##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D. C. 20549
 
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934.
 For the quarterly period ended: June 30, 2009
 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 o(Do not check if a smaller reporting company)
    
    Smaller reporting company þ
  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
    
    
    13Item 3.Quantitative and Qualitative Disclosures About Market Risk
    
    
    21Item 4.Controls and Procedures
    
    
    22Part II. OTHER INFORMATION
    
    
    23Item 1.Legal Proceedings
    
    
    23Item 1A.Risk Factors
    
    
    23Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    23Item 3.Defaults Upon Senior Securities
    
    
    23Item 4.Submission of Matters to a Vote of Security Holders
    
    
    23Item 5.Other Information
    
    
    23Item 6.Exhibits
    
    
    23EX-31.1EX-31.2EX-32




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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
JUNE 30, 2009 AND DECEMBER 31, 2008
 June 30,
    
    
    December 31,2009
    
    
    2008(unaudited)
    
    
    (audited)AssetsCash and due from banks
    
    $
    22,475,865
    
    
    $
    8,858,796Interest-bearing deposits in banks
    
    
    21,367,081
    
    
    
    11,042,345Federal funds sold
    
    
    
    
    
    
    722,000Securities available-for-sale, at fair value
    
    
    48,583,105
    
    
    
    71,764,629Restricted equity securities, at cost
    
    
    2,694,000
    
    
    
    2,053,400Loans
    
    
    646,539,254
    
    
    
    683,177,685Less allowance for loan losses
    
    
    10,819,154
    
    
    
    11,013,996Loans, net
    
    
    635,720,100
    
    
    
    672,163,689Premises and equipment
    
    
    37,873,357
    
    
    
    37,898,122Foreclosed assets
    
    
    14,139,762
    
    
    
    6,041,163Other assets
    
    
    12,053,990
    
    
    
    10,841,477Total assets
    
    $
    794,907,260
    
    
    $
    821,385,621Liabilities and Stockholders EquityLiabilitiesDeposits:Noninterest-bearing
    
    $
    40,788,027
    
    
    $
    34,959,706Interest-bearing
    
    
    661,800,915
    
    
    
    702,131,988Total deposits
    
    
    702,588,942
    
    
    
    737,091,694Other borrowings
    
    
    27,000,000
    
    
    
    16,750,000Other liabilities
    
    
    2,517,208
    
    
    
    1,730,132Total liabilities
    
    
    732,106,150
    
    
    
    755,571,826Stockholders 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;
13,021,194 and 12,492,206 shares issued and outstanding,
respectively
    
    
    73,927,349
    
    
    
    71,907,920Accumulated deficit
    
    
    (10,023,995
    )
    
    
    (5,692,364
    )Accumulated other comprehensive loss
    
    
    (1,102,244
    )
    
    
    (401,761
    )Total stockholders equity
    
    
    62,801,110
    
    
    
    65,813,795Total liabilities and stockholders equity
    
    $
    794,907,260
    
    
    $
    821,385,621
 See Notes to Consolidated Financial Statements.
 4




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FGBC BANCSHARES, INC. AND SUBSIDIARY
 CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2009 AND 2008
AND SIX MONTHS ENDED JUNE 30, 2009 AND 2008
(Unaudited)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Interest income:Loans, including fees
    
    $
    9,399,340
    
    
    $
    10,031,672
    
    
    $
    18,816,636
    
    
    $
    20,547,561Taxable securities
    
    
    452,922
    
    
    
    768,111
    
    
    
    1,076,069
    
    
    
    1,642,317Nontaxable securities
    
    
    141,693
    
    
    
    155,052
    
    
    
    288,702
    
    
    
    314,626Federal funds sold
    
    
    2,805
    
    
    
    47,186
    
    
    
    13,831
    
    
    
    78,622Other interest income
    
    
    46,021
    
    
    
    27,268
    
    
    
    94,716
    
    
    
    46,272Total interest income
    
    
    10,042,781
    
    
    
    11,029,289
    
    
    
    20,289,954
    
    
    
    22,629,398Interest expense:Deposits
    
    
    4,759,980
    
    
    
    5,625,336
    
    
    
    10,142,879
    
    
    
    11,825,987Other borrowings
    
    
    1,567
    
    
    
