##### 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 September 30, 2009
 - 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 
Incorporation or Organization)
    
    (I.R.S. Employer Identification Number)
 (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)
 YES þ NO o
 YES o NO o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ
 YES o NO þ
  Class
    
    Outstanding at November 13, 2009Common Stock, $.001 Par Value
    
    3,499,477 shares




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##### 



GEORGIA-CAROLINA BANCSHARES, INC.
   PagePART I. FINANCIAL INFORMATIONItem 1. Financial Statements (Unaudited)Condensed Consolidated Balance Sheets as of September 30, 2009
and December 31, 2008
    
    
    2Condensed Consolidated Statements of Income for the Three and Nine Months
Ended September 30, 2009 and 2008
    
    
    3Condensed Consolidated Statements of Comprehensive Income for the
Three and Nine Months Ended September 30, 2009 and 2008
    
    
    4Condensed Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 2009 and 2008
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    14Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    22Item 4. Controls and Procedures
    
    
    22Item 4T. Controls and Procedures
    
    
    22PART II. OTHER INFORMATIONItem 6. Exhibits
    
    
    23SIGNATURES
    
    
    24EXHIBIT INDEX
    
    
    25Exhibit 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
 (Unaudited)
 (dollars in thousands)
 September 30,
    
    
    December 31,2009
    
    
    2008ASSETSCash and due from banks
    
    $
    14,169
    
    
    $
    9,954Federal funds sold
    
    
    1,675
    
    
    
    Securities available-for-sale
    
    
    47,157
    
    
    
    57,594Loans, net of allowance for loan losses of $5,470 and $4,284, respectively
    
    
    339,538
    
    
    
    332,009Loans, held for sale
    
    
    44,267
    
    
    
    28,402Bank premises and fixed assets
    
    
    9,760
    
    
    
    10,081Accrued interest receivable
    
    
    1,905
    
    
    
    1,934Foreclosed real estate, net of allowance
    
    
    5,142
    
    
    
    7,217Deferred tax asset, net
    
    
    1,107
    
    
    
    996Federal Home Loan Bank Stock
    
    
    2,828
    
    
    
    2,201Bank-owned life insurance
    
    
    8,738
    
    
    
    8,402Other assets
    
    
    1,495
    
    
    
    2,038Total assets
    
    $
    477,781
    
    
    $
    460,828LIABILITIES AND SHAREHOLDERS EQUITYDeposits:Non-interest bearing
    
    $
    38,151
    
    
    $
    34,121Interest-bearing:NOW accounts
    
    
    34,114
    
    
    
    37,373Savings
    
    
    55,026
    
    
    
    55,426Money market accounts
    
    
    15,005
    
    
    
    9,772Time deposits of $100,000, and over
    
    
    176,474
    
    
    
    170,878Other time deposits
    
    
    77,791
    
    
    
    69,439Total deposits
    
    
    396,561
    
    
    
    377,009Borrowings:Other liabilities, borrowings and retail agreements
    
    
    38,622
    
    
    
    44,735Total liabilities
    
    
    435,183
    
    
    
    421,744Shareholders equity:Preferred stock, par value $.001; 1,000,000 shares authorized;
none issued
    
    
    
    
    
    
    Common stock, par value $.001; 9,000,000 shares authorized;
3,493,179 and 3,456,816 shares
issued and outstanding
    
    
    4
    
    
    
    4Additional paid-in-capital
    
    
    15,523
    
    
    
    15,268Retained Earnings
    
    
    26,392
    
    
    
    23,604Accumulated other comprehensive income
    
    
    679
    
    
    
    208Total shareholders equity
    
    
    42,598
    
    
    
    39,084Total liabilities and shareholders equity
    
    $
    477,781
    
    
    $
    460,828
   2




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##### Table of Contents



GEORGIA-CAROLINA BANCSHARES, INC.
 
