##### 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, 2008o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
1934.For the transition period from ___to ___
  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
 N/A
  þ o
  Large accelerated filer o
    
    Accelerated filer þNon-accelerated filer o
    
    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
    
    
    11Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    16Item 4.
    
    Controls and Procedures
    
    
    17PART II.
    
    OTHER INFORMATION
    
    
    18Item 1.
    
    Legal Proceedings
    
    
    18Item 1A.
    
    Risk Factors
    
    
    18Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    18Item 3.
    
    Defaults Upon Senior Securities
    
    
    18Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    18Item 5.
    
    Other Information
    
    
    18Item 6.
    
    Exhibits
    
    
    18EX-31.1 302 CERTIFICATION OF CEOEX-31.2 302 CERTIFICATION OF CFOEX-32 906 CERTIFICATIONS OF CEO AND CFO




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CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS
   3




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 FGBC BANCSHARES, INC. AND SUBSIDIARY
 CONSOLIDATED BALANCE SHEETS
MARCH 31, 2008 AND DECEMBER 31, 2007
 March 31,
    
    
    December 31,2008
    
    
    2007(unaudited)
    
    
    (audited)AssetsCash and due from banks
    
    $
    11,254,402
    
    
    $
    6,112,287Interest-bearing deposits in banks
    
    
    28,510
    
    
    
    66,017Federal funds sold
    
    
    2,341,000
    
    
    
    20,005,000Securities available-for-sale, at fair value
    
    
    79,797,889
    
    
    
    80,731,983Restricted equity securities, at cost
    
    
    1,907,100
    
    
    
    1,041,800Loans
    
    
    581,689,786
    
    
    
    539,709,171Less allowance for loan losses
    
    
    6,754,561
    
    
    
    6,267,211Loans, net
    
    
    574,935,225
    
    
    
    533,441,960Premises and equipment
    
    
    35,081,897
    
    
    
    34,286,994Other assets
    
    
    10,350,907
    
    
    
    8,947,469Total assets
    
    $
    715,696,930
    
    
    $
    684,633,510Liabilities and Stockholders EquityDeposits:Noninterest-bearing
    
    $
    35,490,116
    
    
    $
    31,526,232Interest-bearing
    
    
    595,995,950
    
    
    
    583,710,127Total deposits
    
    
    631,486,066
    
    
    
    615,236,359Other borrowings
    
    
    15,000,000
    
    
    
    Other liabilities
    
    
    2,209,226
    
    
    
    2,607,209Total liabilities
    
    
    648,695,292
    
    
    
    617,843,568Commitments and contingenciesStockholders equity:Common Stock, par value $0, 100,000,000 shares
authorized;
12,195,761 and 12,185,144 shares issued and
outstanding, respectively
    
    
    67,636,561
    
    
    
    67,478,254Accumulated deficit
    
    
    (327,616
    )
    
    
    (617,429
    )Accumulated other comprehensive loss
    
    
    (307,307
    )
    
    
    (70,883
    )Total stockholders equity
    
    
    67,001,638
    
    
    
    66,789,942Total liabilities and stockholders equity
    
    $
    715,696,930
    
    
    $
    684,633,510
 See Notes to Consolidated Financial Statements.
 4




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FGBC BANCSHARES, INC. AND SUBSIDIARY
 CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 2008 AND 2007
(Unaudited)
 2008
    
    
    2007Interest income:Loans, including fees
    
    $
    10,515,889
    
    
    $
    9,461,391Taxable securities
    
    
    874,206
    
    
    
    837,760Nontaxable securities
    
    
    159,574
    
    
    
    18,649Federal funds sold
    
    
    31,436
    
    
    
    308,658Other interest income
    
    
    19,004
    
    
    
    125,779Total interest income
    
    
    11,600,109
    
    
    
    10,752,237Interest expense:Deposits
    
    
    6,200,651
    
    
    
    5,601,730Other borrowings
    
    
    26,735
    
    
    
    54,506Total interest expense
    
    
    6,227,386
    
    
    
    5,656,236Net interest income
    
    
    5,372,723
    
    
    
    5,096,001Provision for loan losses
    
    
    858,812
    
    
    
    291,809Net interest income after provision for loan losses
    
    
    4,513,911
    
    
    
    4,804,192Other income:Service charges on deposit accounts
    
    
    517,212
    
    
    
    412,110Mortgage origination fees
    
    
    370,555
    
    
    
    330,992Net gain on sale of securities available for sale
    
    
    609,032
    
    
    
    Net gain on sale of premises and equipment
    
    
    173,870
    
    
    
    Other operating income
    
    
    83,907
    
    
    
    77,772Total other income
    
    
    1,754,576
    
    
    
