##### Table of Contents



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, 2008
 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
    
    20-02743161(State or Other Jurisdiction
    
    (I.R.S. Employer Identification Number)of Incorporation or Organization)
 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
 o
  Large accelerated filer o
    
    Accelerated filer
o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 Yes o No þ
   DOCUMENTS INCORPORATED BY REFERENCE




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Table of Contents
 PagePART I
    
    
    3ITEM 1. Business
    
    
    3ITEM 1A. Risk Factors
    
    
    21ITEM 1B. Unresolved Staff Comments
    
    
    21ITEM 2. Properties
    
    
    21ITEM 3. Legal Proceedings
    
    
    21ITEM 4. Submission of Matters to a Vote of Security Holders
    
    
    21PART II
    
    
    22ITEM 5. Market For Registrants Common Equity, Related Stockholder Matters and Issuer
Purchasers of Equity Securities
    
    
    22ITEM 6. Selected Financial Data
    
    
    22ITEM 7. Managements Discussion and Analysis of Financial Condition and Results of
Operations
    
    
    23ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    38ITEM 8. Financial Statements and Supplementary Data
    
    
    39ITEM 9. Changes and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    40ITEM 9A. Controls and Procedures
    
    
    40ITEM 9B. Other Information
    
    
    40PART III
    
    
    40ITEM 10. Directors, Executive Officers and Corporate Governance
    
    
    40ITEM 11. Executive Compensation
    
    
    41ITEM 12. Securities Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
    
    
    41ITEM 13. Certain Relationships and Related Transactions, and Director Independence
    
    
    41ITEM 14. Principal Accountant Fees and Services
    
    
    41PART IV
    
    
    41ITEM 15. Exhibits and Financial Statement Schedules
    
    
    41EX-3.1EX-10.3EX-10.4EX-10.5EX-10.6EX-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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Types of Loans
  Real Estate Mortgage Loans.
  Real Estate Construction Loans.
 4




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Commercial and Industrial Loans.
  Installment Loans to Individuals.
 5




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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 and volume 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;
    
    historical loss experience (when available) used 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.
   6




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Accounting by Creditors for Impairment of a Loan,
    Managements Policy for Investing in Securities
  
    
    provide an investment medium for funds which are not needed to meet loan demand
or deposit withdrawal;
    
    optimize income generated from the investment account consistent with the stated
objectives for liquidity and quality standards;
    
    meet regulatory standards;
    
    provide collateral which we are required to pledge against public monies;
    
    provide an investment medium for funds which may be needed for liquidity
purposes; and
    
    provide an investment medium which will balance market and credit risk for other
assets and our liability structure.
 Industry and Competition
   7




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Employees
  Risk Factors
  Current and anticipated deterioration in the housing market and the homebuilding industry have
led to increased losses and may produce 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.
  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.
  If our allowance for loan losses is not adequate to cover actual losses, our net income may
decrease.
  8




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Changes in market interest rates could adversely affect our financial condition and results of
operations.
  Difficult economic conditions have adversely affected the banking industry
  FDIC Deposit Insurance premiums have increased and may increase further in the future.
  9




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Our net interest income and liquidity could be negatively affected if we are unable to retain
maturing time deposits at competitive rates.
  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.
  10




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There can be no assurance that the Emergency Economic Stabilization Act of 2008 and the
American Recovery and Reinvestment Act will stabilize the U.S. economy and financial system
  Our business may be adversely affected by the highly regulated environment in which we
operate.
  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.
  11




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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.
  We may not be able to successfully expand into new markets.
  Supervision and Regulation
  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.
  12




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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
    
    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.
 13




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
    
    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.
  Support of Subsidiary Institutions
  First Georgia Banking Company
   14




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Branching
   Prompt Corrective Action
    FDIC Insurance Assessments
  15




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Temporary Liquidity Guarantee Program.
   16




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Community Reinvestment Act
  The USA PATRIOT Act and the Bank Secrecy Act
  Sarbanes-Oxley Act of 2002
   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;
 17




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
    
    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 Right to Financial Privacy Act, which imposes a duty to maintain
confidentiality of consumer financial records and prescribes procedures for
complying with administrative subpoenas of financial records; and
    
    the Electronic Funds Transfer Act and Regulation E issued by the Federal Reserve
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.
 Capital Adequacy
      18




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Payment of Dividends
    
    
    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%.
   19




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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
  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.
 20




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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)
    
    1378 Dug Gap Road, Dalton, Georgia 30720 (Whitfield County)
  
 ITEM 3. Legal Proceedings.
  
 ITEM 4. Submission of Matters to a Vote of Security Holders.
  .
 Votes For
    
    Votes Against
    
    Abstain7,967,370
    
    155,262
    
    23,435
 21




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PART II
 
 ITEM 5.
    
    Market For Registrants Common Equity, Related Shareholder Matters and Issuer
Purchasers of Equity Securities.
   
