EXHIBIT 99.1

FINANCIAL STATEMENTS

GEORGIA-CAROLINA BANCSHARES, INC.

Consolidated Financial Statements

For the Years Ended December 31, 2010 and 2009

GEORGIA-CAROLINA BANCSHARES, INC.

Table of Contents

Financial Statements

For the Years Ended December 31, 2010 and 2009

		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			7-48

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, 2010 and 2009 and the related consolidated statements of income, changes in stockholders’ equity, and cash flows for the years then ended December 31, 2010. The Company’s management is responsible for these consolidated financial statements. 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 audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated 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, 2010 and 2009 and the results of their operations and their cash flows for the years then ended December 31, 2010, in conformity with accounting principles generally accepted in the United States of America.

/s/ Cherry, Bekaert & Holland, L.L.P.

Augusta, Georgia
March 29, 2011

GEORGIA-CAROLINA BANCSHARES, INC.

Consolidated Statements of Financial Condition

December 31, 2010 and 2009
(dollars in thousands, except per share amounts)

		2010				2009
Assets
Cash and due from banks		$	31,696			$	13,055
Federal funds sold			—				3,175
Securities available-for-sale			76,904				44,461
Loans, net of allowance for loan losses of $7,866 and $5,072, respectively			308,943				331,777
Loans held for sale			46,570				58,135
Bank premises and equipment			9,271				9,654
Accrued interest receivable			1,697				1,851
Foreclosed real estate, net of allowance			2,751				4,466
Deferred tax asset, net			2,475				1,018
Federal Home Loan Bank stock			2,527				2,828
Bank-owned life insurance			9,210				8,812
Other assets			3,267				4,781
Total assets		$	495,311			$	484,013
Liabilities and Shareholders’ Equity
Liabilities
Deposits
Non-interest bearing		$	41,602			$	41,787
Interest-bearing:
NOW accounts			38,668				36,395
Savings			53,880				51,424
Money market accounts			36,013				19,232
Time deposits of $100,000 or more			171,843				179,123
Other time deposits			72,743				77,279
Total deposits			414,749				405,240
Federal Home Loan Bank borrowings			—				3,600
Repurchase agreements			3,467				3,697
Long-term debt			25,000				25,000
Other borrowings			3,625				—
Other liabilities			3,494				3,203
Total liabilities			450,335				440,740
Shareholders’ equity
Preferred stock, par value $.001; 1,000,000 shares authorized; none issued			—				—
Common stock, par value $.001; 9,000,000 shares authorized; 3,536,715 and 3,499,477 shares issued and outstanding, respectively			4				4
Additional paid-in capital			15,847				15,567
Retained earnings			28,889				27,355
Accumulated other comprehensive income			236				347
Total shareholders’ equity			44,976				43,273
Total liabilities and shareholders’ equity		$	495,311			$	484,013

See notes to consolidated financial statements.

GEORGIA-CAROLINA BANCSHARES, INC.

Consolidated Statements of Income

For the Years Ended December 31, 2010 and 2009
(dollars in thousands, except per share amounts)

		2010				2009
Interest income
Interest and fees on loans		$	22,379			$	22,260
Interest on taxable securities			1,620				1,925
Interest on nontaxable securities			369				412
Interest on Federal funds sold and cash in banks			41				7
Total interest income			24,409				24,604
Interest expense
Interest on time deposits of $100,000 or more			3,578				5,415
Interest on other deposits			2,759				3,330
Interest on funds purchased and other borrowings			953				977
Total interest expense			7,290				9,722
Net interest income			17,119				14,882
Provision for loan losses			8,355				3,082
Net interest income after provision for loan losses			8,764				11,800
Non-interest income
Service charges on deposits			1,476				1,496
Gain on sale of mortgage loans			10,780				9,735
Other income			990				2,926
Total non-interest income			13,246				14,157
Non-interest expense
Salaries and employee benefits			12,511				12,776
Occupancy expenses			1,650				1,657
Other expenses			6,382				6,469
Total non-interest expense			20,543				20,902
Income before income taxes			1,467				5,055
Income tax expense (benefit)			(66	)			1,303
Net income		$	1,533			$	3,752
Earnings per common share
Basic		$	0.44			$	1.08
Diluted		$	0.44			$	1.07

See notes to consolidated financial statements.

