Mid-America Bancshares 10-Q 2007 Q3 Quarterly report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2007

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

For the Transition Period from _____________ to _____________

Commission File No. 000-52212

MID-AMERICA BANCSHARES, INC.

(Exact name of registrant as specified in its charter)

TENNESSEE

(State or other jurisdiction of incorporation or organization)

16-1754596

(I.R.S. Employer Identification No.)

2019 Richard Jones Road, Nashville, Tennessee 37215

(Address of principal executive offices)

615-690-5800

(Registrant’s telephone number including area code)

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

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yesx            Noo

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non accelerated filer. See definition “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act). (Check one):

Large accelerated filero           Accelerated filero           Non-accelerated filerx

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

Yeso           Nox

     State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date:

Common stock outstanding, $1.00 par value: 14,003,378 shares at November 14, 2007

1

TABLE OF CONTENTS

 EX-31.1 SECTION 302 CERTIFICATION OF THE CEO

 EX-31.2 SECTION 302 CERTIFICATION OF THE CFO

 EX-32 SECTION 906 CERTIFICATION OF THE CEO & CFO

2

MID-AMERICA BANCSHARES, INC.

Consolidated Balance Sheets

September 30, 2007 and December 31, 2006

(Unaudited)

	September 30,			December 31,
	2007			2006
	(In Thousands)
Assets
Loans, less allowance for loan losses of $8,695,000 and $7,754,000, respectively	$	817,324		$	686,690
Securities:
Available-for-sale, at market (amortized cost — $172,582,000 and $169,391,000, respectively)		170,544			168,395
Held-to-maturity, at amortized cost (market value — $9,461,000 and $9,774,000, respectively)		9,741			9,740
Total securities		180,285			178,135
Restricted equity securities		2,621			2,174
Federal funds sold		—			7,145
Interest-bearing deposits in financial institutions		2,495			2,559
Loans held for sale		5,431			5,190
Total earning assets		1,008,156			881,893
Cash and due from banks		18,850			20,728
Premises and equipment, net		31,530			32,626
Accrued interest receivable		6,348			5,505
Other real estate		482			185
Intangible assets, net		4,115			4,714
Goodwill		19,147			19,147
Other assets		2,190			3,173
Total assets	$	1,090,818		$	967,971
Liabilities and Stockholders’ Equity
Deposits	$	903,948		$	823,755
Federal funds purchased		8,903			5,095
Line of credit		7,500			2,000
Securities sold under repurchase agreements		19,713			11,353
Deferred tax liability		707			1,153
Accrued interest and other liabilities		5,525			5,928
Advances from Federal Home Loan Bank		36,809			15,747
Total liabilities		983,105			865,031
Stockholders’ equity:
Series A Preferred Stock, authorized 25,000,000 shares		—			—
Common stock, $1 par value; authorized 75,000,000 shares, issued 13,995,545 and 13,922,956 shares issued and outstanding, respectively		13,995			13,923
Additional paid-in capital		88,161			87,666
Retained earnings		6,815			1,966
Net unrealized losses on available-for-sale securities, net of income taxes of $780,000 and $381,000, respectively		(1,258	)		(615	)
Total stockholders’ equity		107,713			102,940
Total liabilities and stockholders’ equity	$	1,090,818		$	967,971

See accompanying notes to consolidated financial statements (unaudited).

3

MID-AMERICA BANCSHARES, INC.

Consolidated Statements of Earnings

Three Months and Nine Months Ended September 30, 2007 and 2006

(Unaudited)

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2007		2006		2007		2006
	(In Thousands, Except Per Share Amounts)
Interest income:
Interest and fees on loans	$	16,370		9,094	$	46,276		21,912
Interest and dividends on taxable securities		1,706		1,179		5,111		2,597
Interest and dividends on non-taxable securities		516		278		1,434		545
Interest on Federal funds sold		99		80		667		467
Interest on loans held for sale		55		30		172		85
Interest and dividends on restricted equity securities		40		35		110		68
Interest on interest-bearing deposit in financial institution		28		86		84		200
Other interest income		3		3		9		3
Total interest income		18,817		10,785		53,863		25,877
Interest expense:
Interest on negotiable order of withdrawal accounts		735		239		2,651		452
Interest on money market and savings accounts		1,632		680		4,259		1,659
Interest on certificates of deposit over $100,000		4,252		2,773		12,520		6,509
Interest on certificates of deposit — other		2,804		1,732		8,311		4,030
Interest on securities sold under repurchase agreements		212		77		490		128
Interest on Federal funds purchased and other borrowed funds		137		27		295		27
Interest on advances from the Federal Home Loan Bank		398		197		983		555
Total interest expense		10,170		5,725		29,509		13,360
Net interest income		8,647		5,060		24,354		12,517
Provision for loan losses		632		83		1,232		247
Net interest income after provision for loan losses		8,015		4,977		23,122		12,270
Other income:
Service charges on deposit accounts		611		315		1,748		729
Investment banking fees and commissions, net		472		339		1,341		1,007
Mortgage broker fees and fees on mortgage originations		497		431		1,728		1,056
Gain on sale of securities, net		—		6		—		—
Gain on sale of SBA loans		30		39		69		128
Title company income		47		68		187		199
Other fees and commissions		248		157		793		411
Total other income		1,905		1,355		5,866		3,530
Other expenses:
Salaries and employee benefits		4,055		2,990		12,423		7,729
Occupancy expenses, net		619		469		1,861		1,201
Furniture and equipment expense		539		422		1,592		1,078
Data processing expense		436		281		1,278		635
Advertising and marketing		88		128		253		380
Printing, stationary and supplies		166		119		502		340
Amortization of intangible assets		195		65		599		65
Loss on sale of securities, net		33		—		33		139
Other operating expenses		1,099		733		3,188		1,633
Loss and expense related to sale of other real estate		6		13		7		13
Loss on disposal of fixed assets		—		2		2		2
Total other expenses		7,236		5,222		21,738		13,215
Earnings before income taxes		2,684		1,110		7,250		2,585
Income taxes		892		345		2,401		683
Net earnings	$	1,792	$	765	$	4,849	$	1,902
Basic earnings per common share	$	.13		.08		.35		.25
Diluted earnings per common share	$	.13		.08		.34		.25

See accompanying notes to consolidated financial statements (unaudited).

4

MID-AMERICA BANCSHARES, INC.

Consolidated Statements of Comprehensive Earnings

Three and Nine Months Ended September 30, 2007 and 2006

(Unaudited)

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2007		2006			2007			2006
			(In Thousands)
Net earnings	$	1,792	$	765		$	4,849		$	1,902
Other comprehensive earnings (loss):
Unrealized gains (losses) on available-for-sale securities arising during period, net of taxes of $581,000, $432,000, $412,000 and $177,000, respectively		921		696			(663	)		285
Reclassification adjustment for (gains) losses included in earnings, net of taxes of $13,000, $2,000, $13,000 and $53,000, respectively		20		(4	)		20			86
Other comprehensive earnings (loss)		941		692			(643	)		371
Comprehensive earnings	$	2,733	$	1,457		$	4,206		$	2,273

See accompanying notes to consolidated financial statements (unaudited).

5

MID-AMERICA BANCSHARES, INC.

Consolidated Statements of Cash Flows

Nine Months Ended September 30, 2007 and 2006

Increase (Decrease) in Cash and Cash Equivalents

(Unaudited)

	2007			2006
	(In Thousands)
Cash flows from operating activities:
Interest received	$	52,497		$	25,104
Fees and commissions received		4,151			2,474
Interest paid		(29,296	)		(12,796	)
Cash paid to suppliers and employees		(18,961	)		(11,885	)
Origination of loans held for sale		(85,229	)		(48,158	)
Proceeds from loan sales		86,716			49,889
Income taxes paid		(1,823	)		(1,988	)
Net cash provided by operating activities		8,055			2,640
Cash flows from investing activities:
Proceeds from sales, paydowns, maturities and calls of available-for- sale securities		24,474			18,189
Purchase of available-for-sale securities		(27,645	)		(59,820	)
Purchase of restricted stock		(445	)		(183	)
Loans made to customers, net of repayments		(131,943	)		(56,090	)
Purchase of premises and equipment		(836	)		(2,900	)
Proceeds from sale of fixed assets		19			—
Purchase of other real estate		—			(208	)
Proceeds from sale of other real estate		187			668
Decrease (increase) in interest-bearing deposits in financial institutions		64			(2,109	)
Proceeds from sale of repossessed assets		46			—
Cash and cash equivalents acquired in acquisition of Bank of the South		—			15,292
Net cash used in investing activities		(136,079	)		(87,161	)
Cash flows from financing activities:
Net increase in non-interest bearing, savings and NOW deposit accounts		44,441			24,605
Net increase in time deposits		35,558			48,208
Cash payment for fractional shares		—			(11	)
Cash expense in connection with acquisition		—			(829	)
Proceeds from sale of common stock		272			1,622
Increase in securities sold under repurchase agreements		8,360			5,946
Proceeds from Federal Home Loan Bank advances, net		21,062			2,910
Proceeds from advances from line of credit		5,500			—
Advances of Federal funds purchased		3,808			—
Net cash provided by financing activities		119,001			82,451
Net decrease in cash and cash equivalents		(9,023	)		(2,070	)
Cash and cash equivalents at beginning of period		27,873			33,134
Cash and cash equivalents at end of period	$	18,850		$	31,064

See accompanying notes to consolidated financial statements (unaudited).

