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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, 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)
 þ o
 YES o NO o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ
 o þ
  Class
    
    Outstanding at May 15, 2009Common Stock, $.001 Par Value
    
    3,481,461 shares




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##### 



GEORGIA-CAROLINA BANCSHARES, INC.
  PagePART I. FINANCIAL INFORMATIONItem 1. Financial Statements (Unaudited)Condensed Consolidated Balance Sheets as of March 31, 2009
and December 31, 2008
    
    
    2Condensed Consolidated Statements of Income for the Three Months
Ended March 31, 2009 and 2008
    
    
    3Condensed Consolidated Statements of Comprehensive Income for the
Three Months Ended March 31, 2009 and 2008
    
    
    4Condensed Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 2009 and 2008
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    13Item 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
    
    
    23Exhibit 31.1Exhibit 31.2Exhibit 32.1




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Part I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements.
 GEORGIA-CAROLINA BANCSHARES, INC.
 
 Condensed Consolidated Balance Sheets
 (Unaudited)  (dollars in thousands)
 March 31,
    
    
    December 31,2009
    
    
    2008ASSETSCash and due from banks
    
    $
    8,315
    
    
    $
    9,954Federal funds sold
    
    
    
    
    
    
    Securities available-for-sale
    
    
    51,551
    
    
    
    57,594Loans, net of allowance for loan losses of $4,765 and $4,284, respectively
    
    
    334,949
    
    
    
    332,009Loans, held for sale
    
    
    40,408
    
    
    
    28,402Bank premises and fixed assets
    
    
    9,936
    
    
    
    10,081Accrued interest receivable
    
    
    1,857
    
    
    
    1,934Foreclosed real estate, net of allowance
    
    
    6,668
    
    
    
    7,217Deferred tax asset, net
    
    
    1,103
    
    
    
    996Federal Home Loan Bank Stock
    
    
    2,692
    
    
    
    2,201Bank-owned life insurance
    
    
    8,485
    
    
    
    8,402Other assets
    
    
    1,959
    
    
    
    2,038Total assets
    
    $
    467,923
    
    
    $
    460,828LIABILITIES AND SHAREHOLDERS EQUITYDeposits:Non-interest bearing
    
    $
    36,084
    
    
    $
    34,121Interest-bearing:NOW accounts
    
    
    35,105
    
    
    
    37,373Savings
    
    
    52,654
    
    
    
    55,426Money market accounts
    
    
    7,992
    
    
    
    9,772Time deposits of $100,000, and over
    
    
    186,516
    
    
    
    170,878Other time deposits
    
    
    76,758
    
    
    
    69,439Total deposits
    
    
    395,109
    
    
    
    377,009Borrowings:Other liabilities, borrowings and retail agreements
    
    
    33,325
    
    
    
    44,735Total liabilities
    
    
    428,434
    
    
    
    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;
3,470,737 and 3,456,816 shares
issued and outstanding
    
    
    4
    
    
    
    4Additional paid-in-capital
    
    
    15,347
    
    
    
    15,268Retained Earnings
    
    
    23,999
    
    
    
    23,604Accumulated other comprehensive income
    
    
    139
    
    
    
    208Total shareholders equity
    
    
    39,489
    
    
    
    39,084Total liabilities and shareholders equity
    
    $
    467,923
    
    
    $
    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 EndedMarch 31,2009
    
    
    2008Interest incomeInterest and fees on loans
    
    $
    5,105
    
    
    $
    6,277Interest on taxable securities
    
    
    568
    
    
    
    715Interest on nontaxable securities
    
    
    105
    
    
    
    73Interest on Federal funds sold
    
    
    2
    
    
    
    38Total interest income
    
    
    5,780
    
    
    
    7,103Interest expenseInterest on time deposits of $100,000 or more
    
    
    1,507
    
    
    
    1,821Interest on other deposits
    
    
    868
    
    
    
    1,846Interest on funds purchased and other borrowings
    
    
    272
    
    
    
    238Total interest expense
    
    
    2,647
    
    
    
    3,905Net interest income
    
    
    3,133
    
    
    
