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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-K
 
 (Mark One)x
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2008o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from  to
  GEORGIA-CAROLINA BANCSHARES, INC.
 
  Georgia
    
    58-2326075(State of Incorporation)
    
    (I.R.S. Employer Identification Number)
 3527 Wheeler Road 
Augusta, Georgia
    
    30909(Address of Principal Executive Offices)
    
    (Zip Code)
 (706) 731-6600
 
  Securities registered under Section 12(b) of the Act:
 Title of Each Class
    
    Name of each exchange on which registeredNone
    
    None
 Securities registered under Section 12(g) of the Exchange Act:
 
 o x
 o x
 x o
 o
  Large accelerated filer ___
    
    Accelerated filer ___
    
    Non-Accelerated filer ___
    
    Smaller reporting company x
 o x




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DOCUMENTS INCORPORATED BY REFERENCE




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##### 



GEORGIA-CAROLINA BANCSHARES, INC.
2008 Form 10-K Annual Report
 TABLE OF CONTENTS
 Item Number
    
    
    
    Page orIn Form 10-K
    
    Description
    
    LocationPART IItem 1.
    
    Business
    
    
    1Item 1A.
    
    Risk Factors
    
    
    12Item 1B.
    
    Unresolved Staff Comments
    
    
    19Item 2.
    
    Properties
    
    
    19Item 3.
    
    Legal Proceedings
    
    
    19Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    19PART IIItem 5.
    
    Market for the Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    20Item 6.
    
    Selected Financial Data
    
    
    22Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    23Item 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    44Item 8.
    
    Financial Statements and Supplementary Data
    
    
    44Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    45Item 9A.
    
    Controls and Procedures
    
    
    45Item 9A(T).
    
    Controls and Procedures
    
    
    45Item 9B.
    
    Other Information
    
    
    45PART IIIItem 10.
    
    Directors, Executive Officers and Corporate Governance
    
    
    46Item 11.
    
    Executive Compensation
    
    
    46Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    46Item 13.
    
    Certain Relationships and Related Transactions, and Director Independence
    
    
    46Item 14.
    
    Principal Accountant Fees and Services
    
    
    46PART IVItem 15.
    
    Exhibits and Financial Statement Schedules
    
    
    47Signatures
    
    
    
    
    50EX-21.1EX-23.1EX-31.1EX-31.2EX-32.1EX-99.1




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Special Note Regarding Forward-Looking Statements
  
 PART I
 
 Item 1 . Business
 General
     1




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Market Area and Competition
   Asset/Liability Management
   Correspondent Banking
  2




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Data Processing
  Employees
  Monetary Policies
  SUPERVISION AND REGULATION
  Recent
Federal Legislation
 Emergency Economic Stabilization Act of 2008.
 3




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The Company
 Bank Holding Company Regulation.
 
    
    acquiring direct or indirect ownership or control of more than 5% of the voting shares
of any bank;
    
    taking any action that causes a bank to become a subsidiary of a bank holding company;
    
    merging or consolidating with another bank holding company; or
    
    acquiring most other operating companies.
   4




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Financial Services Modernization
 
    
    allows bank holding companies that qualify as financial holding companies to engage in
a substantially broader range of non-banking activities than was permissible under prior
law;
    
    allows insurers and other financial services companies to acquire banks;
    
    allows national banks, and some state banks, either directly or through operating
subsidiaries, to engage in certain non-banking financial activities;
    
    removes various restrictions that applied to bank holding company ownership of
securities firms and mutual fund advisory companies; and
 
    
    establishes the overall regulatory structure applicable to bank holding companies that
also engage in insurance and securities operations.
  Transactions with Affiliates.
 Tie-In Arrangements.
 Source of Strength; Cross-Guarantee.
 5




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Subsidiary Dividends.
  State Law Restrictions.
 The Bank
 General
 Insider Credit Transactions
 6




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Regulation W.
 
    
    a bank and its subsidiaries may not purchase a low-quality asset from an affiliate;
    
    covered transactions and other specified transactions between a bank or its subsidiaries
and an affiliate must be on terms and conditions that are consistent with safe and sound
banking practices; and
 
    
    with some exceptions, each loan or extension of credit by a bank to an affiliate must be
secured by collateral with a market value ranging from 100% to 130%, depending on the type
of collateral, of the amount of the loan or extension of credit.
  Federal Deposit Insurance Corporation Improvement Act
 Interstate Banking and Branching.
 7




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Deposit Insurance and Assessments.
   Community Reinvestment Act.
 The Modernization Act-Consumer Privacy.
 8




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Capital Adequacy
     Other Laws and Regulations
 International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001.
  9




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Sarbanes-Oxley Act of 2002
  Other Regulations
 
    
    the federal Truth-In-Lending Act, governing disclosures of credit terms to consumer
borrowers;
    
    the Home Mortgage Disclosure Act of 1975, requiring financial institutions to
provide information to enable the public and public officials to determine whether a
financial institution is fulfilling its obligation to help meet the housing needs of
the community it serves;
    
    the Equal Credit Opportunity Act, prohibiting discrimination on the basis of race,
creed or other prohibited factors in extending credit;
    
    the Fair Credit Reporting Act of 1978, governing the use and provision of
information to credit reporting agencies;
    
    the Fair Debt Collection Act, governing the manner in which consumer debts may be
collected by collection agencies; and
    
    the rules and regulations of the various federal agencies charged with the
responsibility of implementing such federal laws.
  
    
    the Right to Financial Privacy Act, which imposes a duty to maintain confidentiality
of
consumer financial records and prescribes procedures for complying with administrative
subpoenas of financial records; and
 10




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
    
    the Electronic Funds Transfer Act and Regulation E issued by the Federal Reserve
Board to implement that act, which governs automatic deposits to and withdrawals from
deposit accounts and customers rights and liabilities arising from the use of
automated teller machines and other electronic banking services.
 Financial Institutions Reform Recovery and Enforcement Act
 Privacy and Credit Reporting
  Check 21
 
    
    allowing check truncation without making it mandatory;
    
    demanding that every financial institution communicate to accountholders in writing
a description of its substitute check processing program and their rights under the
law;
    
    legalizing substitutions for and replacements of paper checks without agreement from
consumers;
 11




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
    
    retaining in place the previously mandated electronic collection and return of
checks between financial institutions only when individual agreements are in place;
 
    
    requiring that when accountholders request verification, financial institutions
produce the original check (or a copy that accurately represents the original) and
demonstrate that the account debit was accurate and valid; and
    
    requiring the re-crediting of funds to an individuals account on the next business
day after a consumer proves that the financial institution has erred.
 Effect of Governmental Monetary Policies
 Future Legislation.
 
 Item 1A.
    
