##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-K
 (Mark One)
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2009
 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 No. 0-22981
 GEORGIA-CAROLINA BANCSHARES, INC.
 (Exact name of registrant as specified in its charter)
 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  (Registrants telephone number, including area code)
 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 YES  þ NO
 o YES  þ NO
 þ YES  o NO
 o YES  o NO
 o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ
 o YES  þ NO
  DOCUMENTS INCORPORATED BY REFERENCE




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##### 



GEORGIA-CAROLINA BANCSHARES, INC.
2009 Form 10-K Annual Report
 TABLE OF CONTENTS
 Item Number
    
    
    
    Page orIn Form 10-K
    
    Description
    
    LocationPART IItem 1.
    
    Business
    
    
    1Item 1A.
    
    Risk Factors
    
    
    14Item 1B.
    
    Unresolved Staff Comments
    
    
    20Item 2.
    
    Properties
    
    
    21Item 3.
    
    Legal Proceedings
    
    
    21Item 4.
    
    [Removed and Reserved]
    
    
    21PART IIItem 5.
    
    Market for the Registrants Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
    
    
    22Item 6.
    
    Selected Financial Data
    
    
    24Item 7.
    
    Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    25Item 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    47Item 8.
    
    Financial Statements and Supplementary Data
    
    
    47Item 9.
    
    Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
    
    
    47Item 9A.
    
    Controls and Procedures
    
    
    47Item 9A(T).
    
    Controls and Procedures
    
    
    48Item 9B.
    
    Other Information
    
    
    48PART IIIItem 10.
    
    Directors, Executive Officers and Corporate Governance
    
    
    49Item 11.
    
    Executive Compensation
    
    
    49Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
    
    
    49Item 13.
    
    Certain Relationships and Related Transactions, and Director Independence
    
    
    49Item 14.
    
    Principal Accountant Fees and Services
    
    
    49PART IVItem 15.
    
    Exhibits and Financial Statement Schedules
    
    
    50Signatures
    
    
    
    
    53Exhibit 10.9Exhibit 21.1Exhibit 23.1Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 99.1
   (i)




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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
    2




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Correspondent Banking
  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.
  5




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Source of Strength; Cross-Guarantee.
  Subsidiary Dividends.
  Incentive Compensation
   6




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State Law Restrictions.
 The Bank
 General
 Bank Lending Limit.
 Commercial Real Estate Lending
 
    
    total reported loans for construction, land development and other land represent
100 percent or more of the institutions total capital, or
 
    
    total commercial real estate loans represent 300 percent or more of the institutions
total capital and the outstanding balance of the institutions commercial real estate loan
portfolio has increased by 50 percent or more during the prior 36 months.
  7




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Insider Credit Transactions
 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
  8




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Interstate Banking and Branching.
  Deposit Insurance and Assessments.
     9




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Community Reinvestment Act.
 The Modernization Act-Consumer Privacy.
 Capital Adequacy
    10




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Other Laws and Regulations
 International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001.
  Sarbanes-Oxley Act of 2002
  11




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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
    
    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.
  12




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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;
    
    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.
  13




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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.
   14




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Market volatility may have an adverse effect on us.
  The financial distress of other financial institutions could have a material adverse impact on us.
  There can be no assurance that new legislation and federal programs will fully stabilize the U.S.
financial system, and may adversely affect us.
    15




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Our Material Business Risks
 An economic downturn, especially one affecting Richmond, Columbia and McDuffie counties, could
adversely affect our business.
   16




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Weakness in the real estate market, including the secondary residential mortgage loan markets, has
adversely affected us and may continue to adversely affect us.
  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.
  17




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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.
   18




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We could be adversely affected by the loss of one or more key personnel or by an inability to
attract and retain employees.
   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.
   19




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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.
   
 Item 1B. Unresolved Staff Comments
   20




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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 . [Removed and Reserved]
  21




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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, 2009First Quarter
    
    $
    10.00
    
    
    $
    5.75Second Quarter
    
    $
    9.98
    
    
    $
    5.25Third Quarter
    
    $
    8.00
    
    
    $
    6.25Fourth Quarter
    
    $
    8.00
    
    
    $
    6.25Fiscal year ended December 31, 2008First Quarter
    
    $
    11.00
    
    
    $
    9.05Second Quarter
    
    $
    11.50
    
    
    $
    9.00Third Quarter
    
    $
    12.35
    
    
    $
    9.00Fourth Quarter
    
    $
    12.35
    
    
    $
    7.00
 Holders of Common Stock
  Dividends
    22




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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
    
    
    185,955
    
    
    $
    8.70
    
    
    
    2004 Incentive Plan
    
    
    87,933
    
    
    $
    11.78
    
    
    
    237,192Equity compensation plans not
approved by security holders
    
    
    
    
    
    
    
    
    
    
    79,823Total
    
    
    273,888
    
    
    $
    9.69
    
    
    
    317,015
 Directors Equity Incentive Plan
   23




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Item 6. Selected Financial Data
  At and for the Years Ended December 31,($ in thousands, except per share data)2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005Selected Balance Sheet Data:Assets
    
    $
    484,013
    
    
    $
    460,828
    
    
    $
    447,869
    
    
    $
    417,471
    
    
    $
    349,481Investment securities
    
    
    47,289
    
    
    
    59,795
    
    
    
    60,393
    
    
    
    55,404
    
    
    
    39,362Loans, held for investment
    
    
    336,849
    
    
    
    336,293
    
    
    
    322,201
    
    
    
    280,883
    
    
    
    248,311Loans, held for sale
    
    
    58,135
    
    
    
