10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

x	Annual Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
	For The Fiscal Year December 31, 2008.
or
o	Transition Report Pursuant to Section 13 or 15 (d) of The Securities Exchange Act of 1934
	For the Transition Period from                        to

Commission file number: 001-16413

FIRST CENTURY BANCORP.

(Exact name of registrant as specified in its charter)

Georgia	58-2554464
(State of Incorporation)	(I.R.S. Employer Identification No.)
807 Dorsey Street, Gainesville, Georgia	30501
(Address of principal executive offices)	(Zip Code)

(770) 297-8060

(Telephone Number)

Securities registered pursuant to Section 12(b) of the Act:  None

Securities registered pursuant to Section 12(g) of the Act:  Common Stock

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes o    No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.

Yes o    No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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.

Yes x    No o

Indicate by check mark if disclosure of delinquent filers pursuant 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.  x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o Accelerated filer o Non-accelerated filer o Smaller reporing company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o    No x

The aggregate market value of the voting common stock held by non-affiliates of the registrant (computed by reference to the priceat which the common stock was recently sold) was $2,216,571 as of the last business day of the registrant’s most recently completed second fiscal quarter.

4,505,797 shares of the registrant’s common stock were outstanding as of March 23, 2009.

DOCUMENTS INCORPORATED BY REFERENCE

CAUTIONARY STATEMENT FOR PURPOSES OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

This report contains “forward-looking statements” relating to, without limitation, future economic performance, plans and objectives of management for future operations, and projections of revenues and other financial items that are based on the beliefs of management, as well as assumptions made by and information currently available to management.  The words “may,” “will,” “anticipate,” “should,” “would,” “believe,” “contemplate,” “expect,” “estimate,” “continue,” and “intend,” as well as other similar words and expressions of the future, are intended to identify forward-looking statements.  Our actual results may differ materially from the results discussed in the forward-looking statements, and our operating performance each quarter is subject to various risks and uncertainties that are discussed in detail in our filings with the Securities and Exchange Commission, including, without limitation:

·significant increases in competitive pressure in the banking and financial services industries;

·changes in the interest rates and their effects on the level of composition of deposits, loan demands, and the value of loan collateral, securities and other interest-sensitive assets and liabilities;

·the effects of the current global economic crisis, including, without limitation, the recent and dramatic deterioration of real estate values and credit and liquidity markets, as well as the Federal Reserve Board’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; the U.S. government’s proposed plan to purchase large amounts of illiquid mortgage-backed and other securities from financial institutions may not have the desired impact on the financial markets;

·governmental 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;

·our ability to control costs, expenses and loan delinquency rates;

·general economic conditions, either nationally or regionally and especially in our primary service area, becoming less favorable than expected resulting in, among other things, a deterioration in credit quality;

·changes occurring in business conditions and inflation;

·changes in technology;

·changes in deposit flow;

·the failure of our assumptions underlying the establishment of allowances for loan losses and other estimates, or dramatic changes in those underlying assumptions or judgments in future periods, that, in either case, render the allowance for loan losses inadequate or require that further provisions for loan losses be made;

·the anticipated rate of loan growth and the lack of seasoning of our loan portfolio;

·the amount of our real estate-based loans, and the weakness in the commercial real estate market;

·the rate of delinquencies and amounts of charge-offs;

·adverse changes in asset quality and resulting credit risk-related losses and expenses;

·loss of consumer confidence and economic disruptions resulting from terrorist activities;

·the effects of competition from other commercial banks, thrifts, mortgage banking firms, consumer finance companies, credit unions, securities brokerage firms, insurance companies, money market and other mutual funds and other financial institutions operating in our market area and elsewhere,

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including institutions operating regionally, nationally, and internationally, together with such competitors offering banking products and services by mail, telephone, computer and the Internet;

·changes in the securities markets; and

·other risks and uncertainties detailed from time to time in our filings with the Securities and Exchange Commission.

We undertake no obligation to publicly update or otherwise revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

Unless the context indicates otherwise, all references to “FCB,” “the Company,” “we,” “us” and “our” in this Annual Report on Form 10-K refer to First Century Bancorp. and our wholly owned subsidiary, First Century Bank, National Association (the “Bank”).

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PART I

Item 1.                    Business

First Century Bancorp.

We are a Georgia corporation organized in 2000 to serve as the holding company for First Century Bank, National Association, with its principal executive offices in Gainesville, Georgia.  We opened First Century Bank in March 2002.  The Bank is chartered and regulated by the Office of the Comptroller of the Currency (the “OCC”) and the Federal Deposit Insurance Corporation (the “FDIC”).  On September 20, 2007, we changed our name from NBOG Bancorporation, Inc. to First Century Bancorp.  The Bank’s name was also changed from The National Bank of Gainesville to First Century Bank, National Association.  Since our inception, we have focused on serving the banking needs of individuals and businesses that prefer community-oriented banking in the Gainesville and Hall County markets.  We currently engage in no business other than owning and managing the Bank.  As of December 31, 2008, on a consolidated basis, our total assets were $62.9 million, our total loans were $37.9 million, our total deposits were $57.1 million, and our total shareholders’ equity was approximately $3.2 million.

First Century Bank

Since the Bank’s opening in March 2002, the Bank has been primarily engaged in the business of accepting deposits insured by the FDIC and providing commercial, consumer and mortgage loans to the general public.  We operate under a traditional banking model, with a particular focus on real estate and small business lending.

Our net income is dependent primarily on our net interest income, which is the difference between the interest income earned on loans, investments, and other interest-earning assets and the interest paid on deposits and other interest-bearing liabilities.  To a lesser extent, our net income also is affected by our noninterest income derived principally from service charges and fees and income from the sale and/or servicing of financial assets such as loans and investments, as well as the level of noninterest expenses such as salaries, employee benefits and occupancy costs.

Our operations are significantly affected by prevailing economic conditions, competition, and the monetary, fiscal, and regulatory policies of governmental agencies. Lending activities are influenced by a number of factors, including the general credit needs of individuals and small and medium-sized businesses in our market areas, competition among lenders, the level of interest rates, and the availability of funds. Deposit flows and costs of funds are influenced by prevailing market rates of interest, primarily the rates paid on competing investments, account maturities, and the levels of personal income and savings in our market areas.

Pursuant to the terms of a formal agreement with the OCC, dated August 18, 2004, we committed to undertake certain actions, including the maintenance of specified capital levels, retention of senior management and the formulation of strategic and capital plans. Following discussions with the OCC, on January 26, 2006, our Board of Directors passed a resolution to identify, and enter into an agreement with, a strategic partner who would either purchase the entire institution or a significant interest in the institution, and the OCC agreed to a ninety day waiver of certain commitments contained in the formal agreement.

On May 5, 2006, we entered into a merger agreement with El Banco Financial Corporation (“El Banco”), previously known as Nuestra Tarjeta de Servicios, Inc., that provided, among other things, for us to be merged into El Banco in a two-step merger.  On October, 25, 2006, the parties mutually agreed to terminate the pending merger agreement after concluding that receipt of regulatory approval would not be forthcoming on a timely enough basis to satisfy each party’s business requirements.

After a search of potential investors and third party acquirers in late 2006 and early 2007, we selected a proposal from William R. Blanton, to invest in the Company.  Mr. Blanton has 35 years of banking experience, with significant experience in the North Atlanta market.  Most recently he was with First Capital Bank where he served in various capacities including President from 1989 until its sale in 2005.  During his time with First Capital Bank, the bank’s assets grew from $30 million to $700 million.

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In April 2007, Mr. Blanton purchased 738,008 shares of our common stock in a private placement at $2.71 per share.  We also issued Mr. Blanton a warrant (the “Original Warrant”) to purchase up to 738,008 shares at $2.71 per share. The Original Warrant has no expiration date and contains provisions which provide for automatic adjustments in price and shares purchasable under the Original Warrant in the event additional securities are issued below or have a conversion or exercise price below the current Original Warrant exercise price.  We received proceeds of approximately $2,000,000 less fees and expenses related to the sale of the shares, which we used for working capital purposes. There were no brokerages or underwriting commissions paid in connection with the sale of the shares.

In December 2007, we completed a private placement of Series B Preferred Stock, no par value, for $10.00 per share, selling a total of $750,000 of shares.  The investors in that offering also received warrants (the “B Warrants”) to acquire 75,000 shares of common stock at an exercise price of $1.50 per share, which we believe was the fair market value of the common stock on the date of issuance of the B Warrants.  As with the Original Warrant, the B Warrants have no expiration date and contain provisions which provide for automatic adjustments in price and shares purchasable under the warrants in the event additional shares or warrants are issued below the current warrant exercise price.

As a result of the issuance of the B Warrants with an exercise price below the $2.71 exercise price, the exercise price and number of shares of common stock purchasable under the Original Warrant adjusted as follows: (a) with respect to Mr. Blanton, from 553,506 shares at $2.71 per share to 1,000,001 shares at $1.50 per share; and (b) with respect to Silver Hill Enterprises, LP, from 184,502 shares at $2.71 per share to 333,334 shares at $1.50 per share.

On February 5, 2008, the OCC issued a termination of our formal agreement.

In June 2008, Mr. Blanton and Silver Hill Enterprises, LP transferred a portion of the Original Warrant to purchase shares to John Allen Nivens, Jr. and Richard Kramer Whitehead, III, each a director of the Company and to Homestead Investment, LLC, which is controlled by the father of one of our directors, William A. Bagwell, Jr.

Following the transfers and the adjustments to the Original Warrant, the following persons hold rights to purchase shares of common stock at the exercise price of $1.50 under the Original Warrant and the B Warrants:  (i) Mr. Blanton holds rights to purchase 850,254 shares; (ii) Silver Hill Enterprises, LP holds rights to purchase 283,418 shares; (iii) Mr. Nivens holds rights to purchase 69,165 shares; (iv) Mr. Whitehead holds rights to purchase 69,165 shares; and (v) Homestead Investment, LLC and Mr. Bagwell collectively hold rights to purchase 136,332 shares.

Products and Services

                Deposit Services.  We offer a full range of interest-bearing and non-interest-bearing accounts, including commercial and retail checking accounts, money market accounts, individual retirement accounts, regular interest-bearing statement savings accounts and certificates of deposit with fixed rates along with a range of maturity date options.  The sources of deposits are residents, businesses, and employees of businesses within our market area, obtained through the personal solicitation of its officers and directors, direct mail solicitation, and advertisements published in the local media.  In addition, at times when needed, we may obtain deposits from other financial institutions through a nation-wide deposit network.  We pay competitive interest rates on time and savings deposits up to the maximum permitted by law or regulation.  In addition, we offer a service charge fee schedule competitive with other financial institutions in our market area, covering such matters as maintenance fees on checking accounts, per item processing fees on checking accounts, returned check charges and the like.

Credit Services.  We emphasize a range of lending services, includi ng real estate, commercial and consumer loans, to individuals and small-to medium-sized businesses and professional concerns that are located in or conduct a substantial portion of their business in our market area.  The principal economic risk associated with each category of loans that the Bank makes is the creditworthiness of the borrower.  Borrower creditworthiness is affected by general economic conditions and the strength of the relevant business market segment.  General economic factors affecting a borrower’s ability to repay include interest, inflation and employment rates, as well as other factors affecting a borrower’s customers, suppliers and employees.

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Real Estate Loans.  One of the primary components of our loan portfolio is loans secured by first or second mortgages on real estate.  As of December 31, 2008, loans secured by first or second mortgages on real estate made up approximately $30.9 million, or 82% of our loan portfolio.  These loans generally consist of commercial real estate loans, construction and development loans, and residential real estate loans.

·Commercial Real Estate Loans.  At December 31, 2008, our individual commercial real estate loans ranged in size from $9,300 to $1,666,000, with an average commercial real estate loan size of approximately $318,000.  Loan terms generally are limited to five years or less, although payments may be structured on a longer amortization basis.  Interest rates may be fixed or adjustable, and will more likely be fixed in the case of shorter term loans. We also make a concerted effort to establish rate floors to mitigate interest rate risk and improve margins.  We attempt to reduce credit risk in the commercial real estate portfolio by emphasizing loans on owner-occupied office and retail buildings where the loan-to-value ratio, established by independent appraisals, does not exceed 80%.  In addition, we typically require personal guarantees of the principal owners of the collateral property, combined with our review of the personal financial statements of the principal owners.  At December 31, 2008, commercial real estate loans (other than construction loans) totaled $12.4 million, or approximately 33% of our loan portfolio.  Some specific risks associated with commercial real estate loans include tenant vacancy rates and the quality of the borrower’s management.  As such, we place a heavy emphasis on owner occupied commercial real estate.  As of December 31, 2008, owner occupied loans totaled $9.8 million, and non-owner occupied loans totaled $2.7 million.

·Residential Real Estate Loans and Home Equity Loans.  At December 31, 2008, our individual residential real estate loans ranged in size from $10,000 to $875,000, with an average loan size of approximately $346,000.  Generally, we limit the loan-to-value ratio on our residential real estate loans to 85%.  We also offer home equity lines of credit.  At December 31, 2008, our individual home equity lines of credit ranged in size from $4,000 to $476,000, with an average loan size of approximately $142,000.  Our underwriting criteria for, and the risks associated with, home equity loans and lines of credit are generally the same as those for first mortgage loans.  Home equity lines of credit typically have terms of 10 years or less.  We limit the extension of credit to 85% of the available equity of each property.  At December 31, 2008, residential real estate loans (other than construction loans) totaled $14.0 million, or 37% of our loan portfolio.  Included in the residential real estate loans was $11.7 million, or 83% of our residential loan portfolio, in first and second mortgages on individuals’ homes, and $2.3 million, or 17% of our residential loan portfolio, in home equity loans.

·Construction and Development Real Estate Loans.  We offer adjustable and fixed rate residential and commercial construction loans to builders and developers and to consumers who wish to build their own homes.  At December 31, 2008, our construction and development real estate loans ranged in size from approximately $4,300 to $476,000, with an average loan size of approximately $141,175.  At December 31, 2008, our individual residential construction and development real estate loans ranged in size from approximately $60,000 to $70,000, with an average loan size of approximately $64,000.  The duration of our construction and development loans generally is limited to 12 months, although payments may be structured on a longer amortization basis.  Construction and development loans generally carry a higher degree of risk than long-term financing of existing properties because repayment depends on the ultimate completion of the project and usually on the sale of the property.  Specific risks include:

·cost overruns;

·mismanaged construction;

·inferior or improper construction techniques;

·economic changes or downturns during construction;

·a downturn in the real estate market;

·rising interest rates which may prevent sale of the property; and

·failure to sell completed projects in a timely manner.

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We attempt to reduce the risk associated with construction and development loans by obtaining personal guarantees and by keeping the loan-to-value ratio of the completed project at or below 80%, as well as analyzing global cash flow of each builder or developer and their personal liquidity.  At December 31, 2008, total construction loans amounted to $5.2 million, or 14% of our total loan portfolio.

Consumer Loans.  We make a variety of loans to individuals for personal and household purposes, including secured and unsecured installment and term loans and lines of credit. At December 31, 2008, our individual consumer loans ranged in size from $1,000 to $200,000, with an average loan size of approximately $12,100.  These loans typically carry balances of less than $25,000 and, in the case of non-revolving loans, are amortized over a period not to exceed 60 months.  The revolving loans typically bear interest at a fixed rate and require monthly payments of interest and a portion of the principal balance.  Consumer loans generally involve more risks than residential mortgage loans because the collateral for defaulted loans may not provide an adequate source of repayment of the principal due to damage to the collateral or other loss of value.  In addition, consumer loan performance depends upon the borrower’s continued financial stability and is therefore more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy.  At December 31, 2008, consumer loans amounted to $1.8 million, or 5% of our loan portfolio.

Commercial Loans.  We make loans for commercial purposes in various lines of businesses.  At December 31, 2008, our individual commercial business loans ranged in size from approximately $1,000 to $800,000, with an average loan size of approximately $ 74,000.  Equipment loans are typically for a term of five years or less at fixed or variable rates, with the loan fully amortized over the term and secured by the financed equipment and with a loan-to-value ratio of 80% or less.  Working capital loans typically have terms not exceeding one year and are usually secured by accounts receivable, inventory, or personal guarantees of the principals of the business.  For loans secured by accounts receivable or inventory, principal is typically repaid as the assets securing the loan are converted into cash, and in other cases principal is typically due at maturity.  Margining on accounts receivable is done based on those accounts that are current (60 days or less).  The quality of the commercial borrower’s management and its ability to both evaluate properly changes in the supply and demand characteristics affecting its markets for products and services and to respond effectively to such changes are significant factors in a commercial b orrower’s creditworthiness.  At December 31, 2008, commercial loans amounted to $4.5 million, or 12% of our loan portfolio.

Small Business Administration (“SBA”).  The SBA allows terms up to 25 years with no calls or balloons, depending upon the use of the proceeds, thus giving the borrower the ability to repay the loan over a longer term than offered under our normal guidelines and to make loans which may not meet all of our normal underwriting criteria.  These loans typically are partially guaranteed by the government, which helps to reduce their risk.  Government guarantees of SBA loans do n ot exceed, and are generally less than, 80% of the loan.  As of December 31, 2008, we had not originated any SBA loans.

Online Mortgage Division.  On January 29, 2008 we launched our online lending division, Century Point Mortgage (“Century Point”).  Century Point is an Internet-based lender with offices located in Atlanta, Georgia.  We anticipate that Century Point will serve borrowers in all fifty states and the District of Columbia, offering a full line of mortgage products, including loans for purchase or refinancing of primary residences, second homes and investment property, as well as ho me equity loans.  We offer traditional mortgage services through Century Point and intend to generally limit our mortgage originations to conforming Fannie Mae and Freddie Mac loans.  We do not anticipate originating any subprime mortgages.  Prior to closing on these loans, we will have commitments to sell these loans.  At December 31, 2008, the Bank had loans held for sale of $1.9 million.

Loan Approval and Review.  Certain credit risks are inherent in making loans.  These include prepayment risks, risks resulting from uncertainties in the future value of collateral, risks resulting from changes in economic and industry conditions, and risks inherent in dealing with individual borrowers.  We attempt to mitigate repayment risks by adhering to internal credit policies and procedures.  These policies and procedures include officer and customer lending limits, a multi-layered approval process for larger loans, documentation examination, and follow-up procedures for any exceptions to credit policies.  Our loan approval policies provide for various levels of officer lending authority.  When the amount of aggregate loans to a single borrower exceeds an individual officer’s lending authority, the loan request will be reviewed by an officer with a higher lending authority.  We have established a loan committee of the board of directors that must approve any loan that exceeds the lending limit of the Officer’s

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Loan Committee which consists of the chief executive officer, chief lending officer and three market presidents.  We will not make any loans to any director, officer, or employee on terms more favorable to such person than would be available to an unaffiliated person.

Other Services.  In addition to deposit and loan services, the Bank offers banking, travelers’ checks, direct deposit of payroll and social security checks, and automatic drafts for various accounts.  The Bank is a member of a network of automated teller machines that may be used by customers in major cities throughout Georgia, the United States, and in various cities worldwide.  The Bank offers VISA and MasterCard credit cards and merchant credit card processing to the Bank’s customers through third party vendors.  In May 2007, the Bank began offering internet banking services through a third party vendor relationship.  Cash management, bill pay services and e-Statements were introduced in October 2008.  The Bank currently offers telephone banking and online item images as well which allows the customer to view images of their cleared checks via connection to the internet through a secure link in the Bank’s website.

Lending Policies

The Bank’s lending activities are subject to a variety of lending limits imposed by federal law.  Differing limits apply based on the type of loan and the nature of the borrower, including the borrower’s relationship to the Bank.  In general, however, the Bank is able to loan any one borrower a maximum amount equal to either:

·15% of the Bank’s capital and surplus; or

·25% of its capital and surplus if the excess over 15% is within federal guidelines, which provides an exception to the 15% limit for debt secured by readily marketable collateral, as defined by OCC regulations.

The Bank complies with the statutory lending limits, as described above.  As of December 31, 2008, our legal lending limit to one borrower was approximately $569,000.  We seek to sell loan participations to other financial institutions to meet the needs of customers requiring loans above these limits.  Nevertheless, because this amount is substantially lower than the lending limit for most of our competitors, it is difficult for us to compete for many loan relationships.  The Bank’s legal lending limits will increase or decrease as the Bank’s capital increases or decreases as a result of, among other reasons, its earnings o r losses.

The interagency guidelines adopted by federal bank regulators, including the OCC, mandate that financial institutions establish real estate lending policies and establishing particular minimum real estate loan-to-value standards.  The Bank has adopted these federal standards as its minimum standards.  These standards require maximum loan-to-value ratios for various types of real estate loans, although the Bank may make exceptions to the maximum guidelines, such exceptions must be accounted for and tracked.

Asset Management Policies

A committee composed of the senior officers of the Bank is charged with managing the Bank’s assets and liabilities pursuant to policies established by the Asset/Liability and Investment Committee of the Board of Directors (the “Asset/Liability Committee”).  The Asset/Liability Committee attempts to manage asset growth, liquidity and capital in order to optimize income and reduce interest-rate risk.  The Asset/Liability Committee directs the Bank’s overall acquisition and allocation of funds.  The Management Committee meets with the Asset/Liability Committee on a quarterly basis.  The Asset/Liability Committee reviews and discusses the monthly asset and liability funds budget in relation to the actual flow of funds, as well as peer group comparisons; the ratio of the amount of rate-sensitive assets to the amount of rate-sensitive liabilities; local market rates and rate forecasts; and other variables, such as expected loan demand, expected loan and deposit maturities, investment opportunities, core deposit growth within specified categories, regulatory changes, monetary policy adjustments and the overall state of the economy.

The Bank’s investment policy is to optimize income, consistent with liquidity, asset quality and regulatory constraints.  The policy is reviewed from time to time by the Board of Directors of the Bank.  Individual transactions, portfolio composition and performance are reviewed and approved monthly by the Board of Directors

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or a committee thereof.  Management of the Bank implements the policy and reports to the full Board of Directors on a quarterly basis information concerning sales, purchases, resultant gains or losses, average maturity, federal taxable equivalent yields, and appreciation or depreciation by investment categories.

Correspondent banking involves the provision of services by one bank to another bank which cannot provide that service for itself from an economic or practical standpoint.  The Bank has purchased correspondent services offered by larger banks, including check collections, services relating to the purchase of Federal Funds, security safekeeping, investment services, coin and currency supplies, overline and liquidity loan participations and sales of loans to or participations with correspondent banks.  The Bank sells loan participations to correspondent banks with respect to loans that exceed the Bank’s lending limit.  As compensation for services provided by a correspondent, the Bank may maintain balances with such correspondents in noninterest-bearing accounts.

Market Opportunities and Competition

The Bank primarily serves the northern Georgia market of Hall County, including Gainesville and five smaller municipalities.  Hall County has a population of approximately 139,000 and encompasses 394 square miles.  Lake Lanier, a manmade lake with 607 miles of shoreline, forms the county’s western boundary.  Gainesville, the county seat, is situated approximately 50 miles northeast of Atlanta and 100 miles southwest of Greenville, South Carolina.  According to the 2000 Census, the median income for a family in Hall County was $50,100.

In addition, we have identified growth markets throughout northern Georgia, including expansion into South Hall County, Oconee County and Athens-Clarke County.  In May 2008, we opened a loan production office in Oakwood, Georgia.  In June 2008, we also opened an additional loan production office in Athens, Georgia.  Subject to regulatory approval, we intend to open branch offices in these locations within the next six months.

The Bank competes as a financial intermediary with other lenders and deposit-takers, including other commercial banks, thrift institutions, credit unions, finance companies, mutual funds, insurance companies, and brokerage companies and investment banking firms.  According to information provided by the FDIC, as of June 30, 2008, there were 60 offices of 18 banks operating in Hall County with a total of approximately $2.6 billion in deposits.  As of June 30, 2008, the Bank had approximately 1.55% of the deposit market share.  In addition to competition from large national and regional banks, including Regions Bank, Wachovia Bank, N.A., SunTrust Bank and Bank of America, N.A., the Bank also competes with a number of local competitors, including Gainesville Bank & Trust, United Community Bank and Peach State Bank.

Employees

As of December 31, 2008, we had 26 full-time employees.  We consider the relationship with our employees to be good.

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SUPERVISION AND REGULATION

Both the Company and the Bank are subject to extensive state and federal banking laws and regulations that impose specific requirements or restrictions on and provide for general regulatory oversight of virtually all aspects of our operations.  These laws and regulations are generally intended to protect depositors, not shareholders.  The following summary is not an exhaustive list of applicable laws and regulations and is qualified by reference to the statutory and regulatory provisions discussed.  Changes in applicable laws or regulations may have a material effect on our business and prospects.  Our operations may be affected by legislative changes and the policies of various regulatory authorities.  We cannot predict the effect that fiscal or monetary policies, economic control, or new federal or state legislation may have on our business and earnings in the future.

The following discussion is not intended to be a complete list of all the activities regulated by the banking laws or of the impact of such laws and regulations on our operations.  It is intended only to briefly summarize some material provisions.

First Century Bancorp.

We own 100% of the outstanding capital stock of the Bank, and therefore we are a bank holding company under the federal Bank Holding Company Act of 1956 (the “Bank Holding Company Act”). As a result, we are primarily subject to the supervision, examination and reporting requirements of the Board of Governors of the Federal Reserve (the “Federal Reserve Board”) under the Bank Holding Company Act and its regulations promulgated thereunder.  Moreover, because we control a national bank located in Georgia, we are a bank holding company for purposes of the Georgia Bank Holding Company Act as well.

Permitted Activities.  Under the Bank Holding Company Act, a bank holding company is generally permitted to engage in, or acquire direct or indirect control of more than 5% of the voting shares of any company engaged in the following activities:

·banking or managing or controlling banks;

·furnishing services to or performing services for our subsidiaries; and

·any activity that the Federal Reserve Board determines to be so closely related to banking as to be a proper incident to the business of banking.

Activities that the Federal Reserve Board has found by regulation to be so closely related to banking as to be a proper incident to the business of banking include:

·factoring accounts receivable;

·making, acquiring, brokering or servicing loans and related activities;

·leasing personal or real property;

·operating a non-bank depository institution;

·trust company functions;

·financial and investment advisory activities;

·conducting agency and riskless principal securities brokerage activities;

·underwriting and dealing in government obligations and money market instruments;

·foreign exchange activities;

·engaging in certain derivative and similar contracts as principal;

·providing specified management consulting and counseling activities;

·performing selected data processing, courier and other support services;

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·acting as agent or broker, and in some cases principal, in selling credit life insurance and other types of insurance in connection with credit transactions;

·performing selected insurance underwriting activities;

·performing community development activities; and

·issuing and selling money orders, savings bonds and traveler’s checks.

As a bank holding company, we also can elect to be treated as a “financial holding company,” which would allow us to engage in a broader array of activities.  In sum, a financial holding company can engage in activities that are financial in nature or incidental or complementary to financial activities, including expanded insurance underwriting, sales and brokerage activities, expanded securities brokerage activities and certain merchant banking activities.  We have not sought financial holding company status, but may elect such status in the future as our business matures.  If we were to elect financial holding company status, each insured depository institution we control would have to have and maintain well capitalized and well managed status, and a satisfactory rating under the Community Reinvestment Act (discussed below).

The Federal Reserve Board has the authority to order a bank holding company or its subsidiaries to terminate any of these activities or to terminate its ownership or control of any subsidiary when it has reasonable cause to believe that the bank holding company’s continued ownership, activity or control constitutes a serious risk to the financial safety, soundness or stability of it or any of its bank subsidiaries.  Further, federal bank regulatory authorities have discretion to require a bank holding company to divest itself of any bank or non-bank subsidiary if the agency determines that divestiture may aid the depository institution’s financial condition.

Change in Control.  In addition, and subject to certain exceptions, the Bank Holding Company Act and the Change in Bank Control Act, together with regulations promulgated thereunder, require Federal Reserve Board approval prior to any person or company acquiring “control” of a bank holding company.  Control is conclusively presumed to exist if an individual or company acquires 25% or more of any class of voting securities of a bank holding company.  Following the relaxing of these restrictions by the Federal Reserve Board in September 2008, control will be rebuttably presumed to exist if a person acquires 33% of the total equity of a bank or bank holding company, of which it may own, contol or have the power to vote not more than 15% of any class of voting securities.

Source of Strength.  In accordance with Federal Reserve Board policy, we are expected to act as a source of financial strength to the Bank and to commit resources to support the Bank in circumstances in which we might not otherwise do so.  Under the Bank Holding Company Act, the Federal Reserve Board may require a bank holding company to terminate any activity or relinquish control of a non-bank subsidiary, other than a non-bank subsidiary of a bank, upon the Federal Reserve Board’s determination that such activity or control constitutes a serious risk to the financial soundness or stability of any depository institution subsidiary of a bank holding company.  Further, federal bank regulatory authorities have additional discretion to require a bank holding company to divest itself of any bank or non-bank subsidiaries if the agency determines that divestiture may aid the depository institution’s financial condition.  Further, any loans by a bank holding company to a subsidiary bank are subordinate in right of payment to deposits and certain other indebtedness of the subsidiary bank.  In the event of a bank holding company’s bankruptcy, any commitment by the bank holding company to a federal 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 payment.

Capital Requirements.  The Federal Reserve Board imposes certain capital requirements on the bank holding company under the Bank Holding Company Act, including a minimum leverage ratio and a minimum ratio of “qualifying” capital to risk-weighted assets.  These requirements are essentially the same as those that apply to the Bank and are described below under “First Century Bank.”  Under the Federal Reserve Board’s Small Bank Holding Company Policy Statement, our ability to take on debt, thus increasing our leverage ratios, is less strictly applied as compared to larger bank holding companies, and we are not held to the specific capital guidelines applicable to those larger bank holding companies.  Nonetheless, we are required to serve as a source of strength to the Bank.  We are able to borrow money to make a capital contribution to the Bank, and these loans may be repaid from dividends paid from the Bank to the Company.  We are also able to raise capital for contribution to the Bank

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by issuing securities without having to receive regulatory approval, subject to compliance with federal and state securities laws.

Our ability to pay dividends is subject to regulatory restrictions as described below in “First Century Bank — Dividends.”

First Century Bank

The Bank operates as a national banking association incorporated under the laws of the United States and subject to examination by the OCC.  Deposits in the Bank are insured by the FDIC up to a maximum amount which is $100,000 for each non-retirement depositor and $250,000 for certain retirement-account depositors.  However, the FDIC has increased the coverage up to $250,000 for each non-retirement depositor through December 31, 2009, and the Bank is participating in the FDIC’s Temporary Liquidity Guarantee Program (discussed below in greater detail) which, in part, fully insures non-interest bearing transaction accounts.  The OCC and the FDIC regulate or monitor virtually all areas of the Bank’s operations, including:

·security devices and procedures;

·adequacy of capitalization and loss reserves;

·loans;

·investments;

·borrowings;

·deposits;

·mergers;

·issuances of securities;

·payment of dividends;

·interest rates payable on deposits;

·interest rates or fees chargeable on loans;

·establishment of branches;

·corporate reorganizations;

·maintenance of books and records; and

·adequacy of staff training to carry on safe lending and deposit gathering practices.

The OCC requires that the Bank maintain specified ratios of capital to assets and imposes limitations on the Bank’s aggregate investment in real estate, bank premises, and furniture and fixtures.  Two categories of regulatory capital are used in calculating these ratios—Tier 1 capital and total capital.  Tier 1 capital generally includes common equity, retained earnings, a limited amount of qualifying preferred stock, and qualifying minority interests in consolidated subsidiaries, reduced by goodwill and certain other intangible assets, such as core deposit intangibles, and certain other assets.  Total capital generally consists of Tier 1 capital plus Tier 2 capital, which includes the allowance for loan losses, preferred stock that did not qualify as Tier 1 capital, certain types of subordinated debt and a limited amount of other items.

The Bank is required to calculate three capital ratios:  the ratio of Tier 1 capital to risk-weighted assets, the ratio of total capital to risk-weighted assets, and the “leverage ratio,” which is the ratio of Tier 1 capital to average assets on a non-risk-adjusted basis. For the two ratios of capital to risk-weighted assets, certain assets, such as cash and U.S. Treasury securities, have a zero risk weighting. Others, such as commercial and consumer loans, have a 100% risk weighting. Some assets, notably purchase-money loans secured by first-liens on residential real property, are risk-weighted at 50%. Assets also include amounts that represent the potential funding of off-balance sheet obligations such as loan commitments and letters of credit. These potential assets are assigned to risk categories in

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the same manner as funded assets. The total assets in each category are multiplied by the appropriate risk weighting to determine risk-adjusted assets for the capital calculations.

Under the terms of the formal agreement, which was terminated by the OCC on February 5, 2008, the Bank was required to maintain a total capital ratio to risk-weighted assets of at least 14% and a Tier 1 Capital to average assets of at least 9%.  Since the formal agreement has been terminated, the minimum guideline for the ratio of total capital to risk-weighted assets is 8% and Tier 1 Capital must equal at least 4% of risk-weighted assets.  To be eligible to be classified as “well-capitalized,” the Bank must generally maintain a total capital ratio of 10% or more, a Tier 1 capital ratio of 6% or more, and a leverage ratio of 5% or more.  At December 31, 2008, our ratio of total capital to risk-weighted assets was 9.29%, our ratio of Tier 1 Capital to risk-weighted assets was 8.04% and our ratio of Tier 1 Capital to average assets was 6.07%.

In addition, the Federal Reserve Board has established minimum leverage ratio guidelines for bank holding companies.  These guidelines provide for a minimum ratio of Tier 1 Capital to total assets, less goodwill and other specified intangible assets, of 3% for bank holding companies that meet specified criteria, including having the highest regulatory rating and implementing the Federal Reserve Board’s risk-based capital measure for market risk.  All other bank holding companies generally are required to maintain a leverage ratio of at least 4%.  The guidelines also provide that bank holding companies experiencing internal growth or making acquisitions will be expected to maintain strong capital positions substantially above the minimum supervisory levels without reliance on intangible assets.  The Federal Reserve Board considers the leverage ratio and other indicators of capital strength in evaluating proposals for expansion or new activities.

Failure to meet capital guidelines could subject a bank or bank holding company to a variety of enforcement remedies, including issuance of a capital directive, the termination of deposit insurance by the FDIC, a prohibition on accepting brokered deposits, and other restrictions on its business.  As described below, significant additional restrictions can be imposed on FDIC-insured depository institutions that fail to meet applicable capital requirements.  See “First Century Bank—Prompt Corrective Action.”

 Prompt Corrective Action.  The Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”) established a “prompt corrective action” program under which every bank is placed in one of five regulatory categories, depending primarily on its regulatory capital levels.  The OCC and the other federal banking regulators are permitted to take increasingly severe action as a bank’s capital position or financial condition declines below the “Adequately Capitalized” level described below.  Regulators are also empowered to place in receivership or require the sale of a bank to another depository institution when a bank’s leverage ratio reaches 2%. Better capitalized institutions are generally subject to less onerous regulation and supervision than banks with lesser amounts of capital.  The OCC’s regulations set forth five capital categories, each with specific regulatory consequences.  The categories are:

·Well Capitalized — The institution exceeds the required minimum level for each relevant capital measure.  A well capitalized institution is one (i) having a total capital ratio of 10% or greater, (ii) having a Tier 1 capital ratio of 6% or greater, (iii) having a leverage capital ratio of 5% or greater and (iv) that is not subject to any order or written directive to meet and maintain a specific capital level for any capital measure.

·Adequately Capitalized — The institution meets the required minimum level for each relevant capital measure.  No capital distribution may be made that would result in the institution becoming undercapitalized.  An adequately capitalized institution is one (i) having a total capital ratio of 8% or greater, (ii) having a Tier 1 capital ratio of 4% or greater and (iii) having a leverage capital ratio of 4% or greater or a leverage capital ratio of 3% or greater if the institution is rated composite 1 under the CAMELS (Capital, Assets, Management, Earnings, Liquidity and Sensitivity to market risk) rating system.

·Undercapitalized — The institution fails to meet the required minimum level for any relevant capital measure.  An undercapitalized institution is one (i) having a total capital ratio of less than 8%, (ii) having a Tier 1 capital ratio of less than 4% or (iii) having a leverage capital ratio of less

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than 4%, or if the institution is rated a composite 1 under the CAMELS rating system, a leverage capital ratio of less than 3%.

·Significantly Undercapitalized — The institution is significantly below the required minimum level for any relevant capital measure.  A significantly undercapitalized institution is one (i) having a total capital ratio of less than 6%, (ii) having a Tier 1 capital ratio of less than 3% or (iii) having a leverage capital ratio of less than 3%.

·Critically Undercapitalized — The institution fails to meet a critical capital level set by the appropriate federal banking agency.  A critically undercapitalized institution is one having a ratio of tangible equity to total assets that is equal to or less than 2%.

If the OCC determines, after notice and an opportunity for hearing, that the Bank is in an unsafe or unsound condition, the regulator is authorized to reclassify the Bank to the next lower capital category (other than critically undercapitalized) and require the submission of a plan to correct the unsafe or unsound condition.

If a bank is not well capitalized, it cannot accept brokered time deposits without prior FDIC approval and, if approval is granted, cannot offer an effective yield in excess of 75 basis points on interests paid on deposits of comparable size and maturity in such institution’s normal market area for deposits accepted from within its normal market area, or national rate paid on deposits of comparable size and maturity for deposits accepted outside the bank’s normal market area.  Moreover, if a bank becomes less than adequately capitalized, it must adopt a capital restoration plan acceptable to its primary federal regulator that is subject to a limited performance guarantee by its holding company.  The bank also would become subject to increased regulatory oversight, and would be increasingly restricted in the scope of its permissible activities.  Except under limited circumstances consistent with an accepted capital restoration plan, an undercapitalized institution may not grow.  An undercapitalized institution may not acquire another institution, establish additional branch offices or engage in any new line of business unless determined by the appropriate Federal banking agency to be consistent with an accepted capital restoration plan, or unless the FDIC determines that the proposed action will further the purpose of prompt corrective action.  The appropriate federal banking agency may take any action authorized for a significantly undercapitalized institution if an undercapitalized institution fails to submit an acceptable capital restoration plan or fails in any material respect to implement a plan accepted by the agency.  A critically undercapitalized institution is subject to having a receiver or conservator appointed to manage its affairs and for loss of its charter to conduct banking activities.

An insured depository institution may not pay a management fee to a bank holding company controlling that institution or any other person having control of the institution if, after making the payment, the institution, would be undercapitalized.  In addition, an institution cannot make a capital distribution, such as a dividend or other distribution that is in substance a distribution of capital to the owners of the institution if following such a distribution the institution would be undercapitalized.  Thus, if payment of such a management fee or the making of such would cause the Bank to become undercapitalized, it could not pay a management fee or dividend to us.

As of December 31, 2008, the Bank was “adequately capitalized.”

Standards for Safety and Soundness.     The Federal Deposit Insurance Act (the “FDIA”) also requires the federal banking regulatory agencies to prescribe, by regulation or guideline, operational and managerial standards for all insured depository institutions relating to: (i) internal controls, information systems and internal audit systems; (ii) loan documentation; (iii) credit underwriting; (iv) interest rate risk exposure; and (v) 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 banking agencies have adopted regulations and Interagency Guidelines Prescribing Standards for Safety and Soundness to implement these required standards. These guidelines set forth the safety and soundness standards that the federal banking agencies use to identify and address problems at insured depository institutions before capital becomes impaired.  Under the regulations, if the OCC determines that the Bank fails to meet any standards prescribed by the guidelines, the agency may require the Bank to submit to the agency an acceptable plan to achieve compliance with the standard.  The final regulations establish deadlines for the submission and review of such safety and soundness compliance plans.

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Recent Legislative and Regulatory Initiatives to Address Financial and Economic Crises.  The Congress, Treasury Department and the federal banking regulators, including the FDIC, have taken broad action since early September 2008 to address volatility in the U.S. banking system.

In October 2008, the Emergency Economic Stabilization Act of 2008 (“EESA”) was enacted. The EESA authorizes the Treasury Department to purchase from financial institutions and their holding companies up to $700 billion in mortgage loans, mortgage-related securities and certain other financial instruments, including debt and equity securities issued by financial institutions and their holding companies in the troubled asset relief program (“TARP”).  The purpose of TARP is to restore confidence and stability to the U.S. banking system and to encourage financial institutions to increase their lending to customers and to each other.  The Treasury Department has allocated $250 billion towards the TARP Capital Purchase Program (“CPP”).  Under the CPP, Treasury will purchase debt or equity securities from participating institutions.  The TARP also will include direct purchases or guarantees of troubled assets of financial institutions. Participants in the CPP are subject to executive compensation limits and are encouraged to expand their lending and mortgage loan modifications.

EESA also increased FDIC deposit insurance on most accounts from $100,000 to $250,000.  This increase is in place until the end of 2009 and is not covered by deposit insurance premiums paid by the banking industry.