    Risk Factors
  Recent Market, Legislative and Regulatory Events
 The current banking crisis in the United States and globally has adversely affected our industry,
including our business, and may continue to have an adverse effect on our business in the
future.
  12




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Current levels of market volatility are unprecedented.
  The soundness of other financial institutions could adversely affect us.
  There can be no assurance that new legislation and federal programs will stabilize the U.S.
financial system, and may adversely affect us.
   13




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Our Material Business Risks
 An economic downturn, especially one affecting Richmond, Columbia and McDuffie counties, could
adversely affect our business.
  Weakness in the real estate market, including the secondary residential mortgage loan markets, has
adversely affected us and may continue to adversely affect us.
  14




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Our loan portfolio includes a substantial amount of commercial real estate and construction and
development loans, which may have more risks than residential or consumer loans
   Many of our borrowers have more than one loan or credit relationship with us.
  Our decisions regarding credit risk and reserves for loan losses may materially and adversely
affect our business.
  
    
    the duration of the credit;
    
    credit risks of a particular customer;
    
    changes in economic and industry conditions; and
    
    in the case of a collateralized loan, risks resulting from uncertainties about the
future value of the collateral.
 15




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We face strong competition for customers, which could prevent us from obtaining customers and may
cause us to pay higher interest rates to attract deposits.
  Changes in interest rates may reduce our profitability.
  Our recent operating results may not be indicative of our future operating results.
  We could be adversely affected by the loss of one or more key personnel or by an inability to
attract and retain employees.
  16




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The success of our growth strategy depends on our ability to identify and recruit individuals with
experience and relationships in the markets in which we intend to expand.
  We will face risks with respect to future expansion and acquisitions or mergers.
  Our growth may require us to raise additional capital that may not be available when it is needed
or may not be available on terms acceptable to us.
  17




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We are subject to extensive regulation that could limit or restrict our activities.
   Efforts to comply with the Sarbanes-Oxley Act have involved significant expenditures, and
non-compliance with the Sarbanes-Oxley Act may adversely affect us.
   18




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Item 1B.
    
    Unresolved Staff Comments
  
 Item 2.
    
    Properties
  Branch
    
    Date OpenedHill Street Office, Thomson, Georgia
    
    January 1989Daniel Village Office, Augusta, Georgia
    
    March 1999West Town Office, Martinez, Georgia
    
    October 1999Medical Center Office, Augusta, Georgia
    
    January 2001Furys Ferry Road Office, Martinez, Georgia
    
    April 2002Main Office, Augusta, Georgia
    
    September 2005
   
 Item 3.
    
    Legal Proceedings
  
 Item 4.
    
    Submission of Matters to a Vote of Security Holders
  19




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PART II
 
 Item 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
 Market Information
  High
    
    
    LowFiscal year ended December 31, 2008First Quarter
    
    $
    11.00
    
    
    $
    9.05Second Quarter
    
    $
    11.50
    
    
    $
    9.00Third Quarter
    
    $
    12.35
    
    
    $
    9.00Fourth Quarter
    
    $
    12.35
    
    
    $
    7.00Fiscal year ended December 31, 2007First Quarter
    
    $
    14.10
    
    
    $
    12.90Second Quarter
    
    $
    14.00
    
    
    $
    12.90Third Quarter
    
    $
    13.50
    
    
    $
    13.00Fourth Quarter
    
    $
    13.20
    
    
    $
    10.90
 Holders of Common Stock
  Dividends
   20




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Equity Compensation Plan Information
  Number of securities
    
    
    Weighted-average
    
    
    Number of securities remainingto be issued upon
    
    
    exercise price of
    
    
    available for future issuanceexercise of outstanding
    
    
    outstanding
    
    
    under equity compensationoptions, warrants and
    
    
    options, warrants
    
    
    plans (excluding securitiesrights
    
    
    and rights
    
    
    reflected in column (a))Plan category
    
    (a)
    
    
    (b)
    
    
    (c)Equity compensation plans approved
by security holders:1997 Stock Option Plan
    
    
    220,555
    
    
    $
    7.93
    
    
    
    2004 Incentive Plan
    
    
    66,320
    
    
    $
    13.32
    
    
    
    262,805Equity compensation plans not
approved by security holders
    
    
    N/A
    
    
    
    N/A
    
    
    
    70,434Total
    
    
    286,875
    
    
    $
    9.18
    
    
    
    333,239
 Director Stock Purchase Plan
  21




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Item 6.
    
    Selected Financial Data
  At and for the Years Ended December 31,($ in thousands, except per share data)2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004Selected Balance Sheet Data:Assets
    
    $
    460,828
    
    
    $
    447,869
    
    
    $
    417,471
    
    
    $
    349,481
    
    
    $
    332,393Investment securities
    
    
    59,795
    
    
    
    60,393
    
    
    
    55,404
    
    
    
    39,362
    
    
    
    43,375Loans, held for investment
    
    
    336,293
    
    
    
    322,201
    
    
    
    280,883
    
    
    
    248,311
    
    
    
    216,728Loans, held for sale
    
    
    28,402
    
    
    
    39,547
    
    
    
    56,758
    
    
    
    40,064
    
    
    
    56,729Allowance for loan losses
    
    
    4,284
    
    
    
    5,059
    
    
    
    4,386
    
    
    
    3,756
    
    
    
    3,416Deposits
    
    
    377,009
    
    
    
    379,966
    
    
    
    341,342
    
    
    
    304,440
    
    
    
    257,780Short-term borrowings
    
    
    15,859
    
    
    
    17,473
    
    
    
    38,661
    
    
    
    13,442
    
    
    
    47,087Long-term debt
    
    
    25,400
    
    
    
    10,500
    
    
    
    600
    
    
    
    700
    
    
    
    800Other liabilities
    
    
    3,476
    
    
    
    3,959
    
    
    
    4,742
    
    
    
    2,290
    
    
    
    1,358Shareholders equity
    
    
    39,084
    
    
    
    35,971
    
    
    
    32,126
    
    
    
    28,609
    
    
    
    25,368Selected Results of Operations Data:Interest income
    
    
    26,371
    
    
    
    29,019
    
    
    
    25,335
    
    
    
    20,876
    
    
    
    16,088Interest expense
    
    
    13,038
    
    
    
    15,706
    
    
    
    11,969
    
    
    
    8,420
    
    
    
    4,468Net interest income
    
    
    13,333
    
    
    
    13,313
    
    
    
    13,366
    
    
    
    12,456
    
    
    
    11,620Provision for loan losses
    
    
    1,456
    
    
    
    909
    
    
    
    898
    
    
    
    1,022
    
    
    
    808Net interest income after provision for
provision for loan losses
    
    
    11,877
    
    
    
    12,404
    
    
    
    12,468
    
    
    
    11,434
    
    
    
    10,812Non-interest income
    
    
    9,920
    
    
    
    9,932
    
    
    
    9,800
    
    
    
