~~increases ~~was~~in ~~issued~~loan charge-offs, ~~and~~as ~~affected~~the deterioration in the ~~form~~credit and real estate markets causes borrowers to default. In addition, the value of the collateral underlying a ~~dividend~~given loan, and onthe ~~September~~realizable ~~25,~~value ~~1997,~~of asuch 25collateral ~~percent~~in ~~stock~~a ~~split~~foreclosure ~~was~~sale, ~~issued~~will ~~and~~be negatively affected inby the ~~form~~recent ofdownturn ain ~~dividend.~~the ~~Per~~real ~~share~~estate ~~data~~market, ~~for~~and ~~all~~therefore ~~periods~~may ~~presented~~result ~~have~~in ~~been~~our ~~retroactively~~being ~~restated~~unable to ~~reflect~~realize ~~the~~a ~~additional~~full ~~shares~~recovery ~~resulting~~in ~~from~~the ~~these~~event ~~stock~~that ~~splits.~~a borrower

~~Management~~20 is not aware of any trends, events, or uncertainties that will have, or that are reasonably likely to have a material impact on SNB's liquidity, capital resources, or operations. Further, management is aware of no current recommendations by regulatory authorities that, if they were to be implemented, would have such an effect.

AcquisitionsTable of Contents

On defaults ~~July~~on ~~31,~~a ~~2000~~loan. Furthermore, ~~SB-Bibb~~bank ~~acquired~~regulatory ~~Fairfield~~agencies ~~Financial~~periodically ~~Services,~~review ~~Inc.~~our ~~("Fairfield"),~~allowance afor ~~well-established~~loan ~~mortgage~~losses ~~loan~~and ~~company~~may ~~based~~require inan ~~Macon,~~increase ~~Georgia.~~in ~~The~~the ~~purchase~~allowance ~~transaction~~for loan ~~involved~~losses aor ~~combination~~the recognition of ~~SNB~~additional ~~stock~~loan ~~and~~charge ~~cash~~offs ~~consideration.~~based ~~Fairfield~~on ~~has~~judgments adifferent ~~number~~from those of ~~production~~our ~~locations~~management. ~~throughout~~A ~~Georgia~~further ~~and~~decline in the ~~Southeast~~overall economy, ~~including~~any ~~offices~~further increase in ~~Macon,~~our ~~Columbus~~non-performing assets, ~~Warner~~any ~~Robins,~~increase ~~Richmond~~in ~~Hill,~~loan ~~Stockbridge~~charge-offs, any ~~Fayetteville~~further ~~and~~increase ~~St.~~in ~~Simons~~our ~~Island.~~allowance ~~The~~for ~~company~~loan ~~now~~losses ~~functions~~or asany inability by us to realize the full value of underlying collateral in the event of a ~~subsidiary~~loan default, will negatively affect our business, financial condition, liquidity, operating results, cash flow and the price of ~~SB-Bibb~~our securities.

OnOur ~~January~~business ~~29,~~is ~~1998,~~subject ~~SNB entered into an Agreement and Plan of Merger with Crossroads Bancshares, Inc. in Perry, Georgia, pursuant~~ to ~~which Crossroads would be merged with and become a wholly-owned subsidiary of SNB. On August 8, 1998,~~ the success ~~merger was completed in a 100% stock pooling~~ of ~~interests transaction, and 846,743 shares of SNB common stock were issued to effect~~ the ~~merger.~~local Oneconomies ~~June~~where 3,we ~~1999, the bank name was changed from Crossroads Bank to Security Bank of Houston County~~operate. ~~SB-Houston operates four offices in Houston County - one in Perry, Georgia and three in Warner Robins,~~

30Our success significantly depends upon the growth in population, income levels, deposits and housing starts in our primary and secondary markets. If the communities in which we operate do not grow or if prevailing economic conditions locally or nationally continue to be unfavorable, our business may not succeed. We are currently experiencing economic conditions in our market areas, which negatively affect the ability of our customers to repay their loans to us and generally negatively affect our financial condition and results of operations. We are less able than a larger institution to spread the risks of unfavorable local economic conditions across a large number of diversified economies and are thus disproportionately impacted. Moreover, we cannot give any assurance that we will benefit from any market growth or favorable economic conditions in our primary market areas if they do materialize in the future.

~~Part~~Our IIliquidity has come under pressure and funding to provide liquidity may not be available to us on favorable terms or at all.

~~Item~~In 7recent periods, a number of factors have placed stress on our liquidity, including increases in our non-performing assets, increases in our allowance for loan losses, increased competition for deposits in our primary market areas, prohibition on accepting brokered deposits, a freeze on Federal Home Loan Bank (~~Continued~~FHLB) advances and decreases in interest rates. These factors contribute to compression of our net interest margin and our net income. In managing our consolidated balance sheet, we depend on access to a variety of sources of funding to provide us with sufficient capital resources and liquidity to meet our commitments and business needs, and to accommodate the transaction and cash management needs of our customers. Sources of funding available to us, and upon which we have historically relied as regular components of our liquidity and funding management strategy, include inter-bank borrowings, FHLB advances, Fed Funds advances and brokered deposits. If any of these sources are not available to us, we likely will have a severe liquidity deficiency.

~~Georgia.~~ The ~~merger~~capital ~~allowed~~and ~~SNB~~credit tomarkets ~~establish~~have anbeen ~~immediate~~experiencing ~~presence~~extreme volatility and periods of severe disruption that in ~~its~~recent ~~primary~~months ~~targeted~~have ~~market~~reached ~~for~~unprecedented ~~expansion~~levels. Given ~~Houston~~the ~~County~~dramatic deterioration of the credit and liquidity markets, there is ~~included~~no inassurance ~~the~~that ~~same~~we ~~Macon-Warner~~will ~~Robins~~be ~~metropolitan~~able ~~statistical~~to ~~area~~obtain asliquidity ~~SNB's~~on ~~principal~~terms ~~Bibb~~that ~~County~~are ~~market~~favorable to us, or at all. ~~The~~For ~~Warner~~example, ~~Robins~~the ~~Air~~cost ~~Force~~of ~~Base~~brokered isdeposits may continue to exceed the ~~largest~~cost ~~employer~~of deposits of similar maturity in our local market areas, making them unattractive, but necessary, sources of funding. As of December 31, 2008, we had approximately $1.07 billion in out of market deposits, including brokered deposits, which represented approximately 44% of our total deposits. Also, financial institutions may be unwilling to extend credit to banks because of concerns about the ~~middle~~banking ~~Georgia~~industry ~~area~~and the economy generally; and, ~~helps~~given tothe ~~make~~continued downturn in the ~~two~~economy, ~~counties~~there amay ~~common~~not be a market for raising equity capital. If funding continues to be available on a limited basis, or only on unfavorable terms, then our liquidity, net interest margin and net income will be materially and adversely affected.

~~The~~We ~~Company's~~make ~~overall~~and ~~growth~~hold ~~during~~in ~~the~~our ~~past~~portfolio ~~two years is largely attributed to (~~a) ~~the~~significant ~~success~~number of ~~these~~land ~~two~~acquisition ~~acquisitions~~and indevelopment ~~developing synergies~~ and ~~market~~construction ~~cohesiveness in middle Georgia~~loans, ~~and~~which ~~(b)~~pose ~~the~~more ~~community~~credit risk ~~banking~~than ~~philosophies~~other oftypes ~~the two subsidiary banks during a period~~ of ~~industry~~loans ~~consolidation~~typically ~~and~~made ~~merger~~by ~~shake-ups~~financial ~~in the local markets~~institutions.

~~Expanded~~Through ~~Coverage~~2007, we offered land acquisition and development and construction loans for builders and developers, but we no longer offer these loans. As of ~~Market~~December 31, ~~Area~~2008, approximately $993.9 million, or

~~Bibb~~21 ~~County:~~

AsTable the Company grows, it continues to add physical office locations and delivery channels to serve its existing middle Georgia market. Due to continuing growth trends, SB-Bibb has outgrown its current executive offices in Macon and expects to build and occupy a new corporate center and retail banking office on Forsyth Road in Macon by mid-2002. The Company moved its operational and in-house data processing functions to a larger leased facility during 2001, providing ample room for growth in its operational support functions. A major conversion to upgraded banking software will occur during the first half of 2002. During 2001, SB-Bibb opened a limited service office in the Carlyle Place senior community on Zebulon Road in Macon. The Company introduced an Internet banking product for its customers in 1999, and upgraded its Internet services in 2001. In 1998 the Hartley Bridge Road branch was constructed and opened in southwest Bibb County by the lead bank. This was SB-Bibb's sixth full service location in Macon. These and other additional fixed asset purchases were financed through the equity base and retained earnings of the Company with no external borrowing. Contents

~~Houston~~ 50.2%, ~~County:~~of our loan portfolio represented land, land acquisition and development and construction loans. These land acquisition and development and construction loans are generally considered more risky than other types of residential mortgage loans, and banking regulators have determined that we have an excessive concentration in such loans. The primary credit risks associated with land acquisition and development and construction lending are underwriting, project risks and market risks. Project risks include cost overruns, borrower credit risk, project completion risk, general contractor credit risk, and environmental and other hazard risks. Market risks are risks associated with the sale of the completed residential units or rentals of the commercial units. They include affordability risk, which means the risk of affordability of financing by borrowers, product design risk, and risks posed by competing projects. Because of declines in real estate values in our market areas, particularly the metropolitan Atlanta and north Florida areas, this portion of our loan portfolio has been severely impaired. As of December 31, 2008, 20% of this portion of our loan portfolio was non-performing. While we believe we have established adequate reserves on our financial statements to cover the credit risk of our land acquisition and development and construction loan portfolio, if economic conditions and real estate markets do not improve, our losses will likely exceed our reserves, which will adversely impact our results of operations and financial condition.

~~During~~We ~~the~~occasionally ~~first~~purchase ~~quarter of 2000, SB~~non-~~Houston's~~recourse ~~fourth~~loan ~~full~~participations ~~service~~from ~~office~~other inbanks ~~Houston~~based ~~County was established on Houston Lake Road~~ in ~~Warner Robins. The mortgage division in Houston County was merged into the Fairfield administration in 2000 and relocated from leased space into the new branch office~~ part on ~~Houston~~information ~~Lake~~provided ~~Road.~~by ~~Management of SB-Houston is considering~~ the ~~addition~~selling ~~of another full service branch in Houston County with an estimated opening date in 2003~~bank.

~~Mortgage~~From ~~Division:~~time to time, we purchase loan participations from other banks in the ordinary course of business, usually without recourse to the selling bank. When we purchase loan participations we apply the same underwriting standards as we would to loans that we directly originate and seek to purchase only loans that would satisfy these standards. However, we are less likely to be familiar with the borrower and may rely to some extent on information provided to us by the selling bank and on the selling bank’s administration of the loan relationship. We therefore have less control over, and may incur more risk with respect to, loan participations that we purchase from selling banks.

~~The~~If ~~acquisition~~our ofallowance ~~Fairfield~~for ~~during~~loan ~~2000~~losses ~~brings~~is anot ~~number~~sufficient ~~of production locations~~ to ~~SB-Bibb.~~cover ~~These~~actual ~~offices,~~loan ~~located in Macon~~losses, ~~Columbus,~~we ~~Warner~~will ~~Robins,~~incur Richmond Hill, Stockbridge, Fayetteville, St. Simons Island, and other areas throughout the Southeast, are well established and provide various mortgage, construction and commercial lending services. SNB management may consider converting one or more of the Fairfield offices into full service banking offices in the future. Alternatively, management may consider additional ~~expansion moves into the markets where Fairfield offices are now located~~losses.

31Our success depends to a significant extent upon the quality of our assets, particularly loans. In originating loans, there is a substantial likelihood that credit losses will be experienced. The risk of loss will vary with, among other things, general economic conditions, the type of loan being made, the creditworthiness of the borrower over the term of the loan, the underwriting standards, and, in the case of a collateralized loan, the quality of the collateral for the loan.

~~Part~~Our IIloan customers may not repay their loans according to the terms of these loans, and the collateral securing the payment of these loans may be insufficient to assure repayment. As a result, we may experience significant loan losses, which could have a material adverse effect on our operating results. Management makes various assumptions and judgments about the collectability of our loan portfolio, including the creditworthiness of our borrowers and the value of the real estate and other assets serving as collateral for the repayment of many of our loans. We maintain an allowance for loan losses in an attempt to cover any loan losses that may occur.

~~Item~~In 7determining ~~(Continued)~~the size of the allowance, we rely on an analysis of our loan portfolio based on historical loss experience, volume and types of loans, trends in classification, volume and trends in delinquencies and non-accruals, national and local economic conditions and other pertinent information. Our determination of the size of the allowance could be understated due to our lack of familiarity with market-specific factors and the current economic climate. If our assumptions are wrong, our current allowance may not be sufficient to cover future loan losses, and adjustments may be necessary to allow for different economic conditions or adverse developments in our loan portfolio. Material additions to our allowance would materially decrease our net income.

~~RESULTS~~The OFmarket ~~OPERATIONS~~value ~~FOR~~of ~~THE~~the ~~YEARS~~real ~~ENDED~~estate ~~DECEMBER~~securing ~~31,~~our ~~2001,~~loans ~~2000~~as collateral ~~AND~~has ~~1999~~been significantly and adversely affected by the deteriorating economy and unfavorable changes in economic conditions in our market areas and

~~SNB's~~22 net income was $4,342,168, $3,479,247, and $3,245,174 for the years 2001, 2000, and 1999, respectively. Diluted earnings per share amounted to $1.29 in 2001, $1.03 in 2000, and $0.96 in 1999. The Company's return on average assets amounted to 1.00 percent for 2001, 1.09 percent for 2000, and 1.27 percent for 1999. The return on average equity was 13.05 percent, 12.01 percent, and 12.08 percent, respectively. During 2000, the Company incurred approximately $150,000 in merger costs on the Fairfield acquisition, and expensed an additional $350,000 to increase the loan loss reserve due to the Fairfield merger. Additional overhead costs have been incurred for the periods shown for the establishment of a more extensive branch network and increased technology costs associated with relocating a multi-bank data processing center.

NetTable Interestof IncomeContents

~~Net~~ may ~~interest~~be ~~income~~further ~~(the~~adversely ~~difference~~affected ~~between~~in the ~~interest~~future. ~~earned~~As onof ~~assets~~December 31, ~~and~~2008, ~~the~~approximately ~~interest~~89% ~~paid~~of onour ~~deposits~~loans ~~and~~receivable ~~liabilities)~~were issecured ~~the~~by ~~principal~~real ~~source of earnings for the Company~~estate. ~~SNB's~~As ~~average~~a result ~~net~~of ~~interest rate margin, on~~ a ~~taxable~~difficult ~~equivalent~~real ~~basis,~~estate ~~was 4.23 percent in 2001~~market, ~~4.79~~we ~~percent~~have inincreased ~~2000,~~our ~~and~~allowance ~~5.21~~from ~~percent in 1999~~$31.7 ~~The~~million ~~trend~~as of ~~decline reflects the falling interest rate environment~~December 31, ~~competitive~~2007 ~~pricing~~to ~~for~~$59.4 ~~loans~~million ~~and~~as ~~deposits~~of ~~in SNB's local markets~~December 31, ~~and changes in the mix of the loan and deposit portfolios~~2008. ~~Net~~We ~~interest~~expect ~~income~~to ~~before~~continue ~~tax~~to ~~equivalency~~increase ~~adjustments~~our allowance in ~~2001~~2009; ~~amounted to $17~~however,~~022,234,~~ upwe ~~22.2~~can ~~percent~~make ~~from~~no assurance ~~$13,928,611~~that inour ~~2000.~~allowance ~~The~~will ~~2000~~be ~~net~~adequate ~~interest~~to ~~income~~cover ~~was~~future uploan ~~16.3~~losses ~~percent~~given ~~from~~current ~~$11,975,079~~and ~~posted~~future inmarket ~~1999~~conditions.

