##### 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: March 31, 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
    
    (I.R.S. Employerincorporation or organization)
    
    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
    
    Smaller reporting company o(Do
not check if a smaller reporting company)
  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
    
    
    23Part II. OTHER INFORMATION
    
    
    23Item 1. Legal Proceedings
    
    
    23Item 1A. Risk Factors
    
    
    24Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    24Item 3. Defaults Upon Senior Securities
    
    
    24Item 4. Other Information
    
    
    24Item 5. Exhibits
    
    
    24EX-31.1EX-31.2EX-32




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CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS
   3




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PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 FGBC BANCSHARES, INC. AND SUBSIDIARY
 CONSOLIDATED BALANCE SHEETS
 MARCH 31, 2010 AND DECEMBER 31, 2009
 March 31,
    
    
    December 31,2010
    
    
    2009(unaudited)
    
    
    (audited)AssetsCash and due from banks
    
    $
    13,697,344
    
    
    $
    15,752,900Interest-bearing deposits in banks
    
    
    121,103,609
    
    
    
    68,547,359Federal funds sold
    
    
    
    
    
    
    Securities available-for-sale, at fair value
    
    
    48,163,218
    
    
    
    44,955,347Restricted equity securities, at cost
    
    
    2,694,000
    
    
    
    2,694,000Loans
    
    
    592,418,776
    
    
    
    612,213,063Less allowance for loan losses
    
    
    13,328,422
    
    
    
    12,879,081Loans, net
    
    
    579,090,354
    
    
    
    599,333,982Premises and equipment
    
    
    36,622,066
    
    
    
    37,045,578Foreclosed assets
    
    
    19,411,568
    
    
    
    13,740,602Accrued interest receivable
    
    
    3,057,919
    
    
    
    2,929,608Other assets
    
    
    6,724,658
    
    
    
    7,201,231Total assets
    
    $
    830,564,736
    
    
    $
    792,200,607Liabilities and Stockholders EquityLiabilitiesDeposits:Noninterest-bearing
    
    $
    45,026,652
    
    
    $
    37,663,983Interest-bearing
    
    
    729,153,132
    
    
    
    697,125,137Total deposits
    
    
    774,179,784
    
    
    
    734,789,120Other borrowings
    
    
    22,000,000
    
    
    
    22,000,000Accrued interest payable
    
    
    640,667
    
    
    
    531,655Other liabilities
    
    
    973,499
    
    
    
    502,237Total liabilities
    
    
    797,793,950
    
    
    
    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
    
    
    77,488,261
    
    
    
    77,440,952Accumulated deficit
    
    
    (44,321,908
    )
    
    
    (42,741,631
    )Accumulated other comprehensive loss
    
    
    (366,552
    )
    
    
    (321,726
    )Treasury
stock, 8,290 shares
    
    
    (29,015
    )
    
    
    Total stockholders equity
    
    
    32,770,786
    
    
    
    34,377,595Total liabilities and stockholders equity
    
    $
    830,564,736
    
    
    $
    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 MARCH 31, 2010 AND 2009
(Unaudited)
 2010
    
    
    2009Interest income:Loans, including fees
    
    $
    8,572,581
    
    
    $
    9,417,296Taxable securities
    
    
    373,626
    
    
    
    623,147Nontaxable securities
    
    
    63,447
    
    
    
    147,009Federal funds sold
    
    
    
    
    
    
    11,026Other interest income
    
    
    86,731
    
    
    
    48,695Total interest income
    
    
    9,096,385
    
    
    
    10,247,173Interest expense:Deposits
    
    
    3,324,911
    
    
    
    5,382,899Other borrowings
    
    
    114,606
    
    
    
    436,197Total interest expense
    
    
    3,439,517
    
    
    
    5,819,096Net interest income
    
    
    5,656,868
    
    
    
    4,428,077Provision for loan losses
    
    
    2,271,322
    
    
    