GEORGIA-CAROLINA BANCSHARES, INC.

Consolidated Statements of Comprehensive Income

For the Years Ended December 31, 2010 and 2009
(dollars in thousands)

		2010				2009
Net income		$	1,533			$	3,752
Other comprehensive income (loss):
Unrealized holding gain (loss) arising during the period			(139	)			217
Reclassification for gain (loss) included in net income			(35	)			—
Tax effect			63				(78	)
Total other comprehensive income (loss)			(111	)			139
Comprehensive income		$	1,422			$	3,891

See notes to consolidated financial statements.

GEORGIA-CAROLINA BANCSHARES, INC.

Consolidated Statements of Shareholders’ Equity

For the Years Ended December 31, 2010 and 2009
(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, 2009			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
Net income			—				—				—				1,533				—				1,533
Change in unrealized gain (loss) on securities available-for-sale, net of deferred taxes			—				—				—				—				(111	)			(111	)
Disqualifying disposition, net tax effect			—				—				9				—				—				9
Proceeds from exercise of stock options			11,954				—				15				—				—				15
Stock-based compensation expense			—				—				83				—				—				83
Issuance of stock for compensation			25,284				—				173				1				—				174
Balance at December 31, 2010			3,536,715			$	4			$	15,847			$	28,889			$	236			$	44,976

See notes to consolidated financial statements.

GEORGIA-CAROLINA BANCSHARES, INC.

Consolidated Statements of Cash Flows

For the Years Ended December 31, 2010 and 2009
(dollars in thousands)

		2010				2009
Cash flows from operating activities
Net income		$	1,533			$	3,752
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization			658				677
Provision for loan losses			8,355				3,082
(Gains) losses on sales of foreclosed real estate			72				(1,764	)
(Gains) losses on sales of premises and equipment			3				—
Gain on sales of securities			(19	)			—
Increase in cash value of bank-owned life insurance			(398	)			(410	)
Stock-based compensation expense			83				80
Stock compensation			173				166
Deferred income tax			(1,394	)			(245	)
Gain on loans held for sale			(10,780	)			(9,735	)
Proceeds from sale of loans held for sale			560,651				619,768
Originations of loans held for sale			(538,306	)			(639,766	)
(Increase) decrease in accrued interest receivable			154				83
Increase (decrease) in accrued interest payable			(235	)			(721	)
(Increase) decrease in other assets			1,410				(2,702	)
Increase in other liabilities			535				316
Net cash provided by (used in) operating activities			22,495				(27,419	)
Cash flows from investing activities
(Increase) decrease in Federal funds sold			3,175				(3,175	)
Loan originations and collections, net			13,053				(9,187	)
Purchases of available-for-sale securities			(62,634	)			(16,183	)
Proceeds from maturities, sales and calls of available-for-sale securities			30,036				29,533
Net (increase) decrease of FHLB stock			301				(627	)
Proceeds from sale of foreclosed real estate			3,069				10,852
Net additions to premises and equipment			(173	)			(145	)
Net cash provided by (used in) investing activities			(13,173	)			11,068
Cash flows from financing activities
Increase (decrease) in deposits			9,509				28,231
Increase (decrease) in FHLB borrowings			—				(2,400	)
Increase (decrease) in repurchase agreements and other borrowings			(205	)			(6,431	)
Proceeds from stock options exercised			15				52
Net cash provided by financing activities			9,319				19,452
Net increase in cash and due from banks			18,641				3,101
Cash and due from banks at beginning of the year			13,055				9,954
Cash and due from banks at end of the year		$	31,696			$	13,055

See notes to consolidated financial statements.

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements

December 31, 2010 and 2009

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 consolidated 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 consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for losses on loans, including valuation allowances for impaired loans, and the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans. In connection with the determination of the allowances for losses on loans and foreclosed real estate, management obtains independent appraisals for significant properties. Management must also make estimates in determining the estimated useful lives and methods for depreciating premises and equipment.

