##### Table of Contents



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: June 30, 2009
 o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period
from

to
 Commission file number: 000-22503
 BEACH FIRST NATIONAL BANCSHARES, INC.
  South Carolina
    
    57-1030117(State of Incorporation)
    
    (I.R.S. Employer Identification No.)
 3751 Robert M. Grissom Parkway, Suite 100, Myrtle Beach, South Carolina 29577
 (843) 626-2265
 Not Applicable
 þ o
 Yes
o No o
 Rule 12b-2
 Large accelerated filer o
    
    Accelerated filer o
    
    Smaller reporting company þ
    
    Non-accelerated filer o
 o þ




---



TABLE OF CONTENTS  PART IItem 1. Financial StatementsConsolidated Condensed Balance SheetsConsolidated Condensed Statements of IncomeConsolidated Condensed Statements of Changes in Shareholders Equity and Comprehensive IncomeConsolidated Condensed Statements of Cash FlowsItem 2. Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 3. Quantitative and Qualitative Disclosures about Market RiskItem 4. Controls and ProceduresPART IIItem 1. Legal ProceedingsItem 1A. Risk FactorsItem 2. Unregistered Sales of Equity Securities and Use of ProceedsItem 3. Defaults Upon Senior SecuritiesItem 4. Submission of Matters to a Vote of Security HoldersItem 5. Other InformationItem 6. ExhibitsSIGNATURESINDEX TO EXHIBITSExhibit 31.1Exhibit 31.2Exhibit 32    Table of Contents  
 
 PART I
FINANCIAL INFORMATION
 
 
 Item 1. Financial Statements
 Beach First National Bancshares, Inc. and Subsidiaries
 
 
 Consolidated Condensed Balance Sheets
 June 30,
    
    
    December 31,
    
    
    June 30,2009
    
    
    2008
    
    
    2008(unaudited)
    
    
    (audited)
    
    
    (unaudited)AssetsCash and due from banks
    
    $
    9,416,829
    
    
    $
    4,830,112
    
    
    $
    10,473,167Short-term investments
    
    
    730,196
    
    
    
    1,469,273
    
    
    
    3,087,016Federal funds sold
    
    
    18,663,000
    
    
    
    5,111,000
    
    
    
    Total cash and cash equivalents
    
    
    28,810,025
    
    
    
    11,410,385
    
    
    
    13,560,183Investment securities
    
    
    81,545,530
    
    
    
    70,594,811
    
    
    
    69,059,993Portfolio loans, net of unearned income
    
    
    536,855,345
    
    
    
    551,156,821
    
    
    
    553,385,016Allowance for loan losses (ALL)
    
    
    (13,034,291
    )
    
    
    (8,642,651
    )
    
    
    (7,646,053
    )Portfolio loans, net of ALL
    
    
    523,821,054
    
    
    
    542,514,170
    
    
    
    545,738,963Mortgage loans held for sale
    
    
    21,966,286
    
    
    
    7,210,088
    
    
    
    6,528,090Federal Reserve Bank stock
    
    
    1,119,000
    
    
    
    1,014,000
    
    
    
    984,000Federal Home Loan Bank stock
    
    
    3,660,600
    
    
    
    3,545,100
    
    
    
    3,545,100Premises and equipment, net
    
    
    15,075,040
    
    
    
    15,624,792
    
    
    
    16,089,907Cash value of life insurance
    
    
    3,741,947
    
    
    
    3,674,106
    
    
    
    3,616,025Investment in BFNB Trusts
    
    
    310,000
    
    
    
    310,000
    
    
    
    310,000OREO and repossessed assets
    
    
    5,064,325
    
    
    
    3,111,741
    
    
    
    2,365,000Other assets
    
    
    12,498,417
    
    
    
    9,806,424
    
    
    
    7,720,769Total assets
    
    $
    697,612,224
    
    
    $
    668,815,617
    
    
    $
    669,518,030Liabilities and shareholders equityLiabilitiesDepositsNoninterest bearing deposits
    
    $
    29,798,351
    
    
    $
    24,628,632
    
    
    $
    37,345,807Interest bearing deposits
    
    
    544,338,588
    
    
    
    508,730,077
    
    
    
    491,735,048Total deposits
    
    
    574,136,939
    
    
    
    533,358,709
    
    
    
    529,080,855Advances from Federal Home Loan Bank
    
    
    55,000,000
    
    
    
    55,000,000
    
    
    
    55,000,000Federal funds purchased
    
    
    
    
    
    
    
    
    
    
    7,383,200Other borrowings and repurchase agreements
    
    
    12,979,509
    
    
    
    16,165,022
    
    
    
    10,937,468Junior subordinated debentures
    
    
    10,310,000
    
    
    
    10,310,000
    
    
    
    10,310,000Other liabilities
    
    
    5,605,626
    
    
    
    4,263,797
    
    
    
    3,706,225Total liabilities
    
    $
    658,032,074
    
    
    $
    619,097,528
    
    
    $
    616,417,748Shareholders equityCommon stock, $1 par value; 10,000,000 shares
authorized; 4,845,018 issued and outstanding at
June 30, 2009, December 31, 2008,
and at June 30, 2008
    
    
    4,845,018
    
    
    
    4,845,018
    
    
    
    4,845,018Paid-in capital
    
    
    29,522,583
    
    
    
    29,513,166
    
    
    
    29,503,750Retained earnings
    
    
    5,056,241
    
    
    
    14,875,309
    
    
    
    19,803,645Accumulated other comprehensive income (loss)
    
    
    156,308
    
    
    
    484,596
    
    
    
    (1,052,131
    )Total shareholders equity
    
    
    39,580,150
    
    
    
    49,718,089
    
    
    
    53,100,282Total liabilities and shareholders equity
    
    $
    697,612,224
    
    
    $
    668,815,617
    
    
    $
    669,518,030
   2




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##### Table of Contents



Beach First National Bancshares, Inc, and Subsidiaries
 
 
 Consolidated Condensed Statements of Income
 Six Months Ended
    
    
    Three Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)Interest incomeInterest and fees on loans
    
    $
    15,268,352
    
    
    $
    19,463,997
    
    
    $
    7,489,393
    
    
    $
    9,304,543Investment securities
    
    
    1,613,731
    
    
    
    1,906,342
    
    
    
    799,375
    
    
    
    907,898Fed funds sold and short term investments
    
    
    22,723
    
    
    
