NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
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, 2013, the results of operations and comprehensive income for the three months ended March 31, 2013 and 2012, and its changes in stockholders
equity and cash flows for the three months ended March 31, 2013 and 2012. These adjustments are of a normal and recurring nature. The results of operations for the three months ended March 31, 2013, are not necessarily indicative of the
results expected for the full year. These consolidated financial statements should be read in conjunction with the Companys audited financial statements and related disclosures for the year ended December 31, 2012, included in the
Companys Form 10-K. The balance sheet at December 31, 2012, 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, 2012 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.
8
SURREY BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION, CONTINUED
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, 2013 and December 31, 2012, 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, 2013 and
December 31, 2012.
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
managements 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.
9
SURREY BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION, CONTINUED
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 managements 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 borrowers 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 managements 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
borrowers 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 loans effective interest rate, the loans obtainable market price, or the fair value of the collateral if the loan is collateral dependent.
Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Company does not separately identify individual consumer and residential loans for impairment
disclosures.
Recent Accounting Pronouncements
The following is a summary of recent authoritative pronouncements:
In July 2012, the Intangibles topic was amended to permit an entity to consider qualitative factors to determine whether it is more likely than not that indefinite-lived intangible assets are impaired. If
it is determined to be more likely than not that indefinite-lived intangible assets are impaired, then the entity is required to determine the fair value of the indefinite-lived intangible asset and perform the quantitative impairment test by
comparing the fair value with the carrying amount. The amendments are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. The amendments did not have a material effect on the
Companys financial statements.
10
SURREY BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION, CONTINUED
Recent Accounting Pronouncements, continued
The Comprehensive Income topic of the ASC was amended in June 2011. The amendment eliminated the option to present other comprehensive income as a part of
the statement of changes in stockholders equity and required consecutive presentation of the statement of net income and other comprehensive income. The amendments were applicable to the Company 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 while the FASB
redeliberated the presentation requirements for the reclassification adjustments. In February 2013, the FASB further amended the Comprehensive Income topic clarifying the conclusions from such redeliberations. Specifically, the amendments do not
change the current requirements for reporting net income or other comprehensive income in financial statements. However, the amendments do require an entity to provide information about the amounts reclassified out of accumulated other comprehensive
income by component. In addition, in certain circumstances an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive
income by the respective line items of net income. The amendments were effective for the Company on a prospective basis beginning January 1, 2013. These amendments did not have a material effect on the Companys financial statements.
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 Companys 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.
11
SURREY BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. SECURITIES
Debt and equity securities have been classified in the balance sheets according to
managements intent. The amortized costs of securities available for sale and their approximate fair values at March 31, 2013 and December 31, 2012 follow:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized
Cost
|
|
|
Unrealized
Gains
|
|
|
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
|
|
|
|
March 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government-sponsored enterprises
|
|
$
|
3,500,000
|
|
|
$
|
4,070
|
|
|
$
|
1,690
|
|
|
$
|
3,502,380
|
|
Mortgage-backed securities
|
|
|
39,961
|
|
|
|
1,410
|
|
|
|
|
|
|
|
41,371
|
|
Corporate bonds
|
|
|
550,000
|
|
|
|
|
|
|
|
99,000
|
|
|
|
451,000
|
|
Equities and mutual funds
|
|
|
512,196
|
|
|
|
26,338
|
|
|
|
1,269
|
|
|
|
537,265
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,602,157
|
|
|
$
|
31,818
|
|
|
$
|
101,959
|
|
|
$
|
4,532,016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government-sponsored enterprises
|
|
$
|
2,500,000
|
|
|
$
|
4,875
|
|
|
$
|
|
|
|
$
|
2,504,875
|
|
Mortgage-backed securities
|
|
|
41,659
|
|
|
|
1,316
|
|
|
|
|
|
|
|
42,975
|
|
Corporate bonds
|
|
|
550,000
|
|
|
|
|
|
|
|
107,250
|
|
|
|
442,750
|
|
Equities and mutual funds
|
|
|
508,836
|
|
|
|
3,416
|
|
|
|
|
|
|
|
512,252
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,600,495
|
|
|
$
|
9,607
|
|
|
$
|
107,250
|
|
|
$
|
3,502,852
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At March 31, 2013 and December 31, 2012, 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, 2013, were as follows:
|
|
|
|
|
|
|
|
|
|
|
Amortized
Cost
|
|
|
Fair
Value
|
|
|
|
|
Due in one year or less
|
|
$
|
512,196
|
|
|
$
|
537,265
|
|
Due after one year through five years
|
|
|
3,500,000
|
|
|
|
3,502,380
|
|
Due after five years through ten years
|
|
|
577,695
|
|
|
|
479,545
|
|
Due after ten years
|
|
|
12,266
|
|
|
|
12,826
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,602,157
|
|
|
$
|
4,532,016
|
|
|
|
|
|
|
|
|
|
|
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, 2013 and December 31, 2012.