    28,402
    
    
    
    39,547
    
    
    
    56,758
    
    
    
    40,064Allowance for loan losses
    
    
    5,072
    
    
    
    4,284
    
    
    
    5,059
    
    
    
    4,386
    
    
    
    3,756Deposits
    
    
    405,240
    
    
    
    377,009
    
    
    
    379,966
    
    
    
    341,342
    
    
    
    304,440Short-term borrowings
    
    
    7,297
    
    
    
    15,859
    
    
    
    17,473
    
    
    
    38,661
    
    
    
    13,442Long-term debt
    
    
    25,000
    
    
    
    25,400
    
    
    
    10,500
    
    
    
    600
    
    
    
    700Other liabilities
    
    
    3,203
    
    
    
    3,476
    
    
    
    3,959
    
    
    
    4,742
    
    
    
    2,290Shareholders equity
    
    
    43,273
    
    
    
    39,084
    
    
    
    35,971
    
    
    
    32,126
    
    
    
    28,609Selected Results of Operations Data:Interest income
    
    
    24,604
    
    
    
    26,371
    
    
    
    29,019
    
    
    
    25,335
    
    
    
    20,876Interest expense
    
    
    9,722
    
    
    
    13,038
    
    
    
    15,706
    
    
    
    11,969
    
    
    
    8,420Net interest income
    
    
    14,882
    
    
    
    13,333
    
    
    
    13,313
    
    
    
    13,366
    
    
    
    12,456Provision for loan losses
    
    
    3,082
    
    
    
    1,456
    
    
    
    909
    
    
    
    898
    
    
    
    1,022Net interest income after provision for
provision for loan losses
    
    
    11,800
    
    
    
    11,877
    
    
    
    12,404
    
    
    
    12,468
    
    
    
    11,434Non-interest income
    
    
    14,157
    
    
    
    9,920
    
    
    
    9,932
    
    
    
    9,800
    
    
    
    10,331Non-interest expense
    
    
    20,902
    
    
    
    17,745
    
    
    
    17,816
    
    
    
    17,911
    
    
    
    16,368Income before taxes
    
    
    5,055
    
    
    
    4,052
    
    
    
    4,520
    
    
    
    4,357
    
    
    
    5,397Income tax expense
    
    
    1,303
    
    
    
    1,252
    
    
    
    1,619
    
    
    
    1,460
    
    
    
    1,942Net income
    
    $
    3,752
    
    
    $
    2,800
    
    
    $
    2,901
    
    
    $
    2,897
    
    
    $
    3,455Per Share DataNet income  basic
    
    $
    1.08
    
    
    $
    0.82
    
    
    $
    0.85
    
    
    $
    0.86
    
    
    $
    1.04Net income  diluted
    
    $
    1.07
    
    
    $
    0.80
    
    
    $
    0.83
    
    
    $
    0.83
    
    
    $
    0.98Book value
    
    $
    12.37
    
    
    $
    11.31
    
    
    $
    10.58
    
    
    $
    9.51
    
    
    $
    8.53Weighted average number of shares outstanding:Basic
    
    
    3,484,309
    
    
    
    3,426,860
    
    
    
    3,393,224
    
    
    
    3,370,277
    
    
    
    3,336,834Diluted
    
    
    3,492,871
    
    
    
    3,503,856
    
    
    
    3,508,606
    
    
    
    3,489,564
    
    
    
    3,524,294
 At and for the Years Ended December 31,2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005Performance Ratios:Return on average assets
    
    
    0.79
    %
    
    
    0.62
    %
    
    
    0.69
    %
    
    
    0.78
    %
    
    
    1.00
    %Return on average equity
    
    
    8.93
    %
    
    
    7.36
    %
    
    
    8.39
    %
    
    
    9.57
    %
    
    
    12.80
    %Net interest margin (1)
    
    
    3.37
    %
    
    
    3.15
    %
    
    
    3.36
    %
    
    
    3.81
    %
    
    
    3.78
    %Efficiency ratio (2)
    
    
    71.98
    %
    
    
    76.31
    %
    
    
    76.64
    %
    
    
    77.39
    %
    
    
    71.45
    %Loan (excl LHFS) to deposit ratio
    
    
    83.12
    %
    
    
    89.20
    %
    
    
    84.80
    %
    
    
    82.29
    %
    
    
    81.56
    %Asset Quality Ratios:Nonperforming loans to total loans
    
    
    1.57
    %
    
    
    1.39
    %
    
    
    3.20
    %
    
    
    0.68
    %
    
    
    0.59
    %Nonperforming assets to total loans
(excl LHFS) + OREO
    
    
    3.12
    %
    
    
    3.57
    %
    
    
    3.73
    %
    
    
    1.03
    %
    
    
    0.86
    %Allowance for loan losses to
nonperforming loans
    
    
    81.94
    %
    
    
    84.65
    %
    
    
    43.77
    %
    
    
    191.86
    %
    
    
    219.91
    %Allowance for loan losses to
total loans (excl LHFS)
    
    
    1.51
    %
    
    
    1.27
    %
    
    
    1.57
    %
    
    
    1.56
    %
    
    
    1.51
    %
  24




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At and for the Years Ended December 31,2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005Capital Ratios:Average equity to average assets
    