~~The~~In ~~following~~addition, ~~table~~federal ~~presents~~and ~~interest~~state ~~income,~~regulators ~~adjusted~~periodically review our allowance for loan losses and may require us to aincrease ~~tax~~our ~~equivalent~~allowance ~~basis~~for loan losses or recognize further loan charge-offs, ~~interest~~based ~~expense~~on ~~and~~judgments ~~the~~different ~~resulting~~than ~~average~~those ~~net~~of ~~interest~~our ~~rate~~management. ~~margins~~Any increase in our allowance for ~~the~~loan ~~past~~losses ~~three~~or ~~years~~loan charge-offs as required by these regulatory agencies would have a negative effect on our operating results.

TABLE 10
NET INTEREST INCOME
(In Thousands)	Years Ended December 31
	2001	2000	1999
Interest Income	$33,609	$27,040	$20,403
Taxable Equivalent Adjustment	198	234	199
Interest Income (1)	33,807	27,274	20,601
Interest Expense	16,586	13,111	8,428
Net Interest Income (1)	$17,221	$14,163	$12,174
	Years Ended December 31
	2001	2000	1999
	(As a % of Average Earning Assets)
Interest Income (1)	8.30%	9.22%	8.82%
Interest Expense	4.07%	4.43%	3.61%
Net Interest Rate Margin (1)	4.23%	4.79%	5.21%

We face regulatory risks related to our commercial real estate loan concentrations.

~~Reflects~~Commercial ~~taxable~~real ~~equivalent~~estate ~~adjustments~~(CRE) is ~~using~~cyclical ~~the~~and ~~statutory~~poses ~~federal~~risks ~~income~~of ~~tax~~possible ~~rate~~loss due to concentration levels and similar risks of 34the asset class. As of December 31, 2008, approximately 73% inof ~~adjusting~~our ~~interest~~loan onportfolio ~~tax-exempt~~consisted ~~securities~~of CRE loans, which includes land, land acquisition and development and construction loans for builders and developers. The banking regulators give CRE lending greater scrutiny and have required us to implement improved underwriting, internal controls, risk management policies and portfolio stress testing, as well as possibly requiring higher levels of allowances for possible loan losses and capital levels as a ~~fully~~result ~~taxable~~of ~~basis~~CRE lending exposures. Additionally the banking regulators have determined that our exposure to CRE is excessive and could impose further restrictions on us that would adversely affect our results of operation, financial condition and future prospects.

32Our loan portfolio has commercial and industrial loans that include risks that may be greater than the risks related to residential loans.

~~Part~~Many IIanalysts and economists are predicting that the commercial and industrial loans could be the next market to see significant deterioration. Our commercial and industrial loan portfolio was $157.8 million at December 31, 2008 and comprised 8.0% of loans receivable. Commercial and industrial loans generally carry larger loan balances and involve a greater degree of financial and credit risk than home equity loans or residential mortgage loans. Any significant failure to pay on time by our customers would adversely affect our earnings. The increased financial and credit risk associated with these types of loans is a result of several factors, including the concentration of principal in a limited number of loans and borrowers, the size of loan balances, the effects of general economic conditions on income-producing properties and the increased difficulty of evaluating and monitoring these types of loans. In addition, when underwriting a commercial or industrial loan, we may take a security interest in commercial real estate, and, in some instances upon a default by the borrower, we may foreclose on and take title to the property, which may lead to potential financial risk for us under applicable environmental laws. If hazardous substances were discovered on any of these properties, we may be liable to governmental entities or third parties for the costs of remediation of the hazard, as well as for personal injury and property damage. Many environmental laws can impose liability regardless of whether we knew of, or were responsible for, the contamination.

~~Item~~Furthermore, 7the ~~(Continued)~~repayment of loans secured by commercial real estate is typically dependent upon the successful operation of the related real estate or commercial project. If the cash flow from the project is reduced, a borrower’s ability to repay the loan may be impaired. This cash flow shortage may result in the failure to make loan payments. In such cases, we may be compelled to modify the terms of the loan. In addition, the nature of these loans is such that they are generally less predictable and more difficult to evaluate and monitor. As a result, repayment of these loans may, to a greater extent than residential loans, be subject to adverse conditions in the real estate market or economy. If our borrowers on commercial and industrial loans fail to pay, as many analysts predict, then our results or operations likely will be adversely affected.

~~2001~~23 ~~Compared to 2000~~

TaxTable equivalent net interest income increased by $3,057,000 from 2000 to 2001, spurred mainly by strong growth trends in the loan portfolio. The average net interest margin declined by 56 basis points, from 4.79 percent in 2000 to 4.23 percent in 2001. The prime loan rate posted an unprecedented 475 basis point drop in eleven decreases over the course of 2001, from 9.50 percent at the beginning of the year to 4.75 percent by year-end. Average yields on SNB's loan portfolio declined by a more modest 118 basis points, from 9.75 percent in 2000 to 8.57 percent in 2001. However, average loan balances for 2001 increased by $113.3 million, or 46.0 percent over 2000. The primary growth came in real estate construction loans, commercial loans, and balances in mortgage loans held for sale. The acquisition of the Fairfield mortgage subsidiary in July 2000 added a strong lending team in production offices in lucrative loan markets throughout the state of Georgia. Lending activity at the two subsidiary banks continued to be strong as well. A favorable declining interest rate environment encouraged new construction projects and heavy volumes of refinancing activity to further enhance production in 2001. These trends have started to slow in pace as interest rates appear to be approaching their lows for the current cycle. Mortgage lending is very cyclical in nature and reliant on mortgage interest rates. If rates start to rise in 2002, management anticipates some curtailment of the rate of loan growth in 2002. Yields on the investment portfolio decreased 28 basis points from 6.66 percent to 6.38 percent, and the average balances invested in bonds remained relatively flat from 2000 to 2001, increasing only $1.1 million, or 2.7 percent. The overall yield on earning assets on a tax equivalent basis for 2001 was 8.30 percent, a decrease of 92 basis points from 9.22 percent in 2000.Contents

OnAs ~~the~~a ~~liability~~result ~~funding side~~ of the ~~balance~~downturn ~~sheet,~~in the ~~overall~~real ~~cost~~estate ~~of interest-bearing funds averaged 4.84 percent in 2001~~market, ~~down~~we 52have ~~basis~~experienced ~~points~~more ~~from~~elevated ~~5.36~~legal ~~percent~~related incosts ~~2000.~~and expenses ~~Deposits~~associated ~~continue~~with toresolving betroubled ~~our~~loans, ~~primary~~including ~~funding~~participated ~~source. Average interest rates on all interest-bearing deposits for 2001 were 4.93 percent~~loans, athan 25we ~~basis~~would ~~point~~normally ~~drop~~experience ~~from~~during ~~5.18~~more ~~percent~~stable ~~for~~economic ~~2000~~times. ~~Deposit~~These ~~balances~~additional ~~increased~~legal oncosts ~~average~~and byexpenses ~~$78.1~~are ~~million,~~expected orto ~~30.4~~continue ~~percent~~as ~~from~~we ~~2000~~work to ~~2001.~~resolve Aour troubled ~~portion~~credits ofand ~~this~~along ~~increase came from noncore brokered certificates of deposit of $100,000 or more, but local core deposit growth was strong as well. A faltering stock market, combined~~ with ~~terrorist~~any ~~attacks~~adverse inoutcomes ~~September~~from ~~2001~~litigation, ~~encouraged~~could ~~many~~negatively ~~consumer~~impact ~~and~~our ~~business~~results ~~depositors to seek the safety~~ of ~~the~~operations ~~banking~~and ~~system.~~financial ~~Balances~~condition ~~continued to grow in spite of the declining rate environment.~~

~~Reliance~~From ontime ~~alternate~~to ~~noncore~~time, ~~funding~~we ~~sources~~are ~~became~~involved ~~more~~in ~~prevalent~~litigation in ~~2001~~the asordinary ~~management~~course ~~sought~~of ~~ways~~business to ~~meet~~resolve ~~liquidity~~problem ~~demands~~credits. ~~for~~Given ~~lending~~the ~~activities.~~current ~~Average~~market ~~balances~~downturn in ~~various~~real estate ~~borrowed~~and ~~funds~~the ~~rose~~general ~~from~~economy, ~~$33.4~~we ~~million~~are experiencing an increase in ~~2000~~the tovolume ~~$63.8~~of ~~million~~this ordinary course litigation, and as such we have experienced an increase in ~~2001.~~legal ~~Rates~~related oncosts ~~external~~and ~~borrowings~~expenses, ~~became~~which ~~more~~include ~~attractive~~foreclosed property expenses, ~~averaging~~fees ~~4.43~~and expenses ~~percent~~of inlegal ~~2001~~counsel ~~versus~~and 6other professional fees.48 ~~percent~~We inhave ~~2000.~~also ~~The~~been ~~funding~~named ~~mix~~as a defendant in ~~2000~~lawsuits ~~averaged~~where ~~88.5~~co-lenders ~~percent~~in ~~from~~loan ~~deposits~~participations ~~and~~are 11seeking damages against us.5 ~~percent~~Based ~~from~~on ~~borrowed~~current ~~money.~~information, ~~This~~we ~~mix~~believe ~~changed~~that inwe ~~2001~~have valid defenses to these litigation claims but we cannot provide assurance that we will ultimately be ~~84.0~~successful ~~percent~~in ~~from~~our ~~deposits~~defense, and ~~16.0~~regardless ~~percent~~of ~~from~~our ~~external~~success, ~~borrowings~~we expect to incur increased legal fees and costs to defend these litigation claims and in defending against litigation, we may be required to pay damages for settlements and adverse judgments.

33Our insurance may not cover all claims that may be asserted against us and indemnification rights to which we are entitled may not be honored, and any claims asserted against us, regardless of merit or eventual outcome, may harm our reputation. Should the ultimate judgments or settlements in any litigation or investigation significantly exceed our insurance coverage, they could have a material adverse effect on our business, financial condition and results of operations. In addition, we may not be able to obtain appropriate types or levels of insurance in the future, nor may we be able to obtain adequate replacement policies with acceptable terms, if at all.

~~Part~~Concern IIof customers over deposit insurance may cause a decrease in deposits.

~~Item~~With 7recent ~~(Continued)~~increased concerns about bank failures, customers increasingly are concerned about the extent to which their deposits are insured by the FDIC. Customers may withdraw deposits in an effort to ensure that the amount they have on deposit with their bank is fully insured. Decreases in deposits may adversely our funding costs and results of operations.

~~2000~~Our directors ~~Compared~~and toexecutive ~~1999~~officers own a significant portion of our common stock.

~~Tax~~Our ~~equivalent~~directors ~~net~~and ~~interest~~executive ~~income~~officers, ~~increased~~as bya $1group,~~989,000~~ ~~from~~beneficially ~~1999~~owned toapproximately ~~2000~~19.57% ~~This increase in absolute dollars~~ of ~~margin~~our inoutstanding ~~2000~~common ~~was~~stock ~~driven~~as byof ~~strong balance sheet growth. The average margin yield declined by 42 basis points~~February 27, ~~from 5~~2009.21 ~~percent~~As ina ~~1999~~result ~~to 4.79 percent in 2000. Over the course~~ of ~~2000~~their ownership, the ~~prime~~directors ~~lending~~and ~~rate~~executive officers ~~increased~~have bythe ~~100 basis points~~ability, ~~from 8.50 percent to 9.50 percent~~ by ~~year-end.~~voting ~~Management~~their ~~was~~shares ~~able to improve loan yields by 38 basis points~~ in ~~spite of intense local competition on loan pricing. Yields on the investment portfolio were also improved by 30 basis points through repricing and purchases at current market rates. However~~concert, ~~the~~to ~~margin~~significantly ~~was~~influence ~~negatively impacted by an increase in~~ the ~~overall~~outcome ~~cost~~ of ~~funds~~all ofmatters 84submitted ~~basis points for the year. Management resorted~~ to ~~higher~~our ~~balances~~shareholders infor ~~more costly borrowed funds to support strong loan growth~~approval, ~~and~~including ~~deposits~~the ~~repriced~~election ~~rapidly~~of ~~at higher market rates during the year~~directors.

~~Balances~~24 in average interest-earning assets rose by 26.8 percent in 2000 over 1999. Growth in higher yielding loan balances accounted for most of the increase. Average loan balances increased 28.6 percent and represented 77.1 percent of the average balance sheet in 2000, up from 75.1 percent of the average balance sheet in 1999. Investment securities, on the other hand, declined from 14.7 percent to 13.3 percent of the average balance sheet. The overall yield on average interest-earning assets, on a taxable equivalent basis, increased by 40 basis points from 8.82 percent in 1999 to 9.22 percent in 2000.

AtTable the same time, the overall average cost of interest-bearing liabilities has increased by 84 basis points, from 4.52 percent in 1999 to 5.36 percent in 2000. Most deposit rates increased in 2000 over 1999, due to increases in general market rates and strong competition for deposits. Average deposit balances also grew, increasing 18.8 percent in 2000 over 1999. This growth is attributed to aggressive marketing in a period of flux for area super regional competition, growing consumer business due to the convenience of a larger branch network, increases in business deposit relationships from larger commercial credit lines, and Fairfield cross-selling synergies. With the increased liquidity needs brought on by strong loan demand and the increased mortgage activity, average balances from other borrowing sources increased by $8.7 million in 1999 to $33.4 million in 2000. Rates paid on these borrowings increased as well, from 4.77 percent in 1999 to 6.48 percent in 2000.Contents

34Item 1B UNRESOLVED STAFF COMMENTS

~~Part~~None. II

Item 72 ~~(Continued)~~PROPERTIES

The ~~table~~Company, onthrough ~~this~~the ~~and~~Banks, ~~the~~owned ~~following~~20 ~~page~~full-service ~~summarizes~~banking ~~average~~locations ~~balance~~as ~~sheets~~of December 31, ~~interest~~2008. ~~and~~In ~~yield~~addition, ~~information~~the onBanks alease ~~taxable~~one ~~equivalent~~limited-service banking ~~basis~~location ~~for~~and ~~the~~operations ~~years~~centers ~~ended~~in ~~December~~each 31of Macon and Perry, ~~2001~~Georgia. The net book value of all facilities including furniture, ~~2000~~fixtures and equipment totaled $43.2 million as of December 31, 2008. Management considers our properties to be well maintained. For additional information regarding our premises and ~~1999~~equipment, see Note 8 of Notes to Consolidated Financial Statements beginning on page F-24 of Exhibit 13 to this Annual Report on Form 10-K.

