Heritage Southeast Bancorporation (HSBI) 10-Q 2007 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended: June 30, 2007

¨ Transition report under Section 13 or 15(d) of the Exchange Act

For the transition period from            to            

Commission file number: 0-25846

CCF HOLDING COMPANY

(Exact name of issuer as Specified in Its Charter)

Georgia	58-2173616
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

101 North Main Street

Jonesboro, Georgia 30236

(Address of Principal Executive Offices)

(770) 478-8881

(Issuer’s Telephone Number)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:    Yes  x    No  ¨

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

Large accelerated filer  ¨    Accelerated filer  ¨    Non-accelerated filer  x

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: At August 11, 2007, 3,648,663 shares of the registrant’s common stock were outstanding.

Indicate by checkmark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

FORM 10-Q

INDEX

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements:
	Consolidated Balance Sheets as of June 30, 2007 (unaudited) and December 31, 2006 (audited)	1
	Consolidated Statements of Earnings For the Three- and Six- Months Ended June 30, 2007 and June 30, 2006 (unaudited)	2
	Consolidated Statements of Cash Flows For the Six Months Ended June 30, 2007 and June 30, 2006 (unaudited)	3
	Notes to Unaudited Consolidated Financial Statements	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	5
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	8
Item 4.	Controls and Procedures	9
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	10
Item 1A.	Risk Factors	10
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	10
Item 3.	Defaults Upon Senior Securities	10
Item 4.	Submission of Matters to a Vote of Security Holders	10
Item 5.	Other Information	11
Item 6.	Exhibits	11
Signatures		12
Certificates

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

CCF HOLDING COMPANY AND SUBSIDIARY

Consolidated Balance Sheets

	June 30, 2007			December 31, 2006
	(Unaudited)			(Audited)
Assets
Cash and due from banks	$	11,900,259		9,788,081
Interest-bearing deposits in other financial institutions		986,502		3,245,438
Federal funds sold		5,497,000		11,455,000
Cash and cash equivalents		18,383,761		24,488,519
Investment securities available-for-sale		64,481,172		46,201,334
Federal Home Loan Bank stock, at cost		1,216,000		1,177,500
Loans, net		331,989,700		333,384,715
Premises and equipment, net		7,384,491		7,395,392
Accrued interest receivable		2,547,952		2,671,000
Cash surrender value of life insurance		5,607,292		5,449,054
Other assets		6,370,138		5,118,768
Total assets	$	437,980,506		425,886,282
Liabilities and Shareholders’ Equity
Deposits:
Noninterest-bearing deposits	$	41,626,471		44,540,700
Interest-bearing demand deposits		175,604,638		146,160,769
Savings accounts		4,608,144		4,634,791
Time deposits less than $100,000		92,051,423		112,489,226
Time deposits greater than $100,000		50,669,060		58,202,104
Total deposits		364,559,736		366,027,590
Securities sold under agreement to repurchase		19,641,791		8,309,406
Federal Home Loan Bank advances		10,000,000		10,000,000
Junior subordinated debentures		8,765,000		8,765,000
Accrued interest payable and other liabilities		3,941,627		3,738,281
Total liabilities		406,908,154		396,840,277
Shareholders’ Equity:
Preferred stock, no par value; 1,000,000 shares authorized; none issued and outstanding		—		—
Common stock, $.10 par value, 20,000,000 shares authorized; 3,654,932 issued and outstanding in 2007; 3,633,096 shares issued and outstanding in 2006.		365,493		363,310
Additional paid-in capital		9,888,291		9,514,640
Retained earnings		21,102,479		19,428,996
Accumulated other comprehensive loss		(283,911	)	(260,941	)
Total shareholders’ equity		31,072,352		29,046,005
Total liabilities & shareholders’ equity	$	437,980,506		425,886,282

See accompanying notes to unaudited consolidated financial statements.

