10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

[X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
            For the fiscal year ended December 31, 2013

[  ]        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to _______________

Commission File No. 0-22981

GEORGIA-CAROLINA BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
Georgia	58-2326075
(State of Incorporation)	(I.R.S. Employer Identification Number)
3527 Wheeler Road   Augusta, Georgia	30909
(Address of Principal Executive Offices)	(Zip Code)

(706) 731-6600

(Registrant’s telephone number, including area code)

Securities registered under Section 12(b) of the Act:
Title of Each Class	Name of each exchange on which registered
None	None

Securities registered under Section 12(g) of the Exchange Act:

Common Stock, $0.001 Par Value

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐      No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐     No ☒

Indicate by check mark whether the issuer has (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ YES ☐ NO

Indicate by check mark whether the registrant has submitted electronically and has posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☒ YES ☐ NO

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐ 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  _____    Accelerated filer  _____    Non-Accelerated filer _____   Smaller reporting company    X        

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ YES ☒ NO

The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant (2,586,856 shares), on June 30, 2013 was $39,190,868 based on the closing price of the registrant’s common stock as reported on the Over-the-Counter Bulletin Board on June 30, 2013. For purposes of this response, officers, directors and holders of 5% or more of the registrant’s common stock are considered affiliates of the registrant at that date. As of March 7, 2014, 3,594,973 shares of the registrant’s common stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive proxy statement to be delivered to shareholders in connection with the 2014 Annual Meeting of Shareholders scheduled to be held on May 19, 2014 are incorporated herein by reference in response to Part III of this Report.

GEORGIA-CAROLINA BANCSHARES, INC.

2013 Form 10-K Annual Report

TABLE OF CONTENTS

Item Number In Form 10-K	Description	Page or Location
PART I
Item 1.	Business	1
Item 1A.	Risk Factors	15
Item 1B.	Unresolved Staff Comments	23
Item 2.	Properties	23
Item 3.	Legal Proceedings	23
Item 4.	Mine Safety Disclosures	23
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	24
Item 6.	Selected Financial Data	26
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	47
Item 8.	Financial Statements and Supplementary Data	47
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	47
Item 9A.	Controls and Procedures	47
Item 9B.	Other Information	48
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	49
Item 11.	Executive Compensation	49
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	49
Item 13.	Certain Relationships and Related Transactions, and Director Independence	49
Item 14.	Principal Accountant Fees and Services	49
PART IV
Item 15.	Exhibits and Financial Statement Schedules	50
Signatures		54

(i)

Special Note Regarding Forward-Looking Statements

Certain statements in this Annual Report on Form 10-K contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, which represent the expectations or beliefs of our management, including, but not limited to, statements concerning the banking industry and our operations, performance, financial condition and growth. For this purpose, any statements contained in this Report that are not statements of historical fact may be deemed forward-looking statements. Without limiting the generality of the foregoing, words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “should,” “can,” “estimate,” or “continue” or the negative or other variations thereof or comparable terminology are intended to identify forward-looking statements. These statements by their nature involve substantial risks and uncertainties, certain of which are beyond our control, and actual results may differ materially depending on a variety of important factors, including competition, general economic and market conditions, changes in interest rates, changes in the value of real estate and other collateral securing loans, interest rate sensitivity and exposure to regulatory and legislative changes, and other risks and uncertainties described in our periodic reports filed with the Securities and Exchange Commission (the “SEC”), including this Annual Report, and particularly the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Although we believe that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove to be inaccurate. Therefore, we can give no assurance that the results contemplated in the forward-looking statements will be realized. The inclusion of this forward-looking information should not be construed as a representation by us or any person that the future events, plans, or expectations contemplated by us will be achieved. We undertake no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

PART I

Item 1.      Business

General

Georgia-Carolina Bancshares, Inc. (the “Company,” “Holding Company” or “we,” “us,” “our”) is a one-bank holding company and owns 100% of the issued and outstanding stock of First Bank of Georgia (the “Bank”), an independent, locally owned, state-chartered commercial bank which opened for business in 1989. The Bank operates three branch offices in Augusta, Georgia, two branch offices in Martinez, Georgia, one branch office in Evans, Georgia, and one branch office in Thomson, Georgia. The Evans branch opened in May 2013. The Bank is also the parent company of Willhaven Holdings, LLC, which formerly held certain other real estate of the Bank.

The Bank operates as a locally owned bank that targets the banking needs of individuals and small to medium-sized businesses by emphasizing personal service. The Bank offers a full range of deposit and lending services and is a member of an electronic banking network that enables its customers to use the automated teller machines of other financial institutions. In addition, the Bank offers commercial and business credit services, as well as various consumer credit services, including home mortgage loans, automobile loans, lines of credit, home equity loans and home improvement loans. The Bank’s deposits are insured by the Federal Deposit Insurance Corporation (the “FDIC”).

The Company was incorporated under the laws of the State of Georgia in January 1997 at the direction of the Board of Directors of the Bank based on a plan of reorganization developed by the Board to substantially strengthen the Bank’s competitive position. The reorganization, in which the Bank became a wholly owned subsidiary of the Company, was completed in June 1997.

In September 1999, the Bank established a mortgage division which operates as First Bank Mortgage (the “Mortgage Division”). The Mortgage Division originates mortgage loans and offers a variety of other mortgage products. As of December 31, 2013, First Bank Mortgage had locations in the Augusta and Savannah, Georgia markets.

In December 2003, the Bank established a financial services division which operates as FB Financial Services. FB Financial Services offers financial planning and investment services through its relationship with Linsco/Private Ledger (Member NASD/SIPC), one of the nation’s leading independent brokerage firms. A joint office of FB Financial Services and Linsco/Private Ledger is located in the Bank’s Daniel Village location on Wrightsboro Road in Augusta.

For further information responsive to this item, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of this Annual Report on Form 10-K.

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Market Area and Competition

The primary service area of the Bank includes the counties of Richmond, Columbia and McDuffie, Georgia, the communities of Augusta, Martinez, Evans and Thomson, Georgia, and Aiken County, South Carolina, which are within a 40-mile radius of the Bank’s main office. The Bank encounters competition from other commercial banks, which offer a full range of banking services and compete for all types of services, especially deposits. In addition, in certain aspects of its banking business, the Bank also competes with credit unions, savings and loan associations, mortgage banking companies, consumer finance companies, brokerage houses, insurance companies, money market funds and other financial service companies which attract customers that have traditionally been served by banks.

The extent to which other types of financial services companies compete with commercial banks has increased significantly over the past several years as a result of federal and state legislation which has permitted these organizations to compete for customers of banks and offer products that have historically been offered by banks. See the “Supervision and Regulation” section that begins on the next page.

Asset/Liability Management

It is the objective of the Bank to manage assets and liabilities to provide a satisfactory, consistent level of profitability within the framework of established cash, loan investment, borrowing and capital policies. An investment committee is responsible for monitoring policies and procedures that are designed to ensure acceptable composition of the asset/liability mix, stability and leverage of all sources of funds while adhering to prudent banking practices. It is the overall philosophy of management to support asset growth primarily through growth of core deposits, which include deposits of all categories made by individuals, partnerships and corporations. Management of the Bank seeks to invest the largest portion of the Bank’s assets in commercial, consumer and real estate loans.

The Bank’s asset/liability mix is monitored on a daily basis and further evaluated with a quarterly report that reflects interest-sensitive assets and interest-sensitive liabilities. This report is prepared and presented to the Bank’s Investment Committee and Board of Directors. The objective of this policy is to control interest-sensitive assets and liabilities so as to minimize the impact of substantial movements in interest rates on the Company’s earnings.

Correspondent Banking

Correspondent banking involves the delivery of services by one bank to another bank which cannot provide that service from an economic or practical standpoint. The Bank purchases correspondent services offered by larger banks, including check collections, purchase and sale of federal funds, wire transfers, security safekeeping, investment services, coin and currency supplies, foreign exchange (currency and check collection), over line and liquidity loan participations, and sales of loans to or participations with correspondent banks. The Bank has established correspondent relationships with First National Bankers Bank, Federal Home Loan Bank of Atlanta and SunTrust Bank. As compensation for services provided by a correspondent, the Bank maintains certain balances with such correspondents in both non-interest bearing and interest bearing accounts. The Bank may also buy or sell loan participations with other non-correspondent banks.

Data Processing

In 2010 the Bank renewed its data processing servicing agreement through 2015 with Fidelity Information Services, under which the Bank receives a full range of data processing services, including an automated general ledger, deposit accounting, commercial, real estate and installment lending data processing, remote deposit capture, central information file and ATM/Debit card processing, and internet banking services, including bill pay, cash management services, and mobile banking. During 2012, the Bank contracted with Encompass to implement comprehensive mortgage origination and processing software for its Mortgage Division. That implementation was substantially completed at the end of 2012.

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Employees

At December 31, 2013, the Company and the Bank employed 159 persons on a full-time basis and 6 persons on a part-time basis, including 56 banking officers.

Monetary Policies 

The results of operations of the Bank are affected by credit policies of monetary authorities, particularly the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”). The instruments of monetary policy employed by the Federal Reserve Board include open market operations in U.S. Government securities, changes in the discount rate on member bank borrowings, changes in reserve requirements against member bank deposits and limitations on interest rates which member banks may pay on time and savings deposits. In view of changing conditions in the national economy and in the money markets, as well as the effect of action by monetary and fiscal authorities, including the Federal Reserve Board, no prediction can be made as to possible future changes in interest rates, deposit levels, loan demand or the business and earnings of the Bank.

SUPERVISION AND REGULATION

The following discussion sets forth the material elements of the regulatory framework applicable to bank holding companies and their subsidiaries and provides certain specific information relative to the Company and the Bank. The regulatory framework is intended primarily for the protection of depositors and the Deposit Insurance Fund (the “DIF”) of the FDIC and not for the protection of security holders and creditors. To the extent that the following information describes statutory and regulatory provisions, it is qualified in its entirety by reference to the particular statutory or regulatory provisions.

Federal Legislation Related to 2008 Economic Crisis

Economic Stabilization Legislation. In the wake of the 2008 financial crisis, the federal government enacted several laws and certain key federal regulatory agencies enacted various regulations and programs designed to stabilize the economy. The two principal pieces of legislation were the Emergency Economic Stabilization Act of 2008 (the “EESA”) and the American Recovery and Reinvestment Act of 2009. Under these laws and other authority, government agencies enacted the Troubled Asset Relief Program (“TARP”), Capital Purchase Program, Public-Private Investment Program, Temporary Liquidity Guarantee Program (“TLGP”) and other initiatives. The Board of Directors of the Bank elected to participate only in the TLGP (which expired at the end of 2012), although the Bank may elect to participate in other programs in the future.

Effective January 1, 2010, all mortgagees who participate in FHA/VA programs of the U.S. Department of Housing and Urban Development (HUD) are subject to additional requirements. First Bank of Georgia’s Mortgage Division initially fell under the requirement of Section 203(b)(1) of the new “Helping Families Save Their Homes Act of 2009” (HFSH Act) which requires that the Mortgage Division submit annual audited financial statements to HUD prepared and audited in accordance with HUD’s Consolidated Audit Guide for Audits of HUD Programs. The new requirements are a prudent safeguard that permits the FHA to ensure that those entities with which it does business are adequately capitalized to meet potential needs. The following reports are required to be submitted as part of the requirement: an audit report on internal controls as it relates to reporting and administering HUD-assisted programs and an audit report on compliance with applicable laws and regulations related to HUD-assisted programs. Those required audits were completed in early 2014.

The Dodd-Frank Act. The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) was signed into law on July 21, 2010 and results in sweeping changes in the regulation of financial institutions. Many provisions of the Dodd-Frank Act apply to, and are more likely to affect, larger financial institutions. However, the Dodd-Frank Act contains numerous other provisions that affect community banks.

Certain of these provisions may have the consequence of increasing expenses and decreasing revenues of all community banking organizations. Further, the environment in which community banking organizations will operate in the future, including legislative and regulatory changes affecting, among other things, their capital, liquidity, and supervision, may have long-term effects on the business model and profitability of community banking organizations, which effects cannot now be predicted. The specific impact of the Dodd-Frank Act on the current and future financial performance of the Bank, will, in large part, depend on the terms of the required regulations and policies to be developed and implemented by the appropriate regulatory agencies.

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The Dodd-Frank Act effected a number of statutory changes that, together with the regulations promulgated thereunder, impact community banks. Certain of these changes are discussed below, as follows:

● Assessment Base for Deposit Insurance. The Dodd-Frank Act changed the assessment base for federal deposit insurance from the amount of insured deposits to consolidated assets less tangible capital, eliminated the ceiling on the size of the DIF, and increased the floor applicable to the size of the DIF, which may require an increase in the level of assessments for institutions such as the Bank.

● Deposit Insurance Limits. The Dodd-Frank Act made permanent the $250,000 limit on federal deposit insurance.

● Consumer Financial Protection Bureau. The Dodd-Frank Act centralized responsibility for consumer financial protection by creating a new agency responsible for implementing, examining, and enforcing compliance with federal consumer financial laws. The new Consumer Financial Protection Bureau (“CFPB”) has been created under the Federal Reserve Board and has rule-making, enforcement and investigative authority over consumer financial protection statutes. Many new consumer protection regulations are expected to be promulgated over the next few years. Many of those regulations will increase compliance costs for depository institutions or limit the fees they can charge. Community banks may find it more difficult than larger institutions to absorb the increased compliance costs and reduction in income. The new CFPB is specifically authorized to take action and promulgate rules to prohibit unfair, deceptive or abusive acts or practices in connection with any transaction with a consumer for a consumer financial product. Unfair and deceptive acts are already prohibited by the Federal Trade Commission Act and many state laws. However, the Dodd-Frank Act provides minimal guidance as to what activities will be considered “abusive.” This will likely be an area of significant consumer litigation in the future. State attorneys general are specifically granted the authority to enforce the regulations promulgated by the CFPB against state-chartered banks, which will likely result in increased enforcement of the new consumer regulations.

● Loss of Federal Preemption. The Dodd-Frank Act restricts the preemption of state law by federal law and disallows subsidiaries and affiliates of national banks from availing themselves of such preemption.

● Interstate Branching. The Dodd-Frank Act, subject to a state’s restrictions on intra-state branching, now permits interstate branching. Therefore a bank may enter a new state by acquiring a branch of an existing institution or by establishing a new branch office. As a result, there will be no need for the entering bank to acquire or merge with an existing institution in the target state. This ability to establish a de novo branch across state lines will have the effect of increasing competition within a community bank’s existing markets and may create downward pressure on the franchise value for existing community banks.

● Requirement for Mortgage Loans. The Dodd-Frank Act created additional requirements for residential mortgage loans made by community banks and other mortgage lenders, including restrictions on prepayment penalties and yield-spread premiums, requirements for verification of a borrower’s ability to repay the mortgage loan, and other requirements and restrictions. These provisions of the Dodd-Frank Act will likely increase the compliance and management costs of community banks associated with the origination of residential mortgage loans.

● Interchange Fees. The Dodd-Frank Act amended the Electronic Funds Transfer Act to, among other things, give the Federal Reserve Board the authority to establish rules regarding interchange fees charged for electronic debit transactions by payment card issuers having assets over $10 billion and enforce a new statutory requirement that such fees be reasonable and proportional to the actual cost of a transaction to the issuer. The Federal Reserve Board issued its final rule establishing these new standards on June 29, 2011. Although community banks have been exempted from the cap on interchange fees, the cap on the fees of large banks will create market forces that force all fees downward. Therefore, community banks should expect lower interchange revenues in the future.

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● Source of Financial Strength. The Dodd-Frank Act codified the existing policy of the Federal Reserve Board, that a bank holding company serve as a “source of financial strength” for its subsidiary banks. This provision of the Dodd-Frank Act became effective on July 21, 2011, and clarifies ambiguities that might exist with respect to the requirements of a “policy,” as compared to the requirements of a “statute.” Presumably, the regulations promulgated under the statutory requirements will further clarify these source-of-financial-strength requirements for bank holding companies, together with the enforcement powers of the Federal Reserve Board relating thereto.

● Minimum Capital Requirements and Enhanced Supervision. On June 14, 2011, the federal banking agencies published a final rule regarding minimum leverage and risk-based capital requirements for banks and bank holding companies consistent with the requirements of Section 171 of the Dodd-Frank Act. The Dodd-Frank Act also increased regulatory oversight, supervision and examination of banks, bank holding companies and their respective subsidiaries by the appropriate regulatory agency. In addition, new enhanced capital requirements have been approved by federal regulators, including the Federal Reserve and the FDIC (see “The Bank - Capital Adequacy” below).

● Payment of Interest on Demand Deposits. On July 21, 2011, the Federal Reserve Board’s final rule repealing Regulation Q (“Prohibition Against Payment of Interest on Demand Deposits”), became effective. Regulation Q was promulgated to implement the statutory prohibition against payment of interest on demand deposits by institutions that are member banks of the Federal Reserve Board. This will increase community banks’ cost of funds as they may need to pay interest on demand deposits of business entities to retain such customers.

● Transactions with Affiliates. The Dodd-Frank Act enhanced the requirements for certain transactions with affiliates under Section 23A and 23B of the Federal Reserve Act, including an expansion of the definition of “covered transactions” and increasing the amount of time for which collateral requirements regarding covered transactions must be maintained. These requirements became effective on July 21, 2011.

● Enhanced Lending Limits. The Dodd-Frank Act strengthened the previous limits on a depository institution’s credit exposure to one borrower which limited a depository institution’s ability to extend credit to one person (or group of related persons) in an amount exceeding certain thresholds. The Dodd-Frank Act expanded the scope of these restrictions to include credit exposure arising from derivative transactions, repurchase agreements, and securities lending and borrowing transactions.

● Compensation Practices. The Dodd-Frank Act provides that the appropriate federal regulators must establish standards prohibiting as an unsafe and unsound practice any compensation plan of a bank holding company or other “covered financial institution” that provides an insider or other employee with “excessive compensation” or compensation that gives rise to excessive risk or could lead to a material financial loss to such firm. In June 2010, prior to the Dodd-Frank Act, the bank regulatory agencies promulgated the Interagency Guidance on Sound Incentive Compensation Policies, which requires that financial institutions establish metrics for measuring the impact of activities to achieve incentive compensation with the related risk to the financial institution of such behavior. In addition, public companies must now hold non-binding advisory “say-on-pay” and “say-on-frequency” shareholder votes at defined intervals to give shareholders the opportunity to provide feedback on the company’s compensation practices.

Although a significant number of the rules and regulations mandated by the Dodd-Frank Act have been finalized, many of the new requirements called for have yet to be implemented and will likely be subject to implementing regulations over the course of several years. Given the uncertainty associated with the manner in which the provisions of the Dodd-Frank Act will be implemented by the various regulatory agencies, the full extent of the impact such requirements will have on financial institutions’ operations is unclear. The changes resulting from the Dodd-Frank Act may impact the profitability of our business activities, require changes to certain of our business practices, impose upon us more stringent capital, liquidity and leverage ratio requirements or otherwise adversely affect our business. These changes may also require us to invest significant management attention and resources to evaluate and make necessary changes in order to comply with new statutory and regulatory requirements.

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The Company

Bank Holding Company Regulation. The Company is a bank holding company and a member of the Federal Reserve System under the Bank Holding Company Act of 1956 (the “BHC Act”). As such, the Company is subject to the supervision, examination and reporting requirements of the BHC Act, as well as other federal and state laws governing the banking business. The Federal Reserve Board is the primary regulator of the Company, and supervises the Company’s activities on a continual basis. The Company is required to furnish to the Federal Reserve Board an annual report of its operations at the end of each fiscal year, and such additional information as the Federal Reserve Board may require pursuant to the BHC Act. In general, the BHC Act limits bank holding company business to owning or controlling banks and engaging in other banking-related activities. The BHC Act requires that a bank holding company obtain the prior approval of the Federal Reserve Board before:

● acquiring direct or indirect ownership or control of more than 5% of the voting shares of any bank;

● taking any action that causes a bank to become a subsidiary of a bank holding company;

● merging or consolidating with another bank holding company; or

● acquiring most other operating companies.

Subject to certain state laws, a bank holding company that is adequately capitalized and adequately managed may acquire the assets of both in-state and out-of-state banks. Under the Gramm-Leach-Bliley Act (described below), a bank holding company meeting certain qualifications may apply to the Federal Reserve Board to become a financial holding company, and thereby engage (directly or through a subsidiary) in certain activities deemed financial in nature, such as securities brokerage and insurance underwriting. With certain exceptions, the BHC Act prohibits bank holding companies from acquiring direct or indirect ownership or control of voting shares in any company that is not a bank or a bank holding company unless the Federal Reserve Board determines such activities are incidental or closely related to the business of banking.

The Change in Bank Control Act of 1978 requires a person (or a group of persons acting in concert) acquiring “control” of a bank holding company to provide the Federal Reserve Board with 60 days’ prior written notice of the proposed acquisition. Following receipt of this notice, the Federal Reserve Board has 60 days (or up to 90 days if extended) within which to issue a notice disapproving the proposed acquisition. In addition, any “company” must obtain the Federal Reserve Board’s approval before acquiring 25% (5% if the “company” is a bank holding company) or more of the outstanding shares or otherwise obtaining control over a bank holding company.

Financial Services Modernization. The Gramm-Leach-Bliley Financial Services Modernization Act of 1999 (the “Modernization Act”) amended the BHC Act and:

● allows bank holding companies that qualify as “financial holding companies” to engage in a substantially broader range of non-banking activities than was permissible under prior law;

● allows insurers and other financial services companies to acquire banks;

● allows national banks, and some state banks, either directly or through operating subsidiaries, to engage in certain non-banking financial activities;

● removes various restrictions that applied to bank holding company ownership of securities firms and mutual fund advisory companies; and

● establishes the overall regulatory structure applicable to bank holding companies that also engage in insurance and securities operations.

If the Company, which has not obtained qualification as a “financial holding company,” were to do so in the future, the Company would be eligible to engage in, or acquire companies engaged in, the broader range of activities that are permitted by the Modernization Act, provided that if any of the Company’s banking subsidiaries were to cease to be “well capitalized” or “well managed” under applicable regulatory standards, the Federal Reserve Board could, among other things, place limitations on the Company’s ability to conduct these broader financial activities or, if the deficiencies persisted, require the Company to divest the banking subsidiary. In addition, if the Company were to be qualified as a financial holding company and any of its banking subsidiaries were to receive a rating of less than satisfactory under the Community Reinvestment Act of 1977 (the “CRA”), the Company would be prohibited from engaging in any additional activities other than those permissible for bank holding companies that are not financial holding companies. The broader range of activities in which financial holding companies are eligible to engage include activities that are determined to be “financial in nature,” including insurance underwriting, securities underwriting and dealing, and making merchant banking investments in commercial and financial companies.

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Transactions with Affiliates. The Company and the Bank are deemed to be affiliates within the meaning of the Federal Reserve Act, and transactions between affiliates are subject to certain restrictions. Generally, the Federal Reserve Act limits the extent to which a financial institution or its subsidiaries may engage in “covered transactions” with an affiliate. It also requires all transactions with an affiliate, whether or not “covered transactions,” to be on terms substantially the same, or at least as favorable to the institution or subsidiary, as those provided to a non-affiliate. The term “covered transaction” includes the making of loans, purchase of assets, issuance of a guarantee and other similar types of transactions.

Tie-In Arrangements. The Company and the Bank cannot engage in certain tie-in arrangements in connection with any extension of credit, sale or lease of property or furnishing of services. For example, with certain exceptions, neither the Company nor the Bank may condition an extension of credit on either a requirement that the customer obtain additional services provided by either the Company or the Bank, or an agreement by the customer to refrain from obtaining other services from a competitor. The Federal Reserve Board has adopted exceptions to its anti-tying rules that allow banks greater flexibility to package products with their affiliates. These exceptions were designed to enhance competition in banking and non-banking products and to allow banks and their affiliates to provide more efficient, lower cost service to their customers.

Source of Strength; Cross-Guarantee. Under former Federal Reserve Board policy and now codified by the Dodd-Frank Act, the Company is expected to act as a source of financial strength to the Bank and to commit resources to support the Bank. This support may be required at times when, absent such rule, the Company may not find itself able to provide it. Capital loans by a bank holding company to any of its subsidiary banks are subordinate in right of payment to deposits and to certain other indebtedness of such subsidiary banks. In the event of a bank holding company’s bankruptcy, any commitment by the bank holding company to a federal bank regulatory agency to maintain the capital of a subsidiary bank will be assumed by the bankruptcy trustee and entitled to a priority of payment.

Under the BHC Act, the Federal Reserve Board may require a bank holding company to terminate any activity or relinquish control of a non-bank subsidiary, other than a non-bank subsidiary of a bank, upon the Federal Reserve Board’s determination that such activity or control constitutes a serious risk to the financial soundness or stability of any subsidiary depository institution of the bank holding company. Further, federal bank regulatory authorities have additional discretion to require a bank holding company to divest itself of any bank or non-bank subsidiary if the agency determines that divestiture may aid the depository institution’s financial condition.

Subsidiary Dividends. The Company is a legal entity separate and distinct from the Bank. A portion of the Company’s revenues is derived from amounts paid as dividends to the Company by the Bank. Under Georgia law, the Bank may pay dividends only when and if the Bank is not insolvent. In addition, dividends may not be declared or paid at any time when the Bank does not have combined paid-in capital and appropriated retained earnings equal to at least 20% of the Bank’s capital stock. The Georgia Department of Banking and Finance’s approval must be obtained before the Bank may pay cash dividends out of retained earnings if (i) the total classified assets at the most recent examination of the Bank exceeded 80% of the equity capital, (ii) the aggregate amount of dividends declared or anticipated to be declared in the calendar year exceeds 50% of the net profits, after taxes but before dividends for the previous calendar year, or (iii) the ratio of equity capital to adjusted assets is less than 6%.

In addition, the Company and the Bank are subject to various general regulatory policies and requirements relating to the payment of dividends, including requirements to maintain adequate capital above regulatory minimums. The appropriate federal regulatory authority is authorized to determine that the payment of dividends would be an unsafe or unsound practice and to prohibit payment thereof, under certain circumstances relating to the financial condition of a bank or bank holding company. Federal regulatory authorities have indicated that paying dividends that deplete a bank’s capital base to an inadequate level would be an unsound and unsafe banking practice and that banking organizations should generally pay dividends only out of current operating earnings.

Incentive Compensation.   On June 21, 2010, the Federal Reserve Board, along with the Office of the Comptroller of the Currency (the “OCC”), the Office of Thrift Supervision (the “OTS”), and the FDIC, issued final guidance on incentive compensation policies. The guidance is intended to ensure that the incentive compensation policies of financial institutions do not undermine the safety and soundness of such institutions by encouraging excessive risk-taking.

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The agencies incorporate oversight of incentive compensation policies, as part of the regular, risk-focused examination process, of financial institutions that are not “large, complex banking organizations.” These reviews will be tailored to each financial institution based on the scope and complexity of the institution’s activities and the prevalence of incentive compensation arrangements.  The findings of the supervisory initiatives will be included in reports of examination.  Deficiencies will be incorporated into the financial institution’s supervisory ratings, which can affect the institution’s ability to make acquisitions and take other actions. Enforcement actions may be taken against a financial institution if its incentive compensation arrangements, or related risk-management control or governance processes, pose a risk to the institution’s safety and soundness and the institution is not taking prompt and effective measures to correct the deficiencies.

The guidance is designed to ensure that incentive compensation arrangements at banking organizations appropriately tie rewards to longer-term performance and do not undermine the safety and soundness of the institution or create undue risks to the financial system. Because improperly structured compensation arrangements for both executive and non-executive employees may pose safety and soundness risks, the guidance applies not only to top-level managers, but also to other employees who have the ability to materially affect the risk profile of an organization, either individually or as part of a group.

The guidance is based upon the key principles that a financial institution’s incentive compensation arrangements should (i) provide incentives that do not encourage risk-taking beyond the institution’s ability to effectively identify and manage risks, (ii) be compatible with effective internal controls and risk management, and (iii) be supported by strong corporate governance, including active and effective oversight by the institution’s board of directors.

The scope and content of banking regulators’ policies on executive compensation are likely to continue evolving in the future.

The Federal Reserve Board and the Dodd-Frank Act addressed loan officer origination compensation practices with new rules in 2010. See the discussion under “Other Laws and Regulations.”

State Law Restrictions. As a Georgia business corporation, the Company may be subject to certain limitations and restrictions under applicable Georgia corporate law.

The Bank

General. The Bank, as a Georgia state-chartered bank, is subject to regulation and examination by the State of Georgia Department of Banking and Finance, as well as the FDIC. Georgia state laws regulate, among other things, the scope of the Bank’s business, its investments, its payment of dividends to the Company, its required legal reserves and the nature, lending limit, maximum interest charged and amount of and collateral for loans. The laws and regulations governing the Bank generally have been promulgated by the Georgia Legislature to protect depositors and not to protect shareholders of the Company or the Bank.

Bank Lending Limit. In September 2009, the Bank became subject to revised regulations from the State of Georgia Department of Banking and Finance regarding its total aggregate lending limit to a single customer and that customer’s related entities.  The new regulation revised the definition of how a single customer is defined. As a result, the Board of Directors of the Bank approved an increase in the Bank’s statutory capital base in October 2009 by appropriating a portion of retained earnings. At December 31, 2013, the Bank’s statutory capital base totaled $40.0 million and consisted of $3.18 million in capital stock, $16.32 million of surplus and $20.50 million in appropriated retained earnings, allowing for a $10.0 million lending limit (25%).

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Commercial Real Estate Lending. Lending operations that involve concentration of commercial real estate loans are subject to enhanced scrutiny by federal banking regulators.  The regulators have issued guidance with respect to the risks posed by commercial real estate lending concentrations.  Real estate loans generally include land development, construction loans, loans secured by multi-family property and nonfarm nonresidential real property where the primary source of repayment is derived from rental income associated with the property.  The guidance prescribes the following guidelines for examiners to help identify institutions that are potentially exposed to concentration risk and may warrant greater supervisory scrutiny:

● total reported loans for construction, land development and other land represent 100 percent or more of the institution’s total risk-based capital, or

● total commercial real estate loans as defined in the guidance represent 300 percent or more of the institution’s total risk-based capital and the outstanding balance of the institution’s commercial real estate loan portfolio has increased by 50 percent or more during the prior 36 months.

In October 2009, the federal banking agencies issued additional guidance on real estate lending that emphasizes these considerations.

Insider Credit Transactions. Banks are also subject to certain restrictions imposed by the Federal Reserve Act on extensions of credit to executive officers, directors, principal shareholders, or any related interests of such persons. Extensions of credit must be made on substantially the same terms, including interest rates and collateral, and follow credit underwriting procedures that are not less stringent than those prevailing at the time for comparable transactions with persons not covered above and who are not employees. Also, such extensions of credit must not involve more than the normal risk of repayment or present other unfavorable features.

Transactions with Affiliates and Insiders; Regulation W. The Bank is subject to Sections 23A and 23B of the Federal Reserve Act and Federal Reserve Regulation W. Section 23A of the Federal Reserve Act places limits on the amount of loans or extensions of credit to, or investments in, or certain other transactions with, affiliates and on the amount of advances to third parties collateralized by the securities or obligations of affiliates. The aggregate of all “covered transactions” is limited in amount, as to any one affiliate, to 10% of the Bank’s capital and surplus and, as to all affiliates combined, to 20% of the Bank’s capital and surplus. Furthermore, within the foregoing limitations as to amount, each covered transaction must meet specified collateral requirements. The Bank is forbidden to purchase low quality assets from an affiliate.

Section 23B of the Federal Reserve Act, among other things, prohibits an institution from engaging in certain transactions with certain affiliates unless the transactions are on terms substantially the same, or at least as favorable to such institution or its subsidiaries, as those prevailing at the time for comparable transactions with nonaffiliated companies.

Regulation W generally excludes all non-bank and non-savings association subsidiaries of banks from treatment as affiliates, except to the extent that the Federal Reserve decides to treat these subsidiaries as affiliates. The regulation also limits the amount of loans that can be purchased by a bank from an affiliate to not more than 100% of the bank’s capital and surplus.

Federal Deposit Insurance Corporation Improvement Act. Under the Federal Deposit Insurance Corporation Improvement Act of 1991 (the “FDICIA”), all insured institutions must undergo regular on-site examinations by their appropriate banking agency. The cost of examinations of insured depository institutions and any affiliates may be assessed by the appropriate agency against each institution or affiliate as it deems necessary or appropriate. Insured institutions are required to submit annual reports to the FDIC, their federal regulatory agency, and their state supervisor when applicable. The FDICIA directs the FDIC to develop a method for insured depository institutions to provide supplemental disclosure of the estimated fair market value of assets and liabilities, to the extent feasible and practicable, in any balance sheet, financial statement, report of condition, or any other report of any insured depository institution. Each federal banking agency has prescribed, by regulation, non-capital safety and soundness standards for institutions under its authority. These standards cover internal controls, information systems and internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, compensation, fees and benefits, such other operational and managerial standards as the agency determines to be appropriate, and standards for asset quality, earnings and stock valuation.

Interstate Banking and Branching. The Dodd-Frank Act modified the federal statute governing de novo interstate branching by state member banks. As a result, a state member bank is authorized to open its initial branch in a host state by establishing a de novo branch at any location where a bank chartered by that host state could establish a branch. A host state is defined as a state, other than a bank’s home state, in which the bank seeks to establish and maintain a branch. A state member bank seeking to open a de novo interstate branch must file an application with the Federal Reserve Board in addition to adherence to state filing requirements and to capital, management, and community reinvestment standards.

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Deposit Insurance and Assessments. The deposits of the Bank are currently insured to a maximum of $250,000 per depositor for substantially all depository accounts.

In February 2011, the FDIC board of directors approved a final plan to impose parity among banks in the deposit-insurance system by basing the assessment base on average total consolidated assets minus average tangible equity instead of domestic deposits. Institutions in Risk Category I, which includes more than 90 percent of community banks, pay 5-9 basis points instead of the prior base rate schedule of 12-16 basis points. Institutions in Risk Categories II, III and IV pay 14, 23 and 35 basis points, respectively, compared to the prior rates of 22, 32 and 45 basis points, respectively. In addition, the secured liability adjustment was eliminated under the final rule (although secured liabilities are reflected in a bank’s new assessment base), and the unsecured debt adjustment and the brokered deposit adjustment have remained but with some modifications. Under the final rule, institutions with less than $1 billion in assets report average weekly balances of their consolidated total assets rather than reporting average daily balances. The final rule allows institutions with less than $1 billion in average consolidated total assets to report the end-of-quarter amount of Tier 1 capital as a proxy for average tangible equity.

The Bank’s FDIC insurance expense totaled $254,428 for 2013. FDIC insurance expense includes deposit insurance assessments and Financing Corporation (“FICO”) assessments related to outstanding FICO bonds to fund interest payments on bonds to recapitalize the predecessor to the DIF. These assessments will continue until the FICO bonds mature in 2017. The FICO assessment rates, which are determined quarterly, are based on average total consolidated assets minus average tangible equity.

The FDIC may terminate the deposit insurance of any insured depository institution, including the Bank, if it determines after a hearing that the institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC or the banking regulator. It may also suspend deposit insurance temporarily during the hearing process for the permanent termination of insurance, if the institution has no tangible capital. If insurance of accounts is terminated, the accounts at the institution at the time of the termination, less subsequent withdrawals, shall continue to be insured for a period of six months to two years, as determined by the FDIC. Our management is not aware of any practice, condition or violation that might lead to termination of the Bank’s deposit insurance.

Community Reinvestment Act. The CRA requires that, in connection with examinations of financial institutions within their respective jurisdictions, the Federal Reserve Board, the FDIC, or the OCC (as applicable), shall evaluate the record of each financial institution in meeting the credit needs of its local community, including low and moderate income neighborhoods. These factors are also considered in evaluating mergers, acquisitions, and applications to open a branch or facility. Failure to adequately meet these criteria could impose additional requirements and limitations on the Bank.

