##### 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, 2010
 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 RoadAugusta, 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 þ
 Yes o No þ
 þ o
 o o
 o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-Accelerated filer o
    
    Smaller reporting company þ
 o þ
  DOCUMENTS INCORPORATED BY REFERENCE




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##### 



GEORGIA-CAROLINA BANCSHARES, INC.
2010 Form 10-K Annual Report
 TABLE OF CONTENTS
 Item Number
    
    
    
    Page orIn Form 10-K
    
    Description
    
    LocationPART IItem 1.
    
    Business
    
    
    1Item 1A.
    
    Risk Factors
    
    
    16Item 1B.
    
    Unresolved Staff Comments
    
    
    24Item 2.
    
    Properties
    
    
    24Item 3.
    
    Legal Proceedings
    
    
    25Item 4.
    
    [Removed and Reserved]
    
    
    25PART IIItem 5.
    
    Market for the Registrants Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
    
    
    26Item 6.
    
    Selected Financial Data
    
    
    28Item 7.
    
    Managements Discussion and Analysis of
Financial Condition and Results of Operations
    
    
    29Item 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 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 10.1.1Exhibit 10.6Exhibit 10.7Exhibit 10.8Exhibit 21.1Exhibit 23.1Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 99.1
   (i)




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##### Table of Contents



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 Dodd-Frank Act
   
    
    Assessment Base for Deposit Insurance. The Dodd-Frank Act changes the assessment base
for federal deposit insurance from the amount of insured deposits to consolidated assets
less tangible capital, eliminates the ceiling on the size of the Deposit Insurance Fund,
and increases the floor applicable to the size of the Deposit Insurance Fund, which may
require an increase in the level of assessments for institutions such as the bank.
 
    
    Deposit Insurance Limits. The Dodd-Frank Act makes permanent the $250,000 limit on
federal deposit insurance. Further, the Dodd-Frank Act provides unlimited federal deposit
insurance, until December 31, 2012, for noninterest-bearing transaction accounts at all
insured depository institutions. Noninterest-bearing transaction accounts, as defined in
the Dodd-Frank Act, include only traditional, noninterest-bearing demand deposit (or
checking) accounts that allow for an unlimited number of transfers and withdrawals at any
time, whether held by a business, individual, or other type of depositor.
  4




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
    
    Interest on Demand Deposits. The Dodd-Frank Act repeals the federal prohibitions on the
payment of interest on demand deposits, thereby permitting depository institutions to pay
interest
on business transaction and other accounts. This will increase community banks cost of
funds as they may need to pay interest on demand deposits of business entities to retain
such customers.
 
    
    Consumer Financial Protection Bureau. The Dodd-Frank Act centralizes responsibility for
consumer financial protection by creating a new agency responsible for implementing,
examining, and enforcing compliance with federal consumer financial laws. The new Consumer
Financial Protection Bureau (CFPB) will be created under the Federal Reserve and will
have rule-making, enforcement and investigative authority over consumer financial
protection statutes. Many new consumer protection regulations are expected to be
promulgated over the next few years. Many of those regulations will increase compliance
costs for depository institutions or limit the fees they can charge. Community banks may
find it more difficult than larger institutions to absorb the increased compliance costs
and reduction in income. The new CFPB is specifically authorized to take action and
promulgate rules to prohibit unfair, deceptive or abusive acts or practices in connection
with any transaction with a consumer for a consumer financial product. Unfair and
deceptive acts are already prohibited by the Federal Trade Commission Act and many state
laws. However, the Dodd-Frank Act provides minimal guidance as to what activities will be
considered abusive. This will likely be an area of significant consumer litigation in
the future. State attorneys general are specifically granted the authority to enforce the
regulations promulgated by the CFPB against national banks, which will likely result in
increased enforcement of the new consumer regulations.
 
    
    Holding Company Capital Requirements. The Dodd-Frank Act applies the same leverage and
risk-based capital requirements that apply to insured depository institutions to most bank
holding companies, which, among other things, will preclude holding companies from
including in Tier 1 Capital trust preferred securities or cumulative preferred stock, if
any, issued on or after May 19, 2010.
 
    
    Source of Financial Strength. The Dodd-Frank Act codifies the existing policy of the
Federal Reserve, whereunder a bank holding company serves as the source of financial
strength for its subsidiary banks. This provision of the Dodd-Frank Act becomes effective
on July 21, 2011, and clarifies ambiguities that might exist with respect to the
requirements of a policy, as compared to the requirements of a statute. Presumably,
the regulations promulgated under the statutory requirements will further clarify these
source-of-financial-strength requirements for bank holding companies, together with the
enforcement powers of the Federal Reserve relating thereto.
 
    
    Loss of Federal Preemption. The Dodd-Frank Act restricts the preemption of state law by
federal law and disallows subsidiaries and affiliates of national banks from availing
themselves of such preemption.
 
    
    Interstate Branching. The Dodd-Frank Act, subject to a states restrictions on
intra-state branching, now permits interstate branching. Therefore a bank may enter a new
state by acquiring a branch of an existing institution or by establishing a new branch
office. As a result, there will be no need for the entering bank to acquire or merge with
an existing institution in the target state. This ability to establish a de novo branch
across state lines will have the effect of increasing competition within a community banks
existing markets and will create a downward pressure on the franchise value for existing
community banks.
 
    
    Requirement for Mortgage Loans. The Dodd-Frank Act creates additional requirements for
residential mortgage loans made by community banks and other mortgage lenders, including
restrictions on prepayment penalties and yield-spread premiums, requirements for
verification of a borrowers ability to repay the mortgage loan, and other requirements and
restrictions. The likely result of these provisions of the Dodd-Frank Act will be an
increase in the compliance and management costs of community banks associated with the
origination of residential mortgage loans.
 
