##### 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: September 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
 (Issuers telephone number)
 (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
    
    
    15Item 3.Quantitative and Qualitative Disclosures About Market Risk
    
    
    24Item 4.Controls and Procedures
    
    
    26Part II. OTHER INFORMATION
    
    
    26Item 6.Exhibits
    
    
    26EX-10.1EX-31.1EX-31.2EX-32




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CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS
   
    
    our ability to meet the conditions outlined in the Consent Order imposed on our
bank subsidiary;
    
    difficult market conditions and economic trends;
    
    our concentration in real estate loans;
    
    increased carrying costs and the probability of additional impairment charges
associated with foreclosed assets;
    
    our ability to maintain liquidity or access other sources of funding;
    
    changes in the cost and availability of funding;
    
    competition from other financial institutions and financial service providers;
    
    increasing FDIC insurance premiums brought on by systemic industry
deterioration in conjunction with higher risk ratings assigned to our bank;
    
    recently enacted financial regulations that could have a negative impact on us.
  3




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1.
    
    Financial Statements
 FGBC BANCSHARES, INC. AND SUBSIDIARY
 CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2010 AND DECEMBER 31, 2009
 September 30,
    
    
    December 31,2010
    
    
    2009(unaudited)
    
    
    (audited)AssetsCash and due from banks
    
    $
    15,180,842
    
    
    $
    15,752,900Interest-bearing deposits in banks
    
    
    135,047,722
    
    
    
    68,547,359Securities available-for-sale, at fair value
    
    
    49,972,435
    
    
    
    44,955,347Restricted equity securities, at cost
    
    
    2,500,900
    
    
    
    2,694,000Loans
    
    
    539,404,715
    
    
    
    612,213,063Less allowance for loan losses
    
    
    13,814,540
    
    
    
    12,879,081Loans, net
    
    
    525,590,175
    
    
    
    599,333,982Premises and equipment
    
    
    35,805,795
    
    
    
    37,045,578Foreclosed assets
    
    
    31,313,508
    
    
    
    13,740,602Accrued interest receivable
    
    
    2,823,098
    
    
    
    2,929,608Other assets
    
    
    3,852,758
    
    
    
    7,201,231Total assets
    
    $
    802,087,233
    
    
    $
    792,200,607Liabilities and Stockholders EquityLiabilitiesDeposits:Noninterest-bearing
    
    $
    50,676,315
    
    
    $
    37,663,983Interest-bearing
    
    
    702,516,253
    
    
    
    697,125,137Total deposits
    
    
    753,192,568
    
    
    
    734,789,120Other borrowings
    
    
    22,000,000
    
    
    
    22,000,000Accrued interest payable
    
    
    537,020
    
    
    
    531,655Other liabilities
    
    
    683,753
    
    
    
    502,237Total liabilities
    
    
    776,413,341
    
    
    
    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;
13,926,982 and 13,993,233 shares issued and outstanding, respectively
    
    
    77,582,877
    
    
    
    77,440,952Accumulated deficit
    
    
    (52,039,480
    )
    
    
    (42,741,631
    )Accumulated other comprehensive income (loss)
    
    
    196,746
    
    
    
    (321,726
    )Treasury stock, 66,251 shares
    
    
    (66,251
    )
    
    
    Total stockholders equity
    
    
    25,673,892
    
    
    
    34,377,595Total liabilities and stockholders equity
    
    $
    802,087,233
    
    
    $
    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 SEPTEMBER 30, 2010 AND 2009
AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009
(Unaudited)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Interest income:Loans, including fees
    
    $
    8,061,197
    
    
    $
    9,205,976
    
    
    $
    24,957,481
    
    
    $
    28,022,612Taxable securities
    
    
    395,343
    
    
    
    415,401
    
    
    
    1,157,650
    
    
    
    1,491,470Nontaxable securities
    
    
    53,382
    
    
    
    139,889
    
    
    
    172,325
    
    
    
