EXHIBIT 99.1
     GEORGIA-CAROLINA BANCSHARES, INC.
 Financial Statements
 For the Years Ended December 31, 2008 and 2007




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GEORGIA-CAROLINA BANCSHARES, INC.
 Table of Contents
 December 31, 2008 and 2007
 PageReport of Independent Registered Public Accounting Firm
    
    
    1Consolidated Statements of Financial Condition
    
    
    2Consolidated Statements of Income
    
    
    3Consolidated Statements of Comprehensive Income
    
    
    4Consolidated Statements of Shareholders Equity
    
    
    5Consolidated Statements of Cash Flows
    
    
    6Notes to Consolidated Financial Statements
    
    
    7-40




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Report of Independent Registered Public Accounting Firm




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GEORGIA-CAROLINA BANCSHARES, INC.
 Consolidated Statements of Financial Condition
December 31, 2008 and 2007  (dollars in thousands, except per share amounts)
 2008
    
    
    2007AssetsCash and due from banks
    
    $
    9,954
    
    
    $
    6,744Federal funds sold
    
    
    
    
    
    
    Securities available-for-sale
    
    
    57,594
    
    
    
    58,906Loans, net of allowance for loan losses of $4,284 and $5,059, respectively
    
    
    332,009
    
    
    
    317,142Loans held for sale
    
    
    28,402
    
    
    
    39,547Bank premises and fixed assets
    
    
    10,081
    
    
    
    10,432Accrued interest receivable
    
    
    1,934
    
    
    
    2,115Foreclosed real estate, net of allowance
    
    
    7,217
    
    
    
    483Deferred tax asset, net
    
    
    996
    
    
    
    1,315Federal Home Loan Bank stock
    
    
    2,201
    
    
    
    1,487Bank-owned life insurance
    
    
    8,402
    
    
    
    8,086Other assets
    
    
    2,038
    
    
    
    1,612Total assets
    
    $
    460,828
    
    
    $
    447,869Liabilities and Shareholders EquityLiabilitiesDepositsNon-interest bearing
    
    $
    34,121
    
    
    $
    30,292Interest-bearing:NOW accounts
    
    
    37,373
    
    
    
    27,706Savings
    
    
    55,426
    
    
    
    73,184Money market accounts
    
    
    9,772
    
    
    
    9,449Time deposits of $100,000 or more
    
    
    170,878
    
    
    
    145,295Other time deposits
    
    
    69,439
    
    
    
    94,040Total deposits
    
    
    377,009
    
    
    
    379,966Federal funds purchased
    
    
    1,148
    
    
    
    5,037Federal Home Loan Bank borrowings
    
    
    6,000
    
    
    
    6,343Deposit agreements
    
    
    8,611
    
    
    
    5,993Current portion of long-term debt
    
    
    100
    
    
    
    100Long-term debt
    
    
    25,400
    
    
    
    10,500Other liabilities
    
    
    3,476
    
    
    
    3,959Total liabilities
    
    
    421,744
    
    
    
    411,898Shareholders equityPreferred stock, par value $.001; 1,000,000 shares authorized; none issued
    
    
    
    
    
    
    Common stock, par value $.001; 9,000,000 shares authorized; 3,456,816 and 3,398,723 shares issued and
outstanding, respectively
    
    
    4
    
    
    
    4Additional paid-in capital
    
    
    15,268
    
    
    
    14,948Retained earnings
    
    
    23,604
    
    
    
    20,804Accumulated other comprehensive income
    
    
    208
    
    
    
    215Total shareholders equity
    
    
    39,084
    
    
    
    35,971Total liabilities and shareholders equity
    
    $
    460,828
    
    
    $
    447,869
  2




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GEORGIA-CAROLINA BANCSHARES, INC.
 Consolidated Statements of Income
 For the Years Ended December 31, 2008, 2007 and 2006  (dollars in thousands, except per share amounts)
 2008
    
    
    2007
    
    
    2006Interest incomeInterest and fees on loans
    
    $
    23,186
    
    
    $
    25,998
    
    
    $
    23,144Interest on taxable securities
    
    
    2,763
    
    
    
    2,490
    
    
    
    1,541Interest on nontaxable securities
    
    
    337
    
    
    
    270
    
    
    
    512Interest on Federal funds sold and cash in banks
    
    
    85
    
    
    
    261
    
    
    
    138Total interest income
    
    
    26,371
    
    
    
    29,019
    
    
    
    25,335Interest expenseInterest on time deposits of $100,000 or more
    
    
    6,414
    
    
    
    6,687
    
    
    
    4,976Interest on other deposits
    
    
    5,536
    
    
    
    8,227
    
    
    
    5,830Interest on funds purchased and other borrowings
    
    
    1,088
    
    
    
    792
    
    
    
    1,163Total interest expense
    
    
    13,038
    
    
    
    15,706
    
    
    
    11,969Net interest income
    
    
    13,333
    
    
    
    13,313
    
    
    
    13,366Provision for loan losses
    
    
    1,456
    
    
    
    909
    
    
    
    898Net interest income after
provision for loan losses
    
    
    11,877
    
    
    
    12,404
    
    
    
    12,468Non-interest incomeService charges on deposits
    
    
    1,338
    
    
    
    1,273
    
    
    
    928Other income
    
    
    1,430
    
    
    
    897
    
    
    
    560Gain on sale of mortgage loans
    
    
    7,152
    
    
    
    7,762
    
    
    
    8,312Total non-interest income
    
    
    9,920
    
    
    
    9,932
    
    
    
    9,800Non-interest expenseSalaries and employee benefits
    
    
    10,958
    
    
    
    11,131
    
    
    
    11,801Occupancy expenses
    
    
    1,546
    
    
    
    1,523
    
    
    
    1,467Other expenses
    
    
    5,241
    
    
    
    5,162
    
    
    
    4,643Total non-interest expense
    
    
    17,745
    
    
    
    17,816
    
    
    
    17,911Income before income taxes
    
    
    4,052
    
    
    
    4,520
    
    
    
    4,357Income tax expense
    
    
    1,252
    
    
    