    
    Interchange Fees. The Dodd-Frank Act amends the Electronic Funds Transfer Act to, among
other things, give the Federal Reserve, on and after July 21, 2010, the authority to
establish rules regarding interchange fees charged for electronic debit transactions by
payment card issuers having assets over $10 billion and to enforce a new statutory
requirement that such fees be reasonable and proportional to the actual cost of a
transaction to the issuer. Although community banks will be exempt from a cap on
interchange fees, the cap on the fees of large banks, will create market forces that force
all fees downward. Therefore, community banks should expect lower interchange revenues in
the future.
  5




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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.
    6




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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.
  7




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Subsidiary Dividends.
  Incentive Compensation
     8




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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 as defined in the guidance 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.
  9




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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
 Interstate Banking and Branching.
  10




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Deposit Insurance and Assessments.
    Community Reinvestment Act.
  11




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The Modernization Act-Consumer Privacy.
 Capital Adequacy
       12




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Other Laws and Regulations
 International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001.
  Sarbanes-Oxley Act of 2002
    13




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Other Regulations
 
    
    effective April 1, 2011, the Federal Reserve Board will implement new rules
regarding all persons who originate loans, including mortgage loan officers and
brokers. The new rules include, among other things, prohibition of compensation to
loan originators based on the terms or conditions of a loan, prohibiting dual payment
of a mortgage originator from both the consumer and the creditor, prohibiting a loan
officer from steering a consumer to a lender with less favorable terms that increase
the loan officer or brokers compensation. The Dodd-Frank Act also addressed loan
originator compensation in a similar manner but with additional provisions. The Banks
Mortgage Division has addressed these new rules and is prepared for the April 1, 2011
implementation date;
 
    
    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 Practices 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.
 Financial Institutions Reform Recovery and Enforcement Act
  14




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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.
 Effect of Governmental Monetary Policies
  15




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Future Legislation
 
 Item 1A.
    
    Risk Factors
  Recent Market, Legislative and Regulatory Events
 The banking crisis that began in 2008 has adversely affected our industry, including our business,
and may continue to have an adverse effect on our business in the future.
  Market volatility may have an adverse effect on us.
   16




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The financial distress of other financial institutions could have a material adverse impact on us.
  There can be no assurance that legislation and federal programs enacted in response to the
financial crisis that began in 2008 will fully stabilize the U.S. financial system, and such
legislation and programs may adversely affect us.
       17




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Recent legislative reforms could result in our business becoming subject to significant and
extensive additional regulations and/or could adversely affect our results of operations and
financial condition.
   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.
   18




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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.
   19




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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 monetary policies and interest rates could reduce our profitability and adversely affect
our business.
  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.
   20




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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.
  We are subject to extensive regulation that could limit or restrict our activities.
   21




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Efforts to comply with the Sarbanes-Oxley Act have involved significant expenditures, and
non-compliance with the Sarbanes-Oxley Act may adversely affect us.
   We may be required to pay significantly higher FDIC premiums in the future.
    22




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Changes in accounting policies and practices, as may be adopted by the regulatory agencies, the
Financial Accounting Standards Board, or other authoritative bodies, could materially impact our
financial statements.
  We must respond to rapid technological changes, and these changes may be more difficult to
implement or more expensive than anticipated.
  Risks Related to Investing in Our Common Stock
 There is not an active trading market for our common stock and an active trading market may never
develop or be maintained.
  We do not anticipate declaring cash dividends in the foreseeable future for both regulatory and
business reasons.
   23




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Our securities are not FDIC insured .
  We may issue additional shares of our common stock that could result in dilution of an investors
investment.
  
 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
    24




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Item 3.
    
    Legal Proceedings
  
 Item 4.
    
    [Removed and Reserved]
  25




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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, 2010First Quarter
    
    $
    8.00
    
    
    $
    6.25Second Quarter
    
    $
    8.00
    
    
    $
    6.55Third Quarter
    
    $
    8.00
    
    
    $
    5.15Fourth Quarter
    
    $
    8.00
    
    
    $
    5.36Fiscal year ended December 31, 2009First Quarter
    
    $
    10.00
    
    
    $
    5.75Second Quarter
    
    $
    9.98
    
    
    $
    5.25Third Quarter
    
    $
    8.00
    
    
    $
    6.25Fourth Quarter
    
    $
    8.00
    
    
    $
    6.25
 Holders of Common Stock
  Dividends
    26




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Equity Compensation Plan Information
  Number of securitiesto be issued upon
    
    
    Weighted-average
    
    
    Number of securities remainingexercise of
    
    
    exercise price of
    
    
    available for future issuanceoutstanding
    
    
    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
    
    
    159,038
    
    
    $
    9.60
    
    
    
    2004 Incentive Plan
    
    
    124,251
    
    
    $
    10.38
    
    
    
    200,874Equity compensation plans
not approved by security
holders
    
    
    
    
    
    
    
    
    
    
    54,539Total
    
    
    283,289
    
    
    $
    9.94
    
    
    
    255,413
 Directors Equity Incentive Plan
   27




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Item 6.
    
    Selected Financial Data
  At and for the Years Ended December 31,($ in thousands, except per share data)2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006Selected Balance Sheet Data:Assets
    
    $
    495,311
    
    
    $
    484,013
    
    
    $
    460,828
    
    
    $
    447,869
    
    
    $
    417,471Investment securities and FHLB stock
    
    
    79,431
    
    
    
    47,289
    
    
    
    59,795
    
    
    
    60,393
    
    
    
    55,404Loans, held for investment
    
    
    316,809
    
    
    
    336,849
    
    
    
    336,293
    
    
    
    322,201
    
    
    
    280,883Loans, held for sale
    
    
    46,570
    
    
    
    58,135
    
    
    
    28,402
    
    
    
    39,547
    
    
    
    56,758Allowance for loan losses
    
    
    7,866
    
    
    
    5,072
    
    
    
    4,284
    
    
    
    5,059
    
    
    
    4,386Deposits
    
    
    414,749
    
    
    
    405,240
    
    
    
    377,009
    
    
    
    379,966
    
    
    
    341,342Short-term borrowings
    
    
    3,469
    
    
    
    7,297
    
    
    
    15,859
    
    
    
    17,473
    
    
    
    38,661Long-term debt
    
    
    25,000
    
    
    