CCF HOLDING COMPANY AND SUBSIDIARY

Consolidated Statements of Earnings

(Unaudited)

	Three-months Ended June 30,			Six-months Ended June 30,
	2007		2006	2007	2006
Interest and dividend income:
Interest and fees on loans	$	7,523,405	6,883,240	15,119,718	13,003,319
Interest-bearing deposits in other financial institutions and federal funds sold		166,908	146,918	329,523	209,039
Interest and dividends on taxable investment securities		666,151	433,119	1,190,781	873,546
Interest on nontaxable investment securities		46,006	52,242	92,020	106,074
Total interest and dividend income		8,402,470	7,515,519	16,732,042	14,191,978
Interest expense:
Deposit accounts		3,268,958	2,410,883	6,507,200	4,351,469
Other borrowings		520,526	407,084	961,168	762,584
Total interest expense		3,789,484	2,817,967	7,468,368	5,114,053
Net interest income		4,612,986	4,697,552	9,263,674	9,077,925
Provision for loan losses		150,000	165,000	290,000	350,000
Net interest income after provision for loan losses		4,462,986	4,532,552	8,973,674	8,727,925
Other income:
Service charges on deposit accounts		372,346	352,301	719,816	699,100
Gain on sale of loans		—	43,902	50,674	43,902
Gain on sale of investment securities		—	2,663	—	2,663
Other		237,283	182,712	461,733	364,465
Total other income		609,629	581,578	1,232,223	1,110,130
Other expenses:
Salaries and employee benefits		2,020,544	1,865,870	4,005,448	3,708,416
Occupancy		511,227	504,802	1,035,138	994,728
Loss on Real Estate Owned		—	—	—	201,500
Other		940,031	771,397	1,638,576	1,400,286
Total other expenses		3,471,802	3,142,069	6,679,162	6,304,930
Earnings before income taxes		1,600,813	1,972,061	3,526,735	3,533,125
Income tax expense		557,082	634,475	1,213,782	1,131,925
Net earnings	$	1,043,731	1,337,586	2,312,953	2,401,200
Basic earnings per share	$	0.29	0.37	0.63	0.66
Diluted earnings per share	$	0.27	0.36	0.61	0.64

See accompanying notes to unaudited consolidated financial statements.

2

CCF HOLDING COMPANY AND SUBSIDIARY

Consolidated Statements of Cash Flows

(Unaudited)

	Six Months Ended June 30,
	2007			2006
Cash flows from operating activities:
Net earnings	$	2,312,953		2,401,200
Adjustments to reconcile net earnings to net cash provided by operating activities:
Provision for loan losses		290,000		350,000
Depreciation, amortization, and accretion, net		368,636		363,509
Net gain on sale of investment securities		—		(2,663	)
Net write-down (gain) on real estate owned		—		201,500
Net loss on sale of premises and equipment		—		18,116
Net gain on sale of loans		(50,674	)	(43,902	)
Increase in cash surrender value of life insurance		(158,238	)	(144,174	)
Change in:
Accrued interest receivable and other assets		(659,330	)	(295,810	)
Accrued interest payable and other liabilities		165,014		(2,565,668	)
Net cash provided by operating activities		2,268,361		282,108
Cash flows from investing activities:
Proceeds from maturities and calls of investment securities available-for-sale		6,550,800		2,480,362
Purchases of investment securities available-for-sale		(24,985,722	)	(995,000	)
Proceeds from redemption of Federal Home Loan Bank stock		—		675,000
Purchase of Federal Home Loan Bank stock		(38,500	)	(948,400	)
Proceeds from sales of real estate owned		692,492		125,000
Net increase in loans		(833,869	)	(48,157,640	)
Proceeds from sale of loans		954,305		11,104,174
Purchases of premises and equipment		(351,852	)	(658,681	)
Net cash used in investing activities		(18,012,346	)	(36,375,185	)
Cash flows from financing activities:
Net change in deposits		(1,467,854	)	33,707,819
Net change in securities sold under agreements to repurchase		11,332,385		5,389,124
Proceeds from Federal Home Loan Bank advances		—		15,000,000
Repayments of Federal Home Loan Bank advances		—		(10,000,000	)
Dividends paid		(601,138	)	(395,809	)
Proceeds from exercise of stock options		380,853		514,672
Retirement of common stock		(5,019	)	(127,712	)
Net cash provided by financing activities		9,639,227		44,088,094
(Decrease) increase in cash and cash equivalents		(6,104,758	)	7,995,017
Cash and cash equivalents at beginning of period	$	24,488,519		15,418,073
Cash and cash equivalents at end of period	$	18,383,761		23,413,090
Supplemental disclosure of cash flow information:
Interest paid	$	7,432,745		5,076,384
Income taxes paid	$	1,644,000		1,186,279

See accompanying notes to unaudited consolidated financial statements.

