##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D. C. 20549
 
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
 For the quarterly period ended: June 30, 2010
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934.
 For the transition period from  to
 Commission File Number: 000-51957
 FGBC BANCSHARES, INC.
  Georgia
    
    20 - 02743161(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification Number)
 101 Main Street, Franklin, Georgia 30217
 (678) 839-4510  (Issuers telephone number)
 N/A  (Former name, former
address and former fiscal year, if changed since last report)
  þ o
  o o
  Large accelerated filer o
    

Accelerated filer o
    

Non-accelerated filer þ
(Do not check if a smaller reporting company)
    

Smaller reporting company o
  o þ




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##### 



INDEX
 PagePart I. FINANCIAL INFORMATION
    
    
    4Item 1.Financial Statements
    
    
    4Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    14Item 3.Quantitative and Qualitative Disclosures About Market Risk
    
    
    22Item 4.Controls and Procedures
    
    
    24Part II. OTHER INFORMATION
    
    
    24Item 1.Legal Proceedings
    
    
    24Item 1A. Risk Factors
    
    
    24Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    24Item 3.Defaults Upon Senior Securities
    
    
    24Item 4.(Removed and Reserved)
    
    
    25Item 5.Other Information
    
    
    25Item 6.Exhibits
    
    
    26EX-31.1EX-32.1EX-32




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CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 FGBC BANCSHARES, INC. AND SUBSIDIARY
 CONSOLIDATED BALANCE SHEETS
JUNE 30, 2010 AND DECEMBER 31, 2009
 June 30,
    
    
    December 31,2010
    
    
    2009(unaudited)
    
    
    (audited)AssetsCash and due from banks
    
    $
    17,942,048
    
    
    $
    15,752,900Interest-bearing deposits in banks
    
    
    112,878,227
    
    
    
    68,547,359Federal funds sold
    
    
    
    
    
    
    Securities available-for-sale, at fair value
    
    
    48,276,601
    
    
    
    44,955,347Restricted equity securities, at cost
    
    
    2,694,000
    
    
    
    2,694,000Loans
    
    
    560,300,984
    
    
    
    612,213,063Less allowance for loan losses
    
    
    14,180,964
    
    
    
    12,879,081Loans, net
    
    
    546,120,020
    
    
    
    599,333,982Premises and equipment
    
    
    36,215,523
    
    
    
    37,045,578Foreclosed assets
    
    
    30,012,263
    
    
    
    13,740,602Accrued interest receivable
    
    
    2,672,585
    
    
    
    2,929,608Other assets
    
    
    4,719,540
    
    
    
    7,201,231Total assets
    
    $
    801,530,807
    
    
    $
    792,200,607Liabilities and Stockholders EquityLiabilitiesDeposits:Noninterest-bearing
    
    $
    46,473,926
    
    
    $
    37,663,983Interest-bearing
    
    
    702,837,398
    
    
    
    697,125,137Total deposits
    
    
    749,311,324
    
    
    
    734,789,120Other borrowings
    
    
    22,000,000
    
    
    
    22,000,000Accrued interest payable
    
    
    570,159
    
    
    
    531,655Other liabilities
    
    
    858,050
    
    
    
    502,237Total liabilities
    
    
    772,739,533
    
    
    
    757,823,012Stockholders equityPreferred stock, par value $0; 10,000,000 shares authorized;
0 shares issued and outstanding
    
    
    
    
    
    
    Common stock, par value $0; 100,000,000 shares authorized;
13,993,233 shares issued and outstanding
    
    
    77,535,569
    
    
    
    77,440,952Accumulated deficit
    
    
    (48,684,798
    )
    
    
    (42,741,631
    )Accumulated other comprehensive income (loss)
    
    
    93,543
    
    
    
    (321,726
    )Treasury stock, 66,251 shares
    
    
    (153,040
    )
    
    
    Total stockholders equity
    
    
    28,791,274
    
    
    
    34,377,595Total liabilities and stockholders equity
    
    $
    801,530,807
    
    
    $
    792,200,607
 See notes to consolidated financial statements.
 4




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FGBC BANCSHARES, INC. AND SUBSIDIARY
 CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2010 AND 2009
AND SIX MONTHS ENDED JUNE 30, 2010 AND 2009
(Unaudited)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Interest income:Loans, including fees
    