 ITEM 6. Selected Financial Data.
  Year ended December 31,2008
    
    2007
    
    2006
    
    2005
    
    2004EARNINGSInterest income
    
    $
    44,734,948
    
    
    $
    46,997,687
    
    
    $
    33,106,902
    
    
    $
    14,437,231
    
    
    $
    6,754,161Interest expense
    
    
    24,007,875
    
    
    
    25,193,386
    
    
    
    15,836,438
    
    
    
    6,292,607
    
    
    
    2,708,754Provision for loan loss
    
    
    8,914,368
    
    
    
    2,353,244
    
    
    
    2,740,843
    
    
    
    1,814,746
    
    
    
    1,277,459Net interest income (after provision)
    
    
    11,812,705
    
    
    
    19,451,057
    
    
    
    14,529,621
    
    
    
    6,329,878
    
    
    
    2,767,948Non-interest income
    
    
    4,625,591
    
    
    
    3,437,606
    
    
    
    2,557,536
    
    
    
    1,693,746
    
    
    
    991,779Non-interest expense
    
    
    24,472,995
    
    
    
    21,413,101
    
    
    
    16,821,026
    
    
    
    8,888,651
    
    
    
    4,235,634Net income (loss)
    
    
    (5,074,935
    )
    
    
    2,055,068
    
    
    
    266,131
    
    
    
    (865,027
    )
    
    
    (475,907
    )SELECTED AVERAGE BALANCESAssets
    
    $
    768,800,000
    
    
    $
    630,034,000
    
    
    $
    449,611,000
    
    
    $
    238,615,000
    
    
    $
    136,932,000Earning assets
    
    
    720,266,000
    
    
    
    590,797,000
    
    
    
    425,222,000
    
    
    
    225,955,000
    
    
    
    130,471,000Loans
    
    
    633,201,000
    
    
    
    485,631,000
    
    
    
    348,869,000
    
    
    
    178,332,000
    
    
    
    90,832,000Total deposits
    
    
    684,010,000
    
    
    
    563,598,000
    
    
    
    374,283,000
    
    
    
    208,480,000
    
    
    
    122,175,000Shareholders equity
    
    
    67,432,000
    
    
    
    65,004,000
    
    
    
    61,252,000
    
    
    
    36,945,000
    
    
    
    14,548,000Common shares outstanding  diluted
    
    
    13,020,215
    
    
    
    12,889,153
    
    
    
    12,282,832
    
    
    
    7,095,891
    
    
    
    5,018,484YEAR-END BALANCESAssets
    
    $
    821,385,621
    
    
    $
    684,633,510
    
    
    $
    579,410,303
    
    
    $
    326,690,446
    
    
    $
    182,356,714Earning assets
    
    
    731,898,700
    
    
    
    641,553,971
    
    
    
    544,695,656
    
    
    
    310,873,458
    
    
    
    171,596,112Loans (net of allowance)
    
    
    672,163,689
    
    
    
    533,441,960
    
    
    
    403,397,896
    
    
    
    260,870,361
    
    
    
    133,081,729Total deposits
    
    
    737,091,694
    
    
    
    615,236,359
    
    
    
    496,692,502
    
    
    
    258,791,577
    
    
    
    166,657,747Other liabilities
    
    
    1,730,132
    
    
    
    2,607,209
    
    
    
    19,158,514
    
    
    
    10,957,201
    
    
    
    721,833Shareholders equity
    
    
    65,813,795
    
    
    
    66,789,942
    
    
    
    63,559,287
    
    
    
    56,941,668
    
    
    
    14,977,134Common shares outstanding
    
    
    12,492,206
    
    
    
    12,185,144
    
    
    
    12,062,331
    
    
    
    11,229,851
    
    
    
    5,099,201PER COMMON SHAREEarnings (loss) per share  basic
    
    $
    (0.41
    )
    
    $
    .17
    
    
    $
    .02
    
    
    $
    (0.12
    )
    
    $
    (0.09
    )Earnings (loss) per share  diluted
    
    $
    (0.41
    )
    
    
    .16
    
    
    
    .02
    
    
    
    (0.12
    )
    
    
    (0.09
    )Book value
    
    
    5.27
    
    
    
    5.48
    
    
    
    5.27
    
    
    
    5.07
    
    
    
    2.94Cash dividend paid
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 22




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FINANCIAL RATIOSReturn on average assets
    
    
    (0.66
    %)
    
    
    .33
    %
    
    
    .06
    %
    
    
    (0.36
    %)
    
    
    (0.35
    %)Return on average equity
    
    
    (7.53
    %)
    
    
    3.16
    %
    
    
    .43
    %
    
    
    (2.34
    %)
    
    
    (3.27
    %)Average equity to average assets
    
    
    8.77
    %
    
    
    10.32
    %
    
    
    13.62
    %
    
    
    15.48
    %
    
    
    10.62
    %Dividend payout ratio
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/aNON-FINANCIALEmployees
    
    
    191
    
    
    
    192
    
    
    
    185
    
    
    
    130
    
    
    
    49Banking offices
    
    
    12
    
    
    
    11
    
    
    
    10
    
    
    
    3
    
    
    
    3ATMs
    
    
    12
    
    
    
    12
    
    
    
    10
    
    
    
    3
    
    
    
    3
 
 ITEM 7.Managements Discussion and Analysis of Financial Condition and Results of
Operations
 Overview
   Year Ended
    
    Year Ended
    
    Year EndedDecember 31,
    
    December 31,
    
    December 31,2008
    
    2007
    
    2006Total revenues (1)
    
    $
    49,360,539
    
    
    $
    50,435,293
    
    
    $
    35,664,438Net income (loss)
    
    $
    (5,074,935
    )
    