3

CCF HOLDING COMPANY AND SUBSIDIARY

Notes to Consolidated Financial Statements

(Unaudited)

1.Basis of Presentation

The consolidated financial statements for the three- and six-month periods ended June 30, 2007 and 2006 are not audited and reflect all adjustments (consisting only of normal recurring accruals) which are, in the opinion of management, necessary for a fair presentation of the financial position, operating results, and cash flows for the interim periods. Accordingly, they do not include all information and disclosures required by generally accepted accounting principles for complete financial statements.

The results of operations for the three- and six-month periods ended June 30, 2007 are not necessarily indicative of the results for the entire year ending December 31, 2007.

2.Stock Compensation Plans

The Company adopted SFAS No. 123 (revised 2004) (SFAS No. 123(R)) “Share-Based Payment” on January 1, 2006, using the modified prospective transition method. SFAS No. 123(R) addresses the accounting for share-based payment transactions in which the Company receives employee services in exchange for equity instruments of the Company. SFAS No. 123(R) requires the Company to recognize as compensation expense the “grant date fair value” of stock options granted to employees in the statement of earnings using the fair-value-based method. The Company’s policy is to recognize the compensation expense for stock option grants with graded vesting schedules on a straight-line basis over the requisite service period of the award as required by SFAS No. 123(R).

During 2006, 10,000 options, with a six-month holding period, were granted under the 2000 Stock Option Plan. During the quarter ending June 30, 2007, $76,680 in compensation expense was recorded related to this grant.

During the three- and six-months ending June 30, 2007, the Company did not grant any stock options.

3.Accounting Policies

Reference is made to the accounting policies of the Company described in the notes to the consolidated financial statements contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2006, filed with the Securities and Exchange Commission.

4.Reclassification

Certain amounts in the prior period financial statements have been reclassified to conform to the presentation used in the current period unaudited consolidated financial statements.

5.Earnings per share

Basic earnings per share are based on the weighted average number of common shares outstanding during the period while the effects of potential shares outstanding during the period are included in diluted earnings per share. The reconciliation of the amounts used in the computation of both “basic earnings per share” and “diluted earnings per share” for each period is presented as follows:

For the three-months ended June 30, 2007

	Net Earnings		Common Shares	Per Share Amount
Basic earnings per share	$	1,043,731	3,653,539	$	0.29
Effect of dilutive common stock:
Stock options			157,805	$	(0.02	)
Diluted earnings per share	$	1,043,731	3,811,344	$	0.27

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For the three-months ended June 30, 2006

	Net Earnings		Common Shares	Per Share Amount
Basic earnings per share	$	1,337,586	3,629,116	$	0.37
Effect of dilutive common stock:
Stock options			109,291	$	(0.01	)
Diluted earnings per share	$	1,337,586	3,738,407	$	0.36

For the six-months ended June 30, 2007

	Net Earnings		Common Shares	Per Share Amount
Basic earnings per share	$	2,312,953	3,645,869	$	0.63
Effect of dilutive common stock:
Stock options		—	161,723	$	(0.02	)
Diluted earnings per share	$	2,312,953	3,807,592	$	0.61

For the six-months ended June 30, 2006

	Net Earnings		Common Shares	Per Share Amount
Basic earnings per share	$	2,401,200	3,620,589	$	0.66
Effect of dilutive common stock:
Stock options			119,266	$	(0.02	)
Diluted earnings per share	$	2,401,200	3,739,855	$	0.64

6.Dividends Payable

On June 20, 2007, the Company declared a $0.09 dividend per share to shareholders of record on July 2, 2007, with a payment date of July 16, 2007.

7.Recent Accounting Pronouncements

Other accounting standards that have been issued or proposed by the FASB and other standard setting entities that do not require adoption until a future date are not expected to have a material impact on the Company’s consolidated financial statements upon adoption.

Item 2. Management’s Discussion and Analysis or Plan of Operations

CCF Holding Company (the “Company”) may from time to time make written or oral “forward-looking statements”, including statements contained in the Company’s filings with the Securities and Exchange Commission (including this report on Form 10-Q), in its reports to stockholders and in other communications by the Company, which are made in good faith by the Company pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements involve risks and uncertainties, such as statements of the Company’s plans, objectives, expectations, estimates and intentions, that are subject to change based on various important factors, some of which are beyond the Company’s control. The following factors, among others, could cause the Company’s financial performance to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements: the strength of the United States economy in general and the strength of the local economies in which the Company conducts operations; the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System; inflation; interest rate, market and monetary fluctuations; the timely development of and acceptance of new products

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and services of the Company and the perceived overall value of these products and services by users, including the features, pricing and quality compared to competitors’ products and services; the willingness of users to substitute competitors’ products and services for the Company’s products and services; the success of the Company in gaining regulatory approval of its products and services, when required; the impact of changes in financial services’ laws and regulations, including laws concerning taxes, banking, securities and insurance; technological changes and acquisitions; managing credit risk; changes in consumer spending and saving habits; the impact of the war on terrorism; and the success of the Company at managing the risks involved in the foregoing.