Capital Adequacy

Federal bank regulatory agencies use capital adequacy guidelines in the examination and regulation of bank holding companies and banks. If capital falls below minimum guideline levels, the holding company or bank may be denied approval to acquire or establish additional banks or non-bank businesses or to open new facilities.

The FDIC and Federal Reserve Board use risk-based capital guidelines for banks and bank holding companies. These are designed to make such capital requirements more sensitive to differences in risk profiles among banks and bank holding companies, to account for off-balance sheet exposure and to minimize disincentives for holding liquid assets. Assets and off-balance sheet items are assigned to broad risk categories, each with appropriate weights. The resulting capital ratios represent capital as a percentage of total risk-weighted assets and off-balance sheet items. The guidelines are minimums, and the Federal Reserve Board has noted that bank holding companies contemplating significant expansion programs should not allow expansion to diminish their capital ratios and should maintain ratios well in excess of the minimum. The current guidelines require all bank holding companies and federally-regulated banks to maintain a minimum risk-based total capital ratio equal to 8%, of which at least 4% must be Tier 1 capital. Tier 1 capital for bank holding companies includes common shareholders’ equity, certain qualifying perpetual preferred stock and minority interests in equity accounts of consolidated subsidiaries, but excludes goodwill and most other intangibles and excludes the allowance for loan and lease losses. Tier 2 capital includes the excess of any preferred stock not included in Tier 1 capital, mandatory convertible securities, hybrid capital instruments, subordinated debt and intermediate term-preferred stock, and general reserves for loan and lease losses up to 1.25% of risk-weighted assets.

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The FDIC and Federal Reserve Board also employ a leverage ratio, which is Tier 1 capital as a percentage of total assets less intangibles, to be used as a supplement to risk-based guidelines. The principal objective of the leverage ratio is to constrain the maximum degree to which a bank holding company or bank may leverage its equity capital base. A minimum leverage ratio of 3% is required for the most highly rated bank holding companies and banks. Other bank holding companies, banks and bank holding companies seeking to expand, however, are required to maintain minimum leverage ratios of at least 4% to 5%.

In September 2009, the U.S. Treasury Department released a set of principles for financial regulatory reform, including a general recommendation for increased capital for banks and bank holding companies across the board (with even higher requirements for systemically risky banking organizations). In December 2009, the Basel Committee on Banking Supervision issued proposals for regulatory capital changes, including greater emphasis on common equity as a component of Tier 1 capital. On September 12, 2010, the Basel Committee announced the calibration of its revised capital framework for major banking institutions (known as “Basel III”). Both proposals also recommended enhanced leverage and liquidity requirements.

In July 2013, the OCC and the Federal Reserve approved a final rule that replaces the existing risk-based and leverage capital rule. This rule was published in October 2013. An interim final rule was published by the FDIC in September 2013, which is consistent with the OCC/Federal Reserve rule. The Bank will be subject to the FDIC interim rule. The rule establishes a new regulatory capital framework that incorporates revisions to the Basel capital framework, including Basel III and other elements. The rule strengthens the definition of regulatory capital, increases risk-based capital requirements, and amends the methodologies for determining risk-weighted assets. Subject to various transition periods, the rule is effective for “advanced approaches” banks on January 1, 2014, and for all other banks (including the Bank) on January 1, 2015.

Highlights of the new regulatory capital rule:

● Revises the “Prompt Corrective Action” framework to incorporate new regulatory capital minimum thresholds.

● Adds a new Common Equity Tier 1 capital ratio of 4.5 percent and increases the minimum Tier 1 capital ratio requirement from 4.0 percent to 6.0 percent.

● Implements strict eligibility criteria for regulatory capital instruments.

● Improves the measure of risk-weighted assets to enhance risk sensitivity.

● Retains the existing regulatory capital framework for one- to four-family residential mortgage exposures.

● Allows banks not subject to the advanced approaches rule to retain the existing treatment for accumulated other comprehensive income (“AOCI”) through a one-time election.

● Allows certain depository institution holding companies to continue to include in Tier 1 capital previously issued trust preferred securities and cumulative perpetual preferred stock.

● Limits capital distributions and certain discretionary bonus payments if banks do not maintain a “capital conservation buffer” of common equity Tier 1 capital in an amount greater than 2.5% of total risk-weighted assets.

In December 2013, five federal agencies, including the Federal Reserve Board, the FDIC and the SEC, approved final rules to implement Section 619 of the Dodd-Frank Act, known as the “Volcker Rule.” Section 619 prohibits insured depository institutions and their affiliates from engaging in short-term proprietary trading of certain securities, derivatives, commodity futures and options, for their own account. The rules also impose limits on a banking entity’s investments in, and other relationships with, hedge funds and private equity funds. There are exemptions for certain activities and compliance with the rules varies with the size of the banking entity and scope of activities.

On January 14, 2014, the same five federal agencies approved an interim final rule to permit banking entities to retain interests in certain collateralized debt obligations backed primarily by trust preferred securities (“TruPS CDOs”) from the investment prohibitions of Section 619 of the Dodd-Frank Act. Under the interim final rule, the agencies permit the retention of an interest in or sponsorship of covered funds by banking entities if the following qualifications are met: (1) the TruPS CDO was established, and the interest was issued, before May 19, 2010; (2) the banking entity reasonably believes that the offering proceeds received by the TruPS CDO were invested primarily in Qualifying TruPS Collateral; and (3) the banking entity’s interest in the TruPS CDO was acquired on or before December 10, 2013 (the date the agencies issued final rules implementing Section 619 of the Dodd-Frank Act). The TruPS CDO structure was the vehicle that gave effect to the use of trust preferred securities as a regulatory capital instrument prior to May 19, 2010. Section 619 and the related regulations will not have an impact on the Company or the Bank.

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Prompt Corrective Action. The Federal Deposit Insurance Corporation Improvement Act (“FDICIA”) established a “prompt corrective action” program in which every bank is placed in one of five regulatory categories, depending primarily on its regulatory capital levels. Federal banking regulators are permitted to take increasingly severe action as a bank’s capital position or financial condition declines below the “Adequately Capitalized” level described below. Regulators are also empowered to place in receivership or require the sale of a bank to another depository institution when a bank’s leverage ratio reaches two percent. Better capitalized institutions are generally subject to less onerous regulation and supervision than banks with lesser amounts of capital. Currently, for community banks such as the Bank, the categories are:

● Well Capitalized — The institution exceeds the required minimum level for each relevant capital measure. A well capitalized institution is one (i) having a total capital ratio of 10% or greater, (ii) having a Tier 1 capital ratio of 6% or greater, (iii) having a leverage capital ratio of 5% or greater and (iv) that is not subject to any order or written directive to meet and maintain a specific capital level for any capital measure.

● Adequately Capitalized — The institution meets the required minimum level for each relevant capital measure. No capital distribution may be made that would result in the institution becoming undercapitalized. An adequately capitalized institution is one (i) having a total capital ratio of 8% or greater, (ii) having a Tier 1 capital ratio of 4% or greater and (iii) having a leverage capital ratio of 4% or greater or a leverage capital ratio of 3% or greater if the institution is rated composite 1 under the CAMELS (Capital, Assets, Management, Earnings, Liquidity and Sensitivity to market risk) rating system.

● Undercapitalized — The institution fails to meet the required minimum level for any relevant capital measure. An undercapitalized institution is one (i) having a total capital ratio of less than 8% or (ii) having a Tier 1 capital ratio of less than 4% or (iii) having a leverage capital ratio of less than 4%, or if the institution is rated a composite 1 under the CAMELS rating system, a leverage capital ratio of less than 3%.

● Significantly Undercapitalized — The institution is significantly below the required minimum level for any relevant capital measure. A significantly undercapitalized institution is one (i) having a total capital ratio of less than 6% or (ii) having a Tier 1 capital ratio of less than 3% or (iii) having a leverage capital ratio of less than 3% and the institution is rated a composite 2-5 under the CAMELS rating system.

● Critically Undercapitalized — The institution fails to meet a critical capital level set by the appropriate federal banking agency. A critically undercapitalized institution is one having a ratio of tangible equity to total assets that is equal to or less than 2%.

For the Bank, new regulatory capital minimum thresholds will become effective January 1, 2015, as discussed above. As of December 31, 2013, under the present rules in effect, we were deemed to be “well capitalized”.

Standards for Safety and Soundness. The Federal Deposit Insurance Act (the “FDIA”) requires the federal banking regulatory agencies to prescribe, by regulation or guideline, operational and managerial standards for all insured depository institutions relating to: (i) internal controls, information systems and internal audit systems; (ii) loan documentation; (iii) credit underwriting; (iv) interest rate risk exposure; and (v) asset growth. The agencies must also prescribe standards for asset quality, earnings, and stock valuation, as well as standards for compensation, fees and benefits. The federal bank regulatory agencies have adopted regulations and Interagency Guidelines Prescribing Standards for Safety and Soundness to implement these required standards. These guidelines set forth the safety and soundness standards that the federal bank regulatory agencies use to identify and address problems at insured depository institutions before capital becomes impaired. Under the regulations, if the FDIC determines that we fail to meet any standards prescribed by the guidelines, the agency may require us to submit to the agency an acceptable plan to achieve compliance with the standard.

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Other Laws and Regulations

International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001. On October 26, 2001, the USA PATRIOT Act was enacted. It includes the International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001 (the “IMLAFA”) and strong measures to prevent, detect and prosecute terrorism and international money laundering. As required by the IMLAFA, the federal banking agencies, in cooperation with the U.S. Treasury Department, established rules that generally apply to insured depository institutions and U.S. branches and agencies of foreign banks.

Among other things, the new rules require that financial institutions implement reasonable procedures to (1) verify the identity of any person opening an account; (2) maintain records of the information used to verify the person’s identity; and (3) determine whether the person appears on any list of known or suspected terrorists or terrorist organizations. The rules also prohibit banks from establishing correspondent accounts with foreign shell banks with no physical presence and encourage cooperation among financial institutions, their regulators and law enforcement to share information regarding individuals, entities and organizations engaged in terrorist acts or money laundering activities. The rules also limit a financial institution’s liability for submitting a report of suspicious activity and for voluntarily disclosing a possible violation of law to law enforcement. Bank regulators routinely examine institutions for compliance with these obligations and are required to consider compliance in connection with the regulatory review of applications.

Under the USA PATRIOT Act, the Federal Bureau of Investigation (the “FBI”) can send to the bank regulatory agencies lists of the names of persons suspected of involvement in terrorist activities. A bank can be requested to search its records for any relationships or transactions with persons on those lists. If any relationships or transactions are found, the bank must file a suspicious activity report and contact the FBI.

The Office of Foreign Assets Control (“OFAC”), which is a division of the U.S. Department of the Treasury, is responsible for helping to ensure that United States entities do not engage in transactions with “enemies” of the United States, as defined by various Executive Orders and Acts of Congress. OFAC has sent, and will send, to bank regulatory agencies lists of names of persons and organizations suspected of aiding, harboring or engaging in terrorist acts. If a bank finds a name on any transaction, account or wire transfer that is on an OFAC list, the bank must freeze such account, file a suspicious activity report and notify the FBI. The Bank has appointed an OFAC compliance officer to oversee the inspection of accounts and the filing of any required notifications. The Bank actively checks high-risk OFAC areas such as new accounts, wire transfers and customer files, utilizing software which is updated each time a modification is made to the lists provided by OFAC and other agencies of Specially Designated Nationals and Blocked Persons.

Sarbanes-Oxley Act of 2002. The Sarbanes-Oxley Act of 2002 (the “SOX”) was enacted to address corporate and accounting fraud. It established a new accounting oversight board that enforces auditing standards and restricts the scope of services that accounting firms may provide to their public company audit clients. Among other things, it also: (i) requires chief executive officers and chief financial officers to certify to the accuracy of periodic reports filed with the SEC; (ii) imposes new disclosure requirements regarding internal controls, off-balance-sheet transactions, and pro forma (non-GAAP) disclosures; (iii) accelerates the time frame for reporting of insider transactions and periodic disclosures by certain public companies; and (iv) requires companies to disclose whether or not they have adopted a code of ethics for senior financial officers and whether the audit committee includes at least one “audit committee financial expert.”

The SOX requires the SEC, based on certain enumerated factors, to review corporate filings regularly and systematically. To deter wrongdoing, it: (i) subjects bonuses issued to top executives to disgorgement if a restatement of a company’s financial statements was due to corporate misconduct; (ii) prohibits an officer or director from misleading or coercing an auditor; (iii) prohibits insider trades during pension fund “blackout periods”; (iv) imposes new criminal penalties for fraud and other wrongful acts; and (v) extends the period during which certain securities fraud lawsuits can be brought against a company or its officers.

Effective September 21, 2010, the SEC adopted amendments to its rules to conform to Section 404(c) of the SOX, as added by Section 989G of the Dodd-Frank Act. Section 404(c) provides that the SOX shall not apply to any audit report prepared by an issuer that is neither an accelerated filer nor a large accelerated filer as defined in Rule 12b-2 under the Securities Exchange Act of 1934.

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With market value of its common equity less than $75 million, the Company does not qualify as an accelerated filer or large accelerated filer and therefore is not presently subject to Section 404(c) of the SOX for the year ended December 31, 2013. Prior to the enactment of the Dodd-Frank Act, the Company, as a non-accelerated filer, would have been required to include an attestation report from its public accounting firm on internal control over financial reporting in its Annual Report on Form 10-K filed with the SEC.

The Company’s management continues to be responsible for establishing and maintaining adequate internal control over financial reporting as detailed in Item 9A of this Annual Report on Form 10-K.

Other Laws and Regulations. Interest and other charges collected or contracted for by the Bank are subject to state usury laws and federal laws concerning interest rates. The Bank’s loan operations are also subject to federal laws applicable to credit transactions, such as:

● Effective April 1, 2011, the Federal Reserve Board implemented new rules regarding all persons who originate loans, including mortgage loan officers and brokers. The new rules include, among other things, prohibition of compensation to loan originators based on the terms or conditions of a loan, prohibiting dual payment of a mortgage originator from both the consumer and the creditor, and prohibiting a loan officer from steering a consumer to a lender with less favorable terms that increase the loan officer or broker’s compensation. The Dodd-Frank Act also addressed loan originator compensation in a similar manner but with additional provisions. The Bank’s Mortgage Division has addressed these new rules and has met the April 1, 2011 implementation date.

● The Federal Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers.

● The Home Mortgage Disclosure Act of 1975, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves.

● The Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit.

● The Fair Credit Reporting Act of 1978, governing the use and provision of information to credit reporting agencies.

● The Fair Debt Collection Practices Act, governing the manner in which consumer debts may be collected by collection agencies.

● The Check Clearing for the 21^st Century Act, giving “substitute checks,” such as a digital image of a check and copies made from that image, the same legal standing as the original paper check, and enacting other provisions related to check status, communication and verification procedures.

● The rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws.

The deposit operations of the Bank are also subject to:

● the Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records; and

● the Electronic Funds Transfer Act and Regulation E issued by the Federal Reserve Board to implement that act, which govern automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services.

Financial Institutions Reform Recovery and Enforcement Act of 1989. This act expanded and increased the enforcement powers of the federal regulatory agencies in terms of both civil and criminal penalties against depository institutions and certain “institution-affiliated parties.” Institution-affiliated parties primarily include management, employees, and agents of a financial institution, as well as independent contractors and consultants such as attorneys, accountants and others who participate in the conduct of the financial institution’s affairs. Practices subject to these sanctions can include the failure of an institution to timely file required reports or the filing of false or misleading information or the submission of inaccurate reports. Civil penalties may be as high as $1,000,000 a day for such violations. Criminal penalties for some financial institution crimes have been increased to 20 years. In addition, regulators are provided with greater flexibility to commence enforcement actions against institutions and institution-affiliated parties. Possible enforcement actions include the termination of deposit insurance. Furthermore, banking agencies’ power to issue cease-and-desist orders were expanded. Such orders may, among other things, require affirmative action to correct any harm resulting from a violation or practice, including restitution, reimbursement, indemnification or guarantees against loss. A financial institution may also be ordered to restrict its growth, dispose of certain assets, rescind agreements or contracts, or take other actions as determined by the ordering agency to be appropriate.

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Privacy and Credit Reporting. Financial institutions are required to disclose their policies for collecting and protecting confidential information. Customers generally may prevent financial institutions from sharing nonpublic personal financial information with nonaffiliated third parties except under narrow circumstances, such as the processing of transactions requested by the consumer. Additionally, financial institutions generally may not disclose customer account numbers to any nonaffiliated third party for use in telemarketing, direct mail marketing or other marketing to consumers. It is the Bank’s policy not to disclose any personal information unless required by law.

Like other lending institutions, the Bank utilizes credit bureau data in its underwriting activities. Use of such data is regulated under the Fair Credit Reporting Act on a uniform, nationwide basis, including credit reporting, prescreening, sharing of information between affiliates, and the use of credit data. The Fair and Accurate Credit Transactions Act of 2003 (the “FACT Act”) authorizes states to enact identity theft laws that are not inconsistent with the conduct required by the provisions of the FACT Act.

Effect of Governmental Monetary Policies. The Bank’s earnings will be affected by domestic economic conditions and the monetary and fiscal policies of the United States government and its agencies. The Federal Reserve Bank’s monetary policies have had, and are likely to continue to have, an important impact on the operating results of commercial banks through its power to implement national monetary policy in order to, among other things, curb inflation or combat a recession. The monetary policies of the Federal Reserve Board have major effects upon the levels of bank loans, investments and deposits through its open market operations in United States government securities and through its regulation of the discount rate on borrowings of member banks and the reserve requirements against member bank deposits. It is not possible to predict the nature or impact of future changes in monetary and fiscal policies.

Future Legislation. Various other legislative and regulatory initiatives affecting the banking system are from time to time introduced in Congress and state legislatures, as well as regulatory agencies. Future legislation regarding financial institutions may change banking statutes and the operating environment in substantial and unpredictable ways. The nature and extent of future legislative and regulatory changes affecting financial institutions is very unpredictable at this time. The Company cannot determine the ultimate effect that such potential legislation, if enacted, would have upon its financial condition or operations.

Item 1A.      Risk Factors

The following is a summary of certain significant risks related to us, our business and an investment in our common stock. This should not be viewed as an all-inclusive or exhaustive list.

Risks Related to Our Industry

The banking crisis that began in 2008 adversely affected our industry, including our business, and may continue to have an adverse effect on our business in the future.

Dramatic declines in the housing market which began in 2008, unemployment and under-employment, negatively impacted the credit performance of real estate related loans and resulted in significant write-downs of asset values by financial institutions. The crisis caused many financial institutions to seek additional capital, to reduce or eliminate dividends, to merge with larger and stronger institutions and, in many cases, to fail. This economic turmoil and tightening of credit led to an increased level of commercial and consumer delinquencies, lack of consumer confidence, increased market volatility and widespread reduction of business activity generally. The resulting economic pressure on consumers and the lack of confidence in the financial markets adversely affected the banking industry, including our business. Although economic conditions have been improving, future market developments could affect consumer confidence levels and cause adverse changes in loan payment patterns, causing increases in delinquencies and default rates, which may impact our charge-offs and provision for credit losses.

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The financial distress of other financial institutions could have a material adverse impact on us.

Our ability to engage in routine funding transactions could be adversely affected by the actions and commercial soundness of other financial institutions. Financial services institutions are interrelated as a result of trading, clearing, counterparty, or other relationships. We have exposure to many different industries and counterparties, and we routinely execute transactions with counterparties in the financial industry, including brokers and dealers, commercial banks, investment banks, mutual and hedge funds, and other institutional clients. As a result, defaults by, or even rumors or questions about, one or more financial services institutions, or the financial services industry generally, have in the past led, and could in the future lead, to market-wide liquidity problems and thereafter losses or defaults by us or by other institutions. Many of these transactions expose us to credit risk in the event of default of our counterparty or client. In addition, our credit risk may be exacerbated when the collateral held by us cannot be realized upon or is liquidated at prices not sufficient to recover the full amount of the financial instrument exposure due us. There is no assurance that any such losses would not materially and adversely affect our business, financial condition, and results of operations.

Recent legislative reforms have resulted in our business becoming subject to significant and extensive additional regulations and/or could adversely affect our results of operations and financial condition.

The Dodd-Frank Act has resulted in sweeping changes in the regulation of financial institutions aimed at strengthening the sound operation of the financial services sector. The Dodd-Frank Act’s provisions that have received the most public attention generally have been those applying to or more likely to affect larger institutions. However, it contains numerous other provisions that have affected all banks and bank holding companies, and have fundamentally changed the system of oversight described in the section entitled “Supervision and Regulation” above.

Some of these provisions may have the consequence of increasing our expenses, decreasing our revenues, and changing the activities in which we choose to engage. The environment in which banking organizations will operate, including legislative and regulatory changes affecting capital, liquidity, supervision, permissible activities, corporate governance and compensation, changes in fiscal policy and steps to eliminate government support for banking organizations, may have long-term effects on the business model and profitability of banking organizations that cannot now be foreseen. The specific impact of the Dodd-Frank Act on our current activities or new financial activities we may consider in the future, our financial performance, and the markets in which we operate, will depend on the manner in which the relevant agencies develop and implement the required rules and the reaction of market participants to these regulatory developments.

Risks Related to Our Business

An economic downturn, especially one affecting Richmond, Columbia and McDuffie counties, could adversely affect our business.

Our success significantly depends upon the growth in population, income levels, deposits, and housing in our primary market areas of Richmond, Columbia and McDuffie counties in the State of Georgia. If these communities do not grow or if prevailing local or national economic conditions are unfavorable, our business may be adversely affected. An economic downturn would likely harm the quality of our loan portfolio and reduce the level of our deposits, which in turn would hurt our business. If the strength of the U.S. economy in general and the strength of the local economies in which the Company conducts operations declines, or continues to decline, this could result in, among other things, a deterioration in credit quality, increased loan charge-offs and delinquencies or a reduced demand for credit, including a resultant effect on the Bank’s loan portfolio and allowance for loan losses. These factors could materially adversely affect the Company’s financial condition and results of operations. Unlike many larger institutions, we are not able to spread the risks of unfavorable local economic conditions across a large number of diversified economies. The Bank is a community bank and as such, is mandated by the Community Reinvestment Act and other regulations to conduct most of its lending activities within the geographic area where it is located. As a result, the Bank and its borrowers may be especially vulnerable to the consequences of changes in the local economy.

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Weakness in the real estate market, including the secondary residential mortgage loan markets, has adversely affected us in the past and could adversely affect us in the future.

Significant disruptions in the secondary market for residential mortgage loans have reduced the demand for and impaired the liquidity of many mortgage loans. Declining real estate prices have also caused higher delinquencies and losses on certain mortgage loans. Although the market has improved, the effects of mortgage market challenges, combined with a correction in residential real estate market prices and reduced levels of home sales, could result in further price reductions in single family home values, adversely affecting the value of collateral securing mortgage loans that we hold, mortgage loan originations and profits on sales of mortgage loans. Declines in real estate values and home sales, and financial stress on borrowers as a result of job losses, interest rate resets on adjustable rate mortgage loans or other factors, could have further adverse effects on borrowers, resulting in higher delinquencies and greater charge-offs in future periods, which could adversely affect our financial condition and results of operations.

Our loan portfolio includes a substantial amount of commercial real estate and construction and development loans, which may have more risks than residential or consumer loans.

Our commercial real estate loans and construction and development loans account for a substantial portion of our total loan portfolio. These loans generally carry larger loan balances and usually involve a greater degree of financial and credit risk than home equity, residential or consumer loans. The increased financial and credit risk associated with these types of loans is a result of several factors, including the concentration of principal in a limited number of loans and to borrowers in similar lines of business, the size of loan balances, the effects of general economic conditions on income-producing properties and the increased difficulty of evaluating and monitoring these types of loans.

Furthermore, the repayment of loans secured by commercial real estate in some cases is dependent upon the successful operation, development or sale of the related real estate or commercial project. If the cash flow from the project is reduced, the borrower’s ability to repay the loan may be impaired. This cash flow shortage may result in the failure to make loan payments. In these cases, we may be compelled to modify the terms of the loan. As a result, repayment of these loans may, to a greater extent than other types of loans, be subject to adverse conditions in the real estate market or economy.

Many of our borrowers have more than one loan or credit relationship with us.

Many of our borrowers have more than one commercial real estate or commercial business loan outstanding with us. Consequently, an adverse development with respect to one loan or one credit relationship can expose us to a significantly greater risk of loss compared to an adverse development with respect to, for example, a one-to-four family residential mortgage loan.

Our decisions regarding credit risk and reserves for loan losses may materially and adversely affect our business.

Making loans and other extensions of credit is an essential element of our business. Although we seek to mitigate risks inherent in lending by adhering to specific underwriting practices, our loans and other extensions of credit may not be repaid. The risk of nonpayment is affected by a number of factors, including:

● the duration of the credit;

● credit risks of a particular customer;

● changes in economic and industry conditions; and

● in the case of a collateralized loan, risks resulting from uncertainties about the future value of the collateral.

We attempt to maintain an appropriate allowance for loan losses to provide for potential losses in our loan portfolio. However, there is no precise method of predicting credit losses, since any estimate of loan losses is necessarily subjective and the accuracy depends on the outcome of future events. Therefore, we face the risk that charge-offs in future periods will exceed our allowance for loan losses and that additional increases in the allowance for loan losses will be required. Additions to the allowance for loan losses would result in a decrease of our net income, and possibly our capital.

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The current prolonged low interest rate environment presents challenges to us in meeting profitability goals and managing interest rate risk.

The low interest rate environment for the past five years has presented a challenging operating environment for most banks, including us, whereby net interest margins become more and more compressed. This compression is the result of two factors: (1) declining earning asset yields as new loans and securities are added to the balance sheet at lower rates of return, and (2) the realization of lower incremental benefits related to lower interest payments on deposits and other interest-bearing liabilities. Further, the impact of net interest performance on a bank’s operating results is significantly influenced by the bank’s operational efficiency, which generally is a greater challenge for smaller banks than the largest banks. Lower margins result in less net interest income available to cover operating expenses, and may require balance sheet duration adjustments to capture additional yields and try to reduce costs of interest-bearing liabilities. Thus, meeting profitability goals is more difficult and interest rate risks have grown in this low interest rate environment and will continue to persist for the banking industry for the foreseeable future.

We face strong competition for customers, which could prevent us from obtaining customers and may cause us to pay higher interest rates to attract deposits.

The banking business is highly competitive and we experience competition in each of our markets from many other financial institutions. We compete with commercial banks, credit unions, savings and loan associations, mortgage banking firms, consumer finance companies, securities brokerage firms, insurance companies, money market funds and other mutual funds, as well as super-regional, national and international financial institutions that operate offices in our primary market areas and elsewhere. We compete with these institutions both in attracting deposits and in making loans. In addition, in order to grow we have to attract customers from other existing financial institutions or from new residents. Many of our competitors are well-established, larger financial institutions. These institutions offer some services, such as extensive and established branch networks and trust services, which we currently do not provide. In addition, competitors that are not depository institutions are generally not subject to the extensive regulations that apply to us. There is a risk that we will have a competitive disadvantage with these other financial institutions in our markets, and that we may have to pay higher interest rates to attract deposits and/or lower our interest rates on loans to customers, resulting in reduced profitability. In new markets that we may enter, we will also compete against well-established community banks that have developed relationships within the community.

Changes in monetary policies and interest rates could reduce our profitability and adversely affect our business.

Our profitability is affected by credit policies of monetary authorities, particularly the Federal Reserve Board, and depends in large part on our net interest income, which is the difference between interest earned from interest-earning assets, such as loans and investment securities, and interest paid on interest-bearing liabilities, such as deposits and borrowings. Our net interest income will be adversely affected if market interest rates change such that the interest we pay on deposits and borrowings increases faster than the interest we earn on loans and investments. Many factors cause changes in interest rates, including governmental monetary policies and domestic and international economic and political conditions. While we intend to manage the effects of changes in interest rates by adjusting the terms, maturities, and pricing of our assets and liabilities, our efforts may not be effective and our financial condition and results of operations may suffer.

Our recent operating results may not be indicative of our future operating results.

In 2013, we reported strong earnings and an increase in loans and deposit levels. However, we may not be able to sustain our historical rate of growth from prior years and may not even be able to grow our business at all. We may not be able to sustain or increase our profitability. Consequently, our historical results of operations are not necessarily indicative of our future operations. Various factors, such as economic conditions, regulatory and legislative considerations and competition may also impede our ability to increase our rate of growth and our profitability.

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We could be adversely affected by the loss of one or more key personnel or by an inability to attract and retain employees.

We believe that our growth and future success will depend in large part on the skills of our executive and other senior officers. The loss of the services of one or more of these officers could impair our ability to continue to implement our business strategy. Our executive and other senior officers have extensive and long-standing ties within our primary market areas and substantial experience with our operations, and have contributed significantly to our growth. If we lose the services of any one of them, he or she may be difficult to replace and our business could be materially and adversely affected.

Our success also depends, in part, on our continued ability to attract and retain experienced and qualified employees. The competition for such employees is intense, and our inability to continue to attract, retain and motivate employees could adversely affect our business.

The success of our growth strategy depends on our ability to identify and recruit individuals with experience and relationships in the markets in which we intend to expand.

We intend to expand our banking network over the next several years into both new and existing markets in and around our current market areas. We believe that to expand into new markets successfully, we must identify and recruit experienced key management members with local expertise and relationships in these markets. We expect that competition for qualified management in the markets in which we may expand will be intense and that there will be a limited number of qualified persons with knowledge of and experience in the community banking industry in these markets. Even if we identify individuals that we believe could assist us in establishing a presence in a new market, we may be unable to recruit these individuals away from their current employers. In addition, the process of identifying and recruiting individuals with the combination of skills and attributes required to carry out our strategy is often lengthy. Our inability to identify, recruit and retain talented personnel to manage new offices effectively and in a timely manner would limit our growth and could materially adversely affect our business, financial condition and results of operations.

We will face risks with respect to future expansion and acquisitions or mergers.

We may expand into new lines of business or offer new products or services. Any expansion plans we undertake may also divert the attention of our management from the operation of our core business, which could have an adverse effect on our results of operations. We may also seek to acquire other financial institutions or assets of those institutions. Any of these activities would involve a number of risks such as the time and expense associated with evaluating new lines of business or new markets for expansion, hiring or retaining local management and integrating new acquisitions. Even if we acquire new lines of business or new products or services, they may not be profitable. Nor can we say with certainty that we will be able to consummate, or if consummated, successfully integrate, future acquisitions, if any, or that we will not incur disruptions or unexpected expense in integrating such acquisitions. Any given acquisition, if and when consummated, may adversely affect our results of operations and financial condition.

Our growth may require us to raise additional capital that may not be available when it is needed or may not be available on terms acceptable to us.

We are required by regulatory authorities to maintain adequate levels of capital to support our operations. To support our continued growth, we may need to raise additional capital. Our ability to raise additional capital, if needed, will depend in part on conditions in the capital markets at that time, which are outside our control. Accordingly, we cannot be assured of our ability to raise additional capital, if needed, on terms acceptable to us. If we cannot raise additional capital when needed, our ability to further expand our operations through internal growth and acquisitions could be materially impaired.

We are subject to extensive regulation that could limit or restrict our activities, and such regulation is for the protection of our depositors and not for the benefit of our investors.

We operate in a highly regulated industry and are subject to examination, supervision and comprehensive regulation by various regulatory agencies. Our compliance with these regulations is costly and restricts certain of our activities, including payment of dividends, mergers and acquisitions, purchase and sale of investments, origination and sale of loans, interest rates charged on loans, interest rates paid on deposits and locations of offices. We are also subject to regulatory capital requirements established by our regulators, which require us to maintain adequate capital to support our growth. If we fail to meet these capital and other regulatory requirements, our ability to grow, our cost of funds and FDIC insurance, our ability to borrow funds, our ability to pay dividends on common stock, and our ability to make acquisitions, could be materially and adversely affected.

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The laws and regulations applicable to the banking industry could change at any time, and we cannot predict the effects of these changes on our business and profitability. Because government regulation greatly affects the business and financial results of all banks and bank holding companies, our cost of compliance could adversely affect our profitability. In addition, the purpose of these laws and regulations is to protect and insure the interests and deposits of our depositors, and are not for the protection of our investors.

Efforts to comply with the Sarbanes-Oxley Act have involved significant expenditures, and non-compliance with the Sarbanes-Oxley Act may adversely affect us.

The Sarbanes-Oxley Act of 2002, and the related rules and regulations promulgated by the Securities and Exchange Commission, have increased the scope, complexity and cost of corporate governance, reporting and disclosure practices. We have experienced, and we expect to continue to experience, greater compliance costs, including costs related to internal controls, as a result of the Sarbanes-Oxley Act.

In 2010 the SEC adopted amendments to its rules and forms to implement revised Section 404(c) to exclude smaller reporting companies. We are a smaller reporting company and therefore are not presently subject to the SOX Section 404 as it relates to certain internal control requirements. However, management continues to be responsible for establishing and maintaining adequate internal control over financial reporting. For further discussion see “Supervision and Regulation - Other Laws and Regulations.”

We may be required to pay significantly higher FDIC premiums in the future.

Insured institution failures and a deterioration in banking and economic conditions since 2008 have significantly increased the insurance fund loss provisions of the Deposit Insurance Fund (“DIF”) of the FDIC. This resulted in a decline in the designated reserve ratio to historical lows through the end of 2012. The FDIC expects there could be additional insured institution failures in the next few years. The reserve ratio improved during 2013, however, it may decline again. Additionally, the limit on FDIC coverage was increased to $250,000 by the enactment of the Dodd-Frank Act.

These developments caused the premiums assessed by the FDIC to increase. We are generally unable to control the amount of premiums that we are required to pay for FDIC insurance. If there are additional bank or financial institution failures, we may be required to pay even higher FDIC premiums than current levels. Any future increases in FDIC insurance premiums may materially and adversely affect our results of operations. Additionally, the Dodd-Frank Act changed the assessment base for federal deposit insurance from the amount of insured deposits to consolidated assets less tangible capital. Although we may initially see a decline in premiums as a result of this change, there is still risk that future assessments could increase again.

Liquidity needs could adversely affect our results of operations and financial condition.

Our primary sources of funds are customer deposits and loan principal and interest payments. Deposit levels may be affected by a number of factors, including rates paid by competitors, general interest rate levels, returns available to customers on alternative investments and general economic conditions. Scheduled loan repayments are a relatively stable source of funds; however, they are subject to the ability of borrowers to repay the loans. Borrowers’ ability to repay loans can be adversely affected by a number of factors outside our control, including changes in economic conditions, adverse trends or events affecting business industry groups, reductions in real estate values or markets, business closings or lay-offs, inclement weather, natural disasters and international instability. Cash flows from investments are also fairly stable but can be accelerated or extended based on underlying interest rates. Accordingly, we may be required from time to time to rely on secondary sources of liquidity to meet deposit withdrawal demands or otherwise fund operations. Those sources may include Federal Home Loan Bank advances, brokered deposits and federal funds lines of credit from correspondent banks. While we believe these sources are currently adequate, there can be no assurance they will be sufficient to meet future liquidity demands, particularly if we experience atypical deposit withdrawal demands, increased loan demand or if regulatory decisions should limit available funding sources such as brokered deposits. We may be required to slow or discontinue loan growth, capital expenditures, other investments or liquidate assets should those sources not be adequate.

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Changes in accounting policies and practices, as may be adopted by the regulatory agencies, the Financial Accounting Standards Board, or other authoritative bodies, could materially impact our financial statements.