These unrealized losses on investment securities are a result of volatility in interest rates and relate to government-sponsored enterprises and corporate bonds issued by other banks at March 31, 2013 and December 31,
2012.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less Than 12 Months
|
|
|
12 Months or More
|
|
|
Total
|
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
|
|
|
|
|
|
March 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government-sponsored enterprises
|
|
$
|
1,498,310
|
|
|
$
|
1,690
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,498,310
|
|
|
$
|
1,690
|
|
Corporate bonds
|
|
|
|
|
|
|
|
|
|
|
451,000
|
|
|
|
99,000
|
|
|
|
451,000
|
|
|
|
99,000
|
|
Equities and mutual funds
|
|
|
12,406
|
|
|
|
1,269
|
|
|
|
|
|
|
|
|
|
|
|
12,406
|
|
|
|
1,269
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,510,716
|
|
|
$
|
2,959
|
|
|
$
|
451,000
|
|
|
$
|
99,000
|
|
|
$
|
1,961,716
|
|
|
$
|
101,959
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds
|
|
$
|
|
|
|
$
|
|
|
|
$
|
442,750
|
|
|
$
|
107,250
|
|
|
$
|
442,750
|
|
|
$
|
107,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
442,750
|
|
|
$
|
107,250
|
|
|
$
|
442,750
|
|
|
$
|
107,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12
SURREY BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. SECURITIES, CONTINUED
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 issuers 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, 2013 and 2012.
NOTE 3. EARNINGS PER SHARE
Basic earnings per share for the three months ended March 31, 2013 and 2012 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.
NOTE 4. COMMITMENTS AND LETTERS OF CREDIT
At March 31, 2013, the Company had commitments to extend credit, including unused lines of credit of approximately $37,361,000 and
letters of credit outstanding of $1,311,213.
NOTE 5. LOANS
The major components of loans in the balance sheets at March 31, 2013
and December 31, 2012 are below.
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
Commercial
|
|
$
|
65,731,927
|
|
|
$
|
75,914,072
|
|
Real estate:
|
|
|
|
|
|
|
|
|
Construction and land development
|
|
|
4,261,466
|
|
|
|
4,873,512
|
|
Residential, 1-4 families
|
|
|
35,608,828
|
|
|
|
36,091,051
|
|
Residential, 5 or more families
|
|
|
1,643,407
|
|
|
|
1,676,449
|
|
Farmland
|
|
|
2,370,895
|
|
|
|
2,284,155
|
|
Nonfarm, nonresidential, net of discounts of $21,949 in 2013 and $22,001 in 2012
|
|
|
64,420,526
|
|
|
|
48,993,867
|
|
Agricultural
|
|
|
146,811
|
|
|
|
147,860
|
|
Consumer, net of discounts of $14,364 in 2013 and $17,764 in 2012
|
|
|
6,713,173
|
|
|
|
6,703,363
|
|
Other
|
|
|
2,572
|
|
|
|
3,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
180,899,605
|
|
|
|
176,687,329
|
|
|
|
|
Deferred loan origination costs, net of (fees)
|
|
|
407,032
|
|
|
|
293,334
|
|
|
|
|
|
|
|
|
|
|
|
|
|
181,306,637
|
|
|
|
176,980,663
|
|
Allowance for loan losses
|
|
|
(3,342,034
|
)
|
|
|
(3,403,098
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
177,964,603
|
|
|
$
|
173,577,565
|
|
|
|
|
|
|
|
|
|
|
13
SURREY BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5. LOANS, CONTINUED
Net, deferred loan origination costs changed from net deferred cost of $293,334 at December 31,
2012 to net deferred cost of $407,032 at March 31, 2013. The increase in deferred cost in 2013 primarily resulted from the Bank paying government guarantee fees on certain guaranteed loan originations as opposed to the cost being paid by the
borrower. In exchange the Bank received rate concessions to compensate for the added cost.
Residential, 1-4 family loans pledged as
collateral against FHLB advances approximated $17,696,000 and $17,765,000 at March 31, 2013 and December 31, 2012, respectively.
NOTE 6. ALLOWANCE FOR LOAN LOSSES
The activity of the allowance for loan losses by loan components during the
three months ended March 31, 2013 and 2012 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction
&
Development
|
|
|
1-4 Family
Residential
|
|
|
Nonfarm,
Nonresidential
|
|
|
Commercial
&
Industrial
|
|
|
Consumer
|
|
|
Other
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
March 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for credit losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
86,300
|
|
|
$
|
668,700
|
|
|
$
|
801,999
