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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 10-K
 þ
    
    ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2009
 o
    
    TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from _______ to ________
 Commission File No. 000-51957
 FGBC BANCSHARES, INC.
 Georgia
(State or Other Jurisdiction 
of Incorporation or Organization)
    
    20-02743161
(I.R.S. Employer Identification Number)
 101 Main Street
Franklin, Georgia 30217
 (678) 839-4510
 None
 Common Stock, no par value
 Yes o No þ
 Yes o No þ
 Yes þ No o
 Yes o No o
 þ
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
(Do not check if a  smaller reporting company)
    

Smaller reporting company o
 Yes o No þ
   DOCUMENTS INCORPORATED BY REFERENCE




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Table of Contents
 Page
 PART I
    
    
    
    
    3ITEM 1.
    
    Business
    
    
    3ITEM 1A.
    
    Risk Factors
    
    
    24ITEM 1B.
    
    Unresolved Staff Comments
    
    
    24ITEM 2.
    
    Properties
    
    
    24ITEM 3.
    
    Legal Proceedings
    
    
    25PART II
    
    
    
    
    25ITEM 4.
    
    Market For Registrants Common Equity, Related Shareholder Matters and Issuer
Purchasers of Equity Securities
    
    
    25ITEM 5.
    
    Selected Financial Data
    
    
    25ITEM 6.
    
    Managements Discussion and Analysis of Financial Condition and Results of
Operations
    
    
    26ITEM 6A.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    48ITEM 7.
    
    Financial Statements and Supplementary Data
    
    
    49ITEM 8.
    
    Changes and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    50ITEM 8A.
    
    Controls and Procedures
    
    
    50ITEM 8B.
    
    Other Information
    
    
    50PART III
    
    
    
    
    50ITEM 9.
    
    Directors, Executive Officers and Corporate Governance
    
    
    50ITEM 10.
    
    Executive Compensation
    
    
    51ITEM 11.
    
    Securities Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
    
    
    51ITEM 12.
    
    Certain Relationships and Related Transactions, and Director Independence
    
    
    51ITEM 13.
    
    Principal Accountant Fees and Services
    
    
    51PART IV
    
    
    
    
    51ITEM 14.
    
    Exhibits and Financial Statement Schedules
    
    
    51EX-13EX-23EX-31.1EX-31.2EX-32
  2




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Forward-Looking Statements
  
 PART I
 
 ITEM
1. Business.
 Overview
    3




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Recent Developments
      Types of Loans
  Real Estate Mortgage Loans.
 4




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Real Estate Construction Loans.
    Commercial and Industrial Loans.
  5




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Installment Loans to Individuals.
 Mortgage Originations
  Loan Participations
  Managements Policy for Determining the Loan Loss Allowance
  
    
    the asset quality of individual loans;
    
    changes in the national and local economy and business conditions/development,
including underwriting standards, collections, charge-off and recovery practices;
    
    changes in the nature, volume and mix of the loan portfolio;
    
    changes in the experience, ability and depth of our lending staff and
management;
    
    changes in the trend of the volume and severity of past dues and classified
loans; and trends in the volume of non-accrual loans, troubled debt restructurings
and other modifications;
    
    possible deterioration in collateral segments or other portfolio concentrations;
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
    
    historical loss experience for pools of loans (i.e. collateral types, borrowers,
purposes, etc.);
    
    changes in the quality of our loan review system; and
    
    the effect of external factors such as competition and the legal and regulatory
requirement on the level of estimated credit losses in our current loan portfolio.
  ,
    Managements Policy for Investing in Securities
  
    
    provide an investment medium for funds which are not needed to meet loan demand
or deposit withdrawal;
    
    provide an investment medium for funds which may be needed for liquidity
purposes;
    
    provide an investment medium which will balance market and credit risk for other
assets and our liability structure;
    
    optimize income generated from the investment account consistent with the stated
objectives for liquidity and quality standards;
 7




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
    
    meet regulatory standards; and
    
    provide collateral which we are required to pledge against public monies.
 Industry and Competition
     Employees
  Risk Factors
  Our independent registered public accountants have expressed substantial doubt about our
ability to continue as a going concern.
  8




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We expect to become subject to a formal enforcement action in the near future, which will
place significant restrictions on our operations.
  An inability to improve our regulatory capital position could adversely affect our operations
and future prospects.
  We hold in our portfolio a significant number of land acquisition and development and
construction loans, which concentration poses credit and regulatory risk.
  9




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Ongoing deterioration in the housing market and the homebuilding industry have led to
increased losses and may cause further worsening of delinquencies and nonperforming assets in our
loan portfolio. Consequently, our results of operations have been and may continue to be adversely
impacted.
  Difficult economic conditions have adversely affected the banking industry.
  Our access to additional short term funding to meet our liquidity needs is limited.
  10




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Negative publicity about financial institutions, generally, or about the Company or Bank
specifically, could damage the Companys reputation and adversely impact its business operations
and financial results.
  Our net interest income and liquidity could be negatively affected if we are unable to retain
maturing time deposits at competitive rates.
  Because we are undercapitalized according to applicable regulatory standards, we are no longer
able to accept, renew or roll over brokered deposits and have been forced to find other sources of
liquidity, limit our growth and/or sell assets, which could materially and adversely affect our
financial condition and results of operation.
  Current and future restrictions on the conduct of our business could adversely impact our
ability to attract deposits.
  If our allowance for loan losses is not adequate to cover actual losses, our net income may
decrease.
   11




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Because a significant portion of our loan portfolio is secured by real estate, any negative
developments affecting real estate, such as the current market downturn, may harm our business.
  The amount of our foreclosed assets has increased significantly and may continue to increase,
resulting in additional losses, and costs and expenses that have and will continue to negatively
affect our operations.
  Environmental liability associated with lending activities could result in losses.
  FDIC Deposit Insurance premiums have increased and may increase further in the future.
  12




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Future impairment losses could be required on various investment securities, which may
materially reduce the Companys and the Banks regulatory capital levels.
    Changes in market interest rates could adversely affect our financial condition and results of
operations.
  The failure of other financial institutions could adversely affect us.
  13




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The markets for our services are highly competitive and we face substantial competition.
   Our business is subject to the success of the local economies where we operate.
  Our business may be adversely affected by the highly regulated environment in which we
operate.
  14




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Non-compliance with USA PATRIOT Act, Bank Secrecy Act, or other laws and regulations could
result in fines or sanctions, and curtail expansion opportunities.
  Losing key personnel will negatively affect us.
  There are limitations on your ability to transfer our common stock.
  We do not intend to pay dividends on our common stock.
  We encounter technological change continually and have fewer resources than many of our
competitors to invest in technological improvements.
  Supervision and Regulation
  15




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FGBC Bancshares
  Acquisition of Banks
  
    
    acquiring direct or indirect ownership or control of any voting shares of any
bank if, after the acquisition, the bank holding company will directly or
indirectly own or control more than 5% of the banks voting shares;
    
    acquiring all or substantially all of the assets of any bank; or
    
    merging or consolidating with any other bank holding company.
   Change in Bank Control
  
    
    the bank holding company has registered securities under Section 12 of the
Exchange Act; or
    
    no other person owns a greater percentage of that class of voting securities
immediately after the transaction.
  Permitted Activities
  
    
    banking or managing or controlling banks; and
 16




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
    
    any activity that the Federal Reserve determines to be so closely related to
banking as to be a proper incident to the business of banking.
  
    
    factoring accounts receivable;
    
    making, acquiring, brokering or servicing loans and usual related activities;
    
    leasing personal or real property;
    
    operating a non-bank depository institution, such as a savings association;
    
    trust company functions;
    
    financial and investment advisory activities;
    
    conducting discount securities brokerage activities;
    
    underwriting and dealing in government obligations and money market instruments;
    
    providing specified management consulting and counseling activities;
    
    performing selected data processing services and support services;
    
    acting as agent or broker in selling credit life insurance and other types of
insurance in connection with credit transactions; and
    
    performing selected insurance underwriting activities.
   
