Document And Entity Information
v4.2.117.0
Document And Entity Information
 9 Months Ended
Sep. 30, 2011
Nov. 07, 2011
Document And Entity Information [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Sep. 30, 2011
Document Fiscal Year Focus 2011  
Document Fiscal Period Focus Q3  
Entity Registrant Name SURREY BANCORP  
Entity Central Index Key 0001229146  
Current Fiscal Year End Date --12-31  
Entity Filer Category Smaller Reporting Company  
Entity Common Stock, Shares Outstanding   3,215,764

Consolidated Balance Sheets
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Consolidated Balance Sheets (USD $)
Sep. 30, 2011
Dec. 31, 2010
Assets    
Cash and due from banks $ 2,570,375 $ 2,398,433
Interest-bearing deposits with banks 33,791,894 22,792,088
Federal funds sold 709,646 702,121
Investment securities available for sale 2,512,078 2,012,132
Restricted equity securities 852,629 941,379
Loans, net of allowance for loan losses of $4,628,232 at September 30, 2011 and $6,683,922 at December 31, 2010 176,116,287 171,794,247
Property and equipment, net 4,632,998 4,726,483
Foreclosed assets 182,480 450,532
Accrued income 1,043,727 955,516
Goodwill 120,000 120,000
Bank owned life insurance 3,363,465 3,284,990
Other assets 3,111,630 3,474,563
Total assets 229,007,209 213,652,484
Liabilities and Stockholders' Equity    
Noninterest-bearing 36,568,922 27,954,669
Interest-bearing 151,730,369 146,005,404
Total deposits 188,299,291 173,960,073
Long-term debt 8,100,000 9,450,000
Dividends payable 46,233 35,515
Accrued interest payable 249,132 227,887
Other liabilities 1,931,024 1,334,854
Total liabilities 198,625,680 185,008,329
Commitments and contingencies    
Stockholders' equity    
Common stock, 10,000,000 shares authorized at no par value; 3,215,764 and 3,206,495 shares issued and outstanding at September 30, 2011 and December 31, 2010, respectively 9,500,158 9,464,178
Retained earnings 17,067,974 15,380,083
Accumulated other comprehensive loss (55,410) (68,913)
Total stockholders' equity 30,381,529 28,644,155
Total liabilities and stockholders' equity 229,007,209 213,652,484
Convertible Preferred Stock Series A [Member]
    
Stockholders' equity    
Preferred stock 2,620,325 2,620,325
Preferred Stock Series D [Member]
    
Stockholders' equity    
Preferred stock $ 1,248,482 $ 1,248,482

Consolidated Balance Sheets (Parenthetical)
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Consolidated Balance Sheets (Parenthetical) (USD $)
 9 Months Ended 12 Months Ended
Sep. 30, 2011
Dec. 31, 2010
Allowance for loan losses $ 4,628,232 $ 6,683,922
Common stock, no par value    
Common stock, shares authorized 10,000,000 10,000,000
Common stock, shares issued 3,215,764 3,206,495
Common stock, shares outstanding 3,215,764 3,206,495
Convertible Preferred Stock Series A [Member]
    
Preferred stock, shares authorized 1,000,000 1,000,000
Preferred stock, shares issued 189,356 189,356
Preferred stock, shares outstanding 189,356 189,356
Preferred stock, liquidation value $ 14 $ 14
Preferred stock, fixed percentage rate 4.50% 4.50%
Preferred Stock Series D [Member]
    
Preferred stock, no par value    
Preferred stock, shares issued 181,154 181,154
Preferred stock, shares outstanding 181,154 181,154
Preferred stock, liquidation value $ 7.08 $ 7.08
Preferred stock, fixed percentage rate 5.00% 5.00%