    25,000
    
    
    
    25,400
    
    
    
    10,500
    
    
    
    600Other liabilities
    
    
    7,119
    
    
    
    3,203
    
    
    
    3,476
    
    
    
    3,959
    
    
    
    4,742Shareholders equity
    
    
    44,976
    
    
    
    43,273
    
    
    
    39,084
    
    
    
    35,971
    
    
    
    32,126Selected Results of Operations Data:Interest income
    
    
    24,409
    
    
    
    24,604
    
    
    
    26,371
    
    
    
    29,019
    
    
    
    25,335Interest expense
    
    
    7,290
    
    
    
    9,722
    
    
    
    13,038
    
    
    
    15,706
    
    
    
    11,969Net interest income
    
    
    17,119
    
    
    
    14,882
    
    
    
    13,333
    
    
    
    13,313
    
    
    
    13,366Provision for loan losses
    
    
    8,355
    
    
    
    3,082
    
    
    
    1,456
    
    
    
    909
    
    
    
    898Net interest income after provision for
provision for loan losses
    
    
    8,764
    
    
    
    11,800
    
    
    
    11,877
    
    
    
    12,404
    
    
    
    12,468Non-interest income
    
    
    13,246
    
    
    
    14,157
    
    
    
    9,920
    
    
    
    9,932
    
    
    
    9,800Non-interest expense
    
    
    20,543
    
    
    
    20,902
    
    
    
    17,745
    
    
    
    17,816
    
    
    
    17,911Income before taxes
    
    
    1,467
    
    
    
    5,055
    
    
    
    4,052
    
    
    
    4,520
    
    
    
    4,357Income tax expense (benefit)
    
    
    (66
    )
    
    
    1,303
    
    
    
    1,252
    
    
    
    1,619
    
    
    
    1,460Net income
    
    $
    1,533
    
    
    $
    3,752
    
    
    $
    2,800
    
    
    $
    2,901
    
    
    $
    2,897Per Share DataNet income  basic
    
    $
    0.44
    
    
    $
    1.08
    
    
    $
    0.82
    
    
    $
    0.85
    
    
    $
    0.86Net income  diluted
    
    $
    0.44
    
    
    $
    1.07
    
    
    $
    0.80
    
    
    $
    0.83
    
    
    $
    0.83Book value
    
    $
    12.72
    
    
    $
    12.37
    
    
    $
    11.31
    
    
    $
    10.58
    
    
    $
    9.51Weighted average number of shares outstanding:Basic
    
    
    3,519,408
    
    
    
    3,484,309
    
    
    
    3,426,860
    
    
    
    3,393,224
    
    
    
    3,370,277Diluted
    
    
    3,519,408
    
    
    
    3,492,871
    
    
    
    3,503,856
    
    
    
    3,508,606
    
    
    
    3,489,564
  28




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At and for the Years Ended December 31,2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006Performance Ratios:Return on average assets
    
    
    0.32
    %
    
    
    0.79
    %
    
    
    0.62
    %
    
    
    0.69
    %
    
    
    0.78
    %Return on average equity
    
    
    3.41
    %
    
    
    8.93
    %
    
    
    7.36
    %
    
    
    8.39
    %
    
    
    9.57
    %Net interest margin (1)
    
    
    3.83
    %
    
    
    3.37
    %
    
    
    3.15
    %
    
    
    3.36
    %
    
    
    3.81
    %Efficiency ratio (2)
    
    
    67.65
    %
    
    
    71.98
    %
    
    
    76.31
    %
    
    
    76.64
    %
    
    
    77.39
    %Loan (excl LHFS) to deposit ratio
    
    
    76.39
    %
    
    
    83.12
    %
    
    
    89.20
    %
    
    
    84.80
    %
    
    
    82.29
    %Asset Quality Ratios:Nonperforming loans to total loans
    
    
    1.72
    %
    
    
    1.57
    %
    
    
    1.39
    %
    
    
    3.20
    %
    
    
    0.68
    %Nonperforming assets to total loans
(excl LHFS + OREO)
    
    
    2.82
    %
    
    
    3.12
    %
    
    
    3.57
    %
    
    
    3.73
    %
    
    
    1.03
    %Allowance for loan losses to
nonperforming loans
    
    
    125.71
    %
    
    
    81.94
    %
    
    
    84.65
    %
    
    
    43.77
    %
    
    
    191.86
    %Allowance for loan losses to
total loans (excl LHFS)
    
    
    2.48
    %
    
    
    1.51
    %
    
    
    1.27
    %
    
    
    1.57
    %
    
    
    1.56
    %Capital Ratios:Average equity to average assets
    
    
    9.36
    %
    
    
    8.81
    %
    
    
    8.41
    %
    
    
    8.16
    %
    
    
    8.11
    %Leverage ratio
    
    
    9.32
    %
    
    
    8.96
    %
    
    
    8.59
    %
    
    
    8.18
    %
    
    
    7.85
    %Tier 1 risk-based capital ratio
    
    
    11.75
    %
    
    
    10.50
    %
    
    
    9.82
    %
    
    
    9.39
    %
    
    
    9.25
    %Total risk-based capital ratio
    
    
    13.01
    %
    
    
    11.74
    %
    
    
    10.91
    %
    
    
    10.72
    %
    
    
    10.50
    %
 
 (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
     29




---



##### Table of Contents



Contingencies: Loss Contingencies, Receivables: Subsequent
Measurement.
   Consolidated Financial Information
  2010
    
    
    2009
    
    
    2008Total Assets
    
    
    Net Income
    
    
    Total Assets
    
    
    Net Income
    
    
    Total Assets
    
    
    Net Income(Dollar amounts in thousands)GECR consolidated
    
    $
    495,311
    
    
    $
    1,533
    
    
    $
    484,013
    
    
    $
    3,752
    
    
    $
    460,828
    
    
    $
    2,800The Bank
    
    $
    495,223
    
    
    
    1,665
    
    
    $
    483,916
    
    
    
    3,919
    
    
    $
    460,726
    
    
    
