Document And Entity Information
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Document And Entity Information (USD $)
In Millions, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Mar. 09, 2012
Jun. 30, 2011
Document And Entity Information [Abstract]      
Document Type 10-K    
Amendment Flag false    
Document Period End Date Dec. 31, 2011    
Document Fiscal Year Focus 2011    
Document Fiscal Period Focus FY    
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   3,536,724  
Entity Well-known Seasoned Issuer No    
Entity Public Float     $ 19.2
Entity Current Reporting Status Yes    
Entity Voluntary Filers No    

Consolidated Balance Sheets
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Consolidated Balance Sheets (USD $)
Dec. 31, 2011
Dec. 31, 2010
Assets    
Cash and due from banks $ 2,269,116 $ 2,398,433
Interest-bearing deposits with banks 30,757,636 22,792,088
Federal funds sold 709,836 702,121
Investment securities available for sale 2,506,426 2,012,132
Restricted equity securities 809,754 941,379
Loans, net of allowance for loan losses of $3,880,581 in 2011 and $6,683,922 in 2010 175,446,206 171,794,247
Property and equipment, net 4,569,301 4,726,483
Foreclosed assets 560,018 450,532
Accrued interest and other income 962,614 955,516
Goodwill 120,000 120,000
Bank owned life insurance 3,389,447 3,284,990
Other assets 2,627,410 3,474,563
Total assets 224,727,764 213,652,484
Liabilities and Stockholders' Equity    
Noninterest-bearing 30,750,902 27,954,669
Interest-bearing 153,187,474 146,005,404
Total deposits 183,938,376 173,960,073
Long-term debt 8,100,000 9,450,000
Dividends payable 576,741 35,515
Accrued interest payable 185,362 227,887
Other liabilities 1,700,723 1,334,854
Total liabilities 194,501,202 185,008,329
Commitments and contingencies      
Stockholders' equity    
Common stock, 10,000,000 shares authorized at no par value; 3,536,724 shares issued in 2011 and 3,206,495 shares issued in 2010 12,009,588 9,464,178
Retained earnings 14,405,467 15,380,083
Accumulated other comprehensive loss (57,300) (68,913)
Total stockholders' equity 30,226,562 28,644,155
Total liabilities and stockholders' equity 224,727,764 213,652,484
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 $)
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Allowance for loan losses $ 3,880,581 $ 6,683,922
Common stock, no par value      
Common stock, shares authorized 10,000,000 10,000,000
Common stock, shares issued 3,536,724 3,206,495
Convertible Preferred Stock Series A [Member]
   
Preferred stock, no par value      
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 $)
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Interest income    
Loans and fees on loans $ 10,865,655 $ 11,070,807
Federal funds sold 1,598 825
Investment securities, taxable 54,426 49,244
Deposits with banks 14,572 29,027
Total interest income 10,936,251 11,149,903
Interest expense    
Deposits 1,774,442 2,062,001
Federal funds purchased and securities sold under agreements to repurchase   122
Short-term debt   17,720
Long-term debt 341,812 391,964
Total interest expense 2,116,254 2,471,807
Net interest income 8,819,997 8,678,096
Provision for loan losses 743,717 3,003,748
Net interest income after provision for loan losses 8,076,280 5,674,348
Noninterest income    
Service charges on deposit accounts 1,043,469 1,059,876
Gain on sale of government guaranteed loans   244,924
Fees and yield spread premiums on loans delivered to correspondents 109,079 165,556
Other service charges and fees 525,724 448,652
Other operating income 893,207 820,117
Total noninterest income 2,571,479 2,739,125
Noninterest expense    
Salaries and employee benefits 3,549,651 3,296,273
Occupancy expense 393,920 401,549
Equipment expense 233,015 256,098
Data processing 358,588 409,045
Foreclosed assets, net 172,131 41,847
Postage, printing and supplies 193,400 205,332
Professional fees 340,492 298,918
FDIC insurance premiums 230,763 253,305
Litigation settlement 130,000  
Other expense 1,429,402 1,319,175
Total noninterest expense 7,031,362 6,481,542
Net income before income taxes 3,616,397 1,931,931
Income tax expense 1,368,786 693,913
Net income 2,247,611 1,238,018
Preferred stock dividends and accretion of discount (183,423) (301,039)
Net income available to common stockholders $ 2,064,188 $ 936,979
Basic earnings per common share $ 0.58 $ 0.27
Diluted earnings per common share $ 0.54 $ 0.27
Basic weighted average common shares outstanding 3,533,699 3,527,018
Diluted weighted average common shares outstanding 4,167,634 3,980,879
Dividends declared per common share $ 0.15 $ 0.00