Following a systemic risk determination, the FDIC established the Temporary Liquidity Guarantee Program (“TLGP”) on October 14, 2008.  The TLGP includes the Transaction Account Guarantee Program (“TAGP”), which provides unlimited deposit insurance coverage through December 31, 2009 for noninterest-bearing transaction accounts (typically business checking accounts) and certain funds swept into noninterest-bearing savings accounts.  Institutions participating in the TLGP pay a 10 basis points fee (annualized) on the balance of each covered account in excess of $250,000, while the extra deposit insurance is in place.  The TLGP also includes the Debt Guarantee Program (“DGP”), under which the FDIC guarantees certain senior unsecured debt of FDIC-insured institutions and their holding companies.  The unsecured debt must be issued on or after October 14, 2008 and not later than June 30, 2009, and the guarantee is effective through the earlier of the maturity date or June 30, 2012.  On March 17, 2009, the FDIC adopted an interim rule that extends the DGP and imposes surcharges on existing rates for certain debt issuances.  This extension allows institutions that have issued guaranteed debt before April 1, 2009 to issue guaranteed debt during the extended issuance period that ends on October 31, 2009.  For such institutions, the guarantee on debt issued on or after April 1, 2009, will expire no later than December 31, 2012.  The DGP coverage limit is generally 125% of the eligible entity’s eligible debt outstanding on September 30, 2008 and scheduled to mature on or before June 30, 2009 or, for certain insured institutions, 2% of their liabilities as of September 30, 2008.  Depending on the term of the debt maturity, the nonrefundable DGP fee ranges from 60 to 110 basis points (annualized) for covered debt outstanding until the earlier of maturity or June 30, 2012 and 75 to 125 basis points (annualized) for covered debt outstanding until after June 30, 2012.  The TAGP and DGP are in effect for all eligible entities, unless the entity opted out on or before December 5, 2008.  We did not opt out of the TAGP and the DGP.

Insurance of Accounts and Regulation by the FDIC.  The Bank’s deposits are insured up to applicable limits by the Deposit Insurance Fund of the FDIC.  The Deposit Insurance Fund is the successor to the Bank Insurance Fund and the Savings Association Insurance Fund, which were merged effective March 31, 2006.  As insurer, the FDIC imposes deposit insurance premiums and is authorized to conduct examinations of and to require reporting by FDIC insured institutions.  It also may prohibit any FDIC insured institution from engaging in any activity the FDIC determines by regulation or order to pose a serious risk to the insurance fund.  The FDIC also has the authority to initiate enforcement actions against savings institutions, after giving the Office of Thrift Supervision an opportunity to take such action, and may terminate the deposit insurance if it determines that the institution has engaged in unsafe or unsound practices or is in an unsafe or unsound condition.

Under regulations effective January 1, 2007, the FDIC adopted a new risk-based premium system that provides for quarterly assessments based on an insured institution’s ranking in one of four risk categories based upon supervisory and capital evaluations.  For deposits held as of March 31, 2009, institutions are assessed at annual rates ranging from 12 to 50 basis points, respectively, depending on each institution’s risk of default as measured by regulatory capital ratios and other supervisory measures.  Effective April 1, 2009, assessments will take into account each institution’s reliance on secured liabilities and brokered deposits.  This will result in assessments ranging from

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7 to 77.5 basis points.  We anticipate our future insurance costs to be higher than in previous periods.  However, we are not currently able to accurately determine the amount of additional costs.

FDIC insured institutions are required to pay a Financing Corporation assessment, in order to fund the interest on bonds issued to resolve thrift failures in the 1980s.  For the first quarter of 2009, the Financing Corporation assessment equaled 1.14 basis points for each $100 in domestic deposits.  These assessments, which may be revised based upon the level of deposits, will continue until the bonds mature in the years 2017 through 2019.

The FDIC may terminate the deposit insurance of any insured depository institution, including the bank, if it determines after a hearing that the institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC or the OCC.  It also may suspend deposit insurance temporarily during the hearing process for the permanent termination of insurance, if the institution has no tangible capital.  If insurance of accounts is terminated, the accounts at the institution at the time of the termination, less subsequent withdrawals, shall continue to be insured for a period of six months to two years, as determined by the FDIC.  Management of the bank is not aware of any practice, condition or violation that might lead to termination of the bank’s deposit insurance.

Regulatory Examination.     The OCC requires the Bank to prepare quarterly and annual reports on the Bank’s financial condition and to conduct an annual audit of its financial affairs in compliance with its minimum standards and procedures.

All insured institutions must undergo regular on-site examinations by their appropriate banking agency.  The cost of examinations of insured depository institutions and any affiliates may be assessed by the appropriate federal banking agency against each institution or affiliate as it deems necessary or appropriate.  Insured institutions are required to submit quarterly and annual reports to the FDIC, their federal regulatory agency, and state supervisor when applicable.  The FDIC has developed a method for insured depository institutions to provide supplemental disclosure of the estimated fair market value of assets and liabilities, to the extent feasible and practicable, in any balance sheet, financial statement, report of condition or any other report of any insured depository institution.  The federal banking regulatory agencies prescribe, by regulation, standards for all insured depository institutions and depository institution holding companies relating, among other things, to the following:

·internal controls;

·information systems and audit systems;

·loan documentation;

·credit underwriting;

·interest rate risk exposure; and

·asset quality.

Transactions with Affiliates and Insiders.  The Company is a legal entity separate and distinct from the Bank and its other subsidiaries.  Various legal limitations restrict the Bank from lending or otherwise supplying funds to the Company or its non-bank subsidiaries.  The Company and the Bank are subject to Sections 23A and 23B of the Federal Reserve Act and Federal Reserve Regulation W.  Section 23A of the Federal Reserve Act places limits on the amount of loans or extensions of credit to, of for the benefit of, or investments in, or certain other transactions with, affiliates and on the amount of advances to third parties collateralized by the securities or obligations of affiliates.  The aggregate of all covered transactions is limited in amount, as to any one affiliate, to 10% of the Bank’s capital and surplus and, as to all affiliates combined, to 20% of the Bank’s capital and surplus.  Furthermore, within the foregoing limitations as to amount, each covered transaction must meet specified collateral requirements of between 100 and 130% depending on the type of collateral.  The Bank is forbidden to purchase low quality assets from an affiliate.

Section 23B of the Federal Reserve Act, among other things, prohibits an institution from engaging in certain transactions with certain affiliates unless the transactions are on terms substantially the same, or at least as

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favorable to such institution or its subsidiaries, as those prevailing at the time for comparable transactions with nonaffiliated companies.

Regulation W generally excludes all non-bank and non-savings association subsidiaries of banks from treatment as affiliates, except to the extent that the Federal Reserve Board decides to treat these subsidiaries as affiliates. The regulation also limits the amount of loans that can be purchased by a bank from an affiliate to not more than 10% of the bank’s capital and surplus for any one affiliate or 20% of the bank’s capital and surplus for all affiliates.

The Bank is also subject to certain restrictions on extensions of credit to executive officers, directors, certain principal shareholders, and their related interests.  Such extensions of credit (i) must be made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with third parties and (ii) must not involve more than the normal risk of repayment or present other unfavorable features.

Commercial Real Estate Lending.  The Bank’s lending operations may be subject to enhanced scrutiny by the OCC based on its concentration of commercial real estate loans.  On December 6, 2006, the federal banking regulators issued final guidance to remind financial institutions of the risk posed by commercial real estate (“CRE”) lending concentrations.  CRE loans generally include land development, construction loans and loans secured by multifamily property, and nonfarm, nonresidential real property where the primary source of repayment is derived from rental income associated with the property.  The guidance prescribes the following guidelines for its examiners to help identify institutions that are potentially exposed to significant CRE risk and may warrant greater supervisory scrutiny:

·total reported loans for construction, land development and other land represent 100% or more of the institution’s total capital; or

·total CRE loans represent 300% or more of the institution’s total capital, and the outstanding balance of the institution’s commercial real estate loan portfolio has increased by 50% or more during the prior 36 months.

Branching.  National banks are required by the National Bank Act to adhere to branch office banking laws applicable to state banks in the states in which they are located.  Under current Georgia law, the Bank may open branch offices throughout Georgia with the prior approval of the OCC.  In addition, with prior regulatory approval, the Bank is able to acquire existing banking operations in Georgia.   Furthermore, federal legislation permits interstate branching, including out-of-state acquisitions by bank holding companies, interstate branching by banks if allowed by state law, and interstate merging by banks.  Georgia law, with limited exceptions, currently permits branching across state lines only through interstate mergers.

Anti-Tying Restrictions.  Under amendments to the Bank Holding Company Act and Federal Reserve Board 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 (i) the customer obtain or provide some additional credit, property, or services from or to the bank, the bank holding company or subsidiaries thereof or (ii) 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.

Community Reinvestment Act.  The Community Reinvestment Act requires that the OCC evaluate the record of the Bank in meeting the credit needs of its local community, including low and moderate income neighborhoods.  These factors are also considered in evaluating mergers, acquisitions, and applications to open a branch or facility.  Failure to adequately meet these criteria could impose additional requirements and limitations on the Bank.

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Finance Subsidiaries.  Under the Gramm-Leach-Bliley Act (the “GLBA”), subject to certain conditions imposed by their respective banking regulators, national and state-chartered banks are permitted to form “financial subsidiaries” that may conduct financial or incidental activities, thereby permitting bank subsidiaries to engage in certain activities that previously were impermissible.  The GLBA imposes several safeguards and restrictions on financial subsidiaries, including that the parent bank’s equity investment in the financial subsidiary be deducted from the bank’s assets and tangible equity for purposes of calculating the bank’s capital adequacy.   In addition, the GLBA imposes new restrictions on transactions between a bank and its financial subsidiaries similar to restrictions applicable to transactions between banks and non-bank affiliates.

Consumer Protection Regulations.  Activities of the Bank are subject to a variety of statutes and regulations designed to protect consumers.  Interest and other charges collected or contracted for by the Bank are subject to state usury laws and federal laws concerning interest rates.  The Bank’s loan operations are also subject to federal laws applicable to credit transactions, such as:

·the federal Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers;

·the Home Mortgage Disclosure Act of 1975, requiring 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;

·the Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit;

·the Fair Credit Reporting Act of 1978, governing the use and provision of information to credit reporting agencies;

·the Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies; and

·the rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws.

The deposit operations of the Bank also are subject to:

·the Truth-in-Savings Act, which establishes uniformity in the disclosure of terms and conditions regarding interest and fees on savings accounts;

·the Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records; and

·the Electronic Funds Transfer Act and Regulation E issued by the Federal Reserve Board to implement that Act, which governs 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.

Enforcement Powers.  The Bank and its “institution-affiliated parties,” including its management, employees, agents, independent contractors and consultants, such as attorneys and accountants and others who participate in the conduct of the financial institution’s affairs, are subject to potential civil and criminal penalties for violations of law, regulations or written orders of a government agency. These practices can include the failure of an institution to timely file required reports or the filing of false or misleading information or the submission of inaccurate reports.  Civil penalties may be as high as $1,000,000 a day for such violations.  Criminal penalties for some financial institution crimes have been increased to 20 years imprisonment.  Possible enforcement actions include the termination of deposit insurance.  Furthermore, banking agencies have authority to issue cease-and-desist orders, memoranda of understanding and other agreements.  Such orders may, among other things, require affirmative action to correct any harm resulting from a violation or practice, including restitution, reimbursement, indemnifications or guarantees against loss.  A financial institution may also be ordered to restrict its growth, dispose of certain assets, rescind agreements or contracts, or take other actions as determined by the ordering agency to be appropriate.

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Anti-Money Laundering.  Financial institutions must maintain anti-money laundering programs that include established internal policies, procedures, and controls; a designated compliance officer; an ongoing employee training program; and testing of the program by an independent audit function. Financial institutions are also prohibited from entering into specified financial transactions and account relationships and must meet enhanced standards for due diligence and “knowing your customer” in their dealings with foreign financial institutions and foreign customers. Financial institutions must take reasonable steps to conduct enhanced scrutiny of account relationships to guard against money laundering and to report any suspicious transactions, and these laws provide law enforcement authorities with increased access to financial information maintained by banks. Anti-money laundering obligations have been substantially strengthened as a result of the USA PATRIOT Act, enacted in 2001 and renewed in 2006. Bank regulators routinely examine institutions for compliance with these obligations and are required to consider compliance in connection with the regulatory review of applications. The regulatory authorities have been active in imposing “cease and desist” orders and money penalty sanctions against institutions found to be violating these obligations.

USA PATRIOT Act/Bank Secrecy Act and OFAC.  The USA PATRIOT Act, amended, in part, the Bank Secrecy Act and provides for the facilitation of information sharing among governmental entities and financial institutions for the purpose of combating terrorism and money laundering by enhancing anti-money laundering and financial transparency laws, as well as enhanced information collection tools and enforcement mechanics for the U.S. government, including: (i) requiring standards for verifying customer identification at account opening; (ii) rules to promote cooperation among financial institutions, regulators, and law enforcement entities in identifying parties that may be involved in terrorism or money laundering; (iii) reports by nonfinancial trades and businesses filed with the Treasury’s Financial Crimes Enforcement Network for transactions exceeding $10,000; and (iv) filing suspicious activities reports if a bank believes a customer may be violating U.S. laws and regulations.  These laws require enhanced due diligence for financial institutions that administer, maintain, or manage private bank accounts or correspondent accounts for non-U.S. persons.  Bank regulators routinely examine institutions for compliance with these obligations and are required to consider compliance in connection with the regulatory review of applications.

Under the USA PATRIOT Act, the FBI can send to the banking regulatory agencies lists of the names of persons suspected of involvement in terrorist activities.  The Bank can be requested to search its records for any relationships or transactions with persons on those lists.  If the Bank finds any relationships or transactions, it must file a suspicious activity report and contact the FBI.

The Office of Foreign Assets Control (“OFAC”), which is a division of the Treasury, is responsible for helping to insure that U.S. entities do not engage in transactions with known or suspected criminals or terrorists, as defined by various Executive Orders and Acts of Congress.  OFAC maintains a public list of persons and organizations suspected of aiding, harboring or engaging in terrorist or criminal acts.  If the Bank finds a name on any transaction, account or wire transfer that is on an OFAC list, it must confirm the legitimacy of the match, freeze such account, file a suspicious activity report and notify law enforcement.  The Bank has appointed an OFAC compliance officer to oversee the inspection of its accounts and the filing of any notifications.  The Bank performs checks of customer names utilizing software, which is updated each time a modification is made to the lists provided by OFAC and other agencies of Specially Designated Nationals and Blocked Persons.

Privacy and Credit Reporting.  Financial institutions are required to disclose their policies for collecting and protecting confidential information.  Customers generally may prevent financial institutions from sharing nonpublic personal financial information with nonaffiliated third parties except under narrow circumstances, such as the processing of transactions requested by the consumer.  Additionally, financial institutions generally may not disclose consumer account numbers to any nonaffiliated third party for use in telemarketing, direct mail marketing or other marketing to consumers.  It is the Bank’s policy not to disclose any personal information unless required by law.  The OCC and the federal banking agencies have prescribed standards for maintaining the security and confidentiality of consumer information.  The Bank is subject to such standards, as well as certain state laws and OCC guidance that require notification to consumers in the event of a security breach.

Like other lending institutions, the Bank utilizes credit bureau data in its underwriting activities.  Use of such data is regulated under the Federal Credit Reporting Act on a uniform, nationwide basis, including credit reporting, prescreening, sharing of information between affiliates, and the use of credit data.  The Fair and Accurate

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Credit Transactions Act of 2003 (the “FACT Act”) permits states to enact identity theft laws that are not inconsistent with the conduct required by the provisions of the FACT Act.

Check 21.  The Check Clearing for the 21st Century Act gives “substitute checks,” such as a digital image of a check and copies made from that image, the same legal standing as the original paper check.  Some of the major provisions include:

·allowing check truncation without making it mandatory;

·demanding that every financial institution communicate to accountholders in writing a description of its substitute check processing program and their rights under the law;

·legalizing substitutions for and replacements of paper checks without agreement from consumers;

·retaining in place the previously mandated electronic collection and return of checks between financial institutions only when individual agreements are in place;

·requiring that when accountholders request verification, financial institutions produce the original check (or a copy that accurately represents the original) and demonstrate that the account debit was accurate and valid; and

·requiring the re-crediting of funds to an individual’s account on the next business day after a consumer proves that the financial institution has erred.

Effect of Governmental Monetary Policies.  Our earnings are affected by domestic economic conditions and the monetary and fiscal policies of the United States government and its agencies.  The Federal Reserve Board’s monetary policies have had, and are likely to continue to have, an important impact on the operating results of commercial banks through the Federal Reserve Board’s power to implement national monetary policy in order, among other things, to curb inflation or combat a recession.  The monetary policies of the Federal Reserve Board have major effects upon the levels of bank loans, investments and deposits through its open market operations in United States government securities and through its regulation of the discount rate on borrowings of member banks and the reserve requirements against member bank deposits.  It is not possible to predict the nature or impact of future changes in monetary and fiscal policies.

Proposed Legislation and Regulatory Action.  New regulations and statutes are regularly proposed that contain wide-ranging proposals for altering the structures, regulations, and competitive relationships of the nation’s financial institutions.  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.

Formal Agreement

On August 18, 2004, the Bank entered a formal agreement with the OCC.  The formal agreement required specific actions to strengthen or correct identified weaknesses.  The Bank agreed to maintain a Total Capital to risk-weighted assets ratio of at least 14% and a Tier 1 Capital to adjusted total assets ratio of at least 9%.

In addition, the Bank committed to:

·adopt a written strategic plan covering at least a three-year period;

·review and revise its written loan policy;

·obtain an independent review of its loan program; and

·review the adequacy, and establish a program to maintain the adequacy of, its allow ance for loan losses.

On February 5, 2008, the OCC issued a Termination of the Agreement by and between the Bank and the Comptroller of the Currency pursuant to which the OCC determined that the protection of the depositors, other customers and shareholders of the Bank as well as the Bank’s safe and sound operation do not require the continued existence of the agreement.

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Federal Reserve Resolutions

On October 21, 2004, pursuant to the request of the Federal Reserve Bank of Atlanta, the Company’s Board of Directors adopted resolutions (the “Resolutions”) that provide that the Company shall not (without the prior written approval of the Federal Reserve Bank of Atlanta):

·incur debt (or take any action, such as refinancing) that would cause a change in debt instruments or a change in any of the terms of any existing debt instruments;

·declare or pay dividends to its shareholders; or

·reduce its capital position by purchasing or redeeming treasury stock.

The Resolutions also require quarterly financial information on the parent company, the subsidiary bank and written progress on the financial condition of the organization be provided to the Federal Reserve Bank of Atlanta.

Dividends

The Company is a legal entity separate and distinct from the Bank.  The principal sources of the Company’s cash flow, including cash flow to pay dividends to its shareholders, are dividends that the Bank pays to its sole shareholder, the Company.  Statutory and regulatory limitations apply to the Bank’s payment of dividends to the Company as well as to the Company’s payment of dividends to its shareholders.  The Bank is precluded from paying dividends until it is cumulatively profitable.  The Company is currently prohibited from paying dividends without Federal Reserve Bank of Atlanta approval pursuant to the Resolutions.

The Bank is required by federal law to obtain prior approval of OCC for payments of dividends if the total of all dividends declared by our Board of Directors in any year will exceed (1) the total of the Bank’s net profits for that year, plus (2) the Bank’s retained net profits of the preceding two years, less any required transfers to surplus.

The payment of dividends by the Company and the Bank may also be affected by other factors, such as the requirement to maintain adequate capital above regulatory guidelines.  If, in the opinion of the OCC, the Bank were engaged in or about to engage in an unsafe or unsound practice, the OCC could require, after notice and a hearing, that the Bank stop or refrain engaging in the practice.  The federal banking agencies have indicated that paying dividends that deplete a depository institution’s capital base to an inadequate level would be an unsafe and unsound banking practice.  Under the FDICIA, a depository institution may not pay any dividend if payment would cause it to become undercapitalized or if it already is undercapitalized.  Moreover, the federal agencies have issued policy statements that provide that bank holding companies and insured banks should generally only pay dividends out of current operating earnings.  See “First Century Bank—Prompt Corrective Action” above.

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Item 1A.                 Risk Factors.

Our business, financial condition, and results of operations could be harmed by any of the following risks, or other risks that have not been identified or which we believe are immaterial or unlikely. Shareholders should carefully consider the risks described below in conjunction with the other information in this Form 10-K and the information incorporated by reference in this Form 10-K, including our consolidated financial statements and related notes.  The risks discussed below include forward-looking statements, and our actual results may differ substantially from those discussed in these forward-looking statements.

We have experienced significant losses since our inception and have a significant accumulated deficit.

We experienced losses of $3.5 million in 2008, $1.7 million in 2007, and $1.2 million in 2006.  We also had an accumulated deficit of $7.6 million and $11.1 million at December 31, 2007 and December 31, 2008, respectively.  In the last several years, we have experienced a significant amount of management turn-over, been subject to a formal order with the OCC, and devoted a substantial amount of our time and attention to seeking a merger partner.  In late 2006, we terminated our merger agreement with El Banco Financial Corporation.  In many respects, the Bank was essentially reorganized with the investment and leadership of Mr. Blanton, our Chief Executive Officer.  We raised capital in two private placements in 2007, and the OCC terminated our formal agreement in February 2008.  We expect to become profitable beginning in the first quarter of 2009.  To become profitable, we must increase our net interest income and non-interest income above existing levels.  To accomplish this, we need to attract more customers and make more loans.  Although we believe we are taking the appropriate steps to accomplish these goals, there is a risk that we will not be successful and that we will never become profitable.

We have only recently adopted our new business plan and may not be able to implement it effectively.

Our future performance will depend on our ability to implement our new business plan successfully.  This implementation will involve a variety of complex tasks, including identifying and expanding into new geographic areas through branch expansion in the northern Georgia market, recruiting qualified executives and employees at all levels and integrating them within our organization, managing significant influx of capital and developing new services for our anticipated customers.  Any failure or delay in executing these initiatives, whether due to regulatory delays or for other reasons, which may be beyond our control, is likely to impede, and could ultimately preclude, our successful implementation of our business plan and could materially adversely affect our business, financial condition, and results of operations.

We may need to raise additional capital, which may not be available or may only be available on unfavorable terms.

Our strategic plan contemplates the infusion of significant capital.  If we are unable to raise significant capital, we will be required to modify our business plan.  If we proceed with our strategic plan with less than optimal capital, this shortage of capital may adversely affect our ability to implement our business plan and generate revenue.  Specifically, we are required by regulatory authorities to maintain adequate levels of capital to support our operations. We are limited in the amount we can loan a single borrower by the amount of the Bank’s capital.  Our legal lending limit is 15% of the Bank’s capital and surplus, or $569,000 at December 31, 2008.

In the future, if additional capital is needed, there can be no assurance that it will be available when desired or on such terms as we may find acceptable.  If we cannot raise additional capital when needed, our operations could be materially impaired.  In addition, future efforts to raise capital through the sale of securities could reduce the proportionate interest of our shareholders.

Our ability to estimate our loan loss reserves accurately may have an adverse effect on our financial performance.

Lending money is our primary business.  Our 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

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being made, the creditworthiness of the borrower over the term of the loan and, in the case of a collateralized loan, the quality of the collateral for the loan.

Our loan 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. Our management makes various assumptions and judgments about the collectibility 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 attempt to maintain an appropriate allowance for loan losses to provide for potential losses in our loan portfolio.  In determining the amount of the allowance, we consider several factors, including:

·an ongoing review of the quality, mix, and size of our overall loan portfolio;

·our historical loan loss experience;

·evaluation of economic conditions;

·regular reviews of loan delinquencies and loan portfolio quality; and

·the amount and quality of collateral, including guarantees, securing the loans.

However, there is no precise method of predicting credit losses, since any estimate of loan losses is necessarily subjective and the accuracy depends on the outcome of future events. Although we believe the allowance for loan losses is a reasonable estimate of known and inherent losses in our loan portfolio, we cannot fully predict such losses or that our loan loss allowance will be adequate in the future.  At December 31, 2008, our allowance for probable loan losses represented 2.2% of our total loans, 62.4% of our total non-performing assets, and 114.3% of our total non-performing loans.  If our loan losses exceed our allowance for probable loan losses, our business, financial condition and profitability will suffer.

In general, loans do not begin to show signs of credit deterioration or default until they have been outstanding for some period of time, a process we refer to as “seasoning.”  As a result, a portfolio of older loans will usually behave more predictably than a newer portfolio.  Because our loan portfolio is relatively new, the current level of delinquencies and defaults may not be representative of the level that will prevail when the portfolio becomes more seasoned, which may be higher than current levels.  If delinquencies and defaults increase, we may be required to increase our provision for loan losses, which would adversely affect our results of operations and financial condition.  Excessive loan losses could have a material impact on our financial performance. Consistent with our loan loss reserve methodology, we expect to make additions to our loan loss reserve levels as a result of our loan growth, which may affect our short-term earnings.

Federal regulators periodically review our allowance for loan losses and may require us to increase our provision for loan losses or recognize further loan charge-offs, based on judgments different than those of our management. Any increase in the amount of our provision or loans charged-off as required by these regulatory agencies could have a negative effect on our results of operations.

We will face risks with respect to future expansion and acquisitions or mergers.

We may seek to acquire other financial institutions or parts of those institutions.  We are in the early stage of discussions to combine operations with First Covenant Bank, a bank with $190 million in assets as of December 31, 2008, headquartered in Norcross, Georgia.  Any combination or acquisition would require the approval of the federal and state regulatory authorities.  In addition, the Bank has opened several new offices and we may also expand into new lines of business or offer new products or services.  Specifically, we have opened new loan production offices in Oakwood and Athens, Georgia.  Subject to regulatory approval, we intend to open branch offices in these and other cities in our target markets.

These activities would involve a number of risks, including:

·taking additional time and creating expense associated with identifying and evaluating potential acquisitions and merger partners;

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·using inaccurate estimates and judgments to evaluate credit, operations, management, and market risks with respect to the target institution or assets;

·diluting our existing shareholders in an acquisition;

·taking additional time and creating expense associated with evaluating new markets for expansion, hiring experienced local management, and opening new offices, as there may be a substantial time lag between these activities before we generate sufficient assets and deposits to support the costs of the expansion;

·taking a significant amount of time negotiating a transaction or working on expansion plans, resulting in management’s attention being diverted from the operation of our existing business;

·taking time and creating expense integrating the operations and personnel of the combined businesses;

·creating an adverse short-term effect on our results of operations; and

·losing key employees and customers as a result of an acquisition that is poorly received.

We have not acquired another institution and we lack experience in handling any of these risks.  In addition, there is also a risk that any expansion effort will not be successful.  Once opened, if these new branches are not able to increase or generate loan and deposit portfolios to a point where net interest income covers their start-up and operating costs, then our investment in these new markets will generate unsatisfactory or even negative returns and could materially adversely affect our business, financial condition, and results of operations.

Our success depends on our ability to identify and retain individuals with experience and relationships in the markets in which we compete.

Our success depends, in part, on our ability to identify and retain experienced key management members with local expertise and relationships in our market.  Recently, the Bank hired three new Market Presidents, Chris England, Kurt Hansen, and Michael Harris, to serve the markets of South Hall County (Oakwood), Gainesville, Oconee and Athens-Clarke Counties, respectively.  If these new officers fail to perform their duties satisfactorily or are unable to obtain loan and deposit market share, our investment in these new markets will generate unsatisfactory or even negative returns and could materially adversely affect our business, financial condition, and results of operations.

If any of the Bank’s senior officers were to leave the employ of the Bank or become unable to perform their duties for any reason, we would have to replace them.  We expect that competition for qualified management will be intense and that there will be a limited number of qualified persons with knowledge of and experience in the community banking industry in our markets.  Even if we identify individuals that we believe could assist us in growing our presence in the market, we may be unable to recruit these individuals away from more established banks.  In addition, the process of identifying and recruiting individuals with the combination of skills and attributes required to carry out our strategy is often lengthy.  Our inability to identify, recruit, and retain talented personnel would limit our growth and could materially adversely affect our business, financial condition, and results of operations.

We have previously identified weaknesses in our overall credit risk management process.

In a series of audits conducted during the last quarter of 2003 and first quarter of 2004 by the Bank’s internal and external auditors and the OCC, several weaknesses were identified in the overall credit risk management process of the Bank.  To address these weaknesses, bank management contracted with an independent loan review company, Professional Bank Services, Inc., to perform a major review of the Bank’s loan portfolio.  The purpose of the review was to identify problem loans and ensure proper reserves were allocated and/or the problem loans were charged-off.  Significant work was done to reduce loan exceptions which totaled over 1,400 at that time to less than a hundred at the completion of this effort.  The Bank’s policy for maximum loan exceptions today is 30.  A substantial number of loans were charged off during the 2003 and 2004 time frame based on the findings of the independent loan audit company and the Bank’s internal loan review.  The Bank continues to use the services of an external, independent loan review company.

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We are subject to extensive regulation that could limit or restrict our activities.

We operate in a highly regulated industry and are subject to examination, supervision, and comprehensive regulation by the OCC, the FDIC, and the Federal Reserve Board. Our compliance with these regulations is costly and restricts certain of our activities, including payment of dividends, mergers and acquisitions, investments, making loans, charging interest rates, paying interest rates on deposits, and locations of branches. We must also meet regulatory capital requirements. If we fail to meet these capital and other regulatory requirements, our financial condition, liquidity, and results of operations would be materially and adversely affected. Our current status as “adequately capitalized,” rather than “well capitalized” and any failure to remain “well managed” for regulatory purposes could affect customer confidence, our ability to grow, our cost of funds and FDIC insurance, our ability to pay dividends on our capital stock, and our ability to make acquisitions.

The laws and regulations applicable to the banking industry could change at any time, and we cannot predict the effects of these changes on our business and profitability. For example, new legislation or regulation could limit the manner in which we may conduct our business, including our ability to obtain financing, attract deposits, make loans and expand our business through opening new branch offices. Many of these regulations are intended to protect depositors, the public, and the FDIC, not shareholders. In addition, the burden imposed by these regulations may place us at a competitive disadvantage compared to competitors who are less regulated. The laws, regulations, interpretations, and enforcement policies that apply to us have been subject to significant change in recent years, sometimes retroactively applied, and may change significantly in the future. Our cost of compliance with these laws and regulations could adversely affect our ability to operate profitably. See “Supervision and Regulation.”

In addition, as a regulated entity, we are subject to examination and supervision and can be requested by our regulators to implement changes to our operations. We have addressed areas of regulatory concern, including interest rate risk, through the adoption of board resolutions and improved policies and procedures.

Moreover, changes in federal laws regarding the oversight of mortgage brokers and lenders could adversely affect our ability to originate, finance, and sell our residential mortgage loans. The enactment of federal laws, such as licensing requirements for mortgage bankers, applicable to the types of mortgage loans we originate could increase our costs of operations and adversely affect our origination volume, which would negatively impact our business, financial condition, and results of operation.

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

The capital and credit markets have been experiencing volatility and disruption for more than a year.  In recent months, the volatility and disruption has reached unprecedented levels.  In some cases, the markets have produced downward pressure on stock prices and credit availability for certain issuers without regard to those issuers’ underlying financial strength.

In response to financial conditions affecting the banking system and financial markets and the potential threats to the solvency of investment banks and other financial institutions, the United States government has taken unprecedented actions. On October 3, 2008, President Bush signed into law the EESA.  Pursuant to the EESA, the Treasury has the authority to, among other things, purchase mortgages, mortgage-backed securities, and other financial instruments from financial institutions for the purpose of stabilizing and providing liquidity to the U.S. financial markets. The Treasury announced the Capital Purchase Program under the EESA pursuant to which it has purchased and may continue to purchase senior preferred stock in participating financial institutions.  We do not know what actual impact the EESA will have on the financial markets, including the extreme levels of volatility and limited credit availability currently being experienced.  The failure of the EESA to help stabilize the financial markets and a continuation or worsening of current financial market conditions could materially adversely affect our business, financial condition, and results of operation.

In addition, the FDIC created the Temporary Liquidity Guarantee Program (“TGLP”) as part of a larger government effort to strengthen confidence and encourage liquidity in the nation’s banking system.  The TLGP has two components.  First, the TLGP includes the Transaction Account Guarantee Program (“TAGP”), which provides unlimited deposit insurance coverage through December 31, 2009 for non-interest-bearing transaction accounts

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(typically business checking accounts) and certain funds swept into noninterest-bearing savings accounts.  Institutions participating in the TLGP pay a basis point fee (annualized) on the balance of each covered account in excess of $250,000, while the extra deposit insurance is in place.  Second, the TLGP includes the Debt Guarantee Program (“DGP”), under which the FDIC guarantees certain senior unsecured debt of FDIC-insured institutions and their holding companies.  The unsecured debt must be issued on or after October 14, 2008 and not later than June 30, 2009, and the guarantee is effective through the earlier of the maturity date or June 30, 2012.  On March 17, 2009, the FDIC adopted an interim rule that extends the DGP and imposes surcharges on existing rates for certain debt issuances.  This extension allows institutions that have issued guaranteed debt before April 1, 2009 to issue guaranteed debt during the extended issuance period that ends on October 31, 2009.  For such institutions, the guarantee on debt issued on or after April 1, 2009, will expire no later than December 31, 2012.  The DGP coverage limit is generally 125% of the eligible entity’s eligible debt outstanding on September 30, 2008 and scheduled to mature on or before June 30, 2009 or, for certain insured institutions, 2% of their liabilities as of September 30, 2008.  Depending on the term of the debt maturity, the nonrefundable DGP fee ranges from 60 to 110 basis points (annualized) for covered debt outstanding until the earlier of maturity or June 30, 2012 and 75 to 125 basis points (annualized) for covered debt outstanding until after June 30, 2012.  The TAGP and DGP are in effect for all eligible entities, unless the entity opted out on or before December 5, 2008.  We did not opt out of the TAGP and the DGP.

On February 17, 2009, the American Recovery and Reinvestment Act (the “Recovery Act”) was signed into law in an effort to, among other things, create jobs and stimulate growth in the United States economy.  The Recovery Act specifies appropriations of approximately $787 billion for a wide range of Federal programs and will increase or extend certain benefits payable under the Medicaid, unemployment compensation, and nutrition assistance programs.  The Recovery Act also reduces individual and corporate income tax collections and makes a variety of other changes to tax laws.  The Recovery Act also imposes certain limitations on compensation paid by participants in the Treasury’s Troubled Asset Relief Program (“TARP”), which includes programs under TARP such as the Capital Purchase Program.

There can be no assurance that these government actions will achieve their purpose.  The failure of the financial markets to stabilize, or a continuation or worsening of the current financial market conditions, could have a material adverse affect on our business, our financial condition, the financial condition of our customers, our common stock trading price, as well as our ability to access credit.  It could also result in declines in our investment portfolio which could be “other-than-temporary impairments.”

If we participate in the Capital Purchase Program our shareholders ownership interests and voting powers will be diluted and other rights of shareholders could be adversely affected.

Based on the standard documentation for the Capital Purchase Program, if we participate in the Capital Purchase Program, the effects on the rights of our shareholders would include: (i) restrictions on the payment of dividends to holders of our common stock and (ii) restrictions on distributions of assets to our shareholders upon a liquidation or dissolution and until satisfaction of any liquidation preference granted to preferred shares issued in connection with the Capital Purchase Program.  In addition, if we participate in the Capital Purchase Program, our shareholders may suffer dilution of their equity interests and voting power upon exercise of any warrants granted to the Treasury.

Our regulatory capital ratios meet the guidelines established by our regulators for “adequately capitalized” financial institutions but do not meet the guidelines established by our regulators for “well-capitalized” institutions.

As a result of the operating losses we have experienced, our regulatory capital ratios fell below thresholds established by our regulators for “well-capitalized” institutions.  While our capital ratios remain in excess of levels established for “adequately capitalized” financial institutions, as a result of falling below the “well-capitalized” level, we will be required, among other things, to obtain the approval of the FDIC before participating further in the brokered deposit market, which could materially adversely affect our business, financial condition, liquidity and results of operations.

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Current adverse market conditions have resulted in a lack of liquidity and reduced business activity.

Dramatic declines in the housing market, with falling home prices and increasing foreclosures and unemployment, have resulted in significant write-downs of asset values by financial institutions.  These write-downs have caused many financial institutions to seek additional capital, to merge with larger and stronger institutions and, in some cases, to fail.  To the extent a weak institution in our market merges with or is acquired by a stronger institution, the competition within the market may increase.  Reflecting concern about the stability of the financial markets generally and the strength of counterparties, many lenders and institutional investors have reduced, and in some cases, ceased to provide funding to borrowers including other financial institutions.  A prolonged lack of available credit with resulting reduced business activity could materially adversely affect our business, financial condition, and results of operations.

Recent negative developments in the financial industry and the domestic and international credit markets may result in more legislation and regulatory oversight.

Negative developments in the latter half of 2007 and during 2008 in the global credit and securitization markets have resulted in uncertainty in the financial markets in general with the expectation of the general economic downturn continuing well into 2009.  A continued recession could reduce the profitability and therefore the credit worthiness of the Bank’s customers and prospective customers.  As a result of the “credit crunch,” commercial as well as consumer loan portfolio performances have deteriorated at many institutions and the competition for deposits (including through interest rate wars) and quality loans has increased significantly.  In addition, the values of real estate collateral supporting many commercial loans and home mortgages have declined and may continue to decline.  Bank and bank holding company stock prices have been negatively affected, as has the ability of banks and bank holding companies to raise capital or borrow in the debt markets.  As a result, significant new federal laws and regulations relating to financial institutions, including, without limitation, the EESA and the U.S. Treasury Department’s Capital Purchase Program have been adopted.  Furthermore, the potential exists for new federal or state laws and regulations regarding lending and funding practices and liquidity standards, and bank regulatory agencies are expected to be active in responding to concerns and trends identified in examinations, including the expected issuance of formal enforcement orders.  Negative developments in the financial industry and the domestic and international credit markets, and the impact of new legislation in response to those developments, may negatively impact our operations by restricting our business operations, including our ability to obtain deposits or originate loans, and could materially adversely affect our business, financial condition, and results of operations.

The economic downturn, especially in Northern Georgia, has had an adverse effect on the quality of our loan portfolio and our financial performance.

The principal focus of the Bank and its lending officers has been, and continues to be, the financing of growth and management of the deposits of small businesses within the target market of the Bank.  These businesses generally have fewer financial resources in terms of capital borrowing capacity than larger entities.  The economic downturn has adversely affected these small businesses to a greater degree than more highly capitalized and larger corporations.  The negative impact of the general economic conditions on these businesses in the markets in which we operate has adversely affected our business, financial condition, and results of operations.

Economic recession over a prolonged period or other economic problems in Hall, Oconee and Athens-Clarke Counties, Georgia or in our state or nation generally have had, and may continue to have, a material adverse impact on the quality of our loan portfolio and the demand for our products and services.  For example, the downturn in the local economy has made it more difficult for borrowers to repay their loans and this could lead to loan losses, which could in turn reduce our net income and profitability.

The value and liquidity of real estate or other collateral that secures our loans in our market area has been, and may continue to be, adversely affected by the economic downturn.  Unlike many larger institutions, we are not able to spread the risks of unfavorable local economic conditions across a large number of diversified economies or markets. We often secure loans with real estate collateral. As of December 31, 2008, approximately 81 %, of our loans had real estate as a primary or secondary component of collateral. The real estate collateral in each case provides an alternate source of repayment in the event of default by the borrower and may deteriorate in value during the time the credit is extended. If we are required to liquidate the collateral securing a loan to satisfy the debt

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during this period of reduced real estate values, our business, financial condition, and results of operations could be negatively affected.

The FDIC Deposit Insurance assessments that we are required to pay may materially increase in the future, which would have an adverse effect on our earnings and our ability to pay our liabilities as they come due.

As a member institution of the FDIC, we are required to pay semi-annual deposit insurance premium assessments to the FDIC.  During the year ended December 31, 2008, we paid $35,711 in deposit insurance assessments.  Due to the recent failure of several unaffiliated FDIC insurance depository institutions, the FDIC’s new Temporary Liquidity Guarantee Program, the deposit insurance premium assessments paid by all banks will likely increase.  In addition, new FDIC requirements shift a greater share of any increase in such assessments onto institutions with higher risk profiles, including banks which use brokered deposits, such as our Bank.

Weakness in the real estate market, including the secondary residential mortgage loan markets, has adversely affected us and may continue to do so.

