##### 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, 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)
  
   
 
 þ o
 o o
  Large accelerated filer oAccelerated filer oNon-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
    
    
    10Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    17Item 4.
    
    Controls and Procedures
    
    
    18Part II.
    
    OTHER INFORMATION
    
    
    19Item 1.
    
    Legal Proceedings
    
    
    19Item 1A.
    
    Risk Factors
    
    
    19Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    19Item 3.
    
    Defaults Upon Senior Securities
    
    
    19Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    19Item 5.
    
    Other Information
    
    
    19Item 6.
    
    Exhibits
    
    
    19EX-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, 2009 AND DECEMBER 31, 2008
 March 31,
    
    
    December 31,2009
    
    
    2008(unaudited)
    
    
    (audited)AssetsCash and due from banks
    
    $
    26,621,626
    
    
    $
    8,858,796Interest-bearing deposits in banks
    
    
    4,000,931
    
    
    
    11,042,345Federal funds sold
    
    
    15,471,000
    
    
    
    722,000Securities available-for-sale, at fair value
    
    
    52,477,907
    
    
    
    71,764,629Restricted equity securities, at cost
    
    
    2,300,300
    
    
    
    2,053,400Loans
    
    
    664,475,676
    
    
    
    683,177,685Less allowance for loan losses
    
    
    11,485,512
    
    
    
    11,013,996Loans, net
    
    
    652,990,164
    
    
    
    672,163,689Premises and equipment
    
    
    38,080,338
    
    
    
    37,898,122Foreclosed assets
    
    
    11,045,852
    
    
    
    6,041,163Other assets
    
    
    10,805,040
    
    
    
    10,841,477Total assets
    
    $
    814,153,464
    
    
    $
    821,385,621Liabilities and Stockholders EquityDeposits:Noninterest-bearing
    
    $
    42,200,611
    
    
    $
    34,959,706Interest-bearing
    
    
    705,747,597
    
    
    
    702,131,988Total deposits
    
    
    747,948,208
    
    
    
    737,091,694Other borrowings
    
    
    
    
    
    
    16,750,000Other liabilities
    
    
    1,773,905
    
    
    
    1,730,132Total liabilities
    
    
    749,722,113
    
    
    
    755,571,826Commitments and contingenciesStockholders equity:Common stock, par value $0; 100,000,000 shares authorized;
12,525,097 and 12,492,206 shares issued and outstanding,
respectively
    
    
    72,103,169
    
    
    
    71,907,920Accumulated deficit
    
    
    (6,868,253
    )
    
    
    (5,692,364
    )Accumulated other comprehensive loss
    
    
    (803,565
    )
    
    
    (401,761
    )Total stockholders equity
    
    
    64,431,351
    
    
    
    65,813,795Total liabilities and stockholders equity
    
    $
    814,153,464
    
    
    $
    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 MARCH 31, 2009 AND 2008
(Unaudited)
 2009
    
    
    2008Interest income:Loans, including fees
    
    $
    9,417,296
    
    
    
    10,515,889Taxable securities
    
    
    623,147
    
    
    
    874,206Nontaxable securities
    
    
    147,009
    
    
    
    159,574Federal funds sold
    
    
    11,026
    
    
    
    31,436Other interest income
    
    
    48,695
    
    
    
    19,004Total interest income
    
    
    10,247,173
    
    
    
    11,600,109Interest expense:Deposits
    
    
    5,382,899
    
    
    
    6,200,651Other borrowings
    
    
    436,197
    
    
    
    26,735Total interest expense
    
    
    5,819,096
    
    
    
    6,227,386Net interest income
    
    
    4,428,077
    
    
    
    5,372,723Provision for loan losses
    
    
    1,919,007
    
    
    
    858,812Net interest income after provision for
loan losses
    
    
    2,509,070
    
    
    
    4,513,911Other income:Service charges on deposit accounts
    
    
    458,539
    
    
    
    517,212Mortgage origination fees
    
    
    324,986
    
    
    
    370,555Net gain on sale of securities available for sale
    
    
    710,592
    
    
    
    609,032Net gain on sale of premises and equipment
    
    
    
    
    
    
    173,870Other operating income
    
    
    79,203
    
    
    
