##### 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, 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)
 3527 Wheeler Road, Augusta, Georgia 30909
 (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 November 15, 2010Common Stock, $.001 Par Value
    
    3,532,223 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, 2010 and December 31, 2009
    
    
    2Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2010 and 2009
    
    
    3Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2010 and 2009
    
    
    4Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 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
    
    
    22Item 4. Controls and Procedures
    
    
    22PART II. OTHER INFORMATIONItem 6. Exhibits
    
    
    23SIGNATURES
    
    
    24EXHIBIT INDEX
    
    
    25CERTIFICATIONSExhibit 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)
 September 30,
    
    
    December 31,2010
    
    
    2009(Unaudited)ASSETSCash and due from banks
    
    $
    5,030
    
    
    $
    10,970Interest-bearing deposits with banks
    
    
    9,374
    
    
    
    2,085Federal funds sold
    
    
    
    
    
    
    3,175Securities available-for-sale
    
    
    61,932
    
    
    
    44,461Loans, net of allowance for loan losses of $7,255 and $5,072, respectively
    
    
    310,752
    
    
    
    331,777Loans, held for sale
    
    
    51,961
    
    
    
    58,135Bank premises and fixed assets
    
    
    9,372
    
    
    
    9,654Accrued interest receivable
    
    
    1,591
    
    
    
    1,851Foreclosed real estate, net of allowance
    
    
    3,093
    
    
    
    4,466Deferred tax asset, net
    
    
    1,508
    
    
    
    1,018Federal Home Loan Bank stock
    
    
    2,626
    
    
    
    2,828Bank-owned life insurance
    
    
    9,123
    
    
    
    8,812Other assets
    
    
    4,209
    
    
    
    4,781Total assets
    
    $
    470,571
    
    
    $
    484,013LIABILITIES AND SHAREHOLDERS EQUITYDeposits:Non-interest bearing
    
    $
    40,965
    
    
    $
    41,787Interest-bearing:NOW accounts
    
    
    38,636
    
    
    
    36,395Savings
    
    
    52,789
    
    
    
    51,424Money market accounts
    
    
    27,192
    
    
    
    19,232Time deposits of $100,000, and over
    
    
    160,273
    
    
    
    179,123Other time deposits
    
    
    73,440
    
    
    
    77,279Total deposits
    
    
    393,295
    
    
    
    405,240Borrowings:Federal Home Loan Bank borrowings
    
    
    
    
    
    
    3,600Repurchase agreements
    
    
    5,082
    
    
    
    3,697Long-term debt
    
    
    25,000
    
    
    
    25,000Other liabilities and borrowings
    
    
    3,170
    
    
    
    3,203Total liabilities
    
    
    426,547
    
    
    
    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;
3,527,684 and 3,499,477 shares issued and outstanding
    
    
    4
    
    
    
    4Additional paid-in-capital
    
    
    15,774
    
    
    
    15,567Retained earnings
    
    
    27,390
    
    
    
    27,355Accumulated other comprehensive income
    
    
    856
    
    
    
    347Total shareholders equity
    
    
    44,024
    
    
    
    43,273Total liabilities and shareholders equity
    
    $
    470,571
    
    
    $
    484,013
   2




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GEORGIA-CAROLINA BANCSHARES, INC.
 
 Condensed Consolidated Statements of Operations
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(Unaudited)
    
    
    
    
    
    (Unaudited)Interest incomeInterest and fees on loans
    
    $
    5,617
    
    
    $
    5,727
    
    
    $
    16,890
    
    
    $
    16,383Interest on taxable securities
    
    
    401
    
    
    
    452
    
    
    
    1,232
    
    
    
    1,519Interest on nontaxable securities
    
    
    89
    
    
    
    103
    
    
    
    279
    
    
    
    311Interest on Federal funds sold
    
    
    11
    
    
    
    3
    
    
    
    25
    
    
    
    6Total interest income
    
    
    6,118
    
    
    
    6,285
    
    
    
    18,426
    
    
    
    18,219Interest expenseInterest on time deposits of $100,000 or more
    
    
    893
    
    
    
    1,342
    
    
    
    2,755
    
    
    
    4,337Interest on other deposits
    
    
    679
    
    
    
    828
    
    
    
    2,082
    
    
    
    2,548Interest on funds purchased and other borrowings
    
    
    229
    
    
    
    229
    
    
    
    678
    
    
    
    745Total interest expense
    
    
    1,801
    
    
    
    2,399
    
    
    
    5,515
    
    
    
    7,630Net interest income
    
    
    4,317
    
    
    
    3,886
    
    
    
    12,911
    
    
    
    10,589Provision for loan losses
    
    
    1,641
    
    
    
    670
    
    
    
    7,433
    
    
    
    1,910Net interest income after provision for loan losses
    
    
    2,676
    
    
    