    
    lending, trust and other banking activities;
    
    insuring, guaranteeing, or indemnifying against loss or harm, or providing and
issuing annuities, and acting as principal, agent, or broker for these purposes, in
any state;
    
    providing financial, investment, or advisory services;
    
    issuing or selling instruments representing interests in pools of assets
permissible for a bank to hold directly;
    
    underwriting, dealing in or making a market in securities;
    
    other activities that the Federal Reserve may determine to be so closely related
to banking or managing or controlling banks as to be a proper incident to managing
or controlling banks;
    
    foreign activities permitted outside of the United States if the Federal Reserve
has determined them to be usual in connection with banking operations abroad;
    
    merchant banking through securities or insurance affiliates; and
    
    insurance company portfolio investments.
  17




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Support of Subsidiary Institutions
  First Georgia Banking Company
   Branching
   Prompt Corrective Action
  18




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Insurance of Deposit Accounts and Regulation by the FDIC
      19




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Temporary Liquidity Guarantee Program
  Community Reinvestment Act
  The USA PATRIOT Act and the Bank Secrecy Act
  Sarbanes-Oxley Act of 2002
  20




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Other Regulations
  
    
    federal Truth-In-Lending Act, governing disclosures of credit terms to consumer
borrowers;
    
    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;
    
    Equal Credit Opportunity Act, prohibiting discrimination on the basis of race,
creed or other prohibited factors in extending credit;
    
    Fair Credit Reporting Act of 1978, governing the use and provisions of
information to credit reporting agencies;
    
    Fair Debt Collection Act, governing the manner in which consumer debts may be
collected by collection agencies;
    
    Soldiers and Sailors Civil Relief Act of 1940, governing the repayment terms
of, and property rights underlying, secured obligations of persons in military
service; and
    
    rules and regulations of the various federal agencies charged with the
responsibility of implementing these federal laws.
  
    
    the Electronic Funds Transfer Act and Regulation E issued by the Federal Reserve
to implement that act, which govern 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.
  
    
    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.
 Capital Adequacy
   21




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Payment of Dividends
   22




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
    
    total classified assets at the Banks most recent examination do not exceed 80%
of Tier 1 Capital plus the allowance for loan losses as reflected at such
examination;
    
    the aggregate amount of dividends declared or anticipated to be declared in the
calendar year does not exceed 50% of the Banks net profits, after taxes but before
dividends, for the previous calendar year; and
    
    the ratio of Tier 1 Capital to adjusted total assets is not less than 6%.
   Restrictions on Transactions with Affiliates
  
    
    a banks loans or extensions of credit to affiliates;
    
    a banks investment in affiliates;
    
    assets a bank may purchase from affiliates, except for real and personal
property exempted by the Federal Reserve;
    
    loans or extensions of credit made by a bank to third parties collateralized by
the securities or obligations of affiliates; and
    
    a banks guarantee, acceptance or letter of credit issued on behalf of an
affiliate.
    Privacy
  23




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Consumer Credit Reporting
   
    
    requirements for financial institutions to develop policies and procedures to
identify potential identity theft and, upon the request of a consumer, place a
fraud alert in the consumers credit file stating that the consumer may be the
victim of identity theft or other fraud.
    
    for entities that furnish information to consumer reporting agencies (which
would include the Bank), requirements to implement procedures and policies
regarding the accuracy and integrity of the furnished information and regarding the
correction of previously furnished information that is later determined to be
inaccurate; and
    
    a requirement for mortgage lenders to disclose credit scores to consumers.
 Proposed Legislation and Regulatory Action
  
 ITEM 1A.
    
    Risk Factors.
  
 ITEM
1B. Unresolved Staff Comments.
  
 ITEM 2.
    
    Properties.
  
    
    1989 Historic Homer Highway, Commerce, Georgia 30529 (Banks County)
    
    100 Tom Reeve Drive, Carrollton, Georgia 30117 (Carroll County)  also
Operations Center
    
    908 South Carroll Road, Villa Rica, Georgia 30180 (Carroll County)
    
    920 Level Grove Road, Cornelia, Georgia 30531 (Habersham County)
    
    102 Stockbridge Boulevard, Bremen, GA 30110 (Haralson County)
    
    101 Main Street, Franklin, Georgia 30217 (Heard County)
    
    1465 Old Swimming Pool Road, Jefferson, Georgia 30549 (Jackson County)
    
    7320 Veterans Parkway, Columbus, Georgia 31909 (Muscogee County)
    
    1251 Virgil Langford Road, Bogart, Georgia 30622 (Oconee County)
    
    1378 Dug Gap Road, Dalton, Georgia 30720 (Whitfield County)
 24




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ITEM 3.
    
    Legal Proceedings.
  
 PART II
 
 ITEM 4.
    
    Market For Registrants Common Equity, Related Shareholder Matters and Issuer
Purchasers of Equity Securities.
   
 ITEM 5.
    
    Selected Financial Data.
  Year ended December 31,2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005EARNINGSInterest income
    
    $
    39,199,664
    
    
    $
    44,734,948
    
    
    $
    46,997,687
    
    
    $
    33,106,902
    
    
    $
    14,437,231Interest expense
    
    
    18,090,629
    
    
    
    24,007,875
    
    
    
    25,193,386
    
    
    
    15,836,438
    
    
    
    6,292,607Provision for loan loss
    
    
    32,170,357
    
    
    
    8,914,368
    
    
    
    2,353,244
    
    
    
    2,740,843
    
    
    
    1,814,746Net interest income (expense)
(after provision)
    
    
    (11,061,322
    )
    
    
    11,812,705
    
    
    
    19,451,057
    
    
    
    14,529,621
    
    
    
    6,329,878Non-interest income
    
    
    4,205,035
    
    
    
    4,625,591
    
    
    
    3,437,606
    
    
    
    2,557,536
    
    
    
    1,693,746Non-interest expense
    
    
    26,547,583
    
    
    
    24,472,995
    
    
    
    21,413,101
    
    
    
    16,821,026
    
    
    
    8,888,651Net income (loss)
    
    
    (37,049,267
    )
    
    
    (5,074,935
    )
    
    
    2,055,068
    
    
    
    266,131
    
    
    
    (865,027
    )SELECTED AVERAGE BALANCESAssets
    
    $
    798,800,000
    
    
    $
    768,800,000
    
    
    $
    630,034,000
    
    
    $
    449,611,000
    
    
    $
    238,615,000Earning assets
    
    
    733,656,000
    
    
    
    720,266,000
    
    
    
    590,797,000
    
    
    
    425,222,000
    
    
    
    225,955,000Loans
    
    
    651,316,000
    
    
    
    633,201,000
    
    
    
    485,631,000
    
    
    
    348,869,000
    
    
    
    178,332,000Total deposits
    
    
    725,674,000
    
    
    
    684,010,000
    
    
    
    563,598,000
    
    
    
    374,283,000
    
    
    
    208,480,000Shareholders equity
    
    
    62,731,000
    
    
    
    67,432,000
    
    
    
    65,004,000
    
    
    
    61,252,000
    
    
    
    36,945,000Common shares outstanding  diluted
    
    
    13,482,241
    
    
    
    13,020,215
    
    
    
    12,889,153
    
    
    
    12,282,832
    
    
    
    7,095,891
 25




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Year ended December 31,2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005YEAR-END BALANCESAssets
    
    $
    792,200,607
    
    
    $
    821,385,621
    
    
    $
    684,633,510
    
    
    $
    579,410,303
    
    
    $
    326,690,446Earning assets
    
    
    679,689,392
    
    
    
    731,898,700
    
    
    
    641,553,971
    
    
    
    544,695,656
    
    
    
    310,873,458Loans (net of allowance)
    
    
    599,333,982
    
    
    
    672,163,689
    
    
    
    533,441,960
    
    
    
    403,397,896
    
    
    
    260,870,361Total deposits
    
    
    734,789,120
    
    
    
    737,091,694
    
    
    
    615,236,359
    
    
    
    496,692,502
    
    
    
    258,791,577Other liabilities
    
    
    1,033,892
    
    
    
    1,730,132
    
    
    
    2,607,209
    
    
    
    19,158,514
    
    
    
    10,957,201Shareholders equity
    
    
    34,377,595
    
    
    
    65,813,795
    
    
    
    66,789,942
    
    
    
    63,559,287
    
    
    
    56,941,668Common shares outstanding
    
    
    13,993,233
    
    
    
    12,492,206
    
    
    
    12,185,144
    
    
    
    12,062,331
    
    
    
