UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________

FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

For the Quarterly Period Ended March 31, 2009 – Commission File Number 000-25422

_____________

PAB BANKSHARES, INC.

(A Georgia Corporation)

IRS Employer Identification Number: 58-1473302

3250 North Valdosta Road, Valdosta, Georgia 31602

Telephone Number: (229) 241-2775

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 T No £

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).           Yes £   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 definition of “accelerated filer”, “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer £ Accelerated filer T Non-accelerated filer £ Smaller reporting company £

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes £ No T

The number of shares outstanding of the registrant’s common stock at April 30, 2009 was 9,324,407 shares.

TABLE OF CONTENTS

		Page
PART I	FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements (Unaudited)
	Statements of Condition	1
	Statements of Income (Loss)	2
	Statements of Comprehensive Income (Loss)	3
	Statements of Stockholders’ Equity	4
	Statements of Cash Flows	5
	Notes to Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36
Item 4.	Controls and Procedures	38
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	38
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 3.	Defaults Upon Senior Securities	39
Item 4.	Submission of Matters to a Vote of Security Holders	39
Item 5.	Other Information	39
Item 6.	Exhibits	39
SIGNATURES		39

i

PART I.  FINANCIAL INFORMATION

PAB BANKSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CONDITION

AS OF MARCH 31, 2009 AND DECEMBER 31, 2008

	March 31, 2009			December 31, 2008
	(Unaudited)
ASSETS
Cash and due from banks	$	12,623,459		$	18,104,521
Interest-bearing deposits in other banks		130,854,113			118,244,771
Federal funds sold		55,950			1,054,719
Investment securities		187,484,731			185,773,315
Loans		940,278,920			956,687,391
Allowance for loan losses		(20,403,002	)		(19,373,625	)
Net loans		919,875,918			937,313,766
Premises and equipment, net		19,682,727			19,984,288
Goodwill		5,984,604			5,984,604
Cash value of bank-owned life insurance policies		12,407,038			12,302,586
Foreclosed assets		31,488,540			25,268,901
Other assets		26,610,662			26,071,460
Total assets	$	1,347,067,742		$	1,350,102,931
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand	$	111,471,652		$	91,114,337
Interest-bearing demand and savings		250,324,871			252,122,046
Time		743,501,714			780,466,875
Total deposits		1,105,298,237			1,123,703,258
Federal funds purchased and securities sold under agreements to repurchase		8,990,832			8,954,253
Advances from the Federal Home Loan Bank of Atlanta		105,601,722			109,703,917
Guaranteed preferred beneficial interests in debentures (trust preferred securities)		10,310,000			10,310,000
Other borrowings		20,000,000			-
Other liabilities		6,173,364			5,830,761
Total liabilities		1,256,374,155			1,258,502,189
Stockholders' equity:
Preferred stock, no par value; 1,500,000 shares authorized; no shares issued		-			-
Common stock, no par value; 98,500,000 shares authorized;9,324,407 and 9,324,407 shares issued and outstanding		1,217,065			1,217,065
Additional paid-in capital		24,309,689			24,225,407
Retained earnings		62,172,314			62,467,000
Accumulated other comprehensive income		2,994,519			3,691,270
Total stockholders' equity		90,693,587			91,600,742
Total liabilities and stockholders' equity	$	1,347,067,742		$	1,350,102,931

See accompanying notes to consolidated financial statements.

1

PAB BANKSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

THREE MONTHS ENDED MARCH 31, 2009 AND 2008

(Unaudited)

	Three Months Ended March 31,
	2009			2008
Interest income:
Interest and fees on loans	$	13,949,385		$	16,656,796
Interest and dividends on investment securities:
Taxable		1,890,426			1,993,051
Nontaxable		230,157			327,583
Other interest income		80,691			53,046
Total interest income		16,150,659			19,030,476
Interest expense:
Interest on deposits		7,660,956			8,417,362
Interest on Federal Home Loan Bank advances		1,077,245			930,299
Interest on other borrowings		220,251			337,373
Total interest expense		8,958,452			9,685,034
Net interest income		7,192,207			9,345,442
Provision for loan losses		1,750,000			1,200,000
Net interest income after provision for loan losses		5,442,207			8,145,442
Other income:
Service charges on deposit accounts		816,028			904,905
Other fee income		437,532			447,683
Securities transactions, net		16,590			183,384
Gain (loss) on sale and write-down of other assets		(127,355	)		(66,038	)
Gain (loss) on derivative instruments		782,086			-
Other noninterest income		180,881			173,295
Total other income		2,105,762			1,643,229
Other expenses:
Salaries and employee benefits		4,639,771			5,012,102
Occupancy expense of premises		608,134			599,050
Furniture and equipment expense		504,340			524,515
Other noninterest expense		2,373,576			1,693,616
Total other expenses		8,125,821			7,829,283
Income (loss) before income tax expense		(577,852	)		1,959,388
Income tax expense (benefit)		(283,166	)		661,915
Net income (loss)	$	(294,686	)	$	1,297,473
Earnings (loss) per common share:
Basic	$	(0.03	)	$	0.14
Diluted	$	(0.03	)	$	0.14

See accompanying notes to consolidated financial statements.

2

PAB BANKSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

THREE MONTHS ENDED MARCH 31, 2009 AND 2008

(Unaudited)

	Three Months Ended March 31,
	2009			2008
Net income (loss)	$	(294,686	)	$	1,297,473
Other comprehensive income (loss):
Unrealized gains (losses) on cash flow hedges during the period, net of tax (benefit) of ($261,711) and $426,929		(508,027	)		792,868
Reclassification adjustment for gains on cash flow hedge Included in net income, net of tax of $207,472 and $0		(402,739	)		-
Unrealized holding gains on securities available for sale arising during the period, net of tax of $115,892and $749,081		224,964			1,391,152
Reclassification adjustment for gains on securities available for sale included in net income, net of tax of $5,641 and $64,184		(10,949	)		(119,200	)
		(696,751	)		2,064,820
Comprehensive income (loss)	$	(991,437	)	$	3,362,293

See accompanying notes to consolidated financial statements.

3

PAB BANKSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

THREE MONTHS ENDED MARCH 31, 2009 (Unaudited) AND YEAR ENDED DECEMBER 31, 2008

	Common Stock					Additional Paid-in			Retained			Accumulated Other Comprehensive
	Shares			Par Value		Capital			Earnings			Income			Total
Balance, December 31, 2007		9,223,217		$	1,217,065	$	22,792,940		$	72,822,852		$	843,115		$	97,675,972
Net loss		-			-		-			(5,911,265	)		-			(5,911,265	)
Other comprehensive income		-			-		-			-			2,848,155			2,848,155
Cash dividends declared,$0.24 per share		-			-		-			(2,195,622	)		-			(2,195,622	)
2% stock dividend declared		183,739			-		2,248,965			(2,248,965	)		-			-
Stock acquired and cancelled under stock repurchase plan		(86,065	)		-		(1,162,521	)		-			-			(1,162,521	)
Stock-based compensation		-			-		310,043			-						310,043
Stock options exercised		3,516			-		35,980			-			-			35,980
Balance, December 31, 2008		9,324,407			1,217,065		24,225,407			62,467,000			3,691,270			91,600,742
Net loss		-			-		-			(294,686	)		-			(294,686	)
Other comprehensive loss		-			-		-			-			(696,751	)		(696,751	)
Stock-based compensation		-			-		84,282			-			-			84,282
Balance, March 31, 2009		9,324,407		$	1,217,065	$	24,309,689		$	62,172,314		$	2,994,519		$	90,693,587

See accompanying notes to consolidated financial statements.

4

PAB BANKSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

THREE MONTHS ENDED MARCH 31, 2009 AND 2008

(Unaudited)

	Three Months Ended March 31,
	2009			2008
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(294,686	)	$	1,297,473
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, amortization and accretion, net		370,181			404,688
Provision for loan losses		1,750,000			1,200,000
Net realized gain on securities transactions		(16,590	)		(183,384	)
Loss on disposal of assets		127,355			66,038
Gain on derivative instruments		(782,086	)		-
Stock-based compensation expense		84,282			89,583
Increase in cash value of bank-owned life insurance		(104,452	)		(105,245	)
Decrease in deferred compensation accrual		(51,190	)		(42,082	)
Net change in taxes receivable and taxes payable		(42,499	)		666,915
Decrease in interest receivable		310,823			1,457,991
Decrease in interest payable		(96,860	)		(132,624	)
Net increase in prepaid expenses and other assets		(1,074,419	)		(1,035,974	)
Net increase (decrease) in accrued expenses and other liabilities		490,653			(1,253,065	)
Net cash provided by operating activities		670,512			2,430,314
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in interest-bearing deposits in other banks		(12,609,342	)		(325,441	)
(Increase) decrease in federal funds sold		998,769			(14,906,630	)
Purchase of debt securities		(32,174,781	)		(20,336,097	)
Proceeds from sales of debt securities		22,326,382			17,567,701
Proceeds from calls of debt securities		3,712,000			16,042,927
Proceeds from maturities and paydowns of debt securities		5,076,712			3,590,661
Purchase of equity investments		(278,454	)		(938,184	)
Net (increase) decrease in loans		7,731,894			(15,858,872	)
Purchase of premises and equipment		(333,011	)		(119,317	)
Proceeds from disposal of assets		1,868,894			1,127,543
Net cash used in investing activities		(3,680,937	)		(14,155,709	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net decrease in deposits		(18,405,021	)		(8,045,268	)
Net increase (decrease) in federal funds purchased and securities sold under repurchase agreements		36,579			(3,185,042	)
Advances from the Federal Home Loan Bank		-			25,000,000
Payments on Federal Home Loan Bank advances		(4,102,195	)		(7,153,374	)
Dividends paid		-			(1,337,367	)
Proceeds from other borrowings		20,000,000			-
Purchase of cash flow hedge derivative instruments		-			(456,000	)
Acquisition of stock under stock repurchase plans		-			(933,364	)
Net cash provided by (used in) financing activities		(2,470,637	)		3,889,585

5

PAB BANKSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

THREE MONTHS ENDED MARCH 31, 2009 AND 2008 (Continued)

(Unaudited)

	Three Months Ended March 31,
	2009			2008
Net decrease in cash and due from banks	$	(5,481,062	)	$	(7,835,810	)
Cash and due from banks at beginning of period		18,104,521			29,451,700
Cash and due from banks at end of period	$	12,623,459		$	21,615,890
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid (received) during the period for:
Interest	$	9,055,312		$	9,817,658
Taxes	$	(240,667	)	$	-
NONCASH INVESTING AND FINANCING TRANSACTIONS
Increase in unrealized gains on securities available for sale	$	324,266		$	1,956,849
Increase (decrease) in unrealized gain on cash flow hedges	$	(1,379,949	)	$	1,219,797
Transfer of loans to foreclosed assets	$	7,955,954		$	2,049,707

See accompanying notes to consolidated financial statements.

