Securities and Exchange Commission

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2008

¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

From the transition period from              to             

COMMISSION FILE NUMBER: 000-33221

NEWNAN COWETA BANCSHARES, INC.

(Name of Small Business Issuer in Its Charter)

Georgia	58-2655471
(State of Incorporation)	(I.R.S. Employer Identification No.)

145 MILLARD FARMER INDUSTRIAL BLVD.

NEWNAN, GEORGIA 30263

(Address of principal executive offices)(Zip Code)

(770) 683-6222

(Issuer’s telephone number)

N/A

(Former name, former address and former fiscal year, if changed since last report)

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  ¨

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  ¨	Accelerated filer  ¨
Non-accelerated filer  ¨ (Do not check if a smaller reporting company)	Smaller reporting company  x

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

    Yes  ¨    No  x

Number of shares outstanding of the issuer’s sole class of common stock, as of April 28, 2008: 1,006,070; no par value.

NEWNAN COWETA BANCSHARES, INC.

AND SUBSIDIARY

INDEX

	Page
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet – March 31, 2008 and December 31, 2007	1
Consolidated Statements of Income and Comprehensive Income Three Months Ended March 31, 2008 and 2007 (unaudited)	2
Consolidated Statements of Cash Flows – Three Months Ended March 31, 2008 and 2007 (unaudited)	3
Notes to Consolidated Financial Statements (unaudited)	4
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	9
Forward Looking Statements	9
Critical Accounting Policies	9
Liquidity and Capital Resources	10
Off-Balance Sheet Risk	10
Financial Condition	11
Results of Operations for The Three Months Ended March 31, 2008 and 2007	13
Item 4. Controls and Procedures	16
PART II OTHER INFORMATION
Item 1 – Legal Proceedings	17
Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds	17
Item 3 – Defaults Upon Senior Securities	17
Item 4 – Submission of Matters to a Vote of Security Holders	17
Item 5 – Other Information	17
Item 6 – Exhibits	17
Signatures	18

PART I – FINANCIAL INFORMATION

ITEM 1—FINANCIAL STATEMENTS

NEWNAN COWETA BANCSHARES, INC.

AND SUBSIDIARY

CONSOLIDATED BALANCE SHEET

MARCH 31, 2008 and DECEMBER 31, 2007

(Unaudited)

(Dollars in thousands)

	March 31, 2008		December 31, 2007
	(Unaudited)
Assets
Cash and due from banks	$	3,301	$	5,076
Federal funds sold		6,349		6,059
Securities available-for-sale, at fair value		21,100		21,232
Loans, net		180,833		175,708
Premises and equipment		3,888		9,448
Other real estate		15,751		12,643
Other assets		8,332		7,803
Total assets	$	239,554	$	237,969
Liabilities and Stockholders’ Equity
Liabilities
Deposits
Noninterest-bearing	$	11,425	$	13,001
Interest bearing		187,463		182,538
Total deposits		198,888		195,539
Subordinated debentures		3,093		3,093
Other borrowed funds		13,000		18,000
Other liabilities		5,067		1,736
Total liabilities		220,048		218,368
Commitments and contingencies
Stockholders’ equity
Common stock, no par value; 5,000,000 shares authorized; 1,006,070 shares issued and outstanding		12,193		12,193
Retained earnings		6,982		7,320
Accumulated other comprehensive income		331		88
Total stockholders’ equity		19,506		19,601
Total liabilities and stockholders’ equity	$	239,554	$	237,969

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

1

NEWNAN COWETA BANCSHARES, INC.

AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

AND COMPREHENSIVE INCOME (LOSS)

THREE MONTHS ENDED MARCH 31, 2008 AND 2007

(Unaudited)

(Dollars in thousands, except per share amounts)

	Three Months Ended March 31, 2008			Three Months Ended March 31, 2007
Interest income
Loans	$	3,164		$	4,394
Taxable securities		268			191
Federal funds sold		90			166
Total interest income		3,522			4,751
Interest expense
Deposits		2,192			2,326
Other borrowings		187			50
Total interest expense		2,379			2,376
Net interest income		1,143			2,375
Provision for loan losses		290			121
Net interest income after provision for loan losses		853			2,254
Other income
Service charges on deposit accounts		67			59
Gain (loss) on sale of securities available for sale		5			(5	)
Gain on sale of assets		40			—
Other operating income		207			150
Total other income		319			204
Other expenses
Salaries and employee benefits		973			929
Equipment and occupancy expenses		308			178
Data processing expenses		153			139
Other operating expenses		361			219
Total other expenses		1,795			1,465
Income (loss) before income taxes		(623	)		993
Income tax expense (benefit)		(285	)		391
Net income (loss)		(338	)		602
Other comprehensive income (loss):
Unrealized gain on securities available for sale arising during period , net of reclassification adjustment		243			7
Comprehensive income (loss)	$	(95	)	$	609
Basic earnings (loss) per share	$	(.34	)	$	.62
Diluted earnings (loss) per share	$	(.34	)	$	.58
Dividends Declared per share	$	—		$	.18

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

2

NEWNAN COWETA BANCSHARES, INC.

AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

THREE MONTHS ENDED MARCH 31, 2008 AND 2007

(Unaudited)

(Dollars in thousands)

	Three Months Ended March 31, 2008			Three Months Ended March 31, 2007
OPERATING ACTIVITIES
Net income (loss)	$	(338	)	$	602
Adjustments to reconcile net income to net cash provided by (used by) operating activities:
Depreciation		79			75
Provision for loan losses		290			120
Amortization and accretion		(5	)		(3	)
Gain on sales of securities		(5	)		—
Gain on disposal of other real estate and repossessions		(59	)		—
Decrease (increase) in interest receivable		94			(124	)
Decrease in interest payable		(109	)		(328	)
Increase in income taxes payable		267			368
Net other operating activities		(631	)		53
Net cash provided by (used by) operating activities		(417	)		763
INVESTING ACTIVITIES
Proceeds from paydown of securities available for sale		336			—
Purchase of Federal Home Loan Bank Stock		198			(31	)
Net increase in loans		(10,604	)		(521	)
Proceeds from sale of premises and equipment		8,522			(42	)
Proceeds from sale of other real estate and repossessed assets		2,131			—
Net cash used in investing activities		583			(594	)
FINANCING ACTIVITIES
Increase (decrease) in FHLB borrowing		(5,000	)		—
Net increase in deposits		3,349			8,991
Proceeds for the sale of stock		—			609
Exercise of options		—			125
Net cash provided by (used by) financing activities		(1,651	)		9,725
Net increase (decrease) in cash and cash equivalents		(1,485	)		9,894
Cash and cash equivalents at beginning of period		11,135			12,907
Cash and cash equivalents at end of period	$	9,650		$	22,801

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

3

NEWNAN COWETA BANCSHARES, INC.

AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1. BASIS OF PRESENTATION

The consolidated financial information included herein is unaudited; however, such information reflects all adjustments (consisting solely of normal recurring adjustments) and eliminations of inter-company accounts and transactions, which are, in the opinion of management, necessary for a fair statement of results for the interim period.

The results of operations for the period ended March 31, 2008 are not necessarily indicative of the results to be expected for the full year.