    3,216
    
    
    
    5,478
    
    
    
    8,679Non-interest incomeService charges on deposits
    
    
    362
    
    
    
    392
    
    
    
    1,068
    
    
    
    1,090Gain on sale of mortgage loans
    
    
    3,067
    
    
    
    2,506
    
    
    
    7,922
    
    
    
    7,150Other income/loss
    
    
    278
    
    
    
    1,325
    
    
    
    800
    
    
    
    2,342Total non-interest income
    
    
    3,707
    
    
    
    4,223
    
    
    
    9,790
    
    
    
    10,582Non-interest expenseSalaries and employee benefits
    
    
    3,176
    
    
    
    3,287
    
    
    
    9,553
    
    
    
    9,427Occupancy expenses
    
    
    427
    
    
    
    417
    
    
    
    1,245
    
    
    
    1,236Other expenses
    
    
    1,424
    
    
    
    1,661
    
    
    
    4,990
    
    
    
    4,789Total non-interest expense
    
    
    5,027
    
    
    
    5,365
    
    
    
    15,788
    
    
    
    15,452Income/(loss) before income taxes
    
    
    1,356
    
    
    
    2,074
    
    
    
    (520
    )
    
    
    3,809Income tax provision
    
    
    253
    
    
    
    580
    
    
    
    (555
    )
    
    
    1,021Net income
    
    $
    1,103
    
    
    $
    1,494
    
    
    $
    35
    
    
    $
    2,788Net income per share of common stockBasic
    
    $
    0.31
    
    
    $
    0.43
    
    
    $
    0.01
    
    
    $
    0.80Diluted
    
    $
    0.31
    
    
    $
    0.43
    
    
    $
    0.01
    
    
    $
    0.80
   3




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GEORGIA-CAROLINA BANCSHARES, INC.
 
 Condensed Consolidated Statements of Comprehensive Income  (dollars in thousands)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(Unaudited)
    
    
    
    
    
    (Unaudited)Net income
    
    $
    1,103
    
    
    $
    1,494
    
    
    $
    35
    
    
    $
    2,788Unrealized holding gains arising during period,
less reclassifications adjustment for
gains and losses included in net income,
net of tax
    
    
    150
    
    
    
    491
    
    
    
    509
    
    
    
    471Comprehensive income
    
    $
    1,253
    
    
    $
    1,985
    
    
    $
    544
    
    
    $
    3,259
   4




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GEORGIA-CAROLINA BANCSHARES, INC.
 
 Condensed Consolidated Statements of Cash Flows
 (dollars in thousands)
 Nine Months Ended September 30,2010
    
    
    2009(Unaudited)Cash flows from operating activitiesNet income
    
    $
    35
    
    
    $
    2,788Adjustments to reconcile net income
to net cash provided by/(used in) operating activities:Depreciation and amortization
    
    
    497
    
    
    
    512Provision for loan losses
    
    
    7,433
    
    
    
    1,910Stock option expense
    
    
    63
    
    
    
    60Stock compensation
    
    
    144
    
    
    
    144Increase in cash value of bank-owned life insurance
    
    
    (311
    )
    
    
    (336
    )(Gain)/loss on sales of foreclosed real estate
    
    
    20
    
    
    
    (1,432
    )Net originations, proceeds and gains on loans held for sale
    
    
    6,174
    
    
    
    (15,865
    )Decrease in accrued interest receivable
    
    
    260
    
    
    
    29Increase in accrued interest payable
    
    
    227
    
    
    
    143Increase in deferred income tax asset, net
    
    
    (777
    )
    
    
    (376
    )Net change in other assets and liabilities
    
    
    233
    
    
    
    938Net cash provided by/(used in) operating activities
    
    
    13,998
    
    
    
    (11,485
    )Cash flows from investing activities(Increase)/decrease in federal funds sold
    
    
    3,175
    
    
    
    (1,675
    )Loan originations and collections, net
    
    
    12,401
    
    
    
    (12,999
    )Purchases of available for sale securities
    
    
    (41,839
    )
    
    
    (10,655
    )Proceeds from maturities, sales & calls of
available-for-sale securities, net
    
    
    25,163
    
    
    
    21,827Purchases of restricted securities
    
    
    
    
    
    
    (1,995
    )Proceeds from sales of restricted securities
    
    
    202
    
    
    
    1,368Proceeds from sales of foreclosed real estate
    
    
    2,545
    
    
    
    7,067Net additions to bank premises and fixed assets
    
    
    (136
    )
    
    
    (112
    )Net cash provided by investing activities
    
    
    1,511
    
    
    
    2,826Cash flows from financing activitiesIncrease/(decrease) in deposits
    
    
    (11,945
    )
    