6

PAB BANKSHARES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1.  NATURE OF BUSINESS

PAB Bankshares, Inc. (the “Company”) is a bank holding company whose business is conducted primarily by its wholly-owned commercial bank subsidiary, The Park Avenue Bank (the “Bank”).  The Bank is a state-chartered, member bank of the Federal Reserve System that was founded in 1956 in Valdosta, Lowndes County, Georgia.  Through the Bank, the Company offers a broad range of commercial and consumer banking products and services to customers located primarily in the local market areas listed below.  The Company and the Bank are subject to the regulations of certain federal and state agencies and are periodically examined by those regulatory agencies.

Banking Locations	Number of Offices
South Georgia Market:
Valdosta, Lowndes County	3	(including the main office)
Lake Park, Lowndes County	1
Adel, Cook County	1
Bainbridge, Decatur County	3
Cairo, Grady County	1
Statesboro, Bulloch County	2
Baxley, Appling County	1
Hazlehurst, Jeff Davis County	1
North Georgia Market:
McDonough, Henry County	1
Stockbridge, Henry County	1
Oakwood, Hall County	1
Athens, Oconee County	1
Cumming, Forsyth County	1	(loan production office)
Florida Market:
Ocala, Marion County	1
St. Augustine, St. Johns County	1	(loan production office)

The Company also owns PAB Bankshares Capital Trust II, a Delaware statutory business trust.  This non-operating subsidiary was created in 2006 for the sole purpose of issuing trust preferred securities and investing the proceeds in subordinated debt issued by the Company.  The Company follows Financial Accounting Standards Board (“FASB”) Interpretation No. 46R (Revised December 2003), Consolidation of Variable Interest Entities.  This interpretation addresses consolidation by business entities of variable interest entities and when such entities are subject to consolidation under the provisions of this interpretation.  The Company has determined that the provisions of FASB Interpretation No. 46R require deconsolidation of PAB Bankshares Capital Trust II.

NOTE 2.  BASIS OF PRESENTATION

The accompanying consolidated financial information of the Company is unaudited; however, such information reflects all adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the financial position and results of operations.  The results of operations for the three months ended March 31, 2009 are not necessarily indicative of the results that may be expected for the full year.  These statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.

7

PAB BANKSHARES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 2.  BASIS OF PRESENTATION (Continued)

The consolidated financial statements include the accounts of the Company and its subsidiaries.  Significant intercompany transactions and balances are eliminated in consolidation.

In preparing the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the balance sheet date and the 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 relate to the determination of the allowance for loan losses, the valuation of goodwill, the valuation of foreclosed assets and deferred taxes.

In May 2008, the Company declared a 2% stock dividend on the Company’s common stock, payable on July 15, 2008 to holders of record on June 30, 2008.  The weighted average number of shares and all other share and per share data included in this Report has been restated for all periods presented to reflect this stock dividend.

NOTE 3.  EARNINGS (LOSS) PER COMMON SHARE

Basic earnings (loss) per share are computed by dividing net income by the weighted average number of shares of common stock outstanding during the year.  Diluted earnings (loss) per share are computed by dividing net income by the sum of the weighted average number of shares of common stock outstanding and dilutive potential common shares.  Potential common shares consist of stock options.

The components used to calculate basic and diluted earnings (loss) per share for the three months ended March 31, 2009 and 2008 follow.

	Three Months Ended March 31,
	2009			2008
Basic earnings (loss) per share:
Net income (loss)	$	(294,686	)	$	1,297,473
Weighted average common shares outstanding		9,324,407			9,364,691
Earnings (loss) per common share	$	(0.03	)	$	0.14
Diluted earnings (loss) per share:
Net income (loss)	$	(294,686	)	$	1,297,473
Weighted average common shares outstanding		9,324,407			9,364,691
Effect of dilutive stock options		-			58,915
Weighted average diluted common shares outstanding		9,324,407			9,423,606
Earnings (loss) per common share	$	(0.03	)	$	0.14

8

PAB BANKSHARES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 4.  DERIVATIVE FINANCIAL INSTRUMENTS

Accounting Policy for Derivative Instruments and Hedging Activities

Statement of Financial Accounting Standards No. 161, Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133 (SFAS 161), amends and expands the disclosure requirements of FASB Statement No. 133  (SFAS 133) with the intent to provide users of financial statements with an enhanced understanding of: (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. SFAS 161 requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about the fair value of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative instruments.

As required by SFAS 133, the Company records all derivatives on the balance sheet at fair value.  The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge.  The Company may enter into derivative contracts that are intended to economically hedge certain of its risks, even though hedge accounting does not apply or the Company elects not to apply hedge accounting under SFAS 133.

Risk Management Objective of Using Derivatives

The Company is exposed to certain risks arising from both its business operations and economic conditions.  The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of its assets and liabilities and through the use of derivative financial instruments.  Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates.  The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to certain variable rate loan assets and variable rate borrowings.

9

PAB BANKSHARES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 4.  DERIVATIVE FINANCIAL INSTRUMENTS (Continued)

Fair Values of Derivative Instruments on the Balance Sheet

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the Statement of Condition as of March 31, 2009 and December 31, 2008.

	Asset Derivatives						Liability Derivatives
	As of March 31, 2009			As of December 31, 2008			As of March 31, 2009			As of December 31, 2008
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives designated as hedging instruments under SFAS 133:
Interest Rate Products	Other Assets	$	1,638,747	Other Assets	$	3,992,797	Other Liabilities	-		Other Liabilities	-
Total derivatives designated as hedging instruments under SFAS 133		$	1,638,747		$	3,992,797			-			-
Derivatives not designated as hedging instruments under SFAS 133:
Interest Rate Products	Other Assets	$	1,556,350	Other Assets		-	Other Liabilities		-	Other Liabilities		-
Total derivatives not designated as hedging instruments under SFAS 133		$	1,556,350			-			-			-

Cash Flow Hedges of Interest Rate Risk

The Company’s objectives in using interest rate derivatives are to add stability to interest income and expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate collars, caps, and floors as part of its interest rate risk management strategy.  Interest rate floors designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty if interest rates fall below the strike rate on the contract in exchange for an up front premium.  Interest rate collars designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty if interest rates fall below the strike rate on the purchased floor and the payment of variable-rate amounts if interest rates rise above the cap rate on the sold cap. For hedges of the Company’s variable-rate borrowings, an interest rate cap is designated as cash flow hedge to protect the company against interest rate movements above the strike rate of the cap in exchange for an upfront premium.  As of March 31, 2009, the Company had one interest rate cap, one interest rate floor, and one interest rate collar with an aggregate notional amount of $100 million that were designated as cash flow hedges of interest rate risk.

10

PAB BANKSHARES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 4.  DERIVATIVE FINANCIAL INSTRUMENTS (Continued)

During the first quarter of 2009, such derivatives were used to hedge the variable cash inflows associated with existing pools of prime-based floating-rate loans, as well as variable cash outflows associated with the Company’s floating rate deposit accounts.  The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings as a component of other non-interest expense. During the three months ended March 31, 2009 and 2008, the Company recognized a gain of $616 and $0, respectively, for hedge ineffectiveness attributable to a mismatch between the floor notional and the aggregate principal amount of the designated loan pools. In addition, one of the Company’s $25 million interest rate collars failed to qualify for hedge accounting due to the paydown of the designated loan pools; accordingly, the changes in fair value of the collar during the three months ended March 31, 2009 of $89,200 has been recognized directly in earnings as a gain. The fair value of this collar at March 31, 2009 and its change in fair value during the three months ended March 31, 2009 are disclosed under the sections entitled “Derivatives Not Designated as Hedging Instruments under SFAS 133” throughout this footnote.

Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest income or expense as interest payments are received/made on the Company’s variable-rate assets/liabilities. During the next twelve months, the Company estimates that $1,531,784 will be reclassified as an increase to interest income and $92,499 will be reclassified as an increase to interest expense.  During the three months ended March 31, 2009, the Company accelerated the reclassification of amounts in other comprehensive income to earnings as a result of a portion of the hedged forecasted transactions related to one of the Company’s certain failed interest rate collar’s becoming probable not to occur.  The accelerated amount was a gain of $692,270.

Non-designated Hedges

The Company does not use derivatives for trading or speculative purposes.  Derivatives not designated as hedges are used to manage the Company’s exposure to interest rate movements and other identified risks but do not meet the strict hedge accounting requirements of SFAS 133. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in earnings.  As of March 31, 2009, the Company had one outstanding derivative with a $25 million notional amount that failed to qualify for hedge accounting during the period ended March 31, 2009 and is, therefore, no longer designated as a hedge in a qualifying hedging relationship.  All changes in fair value during the period and any future changes in fair value will be recorded directly in earnings.  On April 23, 2009, the Company terminated two derivative instruments, including the derivative instrument that failed to qualify for hedge accounting treatment.

11

PAB BANKSHARES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 4.  DERIVATIVE FINANCIAL INSTRUMENTS (Continued)

Effect of Derivative Instruments on the Income Statement

The tables below present the effect of the Company’s derivative financial instruments on the Income Statement for the three months ended March 31, 2009 and 2008.

Derivatives in SFAS 133 Cash Flow Hedging Relationships	Amount of Gain or (Loss) Recognized in OCI on Derivative (Effective Portion)				Location of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)				Location of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)	Amount of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
	Three Months Ended March 31,					Three Months Ended March 31,					Three Months Ended March 31,
	2009		2008			2009		2008			2009		2008
Interest Rate Products	$	14,166	$	1,887,797	Interest income	$	1,478,092	$	210,445	Other income	$	616		-
Total	$	14,166	$	1,887,797		$	898,496	$	210,445			-		-

		Amount of Gain or (Loss) Recognized in Income on Derivative
Derivatives Not Designated as Hedging Instruments Under SFAS 133	Location of Gain or (Loss) Recognized in Income on Derivative	Three Months Ended March 31,
		2009		2008
Interest Rate Products	Other income	$	89,200		-
Total		$	89,200		-

12

PAB BANKSHARES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 5.  STOCK PLANS AND STOCK-BASED EMPLOYEE COMPENSATION

At March 31, 2009, the Company had two fixed stock option plans under which it has granted options to its employees and directors to purchase common stock at the fair market value on the date of the grant.  Both plans provide for “incentive stock options” and “non-qualified stock options”.  The incentive stock options are intended to qualify under Section 422 of the Internal Revenue Code for favorable tax treatment.

Under the 1994 Employee Stock Option Plan, the Board of Directors could grant up to 400,000 stock options to employees of the Company as part of an incentive plan to attract and retain key personnel in the Company.  The 1994 Employee Stock Option Plan expired in 2004.  At March 31, 2009, there were 47,787 options outstanding that were granted under the 1994 Employee Stock Option Plan.

Under the 1999 Stock Option Plan (as amended), the Board of Directors can grant up to 1,428,000 stock options to directors, employees, consultants and advisors of the Company.  At March 31, 2009, there were 621,585 shares available for grant and there were 651,778 options outstanding that were granted under the 1999 Stock Option Plan.