6

MID-AMERICA BANCSHARES, INC.

Consolidated Statements of Cash Flows, Continued

Nine Months Ended September 30, 2007 and 2006

Increase (Decrease) in Cash and Cash Equivalents

(Unaudited)

	2007			2006
	(In Thousands)
Reconciliation of net earnings to net cash provided by operating activities:
Net earnings	$	4,849		$	1,902
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation, amortization and accretion		1,856			1,161
Amortization of intangible assets		327			37
Provision for loan losses		1,232			247
Stock based compensation expense		295			—
Loss on sale of securities, net		33			139
Loss on sale of repossessed assets		13			—
Loss on disposal of premises and equipment		2			2
Loss on sale of other real estate and related expenses		—			8
Restricted equity securities dividend reinvestment		(2	)		(55	)
(Increase) decrease in loans held for sale		(241	)		675
Increase in interest receivable		(843	)		(706	)
Increase in accrued interest payable		19			541
Decrease in other liabilities		(469	)		(1,271	)
(Increase) decrease in other assets		984			(40	)
Total adjustments		3,206			738
Net cash provided by operating activities	$	8,055		$	2,640
Supplemental Schedule of Non-Cash Activities:
Change in unrealized gains (losses) in value of securities available- for sale	$	(643	)	$	371
Net non-cash transfer from loans to other real estate and repossessed assets, net	$	543		$	(210	)
Acquisition of Bank of the South effective August 31, 2006 (See note 2 to consolidated financial statements related to share exchange)	$	—		$	59,516

See accompanying notes to consolidated financial statements (unaudited).

7

MID-AMERICA BANCSHARES, INC.

Notes to Consolidated Financial Statements

(Unaudited)

Forward-Looking Statements

     Management’s discussion of the Company and management’s analysis of the Company’s operations and prospects, and other matters, may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other provisions of federal and state securities laws. Although the Company believes that the assumptions underlying such forward-looking statements contained in this Report are reasonable, any of the assumptions could be inaccurate and, accordingly, there can be no assurance that the forward-looking statements included herein will prove to be accurate. The use of such words as expect, anticipate, forecast, project, and comparable terms should be understood by the reader to indicate that the statement is “forward-looking” and thus subject to change in a manner that can be unpredictable. Factors that could cause actual results to differ from the results anticipated, but not guaranteed, in this Report, include (without limitation) economic and social conditions, competition for loans, mortgages, fluctuations in the mortgage industry and other financial services and products, changes in interest rates, unforeseen changes in liquidity, results of operations, and financial conditions affecting the Company’s customers, as well as other risks that cannot be accurately quantified or completely identified. Many factors affecting the Company’s financial condition and profitability, including changes in economic conditions, the volatility of interest rates, the demands for housing and real estate, political events and competition from other providers of financial services simply cannot be predicted. Because these factors are unpredictable and beyond the Company’s control, earnings may fluctuate from period to period. The purpose of this type of information is to provide Form 10-Q readers with information relevant to understanding and assessing the financial condition and results of operations of the Company, and not to predict the future or to guarantee results. The Company is unable to predict the types of circumstances, conditions, and factors that can cause anticipated results to change. Except as may be expressly required by applicable law, the Company does not undertake and specifically disclaims any plan or obligations to publicly release the result of any revisions that may be made to any forward-looking statements to reflect actual events, changes, circumstances or results.

(1) Basis of Presentation

The unaudited consolidated financial statements include the financial results of Mid-America Bancshares, Inc. and the wholly-owned subsidiaries, PrimeTrust Bank and Bank of the South, for the nine months ending September 30, 2007. The comparable period in 2006 includes the results of PrimeTrust Bank for the three and nine months plus the financial results of Bank of the South for the one month ended September 30, 2006. See note (2) to the consolidated financial statements.

The accompanying consolidated financial statements have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. Certain prior period financial information has been reclassified to conform with current period presentation.

8

MID-AMERICA BANCSHARES, INC.

Notes to Consolidated Financial Statements

(Unaudited)

(1) Basis of Presentation, Continued

In the opinion of management, the consolidated financial statements contain all adjustments and disclosures necessary to summarize fairly the financial position of Mid-America Bancshares, Inc. (the “Company”) as of September 30, 2007 and December 31, 2006 and the net earnings for the three and nine months ended September 30, 2007 and 2006, comprehensive earnings for the three and nine months ended September 30, 2007 and 2006, and changes in cash flows for the nine months ended September 30, 2007 and 2006. All significant intercompany transactions have been eliminated. The interim consolidated financial statements should be read in conjunction with the notes to the December 31, 2006 consolidated financial statements. The results for interim periods are not necessarily indicative of results to be expected for the complete fiscal year.

(2) Share Exchange

Effective September 1, 2006, the Company completed a share exchange with Bank of the South. For accounting purposes the transaction was treated as an acquisition of Bank of the South. In connection with the acquisition, 6,792,838 shares of the Company’s common stock were issued along with $11,000 of cash for fractional shares in exchange for 100% of the outstanding shares of Bank of the South (this represents a 2.1814 to 1 share exchange ratio). This resulted in a purchase price of $59,516,000 based on a valuation of the Company’s stock prior to the acquisition of $8.76 per share. The net earnings of Bank of the South for the period from September 1, 2006 through September 30, 2006 are included in the accompanying consolidated financial statements. A summary of the transaction is as follows:

	(In Thousands)
Assets and liabilities of Bank of the South:
Cash and Federal funds	$	15,323
Loans, net		287,950
Securities		71,532
Fixed assets		14,316
Other assets		4,137
Deposits		(350,164	)
Other liabilities		(7,203	)
Net book value		35,891
Value of stock issued		59,516
Excess purchase price	$	23,625
Allocation of excess purchase price:
Premium on purchased deposits	$	4,720
Market value adjustment to buildings		4,315
Loan discounts		(2,581	)
Deposit discounts		526
		6,980
Deferred taxes at 38.29%		(2,673	)
		4,307
Initial goodwill		19,318
Total allocation of excess purchase price	$	23,625

9

MID-AMERICA BANCSHARES, INC.

Notes to Consolidated Financial Statements

(Unaudited)

(3) Allowance for Loan Losses

We believe that our determination of the allowance for loan loss is an important judgment and estimate used in the preparation of our consolidated financial statements. The allowance for loan losses is an amount that management believes will be adequate to absorb estimated losses in the loan portfolio. The calculation is an estimate of the amount of loss in the loan portfolios of our subsidiary banks. A formal review is prepared quarterly by the Credit Administration Officer to assess the risk in the portfolio and to determine the adequacy of the allowance for loan losses. The review includes analysis of historical performance, the level of non-performing and adversely rated loans, specific analysis of certain problem loans, loan activity since the previous assessment, consideration of current and anticipated economic conditions, and other pertinent information. The level of the allowance to net loans outstanding will vary depending on the overall results of this quarterly assessment. The review is presented to and subsequently approved by the Board of Directors.

The Company uses a 9 point rating system for its loans. Ratings of 1 to 5 are considered pass ratings, 6 is special mention, 7 is substandard, 8 is doubtful and 9 is loss. These ratings are initially assigned by the loan officer and subsequently reviewed and adjusted, when determined to be appropriate, by the Credit Administration department. A summary of internally graded loans is presented in Item 2 of this Report.

Transactions in the allowance for loan losses were as follows:

	Nine Months Ended
	September 30,
	(In Thousands)
	2007			2006
Balance, January 1, 2007 and 2006, respectively	$	7,755		$	3,649
Add (deduct):
Losses charged to allowance		(341	)		(151	)
Recoveries credited to allowance		49			119
Provision for loan losses		1,232			247
Allowance acquired in acquisition of Bank of the South		—			3,202
Balance, September 30, 2007 and 2006, respectively	$	8,695		$	7,066

The provision for loan losses was $632,000 and $1,232,000 for the three and nine months ended September 30, 2007, respectively. For the same periods in 2006, the provision for loan losses was $83,000 and $247,000. The provision for loan losses is based on past loan experience for comparable institutions and other factors which, in management’s judgment, deserve current recognition in estimating loan losses. Such factors include growth and composition of the loan portfolio, review of specific loan problems, the relationship of the allowance for loan losses to outstanding loans, and current economic conditions that may affect the borrower’s ability to repay. Management has in place a system designed to identify and monitor problems on a timely basis.

10

MID-AMERICA BANCSHARES, INC.