Consolidated Statements Of Income
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Consolidated Statements Of Income (USD $)
 3 Months Ended 9 Months Ended
Sep. 30, 2011
Sep. 30, 2010
Sep. 30, 2011
Sep. 30, 2010
Interest income        
Loans and fees on loans $ 2,762,166 $ 2,738,272 $ 8,138,762 $ 8,277,716
Federal funds sold 415 190 1,210 594
Investment securities, taxable 13,917 11,992 40,275 37,655
Deposits with banks 3,641 8,342 11,645 20,053
Total interest income 2,780,139 2,758,796 8,191,892 8,336,018
Interest expense        
Deposits 435,353 515,211 1,368,776 1,557,497
Short-term debt       17,720
Long-term debt 81,461 94,931 264,361 298,394
Total interest expense 516,814 610,142 1,633,137 1,873,611
Net interest income 2,263,325 2,148,654 6,558,755 6,462,407
Provision for loan losses 188,118 636,736 67,190 1,840,578
Net interest income after provision for loan losses 2,075,207 1,511,918 6,491,565 4,621,829
Noninterest income        
Service charges on deposit accounts 259,093 268,216 767,978 800,693
Gain on sale of government guaranteed loans       244,924
Fees and yield spread premiums on loans delivered to correspondents 25,247 41,774 78,865 91,511
Other service charges and fees 125,646 112,407 372,673 335,456
Other operating income 188,683 159,609 548,662 529,071
Total noninterest income 598,669 582,006 1,768,178 2,001,655
Noninterest expense        
Salaries and employee benefits 862,414 840,474 2,624,411 2,563,874
Occupancy expense 97,313 116,277 294,493 313,507
Equipment expense 58,593 55,667 179,090 192,050
Data processing 85,916 109,513 271,504 306,287
Foreclosed assets, net (142) 7,962 140,190 23,644
Postage, printing and supplies 44,150 48,996 146,904 159,239
Professional fees 77,098 64,467 267,558 217,045
FDIC insurance premiums 36,709 65,990 176,286 184,271
Litigation settlement 130,000   130,000  
Other expense 381,421 307,179 1,075,861 950,463
Total noninterest expense 1,773,472 1,616,525 5,306,297 4,910,380
Net income before income taxes 900,404 477,399 2,953,446 1,713,104
Income tax expense 338,691 171,600 1,128,365 626,756
Net income 561,713 305,799 1,825,081 1,086,348
Preferred stock dividends and accretion of discount (46,233) (65,294) (137,190) (194,107)
Net income available to common stockholders $ 515,480 $ 240,505 $ 1,687,891 $ 892,241
Basic earnings per common share $ 0.16 $ 0.08 $ 0.53 $ 0.28
Diluted earnings per common share $ 0.15 $ 0.08 $ 0.48 $ 0.27
Basic weighted average common shares outstanding 3,215,213 3,206,495 3,212,087 3,206,341
Diluted weighted average common shares outstanding 3,791,515 3,601,643 3,788,389 3,603,784

Consolidated Statements Of Cash Flows
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Consolidated Statements Of Cash Flows (USD $)
 9 Months Ended
Sep. 30, 2011
Sep. 30, 2010
Cash flows from operating activities    
Net income $ 1,825,081 $ 1,086,348
Adjustments to reconcile net income to net cash provided by operations:    
Depreciation and amortization 183,205 194,072
Gain on sale of property and equipment (760) (400)
Loss on the sale of foreclosed assets 50,254 10,695
Stock-based compensation, net of tax benefit 17,155 21,774
Provision for loan losses 67,190 1,840,578
Deferred income taxes (6,853) 13,738
Accretion of discount on securities, net of amortization of premiums 1,526 1,958
Increase in cash surrender value of life insurance (78,475) (83,364)
Changes in assets and liabilities:    
Accrued income (88,211) 54,612
Other assets 361,314 (1,216,011)
Accrued interest payable 21,245 (4,385)
Other liabilities 596,170 730,336
Net cash provided by operating activities 2,948,841 2,649,951
Cash flows from investing activities    
Net increase in interest-bearing deposits with banks (10,999,806) (9,525,379)
Net increase in federal funds sold (7,525) (41,123)
Purchases of investment securities (2,002,500) (2,000,000)
Sales and maturities of investment securities 1,523,003 2,007,127
Redemption of restricted equity securities 88,800 71,385
Purchase of restricted equity securities (50)  
Net (increase) decrease in loans (4,634,755) 5,082,011
Proceeds from the sale of foreclosed assets 463,323 68,340
Purchases of property and equipment (89,720) (108,105)
Proceeds from the sale of property and equipment 760 400
Net cash (used in) investing activities (15,658,470) (4,445,344)
Cash flows from financing activities    
Net increase in deposits 14,339,218 5,798,745
Net decrease in short-term debt   (3,750,000)
Net (decrease) increase in long-term debt (1,350,000) 250,000
Dividends paid (126,472) (170,976)
Common stock options exercised 18,825 34,450
Net cash provided by financing activities 12,881,571 2,162,219
Net increase (decrease) in cash and cash equivalents 171,942 366,826
Cash and due from banks, beginning 2,398,433 1,923,621
Cash and due from banks, ending 2,570,375 2,290,447
Supplemental disclosures of cash flow information    
Interest paid 1,611,892 1,877,996
Taxes paid 626,319 1,246,897
Loans transferred to foreclosed properties $ 245,525 $ 322,034