    1,619
    
    
    
    1,460Net income
    
    $
    2,800
    
    
    $
    2,901
    
    
    $
    2,897Earnings per shareBasic
    
    $
    .82
    
    
    $
    .85
    
    
    $
    .86Diluted
    
    $
    .80
    
    
    $
    .83
    
    
    $
    .83
  3




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GEORGIA-CAROLINA BANCSHARES, INC.
 Consolidated Statements of Comprehensive Income
 For the Years Ended December 31, 2008, 2007 and 2006  (dollars in thousands)
 2008
    
    
    2007
    
    
    2006Net income
    
    $
    2,800
    
    
    $
    2,901
    
    
    $
    2,897Unrealized holding gain (loss) arising during the
period, net of tax
    
    
    (7
    )
    
    
    496
    
    
    
    271Comprehensive income
    
    $
    2,793
    
    
    $
    3,397
    
    
    $
    3,168
  4




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GEORGIA-CAROLINA BANCSHARES, INC.
 Consolidated Statements of Shareholders Equity
 For the Years Ended December 31, 2008, 2007 and 2006  (dollars in thousands)
 AccumulatedCommon
    
    
    Common
    
    
    Additional
    
    
    
    
    
    
    Other
    
    
    TotalStock
    
    
    Stock
    
    
    Paid-in
    
    
    Retained
    
    
    Comprehensive
    
    
    ShareholdersShares
    
    
    Par Value
    
    
    Capital
    
    
    Earnings
    
    
    Income (Loss)
    
    
    EquityBalance at January 1, 2006(1)
    
    
    3,354,090
    
    
    $
    4
    
    
    $
    13,974
    
    
    $
    15,006
    
    
    $
    (552
    )
    
    $
    28,432Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,897
    
    
    
    
    
    
    
    2,897Change in unrealized gain (loss) on securities
available-for-sale, net of deferred taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    271
    
    
    
    271Proceeds from exercise of stock options
    
    
    10,400
    
    
    
    
    
    
    
    59
    
    
    
    
    
    
    
    
    
    
    
    59Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    295
    
    
    
    
    
    
    
    
    
    
    
    295Issuance of stock for compensation
    
    
    12,032
    
    
    
    
    
    
    
    172
    
    
    
    
    
    
    
    
    
    
    
    172Balance at December 31, 2006
    
    
    3,376,522
    
    
    
    4
    
    
    
    14,500
    
    
    
    17,903
    
    
    
    (281
    )
    
    
    32,126Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,901
    
    
    
    
    
    
    
    2,901Change in unrealized gain (loss) on securities
available-for-sale, net of deferred taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    496
    
    
    
    496Proceeds from exercise of stock options
    
    
    8,500
    
    
    
    
    
    
    
    33
    
    
    
    
    
    
    
    
    
    
    
    33Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    226
    
    
    
    
    
    
    
    
    
    
    
    226Issuance of stock for compensation
    
    
    13,701
    
    
    
    
    
    
    
    189
    
    
    
    
    
    
    
    
    
    
    
    189Balance at December 31, 2007
    
    
    3,398,723
    
    
    
    4
    
    
    
    14,948
    
    
    
    20,804
    
    
    
    215
    
    
    
    35,971Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,800
    
    
    
    
    
    
    
    2,800Change in unrealized gain (loss) on securities
available-for-sale, net of deferred taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7
    )
    
    
    (7
    )Proceeds from exercise of stock options
    
    
    43,133
    
    
    
    
    
    
    
    21
    
    
    
    
    
    
    
    
    
    
    
    21Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    134
    
    
    
    
    
    
    
    
    
    
    
    134Issuance of stock for compensation
    
    
    14,960
    
    
    
    
    
    
    
    165
    
    
    
    
    
    
    
    
    
    
    
    165Balance at December 31, 2008
    
    
    3,456,816
    
    
    $
    4
    
    
    $
    15,268
    
    
    $
    23,604
    
    
    $
    208
    
    
    $
    39,084
 
 (1)
    
    See Note 1  Recent accounting standards  5




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GEORGIA-CAROLINA BANCSHARES, INC.
 Consolidated Statements of Cash Flows
 For the Years Ended December 31, 2008, 2007 and 2006  (dollars in thousands)
 2008
    
    
    2007
    
    
    2006Cash flows from operating activitiesNet income
    
    $
    2,800
    
    
    $
    2,901
    
    
    $
    2,897Adjustments to reconcile net income to net
cash provided by (used in) operating activities:Depreciation and amortization
    
    
    723
    
    
    
    752
    
    
    
    764Provision for loan losses
    
    
    1,456
    
    
    
    909
    
    
    
    898Gains on sales of foreclosed real estate
    
    
    (13
    )
    
    
    (33
    )
    
    
    (21
    )(Gains) losses on sales of premises and equipment
    
    
    (1
    )
    
    
    32
    
    
    
    Increase in cash value of bank-owned life insurance
    
    
    (316
    )
    
    
    (86
    )
    
    
    Stock-based compensation expense
    
    
    134
    
    
    
    226
    
    
    
    295Stock compensation
    
    
    165
    
    
    
    189
    
    
    
    172Deferred income tax
    
    
    323
    
    
    
    (234
    )
    
    
    (172
    )Net originations, proceeds and gain
on loans held for sale
    
    
    11,145
    
    
    
    17,211
    
    
    
    (16,694
    )(Increase) decrease in accrued interest receivable
    
    
    181
    
    
    
    (377
    )
    
    
    18Increase (decrease) in accrued interest payable
    
    
    (1,110
    )
    
    
    54
    
    
    
    1,674Net change in other assets and liabilities
    
    
    226
    
    
    
    (8,384
    )
    
    
    241Net cash provided by (used in)
operating activities
    
    
    15,713
    
    
    
    13,160
    
    
    
    (9,928
    )Cash flows from investing activities(Increase) decrease in Federal funds sold
    
    
    
    
    
    
    1,182
    
    
    
    (1,182
    )Loan originations and collections, net
    
    
    (24,983
    )
    
    
    (42,690
    )
    