    86,885
    
    
    
    15,461
    
    
    
    15,283Other
    
    
    5,907
    
    
    
    9,445
    
    
    
    2,705
    
    
    
    4,133Total interest income
    
    
    16,910,713
    
    
    
    21,466,669
    
    
    
    8,306,934
    
    
    
    10,231,857Interest expenseDeposits
    
    
    8,512,734
    
    
    
    9,631,937
    
    
    
    4,145,632
    
    
    
    4,543,330Advances from the FHLB, federal funds purchased
and other borrowings
    
    
    1,296,883
    
    
    
    1,480,042
    
    
    
    644,156
    
    
    
    728,589Junior subordinated debentures
    
    
    196,464
    
    
    
    311,726
    
    
    
    89,972
    
    
    
    137,348Total interest expense
    
    
    10,006,081
    
    
    
    11,423,705
    
    
    
    4,879,760
    
    
    
    5,409,267Net interest income
    
    
    6,904,632
    
    
    
    10,042,964
    
    
    
    3,427,174
    
    
    
    4,822,590Provision for loan losses
    
    
    14,900,000
    
    
    
    1,314,000
    
    
    
    6,400,000
    
    
    
    568,000Net interest income (loss) after provision for loan losses
    
    
    (7,995,368
    )
    
    
    8,728,964
    
    
    
    (2,972,826
    )
    
    
    4,254,590Noninterest incomeService fees on deposit accounts
    
    
    107,307
    
    
    
    209,477
    
    
    
    52,862
    
    
    
    55,433Mortgage production related income
    
    
    3,966,461
    
    
    
    1,663,699
    
    
    
    2,257,793
    
    
    
    923,698Merchant income
    
    
    469,350
    
    
    
    384,829
    
    
    
    280,726
    
    
    
    231,142Income from cash value life insurance
    
    
    68,905
    
    
    
    72,583
    
    
    
    34,356
    
    
    
    39,056Gain on sale of investment securities
    
    
    306,094
    
    
    
    
    
    
    
    255,147
    
    
    
    Gain on sale of fixed assets
    
    
    
    
    
    
    220
    
    
    
    
    
    
    
    (Loss) on sale of OREO (and writedowns)
    
    
    (905,161
    )
    
    
    (2,891
    )
    
    
    (701,961
    )
    
    
    (2,501
    )Other income
    
    
    794,931
    
    
    
    518,944
    
    
    
    86,396
    
    
    
    220,010Total noninterest income
    
    
    4,807,887
    
    
    
    2,846,861
    
    
    
    2,265,319
    
    
    
    1,466,838Noninterest expenseSalaries and wages
    
    
    4,586,998
    
    
    
    3,673,688
    
    
    
    2,403,920
    
    
    
    1,975,807Employee benefits
    
    
    871,780
    
    
    
    799,853
    
    
    
    456,789
    
    
    
    398,645Supplies and printing
    
    
    55,761
    
    
    
    104,916
    
    
    
    29,553
    
    
    
    52,649Advertising and public relations
    
    
    167,934
    
    
    
    318,942
    
    
    
    80,038
    
    
    
    136,542Professional fees
    
    
    417,297
    
    
    
    339,160
    
    
    
    233,799
    
    
    
    196,724Depreciation and amortization
    
    
    573,248
    
    
    
    550,206
    
    
    
    286,293
    
    
    
    281,269Occupancy
    
    
    837,558
    
    
    
    806,242
    
    
    
    411,010
    
    
    
    395,627Data processing fees
    
    
    409,051
    
    
    
    636,525
    
    
    
    206,502
    
    
    
    450,225Mortgage production related expenses
    
    
    634,993
    
    
    
    379,018
    
    
    
    380,392
    
    
    
    209,351Merchant processing
    
    
    381,186
    
    
    
    406,182
    
    
    
    223,917
    
    
    
    248,505Other operating expenses
    
    
    2,987,028
    
    
    
    1,661,621
    
    
    
    2,055,650
    
    
    
    852,257Total noninterest expenses
    
    
    11,922,834
    
    
    
    9,676,353
    
    
    
    6,767,863
    
    
    
    5,197,601Income (loss) before income taxes
    
    
    (15,110,315
    )
    
    
    1,899,472
    
    
    
    (7,475,370
    )
    
    
    523,827Income tax (benefit) expense
    
    
    (5,291,247
    )
    
    
    679,252
    
    
    
    (2,614,616
    )
    
    
    187,320Net income (loss)
    
    $
    (9,819,068
    )
    
    $
    1,220,220
    
    
    $
    (4,860,754
    )
    
    $
    336,507Basic net income (loss) per common share
    
    $
    (2.03
    )
    
    $
    0.25
    
    
    $
    (1.00
    )
    
    $
    0.07Diluted net income (loss) per common share
    
    $
    (2.03
    )
    
    $
    0.25
    
    
    $
    (1.00
    )
    
    $
    0.07Weighted average common shares outstandingBasic
    
    
    4,845,018
    
    
    
    4,845,018
    
    
    
    4,845,018
    
    
    
    4,845,018Diluted
    
    
    4,845,018
    
    
    
    4,914,943
    
    
    
    4,845,018
    
    
    
    4,903,612
   3




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##### Table of Contents



Beach First National Bancshares, Inc. and Subsidiaries
 
 
 Consolidated Condensed Statements of Changes in Shareholders Equity and Comprehensive Income
  AccumulatedOther
    
    
    TotalCommon stock
    
    
    Paid-in
    
    
    Retained
    
    
    Comprehensive
    
    
    ShareholdersShares
    
    
    Amount
    
    
    Capital
    
    
    Earnings
    
    
    Income (Loss)
    
    
    EquityBalance, December 31, 2007
    
    
    4,845,018
    
    
    $
    4,845,018
    
    
    $
    29,494,912
    
    
    $
    18,583,425
    
    
    $
    (345,305
    )
    
    $
    52,578,050Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,220,220
    
    
    
    
    
    
    
    1,220,220Other comprehensive income, net of taxes:Unrealized gain (loss) on investment securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (702,936
    )
    
    
    (702,936
    )Unrealized gain (loss) on interest rate swap
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,890
    )
    
    
    (3,890
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    513,394Stock based compensation expense
    
    
    
    
    
    
    
    
    
    
    8,838
    
    
    
    
    
    
    
    
    
    
    