The Company cautions that these important factors are not exclusive. The Company does not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the Company.

Comparison of Financial Condition at June 30, 2007 and December 31, 2006

Assets - The Company’s total assets increased $12.1 million, or 2.8%, between December 31, 2006, and June 30, 2007. Net loans receivable decreased $1.4 million to $332.0 million at June 30, 2007, from $333.4 million at December 31, 2006. The Company’s loan production for the six-months ending June 30, 2007 totaled $61 million with $31.5 million in commercial loans, $26.2 million in constructions loans and $2.4 million in consumer loans, however, due to repayments, net principal declined $1.2 million. Commercial real estate loans increased $2.1 million during the period. The growth in commercial real estate loans was offset by payoffs of $57.6 million in the commercial and construction lending portfolios. This resulted in net reductions in construction loans of $2.3 million and commercial loans of $1.4 million. The consumer loans and 1-4 family first mortgage loan portfolios had net growth of $63,000. New construction starts decreased significantly and draws on existing construction lines declined from draws totaling $24.7 million during the first six-months of 2006 to draws totaling $15.2 million in the first six-months of 2007. In general, economic activity in the housing sector slowed during the first six-months of 2007 in comparison to the prior two years.

Cash and cash equivalents decreased $6.1 million during the six-month period, with federal funds sold decreasing $6.0 million.

Investment securities increased $18.3 million during the six-months ending June 30, 2007 to cover pledging requirements as the repurchase accounts and public funds deposits increased.

Other assets increased $1.2 million for the six-month period. Other Real Estate increased $324,000, accrued interest on investments increased $273,000 and the deferred tax asset increased $767,000.

Liabilities - Total deposits during the six-months ended June 30, 2007 declined $1.5 million to $364.5 million, from $366.0 million at December 31, 2006. Transaction accounts, which include non-interest bearing demand deposit accounts, NOW accounts and money market accounts, increased to $217.2 million, an increase of $26.5 million, or 13.9%, from $190.7 million at December 31, 2006. Transaction account growth continues to be a focus of the marketing strategy of Heritage Bank (the “Bank”). Average balances of transaction accounts increased during the twelve-month period from June 30, 2006, to June 30, 2007, from $176.6 million to $199.8 million, respectively.

Repurchase accounts, used by small businesses as a cash management tool, increased during the twelve-month period by $7.3 million from $6.3 million average balance at June 30, 2006, to $13.6 million average at June 30, 2007. During the six-month period ended June 30, 2007, repurchase agreements reached $19.6 million, an increase of $11.3 million, or 136.4%, over the December 31, 2006 balance of $8.3 million.

Time deposits decreased $28.0 million during the six-month period from $170.7 million at December 31, 2006, to $142.7 million at June 30, 2007. This decrease was a managed decline, offset by the growth in transaction accounts during the six-month period.

Shareholders’ Equity - Shareholders’ equity increased $2.0 million, from $29.0 million at December 31, 2006, to $31.0 million at June 30, 2007. This increase was the result of net earnings of $2.3 million in the first six-months of 2007 and issuance of stock upon the exercise of stock options of approximately $153,000, partially offset by the declaration of $0.175 per share dividends of approximately $639,000. The remainder of the offset is a reflection of the change in the fair value of the Company’s available-for-sale investment securities portfolio, which affects accumulated other comprehensive income. The ratio of shareholders’ equity as a percentage of total assets was 7.1% at June 30, 2007 and 6.8% at December 31, 2006. Book value per share increased from $7.99 at December 31, 2006, to $8.50 at June 30, 2007.