    135,531
    
    
    
    437,764
    
    
    
    162,266Total interest expense
    
    
    4,761,547
    
    
    
    5,760,867
    
    
    
    10,580,643
    
    
    
    11,988,253Net interest income
    
    
    5,281,234
    
    
    
    5,268,422
    
    
    
    9,709,311
    
    
    
    10,641,145Provision for loan losses
    
    
    4,332,170
    
    
    
    1,566,267
    
    
    
    6,251,177
    
    
    
    2,425,079Net interest income after provision for
loan losses
    
    
    949,064
    
    
    
    3,702,155
    
    
    
    3,458,134
    
    
    
    8,216,066Other income:Service charges on deposit accounts
    
    
    534,232
    
    
    
    569,756
    
    
    
    992,771
    
    
    
    1,086,968Mortgage origination fees
    
    
    311,597
    
    
    
    348,549
    
    
    
    636,583
    
    
    
    719,104Net gain on sale of securities available for sale
    
    
    10,739
    
    
    
    20,955
    
    
    
    721,331
    
    
    
    629,987Net gain on sale of premises and equipment
    
    
    
    
    
    
    (3,732
    )
    
    
    
    
    
    
    170,138Other operating income
    
    
    65,599
    
    
    
    51,349
    
    
    
    144,802
    
    
    
    135,256Total other income
    
    
    922,167
    
    
    
    986,877
    
    
    
    2,495,487
    
    
    
    2,741,453Other expenses:Salaries and employee benefits
    
    
    2,882,676
    
    
    
    3,465,584
    
    
    
    6,027,152
    
    
    
    6,958,043Equipment and occupancy expenses
    
    
    849,244
    
    
    
    828,766
    
    
    
    1,686,401
    
    
    
    1,640,802Other operating expenses
    
    
    3,224,615
    
    
    
    1,662,071
    
    
    
    5,228,917
    
    
    
    3,208,086Total other expenses
    
    
    6,956,535
    
    
    
    5,956,421
    
    
    
    12,942,470
    
    
    
    11,806,931Loss before income taxes
    
    
    (5,085,304
    )
    
    
    (1,267,389
    )
    
    
    (6,988,849
    )
    
    
    (849,412
    )Income tax benefit
    
    
    (1,929,562
    )
    
    
    (503,764
    )
    
    
    (2,657,218
    )
    
    
    (375,601
    )Net loss
    
    
    (3,155,742
    )
    
    
    (763,625
    )
    
    
    (4,331,631
    )
    
    
    (473,811
    )Basic losses per share
    
    $
    (0.25
    )
    
    $
    (0.06
    )
    
    $
    (0.35
    )
    
    $
    (0.04
    )Diluted losses per share
    
    $
    (0.25
    )
    
    $
    (0.06
    )
    
    $
    (0.35
    )
    
    $
    (0.04
    )Cash dividends per share
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
 See Notes to Consolidated Financial Statements.
 5




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FGBC BANCSHARES, INC. AND SUBSIDIARY
 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
THREE MONTHS ENDED JUNE 30, 2009 AND 2008
AND SIX MONTHS ENDED JUNE 30, 2009 AND 2008
(Unaudited)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net loss
    
    $
    (3,155,742
    )
    
    $
    (763,625
    )
    
    $
    (4,331,631
    )
    
    $
    (473,811
    )Other comprehensive income (loss):Reclassification adjustment for net gains on sales of securities
included in net income, net of tax of $4,081 and $7,963 for
(three months) and $274,106 and $239,394 for (six months)
    
    
    (6,658
    )
    
    
    (12,992
    )
    
    
    (447,225
    )
    
    
    (390,593
    )Net unrealized holding gains on securities available for sale
arising during period, net of tax benefit of $178,980 and $586,382
for (three months) and $155,222 and $499,856 for (six months)
    
    
    (292,021
    )
    
    
    (956,729
    )
    
    
    (253,258
    )
    
    
    (815,552
    )Other comprehensive income (loss)
    
    
    (298,679
    )
    
    
    (969,721
    )
    
    
    (700,483
    )
    
    
    (1,206,145
    )Comprehensive loss
    
    $
    (3,454,421
    )
    
    $
    (1,733,346
    )
    