|
|
|
$
|
1,604,510
|
|
|
$
|
198,789
|
|
|
$
|
42,800
|
|
|
$
|
3,403,098
|
|
Charge-offs
|
|
|
|
|
|
|
|
|
|
|
(79,609
|
)
|
|
|
|
|
|
|
(46,185
|
)
|
|
|
|
|
|
|
(125,794
|
)
|
Recoveries
|
|
|
318
|
|
|
|
401
|
|
|
|
136
|
|
|
|
6,299
|
|
|
|
15,182
|
|
|
|
|
|
|
|
22,336
|
|
Provision
|
|
|
(9,618
|
)
|
|
|
(19,301
|
)
|
|
|
99,370
|
|
|
|
(50,111
|
)
|
|
|
21,554
|
|
|
|
500
|
|
|
|
42,394
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
77,000
|
|
|
$
|
649,800
|
|
|
$
|
821,896
|
|
|
$
|
1,560,698
|
|
|
$
|
189,340
|
|
|
$
|
43,300
|
|
|
$
|
3,342,034
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: individually evaluated for impairment
|
|
$
|
|
|
|
$
|
|
|
|
$
|
213,096
|
|
|
$
|
207,398
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
420,494
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: collectively evaluated for impairment
|
|
$
|
77,000
|
|
|
$
|
649,800
|
|
|
$
|
608,800
|
|
|
$
|
1,353,300
|
|
|
$
|
189,340
|
|
|
$
|
43,300
|
|
|
$
|
2,921,540
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: loans acquired with deteriorated credit quality
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans Receivable:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
4,261,466
|
|
|
$
|
35,608,828
|
|
|
$
|
64,420,526
|
|
|
$
|
65,731,927
|
|
|
$
|
6,713,173
|
|
|
$
|
4,163,685
|
|
|
$
|
180,899,605
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: individually evaluated for impairment
|
|
$
|
87,283
|
|
|
$
|
553,793
|
|
|
$
|
3,157,290
|
|
|
$
|
2,430,635
|
|
|
$
|
|
|
|
$
|
206,241
|
|
|
$
|
6,435,242
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: collectively evaluated for impairment
|
|
$
|
4,174,183
|
|
|
$
|
35,055,035
|
|
|
$
|
61,263,236
|
|
|
$
|
63,301,292
|
|
|
$
|
6,713,173
|
|
|
$
|
3,957,444
|
|
|
$
|
174,464,363
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: loans acquired with deteriorated credit quality
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14
SURREY BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6. ALLOWANCE FOR LOAN LOSSES, CONTINUED
The following table presents impaired loans individually evaluated by class of loan as of
March 31, 2013 and December 31, 2012 and the recognized interest income per the related period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid
|
|
|
|
|
|
Average
|
|
|
Interest
|
|
|
|
Recorded
|
|
|
Principal
|
|
|
Related
|
|
|
Recorded
|
|
|
Income
|
|
|
|
Investment
|
|
|
Balance
|
|
|
Allowance
|
|
|
Investment
|
|
|
Recognized
|
|
|
|
|
|
|
|
March 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With no related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and development
|
|
$
|
87,283
|
|
|
$
|
87,283
|
|
|
$
|
|
|
|
$
|
87,199
|
|
|
$
|
2,822
|
|
1-4 family residential
|
|
|
553,793
|
|
|
|
553,793
|
|
|
|
|
|
|
|
544,511
|
|
|
|
|
|
Nonfarm, nonresidential
|
|
|
1,349,492
|
|
|
|
1,349,492
|
|
|
|
|
|
|
|
1,365,908
|
|
|
|
15,756
|
|
Commercial and industrial
|
|
|
1,250,406
|
|
|
|
1,250,406
|
|
|
|
|
|
|
|
1,144,153
|
|
|
|
23,837
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other loans
|
|
|
206,241
|
|
|
|
206,241
|
|
|
|
|
|
|
|
194,155
|
|
|
|
381
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,447,215
|
|
|
|
3,447,215
|
|
|
|
|
|
|
|
3,335,926
|
|
|
|
42,796
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and development
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
1-4 family residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonfarm, nonresidential
|
|
|
1,807,798
|
|
|
|
1,909,238
|
|
|
|
213,096
|
|
|
|
1,848,402
|
|
|
|
698
|
|
Commercial and industrial
|
|
|
1,180,229
|
|
|
|
1,180,229
|
|
|
|
207,398
|
|
|
|
1,195,753
|
|
|
|
7,894
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,988,027
|
|
|
|
3,089,467
|
|
|
|
420,494
|
|
|
|
3,044,155
|
|
|
|
8,592
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and development
|
|
$
|
87,283
|
|
|
$
|
87,283
|
|
|
$
|
|
|
|
$
|
87,199
|
|
|
$
|
2,822
|
|
1-4 family residential
|
|
|
553,793
|
|
|
|
553,793
|
|
|
|
|
|
|
|
544,511
|
|
|
|
|
|
Nonfarm, nonresidential
|
|
|
3,157,290
|
|
|
|
3,258,730
|
|
|
|
213,096
|
|
|
|
3,214,310
|
|
|
|
16,454
|
|
Commercial and industrial
|
|
|
2,430,635
|
|
|
|
2,430,635
|
|
|
|
207,398
|
|
|
|
2,339,906
|
|
|
|
31,731
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other loans