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 Series D [Member]
Preferred Stock [Member]
Preferred Stock Series D [Member]
Retained Earnings [Member]
Preferred Stock Series D [Member]
Series B Preferred Stock [Member]
Preferred Stock [Member]
Series B Preferred Stock [Member]
Series C Preferred Stock [Member]
Preferred Stock [Member]
Series C Preferred Stock [Member]
Convertible Preferred Stock Series A [Member]
Retained Earnings [Member]
Convertible Preferred Stock Series A [Member]
Preferred Stock [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                       1,238,018   1,238,018
Net change in unrealized gain (loss) on investment securities available for sale,net of income tax                         7,083 7,083
Total comprehensive income                           1,245,101
Common stock options exercised, value                     34,450     34,450
Common stock options exercised, shares                     8,390      
Stock-based compensation, net of tax benefit                     23,299     23,299
Issue Series D preferred stock, net 1,248,482   1,248,482                      
Redemption of preferred stock to the U.S. Treasury       (2,000,000) (2,000,000) (100,000) (100,000)              
Reclassification of issue cost to retained earnings                   24,985   (24,985)    
Dividends declared on convertible preferred stock   (5,447) (5,447)         (119,294) (119,294)          
Dividends declared and accrued on Series B and Series C preferred stock, net of discount accretion and (premium) amortization                   68,510   (176,298)   (107,788)
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                       2,247,611   2,247,611
Net change in unrealized gain (loss) on investment securities available for sale,net of income tax                         11,613 11,613
Total comprehensive income                           2,259,224
Common stock options exercised, value                     18,825     18,825
Common stock options exercised, shares                     9,269      
Stock-based compensation, net of tax benefit                     23,097     23,097
Dividends declared on convertible preferred stock   (64,129) (64,129)         (119,294) (119,294)          
Common stock split effected in the form of a common stock dividend                     2,508,296 (2,508,296)    
Common stock split effected in the form of a common stock dividend, shares                     321,576      
Fractional share purchased, value                     (4,808)     (4,808)
Fractional share purchased, shares                     (616)      
Dividends declared on common stock ($.15 per share)                       (530,508)   (530,508)
Balance, value at Dec. 31, 2011                   $ 3,868,807 $ 12,009,588 $ 14,405,467 $ (57,300) $ 30,226,562
Balance, shares at Dec. 31, 2011                     3,536,724      

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 $)
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Net change in unrealized gain (loss) on investment securities available for sale, income tax $ 7,286 $ 4,443
Dividends declared on common stock $ 0.15 $ 0.00
Convertible Preferred Stock Series A [Member]
   
Dividends declared $ 0.63 $ 0.63
Preferred Stock Series D [Member]
   