    $
    (5,032,114
    )
    
    $
    (1,679,956
    )
 See Notes to Consolidated Financial Statements.
 6




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FGBC BANCSHARES, INC. AND SUBSIDIARY
 CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2009 AND 2008
(Unaudited)
 2009
    
    
    2008OPERATING ACTIVITIESNet loss
    
    $
    (4,331,631
    )
    
    $
    (473,811
    )Adjustments
to reconcile net loss to net cash provided by operating activities:Depreciation
    
    
    984,437
    
    
    
    945,017Amortization and accretion of securities
    
    
    84,392
    
    
    
    17,421Provision for loan losses
    
    
    6,251,177
    
    
    
    2,425,079Writedown of foreclosed assets
    
    
    557,247
    
    
    
    Stock compensation expense
    
    
    155,884
    
    
    
    172,998Deferred taxes
    
    
    1,012,421
    
    
    
    (731,365
    )Net gain on sale of securities available for sale
    
    
    (721,331
    )
    
    
    (629,987
    )Net loss on sale of foreclosed assets
    
    
    339,710
    
    
    
    175,741Net gain on sale of premises and equipment
    
    
    
    
    
    
    (170,138
    )Decrease in income taxes payable
    
    
    (1,684,597
    )
    
    
    (165,765
    )Decrease in interest receivable
    
    
    228,873
    
    
    
    377,270Decrease in interest payable
    
    
    (263,106
    )
    
    
    (90,480
    )Net other operating activities
    
    
    710,302
    
    
    
    (34,276
    )Net cash provided by operating activities
    
    
    3,323,778
    
    
    
    1,817,704INVESTING ACTIVITIES(Increase) decrease in interest bearing deposits in banks
    
    
    6,746,697
    
    
    
    (13,325
    )Purchases of securities available for sale
    
    
    (24,151,260
    )
    
    
    (42,954,149
    )Proceeds from maturities of securities available for sale
    
    
    11,007,608
    
    
    
    8,434,160Proceeds from sales of securities available for sale
    
    
    35,832,302
    
    
    
    42,197,663Purchases of restricted equity securities
    
    
    (640,600
    )
    
    
    (865,300
    )Net decrease in federal funds sold
    
    
    722,000
    
    
    
    11,423,000Net (increase) decrease in loans
    
    
    17,896,905
    
    
    
    (111,630,815
    )Purchase of premises and equipment
    
    
    (959,672
    )
    
    
    (3,505,670
    )Proceeds from sale of foreclosed assets
    
    
    3,433,500
    
    
    
    1,024,856Proceeds from sale of premises and equipment
    
    
    
    
    
    
    1,005,997Additions to other real estate owned
    
    
    (133,548
    )
    
    
    (188,150
    )Net cash (used in) provided by investing activities
    
    
    49,753,932
    
    
    
    (95,071,733
    )FINANCING ACTIVITIESNet increase (decrease) deposits
    
    
    (34,502,752
    )
    
    
    80,254,412Net increase in other borrowings
    
    
    10,250,000
    
    
    
    15,000,000Proceeds from sale of common stock
    
    
    1,721,531
    
    
    
    2,306,040Proceeds from exercise of stock options
    
    
    142,013
    
    
    
    149,018Purchase of fractional shares of common stock
    
    
    
    
    
    
    (7,944
    )Net cash (used in) provided by financing activities
    
    
    (22,389,208
    )
    
    
    97,701,526Net increase in cash and due from banks
    
    
    30,688,502
    
    
    
    4,447,497Cash and due from banks, beginning of period
    
    
    8,858,796
    
    
    
    6,112,287Cash and due from banks, end of period
    
    $
    39,547,298
    
    
    $
    10,559,784SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATIONCash paid during period for:Interest
    
    $
    10,861,286
    
    
    $
    12,142,561Income taxes
    
    $
    
    
    
    $
    200,000NONCASH TRANSACTIONSFinanced sales of foreclosed assets
    
    $
    1,522,002
    
    
    $
    Loans transferred to foreclosed assets
    
    $
    13,817,509
    
    
    $
    3,432,739
 See Notes to Consolidated Financial Statements.
 7




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FGBC BANCSHARES, INC.
AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2009
(Unaudited)
 NOTE 1. BASIS OF PRESENTATION
   NOTE 2. LOSSES PER COMMON SHARE
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Basic losses per share:Weighted average common shares outstanding
    