Consolidated Statements Of Changes In Stockholders' Equity And Comprehensive Income
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Consolidated Statements Of Changes In Stockholders' Equity And Comprehensive Income (USD $)
Preferred Stock [Member]
Convertible Preferred Stock Series A [Member]
Preferred Stock Series D [Member]
Common Stock [Member]
Retained Earnings [Member]
Unrealized Appreciation (Depreciation) On Securities [Member]
Total
Balance, value at Dec. 31, 2009 $ 4,626,830     $ 9,406,429 $ 14,468,089 $ (75,996) $ 28,425,352
Balance, shares at Dec. 31, 2009       3,198,105      
Comprehensive income              
Net income         1,086,348   1,086,348
Net change in unrealized gain (loss) on investment securities available for sale,net of income tax           (2,085) (2,085)
Total comprehensive income             1,084,263
Common stock options exercised, value       34,450     34,450
Common stock options exercised, shares       8,390      
Stock-based compensation, net of tax benefit       21,774     21,774
Dividends declared on convertible preferred stock   (89,226)          
Dividends declared and accrued on Series B and Series C preferred stock, net of discount accretion and (premium) amortization 25,944       (104,881)   (81,145)
Balance, value at Sep. 30, 2010 4,652,774     9,462,653 15,360,330 (78,081) 29,395,468
Balance, shares at Sep. 30, 2010       3,206,495      
Balance, value at Dec. 31, 2010 3,868,807     9,464,178 15,380,083 (68,913) 28,644,155
Balance, shares at Dec. 31, 2010       3,206,495      
Comprehensive income              
Net income         1,825,081   1,825,081
Net change in unrealized gain (loss) on investment securities available for sale,net of income tax           13,503 13,503
Total comprehensive income             1,838,584
Common stock options exercised, value       18,825     18,825
Common stock options exercised, shares       9,269      
Stock-based compensation, net of tax benefit       17,155     17,155
Dividends declared on convertible preferred stock   (89,225) (47,965)        
Balance, value at Sep. 30, 2011 $ 3,868,807     $ 9,500,158 $ 17,067,974 $ (55,410) $ 30,381,529
Balance, shares at Sep. 30, 2011       3,215,764      

Consolidated Statements Of Changes In Stockholders' Equity And Comprehensive Income (Parenthetical)
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Consolidated Statements Of Changes In Stockholders' Equity And Comprehensive Income (Parenthetical) (USD $)
 9 Months Ended
Sep. 30, 2011
Sep. 30, 2010
Net change in unrealized gain (loss) on investment securities available for sale, income tax $ 8,471 $ 1,308
Convertible Preferred Stock Series A [Member]
    
Dividends declared $ 0.47 $ 0.47
Preferred Stock Series D [Member]
    
Dividends declared $ 0.26  

Basis Of Presentation
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Basis Of Presentation
 9 Months Ended
Sep. 30, 2011
Basis Of Presentation [Abstract]  
Basis Of Presentation

NOTE 1. BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements were prepared in accordance with instructions for Form 10-Q and therefore, do not include all disclosures required by generally accepted accounting principles for a complete presentation of financial statements. In the opinion of management, the consolidated financial statements contain all adjustments necessary to present fairly the financial condition of Surrey Bancorp, (the "Company), as of September 30, 2011, the results of operations for the nine and three months ended September 30, 2011 and 2010, and its changes in stockholders' equity and comprehensive income and cash flows for the nine months ended September 30, 2011 and 2010. The results of operations for the nine and three months ended September 30, 2011, are not necessarily indicative of the results expected for the full year. These consolidated financial statements should be read in conjunction with the Company's audited financial statements and related disclosures for the year ended December 31, 2010, included in the Company's Form 10-K. The balance sheet at December 31, 2010, has been taken from the audited financial statements at that date.

Organization

Surrey Bancorp began operation on May 1, 2003 and was created for the purpose of acquiring all the outstanding shares of common stock of Surrey Bank & Trust. Stockholders of the bank received six shares of Surrey Bancorp common stock for every five shares of Surrey Bank & Trust common stock owned. The Company is subject to regulation by the Federal Reserve.

Surrey Bank & Trust (the "Bank") was organized and incorporated under the laws of the State of North Carolina on July 15, 1996 and commenced operations on July 22, 1996. The Bank currently serves Surry County, North Carolina and Patrick County, Virginia and surrounding areas through five banking offices. As a state chartered bank, which is not a member of the Federal Reserve, the Bank is subject to regulation by the State of North Carolina Banking Commission and the Federal Deposit Insurance Corporation.

Surrey Investment Services, Inc., ("Subsidiary") was organized and incorporated under the laws of the State of North Carolina on February 10, 1998. The subsidiary provides insurance services through SB&T Insurance and investment advice and brokerage services through LPL Financial.

On July 31, 2000, Surrey Bank & Trust formed Freedom Finance, LLC, a subsidiary operation specializing in the purchase of sales finance contracts from local automobile dealers.

The accounting and reporting policies of the Company, the Bank, and its subsidiaries follow generally accepted accounting principles and general practices within the financial services industry. Following is a summary of the more significant policies.

Critical Accounting Policies

The notes to the audited consolidated financial statements for the year ended December 31, 2010 contain a summary of the significant accounting policies. The Company believes our policies with respect to the methodology for the determination of the allowance for loan losses, and asset impairment judgments, including the recoverability of intangible assets involve a higher degree of complexity and require management to make difficult and subjective judgments which often require assumptions or estimates about highly uncertain matters. Changes in these judgments, assumptions or estimates could cause reported results to differ materially. These critical policies and their application are periodically reviewed with the Audit Committee and our Board of Directors. See our Annual Report for full details on critical accounting policies.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company, the Bank and the subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation.

 

Presentation of Cash Flows

For purposes of reporting cash flows, cash and cash equivalents includes cash and amounts due from depository institutions (including cash items in process of collection). Overnight interest bearing deposits and federal funds sold are shown separately. Federal funds purchased are shown with securities sold under agreements to repurchase.