    10,331
    
    
    
    10,571Non-interest expense
    
    
    17,745
    
    
    
    17,816
    
    
    
    17,911
    
    
    
    16,368
    
    
    
    15,714Income before taxes
    
    
    4,052
    
    
    
    4,520
    
    
    
    4,357
    
    
    
    5,397
    
    
    
    5,669Income tax expense
    
    
    1,252
    
    
    
    1,619
    
    
    
    1,460
    
    
    
    1,942
    
    
    
    2,167Net income
    
    $
    2,800
    
    
    $
    2,901
    
    
    $
    2,897
    
    
    $
    3,455
    
    
    $
    3,502Per Share DataNet income  basic
    
    $
    0.82
    
    
    $
    0.85
    
    
    $
    0.86
    
    
    $
    1.04
    
    
    $
    1.06Net income  diluted
    
    $
    0.80
    
    
    $
    0.83
    
    
    $
    0.83
    
    
    $
    0.98
    
    
    $
    0.99Book value
    
    $
    11.31
    
    
    $
    10.58
    
    
    $
    9.51
    
    
    $
    8.53
    
    
    $
    7.65Weighted average number of shares outstanding:Basic
    
    
    3,426,860
    
    
    
    3,393,224
    
    
    
    3,370,277
    
    
    
    3,336,834
    
    
    
    3,305,534Diluted
    
    
    3,503,856
    
    
    
    3,508,606
    
    
    
    3,489,564
    
    
    
    3,524,294
    
    
    
    3,521,876
 22




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At and for the Years Ended December 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004Performance Ratios:Return on average assets
    
    
    0.62
    %
    
    
    0.69
    %
    
    
    0.78
    %
    
    
    1.00
    %
    
    
    1.19
    %Return on average equity
    
    
    7.36
    %
    
    
    8.39
    %
    
    
    9.57
    %
    
    
    12.80
    %
    
    
    14.86
    %Net interest margin (1)
    
    
    3.15
    %
    
    
    3.36
    %
    
    
    3.81
    %
    
    
    3.78
    %
    
    
    4.14
    %Efficiency ratio (2)
    
    
    76.31
    %
    
    
    76.64
    %
    
    
    77.39
    %
    
    
    71.45
    %
    
    
    70.81
    %Loan to deposit ratio
    
    
    96.73
    %
    
    
    95.21
    %
    
    
    98.92
    %
    
    
    94.72
    %
    
    
    106.08
    %Asset Quality Ratios:Nonperforming loans to total loans
    
    
    1.39
    %
    
    
    3.20
    %
    
    
    0.68
    %
    
    
    0.59
    %
    
    
    0.61
    %Nonperforming assets to total assets
    
    
    2.66
    %
    
    
    2.69
    %
    
    
    0.69
    %
    
    
    0.61
    %
    
    
    0.63
    %Net charge-offs to average total loans
    
    
    0.67
    %
    
    
    0.08
    %
    
    
    0.09
    %
    
    
    0.24
    %
    
    
    0.23
    %Allowance for loan losses to
nonperforming loans
    
    
    84.65
    %
    
    
    43.77
    %
    
    
    191.86
    %
    
    
    219.91
    %
    
    
    205.29
    %Allowance for loan losses to total loans
    
    
    1.17
    %
    
    
    1.40
    %
    
    
    1.30
    %
    
    
    1.30
    %
    
    
    1.25
    %Capital Ratios:Average equity to average assets
    
    
    8.41
    %
    
    
    8.16
    %
    
    
    8.11
    %
    
    
    7.80
    %
    
    
    7.99
    %Leverage ratio
    
    
    8.59
    %
    
    
    8.18
    %
    
    
    7.85
    %
    
    
    8.14
    %
    
    
    7.98
    %Tier 1 risk-based capital ratio
    
    
    9.82
    %
    
    
    9.39
    %
    
    
    9.25
    %
    
    
    9.91
    %
    
    
    9.11
    %Total risk-based capital ratio
    
    
    10.91
    %
    
    
    10.72
    %
    
    
    10.50
    %
    
    
    11.16
    %
    
    
    10.34
    %Growth Ratios and Other Data:Percentage change in net income
    
    
    (3.5
    %)
    
    
    0.1
    %
    
    
    (16.2
    %)
    
    
    (1.3
    %)
    
    
    (30.4
    %)Percentage change in diluted net
income per share
    
    
    (3.6
    %)
    
    
    0.0
    %
    
    
    (15.3
    %)
    
    
    (1.0
    %)
    
    
    (29.8
    %)Percentage change in assets
    
    
    2.9
    %
    
    
    7.3
    %
    
    
    19.5
    %
    
    
    5.1
    %
    
    
    24.9
    %Percentage change in loans
    
    
    0.8
    %
    
    
    7.1
    %
    
    
    17.1
    %
    
    
    5.5
    %
    
    
    31.0
    %Percentage change in deposits
    
    
    (0.8
    %)
    
    
    11.3
    %
    
    
    12.1
    %
    
    
    18.1
    %
    
    
    16.3
    %Percentage change in equity
    
    
    8.7
    %
    
    
    12.0
    %
    
    
    12.3
    %
    
    
    12.8
    %
    
    
    16.0
    %
 
 (1)
    
    Non-tax equivalent.(2)
    
    Computed by dividing non-interest
expense by the sum of net interest
income and non-interest income,
excluding gains and losses on the sale
of assets. 
 Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
  Critical Accounting Policies
   23




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Accounting for Contingencies, Accounting by Creditors for Impairment of a Loan.
   24




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Consolidated Financial Information
  2008
    
    
    2007
    
    
    2006Total Assets
    
    
    Net Income
    
    
    Total Assets
    
    
    Net Income
    
    
    Total Assets
    
    
    Net Income(Dollar amounts in thousands)Consolidated
    
    $
    460,828
    
    
    $
    2,800
    
    
    $
    447,869
    
    
    $
    2,901
    
    
    $
    417,471
    
    
    $
    2,897Bank only
    
    $
    460,726
    
    
    $
    2,983
    
    
    $
    447,852
    
    
    $
    3,155
    
    
    $
    417,154
    
    
    $
    3,040Parent company only
    
    
    
    
    
    $
    (183
    )
    
    
    
    
    
    $
    (254
    )
    
    
    
    
    
    $
    (143
    )
   Results of Operations  Comparison of 2008 and 2007
 Balance Sheet
  25




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Income Statement
     26




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Comparison of 2007 and 2006
 Balance Sheet
     Income Statement
  27




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Distribution of Assets, Liabilities and Shareholders Equity; Interest Rates and Interest
Differential
  28




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CONSOLIDATED AVERAGE BALANCE SHEETS
(Dollar amounts in thousands)
 Year Ended December 31,2008
    
    
    2007
    
    
    2006Interest
    
    
    Average
    
    
    