    3,198Provision for loan losses
    
    
    627
    
    
    
    237Net interest income after provision for loan losses
    
    
    2,506
    
    
    
    2,961Non-interest incomeService charges on deposits
    
    
    335
    
    
    
    300Other income/loss
    
    
    402
    
    
    
    233Gain on sale of mortgage loans
    
    
    1,895
    
    
    
    1,919Total non-interest income
    
    
    2,632
    
    
    
    2,452Non-interest expenseSalaries and employee benefits
    
    
    2,891
    
    
    
    2,761Occupancy expenses
    
    
    382
    
    
    
    380Other expenses
    
    
    1,378
    
    
    
    1,165Total non-interest expense
    
    
    4,651
    
    
    
    4,306Income before income taxes
    
    
    487
    
    
    
    1,107Income tax expense
    
    
    92
    
    
    
    355Net income
    
    $
    395
    
    
    $
    752Net income per share of common stockBasic
    
    $
    0.11
    
    
    $
    0.22Diluted
    
    $
    0.11
    
    
    $
    0.21Dividends 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 EndedMarch 31,2009
    
    
    2008Net income
    
    $
    395
    
    
    $
    752Unrealized holding gain (loss) arising during
the period, net of tax
    
    
    (69
    )
    
    
    413Comprehensive income
    
    $
    326
    
    
    $
    1,165
   4




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GEORGIA-CAROLINA BANCSHARES, INC.
 
 Condensed Consolidated Statements of Cash Flows
 (Unaudited)  (dollars in thousands)
 Three Months Ended 
March 31,2009
    
    
    2008Cash flows from operating activitiesNet income
    
    $
    395
    
    
    $
    752Adjustments to reconcile net income
to net cash used in operating activities:Depreciation and amortization
    
    
    173
    
    
    
    176Provision for loan losses
    
    
    627
    
    
    
    237SFAS 123R Stock option expense
    
    
    20
    
    
    
    33Stock compensation
    
    
    32
    
    
    
    44Increase in cash value of bank-owned life insurance
    
    
    (83
    )
    
    
    (81
    )(Gain)/Loss on sales of foreclosed real estate
    
    
    (163
    )
    
    
    23Gain on sales of premises and equipment
    
    
    
    
    
    
    (1
    )Net originations, proceeds and gain on loans held for sale
    
    
    (12,006
    )
    
    
    6,278(Increase)/decrease in accrued interest receivable
    
    
    77
    
    
    
    (77
    )Increase in accrued interest payable
    
    
    137
    
    
    
    508Increase in deferred tax asset, net
    
    
    (68
    )
    
    
    (117
    )Net change in other assets and liabilities
    
    
    (128
    )
    
    
    (225
    )Net cash (used in) provided by operating activities
    
    
    (10,987
    )
    
    
    7,550Cash flows from investing activitiesIncrease in federal funds sold
    
    
    
    
    
    
    (2,518
    )Loan originations and collections, net
    
    
    (4,123
    )
    
    
    (13,133
    )Purchases of available for sale securities
    
    
    (5,518
    )
    
    
    (11,063
    )Proceeds from maturities, sales & calls of
available-for-sale securities, net
    
    
    11,453
    
    
    
    9,563Purchases of restricted securities
    
    
    (1,553
    )
    
    
    (1,308
    )Proceeds from sales of restricted securities
    
    
    1,062
    
    
    
    1,134Proceeds from sales of foreclosed real estate
    
    
    1,268
    
    
    
    29Net additions to bank premises and fixed assets
    
    
    (2
    )
    
    
    (41
    )Net cash provided by (used in) investing activities
    
    
    2,587
    
    
    
    (17,337
    )Cash flows from financing activitiesIncrease in deposits, funds purchased and other borrowings
    
    
    17,083
    
    
    
    5,305Increase/(decrease) in FHLB borrowings
    
    
    (6,000
    )
    
    
    2,657Increase/(decrease) in repurchase agreements
    
    
    (4,349
    )
    
    
    3,096Proceeds from stock options exercised
    
    
    27
    
    
    
    Net cash provided by financing activities
    
    
    6,761
    
    
    
    11,058Net increase/(decrease) in cash and due from banks
    
    
    (1,639
    )
    
    
    1,271Cash and due from banks at beginning of period
    
    
    9,954
    
    
    
    6,744Cash and due from banks at end of period
    
    $
    8,315
    
    
    $
    8,015
   5




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GEORGIA-CAROLINA BANCSHARES, INC.
 