    
    8.81
    %
    
    
    8.41
    %
    
    
    8.16
    %
    
    
    8.11
    %
    
    
    7.80
    %Leverage ratio
    
    
    8.96
    %
    
    
    8.59
    %
    
    
    8.18
    %
    
    
    7.85
    %
    
    
    8.14
    %Tier 1 risk-based capital ratio
    
    
    10.50
    %
    
    
    9.82
    %
    
    
    9.39
    %
    
    
    9.25
    %
    
    
    9.91
    %Total risk-based capital ratio
    
    
    11.74
    %
    
    
    10.91
    %
    
    
    10.72
    %
    
    
    10.50
    %
    
    
    11.16
    %Growth Ratios and Other Data:Percentage change in net income
    
    
    34.0
    %
    
    
    (3.5
    %)
    
    
    0.1
    %
    
    
    (16.2
    %)
    
    
    (1.3
    %)Percentage change in diluted net
income per share
    
    
    33.8
    %
    
    
    (3.6
    %)
    
    
    0.0
    %
    
    
    (15.3
    %)
    
    
    (1.0
    %)Percentage change in assets
    
    
    5.0
    %
    
    
    2.9
    %
    
    
    7.3
    %
    
    
    19.5
    %
    
    
    5.1
    %Percentage change in loans
    
    
    8.3
    %
    
    
    0.8
    %
    
    
    7.1
    %
    
    
    17.1
    %
    
    
    5.5
    %Percentage change in deposits
    
    
    7.5
    %
    
    
    (0.8
    %)
    
    
    11.3
    %
    
    
    12.1
    %
    
    
    18.1
    %Percentage change in equity
    
    
    10.7
    %
    
    
    8.7
    %
    
    
    12.0
    %
    
    
    12.3
    %
    
    
    12.8
    %
 
 (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
    25




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Contingencies: Loss Contingencies, Receivables: Subsequent
Measurement.
    26




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Consolidated Financial Information
  2009
    
    
    2008
    
    
    2007Total Assets
    
    
    Net Income
    
    
    Total Assets
    
    
    Net Income
    
    
    Total Assets
    
    
    Net Income(Dollar amounts in thousands)Consolidated
    
    $
    484,013
    
    
    $
    3,752
    
    
    $
    460,828
    
    
    $
    2,800
    
    
    $
    447,869
    
    
    $
    2,901Bank
    
    $
    483,916
    
    
    $
    3,919
    
    
    $
    460,726
    
    
    $
    2,983
    
    
    $
    447,852
    
    
    $
    3,155Company
    
    
    
    
    
    $
    (167
    )
    
    
    
    
    
    $
    (183
    )
    
    
    
    
    
    $
    (254
    )
   Results of Operations  Comparison of 2009 and 2008
 Balance Sheet
   27




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Income Statement
   28




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Results of Operations  Comparison of 2008 and 2007
 Balance Sheet
    29




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Income Statement
      30




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Distribution of Assets, Liabilities and Shareholders Equity; Interest Rates and Interest Differential
  CONSOLIDATED AVERAGE BALANCE SHEETS
(Dollar amounts in thousands)
 Year Ended December 31,2009
    
    
    2008
    
    
    2007Interest
    
    
    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
    
    $
    386,961
    
    
    $
    22,260
    
    
    
    5.75
    %
    
    $
    360,689
    
    
    $
    23,186
    
    
    
    6.43
    %
    
    $
    336,434
    
    
    $
    25,998
    
    
    
    7.73
    %Investment securities
    
    
    52,672
    
    
    
    2,337
    
    
    
    4.44
    %
    
    
    61,375
    
    
    
    3,100
    
    
    
    5.05
    %
    
    
    57,463
    
    
    
    2,760
    
    
    
    4.80
    %Fed funds sold & cash in banks
    
    
    4,051
    
    
    
    7
    
    
    
    0.17
    %
    
    
    3,996
    
    
    
    85
    
    
    
    2.13
    %
    
    
    4,887
    
    
    
    261
    
    
    
    5.35
    %Total interest-earning assets
    
    
    443,684
    
    
    
    24,604
    
    
    
    5.55
    %
    
    
    426,060
    
    
    
    26,371
    
    
    
    6.19
    %
    
    
    398,784
    
    
    
    29,019
    
    
    
    7.28
    %NON-INTEREST-EARNING ASSETSCash and due from banks
    
    
    8,686
    
    
    
    
    
    
    
    
    
    
    
    6,296
    
    
    
    
    
    
    
    
    
    
    
    7,530Bank premises and fixed assets
    
    
    9,877
    
    
    
    
    
    
    
    
    
    
    
    10,260
    
    
    
    
    
    
    
    
    
    
    
    10,623Accrued interest receivable
    
    
    1,748
    
    
    
    
    
    
    
    
    
    
    
    1,956
    
    
    
    
    
    
    
    
    
    
    
    2,031Other assets
    
    
    17,506
    
    
    
    
    
    
    
    
    
    
    
    12,978
    
    
    
    
    
    
    
    
    
    
    
    6,746Allowance for loan losses
    
    
    (5,026
    )
    
    
    
    
    
    
    
    
    
    
    (5,190
    )
    
    
    
    
    
    
    
    
    
    
    (4,640
    )Total assets
    
    $
    476,475
    
    
    
    
    
    
    
    
    
    
    $
    452,360
    
    
    
    
    
    
    
    
    
    
    $
    421,074LIABILITIES AND SHAREHOLDERS EQUITYINTEREST-BEARING DEPOSITSNOW accounts
    
    $
    35,300
    
    
    $
    211
    
    
    
    0.60
    %
    
    $
    31,674
    
    
    $
    376
    
    
    
    1.19
    %
    
    $
    28,935
    
    
    $
    478
    
    
    
    1.65
    %Savings accounts
    
    
    52,515
    
    
    
    587
    
    
    
    1.12
    %
    
    
    67,259
    
    
    