    1,919,007Net interest income after provision for
loan losses
    
    
    3,385,546
    
    
    
    2,509,070Other income:Service charges on deposit accounts
    
    
    497,483
    
    
    
    458,539Mortgage origination fees
    
    
    128,845
    
    
    
    324,986Net gain on sale of securities available for sale
    
    
    226,319
    
    
    
    710,592Net gain on sale of premises and equipment
    
    
    9,000
    
    
    
    Other operating income
    
    
    128,916
    
    
    
    79,203Total other income
    
    
    990,563
    
    
    
    1,573,320Other expenses:Salaries and employee benefits
    
    
    2,446,187
    
    
    
    3,144,476Equipment and occupancy expenses
    
    
    764,017
    
    
    
    837,157Net loss on sale of foreclosed assets
    
    
    95,881
    
    
    
    92,167Write down on foreclosed assets
    
    
    71,700
    
    
    
    Foreclosed asset expenses
    
    
    546,495
    
    
    
    142,948FDIC insurance premiums
    
    
    895,089
    
    
    
    467,772Other operating expenses
    
    
    1,137,016
    
    
    
    1,301,415Total other expenses
    
    
    5,956,385
    
    
    
    5,985,935Net loss before income taxes
    
    
    (1,580,276
    )
    
    
    (1,903,545
    )Income tax benefit
    
    
    
    
    
    
    (727,656
    )Net loss
    
    $
    (1,580,276
    )
    
    $
    (1,175,889
    )Basic losses per share
    
    $
    (0.11
    )
    
    $
    (0.09
    )Diluted losses per share
    
    $
    (0.11
    )
    
    $
    (0.09
    )Cash dividends per share
    
    $
    
    
    
    $
    
 See notes to consolidated financial statements.
 5




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FGBC BANCSHARES, INC. AND SUBSIDIARY
 CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
THREE MONTHS ENDED MARCH 31, 2010 AND 2009
(Unaudited)
 2010
    
    
    2009Net loss
    
    $
    (1,580,276
    )
    
    $
    (1,175,889
    )Other comprehensive loss:Reclassification adjustment for net gains on sales of securities
included in net loss, net of tax of $0 and $270,025, respectively
    
    
    (226,319
    )
    
    
    (440,567
    )Net unrealized holding gains on securities available for sale
arising during period, net of tax benefit of $27,474 and $23,758, respectively
    
    
    181,493
    
    
    
    38,763Other comprehensive loss
    
    
    (44,826
    )
    
    
    (401,804
    )Comprehensive loss
    
    $
    (1,625,102
    )
    
    $
    (1,577,693
    )
 See notes to consolidated financial statements.
 6




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##### Table of Contents



FGBC BANCSHARES, INC. AND SUBSIDIARY
 CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2010 AND 2009
(Unaudited)
 2010
    
    
    2009OPERATING ACTIVITIESNet loss
    
    $
    (1,580,276
    )
    
    $
    (1,175,889
    )Adjustments to reconcile net loss to net cash provided by operating activities:Depreciation
    
    
    441,839
    
    
    
    495,506Provision for loan losses
    
    
    2,271,322
    
    
    
    1,919,007Amortization and accretion of securities
    
    
    93,942
    
    
    
    15,067Writedowns of foreclosed assets
    
    
    71,700
    
    
    
    43,121Stock compensation expense
    
    
    47,309
    
    
    
    79,663Deferred taxes
    
    
    
    
    
    
    (96,294
    )Net gain on sale of securities available-for-sale
    
    
    (226,319
    )
    
    
    (710,592
    )Net loss on sale of foreclosed assets
    
    
    95,881
    
    
    
    92,167Gain on sale of premises and equipment
    
    
    (9,000
    )
    
    
    Decrease in income taxes payable
    
    
    
    
    
    
    (93,328
    )(Increase) decrease in interest receivable
    
    
    (128,311
    )
    
    
    499,783Increase in interest payable
    
    
    109,012
    
    
    