    2,983The Company
    
    
    
    
    
    $
    (132
    )
    
    
    
    
    
    $
    (167
    )
    
    
    
    
    
    $
    (183
    )
  30




---



##### Table of Contents



Results of Operations  Comparison of 2010 and 2009
 Balance Sheet
     31




---



##### Table of Contents



Transfers and Servicing
  Income Statement
   32




---



##### Table of Contents



33




---



##### Table of Contents



CONSOLIDATED AVERAGE BALANCE SHEETS
(Dollar amounts in thousands)
 Distribution of Assets, Liabilities and Shareholders Equity; Interest Rates and Interest
Differential
  Year Ended December 31,2010
    
    
    2009
    
    
    2008Interest
    
    
    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
    
    $
    373,779
    
    
    $
    22,379
    
    
    
    5.99
    %
    
    $
    386,961
    
    
    $
    22,260
    
    
    
    5.75
    %
    
    $
    360,689
    
    
    $
    23,186
    
    
    
    6.43
    %Investment securities
    
    
    54,978
    
    
    
    1,989
    
    
    
    3.62
    %
    
    
    52,672
    
    
    
    2,337
    
    
    
    4.44
    %
    
    
    61,375
    
    
    
    3,100
    
    
    
    5.05
    %Fed funds sold & cash in banks
    
    
    18,202
    
    
    
    41
    
    
    
    0.23
    %
    
    
    4,051
    
    
    
    7
    
    
    
    0.17
    %
    
    
    3,996
    
    
    
    85
    
    
    
    2.13
    %Total interest-earning assets
    
    
    446,959
    
    
    
    24,409
    
    
    
    5.46
    %
    
    
    443,684
    
    
    
    24,604
    
    
    
    5.55
    %
    
    
    426,060
    
    
    
    26,371
    
    
    
    6.19
    %NON-INTEREST-EARNING ASSETSCash and due from banks
    
    
    8,226
    
    
    
    
    
    
    
    
    
    
    
    8,686
    
    
    
    
    
    
    
    
    
    
    
    6,296Bank premises and fixed assets
    
    
    9,476
    
    
    
    
    
    
    
    
    
    
    
    9,877
    
    
    
    
    
    
    
    
    
    
    
    10,260Accrued interest receivable
    
    
    1,657
    
    
    
    
    
    
    
    
    
    
    
    1,748
    
    
    
    
    
    
    
    
    
    
    
    1,956Other assets
    
    
    20,019
    
    
    
    
    
    
    
    
    
    
    
    17,506
    
    
    
    
    
    
    
    
    
    
    
    12,978Allowance for loan losses
    
    
    (6,158
    )
    
    
    
    
    
    
    
    
    
    
    (5,026
    )
    
    
    
    
    
    
    
    
    
    
    (5,190
    )Total assets
    
    $
    480,179
    
    
    
    
    
    
    
    
    
    
    $
    476,475
    
    
    
    
    
    
    
    
    
    
    $
    452,360LIABILITIES AND SHAREHOLDERS EQUITYINTEREST-BEARING DEPOSITSNOW accounts
    
    $
    38,473
    
    
    $
    226
    
    
    
    0.59
    %
    
    $
    35,300
    
    
    $
    211
    
    
    
    0.60
    %
    
    $
    31,674
    
    
    $
    376
    
    
    
    1.19
    %Savings accounts
    
    
    52,102
    
    
    
    570
    
    
    
    1.09
    %
    
    
    52,515
    
    
    
    587
    
    
    
    1.12
    %
    
    
    67,259
    
    
    
    1,408
    
    
    
    2.09
    %Money market accounts
    
    
    24,826
    
    
    
    309
    
    
    
    1.24
    %
    
    
    11,945
    
    
    
    139
    
    
    
    1.16
    %
    
    
    8,773
    
    
    
    167
    
    
    
    1.90
    %Time accounts
    
    
    246,359
    
    
    
    5,232
    
    
    
    2.12
    %
    
    
    256,146
    
    
    
    7,808
    
    
    
    3.05
    %
    
    
    231,736
    
    
    
    9,999
    
    
    
    4.31
    %Total interest-bearing deposits
    
    
    361,760
    
    
    
    6,337
    
    
    
    1.75
    %
    
    
    355,906
    
    
    
    8,745
    
    
    
    2.46
    %
    
    
    339,442
    
    
    
    11,950
    
    
    
    3.52
    %OTHER INTEREST-BEARING
LIABILITIESBorrowed funds
    
    
    29,190
    
    
    
    953
    
    
    
    3.26
    %
    
    
    38,614
    
    
    
    977
    
    
    
    2.53
    %
    
    
    37,390
    
    
    
    1,088
    
    
    
    2.91
    %Total interest-bearing liabilities
    
    
    390,950
    
    
    
    7,290
    
    
    
    1.86
    %
    
    
    394,520
    
    
    
    9,722
    
    
    
    2.46
    %
    
    
    376,832
    
    
    
    13,038
    
    
    
    3.46
    %NON-INTEREST-BEARING LIABILITIES AND
SHAREHOLDERS EQUITYDemand deposits
    
    
    42,066
    
    
    
    
    
    
    
    
    
    
    
    36,439
    
    
    
    
    
    
    
    
    
    
    
    33,501Other liabilities
    
    
    2,202
    
    
    
    
    
    
    
    
    
    
    
    3,519
    
    
    
    
    
    
    
    
    
    
    
    3,971Shareholders equity
    
    
    44,961
    
    
    
    
    
    
    
    
    
    
    
    41,997
    
    
    
    
    
    
    
    
    
    
    
    38,056Total liabilities and shareholders equity
    
    $
    480,179
    
    
    
    
    
    
    
    
    
    
    $
    476,475
    
    
    
    
    
    
    
    
    
    
    $
    452,360Net interest income
    
    
    
    
    
    $
    17,119
    
    
    
    
    
    
    
    
    
    
    $
    14,882
    
    
    
    
    
    
    
    
    
    
    $
    13,333Interest rate spread
    
    
    
    
    