    
    
    
    Interest
    
    
    Average
    
    
    
    
    
    
    Interest
    
    
    AverageAverage
    
    
    Income/
    
    
    Yield /
    
    
    Average
    
    
    Income/
    
    
    Yield /
    
    
    Average
    
    
    Income/
    
    
    Yield /Balance
    
    
    Expense
    
    
    Rate
    
    
    Balance
    
    
    Expense
    
    
    Rate
    
    
    Balance
    
    
    Expense
    
    
    RateASSETSINTEREST-EARNING ASSETSLoans, net of unearned income
    
    $
    360,689
    
    
    $
    23,186
    
    
    
    6.43
    %
    
    $
    336,434
    
    
    $
    25,998
    
    
    
    7.73
    %
    
    $
    302,778
    
    
    $
    23,144
    
    
    
    7.64
    %Investment securities
    
    
    61,375
    
    
    
    3,100
    
    
    
    5.05
    %
    
    
    57,463
    
    
    
    2,760
    
    
    
    4.80
    %
    
    
    47,153
    
    
    
    2,053
    
    
    
    4.35
    %Fed funds sold & cash in banks
    
    
    3,996
    
    
    
    85
    
    
    
    2.13
    %
    
    
    4,887
    
    
    
    261
    
    
    
    5.35
    %
    
    
    2,788
    
    
    
    138
    
    
    
    4.95
    %Total interest-earning assets
    
    
    426,060
    
    
    
    26,371
    
    
    
    6.19
    %
    
    
    398,784
    
    
    
    29,019
    
    
    
    7.28
    %
    
    
    352,719
    
    
    
    25,335
    
    
    
    7.18
    %NON-INTEREST-EARNING ASSETSCash and due from banks
    
    
    6,296
    
    
    
    
    
    
    
    
    
    
    
    7,530
    
    
    
    
    
    
    
    
    
    
    
    7,404Bank premises and fixed assets
    
    
    10,260
    
    
    
    
    
    
    
    
    
    
    
    10,623
    
    
    
    
    
    
    
    
    
    
    
    10,879Accrued interest receivable
    
    
    1,956
    
    
    
    
    
    
    
    
    
    
    
    2,031
    
    
    
    
    
    
    
    
    
    
    
    1,779Other assets
    
    
    12,978
    
    
    
    
    
    
    
    
    
    
    
    6,746
    
    
    
    
    
    
    
    
    
    
    
    4,010Allowance for loan losses
    
    
    (5,190
    )
    
    
    
    
    
    
    
    
    
    
    (4,640
    )
    
    
    
    
    
    
    
    
    
    
    (4,039
    )Total assets
    
    $
    452,360
    
    
    
    
    
    
    
    
    
    
    $
    421,074
    
    
    
    
    
    
    
    
    
    
    $
    372,752LIABILITIES AND SHAREHOLDERS
EQUITYINTEREST-BEARING DEPOSITSNOW accounts
    
    $
    31,674
    
    
    $
    376
    
    
    
    1.19
    %
    
    $
    28,935
    
    
    $
    478
    
    
    
    1.65
    %
    
    $
    29,395
    
    
    $
    497
    
    
    
    1.69
    %Savings accounts
    
    
    67,259
    
    
    
    1,408
    
    
    
    2.09
    %
    
    
    68,691
    
    
    
    2,928
    
    
    
    4.26
    %
    
    
    53,603
    
    
    
    1,994
    
    
    
    3.72
    %Money market accounts
    
    
    8,773
    
    
    
    167
    
    
    
    1.90
    %
    
    
    10,982
    
    
    
    307
    
    
    
    2.79
    %
    
    
    18,782
    
    
    
    555
    
    
    
    2.96
    %Time accounts
    
    
    231,736
    
    
    
    9,999
    
    
    
    4.31
    %
    
    
    222,664
    
    
    
    11,201
    
    
    
    5.03
    %
    
    
    178,982
    
    
    
    7,760
    
    
    
    4.34
    %Total interest-bearing deposits
    
    
    339,442
    
    
    
    11,950
    
    
    
    3.52
    %
    
    
    331,272
    
    
    
    14,914
    
    
    
    4.50
    %
    
    
    280,762
    
    
    
    10,806
    
    
    
    3.85
    %OTHER INTEREST-BEARING
LIABILITIESBorrowed funds
    
    
    37,390
    
    
    
    1,088
    
    
    
    2.91
    %
    
    
    15,721
    
    
    
    792
    
    
    
    5.04
    %
    
    
    21,592
    
    
    
    1,163
    
    
    
    5.39
    %Total interest-bearing liabilities
    
    
    376,832
    
    
    
    13,038
    
    
    
    3.46
    %
    
    
    346,993
    
    
    
    15,706
    
    
    
    4.53
    %
    
    
    302,354
    
    
    
    11,969
    
    
    
    3.96
    %NON-INTEREST-BEARING LIABILITIES
AND
SHAREHOLDERS EQUITYDemand deposits
    
    
    33,501
    
    
    
    
    
    
    
    
    
    
    
    34,789
    
    
    
    
    
    
    
    
    
    
    
    36,717Other liabilities
    
    
    3,971
    
    
    
    
    
    
    
    
    
    
    
    4,922
    
    
    
    
    
    
    
    
    
    
    
    3,433Shareholders equity
    
    
    38,056
    
    
    
    
    
    
    
    
    
    
    
    34,370
    
    
    
    
    
    
    
    
    
    
    
    30,248Total liabilities and
shareholders equity
    
    $
    452,360
    
    
    
    
    
    
    
    
    
    
    $
    421,074
    
    
    
    
    
    
    
    
    
    
    $
    372,752Interest rate spread
    
    
    
    
    
    
    
    
    
    
    2.73
    %
    
    
    
    
    
    
    
    
    
    
    2.75
    %
    
    
    

    
    
    
    
    
    
    
    3.22
    %Net interest income
    
    
    
    
    
    $
    13,333
    
    
    
    
    
    
    
    
    
    
    $
    13,313
    
    
    
    
    
    
    
    
    
    
    $
    13,366Net interest margin
    
    
    
    
    
    
    
    
    
    
    3.13
    %
    
    
    
    
    
    
    
    
    
    
    3.34
    %
    
    
    
    
    
    
    
    
    
    
    3.79
    %Average interest-earning assets
to average total assets
    
    
    
    
    
    
    
    
    
    
    94.19
    %
    
    
    
    
    
    
    
    
    
    
    94.71
    %
    
    
    
    
    
    
    
    
    
    
    94.63
    %Average loans to average deposits
    
    
    
    
    
    
    
    
    
    
    96.71
    %
    
    
    
    
    
    
    
    
    
    
    91.91
    %
    
    
    
    
    
    
    
    
    