TABLE 11
AVERAGE BALANCE SHEETS, INTEREST AND YIELDS
(Tax equivalent basis, in thousands)
	Year Ended December 31, 2001			Year Ended December 31, 2000				Year Ended December 31, 1999
	Average		Yield/	Average		Yield/		Average		Yield/
	Balance	Interest	Rate	Balance	Interest	Rate		Balance	Interest	Rate
ASSETS:
Loans, Net of Unearned Income (a) (b)
Taxable	$341,995	$29,721	8.69%	$244,177	$23,871	9.78%		$189,306	$17,826	9.42%
Tax Exempt (c)	0	0	0.00	0	0	0.00		0	0	0.00
Loans Held for Sale	17,878	1,134	6.34	2,365	177	7.47		2,462	168	6.83
Net Loans	359,873	30,855	8.57	246,542	24,048	9.75		191,768	17,994	9.38
Investment Securities (d)
Taxable	35,708	2,196	6.15	33,312	2,138	6.42		29,867	1,799	6.02
Tax Exempt (c)	7,846	582	7.41	9,116	689	7.55		7,640	586	7.67
Total Investment Securities	43,554	2,778	6.38	42,428	2,827	6.66		37,507	2,385	6.36
Interest Earning Deposits	972	30	3.10	967	28	2.91		20	5	23.67
Federal Funds Sold	2,845	144	5.05	6,031	371	6.15		4,204	218	5.19
Total Interest Earning Assets	407,244	$33,807	8.30%	295,968	$27,274	9.22%	%	233,499	$20,602	8.82%
Nonearning Assets	28,670			23,824				21,912
Total Assets	$435,914			$319,792				$255,411

Item 3

LEGAL PROCEEDINGS

35The Company and its subsidiaries are parties to various legal proceedings arising from the normal course of business. During the last several years, the Company has financed numerous residential real estate projects. Many of these loans have been sold, or participated, either in whole or in part to several different banks primarily in the state of Georgia. As the residential real estate market has experienced a growing depression and the local and national economies have suffered during 2008, the Company has experienced an increase in the number of ordinary course lawsuits that fall into two general categories:

~~Part~~1. IIParticipant Suits. These suits and assertions include: breach of obligations and duties under the participation agreement, specific performance, negligence/intentional breach of covenant of good faith and fair dealings, failure to manage the loan in accordance with that standard of care applicable to lending institutions. These suits have been filed in the Superior Court of Bibb County. The plaintiffs are asking that we buy back their loans and pay legal and other costs. The Company believes these suits have no merit, and we are vigorously defending them.

~~Item~~2. 7Borrower ~~(Continued)~~Counter-Claims. These suits and assertions include: fraudulent inducement, constructive fraud, negligent misrepresentation, and economic duress, breach of contract, promissory estoppel, and fraud in the inducement of contractual relationships. These suits have been filed in various state courts in Georgia and Florida. These suits have been brought by borrowers whose loans have become nonperforming and the Company is attempting to foreclose on the underlying collateral and/or enforce the borrowers’ guarantees. The Company believes these suits have no merit, and we are vigorously defending them.

TABLE 11 - Continued	Year Ended December 31, 2001						Year Ended December 31, 2000									Year Ended December 31, 1999
LIABILITIES AND STOCKHOLDERS' EQUITY
	Average			Yield/			Average			Yield/					Average
	Balance	Interest		Rate			Balance		Interest		Rate						Balance
Interest Bearing Demand Deposits	$ 30,338	$ 383		1.26%			$ 21,148		$ 262		1.24 %						$ 19,456
Money Market Accounts	35,167	1,085		3.09			33,332		1,402		4.21						32,151
Savings Deposits	7,207	87		1.21			6,444		112		1.74						6,465
Time Deposits of $100,000 or More	66,384	4,173		6.29			32,177		1,994		6.20						26,525
Other Time Deposits	139,805	8,031		5.74			118,115		7,178		6.08						93,182
Total Interest Bearing Deposits	278,901	13,759		4.93			211,216		10,948		5.18						177,779
Federal Funds Purchased and
Repurchase Agreements Sold	10,498	381		3.63			7,278		443		6.08						4,518
Demand Note U.S. Treasury	972	28		2.83			849		41		4.84						676
Other Borrowed Money and FHLB	52,270	2,407		4.61			25,158		1,660		6.60						3,340
Capital Leases and Mortgage Debt	50	11		22.28			105		19		17.89						159
Total Interest Bearing Liabilities	342,691	16,586		4.84			244,606		13,111		5.36						186,472
Noninterest Bearing Demand Deposits	55,960						45,518										39,414
Other Liabilities	3,982						698										2,663
Stockholders' Equity	33,281						28,969										26,862
Total Liabilities and Stockholders' Equity	$435,914						$319,791										$255,411
Interest Rate Spread					3.46%							3.86%
Net Interest Income			$17,221					$14,163						$12,174
Net Interest Margin						4.23%							4.79%
Notes to Table of Average Balance Sheets, Interest and Yields
(a) Interest income includes loan fees as follows (in thousands): 2001-$1,307; 2000-$1,045; 1999-$908.
(b) Average loans are shown net of unearned income. Nonaccrual loans are included.
(c) Reflects taxable equivalent adjustments using the statutory income tax rate of 34% in adjusting interest on tax-exempt investment securities to a fully taxable basis. The taxable equivalent adjustment included above amounts to $198 for 2001, $234 for 2000, and $199 for 1999 (in thousands)
(d) Investment securities are stated at amortized or accreted cost.

It is possible that an unfavorable resolution of one or more of such litigation proceedings could in the future materially affect our liquidity, consolidated financial position and/or results of operations.

36Item 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

~~Part~~The IICompany held a Special Meeting of Shareholders on December 23, 2008. At the special meeting, the following matters were submitted to a vote:

Item 7 (Continued)


	For	Against	Abstain	Broker Non-Vote
Proposal I—Approval of a proposed amendment to our Amended and Restated Articles of Incorporation to authorize the issuance of up to two million shares of preferred stock	17,330,415	374,805	45,484	3,862,694

Proposal II—Approval of a proposed amendment to our Amended and Restated Articles of Incorporation to increase the number of authorized shares of voting Common Stock from 50 million to 80 million	20,774,837	721,186	117,375	—

~~The~~25 following tables provide a detailed analysis of the changes in interest income and interest expense due to changes in rate and volume for the year 2001 compared to the year 2000 and for the year 2000 compared to the year 1999.

TABLE 12
RATE / VOLUME ANALYSIS
(In thousands)	For the Years Ended December 31
	2001 Compared to 2000			2000 Compared to 1999
	Change Due To (a)			Change Due To (a)
			Net			Net
	Volume	Rate	Change	Volume	Rate	Change
INTEREST EARNED ON
Taxable Loans, Net	$9,563	$(3,714)	$5,849	$5,167	$ 879	$6,046
Tax-Exempt Loans (b)	0	0	0	0	0	0
Loans Held for Sale	1,158	(201)	957	(7)	15	8
Taxable Investment Securities	154	(96)	58	207	132	339
Tax-Exempt Investment Securities (b)	(96)	(11)	(107)	113	(10)	103
Interest-Earning Deposits	0	2	2	224	(201)	23
Federal-Funds Sold	(196)	(31)	(227)	95	58	153
Total Interest Income	10,583	(4,051)	6,532	5,799	873	6,672
INTEREST PAID ON
Interest-Bearing Demand Deposits	114	7	121	18	43	61
Money Market Accounts	77	(394)	(317)	43	184	227
Savings Deposits	13	(38)	(25)	0	(11)	(11)
Time Deposits of $100,000 or More	2,120	59	2,179	318	186	504
Other Time Deposits	1,318	(465)	853	1,344	812	2,156
Federal Funds Purchased
and Repurchase Agreements Sold	196	(258)	(62)	130	100	230
Demand Note U.S. Treasury	6	(19)	(13)	5	15	20
Other Borrowed Money-FHLB	1,789	(1,042)	747	1,091	402	1,493
Capital Leases and Mortgage Debt	(10)	2	(8)	(5)	10	5
Total Interest Expense	5,623	(2,148)	3,475	2,944	1,741	4,685
Net Interest Income	$4,960	($1,903)	$3,057	$2,855	($868)	$1,987
(a) The change in interest due to both rate and volume has been allocated to the rate component.
(b) Reflects taxable equivalent adjustments using the statutory federal income tax rate of 34% in adjusting interest on
tax-exempt investment securities to a fully taxable basis.

37Part II

~~Part~~Item II5 MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

~~Item~~As 7of ~~(Continued)~~February 19, 2009, we had approximately 1,523 shareholders of record plus approximately 4,275 shareholders listed in “street name.” Our common stock is quoted on the Nasdaq Global Select Market under the symbol “SBKC.”

~~Interest~~The ~~Rate~~following ~~Risk~~table ~~Management~~sets forth the high and low sale prices and closing prices per share of common stock as reported on the Nasdaq Global Select Market, and the dividends declared per share for the periods indicated.

The management of interest rate risk is the primary goal of SNB's asset/liability management function. SNB attempts to achieve consistent growth in net interest income while limiting volatility from changes in interest rates. Management seeks to accomplish this goal by balancing the maturity and repricing characteristics of various assets and liabilities. SNB's asset/ liability mix is sufficiently balanced so that the effect on net interest income of interest rate moves in either direction is not expected to be significant over time.


Year Ended December 31, 2008	High		Low		Close		Dividend Per Share⁽¹⁾
Fourth Quarter	$	4.30	$	0.97	$	1.05	$	—
Third Quarter	$	6.92	$	2.39	$	4.15	$	—
Second Quarter	$	8.75	$	2.67	$	5.86	$	0.044
First Quarter	$	9.23	$	6.21	$	7.95	$	0.088

Year Ended December 31, 2007	High		Low		Close		Dividend Per Share
Fourth Quarter	$	13.51	$	9.01	$	9.14	$	0.088
Third Quarter	$	20.21	$	12.25	$	12.52	$	0.088
Second Quarter	$	21.65	$	18.36	$	20.10	$	0.088
First Quarter	$	23.25	$	19.00	$	20.14	$	0.088

~~The~~(1) ~~year~~For ~~2001~~a ~~saw~~discussion ~~one~~on ofdividend ~~the most unique interest rate environments in history. During this period of recessionary pressures and rapidly falling interest rates~~restrictions, ~~management~~see ~~had~~Item ~~to adapt its strategies for growth~~1, ~~pricing~~“Business—Supervision and ~~funding~~Bank ~~to minimize the negative impact on the net interest margin~~Regulation. As loan balances repriced to the new rates, funding sources (deposits and borrowings) had to be structured to reprice in like fashion. Core deposit balances had to be supplemented with other noncore borrowing sources. The Company experienced net interest margin compression, as did many community-banking companies across the nation.”

~~One~~The ~~tool~~Company ~~used~~did bynot ~~SNB~~purchase toany ~~measure~~shares of its ~~interest~~common ~~rate~~stock ~~sensitivity~~during ~~is a cumulative gap analysis model that seeks to measure~~ the quarter ~~repricing~~ended differentials, or gap, between rate sensitive assets and liabilities over various time horizons. Additionally, simulation modeling is used to estimate the impact on net interest income of overall repricing at various levels of increase or decrease in current market interest rates over a range of plus or minus 300 basis points over a 12-month shift horizon. At December 31, ~~2001,~~2008 ~~the~~and ~~Company~~there ~~estimates through simulation modeling that net interest income would increase by $2,682,928 if interest rates increased by 300 basis points. This improvement would~~ have ~~amounted~~been tono ~~15.8~~recent ~~percent~~sales of ~~the~~unregistered ~~Company's net interest income in 2001~~securities. InFor ~~the case of~~ a ~~300~~discussion ~~basis~~on ~~point~~securities ~~decline~~issued inunder ~~interest~~equity ~~rates~~compensation plans, ~~net~~see ~~interest income would increase by $1~~Item 12,~~637,506,~~ ~~which~~“Security ~~would~~Ownership ~~have~~of ~~produced~~Certain aBeneficial ~~9.6~~Owners ~~percent~~and Management ~~improvement~~and inRelated ~~2001~~Stockholder ~~net interest income~~Matters.”

~~The~~26 following table reflects the gap positions of SNB's consolidated balance sheet as of December 31, 2001 and 2000 at various repricing intervals. This gap analysis indicates that SNB's repricing abilities showed liability sensitivity over a one-year time horizon at December 31, 2001 and December 31, 2000, with negative cumulative one-year gaps of (10.2 percent) at 2001 year-end and (23.0 percent) at 2000 year-end. The Company's cumulative rate sensitive assets as a percentage of cumulative rate sensitive liabilities over a one-year time horizon were 82.7 percent at December 31, 2001, and 66.4 percent at December 31, 2000. The projected deposit repricing volumes reflect adjustments based on management's assumptions of the expected rate sensitivity to current market rates for core deposits without contractual maturity (i.e., interest bearing checking, savings and money market accounts). Adjustments are also made for callable investment securities in the bond portfolio to place these bonds in call date categories. Management believes that these adjustments allow for a more accurate profile of SNB's interest rate risk position. Management is of the opinion that the current degree of interest rate risk is acceptable in the current interest rate environment.

38Table of Contents

~~Part~~Stock IIPerformance Graph

~~Item~~Set 7forth ~~(Continued)~~below is a line graph comparing the percentage change in the cumulative shareholder return on our common stock with the cumulative Nasdaq Total Return Index and the SNL Southeast Bank Index. The graph assumes $100 invested on December 31, 2003 in our common stock and the reinvestment of dividends compared to $100 invested in each of the two indexes.