Prior to January 1, 2006, the Company accounted for its stock option plans under the recognition and measurement provision of Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations, as permitted by FASB No. 123, Accounting for Stock-Based Compensation.  Effective January 1, 2006, the Company adopted FASB No. 123R, Share-Based Payment, utilizing the “modified prospective” method as described in FASB No. 123R.  In the “modified prospective” method, compensation cost is recognized for all stock-based payments granted after the effective date and for all unvested awards granted prior to the effective date.  In accordance with FASB No. 123R, prior period amounts were not restated. FASB No. 123R also requires the tax benefits associated with these stock-based payments to be classified as financing activities in the Consolidated Statements of Cash Flows, rather than as operating cash flows as required under previous regulations.

At March 31, 2009, there was approximately $719,000 of unrecognized compensation cost related to stock-based payments, which is expected to be recognized over a weighted-average period of 3.30 years.

NOTE 6.  FAIR VALUE MEASUREMENTS

Fair Value Measurements

On January 1, 2008, the Company adopted FASB No. 157, Fair Value Measurements.  FASB No. 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.  FASB No. 157 applies to reported balances that are required or permitted to be measured at fair value under existing accounting pronouncements; accordingly, the standard does not require any new fair value measurements of reported balances.

FASB No. 157 emphasizes that fair value is a market-based measurement, not an entity-specific measurement.  Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability.  As a basis for considering market participant assumptions in fair value measurements, FASB No. 157 establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).

13

PAB BANKSHARES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 6.  FAIR VALUE MEASUREMENTS (Continued)

Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access. Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the asset or liability, which are typically based on an entity’s own assumptions, as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

Assets Measured at Fair Value on a Recurring Basis

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.

Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. Level 1 securities 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 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy.

As discussed in Note 4, the Company uses floor and collar derivative contracts to manage its interest rate risk.   The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities.  The fair values of interest rate options are determined using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates fell below the strike rate of the floors or rise above the strike price of the collar.  The variable interest rates used in the calculation of projected receipts on the floor (cap) are based on an expectation of future interest rates derived from observable market interest rate curves and volatilities.  To comply with the provisions of FASB No. 157, the Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements.  In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.

Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties.  However, as of March 31, 2009, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.  The Company does not have any fair value measurements using significant unobservable inputs (Level 3) as of March 31, 2009.

14

PAB BANKSHARES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 6.  FAIR VALUE MEASUREMENTS (Continued)

The table below presents the Company’s assets and liabilities measured at fair value on a recurring basis as of March 31, 2009, aggregated by the level in the fair value hierarchy within which those measurements fall.

	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets
Investment securities available-for-sale	$	582,941	$	186,901,790	$	-	$	187,484,731
Derivative financial instruments		-		3,195,097		-	$	3,195,097
Total fair value of assets on a recurring basis	$	582,941	$	190,096,887	$	-	$	190,679,828

Assets Measured at Fair Value on a Nonrecurring Basis

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

Loan impairment is reported when full payment under the loan terms is not expected. Impaired loans are carried at the present value of estimated future cash flows using the loan's existing rate, or the fair value of collateral if the loan is collateral dependent. A portion of the allowance for loan losses is allocated to impaired loans if the value of such loans is deemed to be less than the unpaid balance. If these allocations cause the allowance for loan losses to require an increase, such increase is reported as a component of the provision for loan losses. Loan losses are charged against the allowance when management believes the uncollectibility of a loan is confirmed.  When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the loan impairment as nonrecurring Level 2. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Company records the loan impairment as nonrecurring Level 3.

Foreclosed assets are adjusted to fair value upon transfer of the loans to foreclosed assets. Subsequently, foreclosed assets are carried at the lower of carrying value or fair value. Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral. When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the foreclosed assets as nonrecurring Level 2. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Company records the foreclosed asset as nonrecurring Level 3.

15

PAB BANKSHARES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 6.  FAIR VALUE MEASUREMENTS (Continued)

The table below presents the Company’s assets and liabilities for which a nonrecurring change in fair value has been recorded during the year ended March 31, 2009, aggregated by the level in the fair value hierarchy within which those measurements fall.

	Carrying value at March 31, 2009
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total		Total gains (losses) for the Quarter Ended March 31, 2009
Impaired loans	$	-	$	-	$	56,016,044	$	56,016,044	$	-
Foreclosed assets		-		466,634		31,021,906		31,488,540		(123,364	)
Total fair value of assets on a nonrecurring basis	$	-	$	466,634	$	87,037,950	$	87,504,584	$	(123,364	)

Fair Value Option

In February 2007, the FASB issued FASB No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of FASB Statement No. 115.  FASB No. 159 allows companies to report selected financial assets and liabilities at fair value.  The changes in fair value are recognized in earnings and the assets and liabilities measured under this methodology are required to be displayed separately on the balance sheet.  While FASB No. 159 became effective for the Company beginning January 1, 2008, the Company has not elected the fair value option that is offered by this statement.

NOTE 7.  SUBSEQUENT EVENT

On May 1, 2009, the Office of the Comptroller of the Currency closed Silverton Bank, N.A. and the FDIC was named as receiver.  At March 31, 2009 the Company held 474 shares of Silverton Bank, N.A. common stock, with a net book value of $260,800.  Due to the events on May 1, 2009, the Company will record a loss on this investment of $260,800 during the second quarter of 2009.

16

CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements set forth in this Report or incorporated herein by reference, including, without limitation, matters discussed in Item 2 “Management's Discussion and Analysis of Financial Condition and Results of Operation” beginning on this page, are “forward-looking statements” within the meaning of the federal securities laws, including, without limitation, statements regarding our outlook on earnings, asset quality and adequacy of loan loss reserves, and are based upon management’s beliefs as well as assumptions made based on data currently available to management.  In this Report, the terms “PAB”, “the Company”, “we”, “us” or “our” refer to PAB Bankshares, Inc.  When words like “believe”, “intend”, “plan”, “may”, “continue”, “project”, “would”, “expect”, “estimate”, “could”, “should”, “will”, and similar expressions are used, you should consider them as identifying forward-looking statements.  These forward-looking statements are not guarantees of future performance, and a variety of factors could cause our actual results to differ materially from the anticipated or expected results expressed in these forward-looking statements.  Many of these factors are beyond our ability to control or predict, and readers are cautioned not to put undue reliance on such forward-looking statements.  The following list, which is not intended to be an all-encompassing list of risks and uncertainties affecting us, summarizes several factors that could cause our actual results to differ materially from those anticipated or expected in these forward-looking statements: (1) competitive pressures among depository and other financial institutions may increase significantly; (2) changes in the interest rate environment may reduce margins or the volumes or values of loans made by us; (3) general economic conditions (both generally and in our markets) may be less favorable than expected, resulting in, among other things, a deterioration in credit quality, a reduction in demand for credit and/or a decline in real estate values; (4) continued weakness in the real estate market has adversely affected us and may continue to adversely affect us; (5) legislative or regulatory changes, including changes in accounting standards and compliance requirements, may adversely affect the businesses in which we are engaged; (6) competitors may have greater financial resources and develop products that enable such competitors to compete more successfully than we can; (7) our ability to attract and retain key personnel can be affected by the increased competition for experienced employees in the banking industry; (8) adverse changes may occur in the bond and equity markets; (9) our ability to raise capital to protect against further deterioration in our loan portfolio may be limited due to unfavorable conditions in the equity markets; (10) war or terrorist activities may cause further deterioration in the economy or cause instability in credit markets; (11) restrictions or conditions imposed by our regulators on our operations may make it more difficult for us to achieve our goals; (12) economic, governmental or other factors may prevent the projected population, residential and commercial growth in the markets in which we operate; and (13) the risk factors discussed from time to time in the Company’s periodic reports filed with the Securities and Exchange Commission (the “SEC”), including but not limited to, the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.  We undertake no obligation to, and we do not intend to, update or revise these statements following the date of this filing, whether as a result of new information, future events or otherwise, except as may be required by law.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

The following discussion and analysis of the consolidated financial condition and results of operations of the Company should be read in conjunction with the Consolidated Financial Statements and related Notes included in this Report as well as the Consolidated Financial Statements, related Notes, and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008, and is qualified in its entirety by the foregoing and other more detailed financial information appearing elsewhere.  Historical results of operations and the percentage relationships among any amounts included, and any trends which may appear to be inferred, should not be taken as being necessarily indicative of trends in operations or results of operations for any future periods.

Our operating subsidiary, The Park Avenue Bank, is a $1.3 billion community bank with 18 branches and two loan production offices in Georgia and Florida.  We have offices in both smaller, rural communities as well as larger, metropolitan areas.  We provide traditional banking products and services to commercial and individual customers in our markets.  Competition, regulation, credit risk, and interest rate risk are the primary factors that we must manage in order to be successful.

17

We generally group our offices into three geographic regions for discussion purposes due to the varying demographics of each market.  Our offices in Lowndes, Cook, Decatur, Grady, Bulloch, Appling and Jeff Davis counties are collectively referred to as our “South Georgia” market.  Our offices in Henry, Hall, Oconee, and Forsyth counties are collectively referred to as our “North Georgia” market.  Our offices in Marion and St. Johns counties are collectively referred to as our “Florida” market.  In addition, our corporate assets, correspondent bank account balances, investment portfolio, out-of-market participation loans, insider loans and insider deposits, borrowings, etc. are reported at the corporate level, in what we refer to as the “Treasury”.  In January 2009, we closed our branch and loan production office in Snellville, Georgia and our branch in Jacksonville, Florida due to the economic downturn and disappointing results from these markets.

The tables below provide summary demographic data on each of our markets.

Market/ County	Number of Offices		Total Loans1		Total Deposits1		Market Share (%)2		Market Share Rank2
South Georgia
Lowndes		4	$	250,259	$	283,414		19.4		2
Cook		1		12,288		50,591		26.2		2
Decatur		3		45,495		118,656		32.2		1
Grady		1		11,940		25,880		6.7		5
Appling		1		15,483		40,649		16.0		4
Jeff Davis		1		10,406		53,900		28.0		2
Bulloch		2		35,880		61,580		4.6		6
		13	$	381,751	$	634,670
North Georgia
Henry		2	$	231,627	$	71,549		3.5		8
Hall		1		92,755		27,734		1.0		14
Oconee		1		47,684		14,856		1.8		8
Forsyth		1		57,323		13,761		-		-
		5	$	429,389	$	127,900
Florida
Marion		1	$	31,474	$	162,614		3.4		7
St. Johns		1		70,336		4,114		-		-
		2	$	101,810	$	166,728

____________________

1 Dollar amounts are presented in thousands as of March 31, 2009.  Amounts exclude $27.3 million in loans and $176.0 million in deposits assigned to the “Treasury” that are not allocated to any particular market (i.e. participation loans, employee and director accounts, brokered deposits, official checks, etc.).

