Document And Entity Information
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Document And Entity Information
 3 Months Ended
Mar. 31, 2012
May 07, 2012
Document And Entity Information [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Mar. 31, 2012  
Document Fiscal Year Focus 2012  
Document Fiscal Period Focus Q1  
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   3,542,984

Consolidated Balance Sheets
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Consolidated Balance Sheets (USD $)
Mar. 31, 2012
Dec. 31, 2011
Assets    
Cash and due from banks $ 9,088,032 $ 2,269,116
Interest-bearing deposits with banks 24,094,705 30,757,636
Federal funds sold 710,026 709,836
Investment securities available for sale 2,494,651 2,506,426
Restricted equity securities 811,879 809,754
Loans, net of allowance for loan losses of $3,901,758 at March 31, 2012 and $3,880,581 at December 31, 2011 177,420,797 175,446,206
Property and equipment, net 4,555,132 4,569,301
Foreclosed assets 451,642 560,018
Accrued income 950,804 962,614
Goodwill 120,000 120,000
Bank owned life insurance 5,172,573 3,389,447
Other assets 2,550,940 2,627,410
Total assets 228,421,181 224,727,764
Liabilities and Stockholders' Equity    
Noninterest-bearing 36,226,518 30,750,902
Interest-bearing 150,958,053 153,187,474
Total deposits 187,184,571 183,938,376
Long-term debt 8,100,000 8,100,000
Dividends payable 45,605 576,741
Accrued interest payable 196,087 185,362
Other liabilities 2,049,464 1,700,723
Total liabilities 197,575,727 194,501,202
Commitments and contingencies      
Stockholders' equity    
Common stock, 10,000,000 shares authorized at no par value; 3,536,724 shares issued and outstanding at March 31, 2012 and December 31, 2011 12,016,118 12,009,588
Retained earnings 15,023,919 14,405,467
Accumulated other comprehensive loss (63,390) (57,300)
Total stockholders' equity 30,845,454 30,226,562
Total liabilities and stockholders' equity 228,421,181 224,727,764
Convertible Preferred Stock Series A [Member]
    
Stockholders' equity    
Preferred stock 2,620,325 2,620,325
Convertible 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 $)
 3 Months Ended 12 Months Ended
Mar. 31, 2012
Dec. 31, 2011
Allowance for loan losses $ 3,901,758 $ 3,880,581
Common stock, no par value      
Common stock, shares authorized 10,000,000 10,000,000
Common stock, shares issued 3,536,724 3,536,724
Common stock, shares outstanding 3,536,724 3,536,724
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%
Convertible 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
Mar. 31, 2012
Mar. 31, 2011
Interest income    
Loans and fees on loans $ 2,744,976 $ 2,724,152
Federal funds sold 392 337
Investment securities, taxable 14,203 12,414
Deposits with banks 10,447 5,331
Total interest income 2,770,018 2,742,234
Interest expense    
Deposits 373,012 474,070
Long-term debt 76,406 91,536
Total interest expense 449,418 565,606
Net interest income 2,320,600 2,176,628
Provision for loan losses 67,218 158,897
Net interest income after provision for loan losses 2,253,382 2,017,731
Noninterest income    
Service charges on deposit accounts 235,942 247,891
Fees and yield spread premiums on loans delivered to correspondents 40,821 27,176
Other service charges and fees 131,906 118,959
Other operating income 251,168 199,452
Total noninterest income 659,837 593,478
Noninterest expense    
Salaries and employee benefits 927,383 878,585
Occupancy expense 118,162 95,460
Equipment expense 63,213 58,863
Data processing 92,415 86,831
Foreclosed assets, net 33,230 19,424
Postage, printing and supplies 41,192 42,503
Professional fees 132,045 123,207
FDIC insurance premiums 48,855 83,290
Other expense 397,149 342,209
Total noninterest expense 1,853,644 1,730,372
Net income before income taxes 1,059,575 880,837
Income tax expense 395,518 328,646
Net income 664,057 552,191
Preferred stock dividends (45,605) (45,228)
Net income available to common stockholders $ 618,452 $ 506,963
Basic earnings per common share $ 0.17 $ 0.14
Diluted earnings per common share $ 0.16 $ 0.13
Basic weighted average common shares outstanding 3,536,724 3,528,987
Diluted weighted average common shares outstanding 4,171,028 4,162,922

