##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-Q
 þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended June 30, 2010
 - or -
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period from __________ to _________
 Commission File Number 0-22981
 GEORGIA-CAROLINA BANCSHARES, INC.
  Georgia
    
    58-2326075(State or other Jurisdiction of
    
    (I.R.S. Employer Identification Number)Incorporation or Organization)
 (Address of principal executive offices, including zip code)
 (Registrants telephone number, including area code)
 (Former name, former address and former fiscal year, if changed since last report)
  þ o
  o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ
  o þ
  Class
    
    Outstanding at August 13, 2010Common Stock, $.001 Par Value
    
    3,527,684 shares




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##### 



GEORGIA-CAROLINA BANCSHARES, INC.
  PagePART I. FINANCIAL INFORMATIONItem 1. Financial Statements (Unaudited)Condensed Consolidated Balance Sheets as of June 30, 2010 and
December 31, 2009
    
    
    2Condensed Consolidated Statements of Operations for the Three and Six Months
Ended June 30, 2010 and 2009
    
    
    3Condensed Consolidated Statements of Comprehensive Income/(Loss) for the
Three and Six Months Ended June 30, 2010 and 2009
    
    
    4Condensed Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 2010 and 2009
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    12Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    21Item 4. Controls and Procedures
    
    
    21PART II. OTHER INFORMATIONItem 6. Exhibits
    
    
    22SIGNATURES
    
    
    23EXHIBIT INDEX
    
    
    24Exhibit 10.1Exhibit 10.2Exhibit 31.1Exhibit 31.2Exhibit 32.1




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##### Table of Contents



Part I  FINANCIAL INFORMATION
 
 Item 1.
    
    Financial Statements.
 GEORGIA-CAROLINA BANCSHARES, INC.
 
 Condensed Consolidated Balance Sheets
 (dollars in thousands)
 June 30,
    
    
    December 31,2010
    
    
    2009(Unaudited)ASSETSCash and due from banks
    
    $
    12,473
    
    
    $
    10,970Interest-bearing deposits with banks
    
    
    22,142
    
    
    
    2,085Federal funds sold
    
    
    
    
    
    
    3,175Securities available-for-sale
    
    
    49,003
    
    
    
    44,461Loans, net of allowance for loan losses of $6,123 and $5,072, respectively
    
    
    321,876
    
    
    
    331,777Loans, held for sale
    
    
    52,474
    
    
    
    58,135Bank premises and fixed assets
    
    
    9,455
    
    
    
    9,654Accrued interest receivable
    
    
    1,738
    
    
    
    1,851Foreclosed real estate, net of allowance
    
    
    3,530
    
    
    
    4,466Deferred tax asset, net
    
    
    1,063
    
    
    
    1,018Federal Home Loan Bank stock
    
    
    2,828
    
    
    
    2,828Bank-owned life insurance
    
    
    8,982
    
    
    
    8,812Other assets
    
    
    5,166
    
    
    
    4,781Total assets
    
    $
    490,730
    
    
    $
    484,013LIABILITIES AND SHAREHOLDERS EQUITYDeposits:Non-interest bearing
    
    $
    43,530
    
    
    $
    41,787Interest-bearing:NOW accounts
    
    
    40,340
    
    
    
    36,395Savings
    
    
    53,132
    
    
    
    51,424Money market accounts
    
    
    24,964
    
    
    
    19,232Time deposits of $100,000, and over
    
    
    178,247
    
    
    
    179,123Other time deposits
    
    
    75,045
    
    
    
    77,279Total deposits
    
    
    415,258
    
    
    
    405,240Borrowings:Federal Home Loan Bank borrowings
    
    
    
    
    
    
    3,600Repurchase agreements
    
    
    4,513
    
    
    
    3,697Long-term debt
    
    
    25,000
    
    
    
    25,000Other liabilities and borrowings
    
    
    3,278
    
    
    
    3,203Total liabilities
    
    
    448,049
    
    
    
    440,740Shareholders equity:Preferred stock, par value $.001; 1,000,000 shares authorized; none issued
    
    
    
    
    
    
    Common stock, par value $.001; 9,000,000 shares authorized;
3,517,700 and 3,499,477 shares issued and outstanding
    
    
    4
    
    
    
    4Additional paid-in-capital
    
    
    15,684
    
    
    
    15,567Retained earnings
    
    
    26,287
    
    
    
    27,355Accumulated other comprehensive income
    
    
    706
    
    
    
    347Total shareholders equity
    
    
    42,681
    
    
    
    43,273Total liabilities and shareholders equity
    
    $
    490,730
    
    
    $
    484,013
   2




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##### Table of Contents



GEORGIA-CAROLINA BANCSHARES, INC.
 