Investment Securities

Investments classified as available for sale are intended to be held for indefinite periods of time and include those securities that management may employ as part of asset/liability strategy or that may be sold in response to changes in interest rates, prepayments, regulatory capital requirements or similar factors. These securities are carried at fair value and are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments or significant other observable inputs.

Investment securities classified as held to maturity are those debt securities that the Bank has the ability and intent to hold to maturity. Accordingly, these securities are carried at cost adjusted for amortization of premiums and accretion of discount, computed by the interest-method over their contractual lives. At September 30, 2011 and December 31, 2010, the Bank had no investments classified as held to maturity.

Loans Held for Sale

The Bank originates and holds Small Business Administration (SBA) and United States Department of Agriculture (USDA) guaranteed loans in its portfolio in the normal course of business. Occasionally, the Bank sells the guaranteed portions of these loans into the secondary market. The loans are generally variable rate loans, which eliminates the market risk to the Bank and are therefore carried at cost. The Bank recognizes gains on the sale of the guaranteed portion upon the consummation of the transaction. The Bank plans to continue to originate guaranteed loans for sales, however no such loans were funded at September 30, 2011 and December 31, 2010.

Loans Receivable

Loans receivable that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at their outstanding principal amount adjusted for any charge-offs, the allowance for loan losses, and any deferred fees or cost on originated loans and unamortized premiums or discounts on purchased loans.

Loan origination fees and certain direct origination costs are capitalized and recognized as an adjustment of the yield of the related loan using the interest method. Discounts and premiums on any purchased residential real estate loans are amortized to income using the interest method over the remaining period to contractual maturity, adjusted for anticipated prepayments. Discounts and premiums on any purchased consumer loans are recognized over the expected lives of the loans using methods that approximate the interest method.

Interest is accrued and credited to income based on the principal amount outstanding. The accrual of interest on impaired loans is discontinued when, in management's opinion, the borrower may be unable to meet payments as they become due. When the interest accrual is discontinued, all unpaid accrued interest is reversed. Interest income is subsequently recognized only to the extent cash payments are received. Payments received on nonaccrual loans are first applied to principal and any residual amounts are then applied to interest. When facts and circumstances indicate the borrower has regained the ability to meet the required payments, the loan is returned to accrual status. Past due loans are determined on the basis of contractual terms.

 

Allowance for Loan Losses

The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings. Loan losses are charged against the allowance when management believes the uncollectability of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by management and is based upon management's periodic review of the 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.

The allowance consists of specific, general and unallocated components. The specific component relates to loans that are classified as impaired. For loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers non-impaired loans and is based on historical loss experience adjusted for qualitative factors. An unallocated component is maintained to cover uncertainties that could affect management's estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio.

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower's prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan by loan basis for commercial and construction loans by either the present value of expected future cash flows discounted at the loan's effective interest rate, the loan's obtainable market price, or the fair value of the collateral if the loan is collateral dependent.

Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Company does not separately identify individual consumer and residential loans for impairment disclosures.

Recent Accounting Pronouncements

The following is a summary of recent authoritative pronouncements:

In July 2010, the Receivables topic of the Accounting Standards Codification ("ASC") was amended by Accounting Standards Update ("ASU") 2010-20 to require expanded disclosures related to a company's allowance for credit losses and the credit quality of its financing receivables. The amendments require the allowance disclosures to be provided on a disaggregated basis. The Company is required to include these disclosures in its interim and annual financial statements. See Note 6.

Disclosures about Troubled Debt Restructurings ("TDRs") required by ASU 2010-20 were deferred by the Financial Accounting Standards Board ("FASB") in ASU 2011-01 issued in January 2011. In April 2011 the FASB issued ASU 2011-02 to assist creditors with their determination of when a restructuring is a TDR. The determination is based on whether the restructuring constitutes a concession and whether the debtor is experiencing financial difficulties as both events must be present.

 

Disclosures related to TDRs under ASU 2010-20 have been presented in Note 7.

In December 2010, 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 was effective for the Company beginning January 1, 2011.

In September 2011, the Intangibles topic was again amended to permit an entity to consider qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. These amendments will be effective for the Company on January 1, 2012.

In April 2011, the criteria used to determine effective control of transferred assets in the Transfers and Servicing topic of the ASC was amended by ASU 2011-03. The requirement for the transferor to have the ability to repurchase or redeem the financial assets on substantially the agreed terms and the collateral maintenance implementation guidance related to that criterion were removed from the assessment of effective control. The other criteria to assess effective control were not changed. The amendments are effective for the Company beginning January 1, 2012 but are not expected to have a material effect on the financial statements.

ASU 2011-04 was issued in May 2011 to amend the Fair Value Measurement topic of the ASC by clarifying the application of existing fair value measurement and disclosure requirements and by changing particular principles or requirements for measuring fair value or for disclosing information about fair value measurements. The amendments will be effective for the Company beginning January 1, 2012 but are not expected to have a material effect on the financial statements.