Consolidated Statements Of Comprehensive Income
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Consolidated Statements Of Comprehensive Income (USD $)
 3 Months Ended
Mar. 31, 2012
Mar. 31, 2011
Consolidated Statements Of Comprehensive Income [Abstract]    
Net income $ 664,057 $ 552,191
Other comprehensive income:    
Unrealized gains (losses) arising during the period (9,911) (2,200)
Tax related to unrealized gains (losses) 3,821 848
Total other comprehensive income (loss) (6,090) (1,352)
Total comprehensive income $ 657,967 $ 550,839

Consolidated Statements Of Cash Flows
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Consolidated Statements Of Cash Flows (USD $)
 3 Months Ended
Mar. 31, 2012
Mar. 31, 2011
Cash flows from operating activities    
Net income $ 664,057 $ 552,191
Adjustments to reconcile net income to net cash provided by operations:    
Depreciation and amortization 56,734 59,177
Gain on sale of property and equipment (450) (300)
Loss on the sale of foreclosed assets (35,779) (1,780)
Stock-based compensation, net of tax benefit 6,530 5,271
Provision for loan losses 67,218 158,897
Deferred income taxes 2,429 (89)
Accretion of discount on securities, net of amortization of premiums 385 219
Increase in cash surrender value of life insurance (33,126) (26,615)
Changes in assets and liabilities:    
Accrued income 11,810 47,744
Other assets 77,862 37,810
Accrued interest payable 10,725 30,068
Other liabilities 348,741 437,910
Net cash provided by operating activities 1,177,136 1,300,503
Cash flows from investing activities    
Net (increase) decrease in interest-bearing deposits with banks 6,662,931 (6,098,702)
Net increase in federal funds sold (190) (3,123)
Purchases of investment securities (1,500,000) (1,502,500)
Sales and maturities of investment securities 1,501,479 1,002,416
Purchase of Bank Owned Life Insurance (1,750,000)  
Purchase of restricted equity securities (2,125)  
Net increase in loans (2,098,391) (5,062,055)
Proceeds from the sale of foreclosed assets 200,737 67,371
Purchases of property and equipment (44,033) (21,246)
Proceeds from the sale of property and equipment 1,918 300
Net cash provided by (used in) investing activities 2,972,326 (11,617,539)
Cash flows from financing activities    
Net increase in deposits 3,246,195 10,681,848
Dividends paid (576,741) (35,515)
Common stock options exercised   12,311
Net cash provided by financing activities 2,669,454 10,658,644
Net increase in cash and cash equivalents 6,818,916 341,608
Cash and due from banks, beginning 2,269,116 2,398,433
Cash and due from banks, ending 9,088,032 2,740,041
Supplemental disclosures of cash flow information    
Interest paid 438,693 535,538
Taxes paid   39,419
Loans transferred to foreclosed properties $ 56,582 $ 228,362

Consolidated Statements Of Changes In Stockholders' Equity
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Consolidated Statements Of Changes In Stockholders' Equity (USD $)
Convertible Preferred Stock Series A [Member]
Retained Earnings [Member]
Convertible Preferred Stock Series A [Member]
Convertible Preferred Stock Series D [Member]
Retained Earnings [Member]
Convertible Preferred Stock Series D [Member]
Preferred Stock [Member]
Common Stock [Member]
Retained Earnings [Member]
Accumulated Other Comprehensive Loss [Member]
Total
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      
Net income             552,191   552,191
Net change in unrealized gain (loss) on investment securities available for sale, net of income tax               (1,352) (1,352)
Common stock options exercised, value           12,311     12,311
Common stock options exercised, shares           4,790      
Stock-based compensation, net of tax benefit           5,271     5,271
Dividends declared and accrued on convertible preferred stock (29,415) (29,415) (15,813) (15,813)          
Balance, value at Mar. 31, 2011         3,868,807 9,481,760 15,887,046 (70,265) 29,167,348
Balance, shares at Mar. 31, 2011           3,211,285      
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      
Net income             664,057   664,057
Net change in unrealized gain (loss) on investment securities available for sale, net of income tax               (6,090) (6,090)
Stock-based compensation, net of tax benefit           6,530     6,530
Dividends declared and accrued on convertible preferred stock (29,661) (29,661) (15,944) (15,944)          
Balance, value at Mar. 31, 2012         $ 3,868,807 $ 12,016,118 $ 15,023,919 $ (63,390) $ 30,845,454
Balance, shares at Mar. 31, 2012           3,536,724      

Consolidated Statements Of Changes In Stockholders' Equity (Parenthetical)
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Consolidated Statements Of Changes In Stockholders' Equity (Parenthetical) (USD $)
 3 Months Ended
Mar. 31, 2012
Mar. 31, 2011
Net change in unrealized gain (loss) on investment securities available for sale, income tax $ 3,821 $ 848
Convertible Preferred Stock Series A [Member]
    