    1,408
    
    
    
    2.09
    %
    
    
    68,691
    
    
    
    2,928
    
    
    
    4.26
    %Money market accounts
    
    
    11,945
    
    
    
    139
    
    
    
    1.16
    %
    
    
    8,773
    
    
    
    167
    
    
    
    1.90
    %
    
    
    10,982
    
    
    
    307
    
    
    
    2.79
    %Time accounts
    
    
    256,146
    
    
    
    7,808
    
    
    
    3.05
    %
    
    
    231,736
    
    
    
    9,999
    
    
    
    4.31
    %
    
    
    222,664
    
    
    
    11,201
    
    
    
    5.03
    %Total interest-bearing deposits
    
    
    355,906
    
    
    
    8,745
    
    
    
    2.46
    %
    
    
    339,442
    
    
    
    11,950
    
    
    
    3.52
    %
    
    
    331,272
    
    
    
    14,914
    
    
    
    4.50
    %OTHER INTEREST-BEARING LIABILITIESBorrowed funds
    
    
    38,614
    
    
    
    977
    
    
    
    2.53
    %
    
    
    37,390
    
    
    
    1,088
    
    
    
    2.91
    %
    
    
    15,721
    
    
    
    792
    
    
    
    5.04
    %Total interest-bearing liabilities
    
    
    394,520
    
    
    
    9,722
    
    
    
    2.46
    %
    
    
    376,832
    
    
    
    13,038
    
    
    
    3.46
    %
    
    
    346,993
    
    
    
    15,706
    
    
    
    4.53
    %NON-INTEREST-BEARING LIABILITIES
AND
SHAREHOLDERS EQUITYDemand deposits
    
    
    36,439
    
    
    
    
    
    
    
    
    
    
    
    33,501
    
    
    
    
    
    
    
    
    
    
    
    34,789Other liabilities
    
    
    3,519
    
    
    
    
    
    
    
    
    
    
    
    3,971
    
    
    
    
    
    
    
    
    
    
    
    4,922Shareholders equity
    
    
    41,997
    
    
    
    
    
    
    
    
    
    
    
    38,056
    
    
    
    
    
    
    
    
    
    
    
    34,370Total liabilities and
shareholders equity
    
    $
    476,475
    
    
    
    
    
    
    
    
    
    
    $
    452,360
    
    
    
    
    
    
    
    
    
    
    $
    421,074Interest rate spread
    
    
    
    
    
    
    
    
    
    
    3.08
    %
    
    
    
    
    
    
    
    
    
    
    2.73
    %
    
    
    
    
    
    
    
    
    
    
    2.75
    %Net interest income
    
    
    
    
    
    $
    14,882
    
    
    
    
    
    
    
    
    
    
    $
    13,333
    
    
    
    
    
    
    
    
    
    
    $
    13,313Net interest margin
    
    
    
    
    
    
    
    
    
    
    3.37
    %
    
    
    
    
    
    
    
    
    
    
    3.15
    %
    
    
    
    
    
    
    
    
    
    
    3.36
    %Average interest-earning assets
to average total assets
    
    
    
    
    
    
    
    
    
    
    93.12
    %
    
    
    
    
    
    
    
    
    
    
    94.19
    %
    
    
    
    
    
    
    
    
    
    
    94.71
    %Average loans (excl LHFS) to
average deposits
    
    
    
    
    
    
    
    
    
    
    86.73
    %
    
    
    
    
    
    
    
    
    
    
    88.67
    %
    
    
    
    
    
    
    
    
    
    
    82.24
    %
  31




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##### Table of Contents



Rate/Volume Analysis of Net Interest Income
  Comparison of Years Ended
    
    
    Comparison of Years EndedDecember 31, 2009 and 2008
    
    
    December 31, 2008 and 2007(in thousands)Increase (Decrease) Due toVolume
    
    
    Rate
    
    
    Total
    
    
    Volume
    
    
    Rate
    
    
    TotalInterest earned on:Tax-exempt securities
    
    $
    82
    
    
    $
    (7
    )
    
    $
    75
    
    
    $
    64
    
    
    $
    3
    
    
    $
    67Taxable securities
    
    
    (558
    )
    
    
    (280
    )
    
    
    (838
    )
    
    
    113
    
    
    
    160
    
    
    
    273Federal funds sold and cash in
banks
    
    
    2
    
    
    
    (80
    )
    
    
    (78
    )
    
    
    (47
    )
    
    
    (129
    )
    
    
    (176
    )Net loans and loans held for sale
    
    
    1,689
    
    
    
    (2,615
    )
    
    
    (926
    )
    
    
    1,874
    
    
    
    (4,686
    )
    
    
    (2,812
    )Total interest income
    
    $
    1,215
    
    
    $
    (2,982
    )
    
    $
    (1,767
    )
    
    $
    2,004
    
    
    $
    (4,652
    )
    
    $
    (2,648
    )Interest paid on:NOW deposits
    
    
    43
    
    
    
    (208
    )
    
    
    (165
    )
    
    
    45
    
    
    
    (147
    )
    
    
    (102
    )Money market deposits
    
    
    60
    
    
    
    (88
    )
    
    
    (28
    )
    
    
    (62
    )
    
    
    (78
    )
    
    
    (140
    )Savings deposits
    
    
    (309
    )
    
    
    (512
    )
    
    
    (821
    )
    
    
    (61
    )
    
    
    (1,459
    )
    
    
    (1,520
    )Time deposits
    
    
    1,053
    
    
    
    (3,244
    )
    
    
    (2,191
    )
    