TABLE 13
INTEREST RATE SENSITIVITY
(In Thousands)	December 31, 2001
		Over 3	Over 1 year
	0 up to 3	up to 12	up to	Over 5
Amounts Maturing or Repricing	months	months	5 years	years
Investment Securities (a)	$ 10,087	$ 2,974	$ 17,146	$19,917
Loans, Net of Unearned Income (b)	81,637	133,706	171,358	29,672
Other Earning Assets	1	0	0	0
Interest-Sensitive Assets	91,725	136,680	188,504	49,589
Deposits	134,829	87,789	81,239	0
Other Borrowings	12,562	40,856	27,000	10,000
Interest-Sensitive Liabilities	147,391	128,645	108,239	10,000
Interest-Sensitivity Gap	$(55,666)	$8,035	$80,265	$39,589
Cumulative Interest-Sensitivity Gap	$(55,666)	$ (47,631)	$32,634	$72,223
Cumulative Interest Sensitivity Gap as a Percentage
of Total Interest-Sensitive Assets	(11.9%)	(10.2%)	7.0%	15.5%
Cumulative Interest-Sensitive Assets as a Percentage
of Cumulative Interest-Sensitive Liabilities	62.2%	82.7%	108.5%	118.3%
	December 31, 2000
Amounts Maturing or Repricing
Investment Securities (a)	$ 7,886	$ 2,415	$ 18,027	$ 22,874
Loans, Net of Unearned Income (b)	57,304	97,491	131,519	30,767
Other Earning Assets	4,431	0	0	0
Interest-Sensitive Assets	69,621	99,906	149,546	53,641
Deposits	77,147	127,562	41,387	0
Other Borrowings	32,679	18,000	5,000	8,378
Interest-Sensitive Liabilities	109,826	145,562	46,387	8,378
Interest-Sensitivity Gap	($40,205)	($45,656)	$103,159	$45,263
Cumulative Interest-Sensitivity Gap	($40,205)	($85,861)	$ 17,298	$62,561
Cumulative Interest-Sensitivity Gap as a Percentage
of Total Interest-Sensitive Assets	(10.8%)	(23.0%)	4.6%	16.8%
Cumulative Interest-Sensitive Assets as a Percentage
of Cumulative Interest-Sensitive Liabilities	63.4%	66.4%	105.7%	120.2%
(a) Excludes the effect of SFAS No. 115 Accounting for Certain Investments in Debt and Equity Securities, consisting
of a net unrealized gain of $1,015 in 2001 and a net unrealized loss of $27 in 2001.
(b) Includes loans held for sale. Nonaccrual loans are excluded.

The following performance graph and related information shall not be deemed “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filings under the Securities Act or the Exchange Act, except to the extent we specifically incorporate it by reference into such filing.

LOGO


	Period Ending
Index	12/31/03	12/31/04	12/31/05	12/31/06	12/31/07	12/31/08
Security Bank Corporation	100.00	128.60	151.48	150.38	61.69	7.23
NASDAQ Composite	100.00	108.59	110.08	120.56	132.39	78.72
SNL Southeast Bank Index	100.00	118.59	121.39	142.34	107.23	43.41

~~Part~~27 II

ItemTable 7of (Continued)Contents

~~Provision~~Item ~~for~~6 ~~Loan~~SELECTED ~~Losses~~FINANCIAL DATA

~~The~~Our ~~general~~selected ~~nature~~consolidated offinancial ~~lending~~data ~~results~~presented inbelow ~~periodic~~as ~~charge~~of ~~offs,~~and infor ~~spite~~the ofyears ~~SNB's~~ended ~~continuous~~December 31, ~~loan~~2004 ~~review~~through ~~process~~December 31, ~~credit~~2008 ~~standards,~~is ~~and~~derived from ~~internal~~our ~~controls.~~audited ~~During~~consolidated ~~2001~~financial statements, ~~The~~which ~~Company~~are ~~also~~included ~~factored~~elsewhere in ~~assessments~~this ofAnnual ~~the~~Report ~~economic~~on ~~downturn's~~Form ~~effect~~10-K. onIn the ~~cash~~opinion ~~flow~~ of ~~some~~management, ofall ~~its~~adjustments ~~borrowers.~~(consisting ~~Amounts~~only of ~~net~~normal ~~loans~~recurring ~~charged~~accruals) ~~off~~that ~~during~~are ~~2001~~necessary ~~and~~for ~~2000,~~a ~~although~~fair presentation ~~higher~~for ~~than~~such ~~the~~periods ~~Company's~~or ~~recent~~dates ~~history,~~have ~~are~~been ~~reasonable by industry standards~~made. ~~SNB~~See ~~incurred net charge offs of $815~~Item 7,~~725~~ ~~during~~“Management’s ~~2001,~~Discussion ~~compared to $616,650 during 2000~~ and ~~$479,198~~Analysis inof ~~1999.~~Financial ~~SNB~~Condition ~~expensed $1,911,929 in 2001, $1,292,006 in 2000,~~ and ~~$736,125~~Results inof ~~1999~~Operations” for ~~loan~~a ~~loss~~full ~~provisions.~~discussion ~~The reserve for loan losses on December 31, 2001 stood at 0.98%~~ of ~~outstanding~~comparability ~~net~~between ~~loans and loans held for sale, compared to 0~~periods.~~94%~~ ~~and 1.12% at December 31, 2000 and 1999.~~

The provision for loan losses represents management's determination of the amount necessary to be transferred to the reserve for loan losses to maintain a level that it considers adequate in relation to the risk of future losses inherent in the loan portfolio. It is the policy of SNB's subsidiary banks to provide for exposure to losses principally through an ongoing loan review process. This review process is undertaken to ascertain any probable losses that must be charged off and to assess the risk characteristics of individually significant loans and of the portfolio in the aggregate. This review takes into consideration the judgments of the responsible lending officers and the Loan Committees of the Banks' Boards of Directors, and also those of the regulatory agencies that review the loans as part of their regular examination process. During routine examinations of Banks, the primary banking regulators may, from time to time, require additions to Banks' provisions for loan losses and reserves for loan losses if the regulators' credit evaluations differ from those of management.


	At or For the Year Ended December 31,
	2008			2007			2006			2005			2004
	(Dollars in thousands, except per share amounts)
Selected Balance Sheet Data:
Assets	$	2,846,054		$	2,833,071		$	2,494,071		$	1,662,413		$	1,063,485
Investment securities		407,343			305,399			229,940			150,986			111,412
Loans held for sale		—			7,605			8,878			5,562			7,507
Loans receivable, net of unearned income		1,981,476			2,182,313			1,901,101			1,272,119			845,765
Allowance for loan losses		59,437			31,698			22,336			16,148			10,903
Goodwill and other intangible assets, net		3,241			132,696			133,094			79,269			29,164
Deposits		2,438,136			2,298,705			1,970,927			1,291,253			842,558
Borrowings and repurchase agreements		259,383			165,088			134,367			130,903			88,947
Subordinated debentures		41,238			41,238			41,238			41,238			18,557
Shareholders’ equity		84,708			306,693			306,407			179,305			106,671

Selected Results of Operations Data:
Interest income		145,948			192,840			148,082			78,192			53,926
Interest expense		98,526			102,316			68,647			27,839			14,373
Net interest income		47,422			90,524			79,435			50,353			39,553
Provision for loan losses		128,070			32,660			4,469			2,833			2,819
Net interest income (loss) after provision for loan losses		(80,648	)		57,864			74,966			47,520			36,734
Noninterest income		18,635			18,981			17,955			16,591			14,654
Noninterest expenses		201,088			67,074			55,651			38,616			32,129
Income (Loss) before income taxes		(263,101	)		9,771			37,270			25,495			19,259
Income taxes		(8,735	)		3,183			13,878			9,310			6,940
Net income (Loss)		(254,366	)		6,588			23,392			16,185			12,319

Per Share Data:
Earnings (Loss):
Basic		(11.36	)		0.35			1.36			1.31			1.10
Diluted		(11.36	)		0.34			1.33			1.27			1.07
Dividends		0.13			0.35			0.30			0.26			0.22
Tangible book value	$	3.55		$	9.28		$	8.96		$	7.03		$	6.68
Weighted average shares outstanding:
Basic		22,387,908			19,081,636			17,222,139			12,393,980			11,156,372
Diluted		22,387,908			19,225,069			17,564,990			12,736,545			11,482,830

Performance Ratios:
Return on average assets		-9.27	%		0.25	%		1.15	%		1.31	%		1.27	%
Return on average equity		-221.38	%		2.10	%		9.28	%		12.80	%		13.04	%
Net interest margin ^{(1) (6)}		1.81	%		3.88	%		4.40	%		4.46	%		4.45	%
Interest rate spread ^{(2) (6)}		1.55	%		3.36	%		3.87	%		4.07	%		4.18	%
Efficiency ratio ^{(3) (6)}		303.98	%		61.00	%		56.90	%		57.41	%		58.87	%
Average interest-earning assets to average interest-bearing liabilities		107.09	%		111.85	%		114.05	%		115.84	%		117.08	%
Average loans receivable to average deposits		89.55	%		98.53	%		98.78	%		99.60	%		99.32	%

In28 addition to ongoing internal loan reviews and risk assessment, management uses other factors to judge the adequacy of the reserve including current economic conditions, loan loss experience, regulatory guidelines and current levels of nonperforming loans. Management believes that the $4,098,740 balance in the reserve for loan losses at December 31, 2001, and the $3,002,536 balance in the reserve for loan losses at December 31, 2000 were adequate to absorb known risks in the loan portfolio at those dates. No assurance can be given, however, that adverse economic conditions or other circumstances will not result in increased losses in the Company's loan portfolio.

InTable accordance with SFAS No. 114, Accounting by Creditors for Impairment of a Loan, management, considering current information and events regarding the borrowers' ability to repay their obligations, considers a loan to be impaired when the ultimate collectibility of all amounts due, according to the contractual terms of the loan agreement, is in doubt. When a loan becomes impaired, management calculates the impairment based on the present value of expected future cash flows discounted at the loan's effective interest rate. If the loan is collateral dependent, the fair value of the collateral is used to measure the amount of impairment. The amount of impairment and any subsequent changes are recorded, through a charge to earnings, as an adjustment to the reserve for loan losses. When management considers a loan, or a portion thereof, as uncollectible, it is charged against the reserve for loan losses.Contents

The following tables summarize loans charged off, recoveries of loans previously charged off and additions to the reserve that have been charged to operating expense for the periods indicated. The Company has no lease financing or foreign loans.


	At or For the Year Ended December 31,
	2008		2007		2006		2005		2004
	(Dollars in thousands, except per share amounts)
Asset Quality Ratios:
Nonperforming loans to loans receivable ⁽⁴⁾	11.74	%	2.33	%	1.81	%	0.55	%	0.73	%
Nonperforming assets to total assets ⁽⁵⁾	11.50	%	2.79	%	1.49	%	0.56	%	0.77	%
Net charge-offs to average loans	4.73	%	1.12	%	0.15	%	0.12	%	0.17	%
Allowance for loan losses to nonperforming loans	25.56	%	62.30	%	64.93	%	230.78	%	175.46	%
Allowance for loan losses to loans receivable	3.00	%	1.45	%	1.18	%	1.27	%	1.29	%

Capital Ratios:
Average equity to average assets	4.19	%	12.10	%	12.42	%	10.21	%	9.72	%
Leverage ratio	3.72	%	8.03	%	9.70	%	9.72	%	9.58	%
Tier 1 risk-based capital ratio	5.14	%	8.75	%	10.51	%	10.12	%	10.27	%
Total risk-based capital ratio	8.60	%	9.97	%	11.59	%	11.27	%	11.40	%

40(1) Net interest income divided by average interest-earning assets.

~~Part~~(2) IIYield on interest-earning assets less cost of interest-bearing liabilities.

~~Item 7~~ (~~Continued~~3) Noninterest expenses divided by net interest income and noninterest income.

TABLE 14
RESERVE FOR LOAN LOSSES		Years Ended December 31
(In Thousands)	2001	2000	1999	1998	1997
Reserve for Loan Losses at
Beginning of Period	$3,003	$2,327	$2,070	$1,861	$1,759
Loans Charged Off During the Period
Commercial, Financial and Agricultural	299	109	131	35	295
Real Estate-Construction	0	0	0	58	0
Real Estate-Mortgage	119	0	25	200	150
Loans to Individuals	457	576	431	204	243
Total Loans Charged Off	875	685	587	497	688
Recoveries During the Period of Loans
Previously Charged Off
Commercial, Financial and Agricultural	13	2	49	36	205
Real Estate-Construction	0	0	0	0	0
Real Estate-Mortgage	0	0	5	3	9
Loans to Individuals	46	67	54	31	71
Total Loans Recovered	59	69	108	70	285
Net Loans Charged Off During the Period	816	616	479	427	403
Additions to Reserve-Provision Expense	1,912	1,292	736	636	505
Reserve for Loan Losses at End of Period	$4,099	$3,003	$2,327	$2,070	$1,861
Reserve for Loan Losses to Period End Net Loans	0.98%	0.94%	1.12%	1.16%	1.28%
Ratio of Net Loans Charged Off During the Period to
Average Net Loans Outstanding During the Period	0.23%	0.25%	0.25%	0.27%	0.30%

(4)	Nonperforming loans include nonaccrual loans and loans past due 90 days or more and still accruing interest.

An(5) ~~allocation~~Nonperforming ofassets the reserve for loan losses has been made according to the respective amounts deemed necessary to provide for the possibility of incurred losses within the various loan categories. The allocation is based primarily on previous charge-off experience adjusted for risk characteristic changes among each category. Additional reserve amounts are ~~allocated~~nonperforming ~~by evaluating the loss potential of individual~~ loans ~~that~~plus ~~management~~other ~~has~~real ~~considered impaired~~estate. The reserve for loan loss allocation is based on subjective judgment and estimates, and therefore is not necessarily indicative of the specific amounts or loan categories in which charge-offs may ultimately occur. The following table shows a five-year comparison of the allocation of the reserve for loan losses.

41(6) Calculated on a fully tax-equivalent basis.

~~Part~~29 II

ItemTable 7of (Continued)Contents

TABLE 15
ALLOCATION OF RESERVE FOR LOAN LOSSES
(In Thousands)
					December 31
	2001		2000		1999		1998		1997
Balance at End of Period	Reserve	% *	Reserve	% *	Reserve	% *	Reserve	% *	Reserve	% *
Applicable To
Commercial, Financial
and Agricultural	$ 689	11%	$ 495	14%	$ 332	21%	$ 279	21%	$ 265	24%
Real Estate-Construction	623	32%	315	20%	157	8%	124	10%	98	5%
Real Estate-Mortgage	1,312	52%	901	59%	733	63%	776	59%	726	61%
Loans to Individuals	656	5%	541	7%	524	8%	373	10%	307	10%
Unallocated	820	-	751	-	581	-	518	-	465	-
Total Reserve for Loan Losses	$4,099	100%	$3,003	100%	$2,327	100%	$2,070	100%	$1,861	100%
* Loan balance in each category expressed as a percentage of total end of period loans.

Item 7

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~Asset~~The ~~Quality~~following discussion reviews our financial condition and results of operations and contains forward-looking statements that are subject to known and unknown risks, uncertainties and other factors that may cause the Company’s actual results to differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include those discussed in Item 1A, “Risk Factors” and elsewhere in this Annual Report on Form 10-K. You should read the following discussion and analysis of our financial condition and results of operations in conjunction with “Selected Financial Data” and our Consolidated Financial Statements and the related notes included elsewhere in this Annual Report on Form 10-K.

~~Nonperforming~~Overview ~~assets consist~~ of ~~nonaccrual~~Significant ~~loans,~~Developments loans restructured due to debtors' financial difficulties, loans past due 90 days or more as to interest or principal and still accruing, and real estate acquired through foreclosure and repossession. Nonaccrual loans are those loans on which recognition of interest income has been discontinued. Restructured loans generally allow for an extension of the original repayment period or a reduction or deferral of interest or principal because of deterioration in the financial position of the borrower. Loans, whether secured or unsecured, are generally placed on nonaccrual status when principal and/or interest is 90 days or more past due, or sooner if it is known or expected that the collection of all principal and/or interest is unlikely. Any loan past due 90 days or more, if not classified as nonaccrual based on a determination of collectibility, is classified as a past due loan. Other real estate is initially recorded at the lower of cost or estimated market value at the date of acquisition. A provision for estimated losses is recorded when a subsequent decline in value occurs.

