EXHIBIT 99.1

FINANCIAL STATEMENTS

GEORGIA-CAROLINA BANCSHARES, INC.

Financial Statements

For the Years Ended December 31, 2009, 2008 and 2007

GEORGIA-CAROLINA BANCSHARES, INC.

Table of Contents

Financial Statements

For the Years Ended December 31, 2009, 2008 and 2007

		Page
Report of Independent Registered Public Accounting Firm			1
Consolidated Statements of Financial Condition			2
Consolidated Statements of Income			3
Consolidated Statements of Comprehensive Income			4
Consolidated Statements of Shareholders’ Equity			5
Consolidated Statements of Cash Flows			6
Notes to Consolidated Financial Statements			7-41

Report of Independent Registered Public Accounting Firm

The Board of Directors
Georgia-Carolina Bancshares, Inc.
Augusta, Georgia

We have audited the accompanying consolidated statements of financial condition of Georgia-Carolina Bancshares, Inc. and subsidiary (the “Company”) as of December 31, 2009 and 2008, and the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows, for each of the years in the three-year period ended December 31, 2009. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Georgia-Carolina Bancshares, Inc. and subsidiary as of December 31, 2009 and 2008, and the results of their operations and cash flows, for each of the years in the three-year period ended December 31, 2009, in conformity with accounting principles generally accepted in the United States of America.

Augusta, Georgia
March 26, 2010

GEORGIA-CAROLINA BANCSHARES, INC.

Consolidated Statements of Financial Condition

December 31, 2009 and 2008
(dollars in thousands, except per share amounts)

		2009				2008
Assets
Cash and due from banks		$	13,055			$	9,954
Federal funds sold			3,175				—
Securities available-for-sale			44,461				57,594
Loans, net of allowance for loan losses of $5,072 and $4,284, respectively			331,777				332,009
Loans held for sale			58,135				28,402
Bank premises and fixed assets			9,654				10,081
Accrued interest receivable			1,851				1,934
Foreclosed real estate, net of allowance			4,466				7,217
Deferred tax asset, net			1,018				996
Federal Home Loan Bank stock			2,828				2,201
Bank-owned life insurance			8,812				8,402
Other assets			4,781				2,038
Total assets		$	484,013			$	460,828
Liabilities and Shareholders’ Equity
Liabilities
Deposits
Non-interest bearing		$	41,787			$	34,121
Interest-bearing:
NOW accounts			36,395				37,373
Savings			51,424				55,426
Money market accounts			19,232				9,772
Time deposits of $100,000 or more			179,123				170,878
Other time deposits			77,279				69,439
Total deposits			405,240				377,009
Federal funds purchased			—				1,148
Federal Home Loan Bank borrowings			3,600				6,000
Deposit agreements			3,697				8,611
Current portion of long-term debt			—				100
Long-term debt			25,000				25,400
Other liabilities			3,203				3,476
Total liabilities			440,740				421,744
Shareholders’ equity
Preferred stock, par value $.001; 1,000,000 shares authorized; none issued			—				—
Common stock, par value $.001; 9,000,000 shares authorized; 3,499,477 and 3,456,816 shares issued and outstanding, respectively			4				4
Additional paid-in capital			15,567				15,268
Retained earnings			27,355				23,604
Accumulated other comprehensive income			347				208
Total shareholders’ equity			43,273				39,084
Total liabilities and shareholders’ equity		$	484,013			$	460,828

See notes to consolidated financial statements.

GEORGIA-CAROLINA BANCSHARES, INC.

Consolidated Statements of Income

For the Years Ended December 31, 2009, 2008 and 2007
(dollars in thousands, except per share amounts)

		2009				2008				2007
Interest income
Interest and fees on loans		$	22,260			$	23,186			$	25,998
Interest on taxable securities			1,925				2,763				2,490
Interest on nontaxable securities			412				337				270
Interest on Federal funds sold and cash in banks			7				85				261
Total interest income			24,604				26,371				29,019
Interest expense
Interest on time deposits of $100,000 or more			5,415				6,414				6,687
Interest on other deposits			3,330				5,536				8,227
Interest on funds purchased and other borrowings			977				1,088				792
Total interest expense			9,722				13,038				15,706
Net interest income			14,882				13,333				13,313
Provision for loan losses			3,082				1,456				909
Net interest income after provision for loan losses			11,800				11,877				12,404
Non-interest income
Service charges on deposits			1,496				1,338				1,273
Gain on sale of mortgage loans			9,735				7,152				7,762
Other income			2,926				1,430				897
Total non-interest income			14,157				9,920				9,932
Non-interest expense
Salaries and employee benefits			12,776				10,958				11,131
Occupancy expenses			1,516				1,546				1,523
Other expenses			6,610				5,241				5,162
Total non-interest expense			20,902				17,745				17,816
Income before income taxes			5,055				4,052				4,520
Income tax expense			1,303				1,252				1,619
Net income		$	3,752			$	2,800			$	2,901
Earnings per share
Basic		$	1.08			$	.82			$	.85
Diluted		$	1.07			$	.80			$	.83

See notes to consolidated financial statements.

GEORGIA-CAROLINA BANCSHARES, INC.

Consolidated Statements of Comprehensive Income

For the Years Ended December 31, 2009, 2008 and 2007
(dollars in thousands)

		2009				2008				2007
Net income		$	3,752			$	2,800			$	2,901
Unrealized holding gain (loss) arising during the period, net of tax			139				(7	)			496
Comprehensive income		$	3,891			$	2,793			$	3,397

See notes to consolidated financial statements.

GEORGIA-CAROLINA BANCSHARES, INC.