    820,874Other expenses:Salaries and employee benefits
    
    
    3,492,459
    
    
    
    3,133,700Equipment and occupancy expenses
    
    
    812,036
    
    
    
    678,684Other operating expenses
    
    
    1,546,015
    
    
    
    1,224,572Total other expenses
    
    
    5,850,510
    
    
    
    5,036,956Income before income taxes
    
    
    417,977
    
    
    
    588,109Income tax expense
    
    
    128,163
    
    
    
    Net income
    
    
    289,814
    
    
    
    588,109Basic earnings per share
    
    $
    0.02
    
    
    $
    0.05Diluted earnings per share
    
    $
    0.02
    
    
    $
    0.05
 See Notes to Consolidated Financial Statements.
 5




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FGBC BANCSHARES, INC. AND SUBSIDIARY
 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
THREE MONTHS ENDED MARCH 31, 2008 AND 2007
(Unaudited)
 2008
    
    
    2007Net income
    
    $
    289,814
    
    
    $
    588,109Other comprehensive income (loss):Reclassification adjustment for net gains on sales of securities
included in net income, net of tax of $231,432
    
    
    (377,600
    )
    
    
    -Net unrealized holding gains on securities available for sale
arising during period, net of tax of $86,526 and $0
    
    
    141,176
    
    
    
    52,711Other comprehensive income (loss)
    
    
    (236,424
    )
    
    
    52,711Comprehensive income
    
    $
    53,390
    
    
    $
    640,820
 See Notes to Consolidated Financial Statements.
 6




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FGBC BANCSHARES, INC. AND SUBSIDIARY
 CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2008 AND 2007
(Unaudited)
 2008
    
    
    2007OPERATING ACTIVITIESNet income
    
    $
    289,814
    
    
    $
    588,109Adjustments to reconcile net income to net cash
(used in) provided by operating activities:Depreciation
    
    
    462,159
    
    
    
    321,766Amortization and accretion of securities
    
    
    6,224
    
    
    
    3,054Provision for loan losses
    
    
    858,812
    
    
    
    291,809Stock compensation expense
    
    
    76,902
    
    
    
    5,490Deferred taxes
    
    
    344,258
    
    
    
    Net gain on sale of securities available for sale
    
    
    (609,032
    )
    
    
    Loss on sale of foreclosed assets
    
    
    99,350
    
    
    
    21,072Gain on sale of premises and equipment
    
    
    (173,870
    )
    
    
    Increase (decrease) in income taxes payable
    
    
    472,091
    
    
    
    (674,857
    )Increase (decrease) in interest receivable
    
    
    407,577
    
    
    
    (348,167
    )Increase in interest payable
    
    
    16,283
    
    
    
    16,836Net other operating activities
    
    
    (1,265,834
    )
    
    
    (806,499
    )Net cash (used in) provided in operating activities
    
    
    984,734
    
    
    
    (581,387
    )INVESTING ACTIVITIESDecrease in interest bearing deposits in banks
    
    
    37,507
    
    
    
    5,911,170Purchases of securities available for sale
    
    
    (42,954,149
    )
    
    
    (22,976,644
    )Proceeds from maturities of securities available for sale
    
    
    9,104,222
    
    
    
    17,408,469Proceeds from sales of securities available for sale
    
    
    35,005,499
    
    
    
    (Purchases) redemptions of restricted equity securities
    
    
    (865,300
    )
    
    
    300,900Net decrease in federal funds sold
    
    
    17,664,000
    
    
    
    23,533,000Net increase in loans
    
    
    (44,347,926
    )
    
    
    (44,076,130
    )Purchase of premises and equipment
    
    
    (2,087,932
    )
    
    
    (2,954,775
    )Proceeds from sale of foreclosed assets
    
    
    309,346
    
    
    
    194,566Proceeds from sale of premises and equipment
    
    
    1,004,740
    
    
    
    -Additions to other real estate owned
    
    
    (43,736
    )
    
    
    (6,159
    )Net cash used in investing activities
    
    
    (27,173,729
    )
    
    
    (22,665,603
    )FINANCING ACTIVITIESNet increase in deposits
    
    
    16,249,707
    
    
    
    39,812,403Net increase in (repayments of) other borrowings
    
    
    15,000,000
    
    
    
    (15,000,000
    )Net decrease in federal funds purchased and repurchase agreements
    
    
    
    
    
    
    (1,027,230
    )Excess tax benefit from stock options exercised
    
    
    
    
    
    
    80,104Proceeds from exercise of stock options
    
    
    89,288
    
    
    
    190,479Purchase of fractional shares of common stock
    
    
    (7,885
    )
    