~~Nonperforming~~Security ~~assets~~Bank atCorporation ~~December~~was 31incorporated on February 10, ~~2001~~1994 ~~amounted~~for the purpose of becoming a bank holding company. We are subject to $5extensive federal and state banking laws and regulations,~~933~~ including the Bank Holding Company Act of 1956,~~000~~ as amended, orand ~~1.2~~the ~~percent~~bank ofholding ~~total~~company ~~assets~~laws of Georgia. ~~This~~We ~~compares~~own tosix state-chartered $2subsidiary banks—Security Bank of Bibb County,~~202,000~~ inSecurity ~~nonperforming~~Bank ~~assets~~of atHouston ~~December~~County, 31Security Bank of Jones County, ~~2000~~Security Bank of North Metro, ~~which~~Security ~~represented~~Bank ~~0.54~~of ~~percent~~North Fulton and Security Bank of ~~total~~Gwinnett ~~assets~~County. ~~Nonperforming~~We ~~assets~~also atown ~~December~~SRES, which 31functions as an operating subsidiary of Security Bank of Bibb County, ~~1999~~and ~~were~~Security $1Interim Holding Corporation (Security Interim),~~431,000,~~ orwhich ~~0.50~~does ~~percent~~not have any operations but directly owns the stock of ~~total~~each ~~assets~~of our Banks. Our subsidiaries are also subject to various federal and state banking laws and regulations.

42The condition of the residential real estate marketplace and the U.S. economy in 2007 and 2008 has had a significant impact on the financial services industry as a whole, and specifically on the financial results of the Company. Beginning with a pronounced downturn in the residential real estate market in early 2007 that was led by problems in the sub-prime mortgage market, the deterioration of residential real estate values and higher delinquencies and charge-offs of loans continued throughout 2008 and into 2009. The drop in real estate values negatively impacted residential real estate builder and developer businesses. With the U.S. economy in recession in 2008, financial institutions were facing higher credit losses from distressed real estate values and borrower defaults, resulting in reduced capital levels. In addition, investment securities backed by residential and commercial real estate were reflecting substantial unrealized losses due to a lack of liquidity in the financial markets and anticipated credit losses. Some financial institutions were forced into liquidation or were merged with stronger institutions as losses increased and the amounts of available funding and capital levels lessened. Fannie Mae and Freddie Mac, two government-sponsored entities, were placed in conservatorship in September 2008 by the U.S. Government. The Federal Reserve also lowered its federal funds target rate in the fourth quarter of 2008 three times, from 2.00% at the beginning of the quarter to a range of 0% – .25% at December 31, 2008.

Our federal government has taken unprecedented actions to intervene in our nation’s capital and credit markets. In the third quarter of 2008, the Federal Reserve, the U.S. Department of Treasury (the Treasury) and the FDIC initiated measures to stabilize the financial markets and to provide liquidity for financial institutions. The EESA was signed into law on October 3, 2008 and authorizes the Treasury to provide funds to be used to restore liquidity and stability to the U.S. financial system. Under the authority of the EESA, the Treasury instituted a voluntary capital purchase program to encourage U.S. financial institutions to build capital to increase the flow of financing to U.S. businesses and consumers and to support the U.S. economy. On February 17, 2009, President Obama signed into law the ARRA, more commonly known as the economic stimulus or economic recovery package. The ARRA includes a wide variety of programs intended to stimulate the economy and provide for extensive infrastructure, energy, health and education needs. In addition, the ARRA imposes certain new executive compensation and corporate expenditure limits on all current and future recipients of investments under the Treasury’s Troubled Asset Relief Program under the EESA that are in addition to those previously announced by the Treasury, until the institution has repaid the Treasury.

Following a systemic risk determination pursuant to the Federal Deposit Insurance Act, the FDIC announced a Temporary Liquidity Guarantee Program (TLGP), which temporarily guarantees the senior debt of all FDIC-insured institutions and certain holding companies, as well as deposits in noninterest-bearing deposit transaction accounts, for those institutions and holding companies who did not elect to opt out of the TLGP by December 5, 2008. The Company chose to continue its participation in the TLGP and, thus, did not opt out. To further increase access to funding for businesses in all sectors of the economy, the Federal Reserve announced a Commercial Paper Funding Facility (CPFF) program, which provides a broad backstop for the commercial paper market. Beginning October 27, 2008, the CPFF began funding purchases of commercial paper of three-month maturity from high-quality issuers.

Summary of Financial Results

The following is a summary of our 2008 financial performance:

•

Loans receivable, net of unearned income, decreased 9% to $1.98 billion versus $2.18 billion at December 31, 2007. We experienced slower loan growth in all of our markets, although it was more pronounced in metropolitan Atlanta.

•

Provision for loan losses increased $95.4 million to $128.1 million, and exceeded net charge offs by $27.7 million.

•

Net charge-offs to average loans were 4.73%, up 361 basis points from 2007. Nonperforming assets increased $248.2 million to $327.3 million primarily due to the downturn in the residential real estate market in the metropolitan Atlanta area, and in certain of SRES’s markets including Florida.

•

Net interest income, calculated on a fully tax-equivalent basis, decreased $43.5 million, or 48% with net interest margin down 207 basis points to 1.81%, reflecting credit related costs associated with higher levels of nonperforming assets and the impact of interest rate reductions by the Federal Reserve.

•

Noninterest income decreased $0.3 million to $18.6 million and noninterest expense increased $134.0 million, the largest components of which was goodwill impairment of $128.1 million and increased costs associated with foreclosed properties and loss on sales of OREO.

•

Total deposits were approximately $2.44 billion, an increase of approximately 6% from $2.30 billion at December 31, 2007. Total assets increased slightly to approximately $2.85 billion, compared to approximately $2.83 billion at December 31, 2007.

•

Shareholders’ equity decreased significantly by $222.0 million to $84.7 million compared to December 31, 2007 as a result of a net loss of $254.4 million offset by $28.1 million raised from the rights offering of common stock.

Capital Plan Initiatives

In early 2008, we implemented a strategic plan which focused on three primary issues: strengthen and preserve capital, manage liquidity proactively, and reduce controllable expenses. We believed such a plan was necessary in light of the continuing and substantial deterioration of the residential real estate markets nationally and in our local market that has resulted in increasingly higher levels of nonperforming assets, higher provisions for loan losses and increased credit cycle associated expenses.

Rights Offering

On February 11, 2008, we distributed non-transferable rights to subscribe for and purchase up to 5,319,148 shares of our common stock to our then-current shareholders. In the offering, each shareholder received a right to purchase 0.28121 shares of common stock, at a subscription price of $6.58 per share, for each share owned on the

record date. Shareholders who exercised their full basic subscription right were also able to exercise an oversubscription right enabling such shareholder to purchase shares remaining after the exercise of all other shareholders’ basic subscription rights. In conjunction with the rights offering we entered into a standby purchase agreement with two shareholders, one of whom is a director of the Company and one of whom is a director of a Bank, pursuant to which these shareholders agreed to purchase up to $18 million of common stock remaining after the exercise of shareholders’ basic and oversubscription rights. This aggregate amount included all of the shares purchasable by these two individuals in connection with their basic subscription privileges along with their standby commitment. The offering closed on March 10, 2008, and we raised approximately $28.1 million.

Subordinated Notes

On April 28, 2008, we entered into a Subordinated Note and Securities Purchase Agreement by and among the Company, SBKC Interim, and private equity funds managed by FSI Group, LLC (the Purchasers), pursuant to which we sold $40 million of subordinated notes (the Notes). The Notes were sold to the Purchasers in a private offering, bear an interest rate of 9.5%, are callable after five years at a premium and mature in 2018. The subordinated debt has been structured to qualify as Tier 2 regulatory capital on a consolidated basis.

In connection with the issuance and sale of the Notes by SBKC Interim, the Company issued to the Purchasers immediately exercisable warrants to purchase 2,552,717 shares of the Company’s voting common stock at an exercise price of $6.58 per share, subject to certain adjustments (the voting warrants). The Company also issued to the Purchasers 3,526,310 stock appreciation rights (SARs) that entitle the holders, upon exercise, to receive a cash payment from the Company in an amount equal to the number of SARs outstanding multiplied by the excess of the Company’s common stock price above the exercise price of $6.58 per share, subject to certain adjustments. On June 26, 2008, at a Special Shareholders’ Meeting, our shareholders approved two proposals: (1) an amendment to the Amended and Restated Articles of Incorporation authorizing nonvoting common stock and (2) the exchange of the SARs on a one-for-one basis for nonvoting warrants, which are exercisable for nonvoting common stock. On June 27, 2008, we completed the exchange of the SARs for the nonvoting warrants, which may be exercised at a price of $5.92 per share, subject to certain adjustments, to purchase 3,526,310 shares of nonvoting common stock. In addition, the nonvoting common stock is convertible into shares of voting common stock under certain limited circumstances.

We used a portion of the proceeds from the Notes to pay off and terminate the Company lines of credit. We used the remainder of the proceeds for general corporate purposes, which included infusing additional capital in our Banks.

The Purchasers have been granted certain registration rights with respect to any common stock of the Company issued or issuable to the Purchasers in respect of their holdings of voting warrants, nonvoting warrants or nonvoting common stock, which is set forth in a Registration Agreement between the Company and the Purchasers.

Capital Conservation Initiatives

During the third quarter of 2008 we suspended our quarterly cash dividend, after having reduced it 50% the previous quarter, for total annual savings of $4 million. We have also proactively reduced our loan portfolio by $200.8 million in 2008 through a decrease in originations, charge-offs and loan sales.

Recent Events

As a result of these unprecedented and difficult times, the regulatory capital level of our Banks has decreased significantly and our sources of funding have diminished. Currently, the Company is making all efforts to retain and increase its capital ratios and liquidity. As part of those efforts, in the first quarter of 2009, we exercised our rights under all three of our trust preferred securities agreements to extend the interest payment

periods and therefore will not make the payments due for the first payment periods of 2009. We presently anticipate that we will exercise this right on the remaining interest payments in 2009 as well. In February 2009, the Company notified the affiliates of the FSI Group, LLC that it would defer the March 31, 2009 interest payment on the Notes issued in April 2008. The deferred interest will be added to the principal balance and future interest payments will be calculated on the increased principal balance.

Also, the Company has retained the services of investment bankers to review all strategic opportunities available to the Company and the Banks. As part of such plan of action, in January 2009, the Company applied to the FDIC and the Georgia Department to consolidate its six banking charters into a single banking charter. If approved, the Company expects the consolidation to be completed during the second quarter of 2009. If the consolidation is allowed, the resulting Bank is expected to be adequately capitalized and could apply to the FDIC for a waiver to accept, renew and rollover brokered deposits. We cannot predict whether such approvals will be granted, and if both the consolidation and waiver are not approved by the FDIC, then we will not be able to rely upon brokered deposits as a funding source for four of our Banks.

In January 2009, we completed a preliminary analysis of our deferred taxes as of December 31, 2008, which indicated a possible impairment in the range of zero to $18.0 million. At the time of this preliminary analysis, we were exploring and analyzing several capital initiatives including raising capital in various scenarios and reducing assets. Also at this time, the Economic Stimulus Package being debated in the U.S. Congress contained a provision to extend the carryback period for net operating losses from two years to five years. This would have resulted in our entire net operating loss for 2008 being carried back to offset and recover income taxes previously paid. The final version of the stimulus package signed by President Obama restricted the change in carryback period to those companies with less than $15 million in annual revenue. In the ensuing weeks we were not successful in raising any additional capital. Therefore, given our current circumstances, we could not obtain enough positive evidence that we would generate sufficient taxable income in the future to offset the combination of our net operating loss carryforward and our temporary differences that result in income tax deductions. Therefore, we recorded a valuation allowance of $45.9 million on our gross deferred tax assets as of December 31, 2008.

Liquidity Plan

Late in 2007, we believed it was prudent to significantly enhance our liquidity monitoring and resources. We created a new Liquidity Contingency Plan that included the formation of a Liquidity Task Force. This group meets weekly to review a series of reports related to liquidity-related issues such as forecasted sources and uses of funds, loan pipelines, deposit pricing and deposit and borrowing maturities, among others.

We also restructured our investment portfolio to include more securities of a lower risk weighting by selling certain securities with higher risk weightings. The Company’s investment portfolio provides a ready means to raise cash if liquidity needs arise. As of December 31, 2008, we held $393.7 million in bonds at current market value in our available for sale portfolio with $316.5 million or 80% pledged to secure various public funds deposits, federal funds lines and repurchase agreements and for other purposes.

We have established multiple borrowing sources to augment our funds management. Borrowing capacity exists through the membership of our subsidiary Banks in the FHLB program. Based on the collateral value of assets pledged to the FHLB at December 31, 2008, our subsidiary Banks had total borrowing capacity of up to $252.7 million, of which $190.7 million was drawn and outstanding at year end. Our subsidiary Banks have also established overnight borrowing lines for federal funds purchased through various correspondent banks that collectively amounted to $90.7 million in capacity at December 31, 2008. None of our federal funds lines were in use at year-end. At December 31, 2008, the Company has availability from all borrowing sources of $144.9 million. In February 2009, the Company received notice from the FHLB that it has frozen the borrowing availability for four of our Banks (Security Bank of Bibb County, Security Bank of North Metro, Security Bank of North Fulton and Security Bank of Gwinnett County) to the current amount outstanding. Advances that mature may be renewed; however, no new advances may be obtained.

Expense Management

As part of our efforts to reduce controllable expenses, during 2008 we lowered salary and benefit expenses by $3.4 million through a reduction in workforce of approximately 23%. Furthermore, during the third quarter of 2008, all Board of Directors’ fees at the Company and the Banks were suspended. Additionally, we have applied with the FDIC to consolidate our banking subsidiaries, which we expect will result in expense savings if approved.

Critical Accounting Policies

Our significant accounting policies are described in Note 1 of the consolidated financial statements and are essential in understanding management’s discussion and analysis of financial condition and results of operations. Some of our accounting policies require significant judgment to estimate values of either assets or liabilities. In addition, certain accounting principles require significant judgment in applying the complex accounting principles to complicated transactions to determine the most appropriate treatment.

The following is a summary of the more judgmental estimates and complex accounting principles. In many cases, there are numerous alternative judgments that could be used in the process of estimating values of assets or liabilities. Where alternatives exist, we have used the factors that it believes represent the most reasonable value in developing the inputs for the valuation. Actual performance that differs from our estimates of the key variables could impact net income.

