The ongoing consolidation of the banking industry and de novo bank formations have fueled the growth of the market for correspondent banking services. The creation of de novo banks by executives exiting larger institutions generally creates the need for correspondent loan participations as the credit relationships these executives bring with them are typically larger than the legal lending limits of newly-formed banks.

Further, advances in technology are enabling smaller institutions to provide a broad range of non-credit ancillary services that were previously only available from larger competitors. By offering an expanded range of services, these smaller institutions are able to provide an alternative to their customers seeking larger banking partners. They are also able to target much larger companies as customers. Both of these factors create the need to sell loan participations in order to manage the excess credit needs of these larger clients.

The Company generates approximately 90% of its loan production through loan participations with community banks. Loan participations are loans purchased from community banks because the community bank could not make the loan on its own. The Company’s correspondent lenders focus primarily on small and medium-sized banks in Alabama, Florida, Georgia, North Carolina, South Carolina, and Texas.

The loans generated through community bank loan participations are typically real estate construction loans, commercial real estate loans, and loans secured by common stock of community banks. Construction and commercial real estate loans typically exceed the community bank’s legal lending limit, and the size of the loan is usually between $1 million and $5 million. The Company underwrites each loan participation purchased using standard underwriting policies and procedures. These loans are geographically dispersed through the Company’s market areas, resulting in no concentration in one small geographic region or state. The Company seeks to minimize risk by generally making loans only on owner-occupied properties and by requiring collateral values that exceed the loan amount, adequate cash flow to service the debt, and in most cases, the personal guarantees of principals of the borrowers.

The Company provides investment services to community banks including fixed income securities sales, investment portfolio management services, including bond accounting and safekeeping, and asset/liability management services. The Company’s investment sales team markets primarily U.S. Treasury and Agency securities, including mortgage-backed securities products and municipal securities. Investment representatives also provide portfolio management strategies to community banks. The Company also offers bond portfolio accounting and safekeeping services, as well as asset/liability management services. The Company’s primary asset/liability management services are interest-rate risk modeling and consulting on strategies for effective balance sheet management.

The Company’s clearing and cash management services allow community banks to outsource their daily funds management. The Company will automatically invest or borrow federal funds through an account that is linked to their accounts with the Federal Reserve Bank. Community banks can access their intra-day account information via the Internet. The online system allows them to perform wire transfers, ACH transactions, currency and coin orders, and other important banking operations. This system also allows access to critical loan participation accounting information and bond accounting and safekeeping reports.

The Company provides primarily deposit products and services to consumers and small businesses via the Internet. The Internet provides an efficient distribution channel for serving deposit customers across the United States. The Company uses the Internet to provide advantages to customers desiring to purchase financial products with typically more attractive rates than are available through traditional banking channels, together with easy access to account and product information. Customers can access funds using ATM or debit cards. Customers may review account activity, enter transactions into an on-line account register, pay bills electronically and print bank statement reports, all on a real-time basis. The Company also markets home equity loan products to consumers through the Internet. The Company uses credit scoring systems in the underwriting process as well as external service providers for loan documentation and closing processes.

Net interest income increased to $4.4 million for the quarter ended March 31, 2005 from $3.8 million in the same period in 2004.

The provision for loan losses decreased $220.0 thousand in the quarter ended March 31, 2005 compared to the first quarter of 2004.

Total assets were $630.0 million at March 31, 2005, up 15.0% from $547.8 million at March 31, 2004.

Loans were $391.1 million at March 31, 2005, up 15.5% from $338.6 million at March 31, 2004.

Long-term debt was $100 million at March 31, 2005 compared to $91.8 million at March 31, 2004.