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements

December 31, 2010 and 2009

Note 1—Summary of significant accounting policies (continued)

While management uses available information to recognize losses on loans and foreclosed real estate, future additions to the allowances may be necessary based on changes in local economic conditions. In addition, regulatory agencies, as an integral part of their examination process, periodically review the Company’s allowances for losses on loans and foreclosed real estate. Such agencies may require the Company to recognize additions to the allowances based on their judgments about information available to them at the time of their examinations. Because of these factors, it is reasonably possible that the allowances for losses on loans and foreclosed real estate may change materially in the near term.

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.

Significant concentrations of deposit risk: On July 21, 2010, President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act into law, which, in part, permanently raises the current standard maximum deposit insurance amount (SMDIA) to $250,000. On November 9, 2010, the FDIC issued a Final Rule implementing section 343 of the Dodd-Frank Wall Street Reform and Consumer Protection Act that provides for unlimited insurance coverage of noninterest-bearing transaction accounts. Beginning December 31, 2010, through December 31, 2012, all noninterest-bearing transaction accounts are fully insured, regardless of the balance of the account, at all FDIC-insured institutions. 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.

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

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements

December 31, 2010 and 2009

Note 1—Summary of significant accounting policies (continued)

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 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.

Federal Home Loan Bank Stock — Federal Home Loan Bank Stock consists of the cost of the Company’s investment in the stock of Federal Home Loan Bank. The stock has no quoted market value and no ready market exists. Investment in the Federal Home Loan Bank is a condition of borrowing from the Federal Home Loan Bank, and the stock is pledged to collateralize such borrowings. At December 31, 2010 and 2009, the Company’s investment in Federal Home Loan Bank stock was $2,527,000 and $2,828,000, respectfully. Dividends received on this stock are included in other non-interest income.

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. Interest rate risk is minimal as rates on loans originated and intended for sale are locked with the investor and the loans are held in the portfolio only temporarily until funding from the investor is completed. The Bank also manages credit risk by having loans greater than $650,000 pre-approved by the secondary market investors, while all other loans are approved internally.

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements

December 31, 2010 and 2009

Note 1—Summary of significant accounting policies (continued)

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. 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.

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.

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements

December 31, 2010 and 2009

Note 1—Summary of significant accounting policies (continued)

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 inherent in the loan portfolio. The evaluation of the adequacy of the allowance takes into consideration collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

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. Foreclosed real estate is reported at fair market value. Property is evaluated regularly to ensure the carrying amount is supported by its current fair value. Expenses to maintain such assets and subsequent changes in the valuation allowance are included in other noninterest expenses, while gains and losses on disposal are included in noninterest income.

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 consolidated 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.

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.

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements

December 31, 2010 and 2009

Note 1—Summary of significant accounting policies (continued)

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 and loans held for sale — 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.

Deposit liabilities, other borrowings, and repurchase agreements — Due to the short-term nature of demand and savings accounts and repurchase 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.

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements

December 31, 2010 and 2009

Note 1—Summary of significant accounting policies (continued)

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 December 2010, the FASB issued Accounting Standards Update (ASU) 2010-29, which updates ASC 805-10, “Business Combinations.” The Business Combinations topic of the ASC was amended to specify that if a public entity presents comparative consolidated financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. The amendment also requires that the supplemental pro forma disclosures include a description of the nature and amount of any material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. This amendment is effective for the Company for business combinations for which the acquisition date is on or after January 1, 2011, although early adoption is permitted. The Company does not expect the amendment to have any impact on the consolidated financial statements.

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements

December 31, 2010 and 2009

Note 1—Summary of significant accounting policies (continued)

In December 2010, the FASB issued Accounting Standards Update (ASU) 2010-28, which updates ASC 350-20, “Intangibles — Goodwill and Other.” the Intangibles topic of the ASC was amended to modify Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. For those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. Any resulting goodwill impairment should be recorded as a cumulative-effect adjustment to beginning retained earnings upon adoption. Impairments occurring subsequent to adoption should be included in earnings. The amendment is effective for the Company beginning January 1, 2011. Early adoption is not permitted. The Company does not expect the amendment to have any impact on the consolidated financial statements.