    11,229,851PER COMMON SHAREEarnings (loss) per share  basic
    
    $
    (2.82
    )
    
    $
    (0.41
    )
    
    $
    .17
    
    
    $
    .02
    
    
    $
    (0.12
    )Earnings (loss) per share  diluted
    
    $
    (2.82
    )
    
    $
    (0.41
    )
    
    
    .16
    
    
    
    .02
    
    
    
    (0.12
    )Book value
    
    
    2.46
    
    
    
    5.27
    
    
    
    5.48
    
    
    
    5.27
    
    
    
    5.07Cash dividend paid
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    FINANCIAL RATIOSReturn on average assets
    
    
    (4.64
    %)
    
    
    (0.66
    %)
    
    
    .33
    %
    
    
    .06
    %
    
    
    (0.36
    %)Return on average equity
    
    
    (59.06
    %)
    
    
    (7.53
    %)
    
    
    3.16
    %
    
    
    .43
    %
    
    
    (2.34
    %)Average equity to average assets
    
    
    7.85
    %
    
    
    8.77
    %
    
    
    10.32
    %
    
    
    13.62
    %
    
    
    15.48
    %Dividend payout ratio
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/aNON-FINANCIALEmployees
    
    
    167
    
    
    
    191
    
    
    
    192
    
    
    
    185
    
    
    
    130Banking offices
    
    
    12
    
    
    
    12
    
    
    
    11
    
    
    
    10
    
    
    
    3ATMs
    
    
    12
    
    
    
    12
    
    
    
    12
    
    
    
    10
    
    
    
    3
 
 ITEM 6.
    
    Managements Discussion and Analysis of Financial Condition and Results of
Operations
 Overview
   
    
    Total loans decreased to approximately $612 million at December 31, 2009, down from
approximately $683 million at December 31, 2008. This represents a 10.4% decrease for
the year. We intentionally reduced the size of our loan portfolio, and therefore our
overall assets, in an effort to positively impact our capital ratios in the wake of the
severe decline these ratios have sustained due to recent losses.
    
    Total deposits were approximately $735 million at December 31, 2009, a slight
decline from approximately $737 million at December 31, 2008. Approximately 59% of our
deposits at December 31, 2009 consisted of time deposits.
    
    Our provision for loan losses, which was by far the largest single contributor to
our overall loss, was $32.1 million in 2009, up from $8.9 million in 2008. The
increase was primarily the result of the weakening real estate markets in the
communities we serve, especially as it relates to our portfolio or commercial real
estate loans. Net charge offs totaled $30.3 million during 2009 compared to $4.2
 26




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million in 2008. Our allowance for loan losses as a percentage of total loans stood at
2.10% as of December 31, 2009, up from 1.61% at December 31, 2008.
    
    Nonaccrual loans increased to $48.7 million at December 31, 2009 from $36.7 at
December 31, 2008. Approximately 35% of these nonaccrual loans consisted of commercial
real estate loans. Increasing levels of non-performing loans negatively impacted our
net interest income as the accrual of interest was discontinued and previously accrued
but uncollected interest was reserved against income.
    
    Foreclosed assets (primarily real estate) increased to $13.7 million at December 31,
2009 from $6.0 million at December 31, 2008 as we foreclosed on properties and other
assets that had served as collateral for delinquent loans. Related to this increase,
foreclosed asset expense increased by approximately $1.4 million as compared to 2008 as
we incurred expenses for the upkeep of properties, legal fees, taxes and other holding
costs. Write-downs of foreclosed properties totaled approximately $2.0 million in
2009 as compared to approximately $1.2 million for 2008. During 2009 we sold
approximately $8.8 million of foreclosed property at a loss of approximately $800,000.
At December 31, 2009 we had nine properties under contract to sell for an aggregate
agreed upon price of $771,600.
    
    Net interest income before the provision for loan losses increased marginally to
$21.1 million for 2009 compared to $20.7 million for 2008. Our net interest margin
remained at 2.88% during 2009, unchanged from 2008. The negative impact of lost
interest income from nonaccrual loans was offset by a declining costs of funds as
deposits re-priced to lower rates during the course of the year.
    
    Noninterest income was approximately $4.2 million for the year ended December 31,
2009, down from approximately $4.6 million during 2008.
    
    Noninterest expense increased to approximately $26.5 million in 2009 compared to
approximately $24.5 million in 2008, which represents an 8.2% increase. Increased
expenses associated with foreclosed assets, as detailed above, and increases in FDIC
insurance premiums offset reductions in salary and employee benefits expenses.
    
    Due to our significant losses, we are unable to conclude that we will generate
sufficient net income in the foreseeable future to realize the full value of our
deferred tax assets. Therefore, we established a $16.3 million deferred tax asset
valuation allowance as of December 31, 2009, bringing our net deferred tax asset to
approximately $197,000, which equals the portion of our deferred tax asset that is
related to our net unrealized losses on our securities portfolio. As a result, any
further losses will not have an associated tax benefit unless and until we can show
that it is more likely than not that we will realize those tax benefits.
    
    Shareholders equity decreased to approximately $34.4 million at December 31, 2009
from approximately $65.8 million at December 31, 2008. The reduction was primarily a
result of our net loss, although it was mitigated to a small degree by net proceeds of
approximately $5.1 million from the sale of common stock and warrants in a private
placement that commenced in June 2009. Our book value per common share at December 31,
2009 was $2.46, down from $5.27 at December 31, 2008.
   27




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Year Ended
    
    
    Year Ended
    
    
    Year EndedDecember 31,
    
    
    December 31,
    
    
    December 31,2009
    
    
    2008
    
    
    2007Total revenues (1)
    
    $
    43,404,699
    
    
    $
    49,360,539
    
    
    $
    50,435,293Net income (loss)
    
    $
    (37,049,267
    )
    
    $
    (5,074,935
    )
    
    $
    2,055,068
 At December 31,
    
    
    At December 31,
    
    
    At December 31,2009
    
    
    2008
    
    
    2007Total assets
    
    $
    792,200,607
    
    
    $
    821,385,621
    
    
    $
    684,633,510Total loans (2)
    
    $
    599,333,982
    
    
    $
    672,163,689
    
    
    $
    533,441,960Total deposits
    
    $
    734,789,120
    
    
    $
    737,091,694
    
    
    $
    615,236,359
 
 (1)
    
    Total revenue equals interest income plus total non-interest income.(2)
    
    Total loans reported net of allowance for loan losses and unearned income.  Critical Accounting Policies
  Allowance for Loan Losses
  Estimates of Fair Value
   28




---



##### Table of Contents



Income taxes
  Stock-based compensation
  Results of operations for the years ended December 31, 2009, 2008 and 2007
 Net Income (Loss)
 2009 Compared to 2008
 29




---



##### Table of Contents



2008 Compared to 2007
 Net Interest Income
 Table 1: Average balances, interest income, and interest expense
  Analysis of net interest incomefor the years ended December 31, 2009, 2008 and 20072009
    
    
    
    
    
    
    
    
    
    
    2008
    
    
    
    
    
    
    
    
    
    
    2007Average
    
    
    Income/
    
    
    Yield/
    
    
    Average
    
    
    Income/
    
    
    Yield/
    
    
    Average
    
    
    Income/
    
    
    Yield/Balance
    
    
    Expense
    
    
    Rate
    
    
    Balance
    
    
    Expense
    
    
    Rate
    
    
    Balance
    
    
    Expense
    
    
    Rate(Dollars in thousands)Assets:Taxable investment
securities
    
    $
    40,352
    
    
    $
    1,901
    
    
    
    4.71
    %
    
    $
    61,432
    
    
    $
    3,136
    
    
    
    5.10
    %
    
    $
    67,247
    
    
    $
    3,219
    
    
    
    4.79
    %Non-taxable investment
securities (1)
    
    
    13,157
    
    
    
    529
    
    
    
    4.02
    %
    
    
    15,501
    
    
    
    618
    
    
    
    3.99
    %
    
    
    10,556
    
    
    
    417
    
    
    
    3.95
    %Interest-bearing deposits
    
    
    20,711
    
    
    
    165
    
    
    
    .80
    %
    
    
    2,249
    
    
    
    67
    
    
    
    2.98
    %
    
    
    2,749
    
    
    
    131
    
    
    
    4.76
    %FHLB stock
    
    
    2,349
    
    
    