Dividends declared $ 0.16 $ 0.16
Convertible Preferred Stock Series D [Member]
    
Dividends declared $ 0.09 $ 0.09

Basis Of Presentation
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Basis Of Presentation
 3 Months Ended
Mar. 31, 2012
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 March 31, 2012, the results of operations for the three months ended March 31, 2012 and 2011, and its changes in stockholders' equity, comprehensive income and cash flows for the three months ended March 31, 2012 and 2011. The results of operations for the three months ended March 31, 2012, 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, 2011, included in the Company's Form 10-K. The balance sheet at December 31, 2011, 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, 2011 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 March 31, 2012 and December 31, 2011, 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 March 31, 2012 and December 31, 2011.

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 September 2011, the Intangibles topic was 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 were 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 were effective for the Company on January 1, 2012 and had no effect on the financial statements.

 

Recent Accounting Pronouncements, continued

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 were effective for the Company beginning January 1, 2012 and have been included in Note 8.

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 and requires consecutive presentation of the statement of net income and other comprehensive income. The amendments were applicable to the Company on January 1, 2012 and have been applied retrospectively. In December 2011, the topic was further amended to defer the effective date of presenting reclassification adjustments from other comprehensive income to net income on the face of the financial statements. Companies should continue to report reclassifications out of accumulated other comprehensive income consistent with the presentation requirements in effect prior to the amendments while FASB redeliberates future requirements.

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
 3 Months Ended
Mar. 31, 2012
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 March 31, 2012 and December 31, 2011 follow:

 

xxxxxxxxxxx xxxxxxxxxxx xxxxxxxxxxx xxxxxxxxxxx
     Amortized
Cost		      Unrealized
Gains		      Unrealized
Losses		      Fair
Value		  

March 31, 2012

            

Government-sponsored enterprises

    $ 2,000,000       $ 800       $ 3,695       $ 1,997,105   

Mortgage-backed securities

      47,808         1,488         -         49,296   

Corporate bonds

      550,000         -         101,750         448,250   
  

 

 

     

 

 

     

 

 

     

 

 

  
   $ 2,597,808       $ 2,288       $ 105,445       $ 2,494,651   
  

 

 

     

 

 

     

 

 

     

 

 

  

December 31, 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   
  

 

 

     

 

 

     

 

 

     

 

 

  

At March 31, 2012 and December 31, 2011, 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 March 31, 2012, were as follows:

 

xxxxxxxxxxx xxxxxxxxxxx
     Amortized
Cost		      Fair
Value		  

Due in one year or less

    $ -       $ -   

Due after one year through five years

      2,000,000         1,997,105   

Due after five years through ten years

      583,993         483,283   

Due after ten years

      13,815         14,263   
  

 

 

     

 

 

  
   $ 2,597,808       $ 2,494,651   
  

 

 

     

 

 

  

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 March 31, 2012 and December 31, 2011. 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 March 31, 2012 and December 31, 2011.

 

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

March 31, 2012

                  

Government-sponsored enterprises

    $ 1,496,305       $ 3,695       $ -       $ -       $ 1,496,305       $ 3,695   

Corporate bonds

      -         -         448,250         101,750         448,250         101,750   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
   $ 1,496,305       $ 3,695       $ 448,250       $ 101,750       $ 1,944,555       $ 105,445   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

December 31, 2011

                  

Corporate bonds

    $ -       $ -       $ 451,000       $ 99,000       $ 451,000       $ 99,000   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
   $ -       $ -       $ 451,000       $ 99,000       $ 451,000       $ 99,000   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

 

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 three month periods ended March 31, 2012 and 2011.

Earnings Per Share
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Earnings Per Share
 3 Months Ended
Mar. 31, 2012
Earnings Per Share [Abstract]  
Earnings Per Share

NOTE 3.     EARNINGS PER SHARE

Basic earnings per share for the three months ended March 31, 2012 and 2011 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 2.2955 shares of common stock. Each share of Series D preferred is convertible into 1.10 shares of common stock.

Commitments And Letters Of Credit
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Commitments And Letters Of Credit
 3 Months Ended
Mar. 31, 2012
Commitments And Letters Of Credit [Abstract]  
Commitments And Letters Of Credit

NOTE 4.     COMMITMENTS AND LETTERS OF CREDIT

At March 31, 2012, the Company had commitments to extend credit, including unused lines of credit of approximately $33,888,000. Letters of credit totaling $1,232,886 were outstanding.

Loans
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Loans
 3 Months Ended
Mar. 31, 2012
Loans [Abstract]  
Loans

NOTE 5.     LOANS

The major components of loans in the balance sheets at March 31, 2012 and December 31, 2011 are below.