Allowance for Loan and Lease Losses (ALLL)

Our management assesses the adequacy of the ALLL quarterly. This assessment includes procedures to estimate the allowance and test the adequacy and appropriateness of the resulting balance. The ALLL consists of two components: (1) a specific amount representative of identified credit exposures that are readily predictable by the current performance of the borrower and underlying collateral (SFAS No. 114 component); and (2) a general amount based upon historical losses that is then adjusted for various stress factors representative of various economic factors and characteristics of the loan portfolio (SFAS No. 5 component). Even though the ALLL is composed of two components, the entire ALLL is available to absorb any credit losses.

We establish the specific amount by examining impaired loans. Under generally accepted accounting principles, we may measure the loss either by (1) the observable market price of the loan; or (2) the present value of expected future cash flows discounted at the loan’s effective interest rate; or (3) the fair value of the collateral if the loan is collateral dependent. Because the majority of our impaired loans are collateral dependent, nearly all of our specific allowances are calculated based on the fair value of the collateral.

We establish the general amount by taking the remaining loan portfolio (excluding those impaired loans discussed above) with allocations based on historical losses in the total loan portfolio. The calculation of the general amount is then subjected to stress factors that are somewhat subjective. The amount due to stress testing attempts to correlate the historical loss rates with current economic factors and current risks in the portfolio. The stress factors consist of: (1) economic factors including such matters as changes in the local or national economy; (2) the depth or experience in the lending staff; (3) any concentrations of credit (such as commercial real estate) in any particular industry group; (4) new banking laws or regulations; (5) the credit grade of the loans in our unsecured consumer loan portfolio; and (6) additional risks resulting from the level of speculative real estate loans in the portfolio. After we assess the applicable factors, we evaluate the remaining amount based on management’s experience.

Finally, we compare the level of the ALLL with historical trends and peer information as a reasonableness test. Management then evaluates the result of the procedures performed, including the result of our testing, and makes a conclusion regarding the appropriateness of the ALLL in its entirety.

In assessing the adequacy of the ALLL, we also rely on an ongoing independent credit administration review process. We undertake this process both to ascertain whether there are loans in the portfolio whose credit

quality has weakened over time and to assist in our overall evaluation of the risk characteristics of the entire loan portfolio. Our credit administration review process includes the judgment of management, the input of our internal loan review function and reviews that may have been conducted by bank regulatory agencies as part of their usual examination process. The Credit Quality Committee, which is a committee comprised of members of the Boards of Directors of the Company and its subsidiaries, regularly reviews the ALLL process and results.

Stock-Based Compensation

In accordance with Statement of Financial Accounting Standards (SFAS) No. 123R, Accounting for Stock-Based Compensation, management expenses the fair value of stock options. We utilize the Black-Scholes model in determining the fair value of the stock options. The model takes into account certain estimated factors such as the expected life of the stock option and the volatility of the stock. The expected life of the stock option is a function of the vesting period of the grant, the average length of time similar grants have remained outstanding, and the expected volatility of the underlying stock. Volatility is a measure of the amount by which a price has fluctuated or is expected to fluctuate during a period.

Goodwill and Intangible Assets

Goodwill and intangible assets deemed to have indefinite lives are no longer being amortized but will be subject to impairment tests on at least an annual basis. Other intangible assets, primarily core deposits, will continue to be amortized over their estimated useful lives. In 2008, we began quarterly tests of goodwill for impairment due to the ongoing decline in the Company’s stock price combined with the ongoing crises in the credit markets and residential real estate. The Company recorded significant amounts of goodwill in connection with the acquisitions we made from 2000 to 2006. The companies we acquired have contributed significantly to the Company. However, our market valuation as a whole has been significantly affected with concerns related to commercial banks, housing and real estate lending operations. We determined the fair value of the Company from two approaches: the market approach and the market capitalization approach. We concluded that the goodwill balance was impaired and the amount of impairment loss was required to be expensed as a non-cash charge during 2008. As a result of this analysis, the Company wrote off its goodwill balance of $128.1 million during 2008.

Income Taxes

Income Tax Expense

The calculation of our income tax expense requires significant judgment and the use of estimates. We periodically assess tax positions based on current tax developments, including enacted statutory, judicial and regulatory guidance. In analyzing our overall tax position, consideration is given to the amount and timing of recognizing income tax liabilities and benefits. In applying the tax and accounting guidance to the facts and circumstances, income tax balances are adjusted appropriately through the income tax provision. Reserves for income tax uncertainties are maintained at levels we believe are adequate to absorb probable payments. Actual amounts paid, if any, could differ significantly from these estimates.

Deferred Income Taxes

We use the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. As of December 31, 2008, we determined that the deferred tax assets of $45.9 million were totally impaired. This impairment resulted primarily because our net operating loss for 2008 exceeded the amount that we could carryback to recover taxes previously paid. Presently, there is not enough positive evidence that we will generate future taxable income sufficient to offset the net operating loss carryforward amount and the temporary differences between book and tax accounting that result in tax deductions.

Results of Operations for the Years Ended December 31, 2008, 2007 and 2006

In 2008, we were materially impacted by the continuing deterioration in the real estate markets. Our net income (loss) was ($254.4 million), $6.6 million, and $23.4 million, for the years ended December 31, 2008, 2007, and 2006, respectively. Our 2008 operations resulted in a significant loss in excess of $250 million and followed a significant decline in the 2007 earnings reflecting a 72% decrease from 2006. Diluted earnings (loss) per share (EPS) amounted to ($11.36) in 2008, $0.34 in 2007 and $1.33 in 2006. The ($11.36) in 2008 was down $11.70 per share over 2007 results, while the $0.34 EPS in 2007 was down $0.99 per share over 2006 results for a decrease of 74%. Our return on average equity (ROE) of (221.38%) in 2008 is a substantial decline from our 2007 ROE of 2.10%. The decline in the ROE in 2008 was primarily attributable to the goodwill impairment of $128.1 million and increase in the provision for loan losses from $32.7 million in 2007 to $128.1 million in 2008. Our ROE of 2.10% in 2007 was a 718 basis-point decline from our 2006 ROE of 9.28%. The decline in the ROE in 2007 was primarily attributable to the increase in the provision for loan losses from $4.5 million in 2006 to $32.7 million in 2007.

The following table provides an analysis of the dollar and percentage changes we have experienced in our income statements, balances sheets and key ratios in recent years.

ANALYSIS OF CHANGES IN INCOME STATEMENT & KEY RATIOS

(Dollars in thousands, except per share data)


	Years Ended December 31,
	2008			2007			$ Change 2008 vs. 2007			% Change 2008 vs. 2007		2006			$ Change 2007 vs. 2006			% Change 2007 vs. 2006
Income Statement:
Interest Income	$	145,948		$	192,840		$	(46,892	)	-24.32	%	$	148,082		$	44,758		30.23	%
Interest Expense		98,526			102,316			(3,790	)	-3.70	%		68,647			33,669		49.05	%

Net Interest Income		47,422			90,524			(43,102	)	-47.61	%		79,435			11,089		13.96	%
Provision for Loan Losses		128,070			32,660			95,410		292.13	%		4,469			28,191		630.81	%
Noninterest Income		18,635			18,981			(346	)	-1.82	%		17,955			1,026		5.71	%
Noninterest Expense		201,088			67,074			134,014		199.80	%		55,651			11,423		20.53	%

Income (Loss) Before Tax		(263,101	)		9,771			(272,872	)	NM			37,270			(27,499	)	-73.78	%
Income Taxes		(8,735	)		3,183			(11,918	)	NM			13,878			(10,695	)	-77.06	%

Net Income (Loss)	$	(254,366	)	$	6,588		$	(260,954	)	NM		$	23,392		$	(16,804	)	-71.84	%

Net Operating Income (Loss)⁽¹⁾	$	(88,648	)	$	6,590		$	(95,238	)	NM		$	24,198		$	(17,608	)	-72.77	%

Per Share:
Earnings (Loss) per Common Share:
Basic	$	(11.36	)	$	0.35		$	(11.71	)	NM		$	1.36		$	(1.01	)	-74.26	%
Diluted		(11.36	)		0.34			(11.70	)	NM			1.33			(0.99	)	-74.44	%
Operating Earnings (Loss) per Common Share:⁽¹⁾
Basic		(3.96	)		0.35			(4.31	)	NM			1.41			(1.06	)	-75.18	%
Diluted		(3.96	)		0.34			(4.30	)	NM			1.38			(1.04	)	-75.36	%
Cash Dividends Paid	$	0.13		$	0.35		$	(0.22	)	-62.86	%	$	0.30		$	0.05		16.67	%
Weighted Average Shares Outstanding:
Basic		22,387,908			19,081,636			3,306,272		17.33	%		17,222,139			1,859,497		10.80	%
Diluted		22,387,908			19,225,069			3,162,839		16.45	%		17,564,990			1,660,079		9.45	%
Ratios:
Return on Average Assets		-9.27	%		0.25	%		-9.52	%	NM			1.15	%		-0.90	%	-78.26	%
Return on Average Equity		-221.38	%		2.10	%		-223.48	%	NM			9.28	%		-7.18	%	-77.37	%
Dividend Payout Ratio		-1.14	%		100.00	%		-101.14	%	-101.14			22.06	%		77.94	%	353.31	%
Average Equity to Average Assets		4.19	%		12.10	%		-7.91	%	-65.37	%		12.42	%		-0.32	%	-2.58	%
Net Interest Margin		1.81	%		3.88	%		-2.07	%	-53.35	%		4.40	%		-0.52	%	-11.82	%

(1)	See “Reconciliation of Non-GAAP Financial Measures.”

Net Interest Income

Net interest income (the difference between the interest earned on assets and the interest paid on deposits and liabilities) is the principal source of our earnings. Our average net interest rate margin, on a tax-equivalent basis, was 1.81% in 2008, 3.88% in 2007 and 4.40% in 2006. The 2008 decrease in the net interest margin resulted from decreased interest income on loans due to high levels of nonperforming loans and from the higher liquidity levels we built up throughout 2008. Net interest income before tax equivalency adjustments in 2008 amounted to $47.4 million, down 48% from $90.5 million in 2007. Net interest income before tax equivalency adjustments in 2007 amounted to $90.5 million, up 14% from $79.4 million in 2006.

The following table presents a summary of interest income, adjusted to a tax-equivalent basis, interest expense and the resulting average net interest rate margins for the past three years.

NET INTEREST INCOME

(Dollars in thousands)


	Years Ended December 31,
	2008			2007			2006
Interest Income	$	145,948		$	192,840		$	148,082
Taxable Equivalent Adjustment		94			445			413

Interest Income ⁽¹⁾		146,042			193,285			148,495
Interest Expense		98,526			102,316			68,647

Net Interest Income ⁽¹⁾	$	47,516		$	90,969		$	79,848


	Years Ended December 31,
	2008			2007			2006
	(As a % of Average Earning Assets) ⁽²⁾
Interest Income ⁽¹⁾		5.57	%		8.25	%		8.18	%
Interest Expense		3.76	%		4.37	%		3.78	%

Net Interest Rate Margin ⁽¹⁾		1.81	%		3.88	%		4.40	%

(1)	Reflects taxable equivalent adjustments using the statutory federal income tax rate of 35% in adjusting interest on tax-exempt securities to a fully taxable basis.

(2)	Average Earning Assets used in ratios as follows (in thousands): 2008 – $2,624,203; 2007 – $2,341,803 and 2006 – $1,815,505.

2008 compared to 2007

Net Interest Income. Net interest income on a tax-equivalent basis for the year ended December 31, 2008 decreased by nearly half to $47.5 million from $90.9 million for the year ended December 31, 2007. The decrease in net interest income was attributable to a decrease of $47.2 million, or 24%, in interest income while interest expense only decreased $3.8 million during 2008. The net interest rate spread (the yield on earning assets minus the cost of interest-bearing liabilities) decreased 181 basis points from 3.36% for the year ended December 31, 2007 to 1.55% for the year ended December 31, 2008, while the net interest margin (net interest income on a tax-equivalent basis divided by average earning assets) decreased from 3.88% to 1.81% during the same period. See Interest Income and Interest Expense sections below for a detailed discussion of these changes.

Interest Income. Interest income on a tax-equivalent basis was $146.0 million for the year ended December 31, 2008, a decrease of $47.3 million from $193.3 million for the year ended December 31, 2007. The

decrease in interest income in 2008 was due primarily to a decline of 256 basis points in the yield on the loan portfolio. The decline in the loan portfolio yield is due largely to the lowering of the prime rate by the Federal Reserve and the resulting repricing of our loan portfolio. Also contributing to the decline is lost interest income from nonaccrual loans and interest reversals on such loans, which reduced the yield by 63 and 26 basis points, respectively.

Interest income on investment securities increased $3.8 million as a result of an increase of $121.8 million in the average balance for the year ended December 31, 2008 compared to the year ended December 31, 2007. The primary reason for the increase in the average balance of investment securities was our effort to bolster our on-balance sheet liquidity throughout the year. At December 31, 2008, investment securities equaled 14.1% of assets compared to 10.8% at December 31, 2007.

Interest Expense. Interest expense decreased $3.8 million to $98.5 million for the year ended December 31, 2008, from $102.3 million for the year ended December 31, 2007. The decrease in interest expense resulted primarily from a decrease of $6.0 million in interest expense on deposits, offset by an increase of $2.2 million in the interest expense on borrowed funds.

The average cost of interest-bearing deposits decreased by 85 basis points and the average balance increased by $263.8 million. Time deposits, the largest category of deposits, increased by $348.7 million primarily due to the increased use of brokered and internet-based certificates of deposit. These types of deposits historically have provided a means of generating deposits to meet our funding needs, but our access to this funding source may be limited in the future. The increase in the average balance of time deposits is offset with an 89 basis-point decrease resulting from market interest rate decreases during 2008.

The average balance of interest-bearing NOW accounts decreased $25.1 million and money market accounts decreased $58.8 million, with corresponding declines in the costs of such deposits of 129 and 134 basis points, respectively. To maintain their deposit market share and to assist in liquidity management, the Banks did not decrease their deposit pricing as much as they lowered their loan rates, which increase or decrease more quickly in response to changes in the Prime Rate.

The interest expense on borrowed funds in 2008 increased by $2.2 million when compared to 2007. This increase is related to an increase of $93.0 million in the average balance of borrowed funds offset by a decrease of 138 basis points to 4.47% in the average costs of borrowings. The increase in the average balance is related to the $40.0 million of subordinated notes issued in April 2008 (average balance of $21.1 million during 2008) and an increase in the average balance of FHLB advances of $77.0 million borrowed in an effort to bolster on-balance sheet liquidity. The decrease in the average cost of these borrowings is the result of a 249 basis point decline in the cost of FHLB advances, and a 284 basis point decrease in the cost of repurchase agreements, related to market rate decreases during 2008. These cost decreases are offset by the cost of the subordinated notes.

2007 compared to 2006

Net Interest Income. Net interest income on a tax-equivalent basis for the year ended December 31, 2007 increased $11.1 million to $90.9 million from $79.8 million for the year ended December 31, 2006. The increase in net interest income was attributable to an increase of $44.8 million, or 30%, in interest income while interest expense only increased $33.7 million during 2006. The net interest rate spread (the yield on earning assets minus the cost of interest-bearing liabilities) decreased 51 basis points from 3.87% for the year ended December 31, 2006 to 3.36% for the year ended December 31, 2007, while the net interest margin (net interest income on a tax-equivalent basis divided by average earning assets) decreased from 4.40% to 3.88% during the same period.