    $
    8,323,704
    
    
    $
    9,399,340
    
    
    $
    16,896,284
    
    
    $
    18,816,636Taxable securities
    
    
    388,681
    
    
    
    452,922
    
    
    
    762,308
    
    
    
    1,076,069Nontaxable securities
    
    
    55,496
    
    
    
    141,693
    
    
    
    118,943
    
    
    
    288,702Federal funds sold
    
    
    35,401
    
    
    
    2,805
    
    
    
    35,401
    
    
    
    13,831Other interest income
    
    
    65,882
    
    
    
    46,021
    
    
    
    152,613
    
    
    
    94,716Total interest income
    
    
    8,869,164
    
    
    
    10,042,781
    
    
    
    17,965,549
    
    
    
    20,289,954Interest expense:Deposits
    
    
    3,268,581
    
    
    
    4,759,980
    
    
    
    6,593,492
    
    
    
    10,142,879Other borrowings
    
    
    115,880
    
    
    
    1,567
    
    
    
    230,486
    
    
    
    437,764Total interest expense
    
    
    3,384,461
    
    
    
    4,761,547
    
    
    
    6,823,978
    
    
    
    10,580,643Net interest income
    
    
    5,484,703
    
    
    
    5,281,234
    
    
    
    11,141,571
    
    
    
    9,709,311Provision for loan losses
    
    
    4,348,173
    
    
    
    4,332,170
    
    
    
    6,619,495
    
    
    
    6,251,177Net interest income after provision for
loan losses
    
    
    1,136,530
    
    
    
    949,064
    
    
    
    4,522,076
    
    
    
    3,458,134Other income:Service charges on deposit accounts
    
    
    528,406
    
    
    
    534,232
    
    
    
    1,025,891
    
    
    
    992,771Mortgage origination fees
    
    
    220,425
    
    
    
    311,597
    
    
    
    349,269
    
    
    
    636,583Net gain on sale of securities available for
sale
    
    
    145,623
    
    
    
    10,739
    
    
    
    371,941
    
    
    
    721,331Net gain on sale of premises and equipment
    
    
    10,340
    
    
    
    
    
    
    
    19,340
    
    
    
    Other operating income
    
    
    135,236
    
    
    
    65,599
    
    
    
    264,152
    
    
    
    144,802Total other income
    
    
    1,040,030
    
    
    
    922,167
    
    
    
    2,030,593
    
    
    
    2,495,487Other expenses:Salaries and employee benefits
    
    
    2,382,165
    
    
    
    2,882,676
    
    
    
    4,828,353
    
    
    
    6,027,152Equipment and occupancy expenses
    
    
    739,880
    
    
    
    849,244
    
    
    
    1,503,896
    
    
    
    1,686,401Net loss on sale of foreclosed assets
    
    
    186,461
    
    
    
    199,489
    
    
    
    282,343
    
    
    
    291,656Write down on foreclosed assets
    
    
    580,785
    
    
    
    557,247
    
    
    
    652,484
    
    
    
    557,247Foreclosed asset expenses
    
    
    632,640
    
    
    
    444,525
    
    
    
    1,179,135
    
    
    
    587,474FDIC insurance premiums
    
    
    719,259
    
    
    
    700,445
    
    
    
    1,614,348
    
    
    
    1,168,217Other operating expenses
    
    
    1,298,261
    
    
    
    1,322,909
    
    
    
    2,435,277
    
    
    
    2,624,323Total other expenses
    
    
    6,539,451
    
    
    
    6,956,535
    
    
    
    12,495,836
    
    
    
    12,942,470Loss before income taxes
    
    
    (4,362,891
    )
    
    
    (5,085,304
    )
    
    
    (5,943,167
    )
    
    
    (6,988,849
    )Income tax benefit
    
    
    
    
    
    
    (1,929,562
    )
    
    
    
    
    
    
    (2,657,218
    )Net loss
    
    
    (4,362,891
    )
    
    
    (3,155,742
    )
    
    
    (5,943,167
    )
    
    
    (4,331,631
    )Basic losses per share
    
    $
    (0.31
    )
    
    $
    (0.25
    )
    
    $
    (0.42
    )
    
    $
    (0.35
    )Diluted losses per share
    
    $
    (0.31
    )
    
    $
    (0.25
    )
    
    $
    (0.42
    )
    
    $
    (0.35
    )Cash dividends per share
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
 See Notes to Consolidated Financial Statements.
 5