    16,650Net other operating activities
    
    
    945,481
    
    
    
    (360,641
    )Net cash provided by operating activities
    
    
    2,132,580
    
    
    
    724,220INVESTING ACTIVITIES(Increase) decrease in interest-bearing deposits in banks
    
    
    (52,556,250
    )
    
    
    7,041,414Purchases of securities available for sale
    
    
    (13,204,254
    )
    
    
    (17,137,895
    )Proceeds from maturities of securities available for sale
    
    
    1,440,843
    
    
    
    1,710,592Proceeds from sales of securities available for sale
    
    
    8,615,617
    
    
    
    34,761,480Purchases of restricted equity securities
    
    
    
    
    
    
    (246,900
    )Decrease in federal funds sold
    
    
    
    
    
    
    (14,749,000
    )Net decrease in loans
    
    
    10,566,913
    
    
    
    10,587,337Purchase of premises and equipment
    
    
    (18,327
    )
    
    
    (677,722
    )Proceeds from sale of foreclosed assets
    
    
    1,596,770
    
    
    
    1,571,068Proceeds from sale of premises and equipment
    
    
    9,000
    
    
    
    Additions to other real estate owned
    
    
    (29,112
    )
    
    
    (43,864
    )Net cash provided by (used in) investing activities
    
    
    (43,578,800
    )
    
    
    22,816,510FINANCING ACTIVITIESNet increase in deposits
    
    
    39,390,664
    
    
    
    10,856,514Net repayments of other borrowings
    
    
    
    
    
    
    (16,750,000
    )Proceeds from exercise of stock options
    
    
    
    
    
    
    115,586Net cash provided by financing activities
    
    
    39,390,664
    
    
    
    (5,777,900
    )Net increase (decrease) in cash and due from banks
    
    
    (2,055,556
    )
    
    
    17,762,830Cash and due from banks, beginning of period
    
    
    15,752,900
    
    
    
    8,858,796Cash and due from banks, end of period
    
    $
    13,697,344
    
    
    $
    26,621,626SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATIONCash paid during period for:Interest
    
    $
    3,439,517
    
    
    $
    5,819,511Income taxes
    
    $
    
    
    
    $
    NONCASH TRANSACTIONSFinanced sales of foreclosed assets
    
    $
    222,266
    
    
    $
    593,300Loans transferred to foreclosed assets
    
    $
    7,627,659
    
    
    $
    7,260,481Treasury stock acquired in collection of loan
    
    $
    29,015
    
    
    $
    
 See notes to consolidated financial statements.
 7




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FGBC BANCSHARES, INC.
AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010
(Unaudited)
 NOTE 1. BASIS OF PRESENTATION
   NOTE 2. REGULATORY OVERSIGHT, CAPITAL ADEQUACY AND MANAGEMENTS PLANS
   
    
    Achieving and maintaining a minimum Tier 1 Leverage Ratio of 8%; and
    
    Planning for the scheduled reduction of certain classified assets; and
    
    No cash dividends may be paid without prior regulatory approval.
   NOTE 3. EARNINGS (LOSSES) PER SHARE
  8




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Three Months EndedMarch 31,2010
    
    
    2009Basic earnings (losses) per share:Weighted average common shares outstanding
    
    
    13,993,233
    
    
    
    12,508,802Net income (loss)
    
    $
    (1,580,276
    )
    
    $
    (1,175,889
    )Basic earnings (losses) per share
    
    $
    (0.11
    )
    
    $
    (0.09
    )Diluted earnings (losses) per share:Weighted average common shares outstanding
    
    
    13,993,233
    
    
    
    12,508,802Net 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
    
    
    
    12,508,802Net income (loss)
    
    $
    (1,580,276
    )
    
    $
    (1,175,889
    )Diluted earnings (losses) per share
    
    $
    (0.11
    )
    