Dividends declared $ 0.35 $ 0.03

Consolidated Statements Of Cash Flows
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Consolidated Statements Of Cash Flows (USD $)
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Cash flows from operating activities    
Net income $ 2,247,611 $ 1,238,018
Adjustments to reconcile net income to net cash provided by operations:    
Depreciation and amortization 253,530 264,527
Provision for loan losses 743,717 3,003,748
Loss on the sale of foreclosed assets 55,254 11,042
Write-downs on foreclosed assets 58,109  
Stock-based compensation 23,097 23,299
(Gain) loss on disposal of property and equipment 16,282 (400)
Deferred income taxes 1,115,236 (791,517)
Accretion of discount on securities, net of amortization of premiums 2,182 1,971
Changes in assets and liabilities:    
Accrued income (7,098) 77,473
Increase in cash surrender value of life insurance (104,457) (111,683)
Other assets (275,369) 95,356
Accrued interest payable (42,525) (63,224)
Other liabilities 365,869 70,696
Net cash provided by operating activities 4,451,438 3,819,306
Cash flows from investing activities    
Net increase in interest-bearing deposits with banks (7,965,548) (3,724,714)
Net increase in federal funds sold (7,715) (289,174)
Purchases of investment securities (2,002,500) (2,000,000)
Maturities of investment securities 1,524,923 2,009,348
Purchases of restricted equity securities (75) (65)
Redemption of restricted equity securities 131,700 106,200
Net (increase) decrease in loans (5,160,673) 5,153,107
Proceeds from the sale of foreclosed assets 542,148 82,814
Proceeds from sale of property and equipment 935 400
Purchases of property and equipment (113,565) (109,240)
Net cash provided by (used in) investing activities (13,050,370) 1,228,676
Cash flows from financing activities    
Net increase (decrease) in deposits 9,978,303 (14,485)
Net decrease in short-term debt   (3,750,000)
Proceeds from long-term debt   2,500,000
Maturities of long-term debt (1,350,000) (2,250,000)
Dividends paid on preferred stock (172,705) (241,617)
Common stock options exercised 18,825 34,450
Redemption of preferred stock   (2,100,000)
Proceeds from the issuance of preferred stock, net   1,248,482
Purchase of fractional shares of common stock (4,808)  
Net cash provided by (used in) financing activities 8,469,615 (4,573,170)
Net (decrease) increase in cash and due from banks (129,317) 474,812
Cash and due from banks, beginning 2,398,433 1,923,621
Cash and due from banks, ending 2,269,116 2,398,433
Supplemental disclosures    
Interest paid 2,158,779 2,535,031
Income taxes paid 761,998 1,529,337
Loans transferred to foreclosed properties 764,997 491,052
Cash dividends declared but not paid $ 576,741 $ 35,515
Common stock shares surrendered in cashless exchange 1,103  

Organization And Summary Of Significant Accounting Policies
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Organization And Summary Of Significant Accounting Policies
12 Months Ended
Dec. 31, 2011
Organization And Summary Of Significant Accounting Policies [Abstract]  
Organization And Summary Of Significant Accounting Policies

Note 1. Organization and Summary of Significant Accounting Policies

Organization

Surrey Bancorp (the "Company") 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. Shareholders of the Bank received six shares of Surrey Bancorp common shares for every five shares of Surrey Bank & Trust common shares 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 (originally named Friendly 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 and subsidiaries follow U.S. generally accepted accounting principles and general practices within the financial services industry. Following is a summary of the more significant policies.

Critical Accounting Policies

Management believes the 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 the Board of Directors.

Principles of Consolidation

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

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and 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 loan losses 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 loan and foreclosed real estate losses, management obtains independent appraisals for significant properties.

Substantially, all of the Company's loan portfolio consists of loans in its market area. Accordingly, the ultimate collectability of a substantial portion of the Company's loan portfolio and the recovery of a substantial portion of the carrying amount of foreclosed real estate are susceptible to changes in local market conditions. The regional economy is diverse, but influenced to an extent by the manufacturing and agricultural segments.

While management uses available information to recognize loan and foreclosed real estate losses, future additions to the allowances may be necessary based on changes in local economic conditions. In addition, regulatory agencies, as a part of their routine examination process, periodically review the Company's allowances for loan and foreclosed real estate losses. 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 loan and foreclosed real estate losses may change materially in the near term.

Cash and Due from Banks

For the purpose of presentation in the statement of cash flows, cash and cash equivalents are defined as those amounts included in the balance sheet caption "cash and due from banks."

Interest-bearing Deposits with Banks

Interest-bearing deposits with banks mature within one year and are carried at cost. These deposits are primarily at the Federal Home Loan Bank of Atlanta, which sweeps excess funds out nightly and invests the funds in accounts that pay a daily rate that mirrors the federal funds rate, and the Federal Reserve Bank. Other deposits included in this category are short-term certificates of deposit issued through the Certificate of Deposit Account Registry Service (CDARS).