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FGBC BANCSHARES, INC. AND SUBSIDIARY
 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
THREE MONTHS ENDED JUNE 30, 2010 AND 2009
AND SIX MONTHS ENDED JUNE 30, 2010 AND 2009
(Unaudited)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Net loss
    
    $
    (4,362,891
    )
    
    $
    (3,155,742
    )
    
    $
    (5,943,167
    )
    
    $
    (4,331,631
    )Other comprehensive income (loss):Reclassification adjustment for net gains on sales of
securities
included in net income, net of tax of $0 and $4,081 for
(three months) and $0 and $274,106 for (six months)
    
    
    (145,623
    )
    
    
    (6,658
    )
    
    
    (371,941
    )
    
    
    (447,225
    )Net unrealized holding gains on securities available for sale
arising during period, net of tax benefit of $0 and $178,980
for (three months) and $0 and $155,222 for (six months)
    
    
    605,718
    
    
    
    (292,021
    )
    
    
    787,210
    
    
    
    (253,258
    )Other comprehensive income (loss)
    
    
    460,095
    
    
    
    (298,679
    )
    
    
    415,269
    
    
    
    (700,483
    )Comprehensive income (loss)
    
    $
    (3,902,796
    )
    
    $
    (3,454,421
    )
    
    $
    (5,527,898
    )
    
    $
    (5,032,114
    )
 See Notes to Consolidated Financial Statements.
 6




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FGBC BANCSHARES, INC. AND SUBSIDIARY
 CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2010 AND 2009
(Unaudited)
 2010
    
    
    2009OPERATING ACTIVITIESNet loss
    
    $
    (5,943,167
    )
    
    $
    (4,331,631
    )Adjustments to reconcile net loss to net cash provided by
operating activities:Depreciation
    
    
    864,868
    
    
    
    984,437Provision for loan losses
    
    
    6,619,495
    
    
    
    6,251,177Amortization and accretion of securities
    
    
    166,407
    
    
    
    84,392Writedowns of foreclosed assets
    
    
    652,484
    
    
    
    557,247Stock compensation expense
    
    
    94,617
    
    
    
    155,884Deferred taxes
    
    
    
    
    
    
    1,012,421Net gain on sale of securities available-for-sale
    
    
    (370,326
    )
    
    
    (721,331
    )Net loss on sale of foreclosed assets
    
    
    348,074
    
    
    
    339,710Gain on sale of premises and equipment
    
    
    (19,340
    )
    
    
    Decrease in income taxes payable
    
    
    
    
    
    
    (1,684,597
    )Decrease in interest receivable
    
    
    257,023
    
    
    
    228,873Increase (decrease) in interest payable
    
    
    38,504
    
    
    
    (263,106
    )Net other operating activities
    
    
    2,837,504
    
    
    
    710,302Net cash provided by operating activities
    
    
    5,195,916
    
    
    
    3,323,778INVESTING ACTIVITIES(Increase) decrease in interest-bearing deposits in banks
    
    
    (44,033,398
    )
    
    
    6,746,697Purchases of securities available for sale
    
    
    (29,618,741
    )
    
    
    (24,151,260
    )Proceeds from maturities of securities available for sale
    
    
    2,396,014
    
    
    
    11,007,608Proceeds from sales of securities available for sale
    
    
    24,717,848
    
    
    
    35,832,302Purchases of restricted equity securities
    
    
    
    
    
    
    (640,600
    )Decrease in federal funds sold
    
    
    
    
    
    
    722,000Net decrease in loans
    
    
    25,515,802
    
    
    
    17,896,905Purchase of premises and equipment
    
    
    (34,813
    )
    
    
    (959,672
    )Proceeds from sale of foreclosed assets
    
    
    3,839,944
    
    
    
    3,433,500Proceeds from sale of premises and equipment
    
    
    19,340
    
    
    
    Additions to other real estate owned
    
    
    (33,498
    )
    
    
    (133,548
    )Net cash provided by (used in) investing activities
    
    
    (17,231,502
    )
    
    
    49,753,932FINANCING ACTIVITIESNet increase (decrease) in deposits
    
    
    14,522,204
    
    
    
    (34,502,752
    )Net proceeds from other borrowings
    
    
    
    
    
    
    10,250,000Proceeds from sale of common stock
    
    
    
    
    
    
    1,721,531Proceeds from exercise of stock options
    
    
    
    
    
    
    142,013Purchase of fractional shares of common stock
    
    
    