Significant ongoing disruptions in the secondary market for residential mortgage loans have limited the market for and liquidity of most mortgage loans other than conforming Fannie Mae and Freddie Mac loans. At December 31, 2008, we held approximately $2.7 million of loans that were not eligible for purchase by these agencies but which may be eligible for purchase in the future. The effects of ongoing mortgage market challenges, combined with the ongoing correction in residential real estate market prices and reduced levels of home sales, could result in further price reductions in single family home values, adversely affecting the value of collateral securing mortgage loans held, mortgage loan originations and gains on sale of mortgage loans. Declining real estate prices and higher interest rates have caused higher delinquencies and losses on certain mortgage loans, particularly second lien mortgages and home equity lines of credit. These trends could continue. These conditions have resulted in losses, write downs and impairment charges in the mortgage business, which have continued through the fourth quarter of 2008, and we have curtailed various product offerings and limited our mortgage originations generally to Fannie Mae and Freddie Mac eligible mortgages. Continued declines in real estate values, home sales volumes and financial stress on borrowers as a result of job losses, interest rate resets on adjustable rate mortgage loans or other factors could have further adverse effects on borrowers that result in higher delinquencies and greater charge-offs in future periods, which would adversely affect our financial condition and results of operations. In the event the allowance for loan losses is insufficient to cover such losses, earnings, capital and parent company liquidity could be adversely affected.

Changes in interest rates and our ability to successfully manage interest rate fluctuations may reduce our profitability.

Our results of operations depend in large part upon the level of our net interest income, which is the difference between interest income from interest-earning assets, such as loans and investment securities, and interest expense on interest-bearing liabilities, such as deposits and other borrowings.  Depending on the terms and maturities of our assets and liabilities, a significant change in interest rates could have a material adverse effect on our profitability.  Many factors cause changes in interest rates, including governmental monetary policies and domestic and international economic and political conditions.  While we intend to manage the effects of changes in interest rates by adjusting the terms, maturities, and pricing of our assets and liabilities, our efforts may not be effective and our financial condition and results of operations could suffer.

Because of the differences in maturities and repricing characteristics of our interest-earning assets and interest-bearing liabilities, changes in interest rates do not produce equivalent changes in interest income earned on interest-earning assets and interest paid on interest-bearing liabilities. Fluctuations in interest rates are not predictable or controllable and therefore, there can be no assurances of our ability to continue to maintain a consistent positive spread between the interest earned on our interest-earning assets and the interest paid on our interest-bearing liabilities. Accordingly, fluctuations in interest rates could adversely affect our net interest income and, in turn, our profitability. In addition, loan volumes are affected by market interest rates on loans. Rising interest rates generally are associated with a lower volume of loan originations while lower interest rates are usually associated with higher loan originations. Conversely, in rising interest rate environments, loan repayment rates will generally decline and in falling interest rate environments, loan repayment rates will likely increase. Interest rates also affect how much money we can lend. When interest rates rise, the cost of borrowing increases.  Accordingly, changes in market

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interest rates could materially and adversely affect our net interest income, asset quality, and loan origination volume.

Industry competition may have an adverse effect on our profitability.

Competition in the banking and financial services industry is intense, and our profitability depends upon our continued ability to compete in our market area.  We compete with commercial banks, credit unions, savings and loan associations, mortgage banking firms, consumer finance companies, securities brokerage firms, insurance companies, money market funds, and other mutual funds, as well as other super-regional, national, and international financial institutions that operate offices in our primary market areas and elsewhere.

We compete with these institutions both in attracting deposits and in making loans.  In addition, we have to attract our customer base from other existing financial institutions and from new residents.  Many of our competitors are well-established, larger financial institutions, such as Regions Bank, Wachovia Bank, N.A., SunTrust Bank and Bank of America, N.A.  These institutions offer some services, such as extensive and established branch networks and trust services that we do not provide.  We also compete with local community banks in our market, such as Peach State Bank and Hamilton Bank.  There is a risk that we will not be able to compete successfully with other financial institutions in our market, and that we may have to pay higher interest rates to attract deposits, resulting in reduced profitability.

In addition, because the Gramm-Leach-Bliley Act now permits banks, securities firms and insurance companies to affiliate, a number of larger financial institutions and other corporations offering wider variety of financial services than we currently offer could enter and aggressively compete in the markets we currently serve.  Many of these competitors have substantially greater resources, lending limits and operating histories than we do and may offer services that we do not or cannot provide.  In addition, competitors that are not depository institutions are generally not subject to the extensive regulations that apply to us.

Moreover, we may not be able to compete with our larger competitors for larger customers because our lending limits are lower than theirs.  We are limited in the amount we can loan a single borrower by the amount of the Bank’s capital.  Our legal lending limit is 15% of the Bank’s capital and surplus, or $569,000, at December 31, 2008.  These limits are significantly less than the limits for most of our competitors, and as a result we will have difficulty in obtaining business from the larger customers in our market area.  We seek to sell loan participations to other financial institutions to meet the needs of customers requiring loans above these limits.  Nevertheless, because this amount is substantially lower than the lending limit for most of our competitors, it is difficult for us to compete for many loan relationships.

Efforts to comply with Sarbanes-Oxley Act involve significant expenditures, and non-compliance with the Sarbanes-Oxley Act may adversely affect us.

The Sarbanes-Oxley Act of 2002, and the related rules and regulations promulgated by the Securities and Exchange Commission that are now applicable to us, have increased the scope, complexity, and cost of corporate governance, reporting, and disclosure practices.  We have experienced, and we expect to continue to experience, greater compliance costs, including costs related to internal controls, as a result of the Sarbanes-Oxley Act.  We expect these rules and regulations to continue to increase our accounting, legal, and other costs, and to make some activities more difficult, time consuming, and costly.  In the event that we are unable to maintain or achieve compliance with the Sarbanes-Oxley Act and related rules, we may be adversely affected.

We are evaluating our internal control systems in order to allow management to report on, and our independent registered public accounting firm to attest to, our internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act.  If we identify significant deficiencies or material weaknesses in our internal control over financial reporting that we cannot remediate in a timely manner, or if we are unable to receive a positive attestation from our independent registered public accounting firm with respect to our internal control over financial reporting, the value of our common stock could decline, or our ability to obtain any necessary equity or debt financing could suffer. In this event, the liquidity of our common stock would be severely limited and the market price of our common stock would likely decline significantly.

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In addition, the rules adopted as a result of the Sarbanes-Oxley Act could make it more difficult or more costly for us to obtain certain types of insurance, including directors’ and officers’ liability insurance, which could make it more difficult for us to attract and retain qualified persons to serve on our Board of Directors or as executive officers.

Our directors and executive officers own a significant portion of our common stock and can influence shareholder decisions and may vote to take actions adverse to our interests.

Our directors and executive officers, as a group, beneficially owned approximately 51% of our outstanding common stock as of December 31, 2008.  One of our directors, William R. Blanton, who is also our Chief Executive Officer, owns approximately 26.8% of our outstanding common stock as of December 31, 2008.  The directors and executive officers, as a result of their ownership, have the ability, by voting their shares in concert, to influence the outcome of any matter submitted to our shareholders for approval, including the election of directors.  The directors and executive officers may vote to cause the company to take actions with which shareholders do not agree or that are not beneficial to our shareholders.

One of our directors and major shareholders, William R. Blanton, holds an executive position, serves on the board of directors of two other banks and holds significant shares of banks within our target market and could vote to take actions adverse to our interests.

William R. Blanton, our Chief Executive Officer and a director of the Company and the Bank, who owns approximately 26.8% of our common stock, has 35 years of banking experience and holds interest in various banks across North Georgia.  As a result of his interest in other banks, Mr. Blanton may vote to cause the Company to take actions with which the shareholders do not agree or that are not beneficial to its shareholders.

Mr. Blanton spends a portion of his time as the Chief Executive Officer, Vice-Chairman and as a director of First Covenant Bank, a bank with $190 million in assets as of December 31, 2008, headquartered in Norcross, Georgia.  Mr. Blanton currently owns approximately 16.6% of the outstanding shares of First Covenant Bank.  We currently have a data processing agreement and master services agreement with First Covenant Bank and we may enter into additional agreements with First Covenant Bank in the future.  See “Transactions by Directors, Officers and Ten Percent Shareholders.”  We also are currently exploring the opportunity of combining operations with First Covenant Bank.  Any transaction would be subject to the approval of our independent directors and require the approval of federal and state regulatory authorities.

Mr. Blanton also serves on the board of directors of United Americas Bankshares, Inc. and its subsidiary bank, United Americas Bank, a bank with $240 million in assets as of December 31, 2008, in Atlanta, Georgia.  Mr. Blanton is the largest shareholder of United Americas Bankshares, Inc. and owns approximately 17.1% of United Americas Bankshares, Inc., which consists of 120,000 of outstanding shares and warrants to purchase an additional 100,000 shares which are immediately exercisable.  Mr. Blanton’s application for a change of control was approved and allows Mr. Blanton to acquire up to 100% of the outstanding shares of United Americas Bankshares, Inc.

We are exposed to the possibility of technology failure.

We rely on our computer systems and the technology of outside service providers. Our daily operations depend on the operational effectiveness of their technology. We rely on our systems to accurately track and record our assets and liabilities. If our computer systems or outside technology sources become unreliable, fail, or experience a breach of security, our ability to maintain accurate financial records may be impaired, which could materially affect our business operations and financial condition.

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Item 2.                    Description of Property.

The Bank began operations in a modular temporary office of approximately 2,200 square feet on property located at the corner of Pearl Nix Extension and Dorsey Street in Gainesville, Georgia.  In August 2004 the Company completed construction of its permanent main office at 807 Dorsey Street, Gainesville, Georgia.  The main office provides approximately 12,000 square feet and also serves as the Company’s headquarters.  The main office facilities include a teller line, customer service area, offices for the Bank’s lenders and officers, a vault with safe deposit boxes, drive-in teller lanes and a drive-up automated teller machine.

In January 2008, the Bank opened an online mortgage division in Atlanta doing business as Century Point Mortgage. The Bank has subleased 3,477 square feet of space at 1455 Lincoln Parkway, Suite 250, Atlanta, Georgia for this division.

In May 2008, the Bank opened a loan production office in Oakwood, Georgia.  The Bank has leased approximately 1,800 square feet of office space located at 3715 Mundy Mill Road, Suite A, Oakwood, Georgia for 12 months at $2,175 per month for this office.

In July 2008, the Bank opened a loan production office in Athens, Georgia.  The Bank has leased approximately 1,400 square feet of office space at located at 1551 Jennings Mill Road, Suite 1600A, Bogart, Georgia for 12 months at $1,100 per month for this office.

Item 3.                    Legal Proceedings.

There are no material legal proceedings to which the Company is a party or of which any of its properties are subject, nor are there material proceedings known to the Company to be contemplated by any governmental authority.

Item 4.                    Submission of Matters to a Vote of Security-Holders.

No matter was submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this annual report.

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PART II

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

As of March 23, 2009, the Company had 4,505,797 shares of common stock outstanding and approximately 921 shareholders of record.   There is currently no market for our shares of common stock, and it is not likely that an active trading market will develop for the shares in the future.  In 2008, we were aware of a few trades at $1.50 per share.  There are no present plans for the common stock to be traded on any stock exchange or over-the-counter-market.  There is only incomplete information about trades of our shares and the prices at which any shares have traded.

During 2008, we issued 2,246,669 shares of our common stock, of which 1,305,001 were issued in the fourth quarter, in consideration of $3,370,006 before expenses to accredited investors in transactions exempt from registration under Section 4(2) of the Securities Act and Regulation D under the Securities Act relating to sales not involving any public offering.  The shares were sold by our officers and directors with the assistance of our sales agents, Commerce Street Capital, LLC and FIG Partners, L.L.C.  Our common stock was sold only to investors that we believed were accredited investors.  Our directors and officers received no compensation in connection with the sale of shares.

 We have not declared or paid any cash dividends on our common or preferred stock since our inception.  For the foreseeable future, we do not intend to declare cash dividends.  If we decide to pay cash dividends in the future, it will be at the discretion of our Board of Directors and will be dependent upon any regulatory restrictions, our financial condition, results of operation, capital requirements, level of indebtedness and such other factors as our Board of Directors deems relevant.  The principal source of our cash revenues is dividends from the Bank.  However, certain restrictions exist regarding the ability of the Bank to transfer funds to us in the form of cash dividends.  All dividends must be paid out of undivided profits then on hand, after deducting expenses, including reserves for losses and bad debts.  In addition, a national bank is prohibited from declaring a dividend on its shares of common stock until its surplus equals its stated capital, unless there has been transferred to surplus no less than one-tenth of the bank’s net profits of the preceding two consecutive half-year periods (in the case of an annual dividend).

Moreover, on October 21, 2004, pursuant to the request of the Federal Reserve Bank of Atlanta, our Board of Director’s adopted resolutions that provide that we shall not, without the prior written approval of the Federal Reserve Bank of Atlanta, declare or pay dividends to our shareholders.  The approval of the OCC is required if the total of all dividends declared by a national bank in any calendar year exceeds the total of its net profits for that year combined with its retained net profits for the preceding two years, less any required transfers to surplus.

Item 6.     Selected Financial Data.

Not applicable.

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

This discussion and analysis is intended to assist you in understanding our financial condition and results of operations.  You should read this commentary in conjunction with the financial statements and the related notes and the other statistical information included elsewhere in this annual report, as well as with an understanding of our short operating history.

General

First Century Bancorp. was incorporated in 2000 for the purpose of becoming a bank holding company.  We are subject to extensive federal and state banking laws and regulations, including the Bank Holding Company Act, and the bank holding company laws of Georgia.  We have one bank subsidiary, First Century Bank, National Association, which opened for business on March 25, 2002.  The Bank is also subject to various federal banking laws and regulations.

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The following discussion describes our results of operations and assesses our financial condition.  Our discussion and analysis for the years ended December 31, 2008 and 2007 is based on our audited financial statements for such periods.  Like most community banks, we derive a significant portion of our income from interest we receive on our loans and investments.  Our primary sources of funds for making these loans and investments are our deposits and borrowings, on which we pay interest.  Consequently, one of the key measures of our success is our amount of net interest income, or the difference between the income on our interest-earning assets, such as loans and investments, and the expense on our interest-bearing liabilities, such as deposits and borrowings.  Another key measure is the spread between the yield we earn on these interest-earning assets and the rate we pay on our interest-bearing liabilities.

We have included a number of tables to assist in our description of these measures.  For example, the “Average Balances” table shows the average balance during the years ended December 31, 2008 and 2007 of each category of our assets and liabilities, as well as the yield we earned or the rate we paid with respect to each category.  A review of this table shows that our loans typically provide higher interest yields than do other types of interest earning assets, which is why we intend to channel a substantial percentage of our earning assets into our loan portfolio.  Similarly, the “Rate/Volume Analysis” table helps demonstrate the impact of changing interest rates and changing volume of assets and liabilities during the years shown.  We also track the sensitivity of our various categories of assets and liabilities to changes in interest rates, and we have included a “Sensitivity Analysis Table” to help explain this.  Finally, we have included a number of tables that provide detail about our investment securities, our loans, and our deposits.

There are risks inherent in all loans, so we maintain an allowance for loan losses to absorb probable losses on existing loans that may become uncollectible.  We establish and maintain this allowance by charging a provision for loan losses against our operating earnings.  In the “Provision and Allowance for Loan Losses” section we have included a detailed discussion of this process.

In addition to earning interest on our loans and investments, we earn income through fees and other expenses we charge to our customers.  We describe the various components of this non-interest income, as well as our non-interest expense, in the following discussion.

In response to financial conditions affecting the banking system and financial markets and the potential threats to the solvency of investment banks and other financial institutions, the United States government has taken unprecedented actions. On October 3, 2008, President Bush signed into law the EESA.  Pursuant to the EESA, the Treasury has the authority to, among other things, purchase mortgages, mortgage-backed securities, and 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 the Capital Purchase Program under the EESA, pursuant to which the Treasury intends to make senior preferred stock investments in participating financial institutions. Regardless of whether we are approved for participation in the Capital Purchase Program and choose to participate, governmental intervention and new regulations under these programs could materially and adversely affect our business, financial condition and results of operations.

The following discussion and analysis also identifies significant factors that have affected our financial position and operating results during the periods included in the accompanying consolidated financial statements.  We encourage you to read this discussion and analysis in conjunction with the consolidated financial statements and the related notes and the other statistical information also included in this annual report.

Critical Accounting Policies

We have adopted various accounting policies, which govern the application of accounting principles generally accepted in the United States of America, in the preparation of our consolidated financial statements.  Our significant accounting policies are described in note 1 in the footnotes to the consolidated financial statements at December 31, 2008 included elsewhere in this annual report.

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We believe that the allowance for loan losses is a critical accounting policy that requires the most significant judgments and estimates used in preparation of our consolidated financial statements.  Please refer to the portion of management’s discussion and analysis of financial condition and results of operations that addresses the allowance for loan losses for a description of our processes and methodology for determining the allowance for loan losses.

Formal Agreement

On August 18, 2004, the Bank entered a formal written agreement with the OCC, which set forth a series of actions necessary to correct identified weaknesses.  On February 5, 2008, the OCC determined that the protection of the depositors, other customers and shareholders of the Bank as well as the Bank’s safe and sound operation did not require the continued existence of the agreement, and the OCC terminated the formal agreement.

Pursuant to the terms of the formal agreement, we committed to undertake certain actions, including the maintenance of specified capital levels, retention of senior management and the formulation of strategic and capital plans. Following discussions with the OCC, on January 26, 2006, our Board of Directors passed a resolution to identify, and enter into an agreement with, a strategic partner who would either purchase the entire institution or a significant interest in the institution, and the OCC agreed to a 90 day waiver of certain commitments contained in the formal agreement.

On May 5, 2006, we entered into a merger agreement with El Banco Financial Corporation (“El Banco”), previously known as Nuestra Tarjeta de Servicios, Inc., that provided, among other things, for us to be merged into El Banco in a two-step merger.  On October, 25, 2006, the parties mutually agreed to terminate the pending merger agreement after concluding that receipt of regulatory approval would not be forthcoming on a timely enough basis to satisfy each party’s business requirements.

In April 2007, Mr. Blanton purchased 738,008 shares of our common stock at $2.71 per share in a private placement.  We also issued Mr. Blanton a warrant (the “Original Warrant”) to purchase up to 738,008 shares at $2.71 per share. The Original Warrant has no expiration date and contains provisions which provide for automatic adjustments in price and shares purchasable under the Original Warrants in the event additional securities are issued below or have a conversion or exercise price below the current Original Warrant exercise price.  We received proceeds of approximately $2,000,000 less fees and expenses related to the sale of the shares, which we used for working capital purposes.

In September 2007, Mr. Blanton transferred a portion of the Original Warrant to purchase 184,502 shares to Silver Hill Enterprises, LP, an entity controlled by William Evans, one of our directors.

In December 2007, we completed a private placement of Series B Preferred Stock, no par value, for $10.00 per share, selling a total of $750,000 of shares.  The investors in that offering also received warrants (the “B Warrants”) to acquire 75,000 shares of common stock at an exercise price of $1.50 per share, which we believe was the fair market value of the common stock on the date of issuance of the B Warrants.  As with the Original Warrant, the B Warrants have no expiration date and contain provisions which provide for automatic adjustments in price and shares purchasable under the warrants in the event additional shares or warrants are issued below the current warrant exercise price.

As a result of the issuance of the B Warrants with an exercise price below the $2.71 exercise price, the exercise price and number of shares of common stock purchasable under the Original Warrant adjusted as follows: (a) with respect to Mr. Blanton, from 553,506 shares at $2.71 per share to 1,000,001 shares at $1.50 per share; and (b) with respect to Silver Hill Enterprises, LP, from 184,502 shares at $2.71 per share to 333,334 shares at $1.50 per share.

In June 2008, Mr. Blanton and Silver Hill Enterprises, LP transferred a portion of the Original Warrant to purchase shares to John Allen Nivens, Jr. and Richard Kramer Whitehead, III, each a director of the Company and to Homestead Investment, LLC, which is controlled by the father of one of our directors, William A. Bagwell, Jr.

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Following the transfers and the adjustments to the Original Warrant, the following persons hold rights to purchase shares of common stock at the exercise price of $1.50 under the Original Warrant and the B Warrants:  (i) Mr. Blanton holds rights to purchase 850,254 shares; (ii) Silver Hill Enterprises, LP holds rights to purchase 283,418 shares; (iii) Mr. Nivens holds rights to purchase 69,165 shares; (iv) Mr. Whitehead holds rights to purchase 69,165 shares; and (v) Homestead Investment, LLC and Mr. Bagwell collectively hold rights to purchase 136,332 shares.

In July 2008, we commenced a private offering of shares of our common stock to a limited number of accredited investors.   We are using the net proceeds for working capital purposes, including the possible redemption of preferred stock.  There is no minimum number of shares which must be sold in order for us to accept subscriptions in the offering, and no assurance can be given as to whether we will sell any additional shares in the offering.  During 2008, we had received proceeds of $3,370,006 from the sale of 2,246,669 shares in the offering.  The common stock to be sold in the offering has not been registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

This discussion and analysis is intended to assist you in understanding our financial condition and results of operations.  You should read this commentary in conjunction with the financial statements and the related notes and the other statistical information included elsewhere in this report, as well as with an understanding of our short operating history.

Results of Operations

A net loss of $3,515,000 was incurred for 2008, up $1,769,000, from the net loss of $1,746,000 that was incurred during 2007.  Our operational results depend to a large degree on three factors: our net interest income, our provision for loan losses, and our non-interest expenses.  Net interest income is the difference between the interest income received on investments (such as loans, investment securities, and federal funds sold) and the interest expense on deposit liabilities and borrowings.  Net interest income grew 10%, to $837,000, for the year ended December 31, 2008, compared to $764,000 for the year ended December 31, 2007.

The provision for loan losses grew $525,000, or 455%, to $640,000 for the year ended December 31, 2008, compared to $115,000 for the year ended December 31, 2007.  This increase was due to a $18.8 million increase in our loan portfolio and our response to deteriorating economic conditions, which caused us to apply higher risk weightings to the qualitative factors utilized in determining appropriate levels of reserves.  Management considers the current allowance for loan losses to be adequate to sustain any estimated or potential losses based on the Bank’s internal analysis and on external credit review examinations conducted by regulatory authorities and by third-party review services.  The Bank continues to demonstrate the improvement in the credit quality of the Bank’s loan portfolio and of management’s efforts to identify and reduce criticized and classified loans.

Total non-interest income for the year ended December 31, 2008 was $609,000, compared to $60,000 for the year ended December 31, 2007.  Non-interest income includes service charges on deposit accounts, customer service fees, mortgage origination fee income and investment security gains (losses).  The increase in non-interest income for 2008 was primarily due to an increase in fees earned on mortgage originations, due to the establishment of the mortgage division. Non-interest expenses in 2008 were $4,321,000, compared to $2,455,000 in 2007.  The largest component of non-interest expenses is salaries and employee benefits, which totaled $2,006,000 for the year ended December 31, 2008, compared to $1,161,000 for the year ended December 31, 2007.

Net Interest Income

For the years ended December 31, 2008 and 2007, net interest income totaled $837,000 and $764,000, respectively.  Interest income from loans, including fees, was $1,722,000, which represented a lower yield of 7.53% in 2008, compared to the 8.64% yield earned in 2007.  The falling interest rate environment of 2008 had a negative impact on the Bank’s adjustable rate loans.  Interest expense totaled $1,586,000 for the year ended December 31, 2008, compared to $1,453,000 in 2007.  The net interest margin realized on earning assets and the interest rate spread were 2.20% and 2.11%, respectively, for the year ended December 31, 2008, as compared to an interest rate margin of 2.47% and interest rate spread of 2.07% in 2007.

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Average Balances and Interest Rates

The table below details the average balances outstanding for each category of interest earning assets and interest-bearing liabilities for 2008 and 2007 and the average rate of interest earned or paid thereon.  Average balances have been derived from the daily balances throughout the period indicated.

	For the Year Ended December 31, 2008							For the Year Ended December 31, 2007
	(Amounts presented in thousands)
	Average					Yield/		Average					Yield/
	Balance			Interest		Rate		Balance			Interest		Rate
Assets:
Interest earning assets:
Loans (including loan fees)	$	22,865		$	1,723	7.53	%	$	18,446		$	1,635	8.64	%
Investment securities and other investments	9,481			562		5.93	%	9,077			416		4.59	%
Interest bearing deposits	1,522			39		2.57	%	426			23		5.25	%
Federal funds sold	4,154			99		2.39	%	2,969			143		4.76	%
Total interest earning assets	38,021			2,423		6.37	%	30,918			2,217		7.04	%
Other non-interest earnings assets	4,873							3,520
Total assets	$	42,894						$	34,438
Liabilities and shareholders’ equity:
Interest-bearing liabilities:
Deposits:
Interest-bearing demand	$	1,096		$	23	2.08	%	$	1,518		$	44	2.93	%
Savings and money market	3,818			106		2.77	%	916			18		1.92	%
Time	29,072			1,354		4.66	%	23,731			1,239		5.23	%
Federal funds purchased	21			1		1.58	%	180			9		2.08	%
Borrowings	3,214			103		3.21	%	2,882			143		4.99	%
Total interest-bearing liabilities	37,221			1,586		4.26	%	29,227			1,453		4.97	%
Other non-interest bearing liabilities	2,797							1,987
Shareholders’ equity	2,876							3,224
Total liabilities and shareholders’ equity	$	42,894						$	34,438
Excess of interest-earning assets over interest-bearing liabilities	$	800						$	1,691
Ratio of interest-earning assts to interest-bearing liabilities	102.15		%					105.79		%
Net interest income				$	836						$	764
Net interest spread						2.11	%						2.07	%
Net interest margin						2.20	%						2.47	%

Non-accrual loans are included in average loan balances during the periods presented.

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Volume/Rate Analysis

Net interest income can also be analyzed in terms of the impact of changing rates and changing volume.  The following table describes the extent to which changes in interest rates and changes in the volume of interest-earning assets and interest-bearing liabilities have affected our interest income and interest expense during the periods indicated.  Changes attributed to both rate and volume have been allocated on a pro rata basis.

	2008 Compared to 2007
	Increase (decrease) due to changes in
	Volume			Rate			Net
Change
Interest income on:
Loans (including loan fees)	$	333		$	(246	)	$	87
Investment securities	24			122			146
Interest bearing deposits	28			(12		)	16
Federal funds sold	28			(72		)	(44		)
	413			(208		)	(205		)
Interest expense on:
Deposits:
Interest-bearing demand	(9		)	(12		)	(21		)
Savings and money market	81			7			88
Time	249			(134		)	115
Borrowings	11			(51		)	(40		)
Federal funds purchased	(3		)	(6		)	(9		)
	329			(196		)	133
	$	84		$	(12	)	$	72

Interest Rate Sensitivity and Asset Liability Management

Interest rate sensitivity measures the timing and magnitude of the repricing of assets compared with the repricing of liabilities and is an important part of asset/liability management of a financial institution.  The objective of interest rate sensitivity management is to generate stable growth in net interest income, and to control the risks associated with interest rate movements.  Management constantly reviews interest rate risk exposure and the expected interest rate environment so that adjustments in interest rate sensitivity can be timely made.  Since the assets and liabilities of a bank are primarily monetary in nature (payable in fixed, determinable amounts), the performance of a bank is affected more by changes in interest rates than by inflation.  Interest rates generally increase as the rate of inflation increases, but the magnitude of the change in rates may not be the same.

Net interest income is the primary component of net income for financial institutions.  Net interest income is affected by the timing and magnitude of repricing of as well as the mix of interest sensitive and non-interest sensitive assets and liabilities.  “Gap” is a static measurement of the difference between the contractual maturities or repricing dates of interest sensitive assets and interest sensitive liabilities within the following twelve months.  Gap is an attempt to predict the behavior of the Bank’s net interest income in general terms during periods of movement in interest rates.  In general, if the Bank is liability sensitive, more of its interest sensitive liabilities are expected to reprice within twelve months than its interest sensitive assets over the same period.  In a rising interest rate environment, liabilities repricing more quickly is expected to decrease net interest income.  Alternatively, decreasing interest rates would be expected to have the opposite effect on net interest income since liabilities would theoretically be repricing at lower interest rates more quickly than interest sensitive assets.  Although it can be used as a general predictor, Gap as a predictor of movements in net interest income has limitations due to the static nature of its definition and due to its inherent assumption that all assets will reprice immediately and fully at the

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contractually designated time.  At December 31, 2008, the Bank, as measured by Gap, is in a liability sensitive position within one year.  Management has several tools available to it to evaluate and affect interest rate risk, including deposit pricing policies and changes in the mix of various types of assets and liabilities.

We also measure the actual effects that repricing opportunities have on earnings through simulation modeling, referred to as earnings at risk.  For short-term interest rate risk, the Bank’s model simulates the impact of balance sheet strategies on net interest income, pre-tax income, and net income.  The model includes interest rate simulations to test the impact of rising and falling interest rates on projected earnings.  The Bank determines the assumptions that are used in the model.

The following table summarizes the amounts of interest-earning assets and interest-bearing liabilities outstanding at December 31, 2008, that are expected to mature, prepay, or reprice in each of the future time periods shown.  Except as stated below, the amount of assets or liabilities that mature or reprice during a particular period was determined in accordance with the contractual terms of the asset or liability.  Adjustable rate loans are included in the period in which interest rates are next scheduled to adjust rather than in the period in which they are due, and fixed rate loans and mortgage-backed securities are included in the periods in which they are anticipated to be repaid based on scheduled maturities. The Bank’s savings accounts and interest-bearing demand accounts, which are generally subject to immediate withdrawal, are included in the “Three Months or Less” category, although historical experience has proven these deposits to be more stable over the course of a year.

	At December 31, 2008
	Maturing or Repricing in
	(dollars in thousands)
	Three Months			Four Months			1 to 5			Over 5
	or Less			to 12 Months			Years			Years			Total
Interest-earning assets:
Investment securities	$	2,937		$	—		$	6,595		$	9,173		$	18,705
Federal funds sold	700			—			—			—			700
Loans	5,433			8,915			20,758			4,859			39,965
Total interest-bearing assets	9,070			8,915			27,353			14,032			59,370
Interest-bearing liabilities:
Deposits:
Savings and demand	6,726			—			—			—			6,726
Time deposits	10,411			30,338			6,609			—			47,358
Other Borrowings	—			2,000			—			—			2,000
Total interest-bearing liabilities	17,137			32,338			6,609			—			56,085
Interest sensitive difference per period	$	(8,068	)	$	(31,490	)	$	(10,746	)	$	3,286		$	3,286
Cumulative interest sensitivity difference	$	(8,068	)	$	(23,422	)	$	20,744		$	14,032
Cumulative difference to total interest earning assets	(13.59		)%	(53.04		)%	(18,10		)%	5.53		%

At December 31, 2008, the difference between the Bank’s liabilities and assets repricing within one year was $23,422,000, therefore the Bank’s balance sheet was liability-sensitive in a rising rate environment.  A liability-sensitive position means that, for cumulative gap measurement periods of one year or less, there are more liabilities than assets subject to immediate repricing as market rates change.  Because rate-sensitive interest-bearing liabilities exceed rate sensitive assets, in a rising rate environment the Bank’s earnings position is exposed to declining earnings.  Included in interest-bearing liabilities subject to rate changes within 90 days is a portion of the interest-bearing demand, savings and money market deposits.  These types of deposits historically have not repriced coincidentally with or in the same proportion as general market indicators.

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Certain shortcomings are inherent in the method of analysis presented in the foregoing table.  For example, although particular assets and liabilities may have similar maturities or periods of repricing, they may reflect changes in market interest rates differently.  Additionally, some assets, such as adjustable-rate mortgages, have features that restrict changes in interest rates, both on a short-term basis and over the life of the asset.  Other factors which may affect the assumptions made in the table include changes in interest rates, pre-payment rates, early withdrawal levels, and the ability of borrowers to service their debt.

Provision and Allowance for Loan Losses

The provision for loan losses is the charge to operating earnings that management believes is necessary to maintain the allowance for loan losses at an adequate level.  The provision charged to expense was $640,000 for the year ended December 31, 2008, as compared to the $115,000 that was charged against earnings in 2007.  The loan portfolio increased by approximately $18.8 million during the year ended December 31, 2008.  The allowance for loan losses was $838,000, or 2.20%, of gross loans at December 31, 2008, compared to $276,000, or 1.43%, of gross loans at December 31, 2007.  Management considers the current allowance for loan losses to be adequate to sustain any estimated or potential losses based on the Bank’s internal analysis and on external credit review examinations conducted by regulatory authorities and by third-party review services.

In general, loans do not begin to show signs of credit deterioration or default until they have been outstanding for some period of time, a process we refer to as “seasoning.”  As a result, a portfolio of older loans will usually behave more predictably than a newer portfolio.  Because our loan portfolio is relatively new, the current level of delinquencies and defaults may not be representative of the level that will prevail when the portfolio becomes more seasoned, which may be higher than current levels.  There are risks inherent in making all loans, including risks with respect to the period of time over which loans may be repaid, risks resulting from changes in economic and industry conditions, risks inherent in dealing with individual borrowers, and, in the case of a collateralized loan, risks resulting from uncertainties about the future value of the collateral.  We anticipate maintaining an allowance for loan losses based on, among other things, historical experience, an evaluation of economic conditions, and regular reviews of delinquencies and loan portfolio quality.  Our judgment about the adequacy of the allowance is based upon a number of assumptions about future events, which we believe to be reasonable, but which may not prove to be accurate.  Thus, there is a risk that charge-offs in future periods could exceed the allowance for loan losses or that substantial additional increases in the allowance for loan losses could be required.  Our loan loss reserve methodology incorporates any anticipated write-downs and charge-offs in all problem loans identified by management, credit review services and regulatory authorities.  We consider the current allowance for loan losses to be adequate to sustain any estimated or potential losses based on the Bank’s internal analysis and on credit review examinations conducted by regulatory authorities and third-party review services.  There can be no assurance that charge-offs of loans in future periods will not exceed the allowance for loan losses as estimated at any point in time or that provisions for loan losses will not be significant to a particular accounting period, especially considering the overall weakness in the commercial real estate market in our market area.

The allocation of the allowance for loan losses by loan category at the date indicated is presented below (dollar amounts are presented in thousands):

	December 31,
	2008				2007
	Amount		Percent of loans in each category to total loans		Amount		Percent of loans in each category to total loans
Commercial, financial and agricultural	$	215	26	%	$	77	10	%
Real estate - mortgage	301		36	%	95		46	%
Real estate - construction	282		33	%	40		36	%
Consumer	40		5	%	64		8	%
	$	838	100	%	$	276	100	%

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The following table presents a summary of changes in the allowance for loan losses for the past two years (dollar amounts are presented in thousands):

	For the years ended December 31,
	2008			2007
Balance at the beginning of period	$	276		$	446
Charge-offs:
Commercial, financial and agricultural	—			106
Real estate - mortgage	48			136
Real estate - construction	—			—
Consumer	79			93
Total Charged-off	127			335
Recoveries:
Commercial, financial and agricultural	2			2
Real estate - mortgage	—			4
Consumer	47			44
Total Recoveries	49			50
Net Charge-offs	78			285
Provision for Loan Loss	640			115
Balance at end of period	$	838		$	276
Total loans at end of period	$	38,101		$	19,305
Average loans outstanding	$	21,749		$	19,632
As a percentage of average loans:
Net loans charged-off	0.58		%	1.45		%
Provision for loan losses	2.94		%	.59		%
Allowance for loan losses as a percentage of:
Year end loans	2.20		%	1.43		%

Non-Performing Assets

A loan is placed on non-accrual status when, in management’s judgment, the collection of interest appears doubtful. As a result of management’s ongoing review of the loan portfolio, loans are classified as non-accrual when management believes that, after considering economic and business conditions and collection efforts, the borrower’s financial condition is such that collection of interest is doubtful. Generally, loans are placed on non-accrual status when principal or interest payments are past due for more than 90 days.  Exceptions are allowed for loans past due greater than 90 days when such loans are well secured and in process of collection.

At December 31, 2008, there were $957,000 in loans outstanding, which were accounted for as non-accrual loans whereas there were $851,000 in outstanding loans accounted for as non-accrual loans at December 31, 2007, an increase of $106,000, or 12%.  Non-performing assets increased $670,000, or 71%, from December 31, 2007 to December 31, 2008.  Interest income that would have been reported on the non-accrual loans in 2008 approximated $53,800 and in 2007 totaled $34,200.  Interest income recognized on impaired loans approximated $15,900 and $97,000 in 2008 and 2007, respectively.

At December 31, 2008, the allowance for loan losses represented 52%  of the amount of non-performing loans, compared to 32% at December 31, 2007.  The coverage level of the allowance at December 31, 2008 increased from the coverage level at December 31, 2007 due to an increase in the provision for loan losses.  A

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significant portion, or 79%, of nonperforming loans at December 31, 2008 are secured by real estate.  We have evaluated the underlying collateral on these loans and believe that the collateral on these loans is sufficient to minimize future losses.  However, the recent downturn in the real estate market has resulted in increased loan delinquencies, defaults and foreclosures, and we believe that these trends are likely to continue.  In some cases, this downturn has resulted in a significant impairment to the value of the collateral used to secure these loans and the ability to sell the collateral upon foreclosure.  These conditions have adversely affected our loan portfolio.  The real estate collateral in each case provides an alternate source of repayment in the event of default by the borrower and may deteriorate in value during the time the credit is extended.  If real estate values continue to decline, it is also more likely that we would be required to increase our allowance for loan losses.  If during a period of reduced real estate values we are required to liquidate the property collateralizing a loan to satisfy the debt or to increase the allowance for loan losses, this could materially reduce our profitability and adversely affect our financial condition.

The following table summarizes non-performing assets and the income that would have been reported on non-accrual loans as of December 31, 2008 and 2007 (amounts are presented in thousands):

	December 31,
	2008			2007
Other real estate and repossessions	$	—		$	98
Non-accrual loans	957			851
Accruing loans 90 days or more past due	662			—
Total non-performing assets	$	1,619		$	949
As a percentage of gross loans:	4.25		%	4.92		%

Non-interest Income and Expense

The Bank has experienced significant growth in 2008 due to the implementation of several key initiatives, including the opening of Century Point Mortgage, a division of the Bank, and the two loan production offices in Oakwood, Georgia and Athens, Georgia.  All these divisions were initiated due to favorable market conditions and the Bank’s ability to attract and hire experienced bankers to lead these new divisions.

Non-interest income includes service charges on deposit accounts, customer service fees, mortgage origination fee income and investment security gains (losses).  Total non-interest income for the year ended December 31, 2008 grew to $609,067, compared to $60,165 for the year ended December 31, 2007, an increase of $548,902, or 912%.  The increase in non-interest income in 2008 was primarily due to an increase in fees earned on mortgage origination, due to the establishment of the mortgage division near the end of 2007.

In furtherance of the growth initiatives the Bank hired a team of talented individuals in the Bank’s respective markets based on mergers and acquisitions occurring within the banking industry in the spring of 2008.  The Bank has hired four Divisional Presidents, six key lending personnel, and seven Mortgage origination/support staff since September 30, 2007.  The salary and benefit expense of this additional staff hired to drive our growth initiatives constitutes the majority of the increase of the non-interest expense from 2007 to 2008.  Total non-interest expense for the year ended December 31, 2008 was $4,321,305, as compared to $2,454,955 for the year ended December 31, 2007, an increase of $1,866,350, or 76%.  Salaries and benefits, the largest component of non-interest expense, was $2,006,318 for the year ended December 31, 2008, compared to $1,161,072 for the year ended December 31, 2007.

The Bank’s growth initiative has included the opening of two strategic locations in 2008 as well as our online mortgage division, Century Point.  Total occupancy and equipment expense was $485,775 for the year ended December 31, 2008, compared to $356,737 for the year ended December 31, 2007.  Total occupancy expense for 2008 was higher than 2007 due to the addition of the online mortgage division and the two loan production offices.  The portion of the increase in occupancy expense attributable to the online mortgage division was $56,259, for the year ended December 31, 2008.  The portion of the increase in occupancy expense attributable to the Oakwood and

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Athens, Georgia loan production offices was $55,656 and $19,371, respectively, for the year ended December 31, 2008.  Telephone expense and office supply expense also increased during the respective time periods due to the establishment of these new locations.

Professional fees totaled $274,953 for the year ended December 31, 2008, compared to $195,745 for the year ended December 31, 2007.  The $79,207 increase was attributable to $55,000 in legal expenses and $24,000 in audit fees.

Marketing expense totaled $430,260 for the year ended December 31, 2008, compared to $83,827 for the year ended December 31, 2007.  Of the $346,433 increase, $230,000 was attributable to the Century Point Mortgage Internet advertising.  As a national, Internet-based lender, the mortgage division’s business model depends on online lead generation to drive a high volume of leads with a lower cost of customer acquisition than traditional mortgage lenders. Key elements of the division’s web-based demand generation program are advertising on mortgage rate websites, paid search advertising, search engine optimization and social media tools.  An additional $104,000 in advertising expenses was attributable to a marketing campaign that included billboards and various other media advertisements targeted at the Gainesville, Oakwood and Athens, Georgia markets.