    
    457
    
    
    
    (1,659
    )
    
    
    (1,202
    )Borrowed funds
    
    
    36
    
    
    
    (147
    )
    
    
    (111
    )
    
    
    1,173
    
    
    
    (877
    )
    
    
    296Total interest expense
    
    $
    883
    
    
    $
    (4,199
    )
    
    $
    (3,316
    )
    
    $
    1,552
    
    
    $
    (4,220
    )
    
    $
    (2,668
    )Increase (decrease) in net
interest income
    
    $
    332
    
    
    $
    1,217
    
    
    $
    1,549
    
    
    $
    452
    
    
    $
    (432
    )
    
    $
    20
 Deposits
   32




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##### Table of Contents



Year Ended
    
    
    Year Ended
    
    
    Year EndedDecember 31, 2009
    
    
    December 31, 2008
    
    
    December 31, 2007Average
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageAverage
    
    
    Rate
    
    
    Average
    
    
    Rate
    
    
    Average
    
    
    RateAmount
    
    
    Paid
    
    
    Amount
    
    
    Paid
    
    
    Amount
    
    
    PaidDeposit CategoryNon-interest
bearing demand
deposits
    
    $
    36,806
    
    
    
    
    
    
    $
    34,034
    
    
    
    
    
    
    $
    35,062
    
    
    
    NOW and money
market deposits
    
    
    47,245
    
    
    
    0.74
    %
    
    
    40,447
    
    
    
    1.34
    %
    
    
    39,917
    
    
    
    1.97
    %Savings deposits
    
    
    52,515
    
    
    
    1.12
    %
    
    
    67,259
    
    
    
    2.09
    %
    
    
    68,691
    
    
    
    4.26
    %Time deposits
    
    
    256,146
    
    
    
    3.05
    %
    
    
    231,736
    
    
    
    4.31
    %
    
    
    222,664
    
    
    
    5.03
    %
  2009
    
    
    2008(in thousands)Three months or less
    
    $
    41,119
    
    
    $
    37,231Over three months through six months
    
    
    21,330
    
    
    
    25,122Over six months through twelve months
    
    
    63,001
    
    
    
    95,180Over twelve months
    
    
    53,673
    
    
    
    13,345Total
    
    $
    179,123
    
    
    $
    170,878
 Borrowed Funds
     33




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##### Table of Contents



Loan Portfolio
         34




---



##### Table of Contents



December 31,Type of Loan
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005(in thousands)Commercial, financial and
agricultural
    
    $
    22,906
    
    
    $
    31,173
    
    
    $
    29,582
    
    
    $
    27,692
    
    
    $
    29,945Real estate  construction
    
    
    107,429
    
    
    
    105,032
    
    
    
    89,580
    
    
    
    73,502
    
    
    
    55,737Real estate  mortgage
    
    
    199,190
    
    
    
    191,152
    
    
    
    192,668
    
    
    
    169,141
    
    
    
    152,497Installment and consumer
    
    
    7,468
    
    
    
    9,092
    
    
    
    10,487
    
    
    
    10,609
    
    
    
    10,189Subtotal
    
    $
    336,993
    
    
    $
    336,449
    
    
    $
    322,317
    
    
    $
    280,944
    
    
    $
    248,368Less:Unearned income and deferred loan
Fees
    
    
    (144
    )
    
    
    (156
    )
    
    
    (116
    )
    
    
    (61
    )
    
    
    (57
    )Allowance for possible loan losses
    
    
    (5,072
    )
    
    
    (4,284
    )
    
    
    (5,059
    )
    
    
    (4,386
    )
    
    
    (3,756
    )Total (net of allowance)
    
    $
    331,777
    
    
    $
    332,009
    
    
    $
    317,142
    
    
    $
    276,497
    
    
    $
    244,555
   Due in 1Year or
    
    
    Due in 1 to
    
    
    Due AfterType of Loan
    
    Less
    
    
    5 Years
    
    
    5 Years
    
    
    Total(In thousands)Commercial, financial
and agricultural
    
    $
    14,615
    
    
    $
    7,545
    
    
    $
    746
    
    
    $
    22,906Real estate-construction
    
    
    88,870
    
    
    
    18,559
    
    
    
    
    
    
    
    107,429Total
    
    $
    103,485
    
    
    $
    26,104
    
    
    $
    746
    
    
    $
    130,335
  Loans due after 1 year with predetermined interest rates
    
    $
    13,772Loans due after 1 year with floating interest rates
    
    $
    13,078Total loans due after 1 year
    
    $
    26,850
  35




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##### Table of Contents



December 31,2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005(Dollars in thousands)Loans accounted
for on a
non-accrual basisNumber
    
    
    63
    
    
    
    56
    
    
    
    65
    
    
    
    49
    
    
    
    73Amount
    
    $
    6,190
    
    
    $
    5,061
    
    
    $
    11,558
    
    
    $
    2,286
    
    
    $
    1,708Accruing loans
which are
contractually past
due 90 days or more
as to principal and
interest paymentsNumber
    
    
    
    
    
    
    3
    
    
    
    4
    
    
    
    2
    
    
    
    10Amount
    
    $
    
    
    
    $
    1
    
    
    $
    18
    
    
    $
    71
    
    
    $
    297
     36




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##### Table of Contents



Summary of Loan Loss Experience
  Years Ended December 31,2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005(Dollar amounts in thousands)Allowance for loan losses,
beginning of year
    
    $
    4,284
    
    
    $
    5,059
    
    
    $
    4,386
    
    
    $
    3,756
    
    
    $
    3,416Charge-offs:Construction, land
development and other land
loans
    
    
    1,382
    
    
    