    
    (33,619
    )Purchases of available-for-sale securities
    
    
    (27,262
    )
    
    
    (18,876
    )
    
    
    (21,003
    )Proceeds from maturities and calls of
available-for-sale securities
    
    
    28,564
    
    
    
    14,017
    
    
    
    6,492Purchases of restricted securities
    
    
    (4,816
    )
    
    
    (4,248
    )
    
    
    (6,946
    )Proceeds from sales of restricted securities
    
    
    4,102
    
    
    
    4,892
    
    
    
    5,840Proceeds from sale of foreclosed real estate
    
    
    1,939
    
    
    
    1,285
    
    
    
    628Net additions to premises and equipment
    
    
    (266
    )
    
    
    (456
    )
    
    
    (751
    )Net cash used in investing activities
    
    
    (22,722
    )
    
    
    (44,894
    )
    
    
    (50,541
    )Cash flows from financing activitiesNet increase (decrease) in deposits, funds
purchased, and other borrowings
    
    
    (7,077
    )
    
    
    43,561
    
    
    
    33,346Increase (decrease) in FHLB borrowings
    
    
    14,657
    
    
    
    (15,485
    )
    
    
    23,828Increase (decrease) in repurchase agreements
    
    
    2,618
    
    
    
    (740
    )
    
    
    4,847Proceeds from stock options exercised
    
    
    21
    
    
    
    33
    
    
    
    59Net cash provided by financing activities
    
    
    10,219
    
    
    
    27,369
    
    
    
    62,080Net increase (decrease) in cash and due from banks
    
    
    3,210
    
    
    
    (4,365
    )
    
    
    1,611Cash and due from banks at beginning of the year
    
    
    6,744
    
    
    
    11,109
    
    
    
    9,498Cash and due from banks at end of the year
    
    $
    9,954
    
    
    $
    6,744
    
    
    $
    11,109
  6




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GEORGIA-CAROLINA BANCSHARES, INC.
 Notes to Consolidated Financial Statements
 December 31, 2008 and 2007
 Note 1Summary of significant accounting policies
 Nature of business
   Summary of significant accounting policies
 Basis of presentation
 Estimates
 Significant concentrations of credit risk
 Significant concentrations of deposit risk
 7




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GEORGIA-CAROLINA BANCSHARES, INC.
 Notes to Consolidated Financial Statements
 December 31, 2008 and 2007
 Note 1Summary of significant accounting policies
  Cash and due from banks
 Investment securities
 Securities available-for-sale
      Loans and interest income
 8




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GEORGIA-CAROLINA BANCSHARES, INC.
 Notes to Consolidated Financial Statements
 December 31, 2008 and 2007
 Note 1Summary of significant accounting policies
       9




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GEORGIA-CAROLINA BANCSHARES, INC.
 Notes to Consolidated Financial Statements
 December 31, 2008 and 2007
 Note 1Summary of significant accounting policies
 Allowance for loan losses
 Foreclosed real estate
 Bank premises and equipment
 Financial instruments
 Bank-owned life insurance (BOLI)
 Income taxes
 10




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GEORGIA-CAROLINA BANCSHARES, INC.
 Notes to Consolidated Financial Statements
 December 31, 2008 and 2007
 Note 1Summary of significant accounting policies
 Earnings per share Earnings per Share
 Fair value of financial instruments
  Cash and due from banks, Federal funds sold, and interest-bearing deposits in banks
 Available-for-sale securities
 Loans
 Deposit liabilities, other borrowings, and retail agreements
  11




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GEORGIA-CAROLINA BANCSHARES, INC.
 Notes to Consolidated Financial Statements
 December 31, 2008 and 2007
 Note 1Summary of significant accounting policies
 Comprehensive income
 Stock-based compensation Share-Based Payment
 Recently issued accounting standards
 Accounting for Certain Hybrid Financial Instruments Accounting for Derivative Instruments and Hedging Activities, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities
 Accounting for Uncertainty in Income Taxes
 an interpretation of FASB Statement 109, Accounting for Income Taxes.
 12




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GEORGIA-CAROLINA BANCSHARES, INC.
 Notes to Consolidated Financial Statements
 December 31, 2008 and 2007
 Note 1Recently issued accounting standards
 Fair Value Measurements.
 The Fair Value Option for Financial Assets and
Financial Liabilities
 Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement
Split-Dollar Life Insurance Arrangements.
 Accounting for Purchases of Life Insurance  Determining the Amount That Could Be
Realized in Accordance with FASB Technical Bulletin No. 85-4.
 13




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GEORGIA-CAROLINA BANCSHARES, INC.
 Notes to Consolidated Financial Statements
 December 31, 2008 and 2007
 Note 1Recently issued accounting standards
  Accounting for Servicing of
Financial Assets The Fair Value Option for Financial Assets and Financial
Liabilities
 Accounting for Transfers of Financial Assets and
Repurchase Financing Transactions
 Disclosures about Derivative Instruments and Hedging
Activitiesan amendment of FASB Statement No. 133
 14




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GEORGIA-CAROLINA BANCSHARES, INC.
 Notes to Consolidated Financial Statements
 December 31, 2008 and 2007
 Note 1Recently issued accounting standards
  The Hierarchy of Generally Accepted Accounting Principles The Meaning of Present Fairly in Conformity with
Generally Accepted Accounting Principles
 Disclosures about Credit Derivatives
and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and
Clarification of the Effective Date of FASB Statement No. 161
 Determining the Fair Value of a Financial
Asset When The Market for That Asset Is Not Active Accounting Changes and Error Corrections
 15




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GEORGIA-CAROLINA BANCSHARES, INC.
 Notes to Consolidated Financial Statements
 December 31, 2008 and 2007
 Note 2Cash and due from banks
  Note 3Investment securities
  2008Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    Value(in thousands)Available-for-sale securities:U.S. Government and agency
    
    $
    26,690
    
    
    $
    640
    
    
    $
    
    
    
    $
    27,330Mortgage-backed
    
    
    19,899
    
    
    
    423
    
    
    
    (132
    )
    