The Comprehensive Income topic of the ASC was amended in June 2011. The amendment eliminates the option to present other comprehensive income as a part of the statement of changes in stockholders' equity. The amendment requires consecutive presentation of the statement of net income and other comprehensive income and requires an entity to present reclassification adjustments from other comprehensive income to net income on the face of the financial statements. The amendments will be applicable to the Company on January 1, 2012 and will be applied retrospectively.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company's financial position, results of operations or cash flows.

Subsequent Events

Subsequent events are events or transactions that occur after the balance sheet date but before financial statements are issued. Recognized subsequent events are events or transactions that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements. Non-recognized subsequent events are events that provide evidence about conditions that did not exist at the date of the balance sheet but arose after that date. Management has reviewed events occurring through the date the financial statements were issued and no subsequent events have occurred requiring accrual or disclosure.

 

Securities
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Securities
 9 Months Ended
Sep. 30, 2011
Securities [Abstract]  
Securities

NOTE 2. SECURITIES

Debt and equity securities have been classified in the balance sheets according to management's intent. The amortized costs of securities available for sale and their approximate fair values at September 30, 2011 and December 31, 2010 follow:

 

     Amortized      Unrealized      Unrealized      Fair  
     Cost      Gains      Losses      Value  

September 30, 2011

            

Government-sponsored enterprises

    $ 2,001,016       $ 8,679       $ —         $ 2,009,695   

Mortgage-backed securities

      51,232         1,526         —           52,758   

Corporate bonds

      550,000         —           100,375         449,625   
  

 

 

     

 

 

     

 

 

     

 

 

  
   $ 2,602,248       $ 10,205       $ 100,375       $ 2,512,078   
  

 

 

     

 

 

     

 

 

     

 

 

  

December 31, 2010

            

Government-sponsored enterprises

    $ 1,500,000       $ 1,770       $ —         $ 1,501,770   

Mortgage-backed securities

      74,278         1,584         —           75,862   

Corporate bonds

      550,000         —           115,500         434,500   
  

 

 

     

 

 

     

 

 

     

 

 

  
   $ 2,124,278       $ 3,354       $ 115,500       $ 2,012,132   
  

 

 

     

 

 

     

 

 

     

 

 

  

At September 30, 2011 and December 31, 2010, substantially all government-sponsored enterprises securities were pledged as collateral on public deposits and for other purposes as required or permitted by law. The mortgage-backed securities were pledged to the Federal Home Loan Bank.

Maturities of mortgage-backed bonds are stated based on contractual maturities. Actual maturities of these bonds may vary as the underlying mortgages are prepaid. The scheduled maturities of securities (all available for sale) at September 30, 2011, were as follows:

 

     Amortized      Fair  
     Cost      Value  

Due in one year or less

    $ —         $ —     

Due after one year through five years

      2,001,016         2,009,695   

Due after five years through ten years

      586,895         487,542   

Due after ten years

      14,337         14,841   
  

 

 

     

 

 

  
   $ 2,602,248       $ 2,512,078   
  

 

 

     

 

 

  

The following table shows investments' gross unrealized losses and fair value, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position, at September 30, 2011 and December 31, 2010. These unrealized losses on investment securities are a result of volatility in interest rates and primarily relate to corporate bonds issued by other banks at September 30, 2011 and December 31, 2010.

 

     Less Than 12 Months      12 Months or More      Total  
     Fair      Unrealized      Fair      Unrealized      Fair      Unrealized  
     Value      Losses      Value      Losses      Value      Losses  

September 30, 2011

                  

Corporate bonds

    $ —         $ —         $ 449,625       $ 100,375       $ 449,625       $ 100,375   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
   $ —         $ —         $ 449,625       $ 100,375       $ 449,625       $ 100,375   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

December 31, 2010

                  

Corporate bonds

    $ —         $ —         $ 434,500       $ 115,500       $ 434,500       $ 115,500   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
   $ —         $ —         $ 434,500       $ 115,500       $ 434,500       $ 115,500   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

 

Management considers the nature of the investment, the underlying causes of the decline in the market value and the severity and duration of the decline in market value in determining if impairment is other than temporary. 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 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. Based upon this evaluation, there are two securities in the portfolio with unrealized losses for a period greater than 12 months. We have analyzed each individual security for Other Than Temporary Impairment ("OTTI") purposes by reviewing delinquencies, loan-to-value ratios, and credit quality and concluded that all unrealized losses presented in the tables above are not related to an issuer's financial condition but are due to changes in the level of interest rates and no declines are deemed to be other than temporary in nature.

The Company had no gross realized gains or losses from the sales of investment securities for the nine and three month periods ended September 30, 2011 and 2010.


Earnings Per Share
v4.2.117.0
Earnings Per Share
 9 Months Ended
Sep. 30, 2011
Earnings Per Share [Abstract]  
Earnings Per Share

NOTE 3. EARNINGS PER SHARE

Basic earnings per share for the nine and three months ended September 30, 2011 and 2010 were calculated by dividing net income available to common stockholders by the weighted average number of shares outstanding during the period.