    
    12,533,357
    
    
    
    12,198,712
    
    
    
    12,521,148
    
    
    
    12,194,416Net loss
    
    $
    (3,155,742
    )
    
    $
    (763,625
    )
    
    $
    (4,331,631
    )
    
    $
    (473,811
    )Basic losses per share
    
    $
    (0.25
    )
    
    $
    (0.06
    )
    
    $
    (0.35
    )
    
    $
    (0.04
    )Diluted losses per share:Weighted average common shares outstanding
    
    
    12,533,357
    
    
    
    12,198,712
    
    
    
    12,521,148
    
    
    
    12,194,416Net 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
    
    
    12,533,357
    
    
    
    12,198,712
    
    
    
    12,521,148
    
    
    
    12,194,416Net loss
    
    $
    (3,155,742
    )
    
    $
    (763,625
    )
    
    $
    (4,331,631
    )
    
    $
    (473,811
    )Diluted losses per share
    
    $
    (0.25
    )
    
    $
    (0.06
    )
    
    $
    (0.35
    )
    
    $
    (0.04
    )
  8




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NOTE 3. FAIR VALUE MEASUREMENTS
          Securities Available for Sale:
 9




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Impaired Loans:
 Foreclosed Assets:
  June 30, 2009Quoted Prices
    
    
    Significantin Active
    
    
    Other
    
    
    SignificantMarkets for
    
    
    Observable
    
    
    UnobservableIdentical Assets
    
    
    Inputs
    
    
    Inputs(Dollars in Thousands)
    
    Fair Value
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)AssetsAvailable for sale
investment securities
    
    $
    48,583
    
    
    $
    
    
    
    $
    48,583
    
    
    $
    Total assets at fair value
    
    $
    48,583
    
    
    $
    
    
    
    $
    48,583
    
    
    $
    
 December 31, 2008Quoted Prices
    
    
    Significantin Active
    
    
    Other
    
    
    SignificantMarkets for
    
    
    Observable
    
    
    UnobservableIdentical Assets
    
    
    Inputs
    
    
    Inputs(Dollars in Thousands)
    
    Fair Value
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)AssetsAvailable for sale
investment securities
    
    $
    71,765
    
    
    $
    
    
    
    $
    71,765
    
    
    $
    Total assets at fair value
    
    $
    71,765
    
    
    $
    
    
    
    $
    71,765
    
    
    $
    
  10




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June 30, 2009Quoted Prices
    
    
    Significantin Active
    
    
    Other
    
    
    SignificantMarkets for
    
    
    Observable
    
    
    UnobservableIdentical Assets
    
    
    Inputs
    
    
    Inputs(Dollars in Thousands)
    
    Fair Value
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)AssetsImpaired loans
    
    $
    23,788
    
    
    $
    
    
    
    $
    7,274
    
    
    $
    16,514Foreclosed assets
    
    
    14,140
    
    
    
    
    
    
    
    5,597
    
    
    
    8,543Total assets at fair value
    
    $
    37,928
    
    
    $
    
    
    
    $
    12,871
    
    
    $
    25,057
 December 31, 2008Quoted Prices
    
    
    Significantin Active
    
    
    Other
    
    
    SignificantMarkets for
    
    
    Observable
    
    
    UnobservableIdentical Assets
    
    
    Inputs
    
    
    Inputs(Dollars in Thousands)
    
    Fair Value
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)AssetsImpaired loans
    
    $
    38,625
    
    
    $
    
    
    
    $
    6,765
    
    
    $
    31,860Foreclosed assets
    
    
    6,041
    
    
    
    
    
    
    
    841
    
    
    
    5,200Total assets at fair value
    
    $
    44,666
    
    
    $
    
    
    
    $
    7,606
    
    
    $
    37,060
  Cash and cash equivalents:
 Securities:
 Restricted Equity Securities:
 Loans:
 Deposits:
 Other Borrowings:
 Accrued Interest:
  June 30, 2009
    
    December 31, 2008Carrying
    
    
    
    
    