In August 2010, two updates were issued to amend various SEC rules and schedules pursuant to Release No. 33-9026: Technical Amendments to Rules, Forms, Schedules and Codification of Financial Reporting Policies and based on the issuance of SEC Staff Accounting Bulletin 112. The amendments related primarily to business combinations and removed references to “minority interest” and added references to “controlling” and “noncontrolling interests”. The updates were effective upon issuance but had no impact on the Company’s consolidated financial statements.

In July 2010, the FASB issued Accounting Standards Update (ASU) 2010-20, “Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses,” which updates ASC 310-10, “Receivables.” The update amended the Receivables topic of the ASC to require expanded disclosures related to a company’s allowance for credit losses and the credit quality of its financing receivables. The amendments will require the allowance disclosures to be provided on a disaggregated basis. The Company is required to begin to comply with the disclosures in its consolidated financial statements for the year ended December 31, 2010. The new disclosures are effective for the Company for the current year and have been reflected in Note 4.

In January 2010, the FASB issued Accounting Standards Update (ASU) 2010-06, “Improving Disclosure about Fair Value Measurements,” which updates ASC 820-10, “Fair Value Measurements and Disclosures.” The update amended fair value guidance to require disclosures for significant amounts transferred in and out of Levels 1 and 2 and the reasons for such transfers and to require that gross amounts of purchases, sales, issuances and settlements be provided in the Level 3 reconciliation. Disaggregation of classes of assets and liabilities is also required. The new disclosures are effective for the Company for the current year and have been reflected in Note 15.

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements

December 31, 2010 and 2009

Note 1—Summary of significant accounting policies (continued)

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 was 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.

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, 2010, interest-bearing cash on deposit with correspondent banks totaled $3.3 million compared to $2.1 million as of December 31, 2009. Interest-bearing cash on deposit in the Federal Reserve was $22.2 million as of December 31, 2010 compared to $0 as of December 31, 2009. Funds required to be on reserve with the Federal Reserve totaled $0 and $78,000 as of December 31, 2010 and 2009, respectively.

Note 3—Investment securities

The amortized cost and fair value amounts of securities owned as of December 31, 2010 and 2009 are shown below:

		2010
						Gross				Gross
		Amortized				Unrealized				Unrealized				Fair
		Cost				Gains				Losses				Value
		(in thousands)
Securities available-for-sale:
U.S. Government and agency		$	28,265			$	61			$	(97	)		$	28,229
Mortgage-backed			39,167				715				(282	)			39,600
State and municipal			9,103				127				(155	)			9,075
Total		$	76,535			$	903			$	(534	)		$	76,904

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements

December 31, 2010 and 2009

Note 3—Investment securities (continued)

		2009
						Gross				Gross
		Amortized				Unrealized				Unrealized				Fair
		Cost				Gains				Losses				Value
		(in thousands)
Securities available-for-sale:
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

The amortized cost and fair value of securities as of December 31, 2010 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		$	—			$	—
One to five years			3,459				3,482
Five to ten years			14,871				14,766
Over ten years			19,038				19,056
Mortgage-backed securities			39,167				39,600
Total		$	76,535			$	76,904

Securities with a carrying amount of approximately $65.5 million at December 31, 2010 and $40.3 million at December 31, 2009 were pledged to secure public deposits and for other purposes.

In 2010 the Bank sold $2.4 million in securities available-for-sale, realizing a loss of $19,000. There were no material gross realized gains or gross realized losses on sales of securities during 2009.