    $
    (0.09
    )
  NOTE 4. ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS
  Subsequent Events: Amendments
to Certain Recognition and Disclosure Requirements
 NOTE 5. FAIR VALUE DISCLOSURES
 Determination of Fair Value
   9




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##### Table of Contents



Fair Value Hierarchy
       Cash and cash equivalents and interest-bearing deposits in banks:
 Securities Available for Sale:
 Restricted equity securities:
 Loans:
 10




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##### Table of Contents



Foreclosed Assets:
 Deposits:
 Other Borrowings:
 Accrued Interest:
  (Dollars In Thousands)Quoted Prices inActive Markets for
    
    
    Significant Other
    
    
    SignificantIdentical Assets
    
    
    Observable Inputs
    
    
    Unobservable Inputs(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    Fair ValueMarch 31, 2010Available for sale securities
    
    $
    
    
    
    $
    48,163
    
    
    $
    
    
    
    $
    48,163Total assets at fair value
    
    $
    
    
    
    $
    48,163
    
    
    $
    
    
    
    $
    48,163December 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 Inputs(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    Total Gains (Losses)March 31, 2010Impaired loans
    
    $
    
    
    
    $
    22,953
    
    
    $
    22,652
    
    
    $
    (1,534
    )Foreclosed assets
    
    
    
    
    
    
    5,950
    
    
    
    13,461
    
    
    
    (72
    )Total
    
    $
    
    
    
    $
    28,903
    
    
    $
    36,113
    
    
    $
    (1,606
    )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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March 31, 2010
    
    
    December 31, 2009Carrying
    
    
    
    
    
    
    CarryingAmount
    
    
    Fair Value
    
    
    Amount
    
    
    Fair Value(Dollars In Thousands)Financial Assets:Cash and cash equivalents
    
    $
    134,801
    
    
    $
    134,801
    
    
    $
    84,300
    
    
    $
    84,300Securities available-for-sale
    
    
    48,163
    
    
    
    48,163
    
    
    
    44,955
    
    
    
    44,955Restricted equity securities
    
    
    2,694
    
    
    
    2,694
    
    
    
    2,694
    
    
    
    2,694Loans, net
    
    
    579,090
    
    
    
    577,455
    
    
    
    599,334
    
    
    
    596,516Accrued interest receivable
    
    
    3,058
    
    
    
    3,058
    
    
    
    3,104
    
    
    
    3,104Financial Liabilities:Deposits
    
    $
    774,180
    
    
    $
    778,946
    
    
    $
    734,789
    
    
    $
    739,833Other borrowings
    
    
    22,000
    
    
    
    21,707
    
    
    
    22,000
    
    
    
    21,243Accrued interest payable
    
    
    641
    
    
    
    641
    
    
    
    532
    
    
    
    532
 NOTE 5. SECURITIES AVAILABLE-FOR-SALE
  Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueMarch 31, 2010:U.S. Government-sponsored
Enterprises (GSEs)
    
    $
    1,500,000
    
    
    $
    7,031
    
    
    $
    
    
    
    $
    1,507,031Mortgage-backed securities
GSE residential
    
    
    38,769,745
    
    
    
    76,869
    
    
    
    (246,652
    )
    
    
    38,599,962State, county and municipals
    
    
    5,944,437
    
    
    
    6,573
    
    
    
    (313,115
    )
    
    
    5,637,895Corporate securities
    
    
    2,540,249
    
    
    
    
    
    
    
    (121,919
    )
    
    
    2,418,330$
    48,754,431
    
    
    $
    90,473
    
    
    $
    (681,686
    )
    
    $
    48,163,218December 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
  12




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March 31, 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
    
    
    26,918,628
    
    
    
    (246,652
    )
    
    
    
    
    
    
    
    
    
    
    26,918,628
    
    
    
    (246,652
    )State, county and municipals
    
    
    542,651
    
    
    
    (14,821
    )
    
    
    2,433,139
    
    
    
    (298,294
    )
    
    
    2,975,790
    
    
    
