##### 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, 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 þ NO o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ
 o þ
  Class
    
    Outstanding at August 14, 2009Common Stock, $.001 Par Value
    
    3,493,179 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, 2009
and December 31, 2008
    
    
    2Condensed Consolidated Statements of Income for the Three and Six Months
Ended June 30, 2009 and 2008
    
    
    3Condensed Consolidated Statements of Comprehensive Income for the
Three and Six Months Ended June 30, 2009 and 2008
    
    
    4Condensed Consolidated Statements of Cash Flows for the
Six Months Ended June 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 4. Submission of Matters to a Vote of Security Holders
    
    
    23Item 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)
 June 30,
    
    
    December 31,2009
    
    
    2008ASSETSCash and due from banks
    
    $
    15,983
    
    
    $
    9,954Federal funds sold
    
    
    1,475
    
    
    
    Securities available-for-sale
    
    
    48,304
    
    
    
    57,594Loans, net of allowance for loan losses of $5,142 and $4,284, respectively
    
    
    331,510
    
    
    
    332,009Loans, held for sale
    
    
    58,319
    
    
    
    28,402Bank premises and fixed assets
    
    
    9,869
    
    
    
    10,081Accrued interest receivable
    
    
    1,761
    
    
    
    1,934Foreclosed real estate, net of allowance
    
    
    6,936
    
    
    
    7,217Deferred tax asset, net
    
    
    1,212
    
    
    
    996Federal Home Loan Bank Stock
    
    
    2,828
    
    
    
    2,201Bank-owned life insurance
    
    
    8,572
    
    
    
    8,402Other assets
    
    
    1,412
    
    
    
    2,038Total assets
    
    $
    488,181
    
    
    $
    460,828LIABILITIES AND SHAREHOLDERS EQUITYDeposits:Non-interest bearing
    
    $
    36,748
    
    
    $
    34,121Interest-bearing:NOW accounts
    
    
    38,456
    
    
    
    37,373Savings
    
    
    50,810
    
    
    
    55,426Money market accounts
    
    
    9,114
    
    
    
    9,772Time deposits of $100,000, and over
    
    
    187,667
    
    
    
    170,878Other time deposits
    
    
    76,605
    
    
    
    69,439Total deposits
    
    
    399,400
    
    
    
    377,009Borrowings:Other liabilities, borrowings and retail agreements
    
    
    48,253
    
    
    
    44,735Total liabilities
    
    
    447,653
    
    
    
    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;
3,483,586 and 3,456,816 shares
issued and outstanding
    
    
    4
    
    
    
    4Additional paid-in-capital
    
    
    15,438
    
    
    
    15,268Retained Earnings
    
    
    24,898
    
    
    
    23,604Accumulated other comprehensive income
    
    
    188
    
    
    
    208Total shareholders equity
    
    
    40,528
    
    
    
    39,084Total liabilities and shareholders equity
    
    $
    488,181
    
    
    $
    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
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Interest incomeInterest and fees on loans
    
    $
    5,551
    
    
    $
    5,894
    
    
    $
    10,656
    
    
    $
    12,171Interest on taxable securities
    
    
    499
    
    
    
    713
    
    
    
    1,067
    
    
    
    1,428Interest on nontaxable securities
    
    
    103
    
    
    
    75
    
    
    
    208
    
    
    
    148Interest on Federal funds sold
    
    
    1
    
    
    
    18
    
    
    
    3
    
    
    
    56Total interest income
    
    
    6,154
    
    
    
    6,700
    
    
    
    11,934
    
    
    
    13,803Interest expenseInterest on time deposits of $100,000 or more
    
    
    1,488
    
    
    
    1,594
    
    
    
    2,995
    
    
    
    3,415Interest on other deposits
    
    
    852
    
    
    
    1,436
    
    
    
    1,720
    
    
    
    3,282Interest on funds purchased and other borrowings
    
    
    244
    
    
    
    269
    
    
    
    516
    
    
    
    507Total interest expense
    
    
    2,584
    
    
    
    3,299
    
    
    
    5,231
    
    
    
    7,204Net interest income
    
    
    3,570
    
    
    
    3,401
    
    
    
    6,703
    
    
    
    6,599Provision for loan losses
    
    
    613
    
    
    
    (29
    )
    
    
    1,240
    
    
    
    208Net interest income after provision for loan losses
    
    
    2,957
    
    
    
    3,430
    
    
    
    5,463
    
    
    
    6,391Non-interest incomeService charges on deposits
    
    
    363
    
    
    
    324
    
    
    
    698
    
    
    
    624Other income/loss
    
    
    615
    
    
    
    247
    
    
    
    1,017
    
    
    
    480Gain on sale of mortgage loans
    
    
    2,749
    
    
    
    1,818
    
    
    
    4,644
    
    
    
    3,7373,727
    
    
    
    2,389
    
    
    
    6,359
    
    
    
