##### 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 March 31, 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 
Incorporation or Organization)
    
    (I.R.S. Employer Identification Number)
 
 
 
 þ o
 o o
  Large accelerated filer o
Accelerated filer o
Non-accelerated filer o(Do not check if a smaller reporting company)
Smaller reporting company þ o þ
  Class
    
    Outstanding at May 12, 2010Common Stock, $.001 Par Value
    
    3,510,238 shares




---



##### 



GEORGIA-CAROLINA BANCSHARES, INC.
   
 PagePART I.
    
    FINANCIAL INFORMATIONItem 1.
    
    Financial Statements (Unaudited)Condensed Consolidated Balance Sheets as of March 31, 2010 and
December 31, 2009
    
    
    2Condensed Consolidated Statements of Income for the Three Months
Ended March 31, 2010 and 2009
    
    
    3Condensed Consolidated Statements of Comprehensive Income for the
Three Months Ended March 31, 2010 and 2009
    
    
    4Condensed Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 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
    
    
    20Item 4.
    
    Controls and Procedures
    
    
    20Item 4T.
    
    Controls and Procedures
    
    
    20PART II.
    
    OTHER INFORMATIONItem 6.
    
    Exhibits
    
    
    21SIGNATURES
    
    
    22EXHIBIT INDEX
    
    
    23CERTIFICATIONS
    
    
    24Exhibit 31.1Exhibit 31.2Exhibit 32.1




---



##### Table of Contents



Part I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements.
 
 GEORGIA-CAROLINA BANCSHARES, INC.
Condensed Consolidated Balance Sheets
(Unaudited)  (dollars in thousands)
 March 31,
    
    
    December 31,2010
    
    
    2009ASSETSCash and due from banks
    
    $
    27,490
    
    
    $
    13,055Federal funds sold
    
    
    
    
    
    
    3,175Securities available-for-sale
    
    
    56,284
    
    
    
    44,461Loans, net of allowance for loan losses of $5,245 and $5,072, respectively
    
    
    334,536
    
    
    
    331,777Loans, held for sale
    
    
    30,174
    
    
    
    58,135Bank premises and fixed assets
    
    
    9,542
    
    
    
    9,654Accrued interest receivable
    
    
    1,855
    
    
    
    1,851Foreclosed real estate, net of allowance
    
    
    3,873
    
    
    
    4,466Deferred tax asset, net
    
    
    1,206
    
    
    
    1,018Federal Home Loan Bank stock
    
    
    2,828
    
    
    
    2,828Bank-owned life insurance
    
    
    8,897
    
    
    
    8,812Other assets
    
    
    3,696
    
    
    
    4,781Total assets
    
    $
    480,381
    
    
    $
    484,013LIABILITIES AND SHAREHOLDERS EQUITYDeposits:Non-interest bearing
    
    $
    43,158
    
    
    $
    41,787Interest-bearing:NOW accounts
    
    
    38,495
    
    
    
    36,395Savings
    
    
    52,003
    
    
    
    51,424Money market accounts
    
    
    19,319
    
    
    
    19,232Time deposits of $100,000, and over
    
    
    170,448
    
    
    
    179,123Other time deposits
    
    
    80,347
    
    
    
    77,279Total deposits
    
    
    403,770
    
    
    
    405,240Borrowings:Federal Home Loan Bank borrowings
    
    
    
    
    
    
    3,600Repurchase agreements
    
    
    3,896
    
    
    
    3,697Long-term debt
    
    
    25,000
    
    
    
    25,000Other liabilities and borrowings
    
    
    3,465
    
    
    
    3,203Total liabilities
    
    
    436,131
    
    
    
    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;
3,506,255 and 3,499,477 shares issued and outstanding
    
    
    4
    
    
    
    4Additional paid-in-capital
    
    
    15,634
    
    
    
    15,567Retained earnings
    
    
    28,193
    
    
    
    27,355Accumulated other comprehensive income
    
    
    419
    
    
    
    347Total shareholders equity
    
    
    44,250
    
    
    
    43,273Total liabilities and shareholders equity
    
    $
    480,381
    
    
    $
    484,013
   2




---



##### Table of Contents



GEORGIA-CAROLINA BANCSHARES, INC.
Condensed Consolidated Statements of Income
(Unaudited)
  Three Months EndedMarch 31,2010
    
    
    2009Interest incomeInterest and fees on loans
    
    $
    5,552
    
    
    $
    5,105Interest on taxable securities
    
    
    395
    
    
    
    568Interest on nontaxable securities
    
    
    97
    
    
    
    105Interest on Federal funds sold and other interest
    
    
    7
    
    
    
    2Total interest income
    
    
    6,051
    
    
    
    5,780Interest expenseInterest on time deposits of $100,000 or more
    
    
    936
    
    
    
    1,507Interest on other deposits
    
    
    722
    
    
    