Our accounting policies and methods are fundamental to how we record and report our financial condition and results of operations. From time to time, the regulatory agencies, the Financial Accounting Standards Board, and other authoritative bodies change the financial accounting and reporting standards that govern the preparation of our financial statements. These changes can be difficult to predict and can materially impact how we record and report our financial condition and results of operations.

We must respond to rapid technological changes, and these changes may be more difficult to implement or more expensive than anticipated.

We will have to respond to future technological changes. Specifically, if our competitors introduce new products and services embodying new technologies, or if new industry standards and practices emerge, then our existing product and service offerings, technology and systems may be impaired or become obsolete. Further, if we fail to adopt or develop new technologies or to adapt our products and services to emerging industry standards, then we may lose current and future customers, which could have a material adverse effect on our business, financial condition and results of operations. The financial services industry is changing rapidly and in order to remain competitive, we must continue to enhance and improve the functionality and features of our products, services and technologies. These changes may be more difficult to implement or more expensive than we anticipate.

Our operations and the operations of our vendors, suppliers and customers may be subject to disruption from events beyond our control.

Our operations and the operations of our vendors, suppliers and customers may be subject to disruption from a variety of causes, including work stoppages, financial difficulties, acts of war, terrorism, fire, ice storms, earthquakes, flooding or other natural disasters. If a major disruption were to occur it could result in suspension of operations, harm to people or the environment, delays in our ability to provide banking services, or the inability of customers to repay loan obligations. Adverse consequences may also result from disruptions in the operations of our vendors, suppliers and customers, which could have a material adverse effect upon our business.

Risks Related to Investing in Our Common Stock

Although there is a trading market for our common stock, an active trading market may never develop or be maintained.

Although our common stock is traded on the Over-The-Counter Bulletin Board, there is not a consistently active trading market for our common stock. An investor in our stock may be unable to liquidate his or its investment quickly and efficiently and should be prepared to bear the economic risk of an investment in our common stock for an indefinite period. We cannot predict the extent to which an active public market for our common stock may develop or be sustained.

Our ability to pay dividends is limited and we may be unable to pay future dividends. As a result, capital appreciation, if any, of our common stock may be your sole opportunity for gains on your investment for the foreseeable future.

We make no assurances that we will pay any dividends in the future.Holders of our common stock are not entitled to receive dividends unless declared by our board of directors. Our ability to do so will be limited by regulatory restrictions, our financial condition, results of operations, capital requirements, level of indebtedness and such other factors as our board of directors deems relevant. Our ability to pay dividends is limited by our obligations to maintain sufficient capital and by other restrictions on the payment of dividends that are applicable to us. Investors should not purchase our common stock if they require dividend income.

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Our securities are not FDIC insured.

Our securities, including our common stock, are not savings or deposit accounts, and are not insured by the Deposit Insurance Fund, the FDIC or any other governmental agency and are subject to investment risk, including the possible loss of the entire investment.

We may issue additional shares of our common stock that could result in dilution of an investor’s investment.

Our board of directors may determine from time to time that there is a need to obtain additional capital through the issuance of additional shares of common stock. These issuances would likely dilute the ownership interests of our investors and may dilute the per share book value of our common stock. In addition, the issuance of additional shares of common stock under our stock option and equity incentive plans will further dilute each investor’s ownership of our common stock.

Our board of directors has the authority to set the terms of and issue preferred stock without shareholder approval, which could dilute your ownership interest in the Company, and which would likely have superior rights over the common stock of the Company as to dividends and liquidation preference.

The Company’s Articles of Incorporation authorize the issuance of up to 1,000,000 shares of preferred stock and give the board of directors the authority to decide what the terms (such as dividend rate, liquidation preference, redemption features and the like) of the shares of any series of preferred stock will be and how many shares to issue.

In the future, our board of directors may choose to designate one or more new series of preferred stock, with rights and preferences that are undetermined at this time. In general, dividends on any preferred stock that might be issued must be paid in full before you, as a holder of common stock, would receive any dividends, and holders of preferred stock would be paid out before you would receive anything if the Company were liquidated. Thus, our board of directors will have the ability to issue shares of preferred stock that would have rights superior to your rights as a holder of common stock which could be dilutive to and diminish the value of your common stock.

An entity holding as little as a 5% interest in our outstanding common stock could, under certain circumstances, be subject to regulation as a “bank holding company.”

Any entity, including a “group” composed of natural persons, owning or controlling with the power to vote 25% or more of our outstanding common stock, or 5% or more if the holder otherwise exercises a “controlling influence” over us, may be subject to regulation as a “bank holding company” in accordance with the Bank Holding Company Act (“BHCA”). In addition, (i) any bank holding company or foreign bank with a U.S. presence may be required to obtain the approval of the Federal Reserve under the BHCA to acquire or retain 5% or more of our outstanding common stock, and (ii) any person not otherwise defined as a company by the BHCA and its implementing regulations may be required to obtain the approval of the Federal Reserve under the Change in Bank Control Act to acquire or retain 10% or more of our outstanding common stock.

Becoming a bank holding company imposes statutory and regulatory restrictions and obligations, such as providing managerial and financial strength for any bank subsidiaries. Regulation as a bank holding company could require the holder to divest all or a portion of the holder’s investment in our common stock or those nonbanking investments that may be deemed impermissible or incompatible with bank holding company status, such as a material investment in a company unrelated to banking.

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Item 1B.      Unresolved Staff Comments

Not Applicable

Item 2.          Properties

The Company’s and the Bank’s main office is located at 3527 Wheeler Road in Augusta, Georgia. This office was opened in September 2005. The Bank operates three banking offices in Augusta, Georgia, two banking offices in Martinez, Georgia, one banking office in Evans, Georgia, and one banking office in Thomson, Georgia. All of these offices are owned by the Bank. The following table sets forth the location of each of the Bank’s branch offices and the date each branch opened for business:

Branch	Date Opened
Hill Street Office, Thomson, Georgia	January 1989
Daniel Village Office, Augusta, Georgia	March 1999
West Town Office, Martinez, Georgia	October 1999
Medical Center Office, Augusta, Georgia	January 2001
Fury’s Ferry Road Office, Martinez, Georgia	April 2002
Main Office, Augusta, Georgia	September 2005
Evans Office, Evans, Georgia	May 2013

The Bank also leases office space at one location in Augusta to house the Mortgage Division. The Mortgage Division also operates offices in Savannah, Georgia out of leased office space.

Item 3.           Legal Proceedings

The nature of the business of the Bank is such that it ordinarily results in a certain amount of litigation. In the opinion of management, except as otherwise described below, there are no material pending legal proceedings to which the Company or the Bank is a party or of which any of their properties are the subject; nor are there material proceedings known to the Company or the Bank to be contemplated by any governmental authority; nor are there material proceedings known to the Company or the Bank, pending or contemplated, in which any director, officer, or affiliate or any principal security holder of the Company or the Bank, or any associate of any of the foregoing, is a party or has an interest adverse to the Company or the Bank.

In August 2011, the Bank was sued in State Court by a subcontractor related to a residential development project foreclosed upon by the Bank. The suit alleged various claims against the Bank, all of which the Bank denied. Following a mistrial in November 2012 where the jury failed to reach a verdict, a second trial in January 2013 resulted in a verdict against the Bank in the amount of $597,500. The Bank is in the process of appealing this verdict and believes it has meritorious defenses against the verdict. The entire judgment amount was recorded as a contingent liability as of December 31, 2012 and 2013; therefore management does not expect that there will be any material adverse effects on the Company’s future consolidated financial position, results of operations or cash flows related to this litigation.

Item 4.          Mine Safety Disclosures

Not applicable.

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PART II

Item 5.          Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

The Company’s common stock is listed on the OTC Markets Group’s (OTCQB) tier under the symbol “GECR”. The market for the Company’s common stock must be characterized as a limited market due to its relatively low trading volume and lack of analyst coverage. The following table sets forth for the periods indicated the quarterly high and low sales prices per share as reported by the OTCQB Marketplace. These quotations also reflect inter-dealer prices without retail mark-ups, mark-downs, or commissions and may not necessarily represent actual transactions. The share prices below reflect all stock splits.

	High		Low
Fiscal year ended December 31, 2013
First Quarter	$	14.25	$	12.60
Second Quarter	$	15.99	$	14.02
Third Quarter	$	16.00	$	15.07
Fourth Quarter	$	15.25	$	14.25
Fiscal year ended December 31, 2012
First Quarter	$	9.25	$	6.75
Second Quarter	$	9.45	$	7.00
Third Quarter	$	10.75	$	8.86
Fourth Quarter	$	12.98	$	10.70

Holders of Common Stock

As of March 7, 2014 the number of holders of record of the Company’s common stock was approximately 520.

Dividends

Cash dividends totaling $623,000 and $432,000 were paid by the Company during the years ended December 31, 2013 and 2012, respectively. The Company paid a quarterly dividend of $0.04 per share in the first quarter of 2013 and $0.045 for the second, third and fourth quarters of 2013. Future dividends, if any, will be determined by the Board of Directors of the Company in light of circumstances existing from time to time, including the Company’s growth, financial condition and results of operations, the continued existence of the restrictions described below on the Bank’s ability to pay dividends and other factors that the Board of Directors of the Company considers relevant. In addition, the Board of Directors of the Company may determine, from time to time, that it is prudent to pay special nonrecurring cash dividends in addition to or in lieu of regular cash dividends. Such special dividends will depend upon the financial performance of the Company and will take into account its capital position. No special dividend is presently contemplated.

Because the Company’s principal operations are conducted through the Bank, the Company generates cash to pay dividends primarily through dividends paid to it by the Bank. Accordingly, any dividends paid by the Company will depend on the Bank’s earnings, capital requirements, financial condition and other factors. Under Georgia law, the Bank may pay dividends only when and if the Bank is not insolvent. In addition, dividends may not be declared or paid at any time when the Bank does not have combined paid-in capital and appropriated retained earnings equal to at least 20% of the Bank’s capital stock. Moreover, dividends may not be paid by the Bank without the prior approval of the Georgia Department of Banking and Finance (the “Georgia Banking Department”), if the dividends are in excess of specified amounts fixed by the Georgia Banking Department.

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Equity Compensation Plan Information

The Company currently has three equity compensation plans: (i) the 1997 Stock Option Plan, which was approved by shareholders; (ii) the Amended and Restated 2004 Incentive Plan, which was approved by shareholders; and (iii) the Directors Equity Incentive Plan, which has not been approved by shareholders. The following table provides information as of December 31, 2013 regarding the Company’s then existing compensation plans and arrangements:

Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)		Weighted-average exercise price of outstanding options, warrants and rights (b)		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders:
1997 Stock Option Plan		29,751	$	16.36		-
2004 Incentive Plan		152,491	$	9.96		131,240
Equity compensation plans not approved by security holders		-		-		156,363
Total		182,242	$	11.00		287,603

Directors Equity Incentive Plan

The Directors Equity Incentive Plan provides that non-employee directors of the Company and the Bank may elect to purchase shares of the Company’s common stock in lieu of receiving cash for director fees earned in each calendar quarter. The purchase price for shares acquired under the plan is equal to 85% of the average closing market price of the Company’s common stock for the last ten trading days of each quarter as reported on the Over-the-Counter Bulletin Board. A non-employee director may join the plan at any time during the last seven days of each calendar quarter. The Directors Equity Incentive Plan also provides non-employee directors of the Company and the Bank annual retainer shares in the form of 1) base award shares, plus 2) bonus shares for service as Board chairman, plus 3) bonus shares for service on various committees. Non-employee advisory board members also qualify to receive annual award shares from the Directors Equity Incentive Plan provided they meet an agreed upon annual attendance requirement. During 2013, the Company issued 7,646 shares of stock as retainer stock, and 6,425 shares of stock in lieu of cash for directors’ fees.

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Item 6.          Selected Financial Data

Our selected consolidated financial data presented below as of and for the years ended December 31, 2009 through 2013 is derived from our audited consolidated financial statements. Our audited consolidated balance sheet as of December 31, 2013 and 2012 and results of operations for each of the years in the two year period ended December 31, 2013 are included elsewhere in this report. All years have been restated as necessary for stock dividends and stock splits.

	At and for the Years Ended December 31,
	(Dollars in thousands, except per share data)
	2013			2012			2011		2010			2009
Selected Balance Sheet Data:
Assets	$	516,498		$	506,175		$	493,252	$	495,311		$	484,013
Investment securities		158,439			132,760			100,283		79,431			47,289
Loans, held for investment		274,747			265,831			285,614		316,809			336,849
Loans, held for sale (LHFS)		31,298			48,432			45,227		46,570			58,135
Allowance for loan losses		5,357			5,954			6,804		7,866			5,072
Deposits		419,705			416,956			411,395		414,749			405,240
Repurchase agreements		12,111			3,333			3,565		3,467			7,297
Long-term debt		-			-			25,000		25,000			25,000
Short-term debt		22,200			25,028			-		-			-
Other liabilities		5,593			4,533			2,847		7,119			3,203
Shareholders’ equity		56,889			56,325			50,445		44,976			43,273
Selected Results of Operations Data:
Interest income		18,332			20,569			22,323		24,409			24,604
Interest expense		2,115			3,682			5,702		7,290			9,722
Net interest income		16,217			16,887			16,621		17,119			14,882
Provision for loan losses		(2,029	)		(605	)		1,727		8,355			3,082
Net interest income after provision for provision for loan losses		18,246			17,492			14,894		8,764			11,800
Non-interest income		12,904			14,653			11,170		13,246			14,157
Non-interest expense		22,466			22,861			20,127		20,543			20,902
Income before taxes		8,684			9,284			5,937		1,467			5,055
Income tax expense (benefit)		2,480			2,663			1,838		(66	)		1,303
Net income	$	6,204		$	6,621		$	4,099	$	1,533		$	3,752
Per Share Data
Net income – basic	$	1.74		$	1.84		$	1.15	$	0.44		$	1.08
Net income – diluted	$	1.73		$	1.84		$	1.15	$	0.44		$	1.07
Book value	$	15.93		$	15.96		$	14.04	$	12.72		$	12.37
Dividends	$	0.175		$	0.120		$	0.000	$	0.000		$	0.000
Weighted average number of shares outstanding:
Basic		3,558,876			3,599,431			3,561,064		3,519,408			3,484,309
Diluted		3,590,120			3,599,431			3,561,064		3,519,408			3,492,871

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	At and for the Years Ended December 31,
	2013			2012			2011			2010			2009
Performance Ratios:
Return on average assets		1.26	%		1.34	%		0.82	%		0.32	%		0.79	%
Return on average equity		10.68	%		12.16	%		8.45	%		3.41	%		8.93	%
Net interest margin (1)		3.59	%		3.71	%		3.53	%		3.83	%		3.37	%
Efficiency ratio		74.78	%		72.48	%		72.42	%		67.65	%		71.98	%
Loan (excl LHFS) to deposit ratio		65.39	%		63.76	%		69.43	%		76.39	%		83.12	%
Asset Quality Ratios:
Nonperforming loans to total loans		0.70	%		1.24	%		2.34	%		1.72	%		1.57	%
Nonperforming assets to total loans (excl LHFS + OREO)		2.44	%		3.60	%		5.03	%		2.82	%		3.12	%
Allowance for loan losses to nonperforming loans		278.38	%		152.86	%		87.98	%		125.71	%		81.94	%
Allowance for loan losses to total loans (excl LHFS)		1.95	%		2.24	%		2.38	%		2.48	%		1.51	%
Capital Ratios:
Average equity to average assets		11.77	%		11.04	%		9.66	%		9.36	%		8.81	%
Leverage ratio		11.93	%		11.13	%		9.74	%		9.32	%		8.96	%
Tier 1 risk-based capital ratio		15.99	%		15.34	%		12.11	%		11.75	%		10.50	%
Total risk-based capital ratio		17.25	%		16.59	%		13.37	%		13.01	%		11.74	%
(1) Non-tax equivalent.

Item 7.          Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion provides information about the major components of the results of operations and financial condition, liquidity and capital resources of the Company and Bank and should be read in conjunction with the “Business” and “Financial Statements” sections included elsewhere in this report. Information given in response to Item 6 of this report, “Selected Financial Data,” is incorporated by reference in response to this Item 7.

Critical Accounting Policies 

The accounting and reporting policies of the Company and Bank are in accordance with accounting principles generally accepted in the United States and conform to general practices within the banking industry. Application of these principles requires management to make estimates or judgments that affect the amounts reported in the financial statements and the accompanying notes. These estimates are based on information available as of the date of the financial statements; accordingly, as this information changes, the financial statements could reflect different estimates or judgments. Certain policies inherently have a greater reliance on the use of estimates, and as such have a greater possibility of producing results that could be materially different than originally reported.

Estimates or judgments are necessary when assets and liabilities are required to be recorded at fair value, when a decline in the value of an asset not carried on the financial statements at fair value warrants an impairment write-down or a valuation reserve to be established, or when an asset or liability needs to be recorded contingent upon a future event. Carrying assets and liabilities at fair value inherently results in more financial statement volatility. The fair values and the information used to record the valuation adjustments for certain assets and liabilities are based either on quoted market prices or are provided by other third-party sources, when available. When third-party information is not available, valuation adjustments are estimated in good faith by management primarily through the use of internal cash flow modeling techniques.

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Management views critical accounting policies to be those that are highly dependent on subjective or complex judgments, estimates and assumptions, and where changes in those estimates and assumptions could have a significant impact on the financial statements.

Allowance for Loan Losses

The allowance for loan losses represents management’s estimate of probable credit losses inherent in the loan portfolio. Estimating the amount of the allowance for loan losses requires significant judgment and the use of estimates related to the amount and timing of expected future cash flows on impaired loans, estimated losses on non-impaired loans based on historical loss experience, and consideration of current economic trends and conditions, all of which may be susceptible to significant change. The loan portfolio also represents the largest asset type on the consolidated balance sheet. Loan losses are charged off against the allowance, while recoveries of amounts previously charged off are credited to the allowance. A provision for loan losses is charged to operations based on management’s periodic evaluation of the factors previously mentioned, as well as other pertinent factors.

The allowance consists of specific and general components. The specific component relates to loans that are individually classified as impaired when, based on current information and events, it is probable that the Bank will be unable to collect all amounts due according to the contractual terms of the loan agreement. These analyses involve a high degree of judgment in estimating the amount of loss associated with specific loans, including estimating the amount and timing of future cash flows and collateral values. The general component covers non-impaired loans and is based on historical loss experience adjusted for current factors. Management considers the actual loss history experience over the last four quarters, one year, two year, and three year periods by portfolio segment to determine the historical loss experience used in the general component. This actual loss experience is supplemented with other economic factors based on the risks present for each portfolio segment. These economic factors include consideration of the following: levels of and trends in delinquencies and impaired loans; levels of and trends in charge-offs and recoveries for the most recent three years; trends in volume and terms of loans; effects of any changes in risk selection and underwriting standards; other changes in lending policies, procedures, and practices; experience, ability, and depth of lending management and other relevant staff; national and local economic trends and conditions; industry conditions; and effects of changes in credit concentrations.

There are many factors affecting the allowance for loan losses; some are quantitative while others require qualitative judgment. Although management believes its process for determining the allowance adequately considers all possible factors that could potentially result in credit losses, the process includes subjective elements and may be susceptible to significant change. To the extent actual outcomes differ from management’s estimates, additional provisions for loan losses could be required that could adversely affect the Bank’s earnings or financial position in future periods.

Mortgage Banking Derivatives

Loan commitments, whose underlying mortgage loans at origination will be held for sale upon funding of the loan, are derivative instruments. Loan commitments are recognized on the consolidated balance sheet in other assets and other liabilities at fair value, with changes in their fair values recognized in other non-interest income. At the inception of a loan commitment, the Bank generally will simultaneously enter into a best efforts forward commitment to protect the Bank from losses on sales of the loans underlying the loan commitment by securing the ultimate sale price and delivery date of the loan.

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Other Real Estate Owned 

Assets acquired through or instead of loan foreclosure are initially recorded at fair value less estimated costs to sell when acquired, establishing a new cost basis. If fair value declines subsequent to foreclosure, a valuation allowance is recorded through expense. Operating costs after acquisition are expensed. Costs related to the development and improvement of other real estate owned are capitalized.

Additional information on the Bank’s loan portfolio and allowance for loan losses can be found in the “Loan Portfolio” section of this Item 7. Note 1, Note 4, Note 7, and Note 19 to the consolidated financial statements also include additional information on the Bank’s accounting policies related to the allowance for loan losses and other real estate owned.

Fair Value of Financial Instruments

Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in Note 19 to the consolidated financial statements. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or in market conditions could significantly affect these estimates.

Consolidated Financial Information

Certain consolidated financial information for the Company and Bank as of and for the years ended December 31, 2013 and 2012 is presented below:

	December 31, 2013					December 31, 2012
	Total Assets		Net Income (Loss)			Total Assets		Net Income (Loss)
	(Dollars in thousands)
GECR consolidated	$	516,498	$	6,204		$	506,175	$	6,621
The Bank	$	516,135	$	6,388		$	505,919	$	6,775
The Company			$	(184	)			$	(154	)

The Holding Company on a stand alone basis incurred $288,635 and $229,140 in operational costs for the years ended December 31, 2013 and 2012, respectively. The operational costs were partially offset by income tax benefits of $104,615 and $74,990 for 2013 and 2012, respectively. In total, the net loss for the Holding Company alone was ($184,020) and ($154,150) for the years ended December 31, 2013 and 2012, respectively. The Holding Company alone received $160,000 and $1,500,000 in dividends from the Bank for the years ended December 31, 2013 and 2012, respectively. The Holding Company’s operational costs are primarily funded by proceeds from the exercise of stock options and the dividends received from the Bank.

Results of Operations – Comparison of 2013 and 2012

Balance Sheet

The Company’s total assets increased $10.3 million or 2.0%, to $516.5 million at December 31, 2013 from $506.2 million at December 31, 2012. Average total assets were $493.3 million in 2013 and $493.0 million in 2012, a slight increase of $300,000 or 0.1%. Loans held for sale decreased from $48.4 million at December 31, 2012 to $31.3 million at December 31, 2013, a decrease of $17.1 million or 35.4%. Substantially all loans held for sale originated by the Bank consist of well-secured single family residential mortgage loans which are originated with a sales commitment and are sold in the secondary market shortly after origination, thus reducing the Bank’s credit risk. All other loans, net of allowance, totaled $269.4 million at December 31, 2013 compared to $259.9 million at December 31, 2012, an increase of $9.5 million or 3.7%. Commercial and industrial loans decreased $1.7 million or 8.6%, from $19.8 million at December 31, 2012 to $18.1 million at December 31, 2013. Real estate – residential loans increased $300,000 or 0.5%, from $55.5 million at December 31, 2012 to $55.8 million at December 31, 2013, and real estate – construction, land and land development loans increased $4.6 million or 8.1%, from $55.9 million at December 31, 2012 to $60.5 million at December 31, 2013. Real estate – commercial loans increased $5.9 million or 4.5%, from $130.7 million at December 31, 2012 to $136.6 million at December 31, 2013. Consumer loans totaled $3.9 million at December 31, 2012 and 2013. The increases in most categories are primarily the result of improving loan demand.

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While the Bank experienced an increase in loans and a decrease in loans held for sale, liquidity has continued to remain strong. Therefore, the Bank invested in securities available-for-sale during 2013. Securities available-for-sale increased $25.6 million or 19.3% to $158.4 million at December, 31, 2013 compared to $132.8 million at December 31, 2012. Cash and due from banks decreased $13.5 million or 44.4% to $16.8 million at December 31, 2013 from $30.3 million at December 31, 2012. At December 31, 2013 and 2012, interest bearing balances with correspondent banks totaled $7.2 million and $23.10 million, respectively.

During September 2013, the Bank purchased $5.0 million in additional bank-owned life insurance (BOLI). Please see Note 5 of the consolidated financial statements incorporated in this 10-K at Exhibit 99.1 for additional information.

The allowance for loan losses was $5.4 million at December 31, 2013 and $6.0 million at December 31, 2012. This represents a decrease of $0.6 million or 10.0%. The decrease in the allowance is based upon management’s rating and assessment of the loan portfolio and the credit risk inherent in the portfolio, and is impacted significantly by an increase in recoveries during 2013. The Bank’s ratio of allowance for loan losses to gross loans, excluding loans held for sale, was 1.95% at December 31, 2013, compared to 2.24% at December 31, 2012.

Other real estate owned decreased $1.0 million or 16.7% to $4.9 million at December 31, 2013 compared to $5.9 million at December 31, 2012. The decrease is primarily related to the liquidation of other real estate assets as well as a continued decrease in the acquisition of other properties.

Total deposit accounts at December 31, 2013 were $419.7 million, an increase of $2.7 million or 0.7%, from $417.0 million at December 31, 2012. Core deposits (DDA, NOW, money market and savings) increased $19.6 million or 7.9% in 2013 as compared to 2012. Non-interest bearing deposits increased by $5.8 million or 8.3%, from $70.9 million at December 31, 2012 to $76.7 million at December 31, 2013. NOW accounts increased by $2.2 million or 3.8% from $57.5 million at December 31, 2012 to $59.7 million at December 31, 2013. Savings accounts were $64.2 million at December 31, 2012 compared to $56.8 million at December 31, 2013, a decrease of $7.4 million or 11.6%. Money market accounts increased $19.1 million or 34.7%, from $55.0 million at December 31, 2012 to $74.1 million at December 31, 2013. Time deposits decreased $16.9 million or 10.0% in 2013 as compared to 2012. Classified in time deposits, brokered deposits totaled $13.4 million at December 31, 2013, a decrease of $2.0 million or 13%, compared to $15.4 million at December 31, 2012. The overall decline in brokered deposits is a direct result of the Bank’s increased reliance on core deposits.    Total other borrowings by the Bank were $22.2 million at December 31, 2013, a decrease of $2.8 million or 11.2%, from the balance of $25.0 million at December 31, 2012. The Bank paid off $25.0 million in long-term advances during 2012 and subsequently borrowed $25.0 million from the Federal Home Loan Bank through its short-term line of credit product prior to December 31, 2012. The Bank has continued to utilize this daily rate credit product during 2013. Repurchase agreements increased from $3.3 million to $12.1 million from December 31, 2012 to December 31, 2013, respectively.

The Bank’s loan to deposit ratio was 72.9% at December 31, 2013 and 75.4% at December 31, 2012. Excluding mortgage loans held for sale, this ratio was 65.4% for 2013 and 63.7% for 2012.

Income Statement

Interest income was $18.3 million for 2013 compared to $20.6 million for 2012, a decrease of $2.3 million or 10.9%. This decrease was primarily the result of a continued decline in earning asset yields. While loan demand improved during 2013, the Bank experienced most of the increase in demand during the fourth quarter. As the loans held for sale decreased during 2013, the interest income for these loans also decreased. As a result of reduced loans held for sale, management continued to purchase investment securities. These securities produced a lower yield due to the low interest rate environment. Interest expense decreased $1.6 million or 42.6%, from $3.7 million in 2012 to $2.1 million in 2013. This decrease in interest expense was due to the lower cost of funds resulting from the continued downward repricing of deposits as well as the lower rate on borrowings. Cost of funds also declined due to significant increases in low-cost core deposits and significant decreases in time deposits. As noted above, there were notable changes in the deposit product balance mix which decreased cost of funds. Net interest income was $16.2 million for 2013 compared to $16.9 million for 2012, a decrease of $0.7 million or 4%. Net interest margin decreased to 3.59% for the year ended December 31, 2013 from 3.71% for 2012.

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The Bank recorded a negative (credit) provision for loan losses of $0.6 million for the year ended December 31, 2012 compared to a negative (credit) provision for loan losses of $2.0 million for 2013, a decrease in expense of $1.4 million. The credit provision and decrease from 2012 is the result of management’s detailed review of the Bank’s loan portfolio, the decreased level of the Bank’s non-performing loans, net recoveries for the period and level of loan delinquencies. The allowance for loan losses to total loans, excluding loans held for sale, decreased to 1.95% at December 31, 2013 from 2.24% at December 31, 2012. Net recoveries were $1.4 million in 2013 compared to net charge offs of $245,000 in 2012. This change of $1.7 million resulted in annual charge-off to average loans excluding loans held for sale ratios of (-0.54%) and 0.09% for the years ended December 31, 2013 and 2012, respectively. Management considers the current allowance for loan losses to be appropriate based upon its detailed analysis of the potential risk in the portfolio; however, there can be no assurance that charge-offs in future periods will not exceed the allowance for loan losses or that additional provisions will not be required.

Non-interest income for 2013 was $12.9 million compared to $14.7 million for 2012, a decrease of $1.8 million or 11.9%. This decrease in 2013 is due to the decrease in mortgage banking activities, partially offset by an increase in other income. Mortgage banking activities decreased to $8.2 million in 2013 from $11.4 million in 2012, a decrease of $3.2 million or 27.7%. The mortgage origination volume sold in 2013 was $379.7 million compared to $431.5 million in 2012, a decrease of $51.8 million or 12.0%. Other income increased from $1.9 million to $3.0 million from 2012 to 2013, primarily due to an $806,000 gain on BOLI, a $175,000 recovery of legal fees, and an increase in the gain on sale of real estate of $191,000.

Non-interest expense decreased from $22.9 million in 2012 to $22.5 million in 2013, a decrease of $400,000 or 1.7%. This decrease is due to several factors. Salaries and employee benefits increased $500,000 or 4.3% primarily due to an increase in the number of full-time employees from 2012 to 2013 and normal pay increases. Occupancy expense remained relatively flat, declining $100,000. Other real estate owned expenses decreased $600,000 due to decreased valuation adjustments. Other operating expenses decreased $200,000. In 2012, the Bank recorded a contingent liability of $600,000 due to a legal judgment against the Bank related to OREO. The Bank also recorded an FHLB prepayment penalty of $392,000 for the early payoff of two FHLB advances in 2012. During 2013, the Bank experienced increased loan related expenses of $395,000 and data processing expenses of $296,000. Therefore, other non-interest expense remained comparable from 2012 to 2013.

The Company recorded income tax expense of $2.5 million and $2.7 million for the years ended December 31, 2013 and 2012, respectively. The slight decrease in 2013 resulted from the decrease in net income before taxes. The effective tax rate was 28.6% and 28.8% for the years ended December 31, 2013 and 2012, respectively. The slight decrease in the effective tax rate was due to certain tax-exempt income items including the life insurance death benefit.

As a result of the above factors, net income decreased in 2013 by $400,000 from $6.6 million in 2012 to $6.2 million in 2013.

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Distribution of Assets, Liabilities and Shareholders’ Equity; Interest Rates and Interest Differential

The following table presents the average balance sheet of the consolidated Company for the years ended December 31, 2013, 2012 and 2011. Also presented is the consolidated Company’s actual interest income and expense from each asset and liability, the average yield of each interest-earning asset and the average cost of each interest-bearing liability. This table includes all major categories of interest-earning assets and interest-bearing liabilities. Non-accruing loans have been included in the category “Loans, net of unearned income.”

CONSOLIDATED AVERAGE BALANCE SHEETS

(Dollars in thousands)

	Year Ended December 31,
	2013								2012								2011
	Average Balance			Interest Income/ Expense		Average Yield / Rate			Average Balance			Interest Income/ Expense		Average Yield / Rate			Average Balance			Interest Income/ Expense		Average Yield / Rate
ASSETS
INTEREST-EARNING ASSETS
Loans, net of unearned income	$	294,608		$	15,277		5.19	%	$	320,597		$	18,019		5.62	%	$	334,751		$	19,624		5.86	%
Investment securities		150,060			3,008		2.00	%		109,163			2,485		2.28	%		99,858			2,611		2.61	%
Fed funds sold & cash in banks		12,723			47		0.37	%		25,842			65		0.25	%		36,363			88		0.24	%
Total interest-earning assets		457,391			18,332		4.00	%		455,602			20,569		4.51	%		470,972			22,323		4.74	%
NON-INTEREST-EARNING ASSETS
Cash and due from banks		6,638								10,166								7,716
Bank premises and fixed assets		9,380								8,875								9,119
Accrued interest receivable		1,518								1,513								1,662
Other assets		23,911								23,522								20,520
Allowance for loan losses		(5,492	)							(6,697	)							(7,627	)
Total assets	$	493,346							$	492,981							$	502,362
LIABILITIES AND SHAREHOLDERS’ EQUITY
INTEREST-BEARING DEPOSITS
NOW accounts	$	56,472		$	82		0.15	%	$	50,604		$	178		0.35	%	$	40,958		$	163		0.40	%
Savings accounts		63,259			226		0.36	%		62,092			294		0.47	%		60,056			535		0.89	%
Money market accounts		69,423			243		0.35	%		54,281			249		0.46	%		45,311			333		0.73	%
Time accounts		160,769			1,537		0.96	%		183,331			2,282		1.24	%		224,842			3,648		1.62	%
Total interest-bearing deposits		349,923			2,088		0.60	%		350,308			3,003		0.86	%		371,167			4,679		1.26	%
OTHER INTEREST-BEARING LIABILITIES
Borrowed funds		8,147			27		0.33	%		22,904			679		2.96	%		29,561			1,023		3.46	%
Total interest-bearing liabilities		358,070			2,115		0.59	%		373,212			3,682		0.99	%		400,728			5,702		1.42	%
NON-INTEREST-BEARING LIABILITIES AND SHAREHOLDERS’ EQUITY
Demand deposits		72,593								61,933								50,463
Other liabilities		4,606								3,400								2,647
Shareholders’ equity		58,077								54,436								48,524
Total liabilities and shareholders’ equity	$	493,346							$	492,981							$	502,362
Net interest income				$	16,217							$	16,887							$	16,621
Interest rate spread							3.42	%							3.52	%							3.32	%
Net interest margin							3.59	%							3.71	%							3.53	%
Average loans (excl LHFS) to average deposits							75.92	%							78.72	%							83.40	%

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Rate/Volume Analysis of Net Interest Income

The following table sets forth information regarding changes in net interest income attributable to changes in average balances and changes in rates for the periods indicated. The effect of a change in average balance has been determined by applying the average rate in the earlier period to the change in average balance in the later period, as compared with the earlier period. The balance of the change in interest income or expense and net interest income has been attributed to a change in average rate. Non-accruing loans have been included in the category “Net loans and loans held for sale.”

	Comparison of Years Ended December 31, 2013 and 2012									Comparison of Years Ended December 31, 2012 and 2011
	(Dollars in thousands)
	Increase (Decrease) Due to
	Balance			Rate			Total			Balance			Rate			Total
Interest earned on:
Tax-exempt securities	$	155		$	(58	)	$	97		$	115		$	(79	)	$	36
Taxable securities		773			(347	)		426			156			(318	)		(162	)
Federal funds sold and cash in banks		(33	)		15			(18	)		(25	)		2			(23	)
Net loans and loans held for sale		(1,461	)		(1,281	)		(2,742	)		(830	)		(775	)		(1,605	)
Total interest income		(566	)		(1,671	)		(2,237	)		(584	)		(1,170	)		(1,754	)
Interest paid on:
NOW deposits		21			(117	)		(96	)		38			(23	)		15
Money market deposits		69			(75	)		(6	)		66			(150	)		(84	)
Savings deposits		6			(74	)		(68	)		18			(259	)		(241	)
Time deposits		(281	)		(464	)		(745	)		(674	)		(692	)		(1,366	)
Borrowed funds		(437	)		(215	)		(652	)		(230	)		(114	)		(344	)
Total interest expense		(622	)		(945	)		(1,567	)		(782	)		(1,238	)		(2,020	)
Increase (decrease) in net interest income	$	56		$	(726	)	$	(670	)	$	198		$	68		$	266

Loan Portfolio

The Bank engages in a full complement of lending activities, including commercial, real estate and consumer loans. As of December 31, 2013, the Bank’s loan portfolio, excluding loans held for sale, consisted of 6.6% commercial and industrial loans, 22.0% real estate – construction, land and land development loans, 20.3% real estate – residential loans, 49.7% real estate – commercial loans, and 1.4% consumer loans.