    $
    2,055,068
    
    
    $
    266,131
 At December 31,
    
    At December 31,
    
    At December 31,2008
    
    2007
    
    2006Total assets
    
    $
    821,385,621
    
    
    $
    684,633,510
    
    
    $
    579,410,303Total loans (2)
    
    $
    672,163,689
    
    
    $
    533,441,960
    
    
    $
    403,397,896Total deposits
    
    $
    737,091,694
    
    
    $
    615,236,359
    
    
    $
    496,692,502
 
 (1)
    
    Total revenue equals interest income plus total non-interest income.(2)
    
    Total loans reported net of allowance for loan losses and unearned income. 23




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Critical Accounting Policies
     Accounting for Income Taxes
  24




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Results of operations for the years ended December 31, 2008, 2007 and 2006
 Net income (loss)
 2008 Compared to 2007
 2007 Compared to 2006
 Net interest income
 Table 1: Average balances, interest income, and interest expense
  Analysis of net interest incomefor the years ended December 31, 2008, 2007 and 20062008
    
    
    
    
    
    
    
    
    
    
    2007
    
    
    
    
    
    
    
    
    
    
    2006Average
    
    
    Income/
    
    
    Yield/
    
    
    Average
    
    
    Income/
    
    
    Yield/
    
    
    Average
    
    
    Income/
    
    
    Yield/Balance
    
    
    Expense
    
    
    Rate
    
    
    Balance
    
    
    Expense
    
    
    Rate
    
    
    Balance
    
    
    Expense
    
    
    Rate(Dollars in thousands)Assets:Taxable investment
securities
    
    $
    61,432
    
    
    $
    3,136
    
    
    
    5.11
    %
    
    $
    67,247
    
    
    $
    3,219
    
    
    
    4.79
    %
    
    $
    51,173
    
    
    $
    2,035
    
    
    
    3.97
    %Non-taxable
investment
securities (1)
    
    
    15,501
    
    
    
    618
    
    
    
    3.99
    %
    
    
    10,556
    
    
    
    417
    
    
    
    3.95
    %
    
    
    10
    
    
    
    
    
    
    
    2.65
    %Interest bearing
deposits
    
    
    2,249
    
    
    
    67
    
    
    
    2.98
    %
    
    
    2,749
    
    
    
    131
    
    
    
    4.76
    %
    
    
    901
    
    
    
    46
    
    
    
    5.11
    %FHLB stock
    
    
    1,753
    
    
    
    58
    
    
    
    3.31
    %
    
    
    980
    
    
    
    58
    
    
    
    5.92
    %
    
    
    1,213
    
    
    
    75
    
    
    
    6.20
    %Federal funds sold
    
    
    6,131
    
    
    
    127
    
    
    
    2.07
    %
    
    
    23,810
    
    
    
    1,203
    
    
    
    5.05
    %
    
    
    23,056
    
    
    
    1,188
    
    
    
    5.15
    %Loans (2) (3)
    
    
    633,201
    
    
    
    40,729
    
    
    
    6.43
    %
    
    
    485,631
    
    
    
    41,970
    
    
    
    8.64
    %
    
    
    348,869
    
    
    
    29,763
    
    
    
    8.53
    %Allowance for loan
losses
    
    
    (7,815
    )
    
    
    
    
    
    
    
    
    
    
    (5,729
    )
    
    
    
    
    
    
    
    
    
    
    (4,196
    )Cash and due from
banks
    
    
    8,595
    
    
    
    
    
    
    
    
    
    
    
    7,315
    
    
    
    
    
    
    
    
    
    
    
    6,426Other assets
    
    
    47,753
    
    
    
    
    
    
    
    
    
    
    
    37,475
    
    
    
    
    
    
    
    
    
    
    
    22,159Total assets
    
    
    768,800
    
    
    
    
    
    
    
    
    
    
    
    630,034
    
    
    
    
    
    
    
    
    
    
    
    449,611
 25




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Analysis of net interest incomefor the years ended December 31, 2008, 2007 and 20062008
    
    
    
    
    
    
    
    
    
    
    2007
    
    
    
    
    
    
    
    
    
    
    2006Average
    
    
    Income/
    
    
    Yield/
    
    
    Average
    
    
    Income/
    
    
    Yield/
    
    
    Average
    
    
    Income/
    
    
    Yield/Balance
    
    
    Expense
    
    
    Rate
    
    
    Balance
    
    
    Expense
    
    
    Rate
    
    
    Balance
    
    
    Expense
    
    
    Rate(Dollars in thousands)Total
interest-earning
assets
    
    
    720,267
    
    
    
    44,735
    
    
    
    6.21
    %
    
    
    590,973
    
    
    
    46,998
    
    
    
    7.95
    %
    
    
    425,222
    
    
    
    33,107
    
    
    
    7.79
    %Liabilities:Noninterest-bearing
demand
    
    $
    38,822
    
    
    
    
    
    
    
    
    
    
    
    32,281
    
    
    
    
    
    
    
    
    
    
    
    22,953Interest bearing
demand
and savings
    
    
    186,544
    
    
    
    4,014
    
    
    
    2.15
    %
    
    
    147,356
    
    
    
    4,772
    
    
    
    3.24
    %
    
    
    113,039
    
    
    
    3,434
    
    
    
    3.04
    %Time
    
    
    458,644
    
    
    
    19,516
    
    
    
    4.26
    %
    
    
    382,061
    
    
    
    20,364
    
    
    