    868Interest on funds purchased and other borrowings
    
    
    223
    
    
    
    272Total interest expense
    
    
    1,881
    
    
    
    2,647Net interest income
    
    
    4,170
    
    
    
    3,133Provision for loan losses
    
    
    1,086
    
    
    
    627Net interest income after provision for loan losses
    
    
    3,084
    
    
    
    2,506Non-interest incomeService charges on deposits
    
    
    343
    
    
    
    335Gain on sale of mortgage loans
    
    
    2,419
    
    
    
    1,895Other income
    
    
    267
    
    
    
    402Total non-interest income
    
    
    3,029
    
    
    
    2,632Non-interest expenseSalaries and employee benefits
    
    
    3,052
    
    
    
    2,891Occupancy expenses
    
    
    378
    
    
    
    382Other expenses
    
    
    1,655
    
    
    
    1,378Total non-interest expense
    
    
    5,085
    
    
    
    4,651Income before income taxes
    
    
    1,028
    
    
    
    487Income tax expense
    
    
    190
    
    
    
    92Net income
    
    $
    838
    
    
    $
    395Net income per share of common stockBasic
    
    $
    0.24
    
    
    $
    0.11Diluted
    
    $
    0.24
    
    
    $
    0.11Dividends per share of common stock
    
    $
    
    
    
    $
    
   3




---



##### Table of Contents



GEORGIA-CAROLINA BANCSHARES, INC.
 Condensed Consolidated Statements of Comprehensive Income
(Unaudited)  (dollars in thousands)
 Three Months EndedMarch 31,2010
    
    
    2009Net income
    
    $
    838
    
    
    $
    395Unrealized holding gains and (losses) arising
during period, less reclassifications adjustment
for gains and losses included in net income, net of tax
    
    
    72
    
    
    
    (69
    )Comprehensive income
    
    $
    910
    
    
    $
    326
   4




---



##### Table of Contents



GEORGIA-CAROLINA BANCSHARES, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)  (dollars in thousands)
 Three Months Ended March 31,2010
    
    
    2009Cash flows from operating activitiesNet income
    
    $
    838
    
    
    $
    395Adjustments to reconcile net income
to net cash provided by/(used in) operating activities:Depreciation and amortization
    
    
    165
    
    
    
    173Provision for loan losses
    
    
    1,086
    
    
    
    627Stock option expense
    
    
    22
    
    
    
    20Stock compensation
    
    
    45
    
    
    
    32Increase in cash value of bank-owned life insurance
    
    
    (85
    )
    
    
    (83
    )Gain on sales of foreclosed real estate
    
    
    (45
    )
    
    
    (163
    )Net originations, proceeds and gain on loans held for sale
    
    
    27,961
    
    
    
    (12,006
    )(Increase)/decrease in accrued interest receivable
    
    
    (4
    )
    
    
    77Increase/(decrease) in accrued interest payable
    
    
    (14
    )
    
    
    137Increase in deferred income tax asset, net
    
    
    (229
    )
    
    
    (68
    )Net change in other assets and liabilities
    
    
    1,336
    
    
    
    (128
    )Net cash provided by/(used in) operating activities
    
    
    31,076
    
    
    
    (10,987
    )Cash flows from investing activitiesDecrease in federal funds sold
    
    
    3,175
    
    
    
    Loan originations and collections, net
    
    
    (4,148
    )
    
    
    (4,123
    )Purchases of available for sale securities
    
    
    (19,252
    )
    
    
    (5,518
    )Proceeds from maturities, sales & calls of
available-for-sale securities, net
    
    
    7,541
    
    
    
    11,453Purchases of restricted securities
    
    
    
    
    
    
    (1,553
    )Proceeds from sales of restricted securities
    
    
    
    
    
    
    1,062Proceeds from sales of foreclosed real estate
    
    
    941
    
    
    
    1,268Net additions to bank premises and fixed assets
    
    
    (27
    )
    
    
    (2
    )Net cash provided by/(used in) investing activities
    
    
    (11,770
    )
    
    
    2,587Cash flows from financing activitiesIncrease/(decrease) in deposits
    
    
    (1,470
    )
    
    
    18,100Decrease in FHLB borrowings
    
    
    (3,600
    )
    
    
    (6,000
    )Increase/(decrease) in repurchase agreements and other borrowings
    
    
    199
    
    
    
    (5,366
    )Proceeds from stock options exercised
    
    
    
    
    
    
    27Net cash provided by/(used in) financing activities
    
    
    (4,871
    )
    
    
    6,761Net increase/(decrease) in cash and due from banks
    
    
    14,435
    
    
    
    (1,639
    )Cash and due from banks at beginning of period
    
    
    13,055
    
    
    
    9,954Cash and due from banks at end of period
    
    $
    27,490
    
    
    $
    8,315
   5




---



##### Table of Contents



GEORGIA-CAROLINA BANCSHARES, INC.
 