Commercial and industrial lending is directed principally towards businesses whose demands for funds fall within the Bank’s legal lending limits and which are potential deposit customers of the Bank. This category of loans includes loans made to individual, partnership or corporate borrowers, for a variety of business purposes. These loans include short-term lines of credit, short- to medium-term plant and equipment loans, and loans for general working capital.

The Bank’s real estate – construction, land and land development loans consist of residential and commercial construction loans as well as land development loans. These loans are primarily construction and development loans to builders in the Augusta and Savannah, Georgia areas.

Real estate – residential loans include residential mortgage lending and are primarily single-family residential loans secured by the residential property.  Home equity lines are also included in real estate – residential loans.

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Real estate – commercial loans include commercial mortgage loans that are generally secured by office buildings, retail establishments and other types of real property, both owner occupied and non-owner occupied. A significant component of this type of lending is to owner occupied borrowers, including churches.

Consumer loans consist primarily of installment loans to individuals for personal, family or household purposes, including automobile loans to individuals and pre-approved lines of credit. 

While risk of loss in the Bank’s loan portfolio is primarily tied to the credit quality of the various borrowers, risk of loss may also increase due to factors beyond the Bank’s control, such as local, regional and/or national economic downturns. General conditions in the real estate market may also impact the relative risk in the Bank’s real estate portfolio.

With respect to loans which exceed the Bank’s lending limits or established credit criteria, the Bank may originate such loans and sell them to another bank. The Bank may also purchase loans originated by other banks. Management of the Bank does not believe that its loan purchase participations will necessarily pose any greater risk of loss than loans which the Bank originates.

The following table presents the categories of loans contained in the Bank’s loan portfolio as of the end of the five most recent fiscal years and the total amount of all loans for such periods:

	As of December 31,
	2013			2012			2011			2010			2009
	(Dollars in thousands)
Commercial and industrial	$	18,113		$	19,816		$	18,864		$	20,298		$	22,906
Real estate – construction, land and land development		60,476			55,926			73,823			86,418			107,429
Real estate – residential		55,792			55,495			56,563			61,194			66,050
Real estate – commercial		136,632			130,729			131,725			142,351			133,140
Consumer		3,931			3,921			4,715			6,606			7,468
Total loans receivable	$	274,944		$	265,887		$	285,690		$	316,867		$	336,993
Less:
Unearned income and deferred loan fees		(197	)		(56	)		(76	)		(58	)		(144	)
Allowance for possible loan losses		(5,357	)		(5,954	)		(6,804	)		(7,866	)		(5,072	)
Total (net of allowance)	$	269,390		$	259,877		$	278,810		$	308,943		$	331,777

In addition to the above, the Bank also had $31.3 million and $48.4 million of single family residential mortgage loans held for sale at December 31, 2013 and 2012, respectively, that were originated by the Bank’s Mortgage Division.

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The table below presents an analysis of maturities of loans by loan type as of December 31, 2013:

	Due in 1 Year or Less		Due in 1 to 5 Years		Due After 5 Years		Total
	(Dollars in thousands)
Commercial and industrial	$	9,264	$	8,079	$	770	$	18,113
Real estate – construction, land and land development		39,573		15,654		5,249		60,476
Real estate – residential		20,555		19,653		15,584		55,792
Real estate – commercial		25,982		42,627		68,023		136,632
Consumer		941		2,932		58		3,931
Total loans receivable	$	96,315	$	88,945	$	89,684	$	274,944

The following is a presentation of an analysis of sensitivities of loans to changes in interest rates as of December 31, 2013 (in thousands):

Loans due after one year with predetermined interest rates	$	32,250
Loans due after one year with floating interest rates		146,379
Total loans due after one year	$	178,629

The following table presents information regarding non-accrual and past due loans at the dates indicated:

	As of December 31,
	2013		2012		2011		2010		2009
	(Dollars in thousands)
Loans accounted for on a non-accrual basis
Number		23		35		48		50		63
Amount	$	1,924	$	3,896	$	7,734	$	6,257	$	6,190
Accruing loans which are contractually past due 90 days or more as to principal and interest payments
Number		-		-		-		-		-
Amount	$	-	$	-	$	-	$	-	$	-

Accrual of interest is discontinued when a loan becomes 90 days past due as to principal and interest or when, in management’s judgment, the interest will not be collectible in the normal course of business. Additional interest income of approximately $63,700 in 2013 would have been recorded if all loans accounted for on a non-accrual basis had been current in accordance with their original terms. No interest income has been recognized in 2013 or 2012 on loans that have been accounted for on a non-accrual basis.

At December 31, 2013, there were no loans classified for regulatory purposes as doubtful, substandard or special mention that have not been disclosed above which (i) represent or result from trends or uncertainties which management reasonably expects will materially impact future operating results, liquidity or capital resources, or (ii) represent material credits about which management is aware of any information which causes management to have serious doubts as to the ability of such borrowers to comply with the loan repayment terms.

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Troubled Debt Restructurings

As of December 31, 2013, the Bank had classified 25 loans totaling $7.3 million as “troubled debt restructurings” as defined in ASC 310-40. As of December 31, 2012, the Bank had classified 23 loans totaling $6.7 million as troubled debt restructurings. Included in the troubled debt restructurings was $473,000 and $1.6 million of loans also on non-accrual as of December 31, 2013 and December 31, 2012, respectively.

The following table presents loans classified as “troubled debt restructurings” as defined in ASC 310-40:

	As of December 31,
	2013		2012		2011		2010		2009
	(in thousands)
Troubled debt restructurings	$	7,329	$	6,734	$	9,770	$	9,250	$	4,188

The Bank has utilized different types of concessions related to troubled debt restructurings. The Bank may perform “A note/B note” workout structures as a subset of the Bank’s troubled debt restructuring strategy. Under an A note/B note workout structure, the new A note is underwritten in accordance with customary troubled debt restructuring underwriting standards and is reasonably assured of full repayment while the B note is not. The B note is immediately charged off upon restructuring.

In the case above, if the loan was accruing prior to the troubled debt restructuring (documented with the loan legally bifurcated into an A note fully supporting accrual status and a B note fully contractually forgiven and charged off), the A note may remain on accrual status. If the loan was on nonaccrual prior to the troubled debt restructuring (documented with the loan legally bifurcated into an A note fully supporting accrual status and a B note contractually forgiven and fully charged off), the A note may be returned to accrual status, and risk rated accordingly, after a reasonable period of performance under the troubled debt restructuring terms. Six months of payment performance is generally required to return these loans to accrual status.

The A note will continue to be classified as a troubled debt restructuring and only may be removed from impaired status in years after the restructuring if (a) the restructuring agreement specifies an interest rate equal to or greater than the rate that the Bank was willing to accept at the time of the restructuring for a new loan with comparable risk, and (b) the loan is not impaired based on the terms specified by the restructuring agreement.

The Bank restructured one loan during 2011 using this A note/B note structure. As of December 31, 2013 and 2012 the outstanding balance of this loan was $635,000 and $690,000 , respectively. The Bank had no loans using this structure prior to 2011.

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Summary of Loan Loss Experience

The following presents an analysis of the Bank’s loss experience for the periods indicated.

	Years Ended December 31,
	2013			2012			2011			2010			2009
	(Dollars in thousands)
Allowance for loan losses, beginning of year	$	5,954		$	6,804		$	7,866		$	5,072		$	4,284
Charge‑offs:
Commercial and industrial		12			98			40			139			208
Real estate – construction, land and land development		-			692			2,134			3,663			1,382
Real estate – residential		96			242			570			980			553
Real estate – commercial		105			179			319			850			-
Consumer		93			108			105			147			199
		306			1,319			3,168			5,779			2,342
Recoveries:
Commercial and industrial		6			225			62			63			14
Real estate – construction, land and land development		1,467			734			20			16			-
Real estate – residential		37			43			147			13			4
Real estate – commercial		190			14			99			22			1
Consumer		38			58			51			104			29
		1,738			1,074			379			218			48
Net charge-offs (recoveries)		(1,432	)		245			2,789			5,561			2,294
Provision charged to operations		(2,029	)		(605	)		1,727			8,355			3,082
Allowance for loan losses, end of year	$	5,357		$	5,954		$	6,804		$	7,866		$	5,072
Ratio of net charge-offs (recoveries) during the period to average loans outstanding during the period		-0.54	%		0.09	%		0.90	%		1.69	%		0.67	%

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Allowance for Loan Losses

In the normal course of business, the Bank has recognized and will continue to recognize losses resulting from the inability of certain borrowers to repay loans and the insufficient realizable value of collateral securing such loans.

Accordingly, management has established an allowance for loan losses, totaling $5.4 million at December 31, 2013, which is allocated according to the following table, along with the percentage of loans in each category to total loans:

	December 31, 2013					December 31, 2012					December 31, 2011					December 31, 2010					December 31, 2009
	Allowance Amount		Portfolio as % of Loans			Allowance Amount		Portfolio as % of Loans			Allowance Amount		Portfolio as % of Loans			Allowance Amount		Portfolio as % of Loans			Allowance Amount		Portfolio as % of Loans
	(Dollars in thousands)
Commercial and industrial	$	227		6.6	%	$	225		7.4	%	$	185		6.6	%	$	227		6.4	%	$	259		6.8	%
Real estate – construction, land and land development		1,626		22.0	%		2,870		21.0	%		3,219		25.8	%		3,908		27.3	%		2,364		31.9	%
Real estate – residential		772		20.3	%		794		20.9	%		1,141		19.8	%		1,070		19.3	%		827		19.6	%
Real estate – commercial		2,458		49.7	%		1,872		49.2	%		1,706		46.1	%		1,617		44.9	%		1,319		39.5	%
Consumer		210		1.4	%		77		1.5	%		108		1.7	%		251		2.1	%		176		2.2	%
Unallocated		64		--			116		--			445		--			793		--			127		--
Total	$	5,357				$	5,954				$	6,804				$	7,866				$	5,072

In evaluating the Bank’s allowance for loan losses, management takes into consideration concentrations within the loan portfolio, past loan loss experience, growth of the portfolio, current economic conditions and the appraised value of collateral securing loans. Although management believes the allowance for loan losses is adequate, management’s evaluation of losses is a continuing process which may necessitate adjustments to the allowance in future periods.

Commercial and industrial loans represented approximately 6.6% of outstanding loans at December 31, 2013. The Bank generally originates commercial loans on a secured basis. Management believes that the secured status of a substantial portion of the commercial loan portfolio reduces the risk of loss inherently present in commercial loans.

Real estate – construction, land and land development loans represented approximately 22.0% of the Bank’s outstanding loans at December 31, 2013. This category of the loan portfolio consists of commercial and residential construction and development loans located in the Bank’s market areas. Management closely monitors the performance of these loans and periodically inspects properties and development progress. Management considers these factors in estimating and evaluating the allowance for loan losses.

Real estate – residential loans constituted approximately 20.3% of outstanding loans at December 31, 2013. Residential mortgages are generally secured by the underlying residence. Management currently believes that these loans are adequately secured.

Real estate – commercial loans were approximately 49.7% of outstanding loans at December 31, 2013. Management believes the risk of loss for commercial real estate loans is generally higher than residential loans. Management continuously monitors the performance of the commercial real estate portfolio and collateral values.

Consumer loans represented approximately 1.4% of outstanding loans at December 31, 2013 and are also well secured. The majority of the Bank’s consumer loans are secured by collateral primarily consisting of automobiles, boats and other personal property. Management believes that these loans inherently possess less risk than other categories of loans.

Loans held for sale consist of single family residential mortgage loans originated by the Bank’s Mortgage Division. These loans are originated with an investor purchase commitment and are sold shortly after origination by the Bank.

The Bank’s management and Board of Directors monitor the loan portfolio monthly to evaluate the adequacy of the allowance for loan losses. Ratings on classified loans are also reviewed and performance is evaluated in determining the allowance. The provision for loan losses charged to operations is based on this analysis. In addition, management and the Board consider such factors as delinquent loans, collateral values and economic conditions in their evaluation of the adequacy of the allowance for loan losses.

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Losses on Mortgage Loans Previously Sold

Losses on mortgage loans previously sold are recorded when the Bank indemnifies investors or repurchases mortgage loans previously sold. The representations and warranties in our loan sale agreements require that we repurchase or indemnify the investors for losses or costs on loans we sell under certain limited conditions. Some of these conditions include underwriting errors or omissions, fraud or material misstatements by the borrower in the loan application or invalid market value on the collateral property due to deficiencies in the appraisal. In addition, our loan sale contracts define a condition in which the borrower defaults during a short period of time, typically 120 days to one year, as an Early Payment Default (“EPD”). In the event of an EPD, we are required to return the premium paid by the investor for the loan as well as certain administrative fees, and in some cases repurchase the loan or indemnify the investor, unless an EPD waiver is obtained. The Bank obtains EPD waivers from as many investors as possible. The Bank incurred losses of $196,000 and $167,000 for indemnification and repurchase obligations for the years ended December 31, 2013 and 2012, respectively.

The following table presents the recourse liability activity for the years ended December 31, 2013 and 2012:

Recourse Liability for Mortgage Loans Sold Activity

(Dollars in thousands)

	December 31, 2013			December 31, 2012
Beginning balance	$	772		$	245
Provision		499			499
Losses		(196	)		(167	)
Recoveries		15			195
Ending balance	$	1,090		$	772

Cash and Due from Banks

Cash on hand, cash items in the process of collection, and amounts due from correspondent banks and the Federal Reserve Bank are included in “Cash and Due from Banks.” As of December 31, 2013 and 2012, cash and due from banks totaled $16.8 million and $30.3 million, respectively. Interest-bearing cash on deposit with correspondent banks totaled $1.4 million as of December 31, 2013 compared to $4.8 million as of December 31, 2012. Interest-bearing cash on deposit in the Federal Reserve Bank excess balance fund was $1.3 million as of December 31, 2013 compared to $14.5 million as of December 31, 2012. Other cash funds required to be on reserve with the Federal Reserve Bank totaled $4.5 million and $3.8 million as of December 31, 2013 and 2012, respectively.

Investments

As of December 31, 2013, investment securities comprised approximately 30.7% of the Bank’s assets. The Bank invests primarily in obligations or agencies of the United States, mortgage-backed securities and obligations, certain obligations of states and municipalities, corporate securities, Federal Home Loan Bank stock, and bank-owned life insurance. The Bank also enters into federal funds transactions with its principal correspondent banks. The Bank may act as a net seller or net purchaser of such funds.

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The following table presents, for the dates indicated, the estimated fair market value of the Bank’s investment securities available for sale. The Bank has classified all of its investment securities as available for sale:

	As of December 31,
	2013		2012		2011
	(Dollars in thousands)
U.S government and agencies	$	58,281	$	55,565	$	31,069
Mortgage-backed securities		64,732		51,295		54,351
State and municipal		30,751		22,788		14,863
Corporate bonds		4,675		3,112		-
Total investment securities available for sale		158,439		132,760		100,283
Federal Home Loan Bank stock at cost		1,606		1,865		2,070
Total investment securities and FHLB stock	$	160,045	$	134,625	$	102,353

The following tables present the contractual maturities and weighted average yields of the Bank’s investment securities as of December 31, 2013:

	Maturities of Investment Securities
	One Year or Less		One To Five Years		Five To Ten Years		Over TenYears
	(Dollars in thousands)
U.S government and agencies	$	13,178	$	10,749	$	18,082	$	16,272
Mortgage-backed securities		-		36,212		24,722		3,798
State and municipal		-		10,016		16,170		4,565
Corporate bonds		-		2,155		2,520		-
Total	$	13,178	$	59,132	$	61,494	$	24,635

	Weighted Average Yields
	Less Than One Year			One To Five Years			Five To Ten Years			Over Ten Years
U.S government and agencies		2.09	%		1.20	%		1.63	%		1.85	%
Mortgage-backed securities		-			2.49	%		1.60	%		2.67	%
State and municipal		-			4.22	%		3.77	%		4.14	%
Corporate bonds		-			2.55	%		3.04	%		-
Total		2.09	%		2.55	%		2.24	%		2.40	%

The weighted average yields on tax-exempt obligations presented in the table above have been computed on a tax-equivalent basis.

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Increased liquidity has resulted in significant increases in investment securities, resulting in greater occurrence of issuer concentrations. The table below reflects investments with issuers having a book value which exceeds 10% of the Company’s shareholders’ equity as of December 31, 2013 and 2012:

	2013				2012
	Book Value		Market Value		Book Value		Market Value
	(Dollars in thousands)
Freddie Mac
U.S. agency securities	$	3,000	$	2,672	$	3,000	$	3,006
Mortgage-backed securities		13,214		12,937		7,517		7,693
Ginnie Mae
Mortgage-backed securities		23,760		23,393		19,020		19,439
Fannie Mae
U.S. agency securities		7,744		6,731		9,243		9,217
Mortgage-backed securities		29,122		28,402		23,468		24,164
Small Business Association
U.S. agency securities		35,841		35,574		30,261		30,482
Federal Home Loan Bank
U.S. agency securities		11,900		10,645		12,900		12,861
Total	$	124,581	$	120,354	$	105,409	$	106,862

In September 2007, $8.0 million in bank-owned life insurance policy (BOLI) was acquired through two policies in order to insure certain key officers of the Bank. In September 2013, an additional $5.0 million BOLI policy was acquired in order to insure certain key officers of the Bank. These policies are recorded at cash surrender value, net of surrender charges and/or early termination charges. As of December 31, 2013, the BOLI cash surrender value was $14.8 million, resulting in other income for 2013 of $448,000 and an annualized net yield of 4.06%.

Deposits

The Bank offers a wide range of commercial and consumer interest bearing and non-interest bearing deposit accounts, including checking accounts, savings accounts, money market accounts, negotiable order of withdrawal (“NOW”) accounts, individual retirement accounts, and certificates of deposit. The sources of deposits are residents, businesses and employees of businesses within the Bank’s market area, obtained through the personal solicitation of the Bank’s officers and directors, direct mail solicitation and advertisements published in the local media. Although de-emphasized in 2012 and 2013, the Bank has also utilized the brokered certificate of deposit market and the CDARS program for funding needs for loan origination and liquidity. These brokered and CDARS deposits are included in time deposits on the balance sheet. The Bank pays competitive interest rates on time and savings deposits. In addition, the Bank has implemented a service charge fee schedule competitive with other financial institutions in the Bank’s market area, covering such matters as maintenance fees on checking accounts, per item processing fees on checking accounts, returned check charges and similar items.

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The following table details, for the indicated periods, the average amount of and average rate paid on each of the following deposit categories:

	December 31,
	2013					2012					2011
Deposit Categories	Average Amount		Average Rate Paid			Average Amount		Average Rate Paid			Average Amount		Average Rate Paid
	(Dollars in thousands)
Non-interest bearing demand deposits	$	72,593		0.00	%	$	61,933		0.00	%	$	50,463		0.00	%
NOW and money market deposits		125,895		0.26	%		104,885		0.41	%		86,269		0.57	%
Savings deposits		63,259		0.36	%		62,092		0.47	%		60,056		0.89	%
Time deposits		160,769		0.96	%		183,331		1.24	%		224,842		1.62	%

The maturities of certificates of deposit and individual retirement accounts of $100,000 or more as of December 31, 2013 were as follows:

	December 31, 2013
	(Dollars in thousands)
Three months or less	$	15,938
Over three months through six months		27,384
Over six months through twelve months		14,470
Over twelve months		39,833
Total	$	97,625

Borrowed Funds

The Bank’s borrowed funds consist of short-term borrowings and long-term debt, including federal funds purchased, retail repurchase agreements and lines of credit with the Federal Home Loan Bank and the Federal Reserve Bank. The average balance of borrowed funds was approximately $8.1 million, and $22.9 million for the years ended December 31, 2013 and 2012, respectively.

The most significant borrowed funds categories for the Bank are the lines of credit from the Federal Home Loan Bank, consisting of the “Loans Held For Sale” program (LHFS), a short-term 1-4 family and commercial real estate loans line of credit (1-4 LOC).

At December 31, 2013 and 2012, there was no outstanding balance on the LHFS line of credit. The LHFS line of credit was not used in 2013 or 2012. The interest rate on the LHFS line of credit is equal to the Federal Home Loan Bank’s Daily Rate Credit Program rate plus 50 basis points.

The outstanding balance on the short-term 1-4 LOC was $22.2 million at December 31, 2013, and $25.0 million at December 31, 2012 and 2011. The average balance outstanding on the 1-4 LOC was $3.5 million for 2013 with a weighted average interest rate of 0.36%. The average balance outstanding on the 1-4 LOC was $1.6 million for 2012 with a weighted average interest rate of 0.40%. The average balance outstanding on the 1-4 LOC was $14,000 for 2011 with a weighted average interest rate of 0.36%. The maximum amount outstanding on the 1-4 LOC at any month end during 2013 was $22.2 million, compared to $25.0 million in 2012, and $5.0 million in 2011. This 1-4 LOC is secured by the Bank’s portfolio of 1-4 family first mortgage loans, excluding those loans that are held for sale, and commercial real estate loans. The interest rate on the 1-4 LOC is equal to the Federal Home Loan Bank’s Daily Rate Credit Program rate.

During 2007, a long-term convertible advance was established as an additional line of credit. At December 31, 2011, the outstanding balance on this advance was $10.0 million with a weighted average interest rate of 3.83%. This advance was paid off in September 2012. An additional, but similar, long-term convertible advance was also established during 2008. At December 31, 2011, the outstanding balance on this advance was $15.0 million with a weighted average interest rate of 3.33%. This advance was also paid off in September 2012.

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Return on Equity and Assets 

The following table presents certain profitability, return and capital ratios for the Company as of the end of the past three fiscal years.

	December 31,
	2013			2012			2011
Return on Average Assets		1.26	%		1.34	%		0.82	%
Return on Average Equity		10.68	%		12.16	%		8.45	%
Dividend Payout Ratio		10.04	%		6.52	%		0.00	%
Equity to Assets Ratio		11.01	%		11.13	%		10.23	%

Liquidity and Interest Rate Sensitivity

Deposit levels and the associated timing and quantity of funds flowing into and out of a bank inherently involve a degree of uncertainty. In order to ensure that it is capable of meeting depositors’ demands for funds, the Bank must maintain adequate liquidity. Liquid assets, consisting primarily of cash and deposits due from other banks, federal funds sold, funds held in a Federal Reserve Bank excess balance account, and investment securities maturing within one year, provide the source of such funds. Insufficient liquidity may force a bank to engage in emergency measures to secure necessary funding, which could be costly and negatively affect earnings. The Bank monitors its liquidity on a monthly basis and seeks to maintain it at an optimal level.

As of December 31, 2013, the Bank’s liquidity ratio was 38.4% as compared to 42.4% at December 31, 2012. In addition to the liquid assets described above, the Bank has a reserve funding source in the form of federal funds lines of credit with First National Bankers Bank and SunTrust Bank. Management is not aware of any demands, commitments or uncertainties which could materially affect the Bank’s liquidity position. However, should an unforeseen demand for funds arise, the Bank held readily marketable investment securities at December 31, 2013 with a total market value of $158.4 million in its available-for-sale portfolio which would provide an additional source of liquidity.

Gap management is a conservative asset/liability strategy designed to maximize earnings over a complete interest rate cycle while reducing or minimizing the Bank’s exposure to interest rate risk. Various assets and liabilities are termed “rate sensitive” when the interest rate can be replaced. By definition, the “gap” is the difference between rate sensitive assets and rate sensitive liabilities in a given time horizon. At December 31, 2013, the Bank was liability sensitive in the 0-3 month and 3-12 month time frames, but asset sensitive in the 1-5 years and 5 years or more time frames.

43

The following is an analysis of rate sensitive assets and liabilities as of December 31, 2013 (in thousands):

	0-3 months			3-12 months			1-5 years			More than 5 years		Total
	(Dollars in thousands)
Taxable securities	$	10,348		$	2,830		$	53,411		$	72,088	$	138,677
Tax-exempt securities		-			-			5,721			14,041		19,762
Federal funds sold and cash in banks		7,215			-			-			-		7,215
Loans		64,124			66,076			89,472			86,570		306,242
Total rate sensitive assets		81,687			68,906			148,604			172,699		471,896
NOW and money market deposits		133,717			-			-			-		133,717
Savings deposits		56,757			-			-			-		56,757
Time deposits		27,090			64,559			59,746			1,089		152,484
Total rate sensitive deposits		217,564			64,559			59,746			1,089		342,958
Borrowed funds		12,111			22,200			-			-		34,311
Total rate sensitive liabilities		229,675			86,759			59,746			1,089		377,269
Excess of rate sensitive assets less rate
sensitive liabilities	$	(147,988	)	$	(17,853	)	$	88,858		$	171,610	$	94,627
Cumulative gap	$	(147,988	)	$	(165,841	)	$	(76,983	)	$	94,627

Capital Resources

The equity capital of the Bank totaled $56.1 million at December 31, 2013, an increase of $700,000, or 1.3%, from equity capital of $55.4 million at December 31, 2012. The increase in equity capital was attributable to the Bank’s net income of $6.4 million, partially offset by dividends paid to the Company of $160,000 and a decrease of $5.5 million in the Bank’s after-tax unrealized gain/(loss) on available-for-sale securities, which is recognized in the available-for-sale portion of the bond portfolio by making adjustments to the equity capital account. The consolidated equity capital of the Company totaled $56.9 million at December 31, 2013 compared to $56.3 million at December 31, 2012.

The following table sets forth the applicable actual and required capital ratios for the Company and the Bank as of December 31, 2013:

Bank	December 31, 2013			Minimum Regulatory Requirement
Total risk-based capital ratio		17.25	%		8.00	%
Tier 1 Capital ratio		15.99	%		4.00	%
Leverage ratio		11.93	%		4.00	%
Company
Total risk-based capital ratio		17.44	%		8.00	%
Tier 1 Capital ratio		16.19	%		4.00	%
Leverage ratio		12.08	%		4.00	%

The above ratios indicate that the capital position of the Company and the Bank are sound and that the Company is well positioned for future growth.

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There are no commitments of capital resources known to management which would have a material impact on the Bank’s capital position.

Fair Value Measurements

Fair value measurements for assets and liabilities where there exists limited or no observable market data and therefore measurements are based primarily upon estimates, are often calculated based on the economic and competitive environment, the characteristics of the asset or liability, and other factors. Therefore, the results cannot be determined with precision and may not be realized in an actual sale or immediate settlement of the asset or liability. Additionally, there may be inherent weaknesses in any calculation technique, and changes in the underlying assumptions used, including discount rates and estimates of future cash flows, could significantly affect the results of current or future values. Additional information regarding the Company’s fair value measurements for assets and liabilities can be found in Note 19 to the consolidated financial statements.

Market Risk

Market risk is the risk arising from adverse changes in the fair value of financial instruments due to a change in interest rates, exchange rates and equity prices. Our primary market risk is interest rate risk.

The primary objective of asset/liability management is to manage interest rate risk and achieve reasonable stability in net interest income throughout interest rate cycles. This is achieved by maintaining the proper balance of rate sensitive earning assets and rate sensitive liabilities. The ratio that compares rate sensitive earning assets to rate sensitive liabilities is the principal factor in projecting the effect that fluctuating interest rates will have on future net interest income. Rate sensitive earning assets and interest-bearing liabilities are those that can be re-priced to current market rates within a relatively short time period. Management monitors the rate sensitivity of earning assets and interest-bearing liabilities over the entire life of these instruments in order to manage this risk.

We have not experienced a high level of volatility in net interest income primarily because of the relatively large base of core deposits that do not re-price on a contractual basis. These deposit products include regular savings, interest-bearing transaction accounts and money market savings accounts. Balances for these accounts are reported based on historical re-pricing. However, the rates paid are typically not directly related to market interest rates, since management has some discretion in adjusting these rates as market rates change.

Off-Balance Sheet Arrangements

In the ordinary course of business, the Bank may enter into off-balance sheet financial instruments which are not reflected in the financial statements. These instruments include commitments to extend credit and standby letters of credit. Such financial instruments are recorded in the financial statements when funds are disbursed or the instruments become payable.

Following is an analysis of significant off-balance sheet financial instruments:

	December 31,
	2013		2012
	(Dollars in thousands)
Commitments to extend credit	$	74,144	$	48,976
Standby letters of credit		472		1,029
Total	$	74,616	$	50,005

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Contractual Obligations

We have various contractual obligations that we must fund as part of our normal operations. The following table shows aggregate information about our contractual obligations, including interest, and the periods in which payments are due. The amounts and time periods are measured from December 31, 2013, based upon rates in effect at December 31, 2013.

	Payments due by Period (Dollars in thousands)
	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Time Deposits	$	152,484	$	91,649	$	42,999	$	16,747	$	1,089
Short-Term Debt		22,200		22,200		-		-		-
Data Processing Obligations		1,567		1,014		553		-
Operating Lease Obligations		498		239		259		-		-
Service Contract Obligations		381		261		120		-		-
Total	$	177,130	$	115,363	$	43,931	$	16,747	$	1,089

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Item 7A.      Quantitative and Qualitative Disclosures About Market Risk

Information in response to this Item 7A is incorporated by reference from the previous sections of Item 7 of this report entitled: “Liquidity and Interest Rate Sensitivity” and “Market Risk.”

Item 8.        Financial Statements and Supplementary Data

The following financial statements are filed as Exhibit 99.1 to this Annual Report on Form 10-K and incorporated herein by reference:

Report of Independent Registered Public Accounting Firm

Consolidated Statements of Financial Condition

   as of December 31, 2013 and 2012

Consolidated Statements of Operations

   for the years ended December 31, 2013 and 2012

Consolidated Statements of Comprehensive Income

   for the years ended December 31, 2013 and 2012

Consolidated Statements of Shareholders’ Equity

   for the years ended December 31, 2013 and 2012

Consolidated Statements of Cash Flows

   for the years ended December 31, 2013 and 2012

Notes to Consolidated Financial Statements

Item 9.        Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

There has been no occurrence requiring a response to this item.

Item 9A.      Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the Company’s disclosure controls and procedures as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of the end of the fiscal year covered by this report and have concluded that the Company’s disclosure controls and procedures are effective.

Management’s Annual Report on Internal Control over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. The Company’s management, including its Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of its internal control over financial reporting based on the framework in “Internal Control—Integrated Framework established in 1992” and issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, the Company’s management concluded that the Company’s internal control over financial reporting was effective as of December 31, 2013.

47

Pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report, this report on Form 10-K does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting.

Changes in Internal Control over Financial Reporting

During the fourth quarter of 2013, there were no changes in the Company’s internal control over financial reporting that have materially affected, or that are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Item 9B.       Other Information

Not applicable.

48

PART III

Certain information required by Part III of this Form 10-K is incorporated by reference from the Company’s definitive proxy statement to be filed pursuant to Regulation 14A for the Company’s Annual Meeting of Shareholders to be held on May 19, 2014 (the “Proxy Statement”). The Company will, within 120 days of the end of its fiscal year, file the Proxy Statement with the Securities and Exchange Commission.

Item 10.       Directors, Executive Officers and Corporate Governance

The information responsive to this item is incorporated by reference from the sections entitled “Election of Class II Directors,” “Corporate Governance and Board Matters,” “Executive Officers,” and Section 16(a) Beneficial Ownership Reporting Compliance” contained in the Proxy Statement.

Item 11.       Executive Compensation

The information responsive to this item is incorporated by reference from the section entitled “Executive Compensation” contained in the Proxy Statement.

Item 12.       Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information responsive to this item is incorporated by reference from the section entitled “Security Ownership of Certain Beneficial Owners and Management” contained in the Proxy Statement. See also the section entitled “Equity Compensation Plan Information” in Item 5 of this Annual Report on Form 10-K.

Item 13.       Certain Relationships and Related Transactions, and Director Independence

The information responsive to this item is incorporated by reference from the sections entitled “Corporate Governance and Board Matters” and “Transactions with Related Persons, Promoters and Certain Control Persons” contained in the Proxy Statement.

Item 14.       Principal Accountant Fees and Services

The information responsive to this item is incorporated by reference from the section entitled “Ratification of Appointment of Independent Registered Public Accounting Firm – Principal Accountant Fees and Services” contained in the Proxy Statement.

49

PART IV

Item 15.       Exhibits and Financial Statement Schedules

(a)1. The following financial statements are filed as Exhibit 99.1 to this Report and incorporated herein by reference:

Report of Independent Registered Public Accounting Firm

Consolidated Statements of Financial Condition as of December 31, 2013 and 2012

Consolidated Statements of Operations for the years ended December 31, 2013 and 2012

Consolidated Statements of Comprehensive Income for the years ended December 31, 2013 and 2012

Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2013 and 2012

Consolidated Statements of Cash Flows for the years ended December 31, 2013 and 2012

Notes to Consolidated Financial Statements

(a)2. Financial Statement Schedules

Not Applicable

50

(a)3 & (b). The following exhibits are filed with this report:

Exhibit Number		Description of Exhibit
3.1	-	Articles of Incorporation of the Company (incorporated herein by reference to the exhibit contained in the Company’s Registration Statement on Form SB-2 under the Securities Act of 1933, as amended, Registration No. 333-69763, previously filed with the Commission).
3.1.1	-	Articles of Amendment to the Articles of Incorporation of the Company (incorporated herein by reference to the exhibit contained in the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2000, previously filed with the Commission).
3.2	-	By-Laws of the Company (incorporated herein by reference to the exhibit contained in the Company’s Registration Statement on Form SB-2 under the Securities Act of 1933, as amended (Registration No. 333-69763)).
10.1*	-	1997 Stock Option Plan (incorporated herein by reference to the exhibit contained in the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2001, previously filed with the Commission).
10.1.1*	-	Amendment to 1997 Stock Option Plan effective July 28, 2008 (incorporated herein by reference to the exhibit contained in the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2010, previously filed with the Commission).
10.1.2*	-	Amendment to 1997 Stock Option Plan effective July 26, 2010 (incorporated herein by reference to the exhibit 10.2 contained in the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010, previously filed with the Commission).
10.1.3*		Amendment to 1997 Stock Option Plan effective May 20, 2013 (incorporated herein by reference to the exhibit 10.1 contained in the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, previously filed with the Commission).
10.2*	-	Amended and Restated 2004 Incentive Plan effective April 23, 2012 (incorporated herein by reference to Exhibit 10.1 contained in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2012, previously filed with the Commission).
10.3*	-	Form of Incentive Stock Option Agreement under the Company’s 2004 Incentive Plan (incorporated herein by reference to the exhibit contained in the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2005, previously filed with the Commission).
10.4*	-	Severance Protection Agreement between First Bank of Georgia and Remer Y. Brinson, III, dated September 4, 2000 (incorporated herein by reference to the exhibit contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006, previously filed with the Commission).

51

Exhibit Number		Description of Exhibit
10.5*	-	Severance Protection Agreement with Thomas J. Flournoy (incorporated herein by reference to the exhibit contained in the Company’s Form 8-K filing on June 26, 2009 previously filed with the Commission).
10.6*^	-	Compensation Arrangements with Remer Y. Brinson, III.
10.7*^	-	Compensation Arrangements with Thomas J. Flournoy.
10.8*^	-	First Bank of Georgia Annual Incentive Plan for Remer Y. Brinson, III.
10.9*^	-	First Bank of Georgia Annual Incentive Plan for Thomas J. Flournoy.
10.10*	-	Directors Equity Incentive Plan effective October 26, 2009 (incorporated herein by reference to the exhibit contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009, previously filed with the Commission).
10.10.1*	-	Amendment No. 1 to Directors Equity Incentive Plan effective January 23, 2012 (incorporated herein by reference to Exhibit 10.10.1 contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011, previously filed with the Commission).
10.10.2*	-	Amendment No. 2 to Directors Equity Incentive Plan effective April 23, 2012 (incorporated herein by reference to Exhibit 10.3 contained in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2012, previously filed with the Commission).
10.11*	-	Form of Restricted Stock Award and Details (incorporated herein by reference to Exhibit 10.4 contained in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2012, previously filed with the Commission).
10.12*	-	First Bank of Georgia Supplemental Executive Retirement Plan for Key Officers effective October 22, 2007 (incorporated herein by reference to Exhibit 10.12 contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012, previously filed with the Commission).
10.13*		First Bank of Georgia Death Benefit Plan for Select Management (including the Company’s named executive officers) (incorporated herein by reference to Exhibit 10.1 contained in the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2013, previously filed with the Commission).
14.1	-	Code of Ethics (incorporated herein by reference from Exhibit 99.2 contained in the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2004, previously filed with the Commission).
21.1^	-	Subsidiaries of the Registrant.