    
    
    
    Net cash provided by (used in) financing activities
    
    
    14,522,204
    
    
    
    (22,389,208
    )Net increase in cash and due from banks
    
    
    2,486,618
    
    
    
    30,688,502Cash and due from banks, beginning of period
    
    
    15,752,900
    
    
    
    8,858,796Cash and due from banks, end of period
    
    $
    18,239,518
    
    
    $
    39,547,298SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATIONCash paid during period for:Interest
    
    $
    6,785,473
    
    
    $
    10,861,286Income taxes
    
    $
    
    
    
    $
    NONCASH TRANSACTIONSFinanced sales of foreclosed assets
    
    $
    915,088
    
    
    $
    1,522,002Loans transferred to foreclosed assets
    
    $
    21,993,753
    
    
    $
    13,817,509Treasury stock acquired in collection of loan
    
    $
    153,041
    
    
    $
    
 See notes to consolidated financial statements.
 7




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FGBC BANCSHARES, INC.
AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2010
(Unaudited)
 NOTE 1. BASIS OF PRESENTATION
   NOTE 2. REGULATORY OVERSIGHT, CAPITAL ADEQUACY AND MANAGEMENTS PLANS
    NOTE 3. EARNINGS (LOSSES) PER SHARE
  8




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Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Basic losses per share:Weighted average common shares outstanding
    
    
    13,993,233
    
    
    
    12,533,357
    
    
    
    13,993,233
    
    
    
    12,521,148Net loss
    
    $
    (4,362,891
    )
    
    $
    (3,155,742
    )
    
    $
    (5,822,413
    )
    
    $
    (4,331,631
    )Basic losses per share
    
    $
    (0.31
    )
    
    $
    (0.25
    )
    
    $
    (0.42
    )
    
    $
    (0.35
    )Diluted losses per share:Weighted average common shares outstanding
    
    
    13,993,233
    
    
    
    12,533,357
    
    
    
    13,993,233
    
    
    
    12,521,148Net effect of the assumed exercise of stock
options based on the treasury stock method
using average market prices for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total weighted average common shares and
common stock equivalents outstanding
    
    
    13,993,233
    
    
    
    12,533,357
    
    
    
    13,993,233
    
    
    
    12,521,148Net loss
    
    $
    (4,362,891
    )
    
    $
    (3,155,742
    )
    
    $
    (5,822,413
    )
    
    $
    (4,331,631
    )Diluted losses per share
    
    $
    (0.31
    )
    
    $
    (0.25
    )
    
    $
    (0.42
    )
    
    $
    (0.35
    )
  NOTE 4. ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS
 Disclosures about the Credit Quality of
Financing Receivables and the Allowance for Credit Losses
   9




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NOTE 5. FAIR VALUE DISCLOSURES
 Determination of Fair Value
   Fair Value Hierarchy
       Cash and cash equivalents and interest-bearing deposits in banks:
 Securities Available for Sale:
 Restricted equity securities:
 10




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Loans:
 Foreclosed Assets:
 Deposits:
 Other Borrowings:
 Accrued Interest:
  (Dollars In Thousands)Quoted Prices inActive Markets for
    
    
    Significant Other
    
    
    SignificantIdentical Assets
    
    
    Observable Inputs
    
    
    Unobservable InputsJune 30, 2010
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    Fair ValueAvailable for sale securities
    
    $
    
    
    
    $
    48,277
    
    
    $
    
    
    
    $
    48,277Total assets at fair value
    
    $
    
    
    
    $
    48,277
    
    
    $
    
    
    
    $
    48,277December 31, 2009Available for sale securities
    
    $
    
    
    
    $
    44,955
    
    
    $
    
    
    
    $
    44,955Total assets at fair value
    
    $
    
    
    
    $
    44,955
    
    
    $
    
    
    
    $
    44,955
  (Dollars In Thousands)Quoted Prices inActive Markets for
    
    
    Significant Other
    
    
    SignificantIdentical Assets
    
    
    Observable Inputs
    
    
    Unobservable InputsJune 30, 2010
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    Total Gains (Losses)Impaired loans
    
    $
    
    
    
    $
    21,799
    
    
    $
    18,267
    
    
    $
    (2,551
    )Foreclosed assets
    
    
    
    
    
    
    12,471
    
    
    
    17,501
    
    
    
    (652
    )Total
    
    $
    
    
    