Consolidated Statements of Shareholders’ Equity

For the Years Ended December 31, 2009, 2008 and 2007
(dollars in thousands)

																		Accumulated
		Common				Common				Additional								Other				Total
		Stock				Stock				Paid-in				Retained				Comprehensive				Shareholders’
		Shares				Par Value				Capital				Earnings				Income (Loss)				Equity
Balance at January 1, 2007			3,376,522			$	4			$	14,500			$	17,903			$	(281	)		$	32,126
Net income			—				—				—				2,901				—				2,901
Change in unrealized gain (loss) on securities available-for-sale, net of deferred taxes			—				—				—				—				496				496
Proceeds from exercise of stock options			8,500				—				33				—				—				33
Stock-based compensation expense			—				—				226				—				—				226
Issuance of stock for compensation			13,701				—				189				—				—				189
Balance at December 31, 2007			3,398,723				4				14,948				20,804				215				35,971
Net income			—				—				—				2,800				—				2,800
Change in unrealized gain (loss) on securities available-for-sale, net of deferred taxes			—				—				—				—				(7	)			(7	)
Proceeds from exercise of stock options			43,133				—				21				—				—				21
Stock-based compensation expense			—				—				134				—				—				134
Issuance of stock for compensation			14,960				—				165				—				—				165
Balance at December 31, 2008			3,456,816				4				15,268				23,604				208				39,084
Net income			—				—				—				3,752				—				3,752
Change in unrealized gain (loss) on securities available-for-sale, net of deferred taxes			—				—				—				—				139				139
Proceeds from exercise of stock options			21,103				—				52				—				—				52
Stock-based compensation expense			—				—				80				—				—				80
Issuance of stock for compensation			21,558				—				167				(1	)			—				166
Balance at December 31, 2009			3,499,477			$	4			$	15,567			$	27,355			$	347			$	43,273

See notes to consolidated financial statements.

GEORGIA-CAROLINA BANCSHARES, INC.

Consolidated Statements of Cash Flows

For the Years Ended December 31, 2009, 2008 and 2007
(dollars in thousands)

		2009				2008				2007
Cash flows from operating activities
Net income		$	3,752			$	2,800			$	2,901
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization			677				723				752
Provision for loan losses			3,082				1,456				909
Gains on sales of foreclosed real estate			(1,764	)			(13	)			(33	)
(Gains) losses on sales of premises and equipment			—				(1	)			32
Increase in cash value of bank-owned life insurance			(410	)			(316	)			(86	)
Stock-based compensation expense			80				134				226
Stock compensation			166				165				189
Deferred income tax			(245	)			323				(234	)
Net originations, proceeds and gain on loans held for sale			(29,733	)			11,145				17,211
(Increase) decrease in accrued interest receivable			83				181				(377	)
Increase (decrease) in accrued interest payable			(721	)			(1,110	)			54
Net change in other assets and liabilities			(2,386	)			226				(8,384	)
Net cash provided by (used in) operating activities			(27,419	)			15,713				13,160
Cash flows from investing activities
(Increase) decrease in Federal funds sold			(3,175	)			—				1,182
Loan originations and collections, net			(9,187	)			(24,983	)			(42,690	)
Purchases of available-for-sale securities			(16,183	)			(27,262	)			(18,876	)
Proceeds from maturities and calls of available-for-sale securities			29,533				28,564				14,017
Purchases of restricted securities			(1,995	)			(4,816	)			(4,248	)
Proceeds from sales of restricted securities			1,368				4,102				4,892
Proceeds from sale of foreclosed real estate			10,852				1,939				1,285
Net additions to premises and equipment			(145	)			(266	)			(456	)
Net cash provided by (used in) investing activities			11,068				(22,722	)			(44,894	)
Cash flows from financing activities
Increase (decrease) in deposits			28,231				(2,957	)			38,624
Increase (decrease) in FHLB borrowings			(2,400	)			14,657				(15,485	)
Increase (decrease) in repurchase agreements and other borrowings			(6,431	)			(1,502	)			4,197
Proceeds from stock options exercised			52				21				33
Net cash provided by financing activities			19,452				10,219				27,369
Net increase (decrease) in cash and due from banks			3,101				3,210				(4,365	)
Cash and due from banks at beginning of the year			9,954				6,744				11,109
Cash and due from banks at end of the year		$	13,055			$	9,954			$	6,744

See notes to consolidated financial statements.

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements — (continued)

December 31, 2009 and 2008

Note 1—Summary of significant accounting policies

Nature of business

Georgia-Carolina Bancshares, Inc. (the “Company”) is a one-bank holding company. Substantially all of its business is conducted by its wholly-owned subsidiary, First Bank of Georgia (the “Bank”). The Bank is engaged in community banking activities through its locations in Thomson and Augusta, Georgia and the surrounding area. Most of the Bank’s loans and loan commitments have been made to customers in the Columbia, Richmond, and McDuffie County, Georgia areas. Many of the Bank’s loan customers are also depositors of the Bank. The Bank has established a mortgage division that operates as First Bank Mortgage. This division currently has locations in the Augusta and Savannah, Georgia areas and in Jacksonville, Florida. The division originates residential real estate mortgage loans and provides financing to residential construction and development companies. Substantially all residential mortgage loans originated by the division are sold in the secondary market. The Bank is also the parent company of Willhaven Holdings, LLC, which holds certain other real estate of the Bank.

The Bank is subject to the regulations of Federal and state banking agencies and is periodically examined by them.

Significant accounting policies

Basis of presentation: The consolidated financial statements include the accounts of the Company and the Bank. Significant inter-company transactions and accounts are eliminated in consolidation. The accounting and reporting policies of the Bank conform to accounting principles generally accepted in the United States of America and general practices within the banking industry.

Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Significant concentrations of credit risk: A substantial portion of the Bank’s loan portfolio is with customers in the Thomson and Augusta, Georgia market areas. The ultimate collectibility of a substantial portion of the portfolio is therefore susceptible to changes in the economic and market conditions in and around these areas.

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements — (continued)

December 31, 2009 and 2008

Note 1—Summary of significant accounting policies (continued)

Significant concentrations of deposit risk: In October and November 2008, the Federal Deposit Insurance Corporation (FDIC) temporarily increased coverage to $250,000 for substantially all depository accounts and temporarily provides unlimited coverage for certain qualifying and participating non-interest bearing transaction accounts. The increased coverage was extended until December 31, 2013 by Congress in May 2009. During the year, the Company from time to time may have had amounts on deposit in excess of the insured limits.

Cash and due from banks: For purposes of reporting cash flows, cash and due from banks includes cash on hand and amounts due from banks (including cash items in the process of clearing). The Bank maintains due from accounts with banks primarily located in Georgia and Alabama. Balances generally exceed insured amounts.

Investment securities: The Bank’s investments in securities are classified and accounted for as follows:

Securities available-for-sale — Securities classified as available-for-sale are identified when acquired as being available-for-sale to meet liquidity needs or other purposes. They are carried at fair value with unrealized gains and losses, net of taxes, reported in other comprehensive income.