    8,838Balance, June 30, 2008
    
    
    4,845,018
    
    
    $
    4,845,018
    
    
    $
    29,503,750
    
    
    $
    19,803,645
    
    
    $
    (1,052,131
    )
    
    $
    53,100,282
 AccumulatedOther
    
    
    TotalCommon stock
    
    
    Paid-in
    
    
    Retained
    
    
    Comprehensive
    
    
    ShareholdersShares
    
    
    Amount
    
    
    Capital
    
    
    Earnings
    
    
    Income
    
    
    EquityBalance, December 31, 2008
    
    
    4,845,018
    
    
    $
    4,845,018
    
    
    $
    29,513,166
    
    
    $
    14,875,309
    
    
    $
    484,596
    
    
    $
    49,718,089Net (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,819,068
    )
    
    
    
    
    
    
    (9,819,068
    )Other comprehensive income, net of taxes:Unrealized gain (loss) on investment securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (630,250
    )
    
    
    (630,250
    )Plus reclassification adjustments for
gain included in net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    202,022
    
    
    
    202,022Unrealized gain (loss) on interest rate swap
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    99,940
    
    
    
    99,940Comprehensive income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,147,356
    )Stock based compensation expense
    
    
    
    
    
    
    
    
    
    
    9,417
    
    
    
    
    
    
    
    
    
    
    
    9,417Balance, June 30, 2009
    
    
    4,845,018
    
    
    $
    4,845,018
    
    
    $
    29,522,583
    
    
    $
    5,056,241
    
    
    $
    156,308
    
    
    $
    39,580,150
   4




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##### Table of Contents



Beach First National Bancshares, Inc. and Subsidiaries
 
 
 Consolidated Condensed Statements of Cash Flows
 For the six months
    
    
    For the yearended
    
    
    endedJune 30,
    
    
    December 31,2009
    
    
    2008
    
    
    2008(Unaudited)
    
    
    (Unaudited)
    
    
    (Audited)Operating activitiesNet (loss) income
    
    $
    (9,819,068
    )
    
    $
    1,220,220
    
    
    $
    (3,708,116
    )Adjustments to reconcile net income to net
cash provided by (used in) operating activities:Depreciation and amortization
    
    
    573,248
    
    
    
    550,206
    
    
    
    1,124,250Write-down on real estate acquired in settlement of loans
    
    
    430,000
    
    
    
    
    
    
    
    420,000Proceeds from sale of mortgages held for sale
    
    
    162,650,504
    
    
    
    65,395,286
    
    
    
    116,079,020Disbursements for mortgages held for sale
    
    
    (177,406,702
    )
    
    
    (65,447,757
    )
    
    
    (116,813,489
    )Discount accretion and premium amortization
    
    
    7,993
    
    
    
    (194,662
    )
    
    
    (217,959
    )Deferred income taxes
    
    
    (918,764
    )
    
    
    
    
    
    
    (918,764
    )Provisions for loan losses
    
    
    14,900,000
    
    
    
    1,314,000
    
    
    
    10,491,000Recourse reserve provision
    
    
    
    
    
    
    10,000
    
    
    
    230,000Gain on sale of fixed assets
    
    
    
    
    
    
    (220
    )
    
    
    (220
    )Gain on sale of investment securities
    
    
    (306,094
    )
    
    
    
    
    
    
    (23,180
    )Loss on sale of other real estate owned
    
    
    475,161
    
    
    
    2,890
    
    
    
    353,909Stock based compensation expense
    
    
    9,417
    
    
    
    8,838
    
    
    
    18,254(Increase) decrease in other assets
    
    
    (1,452,686
    )
    
    
    382,834
    
    
    
    (1,841,491
    )Increase (decrease) in other liabilities
    
    
    1,341,829
    
    
    
    (1,889,047
    )
    
    
    (1,580,078
    )Net cash provided by (used in) operating activities
    
    
    (9,515,162
    )
    
    
    1,352,588
    
    
    
    3,613,136Investing activitiesProceeds from paydowns of investment securities
    
    
    24,519,718
    
    
    
    3,779,062
    
    
    
    9,052,822Proceeds from sale of investment securities
    
    
    19,254,732
    
    
    
    21,195,000
    
    
    
    29,206,146Purchase of investment securities
    
    
    (55,075,899
    )
    
    
    (29,226,455
    )
    
    
    (41,376,937
    )Purchase of FHLB stock
    
    
    (115,500
    )
    
    
    (149,800
    )
    
    
    (149,800
    )Purchase of Federal Reserve Stock
    
    
    (105,000
    )
    
    
    
    
    
    
    (30,000
    )Increase in loans, net
    
    
    (1,689,666
    )
    
    
    (54,691,710
    )
    
    
    (64,580,873
    )Increase in CSV of life insurance contracts
    
    
    (67,841
    )
    
    
    (61,218
    )
    
    
    (119,299
    )Purchase of property and equipment
    
    
    (23,496
    )
    
    
    (893,969
    )
    
    
    (1,035,517
    )Proceeds from sale of property and equipment
    
    
    
    
    
    
    220
    
    
    
    32,838Proceeds from sale of other real estate owned
    
    
    2,625,037
    
    
    
    1,782,757
    
    
    
    4,201,953Net cash used in investing activities
    
    
    (10,677,915
    )
    
    
    (58,266,113
    )
    
    
    (64,798,667
    )Financing activitiesIncrease (decrease) in Federal funds purchased
    
    
    
    
    
    
    (3,998,900
    )
    
    
    (1,796,724
    )Net increase in deposits
    
    
    40,778,230
    
    
    
    69,074,679
    
    
    
    69,160,364Repayments of other borrowings
    
    
    (3,185,513
    )
    
    
    (160,749
    )
    
    
    (326,402
    )Net cash provided by financing activities
    
    
    37,592,717
    
    
    
    64,915,030
    
    
    
    67,037,238Net increase in cash and cash equivalents
    
    
    17,399,640
    
    
    
    8,001,505
    
    
    
    5,851,707Cash and cash equivalents beginning of period
    
    $
    11,410,385
    
    
    $
    5,558,678
    
    
    $
    5,558,678Cash and cash equivalents end of period
    
    $
    28,810,025
    
    
    $
    13,560,183
    
    
    $
    11,410,385Cash paid forIncome taxes (refunds)
    
    $
    (2,516,701
    )
    