    (313,115
    )Corporate securities
    
    
    930,000
    
    
    
    (70,000
    )
    
    
    1,488,330
    
    
    
    (51,919
    )
    
    
    2,418,330
    
    
    
    (121,919
    )Total temporarily impaired securities
    
    $
    28,391,279
    
    
    $
    (331,473
    )
    
    $
    3,921,469
    
    
    $
    (350,213
    )
    
    $
    32,312,748
    
    
    $
    (681,686
    )
 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
    
    
    ValueAfter ten years
    
    $
    9,984,686
    
    
    $
    9,563,256Mortgage-backed securities
    
    
    38,769,745
    
    
    
    38,599,962$
    48,754,431
    
    
    $
    48,163,218
  Three Months EndedMarch 31,2010
    
    
    2009Gross gains
    
    $
    226,319
    
    
    $
    710,592Gross losses
    
    
    
    
    
    
    Net realized gains
    
    $
    226,319
    
    
    $
    710,592
 13




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
  Overview
     Critical Accounting Policies
  Liquidity and Capital Resources
  14




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##### Table of Contents



Tier 1
    
    TotalTier 1
    
    Risk-
    
    Risk-Leverage
    
    based
    
    basedMinimum regulatory requirement
    
    
    4.00
    %
    
    
    4.00
    %
    
    
    8.00
    %Minimum regulatory requirement for well capitalized status
    
    
    5.00
    %
    
    
    6.00
    %
    
    
    10.00
    %Actual ratios at March 31, 2010FGBC Bancshares, Inc.
    
    
    4.05
    %
    
    
    5.60
    %
    
    
    6.86
    %First Georgia Banking Company
    
    
    4.04
    %
    
    
    5.57
    %
    
    
    6.84
    %
  Off-Balance Sheet Risk
   March 31, 2010(Dollars in Thousands)Commitments to extend credit
    
    $
    34,343Letters of credit
    
    
    913$
    35,256
   15




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##### Table of Contents



Financial Condition
  March 31,
    
    
    December 31,2010
    
    
    2009(Dollars in Thousands)Cash and due from banks
    
    $
    13,698
    
    
    $
    15,753Interest-bearing deposits in banks
    
    
    121,104
    
    
    
    68,547Securities, available-for-sale
    
    
    48,163
    
    
    
    44,955Restricted equity securities, at cost
    
    
    2,694
    
    
    
    2,694Loans, net
    
    
    579,090
    
    
    
    599,334Premises and equipment
    
    
    36,622
    
    
    
    37,046Foreclosed assets
    
    
    19,412
    
    
    
    13,741Accrued interest receivable
    
    
    3,058
    
    
    
    2,930Other assets
    
    
    6,724
    
    
    
    7,201$
    830,565
    
    
    $
    792,201Deposits
    
    $
    774,180
    
    
    $
    734,789Other borrowings
    
    
    22,000
    
    
    
    22,000Accrued interest payable
    
    
    641
    
    
    
    532Other liabilities
    
    
    973
    
    
    
    502Stockholders equity
    
    
    32,771
    
    
    
    34,378$
    830,565
    
    
    $
    792,201
   Results of Operations for the Three Months Ended March 31, 2010 and 2009
  Three Months EndedMarch 31,2010
    
    
    2009(Dollars in Thousands)Interest income
    
    $
    9,096
    
    
    $
    10,247Interest expense
    
    
    (3,440
    )
    
    
    (5,819
    )Net interest income
    
    
    5,656
    
    
    
    4,428Provision for loan losses
    
    
    (2,271
    )
    
    
    (1,919
    )Other income
    
    
    991
    
    
    
    1,573Other expense
    
    
    (5,956
    )
    
    
    (5,986
    )Pretax loss
    
    
    (1,580
    )
    
    
    (1,904
    )Income tax benefit
    
    
    
    
    
    
    (728
    )Net loss
    
    $
    (1,580
    )
    