    428,591Federal funds sold
    
    
    21,605
    
    
    
    5,990
    
    
    
    57,006
    
    
    
    19,821Other interest income
    
    
    75,553
    
    
    
    58,539
    
    
    
    228,166
    
    
    
    153,255Total interest income
    
    
    8,607,080
    
    
    
    9,825,795
    
    
    
    26,572,628
    
    
    
    30,115,749Interest expense:Deposits
    
    
    3,071,299
    
    
    
    3,936,107
    
    
    
    9,664,790
    
    
    
    14,078,986Other borrowings
    
    
    117,153
    
    
    
    11,015
    
    
    
    347,639
    
    
    
    448,779Total interest expense
    
    
    3,188,452
    
    
    
    3,947,122
    
    
    
    10,012,429
    
    
    
    14,527,765Net interest income
    
    
    5,418,628
    
    
    
    5,878,673
    
    
    
    16,560,199
    
    
    
    15,587,984Provision for loan losses
    
    
    1,463,964
    
    
    
    11,796,831
    
    
    
    8,083,459
    
    
    
    18,048,008Net interest income (expense) after
provision for loan losses
    
    
    3,954,664
    
    
    
    (5,918,158
    )
    
    
    8,476,740
    
    
    
    (2,460,024
    )Other income:Service charges on deposit accounts
    
    
    561,312
    
    
    
    538,105
    
    
    
    1,587,203
    
    
    
    1,530,876Mortgage origination fees
    
    
    267,886
    
    
    
    212,108
    
    
    
    617,155
    
    
    
    848,691Net gain on sale of securities available for sale
    
    
    48,535
    
    
    
    1,896
    
    
    
    420,476
    
    
    
    723,227Net gain on sale (loss) of premises and
equipment
    
    
    (605
    )
    
    
    
    
    
    
    18,735
    
    
    
    Other operating income
    
    
    157,069
    
    
    
    62,206
    
    
    
    421,221
    
    
    
    207,008Total other income
    
    
    1,034,197
    
    
    
    814,315
    
    
    
    3,064,790
    
    
    
    3,309,802Other expenses:Salaries and employee benefits
    
    
    2,359,980
    
    
    
    2,785,035
    
    
    
    7,188,333
    
    
    
    8,812,187Equipment and occupancy expenses
    
    
    752,623
    
    
    
    846,834
    
    
    
    2,256,520
    
    
    
    2,533,235Net loss on sale of foreclosed assets
    
    
    383,732
    
    
    
    474,261
    
    
    
    666,074
    
    
    
    813,873Write down on foreclosed assets
    
    
    1,978,374
    
    
    
    549,613
    
    
    
    2,630,858
    
    
    
    1,106,859Foreclosed asset expenses
    
    
    591,828
    
    
    
    822,634
    
    
    
    1,770,964
    
    
    
    1,410,107FDIC insurance premiums
    
    
    867,785
    
    
    
    445,409
    
    
    
    2,482,132
    
    
    
    1,613,626Other operating expenses
    
    
    1,409,222
    
    
    
    1,365,445
    
    
    
    3,844,498
    
    
    
    3,941,814Total other expenses
    
    
    8,343,544
    
    
    
    7,289,231
    
    
    
    20,839,379
    
    
    
    20,231,701Loss before income taxes
    
    
    (3,354,683
    )
    
    
    (12,393,074
    )
    
    
    (9,297,849
    )
    
    
    (19,381,923
    )Income tax benefit
    
    
    
    
    
    
    (2,068,347
    )
    
    
    
    
    
    
    (4,725,565
    )Net loss
    
    
    (3,354,683
    )
    
    
    (10,324,727
    )
    
    
    (9,297,849
    )
    
    
    (14,656,358
    )Basic losses per share
    
    $
    (0.24
    )
    
    $
    (0.76
    )
    
    $
    (0.67
    )
    
    $
    (1.14
    )Diluted losses per share
    
    $
    (0.24
    )
    