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements

December 31, 2010 and 2009

Note 3—Investment securities (continued)

Information pertaining to securities with gross unrealized losses at December 31, 2010 and December 31, 2009, aggregated by investment category and length of time that individual securities have been in a continuous loss position, follows:

		2010
		Less than Twelve Months												Over Twelve Months
		Gross												Gross								Number
		Unrealized				Fair				Number of				Unrealized				Fair				of
		Losses				Value				Securities				Losses				Value				Securities
		(in thousands)
Securities available-for-sale:
U.S. agency		$	(97	)		$	10,947				7			$	—			$	—				—
State and municipal			(35	)			796				2				(120	)			672				1
Corporate obligations			—				—				—				—				—				—
Mortgage-backed			(265	)			13,013				10				(17	)			935				4
Total		$	(397	)		$	24,756				19			$	(137	)		$	1,607				5

		2009
		Less than Twelve Months												Over Twelve Months
		Gross												Gross								Number
		Unrealized				Fair				Number of				Unrealized				Fair				of
		Losses				Value				Securities				Losses				Value				Securities
		(in thousands)
Securities available-for-sale:
U.S. agency		$	—			$	—				—			$	—			$	—				—
State and municipal			(1	)			197				1				(126	)			1,426				3
Corporate obligations			—				—				—				(73	)			122				1
Mortgage-backed			(170	)			7,019				6				(52	)			763				2
Total		$	(171	)		$	7,216				7			$	(251	)		$	2,311				6

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.

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements

December 31, 2010 and 2009

Note 3—Investment securities (continued)

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 $499,000, 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 five years.

Note 4—Loans

The composition of loans for the years ended December 31, 2010 and 2009 is summarized as follows:

		2010				2009
		(in thousands)
Commercial and industrial		$	20,298			$	22,906
Real estate — construction			86,418				107,429
Real estate — residential			61,194				66,050
Real estate — commercial			142,351				133,140
Consumer			6,606				7,468
Total loans receivable			316,867				336,993
Deferred loan fees			(58	)			(144	)
Total loans			316,809				336,849
Allowance for loan losses			(7,866	)			(5,072	)
Loans, net of allowance for loan losses		$	308,943			$	331,777

The Company categorizes loans into risk grades based on relevant information about the ability of borrowers to service their debt such as: future repayment ability, financial condition, collateral, administration, management ability of borrower, and history and character of borrower. Grades are assigned at loan origination and may be changed due to the result of a loan review or at the discretion of management. The Company uses the following definitions for risk grades:

Grade 1: Loans classified as Grade 1 are considered the highest quality with borrowers of unquestionable financial strength. Financial standing of the individual is known and borrower exhibits superior liquidity, net worth, cash flow and leverage.

Grade 2: Loans classified as Grade 2 are considered above average quality and have minimal risk. The borrower has stable and reliable cash flow and above average liquidity.

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements

December 31, 2010 and 2009

Note 4—Loans (continued)

Grade 3: Loans classified as Grade 3 are considered average quality. The borrower has reliable cash flow and alternate sources of repayment which may require the sale of assets. Financial position has been leveraged to a modest degree however, the borrower has a relatively strong net worth considering income and debt.

Grade 4: Loans classified as Grade 4 are considered below average quality. The borrower’s sources of income or cash flow have become unstable or may possibly decline given current business or economic conditions. The borrower may also have a highly leveraged financial position or limited capital.

Grade 5: Loans classified as Grade 5 are considered to be special mention assets. These loans have potential weaknesses which may inadequately protect the Bank’s position at some future date. The borrower exhibits some degree of weakness in financial condition that may manifest itself in a reduction of net worth or liquidity. Infrequent delinquencies may occur.

Grade 6: Loans classified as Grade 6 are considered to be substandard. These loans have well defined weaknesses in the primary repayment source and undue reliance is placed on secondary repayment sources such as collateral or guarantors. No loss is currently expected, however there is a distinct possibility that the Bank will sustain some future loss if the credit weaknesses are not corrected. Net worth, repayment ability, management and collateral protection all exhibit weakness.