    58
    
    
    
    2.47
    %
    
    
    1,753
    
    
    
    58
    
    
    
    3.31
    %
    
    
    980
    
    
    
    58
    
    
    
    5.92
    %Federal funds sold
    
    
    5,772
    
    
    
    16
    
    
    
    .27
    %
    
    
    6,131
    
    
    
    127
    
    
    
    2.07
    %
    
    
    23,810
    
    
    
    1,203
    
    
    
    5.05
    %Loans (2) (3)
    
    
    651,316
    
    
    
    36,531
    
    
    
    5.61
    %
    
    
    633,201
    
    
    
    40,729
    
    
    
    6.43
    %
    
    
    485,631
    
    
    
    41,970
    
    
    
    8.64
    %Allowance for loan
losses
    
    
    (11,253
    )
    
    
    
    
    
    
    
    
    
    
    (7,815
    )
    
    
    
    
    
    
    
    
    
    
    (5,729
    )Cash and due from
banks
    
    
    15,948
    
    
    
    
    
    
    
    
    
    
    
    8,595
    
    
    
    
    
    
    
    
    
    
    
    7,315Other assets
    
    
    60,906
    
    
    
    
    
    
    
    
    
    
    
    47,753
    
    
    
    
    
    
    
    
    
    
    
    37,475Total assets
    
    $
    798,258
    
    
    
    
    
    
    
    
    
    
    $
    768,800
    
    
    
    
    
    
    
    
    
    
    $
    630,034Total interest-earning
assets
    
    $
    733,657
    
    
    $
    39,200
    
    
    
    5.34
    %
    
    $
    720,267
    
    
    $
    44,735
    
    
    
    6.21
    %
    
    $
    590,973
    
    
    $
    46,998
    
    
    
    7.95
    %Liabilities:Noninterest-bearing
demand
    
    $
    40,997
    
    
    
    
    
    
    
    
    
    
    $
    38,822
    
    
    
    
    
    
    
    
    
    
    $
    32,281Interest bearing demand
and savings
    
    
    257,482
    
    
    
    3,981
    
    
    
    1.55
    %
    
    
    186,544
    
    
    $
    4,014
    
    
    
    2.15
    %
    
    
    147,356
    
    
    $
    4,772
    
    
    
    3.24
    %Time
    
    
    426,576
    
    
    
    13,590
    
    
    
    3.19
    %
    
    
    458,644
    
    
    
    19,516
    
    
    
    4.26
    %
    
    
    382,061
    
    
    
    20,364
    
    
    
    5.33
    %Total deposits
    
    
    725,055
    
    
    
    
    
    
    
    
    
    
    
    684,010
    
    
    
    
    
    
    
    
    
    
    
    561,698Other borrowings
    
    
    9,824
    
    
    
    519
    
    
    
    5.28
    %
    
    
    12,466
    
    
    
    427
    
    
    
    3.43
    %
    
    
    658
    
    
    
    52
    
    
    
    7.87
    %Federal funds purchased
    
    
    15
    
    
    
    
    
    
    
    .60
    %
    
    
    2,280
    
    
    
    51
    
    
    
    2.24
    %Securities sold under
repurchase agreement
    
    
    
    
    
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    
    
    
    
    %
    
    
    126
    
    
    
    6
    
    
    
    4.95
    %Other liabilities
    
    
    1,173
    
    
    
    
    
    
    
    
    
    
    
    2,612
    
    
    
    
    
    
    
    
    
    
    
    2,548Shareholders equity
    
    
    62,731
    
    
    
    
    
    
    
    
    
    
    
    67,432
    
    
    
    
    
    
    
    
    
    
    
    65,004Total liabilities and
shareholders equity
    
    $
    798,798
    
    
    
    
    
    
    
    
    
    
    $
    768,800
    
    
    
    
    
    
    
    
    
    
    $
    630,034Total interest-bearing
liabilities
    
    $
    693,897
    
    
    $
    18,091
    
    
    
    2.61
    %
    
    $
    659,934
    
    
    $
    24,008
    
    
    
    3.64
    %
    
    $
    530,201
    
    
    $
    25,194
    
    
    
    4.75
    %Net interest income
    
    
    
    
    
    $
    21,109
    
    
    
    
    
    
    
    
    
    
    $
    20,727
    
    
    
    
    
    
    
    
    
    
    $
    21,804Net interest margin (4)
    
    
    
    
    
    
    
    
    
    
    2.88
    %
    
    
    
    
    
    
    
    
    
    
    2.88
    %
    
    
    
    
    
    
    
    
    
    
    3.69
    %Net interest spread (5)
    
    
    
    
    
    
    
    
    
    
    2.74
    %
    
    
    
    
    
    
    
    
    
    
    2.57
    %
    
    
    
    
    
    
    
    
    
    
    3.20
    %
 30




---



##### Table of Contents



(1)
    
    Yield on non-taxable investment securities have not been computed on a tax equivalent
basis.(2)
    
    Interest income from loans includes total fee income of approximately $1,353,000, $1,854,000
and $1,692,000 for the years ended December 31, 2009, 2008 and 2007, respectively.(3)
    
    Average non-accrual loans of $27,574,290, $10,993,379 and $1,183,800 are excluded for the
years ended December 31, 2009, 2008 and 2007, respectively.(4)
    
    Net interest margin is net interest income divided by average interest-earning assets.(5)
    
    Interest rate spread is the weighted average yield on interest-earning assets minus the
average rate on interest-bearing liabilities. Table 2: Rate and volume analysis
  Analysis of changes in net interest income
for the years ended December 31, 2009, 2008 and 2007
(Dollars in thousands)
 2009 Compared to 2008
    
    
    2008 Compared to 2007Increase (decrease)
    
    
    Increase (decrease)Due to change in
    
    
    Due to change inRate
    
    
    Volume
    
    
    Change
    
    
    Rate
    
    
    Volume
    
    
    ChangeIncome from interest-earning assets:Interest and fees on loans
    
    $
    (5,213
    )
    
    $
    1,016
    
    
    $
    (4,198
    )
    
    $
    (10,731
    )
    
    $
    9,490
    
    
    $
    (1,241
    )Interest on taxable securities
    
    
    (241
    )
    
    
    (994
    )
    
    
    (1,235
    )
    
    
    214
    
    
    
    (297
    )
    
    
    (83
    )Interest on non-taxable securities
    
    
    5
    
    
    
    (94
    )
    
    
    (89
    )
    
    
    4
    
    
    
    197
    
    
    
    201Interest on FHLB stock
    
    
    (15
    )
    
    
    15
    
    
    
    
    
    
    
    (26
    )
    
    
    26
    
    
    
    Interest on Federal funds sold
    
    
    (110
    )
    
    
    (1
    )
    
    
    (111
    )
    
    
    (711
    )
    
    
    (365
    )
    
    
    (1,076
    )Interest on deposits in banks
    
    
    (49
    )
    
    
    147
    
    
    
    98
    
    
    
    (50
    )
    
    
    (14
    )
    
    
    (64
    )Total interest income
    
    $
    (5,623
    )
    
    $
    89
    
    
    $
    (5,535
    )
    
    $
    (11,300
    )
    
    $
    9,037
    
    
    $
    (2,263
    )Expense from interest-bearing liabilitiesInterest on interest-bearing demand deposits
    
    $
    (1,129
    )
    
    $
    1,097
    
    
    $
    (32
    )
    
    $
    (1,602
    )
    
    $
    844
    
    
    $
    (758
    )Interest on time deposits
    
    
    (4,904
    )
    
    
    (1,022
    )
    
    
    (5,926
    )
    
    
    (4,107
    )
    
    
    3,259
    
    
    
    (848
    )Interest on borrowings
    
    
    232
    
    
    
    (140
    )
    
    
    92
    
    
    
    (30
    )
    
    
    405
    
    
    
    375Interest on Federal funds purchased
    
    
    (37
    )
    
    
    (14
    )
    
    
    (51
    )
    
    
    
    
    
    
    51
    
    
    
    51Interest on securities sold under repurchase
agreement
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3
    )
    
    
    (3
    )
    
    
    (6
    )Total interest expense
    
    
    (5,838
    )
    
    
    (79
    )
    
    
    (5,917
    )
    
    
    (5,742
    )
    
    
    4,556
    
    
    