NOTE 2. CURRENT ACCOUNTING DEVELOPMENTS

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements (FAS 157). SFAS 157 enhances existing guidance for measuring assets and liabilities using fair value. Prior to the issuance of SFAS 157, guidance for applying fair value was incorporated in several accounting pronouncements. SFAS 157 provides a single definition of fair value, together with a framework for measuring it, and requires additional disclosure about the use of fair value to measure assets and liabilities. SFAS 157 also emphasizes that fair value is a market-based measurement, not an entity-specific measurement, and sets out a fair value hierarchy with the highest priority being quoted prices in active markets. Under SFAS 157, fair value measurements are disclosed by level within that hierarchy. While SFAS 157 does not add any new fair value measurements, it does change current practice. Changes to practice include: (1) a requirement for an entity to include its own credit standing in the measurement of its liabilities; (2) a modification of the transaction price presumption; (3) a prohibition on the use of block discounts when valuing large blocks of securities for broker-dealers and investment companies; and (4) a requirement to adjust the value of restricted stock for the effect of the restriction even if the restriction lapses within one year. The Company adopted SFAS 157 on January 1, 2008 which did not impact the Company’s Financial condition, results of operations or cash flows.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities-Including an Amendment to FASB Statement No. 115. This statement permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. This statement requires a business entity to report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. An entity may decide whether to elect the fair value option for each eligible item on its election date, subject to certain requirements described in the statement. The Company adopted SFAS 159 on January 1, 2008. The Company elected not to use the fair value option on any of its eligible items; therefore, the adoption of SFAS 159 did not have an impact on the Company’s financial condition, results of operations or cash flows.

4

SFAS No. 160, Noncontrolling Interest in Consolidated Financial Statements, an amendment of ARB Statement No. 51. SFAS No. 160 amends Accounting Research Bulletin (ARB) No. 51, Consolidated Financial Statements, to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS No. 160 clarifies that a noncontrolling interest in a subsidiary, which is sometimes referred to as minority interest, is an ownership interest in the consolidated entity that should be reported as a component of equity in the consolidated financial statements. Among other requirements, SFAS No. 160 requires consolidated net income to be reported at amounts that include the amounts attributable to both the parent and the noncontrolling interest. It also requires disclosure, on the face of the consolidated statements of income, of the amounts of consolidated net income attributable to the parent and to the noncontrolling interest. SFAS No. 160 is effective for the Company on January 1, 2009 and is not expected to have a significant impact on the Company’s consolidated financial statements.

SFAS No. 141, Business Combinations (Revised 2007). SFAS No. 141R replaces SFAS No. 141, Business Combinations, and applies to all transactions and other events in which one entity obtains control over one or more other businesses. SFAS No. 141R requires an acquirer, upon initially obtaining control of another entity, to recognize the assets, liabilities and any noncontrolling interest in the acquiree at fair value as of the acquisition date. Contingent consideration is required to be recognized and measured at fair value on the date of acquisition rather than at a later date when the amount of that consideration may be determinable beyond a reasonable doubt. This fair value approach replaces the cost-allocation process required under SFAS No. 141 whereby the cost of an acquisition was allocated to the individual assets acquired and liabilities assumed based on their estimated fair value. SFAS No. 141R requires acquirers to expense acquisition-related costs as incurred rather than allocating such costs to the assets acquired and liabilities assumed, as was previously the case under SFAS No. 141. Under SFAS No. 141R, the requirements of SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities, would have to be met in order to accrue for a restructuring plan in purchase accounting. Pre-acquisition contingencies are to be recognized at fair value, unless it is a noncontractual contingency that is not likely to materialize, in which case, nothing should be recognized in purchase accounting and, instead, that contingency would be subject to the probable and estimable recognition criteria of SFAS No. 5, Accounting for Contingencies. SFAS No. 141R is expected to have an impact on the Company’s accounting for business combinations closing on or after January 1, 2009.

5

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 3. PREMISES AND EQUIPMENT

On February 28, 2008, the Bank completed a sale/leaseback transaction on the main office located in Newnan and the branches located in Peachtree City and Tyrone. The purchaser/lessor is Out-Med, IV LLC, whose members and board of managers include three of the Company’s board of directors: Mr. Theo D. Mann, Mr. James Van S. Mottola, and Mr. David LaGuardia. In total, the Bank sold and concurrently leased back land and buildings/improvements with a carrying amount of $5.47 million. Net proceeds of the sale to the Bank were $8.51 million, resulting in a gain, net of transaction cost, of $3.04 million. The Bank will recognize the gain ratable over the ten year expected term of the leases.