Restricted equity securities without a readily determinable fair value are recorded at cost.

The Bank has not classified any securities as held-to-maturity or trading.

Realized gains and losses on the sale of securities are determined using the specific-identification method on a trade date basis. Dividends and interest income are recognized when earned. A decline in fair value of individual available-for-sale or held-to-maturity securities below cost that is deemed other than temporary, results in write-downs of individual securities to their fair value.

The amortization or premiums and accretion of discounts are recognized in interest income using methods approximating the interest method over the life of the securities.

Declines in the fair value of securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses. In estimating other-than-temporary impairment losses, management considers: 1) the length of time and the extent to which the fair value has been less than cost, 2) the financial condition and near-term prospects of the issuer, and 3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements — (continued)

December 31, 2009 and 2008

Note 1—Summary of significant accounting policies (continued)

Loans and interest income: Loans are stated at principal amounts outstanding less unearned income and the allowance for loan losses. Interest income on loans is credited to income based on the principal amount outstanding at the respective rate of interest, except for unearned interest on discounted loans that is recognized as income over the term of the loan using a method that approximates a level yield.

Loans originated and intended for sale in the secondary market are stated at the lower of cost or estimated fair value in the aggregate. Net unrealized losses, if any, are recognized through a valuation allowance by charges to income. As the mortgage loans originated are individually pre-approved by the secondary market investors, the Bank is subject to minimal interest rate and credit risk on these loans, as the Bank only holds the loans in the portfolio temporarily until funding from the investor is completed.

Loan commitments, whose underlying mortgage loans at origination will be held for sale upon funding of the loan, are derivative instruments as defined by ASC 815-10, “Derivatives and Hedging.” Loan commitments are recognized on the consolidated balance sheet in other assets and other liabilities at fair value, with changes in their fair values recognized in current period earnings. At the inception of a loan commitment, the Bank generally will simultaneously enter into a best efforts forward loan sale commitment to protect the Bank from losses on sales of the loans underlying the loan commitment by securing the ultimate sale price and delivery date of the loan.

Accrual of interest income is discontinued when a loan becomes 90 days past due as to principal and interest or when, in management’s judgment, the interest will not be collectible in the normal course of business. Accrual of interest on such loans is resumed when, in management’s judgment, the collection of interest and principal becomes probable. When a loan is placed on non-accrual status, all interest previously accrued but not collected is reversed against current interest income. Interest income is subsequently recognized only to the extent cash payments are received.

The accrual of interest on impaired loans is discontinued when, in management’s judgment, the borrower may be unable to meet payments as due. Management applies this criterion to all loans identified for evaluation except for smaller-balance homogeneous residential mortgage and consumer installment loans that are collectively evaluated for impairment. Impairment on loans is measured using either the discounted expected cash flow method or value of collateral method. A loan is impaired when, based on current information and events, it is probable that the Bank will be unable to collect all amounts due according to the contractual terms of the loan agreement. Impairments on loans are charged to the allowance for loan losses. Management of the Bank evaluates the borrower’s ability to pay, the value of any collateral, and other factors in determining when a loan is impaired. Management does not consider a loan to be impaired during a period of delay in payment if it is expected that the Bank will collect all amounts due including interest accrued at the contractual interest rate for the period of the delay.

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements — (continued)

December 31, 2009 and 2008

Note 1—Summary of significant accounting policies (continued)

Interest payments on impaired loans are applied to the remaining principal balance until the balance is fully recovered. Once principal is recovered, cash payments received are recorded as recoveries to the extent of any principal previously charged-off and then as interest income.

Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield over the life of the loan. Loan origination fees and direct loan origination costs on loans held for sale are deferred and recognized at the time the loan is sold.

Allowance for loan losses: The allowance for loan losses is established through a provision for loan losses charged to expense. Loans, including impaired loans, are charged against the allowance for loan losses when management believes that collectibility of the principal is unlikely. The allowance is an amount that management believes will be adequate to absorb estimated losses on existing loans that may become uncollectible, based on evaluation of the collectibility of certain specific loans and prior loss experience. This evaluation also takes into consideration such factors as changes in the nature and volume of the loan portfolio, overall portfolio quality, review of specific problem loans, and current economic conditions that may affect the borrower’s ability to pay. While management uses the best information available to make its evaluation, future adjustments to the allowance may be necessary if there are significant changes in economic conditions.

Foreclosed real estate: Foreclosed real estate represents properties acquired through foreclosure or other proceedings. The property is held for sale and is recorded at the lower of the recorded amount of the loan, or fair value of the property, less estimated costs of disposal. Any write-down to fair value at the time of foreclosure is charged to the allowance for loan losses. Property is evaluated regularly to ensure the carrying amount is supported by its current fair value. Foreclosed real estate is reported net of allowance for losses in the consolidated financial statements.

Bank premises and equipment: Premises and equipment are stated at cost, less accumulated depreciation, and computed by straight-line and declining balance methods over the estimated useful lives of the assets, which range from three to thirty-nine years.

Financial instruments: In the ordinary course of business, the Company has entered into off balance sheet financial instruments consisting of commitments to extend credit, commercial letters of credit and standby letters of credit. Such financial instruments are recorded in the financial statements when they become payable.

Bank-owned life insurance (BOLI): In order to insure the lives of its key officers, the Bank has acquired a bank-owned life insurance policy. BOLI is recorded at its cash surrender value, net of surrender charges and/or early termination charges, in accordance with ASC 325-30, “Investments in Insurance Contracts.” The change in cash value is recorded as other income/expense.

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements — (continued)

December 31, 2009 and 2008

Note 1—Summary of significant accounting policies (continued)

Income taxes: Provisions for income taxes are based on amounts reported in the statements of income after exclusion of nontaxable income, such as interest on state and municipal securities, and include deferred taxes on temporary differences in the recognition of income and expense for tax and financial statement purposes. Deferred taxes are computed on the liability method. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. In accordance with ASC 740-10, “Income Taxes,” it is the Company’s policy to recognize interest and penalties associated with uncertain tax positions as components of income taxes and to disclose the recognized interest and penalties, if material.

Earnings per share: Earnings per share are calculated on the basis of the weighted average number of shares outstanding in accordance with ASC 260-10, “Earnings Per Share.” This Statement establishes standards for computing and presenting earnings per share and applies to entities with publicly held common stock or potential future issuances of common stock. The Company’s outstanding stock options are the primary component of the Company’s diluted earnings per share.