52

Exhibit Number		Description of Exhibit
23.1^	-	Consent of Crowe Horwath LLP
31.1^	-	Certification of President and Chief Executive Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
31.2^	-	Certification of Senior Vice President and Chief Financial Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
32.1^	-	Certifications Pursuant to Section 906 of Sarbanes-Oxley Act of 2002.
99.1^	-	Financial Statements.
101.INS^	-	XBRL Instance Document**
101.SCH^	-	XBRL Taxonomy Extension Schema Document**
101.CAL^	-	XBRL Taxonomy Extension Calculation Linkbase Document**
101.DEF^	-	XBRL Taxonomy Extension Definition Linkbase Document**
101.LAB^	-	XBRL Taxonomy Extension Label Linkbase Document**
101.PRE^	-	XBRL Taxonomy Extension Presentation Linkbase Document**

* - Denotes a management contract or compensatory plan or arrangement.

** - In accordance with Regulation S-T, XBRL (Extensible Business Reporting Language) related information in Exhibit No. (101) to this Annual Report on From 10-K shall be deemed “furnished” and not “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, and shall not be incorporated by reference into any registration statement pursuant to the Securities Act of 1933, as amended.

 ^ - Filed herewith.

53

SIGNATURES

Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

GEORGIA-CAROLINA BANCSHARES, INC.

	By:	/s/ Remer Y. Brinson, III
Date: March 7, 2014		Remer Y. Brinson, III
		President and Chief Executive Officer
		(principal executive officer)

	By:	/s/ Thomas J. Flournoy
Date: March 7, 2014		Thomas J. Flournoy
		Senior Vice President and Chief Financial Officer
		(principal financial and accounting officer)

54

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

DIRECTORS	DATE	DIRECTORS	DATE
/s/ Patrick G. Blanchard	March 7, 2014	/s/ Jefferson B. A. Knox	March 7, 2014
Patrick G. Blanchard		Jefferson B. A. Knox
/s/ Remer Y. Brinson, III	March 7, 2014	/s/ John W. Lee	March 7, 2014
Remer Y. Brinson, III		John W. Lee
/s/ Mac A. Bowman	March 7, 2014	/s/ James L. Lemley, M.D.	March 7, 2014
Mac A. Bowman		James L. Lemley, M.D.
/s/ Philip G. Farr	March 7, 2014	/s/ William D. McKnight	March 7, 2014
Philip G. Farr		William D. McKnight
/s/ Samuel A. Fowler, Jr.	March 7, 2014	/s/ A. Montague Miller	March 7, 2014
Samuel A. Fowler, Jr.		A. Montague Miller
/s/ Arthur J. Gay, Jr.	March 7, 2014	/s/ Robert N. Wilson, Jr.	March 7, 2014
Arthur J. Gay, Jr.		Robert N. Wilson, Jr.
/s/ George H. Inman	March 7, 2014	/s/ Bennye M. Young	March 7, 2014
George H. Inman		Bennye M. Young
/s/ David W. Joesbury, Sr.	March 7, 2014
David W. Joesbury, Sr.

55

EXHIBIT INDEX

Exhibit Number Description of Exhibit

10.6*^	-	Compensation Arrangements with Remer Y. Brinson, III.
10.7*^	-	Compensation Arrangements with Thomas J. Flournoy.
10.8*^	-	First Bank of Georgia Annual Incentive Plan for Remer Y. Brinson, III.
10.9*^	-	First Bank of Georgia Annual Incentive Plan for Thomas J. Flournoy.
21.1^	-	Subsidiaries of the Registrant.
23.1^	-	Consent of Crowe Horwath LLP
31.1^	-	Certification of President and Chief Executive Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
31.2^	-	Certification of Senior Vice President and Chief Financial Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
32.1^	-	Certifications Pursuant to Section 906 of Sarbanes-Oxley Act of 2002.
99.1^	-	Financial Statements.
101.INS^	-	XBRL Instance Document**
101.SCH^	-	XBRL Taxonomy Extension Schema Document**
101.CAL^	-	XBRL Taxonomy Extension Calculation Linkbase Document**
101.DEF^	-	XBRL Taxonomy Extension Definition Linkbase Document**
101.LAB^	-	XBRL Taxonomy Extension Label Linkbase Document**
101.PRE^	-	XBRL Taxonomy Extension Presentation Linkbase Document**

* - Denotes a management contract or compensatory plan or arrangement.

** - In accordance with Regulation S-T, XBRL (Extensible Business Reporting Language) related information in Exhibit No. (101) to this Annual Report on From 10-K shall be deemed “furnished” and not “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, and shall not be incorporated by reference into any registration statement pursuant to the Securities Act of 1933, as amended.

 ^ - Filed herewith.

56

EX-10

EXHIBIT 10.6

Compensation Arrangements with Remer Y. Brinson, III

Neither Georgia-Carolina Bancshares, Inc. (“Company”), nor First Bank of Georgia (“Bank”), has a written employment agreement with Remer Y. Brinson, III, President and Chief Executive Officer of Georgia-Carolina Bancshares, Inc. and First Bank of Georgia. Mr. Brinson’s current (2014) salary is $320,000 and Mr. Brinson is eligible for an annual incentive award under the Bank’s Annual Incentive Plan, pursuant to which he received $185,857 for his performance in 2013. See Exhibit 10.8 for a description of Mr. Brinson’s Annual Incentive Plan. Mr. Brinson is eligible for stock option, restricted stock and other awards under the Company’s incentive plans as determined from time to time by the Board of Directors of the Company. In addition, Mr. Brinson participates in the Bank’s medical, dental, life and disability insurance plans and he may participate in the Company’s 401(k) plan. Mr. Brinson also receives the following perquisites: payment of private and civic club membership dues, provision of an automobile and an automobile allowance. The aggregate value of these perquisites in 2013 was less than $10,000.

Mr. Brinson entered into a Severance Protection Agreement with the Bank, which entitles him to certain payments following a change in control of the Company, which agreement is included as an exhibit to this Annual Report and is described in the Company’s annual proxy statements. Mr. Brinson also participates in the Bank’s Supplemental Executive Retirement Plan for certain key officers, which provides supplemental benefits upon retirement, termination of employment, death, disability or a change of control of the Bank, and is also included as an exhibit to this Annual Report and is described in the Company’s annual proxy statements. The Bank has also purchased bank owned life insurance (“BOLI”) on Mr. Brinson’s life, which plan and description are included as an exhibit to this Annual Report.

An annual incentive award (if any) shall be paid in restricted stock with three year cliff vesting based on a formula related to the Company’s return on average assets (“ROAA”). The formula for determining the number of shares of restricted stock to be awarded is based on the Company’s achievement of its annual ROAA goals, ranging from 0.85% (threshold award percentage) to 1.25% (stretch award percentage) of achievement for 2014, with a straight line calculation being used for awards between the ROAA threshold and the stretch. If the threshold ROAA target is achieved, then the eligible executive will automatically receive a minimum of 2,500 shares of restricted stock, which will range up to a maximum of 5,000 shares of restricted stock if the stretch is achieved.

EX-10

EXHIBIT 10.7

Compensation Arrangements with Thomas J. Flournoy

Neither Georgia-Carolina Bancshares, Inc. (“Company”), nor First Bank of Georgia (“Bank”), has a written employment agreement with Thomas J. Flournoy, Senior Vice President and Chief Financial Officer of Georgia-Carolina Bancshares, Inc. and First Bank of Georgia. Mr. Flournoy’s current (2014) salary is $192,100 and Mr. Flournoy is eligible for an annual incentive award under the Bank’s Annual Incentive Plan, pursuant to which he received $73,503 for his performance in 2013. See Exhibit 10.9 for a description of Mr. Flournoy’s Annual Incentive Plan. Mr. Flournoy is eligible for stock option, restricted stock and other awards under the Company’s incentive plans as determined from time to time by the Board of Directors of the Company. In addition, Mr. Flournoy participates in the Bank’s medical, dental, life and disability insurance plans and he may participate in the Company’s 401(k) plan.

Mr. Flournoy entered into a Severance Protection Agreement with the Bank, which entitles him to certain payments following a change in control of the Company, which agreement is included as an exhibit to this Annual Report and is described in the Company’s proxy statements. The Bank has also purchased bank owned life insurance (“BOLI”) on Mr. Flournoy’s life, which plan and description are included as an exhibit to this Annual Report.

An annual incentive award (if any) shall be paid in restricted stock with three year cliff vesting based on a formula related to the Company’s return on average assets (“ROAA”). The formula for determining the number of shares of restricted stock to be awarded is based on the Company’s achievement of its annual ROAA goals, ranging from 0.85% (threshold award percentage) to 1.25% (stretch award percentage) of achievement for 2014, with a straight line calculation being used for awards between the ROAA threshold and the stretch. If the threshold ROAA target is achieved, then the eligible executive will automatically receive a minimum of 1,500 shares of restricted stock, which will range up to a maximum of 3,000 shares of restricted stock if the stretch is achieved.

EX-10

EXHIBIT 10.8

First Bank of Georgia Annual Incentive Plan

for

Remer Y. Brinson, III, President and Chief Executive Officer,

Georgia-Carolina Bancshares, Inc. and First Bank of Georgia

Pursuant to the First Bank of Georgia Annual Incentive Plan (the “Plan”), Mr. Brinson may earn an incentive award equal to a percentage of his annual base salary. The cash incentive award is based upon meeting certain financial performance objectives established at the beginning of each calendar year.

The performance measures for Mr. Brinson are related to asset growth, net income (including accruals for incentive payments under the AIP), and a subjective assessment by the Board of Directors. The financial performance objectives of asset growth and net income are assigned a weighting factor of 40% each, and the subjective assessment of the Board of Directors is assigned a weighting factor of 20%.

The AIP includes a “threshold,” “target” and “stretch” or aspiration goal in each of the asset growth and net income categories. Failure to meet the threshold goals results in no incentive payment in that category. Achievement of the threshold goals is designed to result in an incentive award of 15% of base salary. Achievement of the target goals is designed to result in an incentive award of 30% of base salary. Achievement of the stretch goals is designed to result in an incentive award of 60% of base salary. The performance objectives are designed so that the achievement of the target goals would be considered to be reflective of superior performance, and the target goals are considered to be difficult to achieve.

Certain credit quality measures are also included in the AIP, which can have the effect of increasing or decreasing the incentive award amount by as much as 45%. The credit quality measures are designed to act as control measures to ensure that net income is not achieved at the expense of credit quality, and that balanced results are achieved. The credit quality measures include expectations related to: (i) classified assets as a percent of total assets, (ii) charge-offs as a percent of loans, and (iii) delinquencies as a percent of loans. If the credit quality results do not meet expectations for a particular credit quality measure, the incentive award will be reduced by 15%. If the credit quality results meet expectations, there is no impact on the incentive award. If the credit quality results exceed expectations, there will be a 15% increase in the incentive award. Adjustments under the credit quality measures will only be made if the threshold net income measure is exceeded.

The subjective assessment of the Board of Directors takes into account various circumstances, developments and occurrences during the year which may have had an impact on the performance measures, and the Board of Directors may act subjectively based upon those considerations and may make upward or downward adjustments to an incentive award based upon the 20% weighting factor.

Including the subjective assessment of the Board of Directors at the maximum amount, and assuming that (i) the stretch goals were attained for each financial performance category, and (ii) the results of each of the credit quality measures exceeded expectations, the maximum annual incentive award which could be earned in 2014 is 70.8% of base salary.

Pursuant to the actual results for the year ended December 31, 2013, Mr. Brinson’s incentive award included a provision for meeting the “stretch” goal for net income and the “target” goal for asset growth. The three credit quality criteria increased Mr. Brinson’s incentive award for 2013. Two criteria exceeded expectations, and one criteria did not meet expectations. Mr. Brinson’s incentive award for 2013 also included a subjective assessment of the Board of Directors at the “stretch” level. Therefore, pursuant to the 2013 AIP, Mr. Brinson’s incentive award was $185,857.

The financial performance objectives and credit quality measures may be adjusted annually by the Board of Directors or an appropriate committee of the Board of Directors. In 2014, the subjective assessment portion of the Plan will be paid, if at all, in restricted stock awards under the 2004 Incentive Plan, with immediate vesting, based upon the fair market value of the shares at the date of grant.

EX-10

EXHIBIT 10.9

First Bank of Georgia Annual Incentive Plan

for

Thomas J. Flournoy, Senior Vice President and Chief Financial Officer,

Georgia-Carolina Bancshares, Inc. and First Bank of Georgia

Pursuant to the First Bank of Georgia Annual Incentive Plan (the “Plan”), Mr. Flournoy may earn an incentive award equal to a percentage of his annual base salary. The cash incentive award is based upon meeting certain financial performance objectives established at the beginning of each calendar year.

      The performance measures for Mr. Flournoy are also related to asset growth, net income (including accruals for incentive payments under the AIP), and a subjective assessment by the Board of Directors. The financial performance objectives of asset growth and net income are assigned a weighting factor of 40% each, and the subjective assessment of the Board of Directors is assigned a weighting factor of 20%.

The AIP for Mr. Flournoy includes a “threshold,” “target” and “stretch” or aspiration goal in each of the asset growth and net income categories. Failure to meet the threshold goals results in no incentive payment in that category. Achievement of the threshold goals is designed to result in an incentive award of 10% of base salary. Achievement of the target goals is designed to result in an incentive award of 20% of base salary. Achievement of the stretch goals is designed to result in an incentive award of 40% of base salary. The performance objectives are designed so that the achievement of the target goals would be considered to be reflective of superior performance, and the target goals are considered to be difficult to achieve.

Certain credit quality measures are also included in the AIP, which can have the effect of increasing or decreasing the incentive award based on net income by as much 45%. The credit quality measures are designed to act as control measures to ensure that net income is not achieved at the expense of credit quality, and that balanced results are achieved. The credit quality measures include expectations related to: (i) classified assets as a percent of total assets, (ii) charge-offs as a percent of loans, and (iii) delinquencies as a percent of loans. If the credit quality results do not meet expectations for a particular credit quality measure, the incentive award will be reduced by 15%. If the credit quality results meet expectations, there is no impact on the incentive award. If the credit quality results exceed expectations, there will be a 15% increase in the incentive award. Adjustments under the credit quality measures will only be made if the threshold net income measure is exceeded.

The subjective assessment of the Board of Directors takes into account various circumstances, developments and occurrences during the year which may have had an impact on financial performance measures, and the Board of Directors may act subjectively based upon those considerations and may make upward or downward adjustments to an incentive award based upon the 20% weighting factor.

Including the subjective assessment of the Board of Directors at the maximum amount, and assuming (i) the stretch goals were attained for each financial performance category, and (ii) the results of each of the quality measures exceeded expectations, the maximum annual incentive award which could be earned in 2014 is 47.2% of base salary.

Pursuant to the actual results for the year ended December 31, 2013, Mr. Flournoy’s incentive award included a provision for meeting the “stretch” goal for net income and the “target” goal for asset growth. The three credit quality criteria increased Mr. Flournoy’s incentive award for 2013. Two criteria exceeded expectations, and one criteria did not meet expectations. Mr. Flournoy’s incentive award also included a subjective assessment of the Board of Directors at the “stretch” level. Therefore, pursuant to the 2013 AIP, Mr. Flournoy’s incentive award was $73,503.

The financial performance objectives and credit quality measures may be adjusted annually by the Board of Directors or an appropriate committee of the Board of Directors. In 2014, the subjective assessment portion of the Plan will be paid, if at all, in restricted stock awards under the 2004 Incentive Plan, with immediate vesting, based upon the fair market value of the shares at the date of grant.

EX-21

EXHIBIT 21.1

Subsidiaries of the Registrant

First Bank of Georgia

EX-23

EXHIBIT 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in Registration Statement Nos. 333-100176, 333-100177, 333-123855, and 333-190341 of Georgia-Carolina Bancshares, Inc. on Form S-8 of our report dated March 7, 2014, with respect to the consolidated financial statements of Georgia-Carolina Bancshares, Inc. as of December 31, 2013 and December 31, 2012 and for each of the years in the two year period ended December 31, 2013, which appears in this Annual Report on Form 10-K of Georgia-Carolina Bancshares, Inc.

/s/     Crowe Horwath LLP

Atlanta, Georgia

March 7, 2014

EX-31

EXHIBIT 31.1

CERTIFICATION

I, Remer Y. Brinson, III, certify that:

1.  I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2013 of Georgia-Carolina Bancshares, Inc.;

2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.  Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.  The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; and

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)  disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.  The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)  all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 7, 2014

/s/ Remer Y. Brinson, III

Remer Y. Brinson, III

President and Chief Executive Officer

EX-31

EXHIBIT 31.2

CERTIFICATION

I, Thomas J. Flournoy, certify that:

1.  I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2013 of Georgia-Carolina Bancshares, Inc.;

2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.  Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.  The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; and

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)  disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.  The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 7, 2014

/s/ Thomas J. Flournoy

Thomas J. Flournoy

Senior Vice President and

Chief Financial Officer

EX-32

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Georgia-Carolina Bancshares, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2013 as filed with the Securities and Exchange Commission on or about the date hereof (the “Report”), the undersigned, Remer Y. Brinson, III, President and Chief Executive Officer of the Company, and Thomas J. Flournoy, Senior Vice President and Chief Financial Officer, do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)     The Report fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934; and

(2)     The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By:                              

                /s/ Remer Y. Brinson, III                       

Remer Y. Brinson, III

President and Chief Executive Officer

March 7, 2014

/s/ Thomas J. Flournoy      

Thomas J. Flournoy

Senior Vice President and Chief Financial Officer

March 7, 2014

EX-99

Exhibit 99.1

GEORGIA-CAROLINA BANCSHARES, INC.

Consolidated Financial Statements

For the Years Ended December 31, 2013 and 2012

GEORGIA-CAROLINA BANCSHARES, INC.

Table of Contents

Financial Statements

For the Years Ended December 31, 2013 and 2012

	Page
Report of Independent Registered Public Accounting Firm	1
Consolidated Statements of Financial Condition	2
Consolidated Statements of Operations	3
Consolidated Statements of Comprehensive Income	4
Consolidated Statements of Shareholders’ Equity	5
Consolidated Statements of Cash Flows	6
Notes to Consolidated Financial Statements	7-68

Report of Independent Registered Public Accounting Firm

Board of Directors and Shareholders

Georgia-Carolina Bancshares, Inc.

Augusta, Georgia

We have audited the accompanying consolidated statements of financial condition of Georgia-Carolina Bancshares, Inc. (the “Company”) as of December 31, 2013 and 2012, and the related consolidated statements of operations, comprehensive income, shareholders’ equity, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2013 and 2012, and the results of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.

/s/ Crowe Horwath LLP

Atlanta, Georgia

March 7, 2014

GEORGIA-CAROLINA BANCSHARES, INC.

Consolidated Statements of Financial Condition

December 31, 2013 and 2012

(dollars in thousands, except per share data)

	2013			2012
Assets
Cash and due from banks	$	16,828		$	30,279
Securities available-for-sale		158,439			132,760
Loans		274,747			265,831
Allowance for loan losses		(5,357	)		(5,954	)
Loans, net		269,390			259,877
Loans held for sale at fair value		31,298			48,432
Bank-owned life insurance		14,834			10,001
Bank premises and equipment, net		9,512			8,790
Accrued interest receivable		1,854			1,772
Other real estate owned, net		4,897			5,876
Federal Home Loan Bank stock		1,606			1,865
Other assets		7,840			6,523
Total assets	$	516,498		$	506,175
Liabilities and Shareholders’ Equity
Liabilities
Deposits
Non-interest bearing	$	76,747		$	70,880
Interest-bearing:
NOW accounts		59,661			57,482
Savings		56,757			64,236
Money market accounts		74,056			54,982
Time deposits of $100,000 or more		97,625			111,537
Other time deposits		54,859			57,839
Total deposits		419,705			416,956
Short-term debt		22,200			25,028
Repurchase agreements		12,111			3,333
Other liabilities		5,593			4,533
Total liabilities		459,609			449,850
Shareholders’ equity
Preferred stock, par value $.001; 1,000,000 shares authorized; none issued		-			-
Common stock, par value $.001; 9,000,000 shares authorized; 3,572,204 and 3,528,296 shares issued and outstanding, respectively		4			4
Additional paid-in capital		16,192			15,687
Retained earnings		44,758			39,177
Accumulated other comprehensive income (loss)		(4,065	)		1,457
Total shareholders’ equity		56,889			56,325
Total liabilities and shareholders’ equity	$	516,498		$	506,175

See notes to consolidated financial statements.

2

GEORGIA-CAROLINA BANCSHARES, INC.

Consolidated Statements of Operations

For the Years Ended December 31, 2013 and 2012

(dollars in thousands, except per share data)

	2013			2012
Interest income
Interest and fees on loans	$	15,277		$	18,019
Interest on taxable securities		2,472			2,046
Interest on nontaxable securities		536			439
Other interest income		47			65
Total interest income		18,332			20,569
Interest expense
Interest on time deposits of $100,000 or more		1,029			1,600
Interest on other deposits		1,059			1,403
Interest on funds purchased and other borrowings		27			679
Total interest expense		2,115			3,682
Net interest income		16,217			16,887
Provision for loan losses		(2,029	)		(605	)
Net interest income after provision for loan losses		18,246			17,492
Non-interest income
Service charges on deposits		1,567			1,524
Mortgage banking activities		8,225			11,376
Gain (loss) on sale of securities		91			(105	)
Other		3,021			1,858
Total non-interest income		12,904			14,653
Non-interest expense
Salaries and employee benefits		12,853			12,329
Occupancy expenses		1,505			1,556
Other real estate owned expenses		1,654			2,284
Other		6,454			6,692
Total non-interest expense		22,466			22,861
Income before income taxes		8,684			9,284
Income tax expense		2,480			2,663
Net income	$	6,204		$	6,621
Earnings per common share
Basic	$	1.74		$	1.84
Diluted	$	1.73		$	1.84
Dividends per common share	$	0.175		$	0.120

See notes to consolidated financial statements.

3

GEORGIA-CAROLINA BANCSHARES, INC.

Consolidated Statements of Comprehensive Income

For the Years Ended December 31, 2013 and 2012

(dollars in thousands)

	2013			2012
Net income	$	6,204		$	6,621
Other comprehensive income (loss):
Unrealized holding gain (loss) arising during the period		(8,144	)		350
Tax effect of unrealized holding gain (loss)		2,682			(114	)
Reclassification for (gain) loss included in net income		(91	)		105
Tax effect of gain/ loss included in net income		31			(36	)
Total other comprehensive income (loss)		(5,522	)		305
Comprehensive income	$	682		$	6,926

See notes to consolidated financial statements.

4

GEORGIA-CAROLINA BANCSHARES, INC.

Consolidated Statements of Shareholders’ Equity

For the Years Ended December 31, 2013 and 2012

(dollars in thousands)

	Common Stock Shares			Common Stock Par Value		Additional Paid-in-Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Shareholders' Equity
Balance at January 1, 2012		3,592,100		$	4	$	16,301		$	32,988		$	1,152		$	50,445
Net income		-			-		-			6,621			-			6,621
Other comprehensive income		-			-		-			-			305			305
Proceeds from exercise of stock options		45,491			-		253			-			-			253
Stock-based compensation expense		-			-		108			-			-			108
Issuance of restricted stock for compensation		15,988			-		35			-			-			35
Issuance of stock for directors' fees		24,504			-		209			-			-			209
Repurchase of common shares		(149,787	)		-		(1,219	)		-			-			(1,219	)
Dividends		-			-		-			(432	)		-			(432	)
Balance at December 31, 2012		3,528,296		$	4	$	15,687		$	39,177		$	1,457		$	56,325
Net income		-			-		-			6,204			-			6,204
Other comprehensive income		-			-		-			-			(5,522	)		(5,522	)
Proceeds from exercise of stock options		28,469			-		407			-			-			407
Net settlement from exercise of stock options		(22,638	)				(332	)								(332	)
Stock-based compensation expense		-			-		93			-			-			93
Issuance of restricted stock for compensation		24,006			-		132			-			-			132
Issuance of stock for directors' fees		14,071			-		205			-			-			205
Dividends		-			-		-			(623	)		-			(623	)
Balance at December 31, 2013		3,572,204		$	4	$	16,192		$	44,758		$	(4,065	)	$	56,889

See notes to consolidated financial statements.

5

GEORGIA-CAROLINA BANCSHARES, INC.

Consolidated Statements of Cash Flows

For the Years Ended December 31, 2013 and 2012

(dollars in thousands)

	2013			2012
Cash flows from operating activities
Net income	$	6,204		$	6,621
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		603			622
Provision for loan losses		(2,029	)		(605	)
OREO valuation adjustment		896			1,434
Gain on sale of other real estate owned		(231	)		(40	)
(Gain) loss on sale of equipment		5			(5	)
(Gain) loss on sale of securities		(91	)		105
Gain on bank owned life insurance		(806	)		-
Mortgage banking activities		(8,225	)		(11,376	)
Proceeds from sale of loans held for sale		384,495			438,048
Originations of loans held for sale		(359,136	)		(429,877	)
Increase in cash value of bank-owned life insurance		(448	)		(392	)
Stock-based compensation expense		225			108
Stock compensation		205			244
Deferred income tax (benefit) expense		(549	)		(615	)
Increase in accrued interest receivable		(82	)		(40	)
(Increase) decrease in other assets		1,840			(1,513	)
Decrease in accrued interest payable		(56	)		(215	)
Increase in other liabilities		1,116			1,901
Net cash provided by operating activities		23,936			4,405
Cash flows from investing activities
Loan originations and collections, net		(9,452	)		14,352
Purchases of available-for-sale securities		(70,248	)		(76,053	)
Proceeds from maturities and calls of available-for-sale securities		23,690			29,602
Proceeds from sales of available-for-sale securities		12,735			14,324
Proceeds from sale of FHLB stock		259			205
Purchase of bank-owned life insurance		(5,000	)		-
Proceeds from life insurance death benefit		1,421			-
Proceeds from sale of other real estate owned		2,282			4,906
Net additions to bank premises and equipment		(1,225	)		(323	)
Net cash used in investing activities		(45,538	)		(12,987	)
Cash flows from financing activities
Increase in deposits		2,749			5,561
Repayments on FHLB advances and other borrowings		(41,528	)		(25,000	)
Proceeds from FHLB advances and other borrowings		38,700			25,028
Increase (decrease) in repurchase agreements		8,778			(232	)
Proceeds from stock options exercised, net		75			253
Purchase of stock		-			(1,219	)
Cash dividends paid		(623	)		(432	)
Net cash provided by financing activities		8,151			3,959
Net decrease in cash and due from banks		(13,451	)		(4,623	)
Cash and due from banks at beginning of the year		30,279			34,902
Cash and due from banks at end of the year	$	16,828		$	30,279

See notes to consolidated financial statements.

6

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements 

December 31, 2013 and 2012

Note 1—Summary of significant accounting policies

Nature of business

Georgia-Carolina Bancshares, Inc. (the “Company”) is a one-bank holding company. Substantially all of its business is conducted by its wholly-owned subsidiary, First Bank of Georgia (the “Bank”). The Bank is engaged in community banking activities through its locations in Augusta, Thomson, Martinez and Evans, Georgia and the surrounding area. Most of the Bank’s loans and loan commitments have been made to customers in the Columbia, Richmond, and McDuffie County, Georgia areas. Many of the Bank’s loan customers are also depositors of the Bank. The Bank has established a mortgage division that operates as First Bank Mortgage. This division currently has offices in Augusta and Savannah, Georgia. The division originates residential real estate mortgage loans and provides financing to residential construction and development companies. Substantially all residential mortgage loans originated by the division are sold in the secondary market.

The Bank is subject to the regulations of federal and state banking agencies and is periodically examined by them.

Significant accounting policies

Basis of presentation: The consolidated financial statements include the accounts of the Company and the Bank. Significant intercompany transactions and accounts are eliminated in consolidation. The accounting and reporting policies of the Company and the Bank conform to accounting principles generally accepted in the United States of America and general practices within the banking industry.

Estimates: The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for losses on loans, including valuation allowances for impaired loans, the valuation of other real estate acquired in connection with foreclosures or in satisfaction of loans, recourse liability on mortgage loans previously sold, and the fair value of mortgage loans held for sale and the fair value of the interest rate lock and forward commitment derivatives.  In connection with the determination of the allowances for losses on loans and loss estimates on other real estate owned, management obtains independent appraisals for significant properties.  Management must also make estimates in determining the estimated useful lives and methods for depreciating premises and equipment.

7

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements 

December 31, 2013 and 2012

Note 1—Summary of significant accounting policies (continued)

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

Significant concentrations of credit risk: A substantial portion of the Bank’s loan portfolio is with customers in the Augusta, Georgia MSA market area. The ultimate collectability of a substantial portion of the portfolio is therefore susceptible to changes in the economic and market conditions in and around these areas.

Cash and due from banks: For purposes of reporting cash flows, cash and due from banks includes cash on hand and interest-bearing and noninterest-bearing amounts due from banks (including cash items in the process of clearing). The Bank maintains due from accounts with banks primarily located in Georgia and Louisiana. Balances generally exceed insured amounts. Net cash flows are presented for customer loan and deposit transactions and repurchase agreements.

Investment securities: The Bank’s investments in securities are classified and accounted for as follows:

Securities available-for-sale – Securities classified as available-for-sale are identified when acquired as being available-for-sale to meet liquidity needs or other purposes. They are carried at fair value with unrealized gains and losses, net of taxes, reported in other comprehensive income.

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

Realized gains and losses on the sale of securities are determined using the specific-identification method on a trade date basis. Dividends and interest income are recognized when earned. The amortization of premiums and accretion of discounts are recognized in interest income using methods approximating the interest method over the life of the securities.

Management evaluates securities for other-than-temporary impairment (“OTTI”) on at least a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation.  For securities in an unrealized loss position, management considers the extent and duration of the unrealized loss, and the financial condition and near-term prospects of the issuer. Management also assesses whether it intends to sell, or it is more likely than not that it will be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings.  For debt securities that do not meet the aforementioned criteria, the amount of impairment is split into two components as follows: 1) OTTI related to credit loss, which must be recognized in the income statement and 2) other-than-temporary impairment (OTTI) related to other factors, which is recognized in other comprehensive income. 

8

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements 

December 31, 2013 and 2012

Note 1—Summary of significant accounting policies (continued)

The credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis. For equity securities, the entire amount of impairment is recognized through earnings.

Loans and interest income: Loans are stated at principal amounts outstanding less unearned income, deferred fees and costs, and the allowance for loan losses. Management has the intent and ability to hold for the foreseeable future or until maturity or payoff. Interest income on loans is credited to income based on the principal amount outstanding at the respective rate of interest.

Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield over the life of the loan. Loan origination fees and direct loan origination costs on loans held for sale are deferred and recognized at the time the loan is sold.

Accrual of interest income is discontinued for all classes of loans when a loan becomes 90 days past due as to principal and interest or when, in management’s judgment, the interest will not be collectible in the normal course of business. Accrual of interest on such loans is resumed when, in management’s judgment, the collection of interest and principal becomes probable. When a loan is placed on non-accrual status, all interest previously accrued but not collected is reversed against current interest income. Interest income is subsequently recognized only to the extent cash payments are received.

The accrual of interest on impaired loans is discontinued when, in management’s judgment, the borrower may be unable to meet payments as due. Impairment on loans is measured using either the discounted expected cash flow method or value of collateral method. A loan is impaired when, based on current information and events, it is probable that the Bank will be unable to collect all amounts when due according to the contractual terms of the loan agreement. Impairments on loans are charged to the allowance for loan losses.

Management evaluates the borrower’s ability to pay, the value of any collateral, and other factors in determining when a loan is impaired. Management does not consider a loan to be impaired during a period of delay in payment if it is expected that the Bank will collect all amounts due, including interest accrued at the contractual interest rate for the period of the delay. Any loan classified as a troubled debt restructuring is considered impaired.

Interest payments on impaired loans are applied to the remaining principal balance until the balance is fully recovered. Once principal is recovered, cash payments received are recorded as recoveries to the extent of any principal previously charged-off and then as interest income.

Allowance for loan losses: The allowance for loan losses is a valuation allowance for probable incurred credit losses. Loan losses are charged against the allowance when management believes the loan balance is confirmed as uncollectible. Subsequent recoveries, if any, are credited to the allowance. Management estimates the allowance balance required using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged off.

9

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements 

December 31, 2013 and 2012

Note 1—Summary of significant accounting policies (continued)

The allowance consists of specific and general components. The specific component relates to loans that are individually classified as impaired when, based on current information and events, it is probable that the Bank will be unable to collect all amounts due according to the contractual terms of the loan agreement. Loans for which the terms have been modified resulting in a concession, and for which the borrower is experiencing financial difficulties, are considered troubled debt restructurings and classified as impaired.

Factors considered by management in determining impaired loans 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.

All loans included on the management watch list are individually evaluated for impairment. If a loan has an impairment, a portion of the allowance is allocated so that the loan is reported, net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral. Large groups of smaller balance homogeneous loans, such as consumer and residential real estate loans, are collectively evaluated for impairment, and accordingly, they are not separately identified for impairment disclosures.

Troubled debt restructurings are separately identified for impairment disclosures and are measured at the present value of estimated future cash flows using the loan’s effective rate at inception. If a troubled debt restructuring is considered to be a collateral dependent loan, the loan is reported, net, at the fair value of the collateral. For troubled debt restructurings that subsequently default, management determines the amount of reserve in accordance with the accounting policy for the allowance for loan losses.

The general component covers non-impaired loans and is based on historical loss experience adjusted for current economic factors. Management considers the actual loss history experience over the last four quarters, one year, two year, and three year periods by portfolio segment to determine the historical loss experience used in the general component. This actual loss experience is supplemented with other economic factors based on the risks present for each portfolio segment. These economic factors include consideration of the following: levels of and trends in delinquencies and impaired loans; levels of and trends in charge-offs and recoveries for the most recent three years; trends in volume and terms of loans; effects of any changes in risk selection and underwriting standards; other changes in lending policies, procedures, and practices; experience, ability, and depth of lending management and other relevant staff; national and local economic trends and conditions; industry conditions; and effects of changes in credit concentrations.

For further discussion of portfolio segments and associated risks and grades, please see Note 4 to the consolidated financial statements.

10

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements 

December 31, 2013 and 2012

Note 1—Summary of significant accounting policies (continued)

Loans held for sale: Prior to July 1, 2012, mortgage loans originated and intended for sale in the secondary market were carried at the lower of aggregate cost or fair value, as determined by outstanding commitments from investors. Net unrealized losses, if any, were recorded as a valuation allowance and charged to earnings. Mortgage loans held for sale are generally sold with servicing rights released. Gains and losses on sales of mortgage loans are based on the difference between the selling price and the carrying value of the related loan sold. Loans held for sale, for which the fair value option has been elected starting July 1, 2012, are recorded at fair value as of each balance sheet date. The fair value includes the servicing value of the loans as well as any accrued interest.