    
    
    
    
    
    3.60
    %
    
    
    
    
    
    
    
    
    
    
    3.08
    %
    
    
    
    
    
    
    
    
    
    
    2.73
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    3.83
    %
    
    
    
    
    
    
    
    
    
    
    3.37
    %
    
    
    
    
    
    
    
    
    
    
    3.15
    %Average loans (excl LHFS) to average deposits
    
    
    
    
    
    
    
    
    
    
    81.52
    %
    
    
    
    
    
    
    
    
    
    
    86.73
    %
    
    
    
    
    
    
    
    
    
    
    88.67
    %
  34




---



##### Table of Contents



Rate/Volume Analysis of Net Interest Income
  Comparison of Years Ended
    
    
    Comparison of Years EndedDecember 31, 2010 and 2009
    
    
    December 31, 2009 and 2008(in thousands)Increase (Decrease) Due toBalance
    
    
    Rate
    
    
    Total
    
    
    Balance
    
    
    Rate
    
    
    TotalInterest earned on:Tax-exempt securities
    
    $
    (38
    )
    
    $
    (5
    )
    
    $
    (43
    )
    
    $
    82
    
    
    $
    (7
    )
    
    $
    75Taxable securities
    
    
    148
    
    
    
    (453
    )
    
    
    (305
    )
    
    
    (558
    )
    
    
    (280
    )
    
    
    (838
    )Federal funds sold and cash in banks
    
    
    23
    
    
    
    11
    
    
    
    34
    
    
    
    2
    
    
    
    (80
    )
    
    
    (78
    )Net loans and loans held for sale
    
    
    (758
    )
    
    
    877
    
    
    
    119
    
    
    
    1,689
    
    
    
    (2,615
    )
    
    
    (926
    )Total interest income
    
    $
    (625
    )
    
    $
    430
    
    
    $
    (195
    )
    
    $
    1,215
    
    
    $
    (2,982
    )
    
    $
    (1,767
    )Interest paid on:NOW deposits
    
    
    19
    
    
    
    (4
    )
    
    
    15
    
    
    
    43
    
    
    
    (208
    )
    
    
    (165
    )Money market deposits
    
    
    150
    
    
    
    20
    
    
    
    170
    
    
    
    60
    
    
    
    (88
    )
    
    
    (28
    )Savings deposits
    
    
    (5
    )
    
    
    (12
    )
    
    
    (17
    )
    
    
    (309
    )
    
    
    (512
    )
    
    
    (821
    )Time deposits
    
    
    (298
    )
    
    
    (2,278
    )
    
    
    (2,576
    )
    
    
    1,053
    
    
    
    (3,244
    )
    
    
    (2,191
    )Borrowed funds
    
    
    (238
    )
    
    
    214
    
    
    
    (24
    )
    
    
    36
    
    
    
    (147
    )
    
    
    (111
    )Total interest expense
    
    $
    (372
    )
    
    $
    (2,060
    )
    
    $
    (2,432
    )
    
    $
    883
    
    
    $
    (4,199
    )
    
    $
    (3,316
    )Increase (decrease) in net interest
income
    
    $
    (253
    )
    
    $
    2,490
    
    
    $
    2,237
    
    
    $
    332
    
    
    $
    1,217
    
    
    $
    1,549
 Loan Portfolio
     35




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##### Table of Contents



December 31,Type of Loan
    
    2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006(in thousands)Commercial and industrial
    
    $
    20,298
    
    
    $
    22,906
    
    
    $
    31,173
    
    
    $
    29,582
    
    
    $
    27,692Real estate  construction
    
    
    86,418
    
    
    
    107,429
    
    
    
    105,032
    
    
    
    89,580
    
    
    
    73,502Real estate  residential
    
    
    61,194
    
    
    
    66,050
    
    
    
    65,958
    
    
    
    53,557
    
    
    
    47,319Real estate  commercial
    
    
    142,351
    
    
    
    133,140
    
    
    
    125,194
    
    
    
    139,111
    
    
    
    121,822Consumer
    
    
    6,606
    
    
    
    7,468
    
    
    
    9,092
    
    
    
    10,487
    
    
    
    10,609Subtotal
    
    $
    316,867
    
    
    $
    336,993
    
    
    $
    336,449
    
    
    $
    322,317
    
    
    $
    280,944Less:Unearned income and deferred loan
fees
    
    
    (58
    )
    
    
    (144
    )
    
    
    (156
    )
    
    
    (116
    )
    
    
    (61
    )Allowance for possible loan losses
    
    
    (7,866
    )
    
    
    (5,072
    )
    
    
    (4,284
    )
    
    
    (5,059
    )
    
    
    (4,386
    )Total (net of allowance)
    
    $
    308,943
    
    
    $
    331,777
    
    
    $
    332,009
    
    
    $
    317,142
    
    
    $
    276,497
   36




---



##### Table of Contents



Due in 1Year or
    
    
    Due in 1 to
    
    
    Due AfterType of Loan
    
    Less
    
    
    5 Years
    
    
    5 Years
    
    
    Total(In thousands)Commercial and industrial
    
    $
    10,962
    
    
    $
    9,336
    
    
    $
    
    
    
    $
    20,298Real estate  construction
    
    
    77,342
    
    
    
    8,994
    
    
    
    82
    
    
    
    86,418Total
    
    $
    88,304
    
    
    $
    18,330
    
    
    $
    82
    
    
    $
    106,716
  Loans due after 1 year with predetermined interest rates
    
    $
    17,037Loans due after 1 year with floating interest rates
    
    $
    1,375Total loans due after 1 year
    
    $
    18,412
  December 31,2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006(Dollars in thousands)Loans accounted for on a non-accrual basisNumber
    
    
    50
    
    
    
    63
    
    
    
    56
    
    
    
    65
    
    
    
    49Amount
    
    $
    6,257
    
    
    $
    6,190
    
    
    $
    5,061
    
    
    $
    11,558
    
    
    $
    2,286Accruing loans which are contractually
past due 90 days or more as to principal and
interest paymentsNumber
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    4
    