    Carrying(Dollars in Thousands)
    
    Amount
    
    Fair Value
    
    Amount
    
    Fair ValueFinancial assets:Cash and cash equivalents
    
    $
    43,843
    
    
    $
    43,843
    
    
    $
    20,623
    
    
    $
    20,623Securities available-for-sale
    
    
    48,583
    
    
    
    48,583
    
    
    
    71,764
    
    
    
    71,764Restricted equity securities
    
    
    2,694
    
    
    
    2,694
    
    
    
    2,053
    
    
    
    2,053Loans
    
    
    635,720
    
    
    
    633,728
    
    
    
    672,164
    
    
    
    667,130Accrued interest receivable
    
    
    3,651
    
    
    
    3,651
    
    
    
    3,880
    
    
    
    3,880Financial liabilities:Deposits
    
    $
    702,589
    
    
    $
    706,930
    
    
    $
    737,092
    
    
    $
    741,079Other borrowings
    
    
    27,000
    
    
    
    27,000
    
    
    
    16,750
    
    
    
    17,010Accrued interest payable
    
    
    690
    
    
    
    690
    
    
    
    953
    
    
    
    953
 11




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##### Table of Contents



NOTE 4. SECURITIES AVAILABLE-FOR-SALE
  Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueJune 30, 2009:U.S. Government sponsored
agency securities
    
    $
    14,542,710
    
    
    $
    4,190
    
    
    $
    (119,099
    )
    
    $
    14,427,801Mortgage-backed securities
    
    
    19,086,415
    
    
    
    93,604
    
    
    
    (149,862
    )
    
    
    19,030,157State, county and municipals
    
    
    14,187,072
    
    
    
    16,210
    
    
    
    (753,215
    )
    
    
    13,450,067Corporate securities
    
    
    2,544,723
    
    
    
    
    
    
    
    (869,643
    )
    
    
    1,675,080$
    50,360,920
    
    
    $
    114,004
    
    
    $
    (1,891,819
    )
    
    $
    48,583,105December 31, 2008:U.S. Government sponsored
agency securities
    
    $
    20,478,647
    
    
    $
    647,993
    
    
    $
    
    
    
    $
    21,126,640Mortgage-backed securities
    
    
    34,199,020
    
    
    
    696,568
    
    
    
    (76,228
    )
    
    
    34,819,360State, county and municipals
    
    
    15,187,226
    
    
    
    2,170
    
    
    
    (1,648,137
    )
    
    
    13,541,259Corporate securities
    
    
    2,547,738
    
    
    
    7,500
    
    
    
    (277,868
    )
    
    
    2,277,370$
    72,412,631
    
    
    $
    1,354,231
    
    
    $
    (2,002,233
    )
    
    $
    71,764,629
   June 30, 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 agencies
    
    $
    12,219,551
    
    
    $
    (119,099
    )
    
    $
    
    
    
    $
    
    
    
    $
    12,219,551
    
    
    $
    (119,099
    )Mortgage-backed securities
    
    
    9,471,521
    
    
    
    (149,862
    )
    
    
    
    
    
    
    
    
    
    
    9,471,521
    
    
    
    (149,862
    )State, county and municipals
    
    
    10,550,711
    
    
    
    (518,235
    )
    
    
    1,972,985
    
    
    
    (234,980
    )
    
    
    12,523,696
    
    
    
    (753,215
    )Corporate securities
    
    
    450,000
    
    
    
    (550,000
    )
    
    
    1,225,080
    
    
    
    (319,643
    )
    
    
    1,675,080
    
    
    
    (869,643
    )Total temporarily impaired securities
    
    $
    32,691,783
    
    
    $
    (1,337,196
    )
    
    $
    3,198,065
    
    
    $
    (554,623
    )
    
    $
    35,889,848
    
    
    $
    (1,891,819
    )
 December 31, 2008Less Than 12 Months
    
    
    12 Months or More
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedDescription of Securities
    
    Value
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesU.S. Government sponsored agencies
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Mortgage-backed securities
    
    
    6,336,827
    
    
    
    (73,011
    )
    
    
    971,055
    
    
    
    (3,217
    )
    
    
    7,307,882
    
    
    
    (76,228
    )State, county and municipals
    
    
    12,365,148
    
    
    