NOTE 4. EARNINGS PER SHARE

Basic earnings per share are computed by dividing net income by the weighted average number of shares of common stock outstanding. Diluted earnings per share are computed by dividing net income by the sum of the weighted average number of common shares outstanding and common stock equivalents. Common stock equivalents consist of stock options and stock warrants. Below is a calculation of diluted earnings per common share for the periods ended March 31, 2008 and 2007.

	Three Months Ended March 31,
	2008			2007
	(Dollars in thousands, except per share amounts)
Net income (loss)	$	(338	)	$	602
Weighted average common shares outstanding		1,006			989
Net effect of the assumed exercise of stock options and warrants based on the treasury stock method using average market price for the period		—			53
Total weighted average common shares and common stock equivalents outstanding		1,006			1,042
Diluted earnings per share	$	(.34	)	$	.58

6

NOTE 5. LOANS

The composition of loans as of March 31, 2008 is summarized as follows:

Commercial and Financial	$	36,445
Real Estate – Acquisition and Development		108,604
Real Estate – Construction		26,457
Real Estate – Mortgage		9,554
Consumer Installment and Other		2,321
		183,381
Deferred Loan Fees		(53	)
Allowance for Loan Losses		(2,495	)
	$	180,833

The Company originates primarily commercial, residential, and consumer loans to customers in Coweta County and surrounding counties. The ability of the majority of the Company’s customers to honor their contractual loan obligations is dependent on the economy in these areas. Seventy-nine percent of the Company’s loan portfolio is secured by real estate, of which a substantial portion is secured by real estate in the Company’s market area.

The following is a summary of information pertaining to impaired loans:

	Three Months Ended March 31,
	2008			2007
	(Dollars in thousands)
Impaired Loans	$	16,695		$	429
Valuation Allowance		(599	)		(64	)
Net Impaired Loans	$	16,096		$	365

Changes in the allowance for loan losses for the periods ended March 31, 2008 and 2007 are as follows:

	2008			2007
Balance, Beginning	$	2,426		$	2,328
Provision for Loan Losses		290			121
Loans Charged Off		(236	)		(75	)
Recoveries of Loans Previously Charged Off		15			2
Balance, Ending	$	2,495		$	2,376

7

NOTE 6. DISCLOSURES ABOUT FAIR VALUE OF ASSETS AND LIABILITIES

Effective January 1, 2008, the Company adopted Statement of Financial Accounting Standards No. 157, Fair Value Measurements (FAS 157). FAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. FAS 157 has been applied prospectively as of the beginning of the year.

Under the standard, fair value refers to the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the reporting entity transacts. The standard clarifies the principle that fair value should be based on the assumptions market participants would use when pricing the asset or liability. In support of this principle, the standard establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. The fair value hierarchy gives the highest priority to quoted prices in active markets and the lowest priority to unobservable data. Under the standard, fair value measurements would be separately disclosed by level within the fair value hierarchy. The standard describes three levels of inputs that may be used to measure fair value:

Level 1	Quoted prices in an active market for identical assets or liabilities.
Level 2	Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in active markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially full term of the assets or liabilities.
Level 3	Unobservable inputs that are supported by little or no market activity and that are significant to their fair value of the assets and liabilities.

The following is a description of the valuation methodologies used for instruments measured at fair value on a recurring basis and recognized in the accompanying balance sheet, as well as the general classification of such instruments pursuant to the valuation hierarchy.

Securities available-for-sale

Where quoted market prices are available in an active market, 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 based and other securities. In certain cases where level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy. Currently, all of the Company’s securities are considered to be Level 2 securities.

The following is a description of the valuation methodologies used for instruments measured at fair value on a non-recurring basis and recognized in the accompanying balance sheet, as well as the general classification of such instruments pursuant to the valuation hierarchy.

Impaired loans

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 loans is dependent on collateral, is determined by appraisals or independent valuation and are considered Level 3 inputs.