 

xxxxxxxxxxxxx xxxxxxxxxxxxx
     2012     2011  

Commercial

    $ 78,907,056      $ 73,756,422   

Real estate:

     

Construction and land development

      5,653,390        6,213,443   

Residential, 1-4 families

      37,943,451        39,499,189   

Residential, 5 or more families

      2,170,552        2,214,365   

Farmland

      2,377,137        2,722,872   

Nonfarm, nonresidential

      47,357,267        47,867,333   

Agricultural

      27,605        29,493   

Consumer, net of discounts of $22,742 in 2012 and $21,742 in 2011

      6,858,601        7,041,846   
  

 

 

    

 

 

  
     181,295,059        179,344,963   

Deferred loan origination costs, net of (fees)

      27,496        (18,176 ) 
  

 

 

    

 

 

  
     181,322,555        179,326,787   

Allowance for loan losses

      (3,901,758 )      (3,880,581 ) 
  

 

 

    

 

 

  
   $ 177,420,797      $ 175,446,206   
  

 

 

    

 

 

  

 

Residential, 1-4 family loans pledged as collateral against FHLB advances approximated $18,295,000 and $19,112,000 at March 31, 2012 and December 31, 2011, respectively.

Allowance For Loan Losses
v0.0.0.0
Allowance For Loan Losses
 3 Months Ended
Mar. 31, 2012
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 during the three months ending March 31, 2012 and 2011 was as follows:

 

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

March 31, 2012

               

Allowance for credit losses:

               

Beginning balance

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

Charge-offs

      (7,285 )      (41,171 )      -        (91,990 )      (20,745 )      -        (161,191 ) 

Recoveries

      -        408        83,230        23,854        7,658        -        115,150   

Provision

      11,485        30,622        (102,872 )      142,242        (10,059 )      (4,200 )      67,218   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ending balance

    $ 107,400      $ 826,719      $ 846,212      $ 1,882,366      $ 187,661      $ 51,400      $ 3,901,758   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ending balance: individually evaluated for impairment

    $ -      $ 57,719      $ 298,012      $ 449,066      $ -      $ -      $ 804,797   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ending balance: collectively evaluated for impairment

    $ 107,400      $ 769,000      $ 548,200      $ 1,433,300      $ 187,661      $ 51,400      $ 3,096,961   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ending balance: loans acquired with deteriorated credit quality

    $ -      $ -      $ -      $ -      $ -      $ -      $ -   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Loans Receivable:

               

Ending balance

    $ 5,653,390      $ 37,943,451      $ 47,357,267      $ 78,907,056      $ 6,858,601      $ 4,575,294      $ 181,295,059   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ending balance: individually evaluated for impairment

    $ 91,428      $ 469,585      $ 3,430,509      $ 3,191,163      $ -      $ -      $ 7,182,685   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ending balance: collectively evaluated for impairment

    $ 5,561,962      $ 37,473,866      $ 43,926,758      $ 75,715,893      $ 6,858,601      $ 4,575,294      $ 174,112,374   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ending balance: loans acquired with deteriorated credit quality

    $ -      $ -      $ -      $ -      $ -      $ -      $ -   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

March 31, 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

      (12,097 )      (1,052,192 )      (199,909 )      (969,108 )      (13,036 )      -        (2,246,342 ) 

Recoveries

      996        528        5,952        39,675        5,395        -        52,546   

Provision

      4        122,237        (142,557 )      168,709        5,804        4,700        158,897   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ending balance

    $ 107,700      $ 766,641      $ 862,778      $ 2,650,679      $ 203,825      $ 57,400      $ 4,649,023   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ending balance: individually evaluated for impairment

    $ -      $ 59,941      $ 233,877      $ 1,465.980      $ -      $ -      $ 1,759,798   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ending balance: collectively evaluated for impairment

    $ 107,700      $ 706,700      $ 628,901      $ 1,184,699      $ 203,825      $ 57,400      $ 2,889,225   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ending balance: loans acquired with deteriorated credit quality

    $ -      $ -      $ -      $ -      $ -      $ -      $ -   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Loans Receivable:

               

Ending balance

    $ 6,125,086      $ 43,293,412      $ 49,043,395      $ 70,333,721      $ 7,102,666      $ 5,174,328      $ 181,072,608   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ending balance: individually evaluated for impairment

    $ 165,267      $ 1,058,194      $ 3,814,978      $ 7,282,254      $ 1,686      $ -      $ 12,322,379   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ending balance: collectively evaluated for impairment