Notes to Consolidated Financial Statements, Continued

(Unaudited)

(4) Earnings Per Share

Statement of Financial Accounting Standards (SFAS) No. 128 “Earnings Per Share” establishes uniform standards for computing and presenting earnings per share. SFAS No. 128 replaces the presentation of primary earnings per share with the presentation of basic earnings per share and diluted earnings per share. The computation of basic earnings per share is based on the weighted average number of common shares outstanding during the period. For the Company the computation of diluted earnings per share begins with the basic earnings per share plus the effect of common shares contingently issuable from stock options.

The following is a summary of the components comprising basic and diluted earnings per share (EPS) for the three and nine months ended September 30, 2007 and 2006:

	Three Months Ended
	September 30,
(In Thousands, except share amounts)	2007		2006
Basic EPS Computation:
Numerator — net earnings available to common shareholders	$	1,792	$	765
Denominator — weighted average number of common shares outstanding		13,947,271		9,136,015
Basic earnings per common share	$	.13	$	.08
Diluted EPS Computation:
Numerator — net earnings available to common shareholders	$	1,792	$	765
Denominator:
Weighted average number of common shares outstanding		13,947,271		9,136,015
Dilutive effect of stock options		232,488		113,757
		14,179,759		9,249,772
Diluted earnings per common share	$	.13	$	.08

	Nine Months Ended
	September 30,
(In Thousands, except share amounts)	2007		2006
Basic EPS Computation:
Numerator — net earnings available to common shareholders	$	4,849	$	1,902
Denominator — weighted average number of common shares outstanding		13,935,773		7,568,689
Basic earnings per common share	$	.35	$	.25
Diluted EPS Computation:
Numerator — net earnings available to common shareholders	$	4,849	$	1,902
Denominator:
Weighted average number of common shares outstanding		13,935,773		7,568,689
Dilutive effect of stock options		201,702		113,757
		14,137,475		7,682,446
Diluted earnings per common share	$	.34	$	.25

11

MID-AMERICA BANCSHARES, INC.

Notes to Consolidated Financial Statements, Continued

(Unaudited)

(5) Employee Based Compensation Plans

Stock Options

Pursuant to the share exchange which became effective on September 1, 2006, the Company assumed the banks’ respective obligations under the PrimeTrust Bank 2001 Statutory-Nonstatutory Stock Option Plan, the PrimeTrust Bank 2005 Statutory-Nonstatutory Stock Option Plan and the Bank of the South 2001 Stock Option Plan. Options previously granted under these plans will continue to be exercisable for shares of holding company stock. All options related to the PrimeTrust Bank plans were converted at a ratio of 2 for 1 and all options related to Bank of the South plans were converted at a ratio of 2.1814 to 1. All options related to the previous plans of PrimeTrust Bank and Bank of the South were, or as a result of the share exchange transaction, became fully vested and thus exercisable. No other options can be issued under the previous plans. Options issued under these bank plans are now exercisable solely for common stock of the Company rather than for securities of the respective bank.

The directors and shareholders of Mid-America Bancshares, Inc. adopted the Mid-America Bancshares, Inc. 2006 Omnibus Equity Incentive Plan (“Company Plan”) on September 1, 2006. The Equity Incentive Plan will be utilized for future Equity Incentive Awards. Awards granted under the Equity Incentive Plan will be in addition to stock options that may be exercised under the banks’ respective plans. The Company plan provides for granting of stock options, and authorizes the issuance of common stock upon the exercise of such options for up to one million shares (1,000,000) to the employees and directors of the Company. Under the Company Plan, stock option awards may be granted in the form of incentive stock options, non-qualified stock options, stock appreciation rights, restricted shares, stock units, performance units and other awards. They are generally exercisable for ten years following the date such award is granted.

Restricted Equity Incentives

The Company has authorized the issuance of shares of its common stock for restricted stock awards to employees and non-employee directors. At December 31, 2006, the Board had granted 260,000 restricted shares to executive employees and non-employee directors. The recipients have the right to vote and receive dividends but cannot sell, transfer, assign, exchange, pledge, hypothecate or otherwise encumber the shares so long as restrictions apply. Restrictions lapse at the rate of 10% each year of service. The first restrictions lapsed on September 1, 2007, with respect to 26,000 restricted shares.

Statement of Financial Accounting Standards No. 123 (Revised 2004) SFAS No. 123R, “Share-Based Payment” was adopted by the Company as of January 1, 2006. This accounting standard revises Statement of Financial Accounting Standards No. 123 (SFAS No. 123), “Accounting for Stock-Based Compensation” by requiring that all share-based payments to employees, including grants of employee stock options, be recognized in the financial statements based on their fair values at the date of grant.

12

MID-AMERICA BANCSHARES, INC.

Notes to Consolidated Financial Statements, Continued

(Unaudited)

(5) Employee Based Compensation Plans, Continued

Restricted Equity Incentive Plan, Continued

A summary of the activity within the equity incentive plans during the nine months ended September 30, 2007 and information regarding expected vesting, contractual terms remaining, intrinsic values and other matters is as follows:

	Incentive			Stock						Non-
	Stock			Appreciation			Restricted			Qualified
	Options			Rights			Stock			Stock Options			Total
Outstanding at December 31, 2006		622,191			36,150			260,000			565,704			1,484,045
Granted		—			2,000			—			4,000			6,000
Exercised		(44,019	)		—			(26,000	)		(2,570	)		(72,589	)
Forfeited or expired		(11,916	)		(3,030	)		—			(2,500	)		(17,446	)
Outstanding at September 30, 2007		566,256			35,120			234,000			564,634			1,400,010
Exercisable at September 30, 2007		566,256			6,580			—			111,045			683,881
Weighted average exercise price for shares outstanding	$	7.62		$	8.91		$	8.76		$	8.44
Weighted average exercise price for shares exercisable	$	7.62		$	8.76			—		$	7.04
Remaining weighted average contractual life for shares outstanding, in years		6.83			8.96			8.93			8.51
Remaining weighted average contractual life for shares exercisable, in years		6.83			8.83			—			6.77
Aggregate intrinsic values of shares outstanding	$	2,482,684		$	108,409		$	758,160		$	2,011,101
Aggregate intrinsic value of exercisable shares	$	2,482,684		$	21,319		$	—		$	550,433

As of September 30, 2007, the Company had recorded an estimated $3,013,000 of total unrecognized compensation expense related to unvested share-based compensation arrangements granted under our equity incentive plans. That expense is expected to be recognized over a weighted-average period of 4.64 years.

13

MID-AMERICA BANCSHARES, INC.

Notes to Consolidated Financial Statements, Continued

(Unaudited)

(5) Employee Based Compensation Plans, Continued

Restricted Equity Incentive Plan, Continued

During the three month and nine month periods ended September 30, 2007, we recorded share-based compensation expense for stock-based awards granted after January 1, 2006, based on the fair value estimated using the Black-Scholes valuation model. For these awards, we have recognized compensation expense using a straight-line amortization method reduced for estimated forfeitures. The impact of recording stock-based compensation in accordance with SFAS No. 123(R) for the three and nine month periods ended September 30, 2007 is as follows:

	Three Months			Nine Months
	Ended			Ended
	September 30,			September 30,
	2007			2007
	(In Thousands)
Stock-based compensation expense	$	97		$	295
Deferred income tax benefit		(37	)		(113	)
Impact of stock-based compensation expense, after tax effect	$	60		$	182

For 2007 the fair value of each equity incentive award is estimated on the date of grant using the Black-Scholes valuation model that uses the assumptions noted in the following table. Expected volatilities are based on monthly calculations performed by management using industry data. The Company’s expected dividend yield is based on future projections of income and capital level to support anticipated growth. The expected term of equity incentives granted was calculated using the “simplified” method for plain vanilla options as explained in Staff Accounting Bulletin 107. The risk-free rate for periods within the contractual life of the equity incentive is based on the U.S. Treasury yield curve in effect at the time of grant.

	2006/2007
	Stock
	Appreciation			Restricted			Stock
	Rights			Stock			Options
Expected volatility	14.36% to 15.20%				15.20	%	14.30% to 15.20%
Expected dividend yield		1.00	%		1.00	%		1.00	%
Expected term, in years		6.50			7.75			7.00 to 7.75
Risk-free rate	4.69% to 5.10%				4.69	%	4.51% to 4.69%

Expected volatility was most recently calculated at 18.18% based upon the consideration of historical and implied volatility of similar publicly traded companies.

Prior to December 31, 2005, the Company approved the acceleration of vesting of all of its equity incentives that had been granted prior to adoption of SFAS No. 123R. The impact was to eliminate $289,000 from net earnings for periods subsequent to January 1, 2006.

14

MID-AMERICA BANCSHARES, INC.