    $
    34,270
    
    
    $
    35,768
    
    
    $
    (3,203
    )December 31, 2009Impaired loans
    
    $
    
    
    
    $
    24,665
    
    
    $
    24,452
    
    
    $
    (19,256
    )Foreclosed assets
    
    
    
    
    
    
    5,165
    
    
    
    8,575
    
    
    
    (1,251
    )Total
    
    $
    
    
    
    $
    29,830
    
    
    $
    33,027
    
    
    $
    (20,507
    )
 11




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##### Table of Contents



June 30, 2010
    
    
    December 31, 2009Carrying
    
    
    
    
    
    
    CarryingAmount
    
    
    Fair Value
    
    
    Amount
    
    
    Fair Value(Dollars In Thousands)Financial Assets:Cash and cash equivalents
    
    $
    130,820
    
    
    $
    130,820
    
    
    $
    84,300
    
    
    $
    84,300Securities available-for-sale
    
    
    48,277
    
    
    
    48,277
    
    
    
    44,955
    
    
    
    44,955Restricted equity securities
    
    
    2,694
    
    
    
    2,694
    
    
    
    2,694
    
    
    
    2,694Loans, net
    
    
    546,120
    
    
    
    544,794
    
    
    
    599,334
    
    
    
    596,516Accrued interest receivable
    
    
    2,673
    
    
    
    2,673
    
    
    
    3,104
    
    
    
    3,104Financial Liabilities:Deposits
    
    $
    749,311
    
    
    $
    753,484
    
    
    $
    734,789
    
    
    $
    739,833Other borrowings
    
    
    22,000
    
    
    
    22,145
    
    
    
    22,000
    
    
    
    21,243Accrued interest payable
    
    
    570
    
    
    
    570
    
    
    
    532
    
    
    
    532
 NOTE 5. SECURITIES AVAILABLE-FOR-SALE
  Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueJune 30, 2010:U.S. Government-sponsored
Enterprises (GSEs)
    
    $
    14,795,058
    
    
    $
    104,269
    
    
    $
    
    
    
    $
    14,899,327Mortgage-backed securities
GSE residential
    
    
    25,625,250
    
    
    
    319,586
    
    
    
    
    
    
    
    25,944,836State, county and municipals
    
    
    5,224,004
    
    
    
    8,568
    
    
    
    (246,229
    )
    
    
    4,986,343Corporate securities
    
    
    2,538,746
    
    
    
    
    
    
    
    (92,651
    )
    
    
    2,446,095$
    48,183,058
    
    
    $
    432,423
    
    
    $
    (338,880
    )
    
    $
    48,276,601December 31, 2009:U.S. Government-sponsored
Enterprises (GSEs)
    
    $
    1,500,000
    
    
    $
    
    
    
    $
    (16,406
    )
    
    $
    1,483,594Mortgage-backed securities
GSE residential
    
    
    35,043,311
    
    
    
    215,528
    
    
    
    (294,669
    )
    
    
    34,964,170State, county and municipals
    
    
    6,389,224
    
    
    
    18,909
    
    
    
    (309,052
    )
    
    
    6,099,081Corporate securities
    
    
    2,541,724
    
    
    
    
    
    
    
    (133,222
    )
    
    
    2,408,502$
    45,474,259
    
    
    $
    234,437
    
    
    $
    (753,349
    )
    
    $
    44,955,347
  12




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##### Table of Contents



Temporarily Impaired Securities
  June 30, 2010Less Than 12 Months
    
    
    12 Months or More
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized

    
    
    Fair
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesDescription of SecuritiesU.S. Government-sponsored
enterprises (GSEs)
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Mortgage-backed securities
GSE residential
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    State, county and municipals
    
    
    1,027,547
    
    
    
    (12,285
    )
    
    
    1,998,849
    
    
    
    (233,944
    )
    
    
    3,026,396
    
    
    
    (246,229
    )Corporate securities
    
    
    1,516,095
    
    
    
    (22,651
    )
    
    
    930,000
    
    
    
    (70,000
    )
    
    
    2,446,095
    
    
    
    (92,651
    )Total temporarily impaired securities
    
    $
    2,543,642
    
    
    $
    (34,936
    )
    
    $
    2,928,849
    
    
    $
    (303,944
    )
    
    $
    5,472,491
    
    
    $
    (338,880
    )
 December 31, 2009Less Than 12 Months
    
    
    12 Months or More
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    
    
    
    