    $
    (0.76
    )
    
    $
    (0.67
    )
    
    $
    (1.14
    )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 SEPTEMBER 30, 2010 AND 2009
AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009
(Unaudited)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Net loss
    
    $
    (3,354,683
    )
    
    $
    (10,324,727
    )
    
    $
    (9,297,849
    )
    
    $
    (14,656,358
    )Other comprehensive income (loss):Reclassification adjustment for net gains on sales of
securities
included in net income, net of tax of $0 and $720 for
(three months) and $0 and $274,826 for (nine months)
    
    
    (48,535
    )
    
    
    (1,175
    )
    
    
    (420,476
    )
    
    
    (448,401
    )Net unrealized holding gains on securities available for sale
arising during period, net of tax benefit of $0 and $890,196
for (three months) and $0 and $734,974 for (nine months)
    
    
    179,211
    
    
    
    1,452,424
    
    
    
    938,947
    
    
    
    1,199,167Other comprehensive income (loss)
    
    
    130,676
    
    
    
    1,451,249
    
    
    
    518,471
    
    
    
    750,766Comprehensive income
    
    $
    (3,224,007
    )
    
    $
    (8,873,478
    )
    
    $
    (8,779,378
    )
    
    $
    13,905,592
 See Notes to Consolidated Financial Statements.
 6




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FGBC BANCSHARES, INC. AND SUBSIDIARY
 CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009
(Unaudited)
 2010
    
    
    2009OPERATING ACTIVITIESNet loss
    
    $
    (9,297,849
    )
    
    $
    (14,656,358
    )Adjustments to reconcile net loss to net cash provided by operating activities:Depreciation
    
    
    1,285,564
    
    
    
    1,463,020Provision for loan losses
    
    
    8,083,459
    
    
    
    18,048,008Amortization and accretion of securities
    
    
    222,249
    
    
    
    142,593Writedowns of foreclosed assets
    
    
    2,630,858
    
    
    
    1,106,859Stock compensation expense
    
    
    141,925
    
    
    
    232,107Deferred taxes
    
    
    
    
    
    
    (3,715,298
    )Net gain on sale of securities available-for-sale
    
    
    (420,476
    )
    
    
    (723,227
    )Net loss on sale of foreclosed assets
    
    
    666,074
    
    
    
    813,873Gain on sale of premises and equipment
    
    
    (18,735
    )
    
    
    Decrease in income taxes payable
    
    
    
    
    
    
    857,613Decrease in interest receivable
    
    
    106,510
    
    
    
    489,177Increase (decrease) in interest payable
    
    
    5,366
    
    
    
    (364,803
    )Net other operating activities
    
    
    3,282,039
    
    
    
    387,022Net cash provided by operating activities
    
    
    6,686,984
    
    
    
    4,080,586INVESTING ACTIVITIES(Increase) decrease in interest-bearing deposits in banks
    
    
    (66,500,363
    )
    
    
    (20,643,675
    )Purchases of securities available for sale
    
    
    (40,716,354
    )
    
    
    (28,253,010
    )Proceeds from maturities of securities available for sale
    
    
    9,465,585
    
    
    
    14,567,298Proceeds from sales of securities available for sale
    
    
    27,147,567
    
    
    
    38,286,770Redemptions (purchases) of restricted equity securities
    
    
    193,100
    
    
    
    (640,600
    )Decrease in federal funds sold
    
    
    
    
    
    
    722,000Net decrease in loans
    
    
    38,723,264
    
    
    
    17,198,676Purchase of premises and equipment
    
    
    (46,385
    )
    
    
    (1,082,537
    )Proceeds from sale of foreclosed assets
    
    
    6,144,625
    
    
    
    6,870,083Proceeds from sale of premises and equipment
    
    
    19,340
    
    
    
    Additions to other real estate owned
    
    
    (92,869
    )
    
    
    (170,798
    )Net cash provided by (used in) investing activities
    
    
    (25,662,490
    )
    