|
|
|
206,241
|
|
|
|
206,241
|
|
|
|
|
|
|
|
194,155
|
|
|
|
381
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
6,435,242
|
|
|
$
|
6,536,682
|
|
|
$
|
420,494
|
|
|
$
|
6,380,081
|
|
|
$
|
51,388
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With no related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and development
|
|
$
|
86,567
|
|
|
$
|
86,567
|
|
|
$
|
|
|
|
$
|
87,668
|
|
|
$
|
4,898
|
|
1-4 family residential
|
|
|
284,884
|
|
|
|
284,884
|
|
|
|
|
|
|
|
287,802
|
|
|
|
19,798
|
|
Nonfarm, nonresidential
|
|
|
1,381,111
|
|
|
|
1,381,111
|
|
|
|
|
|
|
|
1,396,123
|
|
|
|
81,741
|
|
Commercial and industrial
|
|
|
1,372,796
|
|
|
|
1,547,284
|
|
|
|
|
|
|
|
1,312,662
|
|
|
|
67,194
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other loans
|
|
|
195,989
|
|
|
|
195,989
|
|
|
|
|
|
|
|
199,895
|
|
|
|
18,025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,321,347
|
|
|
|
3,495,835
|
|
|
|
|
|
|
|
3,284,150
|
|
|
|
191,656
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and development
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
1-4 family residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonfarm, nonresidential
|
|
|
1,804,769
|
|
|
|
1,826,600
|
|
|
|
319,699
|
|
|
|
1,813,156
|
|
|
|
70,705
|
|
Commercial and industrial
|
|
|
1,000,379
|
|
|
|
1,000,379
|
|
|
|
195,410
|
|
|
|
1,006,640
|
|
|
|
39,320
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,805,148
|
|
|
|
2,826,979
|
|
|
|
515,109
|
|
|
|
2,819,796
|
|
|
|
110,025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and development
|
|
$
|
86,567
|
|
|
$
|
86,567
|
|
|
$
|
|
|
|
$
|
87,668
|
|
|
$
|
4,898
|
|
1-4 family residential
|
|
|
284,884
|
|
|
|
284,884
|
|
|
|
|
|
|
|
287,802
|
|
|
|
19,798
|
|
Nonfarm, nonresidential
|
|
|
3,185,880
|
|
|
|
3,207,711
|
|
|
|
319,699
|
|
|
|
3,209,279
|
|
|
|
152,446
|
|
Commercial and industrial
|
|
|
2,373,175
|
|
|
|
2,547,663
|
|
|
|
195,410
|
|
|
|
2,319,302
|
|
|
|
106,514
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other loans
|
|
|
195,989
|
|
|
|
195,989
|
|
|
|
|
|
|
|
199,895
|
|
|
|
18,025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
6,126,495
|
|
|
$
|
6,322,814
|
|
|
$
|
515,109
|
|
|
$
|
6,103,946
|
|
|
$
|
301,681
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
SURREY BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6. ALLOWANCE FOR LOAN LOSSES, CONTINUED
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
|
|
March 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and development
|
|
$
|
72,610
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
72,610
|
|
|
$
|
4,188,856
|
|
|
$
|
4,261,466
|
|
|
$
|
|
|
1-4 family residential
|
|
|
457,501
|
|
|
|
|
|
|
|
350,480
|
|
|
|
807,981
|
|
|
|
34,800,847
|
|
|
|
35,608,828
|
|
|
|
34,290
|
|
Nonfarm, nonresidential
|
|
|
411,336
|
|
|
|
317,725
|
|
|
|
417,328
|
|
|
|
1,146,389
|
|
|
|
63,274,137
|
|
|
|
64,420,526
|
|
|
|
|
|
Commercial and industrial
|
|
|
329,250
|
|
|
|
201,280
|
|
|
|
201,480
|
|
|
|
732,010
|
|
|
|
64,999,917
|
|
|
|
65,731,927
|
|
|
|
178,208
|
|
Consumer
|
|
|
50,916
|
|
|
|
16,948
|
|
|
|
7,321
|
|
|
|
75,185
|
|
|
|
6,637,988
|
|
|
|
6,713,173
|
|
|
|
7,321
|
|
Other loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,163,685
|
|
|
|
4,163,685
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,321,613
|
|
|
$
|
535,953
|
|
|
$
|
976,609
|
|
|
$
|
2,834,175
|
|
|
$
|
178,065,430
|
|
|
$
|
180,899,605
|
|
|
$
|
219,819
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of total loans
|
|
|
0.73
|
%
|
|
|
0.30
|
%
|
|
|
0.54
|
%
|
|
|
1.57
|
%
|
|
|
98.43
|
%
|
|
|
100.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-accruals included above
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and development
|
|
$
|
72,610
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
72,610
|
|
|
$
|
|
|
|
$
|
72,610
|
|
|
|
|
|
1-4 family residential
|
|
|
|
|
|
|
|
|
|
|
316,190
|
|
|
|
316,190
|
|
|
|
276,320
|
|
|
|
592,510
|
|
|
|
|
|
Nonfarm, nonresidential
|
|
|
|
|
|
|
|
|
|
|
417,328
|
|
|
|
417,328
|
|
|
|
1,742,811
|
|
|
|
2,160,139
|
|
|
|
|
|
Commercial and industrial
|
|
|
|
|
|
|
|
|
|
|
23,272
|
|
|
|
23,272
|
|
|
|
639,018
|
|
|
|
662,290
|
|
|
|
|
|
Consumer
|
|
|
1,262
|
|
|
|
1,529
|
|
|
|
|
|
|
|
2,791
|
|
|
|
603
|
|
|