 Condensed Consolidated Statements of Operations
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(Unaudited)
    
    
    
    
    
    
    (Unaudited)Interest incomeInterest and fees on loans
    
    $
    5,721
    
    
    $
    5,551
    
    
    $
    11,273
    
    
    $
    10,656Interest on taxable securities
    
    
    436
    
    
    
    499
    
    
    
    831
    
    
    
    1,067Interest on nontaxable securities
    
    
    93
    
    
    
    103
    
    
    
    190
    
    
    
    208Interest on Federal funds sold
    
    
    7
    
    
    
    1
    
    
    
    14
    
    
    
    3Total interest income
    
    
    6,257
    
    
    
    6,154
    
    
    
    12,308
    
    
    
    11,934Interest expenseInterest on time deposits of $100,000 or more
    
    
    926
    
    
    
    1,488
    
    
    
    1,862
    
    
    
    2,995Interest on other deposits
    
    
    681
    
    
    
    852
    
    
    
    1,403
    
    
    
    1,720Interest on funds purchased and other borrowings
    
    
    226
    
    
    
    244
    
    
    
    449
    
    
    
    516Total interest expense
    
    
    1,833
    
    
    
    2,584
    
    
    
    3,714
    
    
    
    5,231Net interest income
    
    
    4,424
    
    
    
    3,570
    
    
    
    8,594
    
    
    
    6,703Provision for loan losses
    
    
    4,706
    
    
    
    613
    
    
    
    5,792
    
    
    
    1,240Net interest income/(loss) after provision for loan losses
    
    
    (282
    )
    
    
    2,957
    
    
    
    2,802
    
    
    
    5,463Non-interest incomeService charges on deposits
    
    
    363
    
    
    
    363
    
    
    
    706
    
    
    
    698Gain on sale of mortgage loans
    
    
    2,436
    
    
    
    2,749
    
    
    
    4,855
    
    
    
    4,644Other income/loss
    
    
    255
    
    
    
    615
    
    
    
    522
    
    
    
    1,017Total non-interest income
    
    
    3,054
    
    
    
    3,727
    
    
    
    6,083
    
    
    
    6,359Non-interest expenseSalaries and employee benefits
    
    
    3,325
    
    
    
    3,249
    
    
    
    6,377
    
    
    
    6,140Occupancy expenses
    
    
    440
    
    
    
    401
    
    
    
    818
    
    
    
    819Other expenses
    
    
    1,911
    
    
    
    1,786
    
    
    
    3,566
    
    
    
    3,128Total non-interest expense
    
    
    5,676
    
    
    
    5,436
    
    
    
    10,761
    
    
    
    10,087Income/(loss) before income taxes
    
    
    (2,904
    )
    
    
    1,248
    
    
    
    (1,876
    )
    
    
    1,735Income tax provision
    
    
    (998
    )
    
    
    349
    
    
    
    (808
    )
    
    
    441Net income/(loss)
    
    $
    (1,906
    )
    
    $
    899
    
    
    $
    (1,068
    )
    
    $
    1,294Net income/(loss) per share of common stockBasic
    
    $
    (0.54
    )
    
    $
    0.26
    
    
    $
    (0.30
    )
    
    $
    0.37Diluted
    
    $
    (0.54
    )
    
    $
    0.26
    
    
    $
    (0.30
    )
    
    $
    0.37
   3




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GEORGIA-CAROLINA BANCSHARES, INC.
 