    
    26,854,207FINANCING ACTIVITIESNet increase (decrease) in deposits
    
    
    18,403,448
    
    
    
    (19,469,968
    )Net proceeds from other borrowings
    
    
    
    
    
    
    (12,750,000
    )Proceeds from sale of common stock
    
    
    
    
    
    
    5,056,667Proceeds from exercise of stock options
    
    
    
    
    
    
    142,013Net cash provided by (used in) financing activities
    
    
    18,403,448
    
    
    
    (27,021,288
    )Net increase in cash and due from banks
    
    
    (572,058
    )
    
    
    3,913,505Cash and due from banks, beginning of period
    
    
    15,752,900
    
    
    
    8,858,796Cash and due from banks, end of period
    
    $
    15,180,842
    
    
    $
    12,772,301SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATIONCash paid during period for:Interest
    
    $
    10,007,064
    
    
    $
    14,545,691Income taxes
    
    $
    
    
    
    $
    NONCASH TRANSACTIONSFinanced sales of foreclosed assets
    
    $
    1,845,671
    
    
    $
    4,331,163Loans transferred to foreclosed assets
    
    $
    28,782,755
    
    
    $
    21,624,657Treasury stock acquired in collection of loan
    
    $
    66,251
    
    
    $
    
 See notes to consolidated financial statements.
 7




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




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NOTE 3. LOSSES PER SHARE
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Basic losses per share:Weighted average common shares outstanding
    
    
    13,948,585
    
    
    
    13,575,392
    
    
    
    13,978,187
    
    
    
    12,876,424Net loss
    
    $
    (3,354,683
    )
    
    $
    (10,324,727
    )
    
    $
    (9,297,849
    )
    
    $
    (14,656,358
    )Basic losses per share
    
    $
    (0.24
    )
    
    $
    (0.76
    )
    
    $
    (0.67
    )
    
    $
    (1.14
    )Diluted losses per share:Weighted average common shares outstanding
    
    
    13,948,585
    
    
    
    13,575,392
    
    
    
    13,978,187
    
    
    
    12,876,873Net 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
    
    
    13,948,585
    
    
    
    13,575,392
    
    
    
    13,978,187
    
    
    
    12,876,424Net loss
    
    $
    (3,354,683
    )
    
    $
    (10,324,727
    )
    
    $
    (9,297,849
    )
    
    $
    (14,656,358
    )Diluted losses per share
    
    $
    (0.24
    )
    
    $
    (0.76
    )
    
    $
    (0.67
    )
    
    $
    (1.14
    )
  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
     10




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Cash and cash equivalents and interest-bearing deposits in banks:
 Securities Available for Sale:
 Restricted equity securities:
 Loans:
 Foreclosed Assets:
 Deposits:
 Other Borrowings:
 Accrued Interest:
 11




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(Dollars In Thousands)Quoted Prices inActive Markets for
    
    
    Significant Other
    
    
    SignificantIdentical Assets
    
    
    Observable Inputs
    
    
    Unobservable InputsSeptember 30, 2010
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    Fair ValueAvailable for sale securities
    
    $
    
    
    
    $
    49,972
    
    
    $
    
    
    
    $
    49,972Total assets at fair value
    
    $
    
    
    
    $
    49,972
    
    
    $
    
    
    
    $
    49,972December 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 InputsSeptember 30, 2010
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    Total Gains (Losses)Impaired loans
    
    $
    
    
    
    $
    26,698
    
    
    $
    15,925
    
    
    $
    (1,457
    )Foreclosed assets
    
    
    
    
    
    
    10,100
    
    
    
    21,176
    
    
    
    (2,482
    )Total
    
    $
    
    
    
    $
    36,798
    
    
    $
    37,101
    
    
    $
    (3,939
    )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
    )
   September 30, 2010
    
    
    December 31, 2009Carrying
    
    
    
    
    