    
    
    2Amount
    
    $
    
    
    
    $
    
    
    
    $
    1
    
    
    $
    18
    
    
    $
    71
   December 31,2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006(Dollars in thousands)Troubled debt restructurings
    
    $
    9,250
    
    
    $
    4,188
    
    
    $
    
    
    
    $
    
    
    
    $
    
   37




---



##### Table of Contents



Summary of Loan Loss Experience
  Years Ended December 31,2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006(Dollar amounts in thousands)Allowance for loan losses, beginning of year
    
    $
    5,072
    
    
    $
    4,284
    
    
    $
    5,059
    
    
    $
    4,386
    
    
    $
    3,756Charge-offs:Real estate  construction
    
    
    3,663
    
    
    
    1,382
    
    
    
    1,107
    
    
    
    
    
    
    
    Real estate  residential
    
    
    980
    
    
    
    553
    
    
    
    798
    
    
    
    28
    
    
    
    98Real estate  commercial
    
    
    850
    
    
    
    
    
    
    
    26
    
    
    
    
    
    
    
    Commercial and industrial
    
    
    139
    
    
    
    208
    
    
    
    223
    
    
    
    163
    
    
    
    106Consumer
    
    
    147
    
    
    
    199
    
    
    
    110
    
    
    
    97
    
    
    
    955,779
    
    
    
    2,342
    
    
    
    2,264
    
    
    
    288
    
    
    
    299Recoveries:Real estate  construction
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Real estate  residential
    
    
    13
    
    
    
    4
    
    
    
    3
    
    
    
    11
    
    
    
    8Real estate  commercial
    
    
    22
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    Commercial and industrial
    
    
    63
    
    
    
    14
    
    
    
    5
    
    
    
    10
    
    
    
    16Consumer
    
    
    104
    
    
    
    29
    
    
    
    25
    
    
    
    31
    
    
    
    7218
    
    
    
    48
    
    
    
    33
    
    
    
    52
    
    
    
    31Net (charge-offs) recoveries
    
    
    (5,561
    )
    
    
    (2,294
    )
    
    
    (2,231
    )
    
    
    (236
    )
    
    
    (268
    )Provision charged to operations
    
    
    8,355
    
    
    
    3,082
    
    
    
    1,456
    
    
    
    909
    
    
    
    898Allowance for loan losses, end of year
    
    $
    7,866
    
    
    $
    5,072
    
    
    $
    4,284
    
    
    $
    5,059
    
    
    $
    4,386Ratio of net (charge-offs) recoveries
during the period to average loans
outstanding during the period
    
    
    (1.49
    %)
    
    
    (.67
    %)
    
    
    (.67
    %)
    
    
    (.08
    %)
    
    
    (.10
    %)
 Allowance for Loan Losses
   38




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##### Table of Contents



2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006Portfolio
    
    
    
    
    
    
    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
    
    
    Loans(dollars in thousands)Commercial and industrial
    
    $
    227
    
    
    
    6.4
    %
    
    $
    259
    
    
    
    6.8
    %
    
    $
    436
    
    
    
    9.3
    %
    
    $
    562
    
    
    
    9.2
    %
    
    $
    883
    
    
    
    9.9
    %Real estate  construction
    
    
    3,908
    
    
    
    27.3
    %
    
    
    2,364
    
    
    
    31.9
    %
    
    
    1,838
    
    
    
    31.2
    %
    
    
    1,928
    
    
    
    27.8
    %
    
    
    1,442
    
    
    
    26.2
    %Real estate  residential
    
    
    1,070
    
    
    
    19.3
    %
    
    
    827
    
    
    
    19.6
    %
    
    
    622
    
    
    
    19.6
    %
    
    
    639
    
    
    
    16.6
    %
    
    
    650
    
    
    
    16.8
    %Real estate  commercial
    
    
    1,617
    
    
    
    44.9
    %
    
    
    1,319
    
    
    
    39.5
    %
    
    
    1,147
    
    
    
    37.2
    %
    
    
    1,608
    
    
    
    43.2
    %
    
    
    1,110
    
    
    
    43.4
    %Consumer
    
    
    251
    
    
    
    2.1
    %
    
    
    176
    
    
    
    2.2
    %
    
    
    133
    
    
    
    2.7
    %
    
    
    195
    
    
    
    3.2
    %
    
    
    191
    
    
    
    3.7
    %Unallocated
    
    
    793
    
    
    
    
    
    
    
    127
    
    
    
    
    
    
    
    107
    
    
    
    
    
    
    
    127
    
    
    
    
    
    
    
    110
    
    
    
    Total
    
    $
    7,866
    
    
    
    
    
    
    $
    5,072
    
    
    
    
    
    
    $
    4,284
    
    
    
    
    
    
    $
    5,059
    
    
    
    
    
    
    $
    4,386
       39




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##### Table of Contents



Cash and Due from Banks
  Investments
   December 31,2010
    
    
    2009
    
    
    2008(In thousands)Obligations of the U.S. Treasury and other U.S
government agencies
    
    $
    28,229
    
    
    $
    10,652
    
    
    $
    27,330Mortgage-backed securities
    
    
    39,600
    
    
    
    23,904
    
    
    
    20,190Obligations of States and political subdivisions
    
    
    9,075
    
    
    
    9,783
    
    
    
    9,924Corporate obligations
    
    
    
    
    
    
    122
    
    
    
    150Total investment securities
    
    $
    76,904
    
    
    $
    44,461
    
    
    $
    57,594Federal Home Loan Bank stock
    
    
    2,527
    
    
    
    2,828
    
    
    
    2,201Total investment securities and FHLB stock
    
    $
    79,431
    
    
    $
    47,289
    
    
    $
    59,795
  40




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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
    
    $
    
    
    
    $
    1,987
    
    
    $
    10,441
    
    
    $
    15,801Mortgage-backed securities
    
    
    419
    
    
    
    
    
    
    
    1,774
    
    
    
    37,408Obligations of States and political subdivisions
    
    
    
    
    