 Condensed Consolidated Statements of Comprehensive Income/(Loss)  (dollars in thousands)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(Unaudited)
    
    
    
    
    
    
    (Unaudited)Net income/(loss)
    
    $
    (1,906
    )
    
    $
    899
    
    
    $
    (1,068
    )
    
    $
    1,294Unrealized holding gains and (losses)
arising during period, less reclassifications adjustment for gains
and losses included in net income,net of tax
    
    
    287
    
    
    
    49
    
    
    
    359
    
    
    
    (20
    )Comprehensive income/(loss)
    
    $
    (1,619
    )
    
    $
    948
    
    
    $
    (709
    )
    
    $
    1,274
   4




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##### Table of Contents



GEORGIA-CAROLINA BANCSHARES, INC.
 
 Condensed Consolidated Statements of Cash Flows
 (dollars in thousands)
 Six Months Ended June 30,2010
    
    
    2009(Unaudited)Cash flows from operating activitiesNet income/(loss)
    
    $
    (1,068
    )
    
    $
    1,294Adjustments to reconcile net income/(loss)
to net cash provided by/(used in) operating activities:Depreciation and amortization
    
    
    330
    
    
    
    342Provision for loan losses
    
    
    5,792
    
    
    
    1,240Stock option expense
    
    
    42
    
    
    
    39Stock compensation
    
    
    75
    
    
    
    79Increase in cash value of bank-owned life insurance
    
    
    (170
    )
    
    
    (170
    )(Gain)/loss on sales of foreclosed real estate
    
    
    7
    
    
    
    (467
    )Net originations, proceeds and gain on loans held for sale
    
    
    5,661
    
    
    
    (29,917
    )Decrease in accrued interest receivable
    
    
    113
    
    
    
    173Increase in accrued interest payable
    
    
    139
    
    
    
    429Increase in deferred income tax asset, net
    
    
    (247
    )
    
    
    (205
    )Net change in other assets and liabilities
    
    
    (500
    )
    
    
    1,255Net cash provided by/(used in) operating activities
    
    
    10,174
    
    
    
    (25,908
    )Cash flows from investing activities(Increase)/decrease in federal funds sold
    
    
    3,175
    
    
    
    (1,475
    )Loan originations and collections, net
    
    
    3,048
    
    
    
    (3,473
    )Purchases of available for sale securities
    
    
    (19,252
    )
    
    
    (10,655
    )Proceeds from maturities, sales & calls of
available-for-sale securities, net
    
    
    15,269
    
    
    
    19,912Purchases of restricted securities
    
    
    
    
    
    
    (1,995
    )Proceeds from sales of restricted securities
    
    
    
    
    
    
    1,368Proceeds from sales of foreclosed real estate
    
    
    1,990
    
    
    
    3,480Net additions to bank premises and fixed assets
    
    
    (78
    )
    
    
    (77
    )Net cash provided by investing activities
    
    
    4,152
    
    
    
    7,085Cash flows from financing activitiesIncrease in deposits
    
    
    10,018
    
    
    
    20,874Increase/(decrease) in FHLB borrowings
    
    
    (3,600
    )
    
    
    8,098Increase/(decrease) in repurchase agreements and other borrowings
    
    
    816
    
    
    
    (4,172
    )Proceeds from stock options exercised
    
    
    
    
    
    
    52Net cash provided by financing activities
    
    
    7,234
    
    
    
    24,852Net increase in cash and total on deposit with banks
    
    
    21,560
    
    
    
    6,029Cash and total on deposit with banks at beginning of period
    
    
    13,055
    
    
    
    9,954Cash and total on deposit with banks at end of period
    
    $
    34,615
    
    
    $
    15,983
   5




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GEORGIA-CAROLINA BANCSHARES, INC.
 