    1,107
    
    
    
    
    
    
    
    
    
    
    
    Commercial, financial and
agricultural
    
    
    208
    
    
    
    223
    
    
    
    163
    
    
    
    106
    
    
    
    521Installment and consumer
    
    
    199
    
    
    
    110
    
    
    
    97
    
    
    
    95
    
    
    
    129Real estate  mortgage
    
    
    553
    
    
    
    824
    
    
    
    28
    
    
    
    98
    
    
    
    732,342
    
    
    
    2,264
    
    
    
    288
    
    
    
    299
    
    
    
    723Recoveries:Construction, land
development and other land
loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Commercial, financial and
agricultural
    
    
    14
    
    
    
    5
    
    
    
    10
    
    
    
    16
    
    
    
    34Installment and consumer
    
    
    29
    
    
    
    25
    
    
    
    31
    
    
    
    7
    
    
    
    7Real estate  mortgage
    
    
    5
    
    
    
    3
    
    
    
    11
    
    
    
    8
    
    
    
    48
    
    
    
    33
    
    
    
    52
    
    
    
    31
    
    
    
    41Net (charge-offs) recoveries
    
    
    (2,294
    )
    
    
    (2,231
    )
    
    
    (236
    )
    
    
    (268
    )
    
    
    (682
    )Provision charged to operations
    
    
    3,082
    
    
    
    1,456
    
    
    
    909
    
    
    
    898
    
    
    
    1,022Allowance for loan losses, end
of year
    
    $
    5,072
    
    
    $
    4,284
    
    
    $
    5,059
    
    
    $
    4,386
    
    
    $
    3,756Ratio of net (charge-offs)
recoveries during the period
to average loans outstanding
during the period
    
    
    (.67%)
    
    
    
    (.67%)
    
    
    
    (.08%)
    
    
    
    (.10%)
    
    
    
    (.29%)
  37




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##### Table of Contents



Allowance for Loan Losses
   2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005Portfolio
    
    
    
    
    
    
    Portfolio
    
    
    
    
    
    
    Portfolio
    
    
    
    
    
    
    Portfolio
    
    
    
    
    
    
    PortfolioAllowance
    
    
    as % of
    
    
    Allowance
    
    
    as % of
    
    
    Allowance
    
    
    as % of
    
    
    Allowance
    
    
    as % of
    
    
    Allowance
    
    
    as % ofAmount
    
    
    Loans
    
    
    Amount
    
    
    Loans
    
    
    Amount
    
    
    Loans
    
    
    Amount
    
    
    Loans
    
    
    Amount
    
    
    LoansCommercial, financial and
agricultural
    
    $
    259
    
    
    
    6.8
    %
    
    $
    436
    
    
    
    9.3
    %
    
    $
    562
    
    
    
    9.2
    %
    
    $
    883
    
    
    
    9.9
    %
    
    $
    543
    
    
    
    12.1
    %Real estate  construction
    
    
    2,364
    
    
    
    31.9
    %
    
    
    1,838
    
    
    
    31.2
    %
    
    
    1,928
    
    
    
    27.8
    %
    
    
    1,442
    
    
    
    26.2
    %
    
    
    1,312
    
    
    
    22.4
    %Real estate  Mortgage
    
    
    2,146
    
    
    
    59.1
    %
    
    
    1,770
    
    
    
    56.8
    %
    
    
    2,247
    
    
    
    59.8
    %
    
    
    1,760
    
    
    
    60.2
    %
    
    
    1,671
    
    
    
    61.4
    %Consumer and installment
    
    
    176
    
    
    
    2.2
    %
    
    
    133
    
    
    
    2.7
    %
    
    
    195
    
    
    
    3.2
    %
    
    
    191
    
    
    
    3.7
    %
    
    
    136
    
    
    
    4.1
    %Unallocated
    
    
    127
    
    
    
    
    
    
    
    107
    
    
    
    
    
    
    
    127
    
    
    
    
    
    
    
    110
    
    
    
    
    
    
    
    94
    
    
    
    Total
    
    $
    5,072
    
    
    
    
    
    
    $
    4,284
    
    
    
    
    
    
    $
    5,059
    
    
    
    
    
    
    $
    4,386
    
    
    
    
    
    
    $
    3,756
       38




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##### Table of Contents



Cash and Due from Banks
  Investments
   December 31,2009
    
    
    2008
    
    
    2007(In thousands)Obligations of the U.S. Treasury and other U.S
government agencies
    
    $
    10,652
    
    
    $
    27,330
    
    
    $
    32,148Mortgage-backed securities
    
    
    23,904
    
    
    
    20,190
    
    
    
    19,332Obligations of States and political subdivisions
    
    
    9,783
    
    
    
    9,924
    
    
    
    7,243Corporate obligations
    
    
    122
    
    
    
    150
    
    
    
    183Total investment securities
    
    $
    44,461
    
    
    $
    57,594
    
    
    $
    58,906Federal Home Loan Bank stock
    
    
    2,828
    
    
    
    2,201
    
    
    
    1,487Total investment securities and FHLB stock
    
    $
    47,289
    
    
    $
    59,795
    
    
    $
    60,393
  39




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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
    
    $
    
    
    
    $
    2,018
    
    
    $
    1,508
    
    
    $
    7,126Mortgage-backed securities
    
    
    
    
    
    
    819
    
    
    
    1,345
    
    
    
    21,740Obligations of States and political subdivisions
    
    
    340
    
    
    
    360
    
    
    
    4,300
    
    
    