|
3,394
|
|
|
|
|
|
Other loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
73,872
|
|
|
$
|
1,529
|
|
|
$
|
756,790
|
|
|
$
|
832,191
|
|
|
$
|
2,658,752
|
|
|
$
|
3,490,943
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and development
|
|
$
|
73,572
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
73,572
|
|
|
$
|
4,799,940
|
|
|
$
|
4,873,512
|
|
|
$
|
|
|
1-4 family residential
|
|
|
380,731
|
|
|
|
|
|
|
|
324,357
|
|
|
|
705,088
|
|
|
|
35,385,963
|
|
|
|
36,091,051
|
|
|
|
292,583
|
|
Nonfarm, nonresidential
|
|
|
711,408
|
|
|
|
197,479
|
|
|
|
386,160
|
|
|
|
1,295,047
|
|
|
|
47,698,820
|
|
|
|
48,993,867
|
|
|
|
|
|
Commercial and industrial
|
|
|
256,672
|
|
|
|
53,391
|
|
|
|
429,226
|
|
|
|
739,289
|
|
|
|
75,174,783
|
|
|
|
75,914,072
|
|
|
|
377,494
|
|
Consumer
|
|
|
172,379
|
|
|
|
28,922
|
|
|
|
13,643
|
|
|
|
214,944
|
|
|
|
6,488,419
|
|
|
|
6,703,363
|
|
|
|
13,643
|
|
Other loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,111,464
|
|
|
|
4,111,464
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,594,762
|
|
|
$
|
279,792
|
|
|
$
|
1,153,386
|
|
|
$
|
3,027,940
|
|
|
$
|
173,659,389
|
|
|
$
|
176,687,329
|
|
|
$
|
683,720
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of total loans
|
|
|
0.90
|
%
|
|
|
0.16
|
%
|
|
|
0.65
|
%
|
|
|
1.71
|
%
|
|
|
98.29
|
%
|
|
|
100.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-accruals included above
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and development
|
|
$
|
73,572
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
73,572
|
|
|
$
|
12,995
|
|
|
$
|
86,567
|
|
|
|
|
|
1-4 family residential
|
|
|
84,838
|
|
|
|
|
|
|
|
31,775
|
|
|
|
116,613
|
|
|
|
359,129
|
|
|
|
475,742
|
|
|
|
|
|
Nonfarm, nonresidential
|
|
|
|
|
|
|
89,322
|
|
|
|
386,160
|
|
|
|
475,482
|
|
|
|
1,690,633
|
|
|
|
2,166,115
|
|
|
|
|
|
Commercial and industrial
|
|
|
|
|
|
|
|
|
|
|
51,731
|
|
|
|
51,731
|
|
|
|
760,662
|
|
|
|
812,393
|
|
|
|
|
|
Consumer
|
|
|
1,612
|
|
|
|
|
|
|
|
|
|
|
|
1,612
|
|
|
|
2,306
|
|
|
|
3,918
|
|
|
|
|
|
Other loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
195,990
|
|
|
|
195,990
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
160,022
|
|
|
$
|
89,322
|
|
|
$
|
469,666
|
|
|
$
|
719,010
|
|
|
$
|
3,021,715
|
|
|
$
|
3,740,725
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit Quality Indicators:
The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience,
credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. Loans classified as substandard or special mention are reviewed quarterly
by the Company for further impairment or improvement to determine if appropriately classified. All other loans greater than $500,000, commercial lines greater than $250,000 and personal lines of credit greater than $100,000, and unsecured loans
greater than $100,000 are specifically reviewed at least annually to determine the appropriate loan grading. In addition, during the renewal process of any loan, as well as when a loan becomes past due, the Company will evaluate the loan grade.
16
SURREY BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6. ALLOWANCE FOR LOAN LOSSES, CONTINUED
Loans excluded from the scope of the annual review process above are generally classified as pass
credits until: (a) they become past due; (b) management becomes aware of deterioration in the credit worthiness of the borrower; or (c) the customer contacts the Company for a modification. In these circumstances, the loan is
specifically evaluated for potential classification as to special mention, substandard or even charged off. The Company uses the following definitions for risk ratings:
Special Mention
. Loans classified as special mention have a potential weakness that deserves managements close attention. If left uncorrected, these potential weaknesses may result in
deterioration of the repayment prospects for the loan or of the institutions credit position at some future date.
Substandard
. Loans classified as substandard are inadequately protected by the current net worth and payment capacity of the
obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss
if the deficiencies are not corrected.
Doubtful
. Loans classified as doubtful have all the weaknesses inherent in those
classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.