Other Real Estate Owned

Certain assets such as other real estate owned (OREO) are measured at fair value. We believe that the fair value component in its valuation follows the provisions of SFAS No. 157. Fair values of OREO at March 31, 2008 were determined by appraisals or independent valuation and are considered Level 2 or Level 3 inputs.

8

NEWNAN COWETA BANCSHARES, INC.

AND SUBSIDIARY

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following is management’s discussion and analysis of certain significant factors which have affected our financial position and operating results during the period included in the accompanying consolidated financial statements.

Forward Looking Statements

Certain of the statements made herein under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (“MD&A”) are forward-looking statements for purposes of the Securities Act of 1933, as amended (the “Securities Act”), and the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and as such may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Such forward looking statements include statements using the words such as “may,” “will,” “anticipate,” “should,” “would,” “believe,” “contemplate,” “expect,” “estimate,” “continue,” “may,” “intend” or other similar words and expressions of the future. Our actual results may differ significantly from the results described in these forward-looking statements.

These forward-looking statements involve risks and uncertainties and may not be realized due to a variety of factors, including, without limitation: the effects of future economic conditions; governmental monetary and fiscal policies, as well as legislative and regulatory changes; the risks of changes in interest rates on the level and composition of deposits, loan demand and the values of loan collateral, securities and other interest-sensitive assets and liabilities; interest rate risks; 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, including institutions operating regionally, nationally and internationally, together with such competitors offering banking products and services by mail, telephone, computer and the Internet.

Critical Accounting Policies

We have adopted various accounting policies which govern the application of accounting principles generally accepted in the United States in the preparation of our financial statements. Our significant accounting policies are described in the footnotes to the consolidated financial statements at December 31, 2007 as filed on our annual report on Form 10-K.

9

Certain accounting policies involve significant judgments and assumptions by us which have a material impact on the carrying value of certain assets and liabilities. We consider these accounting policies to be critical accounting policies. The judgments and assumptions we use are based on historical experience and other factors, which we believe to be reasonable under the circumstances. Because of the nature of the judgments and assumptions we make, actual results could differ from these judgments and estimates which could have a material impact on our carrying values of assets and liabilities and our results of operations.

We believe 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. Refer to the portion of this discussion that addresses our allowance for loan losses for a description of our processes and methodology for determining our allowance for loan losses.

Liquidity and Capital Resources

We monitor our liquidity resources on an ongoing basis. Our liquidity is also monitored on a periodic basis by State and Federal regulatory authorities. As of March 31, 2008, our liquidity, as determined under guidelines established by regulatory authorities and internal policy, was satisfactory.

At March 31, 2008, the Company and bank were deemed well capitalized based on regulatory minimum capital requirements. The minimum capital requirements and the actual capital ratios on a consolidated and bank-only basis at March 31, 2008 were as follows:

	Actual
	Consolidated		Bank		Minimum Regulatory Requirement
Leverage capital ratios	9.21	%	9.19	%	4.00	%
Risk-based capital ratios:
Core capital	10.72	%	10.70	%	4.00	%
Total capital	11.93	%	11.91	%	8.00	%

Off-Balance Sheet Risk

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 include commitments to extend credit and standby letters of credit. Such commitments involve, to varying degrees, elements of credit risk and interest rate risk in excess of the amount recognized in the balance sheets.

10

Our 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. We use the same credit policies in making commitments and conditional obligations as we do for on-balance sheet instruments. A summary of our commitments is as follows:

	March 31, 2008
	(Dollars in Thousands)
Commitments to extend credit	$	17,324
Letters of credit		1,116
	$	18,440

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. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.

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

In 2007, the Company purchased two parcels of land in Coweta County. These properties will be used to locate future branch facilities. No construction agreements exist for these properties as of March 31, 2008.