 Condensed Consolidated Statements of Income
 (Unaudited)
 (dollars in thousands, except per share amounts)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Interest incomeInterest and fees on loans
    
    $
    5,727
    
    
    $
    5,668
    
    
    $
    16,383
    
    
    $
    17,839Interest on taxable securities
    
    
    452
    
    
    
    673
    
    
    
    1,519
    
    
    
    2,101Interest on nontaxable securities
    
    
    103
    
    
    
    84
    
    
    
    311
    
    
    
    232Interest on Federal funds sold
    
    
    3
    
    
    
    20
    
    
    
    6
    
    
    
    76Total interest income
    
    
    6,285
    
    
    
    6,445
    
    
    
    18,219
    
    
    
    20,248Interest expenseInterest on time deposits of $100,000 or more
    
    
    1,342
    
    
    
    1,447
    
    
    
    4,337
    
    
    
    4,862Interest on other deposits
    
    
    828
    
    
    
    1,236
    
    
    
    2,548
    
    
    
    4,518Interest on funds purchased and other borrowings
    
    
    229
    
    
    
    304
    
    
    
    745
    
    
    
    811Total interest expense
    
    
    2,399
    
    
    
    2,987
    
    
    
    7,630
    
    
    
    10,191Net interest income
    
    
    3,886
    
    
    
    3,458
    
    
    
    10,589
    
    
    
    10,057Provision for loan losses
    
    
    670
    
    
    
    518
    
    
    
    1,910
    
    
    
    726Net interest income after provision for loan losses
    
    
    3,216
    
    
    
    2,940
    
    
    
    8,679
    
    
    
    9,331Non-interest incomeService charges on deposits
    
    
    392
    
    
    
    363
    
    
    
    1,090
    
    
    
    987Other income/loss
    
    
    1,325
    
    
    
    658
    
    
    
    2,342
    
    
    
    1,138Gain on sale of mortgage loans
    
    
    2,506
    
    
    
    1,820
    
    
    
    7,150
    
    
    
    5,557Total non-interest income
    
    
    4,223
    
    
    
    2,841
    
    
    
    10,582
    
    
    
    7,682Non-interest expenseSalaries and employee benefits
    
    
    3,287
    
    
    
    2,731
    
    
    
    9,427
    
    
    
    8,316Occupancy expenses
    
    
    382
    
    
    
    418
    
    
    
    1,130
    
    
    
    1,168Other expenses
    
    
    1,696
    
    
    
    1,280
    
    
    
    4,895
    
    
    
    3,790Total non-interest expense
    
    
    5,365
    
    
    
    4,429
    
    
    
    15,452
    
    
    
    13,274Income before income taxes
    
    
    2,074
    
    
    
    1,352
    
    
    
    3,809
    
    
    
    3,739Income tax expense
    
    
    580
    
    
    
    386
    
    
    
    1,021
    
    
    
    1,155Net income
    
    $
    1,494
    
    
    $
    966
    
    
    $
    2,788
    
    
    $
    2,584Net income per share of common stockBasic
    
    $
    0.43
    
    
    $
    0.29
    
    
    $
    0.80
    
    
    $
    0.76Diluted
    
    $
    0.43
    
    
    $
    0.28
    
    
    $
    0.80
    
    
    $
    0.74Dividends per share of common stock
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
   3




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GEORGIA-CAROLINA BANCSHARES, INC.
 
 Condensed Consolidated Statements of Comprehensive Income
 (Unaudited)
 (dollars in thousands)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net income
    
    $
    1,494
    
    
    $
    966
    
    
    $
    2,788
    
    
    $
    2,584Unrealized holding gains and (losses) arising
during period, less reclassifications
adjustment for gains and losses included
in net income, net of tax
    
    
    491
    
    
    
    531
    
    
    
    471
    
    
    
    (111
    )Comprehensive income
    
    $
    1,985
    
    
    $
    1,497
    
    
    $
    3,259
    
    
    $
    2,473
   4




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GEORGIA-CAROLINA BANCSHARES, INC.
 
 Condensed Consolidated Statements of Cash Flows
 (Unaudited)
 (dollars in thousands)
 Nine Months Ended September 30,2009
    
    
    2008Cash flows from operating activitiesNet income
    
    $
    2,788
    
    
    $
    2,584Adjustments to reconcile net income
to net cash (used in) provided by operating activities:Depreciation and amortization
    
    
    512
    
    
    
    549Provision for loan losses
    
    
    1,910
    
    
    
    726Stock option expense
    
    
    60
    
    
    
    101Stock compensation
    
    
    144
    
    
    
    141Increase in cash value of bank-owned life insurance
    
    
    (336
    )
    
    
    (238
    )Gain on sales of foreclosed real estate
    
    
    (1,432
    )
    
    
    (21
    )Gain on sales of premises and equipment
    
    
    
    
    
    
    (1
    )Net originations, proceeds and gain on loans held for sale
    
    
    (15,865
    )
    