Trading Securities

The Company does not hold securities for short-term resale and therefore does not maintain a trading securities portfolio.

Securities Held to Maturity

Bonds, notes, and debentures for which the Company has the positive intent and ability to hold to maturity are reported at cost, adjusted for premiums and discounts that are recognized in interest income using the interest method over the period to maturity or to call dates. No securities held by the Company for the periods presented were classified as held to maturity.

Securities Available for Sale

Available for sale securities are reported at fair value and consist of bonds, notes, debentures, and certain equity securities not classified as trading securities or as held to maturity securities.

Unrealized holding gains and losses, net of tax, on available for sale securities are reported as a net amount in a separate component of stockholders' equity. Realized gains and losses on the sale of available for sale securities are determined using the specific-identification method and are recorded on a trade-date basis. Premiums and discounts are recognized in interest income using the interest method over the period to maturity or to call dates.

Declines in the fair value of individual held to maturity and available for sale securities below cost that are other than temporary are reflected as write-downs of the individual securities to fair value. Related write-downs are included in earnings as realized losses. In determining whether other than temporary impairment exists, management considers many factors, including (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 the 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.

Loans Held for Sale

Government guaranteed loans originated in the normal course of business are sometimes sold into the secondary market. These sales are of the guaranteed portion of the loans only. Loans that carry variable rates, which eliminate the market risk to the Bank, are carried at cost. Fixed rate loans are carried the lower of cost or market.

Loans Receivable

Loans receivable that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are reported at their outstanding principal amount adjusted for any charge-offs, the allowance for loan losses, and any deferred fees or costs 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.

Property and Equipment

Land is carried at cost. Premises, furniture and equipment, and leasehold improvements are carried at cost, less accumulated depreciation and amortization computed principally by the straight-line method over the following estimated useful lives:

 

     Years

Buildings and improvements

   10-40

Furniture and equipment

   3-25

Foreclosed Assets

Assets acquired through, or in lieu of, loan foreclosure are to be sold and are initially recorded at the lower of the investment in the loan or fair value less anticipated cost to sell at the date of foreclosure establishing a new cost basis. After foreclosure, valuations are periodically performed by management, and the assets are carried at the lower of carrying amount or fair value less cost to sell. Revenue and expenses from operations and changes in the valuation allowance are included in foreclosed asset expense.

Goodwill

Goodwill consists of premiums paid on acquisitions of insurance agencies. Goodwill is evaluated for impairment on an annual basis. Any impairment is charged against income in the period of impairment.

Employee Benefit Plans

The Company has a defined contribution plan qualifying under IRS Code Section 401(k). Employee contributions are matched by the Company up to the first six percent of an employee's contribution. The Company match is expensed as incurred.

The Company has a noncontributory, nonqualified supplemental executive retirement plan ("SERP") covering certain executive employees. The plan calls for monthly payments payable for the life of the executive, generally beginning at the age of 65. The SERP costs, which are actuarially determined and recorded on an unfunded basis, are charged to current operations and credited to a liability account on the consolidated balance sheets.

The Company has a deferred compensation plan under which directors may elect to defer their directors' fees. Participating directors receive an additional 30% matching contribution from the Company. Benefit payments are paid for a specific number of years, generally beginning at age 65. The deferred compensation cost, including the Company's matching contribution, are charged to current operations and credited to a liability account on the consolidated balance sheets.

Stock-based Compensation

The Company accounts for stock-based compensation in accordance with the provisions of Financial Accounting Standards Board ("FASB") ASC 718, Compensation – Stock Compensation. Under the fair value recognition provisions of this statement, stock-based compensation is measured at the grant date based on the fair value of the award and is recognized as expense on a straight-line basis over the requisite service period, which is the vesting period.

Transfers of Financial Assets

Transfers of financial assets are accounted for as sales when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

Income Taxes

Provision for income taxes is based on amounts reported in the statements of income (after exclusion of non-taxable income such as interest on state and municipal securities) and consists of taxes currently due plus deferred taxes on temporary differences in the recognition of income and expense for tax and financial statement purposes. Deferred tax assets and liabilities are included in the financial statements at currently enacted income tax rates applicable to the period in which the deferred tax assets or liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes.