The computation of diluted earnings per share is similar to the computation of basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if dilutive potential common shares had been issued. The numerator is adjusted for any changes in income or loss that would result from the assumed conversion of those potential common shares. The potential dilutive shares are represented by common stock options and by the Series A and D convertible preferred stock. Each share of the Series A preferred is convertible into 2.0868 shares of common stock. Each share of Series D preferred is convertible into one share of common stock

Commitments And Letters Of Credit
v4.2.117.0
Commitments And Letters Of Credit
 9 Months Ended
Sep. 30, 2011
Commitments And Letters Of Credit [Abstract]  
Commitments And Letters Of Credit

NOTE 4. COMMITMENTS AND LETTERS OF CREDIT

At September 30, 2011, the Company had commitments to extend credit, including unused lines of credit of approximately $36,414,000. Letters of credit totaling $1,349,531 were outstanding.


Loans
v4.2.117.0
Loans
 9 Months Ended
Sep. 30, 2011
Loans [Abstract]  
Loans

NOTE 5. LOANS

The major components of loans in the balance sheets at September 30, 2011 and December 31, 2010 are below.

 

     2011     2010  

Commercial

    $ 71,722,630      $ 66,377,076   

Real estate:

     

Construction and land development

      5,253,339        5,986,045   

Residential, 1-4 families

      41,806,459        46,356,711   

Residential, 5 or more families

      2,259,445        1,853,346   

Farmland

      2,903,144        2,854,481   

Nonfarm, nonresidential

      49,721,494        48,170,698   

Agricultural

      43,263        73,852   

Consumer, net of discounts of $21,169 in 2011 and $14,770 in 2010

      7,013,836        6,759,770   
  

 

 

    

 

 

  
     180,723,610        178,431,979   

Deferred loan origination costs, net of fees

      20,909        46,190   
  

 

 

    

 

 

  
     180,744,519        178,478,169   

Allowance for loan losses

      (4,628,232 )      (6,683,922 ) 
  

 

 

    

 

 

  
   $ 176,116,287      $ 171,794,247   
  

 

 

    

 

 

  

Residential, 1-4 family loans pledged as collateral against FHLB advances approximated $20,483,000 and $25,141,000 at September 30, 2011 and December 31, 2010.


Allowance For Loan Losses
v4.2.117.0
Allowance For Loan Losses
 9 Months Ended
Sep. 30, 2011
Allowance For Loan Losses [Abstract]  
Allowance For Loan Losses

NOTE 6. ALLOWANCE FOR LOAN LOSSES

The activity of the allowance for loan losses by loan components at September 30, 2011 and 2010 was as follows:

 

     Construction
&
Development		     1-4 Family
Residential		     Nonfarm,
Nonresidential		     Commercial
& Industrial		     Consumer     Other     Total  

2011

               

Allowance for credit losses:

               

Beginning balance

    $ 118,797      $ 1,696,068      $ 1,199,292      $ 3,411,403      $ 205,662      $ 52,700      $ 6,683,922   

Charge-offs

      (27,468 )      (1,113,243 )      (203,418 )      (1,007,729 )      (45,010 )      —          (2,396,868 ) 

Recoveries

      996        56,241        108,114        83,804        24,833        —          273,988   

Provision

      3,621        185,093        (233,826 )      77,669        29,233        5,400        67,190   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ending balance

    $ 95,946      $ 824,159      $ 870,162      $ 2,565,147      $ 214,718      $ 58,100      $ 4,628,232   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ending balance: individually evaluated for impairment

    $ 146      $ 156,159      $ 277,262      $ 1,447,747      $ —        $ —        $ 1,881,314   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ending balance: collectively evaluated for impairment

    $ 95,800      $ 668,000      $ 592,900      $ 1,117,400      $ 214,718      $ 58,100      $ 2,746,918   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ending balance: loans acquired with deteriorated credit quality

    $ —        $ —        $ —        $ —        $ —        $ —        $ —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Loans Receivable:

               

Ending balance

    $ 5,253,339      $ 41,806,459      $ 49,721,494      $ 71,722,630      $ 7,013,836      $ 5,205,852      $ 180,723,610   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ending balance: individually evaluated for impairment

    $ 93,385      $ 949,971      $ 4,054,573      $ 6,338,214      $ 5,475      $ —        $ 11,441,618   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ending balance: collectively evaluated for impairment

    $ 5,159,954      $ 40,856,488      $ 45,666,921      $ 65,384,416      $ 7,008,361      $ 5,205,852      $ 169,281,992   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ending balance: loans acquired with deteriorated credit quality

    $ —        $ —        $ —        $ —        $ —        $ —        $ —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

2010

               

Allowance for credit losses:

               

Beginning balance

    $ 106,397      $ 628,963      $ 696,044      $ 2,903,267      $ 281,134      $ 54,100      $ 4,669,905   

Charge-offs

      —          (26,748 )      (109,948 )      (545,752 )      (92,774 )      —          (775,222 ) 