    
    20,190Corporate obligations
    
    
    194
    
    
    
    
    
    
    
    (44
    )
    
    
    150State and municipal
    
    
    10,482
    
    
    
    30
    
    
    
    (588
    )
    
    
    9,924Total
    
    $
    57,265
    
    
    $
    1,093
    
    
    $
    (764
    )
    
    $
    57,594
 2007Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    Value(in thousands)Available-for-sale securities:U.S. Government and agency
    
    $
    31,671
    
    
    $
    485
    
    
    $
    (8
    )
    
    $
    32,148Mortgage-backed
    
    
    19,431
    
    
    
    48
    
    
    
    (147
    )
    
    
    19,332Corporate obligations
    
    
    194
    
    
    
    
    
    
    
    (11
    )
    
    
    183State and municipal
    
    
    7,271
    
    
    
    41
    
    
    
    (69
    )
    
    
    7,243Total
    
    $
    58,567
    
    
    $
    574
    
    
    $
    (235
    )
    
    $
    58,906
 16




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##### 



GEORGIA-CAROLINA BANCSHARES, INC.
 Notes to Consolidated Financial Statements
 December 31, 2008 and 2007
 Note 3Investment securities
  SecuritiesAvailable-for-SaleAmortized
    
    
    FairCost
    
    
    Value(in thousands)Less than one year
    
    $
    225
    
    
    $
    226One to five years
    
    
    835
    
    
    
    833Five to ten years
    
    
    15,430
    
    
    
    15,574Over ten years
    
    
    20,876
    
    
    
    20,771Mortgage-backed securities
    
    
    19,899
    
    
    
    20,190Total
    
    $
    57,265
    
    
    $
    57,594
   17




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##### 



GEORGIA-CAROLINA BANCSHARES, INC.
 Notes to Consolidated Financial Statements
 December 31, 2008 and 2007
 Note 3Investment securities
  2008Less than
    
    
    OverTwelve Months
    
    
    Twelve MonthsGross
    
    
    
    
    
    
    GrossUnrealized
    
    
    Fair
    
    
    Unrealized
    
    
    FairLosses
    
    
    Value
    
    
    Losses
    
    
    Value(In thousands)Securities available-for-sale:U. S. agency
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    State and municipal
    
    
    (400
    )
    
    
    6,440
    
    
    
    (188
    )
    
    
    742Corporate obligations
    
    
    
    
    
    
    
    
    
    
    (44
    )
    
    
    150Mortgage-backed
    
    
    (131
    )
    
    
    4,224
    
    
    
    (1
    )
    
    
    728Total
    
    $
    (531
    )
    
    $
    10,664
    
    
    $
    (233
    )
    
    $
    1,620
 2007Less than
    
    
    OverTwelve Months
    
    
    Twelve MonthsGross
    
    
    
    
    
    
    GrossUnrealized
    
    
    Fair
    
    
    Unrealized
    
    
    FairLosses
    
    
    Value
    
    
    Losses
    
    
    Value(In thousands)Securities available-for-sale:U. S. agency
    
    $
    
    
    
    $
    1,245
    
    
    $
    (8
    )
    
    $
    4,867State and municipal
    
    
    (21
    )
    
    
    1,546
    
    
    
    (48
    )
    
    
    1,406Corporate obligations
    
    
    (11
    )
    
    
    183
    
    
    
    
    
    
    
    Mortgage-backed
    
    
    (4
    )
    
    
    2,254
    
    
    
    (143
    )
    
    
    12,081Total
    
    $
    (36
    )
    
    $
    5,228
    
    
    $
    (199
    )
    
    $
    18,354
 18




---



##### 



GEORGIA-CAROLINA BANCSHARES, INC.
 Notes to Consolidated Financial Statements
 December 31, 2008 and 2007
 Note 3Investment securities
    Note 4Loans
  2008
    
    
    2007(in thousands)Commercial and industrial
    
    $
    31,173
    
    
    $
    29,582Real estate  construction
    
    
    105,032
    
    
    
    89,580Real estate  residential
    
    
    65,958
    
    
    
    53,557Real estate  commercial
    
    
    125,194
    
    
    
    139,111Consumer
    
    
    9,092
    
    
    
    10,487336,449
    
    
    
    322,317Deferred loan fees
    
    
    (156
    )
    
    
    (116
    )336,293
    
    
    
    322,201Allowance for loan losses
    
    
    (4,284
    )
    
    
    (5,059
    )Loans, net
    
    $
    332,009
    
    
    $
    317,142
 19




---



##### 



GEORGIA-CAROLINA BANCSHARES, INC.
 Notes to Consolidated Financial Statements
 December 31, 2008 and 2007
 Note 4Loans
  2008
    
    
    2007
    
    
    2006Balance at beginning of the year
    
    $
    5,059
    
    
    $
    4,386
    
    
    $
    3,756Provision charged to operations
    
    
    1,456
    
    
    
    909
    
    
    
    898Recoveries
    
    
    33
    
    
    
    52
    
    
    
    31Loans charged off
    
    
    (2,264
    )
    
    
    (288
    )
    
    
    (299
    )Balance at end of the year
    
    $
    4,284
    
    
    $
    5,059
    
    
    $
    4,386
    20




---



##### 



GEORGIA-CAROLINA BANCSHARES, INC.
 Notes to Consolidated Financial Statements
 December 31, 2008 and 2007
 Note 4Loans
 2008
    
    
    2007(in thousands)Balance at beginning of the year
    
    $
    4,061
    
    
    $
    4,508Advances
    
    
    10,921
    
    
    
    1,690Repayments
    
    
    (896
    )
    
    
    (2,137
    )Balance at end of the year
    
    $
    14,086
    
    
    $
    4,061
 Note 5Foreclosed real estate
  2008
    
    
    2007(in thousands)Carrying amount of property
    
    $
    7,217
    
    
    $
    483Less: valuation allowance
    
    
    
    
    
    
    Balance at
end of the year
    
    $
    7,217
    
    
    $
    483
  Note 6Bank premises and equipment
  2008
    
    
    2007(in thousands)Land and improvements
    
    $
    3,844
    
    
    $
    3,836Building and improvements
    
    
    6,321
    
    
    