2 Based on the FDIC/OTS Summary of Deposits report as of June 30, 2008.

18

Market/ County	Total Population1		Population Growth (%)2		Employment Growth (%)3			Unemployment Rate (%)4		Median 2008 Household Income ($)5
Selected Georgia Counties:
South Georgia:
Appling		18,038		3.6		0.0			8.5		36,331
Bulloch		67,761		21.0		0.3			7.0		36,805
Cook		16,608		5.3		(2.1	)		10.7		33,143
Decatur		28,823		2.1		(1.4	)		9.6		35,282
Grady		25,115		6.2		(3.7	)		7.1		34,959
Jeff Davis		13,486		6.3		(3.3	)		12.5		32,660
Lowndes		104,583		13.5		(0.9	)		6.8		41,368
North Georgia:
Forsyth		168,060		70.8		0.0			5.8		95,141
Hall		184,814		32.7		0.5			6.5		57,026
Henry		191,502		60.5		0.0			7.1		73,113
Oconee		32,221		22.9		0.8			4.5		67,570
State of Georgia		9,685,744		18.3		(0.2	)		7.3		56,752
Selected Florida Counties:
Marion		329,628		27.3		(0.5	)		9.6		39,870
St. Johns		181,540		47.4		(0.3	)		6.3		66,135
State of Florida		18,328,340		14.7		(0.6	)		7.4		50,509
National Total		304,059,724		8.0		(0.5	)		6.6		54,749

______

1 Estimated July 1, 2008 poulation provided by the U.S. Census Bureau.

2 Estimated percentage population change from 2000 to 2008 provided by the U.S. Census Bureau.

3 Total employment growth (not seasonally adjusted) for the Fourth Quarter 2008 year-to-date percentage change from the prior year’s year-to-date data provided by the Bureau of Labor Statistics Household Survey.

4 Unemployment rate (not seasonally adjusted) for the Fourth Quarter 2008 provided by the Bureau of Labor Statistics.

5 Based on actual 2008 market demographics provided by SNL Financial.

19

FINANCIAL CONDITION

During the three months ended March 31, 2009, our total assets decreased $3.0 million, or 0.9% on an annualized basis, to $1.35 billion.  Our loan portfolio decreased $16.4 million, or 7.0% on an annualized basis, to $940.3 million at March 31, 2009 from $956.7 million at December 31, 2008.  Total deposits decreased $18.4 million, or 6.6% on an annualized basis, to $1.105 billion at March 31, 2009 from $1.124 billion at December 31, 2008.  The decrease in total deposits is primarily the result of a $46.4 million decrease in brokered deposits and a $1.8 million decrease in interest-bearing demand and savings accounts, offset by a $20.3 million increase in noninterest-bearing deposits and a $9.5 million increase in retail in-market time deposits.  During the first quarter of 2009, the Bank issued $20 million of unsecured debt under the FDIC’s Temporary Liquidity Guarantee Program.

The following table summarizes our loan and deposit portfolios classified by type and market as of March 31, 2009.

As of March  31, 2009	South Georgia			North Georgia			Florida			Treasury			Total
	(Dollars in Thousands)
Loans
Commercial and financial	$	32,108		$	48,402		$	2,007		$	17		$	82,534
Agricultural (including loans secured by farmland)		33,826			4,510			6,335			-			44,671
Real estate – construction and development		75,844			177,219			58,851			2,949			314,863
Real estate - commercial		91,912			150,562			25,294			6,570			274,338
Real estate - residential		135,321			42,399			9,361			4,307			191,388
Installment loans to individuals and other loans		12,564			6,470			171			13,535			32,740
		381,575			429,562			102,019			27,378			940,534
Deferred loan fees and unearned interest, net		175			(173	)		(208	)		(49	)		(255	)
		381,750			429,389			101,811			27,329			940,279
Allowance for loan losses		(5,191	)		(10,463	)		(3,595	)		(1,154	)		(20,403	)
Net loans	$	376,559		$	418,926		$	98,216		$	26,175		$	919,876
Percentage of total		40.9	%		45.5	%		10.7	%		2.9	%		100.0	%
Deposits
Noninterest-bearing demand	$	73,408		$	17,585		$	6,263		$	14,216		$	111,472
Interest-bearing demand and savings		199,479			26,609			23,504			733			250,325
Retail time less than $100,000		188,001			48,866			93,691			296			330,854
Retail time greater than or equal to $100,000		126,799			28,491			43,270			208			198,768
Retail time placed in CDARs program		46,983			6,349			-			380			53,712
Brokered		-			-			-			160,167			160,167
Total deposits	$	634,670		$	127,900		$	166,728		$	176,000		$	1,105,298
Percentage of total		57.4	%		11.6	%		15.1	%		15.9	%		100.0	%

In addition to the geographic concentrations noted in the tables above, we had approximately $76.1 million in loans secured by real estate in Florida to customers of our South Georgia, North Georgia and Treasury offices.

20

Since the second half of 2007, finished housing inventories and the supply of vacant developed lots have continued to increase in several of our markets in the Atlanta MSA as the number of home sales, new building permits and housing starts have decreased.  The table below summarizes, from data available to the Company, the inventory supply trends for housing and vacant developed lots for select counties on the south side of the Atlanta MSA where we have a significant presence in residential real estate construction and development loans and other real estate owned.  These statistics are based on estimated absorption rates using actual house sales compared to the number of houses for sale and housing starts and/or building permits compared to the number of vacant developed lots available.  The actual absorption periods may differ from these estimates given changes in the future volume of home sales and housing starts.

For the Quarter Ended	Mar-09		Dec-08		Sep-08		Jun-08		Mar-08		Mar-07		Mar-06
Housing Inventory:	(Number of Months Supply)
Henry County		12.7		14.0		13.8		13.1		12.6		9.3		8.6
Clayton County		16.7		15.1		11.5		9.9		9.3		12.5		7.7
Newton County		12.9		14.5		15.3		13.9		12.3		7.9		9.0
South Fulton County		9.7		9.5		9.3		9.2		9.1		7.5		8.2
Vacant Developed Lots Inventory:
Henry County		348.8		291.0		207.0		153.0		113.0		37.0		25.0
Clayton County		273.9		169.0		122.0		91.0		62.0		29.0		29.0
Newton County		399.9		326.0		210.0		142.0		93.0		29.0		22.0
South Fulton County		161.7		126.0		96.0		83.0		67.0		26.0		20.0

21

The table below summarizes our loan portfolio by loan type as of the end of each of the last five quarters.

As of Quarter End	Mar-09			Dec-08			Sep-08			Jun-08			Mar-08
	(Dollars In Thousands)
Commercial and financial	$	82,534		$	87,530		$	91,401		$	82,087		$	83,343
Agricultural (including loans secured by farmland)		44,671			48,647			49,227			46,891			42,573
Real estate – construction and development		314,863			315,786			332,901			344,393			363,392
Real estate - commercial		274,338			276,645			281,781			275,962			241,165
Real estate - residential		191,388			196,306			195,439			181,169			179,091
Installment loans to individuals and other loans		32,740			32,084			32,075			33,237			25,704
		940,534			956,998			982,824			963,739			935,268
Deferred loan fees and unearned interest, net		(255	)		(310	)		(253	)		(239	)		(341	)
Total loans		940,279			956,688			982,571			963,500			934,927
Allowance for loan losses		(20,403	)		(19,374	)		(20,240	)		(14,303	)		(13,875	)
Net loans	$	919,876		$	937,314		$	962,331		$	949,197		$	921,052

The percentage of loans outstanding by loan type at the indicated dates is presented in the following table:

As of Quarter End	Mar-09			Dec-08			Sep-08			Jun-08			Mar-08
Commercial and financial		8.78	%		9.15	%		9.30	%		8.52	%		8.91	%
Agricultural (including loans secured by farmland)		4.75	%		5.08	%		5.01	%		4.87	%		4.55	%
Real estate – construction and development		33.49	%		33.01	%		33.88	%		35.74	%		38.87	%
Real estate - commercial		29.18	%		28.92	%		28.68	%		28.64	%		25.80	%
Real estate - residential		20.35	%		20.52	%		19.89	%		18.80	%		19.16	%
Installment loans to individuals and other loans		3.48	%		3.35	%		3.27	%		3.45	%		2.75	%
		100.03	%		100.03	%		100.03	%		100.02	%		100.04	%
Deferred loan fees and unearned interest, net		-0.03	%		-0.03	%		-0.03	%		-0.02	%		-0.04	%
Total loans		100.00	%		100.00	%		100.00	%		100.00	%		100.00	%
Allowance for loan losses		-2.17	%		-2.03	%		-2.06	%		-1.48	%		-1.48	%
Net loans		97.83	%		97.97	%		97.94	%		98.52	%		98.52	%

At March 31, 2009, the loan portfolio was $940.3 million compared to $956.7 million at December 31, 2008, a decrease of $16.4 million, or 1.7%.  Since December 31, 2004, the composition of the loan portfolio has shifted as commercial real estate mortgages decreased from 36.9% of our portfolio in 2004 to 29.2% at March 31, 2009, and construction and land development loans increased from 25.8% of our portfolio to 33.5% of our portfolio during that same time.  However, it should be noted that construction and land development loans have decreased from 38.3% of our portfolio at December 31, 2007.  This increase in construction and land development lending is largely the result of our decision in 2000 to expand into our North Georgia markets.  Of the $314.9 million in construction and development loans outstanding at March 31, 2009, $177.2 million, or 56.3%, were originated in our North Georgia offices.

22

Below is a table showing the collateral distribution of our construction and development and commercial real estate loan portfolios at the indicated dates.