Recoveries

      —          950        20,501        368        25,789        —          47,608   

Provision

      (25,800 )      161,128        100,831        1,573,613        35,606        (4,800 )      1,840,578   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ending balance

    $ 80,597      $ 764,293      $ 707,428      $ 3,931,496      $ 249,755      $ 49,300      $ 5,782,869   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ending balance: individually evaluated for impairment

    $ 12,097      $ 198,093      $ 120,928      $ 3,049,496      $ —        $ —        $ 3,380,614   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ending balance: collectively evaluated for impairment

    $ 68,500      $ 566,200      $ 586,500      $ 882,000      $ 249,755      $ 49,300      $ 2,402,255   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ending balance: loans acquired with deteriorated credit quality

    $ —        $ —        $ —        $ —        $ —        $ —        $ —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Loans Receivable:

               

Ending balance

    $ 5,790,613      $ 47,054,360      $ 47,351,314      $ 67,199,483      $ 6,977,325      $ 4,538,213      $ 178,911,308   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ending balance: individually evaluated for impairment

    $ 56,363      $ 703,762      $ 712,351      $ 6,104,973      $ 3,301      $ —        $ 7,580,750   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ending balance: collectively evaluated for impairment

    $ 5,734,250      $ 46,350,598      $ 46,638,963      $ 61,094,510      $ 6,974,024      $ 4,538,213      $ 171,330,558   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ending balance: loans acquired with deteriorated credit quality

    $ —        $ —        $ —        $ —        $ —        $ —        $ —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

The following table presents impaired loans individually evaluated by class of loan as of September 30, 2011 and December 31, 2010:

 

            Unpaid             Average      Interest  
     Recorded      Principal      Related      Recorded      Income  
     Investment      Balance      Allowance      Investment      Recognized  

September 30, 2011

               

With no related allowance recorded:

               

Construction and development

    $ 77,213       $ 77,213       $ —         $ 78,049       $ —     

1-4 family residential

      387,371         445,185         —           396,325         3,713   

Nonfarm, nonresidential

      2,426,530         2,589,261         —           2,434,737         68,967   

Commercial and industrial

      2,081,475         2,255,962         —           2,184,723         77,625   

Consumer

      5,475         5,475         —           5,475         —     

Other loans

      —           —           —           —           —     
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
     4,978,064         5,373,096         —           5,099,309         150,305   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

With an allowance recorded:

               

Construction and development

    $ 16,172       $ 16,172       $ 146       $ 16,453       $ —     

1-4 family residential

      562,600         589,965         156,159         557,367         10,624   

Nonfarm, nonresidential

      1,628,043         1,628,043         277,262         1,638,660         8,004   

Commercial and industrial

      4,256,739         4,256,739         1,447,747         4,672,517         106,814   

Consumer

      —           —           —           —           —     

Other loans

      —           —           —           —           —     
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
     6,463,554         6,490,919         1,881,314         6,884,997         125,442   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Combined:

               

Construction and development

    $ 93,385       $ 93,385       $ 146       $ 94,502       $ —     

1-4 family residential

      949,971         1,035,150         156,159         953,692         14,337   

Nonfarm, nonresidential

      4,054,573         4,217,304         277,262         4,073,397         76,971   

Commercial and industrial

      6,338,214         6,512,701         1,447,747         6,857,240         184,439   

Consumer

      5,475         5,475         —           5,475         —     

Other loans

      —           —           —           —           —     
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
   $ 11,441,618       $ 11,864,015       $ 1,881,314       $ 11,984,306       $ 275,747   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

December 31, 2010

               

With no related allowance recorded:

               

Construction and development

    $ 97,436       $ 97,436       $ —         $ 173,163       $ 5,758   

1-4 family residential

      931,920         931,920         —           938,365         55,516   

Nonfarm, nonresidential

      2,098,860         2,098,860         —           2,136,591         110,297   

Commercial and industrial

      2,246,985         2,246,985         —           2,289,276         123,804   

Consumer

      10,439         10,439         —           10,439         —     

Other loans

      —           —           —           —           —     
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
     5,385,640         5,385,640         —           5,547,834         295,375   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

With an allowance recorded:

               

Construction and development

    $ 39,267       $ 39,267       $ 12,097       $ 38,893       $ 1,357   

1-4 family residential

      1,240,144         1,240,144         1,118,468         1,243,083         39,709   

Nonfarm, nonresidential

      2,169,536         2,169,536         604,692         2,216,160         126,030   

Commercial and industrial

      5,803,125         5,803,125         2,334,003         6,076,005         276,677   

Consumer

      —           —           —           —           —     

Other loans

      —           —           —           —           —     
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
     9,252,072         9,252,072         4,069,260         9,574,141         443,773   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Combined:

               

Construction and development

    $ 136,703       $ 136,703       $ 12,097       $ 212,056       $ 7,115   

1-4 family residential

      2,172,064         2,172,064         1,118,468         2,181,448         95,225   

Nonfarm, nonresidential

      4,268,396         4,268,396         604,692         4,352,751         236,327   

Commercial and industrial

      8,050,110         8,050,110         2,334,003         8,365,281         400,481   

Consumer

      10,439         10,439         —           10,439         —     

Other loans

      —           —           —           —           —     
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
   $ 14,637,712       $ 14,637,712       $ 4,069,260       $ 15,121,975       $ 739,148   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Nonperforming loans and impaired loans are defined differently. As such, some loans may be included in both categories, whereas other loans may only be included in one category. The following presents by class, an aging analysis of the recorded investment in loans.