    6,245Equipment, furniture and fixtures
    
    
    4,583
    
    
    
    4,43114,748
    
    
    
    14,512Less: accumulated depreciation
    
    
    (4,667
    )
    
    
    (4,080
    )Premises and equipment, net
    
    $
    10,081
    
    
    $
    10,432
  21




---



##### 



GEORGIA-CAROLINA BANCSHARES, INC.
 Notes to Consolidated Financial Statements
 December 31, 2008 and 2007
 Note 7Deposits
  (in thousands)One year or less
    
    $
    215,172Over one year through three years
    
    
    24,245Over three years
    
    
    900Balance at
end of the year
    
    $
    240,317
  Note 8Federal home loan bank advances
  22




---



##### 



GEORGIA-CAROLINA BANCSHARES, INC.
 Notes to Consolidated Financial Statements
 December 31, 2008 and 2007
 Note 9Line of credit
  Note 10Employee benefit plan
  Note 11Shareholders equity and regulatory requirements
   23




---



##### 



GEORGIA-CAROLINA BANCSHARES, INC.
 Notes to Consolidated Financial Statements
 December 31, 2008 and 2007
 Note 11Shareholders equity and regulatory requirements
     Required to BeWell-CapitalizedRequired for
    
    Under PromptCapital Adequacy
    
    Corrective ActionActual
    
    Purposes
    
    ProvisionsAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    RatioAs of December 31, 2008:Total capital (to risk weighted assets)Bank
    
    $
    43,075
    
    
    
    10.89
    %
    
    $
    31,657
    
    
    
    8.0
    %
    
    $
    39,571
    
    
    
    10.0
    %Consolidated
    
    $
    43,158
    
    
    
    10.91
    %
    
    $
    31,657
    
    
    
    8.0
    %
    
    $
    39,571
    
    
    
    10.0
    %Tier 1 capital (to risk weighted assets)Bank
    
    $
    38,791
    
    
    
    9.80
    %
    
    $
    15,828
    
    
    
    4.0
    %
    
    $
    23,742
    
    
    
    6.0
    %Consolidated
    
    $
    38,875
    
    
    
    9.82
    %
    
    $
    15,828
    
    
    
    4.0
    %
    
    $
    23,742
    
    
    
    6.0
    %Tier 1 leverage (to
average assets)Bank
    
    $
    38,791
    
    
    
    8.58
    %
    
    $
    18,094
    
    
    
    4.0
    %
    
    $
    22,617
    
    
    
    5.0
    %Consolidated
    
    $
    38,875
    
    
    
    8.59
    %
    
    $
    18,094
    
    
    
    4.0
    %
    
    $
    22,618
    
    
    
    5.0
    %
 24




---



##### 



GEORGIA-CAROLINA BANCSHARES, INC.
 Notes to Consolidated Financial Statements
 December 31, 2008 and 2007
 Note 11Shareholders equity and regulatory requirements
 Required to BeWell-CapitalizedRequired for
    
    Under PromptCapital Adequacy
    
    Corrective ActionActual
    
    Purposes
    
    ProvisionsAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    RatioAs of December 31, 2007:Total capital (to risk weighted assets)Bank
    
    $
    40,867
    
    
    
    10.74
    %
    
    $
    30,454
    
    
    
    8.0
    %
    
    $
    38,067
    
    
    
    10.0
    %Consolidated
    
    $
    40,814
    
    
    
    10.72
    %
    
    $
    30,454
    
    
    
    8.0
    %
    
    $
    38,067
    
    
    
    10.0
    %Tier 1 capital (to risk
weighted assets)Bank
    
    $
    35,808
    
    
    
    9.41
    %
    
    $
    15,227
    
    
    
    4.0
    %
    
    $
    22,840
    
    
    
    6.0
    %Consolidated
    
    $
    35,755
    
    
    
    9.39
    %
    
    $
    15,227
    
    
    
    4.0
    %
    
    $
    22,840
    
    
    
    6.0
    %Tier 1 leverage (to average assets)Bank
    
    $
    35,808
    
    
    
    8.51
    %
    
    $
    16,833
    
    
    
    4.0
    %
    
    $
    21,042
    
    
    
    5.0
    %Consolidated
    
    $
    35,755
    
    
    
    8.18
    %
    
    $
    16,833
    
    
    
    4.0
    %
    
    $
    21,862
    
    
    
    5.0
    %
    Accounting for Stock-Based Compensation
 25




---



##### 



GEORGIA-CAROLINA BANCSHARES, INC.
 Notes to Consolidated Financial Statements
 December 31, 2008 and 2007
 Note 11Shareholders equity and regulatory requirements
 Accounting for Stock-Based Compensation Accounting Principles Board Opinion 25
   2008
    
    2007
    
    2006Expected volatility
    
    37.4% - 37.6%
    
    40.8% - 40.8%
    
    41.3% - 42.0%Weighted-average volatility
    

    37.53%

    

    40.75%

    

    41.69%Expected dividends
    

    0%

    

    0%

    

    0%Expected term (in years)
    
    7.0 - 7.0
    
    7.0 - 7.0
    
    6.0 - 7.0Risk-free rate
    

    3.30%

    

    4.73%

    

    4.53%
   26




---



##### 



GEORGIA-CAROLINA BANCSHARES, INC.
 Notes to Consolidated Financial Statements
 December 31, 2008 and 2007
 Note 11Shareholders equity and regulatory requirements
    Wtd. Avg.Remaining
    
    
    AggregateWtd. Avg.
    