    (1,186
    )Net interest income
    
    $
    215
    
    
    $
    168
    
    
    $
    382
    
    
    $
    (5,558
    )
    
    $
    4,481
    
    
    $
    (1,077
    )
 2009 Compared to 2008
 31




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##### Table of Contents



2008 Compared to 2007
   Other Income
 2009 Compared to 2008
 2008 Compared to 2007
 32




---



##### Table of Contents



Other Expenses
 2009 Compared to 2008
 2008 Compared to 2007
 Balance Sheet Review
 2009 Compared to 2008
  33




---



##### Table of Contents



2008 Compared to 2007
   Securities Portfolio
   34




---



##### Table of Contents



December 312009
    
    
    2008
    
    
    2007(Dollars in Thousands)U.S. Government-sponsored enterprises (GSEs)
    
    $
    1,484
    
    
    $
    21,127
    
    
    $
    30,490Mortgage-backed securities (GSE residential)
    
    
    34,964
    
    
    
    34,819
    
    
    
    32,633State, county and municipals
    
    
    6,099
    
    
    
    13,541
    
    
    
    15,040Corporate securities
    
    
    2,408
    
    
    
    2,277
    
    
    
    2,568$
    44,955
    
    
    $
    71,764
    
    
    $
    80,731
 Temporarily Impaired Securities
  December 31, 2009Less Than 12 Months
    
    
    12 Months or More
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedDescription of Securities
    
    Value
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesU.S. Government-sponsored
enterprises (GSEs)
    
    $
    1,483,594
    
    
    $
    (16,406
    )
    
    $
    
    
    
    $
    
    
    
    $
    1,483,594
    
    
    $
    (16,406
    )Mortgage-backed securities GSE residential
    
    
    24,022,030
    
    
    
    (294,669
    )
    
    
    
    
    
    
    
    
    
    
    24,022,030
    
    
    
    (294,669
    )State, county and municipals
    
    
    1,236,523
    
    
    
    (22,342
    )
    
    
    2,445,005
    
    
    
    (286,710
    )
    
    
    3,681,528
    
    
    
    (309,052
    )Corporate securities
    
    
    930,000
    
    
    
    (70,000
    )
    
    
    1,478,502
    
    
    
    (63,222
    )
    
    
    2,408,502
    
    
    
    (133,222
    )Total temporarily impaired securities
    
    $
    27,672,147
    
    
    $
    (403,417
    )
    
    $
    3,923,507
    
    
    $
    (349,932
    )
    
    $
    31,595,654
    
    
    $
    (753,349
    )
     35




---



##### Table of Contents



U.S. Government-sponsored enterprises
    
    
    Mortgage-backed
    
    
    State, county and
    
    
    Corporate(GSEs)
    
    
    securities
    
    
    municipals
    
    
    securitiesCarrying
    
    
    
    
    
    
    Carrying
    
    
    
    
    
    
    Carrying
    
    
    
    
    
    
    CarryingAmount
    
    
    Yield
    
    
    Amount
    
    
    Yield
    
    
    Amount
    
    
    Yield
    
    
    Amount
    
    
    Yield(Dollars in Thousands)In one year or less
    
    $
    
    
    
    
    
    %
    
    $
    
    
    
    
    
    %
    
    $
    
    
    
    
    
    %
    
    $
    
    
    
    
    
    %After one year through
two years
    
    
    
    
    
    
    
    %
    
    
    1,069
    
    
    
    5.23
    %
    
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    %After two year through
five years
    
    
    
    
    
    
    
    %
    
    
    12,508
    
    
    
    4.04
    %
    
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    %After five years through
ten years
    
    
    
    
    
    
    
    %
    
    
    11,120
    
    
    
    3.89
    %
    
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    %After ten years
    
    
    1,484
    
    
    
    3.00
    %
    
    
    10,268
    
    
    
    3.94
    %
    
    
    6,099
    
    
    
    4.08
    %
    
    
    2,408
    
    
    
    7.40
    %Total
    
    $
    1,484
    
    
    
    3.00
    %
    
    $
    34,964
    
    
    
    4.00
    %
    
    $
    6,099
    
    
    
    4.08
    %
    
    $
    2,408
    
    
    
    7.40
    %
  As of December 31,2009
    
    
    2008Federal Home Loan Bank stock
    
    $
    2,694
    
    
    $
    2,053
  
    
    We evaluated the ultimate recoverability of the par value.
    
    All of the various Federal Home Loan Banks are meeting their debt obligations.
    
    We believe that we currently have sufficient liquidity or have access to other
sources of liquidity to meet all operational needs in the foreseeable future, and
would not have the need to dispose of this stock below the recorded amount.
 36




---



##### Table of Contents




    
    Historically, the FHLB does not allow for discretionary purchases or sales of
this stock. Redemptions of the stock occur at the discretion of the FHLB,
subsequent to the maturity of outstanding advances held by the member institutions.
    
    We have reviewed the assessments by rating agencies, which have concluded that
debt ratings are likely to remain unchanged and the FHLB has the ability to absorb
economic losses, given the expectation that the various FHLBanks have a very high
degree of government support.
    
    The unrealized losses related to the securities owned by the FHLBanks are
manageable given the capital levels of these organizations.
    
    In the first and second quarter of 2009, we considered the fact that the FHLB
did not make any dividend payments (distributions) in the fourth quarter of 2008
and would not make any dividend determinations until after the end of each quarter
when quarterly results were known; however, our holdings of FHLB stock are not
intended for the receipt of dividends or stock growth, but for the purpose and
right to receive advances, or funding. Further, we deem the FHLBs process of
determining after each quarter end whether it will pay a dividend and, if so, the
amount, as essentially similar to standard practice by most dividend-paying
companies. Based on the FHLBs second and third quarter results, the FHLB
announced on August 12, 2009 and October 30, 2009 a dividend payment for the second
quarter and third quarter, respectively.
  Loan Portfolio
 Types of Loans
    37




---



##### Table of Contents



December 31,2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005(Dollars in Thousands)Commercial and industrial
    
    $
    43,998
    
    
    $
    49,641
    
    
    $
    47,363
    
    
    $
    42,405
    
    
    $
    35,761Real estate  construction
    
    
    147,714
    
    
    
    202,523
    
    
    
    163,206
    
    
    
    114,528
    
    
    
    60,967Real estate  mortgage
    
    
    398,714
    
    
    
    402,843
    
    
    
    299,219
    
    
    
    225,119
    
    
    
    142,520Installment loans to individuals
    
    
    21,890
    
    
    
    28,368
    
    
    
    30,136
    
    
    
    26,859
    
    
    
    24,997612,316
    
    
    
    683,375
    
    
    
    539,924
    
    
    
    408,911
    
    
    
    264,245Deferred loan fees and costs
    
    
    (103
    )
    
    
    (198
    )
    
    
    (215
    )
    
    
    (269
    )
    
    
    (181
    )Less allowance for loan losses
    
    
    (12,879
    )
    
    
    (11,013
    )
    
    
    (6,267
    )
    
    
    (5,244
    )
    
    
    (3,194
    )Loans, net
    
    $
    599,334
    
    
    $
    672,164
    
    
    $
    533,442
    
    
    $
    403,398
    
    
    $
    260,870
 Maturities and sensitivities to changes in interest rates
  Rate Structure forLoans withMaturities OverMaturity in Months(1)
    
    
    One Year(Dollars in Thousands)
    
    
    (Dollars in Thousands)Less than
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Variable
    
    
    Fixed12(2)
    
    
    13-60
    
    
    Over 60
    
    
    Total
    
    
    Rates
    
    
    RatesCommercial and
industrial
    
    $
    21,387
    
    
    $
    15,844
    
    
    $
    6,767
    
    
    $
    43,998
    
    
    $
    8,085
    
    
    $
    14,526Real estate 
construction
    
    
    97,534
    
    
    
    49,864
    
    
    
    316
    
    
    
    147,714
    
    
    
    7,196
    
    
    
    42,984Total
    
    $
    118,921
    
    
    $
    65,708
    
    
    $
    7,083
    
    
    $
    191,712
    
    
    $
    15,281
    
    
    $
    57,510
 
 (1)
    