    
    95.37
    %
 29




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##### Table of Contents



Rate/Volume Analysis of Net Interest Income
  Comparison of Years Ended
    
    
    Comparison of Years EndedDecember 31, 2008 and 2007
    
    
    December 31, 2007 and 2006(in thousands)Increase (Decrease) Due toVolume
    
    
    Rate
    
    
    Total
    
    
    Volume
    
    
    Rate
    
    TotalInterest earned on:Tax-exempt securities
    
    $
    64
    
    
    $
    3
    
    
    $
    67
    
    
    $
    64
    
    
    $
    32
    
    
    $
    96Taxable securities
    
    
    113
    
    
    
    160
    
    
    
    273
    
    
    
    379
    
    
    
    232
    
    
    
    611Federal funds sold and cash in
banks
    
    
    (47
    )
    
    
    (129
    )
    
    
    (176
    )
    
    
    106
    
    
    
    17
    
    
    
    123Net loans and loans held for sale
    
    
    1,874
    
    
    
    (4,686
    )
    
    
    (2,812
    )
    
    
    2,573
    
    
    
    281
    
    
    
    2,854Total interest income
    
    $
    2,004
    
    
    $
    (4,652
    )
    
    $
    (2,648
    )
    
    $
    3,122
    
    
    $
    562
    
    
    $
    3,684Interest paid on:NOW deposits
    
    
    45
    
    
    
    (147
    )
    
    
    (102
    )
    
    
    (8
    )
    
    
    (11
    )
    
    
    (19
    )Money market deposits
    
    
    (62
    )
    
    
    (78
    )
    
    
    (140
    )
    
    
    (230
    )
    
    
    (18
    )
    
    
    (248
    )Savings deposits
    
    
    (61
    )
    
    
    (1,459
    )
    
    
    (1,520
    )
    
    
    561
    
    
    
    373
    
    
    
    934Time deposits
    
    
    457
    
    
    
    (1,659
    )
    
    
    (1,202
    )
    
    
    1,894
    
    
    
    1,547
    
    
    
    3,441Borrowed funds
    
    
    1,173
    
    
    
    (877
    )
    
    
    296
    
    
    
    (351
    )
    
    
    (20
    )
    
    
    (371
    )Total interest expense
    
    $
    1,552
    
    
    $
    (4,220
    )
    
    $
    (2,668
    )
    
    $
    1,866
    
    
    $
    1,871
    
    
    $
    3,737Increase (decrease) in net
interest income
    
    $
    452
    
    
    $
    (432
    )
    
    $
    20
    
    
    $
    1,256
    
    
    $
    (1,309
    )
    
    $
    (53
    )
 Deposits
  30




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##### Table of Contents



Year Ended December 31, 2008
    
    
    Year Ended December 31, 2007
    
    
    Year Ended  December 31, 2006Average
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageAverage
    
    
    Rate
    
    
    Average
    
    
    Rate
    
    
    Average
    
    
    RateAmount
    
    
    Paid
    
    
    Amount
    
    
    Paid
    
    
    Amount
    
    
    PaidDeposit CategoryNon-interest
bearing demand
deposits
    
    $
    34,034
    
    
    
    
    
    
    $
    35,062
    
    
    
    
    
    
    $
    36,717
    
    
    
    NOW and money
market deposits
    
    
    40,447
    
    
    
    1.34
    %
    
    
    39,917
    
    
    
    1.97
    %
    
    
    48,177
    
    
    
    2.18
    %Savings deposits
    
    
    67,259
    
    
    
    2.09
    %
    
    
    68,691
    
    
    
    4.26
    %
    
    
    53,603
    
    
    
    3.72
    %Time deposits
    
    
    231,736
    
    
    
    4.31
    %
    
    
    222,664
    
    
    
    5.03
    %
    
    
    178,982
    
    
    
    4.34
    %
  Three months or less
    
    $
    37,231Over three months through six months.
    
    
    25,122Over six months through twelve months
    
    
    95,180Over twelve months
    
    
    13,345Total
    
    $
    170,878
 Borrowed Funds
    31




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##### Table of Contents



Loan Portfolio
        32




---



##### Table of Contents



December 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004(in thousands)Type of
LoanCommercial, financial and
agricultural
    
    $
    31,173
    
    
    $
    29,582
    
    
    $
    27,692
    
    
    $
    29,945
    
    
    $
    30,820Real estate  construction
    
    
    105,032
    
    
    
    89,580
    
    
    
    73,502
    
    
    
    55,737
    
    
    
    46,581Real estate  mortgage
    
    
    191,152
    
    
    
    192,668
    
    
    
    169,141
    
    
    
    152,497
    
    
    
    127,691Installment and consumer
    
    
    9,092
    
    
    
    10,487
    
    
    
    10,609
    
    
    
    10,189
    
    
    
    11,705Subtotal
    
    $
    336,449
    
    
    $
    322,317
    
    
    $
    280,944
    
    
    $
    248,368
    
    
    $
    216,797Less:Unearned income and deferred loan
fees
    
    
    (156
    )
    
    
    (116
    )
    
    
    (61
    )
    
    
    (57
    )
    
    
    (69
    )Allowance for possible loan losses
    
    
    (4,284
    )
    
    
    (5,059
    )
    
    
    (4,386
    )
    
    
    (3,756
    )
    
    
    (3,416
    )Total (net of allowance)
    
    $
    332,009
    
    
    $
    317,142
    
    
    $
    276,497
    
    
    $
    244,555
    
    
    $
    213,312
   Due in 1Year or
    
    
    Due in 1 to
    
    
    Due AfterType of Loan
    
    
    Less
    
    
    5 Years
    
    
    5 Years
    
    
    Total(In thousands)Commercial, financial
and agricultural
    
    $
    20,952
    
    
    $
    10,004
    
    
    $
    217
    
    
    $
    31,173Real estate-construction
    
    
    84,337
    
    
    
    20,695
    
    
    
    
    
    
    
    105,032Total
    
    $
    105,289
    
    
    $
    30,699
    
    
    $
    217
    
    
    $
    136,205
  Loans due after 1 year with predetermined interest rates
    
    $
    12,355Loans due after 1 year with floating interest rates
    
    $
    18,561
 33




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##### Table of Contents



December 31,2008
    
    2007
    
    2006
    
    2005
    
    2004(Dollars in thousands)Loans accounted for on a non-accrual basisNumber
    
    
    56
    
    
    
    65
    
    
    
    49
    
    
    
    73
    
    
    
    75Amount
    
    $
    5,061
    
    
    $
    11,558
    
    
    $
    2,286
    
    
    $
    1,708
    
    
    $
    1,664Accruing loans
which are
contractually past
due 90 days or more
as to principal and
interest paymentsNumber
    
    
    3
    
    
    
    4
    
    
    
    2
    
    
    
    10
    
    
    