The decrease in the net interest rate spread in 2007 was primarily reflective of a 58 basis-point increase in the average cost of interest-bearing liabilities, while the yield on earning assets increased seven basis points. We experienced significant increases in the costs of all deposits except for interest-bearing demand and savings

deposits. Our average cost of interest-bearing deposits increased to 4.82% in 2007 from 4.18% in 2006. Meanwhile, the loan portfolio yield remained consistent at 8.62%, primarily due to lost interest income from nonaccrual loans; while the yield on investment securities increased from 4.74% in 2006 to 5.25% in 2007.

Interest Income. Interest income on a tax-equivalent basis was $193.3 million for the year ended December 31, 2007, an increase of $44.8 million from $148.5 million for the year ended December 31, 2006. Interest income on loans and investment securities increased $41.6 million and $3.1 million, respectively, for the year ended December 31, 2007 compared to the year ended December 31, 2006.

The increase in interest income on loans for the year ended December 31, 2007 compared to the year ended December 31, 2006 was primarily attributable to an increase in average balance of $482.2 million resulting from loan growth in our core markets. The average yield on our loan portfolio remained consistent at 8.62%.

Interest income on investment securities increased $3.1 million as a result of an increase of $42.9 million in average balance for the year ended December 31, 2007 compared to the year ended December 31, 2006, and an increase of 51 basis points in the average yield on these securities during the same period.

The primary reason for the increase in the average balance of investment securities of $42.9 million was our effort to maintain a certain level of on-balance sheet liquidity. The average yield on securities increased 51 basis points partly as a result of the restructuring of our bond portfolio in December 2006, during which we sold several low-yielding securities. At December 31, 2007, investment securities equaled 10.8% of assets, as compared to 9.2% at December 31, 2006.

Overall, the yield on interest-earning assets increased seven basis points from 8.18% during the year ended December 31, 2006 to 8.25% for the year ended December 31, 2007.

Interest Expense. Interest expense increased $33.7 million, to $102.3 million, for the year ended December 31, 2007, from $68.6 million for the year ended December 31, 2006. The increase in interest expense resulted primarily from an increase of $33.1 million in interest expense on deposits. The average cost of interest-bearing deposits, the largest component of interest expense, increased by 64 basis points and the average balance increased by $496.3 million. Of the $496.3 million increase in average balances, interest-bearing NOW accounts increased $62.9 million, money market accounts increased $18.2 million and savings accounts decreased $3.3 million. The increase in the average balance for interest-bearing NOW accounts reflects the attractive rates paid on the Premium Select Checking account, which have contributed to continued balance growth. Time deposits, the largest category of deposits, increased $418.5 million; primarily due to the increased use of brokered and internet-based certificates of deposit, which provided a means of generating deposits to meet our funding needs. The average cost of time deposits increased 66 basis points. The increase is due to the inclusion of a full year of results for Security Bank of North Fulton and Security Bank of Gwinnett County (both acquired in 2006) whose average cost of time deposits is generally higher than that of the Banks in the Middle and Coastal Georgia markets.

The interest expense on borrowed funds in 2007 increased by $0.5 million or 6.8% when compared to 2006. This increase is related to an increase of $5.4 million or 3.9% in the average balance of borrowed funds combined with an increase of 16 basis points to 5.85% in the average costs of borrowings. The increase in the average balance is related to increases in the draws on correspondent bank lines of credit to meet our funding needs.

Interest Rates and Interest Differential

The following tables set forth our average balance sheets, interest and yield information on a tax-equivalent basis for the years ended December 31, 2008, 2007, and 2006.

AVERAGE BALANCE SHEETS, INTEREST AND YIELDS

(Tax-equivalent basis, dollars in thousands)


	Year Ended December 31, 2008						Year Ended December 31, 2007						Year Ended December 31, 2006
	Average Balance		Interest		Yield/ Rate		Average Balance		Interest		Yield/ Rate		Average Balance		Interest		Yield/ Rate
Assets:
Loans, Net of Unearned Income	$	2,119,936	$	128,476	6.06	%	$	2,081,999	$	179,562	8.62	%	$	1,599,508	$	137,993	8.63	%
Loans Held for Sale		4,129		264	6.39			6,328		453	7.16			6,576		454	6.90

Total Loans		2,124,065		128,740	6.06			2,088,327		180,015	8.62			1,606,084		138,447	8.62

Investment Securities:
Taxable		336,030		14,974	4.46			197,436		10,159	5.15			154,927		7,053	4.55
Tax Exempt⁽³⁾		3,645		268	7.35			20,412		1,274	6.24			19,976		1,238	6.20

Total Investment Securities		339,675		15,242	4.49			217,848		11,433	5.25			174,903		8,291	4.74

Interest-Earning Deposits		82,230		387	0.47			4,561		242	5.31			2,851		160	5.61
Federal Funds Sold		78,233		1,673	2.14			31,067		1,595	5.13			31,667		1,597	5.04

Total Interest-Earning Assets		2,624,203		146,042	5.57			2,341,803		193,285	8.25			1,815,505		148,495	8.18

Non-Earning Assets		120,399						250,144						213,401

Total Assets	$	2,744,602					$	2,591,947					$	2,028,906

Liabilities and Shareholders’ Equity:
Interest-Bearing Demand Deposits	$	348,413	$	8,167	2.34		$	373,522	$	13,550	3.63		$	310,624	$	10,902	3.51
Money Market Accounts		86,857		2,118	2.44			145,619		5,499	3.78			127,456		3,694	2.90
Savings Deposits		14,978		79	0.53			16,005		89	0.56			19,268		106	0.55
Time Deposits of $100,000 or More		1,082,546		35,605	3.29			892,248		47,622	5.34			571,992		27,482	4.80
Other Time Deposits		680,342		41,948	6.17			521,923		27,114	5.20			423,708		18,555	4.38

Total Interest-Bearing Deposits		2,213,136		87,917	3.97			1,949,317		93,874	4.82			1,453,048		60,739	4.18

Federal Funds Purchased and Repurchase Agreements		37,535		742	1.98			43,881		2,104	4.79			29,874		1,469	4.92
Other Borrowed Money & Subordinated Debentures		199,771		9,867	4.94			100,430		6,338	6.31			108,997		6,439	5.91

Total Borrowed Funds		237,306		10,609	4.47			144,311		8,442	5.85			138,871		7,908	5.69

Total Interest-Bearing Funding		2,450,442		98,526	4.02			2,093,628		102,316	4.89			1,591,919		68,647	4.31

Non-Interest-Bearing Demand Deposits		154,173						163,712						166,190
Other Liabilities		25,086						21,103						18,793
Shareholders’ Equity		114,901						313,504						252,004

Total Liabilities & Shareholders’ Equity	$	2,744,602					$	2,591,947					$	2,028,906

Net Interest Income			$	47,516					$	90,969					$	79,848

Interest Rate Spread					1.55	%					3.36	%					3.87	%

Net Interest Margin					1.81	%					3.88	%					4.40	%

(1)	Interest income includes loan fees as follows (in thousands): 2008 – $4,979, 2007 – $7,645 and 2006 – $7,442.

(2)	Nonaccrual loans are included.

(3)	Reflects taxable equivalent adjustments using the statutory income tax rate of 35% in adjusting interest on tax exempt investment securities to a fully taxable basis. The taxable equivalent adjustment included above amounts to (in thousands) $94 for 2008; $445 for 2007 and $413 for 2006.

The following table provides a detailed analysis of the changes in interest income and interest expense due to changes in rate and volume for 2008 compared to 2007 and for 2007 compared to 2006.

RATE / VOLUME ANALYSIS

(In thousands)


	For the Years Ended December 31,
	2008 Compared to 2007 Change Due To⁽¹⁾									2007 Compared to 2006 Change Due To⁽¹⁾
	Volume			Rate			Net Change			Volume			Rate			Net Change
Interest Earned On:
Loans Receivable, Net	$	3,272		$	(54,358	)	$	(51,086	)	$	41,626		$	(57	)	$	41,569
Loans Held for Sale		(157	)		(32	)		(189	)		(17	)		16			(1	)
Taxable Investment Securities		7,131			(2,316	)		4,815			1,935			1,171			3,106
Tax Exempt Investment Securities⁽²⁾		(1,046	)		40			(1,006	)		27			9			36
Interest-Earning Deposits		4,121			(3,976	)		145			96			(14	)		82
Federal Funds Sold		2,422			(2,344	)		78			(30	)		28			(2	)

Total Interest Income		15,743			(62,986	)		(47,243	)		43,637			1,153			44,790

Interest Paid On:
Interest-Bearing Demand Deposits		(911	)		(4,472	)		(5,383	)		2,208			440			2,648
Money Market Accounts		(2,219	)		(1,162	)		(3,381	)		526			1,279			1,805
Savings Deposits		(6	)		(4	)		(10	)		(18	)		1			(17	)
Time Deposits of $100,000 or More		10,157			(22,174	)		(12,017	)		15,387			4,753			20,140
Other Time Deposits		8,230			6,604			14,834			4,301			4,258			8,559
Federal Funds Purchased and Repurchase Agreements		(304	)		(1,058	)		(1,362	)		689			(54	)		635
Other Borrowings		6,269			(2,740	)		3,529			(506	)		405			(101	)

Total Interest Expense		21,216			(25,006	)		(3,790	)		22,587			11,082			33,669

Net Interest Income	$	(5,473	)	$	(37,980	)	$	(43,453	)	$	21,050		$	(9,929	)	$	11,121

(1)	The change in interest due to both rate and volume has been allocated to the rate component.

(2)	Reflects taxable equivalent adjustments using the statutory federal income tax rate of 35% in adjusting interest on tax exempt investment securities to a fully taxable basis.

Provision for Loan Losses

The provision for loan losses is a charge to current earnings taken to increase the allowance for loan losses. The general nature of lending results in periodic charge-offs of nonperforming loans, in spite of our continuous loan review process, credit standards and internal controls. Because of the substantial decline in real estate markets and the overall economy, we significantly increased our provision for loan losses in 2008. We expensed $128.1 million in 2008, $32.7 million in 2007, and $4.5 million in 2006 for loan loss provisions. The increase in the provision for loan losses in 2008 is due primarily to significant declines in residential real estate market values, primarily in the metropolitan Atlanta area and Florida, caused by recent disruptions in financial markets. As a result of these adverse market conditions, our net charge-offs increased to $100.3 million in 2008, compared to $23.3 million in 2007 and $2.4 million in 2006. Our net charge-offs as a percentage of average loans

outstanding increased to 4.73% in 2008 compared to 1.12% in 2007 and 0.15% in 2006. The adverse market conditions also resulted in an increase in the allowance for loan losses as a percentage of outstanding net loans receivable to 3.00% at December 31, 2008, up from 1.45% at December 31, 2007 and 1.18% at December 31, 2006. See Risk Elements section for further discussion.

Noninterest Income

2008 compared to 2007

The composition of noninterest income for the periods presented is as follows:


	Year Ended December 31,					$ Change			% Change
	2008		2007			$ Change			% Change
	(Dollars in thousands)
Service Charges on Deposits	$	9,183	$	9,363		$	(180	)	-1.92	%
Other Service Charges, Commissions and Fees		3,038		4,244			(1,206	)	-28.42	%
Mortgage Origination and Related Fees		2,726		4,475			(1,749	)	-39.08	%
Securities Gains (Losses)		3,334		(3	)		3,337		NM
Other		354		902			(548	)	-60.75	%

	$	18,635	$	18,981		$	(346	)	-1.82	%

The decrease of $346,000 or 1.82% in noninterest income is due primarily to the following:

•

reduction of $1.7 million in mortgage originations and related fees resulting from decreased loan demand;

•

decrease of $0.2 million in commission fees earned by CFS professionals. The Company sold CFS during the first quarter of 2008 and therefore did not generate such fees during most of 2008;

•

decrease of $1.1 million in commission fees on interim construction loans originated by SRES. Due to the downturn in the real estate market and high level of nonperforming assets, which required the attention of loan officers, loan originations declined significantly from the prior year; and

•

a gain on sale of investment securities of $3.3 million resulting from an increase in investment securities sold, including certain U.S. Government sponsored mortgage-backed securities, during the year.

2007 compared to 2006

The composition of noninterest income for the periods presented is as follows:


	Year Ended December 31,						$ Change			% Change
	2007			2006			$ Change			% Change
	(Dollars in thousands)
Service Charges on Deposits	$	9,363		$	9,162		$	201		2.19	%
Other Service Charges, Commissions and Fees		4,244			4,544			(300	)	-6.60	%
Mortgage Origination and Related Fees		4,475			4,922			(447	)	-9.08	%
Securities Gains (Losses)		(3	)		(1,601	)		1,598		99.81	%
Other		902			928			(26	)	-2.80	%

	$	18,981		$	17,955		$	1,026		5.71	%

The increase of $1.0 million or 5.71% in noninterest income is due primarily to the following:

•

decrease of $1.6 million in the loss on the sale of securities. In 2006, we incurred a $1.6 million loss in connection with the restructuring of our bond portfolio and incurred a minimal loss in 2007; and

•

decrease in mortgage origination and related fee income of $0.4 million, which is the result of decreased loan volume.

Noninterest Expense

2008 compared to 2007

The composition of noninterest expense for the periods presented is as follows:


	Year Ended December 31,				$ Change			% Change
	2008		2007		$ Change			% Change
	(Dollars in thousands)
Salaries and Employee Benefits	$	31,623	$	35,061	$	(3,438	)	-9.81	%
Occupancy and Equipment		6,401		6,189		212		3.43	%
Foreclosed Property		15,238		5,059		10,179		201.21	%
FDIC Assessments		1,829		576		1,253		217.53	%
Marketing Expenses		1,501		2,549		(1,048	)	-41.11	%
Professional Fees		2,957		3,426		(469	)	-13.69	%
Amortization-Core Deposit Intangible		884		985		(101	)	-10.25	%
Goodwill Impairment		128,074		—		128,074		100.00	%
Other		12,581		13,229		(648	)	-4.90	%

	$	201,088	$	67,074	$	134,014		199.80	%

The increase of $134.0 million in noninterest expense is due primarily to the following:

•

goodwill impairment charge of $128.1 million;

•

an increase of $10.2 million in foreclosed property expense as a result of the increase in nonperforming assets from 2007 levels to 2008 levels (see Risk Elements section in this discussion); and

•

decrease of $3.4 million in salaries and employee benefits due to reductions of: $1.6 million in loan production commissions due to decreased loan volume and $1.5 million in bonus and incentive plan expense resulting from the Company’s decreased financial performance in 2008; and a net reduction of $0.3 million in other compensation costs.