    $
    1,246,215
    
    
    $
    1,631,780Interest
    
    $
    10,136,080
    
    
    $
    11,872,371
    
    
    $
    22,469,561
   5




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##### Table of Contents



1. Basis of Presentation
   2. Principles of Consolidation
  3. Earnings per Share
   RECONCILIATION OF THE NUMERATORS AND DENOMINATORS OF THE BASIC AND DILUTED EPS COMPUTATIONS:
 For the six months ended
    
    
    For the year endedJune 30,
    
    
    December 31,2009
    
    
    2008
    
    
    2008Basic net income (loss) per share:Net income (loss)
    
    $
    (9,819,068
    )
    
    $
    1,220,220
    
    
    $
    (3,708,116
    )Average common shares outstanding  basic
    
    
    4,845,018
    
    
    
    4,845,018
    
    
    
    4,845,018Basic net income (loss) per share
    
    $
    (2.03
    )
    
    $
    0.25
    
    
    $
    (0.77
    )Diluted earnings per share:Net income (loss)
    
    $
    (9,819,068
    )
    
    $
    1,220,220
    
    
    $
    (3,708,116
    )Average common shares outstanding  basic
    
    
    4,845,018
    
    
    
    4,845,018
    
    
    
    4,845,018Incremental shares from assumed conversion
of stock options
    
    
    
    
    
    
    69,925
    
    
    
    Average common shares outstanding  diluted
    
    
    4,845,018
    
    
    
    4,914,943
    
    
    
    4,548,018Diluted net income (loss) per share
    
    $
    (2.03
    )
    
    $
    0.25
    
    
    $
    (0.77
    )
  6




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##### Table of Contents



4. Investment Securities
  June 30, 2009Amortized
    
    
    Gross Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueGovernment sponsored enterprises
    
    $
    29,648,468
    
    
    $
    15,240
    
    
    $
    222,190
    
    
    $
    29,441,518Mortgage backed securities
    
    
    49,285,158
    
    
    
    1,202,245
    
    
    
    191,484
    
    
    $
    50,295,919Tax exempt securities
    
    
    1,340,747
    
    
    
    
    
    
    
    21,654
    
    
    $
    1,319,093Corporate
    
    
    804,683
    
    
    
    
    
    
    
    315,683
    
    
    $
    489,000Total securities
    
    $
    81,079,056
    
    
    $
    1,217,485
    
    
    $
    751,011
    
    
    $
    81,545,530
 December 31, 2008Amortized
    
    
    Gross Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueGovernment sponsored enterprises
    
    $
    12,456,243
    
    
    $
    179,193
    
    
    $
    
    
    
    $
    12,635,436Mortgage backed securities
    
    
    54,874,211
    
    
    
    1,303,430
    
    
    
    14,861
    
    
    $
    56,162,780Tax exempt securities
    
    
    1,342,270
    
    
    
    
    
    
    
    34,675
    
    
    $
    1,307,595Corporate
    
    
    806,783
    
    
    
    
    
    
    
    317,783
    
    
    $
    489,000Total securities
    
    $
    69,479,507
    
    
    $
    1,482,623
    
    
    $
    367,319
    
    
    $
    70,594,811
  Amortized cost
    
    
    Fair valueDue within one year
    
    $
    
    
    
    $
    Due after one year through five years
    
    
    10,000,000
    
    
    
    9,984,390Due after five through ten years
    
    
    19,648,468
    
    
    
    19,457,128Due after ten years
    
    
    2,145,430
    
    
    
    1,808,093Sub-total
    
    
    31,793,898
    
    
    
    31,249,611Mortgage backed securities
    
    
    49,285,158
    
    
    
    50,295,919Total securities
    
    $
    81,079,056
    
    
    $
    81,545,530
  7




---



##### Table of Contents



June 30, 2009Less than 12 months
    
    
    12 months or more
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesMortgage backed securities
    
    $
    31,560,286
    
    
    $
    413,674
    
    
    $
    
    
    
    $
    
    
    
    $
    31,560,286
    
    
    $
    413,674Tax exempt securities
    
    
    1,319,093
    
    
    
    21,654
    
    
    
    
    
    
    
    
    
    
    
    1,319,093
    
    
    
    21,654Corporate
    
    
    
    
    
    
    
    
    
    
    489,000
    
    
    
    315,683
    
    
    
    489,000
    
    
    
    315,683Total
    
    $
    32,879,379
    
    
    $
    435,328
    
    
    $
    489,000
    
    
    $
    315,683
    
    
    $
    33,368,379
    
    
    $
    751,011
 December 31, 2008Less than 12 months
    
    
    12 months or more
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesMortgage backed securities
    
    $
    3,166,604
    
    
    $
    14,861
    
    
    $
    
    
    
    $
    
    
    
    $
    3,166,604
    
    
    $
    14,861Tax exempt securities
    
    
    1,307,595
    
    
    
    34,675
    
    
    
    
    
    
    
    
    
    
    
    1,307,595
    
    
    
    34,675Corporate
    
    
    489,000
    
    
    
    317,783
    
    
    
    
    
    
    
    
    
    
    
    489,000
    
    
    
    317,783Total
    
    $
    4,963,199
    
    
    $
    367,319
    
    
    $
    
    
    
    $
    
    
    
    $
    4,963,199
    
    
    $
    367,319
   5. Fair Value Measurements
   Level 1:
 Level 2:
  8




---



##### Table of Contents



Level 3:
  Quoted Market
    
    
    Significant Other
    
    
    SignificantPrice in Active
    
    
    Observable
    
    
    UnobservableMarkets
    
    
    Inputs
    
    
    Inputs(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Available for sale investment securities
    
    
    
    
    
    $
    81,545,530
    
    
    
    Mortgage loans held for sale
    
    
    
    
    
    $
    21,966,286
    
    
    
    Interest rate swap agreement (liability)
    
    
    
    
    
    
    (521,919
    )
    
    
    Total
    
    $
    
    
    
    $
    102,989,897
    
    
    $
    
  Quoted Market
    
    
    Significant Other
    
    
    SignificantPrice in Active
    
    
    Observable
    
    
    UnobservableMarkets
    
    
    Inputs
    
    
    Inputs(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Other real estate owned
    
    
    
    
    
    $
    4,989,325
    
    
    
    Repossessed assets
    
    
    
    
    
    $
    75,000
    
    
    
    Impaired Loans
    
    
    
    
    
    $
    52,529,668
    
    
    
    Total
    
    $
    
    
    