    6Amount
    
    $
    1
    
    
    $
    18
    
    
    $
    71
    
    
    $
    297
    
    
    $
    444
    34




---



##### Table of Contents



Summary of Loan Loss Experience
  Years Ended December 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004(Dollar amounts in thousands)Allowance for loan losses,
beginning of year
    
    $
    5,059
    
    
    $
    4,386
    
    
    $
    3,756
    
    
    $
    3,416
    
    
    $
    3,164Charge-offs:Construction, land
development and other land
loans
    
    
    1,107
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Commercial, financial and
agricultural
    
    
    223
    
    
    
    163
    
    
    
    106
    
    
    
    521
    
    
    
    240Installment and consumer
    
    
    110
    
    
    
    97
    
    
    
    95
    
    
    
    129
    
    
    
    127Real estate  mortgage
    
    
    824
    
    
    
    28
    
    
    
    98
    
    
    
    73
    
    
    
    3332,264
    
    
    
    288
    
    
    
    299
    
    
    
    723
    
    
    
    700Recoveries:Construction, land
development and other land
loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Commercial, financial and
agricultural
    
    
    5
    
    
    
    10
    
    
    
    16
    
    
    
    34
    
    
    
    Installment and consumer
    
    
    25
    
    
    
    31
    
    
    
    7
    
    
    
    7
    
    
    
    14Real estate  mortgage
    
    
    3
    
    
    
    11
    
    
    
    8
    
    
    
    
    
    
    
    13033
    
    
    
    52
    
    
    
    31
    
    
    
    41
    
    
    
    144Net (charge-offs) recoveries
    
    
    (2,231
    )
    
    
    (236
    )
    
    
    (268
    )
    
    
    (682
    )
    
    
    (556
    )Provision charged to operations
    
    
    1,456
    
    
    
    909
    
    
    
    898
    
    
    
    1,022
    
    
    
    808Allowance for loan losses, end
of year
    
    $
    4,284
    
    
    $
    5,059
    
    
    $
    4,386
    
    
    $
    3,756
    
    
    $
    3,416Ratio of net (charge-offs)
recoveries during the period
to average loans outstanding
during the period
    
    
    (.62%)
    
    
    
    (.07%)
    
    
    
    (.09%)
    
    
    
    (.24%)
    
    
    
    (.23%)
 Allowance for Loan Losses
  35




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##### Table of Contents



2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent(Dollar amounts in thousands)Commercial,
financial and
agricultural
    
    $
    436
    
    
    
    9.3
    %
    
    $
    562
    
    
    
    9.2
    %
    
    $
    883
    
    
    
    9.9
    %
    
    $
    543
    
    
    
    12.1
    %
    
    $
    581
    
    
    
    14.2
    %Real estate
 construction
    
    
    1,838
    
    
    
    31.2
    %
    
    
    1,928
    
    
    
    27.8
    %
    
    
    1,442
    
    
    
    26.2
    %
    
    
    1,312
    
    
    
    22.4
    %
    
    
    1,165
    
    
    
    21.5
    %Real estate
 Mortgage
    
    
    1,770
    
    
    
    56.8
    %
    
    
    2,247
    
    
    
    59.8
    %
    
    
    1,760
    
    
    
    60.2
    %
    
    
    1,671
    
    
    
    61.4
    %
    
    
    1,432
    
    
    
    58.9
    %Consumer and
installment
    
    
    133
    
    
    
    2.7
    %
    
    
    195
    
    
    
    3.2
    %
    
    
    191
    
    
    
    3.7
    %
    
    
    136
    
    
    
    4.1
    %
    
    
    152
    
    
    
    5.4
    %Unallocated
    
    
    107
    
    
    
    
    
    
    
    127
    
    
    
    
    
    
    
    110
    
    
    
    
    
    
    
    94
    
    
    
    
    
    
    
    86
    
    
    
    Total
    
    $
    4,284
    
    
    
    
    
    
    $
    5,059
    
    
    
    
    
    
    $
    4,386
    
    
    
    
    
    
    $
    3,756
    
    
    
    
    
    
    $
    3,416
      36




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##### Table of Contents



Cash and Due from Banks
  Investments
   December 31,2008
    
    
    2007
    
    
    2006(In thousands)Obligations of the U.S. Treasury and other U.S
government agencies
    
    $
    27,330
    
    
    $
    32,148
    
    
    $
    26,177Mortgage-backed securities
    
    
    20,190
    
    
    
    19,332
    
    
    
    21,415Obligations of States and political subdivisions
    
    
    9,924
    
    
    
    7,243
    
    
    
    5,681Corporate obligations
    
    
    150
    
    
    
    183
    
    
    
    Total investment securities
    
    $
    57,594
    
    
    $
    58,906
    
    
    $
    53,273Federal Home Loan Bank stock
    
    
    2,201
    
    
    
    1,487
    
    
    
    2,131Total investment securities and FHLB stock
    
    $
    59,795
    
    
    $
    60,393
    
    
    $
    55,404
 37




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##### Table of Contents



Maturities of Investment SecuritiesLess Than
    
    
    One To
    
    
    Five To
    
    
    OverOne Year
    
    
    Five Years
    
    
    Ten Years
    
    
    Ten Years(In thousands)Obligations of the U.S. Treasury and other U.S.
government agencies
    
    $
    
    
    
    $
    
    
    
    $
    11,822
    
    
    $
    15,508Mortgage-backed securities
    
    
    
    
    
    
    1,246
    
    
    
    
    
    
    
    18,944Obligations of States and political subdivisions
    
    
    226
    
    
    
    833
    
    
    
    3,602
    
    
    
    5,263Corporate obligations
    
    
    
    
    
    
    
    
    
    
    150
    
    
    
    Federal home loan bank stock
    
    
    2,201
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    2,427
    
    
    $
    2,079
    
    
    $
    15,574
    
    
    $
    39,715
 Weighted Average YieldsAfter One
    
    
    After FiveWithin
    
    
    Through
    
    
    Through
    
    
    AfterOne Year
    
    
    Five Years
    
    
    Ten Years
    
    
    Ten YearsObligations of the U.S. Treasury and other U.S.
government agencies
    
    
    
    
    
    
    
    
    
    
    5.35
    %
    
    
    5.71
    %Mortgage-backed securities
    
    
    
    
    
    
    3.62
    %
    
    
    
    
    
    
    5.20
    %Obligations of States and political subdivisions
    
    
    3.62
    %
    
    
    5.61
    %
    
    
    5.70
    %
    
    
    5.83
    %Corporate obligations
    
    
    
    
    
    
    
    
    
    
    5.60
    %
    
    
    Federal home loan bank stock
    
    
    4.29
    %
    
    
    
    
    
    
    
    
    
    
    Total weighted average yield
    
    
    4.22
    %
    
    
    4.42
    %
    
    
    5.43
    %
    
    
    5.48
    %
    Return on Equity and Assets
  December 31,2008
    
    
    2007
    
    
    2006Return on Average Assets
    
    
    0.62
    %
    
    
    0.69
    %
    
    
    0.78
    %Return on Average Equity
    
    
    7.36
    %
    
    
    8.39
    %
    
    
    9.57
    %Dividend Payout Ratio
    
    
    
    
    
    
    
    
    
    
    Equity to Assets Ratio
    
    
    8.48
    %
    
    
    8.03
    %
    
    
    7.70
    %
 38




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##### Table of Contents



Liquidity and Interest Rate Sensitivity
     5 years0-3 mos.
    