Fair value of financial instruments: The following methods and assumptions are used by the Bank in estimating fair values of financial instruments. In cases where quoted market prices of financial instruments are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows.

In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instrument. Accordingly, the aggregate fair value amounts presented are not intended to and do not represent the underlying value of the Bank.

Cash and due from banks, Federal funds sold, and interest-bearing deposits in banks — Due to the short-term nature of these instruments, their estimated fair values approximate their carrying amounts.

Available-for-sale securities — Estimated fair values are based on quoted market prices when available. Where quoted market prices are not available, quoted market prices of comparable instruments or discounted cash flow methods are used to estimate fair value.

Loans — Fair values for loans are estimated by discounted cash flows using interest rates currently being offered by the Bank for loans with similar terms and similar credit quality. For loan commitments, the Bank utilizes prevailing interest rates being offered on similar loans to estimate the fair value of the commitment.

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements — (continued)

December 31, 2009 and 2008

Note 1—Summary of significant accounting policies (continued)

Deposit liabilities, other borrowings, and retail agreements - Due to the short-term nature of demand and savings accounts and retail agreements, the estimated fair value of these instruments approximates their carrying amounts. In addition, due to the short-term nature of borrowings from other institutions, the estimated fair value of these instruments approximates their carrying amounts. Fair values for certificates of deposit are estimated by discounted cash flows using interest rates currently being offered by the Bank on certificates of deposits.

Commitments to extend credit and standby letters of credit are not recorded until such commitments are funded. The value of these commitments is equal to the fees charged to enter into such agreements. The Bank has determined that such instruments do not have a material distinguishable fair value, and no fair value has been assigned to these instruments.

Comprehensive income: Accounting principles generally require that recognized revenue, expenses, gains, and losses be included in net income, although certain changes in assets and liabilities, such as unrealized gains and losses on available-for-sale securities, are reported as a separate component of the equity section of the statement of financial condition. Such items, along with net income, are components of comprehensive income.

Stock-based compensation: The Company uses the fair value recognition provisions of ASC 718-10, “Compensation-Stock Compensation,” to account for compensation costs under its stock option plans. In adopting ASC 718-10, the Company elected to use the modified prospective method to account for the transition from the previously utilized intrinsic value method to the fair value recognition method. Under the modified prospective method, compensation cost is recognized from the adoption date forward for all new stock options granted and for any outstanding unvested awards as if the fair value method had been applied to those awards as of the date of grant. See Note 10 for additional information regarding the Company’s stock-based compensation plans.

Recently issued accounting standards

In August 2009, the FASB issued Accounting Standards Update (ASU) 2009-05, “Measuring Liabilities at Fair Value,” which updates ASC 820-10, “Fair Value Measurements and Disclosures.” ASU 2009-05 clarifies that the fair value of a liability can be measured relative to the quoted price of the liability when it trades as an asset in an active market, without adjusting the price for restrictions that prevent the sale of the liability. ASU 2009-05 is effective beginning October 1, 2009. The adoption of ASU 2009-05 did not have a material impact on the Company’s financial condition, results of operations, or liquidity.

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements — (continued)

December 31, 2009 and 2008

Note 1—Recently issued accounting standards (continued)

In June 2009, the FASB issued an update to Accounting Standard Codification 105-10, “Generally Accepted Accounting Principles.” This update established the FASB Accounting Standard Codification (Codification) as the source of authoritative U.S. GAAP recognized by the FASB for nongovernmental entities. The Codification replaces SFAS 162, “The Hierarchy of Generally Accepted Accounting Principles,” previously issued by the FASB in May 2008 and adopted by the Company in 2008 as required. In the establishment of the Codification, SFAS 162 was grandfathered into ASC 105-10-70-1. The Codification is effective for interim and annual periods ending after September 15, 2009 and is a reorganization of existing U.S. GAAP and does not change existing U.S. GAAP. The Company adopted the Codification during the third quarter of 2009 as required. The adoption of the Codification did not have a material impact on the Company’s financial condition, results of operations, or liquidity.

In April 2009, the FASB updated ASC 820-10, “Fair Value Measurements and Disclosures,” to provide additional guidance for estimating fair value when the volume and level of activity for the asset or liability have decreased significantly and identifying circumstances that indicate a transaction is not orderly. The provisions of this update to ASC 820-10 were effective for the Company’s interim period ending on June 30, 2009. The Company adopted this update during the second quarter of 2009 as required. The adoption of this update to ASC 820-10 did not have a material impact on the Company’s financial condition, results of operations, or liquidity.

In April 2009, the FASB updated ASC 320-10, “Investments-Debt and Equity Securities.” This update amends current other-than-temporary impairment guidance for debt securities to make the guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments on debt and equity securities in the financial statements. This update does not amend existing recognition and measurement guidance related to other-than-temporary impairments of equity securities. The provisions of this update to ASC 320-10 were effective for the Company’s interim period ending on June 30, 2009. The Company adopted this update during the second quarter of 2009 as required. The adoption of this update to ASC 320-10 did not have a material impact on the Company’s financial condition, results of operations, or liquidity.

In April 2009, the FASB updated ASC 825-10, “Financial Instruments,” to require disclosures about fair value of financial instruments in interim reporting periods of publicly traded companies that were previously only required to be disclosed in annual financial statements. This update to ASC 825-10 was effective for the Company’s interim period ending on June 30, 2009 and amended only the disclosure requirements about fair value of financial instruments in interim periods. The Company adopted this update during the second quarter of 2009 as required. The adoption of this update to ASC 825-10 did not have a material impact on the Company’s financial condition, results of operations, or liquidity.

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements — (continued)

December 31, 2009 and 2008

Note 1—Recently issued accounting standards (continued)

In October 2008, the FASB updated ASC 820-10, “Fair Value Measurements and Disclosures,” to clarify the application of this standard in an inactive market and which provides an example to illustrate key considerations in determining the fair value of a financial asset when the market for that financial asset is not active. This update to ASC 820-10 was effective upon issuance, including prior periods for which financial statements had not been issued. Revisions resulting from a change in the valuation technique or its application shall be accounted for as a change in accounting estimate (ASC 250-10, “Accounting Changes and Error Corrections”). The disclosure provisions of ASC 250-10 for a change in accounting estimate are not required for revisions resulting from a change in valuation technique or its application. The Company adopted this update to ASC 820-10 on October 1, 2008 as required. The adoption of this update to ASC 820-40 did not have a material impact on the Company’s financial condition, results of operations, or liquidity.