    $
    57,593,993
    
    
    $
    
   9




---



##### Table of Contents



June 30, 2009
    
    
    December 31, 2008Carrying
    
    
    Fair
    
    
    Carrying
    
    
    Fairamount
    
    
    value
    
    
    amount
    
    
    valueFinancial Assets:Cash and due from banks
    
    $
    9,416,829
    
    
    $
    9,416,829
    
    
    $
    4,830,112
    
    
    $
    4,830,112Federal funds sold and short term investments
    
    
    19,393,196
    
    
    
    19,393,196
    
    
    
    6,580,273
    
    
    
    6,580,273Investment securities
    
    
    81,545,530
    
    
    
    81,545,530
    
    
    
    70,594,811
    
    
    
    70,594,811Loans, net of ALL
    
    
    523,821,054
    
    
    
    524,618,000
    
    
    
    542,514,170
    
    
    
    544,810,170Mortgage loans held for sale
    
    
    21,966,286
    
    
    
    21,966,286
    
    
    
    7,210,088
    
    
    
    7,210,088Federal Reserve Bank stock
    
    
    1,119,000
    
    
    
    1,119,000
    
    
    
    1,014,000
    
    
    
    1,014,000Federal Home Bank Loan Bank stock
    
    
    3,660,600
    
    
    
    3,660,600
    
    
    
    3,545,100
    
    
    
    3,545,100Trust preferred securities
    
    
    310,000
    
    
    
    310,000
    
    
    
    310,000
    
    
    
    310,000Cash value of life insurance
    
    
    3,741,947
    
    
    
    3,741,947
    
    
    
    3,674,106
    
    
    
    3,674,106Financial Liabilities:Deposits
    
    
    574,136,939
    
    
    
    575,393,000
    
    
    
    533,358,709
    
    
    
    538,096,709Advances from Federal Home Loan Bank
    
    
    55,000,000
    
    
    
    55,859,000
    
    
    
    55,000,000
    
    
    
    57,834,000Federal funds purchased and other borrowings
    
    
    12,979,509
    
    
    
    12,979,509
    
    
    
    16,165,022
    
    
    
    16,165,022Junior subordinated debt
    
    
    10,310,000
    
    
    
    10,310,000
    
    
    
    10,310,000
    
    
    
    10,310,000
 6. Business Segment Reporting
    June 30, 2009
    
    Bank
    
    
    Mortgage
    
    
    ConsolidatedNet interest income
    
    $
    6,663,409
    
    
    $
    241,223
    
    
    $
    6,904,632Provision for loan losses
    
    
    14,900,000
    
    
    
    
    
    
    
    14,900,000Other income
    
    
    886,667
    
    
    
    3,921,220
    
    
    
    4,807,887Noninterest expenses
    
    
    8,226,451
    
    
    
    3,696,383
    
    
    
    11,922,834Net income (loss)
    
    
    (10,122,007
    )
    
    
    302,939
    
    
    
    (9,819,068
    )End of period assets
    
    
    668,367,216
    
    
    
    29,245,008
    
    
    
    697,612,224
 June 30, 2008
    
    Bank
    
    
    Mortgage
    
    
    ConsolidatedNet interest income
    
    $
    9,860,838
    
    
    $
    182,126
    
    
    $
    10,042,964Provision for loan losses
    
    
    1,314,000
    
    
    
    
    
    
    
    1,314,000Other income
    
    
    1,221,668
    
    
    
    1,625,193
    
    
    
    2,846,861Noninterest expenses
    
    
    7,589,231
    
    
    
    2,087,122
    
    
    
    9,676,353Net income (loss)
    
    
    1,400,805
    
    
    
    (180,585
    )
    
    
    1,220,220End of period assets
    
    
    662,597,677
    
    
    
    6,920,353
    
    
    
    669,518,030
  10




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##### Table of Contents



7. Subsequent Events
   
 
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
   
    
    significant increases in competitive pressure in the banking and financial services
industries;
    
    changes in the interest rate environment which could reduce anticipated or actual
margins;
    
    reduced earnings due to higher credit losses because our loans are concentrated by loan
type within the real estate segment, industry, borrower type, or location of the borrower
or collateral;
    
    changes in political conditions or the legislative or regulatory environment;
    
    general economic conditions, either nationally or regionally and especially in our
primary service area, continuing to be weak resulting in, among other things, a
deterioration in credit quality;
    
    the adequacy of the level of our allowance for loan loss;
    
    the rate of delinquencies, non-accrual loans, and amounts of charge-offs;
    
    the rates of loan growth and seasoning in our loan portfolio;
    
    adverse changes in asset quality and resulting credit risk-related losses and expenses
including the risk of further impairment to the value of our collateral on loans for which
we have already taken specific reserves;
    
    higher than anticipated levels of defaults on loans;
    
    the amount of our real estate-based loans and the weakness in the commercial real estate
market;
    
    changes occurring in business conditions and inflation;
    
    changes in management;
    
    changes in technology;
    
    changes in deposit flows;
  11




---



##### Table of Contents




    
    slower growth, a decrease in reliance upon brokered deposits, increased capital
requirements, and other changes in our business that may be required or necessary in order
for us to comply with the agreement we have with the Office of the Comptroller of the
Currency (the OCC);
    
    potential responses by the OCC relating to our noncompliance with the increased capital
ratios required by the OCC;
    
    our reliance on secondary funding sources such as Federal Home Loan Bank advances,
Federal Reserve Bank discount window borrowings, sales of securities and loans, federal
funds lines of credit from correspondent banks and out-of-market time deposits including
brokered deposits, to meet our liquidity needs;
    
    instability of the U.S. financial system;
    
    the nationalization of the banking industry;
    
    our efforts to raise capital or otherwise increase our regulatory capital ratios;
    
    our ability to retain our existing customers, including our deposit relationships;
    
    changes in monetary and tax policies;
    
    loss of consumer confidence and economic disruptions resulting from terrorist
activities;
    
    changes in the securities markets;
    
    other risks and uncertainties detailed from time to time in our filings with the SEC;
and
    
    natural disasters, such as a hurricane or flooding in our primary service area.
   Critical Accounting Policies
     12




---



##### Table of Contents



Overview
     Results of Operations
 Earnings Review
   Net Interest Income
    13




---



##### Table of Contents



14




---



##### Table of Contents



Average Balances, Income and Expenses, and RatesFor the six months ended June 30,2009
    