    4,841Non-interest expenseSalaries and employee benefits
    
    
    3,249
    
    
    
    2,824
    
    
    
    6,140
    
    
    
    5,585Occupancy expenses
    
    
    366
    
    
    
    370
    
    
    
    748
    
    
    
    750Other expenses
    
    
    1,821
    
    
    
    1,345
    
    
    
    3,199
    
    
    
    2,5105,436
    
    
    
    4,539
    
    
    
    10,087
    
    
    
    8,845Income before income taxes
    
    
    1,248
    
    
    
    1,280
    
    
    
    1,735
    
    
    
    2,387Income tax expense
    
    
    349
    
    
    
    414
    
    
    
    441
    
    
    
    769Net income
    
    $
    899
    
    
    $
    866
    
    
    $
    1,294
    
    
    $
    1,618Net income per share of common stockBasic
    
    $
    0.26
    
    
    $
    0.25
    
    
    $
    0.37
    
    
    $
    0.47Diluted
    
    $
    0.26
    
    
    $
    0.25
    
    
    $
    0.37
    
    
    $
    0.46Dividends per share of common stock
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
   3




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GEORGIA-CAROLINA BANCSHARES, INC.
 
 Condensed Consolidated Statements of Comprehensive Income/(Loss)
 (Unaudited)
 (dollars in thousands)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net income
    
    $
    899
    
    
    $
    866
    
    
    $
    1,294
    
    
    $
    1,618Unrealized holding gains and (losses) arising
during period, less reclassifications
adjustment
for gains and losses included in net income,
net of tax
    
    
    49
    
    
    
    (1,055
    )
    
    
    (20
    )
    
    
    (642
    )Comprehensive income/(loss)
    
    $
    948
    
    
    $
    (189
    )
    
    $
    1,274
    
    
    $
    976
   4




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GEORGIA-CAROLINA BANCSHARES, INC.
 
 Condensed Consolidated Statements of Cash Flows
 (Unaudited)
 (dollars in thousands)
 Six Months Ended June 30,2009
    
    
    2008Cash flows from operating activitiesNet income
    
    $
    1,294
    
    
    $
    1,618Adjustments to reconcile net income
to net cash (used in) provided by operating activities:Depreciation and amortization
    
    
    342
    
    
    
    351Provision for loan losses
    
    
    1,240
    
    
    
    208SFAS 123R Stock option expense
    
    
    39
    
    
    
    67Stock compensation
    
    
    79
    
    
    
    124Increase in cash value of bank-owned life insurance
    
    
    (170
    )
    
    
    (161
    )(Gain)/loss on sales of foreclosed real estate
    
    
    (467
    )
    
    
    23(Gain)/loss on sales of premises and equipment
    
    
    
    
    
    
    (1
    )Net originations, proceeds and gain on loans held for sale
    
    
    (29,917
    )
    
    
    489Decrease in accrued interest receivable
    
    
    173
    
    
    
    125Increase in accrued interest payable
    
    
    429
    
    
    
    272Increase in deferred income tax asset, net
    
    
    (205
    )
    
    
    (66
    )Net change in other assets and liabilities
    
    
    1,255
    
    
    
    238Net cash (used in) provided by operating activities
    
    
    (25,908
    )
    
    
    3,287Cash flows from investing activitiesIncrease in federal funds sold
    
    
    (1,475
    )
    
    
    (414
    )Loan originations and collections, net
    
    
    (3,473
    )
    
    
    (5,895
    )Purchases of available for sale securities
    
    
    (10,655
    )
    
    
    (19,548
    )Proceeds from maturities, sales & calls of
available-for-sale securities, net
    
    
    19,912
    
    
    
    19,589Purchases of restricted securities
    
    
    (1,995
    )
    
    
    (2.953
    )Proceeds from sales of restricted securities
    
    
    1,368
    
    
    
    2,230Proceeds from sales of foreclosed real estate
    
    
    3,480
    
    
    
    28Net additions to bank premises and fixed assets
    
    
    (77
    )
    
    
    (94
    )Net cash provided by (used in) investing activities
    
    
    7,085
    
    
    
    (7,057
    )Cash flows from financing activitiesIncrease/(decrease) in deposits, funds purchased and other
borrowings
    
    
    20,874
    
    
    
    (12,360
    )Increase in FHLB borrowings
    
    
    8,098
    
    
    
    14,857Increase/(decrease) in repurchase agreements
    
    
    (4,172
    )
    
    
    4,250Proceeds from stock options exercised
    
    
    52
    
    
    
    7Net cash provided by financing activities
    
    
    24,852
    
    
    
    6,754Net increase in cash and due from banks
    
    
    6,029
    
    
    
    2,984Cash and due from banks at beginning of period
    
    
    9,954
    
    
    
    6,744Cash and due from banks at end of period
    
    $
    15,983
    
    
    $
    9,728
   5




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GEORGIA-CAROLINA BANCSHARES, INC.
 