    5.33
    %
    
    
    238,291
    
    
    
    11,682
    
    
    
    4.90
    %Total deposits
    
    
    684,010
    
    
    
    
    
    
    
    
    
    
    
    561,698
    
    
    
    
    
    
    
    
    
    
    
    374,283Other borrowings
    
    
    12,466
    
    
    
    427
    
    
    
    3.43
    %
    
    
    658
    
    
    
    52
    
    
    
    7.87
    %
    
    
    13,699
    
    
    
    718
    
    
    
    5.24
    %Federal funds
purchased
    
    
    2,280
    
    
    
    51
    
    
    
    2.24
    %Securities sold
under repurchase
agreement
    
    
    
    
    
    
    
    
    
    
    
    %
    
    
    126
    
    
    
    6
    
    
    
    4.95
    %
    
    
    39
    
    
    
    2
    
    
    
    5.22
    %Other liabilities
    
    
    2,612
    
    
    
    
    
    
    
    
    
    
    
    2,548
    
    
    
    
    
    
    
    
    
    
    
    338Shareholders equity
    
    
    67,432
    
    
    
    
    
    
    
    
    
    
    
    65,004
    
    
    
    
    
    
    
    
    
    
    
    61,252Total liabilities
and
shareholders
equity
    
    
    768,800
    
    
    
    
    
    
    
    
    
    
    
    630,034
    
    
    
    
    
    
    
    
    
    
    
    449,611Total
interest-bearing
liabilities
    
    
    659,934
    
    
    
    24,008
    
    
    
    3.64
    %
    
    
    530,201
    
    
    
    25,194
    
    
    
    4.75
    %
    
    
    365,068
    
    
    
    15,836
    
    
    
    4.34
    %Net interest income
    
    
    
    
    
    
    20,727
    
    
    
    
    
    
    
    
    
    
    
    21,804
    
    
    
    
    
    
    
    
    
    
    
    17,271Net interest margin
(4)
    
    
    
    
    
    
    
    
    
    
    2.88
    %
    
    
    
    
    
    
    
    
    
    
    3.69
    %
    
    
    
    
    
    
    
    
    
    
    4.07
    %Net interest spread
(5)
    
    
    
    
    
    
    
    
    
    
    2.57
    %
    
    
    
    
    
    
    
    
    
    
    3.20
    %
    
    
    
    
    
    
    
    
    
    
    3.45
    %
  (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 $1,854,000, $1,692,000
and $1,330,000 for the years ended December 31, 2008, 2007 and 2006, respectively.(3)
    
    Average nonaccrual loans of $10,993,379, $1,183,800 and $579,325 are included for the years
ended December 31, 2008, 2007 and 2006, 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
  26




---



##### Table of Contents



Analysis of changes in net interest income
for the years ended December 31, 2008, 2007 and 2006(Dollars in thousands)
 2008 Compared to 2007
    
    2007 Compared to 2006Increase (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
    
    
    (10,731
    )
    
    
    9,490
    
    
    
    (1,241
    )
    
    
    388
    
    
    
    11,819
    
    
    
    12,207Interest on taxable securities
    
    
    214
    
    
    
    (297
    )
    
    
    (83
    )
    
    
    415
    
    
    
    769
    
    
    
    1,184Interest on non-taxable securities
    
    
    4
    
    
    
    197
    
    
    
    201
    
    
    
    1
    
    
    
    416
    
    
    
    417Interest on FHLB stock
    
    
    (26
    )
    
    
    26
    
    
    
    
    
    
    
    (3
    )
    
    
    (14
    )
    
    
    (17
    )Interest on Federal funds sold
    
    
    (711
    )
    
    
    (365
    )
    
    
    (1,076
    )
    
    
    (22
    )
    
    
    37
    
    
    
    15Interest on deposits in banks
    
    
    (50
    )
    
    
    (14
    )
    
    
    (64
    )
    
    
    (3
    )
    
    
    88
    
    
    
    85Total interest income
    
    
    (11,300
    )
    
    
    9,037
    
    
    
    (2,263
    )
    
    
    776
    
    
    
    13,115
    
    
    
    13,891Expense from interest-bearing
liabilitiesInterest on
interest-bearing demand deposits
    
    
    (1,602
    )
    
    
    844
    
    
    
    (758
    )
    
    
    227
    
    
    
    1,111
    
    
    
    1,338Interest on time deposits
    
    
    (4,107
    )
    
    
    3,259
    
    
    
    (848
    )
    
    
    1,019
    
    
    
    7,663
    
    
    
    8,682Interest on borrowings
    
    
    (30
    )
    
    
    405
    
    
    
    375
    
    
    
    360
    
    
    
    (1,026
    )
    
    
    (666
    )Interest on Federal funds purchased
    
    
    
    
    
    
    51
    
    
    
    51
    
    
    
    
    
    
    
    
    
    
    
    Interest on securities sold under
repurchase
agreement
    
    
    (3
    )
    
    
    (3
    )
    
    
    (6
    )
    
    
    1
    
    
    
    3
    
    
    
    4Total interest expense
    
    
    (5,742
    )
    
    
    4,556
    
    
    
    (1,186
    )
    
    
    1,607
    
    
    
    7,751
    
    
    
    9,358Net interest income
    
    
    (5,558
    )
    
    
    4,481
    
    
    
    (1,077
    )
    
    
    (831
    )
    