In September 2008, the FASB updated ASC 815-10, “Derivatives and Hedging,” which amends and enhances disclosure requirements for sellers of credit derivatives. This update to ASC 815-10 became effective for interim and annual reporting periods ending after November 15, 2008. The Company adopted this update as of December 31, 2008 as required. The adoption of this update to ASC 815-10 did not have a material impact on the Company’s financial condition, results of operations, or liquidity.

In March 2008, the FASB issued ASC 815-10, “Derivatives and Hedging,” which requires entities that utilize derivative instruments to provide qualitative disclosures about their objectives and strategies for using such instruments, as well as any details of credit-risk-related contingent features contained within derivatives. ASC 815-10 also requires entities to disclose additional information about the amounts and location of derivatives located within the financial statements, how the provisions of ASC 815-10 have been applied, and the impact that hedges have on an entity’s financial position, financial performance, and cash flows. ASC 815-10 became effective for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The Company adopted this statement on January 1, 2009 as required. The adoption of ASC 815-10 did not have a material impact on the Company’s financial condition, results of operations, or liquidity.

In February 2008, the FASB issued ASC 860-10, “Transfers and Servicing,” which addresses the issue of whether or not the transfers of financial assets and repurchase financing transactions should be viewed as two separate transactions or as one “linked” transaction. ASC 860-10 includes a “rebuttable presumption” that presumes linkage of the two transactions unless the presumption can be overcome by meeting certain criteria. ASC 860-10 became effective for fiscal years beginning after November 15, 2008 and applied only to original transfers made after that date; early adoption was not allowed. The Company adopted this statement on January 1, 2009 as required. The adoption of this statement did not have a material impact on the Company’s financial condition, results of operations, or liquidity.

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements — (continued)

December 31, 2009 and 2008

Note 1—Recently issued accounting standards (continued)

Other accounting standards that have been issued or proposed by the FASB or other standards- setting bodies, but not specifically addressed in this report, are not expected to have a material impact on the Company’s financial condition, results of operations, or liquidity.

Note 2—Cash and due from banks

Cash on hand, cash items in the process of collection, and amounts due from correspondent banks and the Federal Reserve Bank are included in Cash and due from banks. As of December 31, 2009, interest-bearing cash on deposit with correspondent banks totaled $2.1 million and funds required to be on reserve with the Federal Reserve totaled $78,000 compared to $1.3 million and $960,000, respectively, as of December 31, 2008. Interest-bearing cash on deposit in the Federal Reserve excess balance fund was $0 as of December 31, 2009 and this fund was not used in 2008.

Note 3—Investment securities

The amortized cost and fair value amounts of securities owned as of December 31, 2009 and 2008 are shown below:

		2009
						Gross				Gross
		Amortized				Unrealized				Unrealized				Fair
		Cost				Gains				Losses				Value
		(in thousands)
Available-for-sale securities:
U.S. Government and agency		$	10,501			$	151			$	—			$	10,652
Mortgage-backed			23,446				680				(222	)			23,904
Corporate obligations			195				—				(73	)			122
State and municipal			9,776				134				(127	)			9,783
Total		$	43,918			$	965			$	(422	)		$	44,461

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements — (continued)

December 31, 2009 and 2008

Note 3—Investment securities (continued)

		2008
						Gross				Gross
		Amortized				Unrealized				Unrealized				Fair
		Cost				Gains				Losses				Value
		(in thousands)
Available-for-sale securities:
U.S. Government and agency		$	26,690			$	640			$	—			$	27,330
Mortgage-backed			19,899				423				(132	)			20,190
Corporate obligations			194				—				(44	)			150
State and municipal			10,482				30				(588	)			9,924
Total		$	57,265			$	1,093			$	(764	)		$	57,594

The amortized cost and fair value of securities as of December 31, 2009 by contractual maturity are as follows. Actual maturities may differ from contractual maturities in mortgage-backed securities, as the mortgages underlying the securities may be called or prepaid without penalty; therefore, these securities are not included in the maturity categories in the following maturity summary.

		Securities
		Available-for-Sale
		Amortized				Fair
		Cost				Value
		(in thousands)
Less than one year		$	335			$	340
One to five years			2,345				2,378
Five to ten years			6,032				5,930
Over ten years			11,760				11,909
Mortgage-backed securities			23,446				23,904
Total		$	43,918			$	44,461

Securities with a carrying amount of approximately $43.3 million at December 31, 2009 and $41.5 million at December 31, 2008 were pledged to secure public deposits and for other purposes.

There were no material gross realized gains or gross realized losses on sales of securities during 2009, 2008, or 2007.

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements — (continued)

December 31, 2009 and 2008

Note 3—Investment securities (continued)

Information pertaining to securities with gross unrealized losses at December 31, 2009 and December 31, 2008, aggregated by investment category and length of time that individual securities have been in a continuous loss position, follows:

		2009
		Less than								Over
		Twelve Months								Twelve Months
		Gross								Gross
		Unrealized				Fair				Unrealized				Fair
		Losses				Value				Losses				Value
		(In thousands)
Securities available-for-sale:
U. S. agency		$	—			$	—			$	—			$	—
State and municipal			(1	)			197				(126	)			1,426
Corporate obligations			—				—				(73	)			122
Mortgage-backed			(170	)			7,019				(52	)			763
Total		$	(171	)		$	7,216			$	(251	)		$	2,311

		2008
		Less than								Over
		Twelve Months								Twelve Months
		Gross								Gross
		Unrealized				Fair				Unrealized				Fair
		Losses				Value				Losses				Value
		(In thousands)
Securities available-for-sale:
U. S. agency		$	—			$	—			$	—			$	—
State and municipal			(400	)			6,440				(188	)			742
Corporate obligations			—				—				(44	)			150
Mortgage-backed			(131	)			4,224				(1	)			728
Total		$	(531	)		$	10,664			$	(233	)		$	1,620

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements — (continued)

December 31, 2009 and 2008

Note 3—Investment securities (continued)

Management evaluates securities for other-than-temporary impairment on a periodic basis, and more frequently when economic or market conditions warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuers, and (3) the intent and ability of the Bank to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

At December 31, 2009, the gross unrealized losses are primarily the result of changes in market interest rates and not related to the credit quality of the underlying issuer. All of the securities are mortgage-backed securities, municipal and state securities and corporate securities. As the Bank has the ability to hold the securities for the foreseeable future, no declines are deemed to be other than temporary.