    
    Net cash provided by financing activities
    
    
    31,331,110
    
    
    
    24,055,756Net increase in cash and due from banks
    
    
    5,142,115
    
    
    
    808,766Cash and due from banks, beginning of period
    
    
    6,112,287
    
    
    
    7,343,589Cash and due from banks, end of period
    
    $
    11,254,402
    
    
    $
    8,152,355
 7




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2008
    
    
    2007SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATIONCash paid during period for:Interest
    
    $
    6,245,877
    
    
    $
    5,731,512Income taxes
    
    $
    
    
    
    $
    594,753NONCASH TRANSACTIONSFinanced sales of foreclosed assets
    
    $
    
    
    
    $
    7,100Loans transferred to foreclosed assets
    
    $
    1,995,849
    
    
    $
    424,664
 See Notes to Consolidated Financial Statements.
 8




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FGBC BANCSHARES, INC.
AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2008
(Unaudited)
 NOTE 1. BASIS OF PRESENTATION
   NOTE 2. EARNINGS PER COMMON SHARE
  Three Months Ended March 31,2008
    
    
    2007Basic earnings per share:Weighted average common shares outstanding
    
    
    12,190,121
    
    
    
    12,075,206Net income
    
    $
    289,814
    
    
    $
    588,109Basic earnings per share
    
    $
    .02
    
    
    $
    .05Diluted earnings per share:Weighted average common shares outstanding
    
    
    12,190,121
    
    
    
    12,075,206Net effect of the assumed exercise of stock
options based on the treasury stock method
using average market prices for the year
    
    
    734,395
    
    
    
    752,201Total weighted average common shares and
common stock equivalents outstanding
    
    
    12,924,516
    
    
    
    12,827,407Net income
    
    $
    289,814
    
    
    $
    588,109Diluted earnings per share
    
    $
    .02
    
    
    $
    .05
 9




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NOTE 3. FAIR VALUE MEASUREMENTS
     Quoted Prices
    
    
    Significantin Active
    
    
    Other
    
    
    SignificantMarkets for
    
    
    Observable
    
    
    UnobservableIdentical Assets
    
    
    Inputs
    
    
    Inputs(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    TotalAssetsAvailable for sale
investment
securities
    
    $
    
    
    
    $
    79,797,889
    
    
    $
    
    
    
    $
    79,797,889Total assets at fair value
    
    $
    
    
    
    $
    79,797,889
    
    
    $
    
    
    
    $
    79,779,889
 NOTE 4. COMMON STOCK SPLIT
  10




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Critical Accounting Policies
    Liquidity and Capital Resources
   ActualRegulatoryMinimumRegulatory
    
    
    Requirement forMinimum
    
    
    Well CapitalizedConsolidated
    
    
    Bank
    
    
    Requirement
    
    
    StatusLeverage capital ratio
    
    
    9.67
    %
    
    
    9.34
    %
    
    
    4.00
    %
    
    
    5.00
    %Risk-based capital ratios:Tier I capital
    
    
    11.65
    
    
    
    11.25
    
    
    
    4.00
    
    
    
    6.00Total capital
    
    
    12.82
    
    
    
    12.42
    
    
    
    8.00
    
    
    
    10.00
 Off-Balance Sheet Risk
  11




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March 31,2008(Dollars in Thousands)Commitments to extend credit
    
    $
    64,700Letters of credit
    
    
    1,782$
    66,482
   Financial Condition
  March 31,
    
    
    December 31,2008
    
    
    2007(Dollars in Thousands)Cash and due from banks
    
    $
    11,254
    
    
    $
    6,112Interest-bearing deposits in banks
    
    
    29
    
    
    
    66Federal funds sold
    
    
    2,341
    
    
    
    20,005Securities
    
    
    79,798
    
    
    
    80,732Loans, net
    
    
    574,935
    
    
    
    533,442Premises and equipment
    
    
    35,082
    
    
    
    34,287Other assets
    
    
    12,258
    
    
    
    9,989$
    715,697
    
    
    $
    684,633Deposits
    
    $
    631,486
    
    
    $
    615,236Other borrowings
    
    
    15,000
    
    
    
    -Securities sold under repurchase agreement
    
    
    
    
    
    
    -Other liabilities
    
    
    2,209
    
    
    
    2,607Stockholders equity
    
    
    67,002
    
    
    
    66,790$
    715,697
    
    
    $
    684,633
  12




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Results of Operations for the Three Months Ended March 31, 2008 and 2007
  Three Months EndedMarch 31,2008
    
    
    2007(Dollars in Thousands)Interest income
    
    $
    11,600
    
    
    $
    10,752Interest expense
    
    
    (6,227
    )
    