 Notes to Condensed Consolidated Financial Statements
June 30, 2010
(Unaudited)
 Note 1  Basis of Presentation
    Note 2  Stock-Based Compensation
 Compensation-Stock
Compensation,
  Note 3  Earnings Per Share
   6




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For the Three Months Ended June 30, 2010WeightedAverage Shares-
    
    
    Per-ShareNumerator
    
    
    Denominator
    
    
    AmountBasic EPSIncome/(loss) available to common
stockholders
    
    $
    (1,906,000
    )
    
    
    3,513,928
    
    
    $
    (0.54
    )Effect of stock options outstanding
    
    
    
    
    
    
    
    
    
    
    Diluted EPSIncome/(loss) available to common stockholders
    
    $
    (1,906,000
    )
    
    
    3,513,928
    
    
    $
    (0.54
    )
 For the Three Months Ended June 30, 2009WeightedAverage Shares-
    
    
    Per-ShareNumerator
    
    
    Denominator
    
    
    AmountBasic EPSIncome available to common stockholders
    
    $
    899,000
    
    
    
    3,481,345
    
    
    $
    0.26Effect of stock options outstanding
    
    
    
    
    
    
    12,785
    
    
    
    Diluted EPSIncome available to common stockholders
    
    $
    899,000
    
    
    
    3,494,130
    
    
    $
    0.26
 For the Six Months Ended June 30, 2010WeightedAverage Shares-
    
    
    Per-ShareNumerator
    
    
    Denominator
    
    
    AmountBasic EPSIncome/(loss) available to common
stockholders
    
    $
    (1,068,000
    )
    
    
    3,509,417
    
    
    $
    (0.30
    )Effect of stock options outstanding
    
    
    
    
    
    
    
    
    
    
    Diluted EPSIncome/(loss) available to common stockholders
    
    $
    (1,068,000
    )
    
    
    3,509,417
    
    
    $
    (0.30
    )
 For the Six Months Ended June 30, 2009WeightedAverage Shares-
    
    
    Per-ShareNumerator
    
    
    Denominator
    
    
    AmountBasic EPSIncome available to common stockholders
    
    $
    1,294,000
    
    
    
    3,472,845
    
    
    $
    0.37Effect of stock options outstanding
    
    
    
    
    
    
    17,185
    
    
    
    Diluted EPSIncome available to common stockholders
    
    $
    1,294,000
    
    
    
    3,490,030
    
    
    $
    0.37
  7




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Note 4  Fair Value Measurement
 Fair Value Measurements and Disclosures,
    Level 1
 Level 2
 Level 3
  8




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##### Table of Contents



Investment Securities Available-for-Sale
  Loans Held for Sale
  Loans
  Foreclosed Assets
   9




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##### Table of Contents



Fair Value Measurements atJune 30, 2010, Using,Total
    
    
    
    
    
    
    (in thousands)Carrying
    
    
    
    
    
    
    QuotedAmount in
    
    
    
    
    
    
    Prices inthe
    
    
    Assets/
    
    
    Active
    
    
    Significant
    
    
    SignificantConsolidated
    
    
    Liabilities
    
    
    Markets for
    
    
    Other
    
    
    OtherBalance
    
    
    Measured at
    
    
    Identical
    
    
    Observable
    
    
    UnobservableSheet
    
    
    Fair Value
    
    
    Assets
    
    
    Inputs
    
    
    InputsDescription
    
    6/30/2010
    
    
    6/30/2010
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Available-for-sale
securities,
including FHLB
stock
    
    $
    49,003
    
    
    $
    49,003
    
    
    $
    
    
    
    $
    49,003
    
    
    $
    
  June 30, 2010
    
    
    December 31, 2009Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairAmount
    
    
    Value
    
    
    Amount
    
    
    ValueLoans and loans held for sale
    
    $
    380.5
    
    
    $
    420.2
    
    
    $
    395.0
    
    
    $
    435.5Time deposits
    
    $
    253.3
    
    
    $
    256.0
    
    
    $
    256.4
    
    
    $
    259.7
 Note 5  Impact of Other Recently Issued Accounting Standards
 Disclosures about the Credit
Quality of Financing Receivables and the Allowance for Credit Losses
 Measuring Liabilities
at Fair Value, Fair Value Measurements and Disclosures.
  10




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Generally
Accepted Accounting Principles. The Hierarchy of Generally Accepted Accounting
Principles
  Note 6  Commitments and Contingencies
       11




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Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations.
 Overview
   Critical Accounting Policies
     12