Deferred income tax liability relating to unrealized appreciation (or the deferred tax asset in the case of unrealized depreciation) on investment securities available for sale is recorded in other liabilities (assets). Such unrealized appreciation or depreciation is recorded as an adjustment to equity in the financial statements and not included in income determination until realized. Accordingly, the resulting deferred income tax liability or asset is also recorded as an adjustment to equity.

The Company classifies interest accrued on unrecognized tax benefits with interest expense. Penalties accrued on unrecognized tax benefits are classified with operating expenses.

Basic Earnings per Common Share

Basic earnings per common share is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding during the period, after giving retroactive effect to stock splits and dividends.

Diluted Earnings per Common Share

The computation of diluted earnings per common 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 that would result from the assumed conversion of those potential common shares.

Note 1. Organization and Summary of Significant Accounting Policies, continued

Comprehensive Income

Annual comprehensive income reflects the change in the Company's equity during the year arising from transactions and events other than investments by and distributions to stockholders. It consists of net income plus certain other changes in assets and liabilities that are reported as separate components of stockholders' equity rather than as income or expense.

Advertising Cost

The Company incurred marketing and advertising cost of $105,571 and $106,307 for the years ended December 31, 2011 and 2010, respectively. The amounts are expensed as incurred and included in the statements of income under other expense.

Off-Balance Sheet Credit Related Financial Instruments

In the ordinary course of business, the Company has entered into commitments to extend credit, including commitments under line of credit arrangements, commercial letters of credit, and standby letters of credit. Such financial instruments are recorded when they are funded.

Fair Value of Financial Instruments

FASB ASC 820, Fair Value Measurement and Disclosure, requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet. In cases where quoted market prices 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 instruments. Certain financial instruments and all nonfinancial instruments are excluded from disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company.

Reclassification

Certain reclassifications have been made to the prior years' financial statements to place them on a comparable basis with the current year. Net income and stockholders' equity previously reported were not affected by these reclassifications.

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 5.

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 5.

Recent Accounting Pronouncements, continued

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.


Restrictions On Cash
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Restrictions On Cash
12 Months Ended
Dec. 31, 2011
Restrictions On Cash [Abstract]  
Restrictions On Cash

Note 2. Restrictions on Cash

To comply with banking regulations, the Company is required to maintain certain average cash reserve balances. The daily average cash reserve requirement was approximately $1,391,000 and $1,174,000 for the periods including December 31, 2011 and 2010, respectively.


Securities
v0.0.0.0
Securities
12 Months Ended
Dec. 31, 2011
Securities [Abstract]  
Securities

Note 3. 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 December 31, 2011 and 2010 follow:

 

                                 
     Amortized
Cost
     Unrealized
Gains
     Unrealized
Losses
     Fair
Value
 

2011

                                   

Government-sponsored enterprises

   $ 2,000,374       $ 4,311       $ —         $ 2,004,685   

Mortgage-backed securities

     49,298         1,443         —           50,741   

Corporate bonds

     550,000         —           99,000         451,000   
    

 

 

    

 

 

    

 

 

    

 

 

 
     $ 2,599,672       $ 5,754       $ 99,000       $ 2,506,426   
    

 

 

    

 

 

    

 

 

    

 

 

 

 

 

                                 
     Amortized
Cost
     Unrealized
Gains
     Unrealized
Losses
     Fair
Value
 

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   
    

 

 

    

 

 

    

 

 

    

 

 

 

Restricted equity securities were $809,754 and $941,379 at December 31, 2011 and 2010, respectively. Restricted equity securities primarily consist of investments in stock of the Federal Home Loan Bank of Atlanta ("FHLB") and Community Bankers Bank ("CBB"). These investments are carried at cost. The FHLB requires financial institutions to make equity investments in the FHLB in order to borrow money. The Company is required to hold that stock so long as it borrows from the FHLB. CBB stock is classified as restricted due to the transfer restrictions placed on the ownership of the stock by the issuer.