Included in Other assets is an investment of approximately $604,000, net of amortization, in a real estate rehabilitation project located in Georgia that will provide the Bank with state tax credits for approximately the next 6 years.

Note 4—Loans

The composition of loans for the years ended December 31, 2009 and 2008 is summarized as follows:

		2009				2008
		(in thousands)
Commercial and industrial		$	22,906			$	31,173
Real estate — construction			107,429				105,032
Real estate — residential			66,050				65,958
Real estate — commercial			133,140				125,194
Consumer			7,468				9,092
			336,993				336,449
Deferred loan fees			(144	)			(156	)
			336,849				336,293
Allowance for loan losses			(5,072	)			(4,284	)
Loans, net		$	331,777			$	332,009

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements — (continued)

December 31, 2009 and 2008

Note 4—Loans (continued)

Changes in the allowance for loan losses are as follows:

		2009				2008				2007
Balance at beginning of the year		$	4,284			$	5,059			$	4,386
Provision charged to operations			3,082				1,456				909
Recoveries			48				33				52
Loans charged off			(2,342	)			(2,264	)			(288	)
Balance at end of the year		$	5,072			$	4,284			$	5,059

Loans, classified as non-accrual, for which the accrual of interest had been discontinued or reduced, amounted to approximately $6,190,000 and $5,061,000 at December 31, 2009 and 2008, respectively. The allowance for loan losses specifically reserved for these non-accrual loans totaled approximately $266,000 and $388,000 at December 31, 2009 and 2008, respectively. There was approximately $4,984,000 and $2,697,000 in non-accrual loans that did not require a specific reserve in the allowance as of December 31, 2009 and 2008, respectively. Interest income on non-accrual loans, which would have been reported if on an accrual basis, amounted to approximately $287,000, $504,000 and $239,000 at December 31, 2009, 2008 and 2007, respectively.

At December 31, 2009, impaired loans totaled approximately $18,894,000 as compared to $19,539,000 identified as such at December 31, 2008. The allowance for loan losses specifically reserved for these impaired loans totaled approximately $1,047,000 and $831,000 as of December 31, 2009 and December 31, 2008, respectively. There were approximately $13,444,000 and $13,520,000 in impaired loans that did not require a specific reserve in the allowance for loan losses as of December 31, 2009 and December 31, 2008, respectively. The average recorded investment in impaired loans was approximately $20,352,000 and $20,603,000 at December 31, 2009 and December 31, 2008, respectively. Interest income, on an accrual basis, recognized on loans while they were impaired totaled approximately $879,000, $961,000 and $1,008,000 as of December 31, 2009, 2008 and 2007, respectively. Interest income, on a cash basis, recognized on loans while they were impaired totaled approximately $898,000, $923,000 and $882,000 as of December 2009, 2008 and 2007, respectively. The Bank’s commitment to lend additional funds on impaired loans totaled $546,000 at December 31, 2009.

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements — (continued)

December 31, 2009 and 2008

Note 4—Loans (continued)

At December 31, 2009, executive officers and directors, and companies in which they have a beneficial ownership, were indebted to the Bank in the aggregate amount of approximately $13,820,000. The interest rates on these loans were substantially the same as rates prevailing at the time of the transactions, and repayment terms are customary for the type of loan involved. Following is a summary of transactions for the years ended December 31, 2009 and 2008:

		2009				2008
		(in thousands)
Balance at beginning of the year		$	14,086			$	4,061
Advances			8,136				10,921
Repayments			(8,402	)			(896	)
Balance at end of the year		$	13,820			$	14,086

Note 5—Foreclosed real estate

A summary of foreclosed real estate for the years ended December 31, 2009 and 2008 is as follows:

		2009				2008
		(in thousands)
Carrying amount of property		$	4,466			$	7,217
Less: valuation allowance			—				—
Balance at end of the year		$	4,466			$	7,217

There was no provision charged to income for each of the years presented.

Note 6—Bank premises and equipment

Bank premises and equipment consist of the following for the years ended December 31, 2009 and 2008:

		2009				2008
		(in thousands)
Land and improvements		$	3,844			$	3,844
Building and improvements			6,331				6,321
Equipment, furniture and fixtures			4,682				4,583
			14,857				14,748
Less: accumulated depreciation			(5,203	)			(4,667	)
Premises and equipment, net		$	9,654			$	10,081

Depreciation expense for the years ended December 31, 2009, 2008 and 2007 was approximately $572,000, $618,000 and $647,000, respectively.

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements — (continued)

December 31, 2009 and 2008

Note 7—Deposits

At December 31, 2009 and 2008, the scheduled maturities of time deposit liabilities were as follows:

		2009				2008
		(in thousands)
One year or less		$	178,185			$	215,172
Over one year through three years			76,829				24,245
Over three years			1,388				900
Balance at end of the year		$	256,402			$	240,317

To manage the Bank’s funding capabilities, the Bank may also enter into retail deposit agreements with customers and may obtain short-term funding from other institutions. Retail deposit agreements with customers are generally secured by investment securities owned by the Bank and are established at prevailing market rates. Short-term funding from other institutions is generally overnight or 30-day funding at current market rates. Total deposit agreements were approximately $3.7 million and $8.6 million at December 31, 2009 and 2008, respectively.

Note 8—Federal Home Loan Bank advances

As of December 31, 2009 and 2008, the Bank had credit availability, or potential borrowing capacity, of 25% of total assets, subject to the Bank’s financial condition and collateral balances with the FHLB. One of the advance products utilized in 2009 was the “Loans Held for Sale” (LHFS) program. The line is collateralized by the Bank’s mortgage loans held for sale. Advances under this line are due 90 days from the date of the advance. As of December 31, 2009 and 2008, the Bank did not have a balance outstanding under the LHFS program. The Bank also maintains a line of credit with the FHLB which is secured by 1-4 family and commercial real estate loans held in the Bank’s loan portfolio. As of December 31, 2009 and 2008, the 1-4 family line of credit balances were $3.6 million and $6.0 million, respectively. The weighted average interest rate on the outstanding balance for this line was 0.63% and 2.71% as of December 31, 2009 and 2008, respectively. In 2007, a long-term convertible advance was established. At December 31, 2009, the outstanding balance on this advance was $10.0 million with a weighted average interest rate of 3.83%. This advance matures December 2012 and is callable until December 2010. An additional but similar long-term convertible advance was established during 2008. At December 31, 2009, the outstanding balance on this advance was $15.0 million with a weighted average interest rate of 3.33%. This advance matures May 2013 and is callable until May 2010.