    83,907Total other income
    
    
    1,573,320
    
    
    
    1,754,576Other expenses:Salaries and employee benefits
    
    
    3,144,476
    
    
    
    3,492,459Equipment and occupancy expenses
    
    
    837,157
    
    
    
    812,036Other operating expenses
    
    
    2,004,302
    
    
    
    1,546,015Total other expenses
    
    
    5,985,935
    
    
    
    5,850,510Income before income taxes (benefit)
    
    
    (1,903,545
    )
    
    
    417,977Income tax expense (benefit)
    
    
    (727,656
    )
    
    
    128,163Net income (loss)
    
    
    (1,175,889
    )
    
    
    289,814Basic earnings (losses) per share
    
    $
    (0.09
    )
    
    $
    0.02Diluted earnings (losses) per share
    
    $
    (0.09
    )
    
    $
    0.02
 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 MARCH 31, 2009 AND 2008
(Unaudited)
 2009
    
    
    2008Net income (loss)
    
    $
    (1,175,889
    )
    
    $
    289,814Other comprehensive loss:Reclassification adjustment for net gains on sales of securities
included in net income, net of tax of $270,025 and $231,432
respectively
    
    
    (440,567
    )
    
    
    (377,600
    )Net unrealized holding gains on securities available for sale
arising during period, net of tax benefit $23,758 and
$86,526 respectively
    
    
    38,763
    
    
    
    141,176Other comprehensive loss
    
    
    (401,804
    )
    
    
    (236,424
    )Comprehensive income (loss)
    
    $
    (1,577,693
    )
    
    $
    53,390
 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, 2009 AND 2008
(Unaudited)
 2009
    
    
    2008OPERATING ACTIVITIESNet income (loss)
    
    $
    (1,175,889
    )
    
    $
    289,814Adjustments to reconcile net income (loss) to net cash provided by operating activitiesDepreciation
    
    
    495,506
    
    
    
    462,159Amortization and accretion of securities
    
    
    15,067
    
    
    
    6,224Provision for loan losses
    
    
    1,919,007
    
    
    
    858,812Writedowns of foreclosed assets
    
    
    43,121
    
    
    
    Stock compensation expense
    
    
    79,663
    
    
    
    76,902Deferred taxes
    
    
    (96,294
    )
    
    
    344,258Net gain on sale of securities available for sale
    
    
    (710,592
    )
    
    
    (609,032
    )Loss on sale of foreclosed assets
    
    
    92,167
    
    
    
    99,350Gain on sale of premises and equipment
    
    
    
    
    
    
    (173,870
    )Increase (decrease) in income taxes payable
    
    
    (93,328
    )
    
    
    472,091Increase in interest receivable
    
    
    499,783
    
    
    
    407,577Increase in interest payable
    
    
    16,650
    
    
    
    16,283Net other operating activities
    
    
    (360,641
    )
    
    
    (1,265,834
    )Net cash provided by operating activities
    
    
    724,220
    
    
    
    984,734INVESTING ACTIVITIESDecrease in interest -bearing deposits in banks
    
    
    7,041,414
    
    
    
    37,507Purchases of securities available for sale
    
    
    (17,137,895
    )
    
    
    (42,954,149
    )Proceeds from maturities of securities available for sale
    
    
    1,710,592
    
    
    
    9,104,222Proceeds from sales of securities available for sale
    
    
    34,761,480
    
    
    
    35,005,499Purchases of restricted equity securities
    
    
    (246,900
    )
    
    
    (865,300
    )Net (increase) decrease in federal funds sold
    
    
    (14,749,000
    )
    
    
    17,664,000Net (increase) decrease in loans
    
    
    10,587,337
    
    
    
    (44,347,926
    )Purchase of premises and equipment
    
    
    (677,722
    )
    
    
    (2,087,932
    )Proceeds from sale of foreclosed assets
    
    
    1,571,068
    
    
    
    309,346Proceeds from sale of premises and equipment
    
    
    
    
    
    
    1,004,740Additions to other real estate owned
    
    
    (43,864
    )
    
    
    (43,736
    )Net cash (used in) provided by investing activities
    
    
    22,816,510
    
    
    