    
    3-12 mos.
    
    
    1-5 years
    
    
    or more
    
    
    TotalTaxable securities
    
    $
    
    
    
    $
    
    
    
    $
    1,246
    
    
    $
    46,424
    
    
    $
    47,670Tax-exempt securities
    
    
    
    
    
    
    226
    
    
    
    833
    
    
    
    8,865
    
    
    
    9,924Federal funds sold and cash in banks
    
    
    9,954
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,954Loans
    
    
    195,740
    
    
    
    44,863
    
    
    
    119,406
    
    
    
    4,686
    
    
    
    364,695Total rate sensitive assets
    
    
    205,694
    
    
    
    45,089
    
    
    
    121,485
    
    
    
    59,975
    
    
    
    432,243NOW and money market deposits
    
    
    47,145
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    47,145Savings deposits
    
    
    55,426
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    55,426Time deposits
    
    
    49,285
    
    
    
    165,887
    
    
    
    24,844
    
    
    
    301
    
    
    
    240,317Total rate sensitive deposits
    
    
    151,856
    
    
    
    165,887
    
    
    
    24,844
    
    
    
    301
    
    
    
    342,888Borrowed funds
    
    
    15,128
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,128Total rate sensitive liabilities
    
    
    166,984
    
    
    
    165,887
    
    
    
    24,844
    
    
    
    301
    
    
    
    358,016Excess of rate sensitive assets less rate
sensitive liabilities
    
    $
    38,710
    
    
    $
    (120,798
    )
    
    $
    96,641
    
    
    $
    59,674
    
    
    $
    74,227Cumulative ratio of rate sensitive assets
to liabilities
    
    
    123
    %
    
    
    75
    %
    
    
    104
    %
    
    
    121
    %Cumulative gap
    
    $
    38,710
    
    
    $
    (82,088
    )
    
    $
    14,553
    
    
    $
    74,227
 39




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##### Table of Contents



Capital Resources
   MinimumDecember 31, 2008
    
    Regulatory RequirementBankTotal risk-based capital ratio
    
    
    10.89
    %
    
    
    8.0
    %Tier 1 Capital ratio
    
    
    9.80
    %
    
    
    4.0
    %Leverage ratio
    
    
    8.58
    %
    
    
    4.0
    %Company  ConsolidatedTotal risk-based capital ratio
    
    
    10.91
    %
    
    
    8.0
    %Tier 1 Capital ratio
    
    
    9.82
    %
    
    
    4.0
    %Leverage ratio
    
    
    8.59
    %
    
    
    4.0
    %
   Fair Value Measurement
 Fair Value Measurements,
 40




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##### Table of Contents



Level 1
 Level 2
 Level 3
  Investment Securities Available-for-Sale
 Loans Held for Sale
 41




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##### Table of Contents



Loans
 Foreclosed Assets
  Fair Value Measurements atDecember 31, 2008, Using,TotalCarrying
    
    
    
    
    
    
    QuotedAmount in
    
    
    
    
    
    
    Prices inthe
    
    
    Assets/
    
    
    Active
    
    
    Significant
    
    
    SignificantConsolidated
    
    
    Liabilities
    
    
    Markets for
    
    
    Other
    
    
    OtherBalance
    
    
    Measured at
    
    
    Identical
    
    
    Observable
    
    
    UnobservableSheet
    
    
    Fair Value
    
    
    Assets
    
    
    Inputs
    
    
    InputsDescription
    
    12/31/2008
    
    
    12/31/2008
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Available-for-sale
securities,
including FHLB
stock
    
    $
    59,795
    
    
    $
    59,795
    
    
    $
    
    
    
    $
    59,795
    
    
    $
    
 42




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##### Table of Contents



Market Risk
    Off-Balance Sheet Arrangements
   December 31, 2008
    
    
    December 31, 2007(In thousands)Commitments to extend credit
    
    $
    56,426
    
    
    $
    40,492Standby letters of credit
    
    
    5,102
    
    
    
    1,912Total
    
    $
    61,528
    
    
    $
    42,404
 43




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##### Table of Contents



Contractual Obligations
  Payments Due by Period (in thousands)Less than
    
    
    
    
    
    
    
    
    
    
    More thanTotal
    
    
    1 year
    
    
    1-3 years
    
    
    3-5 years
    
    
    5 yearsTime Deposits
    
    $
    254,914
    
    
    $
    228,426
    
    
    $
    25,636
    
    
    $
    550
    
    
    $
    302Long-Term Debt
    
    
    29,611
    
    
    
    1,072
    
    
    
    2,134
    
    
    
    26,405
    
    
    
    Data Processing Obligations
    
    
    2,236
    
    
    
    1,032
    
    
    
    1,204
    
    
    
    
    
    
    
    Operating Lease Obligations
    
    
    1,201
    
    
    
    291
    
    
    
    566
    
    
    
    344
    
    
    
    Service Contract Obligations
    
    
    615
    
    
    
    232
    
    
    
    272
    
    
    
    111
    
    
    
    Total
    
    $
    288,577
    
    
    $
    231,053
    
    
    $
    29,812
    
    
    $
    27,410
    
    
    $
    302
 
 Item 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk
  
 Item 8.
    
    Financial Statements and Supplementary Data
  Report of Independent Registered Public Accounting FirmConsolidated Statements of Financial Condition
as of December 31, 2008 and 2007Consolidated Statements of Income
for the years ended December 31, 2008, 2007 and 2006Consolidated Statements of Comprehensive Income
for the years ended December 31, 2008, 2007 and 2006Consolidated Statements of Shareholders Equity
for the years ended December 31, 2008, 2007 and 2006Consolidated Statements of Cash Flows
for the years ended December 31, 2008, 2007 and 2006Notes to Consolidated Financial Statements
 44




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##### Table of Contents



Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
  
 Item 9A.
    
    Controls and Procedures.
  
 Item 9A(T).
    
    Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures
  Managements Annual Report on Internal Control over Financial Reporting
   Changes in Internal Control over Financial Reporting
  
 Item 9B.
    
    Other Information.
  45




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##### Table of Contents



PART III
  
 Item 10.
    