Financial Condition

Following is a summary of our balance sheets for the periods indicated:

	March 31, 2008		December 31, 2007
	(Dollars in Thousands)
Cash and due from banks	$	3,301	$	5,076
Federal funds sold		6,349		6,059
Securities		21,100		21,232
Loans, net		180,833		175,708
Premises and equipment		3,888		9,448
Other real estate		15,751		12,643
Other assets		8,332		7,803
	$	239,554	$	237,969
Deposits	$	198,888	$	195,539
Subordinated debentures		3,093		3,093
Other borrowed funds		13,000		18,000
Other liabilities		5,067		1,736
Stockholders’ equity		19,506		19,601
	$	239,554	$	237,969

11

Our total assets grew by 0.67% for the three month period ended March 31, 2008. Loans receivable were $183.4 million at March 31, 2008, an increase of $5.2 million or 2.9% from the $178.2 million total at December 31, 2007. Deposit growth continued, increasing by $3.3 million versus December 31, 2007, our ratio of loans to deposits and all other funding sources increased to 85.34% as of March 31, 2008 from 82.28% as of December 31, 2007. During the three month period ending March 31, 2008, the Company completed a sale/leaseback transaction on the main office located in Newnan and the branches located in Peachtree City and Tyrone, which resulted in Premises and Equipment decreasing in value by $5.5 million from $9.4 million as of December 31, 2007 to $3.9 million as of March 31, 2008. Net proceeds of the sale were $8.51 million, resulting in a gain, net of transaction cost, of $3.04 million. The Company will recognize the gain ratable over the ten year expected term of the leases. The unrecognizable gain is found within Other Liabilities causing the increase from December 31, 2007 to March 31, 2008.

12

Results of Operations For The Three Months Ended March 31, 2008 and 2007

Following is a summary of our operations for the periods indicated.

	Three Months Ended March 31,
	2008			2007
	(Dollars in Thousands)
Interest income	$	3,522		$	4,751
Interest expense		2,379			2,376
Net interest income		1,143			2,375
Provision for loan losses		(290	)		(121	)
Other income		319			204
Other expense		(1,795	)		(1,465	)
Pretax income (loss)		(623	)		993
Income taxes (benefit)		(285	)		391
Net income (loss)	$	(338	)	$	602

Our net interest income decreased by $1.2 million during the first quarter of 2008 as compared to the same period in 2007. Our net interest margin decreased to 1.62% during the first quarter of 2008 as compared to 4.19% during the first quarter of 2007. The decrease in net interest income is due primarily to the decreasing interest rates and an increase in impaired loans as well as other real estate. The cost of funds decreased to 4.43% in the first quarter of 2008 as compared to 4.63% in the first quarter of 2007.

The provision for loan losses increased by $169,000 three months ended March 31, 2008, respectively, as compared to the same period in 2007. There was $16.7 million in non-accrual loans as of March 31, 2008. This increase in non-accrual loans is due to management’s review of the current loan portfolio in relation to the economic conditions surrounding the bank. Loans past due ninety days or more and still accruing interest totaled $45,000 at March 31, 2008. As of March 31, 2008, management has assessed the allowance for loan losses and believes the $2.5 million, or 1.38% of total net outstanding loans, is adequate to absorb risks in the portfolio. No assurance can be given, however, that increased loan volume, and adverse economic conditions or other circumstances, will not result in increased losses in our loan portfolio.

13

Information with respect to non-accrual, past due, restructured, and potential problem loans at March 31, 2008 and 2007 is as follows:

	March 31,
	2008		2007
	(Dollars in Thousands)
Non-accrual loans	$	16,695	$	429
Loans contractually past due ninety days or more as to interest Or principal payments and still accruing		45		—
Restructured loans		—		118
Potential problem loans		—		2,382
Interest income that would have been recorded on non-accrual and restructured loans under original terms		231		21
Interest income that was recorded on non-accrual and restructured loans		445		3

It is our policy to discontinue the accrual of interest income when, in our opinion, collection of interest becomes doubtful. We will generally discontinue the accrual of interest income when (1) there is a significant deterioration in the financial condition of the borrower and full repayment of principal and interest is not expected and (2) the principal or interest is more than ninety days past due, unless the loan is both well-secured and in the process of collection.