	March 31, 2009						December 31, 2008						March 31, 2008
	$ Amount			% to Total			$ Amount			% to Total			$ Amount			% to Total
	(Dollars in Thousands)
Construction and development:
Acquisition and development:
1-4 family residential	$	129,628			41.2	%	$	129,412			41.0	%	$	141,354			38.9	%
Commercial and multi-family		95,669			30.4	%		95,934			30.4	%		106,894			29.4	%
Construction
Residential:
1-4 family residential spec		17,019			5.4	%		19,182			6.1	%		41,590			11.4	%
1-4 family residential pre-sold		112			0.1	%		112			0.1	%		1,281			0.4	%
1-4 family residential other		21,356			6.8	%		23,423			7.4	%		26,095			7.2	%
Commercial:
Commercial owner-occupied		2,297			0.7	%		3,340			1.0	%		6,496			1.8	%
Commercial not owner-occupied		35,689			11.3	%		27,038			8.5	%		19,069			5.2	%
Other:
Hotel/motel		8,554			2.7	%		7,949			2.5	%		10,389			2.9	%
Multi-family properties		-			0.0	%		-			0.0	%		8,282			2.3	%
Special purpose property		3,319			1.0	%		6,538			2.1	%		1,942			0.5	%
Other		1,220			0.4	%		2,858			0.9	%		-			0.0	%
Total construction and development loans	$	314,863			100.0	%	$	315,786			100.0	%	$	363,392			100.0	%
Percentage of total loans		33.5	%					33.0	%					38.9	%

	March 31, 2009						December 31, 2008						March 31, 2008
	$ Amount			% to Total			$ Amount			% to Total			$ Amount			% to Total
Commercial real estate:
Owner-occupied:
Office	$	42,075			15.3	%	$	41,617			15.0	%	$	33,017			13.7	%
Retail		19,581			7.1	%		21,062			7.6	%		21,478			8.9	%
Other		40,546			14.8	%		40,413			14.6	%		36,432			15.1	%
Not owner-occupied:
Office		24,896			9.1	%		25,425			9.2	%		27,598			11.4	%
Retail		35,586			13.0	%		36,085			13.1	%		34,613			14.4	%
Other		24,198			8.8	%		24,656			8.9	%		25,082			10.4	%
Other:
Hotel/motel		15,826			5.8	%		15,812			5.7	%		10,885			4.5	%
Industrial		4,598			1.7	%		4,677			1.7	%		4,789			2.0	%
Multi-family properties		22,822			8.3	%		22,685			8.2	%		12,374			5.1	%
Special purpose property		39,459			14.4	%		39,240			14.2	%		34,897			14.5	%
Other		4,751			1.7	%		4,973			1.8	%		-			0.0	%
Total commercial real estate loans	$	274,338			100.0	%	$	276,645			100.0	%	$	241,165			100.0	%
Percentage of total loans		29.1	%					28.9	%					25.8	%

23

The table below summarizes our deposit portfolio by deposit type as of the end of each of the last five quarters.

As of Quarter End	Mar-09		Dec-08		Sep-08		Jun-08		Mar-08
	(Dollars In Thousands)
Noninterest-bearing demand	$	111,472	$	91,114	$	101,417	$	102,909	$	97,029
Interest-bearing demand and savings		250,325		252,122		262,723		336,359		331,184
Retail time less than $100,000		330,854		328,329		323,377		292,981		298,799
Retail time greater than or equal to $100,000		198,768		198,845		182,491		175,914		179,316
Retail time placed in CDARs programs		53,712		46,690		18,343		-		-
Brokered		160,167		206,603		141,493		88,432		65,776
Total deposits	$	1,105,298	$	1,123,703	$	1,029,844	$	996,595	$	972,104

The percentage of deposits outstanding by deposit type at the indicated dates is presented in the following table:

As of Quarter End	Mar-09			Dec-08			Sep-08			Jun-08			Mar-08
Noninterest-bearing demand		10.09	%		8.11	%		9.85	%		10.33	%		9.98	%
Interest-bearing demand and savings		22.65	%		22.44	%		25.51	%		33.75	%		34.07	%
Retail time less than $100,000		29.93	%		29.22	%		31.40	%		29.40	%		30.74	%
Retail time greater than or equal to $100,000		17.98	%		17.69	%		17.72	%		17.65	%		18.44	%
Retail time placed in CDARs program		4.86	%		4.15	%		1.78	%		0.0	%		0.0	%
Brokered		14.49	%		18.39	%		13.74	%		8.87	%		6.77	%
Total deposits		100.00	%		100.00	%		100.00	%		100.00	%		100.00	%

RESULTS OF OPERATIONS

During the three months ended March 31, 2009 we incurred a net loss of $295,000, or ($0.03) per diluted share, as compared to net income of $1.3 million, or $0.14 per diluted share, during the same period in 2008.  The $1.6 million, or 122.7%, decrease in net income is the net result of a $2.2 million decrease in net interest income, a $550,000 increase in the provision for loan loss expense and a $297,000 increase in other expenses, offset by a $463,000 increase in other income and a $945,000 decrease in income tax expense.  Our return on average assets (“ROA”) and return on average equity (“ROE”) for the three months ended March 31, 2009 were -0.09% and -1.3%, respectively, compared to a 0.44% ROA and a 5.24% ROE for the same period in 2008.

The reasons for these changes are discussed in more detail below.

Net Interest Income

The primary component of a financial institution’s profitability is net interest income, or the difference between the interest earned on assets, primarily loans and investments, and interest paid on liabilities, primarily deposits and other borrowed funds.  For the three months ended March 31, 2009, our net interest income on a taxable-equivalent basis was $7.3 million, a 23.2% decrease from the $9.5 million in net interest income for the first quarter of 2008.  The decrease in net interest income is due to a 15.0% decrease in interest income offset in part by a 7.5% decrease in interest expense.  During the first quarter of 2009, the average balance of our earning assets increased 12.9% compared to the same period in 2008.  The average balances of our interest-bearing liabilities increased by 16.2% to fund the asset growth.  The average yield on our earning assets decreased 168 basis points from 6.89% during the first quarter of 2008, to 5.21% for the first quarter of 2009.  The average rates paid for our funds decreased 77 basis points from 3.91% during the first quarter of 2008, to 3.14% for the first quarter of 2009.  As a result of these rate decreases, our net interest spread declined by 91 basis points from 2.98% during the first quarter of 2008, to 2.07% for the same period in 2009.

24

Net interest margin is net interest income expressed as a percentage of average earning assets.   Our net interest margin for the first quarter of 2009 was 2.34%, 6 basis points lower than our net interest margin of 2.40% for the fourth quarter of 2008, and 107 basis points lower than the 3.41% recorded for the first quarter of 2008.  The reduction in short-term interest rates during 2008 caused our earning assets to re-price downwards faster than our interest-bearing liabilities re-priced downwards.  The reduction of interest income due to our nonperforming assets also negatively impacted the net interest margin by 32 basis points during the first quarter of 2009, compared to a 36 basis point impact in the fourth quarter of 2008 and a 28 basis point impact in the first quarter of 2008.  We do not expect our net interest margin in 2009 to increase back to 2008 levels, considering the increase in nonperforming assets, the interest rate environment and the narrowing spreads on our earning assets.

The following table details the average balances of interest-earning assets and interest-bearing liabilities, the amount of interest earned and paid, and the average yields and rates for the three months ended March 31, 2009 and 2008.  Federally tax-exempt income is presented on a taxable-equivalent basis assuming a 34% Federal tax rate in 2009 and a 35% Federal tax rate in 2008.  Loan average balances include loans on nonaccrual status.

For the Three Months Ended March 31,			2009							2008
			Interest		Average					Interest		Average
	Average		Income/		Yield/			Average		Income/		Yield/
	Balance		Expense		Rate			Balance		Expense		Rate
	(Dollars In Thousands)
Interest-earning assets:
Loans	$	947,030	$	13,949		5.97	%	$	930,049	$	16,657		7.20	%
Investment securities:
Taxable		149,823		1,890		5.12	%		151,172		1,993		5.30	%
Nontaxable		23,358		354		6.15	%		33,143		504		6.12	%
Other short-term investments		146,099		81		0.22	%		7,097		53		3.01	%
Total interest-earning assets	$	1,266,310	$	16,274		5.21	%	$	1,121,461	$	19,207		6.89	%
Interest-bearing liabilities:
Demand deposits	$	214,468	$	291		0.55	%	$	305,907	$	1,927		2.53	%
Savings deposits		34,200		21		0.25	%		35,342		76		0.86	%
Time deposits		769,994		7,349		3.87	%		533,563		6,415		4.84	%
FHLB advances		108,705		1,077		4.02	%		92,454		930		4.05	%
Notes payable		21,199		183		3.50	%		10,310		168		6.57	%
Other short-term borrowings		8,931		37		1.69	%		18,418		169		3.69	%
Total interest-bearing liabilities	$	1,157,497	$	8,958		3.14	%	$	995,994	$	9,685		3.91	%
Interest rate spread						2.07	%						2.98	%
Net interest income			$	7,316						$	9,522
Net interest margin						2.34	%						3.41	%

25

Provision for Loan Losses

During the first quarter of 2009, we provided $1.75 million to our allowance for loan losses due to an increase in nonperforming loans, a decrease in the valuation of underlying collateral on previously recognized nonperforming loans  and further deterioration in residential real estate market conditions.  Additional provisions for loan losses in the second and third quarters of 2009 may be warranted if, among other factors, further weakness in real estate is observed in our markets, if our asset quality deteriorates from current levels or if we attempt to aggressively liquidate our collateral on these impaired loans under current market conditions.

For the first three months of 2009, we charged-off $838,000 in loans and recovered $117,000 in previously charged-off loans.  The $721,000 in net charge-offs for the quarter resulted in an annualized 0.31% ratio of net charge-offs to average loans, which is lower than our 2008 net charge-off ratio of 1.21%, but comparable to our five-year average net charge-off ratio of 0.33%.  At March 31, 2009, the allowance for loan losses as a percentage of total loans was 2.17%, compared to 2.03% at December 31, 2008.

We consider the current level of the allowance for loan losses adequate to absorb losses from loans in the portfolio.  As an integral part of our credit risk management process, we regularly review loans in our portfolio for credit quality and documentation of collateral.  We have a comprehensive methodology for determining the adequacy of our allowance for loan losses.  We perform an allowance analysis quarterly that is broken down into the following three components: (1) specific allowances for individual loans, (2) allowances for pools of loans identified by credit risk grades or delinquency status, and (3) general allowances for all other loans pooled by loan type.  The Problem Asset Committee has the responsibility for assessing the risk elements, determining the specific allowance valuations, and affirming the methodology used.  The Board of Directors reviews management’s assessment and affirms the amount recorded.

The first component of the allowance for loan loss methodology covers the measurement of specific allowances for individual impaired loans as required by Financial Accounting Standards Board (“FASB”) Statement No. 114, Accounting by Creditors for Impairment of a Loan.  Each loan relationship with amounts due in excess of $500,000 that has been identified for potential credit weakness is evaluated for impairment.  A loan is impaired when, based on current information and events, it is probable that the borrower will be unable to pay all amounts due according to the contractual terms of the loan agreement.  By definition, we consider all loans on nonaccrual status and all loans whose terms have been modified in a troubled debt restructuring as impaired.  If impairment is determined, a specific valuation is assessed on that loan based on realizable collateral values (if collateral dependent), discounted cash flows, or observable market values.  At March 31, 2009, we had $6.4 million in specific reserves on $61.8 million in individually evaluated impaired and other significant potential problem loans, compared to $3.4 million in specific reserves on $59.9 million in individually evaluated impaired and other significant potential problem loans at December 31, 2008 and $2.3 million in specific reserves on $16.3 million in individually evaluated impaired and other significant potential problem at December 31, 2007.  During the fourth quarter of 2008, we wrote down $5.8 million of our nonperforming loans.

The second component of the allowance for loan loss methodology addresses all loans not individually evaluated for impairment but are either internally rated, criticized by our banking examiners, or past due 30 days or more.  The allowance factors are based on industry standards and supported by our own historical loss analysis.  At March 31, 2009, we had $7.3 million in general reserves allocated to $249.9 million rated and delinquent loans.  This is a slight decrease from the $7.4 million in general reserves allocated to $200.5 million rated and delinquent loans at December 31, 2008 and the $4.0 million reserved on a lower balance of $119.7 million rated and delinquent loans at December 31, 2007.