    
    1,495
    
    
    
    4,325
    
    
    
    3,255Federal Home Loan Bank stock
    
    
    2,527
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    2,946
    
    
    $
    3,482
    
    
    $
    16,540
    
    
    $
    56,464
 Weighted Average YieldsLess Than
    
    
    One To
    
    
    Five To
    
    
    OverOne Year
    
    
    Five Years
    
    
    Ten Years
    
    
    Ten YearsObligations of the U.S. Treasury and other U.S.
government agencies
    
    
    
    
    
    
    1.00
    %
    
    
    2.69
    %
    
    
    6.00
    %Mortgage-backed securities
    
    
    2.52
    %
    
    
    
    
    
    
    4.01
    %
    
    
    3.13
    %Obligations of States and political subdivisions
    
    
    
    
    
    
    4.01
    %
    
    
    3.92
    %
    
    
    4.06
    %Federal Home Loan Bank stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total weighted average yield
    
    
    2.52
    %
    
    
    2.29
    %
    
    
    3.15
    %
    
    
    3.31
    %
   Book Value
    
    
    Market Value(in thousands)Freddie MacU.S. agency securities
    
    $
    9,500
    
    
    $
    9,441Mortgage-backed securities
    
    
    7,542
    
    
    
    7,733Ginnie MaeMortgage-backed securities
    
    
    11,442
    
    
    
    11,566Fannie MaeMortgage-backed securities
    
    
    15,718
    
    
    
    15,782Small Business AssociationU.S. agency securities
    
    
    14,265
    
    
    
    14,261Total
    
    $
    58,467
    
    
    $
    58,783
 Investments in Insurance Contracts,
  41




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##### Table of Contents



Deposits
   December 31,2010
    
    
    2009
    
    
    2008Average
    
    
    
    
    
    Average
    
    
    
    
    
    AverageAverage
    
    
    Rate
    
    
    Average
    
    
    Rate
    
    
    Average
    
    
    RateDeposit Category
    
    Amount
    
    
    Paid
    
    
    Amount
    
    
    Paid
    
    
    Amount
    
    
    Paid(in thousands)Non-interest
bearing demand
deposits
    
    $
    42,066
    
    
    
    
    
    
    $
    36,439
    
    
    
    
    
    
    $
    33,501
    
    
    
    NOW and money
market deposits
    
    
    63,299
    
    
    
    0.85
    %
    
    
    47,245
    
    
    
    0.74
    %
    
    
    40,447
    
    
    
    1.34
    %Savings deposits
    
    
    52,102
    
    
    
    1.09
    %
    
    
    52,515
    
    
    
    1.12
    %
    
    
    67,259
    
    
    
    2.09
    %Time deposits
    
    
    246,359
    
    
    
    2.12
    %
    
    
    256,146
    
    
    
    3.05
    %
    
    
    231,736
    
    
    
    4.31
    %
  2010(in thousands)Three months or less
    
    $
    23,973Over three months through six months
    
    
    30,996Over six months through twelve months
    
    
    43,211Over twelve months
    
    
    73,663Total
    
    $
    171,843
 Borrowed Funds
    42




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##### Table of Contents



Return on Equity and Assets
  December 31,2010
    
    
    2009
    
    
    2008Return on Average Assets
    
    
    0.32
    %
    
    
    0.79
    %
    
    
    0.62
    %Return on Average Equity
    
    
    3.41
    %
    
    
    8.93
    %
    
    
    7.36
    %Dividend Payout Ratio
    
    
    
    
    
    
    
    
    
    
    Equity to Assets Ratio
    
    
    9.08
    %
    
    
    8.94
    %
    
    
    8.48
    %
 Liquidity and Interest Rate Sensitivity
    43




---



##### Table of Contents



5 years0 - 3 mos.
    
    
    3 - 12 mos.
    
    
    1 - 5 years
    
    
    or more
    
    
    TotalTaxable securities
    
    $
    158
    
    
    $
    261
    
    
    $
    1,987
    
    
    $
    65,423
    
    
    $
    67,829Tax-exempt securities
    
    
    
    
    
    
    
    
    
    
    1,495
    
    
    
    7,580
    
    
    
    9,075Federal funds sold and cash in banks
    
    
    25,526
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,526Loans
    
    
    150,913
    
    
    
    74,914
    
    
    
    77,407
    
    
    
    60,145
    
    
    
    363,379Total rate sensitive assets
    
    
    176,597
    
    
    
    75,175
    
    
    
    80,889
    
    
    
    133,148
    
    
    
    465,809NOW and money market deposits
    
    
    74,681
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    74,681Savings deposits
    
    
    53,880
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    53,880Time deposits
    
    
    36,520
    
    
    
    113,196
    
    
    
    94,772
    
    
    
    98
    
    
    
    244,586Total rate sensitive deposits
    
    
    165,081
    
    
    
    113,196
    
    
    
    94,772
    
    
    
    98
    
    
    
    373,147Borrowed funds
    
    
    3,467
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,467Total rate sensitive liabilities
    
    
    168,548
    
    
    
    113,196
    
    
    
    94,772
    
    
    
    98
    
    
    
    376,614Excess of rate sensitive assets less rate
sensitive liabilities
    
    $
    8,049
    
    
    $
    (38,021
    )
    
    $
    (13,883
    )
    
    $
    133,050
    
    
    $
    89,195Cumulative ratio of rate sensitive assets
to liabilities
    
    
    105
    %
    
    
    89
    %
    
    
    88
    %
    
    
    124
    %Cumulative gap
    
    $
    8,049
    
    
    $
    (29,972
    )
    
    $
    (43,855
    )
    