    The amounts are classified based on the contractual maturity date of the loan. Our
installment loans generally require the borrower to make amortizing principal payments over
the terms of the loan. These amortization payments are reported according to the maturity
date of the underlying loan even though the loan requires that they be paid earlier.(2)
    
    We do not have any demand loans or loans without a stated maturity. Risk Elements
  38




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##### Table of Contents



December 31,2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005(Dollars in Thousands)Non-accrual loansCommercial and industrial
    
    $
    3,690
    
    
    $
    1,048
    
    
    $
    94
    
    
    $
    
    
    
    $
    Real estate  construction
    
    
    17,003
    
    
    
    23,859
    
    
    
    1,110
    
    
    
    
    
    
    
    Real estate  mortgage
    
    
    27,734
    
    
    
    11,631
    
    
    
    883
    
    
    
    269
    
    
    
    219Installment loans to individuals
    
    
    293
    
    
    
    323
    
    
    
    197
    
    
    
    84
    
    
    
    33Total non-accrual loans
    
    $
    48,720
    
    
    $
    36,861
    
    
    $
    2,284
    
    
    $
    353
    
    
    $
    252Loans contractually past due ninety days or more as
to interest or principal payments and still accruing
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Loans, the terms of which have been renegotiated to provide
a reduction or deferral of interest or principal because of
deterioration in the financial position of the borrowerCommercial and industrial
    
    $
    89
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Real estate  construction
    
    
    
    
    
    
    4,640
    
    
    
    
    
    
    
    
    
    
    
    Real estate  mortgage
    
    
    464
    
    
    
    215
    
    
    
    
    
    
    
    
    
    
    
    Installment loans to individuals
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total restructured loans
    
    $
    553
    
    
    $
    4,855
    
    
    $
    
    
    
    $
    
    
    
    $
    Loans now current about which there are serious doubts as to
the ability of the borrower to comply with present loan
repayment terms (potential problem loans)Commercial and industrial
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Real estate  construction
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Real estate  mortgage
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Installment loans to individuals
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total potential problem loans
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
  Interest income that would have been recorded on non-accrual
loans under
original terms
    
    $
    4,520,577Interest income that was recorded on non-accrual loans
    
    
    2,081,934Reduction in interest income
    
    $
    2,438,643
  December 31,2009
    
    
    2008Dalton
    
    $
    13,775
    
    
    $
    5,218Carrollton
    
    
    8,553
    
    
    
    4,593Bremen
    
    
    8,050
    
    
    
    7,590Villa Rica
    
    
    7,399
    
    
    
    11,368Other (8 markets)
    
    
    10,943
    
    
    
    8,092Total
    
    $
    48,720
    
    
    $
    36,861
  39




---



##### Table of Contents



Summary of Loan Loss Experience
    40




---



##### Table of Contents



41




---



##### Table of Contents



December 31,2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005(Dollars in Thousands)Average balance of loans outstanding
    
    $
    651,316
    
    
    $
    633,201
    
    
    $
    485,631
    
    
    $
    348,869
    
    
    $
    178,332Balance of allowance for loan losses at beginning
of year
    
    $
    11,013
    
    
    $
    6,267
    
    
    $
    5,244
    
    
    $
    3,194
    
    
    $
    1,705Charge-offs:Commercial and industrial
    
    
    (2,612
    )
    
    
    (1,078
    )
    
    
    (207
    )
    
    
    (207
    )
    
    
    (69
    )Real estate  construction
    
    
    (13,453
    )
    
    
    (1,073
    )
    
    
    (106
    )
    
    
    0
    
    
    
    0Real estate  mortgage
    
    
    (13,290
    )
    
    
    (1,769
    )
    
    
    (609
    )
    
    
    (182
    )
    
    
    (74
    )Installment loans to individuals
    
    
    (1,038
    )
    
    
    (326
    )
    
    
    (466
    )
    
    
    (361
    )
    
    
    (210
    )Total
    
    
    (30,393
    )
    
    
    (4,246
    )
    
    
    (1,388
    )
    
    
    (750
    )
    
    
    (353
    )Recoveries:Commercial and industrial
    
    
    5
    
    
    
    24
    
    
    
    1
    
    
    
    2
    
    
    
    0Real estate  construction
    
    
    6
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Real estate  mortgage
    
    
    38
    
    
    
    4
    
    
    
    0
    
    
    
    0
    
    
    
    0Installment loans to individuals
    
    
    40
    
    
    
    50
    
    
    
    57
    
    
    
    57
    
    
    
    27Total
    
    
    89
    
    
    
    78
    
    
    
    58
    
    
    
    59
    
    
    
    27Net charge-offs
    
    
    (30,304
    )
    
    
    (4,168
    )
    
    
    (1,330
    )
    
    
    (691
    )
    
    
    (326
    )Additions to allowance charged to operations
    
    
    32,170
    
    
    
    8,914
    
    
    
    2,353
    
    
    
    2,741
    
    
    
    1,815Balance of allowance at end of year
    
    $
    12,879
    
    
    $
    11,013
    
    
    $
    6,267
    
    
    $
    5,244
    
    
    $
    3,194Ratio of net loan charge-offs during the year to
average loans outstanding during the year
    
    
    4.65
    %
    
    
    .66
    %
    
    
    .27
    %
    
    
    .20
    %
    
    
    0.18
    %
 42




---



##### Table of Contents



December 312009
    
    
    2008
    
    
    2007
    
    2006
    
    2005Percent
    
    
    
    
    
    
    Percent
    
    
    
    
    
    
    Percent
    
    
    
    
    
    
    Percent
    
    
    
    
    
    
    PercentOf Loans
    
    
    
    
    
    
    Of Loans
    
    
    
    
    
    
    Of Loans
    
    
    
    
    
    
    Of Loans
    
    
    
    
    
    
    Of LoansIn Each
    
    
    
    
    
    
    In Each
    
    
    
    
    
    
    In Each
    
    
    
    
    
    
    In Each
    
    
    
    
    
    
    In EachCategory
    
    
    
    
    
    
    Category
    
    
    
    
    
    
    Category
    
    
    
    
    
    
    Category
    
    
    
    
    
    
    CategoryTo Total
    
    
    
    
    
    
    To Total
    
    
    
    
    
    
    To Total
    
    
    
    
    
    
    To Total
    
    
    
    
    
    
    To TotalAmount
    
    
    Loans
    
    
    Amount
    
    
    Loans
    
    
    Amount
    
    
    Loans
    
    
    Amount
    
    
    Loans
    
    
    Amount
    
    
    Loans(Dollars in Thousands)Commercial
and industrial
    
    $
    1,281
    
    
    
    7.19
    %
    
    $
    632
    
    
    
    7.26
    %
    
    $
    426
    
    
    
    8.77
    %
    
    $
    1,263
    
    
    
    10.37
    %
    
    $
    839
    
    
    
    13.53
    %Real estate 
construction
    
    
    4,700
    
    
    
    24.13
    %
    
    
    5,452
    
    
    
    29.64
    %
    
    
    2,281
    
    
    
    30.23
    %
    
    
    838
    
    
    
    28.01
    %
    
    
    368
    
    
    
    23.08
    %Real estate 
mortgage
    
    
    6,460
    
    
    
    65.11
    %
    
    
    4,578
    
    
    
    58.95
    %
    
    
    3,191
    
    
    
    55.42
    %
    
    
    2,869
    
    
    
    55.05
    %
    
    
    1,755
    
    
    
    53.93
    %Installment loans
to individuals
    
    
    438
    
    
    
    3.57
    %
    
    
    351
    
    
    
    4.15
    %
    
    
    369
    
    
    
    5.58
    %
    
    
    274
    
    
    
    6.57
    %
    
    
    232
    
    
    
    9.46
    %$
    12,879
    
    
    
    100.00
    %
    
    $
    11,013
    
    
    
    100.00
    %
    
    $
    6,267
    
    
    
    100.00
    %
    
    $
    5,244
    
    
    
    100.00
    %
    
    $
    3,194
    
    
    
    100.00
    %
  Foreclosed Assets
  December 31,2009
    
    
    2008Raw land
    
    $
    6,618
    
    
    $
    188Subdivision lots
    
    
    1,794
    
    
    
    1,4421-4 family residential
    
    
    4,560
    
    
    
    3,678Multifamily
    
    
    
    
    
    
    288Commercial real estate
    
    
    704
    
    
    