    4,783Corporate obligations
    
    
    
    
    
    
    
    
    
    
    122
    
    
    
    Federal home loan bank stock
    
    
    2,828
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    3,168
    
    
    $
    3,197
    
    
    $
    7,275
    
    
    $
    33,649
 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
    
    
    
    
    
    
    5.30
    %
    
    
    4.95
    %
    
    
    5.47
    %Mortgage-backed securities
    
    
    
    
    
    
    2.94
    %
    
    
    5.18
    %
    
    
    4.25
    %Obligations of States and political subdivisions
    
    
    3.91
    %
    
    
    5.91
    %
    
    
    5.67
    %
    
    
    5.79
    %Corporate obligations
    
    
    
    
    
    
    
    
    
    
    5.53
    %
    
    
    Federal home loan bank stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total weighted average yield
    
    
    3.91
    %
    
    
    4.77
    %
    
    
    5.42
    %
    
    
    4.73
    %
   Investments in Insurance Contracts,
 Return on Equity and Assets
  December 31,2009
    
    
    2008
    
    
    2007Return on Average Assets
    
    
    0.79
    %
    
    
    0.62
    %
    
    
    0.69
    %Return on Average Equity
    
    
    8.93
    %
    
    
    7.36
    %
    
    
    8.39
    %Dividend Payout Ratio
    
    
    
    
    
    
    
    
    
    
    Equity to Assets Ratio
    
    
    8.94
    %
    
    
    8.48
    %
    
    
    8.03
    %
  40




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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
    
    $
    
    
    
    $
    
    
    
    $
    2,837
    
    
    $
    31,841
    
    
    $
    34,678Tax-exempt securities
    
    
    
    
    
    
    340
    
    
    
    360
    
    
    
    9,083
    
    
    
    9,783Federal funds sold and cash in banks
    
    
    16,230
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,230Loans
    
    
    176,656
    
    
    
    86,122
    
    
    
    126,065
    
    
    
    6,141
    
    
    
    394,984Total rate sensitive assets
    
    
    192,886
    
    
    
    86,462
    
    
    
    129,262
    
    
    
    47,065
    
    
    
    455,675NOW and money market deposits
    
    
    55,627
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    55,627Savings deposits
    
    
    51,424
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51,424Time deposits
    
    
    55,757
    
    
    
    122,428
    
    
    
    77,753
    
    
    
    464
    
    
    
    256,402Total rate sensitive deposits
    
    
    162,808
    
    
    
    122,428
    
    
    
    77,753
    
    
    
    464
    
    
    
    363,453Borrowed funds
    
    
    7,297
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,297Total rate sensitive liabilities
    
    
    170,105
    
    
    
    122,428
    
    
    
    77,753
    
    
    
    464
    
    
    
    370,750Excess of rate sensitive assets less rate
sensitive liabilities
    
    $
    22,781
    
    
    $
    (35,966
    )
    
    $
    51,509
    
    
    $
    46,601
    
    
    $
    84,925Cumulative ratio of rate sensitive assets
to liabilities
    
    
    113
    %
    
    
    95
    %
    
    
    110
    %
    
    
    123
    %Cumulative gap
    
    $
    22,781
    
    
    $
    (13,185
    )
    
    $
    38,324
    
    
    $
    84,925
  41




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##### Table of Contents



Capital Resources
 Investments-Debt and Equity Securities,
  MinimumDecember 31, 2009
    
    
    Regulatory RequirementBankTotal risk-based capital ratio
    
    
    11.69
    %
    
    
    8.0
    %Tier 1 Capital ratio
    
    
    10.45
    %
    
    
    4.0
    %Leverage ratio
    
    
    8.91
    %
    
    
    4.0
    %Company  ConsolidatedTotal risk-based capital ratio
    
    
    11.74
    %
    
    
    8.0
    %Tier 1 Capital ratio
    
    
    10.50
    %
    
    
    4.0
    %Leverage ratio
    
    
    8.96
    %
    
    
    4.0
    %
   Fair Value Measurement
 Fair Value Measurements and Disclosures,
  42




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##### Table of Contents



December 31, 2009
    
    
    December 31, 2008Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairAmount
    
    
    Value
    
    
    Amount
    
    
    ValueLoans and loans held for
sale, net of allowance
    
    $
    395.0
    
    
    $
    435.5
    
    
    $
    360.4
    
    
    $
    392.3Time deposits
    
    $
    256.4
    
    
    $
    259.7
    
    
    $
    240.3
    
    
    $
    245.1
  Level 1
 Level 2
 Level 3
   43




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##### Table of Contents



Investment Securities Available-for-Sale
  Loans Held for Sale
  Loans
  Foreclosed Assets
   44




---



##### Table of Contents



Fair Value Measurements atDecember 31, 2009, Using,Total
    
    
    
    
    
    
    (in thousands)Carrying
    
    
    
    
    
    
    QuotedAmount in
    
    
    
    
    
    
    Prices inthe
    
    
    Assets/
    
    
    Active
    
    
    Significant
    
    
    SignificantConsolidated
    
    
    Liabilities
    
    
    Markets for
    
    
    Other
    
    
    OtherBalance
    
    
    Measured at
    
    
    Identical
    
    
    Observable
    
    
    UnobservableSheet
    
    
    Fair Value
    
    
    Assets
    
    
    Inputs
    
    
    InputsDescription
    
    12/31/2009
    
    
    12/31/2009
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Available-for-sale securities
    
    $
    47,289
    
    
    $
    47,289
    
    
    $
    
    
    