    (27,173,729
    )FINANCING ACTIVITIESNet increase in deposits
    
    
    10,856,514
    
    
    
    16,249,707Net increase in (repayments of) other borrowings
    
    
    (16,750,000
    )
    
    
    15,000,000Proceeds from exercise of stock options
    
    
    115,586
    
    
    
    89,288Purchase of fractional shares of common stock
    
    
    
    
    
    
    (7,885
    )Net cash (used in) provided by financing activities
    
    
    (5,777,900
    )
    
    
    31,331,110Net increase in cash and due from banks
    
    
    17,762,830
    
    
    
    5,142,115Cash and due from banks, beginning of period
    
    
    8,858,796
    
    
    
    6,112,287Cash and due from banks, end of period
    
    $
    26,621,626
    
    
    $
    11,254,402SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATIONCash paid during period for:Interest
    
    $
    5,819,511
    
    
    $
    6,245,877Income taxes
    
    $
    
    
    
    $
    NONCASH TRANSACTIONSFinanced sales of foreclosed assets
    
    $
    593,300
    
    
    $
    Loans transferred to foreclosed assets
    
    $
    7,260,481
    
    
    $
    1,995,849
  7




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FGBC BANCSHARES, INC.
AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2009
(Unaudited)
 NOTE 1. BASIS OF PRESENTATION
   NOTE 2. EARNINGS PER COMMON SHARE
  Three Months Ended March 31,2009
    
    
    2008Basic earnings (losses) per share:Weighted average common shares outstanding
    
    
    12,508,802
    
    
    
    12,190,121Net income (loss)
    
    $
    (1,175,889
    )
    
    $
    289,814Basic earnings (losses) per share
    
    $
    (.09
    )
    
    $
    .02Diluted earnings (losses) per share:Weighted average common shares outstanding
    
    
    12,508,802
    
    
    
    12,190,121Net effect of the assumed exercise of stock
options based on the treasury stock method
using average market prices for the year
    
    
    
    
    
    
    734,395Total weighted average common shares and
common stock equivalents outstanding
    
    
    12,508,802
    
    
    
    12,924,516Net income (loss)
    
    $
    (1,175,889
    )
    
    $
    289,814Diluted earnings (losses) per share
    
    $
    (.09
    )
    
    $
    .02
  NOTE 3. FAIR VALUE MEASUREMENTS
 Fair
Value Measurements.
 8




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Securities Available-for-Sale
 Impaired Loans Accounting by Creditors for Impairment of a Loan
 Foreclosed Assets
 9




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Quoted Prices
    
    
    Significantin Active
    
    
    Other
    
    
    SignificantMarkets for
    
    
    Observable
    
    
    UnobservableIdentical Assets
    
    
    Inputs
    
    
    Inputs(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    TotalAssetsAvailable for sale investment
securities
    
    $
    
    
    
    $
    52,477,907
    
    
    $
    
    
    
    $
    52,477,907Total assets at fair value
    
    $
    
    
    
    $
    52,477,907
    
    
    $
    
    
    
    $
    52,477,907
  Quoted Prices
    
    
    Significantin Active
    
    
    Other
    
    
    SignificantMarkets for
    
    
    Observable
    
    
    UnobservableIdentical Assets
    
    
    Inputs
    
    
    Inputs(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    TotalAssetsImpaired loans
    
    $
    
    
    
    $
    5,492,790
    
    
    $
    23,365,789
    
    
    $
    28,858,579Foreclosed assets
    
    
    
    
    
    
    2,790,042
    
    
    
    8,255,810
    
    
    
    11,045,852Total assets at fair value
    
    $
    
    
    
    $
    8,282,832
    
    
    $
    31,621,599
    
    
    $
    39,904,431
 
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Overview
   10




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Critical Accounting Policies
       11




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##### Table of Contents



Liquidity and Capital Resources
   RegulatoryMinimumRegulatory
    
    Requirement forActual
    
    Minimum
    
    Well CapitalizedConsolidated
    
    Bank
    
    Requirement
    
    StatusLeverage capital ratio
    
    
    7.44
    %
    
    
    7.34
    %
    
    
    4.00
    %
    
    
    5.00
    %Risk-based capital ratios:Tier I capital
    
    
    9.36
    %
    
    
    9.23
    %
    
    
    4.00
    
    
    