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

Loans sold under the Bank’s mortgage loans held for sale portfolio contain certain representations and warranties in the loan sale agreements which require that we repurchase or indemnify the investors for losses or costs on loans we sell under certain limited conditions. Any losses related to loans previously sold are charged against the Bank’s recourse liability for mortgage loans previously sold. The recourse liability is based on historical loss experience adjusted for current information and events when it is probable that a loss will be incurred.

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

Bank-owned life insurance (BOLI): In order to insure the lives of its key officers, the Bank owns three bank-owned life insurance policies. BOLI is recorded at its cash surrender value, net of surrender charges and/or early termination charges that are probable at settlement. The increase in cash value is recorded as other income.

Bank premises and equipment: Land is carried at cost. Premises and equipment are stated at cost, less accumulated depreciation. Buildings and related components are depreciated using the straight-line method with useful lives ranging from five to thirty-nine years. Furniture, fixtures and equipment are depreciated using the straight-line method with useful lives ranging from three to fifteen years.

Other real estate owned: Other real estate owned represents properties acquired through foreclosure or other proceedings. The property is held for sale and is initially recorded at fair value less estimated selling costs at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, the assets are carried at the lower of carrying amount or fair value less estimated selling costs.

11

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements 

December 31, 2013 and 2012

Note 1—Summary of significant accounting policies (continued)

Expenses to maintain such assets and subsequent changes in the valuations are included in other noninterest expenses, while gains and losses on disposal are included in noninterest income.

Federal Home Loan Bank Stock: Federal Home Loan Bank Stock consists of the cost of the Company’s investment in the stock of the Federal Home Loan Bank (“FHLB”).  The stock has no quoted market value and no ready market exists.  Investment in the Federal Home Loan Bank is a condition of borrowing from the Federal Home Loan Bank, and the stock is pledged to collateralize such borrowings and periodically evaluated for impairment based on ultimate recovery of par value.  Dividends received on this stock are included in other non-interest income.

Mortgage banking derivatives: Loan commitments, whose underlying mortgage loans at origination will be held for sale upon funding of the loan, are derivative instruments. Loan commitments are recognized on the consolidated statement of financial condition in other assets and other liabilities at fair value, with changes in their fair values recognized in mortgage banking activities. At the inception of a loan commitment, the Bank generally will simultaneously enter into a best efforts forward loan sale commitment to protect the Bank from losses on sales of the loans underlying the loan commitment by securing the ultimate sale price and delivery date of the loan.

Loan commitments and related financial instruments: In the ordinary course of business, the Bank has entered into off balance sheet financial instruments consisting of commitments to extend credit, commercial letters of credit and standby letters of credit. The face amount for these items represents the exposure to loss before considering customer collateral or ability to repay. Such financial instruments are recorded in the consolidated financial statements when they become payable.

Income taxes: Provisions for income taxes are based on amounts reported in the statements of operations after exclusion of nontaxable income, such as interest on state and municipal securities, and BOLI income, and include deferred taxes on temporary differences in the recognition of income and expense for tax and financial statement purposes. Deferred taxes are computed on the liability method. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. It is the Company’s policy to recognize interest and penalties associated with uncertain tax positions as components of income taxes and to disclose the recognized interest and penalties, if material.

Stock-based compensation: Compensation cost is recognized for stock options and restricted stock awards issued to employees, based on the fair value of these awards at the date of grant. A Black-Scholes model is utilized to estimate the fair value of stock options when granted and this cost is expensed over the required service period which is usually the vesting period of the options. The fair market value of the Company’s common stock at the date of grant is used for restricted stock awards and this cost is expensed over the required service period which is usually the vesting period of the stock awards.

12

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements 

December 31, 2013 and 2012

Note 1—Summary of significant accounting policies (continued)

Compensation cost is recognized over the required service period, generally defined as the vesting period. For awards with graded vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award.

Comprehensive income: Accounting principles generally require that recognized revenue, expenses, gains, and losses be included in net income, although certain changes in assets and liabilities, such as unrealized gains and losses on available-for-sale securities, are reported as a separate component of the equity section of the statement of financial condition. Such items, along with net income, are components of comprehensive income.

Loss Contingencies: Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management does not believe there are any such matters pending that will have a material effect on the financial statements.

Earnings per common share: Basic earnings per common share is net income divided by the weighted average number of common shares outstanding during the period. The Company’s outstanding stock options are the primary component of the Company’s diluted earnings per share. All outstanding unvested share-based payment awards that contain rights to non-forfeitable dividends are considered participating securities for this calculation. Diluted earnings per common share include the dilutive effect of additional potential common shares issuable under stock options. Earnings and dividends per share are restated for all stock splits and stock dividends through the date of issuance of the financial statements.

Fair value of financial instruments: Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in a separate note. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or in market conditions could significantly affect these estimates.

Operating Segments: While management monitors the revenue streams of the various products and services, operations are managed and financial performance is evaluated on a Company wide basis. Operating segments are aggregated into one as operating results for all segments are similar. Accordingly, all of the financial service operations are considered by management to be aggregated in one reportable operating segment.

Reclassifications: Some items in the prior year financial statements were reclassified to conform to the current presentation. Reclassifications had no effect on prior year net income or shareholders’ equity.

13

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements 

December 31, 2013 and 2012

Note 1—Summary of significant accounting policies (continued)

Recently issued accounting standards

In February 2013, the FASB amended existing guidance related to reporting amounts reclassified out of accumulated other comprehensive income. These amendments do not change the current requirements for reporting net income or other comprehensive income in financial statements. These amendments require an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, 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 but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under U.S. GAAP that provide additional details about those amounts. For public companies, these amendments are effective prospectively for interim and annual reporting periods beginning after December 15, 2012. The effect of adopting this standard did not have a material effect on the Company’s operating results or financial condition.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies, but not specifically addressed in this report, are not expected to have a material impact on the Company’s financial condition, results of operations, or liquidity.

14

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements 

December 31, 2013 and 2012

Note 2—Cash and due from banks

Cash and due from banks totaled $16.8 million at December 31, 2013, compared to $30.3 million at December 31, 2012. Cash on hand, cash items in the process of collection, and amounts due from correspondent banks and the Federal Reserve Bank are included in cash and due from banks. As of December 31, 2013, interest-bearing cash on deposit with correspondent banks totaled $1.4 million compared to $4.8 million as of December 31, 2012. Interest-bearing cash on deposit in the Federal Reserve Bank was $1.3 million as of December 31, 2013 compared to $14.5 million as of December 31, 2012. Funds not included in interest bearing deposits, but required to be on reserve with the Federal Reserve Bank to meet regulatory and reserve clearing requirements totaled $4.5 million and $3.8 as of December 31, 2013 and 2012, respectively.

15

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements 

December 31, 2013 and 2012

Note 3—Investment securities

The amortized cost and fair value amounts of securities owned as of December 31, 2013 and 2012 are shown below:

	2013
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(dollars in thousands)
Securities available-for-sale:
U.S. Government and agency	$	61,486	$	146	$	(3,351	)	$	58,281
Mortgage-backed		66,095		558		(1,921	)		64,732
State and municipal		32,088		255		(1,592	)		30,751
Corporate		4,749		25		(99	)		4,675
Total	$	164,418	$	984	$	(6,963	)	$	158,439

	2012
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(dollars in thousands)
Securities available-for-sale:
U.S. Government and agency	$	55,404	$	260	$	(99	)	$	55,565
Mortgage-backed		50,074		1,313		(92	)		51,295
State and municipal		21,974		852		(38	)		22,788
Corporate		3,052		68		(8	)		3,112
Total	$	130,504	$	2,493	$	(237	)	$	132,760

16

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements 

December 31, 2013 and 2012

Note 3—Investment securities (continued)

The amortized cost and fair value of securities as of December 31, 2013 by contractual maturity are as follows. Actual maturities may differ from contractual maturities in mortgage-backed securities, as the mortgages underlying the securities may be called or prepaid without penalty; therefore, these securities are not included in the maturity categories in the following maturity summary.

	Securities Available-for-Sale
	Amortized Cost		Fair Value
	(dollars in thousands)
Less than one year	$	14,850	$	13,178
One to five years		23,669		22,919
Five to ten years		38,266		36,773
Over ten years		21,538		20,837
Mortgage-backed securities		66,095		64,732
Total	$	164,418	$	158,439

Securities with a carrying amount of approximately $64.1 million at December 31, 2013 and $53.7 million at December 31, 2012 were pledged to secure public deposits and for other purposes.

In 2013, the Bank sold $12.7 million in securities available-for-sale, realizing gains of $158,000 and losses of $74,400 for an overall net gain of $83,600. In 2012, the Bank sold $14.3 million in securities available-for-sale, realizing gains of $161,100 and losses of $270,500, for an overall loss of $109,400.

17

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements 

December 31, 2013 and 2012

Note 3—Investment securities (continued)

Information pertaining to securities with gross unrealized losses at December 31, 2013 and December 31, 2012, aggregated by investment category and length of time that individual securities have been in a continuous loss position, follows:          

	2013
	Less than Twelve Months							Over Twelve Months
	Number of Securities		Fair Value		Gross Unrealized Losses			Number of Securities		Fair Value		Gross Unrealized Losses
	(dollars in thousands)
Securities available-for-sale:
U.S. Government and agency		23	$	34,142	$	(1,911	)		7	$	11,759		(1,440	)
Corporate bonds		4		3,487		(99	)		-		-		-
Mortgage-backed		31		40,852		(1,744	)		3		5,294		(177	)
State and municipal		41		19,934		(1,156	)		8		3,028		(436	)
Total		99	$	98,415	$	(4,910	)		18	$	20,081	$	(2,053	)

	2012
	Less than Twelve Months							Over Twelve Months
	Number of Securities		Fair Value		Gross Unrealized Losses			Number of Securities		Fair Value		Gross Unrealized Losses
	(dollars in thousands)
Securities available-for-sale:
U.S. Government and agency		7	$	13,757	$	(99	)		1	$	1,365		*
Corporate bonds		1		992		(8	)		-		-		-
Mortgage-backed		2		4,794		(92	)		-		-		-
State and municipal		5		2,035		(38	)		-		-		-
Total		15	$	21,578	$	(237	)		1	$	1,365	$	-

* Gross unrealized loss is less than $1,000.

18

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements 

December 31, 2013 and 2012

Note 3—Investment securities (continued)

Management evaluates investment securities for other-than-temporary impairment on a periodic basis, and more frequently when economic or market conditions warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuers, and (3) the intent and ability of the Bank to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

At December 31, 2013 and 2012, the gross unrealized losses in securities available-for-sale are primarily the result of changes in market interest rates and not related to the credit quality of the underlying issuer. All of the securities are U.S. agency debt securities, corporate bonds, mortgage-backed securities, and municipal securities. Management has determined that no declines in market value are deemed to be other than temporary at December 31, 2013 and 2012. Securities rated below Moody’s (Baa) or Standard & Poor’s (BBB-) are not purchased. Non-rated municipal securities are limited to those bonds in the state of Georgia, and possess no greater risk that (Baa) or (BBB) bonds. Corporate bonds will have a minimum rating at purchase of Moody’s (A3), S&P (A-), or Fitch (A-). The Bank does not intend to sell these securities and it is likely that it will not be required to sell the securities before their anticipated recovery.

19

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements 

December 31, 2013 and 2012

Note 4—Loans

The Bank engages in a full complement of lending activities, including commercial, consumer and real estate loans. The composition of loans for the years ended December 31, 2013 and 2012 is summarized as follows:

	2013			2012
	(dollars in thousands)
Commercial and industrial	$	18,113		$	19,816
Real estate - construction, land and land development		60,476			55,926
Real estate - residential		55,792			55,495
Real estate - commercial		136,632			130,729
Consumer		3,931			3,921
Total loans		274,944			265,887
Deferred loan fees		(197	)		(56	)
Total loans		274,747			265,831
Allowance for loan losses		(5,357	)		(5,954	)
Loans, net of allowance for loan losses	$	269,390		$	259,877

Loan segments

Commercial and industrial loans are directed principally towards individual, partnership or corporate borrowers, for a variety of business purposes.  These loans include short-term lines of credit, short-term to medium-term plant and equipment loans, and loans for general working capital.  Risks associated with this type of lending arise from the impact of economic stresses on the business operations of borrowers. The Bank mitigates such risks to the loan portfolio by diversifying lending across North American Industry Classification System (“NAICS”) codes and has experienced very low levels of loss for this loan type for the past three years.  

Real estate – construction, land and land development loans consist of residential and commercial construction loans as well as land and land development loans.  Land development loans are primarily construction and development loans to builders in the Augusta and Savannah, Georgia markets.  These loan portfolios possess an increased level of risk compared to other types. The Bank’s approach to financing the development, financing the construction and providing the ultimate residential mortgage loans to the residential property purchasers has resulted in less exposure to the effects of declines in property values. These loans include certain real estate – construction loans classified as acquisition, development & construction. The loans are managed by the Bank’s construction division.

20

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements 

December 31, 2013 and 2012

Note 4—Loans (continued)

Real estate – residential loans include residential mortgage lending and are primarily single-family residential loans secured by the residential property.  Residential property values have stabilized over the past year, and this loan type has experienced decreases in historical losses over the past three years. Home equity lines are also included in real estate – residential loans.

Real estate – commercial loans include commercial mortgage loans that are generally secured by office buildings, retail establishments and other types of real property, both owner occupied and non-owner occupied. A significant component of this type of lending is to owner occupied borrowers, including churches.

Consumer loans consist primarily of installment loans to individuals for personal, family or household purposes, including automobile loans to individuals and pre-approved lines of credit.  The Bank has experienced low levels of loss for this loan type for the past three years compared to the other loan types.

Loan risk grades

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

Grade 1: Highest quality - Alternate sources of cash exist, such as the commercial paper market, capital market, internal liquidity or other bank lines. These are national or regional companies with excellent cash flow which covers all debt service requirements and a significant portion of capital expenditures. Balance sheet strength and liquidity are excellent and exceed the industry norms. Financial trends are positive. Corporate borrowers are market leaders within the industry and the industry performance is excellent. This grade includes loans which are fully secured by cash or equivalents. This grade includes loans secured by marketable securities with no less than 25% margin. Borrowers are of unquestionable financial strength. Financial standing of borrower is known and borrower exhibits superior liquidity, net worth, cash flow and leverage.

Grade 2: Above average quality - There is minimal risk. Borrowers have strong, stable financial trends. There is strong cash flow covering debt service requirements and some portion of capital expenditures. Alternate sources of repayment are evident and financial ratios are comparable to or exceed the industry norms. Financial trends are positive. Borrower has prominent position within the industry or the local economy and the industry performance is above average. Management is strong in most areas and management depth is good. This grade includes loans secured by marketable securities with a margin less than 25%, and includes borrowers who have stable and reliable cash flow and above average liquidity and cash flow. There is modest risk from exposure to contingent liabilities.

21

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements 

December 31, 2013 and 2012

Note 4—Loans (continued)

Grade 3: Average quality - Cash flow is adequate to cover all debt service requirements but not capital expenditures. Balance sheet may be leveraged but still comparable to industry norms. Financial trends are stable to mixed over the long term but no significant concerns presently exist. Generally there is a stable industry outlook, although there may be some cyclical characteristics. Borrowers are of average position in the industry or the local economy. The management team is considered capable and stable. This grade includes borrowers with reliable cash flow and alternate sources of repayment which may require the sale of assets. Financial position has been leveraged to a modest degree. However, the borrower has a relatively strong net worth considering income and debt.

Grade 4: Below average quality - Loan conditions require more frequent monitoring. Stability is lacking in the primary repayment source, cash flow, credit history or liquidity; however, the instability is manageable and considered temporary. Overall trends are not yet adverse. These loans exhibit Grade 3 financial characteristics but lack proper and complete documentation. Sources of income or cash flow have become unstable or may possibly decline given current business or economic conditions. The borrower has a highly leveraged financial position or limited capital. Speculative construction loans originated by third parties are included in this grade.

Grade 5: Other Assets Especially Mentioned - These loans have potential weaknesses which may inadequately protect the Bank’s position at some future date. Unlike a Grade 4 credit, adverse trends in the borrower’s operations and/or financial position are evident, but have not yet developed into well-defined credit weaknesses. Specific negative events within the borrower or the industry have occurred, which may jeopardize cash flow. Borrower’s operations are highly cyclical or vulnerable to economic or market conditions. Management has potential weaknesses and management depth is lacking. Borrower is taking positive steps to alleviate potential weaknesses and has the potential for improvement and upgrade. Corrective strategy to protect the Bank may be required and active management attention is warranted. Some minor delinquencies may exist from time to time. Borrowers exhibit some degree of weakness in financial condition. This may manifest itself in a reduction of net worth and liquidity.

Grade 6: Substandard - A substandard loan has a well-defined weakness or weaknesses in the primary repayment source and undue reliance is placed on secondary repayment sources (collateral or guarantors). No loss beyond the specific reserves of the allowance for loan losses allocated to these loans is presently expected based on a current assessment of collateral values and guarantor cash flow. However, there is the distinct possibility that the Bank will sustain some future loss if the credit weaknesses are not corrected. Management is inadequate to the extent that the business’s ability to continue operations is in question. Intensive effort to correct the weaknesses and ensure protection against loss of principal (i.e. additional collateral) is mandatory. Delinquency of principal or interest may exist. Net worth, repayment ability, management and collateral protection, all exhibit weakness. In the case of consumer credit, closed end consumer installment loans delinquent between 90 and 119 days (4 monthly payments) will be minimally classified Substandard. Open end consumer credits will be minimally classified substandard if delinquent 90 to 179 days (4 to 6 billing cycles).

22

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements 

December 31, 2013 and 2012

Note 4—Loans (continued)

Grade 7: Doubtful - A doubtful loan has well-defined weaknesses as in Grade 6 with the added characteristic that collection or liquidation in full, on the basis of currently existing facts, conditions and values, is highly questionable and improbable. The possibility of loss is very high, but because of certain important and reasonably specific pending factors which may work to strengthen the credit, its classification as a loss is deferred until a more exact status can be determined. Pending factors include proposed merger, acquisition, liquidation procedures, capital injection, perfecting liens on additional collateral, and refinancing plans. Borrower is facing extreme financial distress, bankruptcy or liquidation, and prospects for recovery are limited. Loans are seriously in default and should be on non-accrual status. Collateral and guarantor protection are insufficient. Efforts are directed solely at retirement of debt, e.g., asset liquidation. Due to their highly questionable collectability, loans rated doubtful should not remain in this category for an extended period of time.

Grade 8: Loss - Loans classified loss are considered uncollectable and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value but rather it is not practical or desirable to defer writing off the asset while pursuing recovery. In the case of consumer credit, closed end consumer installment loans delinquent 120 days or more (5 monthly payments) will be classified Loss. Open end consumer credits will be classified Loss if delinquent 180 days or more (7 or more billing cycles).

As of December 31, 2013 and December 31, 2012, the Bank had no loans classified as Grade 7 or 8. It is the Bank’s practice, in most cases, to take a charge-off when a loan or portion of a loan is deemed doubtful or loss. Consequently, the remaining principal balance, if applicable, which has been evaluated as collectible, is graded accordingly.

23

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements 

December 31, 2013 and 2012

Note 4—Loans (continued)

As of December 31, 2013 and 2012, the credit risk grades of loans by loan class were as follows:

Credit Risk Profile by Risk Grade Category:

	2013
	(dollars in thousands)
	Grades 1 - 4		Grade 5		Grade 6		Total
Commercial and industrial	$	18,010	$	103	$	-	$	18,113
Real estate - construction, land and land development
Acquistion, development, & construction		11,257		49		-		11,306
Other real estate - construction		49,078		-		92		49,170
Real estate - residential
Home equity lines		18,021		-		110		18,131
Other real estate - residential		36,493		612		556		37,661
Real estate - commercial
Owner occupied		54,450		4,845		1,493		60,788
Non-owner occupied		67,989		6,786		1,069		75,844
Consumer		3,910		-		21		3,931
Total loans receivable	$	259,208	$	12,395	$	3,341	$	274,944

	2012
	(dollars in thousands)
	Grades 1 - 4		Grade 5		Grade 6		Total
Commercial and industrial	$	19,723	$	32	$	61	$	19,816
Real estate - construction, land and land development
Acquistion, development, & construction		13,498		774		-		14,272
Other real estate - construction		41,344		192		118		41,654
Real estate - residential
Home equity lines		19,829		104		4		19,937
Other real estate - residential		33,446		81		2,031		35,558
Real estate - commercial
Owner occupied		47,833		5,191		1,804		54,828
Non-owner occupied		72,603		3,103		195		75,901
Consumer		3,872		22		27		3,921
Total loans receivable	$	252,148	$	9,499	$	4,240	$	265,887

The credit risk profile by risk grade category excludes accrued interest receivables of approximately $953,000 and $1,057,000 as of December 31, 2013 and December 31, 2012, respectively.

24

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements 

December 31, 2013 and 2012

Note 4—Loans (continued)

The following tables present the activity in the allowance for loan losses by loan segment for the years ended December 31, 2013 and 2012:

Allowance for Loan Losses Activity

For the Year Ended December 31, 2013

(dollars in thousands)

	Commercial and industrial			Real estate - construction, land and land development			Real estate - residential			Real estate - commercial			Consumer			Unallocated			Total
Beginning balance	$	225		$	2,870		$	794		$	1,872		$	77		$	116		$	5,954
Charge offs		(12	)		-			(96	)		(105	)		(93	)		-			(306	)
Recoveries		6			1,467			37			190			38			-			1,738
Provisions		8			(2,711	)		37			501			188			(52	)		(2,029	)
Ending balance	$	227		$	1,626		$	772		$	2,458		$	210		$	64		$	5,357
Ending balances:
Individually evaluated for impairment	$	-		$	37		$	67		$	252		$	2		$	-		$	358
Collectively evaluated for impairment	$	227		$	1,589		$	705		$	2,206		$	208		$	64		$	4,999

25

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements 

December 31, 2013 and 2012

Note 4—Loans (continued)

Allowance for Loan Losses Activity

For the Year Ended December 31, 2012

(dollars in thousands)

	Commercial and industrial			Real estate - construction, land and land development			Real estate - residential			Real estate - commercial			Consumer			Unallocated			Total
Beginning balance	$	185		$	3,219		$	1,141		$	1,706		$	108		$	445		$	6,804
Charge offs		(98	)		(692	)		(242	)		(179	)		(108	)		-			(1,319	)
Recoveries		225			734			43			14			58			-			1,074
Provisions		(87	)		(391	)		(148	)		331			19			(329	)		(605	)
Ending balance	$	225		$	2,870		$	794		$	1,872		$	77		$	116		$	5,954
Ending balances:
Individually evaluated for impairment	$	28		$	-		$	59		$	185		$	-		$	-		$	272
Collectively evaluated for impairment	$	197		$	2,870		$	735		$	1,687		$	77		$	116		$	5,682

26

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements 

December 31, 2013 and 2012

Note 4—Loans (continued)

The following tables present the recorded investment in loans receivable by loan segment as of December 31, 2013 and December 31, 2012:

Recorded Investment in Loans Receivable

As of December 31, 2013

(dollars in thousands)

	Commercial and industrial		Real estate - construction, land and land development		Real estate - residential		Real estate - commercial		Consumer		Total
Individually evaluated for impairment	$	-	$	92	$	1,695	$	7,053	$	21	$	8,861
Collectively evaluated for impairment	$	18,177	$	60,670	$	54,367	$	129,896	$	3,926	$	267,036
Ending balance total	$	18,177	$	60,762	$	56,062	$	136,949	$	3,947	$	275,897

Recorded Investment in Loans Receivable

As of December 31, 2012

(dollars in thousands)

	Commercial and industrial		Real estate - construction, land and land development		Real estate - residential		Real estate - commercial		Consumer		Total
Individually evaluated for impairment	$	90	$	566	$	2,376	$	6,770	$	27	$	9,829
Collectively evaluated for impairment	$	19,798	$	55,657	$	53,413	$	124,420	$	3,914	$	257,202
Ending balance total	$	19,888	$	56,223	$	55,789	$	131,190	$	3,941	$	267,031

27

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements 

December 31, 2013 and 2012

Note 4—Loans (continued)

Loans for which it is probable that the payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired, and are individually evaluated for impairment. Impaired loans for which interest is recorded on a cash basis is immaterial for disclosure. The following tables present loans individually evaluated for impairment and related allowance by loan class for the years ended December 31, 2013 and 2012:

Impaired Loans

As of and for the Year Ended December 31, 2013

(dollars in thousands)

	Unpaid Principal Balance		Recorded Investment		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial and industrial	$	-	$	-	$	-	$	-	$	-
Real estate - construction, land and land development
Acquistion, development, & construction		-		-		-		-		-
Other real estate - construction		144		55		-		171		2
Real estate - residential
Home equity lines		162		162		-		176		3
Other real estate - residential		1,342		1,260		-		1,546		73
Real estate - comercial
Owner occupied		5,219		5,184		-		6,012		249
Non-owner occupied		1,060		1,057		-		1,061		37
Consumer		31		19		-		32		-
Total	$	7,958	$	7,737	$	-	$	8,998	$	364
With an allowance recorded:
Commercial and industrial	$	-	$	-	$	-	$	-	$	-
Real estate - construction, land and land development
Acquistion, development, & construction		-		-		-		-		-
Other real estate - construction		37		37		37		-		-
Real estate - residential
Home equity lines		14		14		7		-		-
Other real estate - residential		259		259		60		-		-
Real estate - comercial
Owner occupied		812		812		252		-		-
Non-owner occupied		-		-		-		-		-
Consumer		2		2		2		-		-
Total	$	1,124	$	1,124	$	358	$	-	$	-
TOTAL
Commercial and industrial	$	-	$	-	$	-	$	-	$	-
Real estate - construction, land and land development
Acquistion, development, & construction						-		-		-
Other real estate - construction		181		92		37		171		2
Real estate - residential
Home equity lines		176		176		7		176		3
Other real estate - residential		1,601		1,519		60		1,546		73
Real estate - comercial
Owner occupied		6,031		5,996		252		6,012		249
Non-owner occupied		1,060		1,057		-		1,061		37
Consumer		33		21		2		32		-
Total	$	9,082	$	8,861	$	358	$	8,998	$	364

28

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements 

December 31, 2013 and 2012

Note 4—Loans (continued)

Impaired Loans

As of and for the Year Ended December 31, 2012

(dollars in thousands)

	Unpaid Principal Balance		Recorded Investment		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial and industrial	$	60	$	61	$	-	$	454	$	25
Real estate - construction, land and land development
Acquistion, development, & construction		2,457		447		-		2,429		21
Other real estate - construction		197		119		-		206		5
Real estate - residential
Home equity lines		70		70		-		74		-
Other real estate - residential		2,129		1,964		-		2,283		96
Real estate - comercial
Owner occupied		6,053		5,866		-		6,168		258
Non-owner occupied		-		-		-		-		-
Consumer		37		27		-		41		-
Total	$	11,003	$	8,554	$	-	$	11,655	$	405
With an allowance recorded:
Commercial and industrial	$	29	$	29	$	29	$	32	$	2
Real estate - construction, land and land development
Acquistion, development, & construction		-		-		-		-		-
Other real estate - construction		-		-		-		-		-
Real estate - residential
Home equity lines		-		-		-		-		-
Other real estate - residential		342		342		60		346		23
Real estate - comercial
Owner occupied		143		143		23		149		8
Non-owner occupied		760		761		160		780		50
Consumer		-		-		-		-		-
Total	$	1,274	$	1,275	$	272	$	1,307	$	83
TOTAL
Commercial and industrial	$	89	$	90	$	29	$	486	$	27
Real estate - construction, land and land development
Acquistion, development, & construction		2,457		447		-		2,429		21
Other real estate - construction		197		119		-		206		5
Real estate - residential
Home equity lines		70		70		-		74		-
Other real estate - residential		2,471		2,306		60		2,629		119
Real estate - comercial
Owner occupied		6,196		6,009		23		6,317		266
Non-owner occupied		760		761		160		780		50
Consumer		37		27		-		41		-
Total	$	12,277	$	9,829	$	272	$	12,962	$	488

29

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements 

December 31, 2013 and 2012

Note 4—Loans (continued)

The following tables present a summary of current, past due and nonaccrual loans as of December 31, 2013 and 2012 by loan class:

Analysis of Current, Past Due and Nonaccrual Loans

As of December 31, 2013

(dollars in thousands)

	Accruing
	30-89 Days Past Due		90 Days or more Past Due		Nonaccrual		Total Past Due and Nonaccrual		Current and not Past Due or Nonaccrual		Total Loans Receivable
Commercial and industrial	$	59	$	-	$	-	$	59	$	18,054	$	18,113
Real estate - construction, land and land development
Acquistion, development, & construction		-		-		-		-		11,306		11,306
Other real estate - construction		125		31		52		208		48,962		49,170
Real estate - residential
Home equity lines		132		-		110		242		17,889		18,131
Other real estate - residential		468		-		556		1,024		36,637		37,661
Real estate - comercial
Owner occupied		919		-		744		1,663		59,125		60,788
Non-owner occupied		-		-		441		441		75,403		75,844
Consumer		6		-		21		27		3,904		3,931
Total	$	1,709	$	31	$	1,924	$	3,664	$	271,280	$	274,944

30

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements 

December 31, 2013 and 2012

Note 4—Loans (continued)

Analysis of Current, Past Due and Nonaccrual Loans

As of December 31, 2012

(dollars in thousands)

	Accruing
	30-89 Days Past Due		90 Days or more Past Due		Nonaccrual		Total Past Due and Nonaccrual		Current and not Past Due or Nonaccrual		Total Loans Receivable
Commercial and industrial	$	134	$	-	$	61	$	195	$	19,621	$	19,816
Real estate - construction, land and land development
Acquistion, development, & construction		-		-		134		134		14,138		14,272
Other real estate - construction		1,318		-		68		1,386		40,268		41,654
Real estate - residential
Home equity lines		211		-		108		319		19,618		19,937
Other real estate - residential		1,322		-		1,776		3,098		32,460		35,558
Real estate - comercial
Owner occupied		941		-		1,527		2,468		52,360		54,828
Non-owner occupied		772		-		195		967		74,934		75,901
Consumer		27		-		27		54		3,867		3,921
Total	$	4,725	$	-	$	3,896	$	8,621	$	257,266	$	265,887

The Bank’s policy is that loans placed on nonaccrual will typically remain on nonaccrual status until all principal and interest payments are brought current and the prospect for future payments in accordance with the loan agreement appear relatively certain. The Bank’s policy generally refers to six months of payment performance as sufficient to warrant a return to accrual status.

31

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements 

December 31, 2013 and 2012

Note 4—Loans (continued)

Troubled debt restructurings

Troubled debt restructurings are defined as debt modifications, for economic or legal reasons related to the borrower’s financial difficulties, in which the Bank grants a concession that it would not otherwise consider.

Such a concession may stem from an agreement between the Bank and the borrower, or may be imposed by law or a court. Some examples of modifications are as follows:

Rate Modification - A modification in which the interest rate is changed.

Term Modification - A modification in which the maturity date, timing of payments, or frequency of payments is changed.

Interest Only Modification – A modification in which the loan is converted to interest only payments for a period of time.

Payment Modification – A modification in which the dollar amount of the payment is changed, other than an interest only modification described above.

Transfer of Assets Modification – A modification in which a transfer of assets has occurred to partially satisfy debt, including foreclosure and repossession.

Combination Modification – Any other type of modification which includes the use of multiple categories above.

32

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements 

December 31, 2013 and 2012

Note 4—Loans (continued)

The following tables present the Bank’s loans classified as troubled debt restructurings by loan class as of December 31, 2013 and 2012:

As of December 31, 2013

(dollars in thousands)

	Number of  Contracts		Accrual		Nonaccrual		Total Restructurings
Commercial and industrial		-	$	-	$	-	$	-
Real estate - construction, land and land development
Acquistion, development, & construction		-		-		-		-
Other real estate - construction		-		-		-		-
Real estate - residential
Home equity lines		1		66		-		66
Other real estate - residential		10		925				925
Real estate - comercial
Owner occupied		13		5,775				5,775
Non-owner occupied		1		563		-		563
Consumer		-		-		-		-
Total		25	$	7,329	$	-	$	7,329

33

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements 

December 31, 2013 and 2012

Note 4—Loans (continued)

As of December 31, 2012

(dollars in thousands)

	Number of Contracts		Accrual		Nonaccrual		Total Restructurings
Commercial and industrial		1	$	-	$	34	$	34
Real estate - construction, land and land development
Acquistion, development, & construction		2		310		134		444
Other real estate - construction		-		-		-		-
Real estate - residential
Home equity lines		1		66		-		66
Other real estate - residential		10		583		243		826
Real estate - comercial
Owner occupied		9		4,187		1,177		5,364
Non-owner occupied		-		-		-		-
Consumer		-		-		-		-
Total		23	$	5,146	$	1,588	$	6,734

At December 31, 2013 and 2012, commitments to advance additional funds outstanding on troubled debt restructurings totaled $0.

34

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements 

December 31, 2013 and 2012

Note 4—Loans (continued)

The following tables present newly restructured loans that occurred during the years ended December 31, 2013 and 2012, respectively:

Year Ended December 31, 2013

(dollars in thousands)

	Number of Contracts		Rate Modification		Payment Modification		Transfer of Assets Modification		Combination Modification		Total Modifications
Pre-Modification Outstanding Recorded Investment:
Real-estate - residential
Other real estate - residential		2	$	154	$	-	$	-	$	18	$	172
Real estate - commercial
Owner occupied		4		359		-		-		1,231		1,590
Non-owner occupied		3		72		-		-		570		642
Total		9	$	585	$	-	$	-	$	1,819	$	2,404
Post-Modification Outstanding Recorded Investment:
Real-estate - residential
Other real estate - residential		2	$	148	$	-	$	-	$	18	$	166
Real estate - commercial
Owner occupied		4		340		-		-		1,221		1,561
Non-owner occupied		3		64		-		-		563		627
Total		9	$	552	$	-	$	-	$	1,802	$	2,354

35

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements 

December 31, 2013 and 2012

Note 4—Loans (continued)

Year Ended December 31, 2012

(dollars in thousands)

	Number of Contracts		Rate Modification		Payment Modification		Transfer of Assets Modification		Combination Modification		Total Modifications
Pre-Modification Outstanding Recorded Investment:
Real-estate - residential
Other real estate - residential		8	$	243	$	566	$	-	$	-	$	809
Real estate - commercial
Owner occupied		-		-		-		-		-		-
Non-owner occupied		-		-		-		-		-		-
Total		8	$	243	$	566	$	-	$	-	$	809
Post-Modification Outstanding Recorded Investment:
Real-estate - residential
Other real estate - residential		8	$	243	$	557	$	-	$	-	$	800
Real estate - commercial
Owner occupied		-		-		-		-		-		-
Non-owner occupied		-		-		-		-		-		-
Total		8	$	243	$	557	$	-	$	-	$	800

The following tables represent loans receivable modified as troubled debt restructurings and with a payment default, with the payment default occurring within 12 months of the restructure date, and the payment default occurring during the years ended December 31, 2013 and 2012 (dollars in thousands):

	2013				2012
	Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment
Commercial and industrial		-	$	-		1	$	34
Real estate - construction, land and land development
Other real estate - construction		-		-		-		-
Real estate - residential
Other real estate - residential		-		-		-		-
Real estate - commercial
Owner occupied		1		563		2		1,001
Total		1	$	563		3	$	1,035

36

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements 

December 31, 2013 and 2012

Note 4—Loans (continued)

At December 31, 2013, executive officers and directors were indebted to the Bank in the aggregate amount of approximately $5,591,000. Following is a summary of transactions for the years ended December 31, 2013 and 2012:

	2013			2012
	(dollars in thousands)
Balance at beginning of year	$	6,376		$	9,813
Advances		1,144			4,607
Repayments		(1,929	)		(8,044	)
Balance at end of year	$	5,591		$	6,376

Note 5—Bank-owned life insurance (BOLI)

In September 2007, $8.0 million in bank-owned life insurance (BOLI) was acquired through two policies in order to insure certain key officers of the Bank. In September 2013, an additional $5.0 million bank-owned life insurance policy (BOLI) was acquired in order to insure certain key officers of the Bank. As of December 31, 2013, the total BOLI cash surrender value was $14.8 million resulting in other income for 2013 of $448,000 and an annualized net yield of 4.06%. As of December 31, 2012, the BOLI cash surrender value was $10.0 million resulting in other income for 2012 of $392,000 and an annualized net yield of 4.01%. During 2013, the Bank received death insurance benefits from the two original Bank owned life insurance policies totaling $1.42 million. These benefits resulted in $806,000 of other income.