Notes to Consolidated Financial Statements, Continued

(Unaudited)

(6) Definitive Merger Agreement

On August 15, 2007, the Company announced that it had entered into an agreement pursuant to which it would merge with and into Pinnacle Financial Partners Inc. (Nasdaq/NGS: PNFP). The following summary is qualified in its entirety by reference to the Agreement and Plan of Merger (“Agreement”) dated August 15, 2007, by and between the Company and Pinnacle Financial Partners, Inc. (“PNFP”), a copy of which Agreement was filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the United States Securities and Exchange Commission (“SEC”) on that date. Pursuant to the Agreement, Pinnacle agreed to acquire all of the common stock of the Company. The terms of the Agreement specify that each non-dissenting share of the Company will receive 0.4655 shares of Pinnacle common stock and $1.50 in cash, with the result that the merger consideration for Company shares approximates 90 percent paid in Pinnacle common shares and 10 percent paid in cash. Pinnacle filed a Registration Statement on Form S-4 on September 17, 2007, which was assigned Commission File number 333-146128 (“Registration Statement”) and to which the reader should refer for additional information about the Company and the proposed merger. The Company and Pinnacle have distributed a Joint Proxy Statement and Prospectus pursuant to the Registration Statement to their respective shareholders describing items of business, including the Agreement and the proposed merger, to be considered at a special meeting of each company’s shareholders. Presently, the Company expects to hold its special meeting of shareholders on November 27, 2007, at the offices of Bank of the South, 551 North Mt. Juliet Road, Mt. Juliet, Tennessee, to consider and vote upon the Agreement and the proposed merger (among other items of business). Subject to shareholder and regulatory approval and customary closing conditions, the transaction is presently expected to close in late 2007. At that time, the Company will merge with and into Pinnacle and its separate corporate existence will cease.

(7) Acquisition

As referenced in the “Share Exchange”, at note 2 we consummated our share exchange, which we regard as a “merger of equals,” on September 1, 2006. For accounting purposes, the transaction was treated as if the shareholders of PrimeTrust Bank had formed a holding company, exchanged their shares of PrimeTrust Bank for the holding company’s shares, and then acquired Bank of the South. In the share exchange, shareholders of PrimeTrust Bank received 2.00 shares of MBI stock for each share of PrimeTrust Bank stock and shareholders of Bank of the South received 2.1814 shares of MBI stock for each share of Bank of the South stock. Immediately prior to the acquisition of Bank of the South, a reorganization of PrimeTrust Bank occurred whereby 100% of the stock of PrimeTrust Bank was exchanged for 100% of the stock of Mid-America Bancshares, Inc. and then a two-for-one split occurred resulting in 6,814,462 shares being issued to PrimeTrust Bank shareholders. In connection with the acquisition, 6,792,838 shares of Mid-America Bancshares, Inc. were issued to Bank of the South shareholders which results in a 2.1814 exchange ratio to the Bank of the South shareholders. The proforma share exchange was valued at $8.76 per share. All per share amounts for 2005 have been retroactively adjusted to reflect the impact of the 2 of 1 stock split in PrimeTrust Bank stock. The financial information herein includes the activities of Bank of the South since September 1, 2006 and PrimeTrust Bank since January 1, 2006.

15

MID-AMERICA BANCSHARES, INC.

Notes to Consolidated Financial Statements, Continued

(Unaudited)

(7) Acquisition, Continued

Proforma results of operations for the nine months ended September 30, 2006 are as follows:

	September 30, 2006
				Mid-
	Bank of the			America			Pro Forma Adjustments
	South			Bancshares									Pro Forma
	(6)			(7)			Dr.			Cr.			Combined
	(In Thousands)
Interest income	$	16,864			25,877						410	(1)		43,151
Interest expense		7,833			13,360			155	(2)					21,348
Net interest income		9,031			12,517									21,803
Provision for loan losses		(184	)		(247	)								(431	)
Net interest income after provision for loan losses		8,847			12,270									21,372
Non-interest income		1,828			3,530									5,358
Non-interest expense		7,551			13,215			450	(3)
								72	(4)					21,288
Income before income taxes		3,124			2,585									5,442
Income tax expense		1,093			683						102	(5)		1,674
Net income	$	2,031			1,902									3,768
Proforma per share information:
Basic earnings per common share													$	.28
Diluted earnings per common share													$	.27
Weighted average share outstanding:
Basic														13,618,229
Diluted														13,731,986

(1)	Amortization of loan discount for 8 months ($2,581,000 over 4.2 years).
(2)	Amortization of certificate of deposit discount for 8 months ($526,000 in various amounts over 4 years).
(3)	Amortization of core deposits — base premium for 8 months ($4,720,000 over 7 years).
(4)	Additional depreciation of step-up of fixed asset for 8 months.
(5)	Income tax benefit related to amortization of intangible assets for 8 months.
(6)	Actual Bank of the South results for the 8 months ended August 31, 2006.
(7)	Actual results for the nine months ended September 30, 2006, including all activity relating to the Bank of the South assets and liabilities assumed in the merger subsequent to August 31, 2006.

16

MID-AMERICA BANCSHARES, INC.

Notes to Consolidated Financial Statements, Continued

(Unaudited)

(8) Acquired Intangible Assets and Goodwill

In connection with the share exchange certain intangible assets were acquired and goodwill arose summarized as follows:

	In Thousands
Intangibles:
Deposit base premium	$	4,720
Accumulated amortization as of September 30, 2007	$	759
Amortization expense for the nine months ended September 30, 2007	$	534
Estimated amortization expense:
Remaining for 2007	$	181
For year ended 2008		704
For year ended 2009		704
For year ended 2010		704
For year ended 2011		704
For year ended 2012		704

The deposit base premium is being amortized on a straight-line basis over 7 years.

	In Thousands
Goodwill:
Balance January 1, 2007	$	19,147
Goodwill acquired during 2007		—
Balance September 30, 2007	$	19,147

Goodwill will be evaluated for impairment annually.

In connection with the acquisition of Academy Bank, Bank of the South entered into certain non-compete agreements. One agreement totaling $288,000 covers a five year non-compete period and certain other agreements totaling $112,000 cover two year periods. All agreements commenced effective June 1, 2005 and are being amortized on a straight-line basis over the lives of their respective contracts.

17

MID-AMERICA BANCSHARES, INC.

Notes to Consolidated Financial Statements, Continued

(Unaudited)

(8) Acquired Intangible Assets and Goodwill, Continued

In addition to the deposit base premium and goodwill the transaction to acquire Bank of the South resulted in additional allocations of excess purchase price including a loan discount of $2,581,000, a discount on time deposits of $526,000 and a mark to market adjustment of $4,315,000 related to real estate. These items are included in their respective categories in the attached financial statements. The amortization of the loan and deposit discounts will be reflected as yield adjustments and the real estate market adjustment will be depreciated. The following is a summary of the amortization and depreciation of these items for the next five years.

				Real Estate
	Loan			Discount		Time
	Discount			Adjustment		Deposit
Amortization/depreciation Period	4.2 Years			40 years		Various
Remaining for 2007		(156	)		27		25
Year ended 2008		(620	)		108		102
Year ended 2009		(620	)		108		85
Year ended 2010		(513	)		108		28
Year ended 2011		—			108		—
Year ended 2012		—			108		—
Amortization/(accretion) depreciation period	4.2 Years			40 Years		Various

18

MID-AMERICA BANCSHARES, INC.

FORM 10-Q

Item 2.Management’s Discussion and Analysis of Financial Condition and Result of Operations

General

     Mid-America Bancshares (“Mid-America”), Inc. is a two-bank holding company headquartered in Nashville, Tennessee. We began operations as a result of the share exchange between PrimeTrust Bank, a state bank chartered under Tennessee law, that began operations on December 17, 2001, and Bank of the South, a state bank chartered under Tennessee law that began operations on April 30, 2001. The following discussion includes Mid-America and the banks in the references to the Company unless otherwise indicated in the text. Both banks offer a wide range of banking services including checking, savings, money market accounts, certificates of deposit, and loans for consumer, commercial and real estate purposes. The company serves individuals, small to medium-sized businesses, community organizations, and public entities. Our deposits are insured to the extent provided by law through the Bank Insurance Fund administered by the FDIC. The company is subject to regulations, supervisions and examinations by the Tennessee Department of Financial Institutions, the FDIC, the Federal Reserve, and the Securities and Exchange Commission. However, such regulations, supervisions and examinations are for the protection of the consumers, the Deposit Insurance Fund administered by the FDIC, and the banking system, and not for the protection of investors or shareholders. We seek to exercise prudent risk management and lending including diversification of loan category and industry segment, as well as by an identification of credit risks.

     We employ approximately 245 staff members in 14 offices located in six contiguous counties in Middle Tennessee. On June 6, 2007, we relocated our headquarters to 2019 Richard Jones Road, Nashville, Tennessee 37215.

     Both banks provide full-service brokerage services (selling products such as stocks, bonds, mutual funds, limited partnerships, annuities and other investments, insurance products) through the network arrangement with Raymond James Financial Services, a non-affiliated company. The company benefits from the commissions generated through this arrangement.