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements

December 31, 2010 and 2009

Note 4—Loans (continued)

As of December 31, 2010 and 2009 the risk grades of loans by loan type are as follows:

Credit Risk Profile by Risk Grade Category:

As of December 31, 2010
(in thousands)

		Commercial
		and				Real Estate -				Real Estate -				Real Estate -
		Industrial				Construction				Residential				Commercial				Consumer				Total
Grade 1		$	251			$	—			$	—			$	—			$	794			$	1,045
Grade 2			133				—				235				1,059				100				1,527
Grade 3			15,939				14,879				48,901				86,109				5,370				171,198
Grade 4			3,338				62,594				7,801				44,126				99				117,958
Grade 5			—				4,375				568				2,862				—				7,805
Grade 6			637				4,348				3,666				8,195				125				16,971
In process			—				222				23				—				118				363
Total loans receivable		$	20,298			$	86,418			$	61,194			$	142,351			$	6,606			$	316,867

As of December 31, 2009
(in thousands)

		Commercial
		and				Real Estate -				Real Estate -				Real Estate -
		Industrial				Construction				Residential				Commercial				Consumer				Total
Grade 1		$	217			$	—			$	—			$	—			$	183			$	400
Grade 2			—				—				486				150				109				745
Grade 3			17,037				10,686				59,359				116,711				6,698				210,491
Grade 4			4,449				88,099				2,854				7,783				76				103,261
Grade 5			664				1,342				823				1,683				23				4,535
Grade 6			583				7,594				2,300				6,813				165				17,455
In process			(44	)			(292	)			228				—				214				106
Total loans receivable		$	22,906			$	107,429			$	66,050			$	133,140			$	7,468			$	336,993

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements

December 31, 2010 and 2009

Note 4—Loans (continued)

Allowance for Loan Losses and Recorded Investment in Loans Receivable
For the Year Ended December 31, 2010
(in thousands)

		Commercial
		and				Real Estate -				Real Estate -				Real Estate -
		Industrial				Construction				Residential				Commercial				Consumer				Unallocated				Total
Allowance for loan losses:
Beginning balance		$	259			$	2,364			$	827			$	1,319			$	176			$	127			$	5,072
Charge-offs			(139	)			(3,663	)			(980	)			(850	)			(147	)			—				(5,779	)
Recoveries			63				16				13				22				104				—				218
Provisions			44				5,191				1,210				1,126				118				666				8,355
Ending Balance		$	227			$	3,908			$	1,070			$	1,617			$	251			$	793			$	7,866
Ending Balances:
Individually evaluated for impairment		$	30			$	160			$	271			$	149			$	73			$	—			$	683
Collectively evaluated for impairment		$	197			$	3,748			$	799			$	1,468			$	178			$	793			$	7,183
Loans receivable:
Ending balance — total		$	20,298			$	86,418			$	61,194			$	142,351			$	6,606			$	—			$	316,867
Ending balances:
Individually evaluated for impairment		$	627			$	4,347			$	3,185			$	8,146			$	122			$	—			$	16,427
Collectively evaluated for impairment		$	19,671			$	82,071			$	58,009			$	134,205			$	6,484			$	—			$	300,440

In 2009 the allowance for loan losses increased from a beginning balance of $4,284,000 to an ending balance as of December 31, 2009 of $5,072,000. The changes in allowance for loan losses in 2009 were a provision of $3,082,000, recoveries of $48,000 and charge-offs of $2,342,000.

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements

December 31, 2010 and 2009

Note 4—Loans (continued)

Impaired Loans
For the Year Ended December 31, 2010
(in thousands)

														Average				Interest
		Recorded				Unpaid Principal				Related				Recorded				Income
		Investment				Balance				Allowance				Investment				Recognized
With no related allowance recorded:
Commercial and industrial		$	597			$	608			$	—			$	481			$	30
Real Estate — Construction			3,705				7,330				—				7,341				97
Real Estate — Residential			2,466				2,628				—				2,677				81
Real Estate — Commercial			7,680				8,530				—				8,534				498
Consumer			49				68				—				77				2
Total		$	14,497			$	19,164			$	—			$	19,110			$	708
With an allowance recorded:
Commercial and industrial		$	30			$	30			$	30			$	36				2
Real Estate — Construction			642				703				160				703				27
Real Estate — Residential			719				719				271				642				37
Real Estate — Commercial			466				466				149				473				32
Consumer			73				73				73				77				6
Total		$	1,930			$	1,991			$	683			$	1,931			$	104
Total:
Commercial and industrial		$	627			$	638			$	30			$	517				32
Real Estate — Construction			4,347				8,033				160				8,044				124
Real Estate — Residential			3,185				3,347				271				3,319				118
Real Estate — Commercial			8,146				8,996				149				9,007				530
Consumer			122				141				73				154				8
Total		$	16,427			$	21,155			$	683			$	21,041			$	812