2007 compared to 2006

The composition of noninterest expense for the periods presented is as follows:


	Year Ended December 31,				$ Change		% Change
	2007		2006		$ Change		% Change
	(Dollars in thousands)
Salaries and Employee Benefits	$	35,061	$	32,377	$	2,684	8.29	%
Occupancy and Equipment		6,189		5,622		567	10.09	%
Foreclosed Property		5,059		533		4,526	NM
FDIC Assessments		576		213		363	170.42	%
Marketing Expenses		2,549		2,293		256	11.16	%
Professional Fees		3,426		2,263		1,163	51.39	%
Amortization-Core Deposit Intangible		985		903		82	9.08	%
Other		13,229		11,447		1,782	15.57	%

	$	67,074	$	55,651	$	11,423	20.53	%

The increase of $11.4 million in noninterest expense is due primarily to the following:

•

increase of $2.7 million in salaries and benefits. Approximately $2.1 million of the increase is due to the inclusion of a full year’s results for Security Bank of North Fulton and Security Bank of Gwinnett County, which were acquired in March and July 2006, respectively. The remainder of the increase is due to normal salary and benefit increases from merit increases and the hiring of new employees;

•

increase of $1.2 million in professional fees. Audit fees increased by approximately $0.5 million as a result of the additions of Security Bank of North Fulton and Security Bank of Gwinnett County in 2006. Further, legal fees and other expenses increased approximately $0.5 million as a result of the fees incurred in connection with a proposed acquisition that was not consummated;

•

increase of $4.5 million in foreclosed property expense as a result of the increase in nonperforming assets from 2006 levels to 2007 levels (see Risk Elements section in this discussion); and

•

increase of $0.4 million in directors’ fees, resulting from the additional directors at subsidiary banks acquired during 2006. The remainder of the increase is spread across various expense categories.

Income Taxes

Our federal and state income tax expense (benefit) was ($8.7 million) in 2008, compared to $3.2 million in 2007 and $13.9 million in 2006. Our resulting effective tax rate was 3.3% in 2008, down from 32.6% in 2007 and 37.2% in 2006. The effective tax rate for 2008 declined primarily due to the impact of the valuation allowance for deferred tax assets of $45.9 million and the goodwill impairment charge of $128.1 million incurred during 2008 (the majority of which is nontaxable). Our effective tax rate has historically been at or just below the maximum corporate federal and state income tax rates due to the relatively small percentage of tax-free investments carried on our balance sheet.

In January 2009, we completed a preliminary analysis of our deferred taxes as of December 31, 2008, which indicated a possible impairment in the range of zero to $18.0 million. At the time of this preliminary analysis, we were exploring and analyzing several capital initiatives including raising capital in various scenarios and reducing assets. Also at this time, the Economic Stimulus Package being debated in the U.S. Congress contained a provision to extend the carryback period for net operating losses from two years to five years. This would have resulted in our entire net operating loss for 2008 being carried back to offset and recover income taxes previously paid. The final version of the stimulus package signed by President Obama restricted the change in carryback period to those companies with less than $15 million in annual revenue. In the ensuing weeks we were not successful in raising any additional capital. Therefore, given our current circumstances, we could not obtain enough positive evidence that we would generate sufficient taxable income in the future to offset the combination of our net operating loss carry-forward and our temporary differences that result in income tax deductions. Therefore, we recorded a valuation allowance of $45.9 million on our gross deferred tax assets.

During 2007, we purchased low income housing tax credits. These credits provide reductions in our state income tax expense over the next 11 years. Due to the operating loss incurred in 2008, we sold the 2008 credits since we would be unable to use them. When added to existing state income tax credits, the 2007 credits resulted in a zero state income tax expense for 2007. See Note 10 to our Consolidated Financial Statements for a detailed analysis of income taxes.

Quarterly Results of Operations

The following table provides income statement recaps and earnings per share data for each of the four quarters for the years ended December 31, 2008 and 2007.

QUARTERLY RESULTS OF OPERATIONS

(In thousands, except per share data)


	Three Months Ended
	Dec. 31			Sept. 30			June 30			Mar. 31			Total Year
For 2008:
Interest Income	$	31,367		$	36,150		$	37,689		$	40,742		$	145,948
Interest Expense		24,544			24,126			23,913			25,943			98,526

Net Interest Income		6,823			12,024			13,776			14,799			47,422
Provision For Loan Losses		29,129			26,359			30,383			42,199			128,070
Noninterest Income		3,919			3,764			5,090			5,862			18,635
Noninterest Expense		35,877			21,050			127,254			16,907			201,088

Income (Loss) Before Income Taxes		(54,264	)		(31,621	)		(138,771	)		(38,445	)		(263,101	)
Income Taxes		34,310			(11,472	)		(17,326	)		(14,247	)		(8,735	)

Net Income (Loss)	$	(88,574	)	$	(20,149	)	$	(121,445	)	$	(24,198	)	$	(254,366	)

Net Income (Loss) per Common Share:
Basic	$	(3.81	)	$	(0.87	)	$	(5.23	)	$	(1.22	)	$	(11.36	)
Diluted		(3.81	)		(0.87	)		(5.23	)		(1.22	)		(11.36	)

	Three Months Ended
	Dec. 31			Sept. 30			June 30			Mar. 31			Total Year
For 2007:
Interest Income	$	48,989		$	49,643		$	48,175		$	46,033		$	192,840
Interest Expense		27,406			26,862			24,792			23,256			102,316

Net Interest Income		21,583			22,781			23,383			22,777			90,524
Provision For Loan Losses		20,000			9,400			2,000			1,260			32,660
Noninterest Income		4,539			4,600			4,750			5,092			18,981
Noninterest Expense		17,583			17,059			16,544			15,888			67,074

Income (Loss) Before Income Taxes		(11,461	)		922			9,589			10,721			9,771
Income Taxes		(4,588	)		347			3,489			3,935			3,183

Net Income (Loss)	$	(6,873	)	$	575		$	6,100		$	6,786		$	6,588

Net Income (Loss) per Common Share:
Basic	$	(0.36	)	$	0.03		$	0.32		$	0.35		$	0.35
Diluted		(0.36	)		0.03			0.31			0.35			0.34

Balance Sheet Review

Loan Portfolio

Our loan portfolio constitutes our largest interest-earning asset. To analyze prospective loans, management reviews our credit quality and interest rate pricing guidelines to determine whether to extend a loan and the appropriate rate of interest for each loan. At December 31, 2008 and 2007, loans receivable, net of unearned income, of $1.98 billion and $2.18 billion, respectively, amounted to 69.6% and 77.0% of total assets, and 81.3% and 94.9% of deposits. Our loan portfolio decreased by 9.2% from December 31, 2007 to December 31, 2008

due primarily to charge-offs of $100.3 million. Loan yields were 6.06% for 2008, compared to 8.62% for 2007 and 2006. Our allowance for loan losses as a percentage of loans receivable amounted to 3.00% at December 31, 2008, compared to 1.45% and 1.18% at December 31, 2007 and 2006, respectively.

The largest components of our loan portfolio are the real estate construction, land and land development loans and the other mortgages secured by nonfarm, nonresidential properties. Real estate construction, land and land development loans, which constituted 50.2% of the loans outstanding at December 31, 2008, are loans secured by real estate made to finance land development and residential and commercial construction.

The following table presents the amount of loans outstanding by category, both in dollars and in percentages of the total portfolio, at the end of each of the past five years.

LOANS BY TYPE

(Dollars in thousands)


	December 31,
	2008			2007			2006			2005			2004
Commercial and Industrial	$	157,799		$	161,911		$	142,537		$	106,300		$	86,575
Agricultural		1,117			1,225			2,029			3,035			3,179
Real Estate—Construction, Land and Land Development		993,864			1,165,718			981,481			517,373			350,150
Real Estate—Mortgage:
Farmland		33,031			18,717			16,926			5,627			3,879
1-4 Family Residential Properties		278,714			246,340			223,518			199,072			128,770
Multifamily Residential Properties		36,257			24,786			30,084			18,366			13,660
Nonfarm Nonresidential Properties		421,342			504,368			458,070			376,302			220,593
Consumer		60,431			61,757			48,923			47,608			40,012

Total Loans	$	1,982,555		$	2,184,822		$	1,903,568		$	1,273,683		$	846,818
Unearned Income		(1,079	)		(2,509	)		(2,467	)		(1,564	)		(1,053	)

Total Net Loans	$	1,981,476		$	2,182,313		$	1,901,101		$	1,272,119		$	845,765

Percentage of Total Portfolio:
Commercial and Industrial		7.96	%		7.40	%		7.50	%		8.36	%		10.24	%
Agricultural		0.06	%		0.06	%		0.11	%		0.24	%		0.37	%
Real Estate—Construction, Land and Land Development		50.16	%		53.42	%		51.63	%		40.67	%		41.40	%
Real Estate—Mortgage:
Farmland		1.67	%		0.86	%		0.89	%		0.44	%		0.45	%
1-4 Family Residential Properties		14.07	%		11.29	%		11.76	%		15.65	%		15.23	%
Multifamily Residential Properties		1.83	%		1.14	%		1.58	%		1.44	%		1.62	%
Nonfarm Nonresidential Properties		21.26	%		23.11	%		24.09	%		29.58	%		26.08	%
Consumer		3.04	%		2.83	%		2.57	%		3.74	%		4.73	%

Total Loans		100.05	%		100.11	%		100.13	%		100.12	%		100.12	%
Unearned Income		(0.05	)%		(0.11	)%		(0.13	)%		(0.12	)%		(0.12	)%

Total Net Loans		100.00	%		100.00	%		100.00	%		100.00	%		100.00	%

As part of our plans to improve regulatory capital levels, we plan on reducing loans receivable during 2009 through charge-offs, principal repayments, and non-renewal of certain maturing loans.

Lending Limits

When the amount of a loan or loans to a single borrower or relationship exceeds an individual officer’s lending authority, the lending decision must be approved by a more senior officer with the requisite loan authority, or the lending decision will be made by the loan committee comprised of officers or the loan committee comprised of members of the Board of Directors.

Lending limits vary based on the type of loan and nature of the borrower. In general, however, we are able to loan to any one borrower a maximum amount equal to either 15% of total risk-based capital, or 25% of total risk-based capital if the amount that exceeds 15% is fully secured. As of December 31, 2008, our legal lending limit was approximately $20.2 million (unsecured) plus an additional $13.5 million (secured) for a total of approximately $33.7 million, for loans that meet federal and/or state collateral guidelines. Regardless of the legal lending limit, our internal guidelines limit the amount available to be loaned to any one borrowing relationship. We adjust the maximum amount available to any one borrower or relationship in accordance with an assigned credit grade. Every loan of material size is assigned a credit grade either by our credit administration department or by the appropriate approval committee, with grades denoting more credit risk receiving a lower in-house maximum. As a result, our exposure to loans with more risk is limited by the credit grades assigned to those loans. These credit grades are reviewed regularly by management, regulatory authorities and our external loan review vendor for appropriateness and applicability.

Underwriting

Collectively, our chief operating officer, chief credit officer, other senior members of corporate management, our Bank presidents and chief lending officers act as the primary lending officers for the Company. This experienced loan team developed credit underwriting and monitoring guidelines/policies while also delivering growth in our loan portfolio from 2004 to 2007. Due to the significant growth in our nonperforming assets, the problems in the residential real estate market and the national economy, we revised several factors within our loan underwriting system during 2008. Some of the more significant changes include:

•

Increased borrower’s equity in projects.

•

Geographic restrictions on financed projects.

•

Systematically reduce the level of residential acquisition and development loans in our portfolio.

•

Work toward greater diversification in the loan portfolio through increased originations of commercial real estate (nonresidential) loans and of commercial and industrial loans.

We believe we employ a prudent credit approval process and have developed a comprehensive risk-management system for monitoring and measuring the adequacy of our allowance for loan losses and anticipating net charge-offs. During 2008 we created a Problem Asset Resolution team to manage, track, project future levels of and dispose of nonperforming assets. This core group of nine people works with loan officers, credit administration officer and others throughout the organization to reduce the level and impact of nonperforming assets on the Company. During 2008 we also engaged a leading industry consultant to assist with management’s internal review and forecast of problem loans.

Risk Elements

Nonperforming assets consist of nonaccrual loans, loans past due 90 days or more as to interest or principal and still accruing, and other real estate owned, which is real estate acquired through foreclosure. Nonaccrual loans are those loans on which recognition of interest income has been discontinued. When management believes there is sufficient doubt as to the collectibility of principal or interest on any loan, or generally when loans are 90 days or more past due, the accrual of the applicable interest is discontinued and the loan is designated as “nonaccrual,” unless the loan is well secured and in the process of collection. Interest payments received on nonaccrual loans are applied against principal. Loans are returned to an accrual status when factors indicating

doubtful collectibility on a timely basis no longer exist. Other real estate owned is initially recorded at the lower of cost or estimated market value at the date of acquisition. A provision for estimated losses is recorded if a subsequent decline in value occurs.

Nonperforming assets at December 31, 2008 increased dramatically to approximately $327.3 million, or 15.76% of loans receivable and other real estate. This compares to approximately $79.1 million in nonperforming assets, or 3.58% of loans receivable and other real estate at December 31, 2007. The following table sets forth our nonperforming assets and allowance for loan losses at the end of the past five years.

NONPERFORMING ASSETS

(Dollars in thousands)


	December 31,
	2008			2007			2006			2005			2004
Nonperforming loans:
Nonaccrual loans	$	232,436		$	50,635		$	34,401		$	6,997		$	6,214
Loans 90 days or more past due and still accruing		146			242			—			—			—

Total nonperforming loans		232,582			50,877			34,401			6,997			6,214
Other real estate owned		94,717			28,175			2,775			2,394			1,991

Total nonperforming assets	$	327,299		$	79,052		$	37,176		$	9,391		$	8,205

Nonperforming assets to loans receivable and other real estate		15.76	%		3.58	%		1.95	%		0.74	%		0.97	%

Allowance for loan losses to nonperforming loans		25.56	%		62.30	%		64.93	%		230.78	%		175.46	%

The increase in nonperforming assets is primarily attributable to the significant slowdown in residential real estate sales that began in late summer of 2007 and has continued throughout 2008. A significant portion of the loan portfolios of our metropolitan Atlanta banks and SRES is concentrated in loans to residential builders and developers. With the significant slowing of home and land sales, the prices of homes and land have declined precipitously. Therefore, many of our customers who develop and sell residential real estate cannot service their loans because they are not generating any revenue.

At December 31, 2008, the 10 largest nonaccrual loans comprise $113.8 million or 49.0% of the total. Of these 10 loans, six are residential development loans and four are commercial real estate loans. A detail of the activity in nonperforming loans for the years ended December 31, 2008, 2007 and 2006 is as follows:


	2008			2007			2006
	(In thousands)
Nonaccrual loans at beginning of period	$	50,635		$	34,401		$	6,997
Activity during the period:
Additions, net		394,947			88,155			35,586
Foreclosures		(101,917	)		(48,623	)		(5,819	)
Charge-offs, net		(100,331	)		(23,298	)		(2,363	)
Upgrades to accrual status		(4,960	)		—			—
Principal collections		(5,938	)		—			—

Nonaccrual loans at end of period	$	232,436		$	50,635		$	34,401

Filing Compare · SECURITY BANK CORP