At December 31, 2011 and 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 FHLB.

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 December 31, 2011, were as follows:

 

                 
     Amortized
Cost
     Fair
Value
 

Due in one year or less

   $ —         $ —     

Due after one year through five years

     2,000,374         2,004,685   

Due after five years through ten years

     585,163         487,208   

Due after ten years

     14,135         14,533   
    

 

 

    

 

 

 
     $ 2,599,672       $ 2,506,426   
    

 

 

    

 

 

 

For the years ended December 31, 2011 and 2010, the Company had no realized gains or losses from the sale of investment securities. All were held to their scheduled maturity dates or call date.

The following tables show 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 December 31, 2011 and 2010. These unrealized losses on investment securities are a result of volatility in interest rates and relate to corporate bonds issued by other banks at December 31, 2011 and 2010.

 

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

2011

                                                     

Corporate bonds

   $ —         $ —         $ 451,000       $ 99,000       $ 451,000       $ 99,000   
    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     $ —         $ —         $ 451,000       $ 99,000       $ 451,000       $ 99,000   
    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

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.


Loans Receivable
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Loans Receivable
12 Months Ended
Dec. 31, 2011
Loans Receivable [Abstract]  
Loans Receivable

Note 4. Loans Receivable

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

 

     2011     2010  

Commercial

   $ 73,756,422      $ 66,377,076   

Real estate:

    

Construction and land development

     6,213,443        5,986,045   

Residential, 1-4 families

     39,499,189        46,356,711   

Residential, 5 or more families

     2,214,365        1,853,346   

Farmland

     2,722,872        2,854,481   

Nonfarm, nonresidential

     47,867,333        48,170,698   

Agricultural

     29,493        73,852   

Consumer, net of discounts of $21,742 in 2011 and $14,770 in 2010

     7,041,846        6,759,770   

Other

     —          —     
  

 

 

   

 

 

 
     179,344,963        178,431,979   

Deferred loan origination costs, net of fees

     (18,176     46,190   
  

 

 

   

 

 

 
     179,326,787        178,478,169   

Allowance for loan losses

     (3,880,581     (6,683,922
  

 

 

   

 

 

 
   $ 175,446,206      $ 171,794,247   
  

 

 

   

 

 

 

Residential, 1-4 family loans pledged as collateral against FHLB advances approximated $19,112,000 and $25,141,000 at December 31, 2011 and 2010, respectively.


Allowance For Loan Losses
v0.0.0.0
Allowance For Loan Losses
12 Months Ended
Dec. 31, 2011
Allowance For Loan Losses [Abstract]  
Allowance For Loan Losses

Note 5. Allowance for Loan Losses

The allocation of the allowance for loan losses by loan components at December 31, 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     (1,221,990     (270,848     (2,257,627     (56,414     —          (3,834,347

Recoveries

     996        62,368        109,046        90,811        24,068        —          287,289   

Provision

     10,875        300,414        (171,636     563,673        37,491        2,900        743,717   
    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

   $ 103,200      $ 836,860      $ 865,854      $ 1,808,260      $ 210,807      $ 55,600      $ 3,880,581   
    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
               

Ending balance: individually evaluated for impairment

   $ —        $ 83,460      $ 280,454      $ 449,260      $ —        $ —        $ 813,174   
    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance: collectively evaluated for impairment

   $ 103,200      $ 753,400      $ 585,400      $ 1,359,000      $ 210,807      $ 55,600      $ 3,067,407   
    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance: loans acquired with deteriorated credit quality

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
               

Loans Receivable:

                                                        

Ending balance

   $ 6,213,443      $ 39,499,189      $ 47,867,333      $ 73,756,422      $ 7,041,846      $ 4,966,730      $ 179,344,963   
    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance: individually evaluated for impairment

   $ 92,504      $ 705,326      $ 3,627,890      $ 3,160,174      $ 10,452      $ —        $ 7,596,346   
    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance: collectively evaluated for impairment

   $ 6,120,939      $ 38,793,863      $ 44,239,443      $ 70,596,248      $ 7,031,394      $ 4,966,730      $ 171,748,617   
    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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     (545,751     (509,029     —          (1,191,476