    
    CarryingAmount
    
    
    Fair Value
    
    
    Amount
    
    
    Fair Value(Dollars In Thousands)Financial Assets:Cash and cash equivalents
    
    $
    150,229
    
    
    $
    150,229
    
    
    $
    84,300
    
    
    $
    84,300Securities available-for-sale
    
    
    49,972
    
    
    
    49,972
    
    
    
    44,955
    
    
    
    44,955Restricted equity securities
    
    
    2,501
    
    
    
    2,501
    
    
    
    2,694
    
    
    
    2,694Loans, net
    
    
    525,590
    
    
    
    524,398
    
    
    
    599,334
    
    
    
    596,516Accrued interest receivable
    
    
    2,823
    
    
    
    2,823
    
    
    
    3,104
    
    
    
    3,104Financial Liabilities:Deposits
    
    $
    753,193
    
    
    $
    757,279
    
    
    $
    734,789
    
    
    $
    739,833Other borrowings
    
    
    22,000
    
    
    
    22,544
    
    
    
    22,000
    
    
    
    21,243Accrued interest payable
    
    
    537
    
    
    
    537
    
    
    
    532
    
    
    
    532
 12




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NOTE 5. SECURITIES AVAILABLE-FOR-SALE
  Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueSeptember 30, 2010:U.S. Government-sponsored
Enterprises (GSEs)
    
    $
    9,295,142
    
    
    $
    56,742
    
    
    $
    
    
    
    $
    9,351,884Mortgage-backed securities
GSE residential
    
    
    31,880,419
    
    
    
    453,227
    
    
    
    (62,296
    )
    
    
    32,271,350State, county and municipals
    
    
    6,062,913
    
    
    
    51,003
    
    
    
    (242,870
    )
    
    
    5,871,046Corporate securities
    
    
    2,537,216
    
    
    
    10,939
    
    
    
    (70,000
    )
    
    
    2,478,155$
    49,775,690
    
    
    $
    571,911
    
    
    $
    (375,166
    )
    
    $
    49,972,435December 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
  Temporarily Impaired Securities
  September 30, 2010Less Than 12 Months
    
    
    12 Months or More
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedDescription of Securities
    
    Value
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesU.S. Government-sponsored
enterprises (GSEs)
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Mortgage-backed securities
GSE residential
    
    
    9,172,625
    
    
    
    (62,296
    )
    
    
    
    
    
    
    
    
    
    
    9,172,625
    
    
    
    (62,296
    )State, county and municipals
    
    
    1,275,631
    
    
    
    (62,139
    )
    
    
    2,051,754
    
    
    
    (180,731
    )
    
    
    3,327,385
    
    
    
    (242,870
    )Corporate securities
    
    
    
    
    
    
    
    
    
    
    930,000
    
    
    
    (70,000
    )
    
    
    930,000
    
    
    
    (70,000
    )Total temporarily impaired securities
    
    $
    10,448,256
    
    
    $
    (124,435
    )
    
    $
    2,981,754
    
    
    $
    (250,731
    )
    
    $
    13,430,010
    
    
    $
    (375,166
    )
 13




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##### Table of Contents



December 31, 2009Less Than 12 Months
    
    
    12 Months or More
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedDescription of Securities
    
    Value
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesU.S. Government-sponsored
enterprises (GSEs)
    
    $
    1,483,594
    
    
    $
    (16,406
    )
    
    $
    
    
    
    $
    
    
    
    $
    1,483,594
    
    
    $
    (16,406
    )Mortgage-backed securities
GSE residential
    
    
    24,022,030
    
    
    
    (294,669
    )
    
    
    
    
    
    
    
    
    
    
    24,022,030
    
    
    
    (294,669
    )State, county and municipals
    
    
    1,236,523
    
    
    
    (22,342
    )
    
    
    2,445,005
    
    
    
    (286,710
    )
    
    
    3,681,528
    
    
    
    (309,052
    )Corporate securities
    
    
    930,000
    
    
    