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Comparison of Operating Results for the Three-Months and Six-Months Ended June 30, 2007 and June 30, 2006

Net Earnings - The Company had net earnings of $1.0 million for the three-month period ended June 30, 2007, compared to net earnings of $1.3 million in the same three-month period in 2006. This represents a decline in net earnings of $294,000, or 21.7%. For the six-month period ending June 30, 2007, earnings were $2.3 million as compared to $2.4 million for the six-month period ending June 30, 2006.

Net Interest Income - Net interest income for the three-month period ended June 30, 2007, decreased $85,000 over the three-month period ending June 30, 2006. Interest income increased for the period by $887,000, from $7.5 million at June 30, 2006, to $8.4 million at June 30, 2007. Interest income on loans increased $640,000 (net of non- accrual interest reversals of $232,000) due to the increase in the average balance of loans outstanding of $33.4 million since June 30, 2006. Additionally, the increase in the average balance in the investment portfolio of $7.0 million since June 30, 2006, increased interest income on investments by $233,000. Interest expense increased $972,000 from $2.8 million in the period ending June 30, 2006, to $3.8 million for the three-month period ending June 30, 2007. The increase is due to the repricing of deposit accounts at higher rates, which continues until all certificates of deposit have re-priced, following the last increase in federal funds rates.

Net interest income for the six-month period ended June 30, 2007 increased by $186,000, from $9.1 million in 2006 to $9.3 million in 2007. Interest income increased by $2.5 million for the six-month period ending June 30, 2007, from $14.2 million in 2006 to $16.7 million in 2007; interest on loans accounts for $2.1 million of the increase. For the six-month period ending June 30, 2007, interest expense increased $2.4 million, from $5.1 million at June 30, 2006 to $7.5 million at June 30, 2007. As noted above, the average rate paid for deposits increased 76 basis points from June 30, 2006 to June 30, 2007.

During the first six-months of 2007, the yield on loans was negatively affected by the increase in the number of non-accrual credits with $232,000 of loan interest reversed during the six-month period. During the same period in 2006, non-accrual credits accounted for $79,250 of loan interest reversals.

Provision for Loan Losses - As loan growth slowed, the Bank’s provision for loan losses for the three- and six-month periods ended June 30, 2007 was reduced. For the quarter ending June 30, 2007, the provision was $150,000 as compared to a provision of $165,000 for the quarter ended June 30, 2006. For the six-month period in 2007, the provision was $290,000 as compared to $350,000 for the six-months ending June 30, 2006. The loan loss reserve balance at June 30, 2007, was $4.1 million, or 1.23% of loans outstanding. For the period ending June 30, 2006, the loan loss reserve was $3.7 million, or 1.17% of loans outstanding. Based on the Bank’s internal calculation the allowance for loan losses is considered adequate. Management will continue to monitor and adjust the allowance provision as necessary during the year based on growth in the loan portfolio, loss experience, workout of non-performing loans, financial condition of borrowers, and continued monitoring of local economic conditions, as well as any other external factors.

During the quarter ending June 30, 2007, nonperforming assets increased $3.8 million over the quarter ending March 31, 2007. Total non-performing assets at June 30, 2007, of $8.2 million were comprised of $3.0 million in other real estate and $5.2 million in non-accrual loans.

Other real estate loans totaling $3.0 million include:

• $2.0 million secured by 22.5 acres of commercial property in Fulton County Georgia;

• $620,000 secured by two completed new construction single family detached homes, one of which is sold in August 2007 with a gain of approximately $40,000;

• $264,000 secured by twelve developed lots in Grantville, Georgia;

• $67,800 secured by a new construction, single family detached house, which was sold on July 10, 2007;

• $66,000 secured by a residential lot in Stockbridge, Georgia.

The non-accrual loans, totaling $5.2 million include:

• $2.4 million in loans secured by developed property which was paid off, including all interest and fees due, on July 12, 2007;

• $1.1 million in loans secured by two completed new construction single family detached homes located in Fayette County Georgia (these amounts were foreclosed in July 2007 and are currently carried as other real estate owned with no impairment charged at foreclosure);

• $619,000 on a completed new construction single family home in Henry County, Georgia;

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The non-accrual loans (cont’d):

• $312,000 on a completed new construction single family home in Pike County, Georgia this loan was foreclosed in August 2007 with no impairment charge;

• $432,000 in loans secured by developed vacant lots in Henry County Georgia;

• $224,000 in loans secured by commercial property in Spalding County Georgia, as of August 2007, these loans are current and all interest has been recovered;

• $57,000 in loans secured by vehicles.