Note 6—Bank premises and equipment

Bank premises and equipment consist of the following as of December 31, 2013 and 2012:

	2013			2012
	(dollars in thousands)
Land and improvements	$	3,855		$	3,839
Building and improvements		7,191			6,445
Equipment, furniture and fixtures		4,885			4,600
Construction in progress		82			80
		16,013			14,964
Less accumulated depreciation		(6,501	)		(6,174	)
Premises and equipment, net	$	9,512		$	8,790

Depreciation expense for the years ended December 31, 2013 and 2012 was approximately $498,000 and $517,000, respectively. Rental expense of office premises and equipment was approximately $267,000 and $265,000 for the years ended December 31, 2013 and 2012, respectively.

37

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements 

December 31, 2013 and 2012

Note 7—Other real estate owned

At December 31, 2013 and 2012, the Bank had other real estate owned activities as follows:

	2013			2012
	(dollars in thousands)
Balance at beginning of year	$	5,876		$	6,990
Loans transferred to real estate owned		1,968			5,186
Sales of real estate owned		(2,051	)		(4,866	)
Direct write-downs		(896	)		(1,434	)
Balance at end of year	$	4,897		$	5,876

Income and expenses related to other real estate owned for the years ending December 31, 2013 and 2012 were as follows:

	2013		2012
	(dollars in thousands)
Net gains on sales	$	231	$	40
Rental income	$	567	$	686
Operating expenses	$	758	$	850

Note 8—Deposits

At December 31, 2013, the scheduled maturities of time deposit liabilities were as follows:

	2013
	(dollars in thousands)
One year or less	$	91,649
Over one year through two years		32,700
Over two years through three years		10,299
Over three years through four years		8,642
Over four years		9,194
Total	$	152,484

The Bank may also enter into repurchase agreements with customers and may obtain short-term funding from other institutions through brokered and internet deposits in order to manage the Bank’s funding capabilities. Repurchase agreements with customers are generally secured by investment securities owned by the Bank and are established at prevailing market rates. Total repurchase agreements with customers were approximately $12.1 million and $3.3 million at December 31, 2013 and 2012, respectively. Total brokered and internet deposits were $19.9 million and $27.8 million at December 31, 2013 and 2012, respectively.

38

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements 

December 31, 2013 and 2012

Note 9—Federal Home Loan Bank advances and borrowings

As of December 31, 2013 and 2012, the Bank had credit availability, or potential borrowing capacity, of 25% of total assets, subject to the Bank’s financial condition and collateral balances with the FHLB. One of the advance products established is the “Loans Held for Sale” (LHFS) program. The line is collateralized by the Bank’s mortgage loans held for sale. Advances under this line are due 90 days from the date of the advance. As of December 31, 2013 and 2012, the Bank did not have a balance outstanding under the LHFS program. As of December 31, 2013, the Bank had $10.1 million in loans held for sale pledged as collateral under this line.

The Bank also maintains a line of credit with the FHLB which is secured by 1-4 family and commercial real estate loans held in the Bank’s loan portfolio. The balance at December 31, 2012 was $25,000,000 with a variable interest rate of 0.42% and a maturity date of September 30, 2013. The balance at December 31, 2013 was $22,200,000 with a variable interest rate of 0.355% and a maturity date of October 29, 2014. At December 31, 2013, the Bank had $68.5 million in 1-4 family and commercial real estate loans pledged as collateral to the FHLB.

In 2007, a long-term convertible advance was established. During the year ended December 31, 2012, the Bank paid off the outstanding balance on this advance of $10.0 million with a weighted average interest rate of 3.83%. An additional but similar long-term convertible advance was established during 2008. During the year ended December 31, 2012, the Bank paid off the outstanding balance on this advance of $15.0 million with a weighted average interest rate of 3.33%. The Bank paid a penalty of $392,000 for pre-payment of the advances which is included in other non-interest expense for 2012.

Note 10—Employee benefit plans

The Bank has a 401(k) salary-deferred plan covering substantially all employees. At the discretion of the Bank’s Board of Directors, the Bank may match a percentage of the annual amounts deferred by employees. Matching amounts are funded by the Bank as accrued. Total deferred and matching amounts are limited to amounts that can be deducted for Federal income tax purposes. The Bank’s matching contributions were approximately $206,000 and $200,000 for the years ended December 31, 2013 and 2012, respectively.

The Bank has a Nonqualified Executive Deferred Compensation Plan (“EDCP”) covering a select group of key employees and senior management. The EDCP allows participating employees to elect each year to defer compensation into a participant account. At its discretion, the Bank may also elect to make discretionary contributions to the participant account. The EDCP expense, including employee deferrals and contributions made by the Bank, totaled $22,000 and $23,000 for the years ending December 31, 2013 and 2012, respectively. The accrued liability related to the EDCP was approximately $96,000 and $74,000 at December 31, 2013 and 2012, respectively.

39

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements 

December 31, 2013 and 2012

Note 10—Employee benefit plans (continued)

The Bank also has a Supplemental Executive Retirement Plan (“SERP”) for the benefit of certain key officers. The SERP provides selected employees who satisfy specific eligibility requirements with supplemental benefits upon retirement, termination of employment, death, disability or a change of control of the Bank, in certain prescribed circumstances. The Bank recorded expense totaling $273,000 and $294,000 for the SERP for the years ended December 31, 2013 and 2012, respectively. The accrued liability related to the SERP was approximately $1,444,000 and $1,188,000 as of December 31, 2013 and 2012, respectively.

Note 11—Regulatory capital matters

The primary source of funds available to the Company is the payment of dividends by its subsidiary bank. Banking regulations limit the amount of dividends that may be paid by the Bank without prior approval of certain regulatory agencies. The amount of dividends allowable without prior approval was $13.9 million at December 31, 2013.

In 2012, the Company began paying cash dividends to shareholders. Three quarterly dividends of $0.04 per share were paid for a total of $431,500 for the year ended December 31, 2012. One quarterly dividend of $0.04 per share and three quarterly dividends of $0.045 per share were paid for a total of $623,000 for the year ended December 31, 2013.

On January 27, 2014, the Company declared another cash dividend of $0.045 per share to all shareholders of record as of February 11, 2014.

The Bank is subject to various regulatory capital requirements administered by state and Federal banking agencies. Failure to meet minimum capital requirements can trigger certain mandatory, and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements.

Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities, and certain off-balance-sheet items, as calculated under regulatory accounting practices. The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Prompt corrective action provisions are not applicable to bank holding companies.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier I capital (as defined) to average assets (as defined). Management believes that, as of December 31, 2013, the Bank met all capital adequacy requirements to which it is subject.

40

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements 

December 31, 2013 and 2012

Note 11— Regulatory capital matters (continued)

As of December 31, 2013, the most recent notification from the regulatory agencies categorized the Bank as well-capitalized under the regulatory framework for prompt corrective action. To be categorized as well-capitalized, the Bank must maintain minimum total risk-based, Tier I risk-based, and Tier I leverage ratios, as set forth in the table below. There are no conditions or events since that notification that management believes have changed the Bank’s category.

The Bank’s actual capital amounts (in thousands) and ratios as of December 31, 2013 and 2012 are presented in the following tables:

	Actual					Required for Capital Adequacy Purposes					Required to be Well-Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of December 31, 2013:
Total capital to risk weighted assets
Bank	$	64,863		17.25	%	$	30,087		8.00	%	$	37,609		10.00	%
Consolidated	$	65,663		17.44	%	$	30,116		8.00	%	$	37,645		10.00	%
Tier 1 capital to risk weighted assets
Bank	$	60,154		15.99	%	$	15,043		4.00	%	$	22,565		6.00	%
Consolidated	$	60,954		16.19	%	$	15,058		4.00	%	$	22,587		6.00	%
Tier 1 leverage to average assets
Bank	$	60,154		11.93	%	$	20,172		4.00	%	$	25,215		5.00	%
Consolidated	$	60,954		12.08	%	$	20,189		4.00	%	$	25,233		5.00	%

	Actual					Required for Capital Adequacy Purposes					Required to be Well-Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of December 31, 2012:
Total capital to risk weighted assets
Bank	$	58,321		16.59	%	$	28,125		8.00	%	$	35,156		10.00	%
Consolidated	$	59,262		16.86	%	$	28,125		8.00	%	$	35,156		10.00	%
Tier 1 capital to risk weighted assets
Bank	$	53,926		15.34	%	$	14,062		4.00	%	$	21,094		6.00	%
Consolidated	$	54,867		15.61	%	$	14,062		4.00	%	$	21,094		6.00	%
Tier 1 leverage to average assets
Bank	$	53,926		11.13	%	$	19,382		4.00	%	$	24,227		5.00	%
Consolidated	$	54,867		11.32	%	$	19,383		4.00	%	$	24,229		5.00	%

41

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements 

December 31, 2013 and 2012

Note 12— Stock based compensation

During 1997, the Company adopted the 1997 Stock Option Plan (the “1997 Plan”) for eligible directors, officers, and key employees of the Company and the Bank. The 1997 Plan expired in 2007 and no more grants may be made pursuant to this plan. Options were granted to purchase common shares at prices not less than the fair market value of the stock at the date of grant. Fair market value is defined to mean the average closing price for the ten business days prior to the date of board approval and grant. The maximum number of shares reserved under the 1997 Plan was 345,000 shares, as adjusted for the Company’s stock splits and stock dividends.

In early 2005, the Company adopted the 2004 Incentive Plan (the “2004 Plan”) for eligible directors, officers, and key employees of the Company and the Bank. The 2004 Plan allows awards of stock, performance units, stock appreciation rights, incentive stock options, non-qualified stock options and phantom stock. Options are granted to purchase common shares at prices not less than the fair market value of the stock at the date of grant. Fair market value is defined to mean the average closing price for the ten business days prior to the date of board approval and grant. The maximum number of shares reserved and available for issuance under the 2004 Plan is 330,125 shares, as adjusted for the Company’s stock split in 2005.

The Stock Incentive Committee of the Board of Directors of the Company administers both plans and establishes to whom awards shall be made and determines option exercise prices, methods of exercise, vesting requirements, the number of shares covered by each option, the terms and restrictions applicable to restricted stock awards, all subject to the approval of the Company’s Board of Directors.

The Company recorded compensation expense of approximately $93,000 and $108,000 for the years ended December 31, 2013 and 2012, respectively, related to employee stock options. No stock options were issued during the years ended December 31, 2013 and 2012.

The estimated fair value of options is amortized to expense over the option’s vesting period. Option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. Changes in the subjective input assumptions can materially affect the fair value estimate. In management’s opinion, the model does not necessarily provide a reliable single measure of the fair value of options.

Vesting requirements are determined by the Board of Directors at the time options are granted and generally provide for vesting over a seven-year period. The plans provide that vesting periods may not exceed ten years.

During the years ending December 31, 2013 and 2012, the Company made restricted stock awards totaling 24,006 and 15,988 shares, respectively. The shares granted in 2012 vest fully at the end of three years. During 2013, there were 16,406 shares granted which vest fully at the end of three years and 7,600 shares granted which vest fully at the end of five years. The grants resulted in expense of $132,456 and $35,210 for the years ended December 31, 2013 and 2012, respectively.

42

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements 

December 31, 2013 and 2012

Note 12— Stock based compensation (continued)

A summary of the Company’s stock option activity under the plans as of December 31, 2013 and 2012, and changes and related information for the years then ended, is presented below:

Options	Shares			Weighted Average Exercise Price			Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at January 1, 2013		238,728		$	11.21			4.12	$	583,833
Granted		-		$	-
Exercised		(28,469	)	$	(14.30	)
Forfeited or expired		(28,017	)	$	(9.44	)
Outstanding at December 31, 2013		182,242		$	11.00			4.19	$	710,283
Fully vested and expected to vest		182,242		$	11.00			4.19	$	710,283
Exercisable at December 31, 2013		120,933		$	12.49			3.26	$	314,381

Options	Shares			Weighted Average Exercise Price			Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at January 1, 2012		290,344		$	10.26			4.35	$	67,631
Granted		-		$	-
Exercised		(45,491	)	$	(5.55	)
Forfeited or expired		(6,125	)	$	(7.96	)
Outstanding at December 31, 2012		238,728		$	11.21			4.12	$	583,833
Fully vested and expected to vest		238,728		$	11.21			4.12	$	583,833
Exercisable at December 31, 2012		160,861		$	12.59			2.81	$	251,921

At December 31, 2013, options both outstanding and exercisable under both plans have exercise prices that range from $7.00 per share to $20.41 per share.

43

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements 

December 31, 2013 and 2012

Note 12— Stock based compensation (continued)

The fair value of these options was estimated on the date of grant using a Black-Scholes option valuation model that used the following range of assumptions for each of the years presented:

	2013		2012
Total intrinsic value of options exercised	$	6,263	$	318,282
Cash received from option exercise	$	407,107	$	252,630
Tax benefit related to option exercises	$	130,274	$	85,890

In addition, the model assumed that each option grant was exercised in the initial year of full vesting.

A summary of the status of the Company’s nonvested options as of December 31, 2013 and 2012, and changes during the years then ended, is presented below:

Nonvested Options	Shares			Weighted Average Grant-Date Fair Value
Nonvested at January 1, 2013		77,867		$	5.55
Granted		-		$	-
Vested		(16,558	)	$	5.71
Forfeited		-		$	-
Nonvested at December 31, 2013		61,309		$	5.50

Nonvested Options	Shares			Weighted Average Grant-Date Fair Value
Nonvested at January 1, 2012		93,516		$	5.57
Granted		-		$	-
Vested		(15,355	)	$	5.71
Forfeited		(294	)	$	5.69
Nonvested at December 31, 2012		77,867		$	5.55

As of December 31, 2013, there was $243,195 of total unrecognized compensation cost related to the Company’s nonvested options granted under the plans. This cost is expected to be recognized over a weighted-average period of 1.61 years. The total fair value of shares vested during the years ended December 31, 2013 and 2012, was $94,494 and $87,638, respectively.

44

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements 

December 31, 2013 and 2012

Note 12— Stock based compensation (continued)

For the years ended December 31, 2013 and 2012, the Company issued a total of 14,071 and 24,504 shares of common stock, respectively, to non-employee directors as compensation for services rendered under the Company’s Directors Equity Incentive Plan.  The Company recorded $205,000 and $209,000 in stock compensation expense related to the issuance of these shares for the years ended December 31, 2013 and 2012, respectively.

For shares issued as retainer stock, the shares are issued at fair value and the expense recognized was equal to the fair value of the shares on the date of grant. The Company issued 7,646 and 11,350 of retainer shares included above during the years ended December 31, 2013 and 2012, respectively.

In addition, directors may choose to purchase stock under this plan in lieu of directors fees paid for meeting attendance.  The shares under the plan were purchased at 85% of the fair value of the shares on the date of the grant. The Company has defined fair value under the plan to be the average closing market price of the Company’s common stock for the last ten trading days of each quarter as reported on the Over-the-Counter Bulletin Board.The Company records the expense related to the purchases at fair value of the shares on the date of the grant.   The following table represents activity in the Directors’ Equity Incentive Plan in 2013 and 2012:

	2013			2012
Beginning shares authorized and unissued		170,434			21,739
Additional shares authorized and unissued		-			173,199
Shares issued		(14,071	)		(24,504	)
Ending shares authorized and unissued		156,363			170,434

A summary of common stock issued through the exercise of employee stock options and employee/director compensation and expense is as follows:

	2013		2012
Net options exercised		5,831		45,491
Issuance of stock for compensation		24,006		15,988
Issuance of stock for directors' fees		14,071		24,504
Net issuance of common stock		43,908		85,983

45

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements 

December 31, 2013 and 2012

Note 13— Earnings per common share

Following is a reconciliation of the income amounts and common stock amounts utilized in computing the Company’s earnings per share for each of the years ended December 31, 2013 and 2012:

	2013
	Income (Numerator)		Shares (Denominator)		Per Share
	(dollars in thousands, except per share data)
Basic EPS
Net income available to common shareholders	$	6,204		3,558,876	$	1.74
Effect of stock options outstanding		-		31,244		(0.01	)
Diluted EPS
Net income available to common shareholders	$	6,204		3,590,120	$	1.73

	2012
	Income (Numerator)		Shares (Denominator)		Per Share
	(dollars in thousands, except per share data)
Basic EPS
Net income available to common shareholders	$	6,621		3,599,431	$	1.84
Effect of stock options outstanding		-		-		-
Diluted EPS
Net income available to common shareholders	$	6,621		3,599,431	$	1.84

For the years ended December 31, 2013 and 2012, there were 47,365 and 129,417 options, respectively, that were antidilutive since the exercise price exceeded the average market price for the year.

46

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements 

December 31, 2013 and 2012

Note 14—Other expenses

Other non-interest expenses for the years ended December 31, 2013 and 2012 are as follows:

	2013		2012
	(dollars in thousands)
Data processing	$	1,346	$	1,050
FDIC assessment		254		403
Legal and accounting		713		783
Printing and supplies		307		290
Advertising		203		177
Business development		158		144
Telecommunications		222		194
Outside services		255		240
Courier and postage		204		178
Software license fees		85		92
City and county taxes		181		149
Directors fees		288		275
Travel and employee meals and entertainment		162		180
Provision for mortgage recourse liability		499		499
Legal settlement payable		-		598
FHLB early payoff penalty		-		392
Other		1,577		1,048
Total	$	6,454	$	6,692

47

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements 

December 31, 2013 and 2012

Note 15—Income Taxes

Total income taxes in the statements of income for the years ended December 31, 2013 and 2012 are as follows:

	2013			2012
	(dollars in thousands)
Current tax provision	$	3,012		$	3,278
Deferred tax expense (benefit)		(532	)		(615	)
Total income tax expense (benefit)	$	2,480		$	2,663

The Bank’s provision for income taxes differs from the amounts computed by applying the Federal and state income tax statutory rates to income before income taxes. A reconciliation of the differences is as follows:

	2013			2012
Federal statutory rates		34.0	%		34.0	%
State taxes, net of federal benefit		3.3	%		3.8	%
Tax-exempt income		-2.1	%		-1.5	%
State tax credits		-3.0	%		-2.6	%
Bank-owned life insurance		-4.9	%		-1.4	%
State tax credit valuation allowance		0.5	%		-4.1	%
Other		0.8	%		0.6	%
Total		28.6	%		28.8	%

48

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements 

December 31, 2013 and 2012

Note 15—Income Taxes (continued)

The primary components of deferred income taxes at December 31, 2013 and 2012 are as follows:

	2013			2012
Deferred tax assets
Allowance for loan losses	$	1,713		$	1,689
Unrealized loss on securities available for sale		1,913			-
Executive compensation plans		646			502
Valuation adjustment of other real estate owned		645			437
Recourse liability		414			293
Contingent liability		227			228
Investment in GA low-income housing tax credits		310			270
State tax credits		184			281
Mortgage derivatives IRLC expenses		97			115
Other		44			102
Total deferred income tax assets		6,193			3,917
Deferred tax liabilities
Unrealized gain on securities available for sale		-			(798	)
Qualified prepaids		(26	)		(131	)
Depreciation on bank premises and equipment		(198	)		(174	)
Mortgage derivative change in method		(293	)		(439	)
Total deferred income tax liabilities		(517	)		(1,542	)
Valuation allowance		(310	)		(270	)
Net deferred income tax assets	$	5,366		$	2,105

Deferred tax assets are included in other assets. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amount of existing assets and liabilities and their respective tax bases.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered in income.  Deferred tax assets are reduced by a valuation allowance if it is more likely than not that the tax benefits will not be realized. 

Prior to 2012, the Company had created a full valuation allowance for the Georgia Form 900 tax credits. During 2012, the Company reversed the deferred tax valuation allowance that was recorded against these tax credits since it was determined that, based on the profitability of the Company and other positive evidence, these state tax credits would be utilized before their expiration dates. The Company continues to reflect a full valuation allowance on its investment in a Georgia Low Income Housing Project, to reflect management’s estimate of the temporary deductible differences that may expire prior to their utilization.

49

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements 

December 31, 2013 and 2012

Note 15—Income Taxes (continued)

Management has evaluated all other tax positions that could have a significant effect on the consolidated financial statements and determined that the Company had no uncertain income tax positions at December 31, 2013.

The Company and its subsidiary are subject to U.S. Federal income tax as well as income tax within the state of Georgia. The Company is no longer subject to examination by taxing authorities for years before 2010.

Note 16—Commitments and contingencies

In the ordinary course of business, the Bank may enter into off-balance-sheet financial instruments that are not reflected in the consolidated financial statements. These instruments include commitments to extend credit and standby letters of credit. Such financial instruments are recorded in the consolidated financial statements when funds are disbursed or the instruments become payable.

The Bank uses the same credit policies for these off-balance-sheet financial instruments as it does for other instruments that are recorded in the consolidated financial statements.

Following is an analysis of significant off-balance-sheet financial instruments for the years ended December 31, 2013 and 2012:

	2013		2012
	(dollars in thousands)
Commitments to extend credit	$	74,144	$	48,976
Standby letters of credit		472		1,029
Total	$	74,616	$	50,005

Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitment amounts expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. In managing the Bank’s credit and market risk exposure, the Bank may participate with other institutions when these commitments are funded. The credit risk involved in issuing these financial instruments is essentially the same as that involved in making loans to customers. The amount of collateral obtained, if deemed necessary by the Bank, upon extension of credit is based on management’s credit evaluation of the customer. Collateral held varies, but may include real estate and improvements, marketable securities, accounts receivable, inventory, equipment, and personal property.

50

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements 

December 31, 2013 and 2012

Note 16—Commitments and contingencies (continued)

Loans sold under the mortgage loans held for sale portfolio contain certain representations and warranties in the loan sale agreements which require that we repurchase or indemnify the investors for losses or costs on loans we sell under certain limited conditions. Some of these conditions include underwriting errors or omissions, fraud or material misstatements by the borrower in the loan application or invalid market value on the collateral property due to deficiencies in the appraisal. In addition to these representations and warranties, our loan sale contracts define a condition in which the borrower defaults during a short period of time, typically 120 days to one year, as an Early Payment Default (“EPD”). In the event of an EPD, we are required to return the premium paid by the investor for the loan as well as certain administrative fees, and in some cases repurchase the loan or indemnify the investor. Based on these recourse provisions, the Bank established a recourse liability for mortgage loans sold. The following table demonstrates the activity for the years ended December 31, 2013 and 2012:

	2013			2012
	(dollars in thousands)
Beginning balance	$	772		$	245
Provision		499			499
Losses		(196	)		(167	)
Recoveries		15			195
Ending balance	$	1,090		$	772

The nature of the business of the Bank is such that it ordinarily results in a certain amount of litigation. In the opinion of management, at December 31, 2013, there were no pending litigation matters in which the anticipated outcome would have a material adverse effect on the consolidated financial statements.

In August 2011, the Bank was sued in State Court by a subcontractor related to a residential development project foreclosed upon by the Bank. The suit alleged various claims against the Bank, all of which the Bank denied. Following a mistrial in November 2012 where the jury failed to reach a verdict, a second trial in January 2013 resulted in a verdict against the Bank in the amount of $597,500. The Bank is in the process of appealing this verdict and believes it has meritorious defenses against the verdict. The entire judgment amount was recorded as a contingent liability as of December 31, 2012; therefore, management does not expect that there will be any material adverse effects on the Company’s future consolidated financial position, results of operations or cash flows related to this litigation.

51

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements 

December 31, 2013 and 2012

Note 16—Commitments and contingencies (continued)

The Bank has various contractual obligations that it must fund as part of normal operations. The following is a summary of future minimum lease obligations as of December 31, 2013. 

	2014		2015		2016		2017		Thereafter		Total
	(dollars in thousands)
Operating leases	$	239	$	236	$	12	$	11	$	-	$	498

Note 17—Mortgage banking derivatives

Commitments to fund certain mortgage loans (interest rate locks) to be sold into the secondary market and forward commitments for the future delivery of mortgage loans to third party investors are considered derivatives. It is the Bank’s practice to enter into forward commitments for the future delivery of residential mortgage loans when interest rate lock commitments are entered into in order to economically hedge the effect of changes in interest rates resulting from its commitments to fund the loans. These mortgage banking derivatives are not designated in hedge relationships. At December 31, 2013, the Bank had approximately $25.6 million of interest rate lock commitments and $50.6 million of forward commitments for the future delivery of residential mortgage loans. The fair value of these mortgage banking derivatives was reflected by a derivative asset of $823,000 and a derivative liability of $175,000. The net gains related to interest rate lock commitments used for risk management were $166,000 as of December 31, 2013. The net gains for forward contracts related to these mortgage loans was $483,000 as of December 31, 2013. At December 31, 2012, the Company had approximately $35.9 million of interest rate lock commitments and $80.3 million of forward commitments for the future delivery of residential mortgage loans. The fair value of these mortgage banking derivatives was reflected by a derivative asset of $485,000 and a derivative liability of $409,000. The net gains related to interest rate lock commitments used for risk management were $303,000 as of December 31, 2012. The net losses for forward contracts related to these mortgage loans was $227,000 as of December 31, 2012. Fair values were estimated based on changes in mortgage interest rates from the date of the commitments. Changes in the fair values of these mortgage-banking derivatives are included in net gains on sales of loans.

52

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements 

December 31, 2013 and 2012

Note 18—Supplemental consolidated cash flow information

	2013			2012
	(dollars in thousands)
Income taxes paid	$	2,750		$	3,225
Interest paid	$	2,171		$	3,897
Interest received	$	18,250		$	20,529
Transfers from loans to real estate owned	$	1,968		$	5,186
Unrealized gain(loss) on securities, net	$	(5,522	)	$	305

Note 19—Fair value of financial instruments

The Company utilizes fair value measurement to record fair value adjustments to certain other assets and liabilities and to determine fair value measurements where required. For these assets and liabilities recorded at fair value, it is the Company’s policy to maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair value measurements.

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 as follows:

Level 1 – Valuations for assets and liabilities traded in active exchange markets, such as the New York Stock Exchange. At December 31, 2013, the Company’s Level 1 assets include U.S. Government agency obligations.

Level 2 – Valuations for assets and liabilities that are obtained from readily available pricing sources via independent providers for market transactions involving similar assets or liabilities. The Company’s principal markets for these securities are the secondary institutional markets and valuations are based on observable market data in those markets. At December 31, 2013, the Company’s Level 2 assets include U.S. Government agency obligations, state and municipal bonds, and mortgage-backed securities.

Level 3 – Valuations for assets and liabilities that are derived from other valuation methodologies, including option pricing models, discounted cash flow models and similar techniques, and not based on market exchange, dealer, or broker traded transactions. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities. Level 3 assets include impaired loans and other real estate owned as discussed below.

53

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements 

December 31, 2013 and 2012

Note 19—Fair value of financial instruments (continued)

Following is a description of valuation methodologies used for determining fair value for assets and liabilities:

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 present value of future cash flows, adjusted for the securities’ credit rating, prepayment assumptions, and other factors such as credit loss assumptions. At December 31, 2013, the Company classified $158.4 million of investment securities available-for-sale subject to recurring fair value adjustments as Level 2. At December 31, 2012, the Company classified $132.8 million of investment securities available-for-sale subject to recurring fair value adjustments as Level 2.

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 with respect to 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 an individual loan is identified as impaired, management measures the impairment in accordance with ASC 310-10-35, “Receivables-Subsequent Measurements.” The fair value of impaired loans is estimated primarily using the collateral value. However, in some cases other methods are used, such as market value of similar debt, enterprise value, liquidation value, and discounted cash flows. Those impaired loans not requiring an allowance represent loans with respect to which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. At December 31, 2013, substantially all of the total impaired loans were evaluated based on the fair value of the collateral less estimated selling costs. In accordance with ASC 820-10, impaired loans where an allowance is established based on the fair value of collateral require classification in the fair value hierarchy. Most fair values of the collateral are based on an observable market price or a current appraised value by a third party appraiser, tax valuation, or broker price opinion; however, in some cases 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.

As such, the Company records these collateral dependent impaired loans at fair value as nonrecurring Level 3. Collateral dependent impaired loans recorded at fair value totaled $1.4 million and $3.2 million at December 31, 2013 and December 31, 2012, respectively. Specific loan loss allowances for these impaired loans totaled $358,000 and $272,000 at December 31, 2013 and December 31, 2012, respectively. At December 31, 2013 and December 31, 2012, $1.0 million and $2.9 million of impaired loans, net of allowance for loan losses, respectively, were classified as Level 3.

54

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements 

December 31, 2013 and 2012

Note 19—Fair value of financial instruments (continued)

Loans Held for Sale

Loans held for sale are carried at fair value, as determined by outstanding commitments, from third party investors (Level 2). The Company elected the fair value option for loans held for sale on July 1, 2012. These loans are intended for sale and the Company believes that the fair value is the best indicator of the resolution of these loans. Interest income is recorded based on the contractual terms of the loan and in accordance with the Company’s policy on loans held for investment. None of these loans are 90 days or more past due nor on nonaccrual as of December 31, 2013 and 2012.

As of December 31, 2013, the aggregate fair value was $31.3 million, the contractual balance including accrued interest was $30.9 million and the gain recorded from the change in fair value included in earnings for the year ended December 31, 2013 was $372,000. As of December 31, 2012, the aggregate fair value was $48.4 million, the contractual balance including accrued interest was $48.3 million and the gain recorded from the change in fair value included in earnings for the year ended December 31, 2012 was $179,000.

Interest Rate Lock and Forward Commitments

Commitments to fund mortgage loans (interest rate locks) to be sold into the secondary market and forward commitments for the future delivery of these mortgage loans are accounted for as free standing derivatives. Fair values of these mortgage derivatives are estimated based on changes in mortgage interest rates from the date the interest on the loan is locked (Level 2). Changes in the fair values of these derivatives are included in net gains

on sales of loans. The interest rate lock commitments with a positive fair value totaled $39,000 and $97,000 at December 31, 2013 and 2012, respectively, and were recorded in other assets. The interest rate lock commitments with a negative fair value totaled $118,000 and $49,000 at December 31, 2013 and 2012, respectively, and were recorded in other liabilities.

The Company enters into forward commitments for the future delivery of mortgage loans when interest rate locks are entered into, in order to hedge the change in interest rates resulting from its commitments to fund the loans. Changes in the fair values of these derivatives are included in net gains on sales of loans. The interest rate lock commitments with a positive fair value totaled $118,000 and $49,000 at December 31, 2013 and 2012, respectively, and were recorded in other assets. The interest rate lock commitments with a negative fair value totaled $39,000 and $97,000 at December 31, 2013 and 2012, respectively, and were recorded in other liabilities.

Other Real Estate Owned

Foreclosed assets are adjusted to fair value upon transfer of the loans to other real estate owned. Subsequently, other real estate owned is carried at the lower of carrying value or fair value less estimated selling costs. Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral. Most fair values of the collateral are based on an observable market price or a current appraised value; however, in some cases 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. Management may apply discount adjustments to the appraised value for estimated selling costs, information from comparable sales, and marketability of the property.

55

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements 

December 31, 2013 and 2012

Note 19—Fair value of financial instruments (continued)

As such, the Company records other real estate owned with subsequent write downs after transfer as nonrecurring Level 3. Other real estate owned that has had subsequent write-downs after transfer from loans to other real estate totaled $3.6 million and $1.2 million at December 31, 2013 and December 31, 2012, respectively.

The tables below present information about assets and liabilities which are measured at fair value on a recurring basis:

	Fair Value Measurements at December 31, 2013, Using,
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)			Total
	(dollars in thousands)
U.S. Government and agency	$	-	$	58,281	$	-	$	58,281
Mortgage-backed - residential GSEs		-		64,732		-		64,732
State and municipal		-		30,751		-		30,751
Corporate bonds		-		4,675		-		4,675
Total	$	-	$	158,439	$	-	$	158,439
Loans held for sale	$	-	$	31,298	$	-	$	31,298
Derivative assets (1)	$	-	$	823	$	-	$	823
Derivative liabilities(1)	$	-	$	175	$	-	$	175

(1) This amount includes mortgage related interest rate lock commitments and commitments to sell.

56

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements 

December 31, 2013 and 2012

Note 19—Fair value of financial instruments (continued)

	Fair Value Measurements at December 31, 2012, Using,
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)		Total
	(dollars in thousands)
U.S. Government and agency	$	-	$	55,565	$	-	$	55,565
Mortgage-backed - residential GSEs		-		3,112		-		3,112
State and municipal		-		51,295		-		51,295
Corporate bonds		-		22,788		-		22,788
Total	$	-	$	132,760	$	-	$	132,760
Loans held for sale	$	-	$	48,432	$	-	$	48,432
Derivative assets (1)	$	-	$	485	$	-	$	485
Derivative liabilities(1)	$	-	$	409	$	-	$	409

(1) This amount includes mortgage related interest rate lock commitments and commitments to sell.

There were no transfers between Level 1 and Level 2 during 2013 or 2012.

57

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements 

December 31, 2013 and 2012

Note 19—Fair value of financial instruments (continued)

Assets measured at fair value on a non-recurring basis are summarized below:

	Fair Value Measurements at December 31, 2013, Using,
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)		Total
	(dollars in thousands)
Impaired loans, net of allowance
Commercial and industrial	$	-	$	-	$	-	$	-
Real estate - construction		-		-		40		40
Real estate - residential		-		-		249		249
Real estate - commercial		-		-		701		701
Consumer		-		-		11		11
Total impaired loans	$	-	$	-	$	1,001	$	1,001
Other real estate owned
Unimproved land	$	-	$	-	$	471	$	471
Real estate - residential		-		-		144		144
Real estate - commercial		-		-		2,951		2,951
Total other real estate owned	$	-	$	-	$	3,566	$	3,566

58

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements 

December 31, 2013 and 2012

Note 19—Fair value of financial instruments (continued)

	Fair Value Measurements at December 31, 2012, Using,
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)		Total
	(dollars in thousands)
Impaired loans, net of allowance
Commercial and industrial	$	-	$	-	$	-	$	-
Real estate - construction		-		-		542		542
Real estate - residential		-		-		477		477
Real estate - commercial		-		-		1,895		1,895
Consumer		-		-		16		16
Total impaired loans	$	-	$	-	$	2,930	$	2,930
Other real estate owned
Unimproved land	$	-	$	-	$	642	$	642
Real estate - residential		-		-		346		346
Real estate - commercial		-		-		172		172
Total other real estate owned	$	-	$	-	$	1,160	$	1,160

The following tables represent changes in non-recurring fair value recorded during the years ended December 31, 2013 and 2012:

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Impaired Loans			Other Real Estate Owned			Total
	(dollars in thousands)
Balance at December 31, 2012	$	2,930		$	1,160		$	4,090
Gains included in earnings		-			-			-
Gross reductions		(135	)		(1,496	)		(1,631	)
Transfers into (out of) Level 3		(1,794	)		3,902			2,108
Balance at December 31, 2013	$	1,001		$	3,566		$	4,567

Gross reductions in other real estate owned included $1,026,000 in sales and $470,000 in write downs.