     At September 30, 2007, total assets equaled $1.09 billion, total loans equaled $817.3 million, total deposits equaled $903.9 million, and shareholders’ equity equaled $107.7 million.

     We recorded net-income of $4,849,000 (basic earnings per common share of $0.35) and $1,902,000 for the nine months ended September 30, 2007 and 2006, respectively, an increase 154.9%. This represents an increase in basic earnings per share of 40.0% for the period.

     We recorded net-income of $1,792,000, (basic earnings per common share of $0.13) for the third quarter of 2007. This increased 134.2% when compared to our second quarter results in 2006 of net income of $765,000, and represents a 62.5% increase in basic earnings per share. The rapid increase of growth in both our asset base and our income level is a combined result of the “merger of equals” with the Bank of the South, which was consummated on September 1, 2006, and internal organic growth.

     Since December 31, 2006, we have experienced substantial growth in our combined company. Total assets have increased $122.8 million, or 12.7%, from $968.0 million at December 31, 2006 to $1.09 billion at September 30, 2007. This asset growth is primarily a result of the increase in our net loan portfolio by $130.6 million or 19.0%.

19

MID-AMERICA BANCSHARES, INC.

FORM 10-Q

Item 2.Management’s Discussion and Analysis of Financial Condition and Result of Operations, Continued

General, Continued

     We have experienced substantial growth in our deposit base. Total deposits have increased $80.2 million since December 31, 2006, from a level of $823.8 million to $903.9 million as of September 30, 2007. Our Federal Home Loan Bank (“FHLB”) borrowings increased by $21.1 million from a level of $15.7 million to $36.8 million. These funds were used as part of the funding for our loan and investment portfolio. Our equity increased $4,773,000 (4.6%) since December 31, 2006. This is primarily a result of earnings of $4,849,000, an increase in the unrealized loss on available-for-sale securities net of tax benefits of $643,000, $272,000 from the exercise of vested options and $295,000 from stock based compensation.

     The purpose of this discussion is to provide insight into the financial conditions and results of operations of Mid-America Bancshares, Inc. This discussion should be read in conjunction with the annual financial statements filed in conjunction with the forms 10-K and 10-KSB from previous years. The following is a discussion of our financial condition at September 30, 2007 and December 31, 2006. The discussions in Item 2 of this report are subject to the caveats contained in the “forward-looking statements” contained in this document.

     Although both banks continue to operate as separate entities and both remain separately chartered banks, for purposes of the discussion that follows, reference to the company includes both banks unless otherwise noted.

Critical Accounting Policies

     The accounting principles we follow and our methods of applying these principles conform with accounting principles generally accepted in the United States and with general practices within the banking industry. In connection with the application of those principles to the determination of our allowance for loan losses (ALL), we have made judgments and estimates which have significantly impacted our financial position and results of operations.

     Our management assesses the adequacy of the ALL on a regular basis. This assessment includes procedures to estimate the ALL and test the adequacy and appropriateness of the resulting balance. The ALL consists of two portions: (1) an allocated amount representative of specifically identified credit exposure and exposures readily predictable by historical or comparative experience, and (2) an unallocated amount representative of inherent loss which is not readily identifiable. Even though the ALL is composed of two components, the entire allowance is available to absorb any credit losses.

20

MID-AMERICA BANCSHARES, INC.

FORM 10-Q

Item 2.Management’s Discussion and Analysis of Financial Condition and Result of Operations, Continued

Critical Accounting Policies, Continued

     We establish the allocated amount separately for two different risk groups (1) unique loans (commercial loans, including those loans considered impaired); and (2) homogenous loans (generally consumer loans). We base the allocation for unique loans primarily on risk rating grades assigned to each of these loans as a result of our loan management and review processes. Each risk-rating grade is assigned an estimated loss ratio, which is determined based on the experience of management, discussions with banking regulators, historical and current economic conditions and our independent loan review process. We estimate losses on impaired loans based on estimated cash flows discounted at the loan’s original effective interest rate or the underlying collateral value. We also assign estimated loss ratios to our consumer portfolio. However, we base the estimated loss ratios for these homogenous loans on the category of consumer credit (e.g., automobile, residential mortgage, home equity) and not on the results of individual loan reviews.

     The unallocated amount is particularly subjective and does not lend itself to an exact mathematical calculation. We use the unallocated amount to absorb inherent losses which may exist as of the balance sheet date for such matters as changes in the local or national economy, the depth or experience of the lending staff, any concentrations of credit in any particular industry group, and new banking laws or regulations. After we assess applicable factors, we evaluate the aggregate unallocated amount based on our management’s experience.

     We then test the resulting ALL balance by comparing the balance in the allowance account to historical trends and peer information. Our management then evaluates the result of the procedures performed, including the result of our testing, and concludes on the appropriateness of the balance of the ALL in its entirety. The Board of Directors review the assessment prior to the public filing of financial information.

21

MID-AMERICA BANCSHARES, INC.

FORM 10-Q

Item 2.Management’s Discussion and Analysis of Financial Condition and Result of Operations, Continued

Results of Operations

     The Company had earnings of $1,792,000 and $4,849,000 for the three and nine months ended September 30, 2007 as compared to earnings of $765,000 and $1,902,000 for the same periods in 2006. The increase is primarily a result of continued growth in the assets of the Company and the share exchange previously discussed. On a per share basis, the net earnings for the three months and nine months ended September 30, 2007 resulted in basic earnings per common share of $.13 and $.35, respectively. For the same period in 2006 the net earnings resulted in basic earnings per common share of $.08 and $.25, respectively. On a per share basis, the net earnings for the three months and nine months ended September 30, 2007 resulted in diluted earnings per common share of $.13 and $.34, respectively. For the same period in 2006 the net earnings resulted in diluted earnings per common share of $.08 and $.25, respectively.

Net Interest Income

     Net interest income represents the amount by which interest earned on various earning assets exceeds interest paid on deposits and other interest-bearing liabilities and is the most significant component of the Company’s earnings. Total interest income for the nine months ended September 30, 2007 and 2006 was $53,863,000 and $25,877,000, respectively. Total interest expense for the nine months ended September 30, 2007 and 2006 was $29,509,000 and $13,360,000, respectively. This resulted in an increase in net interest income of $11,837,000 or 94.6% during the first nine months of 2007 as compared to the comparable period in the prior year. Total interest income for the three months ended September 30, 2007 and 2006 was $18,817,000 and $10,785,000, respectively. Total interest expense for the three months ended September 30, 2007 and 2006 was $10,170,000 and $5,725,000. This resulted in an increase in net interest income of $3,587,000 or 70.9% during the three months ended September 30, 2007. Net interest income increased as a result of continued growth of the Company and the share exchange previously discussed. Managing interest rate risk is a very subjective exercise based on a wide variety of factors. This activity is based significantly on management’s subjective beliefs about future events (such as potential actions of the Federal Reserve Board and the conduct of competitors) and is never guaranteed.

Provision for Loan Losses

     The Company has designed a system calculated and intended to identify weaknesses or losses in its loan portfolio. The provision for loan losses represents a charge to earnings necessary to establish an allowance for loan losses that, in management’s evaluation, is adequate to provide coverage for estimated losses on outstanding loans and to provide for uncertainties in the economy. The provision for loan losses was $632,000 and $1,232,000 for the three and nine months ended September 30, 2007, respectively. The provision for loan losses was $83,000 and $247,000 for the same periods in 2006.

22

MID-AMERICA BANCSHARES, INC.

FORM 10-Q

Item 2.Management’s Discussion and Analysis of Financial Condition and Result of Operations, Continued

Provision for Loan Losses, Continued

     The allowance for loan losses at September 30, 2007 was $8,695,000 an increase of 12.1% from $7,754,000 at December 31, 2006. The level of the allowance and the amount of the provision involve evaluation of uncertainties and matters of judgment. Management believes the allowance for loan losses at September 30, 2007 to be adequate. The allowance for loan losses was 1.05% and 1.12% of loans at September 30, 2007 and December 31, 2006, respectively. Asset quality continues to be excellent in that net charge-offs for the third quarter were $175,000 and year to date net charge-offs were $292,000 or .04% of total loans. As a result of the combination of PrimeTrust Bank and Bank of the South, our scope of the internal loan review process has expanded. In addition, both Bank’s, while they remain separately chartered, utilize the same loan grading matrix. As a result of this change, our continued excellent history of asset quality, as evidenced by our nominal charge-off amount, and our expanded loan review process, we have been able to improve the accuracy of our risk grading criteria. Thus, our allowance target has been adjusted.

Non-Interest Income

     The Company’s non-interest income consists of service charges on deposit accounts, gain on sale of SBA loans, investment banking fees and commissions, gain on sale of securities, mortgage broker fees and fees on mortgage originations, title company income, and other fees and commissions. Non-interest income increased $2,336,000 or 66.2% to $5,866,000 during the nine months ended September 30, 2007 as compared to the same period in 2006. The increase for the quarter ended September 30, 2007 was $550,000 or 40.6% as compared to the same period in 2006. Non-interest income continues to increase as management achieves service and product growth. Management projects that other fees, commissions, investment banking fees and commissions, mortgage broker fees and fees on mortgage originations, title company income and service charges on deposit accounts will increase for the remainder of 2007 due to the expected growth of the Company.