    
    Contractual
    
    
    IntrinsicOptions
    


    
    Shares
    
    
    Exercise Price
    
    
    Term
    
    
    ValueOutstanding at January 1, 2008
    
    
    324,441
    
    
    $
    7.99Granted
    
    
    23,934
    
    
    
    10.85Exercised
    
    
    61,500
    
    
    
    3.56Forfeited or expired
    
    
    
    
    
    
    Outstanding at December 31, 2008
    
    
    286,875
    
    
    $
    9.18
    
    
    
    4.43
    
    
    $
    810,279Exercisable at December 31, 2008
    
    
    237,294
    
    
    $
    8.35
    
    
    
    3.70
    
    
    $
    810,279
   2008
    
    
    2007
    
    
    2006Weighted-average grant date fair value
    
    $
    4.86
    
    
    $
    7.30
    
    
    $
    7.13Total intrinsic value of options exercised
    
    $
    396,161
    
    
    $
    60,265
    
    
    $
    86,624
 27




---



##### 



GEORGIA-CAROLINA BANCSHARES, INC.
 Notes to Consolidated Financial Statements
 December 31, 2008 and 2007
 Note 11Shareholders equity and regulatory requirements
  Wtd. Avg.Grant-DateNonvested
Shares
    
    Shares
    
    
    Fair ValueNon-vested at January 1, 2008
    
    
    40,455
    
    
    $
    7.67Granted
    
    
    23,934
    
    
    
    4.86Vested
    
    
    (14,808
    )
    
    
    7.51Forfeited
    
    
    
    
    
    
    Nonvested at December 31, 2008
    
    
    49,581
    
    
    $
    6.36
   2008Income
    
    
    Shares
    
    
    Per(Numerator)
    
    
    (Denominator)
    
    
    Share(dollars in thousands, except per share)Basic EPSIncome available to common stockholders
    
    $
    2,800
    
    
    
    3,426,860
    
    
    $
    0.82Effect of stock options outstanding
    
    
    
    
    
    
    76,996
    
    
    
    0.02Diluted EPSIncome available to common stockholders,
    
    $
    2,800
    
    
    
    3,503,856
    
    
    $
    0.80
 28




---



##### 



GEORGIA-CAROLINA BANCSHARES, INC.
 Notes to Consolidated Financial Statements
 December 31, 2008 and 2007
 Note 11Shareholders equity and regulatory requirements
 2007Income
    
    
    Shares
    
    
    Per(Numerator)
    
    
    (Denominator)
    
    
    Share(dollars in thousands, except per share)Basic EPSIncome available to common stockholders
    
    $
    2,901
    
    
    
    3,393,224
    
    
    $
    0.85Effect of stock options outstanding
    
    
    
    
    
    
    115,382
    
    
    
    0.02Diluted EPSIncome available to common stockholders,
plus conversions
    
    $
    2,901
    
    
    
    3,508,606
    
    
    $
    0.83
 2006Income
    
    
    Shares
    
    
    Per(Numerator)
    
    
    (Denominator)
    
    
    Share(dollars in thousands, except per share)Basic EPSIncome available to common stockholders
    
    $
    2,897
    
    
    
    3,370,277
    
    
    $
    0.86Effect of stock options outstanding
    
    
    
    
    
    
    119,287
    
    
    
    0.03Diluted EPSIncome available to common stockholders,
plus conversions
    
    $
    2,897
    
    
    
    3,489,564
    
    
    $
    0.83
 Note 12Income taxes
  2008
    
    
    2007
    
    
    2006Current tax provision
    
    $
    929
    
    
    $
    1,853
    
    
    $
    1,632Deferred tax expense/(benefit)
    
    
    323
    
    
    
    (234
    )
    
    
    (172
    )Income tax
expense
    
    $
    1,252
    
    
    $
    1,619
    
    
    $
    1,460
 29




---



##### 



GEORGIA-CAROLINA BANCSHARES, INC.
 Notes to Consolidated Financial Statements
 December 31, 2008 and 2007
 Note 12Income Taxes
  2008
    
    
    2007
    
    
    2006Federal statutory rates
    
    
    34.0
    %
    
    
    34.0
    %
    
    
    34.0
    %State taxes, net of federal benefit
    
    
    2.7
    
    
    
    4.3
    
    
    
    4.0Tax-exempt income
    
    
    (2.1
    )
    
    
    (1.2
    )
    
    
    (2.0
    )Nondeductible interest
    
    
    0.4
    
    
    
    0.3
    
    
    
    0.5State tax credits
    
    
    (2.1
    )
    
    
    (3.0
    )
    
    
    (4.7
    )Bank-owned life insurance
    
    
    (2.6
    )
    
    
    (0.6
    )
    
    
    Other
    
    
    0.6
    
    
    
    2.0
    
    
    
    1.730.9
    %
    
    
    35.8
    %
    
    
    33.5
    %
  2008
    
    
    2007(in thousands)Deferred tax assetsAllowance for loan losses
    
    $
    1,236
    
    
    $
    1,641Unrealized loss on securities available-for-sale
    
    
    
    
    
    
    Amortization of GA low-income housing tax credits
    
    
    122
    
    
    
    46Executive compensation plans
    
    
    70
    
    
    
    2Valuation allowance on GA low-income housing tax credits
    
    
    (122
    )
    
    
    (84
    )Deferred income tax assets
    
    
    1,306
    
    
    
    1,605Deferred tax liabilitiesUnrealized gain on securities available-for-sale
    
    
    117
    
    
    
    121Depreciation
    
    
    193
    
    
    
    169Deferred income tax liabilities
    
    
    310
    
    
    
    290Net deferred income tax assets
    
    $
    996
    
    
    $
    1,315
  30




---



##### 



GEORGIA-CAROLINA BANCSHARES, INC.
 Notes to Consolidated Financial Statements
 December 31, 2008 and 2007
 Note 13Commitments and contingencies
    2008
    
    
    2007(in thousands)Commitments to extend credit
    
    $
    56,426
    
    
    $
    40,492Standby letters of credit
    
    
    5,102
    
    
    
    1,912Total
    
    $
    61,528
    
    
    $
    42,404
   31




---



##### 



GEORGIA-CAROLINA BANCSHARES, INC.
 Notes to Consolidated Financial Statements
 December 31, 2008 and 2007
 Note 13Commitments and contingencies
   Recovered legal fees
    