The third component of the allowance addresses general allowances on all loans not individually reserved due to impairment, rating or delinquency status.  These loans are divided into smaller homogenous groups based on loan type.  The allowances are determined by applying loss factors to each pool of loans with similar characteristics.  The factors used are based on historical loss percentages for each pool adjusted by current known and documented internal and external environmental factors.  The environmental factors considered in developing our loss measurements include:

· lending policies and procedures, including changes in underwriting standards and collection, charge-off and recovery practices;

· changes in international, national, regional and local economic and business conditions that affect the collectibility of the portfolio;

26

· changes in the nature and volume of the loan portfolio;

· experience, ability, and depth of lending management and other relevant staff;

· levels of and trends in delinquencies and impaired loans;

· changes in the quality of our loan review system;

· value of underlying collateral for collateral-dependent loans;

· existence and effect of any concentrations of credit, and changes in the level of such concentrations; and

· other external factors such as competition and legal and regulatory requirements.

The quantitative risk factors used in determining these general reserves require a high degree of management judgment.  At March 31, 2009, we had $6.7 million in general reserves compared to $7.8 million at December 31, 2008 and $6.6 million December 31, 2007.  This 14% decrease in the general reserves at the end of the first quarter compared to December 31, 2008 is primarily due to the shift of general reserves into specific reserves on impaired loans.

This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.  While we use the best information available to make the evaluation, future adjustments to the allowance may be necessary if there are significant changes in economic conditions or other environmental factors.  In addition, regulatory agencies, as an integral part of their examination process, periodically review our allowance for loan losses, and may require us to make additions to the allowance based on their judgment about information available to them at the time of their examinations.

Allocation of the Allowance for Loan Losses

As of	March 31, 2009					December 31, 2008					December 31, 2007					December 31, 2006
	Amount		Percentage of Loans in Category to Total Loans			Amount		Percentage of Loans in Category to Total Loans			Amount		Percentage of Loans in Category to Total Loans			Amount		Percentage of Loans in Category to Total Loans
Commercial and financial	$	1,355		8.8	%	$	1,382		9.1	%	$	229		8.6	%	$	972		8.1	%
Agricultural (including loans secured by farmland)		90		4.7	%		112		5.1	%		1,029		4.5	%		1,184		5.3	%
Real estate – construction		13,393		33.5	%		11,950		33.0	%		8,383		38.2	%		4,875		35.9	%
Real estate – commercial		2,407		29.2	%		2,552		28.9	%		2,008		27.0	%		2,276		31.1	%
Real estate – residential		2,754		20.3	%		2,417		20.5	%		815		18.9	%		547		17.4	%
Consumer and other loans		200		3.5	%		176		3.4	%		215		2.8	%		255		2.2	%
Unallocated		204		N/A			785		N/A			227		N/A			897		N/A
Total	$	20,403		100.0	%	$	19,374		100.0	%	$	12,906		100.0	%	$	11,006		100.0	%

27

Summary of Loan Loss Experience

The following table summarizes the activity in the allowance for loan losses, the average balance of loans outstanding, and the ratio of net losses experienced for the quarter ended March 31, 2009 and each of the last three fiscal years ended December 31.

	Quarter ended March 31, 2009			Year ended December 31, 2008			Year ended December 31, 2007			Year ended December 31, 2006
Balance at beginning of year	$	19,373		$	12,906		$	11,006		$	11,079
Charge-offs:
Commercial and financial		351			709			66			115
Agricultural (including loans secured by farmland)		-			-			10			-
Real estate – construction and development		293			8,023			324			24
Real estate – commercial		-			25			257			314
Real estate – residential		121			3,188			65			208
Installment loans to individuals and other loans		73			183			146			160
		838			12,128			868			821
Recoveries:
Commercial and financial		40			38			55			118
Agricultural (including loans secured by farmland)		39			38			56			41
Real estate – construction and development		3			2			-			-
Real estate – commercial		6			340			28			335
Real estate – residential		6			33			108			87
Installment loans to individuals and other loans		24			94			121			167
		118			545			368			748
Net charge-offs (recoveries)		720			11,583			500			73
Additions provided to the allowance charged to operations		1,750			18,050			2,400			-
Balance at end of year	$	20,403		$	19,373		$	12,906		$	11,006
Average balance of loans outstanding	$	947,030		$	955,253		$	883,334		$	792,278
Ratio of net charge-offs (recoveries) during the year to average loans outstanding during the year		0.31	%		1.21	%		0.06	%		0.01	%

Nonaccrual, Past Due and Restructured Loans

Our nonperforming loans increased $7.6 million, from $55.4 million at December 31, 2008 to $63.0 million at March 31, 2009, due primarily to the adverse economic and real estate market conditions in our North Georgia and Florida markets.  As a percentage of total loans, nonperforming loans increased 91 basis points to 6.70% at March 31, 2009 from 5.79% at December 31, 2008.  Approximately 62% of the loans on nonaccrual status at March 31, 2009 were construction and development loans, and these loans represented approximately 12% of our total portfolio of construction and development loans.

28

A schedule of our nonperforming loans at March 31, 2009 is presented in the following table.

Category	Net Carrying Value *	Collateral Description	Average Carrying Value/ Unit
Construction and Development	$10.5 million	9 parcels of undeveloped land totaling 468 acres	$14,200 per residential acre and $180,300 per commercial acre
Construction and Development	$13.3 million	467 residential lots	$28,600 per lot
1-4 Family Residential	$8.0 million	73 houses	$109,000 per house
Commercial Real Estate	$11.1 million	10 commercial properties	$1.1 million per property
Agriculture	$1.4 million	1 parcel of farm land totaling 223 acres	$6,500 per acre
Commercial and Industrial	$3.0 million	Non-real estate collateral	$378,000 per loan
Multi-Family Residential	$8.6 million	9 condominium units	$950,000 per unit
Consumer	$85,000	Non-real estate collateral	$5,000 per loan

* The term “net carrying value” represents the book value of the loan less any allocated allowance for loan losses.

The table below summarizes our levels of nonperforming loans and the level of reserves allocated to those loans over the past five quarters.

As of Quarter End	Mar-09			Dec-08			Sep-08			Jun-08			Mar-08
	(Dollars In Thousands)
Loans accounted for on a nonaccrual basis	$	62,653		$	54,903		$	43,471		$	40,464		$	26,090
Accruing loans which are contractually past due 90 days or more as to principal or interest payments		19			206			4			332			13
Troubled debt restructurings not included above		311			311			9,808			9,808			-
Total nonperforming loans	$	62,983		$	55,420		$	53,283		$	50,604		$	26,103
Ratio of  nonperforming loans to total loans		6.70	%		5.79	%		5.42	%		5.25	%		2.79	%
Reserves allocated to nonperforming loans:
Specific Reserves (FAS 114)	$	6,179		$	2,888		$	9,905		$	6,222		$	2,241
General Reserves (FAS 5)		788			1,188			1,136			390			4,578
Total reserves allocated to nonperforming loans	$	6,967		$	4,076		$	11,041		$	6,612		$	6,819
Total reserves allocated as a percentage of nonperforming loans		11.06	%		7.35	%		20.72	%		13.07	%		26.12	%

29

The following table summarizes our nonperforming assets by type and market as of March 31, 2009.

	South Georgia			North Georgia			Florida			Treasury			Total
	(Dollars In Thousands)
Loans accounted for on a nonaccrual basis	$	7,428		$	48,643		$	6,582		$	-		$	62,653
Accruing loans which are contractually past due 90 days or more as to principal or interest payments		-			-			-			19			19
Troubled debt restructurings not included above		-			311			-			-			311
Total nonperforming loans	$	7,248		$	48,954		$	6,582		$	19		$	62,983
Foreclosed assets		1,727			29,102			660			-			31,489
Total nonperforming assets	$	9,155		$	78,056		$	7,242		$	19		$	94,472
Ratio of nonperforming loans to total loans in market		1.91	%		11.11	%		6.46	%		0.07	%		6.70	%
Ratio of nonperforming assets to total assets in market		2.30	%		17.21	%		6.89	%		0.00	%		7.01	%

Potential Problem Loans

At March 31, 2009, we had $13.7 million in total delinquent loans (loans past due 30 days or more) and still accruing interest, or 1.46% of total loans, representing a decrease from $21.6 million, or 2.25% at December 31, 2008.  Approximately 42% of the loans past due 30-89 days at March 31, 2009 were construction and development loans, and these loans represented approximately 1.8% of our total portfolio of construction and development loans.

Of the total delinquent loans discussed above, we have identified $5.8 million in potential problem loans that are not classified as nonperforming loans as of March 31, 2009, as compared to $9.8 million as of December 31, 2008.  These are all construction and land development loans that were past due 30 to 89 days at March 31, 2009 and December 31, 2008.  Potential problem loans are loans where known credit problems of the borrowers cause management to doubt the ability of such borrowers to comply with the present repayment terms.  These loans are at a higher risk of becoming nonperforming in future periods.

Other Real Estate Owned

Our foreclosed assets increased $7.9 million in the first quarter of 2009, from $25.3 million at December 31, 2008 to $31.5 million at March 31, 2009.  Due to economic conditions in the Atlanta area, some builders and developers have been unable to satisfy their obligations to us and we have foreclosed on their collateral.  However, we have decided to hold certain parcels of foreclosed assets rather than to force distressed sales of these properties in this market.

A schedule of the foreclosed properties held at March 31, 2009 is presented in the following table.

Category	Book Value	Description	Average Value/ Unit
Construction and Development	$5.8 million	7 parcels of undeveloped land totaling 657 acres	$8,900 per residential acre
Construction and Development	$8.0 million	324 residential lots	$24,600 per lot
1-4 Family Residential	$11.8 million	64 houses	$184,000 per house
Commercial Real Estate	$5.9 million	22 commercial properties	$267,000 per property

30

Other Income

A summary of noninterest income follows:

For the Three Months Ended March 31,	2009			2008
							Percent
	Amount			Amount			Change
	(Dollars In Thousands)
Noninterest income:
Service charges on deposit accounts	$	816		$	905			-9.8	%
Mortgage origination fees		197			206			-4.4	%
ATM/ debit card fee income		189			175			8.0	%
Securities transactions, net		17			183			-90.7	%
Earnings on bank-owned life insurance		104			105			-1.0	%
Gain (loss) on disposal of assets		(127	)		(66	)		92.4	%
Gain on derivative instrument		782			-			-
Other noninterest income		128			135			-5.2	%
Total noninterest income	$	2,106		$	1,643			28.2	%
Noninterest income (annualized) as a percentage of average assets		0.63	%		0.55	%

Service charges on deposit accounts decreased during the first quarter of 2009 due to a $110,000 net decrease in NSF and overdraft fees, offset by a $21,000 increase in our basic service charge fee income on deposit accounts.

Fee income from ATM and debit cards increased as the volume of point-of-sale transactions continues to increase.  However, we continue to offer a no-fee ATM deposit product in certain markets for competitive reasons, which may reduce our ATM fee income opportunities going forward.