    Fair
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Unrealized Losses
    
    
    Value
    
    
    LossesDescription of SecuritiesU.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
    )
  Amortized
    
    
    FairCost
    
    
    ValueFive to Ten Years
    
    $
    7,550,000
    
    
    $
    7,600,456After ten years
    
    
    15,007,808
    
    
    
    14,731,309Mortgage-backed securities
    
    
    25,625,250
    
    
    
    25,944,836$
    48,183,058
    
    
    $
    48,276,601
 13




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##### Table of Contents



Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Gross gains realized
    
    $
    145,623
    
    
    $
    10,739
    
    
    $
    371,942
    
    
    $
    721,331Gross losses realized
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net realized gains
    
    $
    145,623
    
    
    $
    10,739
    
    
    $
    371,942
    
    
    $
    721,331
 
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
  Overview
       14




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##### Table of Contents



Critical Accounting Policies
  Liquidity and Capital Resources
   Tier 1 Leverage
    
    
    Tier 1 Risk-based
    
    
    Total Risk-basedMinimum regulatory requirement
    
    
    4.00
    %
    
    
    4.00
    %
    
    
    8.00
    %Minimum regulatory requirement for well capitalized status
    
    
    5.00
    %
    
    
    6.00
    %
    
    
    10.00
    %Minimum regulatory requirement under consent order
    
    
    8.00
    %
    
    
    6.00
    %
    
    
    10.00
    %Actual ratios at June 30, 2010FGBC Bancshares, Inc.
    
    
    3.50
    %
    
    
    5.09
    %
    
    
    6.35
    %First Georgia Banking Company
    
    
    3.51
    %
    
    
    5.10
    %
    
    
    6.36
    %
  15




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##### Table of Contents



Off-Balance Sheet Risk
   June 30, 2010(Dollars in Thousands)Commitments to extend credit
    
    $
    26,519Letters of credit
    
    
    868$
    27,387
   Financial Condition
  June 30,
    
    
    December 31,2010
    
    
    2009(Dollars in Thousands)Cash and due from banks
    
    $
    17,942
    
    
    $
    15,753Interest-bearing deposits in banks
    
    
    112,878
    
    
    
    68,547Securities, available-for-sale
    
    
    48,277
    
    
    
    44,955Restricted equity securities, at cost
    
    
    2,694
    
    
    
    2,694Loans, net
    
    
    546,120
    
    
    
    599,334Premises and equipment
    
    
    36,216
    
    
    
    37,046Foreclosed assets
    
    
    30,012
    
    
    
    13,741Accrued interest receivable
    
    
    2,673
    
    
    
    2,930Other assets
    
    
    4,719
    
    
    
    7,201$
    801,531
    
    
    $
    792,201Deposits
    
    $
    749,312
    
    
    $
    734,789Other borrowings
    
    
    22,000
    
    
    
    22,000Accrued interest payable
    
    
    570
    
    
    
    532Other liabilities
    
    
    858
    
    
    
    502Stockholders equity
    
    
    28,791
    
    
    
    34,378$
    801,531
    
    
    $
    792,201
  16




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##### Table of Contents



Results of Operations for the Three and Six Months Ended June 30, 2010 and 2009
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(Dollars in Thousands)Interest income
    
    $
    8,869
    
    
    $
    10,043
    
    
    $
    17,965
    
    
    $
    20,290Interest expense
    
    
    (3,384
    )
    
    
    (4,762
    )
    
    
    (6,824
    )
    
    
    (10,581
    )Net interest income
    
    
    5,485
    
    
    
    5,281
    
    
    
    11,141
    
    
    
    9,709Provision for loan losses
    
    
    (4,348
    )
    
    
    (4,332
    )
    
    
    (6,619
    )
    
    
    (6,251
    )Other income
    
    
    1,040
    
    
    
    922
    
    
    
    2,031
    
    
    
    2,495Other expense
    
    
    (6,540
    )
    
    
    (6,957
    )
    
    
    (12,496
    )
    
    
    (12,942
    )Pretax income (loss)
    
    
    (4,363
    )
    
    
    (5,086
    )
    
    
    (5,943
    )
    
    
    (6,989
    )Income tax expense
(benefit)
    
    
    
    
    
    
    (1,930
    )
    
    
    
    
    
    
    (2,657
    )Net income (loss)
    
    $
    (4,363
    )
    