    
    2008Average
    
    
    Income/
    
    
    Yield/
    
    
    Average
    
    
    Income/
    
    
    Yield/Balance
    
    
    Expense
    
    
    Rate
    
    
    Balance
    
    
    Expense
    
    
    RateFederal funds sold, short term investments and trust preferred securities
    
    $
    15,073,760
    
    
    $
    22,723
    
    
    
    0.30
    %
    
    $
    6,264,381
    
    
    $
    86,885
    
    
    
    2.79
    %Investment securities plus FHLB and FRB stock
    
    
    81,918,344
    
    
    
    1,619,638
    
    
    
    3.99
    %
    
    
    73,139,319
    
    
    
    1,915,787
    
    
    
    5.27
    %Loans
    
    
    573,559,350
    
    
    
    15,268,353
    
    
    
    5.37
    %
    
    
    537,617,439
    
    
    
    19,463,997
    
    
    
    7.28
    %Total earning assets
    
    $
    670,551,454
    
    
    $
    16,910,714
    
    
    
    5.09
    %
    
    $
    617,021,139
    
    
    $
    21,466,669
    
    
    
    7.00
    %Cash and due from banks
    
    
    6,218,862
    
    
    
    
    
    
    
    
    
    
    
    6,358,829Other assets
    
    
    23,735,921
    
    
    
    
    
    
    
    
    
    
    
    21,055,227Total assets
    
    $
    700,506,237
    
    
    
    
    
    
    
    
    
    
    $
    644,435,195Total interest-bearing deposits
    
    $
    542,428,091
    
    
    $
    8,512,734
    
    
    
    3.16
    %
    
    $
    471,999,392
    
    
    $
    9,631,937
    
    
    
    4.10
    %Other borrowings
    
    
    81,089,103
    
    
    
    1,493,347
    
    
    
    3.71
    %
    
    
    79,643,228
    
    
    
    1,791,768
    
    
    
    4.52
    %Total interest-bearing liabilities
    
    $
    623,517,194
    
    
    $
    10,006,081
    
    
    
    3.24
    %
    
    $
    551,642,620
    
    
    $
    11,423,705
    
    
    
    4.16
    %Demand deposits
    
    
    25,262,343
    
    
    
    
    
    
    
    
    
    
    
    34,651,575Other liabilities
    
    
    4,762,631
    
    
    
    
    
    
    
    
    
    
    
    4,663,159Total liabilities
    
    $
    653,542,168
    
    
    
    
    
    
    
    
    
    
    $
    590,957,354Equity capital
    
    
    46,964,069
    
    
    
    
    
    
    
    
    
    
    
    53,477,841Total liabilities and equity
    
    $
    700,506,237
    
    
    
    
    
    
    
    
    
    
    $
    644,435,195Net interest spread
    
    
    
    
    
    
    
    
    
    
    1.85
    %
    
    
    
    
    
    
    
    
    
    
    2.83
    %Net interest income/margin
    
    
    
    
    
    $
    6,904,633
    
    
    
    2.08
    %
    
    
    
    
    
    $
    10,042,964
    
    
    
    3.27
    %
  Analysis of Changes in Net Interest IncomeFor the three months endedJune 30, 2009 versus 2008Volume
    
    
    Rate
    
    
    Net changeFederal funds sold and short term
investments and trust preferred
securities
    
    $
    13,039
    
    
    $
    (77,201
    )
    
    $
    (64,162
    )Investment securities
    
    
    168,267
    
    
    
    (464,416
    )
    
    
    (296,149
    )Loans
    
    
    902,874
    
    
    
    (5,098,518
    )
    
    
    (4,195,644
    )Total earning assets
    
    
    1,084,180
    
    
    
    (5,640,135
    )
    
    
    (4,555,955
    )Interest-bearing deposits
    
    
    1,047,224
    
    
    
    (2,166,427
    )
    
    
    (1,119,203
    )Other borrowings
    
    
    58,497
    
    
    
    (356,918
    )
    
    
    (298,421
    )Total interest-bearing liabilities
    
    
    1,105,721
    
    
    
    (2,523,345
    )
    
    
    (1,417,624
    )Net interest income (loss)
    
    $
    (21,541
    )
    
    $
    (3,116,790
    )
    
    $
    (3,138,331
    )
  15




---



##### Table of Contents



Provision for Loan Losses
  Noninterest Income
    Noninterest Expense
      16




---



##### Table of Contents



Other Operating ExpensesFor the six months ended
    
    
    For the three months endedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Telephone
    
    $
    73,862
    
    
    $
    88,429
    
    
    $
    35,680
    
    
    $
    45,175Postage and freight
    
    
    71,942
    
    
    
    61,027
    
    
    
    41,239
    
    
    
    30,893Armored car
    
    
    12,960
    
    
    
    43,289
    
    
    
    7,221
    
    
    
    22,515Credit and collection-bank
    
    
    555,819
    
    
    
    179,082
    
    
    
    311,489
    
    
    
    103,309Dues and subscriptions
    
    
    72,331
    
    
    
    79,452
    
    
    
    39,878
    
    
    
    37,180Employee travel, conferences, meals, and lodging
    
    
    45,986
    
    
    
    89,644
    
    
    
    25,745
    
    
    
    53,567Business development and donations
    
    
    119,130
    
    
    
    186,861
    
    
    
    40,106
    
    
    
    107,463FDIC insurance
    
    
    1,141,016
    
    
    
    150,245
    
    
    
    1,014,948
    
    
    
    80,954Other insurance
    
    
    24,521
    
    
    
    25,420
    
    
    
    12,578
    
    
    
    12,850Debit/ATM
    
    
    64,118
    
    
    
    55,276
    
    
    
    32,353
    
    
    
    27,235Credit card processing fees
    
    
    44,368
    
    
    
    27,561
    
    
    
    24,053
    
    
    
    14,827Software maintenance
    
    
    125,831
    
    
    
    134,802
    
    
    
    58,130
    
    
    
    43,794Director BOLI
    
    
    69,160
    
    
    
    67,679
    
    
    
    39,408
    
    
    
    33,851Mortgage recourse expense
    
    
    
    
    
    
    10,000
    
    
    
    
    
    
    
    Foreclosure related expense
    
    
    132,023
    
    
    
    37,021
    
    
    
    86,195
    
    
    
    (966
    )Director advisory fees
    
    
    85,151
    
    
    
    144,674
    
    
    
    42,701
    
    
    