The Bank entered into a data processing contract to move its processing from Fidelity Information Systems to Providence, the internal data processing system provided by First Covenant Bank.  We believe this change, which was completed in September 2008, will enable the Bank to decrease its costs and increase its flexibility in data processing.  Data processing expense totaled $546,596 for the year ended December 31, 2008, compared to $319,411 for the year ended December 31, 2007.  The increase was primarily due to data processing conversion expenses.  A contract termination fee of $207,000 was assessed by the Fidelity Information Systems, the Bank’s old data processing host.

Other loan related expenses totaled $206,221 for the year ended December 31, 2008, compared to $76,546 for the year ended December 31, 2007.  A portion of the increase, $27,000, is due to losses from the sale of repossessed assets and foreclosed properties.  The remaining portion was attributable to higher loan origination costs related to increase in volume of loan production.

Other expenses totaled $57,466 for the year ended December 31, 2008, compared to $19,693 for the year ended December 31, 2007.  The increase is primarily due to the amortization of sofware costs associated with the Century Point Mortgage division.

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The following table shows the components of noninterest expense incurred for year ended December 31, 2008 attributable to the growth of the Company:

							Bank &
							Parent			Century
	December 31,		December 31,		Increase /		Increase /			Point				New Locations Opened in 2008
	2008		2007		(Decrease)		(Decrease)			Mortgage		SBA		Oakwood		Athens		Consolidated
Salaries and employee benefits	$	2,006,318	$	1,161,072	$	845,247	$	34,745		$	416,595	$	7,882	$	255,911	$	130,113	$	845,247
Occupancy expenses	485,775		356,737		129,039		(30,543		)	56,259		28,296		56,656		19,371		129,039
Professional fees	274,953		195,745		79,207		56,954			19,678		911		1,665		—		79,207
Marketing	430,260		83,827		346,433		104,243			231,733		188		8,320		1,948		346,433
Data Processing	546,596		319,411		227,185		195,213			25,631		0		4,645		1,697		227,185
Telephone	69,148		33,494		35,654		4,522			11,085		7,604		9,978		2,465		35,654
Postage/Freight	42,407		32,111		10,296		5,039			4,569		126		544		17		10,296
Insurance, Tax & Assessment	131,931		121,320		10,610		7,718			1,754		752		350		36		10,610
Office Supplies	70,231		55,000		15,231		156			4,983		2,613		4,841		2,639		15,231
Other Loan Related Expense	206,221		76,546		129,675		39,775			70,528		27		17,785		1,560		129,675
Other	57,466		19,693		37,773		10,144			17,384		3,950		5,932		363		37,773
Total noninterest expense	$	4,321,305	$	2,454,955	$	1,866,350	$	427,966		$	860,199	$	52,349	$	365,628	$	160,208	$	1,866,350

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Income Taxes

At December 31, 2008, the Company had federal and state net operating loss carryforwards for tax purposes of approximately $11,440,000 and $11,916,000, respectively, which will expire beginning in 2022 if not previously utilized.  The utilization of the net operating loss carry forward has been limited as to its use pursuant to the Internal Revenue Code Section 382 due to the recent change in ownership of the Company.

Financial Condition

Total assets increased $24,227,000, or 63%, from December 31, 2007 to December 31, 2008.  The primary sources of the increase were in gross loans, which increased $18,796,000, or 97%, and investment securities, which increased $9,874,000, or 117%, during the year ended December 31, 2008. Federal funds sold were reduced $5,538,000, or 89%, during 2008, and shifted into higher yielding earning assets.

Total deposits increased $26,115,000, or 84%, from December 31, 2007 to December 31, 2008.  This increase was planned by management to provide funds for anticipated loan growth.  In addition, the economic uncertainty and falling deposit rates during the late third and fourth quarters of 2008 resulted in the Bank’s customer base preferring certificate of deposit accounts over transaction accounts as many individuals diversified deposits between several financial institutions.  The Bank’s local deposit market is very competitive, and the Bank will at times lose deposits to financial institutions paying higher interest rates.  The Bank uses brokered deposits and deposits from institutional investors to mitigate the risk within the certificate of deposit portfolio subject to local high rate competition.  Management has also focused on increasing transaction deposits and is having early success with this effort.  Management expects most of the results from these efforts will be reflected in early 2009 and beyond as the new management team continues to acquire customers from the local community.

Total shareholders’ equity decreased $330,000, from $3,494,000, at December 31, 2007, to $3,164,000, at December 31, 2008.  During 2008, we raised $3,370,006 in additional capital through the sale of common stock in a private placement.  The capital was used to fund $3,515,000 in net operating losses for the year ended December 31, 2008.

Loans

Gross loans totaled approximately $37,944,000 at December 31, 2008, an increase of $18,639,000, or 97%, since December 31, 2007.  This increase was due to the addition of two loan production offices in Oakwood and Athens, Georgia.  Management is continuously investigating opportunities to generate loan growth and diversify its loan portfolio.  Balances within the major loans receivable categories as of December 31, 2008 and December 31, 2007 are as follows (amounts are presented in thousands):

	2008				2007
Commercial, financial and agricultural	$	4,495	12	%	$	3,339	17	%
Real estate — mortgage	26,411		70	%	13,865		72	%
Real estate — construction	5,236		14	%	509		3	%
Consumer	1,801		5	%	1,592		8	%
	$	37,944	100	%	$	19,305	100	%

As of December 31, 2008, maturities of loans in the indicated classifications were as follows (amounts are presented in thousands):

	Commercial		Real Estate Mortgage		Real Estate Construction		Consumer		Total
Within 1 year	$	2,572	$	5,257	$	3,860	$	638	$	12,327
1 to 5 years	1,924		16,580		1,376		878		20,758
Over 5 years	—		4,574		—		285		4,859
Totals	$	4,495	$	26,411	$	5,236	$	1,801	$	37,944

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As of December 31, 2008, the interest terms of loans in the indicated classification for the indicated maturity ranges are as follows (amounts are presented in thousands):

	Fixed Interest Rates		Variable Interest Rates		Total
Commercial, financial and agricultural
Within 1 year	$	1,572	$	1,000	$	2,572
1 to 5 years	1,585		339		1,924
Over 5 years	—		—		—
Real estate — Mortgage
Within 1 year	$	3,784	$	1,473	$	5,257
1 to 5 years	14,371		2,208		16,580
Over 5 years	3,570		1,005		4,574
Real estate — Construction
Within 1 year	$	881	$	2,979	$	3,860
1 to 5 years	691		685		1,376
Over 5 years	—		—		—
Consumer
Within 1 year	$	397	241		$	638
1 to 5 years	849		29		878
Over 5 years	285		—		285

Investment Securities

Investment securities available-for-sale increased $2,696,000, from $8,404,000, at December 31, 2007, to $11,100,000, at December 31, 2008. Investment securities held-to-maturity increased $7,178,000, from $0, at December 31, 2007, to $7,178,000, at December 31, 2008.

Investment securities as of December 31, 2008 are summarized as follows (amounts are presented in thousands):

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Securities Available for Sale
U.S. Government agencies	$	2,382	$	58	$	—		$	2,440
Mortgage-backed securities	7,928		27		(30		)	7,926
Equity Securities	874		1		(140		)	735
	$	11,183	86		(170		)	$	11,100
Securities Held to Maturity
Mortgage-backed securities	$	7,178	—		$	(48	)	$	7,130

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Investments securities as of December 31, 2007 are summarized as follows (amounts are presented in thousands):

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Securities Available for Sale
U.S. Government agencies	$	4,898	$	13	$	(3	)	$	4,908
Mortgage-backed securities	3,513		4		(22		)	3,495
	$	8,412	$	17	$	(24	)	$	8,404

The following outlines the unrealized losses and fair value by (amounts are presented in thousands):

	Less than 12 Months					12 Months or Greater					Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
2008
Securities Available for Sale
U.S. Government agencies	$	—	$	—		$	—	$	—		$	—	$	—
Mortgage-backed securities	1,690		(21		)	200		(8		)	1,891		(30		)
Other Securities - Equity	484		(140		)	—		—			484		(140		)
	2,174		(161		)	200		(8		)	2,374		(170		)
Securities Held to Maturity
Mortgage-backed securities	7,130		(48		)	—		—			7,130		(48		)
2007
Securities Available for Sale
U.S. Government agencies	$	—	$	—		$	1,997	$	(3	)	$	1,997	$	(3	)
Mortgage-backed securities	436		(5		)	1,521		(17		)	1,957		(22		)
	$	436	$	(5	)	$	3,518	$	(20	)	$	3,594	$	(24	)

Management evaluates securities for other than temporary impairment quarterly, and more frequently when economic or market concerns warrant such evaluation.  Consideration is given to the length of time and the extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, and the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for anticipated recovery in fair value.  At December 31, 2008, 9 of the 25 securities issued by U.S. Government agencies and Government sponsored corporations, including mortgage backed securities, and 2 of the 3 equity and other securities contained unrealized losses. Because the declines in market value of investments are attributable to changes in interest rates and not credit quality and because the Company has the ability and intent to hold these investments until a recovery of fair value, which may be until maturity, the Company does not consider these investments to be other than temporarily impaired at December 31, 2008.

The amortized cost and estimated fair value of investment securities at December 31, 2008, by contractual maturity, are shown below (amounts are presented in thousands).  Expected maturities will differ from contractual maturities because borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

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	Available for Sale				Held to Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
U.S Government Agencies
Within 1 Year	$	500	$	501	$	—	$	—
1 to 5 Years	400		403		—		—
5 to 10 Years	982		1,035		—		—
Over 10 Years	500		500		—		—
Equity Securities
1 to 5 Years	874		735		—		—
Mortgage Backed Securities	7,928		7,926		7,178		7,130
	$	11,183	$	11,100	$	7,178	$	7,130

Proceeds from called investments available for sale were $3,896,493 in 2008, and $0 in 2007.  Gross realized gains totaled $3,507 in 2008 and $0 in 2007.  Gross realized losses totaled $0 in 2008 and $0 in 2007.

The following table presents the maturities of investment securities at carrying value and the weighted average yields for each range of maturities presented as of December 31, 2008 (amounts are presented in thousands):

	U.S. Government Agencies		Weighted Average Yields		Mortgage Backed Securities		Weighted Average Yields		Equity Securities		Weighted Average Yields
3 Months or Less	$	500	3.63	%	$	1,383	5.99	%	$	—	—	%
After 3 Months through 1 Year	400		4.15		951		8.93		—		—
After 1 through 5 years	—		N/A		6,929		6.99		874		7.87
Over 5 years	1,482		5.58		5,842		6.90		—		—

Deposits

At December 31, 2008, total deposits were $57,121,000 an increase of $26,115,000, or 84%, from December 31, 2007. Demand deposits (interest bearing and non-interest bearing) totaled $4,118,000, and increase of $1,255,000, or 44%, during 2008.  Money Market Deposit Accounts and savings deposits increased $4,460,000, or 376%, and time deposits increased $20,402,000, or 76%, during the same time period.

Balances within the major deposit categories as of December 31, 2008 and December 31, 2007 are as follows (amounts are presented in thousands):

	2008				2007
	Amount		Rate		Amount		Rate
Non-interest-bearing demand deposits	$	3,036	N/A		$	1,567	N/A
Interest-bearing demand deposits	1,082		2.08	%	1,296		3.01	%
MMDA and Savings deposits	5,645		2.77	%	1,185		1.24	%
Time deposits less than $100,000	35,944		4.67	%	26,152		5.16	%
Time deposits over $100,000	11,414		4.54	%	806		5.32	%
	$	57,121			$	31,006

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Maturities of time certificates of deposit of $100,000 or more outstanding at December 31, 2008 are summarized as follows (amounts are presented in thousands):

Within 3 months	$	955
After 3 through 6 months	2,512
After 6 through 12 months	7,408
After 12 months	539
Total	$	11,414

Capital Resources

Total shareholders’ equity decreased from $3,494,000 at December 31, 2007, to $3,164,000, at December 31, 2008.  During 2008, we raised $3,370,006 in additional capital through the sale of common stock in a private placement.  The capital was used to fund $3,515,000 in net operating losses for the year ended December 31, 2008.

Bank holding companies and their banking subsidiaries are required by banking regulators to meet specific minimum levels of capital adequacy, which are expressed in the form of ratios.  Capital is separated into Tier 1 capital (essentially common stockholders’ equity less intangible assets) and Tier 2 capital (essentially the allowance for loan losses limited to 1.25% of risk-weighted assets).  The first two ratios, which are based on the degree of credit risk in our assets, provide for the weighting of assets based on assigned risk factors and include off-balance sheet items such as loan commitments and stand-by letters of credit.  The ratio of Tier 1 capital to risk-weighted assets must be at least 4.0% and the ratio of Total capital (Tier 1 capital plus Tier 2 capital) to risk-weighted assets must be at least 8.0%.

Banks and bank holding companies are also required to maintain a minimum ratio of Tier 1 capital to adjusted quarterly average total assets of 4.0%.

The following table summarizes the Bank’s risk-based capital ratios at December 31, 2008:

Tier 1 capital (to risk-weighted assets)	8.04	%
Total capital (to risk-weighted assets)	9.29	%
Tier 1 capital (to total average assets)	6.07	%

In July 2008, we commenced a private offering of shares of our common stock to a limited number of accredited investors.  We are using the net proceeds for working capital purposes, including the possible redemption of preferred stock.  There is no minimum number of shares which must be sold in order for us to accept subscriptions in the offering, and no assurance can be given as to whether we will sell any additional shares in the offering.  During 2008, we had received proceeds of $3,370,006 from the sale of 2,246,669 shares in the offering.  The common stock to be sold in the offering has not been registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

Liquidity

The Bank must maintain, on a daily basis, sufficient funds to cover the withdrawals from depositors’ accounts and to supply new borrowers with funds.  To meet these obligations, the Bank keeps cash on hand, maintains account balances with its correspondent banks, and purchases and sells federal funds and other short-term investments.  Asset and liability maturities are monitored in an attempt to match the maturities to meet liquidity needs.  As of December 31, 2008, the Bank was “adequately capitalized” but was not “well-capitalized” and as a result the Bank will be required, among other things, to obtain approval of the FDIC before further participating in

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the brokered deposit market which may adversely affect the Bank’s liquidity.  It is the policy of the Bank to monitor its liquidity to meet regulatory requirements and our local funding requirements.

Although the Bank’s loan portfolio is diversified, a substantial portion of its borrowers’ ability to honor the terms of their loans depends on the economic conditions in the Bank’s market areas.

The Bank maintains relationships with correspondent banks that can provide funds to it on short notice, if needed.  The Bank has a line of credit totaling $9,783,000, representing 20% of the Bank’s total assets at September 30, 2008.  At December 31, 2008, the Bank has one advance from the Federal Home Loan Bank of Atlanta (FHLB) in the amount of $2,000,000.  The advance bears interest at a fixed interest rate of 2.497 percent and matures on May 1, 2013.  The Bank has pledged as collateral investment securities with a carrying amount of $10,135,777 and eligible residential and commercial real estate loans with a carrying amount of $8,271,517 at December 31, 2008 .

At December 31, 2007, the Bank had two advances from the FHLB in the amount of $4,000,000.  The advances matured during 2008.  The Bank had pledged as collateral investment securities available for sale with a carrying amount of $7,009,675 at December 31, 2007.

The Bank has lines of credit available with correspondent banks which represent available credit for overnight borrowing from financial institutions.  As of December 31, 2008 and 2007, these secured lines of credit totaled $1,000,000 and $2,000,000, respectively, of which no balances were outstanding.  The Bank has pledged investment securities with a carrying amount of $1,428,000 as collateral for the one line available at December 31, 2008.

In December 2008, the Bank was approved to borrow from the Federal Reserve Bank discount window program.  As of December 31,2008 the Bank’s primary borrowing capacity was $5,442,000, based on pledged investment securities with a carrying amount of $5,815,000.

Cash and cash equivalents as of December 31, 2008 decreased $6,124,000 from December 31, 2007.  Net cash used by operating activities totaled $2,385,000 in 2008.  Inflows from financing activities totaled $27,345,000, which were attributable to net increase in deposits of $26,115,000, while financing activities resulting from the issuance of common stock provided the Company cash proceeds in the amount of $3,370,006.

During 2008, net cash used by investing activities totaled $31,084,000.  Maturities, calls and principal pay-downs of investment securities provided $5,839,000.  Also, proceeds from the sale of Other Real Estate provided an additional $159,000 to cash and cash equivalents.  Cash from investing activities was used for increased lending of $20,822,000 and for purchases of investment securities available-for-sale of $8,288,000, purchases of securities held-to-maturity of $7,166,000, and equity securities with no readily available market value of $312,000.

Off Balance Sheet Arrangements

We are a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of our customers.  These financial instruments consist of commitments to extend credit and standby letters of credit.  Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.  Standby letters of credit are written conditional commitments issued by the bank to guarantee the performance of a customer to a third party.  Those guarantees are primarily issued to support public and private borrowing arrangements.  Most letters of credit extend for less than one year.  The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.  Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.  A commitment involves, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheets.  Our exposure to credit loss in the event of non-performance by the other party to the instrument is represented by the contractual notional amount of the instrument.

Since certain commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.  We use the same credit policies in making commitments to extend credit as we do for on-balance-sheet instruments.  Collateral held for commitments to extend credit varies but may include unimproved and improved real estate, certificates of deposit or personal property.

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The following table summarizes our off-balance-sheet financial instruments whose contract amounts represent credit risk as of December 31, 2008:

Commitments to extend credit	$	3,093,000
Standby letters of credit	$	261,000

Inflation

Inflation impacts the growth in total assets in the banking industry and causes a need to increase equity capital at higher than normal rates to meet capital adequacy requirements.  We cope with the effects of inflation through the management of interest rate sensitivity gap position, by periodically reviewing and adjusting our pricing of services to consider current costs and through managing our level of net income relative to our dividend payout policy.

Selected Ratios

The following table sets out specified ratios of the Company for the years indicated.

	2008		2007
Net loss to:
Average shareholders’ equity	(121.19	)%	(36.51	)%
Average assets	(7.68	)%	(3.17	)%
Dividends to net loss	—		—
Average equity to average assets	6.33	%	8.68	%

Recent Accounting Pronouncements

Accounting standards that have been issued or proposed by the Financial Accounting Standards Board and other standard setting entities that do not require adoption until a future date are not expected to have a material impact on our consolidated financial statements upon adoption.

In September 2006, the FASB issued Statement No. 157, Fair Value Measurements. This statement defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. This statement establishes a fair value hierarchy about the assumptions used to measure fair value and clarifies assumptions about risk and the effect of a restriction on the sale or use of an asset. The standard is effective for fiscal years beginning after November 15, 2007. In February 2008, the FASB issued Staff Position (FSP) 157-2, Effective Date of FASB Statement No. 157. This FSP delays the effective date of FAS 157 for all non-financial assets and non-financial liabilities, except those that are recognized or disclosed at fair value on a recurring basis (at least annually) to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years. The Company adopted Statement No. 157 effective January 1, 2008 which had no effect on the consolidated balance sheets or consolidated statements of operations.

In February 2007, the FASB issued Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. The standard provides companies with an option to report selected financial assets and liabilities at fair value and establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. The Company did not elect the fair value option for any financial assets or financial liabilities as of January 1, 2008, the effective date of the standard.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (FAS 141R). The statement establishes principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in

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the acquiree. The statement also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statement to evaluate the nature and financial effects of the business combination. SFAS No. 141R is effective for financial statements issued for fiscal years beginning after December 15, 2008. Accordingly, any business combinations the Company engages in will be recorded and disclosed following existing generally accepted accounting principles until January 1, 2009. The Company expects SFAS No. 141R would have an impact on its consolidated financial statements when effective if it acquires another company, but the nature and magnitude of the specific effects will depend upon the nature, terms and size of the acquisitions the Company consummates after the effective date.

In December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in Consolidated Financial Statements,” which provides guidance for accounting and reporting of non-controlling (minority) interests in consolidated financial statements. The statement is effective for fiscal years and interim periods within fiscal years beginning on or after December 15, 2008.  The Company does not hold minority interests in subsidiaries, therefore it is expected that SFAS No. 160 will have no impact on its financial condition or results of operations.

Item 8.Financial Statements.

The following financial statements are included as Exhibit 99.1, and are incorporated herein by reference:

·Report of Independent Registered Public Accounting Firm;

·Consolidated Balance Sheets;

·Consolidated Statements of Operations;

·Consolidated Statements of Comprehensive Income (Loss);

·Consolidated Statements of Changes in Shareholders’ Equity;

·Consolidated Statements of Cash Flows; and

·Notes to Consolidated Financial Statements.

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

None.

Item 9A(T).Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as defined in Exchange Act Rule 13a-15(e).  Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our current disclosure controls and procedures are effective as of December 31, 2008.  There have been no significant changes in our internal controls over financial reporting during the fourth fiscal quarter ended December 31, 2008 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

The design of any system of controls and procedures is based in part upon certain assumptions about the likelihood of future events.  There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

Management’s Annual Report on Internal Controls Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in the Exchange Act Rules 13a-15(f).  A system of internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

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Under the supervision and with the participation of management, including the principal executive officer and the principal financial officer, the Company’s management has evaluated the effectiveness of its internal control over financial reporting as of December 31, 2008 based on the criteria established in a report entitled “Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission” and the interpretive guidance issued by the Commission in Release No. 34-55929.  Based on this evaluation, the Company’s management has evaluated and concluded that the Company’s internal control over financial reporting was effective as of December 31, 2008.

The Company is continuously seeking to improve the efficiency and effectiveness of its operations and of its internal controls. This results in modifications to its processes throughout the Company. However, there has been no change in its internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

Changes in Internal Controls

There was no change in our internal control over financial reporting that occurred during the quarter ended December 31, 2008 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

The design of any system of controls and procedures is based in part upon certain assumptions about the likelihood of future events.  There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

Item 9B.Other Information.

During 2008, we issued 2,246,669 shares of our common stock, of which 1,305,001 were issued in the fourth quarter, in consideration of $3,370,006 before expenses to accredited investors in transactions exempt from registration under Section 4(2) of the Securities Act and Regulation D under the Securities Act relating to sales not involving any public offering.  The shares were sold by our officers and directors with the assistance of our sales agents, Commerce Street Capital, LLC and FIG Partners, L.L.C.  Our common stock was sold only to investors that we believed were accredited investors.  Our directors and officers received no compensation in connection with the sale of shares.

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PART III

Item 10.Directors, Executive Officer, Promoters, Corporate Governance.

Directors

The Company’s Board of Directors consists of eight members.  Each director serves a one-year term, expiring at the annual meeting of shareholders, upon the election and qualification of the director’s successor.  The following table shows for each director:  (a) his or her name; (b) his or her age at December 31, 2008; (c) how long he or she has been a director of the Company; and (d) his or her position(s) with the Company.

Name (Age)	Director Since	Position with the Company
William A. Bagwell, Jr. (37)	2007	Director of the Company and Bank
William R. Blanton (61)	2007	Director of the Company and Bank
Lanny W. Dunagan (57)	2002	Director of the Company and Bank
William M. Evans, Jr. (57)	2007	Director of the Company and Bank
Gilbert T. Jones, Sr. (72)	2000	Director of the Company and Bank
J. Allen Nivens, Jr. (33)	2007	Director of the Company and Bank
Dr. Wendell A. Turner (51)	2001	Director of the Company and Bank
R.K. Whitehead III (43)	2007	Director of the Company and Bank

Background of Directors

William A. Bagwell, Jr.  Mr. Bagwell has been employed by Homestead Investments, LLC, a real estate investment company, since 2005.  Prior to that employment, Mr. Bagwell served from 1999 to 2005 as the Vice President of the Greater Hall Chamber of Commerce.  Mr. Bagwell holds a bachelor of science degree in political science from Presbyterian College.

William R. Blanton.  Mr. Blanton has over 35 years of banking experience and serves as the Chairman of our Board of Directors and our Chief Executive Officer.  Mr. Blanton currently serves as Chief Executive Officer of First Covenant Bank.  Mr. Blanton is also President of CINC Systems, LLC, a software company specializing in software for the banking and non-profit industries, and Accounting Integrators’, LLC a software company specializing in integrating non-profit organizations depository accounts with banks.  In addition, he is the managing member of Terrazza Realty Advisors, LLC and Terrazza Realty Investments, LLC, real estate investment companies.  Mr. Blanton served as President of First Capital Bank from August 1989 through November 2005.  Mr. Blanton has also held executive positions with Investors Bank & Trust in Duluth, Georgia and several other community banks.  In addition, Mr. Blanton previously served as President of Bank Analysts, a bank consulting firm and as an examiner for the Georgia Department of Banking and Finance.  Mr. Blanton serves on the board of directors of First Covenant Bank, United Americas Bankshares, Inc., and its subsidiary United Americas Bank, and Kings Ridge Christian School.  Mr. Blanton holds a degree in accounting from Georgia State University.

Lanny W. Dunagan.  Mr. Dunagan is a Hall County native and is the sole owner of Lanny Dunagan’s Welding Service, a company he founded in 1984.  He is a member and trustee of Hopewell Baptist Church in Gainesville, Georgia.

William M. Evans, Jr.  Mr. Evans is the President of Fox Creek Properties, Inc., a land development business, a position he has held since 1993.  He is also a Vice-President with Piedmont Investments.  Mr. Evans has been a founding member of three banks:  Heritage Bank, Premier Bankshares and Piedmont Bank.  He most recently

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served as chairman of Piedmont Bank from 2001 until its sale in 2006 to PrivateBancorp, Inc. which is publicly traded under the symbol PVTB.  Mr. Evans holds a degree in accounting and finance from West Georgia College and an M.B.A. from the University of Georgia.

Gilbert T. Jones, Sr.  Mr. Jones retired in 2008.  Prior to his retirement he was the sole owner and President of Great Southern Resource and Investment Inc., a development and construction company.  Mr. Jones is a graduate of the Woodrow Wilson College of Law.

J. Allen Nivens, Jr.  Mr. Nivens engages in commercial and acreage sales with The Norton Agency, a real estate and insurance firm in North Georgia, a position he has held since 2005.  From 2003 through 2005, Mr. Nivens served as the Vice President of Commercial Lending at Hamilton State Bank.  Prior to that position, he served as a commercial lender for Regions Bank from 1998 through 2003.  In the community, Mr. Nivens is Chairman of the John Jarrard Foundation, on the Gainesville State College Foundation Executive Board, on the Greater Hall Chamber of Commerce Board and the 2006 Hall County Young Man of the Year.  Mr. Nivens holds a degree in management from the Georgia Institute of Technology.

Dr. Wendell A. Turner.  Dr. Turner is a medical doctor and has been practicing with Gainesville Gynecology, LLC since 2007.  Prior to opening Gainesville Gynecology, LLC, he practiced with Lanier OB/GYN Associates LLC from 2003 until 2007.  Dr. Turner holds an associates degree in art from Clayton State College and a bachelor of science degree in chemistry from the Georgia Institute of Technology.  He received his M.D. degree from the Medical College of Georgia in 1982.

R.K. Whitehead III.  Mr. Whitehead has served as the President of Whitehead Die Casting Co., an aluminum and zinc die casting manufacturer, since 1990.  Mr. Whitehead is also the President of WDI Company, a real estate business located in Gainesville, Georgia.  In addition, he currently serves as Chairman of the Greater Hall Chamber of Commerce and as Chairman of the Finance Committee of the Northeast Georgia Health System.  Mr. Whitehead holds a bachelor of mechanical engineering from the Georgia Institute of Technology.

Executive Officers

The table below shows the following information for the Company’s and the Bank’s executive officers as of March 30, 2009:  (a) his or her name; (b) his or her age at December 31, 2008; (c) how long he or she has been an executive officer of the Company; and (d) his or her positions with the Company and the Bank:

Name (Age)	Executive Officer Since	Position with the Company and Business Experience
William R. Blanton (61)	2008	Chairman, President and Chief Executive Officer of the Company and the Bank
Denise Smyth (45)	2008	Principal Financial and Accounting Officer of the Company and the Bank
Chris England (50)	2008	President of the South Hall division of the Bank
Kurt A. Hansen (41)	2008	President of the Gainesville division of the Bank
Michael A. Harris (43)	2008	President of the Athens division of the Bank

Background of Executive Officers of the Company

The background information for William R. Blanton is provided above under the heading “Background of Directors.”

Denise Smyth.  Ms. Smyth was appointed the Principal Financial and Accounting Officer of the Company in October 2008.  Ms. Smyth has over 20 years of banking industry, accounting and financial reporting experience working for both regional and community banks.  Ms. Smyth also serves as Chief Financial Officer for First

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Covenant Bank, a position she has held since July 2006.  Ms. Smyth served as the Regulatory Reporting Manager at Flag Bank in Atlanta from November 2005 until July 2006.  Prior to Flag Bank, Ms. Smyth was the Assistant Controller at First Capital Bank from October 2003 until October 2005.  From 1984 through 1999 she held Accounting Management positions at First Union National Bank, First Fidelity Bank, NA, Village Bank and Union State Bank.  She holds a bachelor of science degree in accounting from St. Thomas Aquinas College and is a certified public accountant.

Background of Executive Officers of the Bank

Chris England.  Mr. England was appointed as the President of the South Hall division of the Bank in April 2008.  Prior to joining us, from 1998 until 2008, Mr. England held various banking positions with Southern Heritage Bank, including Senior Vice President, Executive Vice President and Division President.  Mr. England holds a B.S.I.M. degree from the Georgia Institute of Technology.

Kurt A. Hansen.  Mr. Hansen was appointed as the President of the Gainesville division of the Bank in May 2008.  Prior to joining the Bank, from October 2005 until May 2008, Mr. Hansen served as Senior Vice President of the retail division of Gainesville Bank & Trust, where he managed the retail staff and helped develop the strategic direction for the bank.  From October 2002 until October 2005, Mr. Hansen served as Senior Vice President and Wealth Management Director for BB&T, for both the banking and investment and financial planning divisions.

Michael A. Harris. Mr. Harris was appointed as the President of the Athens division of the Bank in May 2008.  Prior to joining the Bank, from August 2004 until May 2008, Mr. Harris served as Senior Vice President of Commercial Lending at Bank of Athens, a division of Gainesville Bank & Trust.   From April 1999 until August 2004, Mr. Harris worked for Wachovia Bank, N.A., where he served as Vice President of Community Banking, and then as City President.  Prior to joining Wachovia Bank, Mr. Harris held various positions with Bank of America, N.A. from December 1983 until April 1999, including Vice President of Professional and Executive Banking.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s directors, its executive officer, and persons who own beneficially more than 10% of the Company’s outstanding common stock to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in their ownership of the Company’s common stock.  The directors, its executive officer, and greater than 10% shareholders are required to furnish the Company with copies of the forms they file.

Based on a review of Section 16(a) reports and written representations from our directors and executive officers, we believe that all of our directors, executive officers and 10% shareholders have made all filings required under Section 16(a) in a timely manner with the exception of the following:

Mr. Blanton failed to timely file a Form 4 for his sale of 55,350 shares of common stock and 99,999 warrants on June 30, 2008.  Mr. Blanton has filed a late Form 4 to report these sales.

Mr. Whitehead failed to timely file a Form 4 for his purchase of  36,900 shares of common stock and 66,665 warrants on June 30, 2008.  Mr. Whitehead has filed a late Form 4 to report these sales.

Mr. Nivens failed to timely file a Form 4 for his purchase of 36,900 shares of common stock and 66,665 warrants on June 30, 2008.  Mr. Nivens has filed a late Form 4 to report these sales.

Mr. Evans failed to timely file a Form 4 for his sale of 18,450 shares of common stock and 33,333 warrants on June 30, 2008, and the purchase of 333,333 common shares by his wife, on December 31, 2008.  Mr. Evans has filed a late Form 4 to report these transactions.

Golden Isles Reinsurance Co. LTD, a beneficial owner of more than ten percent of the Company’s common stock, failed to timely file a Form 3 upon becoming a beneficial owner on January 15, 2009.  Golden Isles Reinsurance Co. LTD has filed a late Form 3 to report its beneficial ownership.

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Joe McCart, a beneficial owner of more than ten percent of the Company’s common stock, failed to timely file a Form 3 upon becoming a beneficial owner on January 15, 2009.  Mr. McCart has filed a late Form 3 to report his beneficial ownership.

Code of Ethics

The Company has adopted a Code of Ethics that applies to the Company’s Chief Executive Officer and Chief Financial and Accounting Officer.  The Company will provide a copy of the Code of Ethics free of charge to any person upon written request to the Company.  Any such request should be addressed to our principal executive office at 807 Dorsey Street, Gainesville, Georgia 30501.

Audit Committee

The Boards of Directors of the Company and the Bank have established a joint Audit Committee for the purpose of reviewing the Company’s annual report and internal audit report of independent public accountants.  The Audit Committee members for 2008 were William R. Blanton, Chairman; Lanny W. Dunagan; Dr. Wendell A. Turner; Gilbert Jones, Sr., William M. Evans, Jr., William A. Bagwell, Jr. J. Allen Nivens and R.K. Whitehead, III.  Each of these members, except our Chief Executive Officer, Mr. Blanton, meets the requirement for independence under applicable NASDAQ listing standards.  Our Board of Directors has determined that Mr. Blanton and Mr. Whitehead qualify as audit committee financial experts under the SEC rules.

Item 11.Executive Compensation.

The following table sets forth the annual compensation for certain of our executive officers, for services in all capacities to the Company or our Bank subsidiary for fiscal year 2008.

Summary Compensation Table

Name and Principal Position	Year	Salary ($)		Bonus ($)	Stock Awards ($)		Option Awards(1)($)		Non- Equity Incentive Plan Comp. ($)		Nonqualified Deferred Comp. Earnings ($)	All Other Comp.(2)($)	Total ($)
	(in thousands)
William R. Blanton Chief Executive Officer	2008	$	0	—	—		$	0	—		—	—	$	0
R. Allen Smith, Former Principal Executive Officer	2008	$	82										$	82
	2007	$	212	—	—		$	24	—		—	—	$	236
Chris England President of the South Hall Division of the Bank	2008	$	107	—	$	7	—		$	8	—	—	$	122

(1) Represents the FAS 123R expense related to the options held by each individual.

(2) We have omitted information on perquisites and other personal benefits because the aggregate amount of these items does not meet the minimum amount required for disclosure under the SEC’s regulations.

On October 25, 2006, Allen Smith, was named President of the Bank and Principal Executive Officer of the Company.  Prior to this appointment, Mr. Smith had served as a consultant to the Company and its Board of

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Directors. Mr. Smith also previously served as Interim Chief Executive and Financial Officer of the Company.  Pursuant to the terms of the consulting arrangement with the Company, Mr. Smith will continue to be paid $125 per hour for his services. Mr. Smith resigned from the position effective May 31, 2008, however, he will continue to be a member of the Board of Directors of First Century Bank.

Change of Control Agreements

We entered into an agreement with Chris England which provides that upon a “Change of Control,” Mr. England would be entitled to receive an amount equal to two times his then current base salary.  “Change of Control” is defined as the exercise of power, directly or indirectly, to direct management or policies of the Company by any person that does not own or control 25% of the common stock or other voting securities of the Company as of the date of the agreement or the acquisition by any person of 25% or more of any class of voting securities.

Outstanding Equity Awards at December 31, 2008

	Option Awards
Name	Number of Securities Underlying Unexercised Options (#) Exercisable	Number of Securities Underlying Unexercised Options (#) Unexercisable	Option Exercise Price ($)		Option Expiration Date
R. Allen Smith	100,000	—	$	5.00	September 20, 2015
Chris England	—	90,000	$	2.00	April 30, 2018

Director Compensation

The directors of the Company were not compensated separately for their services as directors for fiscal year 2008.

Equity Compensation Plan Information

The table below sets forth information regarding shares of the Company’s common stock authorized for issuance as of December 31, 2008 under the following the Company equity compensation plans or agreements:

·First Century Bancorp., Inc. 2003 Stock Incentive Plan;

·First Century Bancorp., Inc. Non-Qualified Stock Option Agreement with R. Allen Smith; and

·First Century Bancorp. Warrant Agreements with certain directors of the Company.

The Stock Incentive Plan was approved by shareholders on May 29, 2003.  At the 2008 Annual Meeting of shareholders, the shareholders approved an amendment to increase the number of shares of our common stock authorized to be reserved for issuance under the Stock Incentive Plan from 125,000 to 750,000.  None of the other equity compensation plans or agreements listed above have been approved by the Company’s shareholders.  Each of those plans or agreements is described below.

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	Number of securities to be issued upon exercise of outstanding options	Weighted-average exercise price of outstanding options		Number of securities remaining available for future issuance under the equity compensation plans (excluding shares subject to outstanding options)
Equity compensation plans approved by security holders	438,334	$	2.27	311,666
Equity compensation plans not approved by security holders	253,393	$	8.03	—
Total	691,727	$	4.38	311,166

Non-Qualified Stock Option Agreement with R. Allen Smith.  On September 20, 2005 the Company entered a consulting agreement with Mr. Smith, pursuant to which the Company issued a warrant to Mr. Smith to purchase 100,000 shares of the Company’s common stock at an exercise price of $5.00 per share.  One-third of the option was vested and exercisable upon grant, with the remaining thirds vesting on an annual basis.

Warrant Agreements with Certain of the Company’s Directors.  On March 25, 2002, the Company issued warrants to its directors to purchase an aggregate of 199,736 shares of the Company’s common stock at an exercise price of $10.00 per share.  The warrants become exercisable in one-third annual increments beginning on the first anniversary of the issuance date, provided that throughout the period beginning on the date of the initial issuance of the warrants and ending on the particular anniversary, the warrant holder has served continuously as a director of the Company and the Bank and has attended at least 75% of the meetings of the relevant boards of directors.  Warrants which fail to vest as provided in the previous sentence will expire and no longer be exercisable.  Exercisable warrants will generally remain exercisable for the 10-year period following the date of issuance.  The exercise price of each warrant is subject to adjustment for stock splits, recapitalizations or other similar events.  As of December 31, 2008, 153,393 warrants remained outstanding of which 153,393 are exercisable.

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

The following table sets forth the number of shares of the Company’s common stock beneficially owned as of December 31, 2008 by (a) each director and the executive officers named in the Summary Compensation Table and (b) the executive officers and all directors, as a group.  The information shown below is based upon information furnished to the Company by the named persons.  Other than the directors, executive officers, and shareholders listed below, we are unaware of any holder of more than 5% of the Company’s common stock.

Information relating to beneficial ownership of the Company is based upon “beneficial ownership” concepts set forth in the rules promulgated under the Exchange Act.  Under these rules a person is deemed to be a “beneficial owner” of a security if that person has or shares “voting power,” which includes the power to vote or to direct the voting of a security, or “investment power,” which includes the power to dispose or to direct the disposition of a security.  Under the rules, more than one person may be deemed to be a beneficial owner of the same securities.  A person is also deemed to be a beneficial owner of any security as to which that person has the right to acquire beneficial ownership within 60 days of December 31, 2008.

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Name	Number of Shares	Exercisable Warrants & Options(1)	Total Beneficial Ownership	% of Class (2)		Nature of Beneficial Ownership
Directors:
William A. Bagwell, Jr.	76,994	136,332	213,326	5.2	%	Includes warrants to purchase 136,332 shares held by Homestead Investment, LLC
William R. Blanton	442,806	850,254	1,293,060	26.8	%
William M. Evans, Jr.	484,129	283,418	767,547	18.0	%	Includes warrants to purchase 147,602 shares held by Silver Hill Enterprises LP and 333,333 shares held by Mr. Evan’s spouse
Lanny Dunagan	42,042	13,334	55,376	1.4	%	Includes 500 shares held jointly with Mr. Dunagan’s son
Gilbert Jones, Sr.	48,926	20,534	69,460	1.7	%	Includes 500 shares held as joint custodian for Mr. Jones’ grandchildren
J. Allen Nivens, Jr.	37,345	69,165	106,510	2.6	%
Dr. Wendell Turner	77,327	27,067	104,394	2.6	%
R. K. Whitehead, III	37,345	69,165	106,510	2.6	%
R. Allen Smith	11,631	100,000	111,631	2.7	%
All Directors and Executive Officers as a Group (9 persons):
	1,258,545	1,569,269	2,827,814	51.0	%
5 Percent Shareholders:
Richard T. Smith	333,334	0	0	8.4	%
Golden Isles Reinsurance Co. Ltd.	666,668	0	0	16.8	%
Joe E. McCart	500,000	0	0	16.3	%

(1)  Certain directors hold warrants which contain provisions for automatic adjustments of the exercise price for shares and the number of shares purchasable under the warrants if subsequent shares or warrants are issued at a price less than the current exercise price.  The numbers included in the table include the automatic adjustments to such warrants as a result of the warrants issued in connection with the private placement of Series B Preferred Stock.