    
    (5,656
    )Net interest income
    
    
    5,373
    
    
    
    5,096Provision for loan losses
    
    
    (859
    )
    
    
    (292
    )Other income
    
    
    1,755
    
    
    
    821Other expense
    
    
    (5,851
    )
    
    
    (5,037
    )Pretax income
    
    
    418
    
    
    
    588Income taxes
    
    
    (128
    )
    
    
    -Net income (loss)
    
    $
    290
    
    
    $
    588
  Provision and Allowance for Loan Losses
    13




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March 312008
    
    
    2007(Dollars in Thousands)Nonaccrual loans
    
    $
    1,374
    
    
    $
    235Loans contractually past due ninety days or more as to interest
or principal payments and still accruing
    
    
    
    
    
    
    Restructured loans
    
    
    
    
    
    
    Potential problem loans
    
    
    1,655
    
    
    
    Interest income that would have been recorded on non-accrual
and restructured loans under original terms
    
    
    283
    
    
    
    22Interest income that was recorded on non-accrual and restructured loans
    
    
    210
    
    
    
    7
     14




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Three Months EndedMarch 31,2008
    
    
    2007(Dollars in Thousands)Average amount of loans outstanding
    
    $
    556,723
    
    
    $
    434,502Balance of allowance for loan losses at beginning of period
    
    $
    6,267
    
    
    $
    5,244Loans charged off
Commercial and financial
    
    
    (19
    )
    
    
    (16
    )Real estate mortgage
    
    
    (263
    )
    
    
    (14
    )Installment
    
    
    (111
    )
    
    
    (89
    )(393
    )
    
    
    (119
    )Loans recovered
Commercial and financial
    
    
    
    
    
    
    -Real estate mortgage
    
    
    1
    
    
    
    -Installment
    
    
    21
    
    
    
    1522
    
    
    
    15Net charge-offs
    
    
    (371
    )
    
    
    (104
    )Additions to allowance charged to operating expense during
period
    
    
    859
    
    
    
    292Balance of allowance for loan losses at end of period
    
    $
    6,755
    
    
    $
    5,432Ratio of net loans charged off during the period to
average loans outstanding
    
    
    .07
    %
    
    
    .02
    %
 Other Income and Expenses
    15




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General
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
     16




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Analysis of Interest Sensitivity
As of March 31, 2008
(Dollars in Thousands)
 0 3
    
    
    3-12
    
    
    Over 1Months
    
    
    Months
    
    
    Year
    
    
    TotalInterest-earning assets:Interest-bearing deposits in banks
    
    
    29
    
    
    
    
    
    
    
    
    
    
    
    29Securities
    
    
    
    
    
    
    
    
    
    
    79,798
    
    
    
    79,798Restricted equity securities
    
    
    1,907
    
    
    
    
    
    
    
    
    
    
    
    1,907Federal funds sold
    
    
    2,341
    
    
    
    
    
    
    
    
    
    
    
    2,341Loans
    
    
    331,697
    
    
    
    93,337
    
    
    
    156,656
    
    
    
    581,690Total interest-earning assets
    
    
    335,974
    
    
    
    93,337
    
    
    
    236,454
    
    
    
    665,765Interest-bearing liabilities:Interest-bearing demand deposits
    
    
    87,735
    
    
    
    
    
    
    
    
    
    
    
    87,735Savings and money markets
    
    
    85,525
    
    
    
    
    
    
    
    
    
    
    
    85,525Time deposits
    
    
    134,057
    
    
    
    253,834
    
    
    
    34,845
    
    
    
    422,736Other borrowings
    
    
    
    
    
    
    
    
    
    
    15,000
    
    
    
    15,000Total interest-bearing liabilities
    
    
    307,317
    
    
    
    253,834
    
    
    
    49,845
    
    
    
    610,996Interest rate sensitivity gap
    
    
    28,657
    
    
    
    (160,497
    )
    
    
    186,609
    
    
    
    60,163Cumulative interest rate sensitivity gap
    
    
    28,657
    
    
    
    (131,840
    )
    
    
    54,769Interest rate sensitivity gap ratio
    
    
    1.09
    
    
    
    0.37
    
    
    
    4.74Cumulative interest rate sensitivity gap ratio
    
    
    1.09
    
    
    
    0.77
    
    
    
    1.09
  
 Item 4. Controls and Procedures
  17




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PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  
 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
 18




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SIGNATURES
  FGBC BANCSHARES, INC.Date: May 12, 2008
    /s/ Jackie L. ReedJackie L. ReedPresident and CEODate: May 12, 2008
    /s/ Teresa L. MartinTeresa L. MartinChief Financial Officer 19