    78,924Furniture and equipment
    
    
    91,958
    
    
    
    173,763
    
    
    
    50,647
    
    
    
    98,335Other operating expenses
    
    
    256,852
    
    
    
    107,396
    
    
    
    193,279
    
    
    
    62,351Total
    
    $
    2,987,028
    
    
    $
    1,661,621
    
    
    $
    2,055,650
    
    
    $
    852,257
 Balance Sheet Review
 General
   17




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##### Table of Contents



Investment Securities
   Loans
   Composition of Loan PortfolioJune 30, 2009
    
    
    December 31, 2008
    
    
    June 30, 2008Percent
    
    
    
    
    
    
    Percent
    
    
    
    
    
    
    PercentAmount
    
    
    of Total
    
    
    Amount
    
    
    of Total
    
    
    Amount
    
    
    of TotalCommercial
    
    $
    57,200,261
    
    
    
    10.7
    %
    
    $
    59,040,069
    
    
    
    10.7
    %
    
    $
    68,450,260
    
    
    
    12.4
    %Real estate  construction
    
    
    23,835,789
    
    
    
    4.4
    %
    
    
    33,741,466
    
    
    
    6.1
    %
    
    
    51,220,297
    
    
    
    9.2
    %Real estate  mortgage
    
    
    446,728,523
    
    
    
    83.2
    %
    
    
    448,970,087
    
    
    
    81.4
    %
    
    
    425,205,087
    
    
    
    76.8
    %Consumer
    
    
    9,281,458
    
    
    
    1.7
    %
    
    
    9,700,120
    
    
    
    1.8
    %
    
    
    8,896,536
    
    
    
    1.6
    %Portfolio loans, gross
    
    
    537,046,031
    
    
    
    100.0
    %
    
    
    551,451,742
    
    
    
    100.0
    %
    
    
    553,772,180
    
    
    
    100.0
    %Unearned loan fees and costs, net
    
    
    (190,686
    )
    
    
    
    
    
    
    (294,921
    )
    
    
    
    
    
    
    (387,164
    )Allowance for possible loan losses
    
    
    (13,034,291
    )
    
    
    
    
    
    
    (8,642,651
    )
    
    
    
    
    
    
    (7,646,053
    )Portfolio loans, net
    
    
    523,821,054
    
    
    
    
    
    
    
    542,514,170
    
    
    
    
    
    
    
    545,738,963Mortgage loans held for sale
    
    
    21,966,286
    
    
    
    
    
    
    
    7,210,088
    
    
    
    
    
    
    
    6,528,090Loans, net
    
    $
    545,787,340
    
    
    
    
    
    
    $
    549,724,258
    
    
    
    
    
    
    $
    552,267,053
   18




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Allowance for Loan Losses
        19




---



##### Table of Contents



Allowance for Loan LossesSix months ended
    
    
    Year ended
    
    
    Six months endedJune 30,
    
    
    December 31,
    
    
    June 30,2009
    
    
    2008
    
    
    2008Average total loans outstanding
    
    $
    573,559,350
    
    
    $
    549,953,836
    
    
    $
    537,617,439Total loans outstanding at period end
    
    
    558,821,631
    
    
    
    558,366,909
    
    
    
    559,913,106Total nonperforming loans
    
    
    43,618,262
    
    
    
    19,968,441
    
    
    
    13,003,335Beginning balance of allowance
    
    
    8,642,651
    
    
    
    6,935,616
    
    
    
    6,935,616Loans charged off
    
    
    (10,590,563
    )
    
    
    (8,858,354
    )
    
    
    (615,977
    )Total recoveries
    
    
    82,203
    
    
    
    74,389
    
    
    
    12,414Net loans charged off
    
    
    (10,508,360
    )
    
    
    (8,783,965
    )
    
    
    (603,563
    )Provision for loan losses
    
    
    14,900,000
    
    
    
    10,491,000
    
    
    
    1,314,000Balance at period end
    
    $
    13,034,291
    
    
    $
    8,642,651
    
    
    $
    7,646,053Net charge-offs to average total loans (annualized)
    
    
    3.69
    %
    
    
    1.60
    %
    
    
    0.23
    %Allowance as a percent of total loans
    
    
    2.33
    %
    
    
    1.55
    %
    
    
    1.37
    %Allowance as a percent of portfolio loans
    
    
    2.43
    %
    
    
    1.57
    %
    
    
    1.38
    %Allowance as a percentage of nonperforming loans
    
    
    29.88
    %
    
    
    43.28
    %
    
    
    58.80
    %
  Allocation of the Allowance for Loan LossesAs of June 30, 2009Commercial
    
    $
    1,321,119
    
    
    
    10.2
    %Real estate  construction
    
    
    3,655,608
    
    
    
    4.3
    %Real estate  mortgage
    
    
    7,712,650
    
    
    
    83.8
    %Consumer
    
    
    150,023
    
    
    
    1.7
    %Unallocated
    
    
    194,891
    
    
    
    Total allowance for loan losses
    
    $
    13,034,291
    
    
    
    100.0
    %
 Nonperforming Assets/Other Real Estate Owned and Repossessed Assets
   20




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##### Table of Contents



For the six months ended
    
    
    For the year endedJune 30,
     
    
    December 31,2009
    
    
    2008
    
    
    2008Impaired loans with specific allowance
    
    $
    38,845,408
    
    
    $
    12,977,301
    
    
    $
    11,210,569Impaired loans with no specific allowance
    
    
    13,684,260
    
    
    
    8,987,369
    
    
    
    18,367,715Total impaired loans (quarter end)
    
    
    52,529,668
    
    
    
    21,964,670
    
    
    
    29,578,284Related allowance (quarter end)
    
    
    7,627,988
    
    
    
    3,498,844
    
    
    
    3,107,168Interest income recongnized
    
    
    95,231
    
    
    
    126,302
    
    
    
    1,584,491Foregone interest
    
    
    708,501
    
    
    
    157,925
    
    
    
    1,222,542Average recorded investment on impaired
    
    
    34,527,728
    
    
    
    10,230,488
    
    
    
    21,148,317
    Deposits
   DepositsJune 30, 2009
    
    
    December 31, 2008
    
    
    June 30, 2008% of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % ofAmount
    
    
    Deposits
    
    
    Amount
    
    
    Deposits
    
    
    Amount
    
    
    DepositsDemand deposit accounts
    
    $
    29,798,351
    
    
    