(2) Based on 3,979,127 shares of common stock of the company outstanding as of December 31, 2008, plus the number of shares which the named person exercising all options or warrants has the right to acquire within 60 days, but that no other persons exercise any options or warrants.

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

The Company’s directors and officers, and the businesses and other organizations with which they are associated, from time to time may have banking transactions in the ordinary course of business with the Bank.  The Bank’s policy is that any loans or other commitments to those persons or entities be made in accordance with applicable law and on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons or entities of similar standing.  All transactions with affiliates must be on terms no less favorable than could be obtained from an unaffiliated third party and must be approved by a majority of directors including a majority of disinterested directors.

In addition, each loan by the Bank to any officer, director or controlling person of the Bank or any of its affiliates may be made only in compliance with the following conditions:

The loan:

·must be evidenced by a promissory note naming the Bank as payee and must contain an annual percentage rate which is reasonably comparable to that normally charged to non-affiliates by other commercial lenders for similar loans made in the Bank’s locale;

·must be repaid according to appropriate amortization schedules and contain default provisions comparable to those normally used by other commercial lenders for similar loans made to non-affiliates in the Bank’s locale;

·must be made only if credit reports and financial statements, or other reasonable investigation appropriate in light of the nature and terms of the loan and which meet the loan policies normally used by other commercial lenders for similar loans made to non-affiliates in the Bank’s locale, show the loan to be collectible and the borrower a satisfactory credit risk; and

·the purpose of the loan and the disbursement of proceeds are reviewed and monitored in a manner comparable to that normally used by other commercial lenders for similar loans made in the Bank’s locale.

In April 2007, Mr. Blanton purchased 738,008 shares of our common stock in a private placement at $2.71 per share.  We also issued Mr. Blanton warrants to purchase up to 738,008 shares at $2.71 per share.  The warrant has no expiration date and contains provisions which provide for automatic adjustments in price and shares purchasable under the warrant in the event additional securities are issued below or have a conversion or exercise price below the current warrant exercise price.  We received proceeds of approximately $2,000,000 less fees and expenses related to the sale of the shares, which we used for working capital purposes.  There were no brokerages or underwriting commissions paid in connection with the sale of the shares.

On May 4, 2007, we redeemed 35,000 shares of preferred stock at $10.00 per share that it had issued at the same price per share in 2006 to each of its directors.

In December 2007, we completed a private placement of Series B Preferred Stock, no par value, for $10.00 per share, selling a total of $750,000 of shares.  The investors in that offering also received warrants to acquire 75,000 shares of common stock at an exercise price of $1.50 per share, which we believe was the fair market value of the common stock on the date of issuance of the warrants.  The warrants have no expiration date and contain provisions which provide for automatic adjustments in price and shares purchasable under the warrants in the event additional shares or warrants are issued below the current warrant exercise price.  As a result of the issuance of the warrants with an exercise price below the $2.71 exercises price, the exercise price and the number of shares of common stock purchasable under the warrant issued to Mr. Blanton adjusted as follows:  (a) with respect to Mr. Blanton, from 553,506 shares at $2.71 per share to 1,000,001 shares at $1.50 per share; and (b) with respect to Silver Hill Enterprises, LP, from 184,502 shares at $2.71 per share to 333,334 shares at $1.50 per share.

In September 2008, the Bank entered into a data processing contract and master services agreement to move its processing from Fidelity Information Systems to Providence, the internal data processing system provided by First Covenant Bank.  Pursuant to the agreements, First Covenant will provide services to implement and service

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host system computer software which will provide the Bank with the essential banking processing and accounting functions for deposit products, loans and general ledger accounting.  The term of each contract is 12 months, with the option to renew for additional 12 month periods.  We believe this change will enable the Bank to decrease its costs and increase its flexibility in data processing.  Mr. Blanton serves as a director and as the Chief Executive Officer of First Covenant Bank.  Ms. Smyth serves as the Chief Financial Officer for First Covenant Bank.

The Bank has contracted with CINC Systems, LLC (“CINC”) to provide web and server hosting facilities.  For the year ended December 31, 2008 the total paid to CINC for these services was $10,000.  Mr. Blanton is President of CINC.

The Bank has certain mortgage loans with a carrying amount of $2,742,062 and $2,895,901 as of December 31, 2008 and 2007, respectively, which were purchased from United Americas Bank, an entity in which Mr. Blanton owns approximately 17.1%

The Bank has certain loans with a carrying amount of $1,741,760 and $0 as of December 31, 2008 and 2007, respectively, which were purchased from First Covenant Bank, an entity in which William R. Blanton is a principal owner.

The Bank sold certain loans with a carrying amount of $10,113,232 and $0 as of December 31, 2008 and 2007, respectively, to First Covenant Bank, an entity in which William R. Blanton is a principal owner.

During 2008, we raised $3,370,006 in additional capital throught he sale of common stock in a private placement.  The capital was used to fund $3,515,000 in net operating losses for the year ended December 31, 2008.  In connection with this private placement, Olivia Evans, the wife of one of our directors, William M. Evans, Jr. purchased 333,333 shares.  The following persons also purchased shares in the private placement and became owners of over 5% of our oustanding common stock: (a) Richard T. Smith purchased 333,334 shares; (b) Golden Isles Reinsurance Co. LTD. Purchased 666,668 shares; and (c) Joe E. McCart purchased 500,000 shares.

Director Independence

The Board of Directors determines the independence of each director in accordance with guidelines it has adopted, which include all elements of independence set forth in the NASDAQ Global Market listing standards.  The Board of Directors determined that each of the following non-employee directors is independent and has no material relationship with the Company, except as a director and shareholder of the Company:  William Bagwell, Jr., William Evans, Jr., Lanny W. Dunagan, Gilbert T. Jones, Sr., J. Allen Nivens, Jr., Dr. Wendell A. Turner and R.K. Whitehead, III.  In addition, based on such standards, William R. Blanton is not independent because he serves as our Chief Executive Officer.

Item 14.Principal Accounting Fees and Services

The following table sets forth the fees billed and, as to audit and audit-related fees, expected to be billed to the Company for the fiscal years ended December 31, 2008 and 2007 by McNair, McLemore, Middlebrooks & Co., LLP.

	2008		2007
Audit Fees (1)	$	44,501	$	48,203
Audit-Related Fees(2)	12,942		—
Tax Fees (3)	3,691		3,407
All Other Fees	—		—
Total Fees	$	61,134	$	51,610

(1)Represents fees related to the audit and quarterly reviews of consolidated financial statements of the Company and review of regulatory filings.

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(2)Represents fees related to consents and comfort letter related to Private Placement Memorandum.

(3)Represents fees related to tax compliance, tax advice and tax planning service.

All of the services provided by the independent accountants were pre-approved by the Audit Committee.  The Audit Committee pre-approves all audit and non-audit services provided by the Company’s independent accountants and may not engage them to perform any prohibited non-audit services.  The Audit Committee has determined that the rendering of non-audit professional services, as identified above, is compatible with maintaining the independence of the Company’s auditors.

Item 15.Exhibits List.

Exhibit
Number	Description
3.1	Articles of Incorporation of NBOG Bancorporation, Inc. Incorporated by reference to Exhibit 3(i) of the Registration Statement on Form SB-2, File No. 333-47280, filed on October 4, 2000.
3.2	Amendment to Articles of Incorporation of NBOG Bancorporation, Inc. Incorporated by reference to Exhibit 3.1 of the Current Report on Form 8-K, filed October 5, 2006.
3.3	Second Amendment to the Articles of Incorporation of NBOG Bancorporation, Inc. Incorporated by reference to Exhibit 3.1 of the Current Report on Form 8-K, filed October 2, 2007.
3.4	Third Amendment to the Articles of Incorporation of First Century Bancorp.
3.5	Amended and Restated Bylaws of First Century Bancorp.
4.1	See Exhibits 3.1, 3.2, 3.3, 3.4 and 3.5 for provisions of the Articles of Incorporation and Bylaws defining the rights of shareholders.
4.2	Form of common stock certificate of First Century Bancorp. Incorporated by reference to Exhibit 4(ii) of the Registration Statement on Form SB-2, File No. 333-47280, filed on October 4, 2000.
10.1*	First Century Bancorp. Amended and Restated 2003 Stock Incentive Plan.
10.2*	Form of Incentive Stock Option Award. Incorporated by reference to Exhibit 10.3 of the Registration Statement on Form SB-2, File No. 333-122567, filed on February 4, 2005.
10.3*	Form of Nonqualified Stock Option Award. Incorporated by reference to Exhibit 10.4 of the Registration Statement on Form SB-2, File No. 333-122567, filed on February 4, 2005.
10.4*	Form of First Century Bancorp. Organizer’s Warrant Agreement. Incorporated by reference to Exhibit 10(iv) of the Registration Statement on Form SB-2, File No. 333-47280, filed on October 4, 2000.
10.5	Agreement by and between First Century Bank and the Office of the Comptroller of the Currency, dated August 18, 2004. Incorporated by reference to Exhibit 10.6 of the Annual Report on Form 10-KSB for the year ended December 30, 2004, filed on March 31, 2005.
10.6	Stock Purchase Agreement, by and between FCB, First Century Bank and William R. Blanton, dated January 23, 2007. Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, filed January 29, 2007.
10.7	Agreement Concerning Severance Compensation and Benefits Upon a Change of Control by and between First Century Bank and Chris England dated as of August 29, 2008.

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21.1	Subsidiaries of First Century Bancorp.
24	Power of Attorney (contained in Signature Page).
31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certifications pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.1
99.1	Audited Financial Statements

*Indicates management contract or compensatory plan or arrangement.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

FIRST CENTURY BANCORP.
By:	/s/ William R. Blanton
William R. Blanton,
Chief Executive Officer
Date: March 31, 2009

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints William R. Blanton, his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place, and stead, in any and all capacities, to sign any and all amendments to this Annual Report of Form 10-K, and to file the same, with all exhibits hereto, and other documents in connection herewith with the Securities and Exchange Commission, granting unto the attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as they might or could do in person, hereby ratifying and confirming all that these attorneys-in-fact and agents or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated.

Signature	Title	Date
/s/ William R. Blanton	Chairman and Principal Executive Officer	March 31, 2009
William R. Blanton
/s/ Denise Smyth	Principal Financial and Accounting Officer	March 31, 2009
Denise Smyth
/s/ William A. Bagwell	Director	March 31, 2009
William A. Bagwell
/s/ William M. Evans, Jr.	Director	March 31, 2009
William M. Evans, Jr.
/s/ J. Allen Nivens, Jr.	Director	March 31, 2009
J. Allen Nivens, Jr.
/s/ Lanny W. Dunagan	Director	March 31, 2009
Lanny W. Dunagan
/s/ Gilbert T. Jones, Sr.	Director	March 31, 2009
Gilbert T. Jones, Sr.
/s/ Wendell A Turner	Director	March 31, 2009
Dr. Wendell A. Turner
/s/ R. K. Whitehead, III	Director	March 31, 2009
R. K. Whitehead, III

EXHIBIT INDEX

Exhibit
Number	Description
3.1	Articles of Incorporation of NBOG Bancorporation, Inc. Incorporated by reference to Exhibit 3(i) of the Registration Statement on Form SB-2, File No. 333-47280, filed on October 4, 2000.
3.2	Amendment to Articles of Incorporation of NBOG Bancorporation, Inc. Incorporated by reference to Exhibit 3.1 of the Current Report on Form 8-K, filed October 5, 2006.
3.3	Second Amendment to the Articles of Incorporation of NBOG Bancorporation, Inc. Incorporated by reference to Exhibit 3.1 of the Current Report on Form 8-K, filed October 2, 2007.
3.4	Third Amendment to the Articles of Incorporation of First Century Bancorp.
3.5	Amended and Restated Bylaws of First Century Bancorp.
4.1	See Exhibits 3.1, 3.2, 3.3, 3.4 and 3.5 for provisions of the Articles of Incorporation and Bylaws defining the rights of shareholders.
4.2	Form of common stock certificate of First Century Bancorp. Incorporated by reference to Exhibit 4(ii) of the Registration Statement on Form SB-2, File No. 333-47280, filed on October 4, 2000.
10.1*	First Century Bancorp. Amended and Restated 2003 Stock Incentive Plan.
10.2*	Form of Incentive Stock Option Award. Incorporated by reference to Exhibit 10.3 of the Registration Statement on Form SB-2, File No. 333-122567, filed on February 4, 2005.
10.3*	Form of Nonqualified Stock Option Award. Incorporated by reference to Exhibit 10.4 of the Registration Statement on Form SB-2, File No. 333-122567, filed on February 4, 2005.
10.4*	Form of First Century Bancorp. Organizer’s Warrant Agreement. Incorporated by reference to Exhibit 10(iv) of the Registration Statement on Form SB-2, File No. 333-47280, filed on October 4, 2000.
10.5	Agreement by and between First Century Bank and the Office of the Comptroller of the Currency, dated August 18, 2004. Incorporated by reference to Exhibit 10.6 of the Annual Report on Form 10-KSB for the year ended December 30, 2004, filed on March 31, 2005.
10.6	Stock Purchase Agreement, by and between FCB, First Century Bank and William R. Blanton, dated January 23, 2007. Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, filed January 29, 2007.
10.7	Agreement Concerning Severance Compensation and Benefits Upon a Change of Control by and between First Century Bank and Chris England dated as of August 29, 2008.
21.1	Subsidiaries of First Century Bancorp.
24	Power of Attorney (contained in Signature Page).
31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certifications pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.1
99.1	Audited Financial Statements

*Indicates management contract or compensatory plan or arrangement.

EX-3.4

Exhibit 3.4

THIRD AMENDMENT

TO THE

ARTICLES OF INCORPORATION

OF

FIRST CENTURY BANCORP

I.

The name of the corporation is FIRST CENTURY BANCORP (the “Corporation”).

II.

Article III of the Articles of Incorporation of the Corporation is hereby amended to add, following the existing text of Article III, the designation of the rights, privileges, preferences, and limitations of the Series B Preferred Stock set forth in Attachment I to these Articles of Amendment.

III.

The designation, rights, preferences, and limitations pertaining to the Series B Preferred Stock set forth in Attachment I hereto were duly adopted by the Board of Directors of the Corporation by resolution on December 20, 2007.  As of the date of this Amendment, the Corporation’s common stock is the only class of equity securities outstanding and there are no shares of the Corporation’s Series A Preferred Stock outstanding.  The holders of the Corporation’s common stock do not have the right to vote on this Amendment pursuant to authority conferred upon the Board of Directors by the Articles of Incorporation of the Corporation, which authorize the issuance of up to 10,000,000 shares of preferred stock, and by Section 14-2-602 of the Georgia Business Corporation Code.

IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment to be executed by its duly authorized officer as of the 20th day of December, 2007.

First Century Bancorp

/s/ Sondra J. Perkins

By: Sondra J. Perkins

Title: Chief Operating Officer/Controller

ATTACHMENT I

 FIRST CENTURY BANCORP

SERIES B PREFERRED STOCK

Relative Rights, Preferences, and Other Terms

1.Designation and Initial Number. The class of shares of preferred stock hereby authorized shall be designated the “Series B Preferred Stock.” The initial number of authorized shares of the Series B Preferred Stock shall be 100,000 shares, with no par value.

2.Rank.  The Series B Preferred Stock, with respect to dividend rights and rights of liquidation, dissolution or winding up of the corporation, ranks senior to the corporation’s common stock, no par value per share (the “Common Stock”),  the corporation’s Series A preferred stock, no par value per share (the “Series A Preferred Stock”), and all of the other classes and series of equity securities of the corporation, other than any classes or series of equity securities of the corporation subsequently issued ranking on a parity (as defined in Section 12.b.) with, or senior to (as defined in Section 12.d.), the Series B Preferred Stock, as to dividend rights and rights upon liquidation, dissolution or winding up of the corporation. The Series B Preferred Stock is junior to indebtedness issued from time to time by the corporation, including notes and debentures.

3.Voting Rights. The Series B Preferred Stock shall be non-voting except to the extent required by law.

4.Dividend Rights.

a.From and after the date of the issuance of any shares of Series B Preferred Stock, dividends shall accrue on such shares of Series B Preferred Stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization affecting such shares) (the “Accruing Dividends”).  The rate per annum at which the dividends shall accrue shall initially be equal to the Prime Rate (as defined in Section 12.e.) in effect on the date of issuance, and shall be adjusted semi-annually on the first day of January and the first day of July each year to be equal to the Prime Rate in effect on such date.  The holders of shares of Series B Preferred Stock shall be entitled to a preference in the distribution of Accruing Dividends, when and as declared by the Board of Directors, and shall receive Accruing Dividends out of any assets of the corporation legally available therefor, after payment has been made to the holders of the senior stock and subject to the rights of the holders of the parity stock, but before any payment of any dividends shall be made to the holders of the junior stock (as defined in Section 12.c.).  Accruing Dividends shall accrue from day to day, whether or not earned or declared, and shall be cumulative.  Except as set forth in the following Section 4.b., the corporation shall be under no obligation to pay such Accruing Dividends.

b. Accruing Dividends shall be payable quarterly on the last day of each quarter in arrears (each, a “Dividend Payment Date”), commencing upon the corporation’s achievement of sustained profitability.  For the purposes of this agreement, sustained profitability shall mean that the corporation shall have earned positive net

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income from operations for three consecutive quarters.  If a Dividend Payment Date is not a Business Day (as defined below), then the Accruing Dividend that otherwise would have been payable on such Dividend Payment Date may be paid on the next succeeding Business Day with the same force and effect as if paid on the Dividend Payment Date, and no interest or additional dividends or other sums shall accrue or be payable on the amount so payable from the Dividend Payment Date to such next succeeding Business Day.  A “Business Day” means any day, other than a Saturday or a Sunday, that is neither a legal holiday nor a day on which banking institutions in Gainesville, Georgia are authorized or required by law, regulation or executive order to close.

c.The corporation shall not declare, pay or set aside any dividends on any shares of junior stock of the corporation (other than dividends on shares of Common Stock payable in shares of Common Stock) nor shall any shares of junior stock be redeemed, purchased or otherwise acquired for any consideration (nor shall any funds be paid to or made available for a sinking fund for the redemption or retirement, purchase or reduction of any such shares) by the corporation unless the holders of the Series B Preferred Stock then outstanding shall first receive, or simultaneously receive, a dividend on each outstanding share of Series B Preferred Stock in an amount at least equal to the amount of the aggregate Accruing Dividends then accrued on such share of Series B Preferred Stock and not previously paid.

5.Liquidation or Dissolution. In the event of any voluntary or involuntary liquidation, dissolution, or winding up of the affairs of the corporation, then, after distribution or payment has been made to the holders of the senior stock and subject to the rights of the holders of the parity stock as described below, but before any distribution or payment shall be made to the holders of any junior stock, the holders of Series B Preferred Stock shall be entitled to be paid in full (on a per share basis) a cash redemption price equal to $10.00 per share (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization affecting such shares, such amount, as so adjusted from time to time, being hereinafter referred to as the “Stated Value” of such shares) plus all accrued but unpaid dividends, to the fullest extent the corporation has funds legally available therefor.

If, any voluntary or involuntary liquidation, dissolution, or winding up of the affairs of the corporation, the assets of the corporation available for distribution to its shareholders shall be insufficient to pay the holders of senior stock, the holders of senior stock shall receive all of the assets of the corporation available for distribution and each such holders of senior stock shall share ratably in any distribution in accordance with the amounts due such holders of senior stock.

If, any voluntary or involuntary liquidation, dissolution, or winding up of the affairs of the corporation, the assets of the corporation available for distribution to its shareholders shall be sufficient to pay the holders of senior stock but insufficient to pay the holders of Series B Preferred Stock and the holders of parity stock, the holders of senior stock shall first receive all of the assets to which they are entitled, and the holders of Series B Preferred Stock and the holders of parity stock shall then share ratably in any distribution in accordance with the amounts due such shareholders.

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If, any voluntary or involuntary liquidation, dissolution, or winding up of the affairs of the corporation, the assets of the corporation available for distribution to its shareholders shall be sufficient to pay the holders of senior stock, the holders of Series B Preferred Stock and the holders of parity stock, but insufficient to pay the holders of junior stock, holders of senior stock, the holders of Series B Preferred Stock and the holders of parity stock shall first receive all of the assets to which they are entitled, and the holders of the junior stock shall then share ratably in any distribution in accordance with the amounts due such shareholders.

Neither a Change of Control (as defined in Section 12.a.) nor any purchase or redemption of stock of the corporation of any class shall be deemed to be a liquidation, dissolution or winding up of the corporation within the meaning of the provisions of this Section 5.

6.Optional Redemption by the Corporation. The corporation may, at its option and subject to prior approval (if necessary) of the Board of Governors of the Federal Reserve System or its delegate (the “Federal Reserve”), but shall have no obligation to except as set forth in Section 7 hereafter, redeem the shares of Series B Preferred Stock at any time and from time to time, in whole or in part, at a cash redemption price equal to the Stated Value per share plus all accrued but unpaid dividends, to the fullest extent the corporation has funds legally available therefor. The Series B Preferred Stock has no stated maturity and will not be subject to any sinking fund or mandatory redemption provisions. The corporation shall not purchase, either at a public or private sale or by tender offer, all or part of such Series B Preferred Stock, except pursuant to an offer made on the same terms and conditions to all holders of such shares, subject to the provisions of applicable law. At the time of redemption, the corporation shall provide to the holders of Series B Preferred Stock notice of the mechanisms of redemption.

7.Redemption Upon Change of Control. Shares of the Series B Preferred Stock shall be deemed to be redeemed by the corporation, subject to prior Federal Reserve approval (if necessary), upon the occurrence of a “Change of Control” of the corporation, at a cash redemption price equal to the Stated Value per share plus all accrued but unpaid dividends, to the fullest extent the corporation has funds legally available therefor. If a Change of Control is contemplated to occur, the corporation shall apply to the Federal Reserve for approval (if necessary) to redeem the Series B Preferred Stock concurrent with the closing of the transaction causing the Change of Control.

8.Registration Rights. None.

9.Conversion or Exchange. The shares of Series B Preferred Stock are not convertible into or exchangeable for any other property or securities of the corporation.

10.No Implied Limitations. Nothing herein shall limit, by inference or otherwise, the discretionary right of the Board of Directors to divide any or all of the shares of any preferred or special classes into series, and, within the limitations set forth in the Georgia Business Corporation Act, to fix and determine the relative rights and preferences of the shares of any series so established (including any parity stock or senior stock), to the full extent provided in the Articles of Incorporation of the corporation.

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11.Subject to Articles of Incorporation. In addition to the above provisions with respect to the Series B Preferred Stock, such Series B Preferred Stock shall be subject to, and entitled to the benefits of, the provisions set forth in the corporation’s Articles of Incorporation with respect to preferred stock generally.

12.Definitions. As used herein the following terms have the following meanings:

a.The term “Change of Control” shall mean the consummation of (i) a merger, share exchange, consolidation or other business combination of the corporation with any other “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934) or affiliate thereof, other than a merger, share exchange, consolidation or business combination that would result in the outstanding common stock of the corporation immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into common stock of the surviving entity or a parent or affiliate thereof) more than 50% of the outstanding common stock of the corporation or such surviving entity or parent or affiliate thereof outstanding immediately after such merger, consolidation or business combination, or (ii) an agreement for the sale or disposition by the corporation of all or substantially all of the corporation’s assets.

b.The term “parity stock” means any class of capital stock or series of preferred stock (including but not limited to Series B Preferred Stock) and any other class of stock of the corporation hereafter authorized that ranks on a parity with the Series B Preferred Stock in the payment of dividends or in the distribution of assets on any liquidation, dissolution or winding up of the corporation.

c.The term “junior stock” shall mean the Common Stock, the Series A Preferred Stock, and any other class of stock of the corporation hereafter authorized over which the Series B Preferred Stock has preference or priority in the payment of dividends or in the distribution of assets on any liquidation, dissolution or winding up of the corporation.

d.The term “senior stock” shall mean any class of capital stock or series of preferred stock ranking senior (with respect to priority in the payment of dividends or in the distribution of assets on any liquidation, dissolution or winding up of the corporation) to the Series B Preferred Stock.

e.The term “Prime Rate” shall mean the rate of interest announced or quoted by the Wall Street Journal from time to time as the Prime Rate; and, if the Prime Rate is discontinued by Wall Street Journal as a standard, a comparable reference rate designated by Wall Street Journal as a substitute therefor shall be the Prime Rate.

13.Notices. All notices required or permitted to be given by the corporation with respect to the Series B Preferred Stock shall be in writing, and if delivered by first class United States mail, postage prepaid, to the holders of the Series B Preferred Stock at their last addresses

4

as they shall appear upon the books of the corporation, shall be conclusively presumed to have been duly given, whether or not the shareholder actually receives such notice; provided, however, that failure to duly give such notice by mail, or any defect in such notice, to the holders of any stock designated for repurchase, shall not affect the validity of the proceedings for the repurchase of any other shares of Series B Preferred Stock.

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EX-3.5

Exhibit 3.5

AMENDED AND RESTATED BYLAWS OF

FIRST CENTURY BANCORP.

a Georgia corporation (the “Corporation”)

ARTICLE ONE

OFFICES

1.1REGISTERED OFFICE AND AGENT.  The Corporation will maintain a registered office and will have a registered agent whose business office is identical with such registered office.  The registered office need not be identical with the principal business office of the Corporation.

1.2OTHER OFFICES.  The Corporation may have offices at such other place(s), within or without the State of Georgia, as the Board of Directors may from time to time determine or the business of the Corporation may require.

ARTICLE TWO

SHAREHOLDERS’ MEETINGS

2.1DATE, TIME AND PLACE OF MEETINGS.  All meetings of the shareholders shall be held on such date, time and place, within or without the State of Georgia, as the Board of Directors may set forth from time to time, or if no place is so specified, at the principal executive office of the Corporation.

2.2ANNUAL MEETINGS.  The annual meeting of shareholders shall be held on a date and at a time following the end of the Corporation’s fiscal year as may be determined by the Board of Directors, for the purpose of electing directors and transacting any and all business that may properly come before the meeting.

2.3SPECIAL MEETINGS.  Special meetings of the shareholders for any purpose(s) may be called at any time by the Chairman of the Board or the President or by a majority of the directors then in office or by written request of the holders of at least 25% of the then outstanding shares of capital stock of the Corporation entitled to be cast, voting together as a single class. Business transacted at any special meeting of shareholders shall be limited to the purpose(s) stated in the notice thereof.

2.4NOTICE OF MEETINGS.  Written notice of each shareholders’ meeting stating the date, time and place of the meeting will be delivered either personally or by mail to each shareholder of record entitled to vote at such meeting, not less than 10 days or more than 60 days before the date of the meeting.  In the ease of an annual meeting, the notice of the meeting need not state the purpose(s) for which the meeting is called.  In the ease of a special meeting, the notice of meeting shall state the purpose(s) for which the meeting is called.  If mailed, such notice shall be deemed to be delivered when deposited in the United States mail with first class postage affixed thereon, prepaid, addressed to each shareholder at his address as it appears on the Corporation’s record of shareholders.  Attendance of a shareholder at a meeting of the shareholders shall constitute a waiver of notice of such meeting and of all objections to the place or time of such

meeting, or the manner in which it has been called or convened, except when a shareholder attends a meeting solely for the purpose of stating, at the beginning of the meeting, any such objection to the transaction of any business.  Notice need not be given to any shareholder who signs a waiver of notice, in person or by proxy, either before or after the meeting.  If the language of a proposed resolution or plan requiring the approval of the shareholders is included in a written notice of a meeting of the shareholders, the shareholders’ meeting considering the resolution or plan may adopt it with such clarifying or other amendments as do not enlarge its original purpose without further notice to shareholders not present in person or by proxy.

2.5QUORUM.  The presence, in person or by proxy, of the holders of a majority of shares then issued and outstanding and entitled to vote, shall constitute a quorum for the transaction of business at any meeting of shareholders, except as otherwise required by statute or the Articles of Incorporation.  Where a quorum is once present at a meeting, it shall not be broken by the subsequent withdrawal of any of those present.

2.6ADJOURNMENT.  In the absence of a quorum or for any other reason, the holders of the majority of the shares then issued and outstanding and entitled to vote at any meeting of the shareholders, present in person or represented by proxy, or the Chairman of the Board or the President, shall have the power to adjourn the meeting from time to time, without notice other than announcement at the meeting of the date, time and place of the adjourned meeting.  At such adjourned meeting in which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified.  If after the adjournment a new record date is picked for the adjourned meeting, notice of the adjourned meeting shall be given to each shareholder of record entitled to vote at the adjourned meeting.

2.7VOTE REQUIRED.  When a quorum is present at any meeting, the affirmative vote of the holders of a majority of the shares of stock of the Corporation entitled to vote and present in person or represented by proxy, voting together as a single class, shall decide any questions brought before such meeting, except as otherwise required by statute or the Articles of Incorporation.

2.8VOTING OF SHARES.  Except as otherwise required by statue or the Articles of Incorporation, each shareholder shall be entitled to one vote, in person or represented by proxy, for each share of stock having voting power held by such shareholder at every meeting of the shareholders. Shareholders may vote in person or by written proxy; provided, however, no proxy shall be voted or acted on after 11 months from its date, unless the proxy provides for a longer period.  Any proxy to be voted at a meeting of shareholders shall be filed with the Secretary of the Corporation before or at the time of the meeting.  Voting on matters brought before a shareholders’ meeting may, at the discretion of the person presiding at the meeting, be by voice vote or show of hands, unless any qualified voter, prior to the voting on such matter, demands vote by ballot, in which event the voting shall be by ballot.

2.9NO ACTION BY WRITTEN CONSENT.  Shareholders shall not be entitled to take any action by written consent in lieu of taking such action at an annual or special meeting of shareholders.

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2.10SHAREHOLDERS’ LIST.  A complete list of shareholders entitled to vote at any meeting of shareholders, arranged in alphabetical order showing the address of each such shareholder as it appears in the records of the Corporation and the number of shares registered in the name of such shareholder, shall be prepared by the Secretary of the Corporation at least 10 days prior to every meeting of shareholders.  Such list shall be open to the examination of any shareholder, for any purpose relating to the meeting, during ordinary business hours for a period of at least 10 days prior to the meeting, either at a place within the city where the meeting is to be held or, if not so specified, the place where the meeting is to be held, and a duplicate list shall be similarly open to examination at the principal executive office of the Corporation.  The list shall also be produced and kept at the time and place of the meeting during the duration thereof, and may be inspected by any shareholder who is present.

2.11INSPECTORS OF ELECTION.  In advance of any meeting of shareholders, the Board of Directors may appoint any persons, other than nominees for office, as inspectors of election to act at such meeting or any adjournment thereof.  The number of inspectors shall be either one or three. If such persons are not so appointed or fail or refuse to act, the presiding officer of such meeting shall make such appointment(s) at the meeting.  The number of inspectors shall be either one or three.  If there are three inspectors, the decision, action or certificate of a majority of such inspectors shall be effective and shall represent the decision, action or certificate of all.  No such inspector need be a shareholder of the Corporation.

Unless otherwise required by statute or the Articles of Incorporation, the duties of such inspectors shall include: determining the number of shares outstanding and the voting power of each share, the number of shares represented at the meeting, the existence of a quorum, the authenticity, validity and effect of proxies; receiving votes or ballots; hearing and determining all challenges and questions in any way arising in connection with the right to vote; counting and tabulating all ballots or votes and determining the results thereof; and such acts as may be proper to conduct the election or vote with fairness to all shareholders.  Upon request, the inspectors shall make. a report in writing to the secretary of the meeting concerning any challenge, question or other matter as may have been determined by them and shall execute and deliver to such secretary a certificate of any fact found by them.

2.12CONDUCT OF MEETINGS.

A.All annual and special meetings or shareholders shall be conducted in accordance with such rules and procedures as the Board of Directors may determine subject to the requirements of statute and, as to matters not governed by such rules and procedures, as the presiding officer of such meeting shall determine.  The presiding officer of any annual or special meeting of shareholders shall be the President or, in his absence, such person as designated by the Board of Directors.  The Secretary, or in his absence, a person designated by the presiding officer, shall act as secretary of the meeting.

B.At any annual meeting of shareholders, only such business shall be conducted as shall have been brought before the meeting (i) as specified in the notice of the meeting given by or at the direction of the Board of Directors, (ii) otherwise properly brought before the meeting by or at the direction of the Board of Directors, or (iii) otherwise properly brought before the meeting

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by any shareholder of the Corporation who is entitled to vote. with respect thereto and who complies with the notice procedures set forth in this subparagraph (b).

For business to be properly brought before an annual meeting by a shareholder, the shareholder must have given timely notice thereof in writing to the Secretary of the Corporation.  To be timely, a shareholder’s notice must be delivered or mailed to and received at the principal executive office of the Corporation not less than 60 days or more than 90 days prior to the date of the annual meeting; provided, however, that in the event that less than 40 days’ notice or prior public disclosure of the date of the meeting is given or made to shareholders, notice by a shareholder to be timely must be received not later than the close of business on the tenth day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure was made.  A shareholder’s notice to the Secretary shall set forth as to each matter such shareholder proposes to bring before the annual meeting (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting (ii) the name and address, as they appear on the books of the Corporation, of the shareholder proposing such business, (iii) the class and number of shares of the Corporation’s capital stock that are beneficially owned by such shareholder and (iv) any material interest of such shareholder in such business.  Notwithstanding anything in these Bylaws to the contrary, no business shall be brought before or conducted at an annual meeting except in accordance with the. provisions of this subparagraph (b).  The presiding officer at the annual meeting shall, if the facts so warrant, determine and declare to the meeting that a matter of business was not properly brought before the meeting in accordance with the provisions of this subparagraph (b) and, if he should so determine, he shall so declare to the meeting and any such business so determined to be not properly brought before the meeting shall not be transacted.

C.At any special meeting of the shareholders, only such business shall be conducted as shall have been brought before the meeting by or at the direction of the Board of Directors.

2.13VOTING OF SHARES BY CERTAIN HOLD.

A.If shares or other securities having voting power stand of record in the names of two or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, tenants by the entirety or otherwise, or if two or more persons have the same fiduciary relationship respecting the same shares, unless the Secretary of the Corporation is given written notice to the contrary and is furnished with a copy of the instrument or order appointing them or creating the relationship wherein it is so provided, their acts with respect to voting shall have the following effect: (1) if only one votes, his act binds all; (2) if more than one vote, the act of the majority so voting binds all; (3) if more than one vote, but the vote is evenly split on any particular matter, each faction may vote the securities in question proportionally, or any person voting the shares, or a beneficiary, if any, may apply to such Court as may have jurisdiction to appoint an additional person to act with the persons so voting the shares, which shall then be voted as determined by the majority of such persons and the person appointed by the Court.  If the instrument so filed shows that any such tenancy is held in unequal interests, a majority or even-split for the purposes hereof shall be a majority or even-split in interests.  Shares standing in the name of another corporation may be voted by any officer, agent or proxy as the bylaws of such corporation may prescribe, or, in the absence of such provision, as the board of directors of

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such corporation may determine.  Shares held by an administrator, executor, guardian or conservator may be voted by him, either in person or by proxy, without a transfer of such shares into his name.  Shares standing in the name of a trustee may be voted by him, either in person or by proxy, but no trustee shall be entitled to vote shares held by him without a transfer of such shares into his name.  Shares standing in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into his name if authority so to do is contained in an appropriate order of the court or other public authority by which such receiver was appointed.

B.A shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred.

ARTICLE THREE

THE BOARD OF DIRECTORS

3.1GENERAL POWERS.  The business and affairs of the Corporation will be managed by or under the direction of the Board of Directors.  In addition to the powers and authority expressly conferred upon it by these Bylaws, the Board of Directors may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute, by any legal agreement among shareholders, by the Articles of Incorporation or by these Bylaws directed or required to be exercised or done by the shareholders.  The Board of Directors shall annually elect a Chairman of the Board from among its members and may elect a Vice Chairman of the Board from among its members.

3.2NUMBER AND TENURE.  The Board of Directors shall consist of not less than seven or more than 21 directors.  The number of directors within this range shall be determined from time to time by resolution adopted by a majority of the directors then in office.  Except in the case of earlier death, resignation or removal, each director shall serve a term of one year. Notwithstanding the expiration of a director’s term, such director shall serve until his or her successor, if there is to be any, is elected and qualified or until his or her earlier death, resignation or removal.  No decrease in the number of directors shall shorten the term of any incumbent director.  Except as otherwise provided in the Articles of Incorporation and these Bylaws, directors shall be elected at each annual meeting of shareholders, or at a special meeting of shareholders called for purposes that include the election of directors.

3.3QUALIFICATION OF DIRECTORS.  Directors shall be natural persons who have attained the age of 21 years but need not be residents of the State of Georgia or shareholders of the Corporation.  A director shall not be permitted to stand for election after his seventieth birthday.

3.4VACANCY.  Any vacancy occurring in the Board of Directors, including any vacancy occurring by reason of an increase in the number of directors or by the removal of a director, may be filled by the vote of a majority of the directors then in office, though less than a quorum.  Any director so chosen shall hold office until such director’s successor shall have been elected and qualified.  Any director chosen by the Board of Directors to fill a vacancy created, other than by reason of an increase in the number of directorships, shall serve for the unexpired term of the

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director whose vacancy is being filled.  Any director chosen by the Board of Directors to fill a vacancy created by reason of an increase in the number of directorships shall serve for a term to expire at the next election of directors by the shareholders.

3.5REMOVAL.  At a meeting of shareholders with respect to which notice of such purpose has been given, any or all members of Board of Directors may be removed with or without cause, and then only by the affirmative vote of the holders of a majority of the then outstanding shares of stock of the Corporation entitled to be cast, voting together as single class, or by the affirmative vote of a majority of the directors then in office. For purposes hereof, “cause” shall mean any act or omission for which a director may be personally liable to the Corporation or its shareholders pursuant to the Articles of Incorporation, as well as any other act or omission which relates to personal dishonesty, incompetence or intentional failure to perform stated duties.

3.6COMPENSATION.  The Board of Directors shall have the authority to set the compensation of directors and members of any committees thereof.  The directors and members of any committees thereof may also be paid for their expenses, if any, of attendance at each meeting of the Board or any committee thereof.  No provision of these Bylaws shall be construed to preclude any director or committee member from serving the Corporation in any other capacity and receiving compensation therefor.

3.7NOMINATIONS OF DIRECTORS.

A.Only persons who are nominated in accordance with the procedures set forth in these Bylaws shall be eligible for election as Directors.  Nominations of persons for election to the Board of Directors of the Corporation may be made at any meeting of shareholders at which Directors are to be elected only (i) by or at the direction of the Board of Directors or (ii) by any shareholder of the Corporation entitled to vote for the election of Directors at the meeting who complies with the notice procedures set forth in this Section.  Each year the President shall appoint a special committee of three directors to recommend to the Board of Directors persons to be the management nominees for election as directors.  Based on such recommendations, the Board of Directors shall act as a nominating committee to select the management nominees for election as directors.  Except in the case of a nominee substituted as a result of the death or other incapacity of a management nominee, the nominating committee shall deliver the names of its nominees to the Secretary at least 25 days prior to the date of the annual meeting.

B.Nominations, other than those management nominees made by or at the direction of the Board of Directors, shall be made by timely notice in writing to the Secretary of the Corporation.  To be timely, a shareholder’s notice shall be delivered or mailed to and received at the principal executive offices of the Corporation not less than 30 days prior to the date of the meeting; provided, however, that in the event that less than 40 days’ notice or prior public disclosure of the date of the meeting is given or made to shareholders, notice by the shareholder to be timely must be so received not later than the close of business on the 10th day following the day on which such notice of the date of the meeting is mailed or such public disclosure was made.  Such shareholder’s notice shall set forth (i) as to each person whom the shareholder proposes to nominate for election or re- election as a director, all information relating to such person as required to be disclosed in solicitation of proxies for election of directors, or as otherwise required, in each case pursuant to Regulation 14A under the Securities and Exchange Act of

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1934, as amended (including such person’s written consent to being named in a proxy statement as a nominee and to serving as a director if elected); and (ii) as to the shareholder giving the notice (x) the name and address, as they appear on the books of the Corporation, of such shareholder and (y) the class and number of shares of the Corporation’s capital stock that are beneficially owned by such shareholder.  At the request of the Board of Directors any person nominated by the Board of Directors for election as a director shall furnish to the Secretary of the Corporation that information required to be set forth in a shareholder’s notice of nomination which pertains to the nominee.  No person shall be eligible for election as a Director of the Corporation unless nominated in accordance with the provisions of this Section.  The officer presiding at the meeting shall, if the facts so warrant, determine and declare to the meeting that a nomination was not made in accordance with the provisions of this Section and, if he should so determine, he shall so declare to the meeting and the defective nomination shall be discharged.