During the first quarter 2009, we incurred a loss of $123,000 on the sale of foreclosed assets and a $4,000 loss on the disposal of equipment.  This is compared to a loss of $58,000 on the sale of a parcel of foreclosed real estate and an $8,000 loss on the disposal of an ATM machine during the first quarter of 2008.

During the first quarter of 2009, we recorded a $782,000 gain on our hedging activities, while we did not have any recorded gain on hedging activities during the first quarter of 2008.

31

Other Expenses

A summary of noninterest expense follows:

For the Three Months Ended March 31,	2009			2008
							Percent
	Amount			Amount			Change
	(Dollars In Thousands)
Noninterest expenses:
Salaries and wages	$	4,131		$	4,236			-2.5	%
Deferred loan costs		(371	)		(388	)		-4.4	%
Employee benefits		880			1,164			-24.4	%
Net occupancy expense of premises		608			599			1.5	%
Furniture and equipment expense		504			525			-4.0	%
Advertising and business development		96			182			-47.3	%
Supplies and printing		96			110			-12.7	%
Telephone and internet charges		172			202			-14.9	%
Postage and courier		134			162			-17.3	%
Legal and accounting fees		128			113			13.3	%
Deposit insurance		216			28			671.4	%
Director fees and expenses		177			174			1.7	%
Service charges and fees		148			175			-15.4	%
Foreclosure and repossession expenses		703			79			789.9	%
Other noninterest expense		504			468			7.7	%
Total noninterest expense	$	8,126		$	7,829			3.8	%
Noninterest expense (annualized) as a percentage of average assets		2.43	%		2.64	%

Noninterest expense increased 3.8% from $7.8 million in the first quarter of 2008 to $8.1 million in the first quarter of 2009.  However, as a percentage of average assets, noninterest expense improved from 2.64% at March 31, 2008 to 2.43% at March 31, 2009.

Salaries and wages expense and employee benefits decreased 2.5% for the first quarter of 2009 compared to the same period in 2008 due to the reduction of our staff from 321 full time equivalent employees at March 31, 2008 to 287 full time equivalent employees at March 31, 2009.  The decreases in salary due to these reductions were offset by a one-time severance accrual of $730,000 in the first quarter of 2009 related to the retirement of our President and Chief Executive Officer.  Deferred loan costs, which are credits against salaries and wages, decreased due to a decrease in loan volume.

Advertising and business development expenses, office supplies and printing charges and telephone and internet fees decreased from the first quarter of 2008 to the first quarter of 2009 due to cost-saving awareness and efforts among our locations to reduce noninterest expenses.  The decrease in postage and courier fees is due to a reduction in our courier’s schedule as part of our cost-saving awareness efforts.

Service charges and fees were higher in the first quarter of 2008, compared to the first quarter of 2009, due to expenses related to our remote deposit product that we incurred in the first quarter of 2008.

 Foreclosure and repossession expenses increased significantly from the first quarter of 2008 to the first quarter of 2009 due to the increased level of foreclosed assets owned by the Company.  These increased expenses include property taxes, repairs and maintenance, insurance and legal and collection expenses.

Our deposit insurance premiums increased from $28,000 during the first quarter of 2008 to $216,000 in the first quarter of 2009 due to rate increases from the FDIC.

32

Income Tax Expense

As a percentage of net income before taxes, income tax expense was 49.0% and 33.8% for the three-month periods ended March 31, 2009 and 2008, respectively.  There is a difference between the effective rate and the statutory federal rate of 35% due primarily to income earned on tax-exempt municipalities, earnings on the cash value of our bank-owned life insurance and state income taxes.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity is an important factor in our financial condition and affects our ability to meet the borrowing needs and deposit withdrawal requirements of our customers.  Assets, consisting primarily of loans and investment securities, are funded by customer deposits, borrowed funds and retained earnings.  Maturities in the investment and loan portfolios also provide a steady flow of funds for reinvestment.  In addition, our liquidity is enhanced by a relatively stable core deposit base and the availability of additional funding sources.

At March 31, 2009, our ratio of liquid assets (defined as the sum of cash and due from bank balances, interest-bearing deposits in other banks, federal funds sold, and investment securities) to total assets was 24.6%, compared to 23.9% at December 31, 2008.  It is our policy to maintain a ratio of liquid assets to total assets of at least 15%.

During the first quarter of 2009, we utilized the $20.0 million proceeds from the issuance of a three year unsecured debt at an interest rate of 2.74% under the FDIC’s Temporary Liquidity Guarantee Program and the $16.4 million decrease in loans to fund the  $18.4 decrease in deposits, the $4.1 million decrease in advances from the FHLB and the $13.3 million increase in liquid assets.

Contractual Obligations

Summarized below are our contractual obligations as of March 31, 2009.

Contractual Obligations	Total		Less than 1 year		1 to 3 years		3 to 5 years		More than 5 years
	(Dollars In Thousands)
Federal Home Loan Bank of Atlanta Advances	$	105,602	$	20,631	$	30,821	$	31,659	$	22,491
Senior Unsecured Debt		20,000		-		20,000		-		-
Operating Lease Obligations		1,668		352		623		382		311
Guaranteed Preferred Beneficial Interests in Debentures		10,310		-		-		-		10,310
	$	137,580	$	20,983	$	51,444	$	32,041	$	33,112

Off Balance Sheet Arrangements

Our financial statements do not reflect various commitments and contingent liabilities that arise in the normal course of business.  These off-balance sheet financial instruments include commitments to extend credit and standby letters of credit.  Such financial instruments are included in the financial statements when funds are distributed or when the instruments become payable.  Our exposure to credit loss in the event of nonperformance by the other party to a financial instrument for commitments to extend credit, standby letters of credit and credit card commitments is represented by the contractual amount of those instruments.  We use the same credit policies in making commitments as we do for on-balance sheet instruments.  Although these amounts do not necessarily represent future cash requirements, a summary of our commitments as of March 31, 2009 and December 31, 2008 are as follows:

	Mar-09		Dec-08
Commitments to extend credit	$	138,201,000	$	147,187,000
Standby letters of credit	$	4,311,000	$	4,134,000

33

In June 2006, we entered into a $50 million notional amount, 3-year, 8.25% Prime rate floor contract to hedge against interest rate risk in a declining rate environment.  In January 2008, we entered into a $25 million notional amount, 3-year 5.75%/6.50% Prime rate collar contract and a $25 million notional amount, 5-year 6.00%/7.25% Prime rate collar contract and in April 2008, we entered into a $25 million notional amount, 3-year 2.975% 1-month LIBOR cap contract to further hedge against interest rate risk.  In April 2009, we terminated the two Prime rate collar contracts.  Notional amounts provide the basis for calculating payments between counterparties and do not represent amounts to be exchanged between parties, and are not a measure of financial risk.  The risk of loss with our counterparty is limited to a small fraction of the notional amount.  We only deal with counterparties that have investment grade credit ratings, are well capitalized and are approved by our Board of Directors.  Due to these factors, we feel our credit risk exposure under these hedging arrangements at March 31, 2009 was not material.

Stockholders’ Equity

Stockholders’ equity represented 6.7% of total assets at March 31, 2009, a slight decrease compared to 6.8% at December 31, 2008.  Total stockholders’ equity decreased $907,000, or 1.0%, since December 31, 2008.  This decrease is primarily the result of our net loss of $295,000 and a $696,000 decrease in accumulated other comprehensive gains, offset by our stock based compensation expense of $84,000.  We did not declare a dividend in the first quarter of 2009, compared to a $0.145 per common share cash dividend declared during the first quarter of 2008.  In setting our dividend on a quarterly basis, we evaluate our capital adequacy and the quality of our earnings, and we estimate our capital requirements and our earnings outlook for the next year. Based on these evaluations, we suspended our quarterly dividends on our Common Stock in the third quarter of 2008, and we do not intend to pay a Common Stock dividend in 2009 due to continued pressure on earnings and capital.

The Company maintains a ratio of stockholders’ equity to total assets that is considered adequate according to regulatory standards.  The Company and the Bank are required to comply with capital adequacy standards established by our regulators.  At March 31, 2009, the Company and the Bank were in compliance with those standards.  There are no conditions or events since quarter end that we believe have materially changed our regulatory capital ratios.

The following table summarizes the regulatory capital ratios of the Company and the Bank at March 31, 2009.

	Company Consolidated			Bank			Minimum Regulatory Requirement
Total Capital to Risk Weighted Assets		10.5	%		10.5	%		8.0	%
Tier 1 Capital to Risk Weighted Assets		9.2	%		9.2	%		4.0	%
Tier 1 Capital to Average Assets (Leverage Ratio)		6.8	%		6.8	%		4.0	%

On March 5, 2009, we entered into investment agreements with certain purchasers to purchase shares of our Series A Preferred Stock (the “Private Placement”).  The Private Placement raised in the aggregate approximately $10,305,000.  Under the terms of the investment agreements, the purchasers agreed to purchase 10,305 shares of the Company’s Series A Preferred Stock at a purchase price of $1,000 per share.  The Series A Preferred Stock will be convertible into shares of Common Stock and upon conversion of the Series A Preferred Stock, holders will receive warrants to purchase shares of Common Stock equal to 30% of the aggregate value of the Series A Preferred Stock.  The initial conversion price for the Series A Preferred Stock is $3.00, subject to adjustment.  The warrants will have an exercise price equal to $3.75 (which represents 125% of the conversion price of the Series A Preferred Stock).  The Series A Preferred Stock ranks senior to the Common Stock in terms of dividend payments and distributions upon liquidation, dissolution and winding up of the Company.  The proceeds of the Private Placement will be held by the Bank in escrow until the satisfaction or waiver of a number of conditions, including that the Bank’s total risk-based capital ratio equals or exceeds twelve percent (12%). In calculating the Bank’s risk-based capital ratio, we must exclude any funds received or held in escrow pursuant to the Private Placement.  In the event we are unable to achieve this capital ratio by June 30, 2009, the Company and the purchasers in the Private Placement will enter into a 120-day negotiation period to negotiate the terms of a Stand-By Purchase Agreement whereby the initial purchasers would purchase the Company’s Common Stock in an aggregate value equal to the amount of Series A Preferred Stock subscribed for under the Private Placement.  A majority of the purchasers in the Private Placement were officers, directors and affiliates of the Company.

34

CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements and the related disclosures in conformity with accounting principles generally accepted in the United States requires that management make estimates and assumptions which affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.  We believe that our determination of the allowance for loan losses and the fair value of assets, including the impairment of goodwill, affect our most significant judgments and estimates used in the preparation of our consolidated financial statements.  The Company’s accounting policies are described in detail in Note 1 of our Consolidated Financial Statements provided in Item 8 of our  Annual Report on Form 10-K for the year ended December 31, 2008.  The following is a brief description of the Company’s critical accounting estimates involving significant management valuation judgment.  Management has discussed these critical accounting policies with the Audit Committee.