Non-Interest Expense

     Non-interest expense consist primarily of salaries and employee benefits, occupancy expenses, furniture and equipment expenses, data processing expense, advertising expense, printing, postage, stationary and supplies, loss on sale of securities, amortization of intangible assets and other operating expenses. Non-interest expense, exclusive of securities losses increased $8,629,000 or 66.0% to $21,705,000 during the nine months ended September 30, 2007 as compared to the same period in 2006. The increase for the three months ended September 30, 2007 was $1,981,000 or 37.9% as compared to the same period in 2006. The increases in non-interest expense are attributable primarily to increases in salaries and benefits and occupancy expenses due to continued growth of the Company and the merger as previously discussed. Other operating expenses for the nine months ended September 30, 2007 increased to $3,188,000 from $1,633,000 from the first nine months of 2006. These expenses include taxes, professional fees, directors fees and general operating costs which increased as a result of continued growth of the Company. A significant portion of this increase is directly attributable to the share exchange with a significant amount of this expense resulting from increased fees due to compliance with expanded SEC reporting and preparation for compliance with the Sarbanes-Oxley Act.

23

MID-AMERICA BANCSHARES, INC.

FORM 10-Q

Item 2.Management’s Discussion and Analysis of Financial Condition and Result of Operations, Continued

Income Taxes

     Income taxes were $892,000 and $2,401,000 for the three and nine months ended September 30, 2007. Because of net operating loss carryovers the Company did not become fully taxable until 2006. As a result, income tax expense for the three and nine months ended September 30, 2006 was $345,000 and $683,000, respectively.

Financial Condition

     Balance Sheet Summary.

     The Company’s total assets were $1,090,818,000 and $967,971,000 at September 30, 2007 and December 31, 2006, respectively. Loans, net of allowance for loan losses, totaled $817,324,000 and $686,690,000 at September 30, 2007 and December 31, 2006, respectively, and investment securities totaled $180,285,000 and $178,135,000, respectively. Restricted equity securities totaled $2,621,000 and $2,174,000 at September 30, 2007 and December 31, 2006, respectively. Interest bearing deposits in financial institutions decreased to $2,495,000 at September 30, 2007 from $2,559,000 at December 31, 2006. These consist mostly of overnight deposits at the Federal Home Loan Bank.

     Total liabilities were $983,105,000 and $865,031,000 at September 30, 2007 and December 31, 2006, respectively, and stockholders’ equity was $107,713,000 and $102,940,000, respectively. A more detailed discussion of assets, liabilities and capital follows.

     Loans

     Loan categories are as follows:

	September 30,		December 31,
	2007		2006
	(In Thousands)
Commercial, financial and agricultural	$	401,472	$	324,283
Installment		23,781		22,123
Real estate — mortgage		224,171		183,910
Real estate — construction		175,457		162,312
Lease financing		1,138		1,816
Total	$	826,019	$	694,444

     As represented in the table, primary loan growth was in commercial, financial and agricultural and real estate — mortgage loans. Management is increasing loans in an orderly fashion to maintain quality. As discussed previously, a portion of the loan growth was also achieved through the merger of equals. The loan discounts resulting from the share exchange have been assigned to the respective category to which it was derived.

24

MID-AMERICA BANCSHARES, INC.

FORM 10-Q

Item 2.Management’s Discussion and Analysis of Financial Condition and Result of Operations, Continued

Financial Condition, Continued

     Loans, Continued

     In the normal course of business the Company’s subsidiaries have made loans at prevailing interest rates and terms to its executive officers, directors and their affiliates aggregating $18.3 million. As of September 30, 2007 none of these loans were restructured, nor were any related party loans charged off during the past three years nor did they involve more than the normal risk of collectibility or present other unfavorable features.

     The Company follows the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 114, “Accounting by Creditors for Impairment of a Loan” and SFAS No. 118, “Accounting by Creditors for Impairment of a Loan — Income Recognition and Disclosures”. These pronouncements apply to impaired loans except for large groups of smaller-balance homogeneous loans that are collectively evaluated for impairment including credit card, residential mortgage, and installment loans.

     A loan is impaired when it is probable that the Company will be unable to collect the scheduled payments of principal and interest due under the contractual terms of the loan agreement. Impaired loans are measured at the present value of expected future cash flows discounted at the loan’s effective interest rate, at the loan’s observable market price, or the fair value of the collateral if the loan is collateral dependent. If the measure of the impaired loan is less than the recorded investment in the loan, the Company shall recognize an impairment by creating a valuation allowance with a corresponding charge to the provision for loan losses or by adjusting an existing valuation allowance for the impaired loan with a corresponding charge or credit to the provision for loan losses.

     The Company’s first mortgage single family residential and consumer loans which total approximately $143,643,000 and $23,781,000, respectively at September 30, 2007, are divided into various groups of smaller-balance homogeneous loans that are collectively evaluated for impairment and thus are not subject to the provisions of SFAS Nos. 114 and 118. Substantially all other loans of the Company are evaluated for impairment under the provisions of SFAS Nos. 114 and 118.

     The Company considers all loans subject to the provisions of SFAS Nos. 114 and 118 that are on nonaccrual status to be impaired. Loans are placed on nonaccrual status when doubt as to timely collection of principal or interest exists, or when principal or interest is past due 90 days or more unless such loans are well-secured and in the process of collection. Delays or shortfalls in loan payments are evaluated with various other factors to determine if a loan is impaired. Generally, delinquencies under 90 days are considered insignificant unless certain other factors are present which indicate impairment is probable. The decision to place a loan on nonaccrual status is also based on Management’s subjective evaluation of the borrower’s financial condition, collateral, liquidation value, and other factors that affect the borrower’s ability to pay.

25

MID-AMERICA BANCSHARES, INC.

FORM 10-Q

Item 2.Management’s Discussion and Analysis of Financial Condition and Result of Operations, Continued

Financial Condition, Continued

     Loans, Continued

     Generally, at the time a loan is placed on nonaccrual status, all interest accrued on the loan in the current fiscal year is reversed from income, and all interest accrued and uncollected from the prior year is charged off against the allowance for loan losses. Thereafter, interest on nonaccrual loans is recognized as interest income only to the extent that cash is received and future collection of principal is not believed to be in doubt. If the collectibility of outstanding principal is doubtful, such interest received is applied as a reduction of principal. A nonaccrual loan may be restored to accruing status when principal and interest are no longer past due and unpaid and future collection of principal and interest on a timely basis is not believed to be in doubt. At September 30, 2007 the Company had $3,354,000 of loans on nonaccrual status and $1,977,000 of loans on non-accrual status as of December 31, 2006. The increase in non-accrual loans is the primary result of three loans that are 75% guaranteed by the Small Business Administration. Liquidation plans are in progress and specific reserves have been allocated. We do not anticipate a substantial loss after liquidation of the collateral.

     Generally the Company also classifies as impaired any loans the terms of which have been modified in a troubled debt restructuring. Interest is accrued on such loans that continue to meet the modified terms of their loan agreements. At September 30, 2007 and 2006, the Company had no loans that have had the terms modified in a troubled debt restructuring.

     The Company’s charge-off policy for impaired loans is similar to its charge-off policy for all loans in that loans are charged-off in the month when they are considered uncollectible.

     As of September 30, 2007, the Company had impaired loans totaling $17,005,000. The amount of specific reserve assigned to these loans is $2,161,000. The total amount of interest recognized during the period on impaired loans approximated $1,194,000 and the average recorded investment for the nine months ended September 30, 2007 was $9,271,000. At December 31, 2006, impaired loans totaled $3,096,000 and had a specific allowance for loan losses of $359,000 allocated. The impaired loans are generally commercial loans and meet the above mentioned criteria for impaired loans. This increase in impaired loans is the primary result of seven relationships. Repayment and/or liquidation plans are in place. We do not anticipate any significant loss and each impaired loan has been specifically allocated to a portion of our loan loss reserve.

     Non-performing loans, which include non-accrual loans and loans 90 days past due, at September 30, 2007, totaled $4,291,000. There were $2,066,000 of non-performing loans at December 31, 2006.

26

MID-AMERICA BANCSHARES, INC.