3.8DIRECTORS EMERITUS.  The Board of Directors shall have the authority, at its discretion, to choose persons to serve as directors emeritus.  Such action, if taken, shall be taken at the regular meeting of the Board of Directors next following the annual meeting of shareholders.  No more than three persons may serve as directors emeritus at any one time. Once elected, a director emeritus shall serve a term of one year, but he may be re-elected by the Board to serve additional terms.  A director emeritus shall be allowed to attend all regular and special meetings of the Board of Directors, and he may actively participate in such meetings except that he shall not be allowed to vote on any matters voted upon by the directors, nor shall he be counted for purposes of determining if there is a quorum.  A director emeritus may also serve in an advisory capacity on committees, but again, he shall not be allowed to vote.  A director emeritus may be removed from office at any time, with or without cause, by majority vote of the Board of Directors.  A director emeritus shall be entitled to reasonable compensation for his services as a director emeritus and to reasonable expenses incurred in attending meetings, all as determined by the Board of Directors, provided that no such compensation shall be paid unless the direct members of the Board of Directors are likewise being compensated, and provided further that such compensation shall be less than that paid to the members of the Board of Directors.  A director emeritus shall not have the responsibility imposed upon a director, nor shall he be subject to any liability imposed upon a director, or otherwise be deemed a director.

ARTICLE FOUR

MEETINGS OF THE BOARD OF DIRECTORS

4.1ANNUAL AND OTHER REGULAR MEETINGS.  The annual regular meeting of the Board of Directors shall be held at the time and place of the regularly scheduled meeting of the Board of Directors next following the annual meeting of the shareholders.  Regular meetings of the Board of Directors or any committee thereof may be held between annual meetings without notice at such time and at such place, within or without the State of Georgia, as from time to time shall be determined by the Board or any committee thereof, as the case may be.

4.2SPECIAL MEETINGS.  Special meetings of Board of Directors may be called for any purpose(s) by the Chairman of the Board or the President or by written request of any two or more directors then in office.  Special meetings of any committee of the Board of Directors may

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be held on the date set at the previous meeting of the committee or when called by its chairman or by a majority of its members.  Any such special meetings shall be held at such date, time and place, within or without the State of Georgia, as shall be communicated in the notice of the meeting.

4.3NOTICE.  Notice of any special meeting of the Board of Directors or any committee thereof, setting forth the date, time and place of the meeting, shall be delivered to each director or committee member, addressed to him at his residence or usual place of business, or by telephone, telegram, cable, telecommunication, teletype, facsimile transmission or personal delivery not later than the second business day immediately preceding the date of the meeting. Neither the business to be transacted at, nor the purpose of, any regular or special meeting need be specified in the notice or any waiver of notice.

Notice of any meeting need not be given to any director or committee member who shall attend such meeting in person (except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not properly called or convened) or who shall waive notice thereof, before or after such meeting, in a signed writing.

4.4QUORUM AND ADJOURNMENT.  At all meetings of the Board of Directors or any committee thereof, the presence of a majority of the directors or committee members then in office shall constitute a quorum for the transaction of business.  In the absence of a quorum or for any other reason, a majority of the directors or committee members present thereat may adjourn the meeting from time to time.  Notice of any adjourned meeting shall be given to each director or committee member who was not present at the time of adjournment and, unless the time and place of the adjourned meeting are announced at the time of adjournment, to the other directors or committee members.  At any reconvened meeting following such adjournment at which a quorum shall be present, any business may be transacted which might have transacted at the meeting as originally notified.

4.5VOTING.  At all meetings of the Board of Directors or any committee thereof, each director or committee member present shall have one vote.  The act of a majority of the directors or committee members present at any meeting, in which there is a quorum, shall be the act of the Board of Directors or any committee thereof, except as otherwise provided by statute, the Articles of Incorporation or these Bylaws.  On any question on which the Board of Directors or any committee thereof shall vote, the names of those voting and their votes shall be entered into the minutes of the meeting when any member of the Board of Directors or any committee member present at the meeting so requests.

4.6PRESUMPTION OF ASSENT.  Any director or committee member present at a meeting of the Board of Directors or any committee thereof shall be presumed to have assented to any action taken at the meeting unless his dissent or abstention is entered in the minutes of the meeting or unless he files, at the meeting or immediately after its adjournment, his written dissent to the action with the person acting as secretary of the meeting.  This right to dissent shall not be available to a director or committee member who voted in favor of the action.

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4.7MEETING BY MEANS OF CONFERENCE TELEPHONE OR SIMILAR TELECOMMUNICATIONS EQUIPMENT.  Members of the Board of Directors or any committee thereof may participate in a meeting of the Board or any committee by means of conference telephone or similar telecommunications equipment, by means of which all persons participating in the meeting can hear each other.  Participation in the meeting in this matter shall constitute presence in person at such meeting.

4.8ACTION BY DIRECTORS WITHOUT A MEETING. Any action required or permitted to be taken at any meeting of the Board of Directors or any committee thereof may be taken without a meeting if a written consent, setting forth the action so taken, is signed by all the directors or all the committee members, as the case may be, and filed with the minutes of the proceedings of the Board or the committee.  Such consent will have the same force and effect as a unanimous vote of the Board of Directors or the committee.

4.9CONDUCT OF MEETINGS.  All meetings of the Board of Directors or any committee thereof shall be conducted in accordance with such rules and procedures as the directors may determine subject to the requirements of statute and, as to matters not governed by such rules and procedures, as the presiding officer of such meeting shall determine.  The presiding officer of any meeting of the Board of Directors shall be the Chairman of the Board or, in his absence, the President, or, in the absence of both, such person as designated by the Board of Directors.  The Secretary, or in his absence, a person designated by the presiding officer, shall act as secretary of the meeting.

4.10RESIGNATION.  Any director may resign at any time by giving written notice thereof to the Corporation addressed to the Chairman of the Board or the President.  Unless otherwise specified, such resignation shall take effect upon delivery of such notice unless some other date is specified in such notice.  Acceptance of any resignation shall not be necessary to make it effective unless the resignation is tendered subject to such acceptance.  A director’s absence from more than three consecutive regular meetings of the Board of Directors, unless excused by resolution of the Board of Directors, shall be deemed to constitute the resignation of such a director, effective once such resignation is accepted by resolution of the Board of Directors.

ARTICLE FIVE

BOARD COMMITTEES

5.1COMMITTEES.

A.The Board of Directors may, by the vote of a majority of the directors then in office, establish committees, including standing or special committees, which shall have such duties as are authorized by the Board or by these Bylaws. Committee members, and the chairman of each committee, shall be appointed by the Board of Directors.  If an executive committee or similar committee is designated by the Board of Directors, the President shall serve as a member of that committee.  The presiding officer of any committee meeting shall be the chairman of the committee and the chairman shall designate a person to act as secretary of the committee meeting.

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B.The Board of Directors may, by the vote of majority of the directors then in office, remove any member of any committee, with or without cause, or fill any vacancies in any committee, and dissolve or discontinue any committee.

C.The designation of any committee under this Article and the delegation of authority thereto shall not operate to relieve the Board of Directors, or any director, of any responsibility imposed by statute.

5.2MINUTES.  Each committee shall keep minutes of its actions and proceedings.  Any action taken by the Board of Directors with respect to the actions or proceedings of any committee shall be entered into the minutes of the Board of Directors.

ARTICLE SIX

OFFICERS

6.1OFFICERS.  The officers of the Corporation shall include a President, a Secretary, and a Treasurer.  The Board of Directors may also designate the Chairman of the Board as an officer of the Corporation.  The Board of Directors may also designate one or more Vice Presidents as Executive Vice President or Senior Vice President.  The Board of Directors may also elect or authorize the appointment of such other officers or assistant officers as the business of the Corporation may require.  In addition to the duties and powers enumerated in this Article, the officers of the Corporation shall perform such other duties and exercise such further powers as the Board of Directors may authorize or determine from time to time.  Any two or more of the above offices may be held by the same persons except as prohibited by statute, but no officers shall execute, acknowledge or verify an instrument in more than one capacity if the instrument is required by statute or the Articles of Incorporation to be executed, acknowledged or verified by two or more officers.  No officer need be a shareholder of the Corporation.

6.2COMPENSATION.  The salaries of the officers of the Corporation shall be fixed by the Board of Directors.  No officer shall be prevented from receiving compensation by reason of also being a director of the Corporation.

6.3ELECTION AND TERM OF OFFICE.  The officers of the Corporation shall be elected annually by the Board of Directors at the first meeting of the Board of Directors held after each annual meeting of the shareholders.  If the election of officers is not held at such meeting, such election shall be held as soon as possible thereafter.  Each officer of the Corporation shall hold office until his successor is elected or until his earlier resignation, death or removal, or the termination of his office.  The election or appointment of an officer, employee or agent shall not itself create contractual rights.  The Board of Directors may authorize the Corporation to enter into an employment contract or other arrangement with any officer; but no such contract shall impair the rights of the Board of Directors to remove any officer at any time in accordance with this Article.

6.4REMOVAL.  Any officer may be removed from office at any time, with or without cause, by the vote of a majority of the directors then in office whenever in their judgment, the best interest of the Corporation will be served thereby.  Any such removal shall be without prejudice to the contract rights, if any, of the officer so removed.

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6.5VACANCY.  Any vacancy in an office resulting from any cause may be filled by the Board of Directors in the manner prescribed by these Bylaws.

6.6CHAIRMAN AND VICE CHAIRMAN OF THE BOARD.  The Chairman of the Board shall be elected annually by the Board of Directors from among its members.  The Chairman shall preside at all meetings of the Board and shall perform all of the duties and shall have all the powers commonly incident to his office or delegated to him by the Board of Directors, or which are or may at any time be authorized or required by statute or these Bylaws.  Unless a Vice President has been elected and has as one of his duties to act in the President’s stead in the event of his absence or inability to serve, then the Chairman of the Board, in the event of the President’s absence, inability to serve or refusal to serve, shall act in the President’s stead and shall have all the powers of and be subject to all the restrictions of the President until such time as the President resumes his duties, a new President is chosen, or an officer of the Corporation is selected by the Board of Directors to perform the duties of the President.  The Board of Directors also shall elect annually a Vice Chairman who, in the absence of the Chairman, shall preside at all meetings of the Board and shall perform all of the duties and have all of the powers of the Chairman.

6.7PRESIDENT.  The President shall be the Chief Executive Officer of the Corporation and shall have general responsibility for the management and supervision of the business of the Corporation and corporate policy.  The President shall have administrative authority over the business of the Corporation, and shall have such further authority and perform such other duties as may be delegated to him by the Board of Directors.

6.8VICE PRESIDENT.  Each Executive Vice President, each Senior Vice President and each other Vice President shall have such powers and perform such duties as may be delegated to him by the Board of Directors or delegated by the President.  In the absence or disability of the President, those powers, duties and functions of the President may be temporarily performed and exercised by such one of the Executive Vice Presidents, Senior Vice Presidents or the other Vice Presidents as shall be expressly designated by the Board of Directors.  When more than one Vice President is elected, the Board may specify an order of seniority among such Vice Presidents.

6.9SECRETARY.  The Secretary shall attend all meetings of the Board of Directors and all meetings of the shareholders and record all votes and the minutes of all proceedings in books to be kept for that purpose, and shall perform like duties for any Board committees when required.  The Secretary shall give, or cause to be given, any notice required to be given of any meetings of the shareholders, of the Board of Directors or any Board committees when required, and shall perform such other duties as may be prescribed by the Board of Directors or the President, under whose supervision the Secretary shall be.  The Secretary shall cause to be kept such books and records as the Board of Directors or the President may require and shall cause to be prepared, recorded, transferred, issued, sealed and cancelled certificates of stock as required by the transactions of the Corporation and its shareholders.  The Secretary shall attend to such other correspondence and shall perform such other duties as may be incident to such office or as may be assigned to him by the Board of Directors or the President.  The Secretary shall have custody of the seal of the Corporation, shall have the authority to affix the same to any instrument, the execution of which on behalf of the Corporation under its seal is duly authorized, and shall attest

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the same by his signature whenever required.  The Board of Directors may give general authority to any other officer to affix the seal of the Corporation and to attest the same by his signature.

6.10TREASURER.  The Treasurer shall have charge of and be responsible for all funds, securities, receipts and disbursements of the Corporation, and shall deposit, or cause to be deposited, in the name of the Corporation, all monies or other valuable effects, in such banks, trust companies or other depositories as shall from time to time be selected by the Board of Directors.  He shall render to the President and to the Board of Directors, whenever requested, an account of the financial condition of the Corporation, and in general, he shall perform all such other duties as may be delegated to him by the Board of Directors or the President.

6.11ASSISTANT VICE PRESIDENT, ASSISTANT SECRETARY AND ASSISTANT TREASURER.  The Assistant Vice President, Assistant Secretary and Assistant Treasurer, in the absence or disability of any Vice President, the Secretary or the Treasurer, respectively, shall perform the duties and exercise the powers of those offices, and, in general, they shall perform such other duties as shall be delegated to them by the Board of Directors or by the person appointing them.  Specifically, the Assistant Secretary may affix the seal of the Corporation to all necessary documents and attest the signature of any officer of the Corporation.

6.12DELEGATION OF AUTHORITY.  In the case of the absence of any officer of the Corporation or for any other reason that the Board of Directors may deem sufficient, the Board of Directors may delegate, for the time being, any or all of the powers or duties of such officer to any other officer or to any director.

ARTICLE SEVEN

CAPITAL STOCK

7.1STOCK CERTIFICATES.  Each shareholder shall be entitled to a certificate representing the number of shares of capital stock of the Corporation owned by such person. The certificate shall be in such form as approved by the Board of Directors of the Corporation.  Each certificate shall be signed by the President or a Vice President and by the Secretary or an Assistant Secretary and shall be sealed with the seal of the Corporation or a facsimile thereof.  The signatures upon a certificate may be facsimiles.  In case any officer who shall have signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer of the Corporation before such certificate shall have been issued by the Corporation, such certificate may nevertheless be issued as though the person who signed such certificate had not ceased to be such officer.

7.2STOCK RECORDS.  Each certificate for shares of Stock in the Corporation shall be numbered or otherwise identified in the stock records of the Corporation.  The Corporation shall keep stock records which shall show the names and addresses of the persons to whom the shares are issued, with the number of shares and date of issuance.

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7.3STOCK TRANSFERS.  Transfers of shares of stock of the Corporation shall be made on the stock transfer books of the Corporation only when authorized by the person named in the certificate, or by his legal representative, who shall furnish written evidence of such authority, or by his attorney authorized by a duly executed power of attorney and filed with the Corporation.  Such transfer shall be made only upon surrender of the certificate therefor, or in the case of a certificate alleged to have been lost, stolen or destroyed, upon compliance with the provisions of this Article and as may otherwise be provided by statute.  The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends and to vote as such owner, and for all other purposes, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by law.  No transfer shall be valid, except between the parties thereto, until such transfer shall have been made upon the books of the Corporation as herein provided.  The Board of Directors shall have the power and authority to make such other rules and regulations concerning the issue, transfer and registration of certificates of the Corporation’s stock as it may deem appropriate.

7.4RECORD DATES.  The Board of Directors may fix, in advance, a date as the record date for the purpose of determining shareholders entitled to notice of, or to vote at, any meeting of shareholders or any adjournment thereof, or shareholders entitled to receive payment of any dividend of other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock, or in order to make a determination of shareholders for any other purpose.  Such date in any case shall not be more than 70 days, and in the case of the meeting of shareholders, not less than 10 days, prior to the date on which the particular action, requiring the determination of shareholders is to be taken.  Only those shareholders of record on the dates so fixed shall be entitled to any of the foregoing rights, notwithstanding the transfer of any such stock on the books of the Corporation after any such record date fixed by the Board of Directors.

7.5TRANSFER AGENTS AND REGISTRARS.  The Corporation may have one or more transfer agents and one or more registrars of its stock whose respective duties the Board of Directors or Secretary may, from time to time, determine.  No certificate of stock shall be valid until countersigned by a transfer agent, if the Corporation has a transfer agent, or until registered by the registrar, if the Corporation has a registrar.  The duties of transfer agent and registrar may be combined.

7.6LOST CERTIFICATES.  The Corporation may issue a new certificate of stock in place of any certificate previously issued and alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or his legal representative to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate and any other conditions as may otherwise be provided by statute.

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ARTICLE EIGHT

GENERAL PROVISIONS

8.1REFERENCES.  Whenever in these Bylaws reference is made to an Article or Section number, such reference is to the number of an Article or Section of the Bylaws.  Whenever in the Bylaws reference is made to the Bylaws, such reference is to these Bylaws of the Corporation as the same may be amended from time to time.  Whenever in the Bylaws reference is made to the Articles of Incorporation, such reference is to the Articles of Incorporation of the Corporation as the same may be amended from time to time.

8.2REFERENCE TO GENDER.  Whenever in the Bylaws reference is made to the masculine gender, such reference shall where the context so requires be deemed to include the feminine gender and the neuter gender, and the Bylaws shall be read accordingly.

8.3LEGAL RESTRICTIONS.  All matters covered in these Bylaws shall be subject to such restrictions as shall be imposed on the Corporation by applicable state and federal statutes, rules and regulations.

8.4SEAL.  The seal of the Corporation shall be in such form as the Board of Directors may determine from time to time.  The seal may be used by causing it or by facsimile thereof to be impressed or affixed or reproduced or otherwise.  If it is inconvenient to use such a seal at any time, the signature of the Chairman of the Board, President, Secretary or an Assistant Secretary of the Corporation, followed by the word “Seal” shall be deemed the seal of the Corporation.

8.5FISCAL YEAR.  The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors and may be changed from time to time.

8.6VOTING SHARES IN SUBSIDIARIES.  In the absence of other arrangements by the Board of Directors, shares of stock issued by another corporation and owned or controlled by the Corporation, whether in a fiduciary capacity or otherwise, may be voted by the President of the Corporation or by such other person as the Board of Directors by resolution shall so designate, and such person may execute the aforementioned powers by executing proxies and written waivers and consents on behalf of the Corporation.

8.7INSPECTION OF BOOKS.  The Board of Directors shall have the power to determine which accounts and books of the Corporation, if any, shall be opened to the inspection of shareholders, except such as may by statute be specifically opened to inspection, and shall have the power to affix reasonable rules and regulations not in conflict with the applicable statute for the inspection of accounts and books which by statute or by the determination of the Board of Directors shall be opened to inspection, and the shareholders’ rights in this respect arc and shall be restricted and limited accordingly.

8.8CONTRACTS.  No contract or other transaction between Corporation and any other corporation, partnership or other entity shall be affected or invalidated by the fact that a shareholder, director or officer of the Corporation is a shareholder, director, partner or other officer of, or is interested in, such other corporation, partnership or other entity, and no contract or other transaction between Corporation and any other person shall be affected or invalidated by the fact that a shareholder, director or officer of the Corporation is a party to, or interested in, such contract or transaction; provided that, in each such case, the nature and extent of the interest of such shareholder, director or officer in such contract or other transaction or the fact that such

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shareholder, director or officer is a shareholder, director, officer, partner or other party of such other corporation, partnership, entity or other person is known to the Board of Directors or is disclosed at the meeting of the Board of Directors at which such contract or the transaction is authorized.

8.9AMENDMENT OF BYLAWS.  These Bylaws may be altered, amended or repealed, or new Bylaws adopted, pursuant to the provisions of the Articles of Incorporation.

ARTICLE NINE

INDEMNIFICATION

9.1INDEMNIFICATION.

A.Each person who is or was a director or officer of the Corporation, and each person who is or was a director or officer of the Corporation who at request of the Corporation is serving or has served as an officer, director, partner, agent, joint venturer or trustee of another corporation, partnership, joint venture, trust or other enterprise, shall be indemnified by the Corporation against those expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement which are allowed to be paid or reimbursed by the Corporation under the laws of the State of Georgia and which are actually and reasonably incurred in connection with any action, suit or proceeding, pending or threatened, whether civil, criminal, administrative or investigative, in which such person may be involved by reason of his being or having been a director or officer of this Corporation or as an officer, director, partner, agent, joint venturer or trustee of such other enterprise.

B.Expenses incurred in defending a criminal or civil action, suit, or proceeding may be paid by the corporation in advance of the final disposition of such action, suit, or proceeding as authorized by the Board of Directors in the specific case upon receipt of an undertaking by or on behalf of the Director, office, employee, or agent to repay such amount unless it shall ultimately be determined that he is entitled to be indemnified by the Corporation as authorized in this section.

C.In any instance where the laws of the State of Georgia permit indemnification or advancement of expenses to be provided to persons who are or have been an officer or director the Corporation or who are or have been an officer, director, partner, agent, joint venturer trustee of any such other enterprise only on a determination that certain specified standards of conduct have been met, upon application for indemnification, or advancement of expenses by any such person the Corporation shall promptly cause such determination to be made (i) by the Board of Directors by majority vote of a quorum consisting of directors not at the time parties to such proceeding; (ii) if such a quorum cannot be obtained, then by majority vote of a committee duly designated by the Board of Directors (in which designation directors who are parties participate), consisting solely of two (2) or more directors not at the time parties to such proceeding; (iii) by special legal counsel selected by the Board of Directors if a quorum cannot be obtained under (i) and a committee cannot be designated under (ii), selected by majority vote of the full Board of Directors (in which selection directors who are parties participate); or (iv) by the shareholders, but shares owned or voted under control of the directors who are at the time parties to such proceeding may not be voted with respect to such determination.

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D.As a condition to any such right of indemnification or advancement of expenses, the Corporation may require that it be permitted to participate in the defense of any such action or proceeding through legal counsel designated by the Corporation and at the expense of the Corporation.

E.The Corporation may purchase and maintain insurance on behalf of any such persons, whether or not the Corporation would have the power to indemnify such officers and directors against any liability under the laws of the State of Georgia.  If any expenses or other amounts are paid by way of indemnification, other than by court order, action by shareholders or by an insurance carrier, the Corporation shall provide notice of such payment to the shareholders in accordance with the provisions of the laws of the State of Georgia.

F.The indemnification and advancement of expenses provided in this Article shall not be deemed exclusive of any other rights, in respect to indemnification or otherwise, to which the persons seeking indemnification or advancement of expenses may be entitled under any bylaws, resolution, agreement, statute or otherwise.

G.The rights to indemnification and advancement of expenses provided by this Article shall be deemed a contract between the Corporation and each such person and any modification or repeal of this Article shall not affect any right or obligation then existing with respect to any stated fact then or previously existing or any action, or proceeding previously or thereafter brought or threatened based in whole or in part of any such state of facts.  Such contract right may not be modified or repealed without consent of each such person.  The rights to indemnification and advancement of expenses provided by this Article shall continue to a person entitled to indemnification and advancement of expenses provided by this Article shall continue to a person entitled to indemnification hereunder who has ceased to be a director or office and shall inure to the benefit of the heirs, executors, or administrators of each such person.

H.Notwithstanding anything contained herein to the contrary, Article 9 is intended to provide indemnification to each director and officer of the Corporation to the fullest extent authorized by the Code, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader rights than said statute permitted the Corporation to provide prior thereto).

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EX-10.1

Exhibit 10.1

FIRST CENTURY BANCORP.

AMENDED AND RESTATED

2003 STOCK INCENTIVE PLAN

TABLE OF CONTENTS

						PAGE
SECTION 1				DEFINITIONS		1
1.1		Definitions				1
SECTION 2				THE STOCK INCENTIVE PLAN		4
2.1		Purpose of the Plan				4
2.2		Stock Subject to the Plan				4
2.3		Administration of the Plan				5
2.4		Eligibility and Limits				5
SECTION 3				TERMS OF STOCK INCENTIVES		6
3.1			General Terms and Conditions			6
3.2			Terms and Conditions of Options			6
	(a)				Option Price	7
	(b)				Option Term	7
	(c)				Payment	7
	(d)				Conditions to the Exercise of an Option	7
	(e)				Termination of Incentive Stock Option Status	8
	(f)				Special Provisions for Certain Substitute Options	8
3.3		Treatment of Awards Upon Termination of Service				8
SECTION 4				RESTRICTIONS ON STOCK		8
4.1		Escrow of Shares				8
4.2		Restrictions on Transfer				9
SECTION 5				GENERAL PROVISIONS		9
5.1			Withholding			9
5.2			Changes in Capitalization; Merger; Liquidation			9
5.3			Cash Awards			10
5.4			Compliance with Code			10
5.5			Right to Terminate Service			11
5.6			Restrictions on Delivery and Sale of Shares; Legends			11
5.7			Non-Alienation of Benefits			11
5.8			Termination and Amendment of the Plan			11
5.9			Stockholder Approval			11
5.10			Choice of Law			11
5.11			Effective Date of the Plan			11

FIRST CENTURY BANCORP.

AMENDED AND RESTATED

2003 STOCK INCENTIVE PLAN

SECTION 1  DEFINITIONS

1.1           Definitions.  Whenever used herein, the masculine pronoun shall be deemed to include the feminine, and the singular to include the plural, unless the context clearly indicates otherwise, and the following capitalized words and phrases are used herein with the meaning thereafter ascribed:

(a)           “Affiliate” means

(1)           any Subsidiary or Parent;

(2)           an entity that directly or through one or more intermediaries controls, is controlled by, or is under common control with the Company, as determined by the Company; or

(3)           any entity in which the Company has such a significant interest that the Company determines it should be deemed an “Affiliate,” as determined in the sole discretion of the Company.

(b)           “Bank” means The National Bank of Gainesville.

(c)           “Board of Directors” means the board of directors of the Company.

(d)           “Cause” has the same meaning as provided in the employment agreement between the Participant and the Company or Affiliate(s) on the date of Termination of Service, or if no such definition or employment agreement exists, “Cause” means conduct amounting to (1) fraud or dishonesty against the Company or Affiliate(s); (2) Participant’s willful misconduct, repeated refusal to follow the reasonable directions of the Board of Directors or knowing violation of law in the course of performance of the duties of Participant’s service with the Company or Affiliate(s); (3) repeated absences from work without a reasonable excuse; (4) repeated intoxication with alcohol or drugs while on the Company’s or Affiliate(s)’ premises during regular business hours; (5) a conviction or plea of guilty or nolo contendere to a felony or a crime involving dishonesty; or (6) a breach or violation of the terms of any agreement to which Participant and the Company or Affiliate(s) are party.

(e)           “Change in Control” has the same meaning as provided in the employment agreement between the Participant and the Company or Affiliate(s), or if no such definition or employment agreement exists, “Change in Control shall mean any one of the following events which may occur after the date the Stock Incentive is granted:

(1)           the acquisition by any individual, entity or “group,” within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Securities Exchange Act of 1934, as amended, (a “Person”) of beneficial ownership (within the meaning of Rule 13-d-3 promulgated under the Securities Exchange Act of 1934) of voting securities of the Company or the Bank where such acquisition

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causes any such Person to own fifty percent (50%) or more of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors;

(2)           within any twelve-month period, the persons who were directors of the Company or the Bank immediately before the beginning of such twelve-month period (the “Incumbent Directors”) shall cease to constitute at least a majority of the Board of Directors of the Company or the Bank; provided that any director who was not a director as of the beginning of such twelve-month period shall be deemed to be an Incumbent Director if that director were elected to the Board of Directors of the Company or the Bank by, or on the recommendation of or with the approval of, at least two-thirds of the directors who then qualified as Incumbent Directors; and provided further that no director whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of directors shall be deemed to be an Incumbent Director;

(3)           a reorganization, merger or consolidation, with respect to which persons who were the stockholders of the Company or the Bank immediately prior to such reorganization, merger or consolidation do not, immediately thereafter, own more than fifty percent (50%) of the combined voting power entitled to vote in the election of directors of the reorganized, merged or consolidated company’s then outstanding voting securities; or

(4)           the sale, transfer or assignment of all or substantially all of the assets of the Company or the Bank to any third party.

(f)            “Code” means the Internal Revenue Code of 1986, as amended.

(g)           “Committee” means the committee appointed by the Board of Directors to administer the Plan pursuant to Plan Section 2.3.  If the Committee has not been appointed, the Board of Directors in its entirety shall constitute the Committee.

(h)           “Company” means First Century Bancorp.

(i)            “Disability” has the same meaning as provided in the long-term disability plan or policy maintained or, if applicable, most recently maintained, by the Company or an Affiliate for the Participant.  If no long-term disability plan or policy was ever maintained on behalf of the Participant or, if the determination of Disability relates to an Incentive Stock Option, Disability shall mean that condition described in Code Section 22(e)(3), as amended from time to time.  In the event of a dispute, the determination of Disability shall be made by the Board of Directors and shall be supported by advice of a physician competent in the area to which such Disability relates.

(j)            “Disposition” means any conveyance, sale, transfer, assignment, pledge or hypothecation, whether outright or as security, inter vivos or testamentary, with or without consideration, voluntary or involuntary.

(k)           “Exchange Act” means the Securities Exchange Act of 1934, as amended.

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(l)            “Fair Market Value” with regard to a date means:

(1)           if the Stock is then readily tradable on an established securities market (as defined in Section 1.897-1(m) of the Treasury Regulations), the closing sales price of the Stock on the trading day immediately preceding such date on the securities exchange having the greatest volume of trading in the Stock during the thirty (30) day period preceding the day the value is to be determined or, if such exchange was not open for trading on such date, the next preceding date on which it was open; or

(2)           if the Stock is not then readily tradable on an established securities market (as defined in Section 1.897-1(m) of the Treasury Regulations), then (A) with respect to the grant of a Nonqualified Stock Option, as of any date, the fair market value of a share of Stock determined by the Committee by the reasonable application of a reasonable valuation method in compliance with Section 409A of the Code and Section 1.409A-1(b)(5)(iv) of the Treasury Regulations; and (B) with respect to the grant of an Incentive Stock Option, the fair market value of a share of Stock determined in good faith by the Committee in any reasonable manner, in compliance with Section 422 of the Code and Section 1.422-2(e) of the Treasury Regulations.

(m)          “Incentive Stock Option” means an incentive stock option, as defined in Code Section 422, described in Plan Section 3.2.

(n)           “Nonqualified Stock Option” means a stock option, other than an option qualifying as an Incentive Stock Option, described in Plan Section 3.2.

(o)           “Option” means a Nonqualified Stock Option or an Incentive Stock Option.

(p)           “Over 10% Owner” means an individual who at the time an Incentive Stock Option is granted owns Stock possessing more than ten percent (10%) of the total combined voting power of the Company or one of its Parents or Subsidiaries, determined by applying the attribution rules of Code Section 424(d).

(q)           “Parent” means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company if, with respect to Incentive Stock Options, at the time of granting of the Incentive Stock Option, each of the corporations other than the Company owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in the chain.

(r)            “Participant” means an individual who receives a Stock Incentive hereunder.

(s)           “Plan” means the First Century Bancorp. Amended and Restated 2003 Stock Incentive Plan.

(t)            “Stock” means the Company’s no par value common stock.

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(u)           “Stock Incentive Agreement” means an agreement between the Company and a Participant or other documentation evidencing an award of a Stock Incentive.

(v)           “Stock Incentive” means, collectively, Incentive Stock Options and Nonqualified Stock Options.

(w)          “Subsidiary” means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if, with respect to Incentive Stock Options, at the time of the granting of the Incentive Stock Option, each of the corporations other than the last corporation in the unbroken chain owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in the chain.  A “Subsidiary” shall include any entity other than a corporation to the extent permissible under Section 424(f) of the Code or the Treasury Regulations or rulings thereunder.

(x)            “Termination of Service” means the termination of the service relationship, whether employment or otherwise, between a Participant and the Company and any Affiliates, regardless of the fact that severance or similar payments are made to the Participant for any reason, including, but not by way of limitation, a termination by resignation, discharge, death, Disability or retirement.  The Committee shall, in its absolute discretion, determine the effect of all matters and questions relating to a Termination of Service, including, but not by way of limitation, the question of whether a leave of absence constitutes a Termination of Service, or whether a Termination of Service is for Cause.

(y)           “Treasury Regulations” means regulations promulgated by the United States Department of Treasury pursuant to the Code, as amended, including proposed or temporary regulations as applicable.

SECTION 2  THE STOCK INCENTIVE PLAN

2.1           Purpose of the Plan.  The Plan is intended to (a) provide incentives to officers, employees and directors of the Company and its Affiliates to stimulate their efforts toward the continued success of the Company and to operate and manage the business in a manner that will provide for the long-term growth and profitability of the Company; (b) encourage stock ownership by officers, employees and directors by providing them with a means to acquire a proprietary interest in the Company by acquiring shares of Stock; and (c) provide a means of obtaining and rewarding key personnel.

2.2           Stock Subject to the Plan.  Subject to adjustment in accordance with Section 5.2, 750,000 shares of Stock (the “Maximum Plan Shares”) are hereby reserved exclusively for issuance upon exercise or payment pursuant to Stock Incentives.  At such times as the Company is subject to Section 16 of the Exchange Act, at no time shall the Company have outstanding Stock Incentives subject to Section 16 of the Exchange Act and shares of Stock issued in respect of Stock Incentives in excess of the Maximum Plan Shares.  The shares of Stock attributable to the nonvested, unpaid, unexercised, unconverted or otherwise unsettled portion of any Stock Incentive that is forfeited or cancelled or expires or terminates for any reason without becoming vested, paid, exercised, converted or otherwise settled in full will again be available for purposes of the Plan.

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2.3           Administration of the Plan.  The Plan shall be administered by the Committee.   The Committee shall consist of at least two members of the Board of Directors.  During those periods that the Company is subject to the provisions of Section 16 of the Exchange Act, the Board of Directors shall consider whether each Committee member should qualify as an “outside director” as defined in Section 1.162-27(e) of the Treasury Regulations and a “non-employee director” as defined in Rule 16b(3)(b)(3) as promulgated under the Exchange Act.  The Committee shall have full authority in its discretion to determine the officers, employees and directors of the Company or its Affiliates to whom Stock Incentives shall be granted and the terms and provisions of Stock Incentives subject to the Plan.  Subject to the provisions of the Plan, the Committee shall have full and conclusive authority to interpret the Plan; to prescribe, amend and rescind rules and regulations relating to the Plan; to determine the terms and provisions of the respective Stock Incentive Agreements and to make all other determinations necessary or advisable for the proper administration of the Plan.  The Committee’s determinations under the Plan need not be uniform and may be made by it selectively among persons who receive, or are eligible to receive, awards under the Plan (whether or not such persons are similarly situated).  The Committee’s decisions shall be final and binding on all Participants.  Each member of the Committee shall serve at the discretion of the Board of Directors and the Board of Directors may from time to time remove members from or add members to the Committee.  Vacancies on the Committee shall be filled by the Board of Directors.

The Committee shall select one of its members as chairman and shall hold meetings at the times and in the places as it may deem advisable.  Acts approved by a majority of the Committee in a meeting at which a quorum is present, or acts reduced to or approved in writing by a majority of the members of the Committee, shall be the valid acts of the Committee.

2.4           Eligibility and Limits.  Stock Incentives may be granted only to officers, employees and directors of the Company or any Affiliate; provided, however, that an Incentive Stock Option may only be granted to an employee of the Company or any Subsidiary.  In the case of Incentive Stock Options, the aggregate Fair Market Value (determined as of the date an Incentive Stock Option is granted) of stock with respect to which stock options intended to meet the requirements of Code Section 422 become exercisable for the first time by an individual during any calendar year under all plans of the Company and its Parents and Subsidiaries shall not exceed $100,000; provided further, that if the limitation is exceeded, the Incentive Stock Option(s) which cause the limitation to be exceeded shall be treated as Nonqualified Stock Option(s).   During such periods as required by Code Section 162(m) of the Code and the regulations thereunder for compensation to be treated as qualified performance-based compensation, the maximum number of shares of Stock with respect to which Options may be granted during any calendar year to an employee may not exceed 25,000, subject to adjustment in accordance with Section 5.2.  If, after grant, the exercise price of an Option is reduced, the transaction shall be treated as the cancellation of the Option and the grant of a new Option.  If an Option is deemed to be cancelled as described in the preceding sentence, the Option that is deemed to be cancelled and the Option that is deemed to be granted shall both be counted against the Maximum Plan Shares and the maximum number of shares for which Options may be granted to an employee during any calendar year.

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SECTION 3  TERMS OF STOCK INCENTIVES

3.1           General Terms and Conditions.

(a)           The number of shares of Stock as to which a Stock Incentive shall be granted shall be determined by the Committee in its sole discretion, subject to the provisions of Section 2.2, as to the total number of shares available for grants under the Plan.  If a Stock Incentive Agreement so provides, a Participant may be granted a new Option to purchase a number of shares of Stock equal to the number of previously owned shares of Stock tendered in payment of the Exercise Price (as defined below) for each share of Stock purchased pursuant to the terms of the Stock Incentive Agreement.

(b)           Each Stock Incentive shall be evidenced by a Stock Incentive Agreement in such form and containing such terms, conditions and restrictions as the Committee may determine is appropriate.  Each Stock Incentive Agreement shall be subject to the terms of the Plan and any provision in a Stock Incentive Agreement  that is inconsistent with the Plan shall be null and void.

(c)           The date a Stock Incentive is granted shall be the date on which the Committee has approved the terms of, and satisfaction of any conditions applicable to, the grant of the Stock Incentive and has determined the recipient of the Stock Incentive and the number of shares covered by the Stock Incentive and has taken all such other action necessary to complete the grant of the Stock Incentive.

(d)           The Committee may provide in any Stock Incentive Agreement (or subsequent to the award of a Stock Incentive but prior to its expiration or cancellation, as the case may be) that, in the event of a Change in Control, the Stock Incentive shall or may be cashed out on the basis of any price not greater than the price per share of Stock received or to be received by other stockholders of the Company in the Change of Control transaction, as determined by the Committee, or, if the Committee in its sole discretion deems it to be appropriate, the Fair Market Value of a share of Stock as of the date of the Change of Control; provided, however, that, in the case of Incentive Stock Options, then unless the Committee determines otherwise, the price will be based only on the Fair Market Value of the Stock on the date on which the Incentive Stock Options are cashed out (the “Change in Control Price”).  For purposes of this Subsection, any Option shall be cashed out on the basis of the excess, if any, of the Change in Control Price over the Exercise Price to the extent the Option is then exercisable in accordance with the terms of the Option and the Plan.

(e)           Stock Incentives shall not be transferable or assignable except by will or by the laws of descent and distribution and shall be exercisable, during the Participant’s lifetime, only by the Participant; in the event of the Disability of the Participant, by the legal representative of the Participant; or in the event of the death of the Participant, by the personal representative of the Participant’s estate or if no personal representative has been appointed, by the successor in interest determined under the Participant’s will.

3.2           Terms and Conditions of Options.  Each Option granted under the Plan shall be evidenced by a Stock Incentive Agreement.  At the time any Option is granted, the Committee shall determine whether the Option is to be an Incentive Stock Option or a Nonqualified Stock Option, and the Option shall be clearly identified as to its status as an Incentive Stock Option or a Nonqualified Stock Option.  At the time any

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Incentive Stock Option is exercised, the Company shall be entitled to place a legend on the certificates representing the shares of Stock purchased pursuant to the Option to clearly identify them as shares of Stock purchased upon exercise of an Incentive Stock Option.  An Incentive Stock Option may only be granted within ten (10) years from the earlier of the date the Plan is adopted by the Board of Directors or approved by the Company’s stockholders.  All Options shall provide that the primary federal regulator of the Company or the Bank may require a Participant to exercise an Option in whole or in part if the capital of the Company or the Bank falls below minimum requirements and shall further provide that, if the Participant fails to so exercise any such portion of the Option, that portion of the Option shall be forfeited.

(a)           Option Price.   Subject to adjustment in accordance with Section 5.2 and the other provisions of this Section 3.2, the exercise price (the “Exercise Price”) per share of Stock purchasable under any Option shall be as set forth in the applicable Stock Incentive Agreement.  With respect to each grant of an Incentive Stock Option to a Participant who is not an Over 10% Owner, the Exercise Price per share shall not be less than the Fair Market Value on the date the Option is granted.  With respect to each grant of an Incentive Stock Option to a Participant who is an Over 10% Owner, the Exercise Price shall not be less than 110% of the Fair Market Value on the date the Option is granted.  With respect to each grant of a Nonqualified Stock Option, the Exercise Price per share shall be no less than the Fair Market Value.

(b)           Option Term.  The term of an Option shall be as specified in the applicable Stock Incentive Agreement; provided, however that any Option granted to a Participant shall not be exercisable after the expiration of ten (10) years after the date the Option is granted and any Incentive Stock Option granted to an Over 10% Owner shall not be exercisable after the expiration of five (5) years after the date the Option is granted.