    $
    (3,156
    )
    
    $
    (5,943
    )
    
    $
    (4,332
    )
  Period
    
    Net interest marginJune, 2010
    
    
    2.96
    %March, 2010
    
    
    3.01
    %December, 2009
    
    
    2.88
    %September, 2009
    
    
    2.83
    %June, 2009
    
    
    2.61
    %March, 2009
    
    
    2.32
    %December, 2008
    
    
    2.88
    %September, 2008
    
    
    3.08
    %
 Provision and Allowance for Loan Losses
    17




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18




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##### Table of Contents



June 30, 2010
    
    
    December 31, 2009Percentage of loans
    
    
    
    
    
    
    Percentage of loansAmount
    
    
    in each category
    
    
    Amount
    
    
    in each category(Dollars in Thousands)Commercial and industrial
    
    $
    1,301
    
    
    
    7.06
    %
    
    $
    1,281
    
    
    
    7.19
    %Real estate  construction
    
    
    5,026
    
    
    
    22.54
    %
    
    
    4,700
    
    
    
    24.13
    %Real estate  mortgage
    
    
    7,398
    
    
    
    66.79
    %
    
    
    6,460
    
    
    
    65.11
    %Installment loans to individuals
    
    
    456
    
    
    
    3.61
    %
    
    
    438
    
    
    
    3.57
    %$
    14,181
    
    
    
    100
    %
    
    $
    12,879
    
    
    
    100
    %
  June 30,
    
    
    December 31,2010
    
    
    2009(Dollars in Thousands)Non-accrual loansCommercial and industrial
    
    $
    3,603
    
    
    $
    3,690Real estate  construction
    
    
    11,118
    
    
    
    17,003Real estate  mortgage
    
    
    20,898
    
    
    
    27,734Installment loans to individual
    
    
    599
    
    
    
    293Total non-accrual loans
    
    $
    36,218
    
    
    $
    48,720Loans 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
    
    $
    
    
    
    $
    89Real estate  construction
    
    
    
    
    
    
    Real estate  mortgage
    
    
    
    
    
    
    464Installment loans to individual
    
    
    
    
    
    
    Total restructured loans
    
    $
    
    
    
    $
    553Loans 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 individual
    
    
    
    
    
    
    Total potential problem loans
    
    $
    
    
    
    $
    Interest income that would have been recorded on non-accrual
loans under original terms
    
    $
    1,278Interest income that was recorded on non-accrual loans
    
    
    388Reduction in interest income
    
    $
    890
 19




---



##### Table of Contents



June 30,
    
    
    December 31,2010
    
    
    2009(Dollars in Thousands)Bremen
    
    $
    9,784
    
    
    $
    8,050Carrollton
    
    
    8,630
    
    
    
    8,553Villa Rica
    
    
    4,653
    
    
    
    7,399Dalton
    
    
    4,386
    
    
    
    13,775Other (8 markets)
    
    
    8,765
    
    
    
    10,943Total
    
    $
    36,218
    
    
    
    48,720
    20




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##### Table of Contents



Six Months EndedJune 30,2010
    
    
    2009(Dollars in Thousands)Average amount of loans outstanding
    
    $
    593,149
    
    
    $
    666,254Balance of allowance for loan losses at beginning of period
    
    $
    12,879
    
    
    $
    11,013Loans charged offCommercial and industrial
    
    
    (94
    )
    
    
    (383
    )Real estate  construction
    
    
    (1,371
    )
    
    
    (3,395
    )Real estate  mortgage
    
    
    (3,848
    )
    
    
    (2,380
    )Installment loans to individuals
    
    
    (272
    )
    
    
    (311
    )(5,585
    )
    
    
    (6,469
    )Loans recoveredCommercial and industrial
    
    
    35
    
    
    
    5Real estate  construction
    
    
    97
    
    
    
    5Real estate  mortgage
    
    
    96
    
    
    
    2Installment loans to individuals
    
    
    40
    
    
    
    12268
    
    
    
    24Net charge-offs
    
    
    (5,317
    )
    
    
    (6,445
    )Additions to allowance charged to operating expense during period
    
    
    6,619
    
    
    
    6,251Balance of allowance for loan losses at end of period
    
    $
    14,181
    
    
    $
    10,819Ratio of net loans charged off during the period to
average loans outstanding
    