    360Other repossessed assets
    

65
    
    


85Total
    
    $
    13,741
    
    
    $
    6,041
 43




---



##### Table of Contents



December 31,2009
    
    
    2008Villa Rica
    
    $
    5,885
    
    
    $
    1,507Carrollton
    
    
    2,248
    
    
    
    714Jefferson
    
    
    1,524
    
    
    
    1,131Dalton
    
    
    1,395
    
    
    
    1,215Other (8 markets)
    
    
    2,689
    
    
    
    1,474Total
    
    $
    13,741
    
    
    $
    6,041
  Deposits
  December 31,2009
    
    
    2008
    
    
    2007Amount
    
    
    Rate
    
    
    Amount
    
    
    Rate
    
    
    Amount
    
    
    Rate(Dollars in Thousands)Non-interest bearing demand deposits
    
    $
    40,997
    
    
    
    
    
    
    $
    38,822
    
    
    
    
    
    
    $
    32,281Interest-bearing demand and savings
deposits
    
    
    257,482
    
    
    
    1.55
    %
    
    
    186,544
    
    
    
    2.15
    %
    
    
    147,356
    
    
    
    3.24
    %Time deposits
    
    
    426,576
    
    
    
    3.19
    %
    
    
    458,644
    
    
    
    4.26
    %
    
    
    382,061
    
    
    
    5.33
    %$
    725,055
    
    
    
    
    
    
    $
    684,010
    
    
    
    
    
    
    $
    561,698
  As of December 31,2009Three months or less
    
    $
    46,415Over three months through six months
    
    
    42,598Over six through 12 months
    
    
    72,637Over 12 months
    
    
    75,854Total
    
    $
    237,504
 44




---



##### Table of Contents



Borrowings
  Fixed rate credit at 1.43% due November 4, 2011
    
    $
    10,000,000Fixed rate credit at 2.34% due November 18, 2013
    
    
    7,000,000Fixed rate credit at 3.04% due November 4, 2014
    
    
    5,000,000$
    22,000,000
  Return on Equity and Assets
  For the Years EndingDecember  31,2009
    
    
    2008
    
    
    2007Return on average assets
    
    
    (4.64
    %)
    
    
    (.66
    %)
    
    
    .33
    %Return on average equity
    
    
    (59.06
    %)
    
    
    (7.53
    %)
    
    
    3.16
    %Average equity as a percentage of average assets
    
    
    7.85
    %
    
    
    8.77
    %
    
    
    10.32
    %
 Liquidity
  Regulatory Capital Requirements
  45




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##### Table of Contents



Tier 1
    
    
    Tier 1
    
    
    TotalLeverage
    
    
    Risk-based
    
    
    Risk-basedMinimum regulatory requirement
    
    
    4.00
    %
    
    
    4.00
    %
    
    
    8.00
    %Minimum regulatory requirement for well capitalized status
    
    
    5.00
    %
    
    
    6.00
    %
    
    
    10.00
    %Actual ratios at December 31, 2009FGBC Bancshares, Inc.
    
    
    4.37
    %
    
    
    5.75
    %
    
    
    7.01
    %First Georgia Banking Company
    
    
    4.29
    %
    
    
    5.65
    %
    
    
    6.91
    %
  Off Balance Sheet Arrangements
   December 31,2009
    
    
    2008
    
    
    2007(Dollars in Thousands)Commitments to extend credit
    
    $
    34,397
    
    
    $
    52,382
    
    
    $
    62,064Letters of credit
    
    
    308
    
    
    
    957
    
    
    
    1,404$
    34,705
    
    
    $
    53,339
    
    
    $
    63,468
  Asset/Liability Management
   46




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##### Table of Contents



Analysis of Interest Sensitivity
As of December 31, 2009
(Dollars in Thousands)
 0  3
    
    
    3 - 12
    
    
    Over 1Months
    
    
    Months
    
    
    Year
    
    
    TotalInterest-earning assets:Interest-bearing deposits in banks
    
    
    68,547
    
    
    
    
    
    
    
    
    
    
    
    68,547Securities
    
    
    
    
    
    
    
    
    
    
    44,955
    
    
    
    44,955FHLB stock
    
    
    2,694
    
    
    
    
    
    
    
    
    
    
    
    2,694Federal funds sold
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Loans (1)
    
    
    120,994
    
    
    
    159,787
    
    
    
    282,816
    
    
    
    563,597Total interest-earning assets
    
    
    192,235
    
    
    
    159,787
    
    
    
    327,771
    
    
    
    679,793Interest-bearing liabilities:Interest-bearing demand deposits
    
    
    89,860
    
    
    
    
    
    
    
    
    
    
    
    89,860Savings and money markets
    
    
    176,282
    
    
    
    
    
    
    
    
    
    
    
    176,282Time deposits
    
    
    95,772
    
    
    
    224,214
    
    
    
    110,997
    
    
    
    430,983Federal Home Loan Bank borrowings
    
    
    
    
    
    
    
    
    
    
    22,000
    
    
    
    22,000Total interest-bearing liabilities
    
    
    361,914
    
    
    
    224,214
    
    
    
    132,997
    
    
    
    719,125Interest rate sensitivity gap
    
    
    (169,679
    )
    
    
    (64,427
    )
    
    
    194,774
    
    
    
    (39,332
    )Cumulative interest rate sensitivity gap
    
    
    (169,679
    )
    
    
    (234,106
    )
    
    
    (39,332
    )Interest rate sensitivity gap ratio
    
    
    .53
    
    
    
    .71
    
    
    
    2.46Cumulative interest rate sensitivity gap ratio
    
    
    .53
    
    
    
    .60
    
    
    
    .95
 
 (1)
    
    Excludes non-accrual loans totaling approximately $48.7 million. 47




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##### Table of Contents



Effects of Inflation
   Contractual Obligations
  Payment Due by PeriodContractual Obligations
    
    Total
    
    
    Less than 1 year
    
    
    1-3 years
    
    
    3-5 years
    
    
    More than 5 yearsOperating lease obligations
    
    $
    42,500
    
    
    $
    30,000
    
    
    $
    12,500
    
    
    $
    
    
    
    $
    
 
 ITEM 6A.
    
    Quantitative and Qualitative Disclosures About Market Risk.
  48




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##### Table of Contents



ITEM 7.
    
    Financial Statements and Supplementary Data.
   Quarterly Period EndedMarch 31
    
    
    June 30
    
    
    September 30
    
    
    December 31Year ended December 31, 2009Interest income
    
    $
    10,247
    
    
    $
    10,043
    
    
    $
    9,826
    
    
    $
    9,084Interest expense
    
    
    (5,819
    )
    
    
    (4,762
    )
    
    
    (3,947
    )
    
    
    (3,563
    )Net interest income
    
    
    4,428
    
    
    
    5,281
    
    
    
    5,879
    
    
    
    5,521Provision for loan losses
    
    
    (1,919
    )
    
    
    (4,332
    )
    
    
    (11,797
    )
    
    
    (14,122
    )Net interest income after provision for loan losses
    
    
    2,509
    
    
    
    949
    
    
    
    (5,918
    )
    
    
    (8,601
    )Other income
    
    
    1,573
    
    
    
    922
    
    
    
    814
    
    
    
    896Other expenses
    
    
    (5,986
    )
    
    
    (6,956
    )
    
    
    (7,289
    )
    
    
    (6,317
    )Income before income taxes
    
    
    (1,904
    )
    
    
    (5,085
    )
    
    
    (12,393
    )
    
    
    (14,022
    )Income tax (expense) benefit
    
    
    728
    
    
    
    1,929
    
    
    
    2,068
    
    
    
    (8,370
    )Net income (loss)
    
    $
    (1,176
    )
    
    $
    (3,156
    )
    
    $
    (10,325
    )
    
    $
    (22,392
    )Basic earnings (losses) per share
    
    $
    (0.09
    )
    
    $
    (0.25
    )
    
    $
    (0.76
    )
    
    $
    (1.72
    )Diluted earnings(losses) per share
    
    $
    (0.09
    )
    
    $
    (0.25
    )
    
    $
    (0.76
    )
    
    $
    (1.72
    )Year ended December 31, 2008Interest income
    
    $
    11,600
    
    
    $
    11,029
    
    
    $
    11,531
    
    
    $
    10,574Interest expense
    
    
    (6,227
    )
    