(c)           Payment.  Payment for all shares of Stock purchased pursuant to the exercise of an Option shall be made in cash or, if the Stock Incentive Agreement provides, in a cashless exercise through a broker.   In its discretion, the Committee also may authorize (at the time an Option is granted or thereafter) Company financing to assist the Participant as to payment of the Exercise Price on such terms as may be offered by the Committee in its discretion.  Payment shall be made at the time that the Option or any part thereof is exercised, and no shares shall be issued or delivered upon exercise of an Option until full payment has been made by the Participant.  The holder of an Option, as such, shall have none of the rights of a stockholder.

(d)           Conditions to the Exercise of an Option.  Each Option granted under the Plan shall be exercisable by the Participant or any other designated person, at such time or times, or upon the occurrence of such event or events, and in such amounts, as the Committee shall specify in the Stock Incentive Agreement; provided, however, that subsequent to the grant of an Option, the Committee, at any time before complete termination of such Option, may accelerate the time or times at which such Option may be exercised in whole or in part, including, without limitation, upon a Change in Control and may permit the Participant or any other designated person to exercise the Option, or any portion thereof, for all or part of the remaining Option term notwithstanding any provision of the Stock Incentive Agreement to the contrary.  Notwithstanding the foregoing, no Option granted prior to the third anniversary of the date the Bank opens for business shall contain provisions which allow the

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Option to become vested and exercisable at a rate faster than in equal one-third increments commencing with the first anniversary of the Option’s grant date.

(e)           Termination of Incentive Stock Option Status.  With respect to an Incentive Stock Option, in the event of the Termination of Service of a Participant, the Option or portion thereof held by the Participant which is unexercised shall expire, terminate and become unexercisable no later than three (3) months after the date of termination of employment; provided, however, that in the case of a holder whose termination of employment is due to death or Disability, up to one (1) year may be substituted for such three (3) month period.  For purposes of this Subsection (e), Termination of Service of the Participant shall not be deemed to have occurred if the Participant is employed by another corporation (or a parent or subsidiary corporation of such other corporation) which has assumed the Incentive Stock Option of the Participant in a transaction to which Code Section 424(a) is applicable.

(f)            Special Provisions for Certain Substitute Options.  Notwithstanding anything to the contrary in this Section 3.2, any Option issued in substitution for an option previously issued by another entity, which substitution occurs in connection with a transaction to which Code Section 424(a) (with respect to Incentive Stock Options) or Section 1.409A-1(b)(v)(D) of the Treasury Regulations (with respect to Nonqualified Stock Options) is applicable, may provide for an exercise price computed in accordance with such Code and Treasury Regulation provisions and may contain such other terms and conditions as the Committee may prescribe to cause such substitute Option to contain as nearly as possible the same terms and conditions (including the applicable vesting and termination provisions) as those contained in the previously issued option being replaced thereby.

3.3           Treatment of Awards Upon Termination of Service.  Except as otherwise provided by Plan Section 3.2(e), any award under this Plan to a Participant who suffers a Termination of Service may be cancelled, accelerated, paid or continued, as provided in the Stock Incentive Agreement or, in the absence of such provision, as the Committee may determine.  The portion of any award exercisable in the event of continuation or the amount of any payment due under a continued award may be adjusted by the Committee to reflect the Participant’s period of service from the date of grant through the date of the Participant’s Termination of Service or such other factors as the Committee determines are relevant to its decision to continue the award.

SECTION 4  RESTRICTIONS ON STOCK

4.1           Escrow of Shares.  Any certificates representing the shares of Stock issued under the Plan shall be issued in the Participant’s name, but, if the Stock Incentive Agreement so provides, the shares of Stock shall be held by a custodian designated by the Committee (the “Custodian”).  Each applicable Stock Incentive Agreement providing for transfer of shares of Stock to the Custodian shall appoint the Custodian as the attorney-in-fact for the Participant for the term specified in the applicable Stock Incentive Agreement, with full power and authority in the Participant’s name, place and stead to transfer, assign and convey to the Company any shares of Stock held by the Custodian for such Participant, if the Participant forfeits the shares under the terms of the applicable Stock Incentive Agreement.  During the period that the Custodian holds the shares subject to this Section, the Participant shall be entitled to all rights, except as provided in the applicable Stock Incentive Agreement, applicable to shares of Stock not so held.  Any dividends declared on shares of Stock held by the Custodian shall, as the Committee may provide in the applicable Stock Incentive Agreement, be paid

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directly to the Participant or, in the alternative, be retained by the Custodian until the expiration of the term specified in the applicable Stock Incentive Agreement and shall then be delivered, together with any proceeds, with the shares of Stock to the Participant or to the Company, as applicable.

4.2           Restrictions on Transfer.  The Participant shall not have the right to make or permit to exist any Disposition of the shares of Stock issued pursuant to the Plan except as provided in the Plan or the applicable Stock Incentive Agreement.  Any Disposition of the shares of Stock issued under the Plan by the Participant not made in accordance with the Plan or the applicable Stock Incentive Agreement shall be void.  The Company shall not recognize, or have the duty to recognize, any Disposition not made in accordance with the Plan and the applicable Stock Incentive Agreement, and the shares so transferred shall continue to be bound by the Plan and the applicable Stock Incentive Agreement.

SECTION 5  GENERAL PROVISIONS

5.1           Withholding.  The Company shall deduct from all cash distributions under the Plan any taxes required to be withheld by federal, state or local government.  Whenever the Company proposes or is required to issue or transfer shares of Stock under the Plan, the Company shall have the right to require the recipient to remit to the Company an amount sufficient to satisfy any federal, state and local tax withholding requirements prior to the delivery of any certificate or certificates for such shares.  A Participant may pay the withholding obligation in cash, by tendering shares of Stock which have been owned by the holder for at least six (6) months prior to the date of exercise or, if the applicable Stock Incentive Agreement provides, a Participant may elect to have the number of shares of Stock he is to receive reduced by the smallest number of whole shares of Stock which, when multiplied by the Fair Market Value of the shares of Stock determined as of the Tax Date (defined below), is sufficient to satisfy federal, state and local, if any, withholding obligation arising from exercise or payment of a Stock Incentive (a “Withholding Election”).  A Participant may make a Withholding Election only if both of the following conditions are met:

(a)           The Withholding Election must be made on or prior to the date on which the amount of tax required to be withheld is determined (the “Tax Date”) by executing and delivering to the Company a properly completed notice of Withholding Election as prescribed by the Committee; and

(b)           Any Withholding Election made will be irrevocable; however, the Committee may, in its sole discretion, disapprove and give no effect to the Withholding Election.

5.2           Changes in Capitalization; Merger; Liquidation.

(a)           The number of shares of Stock reserved for the grant of Options, the maximum number of shares of Stock for which Options may be granted to any employee during any calendar year, the number of shares of Stock reserved for issuance upon the exercise of each outstanding Option, and the Exercise Price of each outstanding Option shall be proportionately adjusted for any increase or decrease in the number of issued shares of Stock resulting from a subdivision or combination of shares or the payment of an ordinary stock dividend in shares of Stock to holders of outstanding shares of Stock or any other increase or decrease in the number of shares of Stock outstanding effected without receipt of consideration by the Company.  Any such adjustments shall be made in accordance with Section 1.424-1

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of the Treasury Regulations (with respect to Incentive Stock Options) or Section 1.409A-1(b)(v) of the Treasury Regulations (with respect to Nonqualified Stock Options).

(b)           In the event of any merger, consolidation, reorganization, extraordinary dividend, spin-off, sale of substantially all of the Company’s assets, other change in the capital structure of the Company or its Stock (including any Change in Control) or tender offer for shares of Stock, the Committee, in its sole discretion, may make such adjustments with respect to awards and take such other action as it deems necessary or appropriate to reflect or in anticipation of such merger, consolidation, reorganization, extraordinary dividend, spin-off, sale of substantially all of the Company’s assets, other change in capital structure or tender offer, including, without limitation; the assumption of other awards, the substitution of new awards, the adjustment of outstanding awards (with or without the payment of any consideration), the acceleration of awards or the removal of restrictions on outstanding awards, all as may be provided in the applicable Stock Incentive Agreement or, if not expressly addressed therein, as the Committee subsequently may determine in the event of any such merger, consolidation, reorganization, extraordinary dividend, spin-off, sale of substantially all of the Company’s assets, other change in the capital structure of the Company or its Stock or tender offer for shares of Stock or the termination of outstanding awards in exchange for the cash value, as determined in good faith by the Committee of the vested and/or unvested portion of the award.  The Committee’s general authority under this Section 5.2 is limited by and subject to all other express provisions of the Plan.  Any adjustment pursuant to this Section 5.2 may provide, in the Committee’s discretion, for the elimination without payment therefor of any fractional shares that might otherwise become subject to any Stock Incentive. Any such adjustments shall be made in accordance with Section 1.424-1 of the Treasury Regulations (with respect to Incentive Stock Options) or Section 1.409A-1(b)(v) of the Treasury Regulations (with respect to Nonqualified Stock Options).

(c)           The existence of the Plan and the Stock Incentives granted pursuant to the Plan shall not affect in any way the right or power of the Company to make or authorize any adjustment, reclassification, reorganization or other change in its capital or business structure, any merger or consolidation of the Company, any issue of debt or equity securities having preferences or priorities as to the Stock or the rights thereof, the dissolution or liquidation of the Company, any sale or transfer of all or any part of its business or assets, or any other corporate act or proceeding.

5.3           Cash Awards.  The Committee may, at any time and in its discretion, grant to any holder of a Stock Incentive the right to receive, at such times and in such amounts as determined by the Committee in its discretion, a cash amount which is intended to reimburse such person for all or a portion of the federal, state and local income taxes imposed upon such person as a consequence of the receipt of the Stock Incentive or the exercise of rights thereunder.

5.4           Compliance with Code.  All Incentive Stock Options to be granted hereunder are intended to comply with Code Section 422, and all Nonqualified Stock Options to be granted hereunder are intended to comply with Code Section 409A or an exemption thereto. All provisions of the Plan and all Options granted hereunder shall be construed in such a manner as to effectuate that intent.

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5.5           Right to Terminate Service.  Nothing in the Plan or in any Stock Incentive Agreement shall confer upon any Participant the right to continue as an employee, director, organizer or officer of the Company or affect the right of the Company to terminate the Participant’s services at any time.

5.6           Restrictions on Delivery and Sale of Shares; Legends.  Each Stock Incentive is subject to the condition that if at any time the Committee, in its discretion, shall determine that the listing, registration or qualification of the shares covered by such Stock Incentive upon any securities exchange or under any state or federal law is necessary or desirable as a condition of or in connection with the granting of such Stock Incentive or the purchase or delivery of shares thereunder, the delivery of any or all shares pursuant to such Stock Incentive may be withheld unless and until such listing, registration or qualification shall have been effected.  If a registration statement is not in effect under the Securities Act of 1933 or any applicable state securities laws with respect to the shares of Stock purchasable or otherwise deliverable under Stock Incentives then outstanding, the Committee may require, as a condition of exercise of any Option or as a condition to any other delivery of Stock pursuant to a Stock Incentive, that the Participant or other recipient of a Stock Incentive represent, in writing, that the shares received pursuant to the Stock Incentive are being acquired for investment and not with a view to distribution and agree that the shares will not be disposed of except pursuant to an effective registration statement, unless the Company shall have received an opinion of counsel that such disposition is exempt from such requirement under the Securities Act of 1933 and any applicable state securities laws.  The Company may include on certificates representing shares delivered pursuant to a Stock Incentive such legends referring to the foregoing representations or restrictions or any other applicable restrictions on resale as the Company, in its discretion, shall deem appropriate.

5.7           Non-Alienation of Benefits.  Other than as specifically provided herein, no benefit under the Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge; and any attempt to do so shall be void.  No such benefit shall, prior to receipt by the Participant, be in any manner liable for or subject to the debts, contracts, liabilities, engagements or torts of the Participant.

5.8           Termination and Amendment of the Plan.  The Board of Directors at any time may amend or terminate the Plan without stockholder approval; provided, however, that the Board of Directors may condition any amendment on the approval of stockholders of the Company if such approval is necessary or advisable with respect to tax, securities or other applicable laws.  No such termination or amendment without the consent of the holder of a Stock Incentive shall adversely affect the rights of the Participant under such Stock Incentive.

5.9           Stockholder Approval.   The Plan must be submitted to the stockholders of the Company for their approval within twelve (12) months before or after the adoption of the Plan by the Board of Directors.

5.10         Choice of Law.  The laws of the State of Georgia shall govern the Plan, to the extent not preempted by federal law.

5.11         Effective Date of the Plan.  The Plan was approved by the Board as of May 15, 2008 and will be effective as of that date.

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FIRST CENTURY BANCORP.
By:	/s/ William R. Blanton
Title:		Chief Executive Officer

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EX-10.7

Exhibit 10.7

AGREEMENT CONCERNING SEVERANCE COMPENSATION AND
BENEFITS UPON A CHANGE OF CONTROL

THIS AGREEMENT is made and entered into effective as of the 29th day of August, 2008 by and between First Century Bank, a Georgia corporation (the “Company”), and Chris England (the “Employee”).

W I T N E S S E T H:

WHEREAS, the Employee has been an employee of the Company since April 30, 2008;

WHEREAS, the Employee desires to enter into an agreement with the Company  which includes certain compensation and benefits in the event of a change of control of the Company or in the event that the Company is acquired;

WHEREAS, the Company desires to provide compensation and benefits in the event of a change of control in consideration of certain promises from the Employee;

WHEREAS, the Employee and Company acknowledge that this Agreement and the benefits described herein are valuable consideration.

NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1.Employment.  The Company employs the Employee, pursuant to the terms and conditions of an offer letter dated April 4, 2008 (“Offer Letter”).  The Employee’s employment by the Company began April 30, 2008. Pursuant to the Offer Letter, the Company and the Employee have agreed that the Employee shall be paid an annual base salary, (as may be adjusted from time to time, the “Base Salary”) and certain other benefits.

2.Term of Agreement.  This Agreement commenced as of the effective date of this agreement and shall continue in force and effect for a period of not less than eighteen (18) months after a separation of employment occurs.

3.Change of Control.  The Company and the Employee agree that the compensation and benefits to be provided to the Employee under Section 4 of this Agreement shall be payable to the Employee if the following event in section (a) occurs:

(a)Upon a Change of Control, which means the exercise of power, directly or indirectly, to direct management or policies of the Company by any person, firm, corporation or other business entity or investor that does not own or control 25% of the common stock or other voting securities of the Company as of the date of this Agreement (each, a “Successor Entity”), or the acquisition by any Successor Entity of 25% or more of

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any class of voting securities.  A Change of Control is not deemed to occur with any organization affiliated with William Blanton, First Covenant Bank, or First Century Bank.

(b)As used in this Agreement, the event described in Section 3(a) is a “Change of Control Event.”

4.Compensation and Benefits.    If the Change of Control Event described in Section 3 of this Agreement occurs, the Employee shall be entitled to receive a specific payment described herein.  As used in this Agreement, “Change of Control Payment” means an amount equal to two (2) times the Employee’s Base Salary in effect as of the date of such Change of Control Event.  This payment shall be payable by the Company or any Successor Entity  within thirty (30) days after the effective date of any Change of Control Event (the “Change of Control Payment”).

5.Noninterference and Nondisclosure.

5.1.For purposes of this Agreement, the following definitions shall apply:

(a)“Trade Secrets” means all information from which the Employer, or any person or company that does business with the Employer, derives actual or potential economic value from its not being known by those who can obtain economic value from its disclosure or use and it not being readily ascertainable by proper means.  Employee agrees that Trade Secrets of the Employer include, but are not limited to, technical and non-technical data, formulas, patterns, circuitry, software, compilations, programs, devices, methods, techniques, drawings, processes, financial data, financial plans, product plans, distribution lists or lists of actual or potential suppliers, advertisers, contractors, consultants or customers or other Employer information that is the subject of reasonable efforts under the circumstances to maintain secrecy.  Without limiting the foregoing, Trade Secret means any item of confidential information that constitutes a “trade secret(s)” under applicable common law or statutory law.

(b) “Confidential Information” means information of the Employer, or of any person or company that does business with the Employer, which is not generally known by others and is commercially valuable, but does not constitute a Trade Secret.  Employee agrees that Confidential Information of the Employer includes, but is not limited to, oral and written information about the financial affairs of the Employer, financing methods, accounting, marketing and personnel records, current or potential customers lists, business plans and strategies, profit and performance reports, training manuals, product developments, discoveries, ideas, concepts designs, improvements, processes and any other information that is treated by the Employer as being confidential or is labeled as “confidential” or to similar effect.  Confidential Information also includes any information described as proprietary or designated as confidential information, whether or not owned or developed by Employer.

5.2.Agreement Not to Use, Disclose or Compete.  As an Employee for the Employer, Employee will be in frequent direct and indirect contact with customers of the Employer and, in consideration for signing this Agreement, Employee will be presented with, gain access to, and may participate in the development of both Trade Secrets and Confidential Information.  The Employee recognizes and acknowledges that the Trade Secrets and Confidential Information constitute

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valuable, special and unique assets of the Employer and use or/and disclosure thereof contrary to the terms of this Agreement would cause substantial loss of competitive advantage and other serious injury to the Employer.  The Employee further acknowledges that knowledge of Trade Secrets and Confidential Information Employee is presented with, has access to and may participate in developing with the Employer may be inevitably disclosed by Employee if he obtains a position with a competitor that is similar or related to the position Employee previously held with the Employer.  Under such circumstances it would be extremely difficult for him not to disclose, rely on or use the Employer’s Trade Secrets and Confidential Information, and Employee could not be depended upon to voluntarily avoid this, thereby causing a threat of substantial and irreparable harm to the Employer.  Therefore, in order to protect the Trade Secret and Confidential Information that Employee will be presented with, gain access to and participate in the development of, Employee covenants and agrees to the following restrictions:

(a) Employee agrees that Employee shall hold all Trade Secrets in strictest confidence, shall not use or disclose such Trade Secrets at any time or for any purpose except in the performance of Employee’s designated duties for the Employer, shall diligently protect any and all Trade Secrets against loss by inadvertent or unauthorized disclosure, use or misappropriation, and shall comply with all regulations established by the Employer for the purpose of protecting such information.  The foregoing provision will not apply to information that ceases to be a Trade Secret, unless such information has ceased to be a Trade Secret due to Employee’s breach or default of this Agreement.

(b)Employee agrees that during Employee’s engagement with the Employer and thereafter, Employee shall hold all Confidential Information in strictest confidence, shall not use or disclose such Confidential Information except in the performance of Employee’s designated duties for the Employer, shall diligently protect any and all Confidential Information against loss by inadvertent or unauthorized disclosure, use or misappropriation, and shall comply with regulations established by the Employer for the purpose of protecting such information.

(c) Employee agrees that all records, notes, files, memoranda, reports, printouts, drawings, plans, sketches, documents, equipment, apparatus and like items relating to the business of the Employer or containing any Confidential Information or Trade Secrets will be and remain the sole and exclusive property of the Employer.  At any time upon request from the Employer, Employee shall promptly deliver to the Employer the originals and all copies of any such items that are in Employee’s possession, custody or control.

(d) Employee agrees that all inventions, original works of authorship, developments, concepts, know-how, discoveries, improvements, trade secrets, secret processes, patents, patent applications, service marks, trademarks, trademark applications, copyright and copyright registrations, whether or not patentable or registerable under copyright, trademark or other similar laws, made by Recipient, in whole or in part, or conceived by Recipient alone or with others, that relate to the business, operations, activities, research, investigation or obligations of the Employer (collectively, the “Works”) are the property of the Employer and all right, title, interest and ownership in all such Works, including but not limited to copyrights, trademarks, patents, trade secret rights, trade names, and know-how and the rights to secure any renewals, reissues, and extensions thereof, will vest in the Employer.  The Works will be deemed to be “works made for

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hire” under United States copyright law (17 U.S.C.  Section 101 et seq.) and made in the course of this Agreement.  To the extent that the Works may not, by operation of law, vest in the Employer or may not be considered to be works made for hire, all right, title and interest therein are hereby irrevocably assigned to the Employer.  Employee understands that the Employer may register the copyright, trademark, patent and other rights in the Works in the Employer’s name.  Employee hereby agrees to sign such applications, documents, assignment forms and other papers as the Employer requests from time to time to further confirm this assignment and Employee agrees to give the Employer and any person designated by the Employer any reasonable assistance required to perfect and enforce the rights defined in this Section.  Employee further understands that the Employer has full, complete and exclusive ownership of the Works (the “Intellectual Property”).  Employee agrees not to use the Intellectual Property for the benefit of anyone other than the Employer without the Employer’s prior written permission.

5.3.  Agreement Not to Solicit.  Employee agrees that during the period of Employee’s engagement with the Employer, Employee will devote Employee’s best efforts to Employee’s work for the Employer.  In order to protect the Trade Secret and Confidential Information that Employee will be presented with, gain access to and participate in the development of, Employee covenants and agrees that during the period of Employee’s engagement with the Employer and for a period of eighteen (18) months thereafter, Employee will not:

(a) solicit, recruit, or induce to leave, directly or indirectly, for Employee’s own account or for any other business, any of the Employer’s employees with whom Employee had contact while working for the Employer during any part of the year immediately preceding the termination of Employee’s engagement;

(b) solicit, recruit, or induce for Employee’s own account or for any other business any of the Employer’s clients or customers with whom Employee had contact while working for the Employer during any part of the year immediately preceding the termination of Employee’s engagement; or

(c) make false, misleading or disparaging statements about the Employer, including its products, services, management, employees, and customers.

6.Arbitration.  The parties agree, except as otherwise provided herein, that any and all disputes that they have with one another which arise out of the Employee’s employment or under the terms of this Agreement shall be resolved through final and binding arbitration by a single arbitrator, as specified herein.  This shall include, without limitation, disputes relating to this Agreement, the Employee’s employment by the Company or the termination thereof, claims for breach of contract or breach of the covenant of good faith and fair dealing, and any claims of discrimination or other claims under any federal, state or local law or regulation now in existence or hereinafter enacted and as amended from time to time concerning in any way the subject of the Employee’s employment with the Company or its termination.  The only claims not covered by this Section 6 are claims for benefits under the workers’ compensation laws or claims for unemployment insurance benefits, which will be resolved pursuant to those laws.  Binding arbitration will be conducted in Atlanta, Georgia, in accordance with the applicable rules and regulations of the American Arbitration Association for the resolution of commercial disputes.

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The Employee and the Company understand and agree that the arbitration shall be instead of any civil litigation and that the arbitrator’s decision shall be final and binding to the fullest extent permitted by law and enforceable by any court having jurisdiction thereof.

7.Modification.  No modification, amendment, or alteration of any provision of this Agreement shall be effective unless contained in a written agreement signed by the parties hereto, and then such modification, amendment, or alteration shall be effective only in the specific instances and for the specific purposes for which given.

8.Successors and Assigns.  This Agreement shall bind and inure to the benefit of the parties and their respective successors and permitted assigns.  Upon prior notice to the Employee, the Company may assign this Agreement to a wholly-owned subsidiary, “spin-off” Company, or other entity affiliated with the Company, or to any Successor Entity.  The Employee shall not assign his rights or obligations hereunder to any person or entity without the prior written consent of the Company.

9.No Waiver.  No delay or failure on the part of the Company in the exercise of any right, power, or privilege under this Agreement shall impair any such right, power, or privilege or be construed as a waiver of any default or any acquiescence therein.  No waiver shall be valid against the Company unless made in writing and signed by it, and then only to the extent expressly specified therein.

10.Notices.  All notices required to be in writing shall be personally delivered or sent by first-class, registered, or certified mail, postage prepaid, and addressed as follows:

If to the Company:

William Blanton/CEO

First Century Bank

807 Dorsey Street

Gainesville, GA 30501

If to the Employee:

Chris England

5506 Stone Trace

Gainesville, GA  30504

Either party may change its address for notice purposes by prior written notice to the other party as specified herein.

11.Governing Law.  Except as preempted by federal law, this Agreement shall be governed by and interpreted in accordance with the laws of the State of Georgia without reference to its conflict of law provisions.

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12.Counterparts.  Any number of counterparts of this Agreement may be signed and delivered, each of which shall be considered an original and all of which, together shall constitute one and the same instrument.

13.Severability.  The provisions of this Agreement shall be deemed severable, and the invalidity or unenforceability of any provision (or part thereof) of this Agreement shall in no way affect the validity or enforceability of any other provisions (or remaining part thereof). If any part of any covenant or provision contained in this Agreement is determined by a court of competent jurisdiction, or by any arbitrator to which a dispute is submitted, to be invalid, illegal or incapable of being enforced, then the court or arbitrator so deciding shall interpret such provisions in a manner so as to enforce them to the fullest extent of the law.

14.Entire Agreement.  This Agreement with attachments constitutes the entire understanding of the parties with respect to the subject matter hereof.  This Agreement supersedes any and all other understandings and agreements, either oral or in writing, between the parties hereto with respect to the subject matter hereof and constitutes the sole and only agreement between the parties with respect to said subject matter.  Each party to this Agreement acknowledges that no representations, inducements, promises or agreements, oral or otherwise, have been made by any party or by anyone acting on behalf of any party, which are not embodied herein, and that no agreement, statement or promise not contained in this Agreement shall be valid or binding or of any force or effect.

15.Duplication.  If a benefit promised herein is otherwise provided by the terms of a plan or policy sponsored by the Company on account of the same event giving rise to the benefit under this Agreement, nothing herein shall be construed to entitle the Employee to duplicate benefits; however, if the terms of this Agreement provide for an enhanced benefit, the Employee shall be entitled to the incremental benefit provided hereunder whether under the plan or policy or by direct payments from the Company.

16.Withholding.  All payments made hereunder shall be less taxes and applicable withholdings.

17.Headings.  The headings contained in this Agreement are for reference purposes and shall not be deemed as an interpretation of this Agreement.

IN WITNESS WHEREOF, the parties have executed this Agreement the day and year first above written.

FIRST CENTURY BANK		EMPLOYEE
By:	William R. Blanton	/s/ Chris England
	Chief Executive Officer	Chris England

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EX-21.1

Exhibit 21.1

Subsidiaries of the Company

First Century Bank, National Association

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, William R. Blanton, chief executive officer, certify that:

1.I have reviewed this annual report on Form 10-K of First Century Bancorp.

2.Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)  Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)  Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)  Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)  All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)  Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 31, 2009
	/s/ William R. Blanton
	William R. Blanton, Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Denise Smyth, principal financial and accounting officer, certify that:

1.I have reviewed this annual report on Form 10-K of First Century Bancorp.

2.Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)  Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)  Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)  Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)  All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)  Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 31, 2009	/s/ Denise Smyth
	Denise Smyth, Principal Financial and Accounting Officer
	(Principal Financial Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2003

The undersigned, the Chief Executive Officer and the Principal Financial and Accounting Officer of First Century Bancorp. (the “company”), each certify that, to his or her knowledge on the date of this certification:

1.The annual report of the company for the period ended December 31, 2008 as filed with the Securities and Exchange Commission on this date (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the company.

This 31st day of March, 2009.

/s/ William R. Blanton

William R. Blanton

Chief Executive Officer

/s/ Denise Smyth

Denise Smyth

Principal Financial and Accounting Officer

EX-99.1

Exhibit 99.1

FIRST CENTURY BANCORP, INC. AND SUBSIDIARY

GAINESVILLE, GEORGIA

CONSOLIDATED FINANCIAL STATEMENTS AS OF

DECEMBER 31, 2008 AND 2007 AND

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

FIRST CENTURY BANCORP, INC. AND SUBSIDIARY

CONTENTS

Report of Independent Registered Public Accounting Firm	1
Consolidated Balance Sheets	2
Consolidated Statements of Operations	4
Consolidated Statements of Comprehensive Income (Loss)	5
Consolidated Statements of Changes in Stockholders’ Equity	6
Consolidated Statements of Cash Flows	7
Notes to Consolidated Financial Statements	8

MCNAIR, MCLEMORE, MIDDLEBROOKS & CO., LLP

CERTIFIED PUBLIC ACCOUNTANTS

389 Mulberry Street · Post Office Box One · Macon, GA 31202

Telephone (478) 746-6277 · Facsimile (478) 743-6858

www.mmmcpa.com

RALPH S. McLEMORE, SR., CPA (1902-1981)
SIDNEY B. McNAIR, CPA (1913-1992)
	RICHARD A. WHITTEN, JR., CPA
SIDNEY E. MIDDLEBROOKS, CPA, PC	ELIZABETH WARE HARDIN, CPA
RAY C. PEARSON, CPA	CAROLINE E. GRIFFIN, CPA
J. RANDOLPH NICHOLS, CPA	RONNIE K. GILBERT, CPA
WILLIAM H. EPPS, JR., CPA	RON C. DOUTHIT, CPA
RAYMOND A. PIPPIN, JR., CPA	CHARLES A. FLETCHER, CPA
JERRY A. WOLFE, CPA	MARJORIE HUCKABEE CARTER, CPA
W. E. BARFIELD, JR., CPA	BRYAN A. ISGETT, CPA
HOWARD S. HOLLEMAN, CPA	DAVID PASCHAL MUSE, JR., CPA
F. GAY McMICHAEL, CPA	KATHY W. FLETCHER, CPA

March 31, 2009

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders

First Century Bancorp.

We have audited the accompanying consolidated balance sheets of First Century Bancorp. and Subsidiary as of December 31, 2008, and 2007 and the related consolidated statements of operations, comprehensive income (loss), changes in stockholders’ equity and cash flows for the years then ended.  These consolidated financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of First Century Bancorp. and Subsidiary as of December 31, 2008 and 2007, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

We were not engaged to examine management’s assertion about the effectiveness of First Century Bancorp’s internal control over financial reporting as of December 31, 2008 included in the Management’s Report on Internal Control Over Financial Reporting and, accordingly, we do not express an opinion thereon.

/s/ McNair, McLemore, Middlebrooks & Co., LLP

McNAIR, McLEMORE, MIDDLEBROOKS & CO., LLP

1

FIRST CENTURY BANCORP. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

DECEMBER 31

ASSETS

	2008			2007
Cash and Cash Equivalents
Cash and Due from Banks	$	1,525,027		$	2,111,446
Federal Funds Sold	700,000			6,238,000
	2,225,027			8,349,446
Investment Securities
Available for Sale, at Fair Value	11,100,067			8,404,238
Held to Maturity, at Cost (Fair Value of $7,129,889 and $0 as of December 31, 2008 and 2007, Respectively	7,178,040			—
	18,278,107			8,404,238
Other Investments	427,170			402,770
Loans Held for Sale	1,863,750			—
Loans	37,943,602			19,305,101
Allowance for Loan Losses	(838,234		)	(275,920		)
Net deferred loan costs	157,468			—
	37,262,836			19,029,181
Premises and Equipment	2,425,568			2,122,763
Other Real Estate	—			98,343
Other Assets	396,053			244,721
Total Assets	$	62,878,510		$	38,651,462

The accompanying notes are an integral part of these consolidated balance sheets.

2

FIRST CENTURY BANCORP. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

DECEMBER 31

LIABILITIES AND STOCKHOLDERS’ EQUITY

	2008			2007
Deposits
Noninterest-Bearing	$	3,036,337		$	1,566,488
Interest-Bearing	54,084,517			29,439,470
	57,120,854			31,005,958
Borrowings	2,000,000			4,000,000
Other Liabilities	593,755			151,816
Stockholders’ Equity
Preferred Stock, No Par Value; 10,000,000 Shares Authorized; 75,000 and 75,000 Shares Issued and Outstanding in 2008 and 2007, Respectively	750,000			750,000
Common Stock, No Par Value; 50,000,000 Shares Authorized; 3,979,127 and 1,732,458 Shares Issued and Outstanding in 2008 and 2007, Respectively	13,572,151			10,311,206
Accumulated Deficit	(11,075,145		)	(7,559,873		)
Accumulated Other Comprehensive Loss	(83,105		)	(7,645		)
	3,163,901			3,493,688
Total Liabilities and Stockholders’ Equity	$	62,878,510		$	38,651,462

The accompanying notes are an integral part of these consolidated balance sheets.

3

FIRST CENTURY BANCORP. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31

	2008			2007
Interest Income
Loans, Including Fees	$	1,722,303		$	1,634,711
Investments	562,050			416,533
Federal Funds Sold	99,156			143,398
Interest Bearing Deposits	39,167			22,636
	2,422,676			2,217,278
Interest Expense
Deposits	1,482,529			1,301,153
Borrowings	103,092			143,024
Federal Funds Purchased	328			9,139
	1,585,949			1,453,316
Net Interest Income	836,726			763,962
Provision for Loan Losses	639,760			115,199
Net Interest Income After Provision for Loan Losses	196,966			648,763
Noninterest Income
Service Charges on Deposits	55,312			21,664
Mortgage Origination and Processing Fees	543,679			—
Securities Gains	3,507			—
Other	6,569			38,501
	609,067			60,165
Noninterest Expenses
Salaries and Employee Benefits	2,006,318			1,161,072
Occupancy and Equipment	485,775			356,737
Professional Fees	274,953			195,745
Other	1,554,259			741,400
	4,321,305			2,454,954
Loss Before Income Taxes	(3,515,272		)	(1,746,026		)
Income Taxes	—			—
Net Loss	$	(3,515,272	)	$	(1,746,026	)
Basic Loss Per Share	$	(1.47	)	$	(1.16	)
Weighted Average Shares Outstanding	2,391,229			1,503,383

The accompanying notes are an integral part of these consolidated statements.

4

FIRST CENTURY BANCORP. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

DECEMBER 31

	2008			2007
Net Loss	$	(3,515,272	)	$	(1,746,027	)
Other Comprehensive Income (Loss)
Unrealized Gains (Losses) on Securities Arising During the Year	(71,953		)	125,504
Reclassification Adjustment	(3,507		)	—
Net Change in Unrealized Gains (Losses) on Securities	(75,460		)	125,504
Comprehensive Loss	$	(3,590,732	)	$	(1,620,523	)

The accompanying notes are an integral part of these consolidated statements.

5

FIRST CENTURY BANCORP. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

													Accumulated
	Preferred Stock					Common Stock				Accumulated			Comprehensive
	Shares		Amount			Shares	Amount			Deficit			Income (Loss)			Total
Balance, December 31, 2006	35,000		$	350,000		993,560	$	8,450,049		$	(5,813,847	)	$	(133,149	)	$	2,853,053
Issuance of Common Stock	—		—			738,898	2,002,002			—			—			2,002,002
Issuance of Preferred Stock	75,000		750,000			—	—			—			—			750,000
Redemption of Preferred Stock	(35,000	)	(350,000		)	—	—			—			—			(350,000		)
Common Stock Issuance Costs	—		—				(169,045		)	—			—			(169,045		)
Stock Compensation Costs	—		—			—	28,200			—			—			28,200
Net Change in Unrealized Gain on Securities Available for Sale	—		—			—	—			—			125,504			125,504
Net Loss	—		—			—	—			(1,746,026		)	—			(1,746,026		)
Balance, December 31, 2007	75,000		750,000			1,732,458	10,311,206			(7,559,873		)	(7,645		)	3,493,688
Issuance of Common Stock	—		—			2,246,669	3,370,006			—			—			3,370,006
Issuance of Preferred Stock	—		—			—	—			—			—			—
																—
Redemption of Preferred Stock	—		—			—	—			—			—			—
Common Stock Issuance Costs	—		—			—	(140,333		)	—			—			(140,333		)
Stock Compensation Costs	—		—			—	31,272			—			—			31,272
Net Change in Unrealized Gain on Securities Available for Sale	—		—			—	—			—			(75,460		)	(75,460		)
Net Loss	—		—			—	—			(3,515,272		)	—			(3,515,272		)
Balance, December 31, 2008	75,000		$	750,000		3,979,127	$	13,572,151		$	(11,075,145	)	$	(83,105	)	$	3,163,901

The accompanying notes are an integral part of these consolidated statements

6

FIRST CENTURY BANCORP. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31

	2008			2007
Cash Flows from Operating Activities
Net Loss	$	(3,515,272	)	$	(1,746,026	)
Adjustments to Reconcile Net Loss to Net Cash Used by Operating Activities
Provision for Loan Losses	639,760			115,199
Depreciation, Amortization and Accretion	147,225			164,783
Loss on Sale of Other Assets	20,897			23,514
Loss on Sale of Other Real Estate	24,832			25,725
Gain on Sale of Investment Securities	(3,507		)	—
Stock Compensation Expense	31,272			28,200
Change In
Other Assets	(172,229		)	37,244
Other Liabilities	441,938			(17,178		)
	(2,385,084		)	(1,368,539		)
Cash Flows from Investing Activities
Purchases of Investment Securities Available for Sale	(8,287,843		)	(971,061		)
Proceeds from Sales, Maturities, Calls and Paydowns of Investment Securities Available for Sale	5,538,398			1,765,706
Purchases of Investment Securities Held to Maturity	(7,166,192		)	—
Proceeds from Maturities, Calls and Paydowns of Investment Securities Held to Maturity	12,869			—
Purchases of Other Investments	(311,850		)	(119,150		)
Proceeds from the Sale of Other Investments	287,450			37,700
Net Change in Loans	(18,958,672		)	609,136
Net Change in Loans Held for Sale	(1,863,750		)	—
Proceeds from the Sale of Other Real Estate	158,768			137,006
Purchases of Premises and Equipment	(493,082		)	(95,637		)
	(31,083,904		)	1,363,700
Cash Flows from Financing Activities
Net Change in Deposits	26,114,896			2,783,852
Payment of Stock Issuance Costs	(140,333		)	(169,045		)
Proceeds from Borrowings	—			2,000,000
Repayments of Borrowings	(2,000,000		)	—
Redemption of Preferred Stock	—			(350,000		)
Proceeds from Issuance of Preferred Stock	—			750,000
Proceeds from the Issuance of Common Stock	3,370,006			2,002,002
	27,344,569			7,016,809
Net Increase (Decrease) in Cash and Cash Equivalents	(6,124,419		)	7,011,970
Cash and Cash Equivalents, Beginning	8,349,446			1,337,476
Cash and Cash Equivalents, Ending	$	2,225,027		$	8,349,446

The accompanying notes are an integral part of these consolidated statements.

7

FIRST CENTURY BANCORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)  Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of First Century Bancorp. (the Company) and its wholly-owned subsidiary, First Century Bank, National Association (the Bank). On September 20, 2007, the Company changed its name from NBOG Bancorporation, Inc. to First Century Bancorp. The Bank’s name was also changed from The National Bank of Gainesville to First Century Bank, National Association.  All significant intercompany balances and transactions have been eliminated in consolidation.

Nature of Operations

The Bank provides a variety of retail and commercial banking services for consumers and small businesses located in key locations in the northern Georgia market, with its main branch office located in Gainesville, Georgia.  In 2008, the Bank opened an Oakwood loan and deposit production (LP/DP) office in south Hall County, Georgia, and an Athens LP/DP office in Athens-Clarke County, Georgia. Lending and investing activities are funded primarily by deposits gathered through its banking offices.  The Bank commenced operations on March 25, 2002.

Use of Estimates

In preparing the consolidated financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.  Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans and the valuation of deferred tax assets.

Concentrations of Credit Risk

Lending is concentrated in mortgage, commercial and consumer loans to local borrowers. In management’s opinion, although the Bank has a high concentration of real estate loans, these loans are well collateralized and do not pose an adverse credit risk.  In addition, the balance of the loan portfolio is sufficiently diversified to avoid significant concentration of credit risk.

The success of the Bank is dependent, to a certain extent, upon the economic conditions in the geographic markets it serves.  No assurance can be given that the current economic conditions will continue.  Adverse changes in the economic conditions in these geographic markets would likely have a material detrimental effect on the Bank’s results of operations and financial condition. The operating results of the Bank depend primarily on its net interest income.  Accordingly, operations are subject to risks and uncertainties surrounding the exposure to changes in the interest rate environment.

At times, the Bank may have cash and cash equivalents at financial institutions in excess of insured limits.  The Bank places its cash and cash equivalents with high credit quality financial institutions whose credit rating is monitored by management to minimize credit risk.

8

(1)  Summary of Significant Accounting Policies (Continued)

Investment Securities

Investment securities are recorded under the provisions of Statement of Financial Accounting Standards (SFAS) No. 115, whereby the Bank may classify its securities as trading, available for sale or held to maturity.  Trading securities are purchased and held for sale in the near term.  Securities held to maturity are those which the Bank has the ability and intent to hold until maturity.  All other securities not classified as trading or held to maturity are considered available for sale.

Securities available for sale are reported at estimated fair value.  Unrealized gains and losses on securities available for sale are excluded from earnings and are reported in accumulated other comprehensive income (loss), a component of stockholders’ equity.  Gains and losses from sales of securities available for sale are computed using the specific identification method.  Securities available for sale may be sold to meet liquidity needs arising from unanticipated deposit and loan fluctuations, changes in regulatory capital requirements or unforeseen changes in market conditions.  Premiums and discounts are recognized in interest income using the interest method over the period to maturity.