FORM 10-Q

Item 2.Management’s Discussion and Analysis of Financial Condition and Result of Operations, Continued

Financial Condition, Continued

     Loans, Continued

     The following schedule details selected information as to non-performing loans of the Company at September 30, 2007 and December 31, 2006:

	September 30, 2007				December 31, 2006
	Past Due				Past Due
	90 Days		Non-Accrual		90 Days		Non-Accrual
	(In Thousands)				(In Thousands)
Commercial, financial and agricultural	$	390		2,619	$	30		1,295
Installment loans		16		246		1		83
Real estate mortgage		103		382		58		581
Real estate - construction		415		107		—		18
Lease financing		13		—		—		—
	$	937		3,354	$	89		1,977
Renegotiated loans	$	—			$	—

     The following tables present internally graded loans as of September 30, 2007 and December 31, 2006:

	(In Thousands)		Special
September 30, 2007	Total		Mention		Substandard		Doubtful
Commercial, financial and agricultural	$	14,567		2,526		11,167		874
Real estate mortgage		5,388		1,006		4,382		—
Real estate construction		2,235		667		1,568		—
Installment		486		97		378		11
Lease financing		11		—		11		—
	$	22,687		4,296		17,506		885

	(In Thousands)		Special
December 31, 2006	Total		Mention		Substandard		Doubtful
Commercial, financial and agricultural	$	4,253		995		3,258		—
Real estate mortgage		2,668		569		2,099		—
Real estate construction		2,826		2,740		86		—
Installment		321		69		252		—
Lease financing		—		—		—		—
	$	10,068		4,373		5,695		—

27

MID-AMERICA BANCSHARES, INC.

FORM 10-Q

Item 2.Management’s Discussion and Analysis of Financial Condition and Result of Operations, Continued

Financial Condition, Continued

     Loans, Continued

     The outstanding balance of our internally graded loans increased by approximately $12.7 million from a level of $10.0 million at December 31, 2006 to a level of $22.7 million at September 30, 2007. This increase has been discussed previously in the impaired loans section.

     The collateral values at September 30, 2007, based on estimates received by management, securing these loans total approximately $27,759,000 ($21,915,000 related to real estate loans and $5,844,000 related to commercial and other non-real estate loans). Such loans are listed as classified when information obtained about possible credit problems of the borrower has prompted management to question the ability of the borrower to comply with the repayment terms of the loan agreement. The loan classifications do not represent or result from trends or uncertainties that management expects will materially and adversely impact future operating results, liquidity or capital resources.

     The following detail provides a breakdown of the allocation of the allowance for loan losses:

	September 30, 2007					December 31, 2006
			Percent of					Percent of
			Loans In					Loans In
	In		Each Category			In		Each Category
	Thousands		To Total Loans			Thousands		To Total Loans
Commercial, financial and agricultural	$	4,841		48.7	%	$	4,141		46.7	%
Real estate construction		2,124		21.2			2,073		23.4
Real estate mortgage		1,437		27.1			1,245		26.5
Installment		271		2.9			260		3.2
Lease financing		22		0.1			35		0.2
	$	8,695		100.0	%	$	7,754		100.0	%

     The Company has targeted commercial business lending, commercial and residential real estate lending and consumer lending as potential growth areas. The Company seeks to build a loan portfolio which is capable to adjusting to swings in the interest rate market, and it is the Company’s policy to maintain a diverse loan portfolio not dependent on any particular market or industrial segment.

28

MID-AMERICA BANCSHARES, INC.

FORM 10-Q

Item 2.Management’s Discussion and Analysis of Financial Condition and Result of Operations, Continued

Financial Condition, Continued

Securities

     Securities totaled $180,285,000 and $178,135,000 at September 30, 2007 and December 31, 2006, respectively, and are a primary component of the Company’s earning assets. Restricted equity securities, which consists primarily of investments in FHLB stock, totaled $2,621,000 and $2,174,000 at September 30, 2007 and December 31, 2006, respectively. The Company has adopted the provisions of Statement of Financial Accounting Standards No. 115 (SFAS No. 115), “Accounting for Certain Investments in Debt and Equity Securities”. Under the provisions of the Statement, securities are to be classified in three categories and accounted for as follows:

• Debt securities for which the enterprise has the positive intent and ability to hold to maturity are classified as held-to-maturity securities and reported at amortized costs.

• Debt and equity securities that are bought and held principally for the purpose of selling them in the near term are classified as trading securities and reported at fair value, with unrealized gains and losses included in earnings.

• Debt and equity securities not classified as either held-to-maturity securities or trading securities are classified as available-for-sale securities and reported at fair value, with unrealized gains and losses excluded from earnings and reported in a separate component of stockholders’ equity.

     The Company’s classification of securities as of September 30, 2007 and December 31, 2006 are as follows:

	Available-for-Sale
	September 30, 2007				December 31, 2006
	(In Thousands)
			Estimated				Estimated
	Amortized		Market		Amortized		Market
	Cost		Value		Cost		Value
U.S. Treasury and other U.S. Government agencies and corporations	$	53,048		52,881	$	59,219		58,991
Mortgage-backed securities		78,406		77,472		76,281		75,343
Obligations of states and political subdivisions		39,628		38,704		32,391		32,570
Corporate bonds		900		887		900		891
Equity investment		600		600		600		600
	$	172,582		170,544	$	169,391		168,395

29

MID-AMERICA BANCSHARES, INC.

FORM 10-Q

Item 2.Management’s Discussion and Analysis of Financial Condition and Result of Operations, Continued

Financial Condition, Continued

Securities, Continued

	Held-to-Maturity
	September 30, 2007				December 31, 2006
	(In Thousands)
			Estimated				Estimated
	Amortized		Market		Amortized		Market
	Cost		Value		Cost		Value
Obligation of states and political subdivisions	$	9,741		9,461	$	9,740		9,774
	$	9,741		9,461	$	9,740		9,774

     There were no securities classified as trading during 2007 or 2006.

Deposits

     Deposits, which in the future are expected to be the principal source of funds for the Company, totaled $903,948,000 and $823,755,000 at September 30, 2007 and December 31, 2006, respectively. The Company has targeted local consumers, professionals, local governments and commercial businesses as its central clientele; therefore, deposit instruments in the form of demand deposits, savings accounts, money market demand accounts, certificates of deposits and individual retirement accounts are offered to customers.

     Management believes the Middle Tennessee area is a growing economic market offering growth opportunities for the Company; however, the Company competes with several of the larger bank holding companies that have bank offices in this area; and therefore, no assurances of market growth can be given. However, even though the Company’s are in a very competitive market, management currently believes that it is possible to increase the Company’s deposit and asset size. Management believes that its position as a locally oriented financial institution that offers personalized service will contribute significantly to quality loan and deposit growth and, ultimately, to overall profitability. However, no assurance of market growth can be given.

Liquidity and Asset Management

     The Company’s management seeks to maximize net interest income by managing the Company’s assets and liabilities within appropriate constraints on capital, liquidity and interest rate risk. Liquidity is the ability to maintain sufficient cash levels necessary to fund operations, meet the requirements of depositors and borrowers and fund attractive investment opportunities. The Company’s primary source of liquidity is expected to be a stable core deposit base. In addition, short-term investments, loan payments and investment security maturities provide a secondary source.

30

MID-AMERICA BANCSHARES, INC.

FORM 10-Q

Item 2.Management’s Discussion and Analysis of Financial Condition and Result of Operations, Continued

Financial Condition, Continued

Liquidity and Asset Management, Continued

     The Company maintains a formal asset and liability management process to quantify, monitor and control interest rate risk and to assist management in maintaining stability in the net interest margin under varying interest rate environments. The Company accomplishes this process through the development and implementation of lending, funding and pricing strategies designed to maximize net interest income under varying interest rate environments subject to specific liquidity and interest rate risk guidelines.

     Analysis of rate sensitivity and rate gap analysis are the primary tools used to assess the direction and magnitude of changes in net interest income resulting from changes in interest rates. Included in the analysis are cash flows and maturities of financial instruments held for purposes other than trading, changes in market conditions, loan volumes and pricing and deposit volume and mix. These assumptions are inherently uncertain, and, as a result, net interest income cannot be precisely estimated nor can the impact of higher or lower interest rates on net interest income be precisely predicted. Actual results will differ due to timing, magnitude and frequency of interest rate changes and changes in market conditions and managements strategies, among other factors.

     The Company’s securities portfolio consists of earning assets that provide interest income. Securities classified as available-for-sale include securities intended to be used as part of the Company’s asset/liability strategy and/or securities that may be sold in response to changes in interest rate, prepayment risk, the need or desire to increase capital and similar economic factors. Securities totaling approximately $21.8 million mature or will be subject to rate adjustments within the next twelve months.

     A secondary source of liquidity is the Company’s loan portfolio. At September 30, 2007, loans of approximately $463.6 million either will become due or will be subject to rate adjustments within twelve months from the respective date.

     As for liabilities, certificates of deposit of $100,000 or greater of approximately $298.6 million will become due during the next twelve months. Management anticipates that there will be no significant reductions from withdrawal accounts such as negotiable order of withdrawal accounts, money market demand accounts, demand deposit and regular savings accounts in the future.

31

MID-AMERICA BANCSHARES, INC.