 

                                        Recorded  
                                        Investment  
                                        > 90 Days  
     30-89 Days      90 Days Plus      Total                    and  
     Past Due      Past Due      Past Due      Current      Total      Accruing  

September 30, 2011

                  

Construction and development

    $ 36,488       $ —         $ 36,488       $ 5,216,851       $ 5,253,339       $ —     

1-4 family residential

      490,283         710,586         1,200,869         40,605,590         41,806,459         263,960   

Nonfarm, nonresidential

      940,468         686,495         1,626,963         48,094,531         49,721,494         686,495   

Commercial and industrial

      1,330,747         3,298,976         4,629,723         67,092,907         71,722,630         1,611,684   

Consumer

      148,817         5,475         154,292         6,859,544         7,013,836         —     

Other loans

      —           —           —           5,205,852         5,205,852         —     
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 2,946,803       $ 4,701,532       $ 7,648,335       $ 173,075,275       $ 180,723,610       $ 2,562,139   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Non-accruals included above

    $ 126,751       $ 2,139,393       $ 2,266,144       $ 2,262,092       $ 4,528,236      
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

December 31, 2010

                  

Construction and development

    $ 67,993       $ 39,267       $ 107,260       $ 5,878,785       $ 5,986,045       $ —     

1-4 family residential

      766,017         272,405         1,038,422         45,318,289         46,356,711         —     

Nonfarm, nonresidential

      229,393         220,321         449,714         47,720,984         48,170,698         —     

Commercial and industrial

      567,740         1,351,710         1,919,450         64,457,626         66,377,076         —     

Consumer

      143,832         —           143,832         6,615,938         6,759,770         —     

Other loans

      3,472         —           3,472         4,778,207         4,781,679         —     
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 1,778,447       $ 1,883,703       $ 3,662,150       $ 174,769,829       $ 178,431,979       $ —     
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Non-accruals included above

    $ 369,103       $ 1,883,703       $ 2,252,806       $ 4,109,322       $ 6,362,128      
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

Credit Quality Indicators:

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. Loans classified as substandard or special mention are reviewed quarterly by the Company for further impairment or improvement to determine if appropriately classified. All other loans greater than $500,000, commercial lines greater than $250,000 and personal lines of credit greater than $100,000, and unsecured loans greater than $100,000 are specifically reviewed at least annually to determine the appropriate loan grading. In addition, during the renewal process of any loan, as well as when a loan becomes past due, the Company will evaluate the loan grade.

Loans excluded from the scope of the annual review process above are generally classified as pass credits until: (a) they become past due; (b) management becomes aware of deterioration in the credit worthiness of the borrower; or (c) the customer contacts the Company for a modification. In these circumstances, the loan is specifically evaluated for potential classification as to special mention, substandard or even charged off. The Company uses the following definitions for risk ratings:

Special Mention. Loans classified as special mention have a potential weakness that deserves management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution's credit position at some future date.

Substandard. Loans classified as substandard are inadequately protected by the current net worth and payment capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

 

Loans by credit quality indicator are provided in the following table.

 

                 Special              
     Total     Pass Credits     Mention     Substandard     Doubtful  

September 30, 2011

Construction and development

    $ 5,253,339      $ 5,159,954      $ 93,385      $ —        $ —     

1-4 family residential

      41,806,459        40,786,605        1,019,854        —          —     

Nonfarm, nonresidential

      49,721,494        47,459,188        1,889,139        373,167     

Commercial and industrial

      71,722,630        67,403,744        4,318,886        —          —     

Consumer

      7,013,836        7,011,216        94        2,526        —     

Other loans

      5,205,852        5,205,852        —          —          —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
   $ 180,723,610      $ 173,026,559      $ 7,321,358      $ 375,693      $ —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     100.0 %      95.7 %      4.1 %      0.2 %      0.0 % 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Guaranteed portion of loans

    $ 37,399,239      $ 34,523,956      $ 2,875,283      $ —        $ —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
                 Special              
     Total     Pass Credits     Mention     Substandard     Doubtful  

December 31, 2010

           

Construction and development

    $ 5,986,045      $ 5,779,959      $ 206,086      $ -      $ -   

1-4 family residential

      46,356,711        43,990,930        1,333,354        65,143        967,284   

Nonfarm, nonresidential

      48,170,698        45,750,435        2,420,263        —          —     

Commercial and industrial

      66,377,076        59,501,127        6,094,833        —          781,116   

Consumer

      6,759,770        6,743,029        13,864        2,877        —     

Other loans

      4,781,679        4,781,679        —          —          —