Declines in the fair value of individual securities available for sale below their cost that are deemed to be other than temporary are reflected in earnings as realized losses.  In estimating other than temporary impairment losses, management considers (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer and (3) the intent and ability of the Bank to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

Other Investments

Other investments include equity securities with no readily determinable fair value.  These investments are carried at cost. Dividends are recorded when earned.

Loans Held For Sale

Loans held for sale are reported at the lower of cost or market value in the aggregate.  Net unrealized losses, if any, are recognized in a valuation allowance through charges to earnings.  Gains and losses on the sale of loans held for sale are determined using the specific identification method.  The cost of loans held for sale approximated fair value at December 31, 2008.

9

(1)  Summary of Significant Accounting Policies (Continued)

Loans

Loans that the Bank has the ability and intent to hold for the foreseeable future or until maturity are recorded at their principal amount outstanding, net of unearned interest and fees.  Interest income on loans is recognized using the effective interest method.

A loan is considered to be delinquent when payments have not been made according to contractual terms, typically evidenced by nonpayment of a monthly installment by the due date.

When management believes there is sufficient doubt as to the collectibility of principal or interest on any loan, the accrual of 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 either applied against principal or reported as income, according to management’s judgment as to the collectibility of principal.  Loans are returned to an accrual status when factors indicating doubtful collectibility on a timely basis no longer exist.

Allowance for Loan Losses

The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings.  Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed.  Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectibility of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions.  This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revisions as more information becomes available.

The allowance consists of specific, general and unallocated components.  The specific component relates to specific individual loans that are classified as impaired.  Specific allowances on impaired loans are measured by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price or the fair value of the collateral if the loan is collateral dependent.  The general component covers nonclassified loans and is based on historical loss experience adjusted for qualitative factors.  An unallocated component is maintained to cover uncertainties that could affect management’s estimate of probable losses.  The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio.

10

(1)  Summary of Significant Accounting Policies (Continued)

A loan is considered impaired when, based on current information and events, it is probable that the Bank will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement.  Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due.  Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired.  Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed.  Impairment is measured on a loan-by-loan basis by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price or the fair value of the collateral if the loan is collateral dependent.

Off-Balance Sheet Credit Related Financial Instruments

In the ordinary course of business, the Bank has entered into commitments to extend credit, including commitments under standby letters of credit.  Such financial instruments are recorded when they are funded.

Premises and Equipment

Premises and equipment are carried at cost less accumulated depreciation.  Depreciation of premises and equipment is provided over the estimated useful lives of the respective assets utilizing the straight-line method.  Premises and equipment that are still undergoing development and have not been placed in service are classified as construction in process and are not depreciated.  Expenditures for major renewals and betterments are capitalized and those for maintenance and repairs are charged to income as incurred.  When premises and equipment are retired or sold, the cost and accumulated depreciation are removed from their respective accounts and any gain or loss is reflected in other income or expense.

Other Real Estate

Other real estate owned represents property acquired through foreclosure.  Properties are carried at the lower of cost or current appraisal values.  Losses from the acquisition of property in full or partial satisfaction of debt are recorded as loan losses.  Subsequent declines in value, routine holding costs and gains or losses upon disposition are included in other expense.

Transfers of Financial Assets

Transfers of financial assets are accounted for as sales, when control over the asset has been surrendered.  Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

Advertising Costs

The Company expenses the costs of advertising in the periods in which those costs are incurred.

11

(1)  Summary of Significant Accounting Policies (Continued)

Income Taxes

The Company accounts for income taxes under the liability method.  Accordingly, 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 and operating loss and tax credit carryforwards.  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.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings in the period that includes the enactment date.

In the event the future tax consequences of differences between the financial reporting bases and the tax bases of the assets and liabilities result in deferred tax assets, an evaluation of the probability of being able to realize the future benefits indicated by such asset is required.  A valuation allowance is provided for the portion of the deferred tax asset when it is more likely than not that some portion or all of the deferred tax asset will not be realized.  In assessing the realizability of the deferred tax assets, management considers the scheduled reversals of deferred tax liabilities, projected future taxable income and tax planning strategies.

12

(1)  Summary of Significant Accounting Policies (Continued)

Comprehensive Income

Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income.  Certain changes in assets and liabilities, such as unrealized gains and losses on securities available for sale, represent equity changes from economic events of the period other than transactions with owners and are not reported in the consolidated statements of operations but as a separate component of the equity section of the consolidated balance sheets.  Such items are considered components of other comprehensive income.  SFAS No. 130, Reporting Comprehensive Income, requires the presentation in the consolidated financial statements of net income and all items of other comprehensive income as total comprehensive income.

Net Loss Per Share

Net loss per common share is based on the weighted average number of common shares outstanding during the period.  The effects of potential common shares outstanding are included in diluted earnings (loss) per share.  No common stock equivalents were considered in 2008 or 2007 as the effects of such would be antidilutive to the loss per share calculation.

Stock Compensation Plans

The Company adopted Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment (FAS 123R) on January 1, 2006 using the modified prospective transition method.  Under the modified prospective transition method, awards that are granted, modified or settled beginning at the date of adoption will be measured and accounted for in accordance with FAS 123R.  FAS 123R requires public companies to recognize compensation expense related to stock-based compensation awards in their statements of operations over the period during which an employee is required to provide service in exchange for the award.

Statements of Cash Flows

For reporting cash flows, cash and cash equivalents include cash on hand, noninterest-bearing amounts due from banks and federal funds sold.  Cash flows from demand deposits, NOW accounts, savings accounts, loans and certificates of deposit are reported net.

Supplementary Cash Flow Information:	2008		2007
Cash Paid During the Year for Interest	$	1,493,325	$	1,448,076
Noncash Investing and Financing Activities:
Transfer of Loans to Other Real Estate	$	98,000	$	164,574
Change in Unrealized Loss on Securities Available for Sale	$	75,460	$	125,504

13

(1)  Summary of Significant Accounting Policies (Continued)

Changes in Accounting Principles and Effects of New Accounting Pronouncements

In September 2006, the FASB issued Statement No. 157, Fair Value Measurements. This statement defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. This statement establishes a fair value hierarchy about the assumptions used to measure fair value and clarifies assumptions about risk and the effect of a restriction on the sale or use of an asset. The standard is effective for fiscal years beginning after November 15, 2007. In February 2008, the FASB issued Staff Position (FSP) 157-2, Effective Date of FASB Statement No. 157. This FSP delays the effective date of FAS 157 for all non-financial assets and non-financial liabilities, except those that are recognized or disclosed at fair value on a recurring basis (at least annually) to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years. The Company adopted Statement No. 157 effective January 1, 2008 which had no effect on the consolidated balance sheets or consolidated statements of operations.

In February 2007, the FASB issued Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. The standard provides companies with an option to report selected financial assets and liabilities at fair value and establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. The Company did not elect the fair value option for any financial assets or financial liabilities as of January 1, 2008, the effective date of the standard.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (FAS 141R). The statement establishes principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree. The statement also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statement to evaluate the nature and financial effects of the business combination. SFAS No. 141R is effective for financial statements issued for fiscal years beginning after December 15, 2008. Accordingly, any business combinations the Company engages in will be recorded and disclosed following existing generally accepted accounting principles until January 1, 2009. The Company expects SFAS No. 141R would have an impact on its consolidated financial statements when effective if it acquires another company, but the nature and magnitude of the specific effects will depend upon the nature, terms and size of the acquisitions the Company consummates after the effective date.

In December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in Consolidated Financial Statements,” which provides guidance for accounting and reporting of non-controlling (minority) interests in consolidated financial statements. The statement is effective for fiscal years and interim periods within fiscal years beginning on or after December 15, 2008.  The Company does not hold minority interests in subsidiaries, therefore it is expected that SFAS No. 160 will have no impact on its financial condition or results of operations.

14

(2)  Investment Securities

Investment securities as of December 31, 2008 are summarized as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Securities Available for Sale
U.S. Government Agencies	$	2,381,588	$	57,950	$	—		$	2,439,538
Mortgage Backed Securities	7,927,904		27,436		(29,611		)	7,925,729
Equity Securities	873,680		1,100		(139,980		)	734,800
	$	11,183,172	$	86,486	$	(169,591	)	$	11,100,067
Securities Held to Maturity
Mortgage Backed Securities	$	7,178,040	$	—	$	(48,151	)	$	7,129,889

Investment securities as of December 31, 2007 are summarized as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Securities Available for Sale
U.S. Government Agencies	$	4,898,448	$	12,744	$	(2,942	)	$	4,908,250
Mortgage Backed Securities	3,513,435		4,086		(21,533		)	3,495,988
	$	8,411,883	$	16,830	$	(24,475	)	$	8,404,238

15

(2)  Investment Securities (Continued)

The following outlines the unrealized losses and fair value by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 31:

	Less Than 12 Months					12 Months or Greater					Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
2008
Securities Available for Sale
Mortgage Backed Securities	$	1,690,457	$	(21,160	)	$	200,222	$	(8,451	)	$	1,890,679	$	(29,611	)
Equity Securities	483,700		(139,980		)	—		—			483,700		(139,980		)
	$	2,174,157	$	(161,140)		$	200,222	$	(8,451)		$	2,374,379	$	(169,591)
Securities Held to Maturity
Mortgage Backed Securities	$	7,129,889	$	(48,151	)	$	—	$	—		$	7,129,889	$	(48,151	)
2007
Securities Available for Sale
U.S. Government Agencies	$	—	$	—		$	1,996,750	$	(2,942	)	$	1,996,750	$	(2,942	)
Mortgage Backed Securities	435,579		(4,575		)	1,521,421		(16,958		)	1,957,000		(21,533		)
	$	435,579	$	(4,575	)	$	3,518,171	$	(19,900	)	$	3,953,750	$	(24,475	)

Management evaluates securities for other than temporary impairment quarterly, and more frequently when economic or market concerns warrant such evaluation.  Consideration is given to the length of time and the extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, and the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for anticipated recovery in fair value.  At December 31, 2008, 9 of the 25 securities issued by U.S. Government agencies and Government sponsored corporations, including mortgage backed securities, and 2 of the 3 equity and other securities contained unrealized losses. Because the declines in market value of investments are attributable to changes in interest rates and not credit quality and because the Company has the ability and intent to hold these investments until a recovery of fair value, which may be until maturity, the Company does not consider these investments to be other than temporarily impaired at December 31, 2008.

16

(2)  Investment Securities (Continued)

The amortized cost and estimated fair value of investments in securities at December 31, 2008, by contractual maturity, are shown in the following table.  Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.  Because mortgage-backed securities have both known principal repayment terms as well as unknown principal repayments due to potential borrower pre-payments, it is difficult to accurately predict the final maturity of these investments.  Mortgage-backed securities are shown separately.

	Securities
	Available for Sale				Held to Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Within 1 Year	$	500,000	$	501,470	$	—	$	—
1 to 5 Years	1,273,680		1,137,688		—		—
5 to 10 Years	981,588		1,035,180		—
Over 10 Years	500,000		500,000		—		—
Mortgage Backed Securities	7,927,904		7,925,729		7,178,040		7,129,889
	$	11,183,172	$	11,100,067	$	7,178,040	$	7,129,889

Proceeds from called investments available for sale were $3,896,493 in 2008 and $0 in 2007.  Gross realized gains totaled $3,507 in 2008 and $0 in 2007.

At December 31, 2008 and 2007, there were no securities required to be pledged to secure public deposits.

17

(3)  Loans

The composition of loans as of December 31 are:

	2008		2007
Commercial, Financial and Agricultural	$	4,495,355	$	3,339,020
Real Estate-Mortgage	26,411,116		13,865,088
Real Estate-Construction	5,236,464		508,577
Consumer	1,800,667		1,592,416
	$	37,943,602	$	19,305,101

The Bank grants loans and extensions of credit to individuals and a variety of businesses and corporations located primarily in its general trade area of Hall County and Clarke County, Georgia. Although the Bank has a diversified loan portfolio, a substantial portion of the loan portfolio is collateralized by improved and unimproved real estate and is dependent upon the real estate market.

(4)  Allowance for Loan Losses

Transactions in the allowance for loan losses are summarized for the years ended December 31 as follows:

	2008			2007
Balance, Beginning	$	275,920		$	445,629
Provision Charged to Operating Expenses	639,760			115,199
Loans Charged Off	(127,311		)	(335,175		)
Loan Recoveries	49,865			50,267
Balance, Ending	$	838,234		$	275,920

At December 31, 2008 and 2007, the total loans past due 90 days or more and still accruing interest approximated $662,000 and $0, respectively.  At December 31, 2008 and 2007, the total recorded investment in loans on nonaccrual status approximated $957,000 and $851,000, respectively.  Interest income that would have been recognized on nonaccrual loans approximated $53,800 and $34,200 in 2008 and 2007, respectively.  Impaired loans approximated $1,631,000 and $1,140,000 as of December 31, 2008 and 2007, respectively.  The allowance for loan loss included a specific allowance of $488,631 and $102,960 for impaired loans as of December 31, 2008 and 2007, respectively.  Impaired loans with no specific allowance included in the allowance for loan losses approximated $598,000 and $650,000 as of December 31, 2008 and 2007, respectively.  The average investment in impaired loans during 2008 and 2007 approximated $940,000 and $490,000, respectively.  Interest income recognized on impaired loans approximated $15,900 and $97,000 in 2008 and 2007, respectively.  The cash basis interest income recognized on impaired loans was $0 and $90,000 as of December 31, 2008 and 2007, respectively.  No additional funds are committed to be advanced in connection with impaired loans.

18

(5)  Premises and Equipment

Premises and equipment are comprised of the following as of December 31:

	2008			2007
Land and Land Improvements	$	409,442		$	409,442
Building	1,693,776			1,693,776
Leasehold Improvements	18,820			—
Furniture and Equipment	1,212,604			752,728
Bank Vehicles	88,904			1,175
	3,423,546			2,857,120
Accumulated Depreciation	(997,978		)	(734,358		)
	$	2,425,568		$	2,122,763

Depreciation charged to operations totaled $190,280 and $154,199 for 2008 and 2007, respectively.

Certain bank facilities are leased under various short-term operating leases.  Lease expense was $82,532 and $22,140 for the years ended December 31, 2008 and 2007, respectively.

(6)  Deposits

The aggregate amount of overdrawn deposit accounts reclassified as loan balances totaled $4,323 and $2,350 as of December 31, 2008 and 2007, respectively.

Components of interest-bearing deposits as of December 31 are as follows:

	2008		2007
Interest-Bearing Demand	$	1,081,609	$	1,296,161
Savings	5,644,624		1,185,383
Time, $100,000 and Over	11,414,255		2,866,927
Other Time	35,944,028		24,090,998
	$	54,084,517	$	29,439,469

The aggregate amount of short-term jumbo certificates of deposit, each with a minimum denomination of $100,000, was approximately $10,875,000 and $2,644,000 as of December 31, 2008 and 2007, respectively.

19

(6)  Deposits (Continued)

As of December 31, 2008, the scheduled maturities of certificates of deposit are as follows:

Year	Amount
2009	$	40,749,235
2010	6,438,389
2011	—
2012	170,660
	$	47,358,284

Brokered deposits are third-party deposits placed by or through the assistance of a deposit broker.  As of December 31, 2008 and 2007, the Bank had $18,446,000 and $0, respectively, in brokered deposits.

(7)  Income Taxes

The components of the income tax expense for the years ended December 31 are as follows:

	2008			2007
Deferred Expense	$	1,194,044		$	594,774
Change in Valuation Allowance	(1,194,044		)	(594,774		)
	$	—		$	—

The difference between income tax expense and the amount computed by applying the statutory federal income tax rate to the earnings before income taxes for the years ended December 31, 2008 and 2007 relates primarily to the change in the valuation allowance.

The following summarizes the components of deferred taxes at December 31:

	2008			2007
Deferred Income Tax Assets
Allowance for Loan Losses	$	44,876		$	—
Operating Loss Carryforwards	3,889,749			2,741,251
Other	22,601			13,594
	3,957,226			2,754,845
Deferred Tax Liabilities
Premises and Equipment	12,079			1,090
	3,945,147			2,753,755
Less Valuation Allowance	(3,945,147		)	(2,753,755		)
Net Deferred Tax Asset	$	—		$	—

20

(7)  Income Taxes (Continued)

The future tax consequences of the differences between the financial reporting and tax bases of the Company’s assets and liabilities resulted in a net deferred tax asset. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.

At December 31, 2008, the Company had federal and state net operating loss carryforwards for tax purposes of approximately $11,440,000 and $11,916,000, respectively, which will expire beginning in 2022 if not previously utilized. The utilization of the net operating loss carryforward has been limited as to its use pursuant to the Internal Revenue Code Section 382 due to the recent change in ownership of the Company.

The Company has analyzed the tax positions taken or expected to be taken in its tax returns and concluded it has no liability related to uncertain tax positions in accordance with FASB Interpretation No. 48, Accounting for Uncertain Tax Positions.  The Company is no longer subject to U.S. federal, state and local income tax examinations by tax authorities for years prior to 2005.

(8)  Borrowings

The Bank has a line of credit totaling $9,783,000, representing 20% of the Bank’s total assets at September 30, 2008.  At December 31, 2008, the Bank has one advance from the Federal Home Loan Bank of Atlanta (FHLB) in the amount of $2,000,000.  The advance bears interest at a fixed interest rate of 2.497 percent and matures on May 1, 2013.  The Bank has pledged as collateral investment securities with a carrying amount of $10,135,777, and eligible residential and commercial real estate loans with a carrying amount of $8,271,517 at December 31, 2008.

At December 31, 2007, the Bank had two advances from the FHLB in the amount of $4,000,000.  The advances matured during 2008.  The Bank had pledged as collateral investment securities available for sale with a carrying amount of $7,009,675 at December 31, 2007.

The Bank has lines of credit available with correspondent banks which represent available credit for overnight borrowing from financial institutions.  As of December 31, 2008 and 2007, these secured lines of credit totaled $1,000,000 and $2,000,000, respectively, of which no balances were outstanding.  The Bank has pledged investment securities with a carrying amount of $1,428,000 as collateral for the one line available at December 31, 2008.

In December 2008, the Bank was approved to borrow from the Federal Reserve Bank discount window program.  As of December 31, 2008 the Bank’s primary borrowing capacity was $5,442,000, based on pledged investment securities with a carrying amount of $5,815,000.

21

(9)  Contingencies, Commitments and Going Concern

Financial Instruments with Off-Balance Sheet Risk

The Bank is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers.  These financial instruments include commitments to extend credit and standby letters of credit.  Those instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized on the consolidated balance sheets.  The contractual amounts of those instruments reflect the extent of involvement the Bank has in particular classes of financial instruments.

The Bank’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments.  The Bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.  In most cases, the Bank requires collateral to support financial instruments with credit risk.

The following summarizes commitments as of December 31:

	Approximate Contract Amount
	2008		2007
Financial Instruments Whose Contract Amounts Represent Credit Risk
Commitments to Extend Credit	$	3,093,000	$	2,442,000
Standby Letters of Credit	261,000		294,000

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.  Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.  Since many of the commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.  The Bank evaluates each customer’s creditworthiness on a case-by-case basis.  The amount of collateral obtained, if deemed necessary by the Bank, upon extension of credit is based on management’s credit evaluation.  Collateral held varies but may include unimproved and improved real estate, certificates of deposit or personal property.

Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party.  The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.

22

(9)  Contingencies, Commitments and Going Concern

Going Concern

As shown in the accompanying consolidated financial statements, the Company has incurred net losses of $3,515,272 and $1,746,026 from operations for the years ended December 31, 2008 and 2007, respectively, and has an accumulated deficit of $11,075,145 as of December 31, 2008.  These conditions create an uncertainty about the Company’s ability to continue as a going concern.  Management of the company has developed a capital plan to maintain minimum capital levels equal to or above those determined by regulatory authorities through the issuance of additional stock.  During 2008, the Company initiated a private placement offering and received gross proceeds of $3,370,006 through the sale of common stock.  The private placement offering has been extended through April 2009 with gross proceeds of $790,000 received during 2009.  The ability of the Company to continue as a going concern is dependant on the success of the capital plan.  The financial statements do not include any adjustment that might be necessary if the Company is unable to continue as a going concern.

23

(10) Stockholders’ Equity

Shares of preferred stock may be issued from time to time in one or more series as established by resolution of the board of directors of the Company, up to a maximum of 10,000,000 shares.  Each resolution shall include the number of shares issued, preferences, special rights and limitations as determined by the board.

During 2006, First Century Bancorp (First Century) issued 35,000 shares of Series A Preferred Stock, no par value (the Series A Preferred Stock), for $10.00 per share.  The Series A Preferred Stock is noncumulative perpetual preferred stock and will be treated as Tier 1 capital under existing Federal Reserve regulations.  The Series A Preferred Stock is generally nonvoting and cannot be converted into common stock of First Century.  First Century has the right, subject to Federal Reserve approval, to redeem the shares for their purchase price plus accrued dividends, if any.  The Bank is currently not allowed to pay dividends to the Company until it becomes cumulatively profitable.  On May 4, 2007, the Company redeemed the 35,000 shares of Series A Preferred Stock at $10.00 per share.

On December 31, 2007, First Century issued 75,000 shares of Series B Preferred Stock, no par value (the Series B Preferred Stock), for $10.00 per share in a private placement.  The Series B Preferred Stock is cumulative perpetual preferred stock and will be treated as Tier 1 capital under existing Federal Reserve regulations.  The Series B Preferred Stock is generally nonvoting and cannot be converted into common stock of First Century.  First Century has the right, subject to Federal Reserve approval, to redeem the shares for their purchase price plus accrued dividends, if any.  Dividends accrue on the Series B Preferred Stock at a rate per annum initially equal to the prime rate in effect on the date of issuance, adjusted semi-annually on the first date of January and the first day of July each year to be equal to the prime rate in effect on such date.  The investors also received a warrant to acquire one share of common stock for each share of Series B Preferred Stock purchased in the offering at an exercise price of $1.50 per share, which was the fair market value of the common stock on the date of the issuance of the warrants.  The warrants have no expiration date.  Cumulative dividends in arrears at December 31, 2008 were $45,891.

In July 2008, First Century commenced a private offering of shares of our common stock to a limited number of accredited investors.   First Century anticipates using the net proceeds for working capital purposes, including the possible redemption of preferred stock.  There is no minimum number of shares which must be sold in order for us to accept subscriptions in the offering, and no assurance can be given as to whether, or on what terms we will be able to consummate the proposed offering.  As of December 31, 2008 proceeds of $3,370,006 have been received from the sale of 2,246,669 shares at $1.50 per share in the offering.  The common stock to be sold in the offering has not been registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

Dividends paid by the Bank are the primary source of funds available to the Company.  Banking regulations limit the amount of dividends that may be paid without prior approval of the regulatory authorities.  These restrictions are based on the level of regulatory classified assets, the prior years’ net earnings and the ratio of equity capital to total assets.

24

(11) Related Party Transactions

It is the Bank’s policy to make loans to directors and officers, including companies in which they have a beneficial interest, in the normal course of business.  It is also the Bank’s policy to comply with federal regulations that require that loan and deposit transactions with directors and executive officers be made on substantially the same terms as those prevailing at the time made for comparable loans and deposits to other persons.

In September 2008, the Bank entered into a data processing contract and master services agreement to move its processing from Fidelity Information Systems to Providence, the internal data processing system provided by First Covenant Bank,  an entity in which William R. Blanton is a principal owner.  Pursuant to the agreements, First Covenant will provide services to implement and service host system computer software which will provide the Bank with the essential banking processing and accounting functions for deposit products, loans and general ledger accounting.  The term of each contract is 12 months, with the option to renew for additional 12 month periods.  For the year ended December 31, 2008 the total paid to for these services was $78,000.

The Bank is affiliated with CINC Systems (“CINC”), a software services company.  The Bank and CINC are affiliated through common management.  The Bank has contracted with CINC to provide web and server hosting facilities.  For the year ended December 31, 2008 the total paid to CINC for these services was $10,000.

The Bank has certain mortgage loans with a carrying amount of $2,742,062 and $2,895,901 as of December 31, 2008 and 2007, respectively, which were purchased from United Americas Bank, an entity in which William R. Blanton is a principal owner.

The Bank has certain loans with a carrying amount of $1,741,760 and $0 as of December 31, 2008 and 2007, respectively, which were purchased from First Covenant Bank, an entity in which William R. Blanton is a principal owner.

The Bank sold certain loans with a carrying amount of $10,113,232 and $0 as of December 31, 2008 and 2007, respectively, to First Covenant Bank, an entity in which William R. Blanton is a principal owner.

The following summary reflects activities for related party loans:

	2008			2007
Balance, Beginning	$	547,427		$	604,348
New Loans	124,050			487,038
Principal Repayments	(350,137		)	(543,959		)
Balance, Ending	$	321,340		$	547,427

As of December 31, 2008 and 2007, deposit accounts for related parties totaled approximately $1,170,000 and $696,000, respectively.

25

(12) Employee Benefit Plan

The Company has a qualified retirement plan pursuant to Internal Revenue Code Section 401(K) covering substantially all employees subject to minimum age and service requirements.  Contribution to the plan by employees is voluntary.  The Company made no contributions to the plan in 2008 or 2007.

(13) Stock Option Plan

During 2003, the stockholders approved a stock option plan (the Option Plan) whereby the Company may grant options to acquire shares of common stock of the Company at the then fair value.  A total of 125,000 shares of common stock were reserved for possible issuance under this plan.  At the 2008 Annual Meeting of shareholders, the shareholders approved an amendment to increase the number of shares of our common stock authorized to be reserved for issuance under the Option Plan from 125,000 to 750,000.  Vesting periods are established by the board at the date of grant and expire on the tenth anniversary of the grant date.

A summary of activity related to the stock options, for the years ended December 31, 2008 and 2007 is presented below:

	Shares		Weighted Average Exercise Price
Outstanding, December 31, 2006	144,834		$	5.66
Granted	7,500		$	2.01
Exercised	—		—
Forfeited	(28,500	)	$	4.21
Outstanding, December 31, 2007	123,834		$	5.77
Granted	421,000		$	2.00
Exercised	—		—
Forfeited	(6,500	)	$	5.00
Outstanding, December 31, 2008	538,334		$	2.78
Eligible to be Exercised, December 31, 2008	117,001		$	5.58

The options outstanding and exercisable at December 31, 2008 had no aggregate intrinsic value.  At December 31, 2008, there was $272,557 of total unrecognized compensation expense related to nonvested share-based compensation arrangements.  The cost is expected to be recognized over a weighted average period of 4.5 years.

26

(13) Stock Option Plan (Continued)

Information pertaining to options outstanding at December 31, 2008 is as follows:

Exercise Prices		Number Outstanding	Weighted Average Remaining Contractual Life	Number Exercisable
$	10.00	13,334	4.4	13,334
5.00		104,000	6.8	103,667
2.00		421,000	9.3	—
		538,334	8.3	117,001

The fair value of options granted during 2008 was $307,220.  The fair value of each option grant was estimated on the date of the grant using the Black-Scholes option valuation model that uses the assumptions noted in the following table for the year ended December 31, 2008.

	2008
Dividend Yield	0.00		%
Risk Free Interest Rate	3.98		%
Expected Life (in Years)	10
Expected Volatility	29		%
Weighted average fair value per option granted	$	0.77

The risk-free interest rates for periods within the contractual life of the awards are based on the U.S. Treasury yield curve in effect at the time of grant.  The expected life of options represents the period of time that options granted are expected to be outstanding.  The dividend yield assumption is based on the Company’s history and expectation of dividend payouts.

27

(14) Stock Warrants

On March 25, 2002, the Company issued warrants to its directors to purchase an aggregate of 199,736 shares of the Company’s common stock at an exercise price of $10.00 per share.  The warrants become exercisable in one-third annual increments beginning on the first anniversary of the issuance date, provided that throughout the period beginning on the date of the initial issuance of the warrants and ending on the particular anniversary, the warrant holder has served continuously as a director of the Company and the Bank and has attended at least 75% of the meetings of the relevant boards of directors.  Warrants which fail to vest as provided in the previous sentence will expire and no longer be exercisable.  Exercisable warrants will generally remain exercisable for the 10-year period following the date of issuance.  The exercise price of each warrant is subject to adjustment for stock splits, recapitalizations or other similar events.  As of December 31, 2008, 153,393 of these warrants remained outstanding of which all were exercisable.

In April 2007, Mr. Blanton purchased 738,008 shares of the Company’s common stock in a private placement at $2.71 per share.  The Company also issued Mr. Blanton a warrant (the “Original Warrant”) to purchase up to 738,008 shares at $2.71 per share. The Original Warrant has no expiration date and contains provisions which provide for automatic adjustments in price and shares purchasable under the Original Warrants in the event additional securities are issued below or have a conversion or exercise price below the current Original Warrant exercise price.  The Company received proceeds of approximately $2,000,000 less fees and expenses related to the sale of the shares, which was used for working capital purposes.

In September 2007, Mr. Blanton transferred a portion of the Original Warrant to purchase 184,502 shares to Silver Hill Enterprises, LP, an entity controlled by William Evans, one of the Company’s directors.

In December 2007, the Company completed a private placement of Series B Preferred Stock, no par value, for $10.00 per share, selling a total of $750,000 worth of shares.  The investors in that offering also received warrants (the “B Warrants”) to acquire 75,000 shares of common stock at an exercise price of $1.50 per share, which we believe was the fair market value of the common stock on the date of issuance of the B Warrants.  As with the Original Warrant, the B Warrants have no expiration date and contain provisions which provide for automatic adjustments in price and shares purchasable under the warrants in the event additional shares or warrants are issued below the current warrant exercise price.

As a result of the issuance of the B Warrants with an exercise price below the $2.71 exercise price, the exercise price and number of shares of common stock purchasable under the Original Warrant adjusted as follows: (a) with respect to Mr. Blanton, from 553,506 shares at $2.71 per share to 1,000,001 shares at $1.50 per share; and (b) with respect to Silver Hill Enterprises, LP, from 184,502 shares at $2.71 per share to 333,333 shares at $1.50 per share.

In June 2008, Mr. Blanton and Silver Hill Enterprises, LP transferred a portion of the Original Warrant to purchase shares to John Allen Nivens, Jr. and Richard Kramer Whitehead, III, each a director of the Company and to Homestead Investment, LLC, which is controlled by the father of Company director, William A. Bagwell, Jr.

Following the transfers and the adjustments to the Original Warrant, the following persons hold rights to purchase shares of common stock at the exercise price of $1.50 under the Original Warrant and the B Warrants:  (i) Mr. Blanton holds rights to purchase 850,254 shares; (ii) Silver Hill Enterprises, LP holds rights to purchase 283,418 shares; (iii) Mr. Nivens holds rights to purchase 69,165 shares; (iv) Mr. Whitehead holds rights to purchase 69,165 shares; and (v) Homestead Investment, LLC and Mr. Bagwell collectively hold rights to purchase 136,332 shares.

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(15) Fair Value of Financial Instruments

SFAS No. 107, Disclosures about Fair Value of Financial Instruments, requires disclosure of fair value information about financial instruments, whether or not recognized on the face of the balance sheet, for which it is practicable to estimate that value.  The assumptions used in the estimation of the fair value of First Century Bank’s financial instruments are detailed below.  Where quoted prices are not available, fair values are based on estimates using discounted cash flows and other valuation techniques.  The use of discounted cash flows can be significantly affected by the assumptions used, including the discount rate and estimates of future cash flows.  The following disclosures should not be considered a surrogate of the liquidation value of the Bank, but rather a good-faith estimate of the increase or decrease in value of financial instruments held by the Bank since purchase, origination or issuance.

Cash and Short-Term Investments - For cash, due from banks and federal funds sold, the carrying amount is a reasonable estimate of fair value.

Investment Securities Available for Sale – Fair values for investment securities are based on quoted market prices.

Other Investments - The fair value of other investments approximates carrying value.

Loans - The fair value of fixed rate loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings.  For variable rate loans, the carrying amount is a reasonable estimate of fair value.

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15) Fair Value of Financial Instruments (Continued)

Deposit Liabilities - The fair value of demand deposits, savings accounts and certain money market deposits is the amount payable on demand at the reporting date.  The fair value of fixed maturity certificates of deposit is estimated by discounting the future cash flows using the rates currently offered for deposits of similar remaining maturities.

Borrowings – Due to their short-term nature, the fair value of FHLB advances approximates carrying amount.

Standby Letters of Credit and Unfulfilled Loan Commitments - - Fair values are based on fees currently charged to enter into similar agreements taking into account the remaining terms of the agreements and the counterparties’ credit standing.  The fees associated with these instruments are not considered material.

The carrying amount and estimated fair values of the Bank’s financial instruments as of December 31 are presented hereafter:

	2008				2007
	Carrying		Estimated		Carrying		Estimated
	Amount		Fair Value		Amount		Fair Value
	(in Thousands)
Assets
Cash and Short-Term Investments	$	2,225	$	2,225	$	8,349	$	8,349
Investment Securities Available for Sale	11,183		11,100		8,404		8,404
Investment Securities Held to Maturity	7,178		7,130		—		—
Other Investments	427		427		403		403
Loans Held for Sale	1,864		1,864		—		—
Loans	37,944		38,437		19,305		19,476
Liabilities
Deposits	57,121		57,008		31,006		31,417
Borrowings	2,000		2,071		4,000		4,000

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument.  These estimates do not reflect any premium or discount that could result from offering for sale at one time the entire holdings of a particular financial instrument.  Because no market exists for a significant portion of the Bank’s financial instruments, fair value estimates are based on many judgments.  These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision.  Changes in assumptions could significantly affect the estimates.

Fair value estimates are based on existing on-and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments.  Significant assets and liabilities that are not considered financial instruments include the deferred income taxes and premises and equipment.  In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.

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15) Fair Value of Financial Instruments (Continued)

Fair Value Hierarchy

SFAS No. 157, Fair Value Measurements, defines fair value, establishes a framework for measuring fair value, establishes a three-level valuation hierarchy for disclosure of fair value measurement and enhances disclosure requirements for fair value measurements.  The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date.  The three levels are defined as follows:

·Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

·Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

·Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.

Following is a description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy:

Investment Securities Available for Sale

Where quoted prices are available in an active market, investment securities are classified within level 1 of the valuation hierarchy.  Level 1 securities would include highly liquid government bonds, mortgage products and exchange traded equities.  If quoted market prices are not available then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics or discounted cash flows.  Level 2 securities include U.S. agency securities, mortgage-backed agency securities, obligations of states and political subdivisions and certain corporate, asset backed and other securities.  In certain cases where Level 1 and Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy.

Impaired loans

SFAS No. 157 applies to loans measured for impairment using the practical expedients permitted by SFAS No. 114, Accounting by Creditors for Impairment of a Loan, including impaired loans measured at an observable market price (if available), or at the fair value of the loan’s collateral (if the loan is collateral dependent).  Fair value of the loan’s collateral, when the loan is dependent on collateral, is determined by appraisals or independent valuation which is then adjusted for the cost related to liquidation of the collateral.

Additionally, from time to time, the Company may be required to record at fair value other assets on a nonrecurring basis, such as loans held for sale, other real estate, and certain other assets.  These nonrecurring fair value adjustments typically involve application of lower of cost or market accounting or write-downs of individual assets.

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15) Fair Value of Financial Instruments (Continued)

Assets and Liabilities Measured at Fair Value on a Recurring Basis as of December 31, 2008

			Fair Value Measurements at Reporting Date Using
	Total		Level 1	Level 2		Level 3
Investment Securities Available for Sale	$	11,100,067	—	$	11,100,067	—

The Company did not identify any liabilities that are required to be presented at fair value.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis as of December 31, 2008

			Fair Value Measurements at Reporting Date Using
	Total		Level 1		Level 2		Level 3
Loans Held for Sale	$	1,863,500	$	1,863,500	—		—
Impaired Loans	$	1,142,558	—		$	1,142,558	—

(16) Regulatory Matters

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

Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios (set forth in the following table) of Total and Tier 1 Capital to risk-weighted assets and of Tier 1 Capital to average assets.

As of December 31, 2008, the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as adequately capitalized under the regulatory framework for prompt corrective action.  As a result, the Bank is prohibited from directly or indirectly accepting, renewing, or rolling over any brokered deposits, absent receiving a waiver from the FDIC.  To be categorized as well capitalized, the Bank must maintain minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the following table.  The actual capital amounts and ratios for the Bank are also presented in the following table.  In the opinion of management, there are no conditions or events since prior notification of capital adequacy from the regulators that have changed the Bank’s classification.  Disclosures related to the Company have been excluded as they did not significantly deviate from the disclosure herein.

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(16) Regulatory Matters (Continued)

									To Be Well
									Capitalized Under
					For Capital				Prompt Corrective
	Actual				Adequacy Purposes				Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
	(In Thousands)
December 31, 2008
Total Capital to Risk-Weighted Assets	$	3,793	9.29	%	$	3,265	8.00	%	$	4,081	10.00	%
Tier I Capital to Risk-Weighted Assets	3,279		8.04		1,632		4.00		2,449		6.00
Tier I Capital to Average Assets	3,279		6.07		2,160		4.00		2,701		5.00
December 31, 2007
Total Capital to Risk-Weighted Assets	$	3,770	16.62		1,814		8.00		2,268		10.00
Tier I Capital to Risk-Weighted Assets	3,487		15.38		907		4.00		1,361		6.00
Tier I Capital to Average Assets	3,487		9.41		1,482		4.00		1,853		5.00

(17) Other Operating Expenses

Components of other operating expenses which are greater than 1 percent of interest income and other operating income for the years ended December 31 are as follows:

	2008		2007
Data Processing Fees	$	546,596	$	134,028
Advertising and Marketing	274,953		58,937
Insurance and Assessments	131,931		119,060
Office Supplies	70,231		34,881
Telephone	69,148		33,494
Postage and Courier	42,407		30,796
Other Loan Related and Repossession	206,221		76,545

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(18) Financial Information of First Century Bancorp. (Parent Only)

FIRST CENTURY BANCORP. (PARENT ONLY)

CONDENSED BALANCE SHEETS

DECEMBER 31

	2008		2007
ASSETS
Cash and Interest-Bearing Deposits	$	33,010	$	25,516
Investment in Subsidiary	3,316,508		3,480,244
Other Assets	2,829		3,408
Total Assets	$	3,352,347	$	3,509,168
LIABILITIES AND STOCKHOLDERS’ EQUITY
Other Liabilities	$	188,446	$	15,480
Stockholders’ Equity	3,163,901		3,493,688
Total Liabilities and Stockholders’ Equity	$	3,352,347	$	3,509,168

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(18) Financial Information of First Century Bancorp. (Parent Only) (Continued)

FIRST CENTURY BANCORP. (PARENT ONLY)

CONDENSED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31

	2008			2007
Interest Income	$	347		$	1,684
Expenses
Salaries and Employee Benefits	—			24,000
Professional Fees	165,698			135,429
Other	30,373			25,767
	196,071			185,196
Loss Before Equity in Undistributed Loss of Subsidiary	(195,724		)	(183,512		)
Equity in Undistributed Loss of Subsidiary	(3,319,548		)	(1,562,514		)
Net Loss	$	(3,515,272	)	$	(1,746,026	)

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(18) Financial Information of First Century Bancorp. (Parent Only) (Continued)

FIRST CENTURY BANCORP. (PARENT ONLY)

CONDENSED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31

	2008			2007
Cash Flows from Operating Activities
Net Loss	$	(3,515,272	)	$	(1,746,026	)
Adjustments to Reconcile Net Loss to Net Cash Used by Operating Activities
Equity in Undistributed Loss of Subsidiary	3,319,548			1,562,514
Stock Compensation Expense	—			24,000
Change In
Other Assets	581			1,680
Other Liabilities	172,966			—
	(22,177		)	(157,832		)
Cash Flows from Investing Activities
Capital Infusion in Subsidiary	(3,200,002		)	(2,050,000		)
Cash Flows from Financing Activities
Exercise of Stock Options and Warrants	—			2,002,002
Proceeds from Issuance of Common Stock	3,370,006			750,000
Proceeds from Redemption of Preferred Stock	—			(350,000		)
Payments of Stock Issuance Costs	(140,333		)	(169,045		)
	3,229,673			2,232,957
Net Decrease in Cash	7,494			25,125
Cash and Interest-Bearing Deposits, Beginning	25,516			391
Cash and Interest-Bearing Deposits, Ending	$	33,010		$	25,516

(19) Subsequent Events

During 2009, the Company has received $790,000 from accredited investors in connection with the private offering of the Company’s common stock.

During 2009, the Company increased its borrowing capacity with the FHLB and Federal Reserve Bank as additional sources of liquidity.  As of March 31, 2009, the borrowing capacity with the FHLB was $12,580,000 of which $10,555,000 is available.  Borrowing capacity through the Federal Reserve Bank’s discount window was $21,855,000 of which $17,156,000 was available as of March 25, 2009.

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