Other Income - - Other income was $610,000 for the three-month period ending June 30, 2007, which exceeded other income of $582,000 for the same period in 2006. This represents an increase of $28,000, or 4.8%. Service charges increased for the three-month period ending June 30, 2007, by $20,000, or 5.7%. For the six-month period ending June 30, 2007, other income increased $122,000, or 11.0%. Of the increase, service charges and other deposit account fees accounted for $29,000. The remaining portion of the increase, $93,000, is related to miscellaneous fees and an increase in the earnings on the life insurance asset.

Other Expenses - Other expenses totaling $3.5 million for the three-month period ended June 30, 2007 increased $330,000, or 10.5%, compared to $3.14 million for the three-month period ended June 30, 2006. Of this increase, salaries and benefits increased $155,000, or 8.3%. Annual salary increases and related benefits expenses, including the expense for stock options of $77,000, accounted for the increase. The remaining increase includes $175,000 in one-time charges related to loan expenses and the acceleration of the amortization of indirect dealer reserve accounts due to pay-downs. For the six-month period ending June 30, 2007, other expenses increased $374,000, or 5.9%. Of this increase, $297,000, or 8.0%, was in salaries and benefits. In 2006, the write-down on real estate owned accounted for $201,500 of other expenses.

Liquidity - The Bank’s short-term liquidity on the balance sheet was 10.19% as of June 30, 2007. Off-balance sheet liquidity, which includes available federal funds borrowing lines and available Federal Home Loan Bank available credit, was 21.33%. The Bank is required to maintain minimum levels of liquid assets as defined by the Georgia Department of Banking and Finance and the Federal Deposit Insurance Corporation (“FDIC”) regulations. The Bank continues to search for deposits and other means of meeting its loan demand. The Bank adjusts its liquidity level as appropriate to meet its asset/liability objectives. The primary sources of funds are deposits, amortization, and prepayments of loans and mortgage-backed securities, maturity of investments, and funds provided from operations. As an alternative to supplement liquidity needs, the Bank has the ability to borrow from the Federal Home Loan Bank of Atlanta and other correspondent banks. These commitments totaled $49.6 million at June 30, 2007, with $10.0 million drawn. Scheduled loan amortization and maturing investment securities are a relatively predictable source of funds, however, deposit flow and loan prepayments are greatly influenced by, among other things, market interest rates, economic conditions, and competition. The Bank’s liquidity, represented by cash, cash equivalents, and unpledged securities available-for-sale, is a product of its operating, investing, and financing activities.

Capital Ratios - Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios of total and Tier 1 capital to risk-weighted assets, and of Tier 1 capital to average assets. As of June 30, 2007, the most recent notification from the FDIC categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the Bank’s capital category.

As of June 30, 2007, total risk based capital ratios were 11.15% for the Bank and 11.64% for the consolidated company. Tier 1 capital to risk weighted assets was 10.05% for the Bank and 10.31% for the consolidated company. The Tier 1 capital to average asset ratio (leverage ratio) was 8.73% for the Bank and 9.10% for the consolidated company.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Market risk, with respect to the Company, is the risk of loss from adverse changes in market prices and interest rates. The Company’s market risk arises principally from interest rate risk inherent in its lending, deposit, and borrowing activities. Although the Company manages certain other risks, such as credit quality and liquidity risk, in the normal course of business management considers interest rate risk to be the Company’s most significant market risk and the risk that could potentially have the largest material effect on the Company’s financial condition and results of operations. The Company does not maintain a trading portfolio or deal in international instruments, and therefore, other types of market risks, such as foreign currency risk and commodity price risk, do not arise in the normal course of its business activities.

Interest rate risk represents the sensitivity of earnings to changes in interest rates. As interest rates change, the interest income and expense associated with the Company’s interest sensitive assets and liabilities also change, thereby impacting net interest income,

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the primary component of the Company’s earnings. The Company has adopted an asset/liability management program to monitor its interest rate sensitivity and to ensure that the Bank is competitive in the loan and deposit markets. Management seeks to manage the relationship between interest-sensitive assets and liabilities in order to protect against wide interest rate fluctuations, including those resulting from inflation.