    $
    28,000Interest
    
    
    36,000Non-interest income
    
    
    366,000Total
    
    $
    430,000
  2008
    
    
    2007
    
    
    2006(dollars in thousands)Office premises rental expense
    
    $
    285
    
    
    $
    276
    
    
    $
    272Equipment rental expense
    
    $
    13
    
    
    $
    27
    
    
    $
    28
 Note 14Supplemental consolidated cash flow information
 2008
    
    
    2007
    
    
    2006(dollars in thousands)Income taxes paid
    
    $
    1,397
    
    
    $
    2,354
    
    
    $
    1,396Interest paid
    
    $
    14,147
    
    
    $
    15,598
    
    
    $
    10,295Interest received
    
    $
    26,552
    
    
    $
    28,643
    
    
    $
    25,351Real estate acquired by foreclosure (non-cash)
    
    $
    8,660
    
    
    $
    1,136
    
    
    $
    822Unrealized gain/(loss) on securities (non-cash)
    
    $
    (11
    )
    
    $
    755
    
    
    $
    424
 32




---



##### 



GEORGIA-CAROLINA BANCSHARES, INC.
 Notes to Consolidated Financial Statements
 December 31, 2008 and 2007
 Note 15Fair value of financial instruments
     2008
    
    
    2007Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairAmount
    
    
    Value
    
    
    Amount
    
    
    ValueLoans and loans held for
sale, net of allowance
    
    $
    360.4
    
    
    $
    392.3
    
    
    $
    356.7
    
    
    $
    442.5Time deposits
    
    $
    240.3
    
    
    $
    245.1
    
    
    $
    239.3
    
    
    $
    234.3
   33




---



##### 



GEORGIA-CAROLINA BANCSHARES, INC.
 Notes to Consolidated Financial Statements
 December 31, 2008 and 2007
 Note 15Fair value of financial instruments
 Level 1
 Level 2
 Level 3
  Investment Securities Available-for-Sale
 Loans Held for Sale
 Loans
 34




---



##### 



GEORGIA-CAROLINA BANCSHARES, INC.
 Notes to Consolidated Financial Statements
 December 31, 2008 and 2007
 Note 15Fair value of financial instruments
  Foreclosed Assets
  Fair Value Measurements atDecember 31, 2008, Using,Total
    
    
    
    
    
    
    QuotedCarrying
    
    
    
    
    
    
    Prices inAmount in the
    
    
    Assets/
    
    
    Active
    
    
    Significant
    
    
    SignificantConsolidated
    
    
    Liabilities
    
    
    Markets for
    
    
    Other
    
    
    OtherBalance
    
    
    Measured at
    
    
    Identical
    
    
    Observable
    
    
    UnobservableSheet
    
    
    Fair Value
    
    
    Assets
    
    
    Inputs
    
    
    InputsDescription
    
    12/31/2008
    
    
    12/31/2008
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Available-for-sale
securities,
including FHLB
stock
    
    $
    59,795
    
    
    $
    59,795
    
    
    $
    
    
    
    $
    59,795
    
    
    $
    
 35




---



##### 



GEORGIA-CAROLINA BANCSHARES, INC.
 Notes to Consolidated Financial Statements
 December 31, 2008 and 2007
 Note 16Bank-owned life insurance (BOLI)
  Note 17Other expenses
  2008
    
    
    2007
    
    
    2006(dollars in thousands)Data processing
    
    $
    904
    
    
    $
    906
    
    
    $
    759Legal and accounting
    
    
    540
    
    
    
    475
    
    
    
    367Printing and supplies
    
    
    314
    
    
    
    309
    
    
    
    319Advertising
    
    
    277
    
    
    
    309
    
    
    
    303Business development
    
    
    167
    
    
    
    159
    
    
    
    151Telephone
    
    
    171
    
    
    
    142
    
    
    
    174Outside services
    
    
    381
    
    
    
    415
    
    
    
    458Courier and postage
    
    
    201
    
    
    
    229
    
    
    
    263Software license fees
    
    
    190
    
    
    
    237
    
    
    
    178FDIC assessment
    
    
    320
    
    
    
    241
    
    
    
    39City and county taxes
    
    
    263
    
    
    
    241
    
    
    
    233Other
    
    
    1,513
    
    
    
    1,499
    
    
    
    1,399Total
    
    $
    5,241
    
    
    $
    5,162
    
    
    $
    4,643
 Note 18Comprehensive Income
  2008
    
    
    2007
    
    
    2006Unrealized holding losses on
available-for-sale securities
    
    $
    (11
    )
    
    $
    775
    
    
    $
    424Tax effect
    
    
    4
    
    
    
    (279
    )
    
    
    (153
    )Net of tax amount
    
    $
    (7
    )
    
    $
    496
    
    
    $
    271
 36




---



##### 



GEORGIA-CAROLINA BANCSHARES, INC.
 Notes to Consolidated Financial Statements
 December 31, 2008 and 2007
 Note 19  Quarterly Financial Data (Unaudited)
  Selected Quarterly Data($ in thousands, except per share data)2008
    
    
    20074Q
    
    
    3Q
    
    
    2Q
    
    
    1Q
    
    
    4Q
    
    
    3Q
    
    
    2Q
    
    
    1QInterest income
    
    $
    6,123
    
    
    $
    6,445
    
    
    $
    6,700
    
    
    $
    7,103
    
    
    $
    7,056
    
    
    $
    7,569
    
    
    $
    7,382
    
    
    $
    7,012Interest expense
    
    
    2,847
    
    
    
    2,987
    
    
    
    3,299
    
    
    
    3,905
    
    
    
    4,019
    
    
    
    4,060
    
    
    
    3,880
    
    
    
    3,747Net interest income
    
    
    3,276
    
    
    
    3,458
    
    
    
    3,401
    
    
    
    3,198
    
    
    
    3,037
    
    
    
    3,509
    
    
    
    3,502
    
    
    
    3,265Provision for loan losses
    
    
    730
    
    
    
    518
    
    
    
    (29
    )
    
    
    237
    
    
    
    436
    
    
    
    103
    
    
    
    102
    
    
    
    268Net interest income after
provision for loan losses
    
    
    2,546
    
    
    
    2,940
    
    
    
    3,430
    
    
    