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##### Table of Contents



Contingencies: Loss Contingencies, Receivables: Subsequent
Measurement.
  Results of Operations
 Overview
    13




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##### Table of Contents



Interest Income
  Interest Expense
  Net Interest Income
    14




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##### Table of Contents



Provision for Loan Losses
  Non-interest Income
    15




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##### Table of Contents



Non-interest Expense
   Income Taxes
  Financial Condition
 Overview
   16




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Asset Quality
   June 30,
    
    
    December 31,
    
    
    June 30,2010
    
    
    2009
    
    
    2009Non-accrual loans
    
    $
    4,207,000
    
    
    $
    6,190,000
    
    
    $
    7,911,000OREO, net of valuation allowance
    
    
    3,530,000
    
    
    
    4,466,000
    
    
    
    6,936,000Total non-performing assets
    
    $
    7,737,000
    
    
    $
    10,656,000
    
    
    $
    14,847,000
     17




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Liquidity and Capital Resources
      18




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Off-Balance Sheet Arrangements
   June 30,
    
    
    December 31,2010
    
    
    2009(in thousands)Commitments to extend credit
    
    $
    50,717
    
    
    $
    59,082Standby letters of credit
    
    
    5,607
    
    
    
    5,712Total off-balance sheet financial instruments
    
    $
    56,324
    
    
    $
    64,794
  19




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Supplemental Consolidated Cash Flow Information
  June 30,
    
    
    June 30,2010
    
    
    2009(in thousands)Real estate acquired by foreclosure
    
    $
    1,061
    
    
    $
    2,732Unrealized gain/(loss) on securities
    
    
    559
    
    
    
    (33
    )$
    1,620
    
    
    $
    2,699
 Cautionary Note Regarding Forward-Looking Statements
    20




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Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk.
  
 Item 4.
    
    Controls and Procedures.
     21




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Part II  OTHER INFORMATION
 
 Item 6.
    
    Exhibits.
  Exhibit No.
    
    Description3.1
    
    
    -
    
    Articles of Incorporation of the Company (incorporated herein by reference to Exhibit
3.1 of the Companys Registration Statement on Form SB-2 under the Securities Act of 1933,
as amended, Registration No. 333-69763).3.1.1
    
    
    -
    
    Articles of Amendment to the Articles of Incorporation of the Company (incorporated
herein by reference to Exhibit 3.1.1 of the Companys Annual Report on Form 10-KSB for the
year ended December 31, 2000).3.2
    
    
    -
    
    By-Laws of the Company (incorporated herein by reference to Exhibit 3.2 of the
Companys Registration Statement on Form SB-2 under the Securities Act of 1933, as amended,
Registration No. 333-69763).10.1
    
    
    -
    
    Georgia-Carolina Bancshares, Inc. 2004 Incentive Plan as amended per Board approval
April 26, 2010.10.2
    
    
    -
    
    Resolution to amend the Georgia-Carolina Bancshares, Inc. 1997 Stock Option Plan per
Board approval July 26, 2010.31.1
    
    
    -
    
    Certification of President and Chief Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.31.2
    
    
    -
    
    Certification of Senior Vice President and Chief Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    
    -
    
    Certifications Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
  22




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##### Table of Contents



SIGNATURES
  GEORGIA-CAROLINA BANCSHARES, INC.August 13, 2010
    By:
    /s/ Remer Y. Brinson, IIIRemer Y. Brinson, IIIPresident and Chief Executive Officer
(principal executive officer)August 13, 2010
    By:
    /s/ Thomas J. FlournoyThomas J. FlournoySenior Vice President and Chief Financial Officer
(principal financial and accounting officer)  23




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##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    
    Description of ExhibitExhibit 10.1
    
    Georgia-Carolina Bancshares, Inc. 2004 Incentive Plan as amended per Board approval April 26, 2010.Exhibit 10.2
    
    Resolution to amend the Georgia-Carolina Bancshares, Inc. 1997 Stock Option Plan per Board approval July 26, 2010.Exhibit 31.1
    
    Certification of President and Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.Exhibit 31.2
    
    Certification of Senior Vice President and Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.Exhibit 32.1
    
    Certifications Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
  24