The Company’s income simulation analysis projected net interest income based on both a rise and fall in interest rates of 200 basis points (i.e. 2.00%) over a twelve-month period. Given this scenario, the Company had, as of June 30, 2007, an exposure to rising rates and a benefit from falling rates. More specifically, the model forecasts a decline in net interest income of $118,000 thousand or 0.6%, as a result of a 200 basis point increase in rates. The model also predicts a $39,000 thousand decline in net interest income, or 0.2%, as a result of a 200 basis point increase in rates. The forecasted results of the model are within the limits specified by the Company’s asset/liability management program. The following chart reflects the Company’s sensitivity to changes in interest rates as of June 30, 2007.

Interest Rate Risk: Income Sensitivity Summary

	Down 200 BP			Current		Up 200 BP
	(Dollar amounts in thousands)
Net interest income	$	18,985		$	19,024	$	18,907
$ change net interest income	$	(118	)		—	$	(39	)
% change net interest income		(0.6	)%		—		(0.2	)%

As market conditions vary from those assumed in the sensitivity analysis, actual results will differ. Also, the sensitivity analysis does not reflect actions that the Company might take in responding to or anticipating changes in interest rates.

Item 4. Controls and Procedures

Within the 90-day period prior to the date of this report, the Company, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as defined in Exchange Act Rule 13a – 15(e). The design of any system of controls and procedures is based in part upon certain assumptions about the likelihood of future events. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective as of June 30, 2007 in ensuring that material information relating to the Company, including our consolidated subsidiaries, is made known to them by others within those entities, particularly during the period in which this quarterly report was being prepared. There were no significant changes in our internal controls or in other factors during the fiscal period ended June 30, 2007 that have materially affected or are reasonable likely to materially affect these controls subsequent to the date of the evaluation.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

You should carefully consider the factors discussed in Part I, “Item 1. Description of Business” under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2006, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing the Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a) Not applicable.

(b) Not applicable.

(c) The following table sets forth the Company’s repurchases of its common equity during the second quarter of 2007:

Period	Total Number of Shares Purchased(1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
April 1 through April 30, 2007	246	$	20.40	—	—
May 1 through May 31, 2007	—		—	—	—
June 1 through June 30, 2007	—		—	—	—
Total	246	$	20.40	—	—

(1) The Company repurchased the shares indicated from certain participants in the Company’s Employee Stock Ownership Plan. The purchases were made pursuant to the terms of the Employee Stock Ownership Plan and such purchases were not made pursuant to a publicly announced plan or program.

Item 3. Defaults Upon Senior Securities

None.

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

The Company held its Annual Meeting of Shareholders on May 24, 2007. Following is a description of each matter voted on at the Annual Meeting and the results of the voting:

1. Election of Directors to serve a three-year term expiring at the 2010 Annual Meeting of Shareholders :

	Roy V. Hall	John B. Lee, Jr.	Leonard A. Moreland
Shares voted in favor	3,180,852	3,180,852	3,170,154
Votes withheld	—	—	—
Shares abstained	324,159	324,159	334,857
Broker non-votes	—	—	—

The terms of Charles S. Tucker and David B. Turner will expire in 2008 and the terms of John T. Mitchell, Edwin S. Kemp, Jr. and Stephen E. Boswell will expire in 2009.

2. Approval of the CCF Holding Company 2007 Stock Incentive Plan:

Shares voted in favor	1,837,960
Shares voted against	1,070,160
Votes withheld	—
Shares abstained	2,857
Broker non-votes	—

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3. Approval of an amendment to the Articles of Incorporation of CCF Holding Company to authorize 20,000,000 shares of common stock:

Shares voted in favor	2,578,165
Shares voted against	921,391
Votes withheld	—
Shares abstained	5,455
Broker non-votes	—

Item 5. Other Information

None.

Item 6. Exhibits

(a) Exhibits

10.20	Form of Nonqualified Stock Option Award Pursuant to the CCF Holding Company 2007 Stock Incentive Plan.
10.21	Form of Incentive Stock Option Award Pursuant to the CCF Holding Company 2007 Stock Incentive Plan.
10.22	Form of Director Nonqualified Stock Option Award Pursuant to the CCF Holding Company 2007 Stock Incentive Plan.
31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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CCF HOLDING COMPANY AND SUBSIDIARY

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.

CCF HOLDING COMPANY

Date: August 14, 2007	BY:	/s/ David B. Turner
		David B. Turner
		President and
		Chief Executive Officer
Date: August 14, 2007	BY:	/s/ Mary Jo Rogers
		Mary Jo Rogers
		Sr. Vice President and
		Chief Financial Officer

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