Loans by credit quality indicator are provided in the following table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Special
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
Pass Credits
|
|
|
Mention
|
|
|
Substandard
|
|
|
Doubtful
|
|
|
|
|
|
|
|
March 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and development
|
|
$
|
4,261,466
|
|
|
$
|
4,188,855
|
|
|
$
|
72,611
|
|
|
$
|
|
|
|
$
|
|
|
1-4 family residential
|
|
|
35,608,828
|
|
|
|
35,147,006
|
|
|
|
461,822
|
|
|
|
|
|
|
|
|
|
Nonfarm, nonresidential
|
|
|
64,420,526
|
|
|
|
63,029,057
|
|
|
|
1,207,125
|
|
|
|
184,344
|
|
|
|
|
|
Commercial and industrial
|
|
|
65,731,927
|
|
|
|
64,821,429
|
|
|
|
904,348
|
|
|
|
6,150
|
|
|
|
|
|
Consumer
|
|
|
6,713,173
|
|
|
|
6,712,570
|
|
|
|
603
|
|
|
|
|
|
|
|
|
|
Other loans
|
|
|
4,163,685
|
|
|
|
3,957,444
|
|
|
|
206,241
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
180,899,605
|
|
|
$
|
177,856,361
|
|
|
$
|
2,852,750
|
|
|
$
|
190,494
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100.0
|
%
|
|
|
98.3
|
%
|
|
|
1.6
|
%
|
|
|
0.1
|
%
|
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guaranteed portion of loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and development
|
|
$
|
16,268
|
|
|
|
16,268
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
1-4 family residential
|
|
|
734,992
|
|
|
|
734,992
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonfarm, nonresidential
|
|
|
30,196,443
|
|
|
|
29,999,011
|
|
|
|
197,432
|
|
|
|
|
|
|
|
|
|
Commercial and industrial
|
|
|
15,921,495
|
|
|
|
15,307,583
|
|
|
|
613,912
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other loans
|
|
|
504,447
|
|
|
|
504,447
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
47,373,645
|
|
|
$
|
46,562,301
|
|
|
$
|
811,344
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Special
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
Pass Credits
|
|
|
Mention
|
|
|
Substandard
|
|
|
Doubtful
|
|
|
|
|
|
|
|
December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and development
|
|
$
|
4,873,512
|
|
|
$
|
4,786,945
|
|
|
$
|
86,567
|
|
|
$
|
|
|
|
$
|
|
|
1-4 family residential
|
|
|
36,091,051
|
|
|
|
35,755,061
|
|
|
|
335,990
|
|
|
|
|
|
|
|
|
|
Nonfarm, nonresidential
|
|
|
48,993,867
|
|
|
|
47,500,758
|
|
|
|
1,230,275
|
|
|
|
262,834
|
|
|
|
|
|
Commercial and industrial
|
|
|
75,914,072
|
|
|
|
74,878,901
|
|
|
|
1,035,171
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
6,703,363
|
|
|
|
6,696,475
|
|
|
|
6,888
|
|
|
|
|
|
|
|
|
|
Other loans
|
|
|
4,111,464
|
|
|
|
3,915,474
|
|
|
|
195,990
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
176,687,329
|
|
|
$
|
173,533,614
|
|
|
$
|
2,890,881
|
|
|
$
|
262,834
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100.0
|
%
|
|
|
98.2
|
%
|
|
|
1.6
|
%
|
|
|
0.2
|
%
|
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
SURREY BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6. ALLOWANCE FOR LOAN LOSSES, CONTINUED
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Special
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
Pass Credits
|
|
|
Mention
|
|
|
Substandard
|
|
|
Doubtful
|
|
|
|
|
|
|
|
Guaranteed portion of loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and development
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
1-4 family residential
|
|
|
752,677
|
|
|
|
752,677
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonfarm, nonresidential
|
|
|
19,855,775
|
|
|
|
19,654,773
|
|
|
|
201,002
|
|
|
|
|
|
|
|
|
|
Commercial and industrial
|
|
|
22,001,515
|
|
|
|
21,354,422
|
|
|
|
647,093
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other loans
|
|
|
508,363
|
|
|
|
508,363
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
43,118,330
|
|
|
$
|
42,270,235
|
|
|
$
|
848,095
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 7. TROUBLED DEBT RESTRUCTURINGS
For the quarters ended March 31, 2013 and 2012, the following table
presents loans modified during the period that were considered to be troubled debt restructurings.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months
ended
March 31, 2013
|
|
|
For the three months
ended
March 31, 2012
|
|
|
|
Number
of
Contracts
|
|
|
Pre-
Modification
Outstanding
Recorded
Investment
|
|
|
Post-
Modification
Outstanding
Recorded
Investment
|
|
|
Number
of
Contracts
|
|
|
Pre-
Modification
Outstanding
Recorded
Investment
|
|
|
Post-
Modification
Outstanding
Recorded
Investment
|
|
Troubled Debt Restructurings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and development
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
1
|
|
|
$
|
237,883
|
|
|
$
|
237,883
|
|
1-4 Family residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
113,743
|
|
|
|
116,438
|
|
Nonfarm, nonresidential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
96,028
|
|
|
|
96,028
|
|
Commercial and industrial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
266,702
|
|
|
|
266,702
|
|
The bank had no troubled debt restructurings during the three months ending March 31, 2013. During the three months ended
March 31, 2013, no loans that had previously been restructured were in default.
In the determination of the allowance for loan losses,
management considers troubled debt restructurings and subsequent defaults in these restructurings by adjusting the loan grades of such loans, which figure into the environmental factors associated with the allowance. Defaults resulting in
charge-offs affect the historical loss experience ratios which are a component of the allowance calculation. Additionally, specific reserves may be established on restructured loans evaluated individually.
NOTE 8. SHORT-TERM DEBT
Short-term debt in the amount of $3,743,820 at March 31, 2013, consists of the proceeds from a transaction involving a loan
guaranteed by the SBA. The transaction meets all the criteria to receive sales treatment under ASC 860 except for the lapse of the 90-day warranty period for prepayments. Upon the expiration of the warranty period in June 2013, the transaction will
be recorded as an asset sale with the securing loan and secured borrowing being removed from the balance sheet and the gain recorded in the income statement. The loan securing the borrowing amounts to $4,991,759 and carries an annual interest rate
of 5.125%. The secured borrowing carries annual interest rate of 4.125%.
18
SURREY BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9. FAIR VALUE
The Company utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair
value disclosures. Securities available for sale, trading securities and derivatives, if present, are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other assets on a
nonrecurring basis, such as loans held for sale, loans held for investment and certain other assets. These nonrecurring fair value adjustments typically involve application of lower of cost or market accounting or write-downs of individual assets.