    6.00Total capital
    
    
    10.62
    %
    
    
    10.49
    %
    
    
    8.00
    
    
    
    10.00
  Off-Balance Sheet Risk
   March 31,2009(Dollars in Thousands)Commitments to extend credit
    
    $
    52,157Letters of credit
    
    
    1,032$
    53,189
  12




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Financial Condition
  March 31,
    
    
    December 31,2009
    
    
    2008(Dollars in Thousands)Cash and due from banks
    
    $
    26,622
    
    
    $
    8,859Interest-bearing deposits in banks
    
    
    4,001
    
    
    
    11,042Federal funds sold
    
    
    15,471
    
    
    
    722Securities
    
    
    54,778
    
    
    
    73,818Loans, net
    
    
    652,990
    
    
    
    672,164Premises and equipment
    
    
    38,080
    
    
    
    37,898Foreclosed assets
    
    
    11,046
    
    
    
    6,041Other assets
    
    
    11,165
    
    
    
    10,842$
    814,153
    
    
    $
    821,386Deposits
    
    $
    747,948
    
    
    $
    737,092Other borrowings
    
    
    
    
    
    
    16,750Other liabilities
    
    
    1,774
    
    
    
    1,730Stockholders equity
    
    
    64,431
    
    
    
    65,814$
    814,153
    
    
    $
    821,386
  Results of Operations for the Three Months Ended March 31, 2009 and 2008
  Three Months EndedMarch 31,2009
    
    
    2008(Dollars in Thousands)Interest income
    
    $
    10,247
    
    
    $
    11,600Interest expense
    
    
    (5,819
    )
    
    
    (6,227
    )Net interest income
    
    
    4,428
    
    
    
    5,373Provision for loan losses
    
    
    (1,919
    )
    
    
    (859
    )Other income
    
    
    1,573
    
    
    
    1,755Other expense
    
    
    (5,986
    )
    
    
    (5,851
    )Pretax income (loss)
    
    
    (1,904
    )
    
    
    418Income tax expense (benefit)
    
    
    (728
    )
    
    
    (128
    )Net income (loss)
    
    $
    (1,176
    )
    
    $
    290
 13




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Provision and Allowance for Loan Losses
  Accounting for Contingencies Accounting by Creditors for Impairment of a
Loan
    14




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March 31, 2009
    
    
    December 31, 2008Percentage of loans in
    
    
    
    
    
    
    Percentage  of loans inAmount
    
    
    each  category
    
    
    Amount
    
    
    each  category(Dollars in Thousands)Commercial and industrial
    
    $
    827
    
    
    
    7.46
    %
    
    $
    632
    
    
    
    7.26
    %Real estate  construction
    
    
    4,715
    
    
    
    26.99
    %
    
    
    5,452
    
    
    
    29.64
    %Real estate  mortgage
    
    
    5,602
    
    
    
    61.59
    %
    
    
    4,578
    
    
    
    58.95
    %Installment loans to individuals
    
    
    341
    
    
    
    3.96
    %
    
    
    351
    
    
    
    4.15
    %$
    11,485
    
    
    
    100
    %
    
    $
    11,013
    
    
    
    100
    %
  March 31,2009
    
    
    2008(Dollars in Thousands)Non-accrual loans:Commercial and industrial
    
    $
    1,001
    
    
    $
    355Real estate  construction
    
    
    16,644
    
    
    
    233Real estate  mortgage
    
    
    10,524
    
    
    
    691Installment loans to individuals
    
    
    346
    
    
    
    95Total non-accrual loans
    
    $
    28,515
    
    
    $
    1,374Loans 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
    
    $
    3,756
    
    
    $
    Real estate  construction
    
    
    
    
    
    
    Real estate  mortgage
    
    
    
    
    
    
    Installment loans to individuals
    
    
    
    
    
    
    Total restructured loans in compliance with terms
    
    $
    3,756
    
    
    $
    Potential problem loans:Commercial and industrial
    
    $
    144
    
    
    $
    107Real estate  construction
    
    
    557
    
    
    