    5.2
    %
    
    $
    24,628,632
    
    
    
    4.6
    %
    
    $
    37,345,807
    
    
    
    7.1
    %Interest bearing checking accounts
    
    
    20,173,833
    
    
    
    3.5
    %
    
    
    15,916,904
    
    
    
    3.0
    %
    
    
    24,150,241
    
    
    
    4.6
    %Money market accounts
    
    
    75,970,038
    
    
    
    13.2
    %
    
    
    90,708,621
    
    
    
    17.0
    %
    
    
    130,971,973
    
    
    
    24.8
    %Savings accounts
    
    
    3,564,583
    
    
    
    0.6
    %
    
    
    3,491,913
    
    
    
    0.7
    %
    
    
    3,265,704
    
    
    
    0.6
    %Time deposits less than $100,000
    
    
    178,861,237
    
    
    
    31.2
    %
    
    
    150,533,893
    
    
    
    28.2
    %
    
    
    122,855,238
    
    
    
    23.2
    %Time deposits of $100,000 or more
    
    
    172,960,334
    
    
    
    30.1
    %
    
    
    151,329,497
    
    
    
    28.4
    %
    
    
    134,937,892
    
    
    
    25.5
    %Brokered CDs
    
    
    64,106,000
    
    
    
    11.2
    %
    
    
    74,785,000
    
    
    
    14.0
    %
    
    
    75,284,000
    
    
    
    14.2
    %CDARS deposits
    
    
    28,702,563
    
    
    
    5.0
    %
    
    
    21,964,249
    
    
    
    4.1
    %
    
    
    270,000
    
    
    
    0.1
    %Total deposits
    
    $
    574,136,939
    
    
    
    100.0
    %
    
    $
    533,358,709
    
    
    
    100.00
    %
    
    $
    529,080,855
    
    
    
    100.00
    %
  21




---



##### Table of Contents




    
    All newly issued senior unsecured debt (up to $1.5 trillion) issued on or before June
30, 2009, including promissory notes, commercial paper, inter-bank funding, and any
unsecured portion of secured debt. For eligible debt issued on or before June 30, 2009,
coverage would only be provided for three years beyond that date, even if the liability has
not matured; and
 
    
    Funds in non-interest-bearing transaction deposit accounts, or interest bearing
transactions accounts as long as the interest paid is less than 0.50%, held by FDIC-insured
banks until December 31, 2009.
    Advances from Federal Home Loan Bank
   22




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##### Table of Contents



Current
    
    
    Maturity
    
    
    OptionFHLB Description
    
    Balance
    
    
    Rate
    
    
    Date
    
    
    DateFixed rate advances:Fixed rate
    
    $
    10,000,000
    
    
    
    5.36
    %
    
    
    06/04/10
    
    
    
    Fixed rate hybrid
    
    
    5,000,000
    
    
    
    4.76
    %
    
    
    10/21/10
    
    
    
    Convertible
    
    
    7,500,000
    
    
    
    4.51
    %
    
    
    11/23/10
    
    
    
    Convertible
    
    
    5,000,000
    
    
    
    3.68
    %
    
    
    07/13/15
    
    
    
    07/13/09Convertible
    
    
    5,000,000
    
    
    
    4.06
    %
    
    
    09/29/15
    
    
    
    09/29/09Convertible
    
    
    5,000,000
    
    
    
    4.16
    %
    
    
    03/13/17
    
    
    
    09/14/09Convertible
    
    
    7,500,000
    
    
    
    4.39
    %
    
    
    04/13/17
    
    
    
    07/13/09Variable rate
advances:Prime based advance
    
    
    10,000,000
    
    
    
    0.41
    %
    
    
    9/19/2011
    
    
    
    $
    55,000,000
 Junior Subordinated Debentures
  Capital Resources
    Liquidity Management
   23




---



##### Table of Contents



Interest Rate Sensitivity
     24




---



##### Table of Contents



Off Balance Sheet Risk
     Impact of Inflation
   Recently Issued Accounting Standards
 FASB Accounting Standards Codification TM FASB Accounting Standards Codification TM Accounting Standards Codification
   25




---



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26




---



##### Table of Contents



27




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##### Table of Contents



Item 3.
    Quantitative and Qualitative Disclosures about Market Risk
   
 
 Item 4.

    Controls and Procedures
   
 
 PART II
 OTHER INFORMATION
 
 
 Item 1.

    Legal Proceedings
  
 
 Item 1A.
    Risk Factors
  
 
 Item 2.
    Unregistered Sales of Equity Securities and Use of Proceeds
  
 
 Item 3.
    Defaults Upon Senior Securities
   28




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##### Table of Contents



Item 4.
    Submission of Matters to a Vote of Security Holders
  Proposal #1  Election of Class I Directors
 Voting Shares in Favor
    
    
    WithheldClass I Directors:
    
    #
    
    
    %
    
    
    AuthorityM. Bert Anderson
    
    
    3,989,023
    
    
    
    82.3
    
    
    
    128,956O. Bart Buie
    
    
    4,075,563
    
    
    
    84.1
    
    
    
    42,416Michael Harrington
    
    
    4,076,838
    
    
    
    84.1
    
    
    
    41,141Rick Seagroves
    
    
    4,065,288
    
    
    
    83.9
    
    
    
    52,691Walt Standish
    
    
    4,055,000
    
    
    
    83.7
    
    
    
    62,979
 
 
 Item 5.
    
    Other Information
  
 
 Item 6.
    
    Exhibits
 Exhibit
    
    Description31.1
    
    
    Rule 13a-14(a) Certification of the Principal Executive Officer.31.2
    
    
    Rule 13a-14(a) Certification of the Principal Financial Officer.32
    
    
    Section 1350 Certifications.
  29




---



##### Table of Contents



BEACH FIRST NATIONAL BANCSHARES, INC.Date:  August 14, 2009
    By:

/s/ Walter E. Standish, IIIWalter E. Standish, IIIPresident and Chief Executive OfficerDate: August 14, 2009
    By:
    /s/ Gary S. AustinGary S. AustinChief Financial and Principal Accounting Officer  30




---



##### Table of Contents



ExhibitNumber
    
    Description31.1
    
    
    Rule 13a-14(a) Certification of the Principal Executive Officer31.2
    
    
    Rule 13a-14(a) Certification of the Principal Financial Officer32
    
    
    Section 1350 Certifications
  31