    $
    47,289
    
    
    $
    
 Market Risk
    Off-Balance Sheet Arrangements
   45




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##### Table of Contents



December 31, 2009
    
    
    December 31, 2008(In thousands)Commitments to extend credit
    
    $
    59,082
    
    
    $
    56,426Standby letters of credit
    
    
    5,712
    
    
    
    5,102Total
    
    $
    64,794
    
    
    $
    61,528
 Contractual Obligations
  Payments Due by Period (in thousands)
 Less than
    
    
    
    
    
    
    
    
    
    
    More thanTotal
    
    
    1 year
    
    
    1-3 years
    
    
    3-5 years
    
    
    5 yearsTime Deposits
    
    $
    261,958
    
    
    $
    181,869
    
    
    $
    78,673
    
    
    $
    951
    
    
    $
    465Long-Term Debt
    
    
    28,447
    
    
    
    957
    
    
    
    11,915
    
    
    
    15,575
    
    
    
    Data Processing Obligations
    
    
    1,317
    
    
    
    1,129
    
    
    
    188
    
    
    
    
    
    
    
    Operating Lease Obligations
    
    
    955
    
    
    
    301
    
    
    
    503
    
    
    
    151
    
    
    
    Service Contract Obligations
    
    
    531
    
    
    
    288
    
    
    
    243
    
    
    
    
    
    
    
    Total
    
    $
    293,208
    
    
    $
    184,544
    
    
    $
    91,522
    
    
    $
    16,677
    
    
    $
    465
  46




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##### Table of Contents



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, 2009 and 2008Consolidated Statements of Income
for the years ended December 31, 2009, 2008 and 2007Consolidated Statements of Comprehensive Income
for the years ended December 31, 2009, 2008 and 2007Consolidated Statements of Shareholders Equity
for the years ended December 31, 2009, 2008 and 2007Consolidated Statements of Cash Flows
for the years ended December 31, 2009, 2008 and 2007Notes to Consolidated Financial Statements
 
 Item 9 . Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
  
 Item 9A . Controls and Procedures
   47




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##### Table of Contents



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
   48




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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
   49




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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, 2009 and 2008Consolidated Statements of Income
for the years ended December 31, 2009, 2008 and 2007Consolidated Statements of Comprehensive Income
for the years ended December 31, 2009, 2008 and 2007Consolidated Statements of Shareholders Equity
for the years ended December 31, 2009, 2008 and 2007Consolidated Statements of Cash Flows
for the years ended December 31, 2009, 2008 and 2007Notes 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)).
  50




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##### 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
    
    
    
    
    2004 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).* 10.3
    
    
    
    
    Form of Incentive Stock Option Agreement under the
Companys 2004 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).* 10.4
    
    
    
    
    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).* 10.5
    
    
    
    
    Severance Protection Agreement with Thomas J.
Flournoy (incorporated herein by reference to the
exhibit contained in the Companys Form 8-K filing
on June 26, 2009 previously filed with the
Commission).* 10.6
    
    
    
    
    Compensation Arrangement 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
    
    
    
    
    Compensation Arrangement with Thomas J. Flournoy
(incorporated herein by reference to the exhibit
contained in the Companys Form 8-K filing on March
30, 2009 previously filed with the Commission).* 10.8
    
    
    
    
    First Bank of Georgia Annual Incentive Plan for
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).* 10.9
    
    
    
    
    Directors Equity Incentive Plan effective October
26, 2009. (This plan replaces the Directors Stock
Purchase Plan.)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).
  51




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##### Table of Contents



ExhibitNumber
    
    
    
    Description of Exhibit21.1
    
    
    
    
    Subsidiaries of the Registrant.23.1
    
    
    
    
    Consent of Cherry, Bekaert & Holland, L.L.P.31.1
    
    
    
    
    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.  52




---



##### Table of Contents



SIGNATURES
  GEORGIA-CAROLINA BANCSHARES, INC.Date: March 26, 2010
    
    By:
    
    /s/ Remer Y. Brinson, III

Remer Y. Brinson, IIIPresident and Chief Executive Officer(principal executive officer)Date: March 26, 2010
    
    By:
    
    /s/ Thomas J. Flournoy

Thomas J. FlournoySenior Vice President and Chief Financial Officer(principal financial and accounting officer)
  53




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##### Table of Contents



DIRECTORS
    
    DATE/s/ Patrick G. Blanchard

Patrick G. Blanchard
    
    March 26, 2010/s/ Remer Y. Brinson, III

Remer Y. Brinson, III
    
    March 26,
2010/s/ Mac A. Bowman

Mac A. Bowman
    
    March 26, 2010/s/ Philip G. Farr

Philip G. Farr
    
    March 26, 2010/s/ Samuel A. Fowler, Jr.

Samuel A. Fowler, Jr.
    
    March 26, 2010/s/ Arthur J. Gay, Jr.

Arthur J. Gay, Jr.
    
    March 26, 2010/s/ John W. Lee

John W. Lee
    
    March 26, 2010/s/ Robert N. Wilson, Jr.
    
    March 26, 2010Robert N. Wilson, Jr./s/ A. Montague Miller

A. Montague Miller
    
    March 26,
2010/s/ George H. Inman

George H. Inman
    
    March 26, 2010/s/ David W. Joesbury, Sr.

David W. Joesbury, Sr.
    
    March 26, 2010/s/ James L. Lemley, M.D.

James L. Lemley, M.D.
    
    March 26, 2010/s/ Julian W. Osbon

Julian W. Osbon
    
    March 26, 2010/s/ Bennye M. Young

Bennye M. Young
    
    March 26, 2010
  54