Loans classified for regulatory purposes as loss, doubtful, substandard or special mention that have not been included in the table above do not represent or result from trends or uncertainties which we reasonably expect will materially impact future operating results, liquidity, or capital resources. These classified loans do not represent material credits about which we are aware of any information that causes us to have serious doubts as to the ability of such borrowers to comply with the loan repayment terms.

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Information regarding certain loans and allowance for loan loss data for the quarters ended March 31, 2008 and 2007 is as follows:

	Three Months Ended March 31,
	2008			2007
	(Dollars in Thousands)
Average amount of loans outstanding	$	177,013		$	186,273
Balance of allowance for loan losses at beginning of period	$	2,426		$	2,328
Loans charged off
Commercial and financial		43			74
Real estate mortgage		155			—
Installment		38			1
		236			75
Loans recovered
Commercial and financial		(1	)		(1	)
Real estate mortgage		(13	)		—
Installment		(1	)		(1	)
		(15	)		(2	)
Net charge-offs		221			73
Additions to allowance charged to operating expense during period		290			121
Balance of allowance for loan losses at end of period	$	2,495		$	2,376
Ratio of net loans charged off during the period to average loans outstanding		0.1249			0.0392

The allowance for loan losses is maintained at a level that is deemed appropriate by management to adequately cover all known and inherent risks in the loan portfolio. Management’s evaluation of the loan portfolio includes a loan classification program. Under the program, as each loan is made, we assign a loan grade. The loans are then classified by loan type and assigned an allowance percentage based on our specific experience and the historical experience of the banking industry in general. Loan classifications are subject to periodic review by the responsible lending officers and by senior management based upon their judgment, our loan loss experience, current economic conditions that may affect the borrower’s ability to repay, lender requirements, the underlying collateral value of the loans and other appropriate information. Management relies predominantly on this ongoing review of the loan portfolio to assess the risk characteristics of the portfolio in the aggregate and to determine adjustments, if any, to our allowance for loan losses. Based upon this ongoing review, we may identify loans that could be impaired. A loan is considered impaired when it is probable that we will be unable to collect all principal and interest due in accordance with the contractual terms of the loan agreement. When we identify a loan as impaired, the loan is reviewed on an individual basis to determine the amount of the impairment. A specific allowance is established when the discounted cash flows, collateral value or observable market price of the impaired loan is less than the carrying value of the loan.

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The Company continues to explore ways to reduce its overall exposure in these non-performing loans through various alternatives, including the potential sale of certain of the non-performing assets. Any future impact to the Company’s allowance for losses on loans in the event of such sales or other similar actions cannot be reasonably determined at this time

ITEM 4. 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 Chief Executive Officer and the Principal Financial and Accounting Officer, of the design and operation of our disclosure controls and procedures. Based on this evaluation, our Chief Executive Officer and Principal Financial and Accounting Officer concluded that our disclosure controls and procedures are effective.

There have been no changes in the Company’s internal control over financial reporting in the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

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PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company is not a party to any pending legal proceeding (nor is any property of the Company subject to any legal proceeding) other than routine litigation that is incidental to the business.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

There have been no defaults in the payment of principal, interest, a sinking or purchase fund installment, or any other default with respect to any indebtedness of the Company.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

3.1	Articles of Incorporation of the Company (filed as Exhibit 3.1 to the Registrant’s Form 8-K12g3 previously filed with the Commission on October 11, 2001 and incorporated herein by reference)
3.2	Bylaws of the Company, as amended (filed as Exhibit 3.2 to the Registrant’s Form 8-K12g3 previously filed with the Commission on October 11, 2001 and incorporated herein by reference)
31.1	Certificate of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certificate of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certificate of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certificate of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		NEWNAN COWETA BANCSHARES, INC. (Registrant)
DATE:	May 14, 2008		BY:	/s/ James B. Kimsey
				James B. Kimsey, President and Chief Executive Officer (Principal Executive Officer)
DATE:	May 14, 2008		BY:	/s/ J. Randal McKoon
				J. Randal McKoon, Principal Financial and Accounting Officer

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