    
    (5,761
    )
    
    
    (6,040
    )
    
    
    (5,980
    )Net interest income
    
    
    5,373
    
    
    
    5,268
    
    
    
    5,491
    
    
    
    4,594Provision for loan losses
    
    
    (859
    )
    
    
    (1,566
    )
    
    
    (2,151
    )
    
    
    (4,338
    )Net interest income after provision for loan losses
    
    
    4,514
    
    
    
    3,702
    
    
    
    3,340
    
    
    
    256Other income
    
    
    1,755
    
    
    
    986
    
    
    
    921
    
    
    
    964Other expenses
    
    
    (5,851
    )
    
    
    (5,955
    )
    
    
    (5,780
    )
    
    
    (6,887
    )Income before income taxes
    
    
    418
    
    
    
    (1,267
    )
    
    
    (1,519
    )
    
    
    (5,667
    )Income tax (expense) benefit
    
    
    (128
    )
    
    
    504
    
    
    
    591
    
    
    
    1,993Net income
    
    $
    290
    
    
    $
    (763
    )
    
    $
    (928
    )
    
    $
    (3,674
    )Basic earnings per share
    
    $
    0.02
    
    
    $
    (0.06
    )
    
    $
    (0.08
    )
    
    $
    (0.29
    )Diluted earnings per share
    
    $
    0.02
    
    
    $
    (0.06
    )
    
    $
    (0.08
    )
    
    $
    (0.29
    )
  49




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##### Table of Contents



ITEM 8.
    
    Changes and Disagreements with Accountants on Accounting and Financial Disclosure.
  
 ITEM 8A.
    
    Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control Over Financial Reporting
  Managements Annual Report on Internal Control over Financial Reporting
    Attestation Report of the Registered Public Accounting Firm
  
 ITEM 8B.
    
    Other Information.
  
 PART III
 
 ITEM 9.
    
    Directors, Executive Officers and Corporate Governance.
  50




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##### Table of Contents



ITEM 10.
    
    Executive Compensation.
  
 ITEM 11.
    
    Securities Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.
  Equity Compensation Plan Table
  (a)
    
    
    (b)
    
    
    (c)Number of
    
    
    Weighted-
    
    
    Number of securitiessecurities to be
    
    
    average exercise
    
    
    remaining available forissued upon
    
    
    price of
    
    
    future issuance underexercise of
    
    
    outstanding
    
    
    equity compensationoutstanding
    
    
    options,
    
    
    plans (excludingoptions, warrants
    
    
    warrants
    
    
    securities reflected inPlan category
    
    and rights
    
    
    and rights
    
    
    column (a))Equity compensation
plans approved by
security holders
    
    
    1,071,047
    
    
    $
    6.26
    
    
    
    347,446Equity compensation
plans not approved
by security holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    1,071,047
    
    
    $
    6.26
    
    
    
    347,446
 
 ITEM 12.
    
    Certain Relationships and Related Transactions, and Director Independence.
  
 ITEM 13.
    
    Principal Accountant Fees and Services.
  
 PART IV
 
 ITEM 14.
    
    Exhibits and Financial Statement Schedules
 1.
    
    The following financial statements are filed as a part of this report:Report of Independent Registered Public Accounting FirmConsolidated Balance Sheets as of December 31, 2009 and 2008Consolidated Statements of Operations for Years Ended December 31, 2009, 2008 and 2007Consolidated Statements of Comprehensive Income (Loss) for Years Ended December 31, 2009,
2008 and 2007Consolidated Statements of Stockholders Equity for Years Ended December 31, 2009, 2008 and
2007Consolidated Statements of Cash Flows for Years Ended December 31, 2009, 2008 and 2007Notes to Consolidated Financial Statements
 51




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2.
    
    All financial statement schedules are omitted as the required information is inapplicable or
the information is presented in the financial statements or related notes.
 3.
    
    The following exhibits are filed with this report on Form 10-K.
 Exhibit No.
    
    Name of Exhibit3.1
    
    Articles of Incorporation, as amended (incorporated by reference to exhibit 3.1
of Registrants Form 10-K filed with the SEC on April 2, 2009)3.2
    
    Bylaws (incorporated by reference to exhibit 3.2 of Registrants Form 10 filed
with the SEC on May 1, 2006)10.1
    
    2004 Stock Option Plan (incorporated by reference to exhibit 10.1 of
Registrants Form 10 filed with the SEC on May 1, 2006) *10.2
    
    2007 Equity Plan (incorporated by reference to Appendix C to the Registrants
definitive proxy statement filed with the SEC on April 25, 2007, which consists of
pages C-1 through C-18)*10.3
    
    Employment Agreement with Jackie L. Reed (incorporated by reference to exhibit
10.3 of Registrants Form 10-K filed with the SEC of April 2, 2009)*10.4
    
    Employment Agreement with Teresa L. Martin (incorporated by reference to
exhibit 10.4 of Registrants Form 10-K filed with the SEC of April 2, 2009)*10.5
    
    Employment Agreement with Gregory S. Akins (incorporated by reference to
exhibit 10.5 of Registrants Form 10-K filed with the SEC of April 2, 2009)*10.6
    
    Employment Agreement with W. Brett Morgan (incorporated by reference to exhibit
10.6 of Registrants Form 10-K filed with the SEC of April 2, 2009)*13
    
    Consolidated Financial Statements of FGBC Bancshares, Inc.21
    
    List of Subsidiaries (incorporated by reference to exhibit 21 of Registrants
Form 10 filed with the SEC on May 1, 2006)23
    
    Consent of Mauldin & Jenkins, LLC31.1
    
    Certificate of the Interim CEO pursuant to Section 302 of the Sarbanes-Oxley
Act of 200231.2
    
    Certificate of the CFO pursuant to Section 302 of the Sarbanes-Oxley Act of
200232
    
    Certificate of the Interim CEO and CFO pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
 
 *
    
    Indicates a management contract or compensatory plan or arrangement. 52




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SIGNATURES
  FGBC BANCSHARES, INC.By: /s/ W. Brett Morgan

Name: W. Brett
Morgan
    
    Date:
    
    April 15, 2010Title: Interim President and Chief
Executive Officer
  /s/ W. Brett Morgan

W. Brett Morgan
    
    Date:
    
    April 15, 2010Interim President and Chief Executive Officer[Principal Executive Officer]/s/ Teresa L. Martin

Teresa L. Martin
    
    Date:
    
    April 15, 2010Chief Financial Officer and Executive Vice President[Principal Financial Officer and Principal Accounting Officer]/s/ Roy L. Denny

Roy L. Denny, Director
    
    Date:
    
    April 15, 2010/s/ Walter D. Duke

Walter D. Duke, Director
    
    Date:
    
    April 15, 2010/s/ Wyche T. Green, III

Wyche T. Green, III, Director
    
    Date:
    
    April 15, 2010/s/ Greg M. Hagan

Greg M. Hagan, Director
    
    Date:
    
    April 15, 2010/s/ George B. Hamil, Jr.

George B. Hamil, Jr., Director
    
    Date:
    
    April 15, 2010/s/ Terry L. Harper

Terry L. Harper, Director
    
    Date:
    
    April 15, 2010/s/ Emmett K. Harrod

Emmett K. Harrod, Director
    
    Date:
    
    April 15, 2010/s/ Howard J. Lindsey

Howard J. Lindsey, Director
    
    Date:
    
    April 15, 2010/s/ Dennis H. McDowell

Dennis H. McDowell, Director
    
    Date:
    
    April 15, 2010/s/ Edward R. Newbern

Edward R. Newbern, Director
    
    Date:
    
    April 15, 2010
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##### Table of Contents



/s/ Randall Pugh

Randall Pugh, Director
    
    Date:
    
    April 15, 2010/s/ Carl R. Sewell, Jr.

Carl R. Sewell, Jr., Director
    
    Date:
    
    April 15, 2010/s/ Bart R. Smith

Bart R. Smith, Director
    
    Date:
    
    April 15, 2010/s/ Gleamer L. Smith, Jr.

Gleamer L. Smith, Jr., Director
    
    Date:
    
    April 15, 2010/s/ Robert L. Stewart, Jr.

Robert L. Stewart, Jr., Director
    
    Date:
    
    April 15, 2010
 54