    
    .90
    %
    
    
    .97
    %
 Foreclosed Assets
  June 30,
    
    
    December 31,2010
    
    
    2009(Dollars in Thousands)Raw land
    
    $
    11,360
    
    
    $
    6,6181-4 family residential
    
    
    7,685
    
    
    
    4,560Subdivision lots
    
    
    5,177
    
    
    
    1,794Commercial real estate
    
    
    2,757
    
    
    
    704Multifamily
    
    
    2,512
    
    
    
    Farmland
    
    
    481
    
    
    
    Other repossessed assets
    
    
    40
    
    
    
    65Total
    
    $
    30,012
    
    
    $
    13,741
  June 30,
    
    
    December 31,2010
    
    
    2009(Dollars in Thousands)Dalton
    
    $
    11,207
    
    
    $
    1,395Villa Rica
    
    
    7,682
    
    
    
    5,885Carrollton
    
    
    4,159
    
    
    
    2,248Jefferson
    
    
    2,959
    
    
    
    1,524Other (8 markets)
    
    
    4,005
    
    
    
    2,689Total
    
    $
    30,012
    
    
    $
    13,741
  21




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Other Income and Expenses
     
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
   22




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##### Table of Contents



Analysis of Interest Sensitivity  As of June 30, 2010
(Dollars in Thousands)
 0-3
    
    
    3-12
    
    
    Over 1Months
    
    
    Months
    
    
    Year
    
    
    TotalInterest-earning assets:Interest-bearing deposits in banks
    
    
    112,878
    
    
    
    
    
    
    
    
    
    
    
    112,878Securities
    
    
    
    
    
    
    
    
    
    
    48,277
    
    
    
    48,277Restricted equity securities
    
    
    2,694
    
    
    
    
    
    
    
    
    
    
    
    2,694Federal funds sold
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Loans (1)
    
    
    74,213
    
    
    
    163,365
    
    
    
    286,431
    
    
    
    524,009Total interest-earning assets
    
    
    189,785
    
    
    
    163,365
    
    
    
    334,708
    
    
    
    687,858Interest-bearing liabilities:Interest-bearing demand deposits
    
    
    70,820
    
    
    
    
    
    
    
    
    
    
    
    70,820Savings and money markets
    
    
    148,450
    
    
    
    
    
    
    
    
    
    
    
    148,450Time deposits
    
    
    96,861
    
    
    
    298,033
    
    
    
    88,673
    
    
    
    483,567Federal Home loan Bank borrowings
    
    
    
    
    
    
    
    
    
    
    22,000
    
    
    
    22,000Total interest-bearing liabilities
    
    
    316,131
    
    
    
    298,033
    
    
    
    110,673
    
    
    
    724,837Interest rate sensitivity gap
    
    
    (126,346
    )
    
    
    (134,668
    )
    
    
    224,035
    
    
    
    (36,979
    )Cumulative interest rate sensitivity gap
    
    
    (126,346
    )
    
    
    (261,014
    )
    
    
    (36,979
    )Interest rate sensitivity gap ratio
    
    
    0.60
    
    
    
    0.55
    
    
    
    3.02Cumulative interest rate sensitivity gap ratio
    
    
    0.60
    
    
    
    0.58
    
    
    
    0.95
 
 (1)
    
    Excludes non-accrual loans totaling approximately $36,217,000 and deferred fees of
approximately $75,000. 23




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##### Table of Contents



Item 4.
    
    Controls and Procedures
  
 PART II. OTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings
  
 Item 1A.
    
    Risk Factors
  The Bank is currently operating under a consent order and may be unable to meet all of the
steps required to be taken under the order. The failure to do so could result in further
regulatory action and operating restrictions and could threaten the viability of the Bank.
  
 Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3.
    
    Defaults Upon Senior Securities
  24




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##### Table of Contents



Item 4.
    
    (Removed and Reserved)
 
 Item 5.
    
    Other Information
 Appointment of W. Brett Morgan as Permanent CEO
  Consent Order
     25




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##### Table of Contents



Item 6.
    
    Exhibits
  31.1
    
    Certificate of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Certificate of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 200232
    
    Certificate of CEO and CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 SIGNATURES
  FGBC BANCSHARES, INC.Date:  August 13, 2010
    /s/ W. Brett MorganW. Brett MorganPrincipal Executive OfficerDate:  August 13, 2010
    /s/ Teresa L. MartinTeresa L. MartinChief Financial Officer 26