    $ 5,959,819      $ 42,235,218      $ 45,228,417      $ 63,051,467      $ 7,100,980      $ 5,174,328      $ 168,750,229   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ending balance: loans acquired with deteriorated credit quality

    $ -      $ -      $ -      $ -      $ -      $ -      $ -   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

The following table presents impaired loans individually evaluated by class of loan as of March 31, 2012 and December 31, 2011:

 

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

March 31, 2012

               

With no related allowance recorded:

               

Construction and development

    $ 91,428       $ 91,428       $ -       $ 93,135       $ -   

1-4 family residential

      187,189         220,273         -         194,493         -   

Nonfarm, nonresidential

      1,236,670         1,236,670         -         1,542,714         16,415   

Commercial and industrial

      1,541,965         1,716,453         -         1,567,701         26,836   

Consumer

      -         -         -         -         -   

Other loans

      -         -         -         -         -   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
     3,057,252         3,264,824         -         3,398,043         43,251   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

With an allowance recorded:

               

Construction and development

    $ -       $ -       $ -       $ -       $ -   

1-4 family residential

      282,396         282,396         57,719         286,342         230   

Nonfarm, nonresidential

      2,193,839         2,193,839         298,012         2,235,595         1,067   

Commercial and industrial

      1,649,198         1,649,198         449,066         1,679,092         10,208   

Consumer

      -         -         -         -         -   

Other loans

      -         -         -         -         -   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
     4,125,433         4,125,433         804,797         4,201,029         11,505   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Combined:

               

Construction and development

    $ 91,428       $ 91,428       $ -       $ 93,135       $ -   

1-4 family residential

      469,585         502,669         57,719         480,835         230   

Nonfarm, nonresidential

      3,430,509         3,430,509         298,012         3,778,309         17,482   

Commercial and industrial

      3,191,163         3,365,651         449,066         3,246,793         37,044   

Consumer

      -         -         -         -         -   

Other loans

      -         -         -         -         -   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
   $ 7,182,685       $ 7,390,257       $ 804,797       $ 7,599,072       $ 54,756   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

December 31, 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   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

 

The following presents by class, an aging analysis of the recorded investment in loans.

 

xxxxxxxxxx xxxxxxxxxx xxxxxxxxxx xxxxxxxxxx xxxxxxxxxx xxxxxxxxxx xxxxxxxxxx
     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		  

March 31, 2012

                     

Construction and development

    $ 2,343       $ -       $ -       $ 2,343       $ 5,651,047       $ 5,653,390       $ -   

1-4 family residential

      809,727         95,152         304,957         1,209,836         36,733,615         37,943,451         -   

Nonfarm, nonresidential

      325,749         136,851         -         462,600         46,894,667         47,357,267         -   

Commercial and industrial

      613,353         4,359         213,595         831,307         78,075,749         78,907,056         21,929   

Consumer

      169,683         53,241         34,502         257,426         6,601,175         6,858,601         29,530   

Other loans

      -         -         -         -         4,575,294         4,575,294         -   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 1,920,855       $ 289,603       $ 553,054       $ 2,763,512       $ 178,531,547       $ 181,295,059       $ 51,459   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Percentage of total loans

      1.06%         0.16%         0.31%         1.52%         98.48%         100.00%      
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

Non-accruals included above

                     

Construction and development

    $ -       $ -       $ -       $ -       $ 91,429       $ 91,429      

1-4 family residential

      150,062         71,751         304,957         526,770         278,064         804,834      

Nonfarm, nonresidential

      -         -         -         -         2,202,838         2,202,838      

Commercial and industrial

      45,504         -         191,667         237,171         805,568         1,042,739      

Consumer

      -         837         4,972         5,809         -         5,809      

Other loans

      -         -         -         -         -         -      
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     
   $ 195,566       $ 72,588       $ 501,596       $ 769,750       $ 3,377,899       $ 4,147,649      
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

December 31, 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   

Other loans

      -         -         -         -         4,966,730         4,966,730         -   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 1,928,713       $ 505,889       $ 307,080       $ 2,741,682       $ 176,603,281       $ 179,344,963       $ 49,881   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Percentage of total loans

      1.08%         0.28%         0.17%         1.53%         98.47%         100.00%      
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

Non-accruals included above

                     

Construction and development

    $ -       $ -       $ -       $ -       $ 92,504       $ 92,504      

1-4 family residential

      92,736         217,814         72,774         383,324         322,003         705,327      

Nonfarm, nonresidential

      -         -         -         -         2,517,311         2,517,311      

Commercial and industrial

      -         -         173,973         173,973         895,643