    
    5,364
    
    
    
    4,533
 2008 Compared to 2007
   2007 Compared to 2006
 27




---



##### Table of Contents



Other income
 2008 Compared to 2007
 2007 Compared to 2006
 Other expenses
 2008 Compared to 2007
 2007 Compared to 2006
 Balance Sheet Review
 2008 Compared to 2007
  28




---



##### Table of Contents



2007 Compared to 2006
   Securities Portfolio
   December 312008
    
    
    2007
    
    
    2006(Dollars in Thousands)U.S. governmental-sponsored agencies
    
    $
    21,127
    
    
    $
    30,490
    
    
    $
    49,535Mortgage-backed securities
    
    
    34,819
    
    
    
    32,633
    
    
    
    19,669State, county and municipals
    
    
    13,541
    
    
    
    15,040
    
    
    
    910Corporate securities
    
    
    2,277
    
    
    
    2,568
    
    
    
    $
    71,764
    
    
    $
    80,731
    
    
    $
    70,114
  29




---



##### Table of Contents



U.S. governmental-
    
    
    Mortgage-backed
    
    
    State, county and
    
    
    Corporatesponsored agencies
    
    
    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
five years
    
    
    2,024
    
    
    
    3.55
    %
    
    
    971
    
    
    
    3.58
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    After five years through
ten years
    
    
    10,825
    
    
    
    4.65
    %
    
    
    
    
    
    
    
    %
    
    
    895
    
    
    
    5.23
    %
    
    
    
    
    
    
    After ten years
    
    
    8,278
    
    
    
    5.24
    %
    
    
    33,848
    
    
    
    5.37
    %
    
    
    12,646
    
    
    
    5.73
    %
    
    
    2,277
    
    
    
    7.69
    %Total
    
    $
    21,127
    
    
    
    4.78
    %
    
    $
    34,819
    
    
    
    5.32
    %
    
    $
    13,541
    
    
    
    5.70
    %
    
    $
    2,277
    
    
    
    7.69
    %
 Loan Portfolio
 Types of Loans
  December 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004(Dollars in Thousands)Commercial and industrial
    
    $
    49,641
    
    
    $
    47,363
    
    
    $
    42,405
    
    
    $
    35,761
    
    
    $
    28,971Real estate  construction
    
    
    202,523
    
    
    
    163,206
    
    
    
    114,528
    
    
    
    60,967
    
    
    
    25,760Real estate  mortgage
    
    
    402,843
    
    
    
    299,219
    
    
    
    225,119
    
    
    
    142,520
    
    
    
    61,037Installment loans to individuals
    
    
    28,368
    
    
    
    30,136
    
    
    
    26,859
    
    
    
    24,997
    
    
    
    19,083683,375
    
    
    
    539,924
    
    
    
    408,911
    
    
    
    264,245
    
    
    
    134,851Deferred loan fees and costs
    
    
    (198
    )
    
    
    (215
    )
    
    
    (269
    )
    
    
    (181
    )
    
    
    (64
    )Less allowance for loan losses
    
    
    (11,013
    )
    
    
    (6,267
    )
    
    
    (5,244
    )
    
    
    (3,194
    )
    
    
    (1,705
    )Loans, net
    
    $
    672,164
    
    
    $
    533,442
    
    
    $
    403,398
    
    
    $
    260,870
    
    
    $
    133,082
 Maturities and sensitivities to changes in interest rates
  30




---



##### Table of Contents



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
    
    $
    21,937
    
    
    $
    20,671
    
    
    $
    7,033
    
    
    $
    49,641
    
    
    $
    7,470
    
    
    $
    20,234Real estate 
construction
    
    
    150,051
    
    
    
    51,042
    
    
    
    1,430
    
    
    
    202,523
    
    
    
    9,458
    
    
    
    43,014Total
    
    $
    171,988
    
    
    $
    71,713
    
    
    $
    8,463
    
    
    $
    252,164
    
    
    $
    16,928
    
    
    $
    63,248
 
 (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
  December 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004(Dollars in Thousands)Non-accrual loansCommercial and industrial
    
    $
    1,048
    
    
    $
    94
    
    
    $
    
    
    
    $
    
    
    
    $
    6Real estate  construction
    
    
    23,858
    
    
    
    1,110
    
    
    
    
    
    
    
    
    
    
    
    Real estate  mortgage
    
    
    11,632
    
    
    
    883
    
    
    
    269
    
    
    
    219
    
    
    
    94Installment loans to individuals
    
    
    323
    
    
    
    197
    
    
    
    84
    
    
    
    33
    
    
    
    Total non-accrual loans
    
    $
    36,861
    
    
    $
    2,284
    
    
    $
    353
    
    
    $
    252
    
    
    $
    100Loans 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
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Real estate  construction
    
    
    4,640
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Real estate  mortgage
    
    
    215
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Installment loans to individuals
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total restructured loans
    
    $
    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
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
 31




---



##### Table of Contents



Interest income that would have been recorded on nonaccrual loans under
original terms
    
    $
    4,064,889Interest income that was recorded on nonaccrual loans
    
    
    2,893,948Reduction in interest income
    
    $
    1,170,941
     Summary of Loan Loss Experience
  Accounting for Contingencies Accounting by Creditors for Impairment of a
Loan
 32




---



##### Table of Contents



33




---



##### Table of Contents



December 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004(Dollars in Thousands)Average balance of loans outstanding
    