    (1,492,817
    )
    
    
    888,316
    
    
    
    (155,320
    )
    
    
    13,253,464
    
    
    
    (1,648,137
    )Corporate securities
    
    
    1,269,870
    
    
    
    (277,868
    )
    
    
    
    
    
    
    
    
    
    
    1,269,870
    
    
    
    (277,868
    )Total temporarily impaired securities
    
    $
    19,971,845
    
    
    $
    (1,843,696
    )
    
    $
    1,859,371
    
    
    $
    (158,537
    )
    
    $
    21,831,216
    
    
    $
    (2,002,233
    )
 12




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##### Table of Contents



Amortized
    
    
    FairCost
    
    
    ValueDue in less than one year
    
    $
    
    
    
    $
    Due from one to five years
    
    
    285,564
    
    
    
    294,567Due from five to ten years
    
    
    6,826,737
    
    
    
    6,801,154After ten years
    
    
    24,162,204
    
    
    
    22,457,227Mortgage-backed securities
    
    
    19,086,415
    
    
    
    19,030,157$
    50,360,920
    
    
    $
    48,583,105
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Gross gains realized
    
    $
    10,739
    
    
    $
    33,828
    
    
    $
    721,331
    
    
    $
    655,643Gross losses realized
    
    
    
    
    
    
    (12,873
    )
    
    
    
    
    
    
    (25,656
    )Net realized gain
    
    $
    10,739
    
    
    $
    20,955
    
    
    $
    721,331
    
    
    $
    629,987
 NOTE 5. SUBSEQUENT EVENTS
  
 Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of
Operations
  Overview
  13




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Critical Accounting Policies
       14




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##### Table of Contents



Liquidity and Capital Resources
   RegulatoryMinimumRegulatory
    
    Requirement forActual
    
    Minimum
    
    Well CapitalizedConsolidated
    
    Bank
    
    Requirement
    
    StatusLeverage capital ratio
    
    
    7.74
    %
    
    
    7.71
    %
    
    
    4.00
    %
    
    
    5.00
    %Risk-based capital ratios:Tier I capital
    
    
    9.46
    %
    
    
    9.46
    %
    
    
    4.00
    %
    
    
    6.00
    %Total capital
    
    
    10.75
    %
    
    
    10.71
    %
    
    
    8.00
    %
    
    
    10.00
    %
  Off-Balance Sheet Risk
   15




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##### Table of Contents



June 30, 2009(Dollars in Thousands)Commitments to extend credit
    
    $
    51,316Letters of credit
    
    
    1,179$
    52,495
   Financial Condition
  June 30,
    
    
    December 31,2009
    
    
    2008(Dollars in Thousands)Cash and due from banks
    
    $
    22,476
    
    
    $
    8,859Interest-bearing deposits in banks
    
    
    21,367
    
    
    
    11,042Federal funds sold
    
    
    
    
    
    
    722Securities
    
    
    51,277
    
    
    
    73,818Loans, net
    
    
    635,720
    
    
    
    672,164Premises and equipment
    
    
    37,873
    
    
    
    37,898Foreclosed assets
    
    
    14,140
    
    
    
    6,041Other assets
    
    
    12,054
    
    
    
    10,842$
    794,907
    
    
    $
    821,386Deposits
    
    $
    702,589
    
    
    $
    737,092Other borrowings
    
    
    27,000
    
    
    
    16,750Other liabilities
    
    
    2,517
    
    
    
    1,730Stockholders equity
    
    
    62,801
    
    
    
    65,814$
    794,907
    
    
    $
    821,386
  16




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##### Table of Contents



Results of Operations for the Three and Six Months Ended June 30, 2009 and 2008
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(Dollars in Thousands)Interest income
    
    $
    10,043
    
    
    $
    11,029
    
    
    $
    20,290
    
    
    $
    22,629Interest expense
    
    
    (4,762
    )
    
    
    (5,761
    )
    
    
    (10,581
    )
    
    
    (11,988
    )Net interest income
    
    
    5,281
    
    
    
    5,268
    
    
    
    9,709
    
    
    
    10,641Provision for loan losses
    
    
    (4,332
    )
    
    
    (1,566
    )
    