    $
    (1,176
    )
  16




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##### Table of Contents



Net interestPeriod
    
    marginMarch, 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
    %June, 2008
    
    
    3.17
    %
 Provision and Allowance for Loan Losses
      17




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March 31, 2010
    
    
    December 31, 2009Percentage of loans
    
    
    
    
    
    
    Percentage of loansAmount
    
    
    in each category
    
    
    Amount
    
    
    in each category(Dollars in Thousands)Commercial and industrial
    
    $
    1,474
    
    
    
    7.41
    %
    
    $
    1,281
    
    
    
    7.19
    %Real estate  construction
    
    
    4,919
    
    
    
    23.54
    %
    
    
    4,700
    
    
    
    24.13
    %Real estate  mortgage
    
    
    6,498
    
    
    
    65.83
    %
    
    
    6,460
    
    
    
    65.11
    %Installment loans to individuals
    
    
    437
    
    
    
    3.22
    %
    
    
    438
    
    
    
    3.57
    %$
    13,328
    
    
    
    100
    %
    
    $
    12,879
    
    
    
    100
    %
  18




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##### Table of Contents



March 31,
    
    
    December 31,2010
    
    
    2009(Dollars in Thousands)Non-accrual loansCommercial and industrial
    
    $
    3,727
    
    
    $
    3,690Real estate  construction
    
    
    16,841
    
    
    
    17,003Real estate  mortgage
    
    
    23,986
    
    
    
    27,734Installment loans to individual
    
    
    366
    
    
    
    293Total non-accrual loans
    
    $
    44,920
    
    
    $
    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
    
    $
    137
    
    
    $
    89Real estate  construction
    
    
    
    
    
    
    Real estate  mortgage
    
    
    159
    
    
    
    464Installment loans to individual
    
    
    
    
    
    
    Total restructured loans
    
    $
    552
    
    
    $
    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
    
    $
    554Interest income that was recorded on non-accrual loans
    
    
    201Reduction in interest income
    
    $
    353
    19




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##### Table of Contents



March 31,
    
    
    December 31,2010
    
    
    2009(Dollars in Thousands)Dalton
    
    $
    11,930
    
    
    $
    13,775Bremen
    
    
    7,735
    
    
    
    8,050Carrollton
    
    
    7,666
    
    
    
    8,553Villa Rica
    
    
    7,331
    
    
    
    7,399Other (8 markets)
    
    
    10,258
    
    
    
    10,943Total
    
    $
    44,920
    
    
    
    48,720
     Three Months EndedMarch 31,2010
    
    
    2009(Dollars in Thousands)Average amount of loans outstanding
    
    $
    604,332
    
    
    $
    676,446Balance of allowance for loan losses at beginning of period
    
    $
    12,879
    
    
    $
    11,013Loans charged offCommercial and industrial
    
    
    (98
    )
    
    
    (105
    )Real estate  construction
    
    
    (270
    )
    
    
    (797
    )Real estate  mortgage
    
    
    (1,364
    )
    
    
    (409
    )Installment loans to individuals
    
    
    (149
    )
    
    
    (149
    )(1,881
    )
    
    
    (1,460
    )Loans recoveredCommercial and industrial
    
    
    5
    
    
    
    1Real estate  construction
    
    
    17
    
    
    
    5Real estate  mortgage
    
    
    5
    
    
    
    2Installment loans to individuals
    
    
    32
    
    
    
    559
    
    
    
    13Net charge-offs
    
    
    (1,822
    )
    
    
    (1,447
    )Additions to allowance charged to operating expense during period
    
    
    2,271
    
    
    
    1,919Balance of allowance for loan losses at end of period
    
    $
    13,328
    
    
    $
    11,485Ratio of net loans charged off during the period to
average loans outstanding
    
    
    .30
    %
    
    
    .21
    %
 20




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Foreclosed Assets
  March 31,
    