    $
    633,201
    
    
    $
    485,631
    
    
    $
    348,869
    
    
    $
    178,332
    
    
    $
    90,832Balance of allowance for loan losses at beginning
of year
    
    $
    6,267
    
    
    $
    5,244
    
    
    $
    3,194
    
    
    $
    1,705
    
    
    $
    460Charge-offs:Commercial and industrial
    
    
    (1,078
    )
    
    
    (207
    )
    
    
    (207
    )
    
    
    (69
    )
    
    
    0Real estate  construction
    
    
    (1,073
    )
    
    
    (106
    )
    
    
    0
    
    
    
    0
    
    
    
    0Real estate  mortgage
    
    
    (1,769
    )
    
    
    (609
    )
    
    
    (182
    )
    
    
    (74
    )
    
    
    0Installment loans to individuals
    
    
    (326
    )
    
    
    (466
    )
    
    
    (361
    )
    
    
    (210
    )
    
    
    (38
    )Total
    
    
    (4,246
    )
    
    
    (1,388
    )
    
    
    (750
    )
    
    
    (353
    )
    
    
    (38
    )Recoveries:Commercial and industrial
    
    
    24
    
    
    
    1
    
    
    
    2
    
    
    
    0
    
    
    
    0Real estate  construction
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Real estate  mortgage
    
    
    4
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Installment loans to individuals
    
    
    50
    
    
    
    57
    
    
    
    57
    
    
    
    27
    
    
    
    6Total
    
    
    78
    
    
    
    58
    
    
    
    59
    
    
    
    27
    
    
    
    6Net charge-offs
    
    
    (4,168
    )
    
    
    (1,330
    )
    
    
    (691
    )
    
    
    (326
    )
    
    
    (32
    )Additions to allowance charged to operations
    
    
    8,914
    
    
    
    2,353
    
    
    
    2,741
    
    
    
    1,815
    
    
    
    1,277Balance of allowance at end of year
    
    $
    11,013
    
    
    $
    6,267
    
    
    $
    5,244
    
    
    $
    3,194
    
    
    $
    1,705Ratio of net loan charge-offs during the year to
average loans outstanding during the year
    
    
    .66
    %
    
    
    .27
    %
    
    
    .20
    %
    
    
    0.18
    %
    
    
    0.04
    %
  December 312008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004Percent
    
    
    
    
    
    
    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
    
    $
    632
    
    
    
    7.26
    %
    
    $
    426
    
    
    
    8.77
    %
    
    $
    1,263
    
    
    
    10.37
    %
    
    $
    839
    
    
    
    13.53
    %
    
    $
    374
    
    
    
    21.48
    %Real estate 
construction
    
    
    5,452
    
    
    
    29.64
    %
    
    
    2,281
    
    
    
    30.23
    %
    
    
    838
    
    
    
    28.01
    %
    
    
    368
    
    
    
    23.08
    %
    
    
    82
    
    
    
    19.11
    %Real estate 
mortgage
    
    
    4,578
    
    
    
    58.95
    %
    
    
    3,191
    
    
    
    55.42
    %
    
    
    2,869
    
    
    
    55.05
    %
    
    
    1,755
    
    
    
    53.93
    %
    
    
    972
    
    
    
    45.26
    %Installment loans
to individuals
    
    
    351
    
    
    
    4.15
    %
    
    
    369
    
    
    
    5.58
    %
    
    
    274
    
    
    
    6.57
    %
    
    
    232
    
    
    
    9.46
    %
    
    
    277
    
    
    
    14.15
    %$
    11,013
    
    
    
    100.00
    %
    
    $
    6,267
    
    
    
    100.00
    %
    
    $
    5,244
    
    
    
    100.00
    %
    
    $
    3,194
    
    
    
    100.00
    %
    
    $
    1,705
    
    
    
    100.00
    %
  34




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##### Table of Contents



Deposits
  December 31,2008
    
    
    2007
    
    
    2006Amount
    
    
    Rate
    
    
    Amount
    
    
    Rate
    
    
    Amount
    
    
    Rate(Dollars in Thousands)Non-interest bearing demand deposits
    
    $
    38,822
    
    
    
    
    
    
    $
    32,281
    
    
    
    
    
    
    $
    22,953Interest-bearing demand and savings
deposits
    
    
    186,544
    
    
    
    2.15
    %
    
    
    147,356
    
    
    
    3.24
    %
    
    
    113,039
    
    
    
    3.04
    %Time deposits
    
    
    458,644
    
    
    
    4.26
    %
    
    
    382,061
    
    
    
    5.33
    %
    
    
    238,291
    
    
    
    4.90
    %$
    684,010
    
    
    
    
    
    
    $
    561,698
    
    
    
    
    
    
    $
    374,283
  (Dollars inThousands)Three months or less
    
    $
    63,635Over three months through six months
    
    
    68,792Over six through 12 months
    
    
    54,743Over 12 months
    
    
    49,147$
    236,317
 Return on Equity and Assets
  For the Years EndingDecember 31,2008
    
    2007
    
    2006Return on average assets
    
    
    (.66
    %)
    
    
    .33
    %
    
    
    .06
    %Return on average equity
    
    
    (7.53
    %)
    