    (70,000
    )
    
    
    1,478,502
    
    
    
    (63,222
    )
    
    
    2,408,502
    
    
    
    (133,222
    )Total temporarily impaired securities
    
    $
    27,672,147
    
    
    $
    (403,417
    )
    
    $
    3,923,507
    
    
    $
    (349,932
    )
    
    $
    31,595,654
    
    
    $
    (753,349
    )
  Amortized
    
    
    FairCost
    
    
    ValueFive to Ten Years
    
    $
    3,550,000
    
    
    $
    3,566,669After ten years
    
    
    14,345,271
    
    
    
    14,134,416Mortgage-backed securities
    
    
    31,880,419
    
    
    
    32,271,350$
    49,775,690
    
    
    $
    49,972,435
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Gross gains realized
    
    $
    50,151
    
    
    $
    1,896
    
    
    $
    422,092
    
    
    $
    723,227Gross losses realized
    
    
    (1,616
    )
    
    
    
    
    
    
    (1,616
    )
    
    
    Net realized gains
    
    $
    48,535
    
    
    $
    1,896
    
    
    $
    420,476
    
    
    $
    723,227
 14




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
  Overview
       15




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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 September 30, 2010FGBC Bancshares, Inc.
    
    
    3.19
    %
    
    
    4.67
    %
    
    
    5.94
    %First Georgia Banking Company
    
    
    3.19
    %
    
    
    4.67
    %
    
    
    5.94
    %
  16




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Off-Balance Sheet Risk
   September 30, 2010(Dollars in Thousands)Commitments to extend credit
    
    $
    26,707Letters of credit
    
    
    903$
    27,610
   Financial Condition
  September 30,
    
    
    December 31,2010
    
    
    2009(Dollars in Thousands)Cash and due from banks
    
    $
    15,181
    
    
    $
    15,753Interest-bearing deposits in banks
    
    
    135,048
    
    
    
    68,547Securities, available-for-sale
    
    
    49,972
    
    
    
    44,955Restricted equity securities, at cost
    
    
    2,501
    
    
    
    2,694Loans, net
    
    
    525,590
    
    
    
    599,334Premises and equipment
    
    
    35,806
    
    
    
    37,046Foreclosed assets
    
    
    31,313
    
    
    
    13,741Accrued interest receivable
    
    
    2,823
    
    
    
    2,930Other assets
    
    
    3,853
    
    
    
    7,201$
    802,087
    
    
    $
    792,201Deposits
    
    $
    753,192
    
    
    $
    734,789Other borrowings
    
    
    22,000
    
    
    
    22,000Accrued interest payable
    
    
    537
    
    
    
    532Other liabilities
    
    
    684
    
    
    
    502Stockholders equity
    
    
    25,674
    
    
    
    34,378$
    802,087
    
    
    $
    792,201
 17




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##### Table of Contents



Results of Operations for the Three and Nine Months Ended September 30, 2010 and 2009
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(Dollars in Thousands)Interest income
    
    $
    8,607
    
    
    $
    9,826
    
    
    $
    26,573
    
    
    $
    30,116Interest expense
    
    
    (3,188
    )
    
    
    (3,947
    )
    
    
    (10,013
    )
    
    
    (14,528
    )Net interest income
    
    
    5,419
    
    
    
    5,879
    
    
    
    16,560
    
    
    
    15,588Provision for loan losses
    
    
    (1,464
    )
    
    
    (11,797
    )
    
    
    (8,083
    )
    
    
    (18,048
    )Other income
    
    
    1,034
    
    
    
    814
    
    
    
    3,065
    
    
    
    3,310Other expense
    
    
    (8,344
    )
    
    
    (7,289
    )
    
    
    (20,839
    )
    
    
    (20,232
    )Pretax loss
    
    
    (3,355
    )
    
    
    (12,393
    )
    
    
    (9,298
    )
    
    
    (19,382
    )Income tax benefit
    
    
    