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements — (continued)

December 31, 2009 and 2008

Note 9—Line of credit

The Company has a line of credit issued in June 2009 with its correspondent bank, First National Bankers Bank, which provides the Company the ability to draw a principal sum of $1.0 million in periodic advances with a maturity date of June 5, 2010. Interest is calculated annually using a rate of prime plus 0.75% (4.00% at December 31, 2009) with a floor of 4.00%. The line of credit is secured through the pledge of all issued and outstanding shares of the Bank’s capital stock. The outstanding principal balance at December 31, 2009 was $0. The arrangement requires the Company and Bank to comply with financial covenants related to capital levels, the levels of non-performing assets, and other financial matters. At December 31, 2009, the Company and the Bank were in compliance with all of these covenants. Future noncompliance with this covenant would not have a material impact on the Company’s ability to meet future obligations.

Note 10—Employee benefit plan

The Bank has a 401(k) salary-deferred plan covering substantially all employees. At the discretion of the Bank’s Board of Directors, the Bank may match a percentage of the annual amounts deferred by employees. Matching amounts are funded by the Bank as accrued. Total deferred and matching amounts are limited to amounts that can be deducted for Federal income tax purposes. The Bank’s matching contributions were approximately $171,000, $161,000, and $170,000, respectively, for each of the years in the three year period ended December 31, 2009.

Note 11—Shareholders’ equity and regulatory requirements

The primary source of funds available to the Company is the payment of dividends by its subsidiary bank. Banking regulations limit the amount of dividends that may be paid by the Bank without prior approval of regulatory agencies.

The Bank is subject to various regulatory capital requirements administered by state and Federal banking agencies. Failure to meet minimum capital requirements can trigger certain mandatory, and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities, and certain off-balance-sheet items, as calculated under regulatory accounting practices. The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Prompt corrective action provisions are not applicable to bank holding companies.

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements — (continued)

December 31, 2009 and 2008

Note 11—Shareholders’ equity and regulatory requirements (continued)

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier I capital (as defined) to average assets (as defined). Management believes that, as of December 31, 2009, the Bank met all capital adequacy requirements to which it is subject.

As of December 31, 2009, the most recent notification from the regulatory agencies categorized the Bank as well-capitalized under the regulatory framework for prompt corrective action. To be categorized as well-capitalized, the Bank must maintain minimum total risk-based, Tier I risk-based, and Tier I leverage ratios, as set forth in the table below. There are no conditions or events since that notification that management believes have changed the Bank’s category.

The Bank’s actual capital amounts (in thousands) and ratios as of December 31, 2009 and 2008 are also presented in the following tables:

																		Required to Be
																		Well-Capitalized
										Required for								Under Prompt
										Capital Adequacy								Corrective Action
		Actual								Purposes								Provisions
		Amount				Ratio				Amount				Ratio				Amount				Ratio
As of December 31, 2009:
Total capital (to risk weighted assets)
Bank		$	47,782				11.69	%		$	32,698				8.0	%		$	40,872				10.0	%
Consolidated		$	47,997				11.74	%		$	32,698				8.0	%		$	40,872				10.0	%
Tier 1 capital (to risk weighted assets)
Bank		$	42,710				10.45	%		$	16,349				4.0	%		$	24,523				6.0	%
Consolidated		$	42,926				10.50	%		$	16,349				4.0	%		$	24,523				6.0	%
Tier 1 leverage (to average assets)
Bank		$	42,710				8.91	%		$	19,164				4.0	%		$	23,955				5.0	%
Consolidated		$	42,926				8.96	%		$	19,164				4.0	%		$	23,956				5.0	%

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements — (continued)

December 31, 2009 and 2008

Note 11—Shareholders’ equity and regulatory requirements (continued)

																		Required to Be
																		Well-Capitalized
										Required for								Under Prompt
										Capital Adequacy								Corrective Action
		Actual								Purposes								Provisions
		Amount				Ratio				Amount				Ratio				Amount				Ratio
As of December 31, 2008:
Total capital (to risk weighted assets)
Bank		$	43,075				10.66	%		$	32,323				8.0	%		$	40,404				10.0	%
Consolidated		$	43,158				10.68	%		$	32,323				8.0	%		$	40,404				10.0	%
Tier 1 capital (to risk weighted assets)
Bank		$	38,791				9.60	%		$	16,161				4.0	%		$	24,242				6.0	%
Consolidated		$	38,875				9.62	%		$	16,161				4.0	%		$	24,242				6.0	%
Tier 1 leverage (to average assets)
Bank		$	38,791				8.61	%		$	18,016				4.0	%		$	22,519				5.0	%
Consolidated		$	38,875				8.63	%		$	18,016				4.0	%		$	22,520				5.0	%

During 1997, the Company adopted the 1997 Stock Option Plan (the “1997 Plan”) for eligible directors, officers, and key employees of the Company and the Bank. Options are granted to purchase common shares at prices not less than the fair market value of the stock at the date of grant. The maximum number of shares reserved and available for issuance under the 1997 Plan is 345,000 shares, as adjusted for the Company’s stock splits and stock dividends.

During early 2005, the Company adopted the 2004 Incentive Plan (the “2004 Plan”) for eligible directors, officers, and key employees of the Company and the Bank. Options are granted to purchase common shares at prices not less than the fair market value of the stock at the date of grant. The maximum number of shares reserved and available for issuance under the 2004 Plan is 330,125 shares, as adjusted for the Company’s stock split in 2005.

The Plans provide for the grant of both incentive and nonqualified stock options to purchase the Company’s common stock. The Stock Option Committee of the Board of Directors of the Company establishes to whom options shall be granted and determines exercise prices, vesting requirements, and the number of shares covered by each option, subject to the approval of the Company’s Board of Directors.