    
    7,683Decrease in accrued interest receivable
    
    
    29
    
    
    
    41Increase/(decrease) in accrued interest payable
    
    
    143
    
    
    
    (592
    )Increase in deferred income tax asset, net
    
    
    ( 376
    )
    
    
    (219
    )Net change in other assets and liabilities
    
    
    938
    
    
    
    599Net cash (used in) provided by operating activities
    
    
    (11,485
    )
    
    
    11,353Cash flows from investing activitiesIncrease in federal funds sold
    
    
    (1,675
    )
    
    
    Loan originations and collections, net
    
    
    (12,999
    )
    
    
    (9,957
    )Purchases of available for sale securities
    
    
    (10,655
    )
    
    
    (23,243
    )Proceeds from maturities, sales & calls of available-for-sale securities, net
    
    
    21,827
    
    
    
    23,149Purchases of restricted securities
    
    
    (1,995
    )
    
    
    (3,925
    )Proceeds from sales of restricted securities
    
    
    1,368
    
    
    
    3,184Proceeds from sales of foreclosed real estate
    
    
    7,067
    
    
    
    1,426Net additions to bank premises and fixed assets
    
    
    (112
    )
    
    
    (214
    )Net cash provided by (used in) investing activities
    
    
    2,826
    
    
    
    (9,580
    )Cash flows from financing activitiesIncrease/(decrease) in deposits, funds purchased and other
borrowings
    
    
    18,035
    
    
    
    (18,451
    )Increase/(decrease) in FHLB borrowings
    
    
    (1,400
    )
    
    
    15,257Increase/(decrease) in repurchase agreements
    
    
    (3,813
    )
    
    
    3,904Proceeds from stock options exercised
    
    
    52
    
    
    
    21Net cash provided by financing activities
    
    
    12,874
    
    
    
    731Net increase in cash and due from banks
    
    
    4,215
    
    
    
    2,504Cash and due from banks at beginning of period
    
    
    9,954
    
    
    
    6,744Cash and due from banks at end of period
    
    $
    14,169
    
    
    $
    9,248
   5




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GEORGIA-CAROLINA BANCSHARES, INC.
 
 Notes to Condensed Consolidated Financial Statements
 September 30, 2009
 (Unaudited)
 Note 1  Basis of Presentation
    Note 2  Stock-Based Compensation
 Compensation-Stock Compensation,
   6




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Note
3  Earnings Per Share
   For the Three Months Ended September 30, 2009WeightedAverage Shares-
    
    
    Per-ShareNumerator
    
    
    Denominator
    
    
    AmountBasic EPSIncome available to common stockholders
    
    $
    1,494,000
    
    
    
    3,491,697
    
    
    $
    0.43Effect of stock options outstanding
    
    
    
    
    
    
    1,488
    
    
    
    Diluted EPSIncome available to common stockholders
    
    $
    1,494,000
    
    
    
    3,493,185
    
    
    $
    0.43
 For the Three Months Ended September 30, 2008WeightedAverage Shares-
    
    
    Per-ShareNumerator
    
    
    Denominator
    
    
    AmountBasic EPSIncome available to common stockholders
    
    $
    966,000
    
    
    
    3,439,459
    
    
    $
    0.29Effect of stock options outstanding
    
    
    
    
    
    
    65,189
    
    
    
    (0.01
    )Diluted EPSIncome available to common stockholders
    
    $
    966,000
    
    
    
    3,504,648
    
    
    $
    0.28
 For the Nine Months Ended September 30, 2009WeightedAverage Shares-
    
    
    Per-ShareNumerator
    
    
    Denominator
    
    
    AmountBasic EPSIncome available to common stockholders
    
    $
    2,788,000
    
    
    
    3,479,198
    
    
    $
    0.80Effect of stock options outstanding
    
    
    
    
    
    
    10,477
    
    
    
    Diluted EPSIncome available to common stockholders
    
    $
    2,788,000
    
    
    
    3,489,675
    
    
    $
    0.80
  7




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For the Nine Months Ended September 30, 2008WeightedAverage Shares-
    
    
    Per-ShareNumerator
    
    
    Denominator
    
    
    AmountBasic EPSIncome available to common stockholders
    
    $
    2,584,000
    
    
    
    3,416,802
    
    
    $
    0.76Effect of stock options outstanding
    
    
    