    
    
    
    (2,068
    )
    
    
    
    
    
    
    (4,726
    )Net loss
    
    $
    (3,355
    )
    
    $
    (10,325
    )
    
    $
    (9,298
    )
    
    $
    (14,656
    )
  Period
    
    Net interest marginSeptember, 2010
    
    
    2.97
    %June, 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
    %
 Provision and Allowance for Loan Losses
   18




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19




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September 30, 2010
    
    
    December 31, 2009Percentage
    
    
    
    
    
    
    Percentageof loans in
    
    
    
    
    
    
    of loans ineach
    
    
    
    
    
    
    eachAmount
    
    
    category
    
    
    Amount
    
    
    category(Dollars in Thousands)Commercial and industrial
    
    $
    227
    
    
    
    6.70
    %
    
    $
    1,281
    
    
    
    7.19
    %Real estate  construction
    
    
    5,670
    
    
    
    21.22
    %
    
    
    4,700
    
    
    
    24.13
    %Real estate  mortgage
    
    
    7,490
    
    
    
    68.71
    %
    
    
    6,460
    
    
    
    65.11
    %Installment loans to individuals
    
    
    428
    
    
    
    3.37
    %
    
    
    438
    
    
    
    3.57
    %$
    13,815
    
    
    
    100
    %
    
    $
    12,879
    
    
    
    100
    %
  September 30,
    
    
    December 31,2010
    
    
    2009(Dollars in Thousands)Non-accrual loansCommercial and industrial
    
    $
    3,788
    
    
    $
    3,690Real estate  construction
    
    
    11,990
    
    
    
    17,003Real estate  mortgage
    
    
    20,578
    
    
    
    27,734Installment loans to individual
    
    
    516
    
    
    
    293Total non-accrual loans
    
    $
    36,872
    
    
    $
    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
    
    
    5,461
    
    
    
    Real estate  mortgage
    
    
    960
    
    
    
    464Installment loans to individual
    
    
    
    
    
    
    Total restructured loans
    
    $
    6,421
    
    
    $
    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
    
    $
    1,837Interest income that was recorded on non-accrual loans
    
    
    753Reduction in interest income
    
    $
    1,084
 20




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September 30,
    
    
    December 31,2010
    
    
    2009(Dollars in Thousands)Carrollton
    
    $
    10,440
    
    
    $
    8,553Bremen
    
    
    8,687
    
    
    
    8,050Dalton
    
    
    4,911
    
    
    
    13,775Villa Rica
    
    
    958
    
    
    
    7,399Other (8 markets)
    
    
    11,876
    
    
    
    10,943Total
    
    $
    36,872
    
    
    
    48,720
   21




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##### Table of Contents



Nine Months EndedSeptember 30,2010
    
    
    2009(Dollars in Thousands)Average amount of loans outstanding
    
    $
    578,622
    
    
    $
    657,497Balance of allowance for loan losses at beginning of period
    
    $
    12,879
    
    
    $
    11,013Loans charged offCommercial and industrial
    
    
    (193
    )
    
    
    (952
    )Real estate  construction
    
    
    (1,892
    )
    
    
    (6,464
    )Real estate  mortgage
    
    
    (5,075
    )
    
    
    (5,872
    )Installment loans to individuals
    
    
    (385
    )
    
    
    (604
    )(7,545
    )
    
    
    (13,892
    )Loans recoveredCommercial and industrial
    
    
    62
    
    
    
    5Real estate  construction
    
    
    99
    
    
    
    5Real estate  mortgage
    
    
    168
    
    
    
    33Installment loans to individuals
    
    
    69
    
    
    
    18398
    
    
    
    61Net charge-offs
    
    
    (7,147
    )
    
    
    (13,831
    )Additions to allowance charged to operating expense during period
    
    
    8,083
    
    
    
    18,048Balance of allowance for loan losses at end of period
    
    $
    13,815
    
    
    $
    15,230Ratio of net loans charged off during the period to
average loans outstanding
    