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements

December 31, 2010 and 2009

Note 4—Loans (continued)

At December 31, 2009 impaired loans totaled approximately $18,894,000 and the allowance for loan losses specifically reserved for these impaired loans totaled approximately $1,047,000. There were approximately $13,444,000 in impaired loans that did not require a specific reserve in the allowance for loan losses at December 31, 2009. The average recorded investment in impaired loans was approximately $20,352,000 at December 31, 2009. Interest income, on an accrual basis, recognized on loans while they were impaired totaled approximately $879,000 as of December 31, 2009.

Age Analysis of Past Due Loans Receivable
As of December, 31, 2010
(in thousands)

																										Recorded
		30-59				60-89																				Investment
		Days				Days				Greater				Total				Current				Total				> 90 Days
		Past				Past				Than 90				Past				and not				Loans				and
		Due				Due				Days				Due				Past Due				Receivable				Accruing
Commercial and Industrial		$	152			$	30			$	9			$	191			$	20,107			$	20,298			$	—
Real Estate —Construction			675				943				3,618				5,236				81,182				86,418				—
Real Estate — Residential			1,177				740				691				2,608				58,586				61,194				—
Real Estate — Commercial			55				217				90				362				141,989				142,351				—
Consumer			16				38				50				104				6,502				6,606				—
Total		$	2,075			$	1,968			$	4,458			$	8,501			$	308,366			$	316,867			$	—

Loans Receivable on Nonaccrual Status
As of December 31, 2010 and 2009

		2010				2009
Commercial and industrial		$	34			$	37
Real estate — construction			3,753				3,228
Real estate — residential			1,979				2,464
Real estate — commercial			408				368
Consumer			83				93
Total		$	6,257			$	6,190

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements

December 31, 2010 and 2009

Note 4—Loans (continued)

Troubled Debt Restructurings
As of December 31, 2010

						Pre-Modification				Post-Modification
						Outstanding				Outstanding
		Number of				Recorded				Recorded
		Contracts				Investment				Investment
Commercial and industrial			1			$	546			$	546
Real estate — construction			3				1,569				1,569
Real Estate — residential			2				1,190				1,190
Real estate — Commercial			9				5,945				5,945
Total			15			$	9,250			$	9,250

At December 31, 2010, executive officers and directors, and companies in which they have a beneficial ownership, were indebted to the Bank in the aggregate amount of approximately $12,474,000. 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, 2010 and 2009:

		2010				2009
		(in thousands)
Balance at beginning of the year		$	13,820			$	14,086
Advances			3,967				8,136
Repayments			(5,313	)			(8,402	)
Balance at end of the year		$	12,474			$	13,820

Note 5—Foreclosed real estate

A summary of foreclosed real estate for the years ended December 31, 2010 and 2009 is as follows:

		2010				2009
		(in thousands)
Carrying amount of property		$	2,751			$	4,466
Less: valuation allowance			—				—
Balance at end of the year		$	2,751			$	4,466

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

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements

December 31, 2010 and 2009

Note 6—Bank premises and equipment

Bank premises and equipment consist of the following for the years ended December 31, 2010 and 2009:

		2010				2009
		(in thousands)
Land and improvements		$	3,804			$	3,844
Building and improvements			6,384				6,331
Equipment, furniture and fixtures			4,558				4,682
			14,746				14,857
Less: accumulated depreciation			(5,475	)			(5,203	)
Premises and equipment, net		$	9,271			$	9,654