Recoveries

     —          2,290        20,501        150,467        28,487        —          201,745   

Provision

     12,400        1,091,563        592,695        903,420        405,070        (1,400     3,003,748   
    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance: individually evaluated for impairment

   $ 12,097      $ 1,118,468      $ 604,692      $ 2,334,003      $ —        $ —        $ 4,069,260   
    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance: collectively evaluated for impairment

   $ 106,700      $ 577,600      $ 594,600      $ 1,077,400      $ 205,662      $ 52,700      $ 2,614,662   
    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance: loans acquired with deteriorated credit quality

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
               

Loans Receivable:

                                                        

Ending balance

   $ 5,986,045      $ 46,356,711      $ 48,170,698      $ 66,377,076      $ 6,759,770      $ 4,781,679      $ 178,431,979   
    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance: individually evaluated for impairment

   $ 136,703      $ 2,172,064      $ 4,268,396      $ 8,050,110      $ 10,439      $ —        $ 14,637,712   
    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance: collectively evaluated for impairment

   $ 5,849,342      $ 44,184,647      $ 43,902,302      $ 58,326,966      $ 6,749,331      $ 4,781,679      $ 163,794,267   
    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance: loans acquired with deteriorated credit quality

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

The following table presents loans individually evaluated for impairment by class of loan as of December 31, 2011 and 2010:

 

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

2011

                                            

With no related allowance recorded:

                                            

Construction and development

   $ 92,504       $ 92,504       $ —         $ 92,504       $ 4,398   

1-4 family residential

     469,514         502,598         —           504,456         20,970   

Nonfarm, nonresidential

     1,548,288         1,711,019         —           1,720,582         90,633   

Commercial and industrial

     1,526,985         1,701,473         —           1,679,148         99,979   

Consumer

     10,452         10,452         —           6,753         6,738   

Other loans

     —           —           —           —           —     
    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
       3,647,743         4,018,046         —           4,003,443         222,718   
    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
           

With an allowance recorded:

                                            

Construction and development

   $ —         $ —         $ —         $ —         $ —     

1-4 family residential

     235,812         235,812         83,460         236,822         13,693   

Nonfarm, nonresidential

     2,079,602         2,079,602         280,454         2,079,917         109,936   

Commercial and industrial

     1,633,189         1,633,189         449,260         1,843,975         97,007   

Consumer

     —           —           —           —           —     

Other loans

     —           —           —           —           —     
    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
       3,948,603         3,948,603         813,174         4,160,714         220,636   
    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
           

Combined:

                                            

Construction and development

   $ 92,504       $ 92,504       $ —         $ 92,504       $ 4,398   

1-4 family residential

     705,326         738,410         83,460         741,278         34,663   

Nonfarm, nonresidential

     3,627,890         3,790,621         280,454         3,800,499         200,569   

Commercial and industrial

     3,160,174         3,334,662         449,260         3,523,123         196,986   

Consumer

     10,452         10,452         —           6,753         6,738   

Other loans

     —           —           —           —           —     
    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     $ 7,596,346       $ 7,966,649       $ 813,174       $ 8,164,157       $ 443,354   
    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
           

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.

 

                                                         
     30-59 Days
Past Due
    60-89 Days
Past Due
    90 Days Plus
Past Due
    Total
Past Due
    Current     Total
Financing
Receivables
    Recorded
Investment
> 90 Days
and
Accruing
 

2011

                                                        
               

Construction and development

   $ 273,412      $ 23,727      $ —        $ 297,139      $ 5,916,304      $ 6,213,443      $ —     

1-4 family residential

     621,656        77,631        72,774        772,061        38,727,128        39,499,189        —     

Nonfarm, nonresidential

     98,922        119,046        —          217,968        47,649,365        47,867,333        —     

Commercial and industrial

     764,276        56,117        218,516        1,038,909        72,717,513        73,756,422        44,543   

Consumer

     170,447        229,368        15,790        415,605        6,626,241        7,041,846        5,338