 Notes to Condensed Consolidated Financial Statements
March 31, 2010
(Unaudited)
 Note 1  Basis of Presentation
    Note 2  Stock-Based Compensation
 Compensation-Stock Compensation,
  Note 3  Earnings Per Share
   6




---



##### Table of Contents



For the Three Months Ended March 31, 2010WeightedAverage Shares-
    
    
    Per-ShareNumerator
    
    
    Denominator
    
    
    AmountBasic EPSIncome available to common stockholders
    
    $
    838,000
    
    
    
    3,504,855
    
    
    $
    0.24Effect of stock options outstanding
    
    
    
    
    
    
    (9,123
    )
    
    
    Diluted EPSIncome available to common stockholders
    
    $
    838,000
    
    
    
    3,495,732
    
    
    $
    0.24
 For the Three Months Ended March 31, 2009WeightedAverage Shares-
    
    
    Per-ShareNumerator
    
    
    Denominator
    
    
    AmountBasic EPSIncome available to common stockholders
    
    $
    395,000
    
    
    
    3,464,251
    
    
    $
    0.11Effect of stock options outstanding
    
    
    
    
    
    
    20,823
    
    
    
    Diluted EPSIncome available to common stockholders
    
    $
    395,000
    
    
    
    3,485,074
    
    
    $
    0.11
 Note 4  Fair Value Measurement
 Fair Value Measurements and Disclosures,
   7




---



##### Table of Contents



Level 1
 Level 2
 Level 3
  Investment Securities Available-for-Sale
  Loans Held for Sale
  Loans
   8




---



##### Table of Contents



Foreclosed Assets
   Fair Value Measurements atMarch 31, 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
    
    3/31/2010
    
    
    3/31/2010
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Available-for-sale
securities,
including FHLB
stock
    
    $
    56,284
    
    
    $
    56,284
    
    
    $
    
    
    
    $
    56,284
    
    
    $
    
  March 31, 2010
    
    
    December 31, 2009Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairAmount
    
    
    Value
    
    
    Amount
    
    
    ValueLoans and loans held for sale
    
    $
    364.7
    
    
    $
    402.1
    
    
    $
    395.0
    
    
    $
    435.5Time deposits
    
    $
    250.8
    
    
    $
    254.0
    
    
    $
    256.4
    
    
    $
    259.7
  9




---



##### Table of Contents



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
 Fair Value Measurements and Disclosures,
 Investments-Debt and Equity Securities.
 Financial Instruments,
   10




---



##### Table of Contents



Note 6  Commitments and Contingencies
       11




---



##### Table of Contents



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




---



##### Table of Contents



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




---



##### Table of Contents



Net Interest Income
   Provision for Loan Losses
  Non-interest Income
   14




---



##### Table of Contents



Non-interest Expense
  Income Taxes
  Financial Condition
 Overview
   15




---



##### Table of Contents



Asset Quality
   March 31,
    
    
    December 31,
    
    
    March 31,2010
    
    
    2009
    
    
    2009Non-accrual loans
    
    $
    6,582,000
    
    
    $
    6,190,000
    
    
    $
    7,863,000OREO, net of valuation allowance
    
    
    3,874,000
    
    
    
    4,466,000
    
    
    
    6,668,000Total non-performing assets
    
    $
    10,456,000
    
    
    $
    10,656,000
    
    
    $
    14,531,000
     16




---



##### Table of Contents



Liquidity and Capital Resources
        17




---



##### Table of Contents



Off-Balance Sheet Arrangements
   March 31,
    
    
    December 31,2010
    
    
    2009(in thousands)Commitments to extend credit
    
    $
    62,576
    
    
    $
    59,082Standby letters of credit
    
    
    5,702
    
    
    
    5,712Total off-balance sheet financial instruments
    
    $
    68,278
    
    
    $
    64,794
 Supplemental Consolidated Cash Flow Information
  March 31,
    
    
    March 31,2010
    
    
    2009(in thousands)Real estate acquired by foreclosure
    
    $
    303
    
    
    $
    556Unrealized gain/(loss) on securities
    
    
    112
    
    
    
    (108
    )$
    415
    
    
    $
    448
  18




---



##### Table of Contents



Cautionary Note Regarding Forward-Looking Statements
    19




---



##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk.
  
 Item 4. Controls and Procedures.
  
 Item 4T. Controls and Procedures.
     20




---



##### Table of Contents



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.
  21




---



##### Table of Contents



SIGNATURES
  GEORGIA-CAROLINA BANCSHARES, INC.May 12, 2010
    By:
    /s/ Remer Y. Brinson, IIIRemer Y. Brinson, IIIPresident and Chief Executive Officer
(principal executive officer) May 12, 2010
    By:
    /s/ Thomas J. FlournoyThomas J. FlournoySenior Vice President and Chief Financial Officer
(principal financial and accounting officer)  22




---



##### 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.
  23