    
    1.24
    %
    
    
    2.10
    %
 Foreclosed Assets
  September 30,
    
    
    December 31,2010
    
    
    2009(Dollars in Thousands)Raw land
    
    $
    10,165
    
    
    $
    6,6181-4 family residential
    
    
    8,339
    
    
    
    4,560Subdivision lots
    
    
    6,474
    
    
    
    1,794Commercial real estate
    
    
    3,909
    
    
    
    704Multifamily
    
    
    2,389
    
    
    
    Farmland
    
    
    
    
    
    
    Other repossessed assets
    
    
    38
    
    
    
    65Total
    
    $
    31,314
    
    
    $
    13,741
  September 30,
    
    
    December 31,2010
    
    
    2009(Dollars in Thousands)Dalton
    
    $
    11,166
    
    
    $
    1,395Villa Rica
    
    
    9,177
    
    
    
    5,885Carrollton
    
    
    3,838
    
    
    
    2,248Jefferson
    
    
    2,967
    
    
    
    1,524Other (8 markets)
    
    
    4,166
    
    
    
    2,689Total
    
    $
    31,314
    
    
    $
    13,741
 22




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##### Table of Contents



Other Income and Expenses
     23




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##### Table of Contents



Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    24




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##### Table of Contents



Analysis of Interest Sensitivity  As of September 30, 2010
(Dollars in Thousands)
 0 3
    
    
    3-12
    
    
    Over 1Months
    
    
    Months
    
    
    Year
    
    
    TotalInterest-earning assets:Interest-bearing deposits in banks
    
    
    135,048
    
    
    
    
    
    
    
    
    
    
    
    135,048Securities
    
    
    
    
    
    
    
    
    
    
    49,972
    
    
    
    49,972Restricted equity securities
    
    
    2,501
    
    
    
    
    
    
    
    
    
    
    
    2,501Federal funds sold
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Loans (1)
    
    
    99,806
    
    
    
    158,236
    
    
    
    244,549
    
    
    
    502,591Total interest-earning assets
    
    
    237,355
    
    
    
    158,236
    
    
    
    294,521
    
    
    
    690,112Interest-bearing liabilities:Interest-bearing demand deposits
    
    
    75,560
    
    
    
    
    
    
    
    
    
    
    
    75,560Savings and money markets
    
    
    149,438
    
    
    
    
    
    
    
    
    
    
    
    149,438Time deposits
    
    
    73,715
    
    
    
    327,609
    
    
    
    76,194
    
    
    
    477,518Federal Home loan Bank borrowings
    
    
    
    
    
    
    
    
    
    
    22,000
    
    
    
    22,000Total interest-bearing liabilities
    
    
    298,713
    
    
    
    327,609
    
    
    
    98,194
    
    
    
    724,516Interest rate sensitivity gap
    
    
    (61,358
    )
    
    
    (169,373
    )
    
    
    196,327
    
    
    
    (31,726
    )Cumulative interest rate sensitivity gap
    
    
    (61,358
    )
    
    
    (230,731
    )
    
    
    (34,404
    )Interest rate sensitivity gap ratio
    
    
    0.80
    
    
    
    0.48
    
    
    
    3.00Cumulative interest rate sensitivity gap ratio
    
    
    0.80
    
    
    
    0.63
    
    
    
    0.95
 
 (1)
    
    Excludes non-accrual loans totaling approximately $36,872,000 and deferred fees of
approximately $58,000.  25




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Item 4.
    
    Controls and Procedures
  
 PART II. OTHER INFORMATION
 
 Item 6.
    
    Exhibits
  10.1
    
    Amendment to Employment Agreement for W. Brett Morgan31.1
    
    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:  November 15, 2010
    /s/ W. Brett MorganW. Brett MorganPrincipal Executive OfficerDate:  November 15, 2010
    /s/ Teresa L. MartinTeresa L. MartinChief Financial Officer 26