    
    December 31,2010
    
    
    2009(Dollars in Thousands)Raw land
    
    $
    7,513
    
    
    $
    6,618Subdivision lots
    
    
    2,506
    
    
    
    1,7941-4 family residential
    
    
    5,863
    
    
    
    4,560Multifamily
    
    
    1,679
    
    
    
    Commercial real estate
    
    
    1,340
    
    
    
    704Farmland
    
    
    481
    
    
    
    Other repossessed assets
    
    
    30
    
    
    
    65Total
    
    $
    19,412
    
    
    $
    13,741
  March 31,
    
    
    December 31,2010
    
    
    2009(Dollars in Thousands)Villa Rica
    
    $
    6,446
    
    
    $
    5,885Dalton
    
    
    4,860
    
    
    
    1,395Carrollton
    
    
    3,684
    
    
    
    2,248Jefferson
    
    
    1,596
    
    
    
    1,524Other (8 markets)
    
    
    2,826
    
    
    
    2,689Total
    
    $
    19,412
    
    
    $
    13,741
  Other Income and Expenses
   21




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Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
     22




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##### Table of Contents



Analysis of Interest Sensitivity  As of March 31, 2010
(Dollars in Thousands)
 0  3
    
    
    3-12
    
    
    Over 1Months
    
    
    Months
    
    
    Year
    
    
    TotalInterest-earning assets:Interest-bearing deposits in banks
    
    
    121,104
    
    
    
    
    
    
    
    
    
    
    
    121,104Securities
    
    
    
    
    
    
    
    
    
    
    48,163
    
    
    
    48,163Restricted equity securities
    
    
    2,694
    
    
    
    
    
    
    
    
    
    
    
    2,694Federal funds sold
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Loans (1)
    
    
    155,498
    
    
    
    127,191
    
    
    
    264,896
    
    
    
    547,585Total interest-earning assets
    
    
    279,296
    
    
    
    127,191
    
    
    
    313,059
    
    
    
    719,546Interest-bearing liabilities:Interest-bearing demand deposits
    
    
    89,357
    
    
    
    
    
    
    
    
    
    
    
    89,357Savings and money markets
    
    
    158,199
    
    
    
    
    
    
    
    
    
    
    
    158,199Time deposits
    
    
    94,715
    
    
    
    270,085
    
    
    
    116,797
    
    
    
    481,597Federal Home loan Bank borrowings
    
    
    
    
    
    
    
    
    
    
    22,000
    
    
    
    22,000Total interest-bearing liabilities
    
    
    342,271
    
    
    
    270,085
    
    
    
    138,797
    
    
    
    751,153Interest rate sensitivity gap
    
    
    (62,975
    )
    
    
    (142,894
    )
    
    
    174,262
    
    
    
    (31,607
    )Cumulative interest rate sensitivity gap
    
    
    (62,975
    )
    
    
    (205,869
    )
    
    
    (31,607
    )Interest rate sensitivity gap ratio
    
    
    .82
    
    
    
    0.47
    
    
    
    2.26Cumulative interest rate sensitivity gap ratio
    
    
    .82
    
    
    
    0.66
    
    
    
    0.96
 
 (1)
    
    Excludes non-accrual loans totaling approximately $44,920,000 and deferred fees of
approximately $84,000.  
 Item 4.
    
    Controls and Procedures
  
 PART II. OTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings
  23




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##### Table of Contents



Item 1A.
    
    Risk Factors
  
 Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3.
    
    Defaults Upon Senior Securities
  
 Item 4.
    
    Other Information
  
 Item 5.
    
    Exhibits
  31.1
    
    Certificate of Interim 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 Interim CEO and CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 24




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##### Table of Contents



SIGNATURES
  FGBC BANCSHARES, INC.Date:  May 14, 2010
    /s/ W. Brett MorganW. Brett MorganInterim Principal Executive OfficerDate:  May 14, 2010
    /s/ Teresa L. MartinTeresa L. MartinChief Financial Officer 25