    
    3.16
    %
    
    
    .43
    %Average equity as a percentage
of average assets
    
    
    8.77
    %
    
    
    10.32
    %
    
    
    13.62
    %
 Liquidity
  35




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##### Table of Contents



Regulatory capital requirements
  MinimumRegulatoryMinimum
    
    Requirement forRegulatory
    
    Well CapitalizedRequirement
    
    Status
    
    ActualTier 1 capital to risk adjusted assets
    
    
    4.00
    %
    
    
    6.00
    %
    
    
    9.42
    %Total capital to risk adjusted assets
    
    
    8.00
    %
    
    
    10.00
    %
    
    
    10.67
    %Tier 1 leverage ratio (to average quarterly assets)
    
    
    4.00
    %
    
    
    5.00
    %
    
    
    7.65
    %
  Off Balance Sheet Arrangements
   December 31,2008
    
    
    2007
    
    
    2006(Dollars in Thousands)Commitments to extend credit
    
    $
    52,382
    
    
    $
    62,064
    
    
    $
    67,460Letters of credit
    
    
    957
    
    
    
    1,404
    
    
    
    702$
    53,339
    
    
    $
    63,468
    
    
    $
    68,162
  Asset/liability management
   36




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##### Table of Contents



Analysis of Interest Sensitivity
As of December 31, 2008
(Dollars in Thousands)
 0 - 3
    
    3 - 12
    
    Over 1Months
    
    Months
    
    Year
    
    TotalInterest-earning assets:Interest-bearing deposits in banks
    
    
    11,042
    
    
    
    
    
    
    
    
    
    
    
    11,042Securities
    
    
    
    
    
    
    
    
    
    
    71,764
    
    
    
    71,764FHLB stock
    
    
    2,053
    
    
    
    
    
    
    
    
    
    
    
    2,053Federal funds sold
    
    
    722
    
    
    
    
    
    
    
    
    
    
    
    722Loans (1)
    
    
    245,548
    
    
    
    122,914
    
    
    
    277,856
    
    
    
    646,318Total interest-earning assets
    
    
    259,365
    
    
    
    122,914
    
    
    
    349,620
    
    
    
    731,899Interest-bearing liabilities:Interest-bearing demand deposits
    
    
    81,285
    
    
    
    
    
    
    
    
    
    
    
    81,285Savings and money markets
    
    
    128,314
    
    
    
    
    
    
    
    
    
    
    
    128,314Time deposits
    
    
    128,735
    
    
    
    284,565
    
    
    
    79,233
    
    
    
    492,533Federal Home Loan Bank borrowings
    
    
    
    
    
    
    
    
    
    
    16,750
    
    
    
    16,750Total interest-bearing liabilities
    
    
    338,334
    
    
    
    284,565
    
    
    
    95,983
    
    
    
    718,882Interest rate sensitivity gap
    
    
    (78,969
    )
    
    
    (161,651
    )
    
    
    253,637
    
    
    
    13,017Cumulative interest rate sensitivity gap
    
    
    (78,969
    )
    
    
    (240,620
    )
    
    
    13,017Interest rate sensitivity gap ratio
    
    
    .77
    
    
    
    .43
    
    
    
    3.64Cumulative interest rate sensitivity gap ratio
    
    
    .77
    
    
    
    .61
    
    
    
    1.02
  (1)
    
    Excludes nonaccrual loans totaling approximately $36,681 million. 37




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##### Table of Contents



Effects of Inflation
   Contractual Obligations
  Payment Due by PeriodMoreLess than 1
    
    
    
    
    
    
    
    
    
    
    than 5Contractual Obligations
    
    Total
    
    
    year
    
    
    1-3 years
    
    
    3-5 years
    
    
    yearsOperating lease obligations
    
    $
    85,920
    
    
    $
    43,420
    
    
    $
    42,500
    
    
    $
    
    
    
    $
    Purchase obligations
    
    
    610,529
    
    
    
    610,529
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    696,449
    
    
    $
    653,949
    
    
    $
    42,500
    
    
    $
    
    
    
    $
    
  ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk.
  38




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##### Table of Contents



ITEM
8. Financial Statements and Supplementary Data.
   Quarterly Period EndedMarch 31
    
    
    June 30
    
    
    September 30
    
    
    December 31Year 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 loans 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 (loss)
    
    $
    290
    
    
    $
    (763
    )
    
    $
    (928
    )
    
    $
    (3,674
    )Basic earnings (losses) per share
    
    $
    0.02
    
    
    $
    (0.06
    )
    
    $
    (0.08
    )
    
    $
    (0.29
    )Diluted earnings(losses) per share
    
    $
    0.02
    
    
    $
    (0.06
    )
    
    $
    (0.08
    )
    
    $
    (0.29
    )Year ended December 31, 2007Interest income
    
    $
    10,752
    
    
    $
    11,579
    
    
    $
    12,393
    
    
    $
    12,274Interest expense
    
    
    (5,656
    )
    
    
    (6,211
    )
    
    
    (6,645
    )
    
    
    (6,682
    )Net interest income
    
    
    5,096
    
    
    
    5,368
    
    
    
    5,748
    
    
    
    5,592Provision for loan losses
    
    
    (292
    )
    
    
    (501
    )
    
    
    (841
    )
    
    
    (719
    )Net interest income after provision
for loans losses
    
    
    4,804
    
    
    
    4,867
    
    
    
    4,907
    
    
    
    4,873Other income
    
    
    821
    
    
    