    
    (6,251
    )
    
    
    (2,425
    )Other income
    
    
    922
    
    
    
    986
    
    
    
    2,495
    
    
    
    2,741Other expense
    
    
    (6,957
    )
    
    
    (5,955
    )
    
    
    (12,942
    )
    
    
    (11,806
    )Pretax income (loss)
    
    
    (5,086
    )
    
    
    (1,267
    )
    
    
    (6,989
    )
    
    
    (849
    )Income tax expense
(benefit)
    
    
    (1,930
    )
    
    
    (504
    )
    
    
    (2,657
    )
    
    
    (375
    )Net income (loss)
    
    $
    (3,156
    )
    
    $
    (763
    )
    
    $
    (4,332
    )
    
    $
    (474
    )
  Period
    
    
    
    
    
    Net interest marginJune, 2009
    
    
    
    
    
    
    2.61
    %March, 2009
    
    
    
    
    
    
    2.32
    %December, 2008
    
    
    
    
    
    
    2.88
    %September, 2008
    
    
    
    
    
    
    3.08
    %June, 2008
    
    
    
    
    
    
    3.17
    %March, 2008
    
    
    
    
    
    
    3.32
    %December, 2007
    
    
    
    
    
    
    3.69
    %
   Provision and Allowance for Loan Losses
  Accounting for Contingencies Accounting by Creditors for Impairment of a
Loan
 17




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##### Table of Contents



June 30, 2009
    
    
    December 31, 2008Percentage
    
    
    
    
    
    
    Percentageof loans in
    
    
    
    
    
    
    of loans ineach
    
    
    
    
    
    
    eachAmount
    
    
    category
    
    
    Amount
    
    
    category(Dollars in Thousands)Commercial and industrial
    
    $
    629
    
    
    
    7.11
    %
    
    $
    632
    
    
    
    7.26
    %Real estate  construction
    
    
    4,809
    
    
    
    27.07
    %
    
    
    5,452
    
    
    
    29.64
    %Real estate  mortgage
    
    
    5,055
    
    
    
    61.86
    %
    
    
    4,578
    
    
    
    58.95
    %Installment loans to individuals
    
    
    326
    
    
    
    3.96
    %
    
    
    351
    
    
    
    4.15
    %$
    10,819
    
    
    
    100
    %
    
    $
    11,013
    
    
    
    100
    %
  18




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##### Table of Contents



June 30,2009
    
    
    2008(Dollars in Thousands)Non-accrual loans:Commercial and industrial
    
    $
    752
    
    
    $
    344Real estate  construction
    
    
    17,072
    
    
    
    739Real estate  mortgage
    
    
    7,893
    
    
    
    942Installment loans to individuals
    
    
    183
    
    
    
    109Total non-accrual loans
    
    $
    25,900
    
    
    $
    2,134Loans contractually past due ninety days or more as to interest
or principal payments and still accruing
    
    $
    
    
    
    $
    Restructured loans in compliance with terms:Commercial and industrial
    
    $
    3,894
    
    
    $
    Real estate  construction
    
    
    
    
    
    
    Real estate  mortgage
    
    
    1,271
    
    
    
    Installment loans to individuals
    
    
    
    
    
    
    Total restructured loans in compliance with terms
    
    $
    5,165
    
    
    $
    Potential problem loans:Commercial and industrial
    
    $
    133
    
    
    $
    49Real estate  construction
    
    
    1,553
    
    
    
    24Real estate  mortgage
    
    
    1,595
    
    
    
    561Installment loans to individuals
    
    
    69
    
    
    
    8Total potential problem loans
    
    $
    3,350
    
    
    $
    642Interest income that would have been recorded on non-accrual
loans under original terms
    
    $
    2,867Interest income that was recorded on non-accrual loans
    
    
    2,475Reduction in interest income
    
    $
    392
     19




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##### Table of Contents



Six Months EndedJune 30,2009
    
    
    2008(Dollars in Thousands)Average amount of loans outstanding
    
    $
    666,254
    
    
    $
    582,165Balance of allowance for loan losses at beginning of period
    
    $
    11,013
    
    
    $
    6,267Loans charged offCommercial and industrial
    
    
    (383
    )
    