Allowance for Loan Losses

The allowance for loan losses represents management’s estimate of losses inherent in the existing loan portfolio.  The allowance for loan losses is increased by the provision for loan losses charged to expense and reduced by loans charged off, net of recoveries.  The allowance for loan losses is determined based on management’s assessment of several factors including, but not limited to, reviews and evaluations of specific loans, changes in the nature and volume of the loan portfolio, current economic conditions and the related impact on segments of the loan portfolio, historical loan loss experiences and the level of classified and nonperforming loans.

Loans are considered impaired if, 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.  The measurement of impaired loans is based on either the fair value of the underlying collateral, the present value of the future cash flows discounted at the historical effective interest rate stipulated in the loan agreement, or the estimated market value of the loan.  In measuring the fair value of the collateral, management uses assumptions (e.g., discount rate) and methodologies (e.g., comparison to the recent selling price of similar assets) consistent with those that would be utilized by unrelated third parties.

Management’s assessment is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available.  Changes in various internal and external environmental factors including, but not limited to, the financial condition of individual borrowers, economic conditions, historical loss experience, or the condition of the various markets in which collateral may be sold may affect the required level of the allowance for loan losses and the associated provision for loan losses.  Should these environmental factors change, a different amount may be reported for the allowance for loan losses and the associated provision for loan losses.

Estimates of Fair Value

The estimation of fair value is significant to a number of the Company’s assets, including, but not limited to, investment securities, goodwill, other real estate owned and other repossessed assets.  These are all recorded at either fair value or at the lower of cost or fair value.  Fair values are volatile and may be influenced by a number of factors.  Circumstances that could cause estimates of the fair value of certain assets and liabilities to change include a change in prepayment speeds, discount rates, or market interest rates.  Our estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the consolidated financial statements in the period they are determined to be necessary.

Fair values for most investment securities are based on quoted market prices.  If quoted market prices are not available, fair values are based on the quoted prices of similar instruments.  The fair values of other real estate owned are typically determined based on appraisals by third parties, less estimated costs to sell.

Estimates of fair value are also required in performing an impairment analysis of goodwill.  The Company reviews goodwill for impairment on at least an annual basis and whenever events or circumstances indicate the carrying value may not be recoverable.  An impairment would be indicated if the carrying value exceeds the fair value of a reporting unit.

Recent Accounting Pronouncements

In management’s opinion, there are no recent accounting pronouncements that have had or will have a material impact on our earnings or financial position as of or for the quarter ended March 31, 2009.

35

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are subject to exposure from U.S. dollar interest rate changes and accordingly, we manage our exposure by considering the possible changes in the net interest margin.  We do not engage in trading activity nor do we classify any portion of the investment portfolio as held for trading.  Finally, we have no material direct exposure to foreign currency exchange rate risk, commodity price risk and other market risks.

Interest rates play a major part in the net interest income of a financial institution.  The sensitivity to rate changes is known as “interest rate risk.”  The repricing of interest-earning assets and interest-bearing liabilities can influence the changes in net interest income.  As part of our asset/liability management program, the timing of repriced assets and liabilities is referred to as gap management.  It is our policy to maintain a gap ratio in the one-year time horizon between 0.80 and 1.20.  At March 31, 2009, our one-year management-adjusted gap ratio of 0.98 was within our policy guidelines.  This is a significant improvement compared to our one-year gap position of 1.25 three years ago at March 31, 2006.

We have reduced the level of asset-sensitivity on the Company’s balance sheet in recent years in an effort to better mitigate our interest rate risk in a declining interest rate environment.  We have accomplished this by conscientiously lengthening the duration of our earning assets, shortening the duration of our deposits and other borrowings and utilizing off-balance sheet derivative instruments to further hedge against interest rate risk in a declining interest rate environment.

The table below shows our contractual maturity gap at March 31, 2009.  A positive maturity gap (a gap ratio > 1.00) occurs when more assets are maturing than liabilities for any given time period, and generally equates to a lower liquidity risk.  A negative maturity gap (a gap ratio < 1.00) for any given time period results in a higher liquidity risk and could indicate potential liquidity problems exist.

Cumulative Maturity Gap Analysis
	3-Month		6-Month		1-Year
	(Dollars in Thousands)
Regulatory Defined
Rate Sensitive Assets (RSA)	$	245,339	$	375,879	$	550,672
Rate Sensitive Liabilities (RSL)		166,715		314,886		523,720
RSA minus RSL (Gap)	$	78,624	$	60,993	$	26,952
Maturity Gap Ratio (RSA/RSL)		1.47		1.19		1.05

36

The table below has two gap ratio measurements, regulatory and management-adjusted.  The regulatory gap considers only contractual maturities or repricings.  The management-adjusted gap ratio includes assumptions regarding prepayment speeds on certain rate sensitive assets, the repricing frequency of interest-bearing demand and savings accounts, and the stability of core deposit levels, all of which are adjusted periodically as market conditions change.  The management-adjusted gap ratio indicates we are highly asset sensitive in relation to changes in market interest rates in the short-term.  Being asset sensitive would result in net interest income increasing in a rising rate environment and decreasing in a declining rate environment.

	3-Month		6-Month		1-Year
	(Dollars In Thousands)
Regulatory Defined
Rate Sensitive Assets (RSA)	$	690,428	$	757,962	$	826,851
Rate Sensitive Liabilities (RSL)		455,273		603,445		816,909
RSA minus RSL (Gap)	$	235,155	$	154,517	$	9,942
Gap Ratio (RSA/RSL)		1.52		1.26		1.01
Management-Adjusted
Rate Sensitive Assets (RSA)	$	694,219	$	763,074	$	835,313
Rate Sensitive Liabilities (RSL)		464,667		621,419		849,884
RSA minus RSL (Gap)	$	229,552	$	141,655	$	(14,571	)
Gap Ratio (RSA/RSL)		1.49		1.23		0.98

We use simulation analysis to monitor changes in net interest income due to the impact that changes in market interest rates has on our financial instruments.  The simulation of rising, declining, and flat interest rate scenarios allows us to monitor and adjust interest rate sensitivity to minimize the impact of market interest rate swings.  The analysis of the impact on net interest income over a twelve-month period is subjected to increases or decreases in market rates on net interest income and is monitored on a quarterly basis.  Our policy states that net interest income cannot be reduced by more than 20% using this analysis.  As of March 31, 2009, the simulation model projected net interest income would increase 9.29% over the next year if market rates immediately rose by 100 basis points and the model projected net interest income would decrease 0.86% over the next year if market rates immediately fell by 25 basis points.  Over the past two years, we have seen lower volatility in our results due to our efforts to neutralize our asset-sensitive balance sheet mix, to improve our asset/liability modeling with updated behavioral assumptions for repricing and prepayment speeds and to implement an off-balance sheet derivative hedging program.

The following table shows the results of these projections for net interest income expressed as a percentage change over net interest income in a flat rate scenario for both a gradual change in market interest rates over a twelve-month period and an immediate change, or “shock”, in market interest rates.

Market	Effect on Net Interest Income
Rate Change	Gradual			Immediate
+300 bps		16.79	%		28.55	%
+200 bps		14.65	%		18.73	%
+100 bps		8.45	%		9.29	%
-25 bps		-0.86	%		-0.86	%

37

ITEM 4.  CONTROLS AND PROCEDURES

A review and evaluation was performed by the Company’s management, including the Company’s Chief Executive Officer (the “CEO”) and Chief Financial Officer (the “CFO”), of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the period covered by this Quarterly Report.  Based on that review and evaluation, the CEO and CFO have concluded that the Company’s current disclosure controls and procedures, as designed and implemented, were effective as of the end of the period covered by this report in alerting them on a timely basis to material information relating to the Company required to be included in the Company’s reports filed or submitted under the Securities Exchange Act of 1934.  There have been no significant changes in the Company’s internal controls over financial reporting that occurred during the Company’s most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II.  OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

The nature of the business of PAB and the Bank ordinarily results in a certain amount of litigation.  Accordingly, we are party to a limited number of lawsuits incidental to our respective businesses.  In our opinion, the ultimate disposition of these matters will not have a material adverse impact on our consolidated financial position or results of operations.

ITEM 1A.  RISK FACTORS

The closing of the Private Placement and the receipt of the funds in connection therewith is conditioned upon the Bank’s total risk-based capital ratio being equal to or exceeding 12%.

In addition to customary closing conditions, the closing of the Private Placement will not occur and the Series A Preferred Stock will not be issued until the Bank’s total risk-based capital ratio equals or exceeds 12%.  In calculating the Bank’s risk-based capital ratio, we must exclude any funds received or held in escrow pursuant to the Private Placement.  In the event we are unable to achieve this capital ratio by June 30, 2009, the Company and the purchasers in the Private Placement will enter into a 120-day negotiation period to negotiate the terms of a purchase agreement (the “Stand-By Purchase Agreement”) whereby the initial purchasers would purchase the Company’s Common Stock in an aggregate value equal to the amount of Series A Preferred Stock subscribed to under the Private Placement.  There are no guarantees that the Company and the purchasers in the Private Placement will come to an agreement on the terms of the Stand-By Purchase Agreement within the 120-day negotiation period.  If the Company and the purchasers in the Private Placement do not consummate the Stand-By Purchase Agreement within the 120-day negotiation period, the $10,305,000 currently being held in escrow will be returned to the purchasers in the Private Placement.

Other than as provided above, there has not been any material change in the risk factors disclosure from that contained in the Company’s 2008 Annual Report on Form 10-K for the fiscal year ended December 31, 2008.

38

ITEM 2.  UNREGISTERED SALE OF EQUITY SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES

As described above under “Liquidity and Capital Resources,” the Company is conducting an offering of 10,305 shares of its Series A Preferred Stock to purchasers through a private placement in reliance upon an exemption from the registration requirements of Section 5 of the Securities Act of 1933, as amended, afforded by Section 4(2) thereunder, and, in particular, the safe harbor provisions afforded by Regulation D, as promulgated thereunder. Each of the purchasers has represented to the Company that he or she is an “accredited investor” as defined in Rule 501(a) of Regulation D.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None

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

None

ITEM 5.  OTHER INFORMATION

None

ITEM 6.  EXHIBITS

10.1 Form of Investment Agreement

31.1 Rule 13a-14(a) Certification of CEO

31.2 Rule 13a-14(a) Certification of CFO

32.1 Section 1350 Certification of CEO

32.2 Section 1350 Certification of CFO

SIGNATURES

Pursuant to the requirements 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.

PAB BANKSHARES, INC.
Registrant
	Date:  May 11, 2009	By:	/s/ Donald J. Torbert, Jr.
			Donald J. Torbert, Jr.
			President and Interim Chief Executive Officer
			(principal executive officer of the registrant)
	Date:  May 11, 2009	By:	/s/ Nicole S. Stokes
			Nicole S. Stokes
			Senior Vice President and Chief Financial Officer
			(principal financial officer of the registrant)

39