    
    
    
    87,742
    
    
    
    (0.02
    )Diluted EPSIncome available to common stockholders
    
    $
    2,584,000
    
    
    
    3,504,544
    
    
    $
    0.74
 Note 4  Fair Value Measurement
 Fair Value Measurements and Disclosures,
    8




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September 30, 2009
    
    
    December 31, 2008Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairAmount
    
    
    Value
    
    
    Amount
    
    
    ValueLoans and loans held for
sale, net of allowance
    
    $
    383.8
    
    
    $
    421.0
    
    
    $
    360.4
    
    
    $
    392.3Time deposits
    
    $
    254.3
    
    
    $
    257.8
    
    
    $
    240.3
    
    
    $
    245.1
  Level 1
 Level 2
 Level 3
  Investment Securities Available-for-Sale
  Loans Held for Sale
  Loans
   9




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##### Table of Contents



Foreclosed Assets
   Fair Value Measurements atSeptember 30, 2009, 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
    
    9/30/2009
    
    
    9/30/2009
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Available-for-sale
securities
    
    $
    47,157
    
    
    $
    47,157
    
    
    $
    
    
    
    $
    47,157
    
    
    $
    
 Note 5  Impact of Other Recently Issued Accounting Standards
 Measuring Liabilities
at Fair Value, Fair Value Measurements and Disclosures.
 Generally
Accepted Accounting Principles. The Hierarchy of Generally Accepted Accounting
Principles
  10




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Subsequent Events,
 Fair Value Measurements and Disclosures,
 Investments-Debt and Equity Securities.
 Financial Instruments,
 Fair Value Measurements and Disclosures, Accounting Changes and Error Corrections
 Derivatives and Hedging,
  11




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Derivatives and Hedging,
 Transfers and Servicing,
  Note 6  Commitments and Contingencies
    12




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##### Table of Contents



Note 7  Subsequent Events
   13




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##### Table of Contents



Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations.
 Overview
   Critical Accounting Policies
      14




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##### Table of Contents



Accounting for Contingencies, Accounting by Creditors for Impairment of a Loan 
  Results of Operations
 Overview
     15




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##### Table of Contents



Interest Income
  Interest Expense
  Net Interest Income
    16




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##### Table of Contents



Provision for Loan Losses
  Non-interest Income
  Non-interest Expense
   17




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##### Table of Contents



Income Taxes
  Financial Condition
 Overview
   Asset Quality
   18




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September 30,
    
    
    December 31,
    
    
    September 30,2009
    
    
    2008
    
    
    2008Non-accrual loans
    
    $
    7,888,000
    
    
    $
    5,061,000
    
    
    $
    10,422,000OREO, net of valuation allowance
    
    
    5,142,000
    
    
    
    7,217,000
    
    
    
    2,342,000Total non-performing assets
    
    $
    13,030,000
    
    
    $
    12,278,000
    
    
    $
    12,764,000
      19




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Liquidity and Capital Resources
      Off-Balance Sheet Arrangements
   20




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September 30,
    
    
    December 31,2009
    
    
    2008(in thousands)Commitments to extend credit
    
    $
    59,341
    
    
    $
    56,426Standby letters of credit
    
    
    5,432
    
    
    
    5,102Total off-balance sheet financial instruments
    
    $
    64,773
    
    
    $
    61,528
 Supplemental Consolidated Cash Flow Information
  September 30,
    
    
    September 30,2009
    
    
    2008(in thousands)Real estate acquired by foreclosure
    
    $
    3,560
    
    
    $
    3,264Unrealized gain/(loss) on securities
    
    
    735
    
    
    
    <174
    >$
    4,295
    
    
    $
    3,090
 Cautionary Note Regarding Forward-Looking Statements
    21




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Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk.
  
 Item 4.
    
    Controls and Procedures.
  
 Item 4T.
    
    Controls and Procedures.
     22




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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).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.
  23




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SIGNATURES
  GEORGIA-CAROLINA BANCSHARES, INC.November 13, 2009
    By:
    /s/ Remer Y. Brinson, IIIRemer Y. Brinson, IIIPresident and Chief Executive Officer
(principal executive officer)November 13, 2009
    By:
    /s/ Thomas J. FlournoyThomas J. FlournoySenior Vice President and Chief Financial Officer
(principal financial and accounting officer)  24




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##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    
    Description of ExhibitExhibit 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.
  25