    Directors, Executive Officers and Corporate Governance.
  
 Item 11.
    
    Executive Compensation.
  
 Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
  
 Item 13.
    
    Certain Relationships and Related Transactions, and Director Independence.
  
 Item 14.
    
    Principal Accountant Fees and Services
  46




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##### Table of Contents



PART IV
 
 Item 15.
    
    Exhibits and Financial Statement Schedules.
 (a)1.
 Report of Independent Registered Public Accounting FirmConsolidated Statements of Financial Condition
as of December 31, 2008 and 2007Consolidated Statements of Income
for the years ended December 31, 2008, 2007 and 2006Consolidated Statements of Comprehensive Income
for the years ended December 31, 2008, 2007 and 2006Consolidated Statements of Shareholders Equity
for the years ended December 31, 2008, 2007 and 2006Consolidated Statements of Cash Flows
for the years ended December 31, 2008, 2007 and 2006Notes to Consolidated Financial Statements
 (a)2.
  (a)3 & (b). :
 ExhibitNumber
    
    
    
    Description of Exhibit3.1
    
    
    
    Articles of Incorporation of the Company
(incorporated herein by reference to the exhibit
contained in the Companys Registration Statement
on Form SB-2 under the Securities Act of 1933, as
amended, Registration No. 333-69763, previously
filed with the Commission).3.1.1
    
    
    
    Articles of Amendment to the Articles of
Incorporation of the Company (incorporated herein
by reference to the exhibit contained in the
Companys Annual Report on Form 10-KSB for the year
ended December 31, 2000, previously filed with the
Commission).3.2
    
    
    
    By-Laws of the Company (incorporated herein by
reference to the exhibit contained in the Companys
Registration Statement on Form SB-2 under the
Securities Act of 1933, as amended (Registration
No. 333-69763)).
 47




---



##### Table of Contents



ExhibitNumber
    
    
    
    Description of Exhibit* 10.1
    
    
    
    1997 Stock Option Plan (incorporated herein by
reference to the exhibit contained in the Companys
Annual Report on Form 10-KSB for the year ended
December 31, 2002, previously filed with the
Commission).* 10.2
    
    
    
    Directors Stock Purchase Plan (incorporated herein
by reference to the exhibit contained in the
Companys Annual Report on Form 10-KSB for the year
ended December 31, 2002, previously filed with the
Commission).* 10.3
    
    
    
    2005 Incentive Plan (incorporated herein by
reference to Appendix A contained in the Companys
Proxy Statement for its 2005 Annual Meeting of
Shareholders, filed with the Commission on May 5,
2005).* 10.4
    
    
    
    Form of Incentive Stock Option Agreement under the
Companys 2005 Incentive Plan (incorporated herein
by reference to the exhibit contained in the
Companys Annual Report on Form 10-KSB for the year
ended December 31, 2005, previously filed with the
Commission).* 10.5
    
    
    
    Severance Protection Agreement between First Bank
of Georgia and Remer Y. Brinson, III, dated
September 4, 2000 (incorporated herein by reference
to the exhibit contained in the Companys Annual
Report on Form 10-K for the year ended December 31,
2006, previously filed with the Commission).* 10.6
    
    
    
    Compensation Arrangements with Remer Y. Brinson,
III (incorporated herein by reference to the
exhibit contained in the Companys Annual Report on
Form 10-K for the year ended December 31, 2007,
previously filed with the Commission).* 10.7
    
    
    
    First Bank of Georgia Annual Incentive Plan for
Patrick G. Blanchard and Remer Y. Brinson, III
(incorporated herein by reference to the exhibit
contained in the Companys Annual Report on Form
10-K for the year ended December 31, 2006,
previously filed with the Commission).14.1
    
    
    
    Code of Ethics (incorporated herein by reference
from Exhibit 99.2 contained in the Companys Annual
Report on Form 10-KSB for the year ended December
31, 2004, previously filed with the Commission).21.1
    
    
    
    Subsidiaries of the Registrant.23.1
    
    
    
    Consent of Cherry, Bekaert & Holland, L.L.P.
 48




---



##### Table of Contents



ExhibitNumber
    
    
    
    Description of Exhibit31.1
    
    
    
    Certification of President and Chief Executive
Officer Pursuant to Section 302 of Sarbanes-Oxley
Act of 2002.31.2
    
    
    
    Certification of Senior Vice President and Chief
Financial Officer Pursuant to Section 302 of
Sarbanes-Oxley Act of 2002.32.1
    
    
    
    Certifications Pursuant to Section 906 of
Sarbanes-Oxley Act of 2002.99.1
    
    
    
    Financial Statements.
 
 *
    
    - Denotes a management contract or compensatory plan or arrangement. 49




---



##### Table of Contents



SIGNATURES
  GEORGIA-CAROLINA BANCSHARES, INC.Date:  March 31, 2009
    By:
    /s/ Remer Y. Brinson, IIIRemer Y. Brinson, IIIPresident and Chief Executive
Officer
(principal executive officer) Date:  March 31, 2009
    By:
    /s/ Thomas J. FlournoyThomas J. FlournoySenior Vice President and Chief Financial Officer
(principal financial and accounting officer) 50




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##### Table of Contents



DIRECTORS
    
    DATE
    
    DIRECTORS
    
    DATE/s/ Patrick G. Blanchard
    
    March 31, 2009
    
    /s/ Robert N. Wilson, Jr.
    
    March 31, 2009Patrick G. Blanchard
    
    
    
    Robert N. Wilson, Jr./s/ Remer Y. Brinson, III
    
    March 31, 2009
    
    /s/ Hugh L. Hamilton, Jr.
    
    March 31, 2009Remer Y. Brinson, III
    
    
    
    Hugh L. Hamilton, Jr./s/ Mac A. Bowman
    
    March 31, 2009
    
    /s/ George H. Inman
    
    March 31, 2009Mac A. Bowman
    
    
    
    George H. Inman/s/ Philip G. Farr
    
    March 31, 2009
    
    /s/ David W. Joesbury, Sr.
    
    March 31, 2009Philip G. Farr
    
    
    
    David W. Joesbury, Sr./s/ Samuel A. Fowler, Jr.
    
    March 31, 2009
    
    /s/ James L. Lemley, M.D.
    
    March 31, 2009Samuel A. Fowler, Jr.
    
    
    
    James L. Lemley, M.D./s/ Arthur J. Gay, Jr.
    
    March 31, 2009
    
    /s/ Julian W. Osbon
    
    March 31, 2009Arthur J. Gay, Jr.
    
    
    
    Julian W. Osbon/s/ John W. Lee
    
    March 31, 2009
    
    /s/ Bennye M. Young
    
    March 31, 2009John W. Lee
    
    
    
    Bennye M. Young/s/ A. Montague Miller
    
    March 31, 2009A. Montague Miller
 51