    $
    89,195
 Capital Resources
 Investments-Debt and Equity Securities,
   44




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##### Table of Contents



MinimumDecember 31, 2010
    
    
    Regulatory RequirementBankTotal risk-based capital ratio
    
    
    12.91
    %
    
    
    8.0
    %Tier 1 Capital ratio
    
    
    11.65
    %
    
    
    4.0
    %Leverage ratio
    
    
    9.17
    %
    
    
    4.0
    %Company  ConsolidatedTotal risk-based capital ratio
    
    
    13.01
    %
    
    
    8.0
    %Tier 1 Capital ratio
    
    
    11.75
    %
    
    
    4.0
    %Leverage ratio
    
    
    9.24
    %
    
    
    4.0
    %
   Fair Value Measurement
    Market Risk
   45




---



##### Table of Contents



Off-Balance Sheet Arrangements
   December 31, 2010
    
    
    December 31, 2009(In thousands)Commitments to extend credit
    
    $
    49,477
    
    
    $
    59,082Standby letters of credit
    
    
    5,154
    
    
    
    5,712Total
    
    $
    54,631
    
    
    $
    64,794
 Contractual Obligations
  Payments Due by Period (in thousands)
 Less than
    
    
    
    
    
    
    
    
    
    
    More thanTotal
    
    
    1 year
    
    
    1-3 years
    
    
    3-5 years
    
    
    5 yearsTime Deposits
    
    $
    244,586
    
    
    $
    149,716
    
    
    $
    82,629
    
    
    $
    12,144
    
    
    $
    97Long-Term Debt
    
    
    27,154
    
    
    
    957
    
    
    
    26,197
    
    
    
    
    
    
    
    Data Processing Obligations
    
    
    3,261
    
    
    
    712
    
    
    
    1,423
    
    
    
    1,126
    
    
    
    Operating Lease Obligations
    
    
    703
    
    
    
    297
    
    
    
    378
    
    
    
    14
    
    
    
    14Service Contract Obligations
    
    
    400
    
    
    
    287
    
    
    
    113
    
    
    
    
    
    
    
    Total
    
    $
    276,104
    
    
    $
    151,969
    
    
    $
    110,740
    
    
    $
    13,284
    
    
    $
    111
  46




---



##### 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, 2010 and 2009Consolidated Statements of Income
for the years ended December 31, 2010 and 2009Consolidated Statements of Comprehensive Income
for the years ended December 31, 2010 and 2009Consolidated Statements of Shareholders Equity
for the years ended December 31, 2010 and 2009Consolidated Statements of Cash Flows
for the years ended December 31, 2010 and 2009Notes to Consolidated Financial Statements
 
 Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure.
  
 Item 9A.
    
    Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures
   47




---



##### Table of Contents



Managements Annual Report on Internal Control over Financial Reporting
   Changes in Internal Control over Financial Reporting
  
 Item 9B.
    
    Other Information.
   48




---



##### 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




---



##### 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, 2010 and 2009Consolidated Statements of Income
for the years ended December 31, 2010 and 2009Consolidated Statements of Comprehensive Income
for the years ended December 31, 2010 and 2009Consolidated Statements of Shareholders Equity
for the years ended December 31, 2010 and 2009Consolidated Statements of Cash Flows
for the years ended December 31, 2010 and 2009Notes 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




---



##### 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).*10.1.1
    
    
    
    
    
    
    Amendment to 1997 Stock Option Plan effective July 28, 2008 (filed herewith).*10.1.2
    
    
    
    
    
    
    Amendment to 1997 Stock Option Plan effective July 26, 2010 (incorporated
herein by reference to the exhibit 10.2 contained in the Companys Quarterly
Report on Form 10-Q for the quarter ended June 30, 2010, previously filed
with the Commission).* 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 as amended (incorporated herein by reference to the
Exhibit 10.1 contained in the Companys Quarterly Report on Form 10-Q for
the quarter ended June 30, 2010, previously filed with the Commission).* 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 (filed herewith).* 10.7
    
    
    
    
    
    
    Compensation Arrangement with Thomas J. Flournoy (filed herewith).* 10.8
    
    
    
    
    
    
    First Bank of Georgia Annual Incentive Plan for Remer Y. Brinson, III (filed
herewith).
  51




---



##### Table of Contents



ExhibitNumber
    
    
    
    
    Description of Exhibit* 10.9
    
    
    
    
    
    
    Directors Equity Incentive Plan effective October 26, 2009 (incorporated
herein by reference to the exhibit contained in the Companys Annual Report
on Form 10-K for the year ended December 31, 2009, 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.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 29, 2011
    By:
    /s/ Remer Y. Brinson, IIIRemer Y. Brinson, IIIPresident and Chief Executive Officer
(principal executive officer)Date: March 29, 2011
    By:
    /s/ Thomas J. FlournoyThomas J. FlournoySenior Vice President and Chief Financial Officer
(principal financial and accounting officer)  53




---



##### Table of Contents



DIRECTORS
    
    DATE
    
    DIRECTORS
    
    DATE/s/ Patrick G. Blanchard

Patrick G. Blanchard
    
    March 29, 2011
    
    /s/ Robert N. Wilson, Jr.

Robert N. Wilson, Jr.
    
    March 29, 2011/s/ Remer Y. Brinson, III

Remer Y. Brinson, III
    
    March 29,
2011
    
    /s/ A. Montague Miller

A. Montague Miller
    
    March 29, 2011/s/ Mac A. Bowman

Mac A. Bowman
    
    March 29, 2011
    
    /s/ George H. Inman

George H. Inman
    
    March 29, 2011/s/ Philip G. Farr

Philip G. Farr
    
    March 29, 2011
    
    /s/ David W. Joesbury, Sr.

David W. Joesbury, Sr.
    
    March 29, 2011/s/ Samuel A. Fowler, Jr.

Samuel A. Fowler, Jr.
    
    March 29, 2011
    
    /s/ James L. Lemley, M.D.

James L. Lemley, M.D.
    
    March 29, 2011/s/ Arthur J. Gay, Jr.

Arthur J. Gay, Jr.
    
    March 29, 2011
    
    /s/ Julian W. Osbon

Julian W. Osbon
    
    March 29, 2011/s/ John W. Lee

John W. Lee
    
    March 29, 2011
    
    /s/ Bennye M. Young

Bennye M. Young
    
    March 29, 2011/s/ William D. McKnight

William D. McKnight
    
    March 29, 2011
  54