    834
    
    
    
    889
    
    
    
    893Other expenses
    
    
    (5,037
    )
    
    
    (5,150
    )
    
    
    (5,624
    )
    
    
    (5,601
    )Income before income taxes
    
    
    588
    
    
    
    551
    
    
    
    172
    
    
    
    165Income tax (expense) benefit
    
    
    
    
    
    
    636
    
    
    
    (33
    )
    
    
    (24
    )Net income
    
    $
    588
    
    
    $
    1,187
    
    
    $
    139
    
    
    $
    141Basic earnings per share
    
    $
    0.05
    
    
    $
    0.10
    
    
    $
    0.01
    
    
    $
    0.01Diluted earnings per share
    
    $
    0.05
    
    
    $
    0.09
    
    
    $
    0.01
    
    
    $
    0.01
  39




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##### Table of Contents



ITEM
9. Changes and Disagreements with Accountants on Accounting and Financial Disclosure.
   ITEM
9A. Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control Over Financial Reporting
  Managements Annual Report on Internal Control over Financing Reporting
    Attestation Report of the Registered Public Accounting Firm
   ITEM
9B. Other Information.
   PART III
  ITEM
10. Directors, Executive Officers and Corporate Governance.
  40




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##### Table of Contents



ITEM
11. Executive Compensation.
   ITEM 12.
    
    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 and
    
    
    securities reflected inPlan
category
    
    and rights
    
    
    rights
    
    
    column (a))Equity compensation
plans approved by
security holders
    
    
    999,277
    
    
    $
    5.86
    
    
    
    292,493Equity compensation
plans not approved
by security holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    999,277
    
    
    $
    5.86
    
    
    
    292,493
  ITEM
13. Certain Relationships and Related Transactions, and Director Independence.
   ITEM
14. Principal Accountant Fees and Services.
   PART IV
  ITEM
15. Exhibits and Financial Statement Schedules
 (a)
    
    The following documents are filed as a part of this report:Report of Independent Registered Public Accounting FirmConsolidated Balance Sheets as of December 31, 2008 and 2007
Consolidated Statements of Operations for Years Ended December 31, 2008, 2007 and 2006Consolidated Statements of Comprehensive Income (Loss) for Years Ended December 31, 2008,
2007 and 2006Consolidated Statements of Stockholders Equity for Years Ended December 31, 2008, 2007 and
2006Consolidated Statements of Cash Flows for Years Ended December 31, 2008, 2007 and 2006
Notes to Consolidated Financial StatementsThe exhibits identified in (b) below.
 41




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##### Table of Contents





(b)
    
    The following exhibits are furnished with this registration statement.


Exhibit No.
    
    Name of Exhibit3.1
    
    Articles of Incorporation, as amended3.2
    
    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 *10.4
    
    Employment Agreement with Teresa L. Martin *10.5
    
    Employment Agreement with Gregory S. Akins *10.6
    
    Employment Agreement with W. Brett Morgan *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 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 CEO and CFO pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002




|  |  |                                                                     
|- |  | --------------------------------------------------------------------
|* |  | Indicates a management contract or compensatory plan or arrangement.

SIGNATURES




FGBC BANCSHARES, INC.By:
    
    /s/ Jackie L. Reed
    
    Date:     March 31, 2009Name: Jackie L. ReedTitle: President and Chief Executive Officer




42



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##### Table of Contents



/s/ Jackie L. Reed

Jackie L. Reed
    
    Date:     March 31, 2009Chief Executive Officer and Director[Principal Executive Officer]/s/ Teresa L. Martin

Teresa L. Martin
    
    Date:     March 31, 2009Chief Financial Officer and Executive Vice President[Principal Financial Officer and Principal Accounting Officer]/s/ Roy L. Denny

Roy L. Denny, Director
    
    Date:     March 31, 2009/s/ Walter D. Duke

Walter D. Duke, Director
    
    Date:     March 31, 2009/s/ Wyche T. Green, III

Wyche T. Green, III, Director
    
    Date:     March 31, 2009/s/ Greg M. Hagan

Greg M. Hagan, Director
    
    Date:     March 31, 2009/s/ George B. Hamil, Jr.

George B. Hamil, Jr., Director
    
    Date:     March 31, 2009/s/ Terry L. Harper

Terry L. Harper, Director
    
    Date:     March 31, 2009/s/ Emmett K. Harrod

Emmett K. Harrod, Director
    
    Date:     March 31, 2009/s/ Howard J. Lindsey

Howard J. Lindsey, Director
    
    Date:     March 31, 2009/s/ Dennis H. McDowell

Dennis H. McDowell, Director
    
    Date:     March 31, 2009/s/ Edward R. Newbern

Edward R. Newbern, Director
    
    Date:     March 31, 2009/s/ Randall Pugh

Randall Pugh, Director
    
    Date:     March 31, 2009/s/ Carl R. Sewell, Jr.

Carl R. Sewell, Jr., Director
    
    Date:     March 31, 2009
 43




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##### Table of Contents



/s/ Bart R. Smith

Bart R. Smith, Director
    
    Date:     March 31, 2009/s/ Gleamer L. Smith, Jr.

Gleamer L. Smith, Jr., Director
    
    Date:     March 31, 2009/s/ Robert L. Stewart, Jr.

Robert L. Stewart, Jr., Director
    
    Date:     March 31, 2009
 44