    2,961
    
    
    
    2,601
    
    
    
    3,406
    
    
    
    3,400
    
    
    
    2,997Non-interest income
    
    
    2,169
    
    
    
    2,841
    
    
    
    2,352
    
    
    
    2,432
    
    
    
    2,117
    
    
    
    2,584
    
    
    
    2,712
    
    
    
    2,519Securities gain (loss)
    
    
    69
    
    
    
    
    
    
    
    37
    
    
    
    20
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-interest expenses
    
    
    4,471
    
    
    
    4,429
    
    
    
    4,539
    
    
    
    4,306
    
    
    
    4,181
    
    
    
    4,584
    
    
    
    4,650
    
    
    
    4,401Income before income tax
expense
    
    
    313
    
    
    
    1,352
    
    
    
    1,280
    
    
    
    1,107
    
    
    
    537
    
    
    
    1,406
    
    
    
    1,462
    
    
    
    1,115Income tax expense
    
    
    97
    
    
    
    386
    
    
    
    414
    
    
    
    355
    
    
    
    198
    
    
    
    510
    
    
    
    527
    
    
    
    384Net income
    
    $
    216
    
    
    $
    966
    
    
    $
    866
    
    
    $
    752
    
    
    $
    339
    
    
    $
    896
    
    
    $
    935
    
    
    $
    731Basic earnings per common
share
    
    $
    0.06
    
    
    $
    0.29
    
    
    $
    0.25
    
    
    $
    0.22
    
    
    $
    0.10
    
    
    $
    0.26
    
    
    $
    0.28
    
    
    $
    0.22Diluted earnings per
common share
    
    $
    0.06
    
    
    $
    0.28
    
    
    $
    0.25
    
    
    $
    0.21
    
    
    $
    0.10
    
    
    $
    0.25
    
    
    $
    0.27
    
    
    $
    0.21
 37




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##### 



GEORGIA-CAROLINA BANCSHARES, INC.
 Notes to Consolidated Financial Statements
 December 31, 2008 and 2007
 Note 20Condensed financial information on Georgia-Carolina Bancshares, Inc. (parent company only)
 Condensed Balance Sheet
December 31, 2008 and 2007  (dollars in thousands)
 2008
    
    
    2007AssetsCash
    
    $
    616
    
    
    $
    434Investment in subsidiary
    
    
    38,999
    
    
    
    36,024Other assets
    
    
    64
    
    
    
    33Deferred tax benefit
    
    
    91
    
    
    
    Total assets
    
    $
    39,770
    
    
    $
    36,491LiabilitiesNote payable
    
    $
    500
    
    
    $
    600Other Liabilities
    
    
    186
    
    
    
    (80
    )Total liabilities
    
    
    686
    
    
    
    520Shareholders equity
    
    
    39,084
    
    
    
    35,971Total liabilities and shareholders equity
    
    $
    39,770
    
    
    $
    36,491
 38




---



##### 



GEORGIA-CAROLINA BANCSHARES, INC.
 Notes to Consolidated Financial Statements
 December 31, 2008 and 2007
 Note 20Condensed financial information on Georgia-Carolina Bancshares, Inc. (parent company only)
 Condensed Statement of Income
Years Ended December 31, 2008, 2007 and 2006  (dollars in thousands)
 2008
    
    
    2007
    
    
    2006Income, dividends from subsidiary
    
    $
    
    
    
    $
    
    
    
    $
    ExpensesDirector compensation
    
    
    30
    
    
    
    53
    
    
    
    48Other
    
    
    239
    
    
    
    344
    
    
    
    282Total expenses
    
    
    269
    
    
    
    397
    
    
    
    330Loss before income tax benefits and equity in
undistributed earnings of subsidiary
    
    
    (269
    )
    
    
    (397
    )
    
    
    (330
    )Income tax benefits
    
    
    86
    
    
    
    143
    
    
    
    187Loss before equity in undistributed earnings of
subsidiary
    
    
    (183
    )
    
    
    (254
    )
    
    
    (143
    )Equity in undistributed earnings of subsidiary
    
    
    2,983
    
    
    
    3,155
    
    
    
    3,040Net income
    
    $
    2,800
    
    
    $
    2,901
    
    
    $
    2,897
 39




---



##### 



GEORGIA-CAROLINA BANCSHARES, INC.
 Notes to Consolidated Financial Statements
 December 31, 2008 and 2007
 Note 20Condensed financial information on Georgia-Carolina Bancshares, Inc. (parent company only)
 Condensed Statement of Cash Flows
Years Ended December 31, 2008, 2007 and 2006  (dollars in thousands)
 2008
    
    
    2007
    
    
    2006Cash flows from operating activitiesNet income
    
    $
    2,800
    
    
    $
    2,901
    
    
    $
    2,897Adjustments to reconcile net income to net cash
provided by operating activities:Stock-based compensation expense
    
    
    134
    
    
    
    226
    
    
    
    295Stock compensation
    
    
    164
    
    
    
    189
    
    
    
    172Equity in undistributed earnings of subsidiary
    
    
    (2,983
    )
    
    
    (3,155
    )
    
    
    (3,040
    )Net change in other assets and liabilities
    
    
    146
    
    
    
    228
    
    
    
    (252
    )Total adjustments
    
    
    (2,539
    )
    
    
    (2,512
    )
    
    
    (2,825
    )Net cash provided by operating activities
    
    
    261
    
    
    
    389
    
    
    
    72Cash flows from financing activitiesPayments on borrowed funds
    
    
    (100
    )
    
    
    (100
    )
    
    
    (100
    )Proceeds from issuance of common stock, and
exercise of stock options
    
    
    21
    
    
    
    33
    
    
    
    59Net cash provided by (used in) financing activities
    
    
    (79
    )
    
    
    (67
    )
    
    
    (41
    )Net change in cash
    
    
    182
    
    
    
    322
    
    
    
    31Cash at beginning of the year
    
    
    434
    
    
    
    112
    
    
    
    81Cash at end of the year
    
    $
    616
    
    
    $
    434
    
    
    $
    112
 40