    
    18,035Decrease in FHLB borrowings
    
    
    (3,600
    )
    
    
    (1,400
    )Increase/(decrease) in repurchase agreements and other borrowings
    
    
    1,385
    
    
    
    (3,813
    )Proceeds from stock options exercised
    
    
    
    
    
    
    52Net cash (used in)/provided by financing activities
    
    
    (14,160
    )
    
    
    12,874Net increase in cash and total on deposit with banks
    
    
    1,349
    
    
    
    4,215Cash and total on deposit with banks at beginning of period
    
    
    13,055
    
    
    
    9,954Cash and total on deposit with banks at end of period
    
    $
    14,404
    
    
    $
    14,169
   5




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GEORGIA-CAROLINA BANCSHARES, INC.
 
 Notes to Condensed Consolidated Financial Statements
 September 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 September 30, 2010WeightedAverage Shares-
    
    
    Per-ShareNumerator
    
    
    Denominator
    
    
    AmountBasic EPSIncome/(loss) available to common
stockholders
    
    $
    1,103,000
    
    
    
    3,525,579
    
    
    $
    0.31Effect of stock options outstanding
    
    
    
    
    
    
    
    
    
    
    Diluted EPSIncome/(loss) available to common stockholders
    
    $
    1,103,000
    
    
    
    3,525,579
    
    
    $
    0.31For 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
    
    
    $
    0.43For the Nine Months Ended September 30, 2010WeightedAverage Shares-
    
    
    Per-ShareNumerator
    
    
    Denominator
    
    
    AmountBasic EPSIncome/(loss) available to common
stockholders
    
    $
    35,000
    
    
    
    3,514,863
    
    
    $
    0.01Effect of stock options outstanding
    
    
    
    
    
    
    
    
    
    
    Diluted EPSIncome/(loss) available to common stockholders
    
    $
    35,000
    
    
    
    3,514,863
    
    
    $
    0.01For 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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Note 4  Fair Value Measurement
 Fair Value Measurements and Disclosures,
    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 atSeptember 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
    
    9/30/2010
    
    
    9/30/2010
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Available-for-sale securities, including FHLB stock
    
    $
    64,558
    
    
    $
    64,558
    
    
    $
    
    
    
    $
    64,558
    
    
    $
    
  September 30, 2010
    
    
    December 31, 2009Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairAmount
    
    
    Value
    
    
    Amount
    
    
    ValueLoans and loans held for sale
    
    $
    370.0
    
    
    $
    408.1
    
    
    $
    395.0
    
    
    $
    435.5Time deposits
    
    $
    233.7
    
    
    $
    235.8
    
    
    $
    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
 Improving Disclosures
about Fair Value Measurements, Fair Value Measurements and
Disclosures.
  10




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Measuring Liabilities
at Fair Value, Fair Value Measurements and Disclosures.
  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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Contingencies: Loss Contingencies, Receivables: Subsequent
Measurement.
  Results of Operations
 Overview
    13




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Interest Income
  Interest Expense
  Net Interest Income
    14




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Provision for Loan Losses
  Non-interest Income
    15




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Non-interest Expense
   Income Taxes
  Financial Condition
 Overview
   16




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Asset Quality
   September 30,
    
    
    December 31,
    
    
    September 30,2010
    
    
    2009
    
    
    2009Non-accrual loans
    
    $
    5,878,000
    
    
    $
    6,190,000
    
    
    $
    7,888,000OREO, net of valuation allowance
    
    
    3,093,000
    
    
    
    4,466,000
    
    
    
    5,142,000Total non-performing assets
    
    $
    8,971,000
    
    
    $
    10,656,000
    
    
    $
    13,030,000
   17




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Liquidity and Capital Resources
     18




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Off-Balance Sheet Arrangements
   19




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September 30,
    
    
    December 31,2010
    
    
    2009(in thousands)Commitments to extend credit
    
    $
    54,879
    
    
    $
    59,082Standby letters of credit
    
    
    5,508
    
    
    
    5,712Total off-balance sheet financial instruments
    
    $
    60,387
    
    
    $
    64,794
 Supplemental Consolidated Cash Flow Information
  September 30,
    
    
    September 30,2010
    
    
    2009(in thousands)Interest received
    
    $
    18,686
    
    
    $
    18,248Interest paid
    
    
    5,288
    
    
    
    7,488Real estate acquired by foreclosure
    
    
    1,192
    
    
    
    3,560Unrealized gain/(loss) on securities
    
    
    795
    
    
    
    735Income taxes paid
    
    
    520
    
    
    
    710$
    26,481
    
    
    $
    30,741
  20




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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.
     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 15, 2010
    By:
    /s/ Remer Y. Brinson, IIIRemer Y. Brinson, IIIPresident and Chief Executive Officer
(principal executive officer)November 15, 2010
    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