 Notes to Condensed Consolidated Financial Statements
 June 30, 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 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 Three Months Ended June 30, 2008WeightedAverage Shares-
    
    
    Per-ShareNumerator
    
    
    Denominator
    
    
    AmountBasic EPSIncome available to common stockholders
    
    $
    866,000
    
    
    
    3,408,932
    
    
    $
    0.25Effect of stock options outstanding
    
    
    
    
    
    
    91,346
    
    
    
    Diluted EPSIncome available to common stockholders
    
    $
    866,000
    
    
    
    3,500,278
    
    
    $
    0.25
 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
 For the Six Months Ended June 30, 2008WeightedAverage Shares-
    
    
    Per-ShareNumerator
    
    
    Denominator
    
    
    AmountBasic EPSIncome available to common stockholders
    
    $
    1,618,000
    
    
    
    3,405,349
    
    
    $
    0.47Effect of stock options outstanding
    
    
    
    
    
    
    96,381
    
    
    
    (0.01
    )Diluted EPSIncome available to common stockholders
    
    $
    1,618,000
    
    
    
    3,501,730
    
    
    $
    0.46
  7




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##### Table of Contents



Note 4  Fair Value Measurement
 Fair Value Measurements,
    8




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##### Table of Contents



June 30, 2009
    
    
    December 31, 2008Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairAmount
    
    
    Value
    
    
    Amount
    
    
    ValueLoans and loans held for
sale, net of allowance
    
    $
    389.8
    
    
    $
    433.9
    
    
    $
    360.4
    
    
    $
    392.3Time deposits
    
    $
    264.3
    
    
    $
    267.7
    
    
    $
    240.3
    
    
    $
    245.1
  Level 1
 Level 2
 Level 3
  Investment Securities Available-for-Sale
  Loans Held for Sale
   9




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##### Table of Contents



Loans
  Foreclosed Assets
   Fair Value Measurements atJune 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
    
    6/30/2009
    
    
    6/30/2009
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Available-for-sale
securities
    
    $
    48,304
    
    
    $
    48,304
    
    
    $
    
    
    
    $
    48,304
    
    
    $
    
 Note 5  Impact of Other Recently Issued Accounting Standards
 Accounting for Transfers of Financial Assets and
Repurchase Financing Transactions
  10




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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
 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
  11




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Recognition and
Presentation of Other-Than-Temporary Impairments
  Note 6  Commitments and Contingencies
     12




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##### Table of Contents



Note 7  Subsequent Events
   13




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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
  Income Taxes
   17




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Financial Condition
 Overview
   Asset Quality
   June 30,
    
    
    December 31,
    
    
    June 30,2009
    
    
    2008
    
    
    2008Non-accrual loans
    
    $
    7,911,000
    
    
    $
    5,061,000
    
    
    $
    12,046,000OREO, net of valuation allowance
    
    
    6,936,000
    
    
    
    7,217,000
    
    
    
    1,693,000Total non-performing assets
    
    $
    14,847,000
    
    
    $
    12,278,000
    
    
    $
    13,739,000
   18




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Liquidity and Capital Resources
      19




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Off-Balance Sheet Arrangements
   June 30,
    
    
    December 31,2009
    
    
    2008(in thousands)Commitments to extend credit
    
    $
    63,208
    
    
    $
    56,426Standby letters of credit
    
    
    5,513
    
    
    
    5,102Total off-balance sheet financial instruments
    
    $
    68,721
    
    
    $
    61,528
 Supplemental Consolidated Cash Flow Information
  June 30,
    
    
    June 30,2009
    
    
    2008(in thousands)Real estate acquired by foreclosure
    
    $
    2,732
    
    
    $
    1,262Unrealized gain/(loss) on securities
    
    
    <33>
    
    
    
    <1,003>$
    2,699
    
    
    $
    259
  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.
  
 Item 4T. Controls and Procedures.
     22




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Part II  OTHER INFORMATION
 
 Item 4. Submission of Matters to a Vote of Security Holders.
   Votes
    
    
    VotesFOR
    
    
    WITHHELDPatrick G. Blanchard
    
    
    2,427,223
    
    
    
    77,762David W. Joesbury, Sr.
    
    
    2,365,893
    
    
    
    139,092A. Montague Miller
    
    
    2,437,012
    
    
    
    67,973Robert N. Wilson, Jr.
    
    
    2,437,012
    
    
    
    67,973Bennye M. Young
    
    
    2,437,012
    
    
    
    67,973John W. Lee
    
    
    2,437,012
    
    
    
    67,973
  
 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.August 14, 2009
    By:
    /s/ Remer Y. Brinson IIIRemer Y. Brinson IIIPresident and Chief Executive Officer

(principal executive officer)August 14, 2009
    By:
    /s/ Thomas J. FlournoyThomas J. FlournoySenior Vice President and Chief Financial Officer
(principal financial and accounting officer)  24




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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.
  25