Fair Value Hierarchy
Under the Fair Value Measurements and Disclosures Topic of the FASB ASC, the Company groups assets and liabilities at fair value in three levels, based on
the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:
|
|
|
Level 1
|
|
Valuation is based upon quoted prices for identical instruments traded in active markets.
|
|
|
Level 2
|
|
Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based
valuation techniques for which all significant assumptions are observable in the market.
|
|
|
Level 3
|
|
Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of
assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.
|
Following is a description of valuation methodologies used for assets and liabilities recorded at fair value.
Investment Securities Available for Sale
Investment securities available for sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values
are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the securitys credit rating, prepayment assumptions and other factors such as credit loss
assumptions. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange, U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter markets and money market funds. Level 2
securities include mortgage-backed securities issued by government sponsored entities, municipal bonds and corporate debt securities. Securities classified as Level 3 include asset-backed securities in less liquid markets.
Loans
The Company does not
record loans at fair value on a recurring basis. However, from time to time, a loan is considered impaired and an allowance for loan losses is established. Loans for which it is probable that payment of interest and principal will not be made in
accordance with the contractual terms of the loan agreement are considered impaired. Once a loan is identified as individually impaired, management measures impairment in accordance with the Receivables Topic of the FASB ASC. The fair value of
impaired loans is estimated using one of several methods, including collateral value, market value of similar debt, enterprise value, liquidation value and discounted cash flows. Those impaired loans not requiring an allowance represent loans for
which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. At March 31, 2013, substantially all of the total impaired loans were evaluated based on the fair value of the collateral. In
accordance with the Fair Value and Measurement Topic of the FASB ASC, impaired loans where an allowance is established based on the fair value of collateral require classification in the fair value hierarchy. When the fair value of the collateral is
based on an observable market price or a current appraised value, the Company records the impaired loan as nonrecurring Level 2. When an appraised value is not available or management determines the fair value of the collateral is further impaired
below the appraised value and there is no observable market price, the Company records the impaired loan as nonrecurring Level 3.
19
SURREY BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9. FAIR VALUE, CONTINUED
Servicing Assets
A valuation of loan servicing rights is performed on an individual basis due to the small number of loans serviced. Loans are evaluated on a discounted earnings basis to determine the present value of
future earnings. The present value of the future earnings is the estimated market value for the loan, calculated using consensus assumptions that a first party purchaser would utilize in evaluating a potential acquisition of the servicing. As such,
the Company classifies loan servicing rights as Level 3.
Foreclosed Assets
Foreclosed assets are adjusted to fair value upon transfer of the loans to foreclosed assets. Subsequently, foreclosed assets are carried at the lower of
carrying value or fair value. Fair value is based upon independent market prices, appraised values of the collateral or managements estimation of the value of the collateral. When the fair value of the collateral is based on an observable
market price or a current appraised value, the Company records the foreclosed asset as nonrecurring Level 2. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised
value and there is no observable market price, the Company records the foreclosed asset as nonrecurring Level 3.
Assets and Liabilities
Recorded at Fair Value on a Recurring Basis
The table below presents the recorded amount of assets
and liabilities measured at fair value on a recurring basis.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2013
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Government-sponsored enterprises
|
|
$
|
3,502
|
|
|
$
|
|
|
|
$
|
3,502
|
|
|
$
|
|
|
Mortgage-backed securities
|
|
|
41
|
|
|
|
|
|
|
|
41
|
|
|
|
|
|
Corporate bonds
|
|
|
451
|
|
|
|
|
|
|
|
|
|
|
|
451
|
|
Equities and mutual funds
|
|
|
537
|
|
|
|
537
|
|
|
|
|
|
|
|
|
|
Servicing assets
|
|
|
63
|
|
|
|
|
|
|
|
|
|
|
|
63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets at fair value
|
|
$
|
4,594
|
|
|
$
|
537
|
|
|
$
|
3,543
|
|
|
$
|
514
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities at fair value
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2012
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Government-sponsored enterprises
|
|
$
|
2,505
|
|
|
$
|
|
|
|
$
|
2,505
|
|
|
$
|
|
|
Mortgage-backed securities
|
|
|
43
|
|
|
|
|
|
|
|
43
|
|
|
|
|
|
Corporate bonds
|
|
|
443
|
|
|
|
|
|
|
|
|
|
|
|
443
|
|
Equities and mutual funds
|
|
|
512
|
|
|
|
512
|
|
|
|
|
|
|
|
|
|
Servicing assets
|
|
|
63
|
|
|
|
|
|
|
|
|
|
|
|
63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets at fair value
|
|
$
|
3,566
|
|
|
$
|
512
|
|
|
$
|
2,548
|
|
|
$
|
506
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities at fair value
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended March 31, 2013
and 2012, the changes in Level 3 assets and liabilities measured at fair value on a recurring basis were as follows:
|
|
|
|
|
|
|
|
|
|
|
Level 3
|
|
|
|
2013
|
|
|
2012
|
|
(in thousands)
|
|
Fair Value
|
|
|
Fair Value
|
|
Corporate Bonds Available for Sale
|
|
|
|
|
|
|
|
|
Balance, January 1
|
|
$
|
443
|
|
|
$
|
451
|
|
Total unrealized gain (loss) included in income
|
|
|
|
|
|
|
|
|
Total unrealized gain (loss) included in other comprehensive income
|
|
|
8
|
|
|
|
(3
|
)
|
Net transfers in/out of Level 3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31
|
|
$
|
451
|
|
|
$
|
448
|
|
|
|
|
|
|
|
|
|
|
20
SURREY BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9. FAIR VALUE, CONTINUED
Changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the three
month period ended March 31, 2013 and 2012, were $8,250 and ($2,750), respectively, which was included in other comprehensive income.
Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis
The Company may be required, from time to time, to measure certain assets or liabilities at fair value on a nonrecurring basis in accordance with U.S. generally accepted accounting principles. These
include assets and liabilities that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period.
Assets and liabilities measured at fair value on a nonrecurring basis are included in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2013
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Loans-commercial and industrial
|
|
$
|
973
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
973
|
|
Loans-nonfarm, non-residential
|
|
|
1,595
|
|
|
|
|
|
|
|
|
|
|
|
1,595
|
|
Loans-other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreclosed assets
|
|
|
488
|
|
|
|
|
|
|
|
|
|
|
|
488
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets at fair value
|
|
$
|
3,056
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
3,056
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities at fair value
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2012
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Loans-commercial and industrial
|
|
$
|
805
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
805
|
|
Loans-nonfarm, non-residential
|
|
|
1,485
|
|
|
|
|
|
|
|
|
|
|
|
1,485
|
|
Loans- 1- 4 family residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans-other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreclosed assets
|
|
|
491
|
|
|
|
|
|
|
|
|
|
|
|
491
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets at fair value
|
|
$
|
2,781
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
2,781
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities at fair value
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Instruments
The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments:
Cash and due from banks
: The carrying amounts reported in the balance sheet for cash and due from banks approximate their fair values.
Interest-bearing deposits with banks
: Fair values for time deposits are estimated using a discounted cash flow analysis that applies interest rates currently being offered on certificates to a
schedule of aggregated contractual maturities on such time deposits.
Federal funds sold
: Due to the short-term nature of these assets,
the carrying value approximates fair value.
Securities
: Fair values for securities, excluding restricted equity securities, are based
on quoted market prices, where available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the
securitys credit rating, prepayment assumptions and other factors such as credit loss assumptions. The carrying values of restricted equity securities approximate fair values.
21
SURREY BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9. FAIR VALUE, CONTINUED
Loans receivable
: For variable-rate loans that reprice frequently and with no significant change
in credit risk, fair values are based on carrying amounts. The fair values for other loans are estimated using discounted cash flow analysis, based on interest rates currently being offered for loans with similar terms to borrowers of similar credit
quality. Loan fair value estimates include judgments regarding future expected loss experience and risk characteristics. The fair value of impaired loans is estimated using one of several methods, including collateral value, market value of similar
debt, enterprise value, liquidation value and discounted cash flows.
Bank owned life insurance:
The carrying amount reported in the
balance sheet approximates the fair value as it represents the cash surrender value of the life insurance.
Deposit liabilities
: The
fair values disclosed for demand and savings deposits are, by definition, equal to the amount payable on demand at the reporting date. The fair values for certificates of deposit are estimated using a discounted cash flow calculation that applies
interest rates currently being offered on certificates to a schedule of aggregated contractual maturities on such time deposits.
Federal
funds purchased, securities sold under agreements to repurchase and short-term debt
: The carrying amounts of federal funds purchased, securities sold under agreements to repurchase and short-term debt approximate their fair values.
Long-term debt:
The fair value of long-term debt is estimated using a discounted cash flow calculation that applies interest rates currently
available on similar instruments.
Other liabilities
: For fixed-rate loan commitments, fair value considers the difference between
current levels of interest rates and the committed rates. The carrying amounts of other liabilities approximate fair value.
The following presents the carrying amount, fair value, and placement in the fair value
hierarchy of the Companys financial instruments as of March 31, 2013 and December 31, 2012.
This table excludes financial instruments for which the carrying amount approximates fair value.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements
|
|
(dollars in thousands)
|
|
Carrying
Amount
|
|
|
Fair Value
|
|
|
Quoted
Prices in
Active Markets
for Identical
Assets
or
Liabilities
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
|
|
|
|
|
March 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Instruments - Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
$
|
177,965
|
|
|
$
|
180,863
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
180,863
|
|
|
|
|
|
|
|
Financial Instruments Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
194,175
|
|
|
|
187,822
|
|
|
|
|
|
|
|
187,822
|
|
|
|
|
|
Short-Term Debt
|
|
|
3,744
|
|
|
|
3,800
|
|
|
|
|
|
|
|
3,800
|
|
|
|
|
|
Long-Term Debt
|
|
|
7,750
|
|
|
|
8,243
|
|
|
|
|
|
|
|
8,243
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Instruments - Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
$
|
173,578
|
|
|
$
|
173,813
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
173,813
|
|
|
|
|
|
|
|
Financial Instruments Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
187,823
|
|
|
|
180,777
|
|
|
|
|
|
|
|
180,777
|
|
|
|
|
|
Long-Term Debt
|
|
|
7,750
|
|
|
|
8,291
|
|
|
|
|
|
|
|
8,291
|
|
|
|
|
|
22