    
    (459
    )Real estate  construction
    
    
    (3,395
    )
    
    
    (220
    )Real estate  mortgage
    
    
    (2,380
    )
    
    
    (254
    )Installment loans to individuals
    
    
    (311
    )
    
    
    (157
    )(6,469
    )
    
    
    (1,090
    )Loans recoveredCommercial and industrial
    
    
    5
    
    
    
    1Real estate  construction
    
    
    5
    
    
    
    Real estate  mortgage
    
    
    2
    
    
    
    4Installment loans to individuals
    
    
    12
    
    
    
    2824
    
    
    
    33Net charge-offs
    
    
    (6,445
    )
    
    
    (1,057
    )Additions to allowance charged to operating expense during period
    
    
    6,251
    
    
    
    2,425Balance of allowance for loan losses at end of period
    
    $
    10,819
    
    
    $
    7,635Ratio of net loans charged off during the period to
average loans outstanding
    
    
    .97
    %
    
    
    .18
    %
  20




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##### Table of Contents



Other Income and Expenses
    
 Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    21




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##### Table of Contents



Analysis of Interest Sensitivity
As of June 30, 2009
(Dollars in Thousands)
 03
    
    
    312
    
    
    Over 1Months
    
    
    Months
    
    
    Year
    
    
    TotalInterest-earning assets:Interest-bearing deposits in banks
    
    
    21,367
    
    
    
    
    
    
    
    
    
    
    
    21,367Securities
    
    
    
    
    
    
    
    
    
    
    48,583
    
    
    
    48,583Restricted equity securities (1)
    
    
    2,694
    
    
    
    
    
    
    
    
    
    
    
    2,694Federal funds sold
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Loans (2)
    
    
    203,601
    
    
    
    139,525
    
    
    
    277,676
    
    
    
    620,802Total interest-earning assets
    
    
    227,662
    
    
    
    139,525
    
    
    
    326,259
    
    
    
    693,446Interest-bearing liabilities:Interest-bearing demand deposits
    
    
    85,993
    
    
    
    
    
    
    
    
    
    
    
    85,993Savings and money markets
    
    
    188,534
    
    
    
    
    
    
    
    
    
    
    
    188,534Time deposits
    
    
    113,862
    
    
    
    216,033
    
    
    
    57,379
    
    
    
    387,274Federal Home loan Bank borrowings
    
    
    27,000
    
    
    
    
    
    
    
    
    
    
    
    27,000Total interest-bearing liabilities
    
    
    415,389
    
    
    
    216,033
    
    
    
    57,379
    
    
    
    688,801Interest rate sensitivity gap
    
    
    (187,727
    )
    
    
    (76,508
    )
    
    
    268,880
    
    
    
    4,645Cumulative interest rate sensitivity gap
    
    
    (187,727
    )
    
    
    (264,235
    )
    
    
    4,645Interest rate sensitivity gap ratio
    
    
    .55
    
    
    
    0.65
    
    
    
    5.69Cumulative interest rate sensitivity gap ratio
    
    
    .55
    
    
    
    0.58
    
    
    
    1.01
 
 (1)
    
    Restricted equity securities have not paid dividends in 2009.(2)
    
    Excludes non-accrual loans totaling approximately $25,901,000.  
 Item 4.
    
    Controls and Procedures
  22




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##### Table of Contents



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
   Name
    
    Votes For
    
    Votes Against/AbstainWyche T. Green, III
    
    
    6,933,388
    
    
    
    46,666Dennis H. McDowell
    
    
    6,933,388
    
    
    
    46,666Jackie L. Reed
    
    
    6,933,388
    
    
    
    46,666Carl R. Sewell, Jr.
    
    
    6,933,388
    
    
    
    46,666Gleamer L. Smith, Jr.
    
    
    6,933,388
    
    
    
    46,666
  Votes For
    
    Votes Against
    
    Abstain7,000,412
    
    3,333
    
    34,072
 
 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
 23




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##### Table of Contents



SIGNATURES
  FGBC BANCSHARES, INC.Date:  August 14, 2009
    /s/ Jackie L. ReedJackie L. ReedPresident and CEODate:  August 14, 2009
    /s/ Teresa L. MartinTeresa L. MartinChief Financial Officer 24