FORM 10-Q

Item 2.Management’s Discussion and Analysis of Financial Condition and Result of Operations, Continued

Financial Condition, Continued

Capital Position and Dividends

     At September 30, 2007 and December 31, 2006, total stockholders’ equity was $107,713,000 and $102,940,000 or 9.9% and 10.6%, respectively, of total assets.

     The Company’s principal regulators have established minimum risk-based capital requirements and leverage capital requirements for the Company. These guidelines classify capital into two categories of Tier I and Total risk-based capital. Total risk-based capital consists of Tier I (or core) capital (essentially common equity less intangible assets) and Tier II capital (essentially qualifying long-term debt, of which the Company has none, and a part of the allowance for loan losses). In determining risk-based capital requirements, assets are assigned risk-weights of 0% to 100%, depending on regulatory assigned levels of credit risk associated with such assets. The risk-based capital guidelines require the Company to have a Total risk-based capital ratio of 8.0% and a Tier I risk-based capital ratio of 4.0%. At September 30, 2007, the Company’s Total risk-based capital ratio was 10.46% and its Tier I risk-based capital ratio was 9.51%. At December 31, 2006, the Company’s total risk-based capital ratio was 11.12% and its Tier I risk-based capital ratio was 10.15%. The required Tier I leverage capital ratio (Tier I capital to average assets for the most recent quarter) for the Company is 4%. At September 30, 2007, the Company had a leverage ratio of 8.29%. At December 31, 2006 the Company had a leverage ratio of 8.80%.

     The payment of dividends by the Company is subject to the Tennessee Business Corporation Act. The Act provides that the Company may not make distributions to shareholders or declare dividends at any time that the Company is insolvent or if such action would render the Company insolvent. The Company is primarily dependent on dividends from its two subsidiary banks for its own funding, including funds that could be utilized to pay dividends. Under Tennessee law, the ability of our two subsidiary banks to pay dividends is limited. First, no Tennessee charter bank may pay dividends in any calendar year that exceeds the total of its net income of that year combined with its retained net income of the preceding two years without the approval of the TDFI. Thereafter, 10% of net profits must be transferred to capital surplus prior to payment of dividends until capital surplus equals capital stock. The subsidiary banks and the Company are also subject to the minimum capital requirements of the FDIC and the Federal Reserve Board, respectively, which impact the banks’ and the Company’s ability to pay dividends. If the Company fails to meet these standards, it may not be able to pay dividends or to accept additional deposits because of regulatory requirements. Presently, our dividend policy remains as announced in earlier filings, which is that we expect for the foreseeable future to retain most if not all of our earnings to reinvest in operations and to support anticipated growth. Dividends, if any, will be subject to the discretion of the board and to the above-described legal limitations, and may be declared and paid as determined by the board subject to legal, regulatory and prudential considerations.

32

MID-AMERICA BANCSHARES, INC.

FORM 10-Q

Item 2.Management’s Discussion and Analysis of Financial Condition and Result of Operations, Continued

Financial Condition, Continued

Capital Position and Dividends, Continued

     The Company is subject to numerous federal and state laws, rules and regulations, and compliance with these legal requirements is mandatory. One significant and developing area of law involves Homeland Security and the Bank Secrecy Act. The Company currently believes that its systems are adequate to meet its compliance needs with respect to these and other regulations. However, compliance with the Bank Secrecy Act may prove expensive to the Company in the near-term and in the long-term. Current regulatory statements indicate that the cost of non-compliance, even inadvertent non-compliance, can be harsh. Management cannot at this time quantify the costs of compliance or the expense of inadvertent non-compliance.

     There is no established trading market for the Company’s stock. During the nine months ended September 30, 2007, the Company issued 46,589 shares of its voting common stock for $272,000 in connection with the exercise of options and 26,000 restricted shares vested and were issued effective September 1, 2007. Privately negotiated trades may involve the Company, its directors and officials and, accordingly, may not be reliable indicators of value. During the nine months ended September 30, 2007 the market for our stock was very thin as only 64,087 shares, representing less than 1% of total outstanding shares, were traded.

Off Balance Sheet Arrangements

     At September 30, 2007 the Company had unfunded loan commitments outstanding of $215.9 million and outstanding standby letters of credit of $28.0 million. Because these commitments generally have fixed expiration dates and many will expire without being drawn upon, the total commitment level does not necessarily represent future cash requirements. If needed to fund these outstanding commitments, the Company has the ability to liquidate Federal funds sold or securities available-for-sale or on a short-term basis to borrow and purchase Federal funds from other financial institutions. Additionally, the Company could sell participations in these or other loans to correspondent banks. As mentioned above, the Company has been able to fund its ongoing liquidity needs through its stable core deposit base, loan payments, its investment security maturities and short-term borrowings.

     The Company is currently leasing five branch locations and its operations center. Minimum lease payments pursuant to these leases are as follows:

Remainder of 2007	$	176
2008		694
2009		704
2010		606
2011		370
Thereafter		2,288
Total	$	4,838

33

MID-AMERICA BANCSHARES, INC.

FORM 10-Q

Item 2.Management’s Discussion and Analysis of Financial Condition and Result of Operations, Continued

Impact of Inflation

     The primary impact which inflation has on the results of the Company’s operations, is evidenced by its effects on interest rates. Interest rates tend to reflect, in part, the financial market’s expectations of the level of inflation, and, therefore, will generally rise or fall as the level of expected inflation fluctuates. To the extent interest rates paid on deposits and other sources of funds rise or fall at a faster rate than the interest income earned on funds, loans or investments, net interest income will vary. Inflation also affects non-interest expenses as goods and services are purchased, although this has not had a significant effect on net earnings in recent years. If the inflation rate stays flat or increases slightly, the effect on profits is not expected to be significant.

Item 3.Quantitative and Qualitative Disclosures About Market Risk

     The Company’s primary component of market risk is interest rate volatility. Fluctuations in interest rates will ultimately impact both the level of income and expense recorded on a large portion of the Company’s assets and liabilities, and the market value of all interest-earning assets and interest-bearing liabilities, other than those which possess a short term to maturity such as Federal funds sold or purchased and loans, securities and deposits as discussed in Item 2. Based upon the nature of the Company’s operations, the Company is not subject to foreign currency exchange or commodity price risk.

     Interest rate risk (sensitivity) management focuses on the earnings risk associated with changing interest rates. Management seeks to maintain profitability in both immediate and long term earnings through funds management/interest rate risk management. The Company’s rate sensitivity position has an important impact on earnings. Senior management of the Company meets periodically to analyze the rate sensitivity position. These meetings focus on the spread between the cost of funds and interest yields generated primarily through loans and investments.

     There have been no material changes in reported market risks during the nine months ended September 30, 2007. Please refer to Item 2 of Part I of this Report of additional information related to market and other risks.

Item 4.Controls and Procedures

     As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of the Company’s Chief Executive Officer and the Chief Financial Officer, of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act of 1934, as amended (the “Exchange Act”)). Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective for gathering, analyzing and disclosing the information that we are required to disclose in the reports we file under the Exchange Act, within the time periods specified in the SEC’s rules and forms. Our Chief Executive Officer and Chief Financial Officer also concluded that our disclosure controls and procedures are effective and timely, alerting them to material information relating to our Company required to be included in our periodic SEC filings.

34

MID-AMERICA BANCSHARES, INC.

FORM 10-Q

Item 4.Controls and Procedures, Continued

     During the quarter ended September 30, 2007 there have been no changes in our internal controls over financial reporting or in other factors that could materially affect, or are reasonably likely to materially affect, our internal controls over financial reporting.

35

PART II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

     None

Item 1A. RISK FACTORS

There are no material changes to the Company’s risk factors as previously disclosed in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2006.

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

     (a) None

     (b) Not Applicable.

(c) No repurchases for our securities were made during the quarter ended September 30, 2007. The only restrictions on working capital and/or dividends are those reported in Part I of this Quarterly Report on Form 10Q, as well as those discussed with respect to dividends with respect to subsidiary banks’ securities as discussed in the registration statement on Form S-4 (Commissions file No. 333-134247, as amended) particularly in the section “Supervision and Regulation” and in the discussion of the common stocks of the respective subsidiary banks.

Item 3. DEFAULTS UPON SENIOR SECURITIES

     (a) None

     (b) None

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

     (a) Not applicable.

     (b) Not applicable.

     (c) Not applicable.

     (d) Not applicable.

Item 5. OTHER INFORMATION

     (a) None

     (b) Not applicable.

36

PART II. OTHER INFORMATION

Item 6. EXHIBITS

(a) Rule 13a-14(a) Certifications.
Section 1350 Certifications. Any certification furnished pursuant to this Item will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act (15 U.S.C. 78r), or otherwise subject to the liability of that section.

(b) None.

37

SIGNATURES

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

MID-AMERICA BANCSHARES, INC.

(Registrant)

DATE: November 14, 2007	/s/ Gary L. Scott
	Gary L. Scott, Chairman and
	Chief Executive Officer

DATE: November 14, 2007	/s/ Jason K. West
	Jason K. West, Chief Financial Officer

38