    1,468Real estate  mortgage
    
    
    1,667
    
    
    
    65Installment loans to individuals
    
    
    130
    
    
    
    15Total potential problem loans
    
    $
    2,498
    
    
    $
    1,655Interest income that would have been recorded on non-accrual
loans under original terms
    
    $
    1,284Interest income that was recorded on non-accrual loans
    
    
    1,106Reduction in interest income
    
    $
    179
   15




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##### Table of Contents



Three Months EndedMarch 31,2009
    
    
    2008(Dollars in Thousands)Average amount of loans outstanding
    
    $
    676,446
    
    
    $
    556,723Balance of allowance for loan losses at beginning of period
    
    $
    11,013
    
    
    $
    6,267Loans charged offCommercial and industrial
    
    
    (105
    )
    
    
    (19
    )Real estate  construction
    
    
    (797
    )
    
    
    (170
    )Real estate  mortgage
    
    
    (409
    )
    
    
    (93
    )Installment loans to individuals
    
    
    (149
    )
    
    
    (111
    )(1,460
    )
    
    
    (393
    )Loans recoveredCommercial and industrial
    
    
    1
    
    
    
    Real estate  construction
    
    
    5
    
    
    
    Real estate  mortgage
    
    
    2
    
    
    
    1Installment loans to individuals
    
    
    5
    
    
    
    2113
    
    
    
    22Net charge-offs
    
    
    (1,447
    )
    
    
    (371
    )Additions to allowance charged to operating expense during period
    
    
    1,919
    
    
    
    859Balance of allowance for loan losses at end of period
    
    $
    11,485
    
    
    $
    6,755Ratio of net loans charged off during the period to
average loans outstanding
    
    
    .21
    %
    
    
    .07
    %
 16




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Other Income and Expenses
    
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
    17




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##### Table of Contents



Analysis of Interest Sensitivity
As of March 31, 2009
(Dollars in Thousands)
 0-3
    
    3-12
    
    Over 1Months
    
    Months
    
    Year
    
    TotalInterest-earning assets:Interest-bearing deposits in banks
    
    
    4,001
    
    
    
    
    
    
    
    
    
    
    
    4,001Securities
    
    
    
    
    
    
    
    
    
    
    52,478
    
    
    
    52,478Restricted equity securities
    
    
    2,300
    
    
    
    
    
    
    
    
    
    
    
    2,300Federal funds sold
    
    
    15,471
    
    
    
    
    
    
    
    
    
    
    
    15,471Loans (1)
    
    
    228,341
    
    
    
    122,581
    
    
    
    285,040
    
    
    
    635,962Total interest-earning assets
    
    
    250,113
    
    
    
    122,581
    
    
    
    337,518
    
    
    
    710,212Interest-bearing liabilities:Interest-bearing demand deposits
    
    
    83,180
    
    
    
    
    
    
    
    
    
    
    
    83,180Savings and money markets
    
    
    160,731
    
    
    
    
    
    
    
    
    
    
    
    160,731Time deposits
    
    
    170,280
    
    
    
    217,851
    
    
    
    73,706
    
    
    
    461,837Total interest-bearing liabilities
    
    
    414,191
    
    
    
    217,851
    
    
    
    73,706
    
    
    
    705,748Interest rate sensitivity gap
    
    
    (164,078
    )
    
    
    (95,270
    )
    
    
    263,812
    
    
    
    4,464Cumulative interest rate sensitivity gap
    
    
    (164,078
    )
    
    
    (259,348
    )
    
    
    4,464Interest rate sensitivity gap ratio
    
    
    .60
    
    
    
    0.56
    
    
    
    4.58Cumulative interest rate sensitivity gap ratio
    
    
    .60
    
    
    
    0.59
    
    
    
    1.01
 
 (1)
    
    Excludes non-accrual loans totaling approximately $28,515,000.  
 Item 4. Controls and Procedures
  18




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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
  
 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
 19




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##### Table of Contents



SIGNATURES
  FGBC BANCSHARES, INC.Date:  May 14, 2009
    /s/ Jackie L. ReedJackie L. ReedPresident and CEODate:  May 14, 2009
    /s/ Teresa L. MartinTeresa L. MartinChief Financial Officer 20