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements — (continued)

December 31, 2009 and 2008

Note 11—Shareholders’ equity and regulatory requirements (continued)

On January 1, 2006, the Company adopted ASC 718-10, “Compensation-Stock Compensation,” which requires all share-based payment to employees, including grants of employee stock options, to be recognized as expense in the statement of earnings based on their fair values. Prior to ASC 718-10, only certain pro forma disclosures of fair value were required. The amount of compensation is measured at the fair value of the options when granted and this cost is expensed over the required service period, which is normally the vesting period of the options. ASC 718-10 applies to awards granted or modified after January 1, 2006 or any unvested awards outstanding at December 31, 2005. The effect of the adoption of the new accounting principle on results of operations depends on the level of option grants, the vesting period for those grants, and the fair value of the options granted as of such date. Existing options that vested after the adoption date resulted in additional compensation expense of approximately $80,000 in 2009. The Company utilized the disclosure requirements permitted by ASC 718-10 for transactions entered into during 2006 and thereafter. For the periods prior to January 1, 2006, the Company elected to remain with the former intrinsic value method of accounting for stock compensation.

As of December 31, 2009, the Company has two share-based compensation plans, which are described above, and has issued shares of common stock to non-employee directors as compensation for services rendered. The Company recorded $167,000, $165,000, and $189,000 in stock compensation expense related to the issuance of these shares for the years ended December 31, 2009, 2008 and 2007, respectively. The expense recognized for these shares was equal to the fair value of the shares on the date of grant.

The fair value for these options was estimated on the date of grant using a lattice-based option valuation model that used the following range of assumptions for each of the years presented:

		2009		2008		2007
Expected volatility		66.8% – 95.7%		37.4% – 37.6%		40.8% – 40.8%
Weighted-average volatility		78.20%		37.53%		40.75%
Expected dividends		0%		0%		0%
Expected term (in years)		7.0 – 7.0		7.0 – 7.0		7.0 – 7.0
Risk-free rate		3.00%		3.30%		4.73%

In addition, the model assumed that each option was exercised in the initial year of vesting.

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements — (continued)

December 31, 2009 and 2008

Note 11—Shareholders’ equity and regulatory requirements (continued)

For purposes of proforma disclosures, the estimated fair value of options is amortized to expense over the option’s vesting period. Option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. Changes in the subjective input assumptions can materially affect the fair value estimate. In management’s opinion, the model does not necessarily provide a reliable single measure of the fair value of options.

Vesting requirements are determined by the Board of Directors at the time options are granted and generally provide for vesting over a seven-year period. The plans provide that vesting periods may not exceed ten years.

A summary of the Company’s stock option activity under the plans as of December 31, 2009 and 2008, and changes and related information, for the years then ended is presented below:

										Weighted
						Weighted				Average
						Average				Remaining				Aggregate
						Exercise				Contractual				Intrinsic
Options		Shares				Price				Term				Value
Outstanding at January 1, 2009			286,875			$	9.18
Granted			25,613				8.06
Exercised			(27,700	)			(3.79	)
Forfeited or expired			(10,900	)			(7.43	)
Outstanding at December 31, 2009			273,888			$	9.69				4.43			$	267,086
Exercisable at December 31, 2009			217,894			$	9.44				3.48			$	265,265

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements — (continued)

December 31, 2009 and 2008

Note 11—Shareholders’ equity and regulatory requirements (continued)

										Weighted
						Weighted				Average
						Average				Remaining				Aggregate
						Exercise				Contractual				Intrinsic
Options		Shares				Price				Term				Value
Outstanding at January 1, 2008			324,441			$	7.99
Granted			23,934				10.85
Exercised			(61,500	)			(3.56	)
Forfeited or expired			—				—
Outstanding at December 31, 2008			286,875			$	9.18				4.43			$	810,279
Exercisable at December 31, 2008			237,294			$	8.35				3.70			$	810,279

At December 31, 2009, options both outstanding and exercisable have exercise prices that range from $3.33 per share to $20.41 per share. The weighted-average remaining contractual life of options outstanding at December 31, 2009 was approximately 4.43 years or 53 months.

The estimated weighted-average grant date fair value of options granted and the total intrinsic value of options exercised during the years ended December 31, 2009, 2008 and 2007 are as follows:

		2009				2008				2007
Weighted-average grant date fair value		$	5.70			$	4.86			$	7.30
Total intrinsic value of options exercised		$	94,583			$	396,161			$	60,265

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements — (continued)

December 31, 2009 and 2008

Note 11—Shareholders’ equity and regulatory requirements (continued)

A summary of the status of the Company’s nonvested shares as of December 31, 2009 and 2008, and changes during the years then ended, is presented below:

						Weighted
						Average
						Grant-Date
Nonvested Shares		Shares				Fair Value
Nonvested at January 1, 2009			49,581			$	6.36
Granted			25,613				5.70
Vested			(15,200	)			7.14
Forfeited			(4,000	)			7.43
Nonvested at December 31, 2009			55,994			$	5.82

						Weighted
						Average
						Grant-Date
Nonvested Shares		Shares				Fair Value
Nonvested at January 1, 2008			40,455			$	7.67
Granted			23,934				4.86
Vested			(14,808	)			7.51
Forfeited			—				—
Nonvested at December 31, 2008			49,581			$	6.36

As of December 31, 2009, there was $274,513 of total unrecognized compensation cost related to the Company’s nonvested shares granted under the plans. This cost is expected to be recognized over a weighted-average period of 2.78 years. The total fair value of shares vested during the years ended December 31, 2009, 2008 and 2007, was $115,712, $111,205 and $203,932, respectively.

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements — (continued)

December 31, 2009 and 2008

Note 11—Shareholders’ equity and regulatory requirements (continued)

Following is a reconciliation of the income amounts and common stock amounts utilized in computing the Company’s earnings per share for each of the years ended December 31, 2009, 2008 and 2007.

		2009
		Income				Shares				Per
		(Numerator)				(Denominator)				Share
		(dollars in thousands, except per share)
Basic EPS
Income available to common stockholders		$	3,752				3,484,309			$	1.08
Effect of stock options outstanding			—				8,562				0.01
Diluted EPS
Income available to common stockholders, plus conversions		$	3,752				3,492,871			$	1.07