 Notes to Condensed Consolidated Financial Statements
 March 31, 2009
(Unaudited)
 Note 1  Basis of Presentation
    Note 2  Stock-Based Compensation
 Share-Based Payment
   6




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Note 3  Earnings Per Share
   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
 For the Three Months Ended March 31, 2008WeightedAverage Shares-
    
    
    Per-ShareNumerator
    
    
    Denominator
    
    
    AmountBasic EPSIncome available to common stockholders
    
    $
    752,000
    
    
    
    3,401,766
    
    
    $
    0.22Effect of stock options outstanding
    
    
    
    
    
    
    95,702
    
    
    
    (0.1
    )Diluted EPSIncome available to common stockholders
    
    $
    752,000
    
    
    
    3,497,468
    
    
    $
    0.21
  7




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




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




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Fair Value Measurements atMarch 31, 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
    
    3/31/2009
    
    
    3/31/2009
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Available-for-sale
securities
    
    $
    51,551
    
    
    $
    51,551
    
    
    $
    
    
    
    $
    51,551
    
    
    $
    
 Note 5  Impact of Other Recently Issued Accounting Standards
 Accounting for Transfers of Financial Assets and
Repurchase Financing Transactions
 Disclosures about Derivative Instruments and Hedging
Activitiesan amendment of FASB Statement No. 133
 The Hierarchy of Generally Accepted Accounting Principles The Meaning of Present Fairly in Conformity with
Generally Accepted Accounting Principles
  10




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Disclosures about Credit Derivatives
and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and
Clarification of the Effective Date of FASB Statement No. 161
 Determining the Fair Value of a Financial
Asset When The Market for That Asset Is Not Active Accounting Changes and Error Corrections
 Determining Fair Value When the Volume and
Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying
Transactions That Are Not Orderly
 Interim Disclosures about Fair
Value of Financial Instruments
 Recognition and
Presentation of Other-Than-Temporary Impairments
  11




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Note 6  Commitments and Contingencies
       12




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
 Overview
   Critical Accounting Policies
      13




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Accounting for Contingencies, Accounting by Creditors for Impairment of a Loan 
  Results of Operations
 Overview
   Net Interest Income
    14




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Interest Income
  Interest Expense
  Provision for Loan Losses
  Non-interest Income
   15




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Non-interest Expense
  Income Taxes
  Financial Condition
 Overview
   Asset Quality
   16




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March 31,
    
    
    December 31,
    
    
    March 31,2009
    
    
    2008
    
    
    2008Non-accrual loans
    
    $
    7,863,000
    
    
    $
    5,061,000
    
    
    $
    10,961,000OREO, net of valuation allowance
    
    
    6,668,000
    
    
    
    7,217,000
    
    
    
    486,000$
    14,531,000
    
    
    $
    12,278,000
    
    
    $
    11,447,000
   Liquidity and Capital Resources
      17




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Off-Balance Sheet Arrangements
   March 31,
    
    
    December 31,2009
    
    
    2008(in thousands)Commitments to extend credit
    
    $
    67,702
    
    
    $
    56,426Standby letters of credit
    
    
    5,164
    
    
    
    5,102$
    72,866
    
    
    $
    61,528
  18




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Cautionary Note Regarding Forward-Looking Statements
    19




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




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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.
  21




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SIGNATURES
  GEORGIA-CAROLINA BANCSHARES, INC.May 15, 2009
    By:
    /s/ Remer Y. Brinson IIIRemer Y. Brinson IIIPresident and Chief Executive Officer
(principal executive officer)May 15, 2009
    By:
    /s/ Thomas J. FlournoyThomas J. FlournoySenior Vice President and Chief Financial Officer
(principal financial and accounting officer)  22




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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