59

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements 

December 31, 2013 and 2012

Note 19—Fair value of financial instruments (continued)

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Impaired Loans			Other Real Estate Owned			Total
	(dollars in thousands)
Balance at December 31, 2011	$	4,816		$	1,038		$	5,854
Gains (losses) included in earnings		-			103			103
Gross additions (reductions)		(1,886	)		(1,980	)		(3,866	)
Transfers into (out of) Level 3		-			1,999			1,999
Balance at December 31, 2012	$	2,930		$	1,160		$	4,090

Gross reductions in other real estate owned included $1,752,000 in sales and $228,000 in write downs.

60

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements 

December 31, 2013 and 2012

Note 19—Fair value of financial instruments (continued)

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at December 31, 2013 for collateral dependent impaired loans and other real estate owned:

	Fair Value		Valuation Technique	Unobservable Inputs	Range				Weighted Average
Impaired loans:
Real estate – construction	$	40	Sales comparison	Management and appraiser adjustment for difference between comparable sales		42.41%	-	94%		42.41	%
Real estate – residential		249	Sales comparison	Management and appraiser adjustment for difference between comparable sales		27.31%	-	94%		16.92	%
Real estate - commercial		701	Sales comparison	Management and appraiser adjustment for difference between comparable sales		3.87%	-	44.85%		13.86	%
			Income approach	Capitalization rate			9.50%			9.50	%
Consumer		11	NADA or third party valuation of underlying collateral	Management adjustment for comparable sales		45.85%	-	100%		45.85	%
Total	$	1,001
Other real estate owned:
Unimproved land	$	471	Sales comparison	Management and appraiser adjustment for difference between comparable sales		0%	-	10%		1.51	%
Real estate - residential		144	Sales comparison	Management and appraiser adjustment for difference between comparable sales		29.73%	-	82.80%		33.99	%
Real estate – commercial		2,951	Sales comparison	Management and appraiser adjustment for difference between comparable sales		10.12%	-	26.54%		17.86	%
			Income approach	Capitalization rate			10.00%			10.00	%
Total	$	3,566

61

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements 

December 31, 2013 and 2012

Note 19—Fair value of financial instruments (continued)

Financial Instruments

Fair value measurements for assets and liabilities where there exists limited or no observable market data and, therefore, are based primarily upon estimates, are often calculated based on the economic and competitive environment, the characteristics of the asset or liability, and other factors. Therefore, the fair value cannot be determined with precision and may not be realized in an actual sale or immediate settlement of the asset or liability. Additionally, there may be inherent weaknesses in any calculation technique, and changes in the underlying assumptions used, including discount rates and estimates of future cash flows, could significantly affect current or future values.

The methods and assumptions, not previously presented, used to estimate the fair value of significant financial instruments are as follows:

Cash and due from banks - The carrying value of cash and due from banks approximates the fair value and is classified as Level 1.

Loans held for sale – Loans held for sale are carried at fair value, as determined by outstanding commitments from third party investors. Loans held for sale are classified as Level 2.

Federal Home Loan Bank stock - The fair value of Federal Home Loan Bank (“FHLB”) stock is not practicable since no ready market exists for the stock.

Deposits - The fair value of time deposits is estimated using a discounted cash flow calculation that applies current interest rates to a schedule of aggregated expected maturities and is classified as Level 2. The carrying value of other deposits approximates the fair value and they are classified as Level 1.

Repurchase agreements - The carrying value of repurchase agreements approximates fair value due to their short-term nature and they are classified as Level 1.

Short-term debt and other borrowings - Fair value approximates the carrying value of other borrowings due to their short-term nature and they are classified as

Level 1.

Long-term debt - The fair value of long-term debt is calculated by discounting contractual cash flows using an estimated interest rate based on the current rates available for debt of similar remaining maturities and collateral terms, resulting in a Level 2 classification.

62

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements 

December 31, 2013 and 2012

Note 19—Fair value of financial instruments (continued)

The carrying amount and estimated fair values of financial instruments at December 31, 2013 and December 31, 2012 are as follows:

	Fair Value Measurements at December 31, 2013
	Carrying Value		Level 1		Level 2		Level 3		Total
	(dollars in thousands)
Financial assets:
Cash and due from banks	$	16,828	$	16,828	$	-	$	-	$	16,828
Securities available for sale		158,439		-		158,439		-		158,439
Loans, net of allowance		269,390		-		-		271,112		271,112
Loans held for sale		31,298		-		31,298		-		31,298
Federal Home Loan Bank stock		1,606	N/A		N/A		N/A		N/A
Accrued interest receivable, loans		974		-		974		-		974
Accrued interest receivable, securities		880		-		880		-		880
Other derivative assets(1)		823		-		823		-		823
Financial liabilities
Time deposits	$	152,484	$	-	$	153,411	$	-	$	153,411
Other deposits		267,221		267,221		-		-		267,221
Repurchase agreements		12,111		12,111		-		-		12,111
FHLB short-term debt		22,200		22,200				-		22,200
Accrued interest payable, deposits		398		5		393		-		398
Accrued interest payable, borrowings		6		6		-		-		6
Other derivative liabilities(1)		409		-		409		-		409

(1) This amount includes mortgage related interest rate lock commitments and commitments to sell.

63

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements 

December 31, 2013 and 2012

Note 19—Fair value of financial instruments (continued)

	Fair Value Measurements at December 31, 2012
	Carrying Value		Level 1		Level 2		Level 3		Total
	(dollars in thousands)
Financial assets:
Cash and due from banks	$	30,279	$	30,279	$	-	$	-	$	30,279
Securities available for sale		132,760		-		132,760		-		132,760
Loans, net of allowance		259,877		-		-		264,159		264,159
Loans held for sale		48,432		-		48,432		-		48,432
Federal Home Loan Bank stock		1,865	N/A		N/A		N/A		N/A
Accrued interest receivable, loans		1,123		-		1,123		-		1,123
Accrued interest receivable, securities		649		-		649		-		649
Other derivative assets(1)		485		-		485		-		485
Financial liabilities
Time deposits	$	169,376	$	-	$	170,707	$	-	$	170,707
Other deposits		247,580		247,580		-		-		247,580
Repurchase agreements		3,333		3,333		-		-		3,333
FHLB short-term debt		25,028		25,028				-		25,028
Accrued interest payable, deposits		458		5		453		-		458
Accrued interest payable, repurchase agreements		3		3		-		-		3
Other derivative liabilities(1)		409		-		409		-		409

(1) This amount includes mortgage related interest rate lock commitments and commitments to sell.

64

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements 

December 31, 2013 and 2012

Note 20 – Quarterly Financial Data (Unaudited)

The following table represents summarized data for each of the quarters in 2013 and 2012:

	Selected Quarterly Data
	2013											2012
	4Q			3Q		2Q			1Q			4Q			3Q			2Q		1Q
	(dollars in thousands, except per share data)
Interest income	$	4,655		$	4,581	$	4,576		$	4,520		$	4,887		$	5,200		$	5,226	$	5,256
Interest expense		489			512		545			569			649			945			1,016		1,072
Net interest income		4,166			4,069		4,031			3,951			4,238			4,255			4,210		4,184
Provision for loan losses		(242	)		15		(1,200	)		(602	)		(306	)		(729	)		125		305
Net interest income after provision for loan losses		4,408			4,054		5,231			4,553			4,544			4,984			4,085		3,879
Non-interest income		2,610			2,704		3,723			3,776			3,529			4,824			3,484		2,921
Securities gain (loss)		-			-		78			13			(116	)		11			-		-
Other-than-temporary impairment on securities		-			-		-			-			-			-			-		-
Less: Non-interest expenses		5,752			5,633		5,868			5,213			6,323			6,507			5,065		4,966
Income before income tax expense (benefit)		1,266			1,125		3,164			3,129			1,634			3,312			2,504		1,834
Income tax expense (benefit)		331			282		1,045			822			242			1,070			801		550
Net income	$	935		$	843	$	2,119		$	2,307		$	1,392		$	2,242		$	1,703	$	1,284
Basic earnings (loss) per common share	$	0.26		$	0.24	$	0.60		$	0.65		$	0.39		$	0.62		$	0.47	$	0.36
Diluted earnings (loss) per common share	$	0.26		$	0.23	$	0.59		$	0.65		$	0.39		$	0.62		$	0.47	$	0.36
Dividends per common share	$	0.045		$	0.045	$	0.045		$	0.040		$	0.04		$	0.04		$	0.04	$	-

65

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements 

December 31, 2013 and 2012

Note 21—Condensed financial information on Georgia-Carolina Bancshares, Inc. (Parent Company only)

Condensed Balance Sheets

December 31, 2013 and 2012

(dollars in thousands)

	2013		2012
Assets
Cash	$	431	$	683
Investment in subsidiary		56,089		55,383
Other assets		436		317
Total assets	$	56,956	$	56,383
Liabilities
Deferred tax liability	$	-	$	7
Other liabilities		67		51
Total liabilities		67		58
Shareholders' equity		56,889		56,325
Total liabilities and shareholders' equity	$	56,956	$	56,383

66

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements 

December 31, 2013 and 2012

Note 21—Condensed financial information on Georgia-Carolina Bancshares, Inc. (Parent Company only) (continued)

Condensed Statements of Income

Years Ended December 31, 2013 and 2012

(dollars in thousands)

	2013			2012
Income, dividends from subsidiary	$	160		$	1,500
Expenses
Director compensation		71			56
Legal fees		80			73
Audit exam and accounting fees		71			42
Annual report and proxy		25			20
Shareholder services		26			27
Other		16			11
Total expenses		289			229
Income (loss) before income tax benefits and equity in undistributed earnings of subsidiary		(129	)		1,271
Income tax benefits		105			75
Income (loss) before equity in undistributed earnings of subsidiary		(24	)		1,346
Equity in undistributed earnins of subsidiary		6,228			5,275
Net income	$	6,204		$	6,621

67

GEORGIA-CAROLINA BANCSHARES, INC.

Notes to Consolidated Financial Statements 

December 31, 2013 and 2012

Note 21—Condensed financial information on Georgia-Carolina Bancshares, Inc. (Parent Company only) (continued)

Condensed Statements of Cash Flows

Years Ended December 31, 2013 and 2012

(dollars in thousands)

	2013			2012
Cash flows from operating activities
Net income	$	6,204		$	6,621
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Provision for deferred income taxes		(7	)		1
Stock incentive expense		225			143
Stock compensation		205			209
Equity in undistributed earnings of subsidiary		(6,228	)		(5,275	)
Change in other liabilities		16			(32	)
Change in other assets		(119	)		(78	)
Net cash provided by operating activities		296			1,589
Cash flows from financing activities
Proceeds from stock options exercised		75			253
Repurchased Stock		-			(1,219	)
Dividends		(623	)		(432	)
Net cash used in financing activities		(548	)		(1,398	)
Net increase (decrease) in cash and due from backs		(252	)		191
Cash and due from banks at beginning of period		683			492
Cash and due from banks at end of period	$	431		$	683

68 

XML

Note 15 - Income taxes (Tables)

12 Months Ended

Dec. 31, 2013

Income Tax Disclosure [Abstract]

Schedule of Components of Income Tax Expense (Benefit) [Table Text Block]

	2013			2012
	(dollars in thousands)
Current tax provision	$	3,012		$	3,278
Deferred tax expense (benefit)		(532	)		(615	)
Total income tax expense (benefit)	$	2,480		$	2,663

Schedule of Effective Income Tax Rate Reconciliation [Table Text Block]

	2013			2012
Federal statutory rates		34.0	%		34.0	%
State taxes, net of federal benefit		3.3	%		3.8	%
Tax-exempt income		-2.1	%		-1.5	%
State tax credits		-3.0	%		-2.6	%
Bank-owned life insurance		-4.9	%		-1.4	%
State tax credit valuation allowance		0.5	%		-4.1	%
Other		0.8	%		0.6	%
Total		28.6	%		28.8	%

Schedule of Deferred Tax Assets and Liabilities [Table Text Block]

	2013			2012
Deferred tax assets
Allowance for loan losses	$	1,713		$	1,689
Unrealized loss on securities available for sale		1,913			-
Executive compensation plans		646			502
Valuation adjustment of other real estate owned		645			437
Recourse liability		414			293
Contingent liability		227			228
Investment in GA low-income housing tax credits		310			270
State tax credits		184			281
Mortgage derivatives IRLC expenses		97			115
Other		44			102
Total deferred income tax assets		6,193			3,917
Deferred tax liabilities
Unrealized gain on securities available for sale		-			(798	)
Qualified prepaids		(26	)		(131	)
Depreciation on bank premises and equipment		(198	)		(174	)
Mortgage derivative change in method		(293	)		(439	)
Total deferred income tax liabilities		(517	)		(1,542	)
Valuation allowance		(310	)		(270	)
Net deferred income tax assets	$	5,366		$	2,105

XML

Note 4 - Loans (Details) - Allowance for Loan Losses Activity (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	$ 5,954	$ 6,804
Ending Balance	5,357	5,954
Ending balances:
Individually evaluated for impairment	358	272
Collectively evaluated for impairment	4,999	5,682
Charge-offs	(306)	(1,319)
Recoveries	1,738	1,074
Provisions	(2,029)	(605)
Commercial Portfolio Segment [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	225	185
Ending Balance	227	225
Ending balances:
Individually evaluated for impairment		28
Collectively evaluated for impairment	227	197
Charge-offs	(12)	(98)
Recoveries	6	225
Provisions	8	(87)
Real Estate Development Portfolio Segment [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	2,870	3,219
Ending Balance	1,626	2,870
Ending balances:
Individually evaluated for impairment	37
Collectively evaluated for impairment	1,589	2,870
Charge-offs		(692)
Recoveries	1,467	734
Provisions	(2,711)	(391)
Residential Portfolio Segment [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	794	1,141
Ending Balance	772	794
Ending balances:
Individually evaluated for impairment	67	59
Collectively evaluated for impairment	705	735
Charge-offs	(96)	(242)
Recoveries	37	43
Provisions	37	(148)
Commercial Real Estate Portfolio Segment [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	1,872	1,706
Ending Balance	2,458	1,872
Ending balances:
Individually evaluated for impairment	252	185
Collectively evaluated for impairment	2,206	1,687
Charge-offs	(105)	(179)
Recoveries	190	14
Provisions	501	331
Consumer Portfolio Segment [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	77	108
Ending Balance	210	77
Ending balances:
Individually evaluated for impairment	2
Collectively evaluated for impairment	208	77
Charge-offs	(93)	(108)
Recoveries	38	58
Provisions	188	19
Unallocated Financing Receivables [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	116	445
Ending Balance	64	116
Ending balances:
Collectively evaluated for impairment	64	116
Provisions	$ (52)	$ (329)

XML

Note 3 - Investment Securities (Details) - Amortized Cost and Fair Value Amounts of Securities Owned (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Securities available-for-sale:
Gross Amortized Cost	$ 164,418	$ 130,504
Gross Unrealized Gains	984	2,493
Unrealized Losses	(6,963)	(237)
Available for Sale Securities Measured at Fair Value	158,439	132,760
US Government Agencies Debt Securities [Member]
Securities available-for-sale:
Gross Amortized Cost	61,486	55,404
Gross Unrealized Gains	146	260
Unrealized Losses	(3,351)	(99)
Available for Sale Securities Measured at Fair Value	58,281	55,565
Mortgage Backed [Member]
Securities available-for-sale:
Gross Amortized Cost	66,095	50,074
Gross Unrealized Gains	558	1,313
Unrealized Losses	(1,921)	(92)
Available for Sale Securities Measured at Fair Value	64,732	51,295
US States and Political Subdivisions Debt Securities [Member]
Securities available-for-sale:
Gross Amortized Cost	32,088	21,974
Gross Unrealized Gains	255	852
Unrealized Losses	(1,592)	(38)
Available for Sale Securities Measured at Fair Value	30,751	22,788
Corporate Debt Securities [Member]
Securities available-for-sale:
Gross Amortized Cost	4,749	3,052
Gross Unrealized Gains	25	68
Unrealized Losses	(99)	(8)
Available for Sale Securities Measured at Fair Value	$ 4,675	$ 3,112

XML

Note 10 - Employee Benefit Plans (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Salary-deferred Plan 401K [Member]
Note 10 - Employee Benefit Plans (Details) [Line Items]
Defined Contribution Plan, Employer Discretionary Contribution Amount	$ 206,000	$ 200,000
Nonqualified Executive Deferred Compensation Plan [Member]
Note 10 - Employee Benefit Plans (Details) [Line Items]
Defined Contribution Plan, Cost Recognized	22,000	23,000
Deferred Compensation Liability, Current and Noncurrent	96,000	74,000
Supplemental Executive Retirement Plan [Member]
Note 10 - Employee Benefit Plans (Details) [Line Items]
Defined Contribution Plan, Cost Recognized	273,000	294,000
Deferred Compensation Liability, Current and Noncurrent	$ 1,444,000	$ 1,188,000

XML

Note 4 - Loans (Details) - Recorded Investment in Loans Receivable (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Accounts, Notes, Loans and Financing Receivable [Line Items]
Individually evaluated for impairment	$ 8,861	$ 9,829
Collectively evaluated for impairment	267,036	257,202
Ending balance	275,897	267,031
Commercial Portfolio Segment [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Individually evaluated for impairment		90
Collectively evaluated for impairment	18,177	19,798
Ending balance	18,177	19,888
Real Estate Development Portfolio Segment [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Individually evaluated for impairment	92	566
Collectively evaluated for impairment	60,670	55,657
Ending balance	60,762	56,223
Residential Portfolio Segment [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Individually evaluated for impairment	1,695	2,376
Collectively evaluated for impairment	54,367	53,413
Ending balance	56,062	55,789
Commercial Real Estate Portfolio Segment [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Individually evaluated for impairment	7,053	6,770
Collectively evaluated for impairment	129,896	124,420
Ending balance	136,949	131,190
Consumer Portfolio Segment [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Individually evaluated for impairment	21	27
Collectively evaluated for impairment	3,926	3,914
Ending balance	$ 3,947	$ 3,941

XML

Note 12 - Stock Based Compensation (Details) - Common Stock Issued Through Exercise of Employee Stock Options And Director Compensation	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Note 12 - Stock Based Compensation (Details) - Common Stock Issued Through Exercise of Employee Stock Options And Director Compensation [Line Items]
Net options exercised	28,469,000	45,491,000
Net issuance of common stock	3,572,204	3,528,296
Employee Stock Options and Director Compensation [Member]
Note 12 - Stock Based Compensation (Details) - Common Stock Issued Through Exercise of Employee Stock Options And Director Compensation [Line Items]
Net options exercised	5,831	45,491
Issuance of stock for compensation	24,006	15,988
Issuance of stock for directors' fees	14,071	24,504
Net issuance of common stock	43,908	85,983

XML

Note 2 - Cash and Due From Banks (Details) (USD $)	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Note 2 - Cash and Due From Banks (Details) [Line Items]
Cash and Due from Banks	$ 16,828,000	$ 30,279,000	$ 34,902,000
Interest-bearing Deposits in Banks and Other Financial Institutions	1,400,000	4,800,000
Restricted Cash and Cash Equivalents	4,500,000	3,800,000
Deposit in Federal Reserve Bank [Member]
Note 2 - Cash and Due From Banks (Details) [Line Items]
Interest-bearing Deposits in Banks and Other Financial Institutions	$ 1,300,000	$ 14,500,000

XML

Note 7 - Other Real Estate Owned (Tables)

12 Months Ended

Dec. 31, 2013

Disclosure Text Block [Abstract]

Other Real Estate, Roll Forward [Table Text Block]

	2013			2012
	(dollars in thousands)
Balance at beginning of year	$	5,876		$	6,990
Loans transferred to real estate owned		1,968			5,186
Sales of real estate owned		(2,051	)		(4,866	)
Direct write-downs		(896	)		(1,434	)
Balance at end of year	$	4,897		$	5,876

Income and Expense Related to Other Real Estate Owned [Table Text Block]

	2013		2012
	(dollars in thousands)
Net gains on sales	$	231	$	40
Rental income	$	567	$	686
Operating expenses	$	758	$	850

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Note 13 - Earnings Per Common Share (Details)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Earnings Per Share [Abstract]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	47,365	129,417

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Note 12 - Stock Based Compensation (Details) (USD $)	12 Months Ended										12 Months Ended			12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013 Vesting Three Years [Member] Restricted Stock [Member] Granted 2013 [Member]	Dec. 31, 2013 Vesting Five Years [Member] Restricted Stock [Member] Granted 2013 [Member]	Dec. 31, 2013 Restricted Stock [Member]	Dec. 31, 2012 Restricted Stock [Member]	Dec. 31, 2013 Restricted Stock [Member] Granted 2012 [Member]	Dec. 31, 2013 Retainer Stock [Member]	Dec. 31, 2012 Retainer Stock [Member]	Dec. 31, 1997 Stock Option Plan 1997 [Member]	Dec. 31, 2013 Incentive Plan 2004 [Member]	Dec. 31, 2012 Incentive Plan 2004 [Member]	Dec. 31, 2005 Incentive Plan 2004 [Member]	Dec. 31, 2012 Maximum [Member]
Note 12 - Stock Based Compensation (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized										345,000			330,125
Stock or Unit Option Plan Expense (in Dollars)	$ 93,000	$ 108,000
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period		7 years		5 years			3 years							10 years
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period			16,406	7,600	24,006	15,988
Allocated Share-based Compensation Expense (in Dollars)					132,456	35,210					205,000	209,000
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, Lower Range Limit (in Dollars per share)	$ 7.00
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, Upper Range Limit (in Dollars per share)	$ 20.41
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized (in Dollars)	243,195
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition	1 year 222 days
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested in Period, Fair Value (in Dollars)	$ 94,494	$ 87,638
Share-based Compensation Arrangement by Share-based Payment Award, Shares Issued in Period								7,646	11,350		14,071	24,504
Share Based Compensation Arrangement By Share Based Payment Award, Purchased Price, Percentage of Grant Date Fair Value											85%

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Note 17 - Mortgage Banking Derivative (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Interest Rate Lock Commitments [Member]
Note 17 - Mortgage Banking Derivative (Details) [Line Items]
Derivative, Notional Amount	$ 25,600,000	$ 35,900,000
Derivative Asset, Fair Value, Amount Not Offset Against Collateral	823,000	303,000
Derivative, Gain (Loss) on Derivative, Net	166,000
Derivative Assets (Liabilities), at Fair Value, Net		485,000
Forward Contracts [Member]
Note 17 - Mortgage Banking Derivative (Details) [Line Items]
Derivative, Notional Amount	50,600,000	80,300,000
Derivative Liability, Fair Value, Amount Not Offset Against Collateral	175,000	(227,000)
Derivative, Gain (Loss) on Derivative, Net	483,000
Derivative Assets (Liabilities), at Fair Value, Net		$ (409,000)

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Note 4 - Loans (Details) - Analysis of Current, Past Due And Nonaccrual Loans (USD $)	Dec. 31, 2013	Dec. 31, 2012
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-89 Days Past Due	$ 1,709,000	$ 4,725,000
Past Due 90 Days or More	31
Nonaccrual	1,924,000	3,896,000
Total Past Due and Nonaccrual	3,664,000	8,621,000
Current and not Past Due or Nonaccrual	271,280,000	257,266,000
Total Loans Receivable	274,944,000	265,887,000
Commercial and Industrial [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-89 Days Past Due	59,000	134,000
Nonaccrual		61,000
Total Past Due and Nonaccrual	59,000	195,000
Current and not Past Due or Nonaccrual	18,054,000	19,621,000
Total Loans Receivable	18,113,000	19,816,000
Acquisition Development & Construction [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Nonaccrual		134,000
Total Past Due and Nonaccrual		134,000
Current and not Past Due or Nonaccrual	11,306,000	14,138,000
Total Loans Receivable	11,306,000	14,272,000
Other Real Estate Construction [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-89 Days Past Due	125,000	1,318,000
Past Due 90 Days or More	31
Nonaccrual	52,000	68,000
Total Past Due and Nonaccrual	208,000	1,386,000
Current and not Past Due or Nonaccrual	48,962,000	40,268,000
Total Loans Receivable	49,170,000	41,654,000
Home Equity Line [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-89 Days Past Due	132,000	211,000
Nonaccrual	110,000	108,000
Total Past Due and Nonaccrual	242,000	319,000
Current and not Past Due or Nonaccrual	17,889,000	19,618,000
Total Loans Receivable	18,131,000	19,937,000
Other Real Estate Residential [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-89 Days Past Due	468,000	1,322,000
Nonaccrual	556,000	1,776,000
Total Past Due and Nonaccrual	1,024,000	3,098,000
Current and not Past Due or Nonaccrual	36,637,000	32,460,000
Total Loans Receivable	37,661,000	35,558,000
Owner Occupied [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-89 Days Past Due	919,000	941,000
Nonaccrual	744,000	1,527,000
Total Past Due and Nonaccrual	1,663,000	2,468,000
Current and not Past Due or Nonaccrual	59,125,000	52,360,000
Total Loans Receivable	60,788,000	54,828,000
Non Owner Occupied [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-89 Days Past Due		772,000
Nonaccrual	441,000	195,000
Total Past Due and Nonaccrual	441,000	967,000
Current and not Past Due or Nonaccrual	75,403,000	74,934,000
Total Loans Receivable	75,844,000	75,901,000
Consumer [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-89 Days Past Due	6,000	27,000
Nonaccrual	21,000	27,000
Total Past Due and Nonaccrual	27,000	54,000
Current and not Past Due or Nonaccrual	3,904,000	3,867,000
Total Loans Receivable	$ 3,931,000	$ 3,921,000

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Note 12 - Stock Based Compensation (Details) - Nonvested Options (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Nonvested Options [Abstract]
Shares Nonvested Balance at January 1	77,867	93,516
Shares Nonvested Weighted Average Grant- Date Fair Value at January 1 (in Dollars per share)	$ 5.55	$ 5.57
Shares Vested	(16,558)	(15,355)
Weighted Average Grant-Date Fair Value Vested (in Dollars per share)	$ 5.71	$ 5.71
Shares forfeited		(294)
Weighted Average Grant-Date Fair Value forfeited (in Dollars per share)		$ 5.69
Shares Nonvested Balance at December 31	61,309	77,867
Shares Nonvested Weighted Average Grant- Date Fair Value at December 31 (in Dollars per share)	$ 5.50	$ 5.55

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Note 16 - Commitments and Contingencies (Details) - Significant Off-balance-sheet Financial Instruments (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Financial Instruments	$ 74,616	$ 50,005
Standby Letters of Credit [Member]
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Financial Instruments	472	1,029
Commitments to Extend Credit [Member]
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Financial Instruments	$ 74,144	$ 48,976

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Note 14 - Other expenses (Details) - Other Non-interest Expenses (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Note 14 - Other expenses (Details) - Other Non-interest Expenses [Line Items]
Data processing	$ 1,346,000	$ 1,050,000
FDIC assessment	254,000	403,000
Legal and accounting	713,000	783,000
Printing and supplies	307,000	290,000
Advertising	203,000	177,000
Business development	158,000	144,000
Telecommunications	222,000	194,000
Outside services	255,000	240,000
Courier and postage	204,000	178,000
Software license fees	85,000	92,000
City and county taxes	181,000	149,000
Directors fees	288,000	275,000
Travel and employee meals and entertainment	162,000	180,000
Provision for mortgage recourse liability	499,000	499,000
Legal settlement payable	597,500	598,000
FHLB early payoff penalty		392,000
Other Non-interest Expense	6,454,000	6,692,000
Other Non-interest Expense [Member]
Note 14 - Other expenses (Details) - Other Non-interest Expenses [Line Items]
Other Non-interest Expense	$ 1,577,000	$ 1,048,000

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Note 16 - Commitments and Contingencies (Details) - Recourse Liability for Mortgage Loans Sold Activity (USD $) In Thousands, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2013	Dec. 31, 2012
Loss Contingencies [Line Items]
Recourse Liability for Mortgage Loans Sold				$ 265,831					$ 265,831
Provision	(242)	15	(1,200)	(602)	(306)	(729)	125	305	(2,029)	(605)
Recourse Liability for Mortgage Loans Sold	274,747				265,831				274,747	265,831
Mortgage Loans Sold, Recourse Liability [Member]
Loss Contingencies [Line Items]
Recourse Liability for Mortgage Loans Sold				772				245	772	245
Provision									499	499
Losses									(196)	(167)
Recoveries									15	195
Recourse Liability for Mortgage Loans Sold	$ 1,090				$ 772				$ 1,090	$ 772

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Note 12 - Stock Based Compensation (Details) - Directors' Equity Incentive Plan Activity (Directors Equity Incentive Plan [Member])	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Directors Equity Incentive Plan [Member]
Note 12 - Stock Based Compensation (Details) - Directors' Equity Incentive Plan Activity [Line Items]
Beginning shares authorized and unissued	170,434	21,739
Additional shares authorized and unissued		173,199
Shares issued	(14,071)	(24,504)
Ending shares authorized and unissued	156,363	170,434

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Note 11 - Regulatory Capital Matters (Details) (USD $)	0 Months Ended	12 Months Ended
	Feb. 12, 2013	Dec. 31, 2013	Dec. 31, 2012
Note 11 - Regulatory Capital Matters (Details) [Line Items]
Statutory Accounting Practices, Statutory Amount Available for Dividend Payments without Regulatory Approval (in Dollars)		$ 13,900,000
Common Stock, Dividends, Per Share, Cash Paid	$ 0.045	$ 0.175	$ 0.120
Dividends (in Dollars)		$ 623,000	$ 431,500
Dividend 2012 Third [Member]
Note 11 - Regulatory Capital Matters (Details) [Line Items]
Common Stock, Dividends, Per Share, Cash Paid			$ 0.04
Dividend 2013, First [Member]
Note 11 - Regulatory Capital Matters (Details) [Line Items]
Common Stock, Dividends, Per Share, Cash Paid		$ 0.04
Dividend 2013, Second [Member]
Note 11 - Regulatory Capital Matters (Details) [Line Items]
Common Stock, Dividends, Per Share, Cash Paid		$ 0.045
Dividend 2013,Third [Member]
Note 11 - Regulatory Capital Matters (Details) [Line Items]
Common Stock, Dividends, Per Share, Cash Paid		$ 0.045
Dividend 2013, Fourth [Member]
Note 11 - Regulatory Capital Matters (Details) [Line Items]
Common Stock, Dividends, Per Share, Cash Paid		$ 0.045

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Note 18 - Supplemental Consolidated Cash Flow Information

12 Months Ended

Dec. 31, 2013

Supplemental Cash Flow Elements [Abstract]

Cash Flow, Supplemental Disclosures [Text Block]

Note 18—Supplemental consolidated cash flow information

	2013			2012
	(dollars in thousands)
Income taxes paid	$	2,750		$	3,225
Interest paid	$	2,171		$	3,897
Interest received	$	18,250		$	20,529
Transfers from loans to real estate owned	$	1,968		$	5,186
Unrealized gain(loss) on securities, net	$	(5,522	)	$	305

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Note 3 - Investment Securities (Details) - Investment Securities with Continuous Loss Position (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013		Dec. 31, 2012
Securities available-for-sale:
Gross Unrealized Losses	$ 6,963		$ 237
US Government Agencies Debt Securities [Member] | Less Than 12 Months [Member]
Securities available-for-sale:
Number of Securities	23		7
Fair Value	34,142		13,757
Gross Unrealized Losses	(1,911)		(99)
US Government Agencies Debt Securities [Member] | Over 12 Months [Member]
Securities available-for-sale:
Number of Securities	7		1
Fair Value	11,759		1,365
Gross Unrealized Losses	(1,440)			[1]
US Government Agencies Debt Securities [Member]
Securities available-for-sale:
Gross Unrealized Losses	3,351		99
Corporate Debt Securities [Member] | Less Than 12 Months [Member]
Securities available-for-sale:
Number of Securities	4		1
Fair Value	3,487		992
Gross Unrealized Losses	(99)		(8)
Corporate Debt Securities [Member]
Securities available-for-sale:
Gross Unrealized Losses	99		8
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member] | Less Than 12 Months [Member]
Securities available-for-sale:
Number of Securities	31		2
Fair Value	40,852		4,794
Gross Unrealized Losses	(1,744)		(92)
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member] | Over 12 Months [Member]
Securities available-for-sale:
Number of Securities	3
Fair Value	5,294
Gross Unrealized Losses	(177)
US States and Political Subdivisions Debt Securities [Member] | Less Than 12 Months [Member]
Securities available-for-sale:
Number of Securities	41		5
Fair Value	19,934		2,035
Gross Unrealized Losses	(1,156)		(38)
US States and Political Subdivisions Debt Securities [Member] | Over 12 Months [Member]
Securities available-for-sale:
Number of Securities	8
Fair Value	3,028
Gross Unrealized Losses	(436)	[1]
US States and Political Subdivisions Debt Securities [Member]
Securities available-for-sale:
Gross Unrealized Losses	1,592		38
Less Than 12 Months [Member]
Securities available-for-sale:
Number of Securities	99		15
Fair Value	98,415		21,578
Gross Unrealized Losses	(4,910)		(237)
Over 12 Months [Member]
Securities available-for-sale:
Number of Securities	18		1
Fair Value	20,081		1,365
Gross Unrealized Losses	$ (2,053)	[1]

[1] Gross unrealized loss is less than $1,000.

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Note 19 - Fair Value of Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2013

Fair Value Disclosures [Abstract]

Fair Value, Assets Measured on Recurring Basis [Table Text Block]

	Fair Value Measurements at December 31, 2013, Using,
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)			Total
	(dollars in thousands)
U.S. Government and agency	$	-	$	58,281	$	-	$	58,281
Mortgage-backed - residential GSEs		-		64,732		-		64,732
State and municipal		-		30,751		-		30,751
Corporate bonds		-		4,675		-		4,675
Total	$	-	$	158,439	$	-	$	158,439
Loans held for sale	$	-	$	31,298	$	-	$	31,298
Derivative assets (1)	$	-	$	823	$	-	$	823
Derivative liabilities(1)	$	-	$	175	$	-	$	175

	Fair Value Measurements at December 31, 2012, Using,
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)		Total
	(dollars in thousands)
U.S. Government and agency	$	-	$	55,565	$	-	$	55,565
Mortgage-backed - residential GSEs		-		3,112		-		3,112
State and municipal		-		51,295		-		51,295
Corporate bonds		-		22,788		-		22,788
Total	$	-	$	132,760	$	-	$	132,760
Loans held for sale	$	-	$	48,432	$	-	$	48,432
Derivative assets (1)	$	-	$	485	$	-	$	485
Derivative liabilities(1)	$	-	$	409	$	-	$	409

Fair Value Measurements, Nonrecurring [Table Text Block]

	Fair Value Measurements at December 31, 2013, Using,
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)		Total
	(dollars in thousands)
Impaired loans, net of allowance
Commercial and industrial	$	-	$	-	$	-	$	-
Real estate - construction		-		-		40		40
Real estate - residential		-		-		249		249
Real estate - commercial		-		-		701		701
Consumer		-		-		11		11
Total impaired loans	$	-	$	-	$	1,001	$	1,001
Other real estate owned
Unimproved land	$	-	$	-	$	471	$	471
Real estate - residential		-		-		144		144
Real estate - commercial		-		-		2,951		2,951
Total other real estate owned	$	-	$	-	$	3,566	$	3,566

	Fair Value Measurements at December 31, 2012, Using,
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)		Total
	(dollars in thousands)
Impaired loans, net of allowance
Commercial and industrial	$	-	$	-	$	-	$	-
Real estate - construction		-		-		542		542
Real estate - residential		-		-		477		477
Real estate - commercial		-		-		1,895		1,895
Consumer		-		-		16		16
Total impaired loans	$	-	$	-	$	2,930	$	2,930
Other real estate owned
Unimproved land	$	-	$	-	$	642	$	642
Real estate - residential		-		-		346		346
Real estate - commercial		-		-		172		172
Total other real estate owned	$	-	$	-	$	1,160	$	1,160

Fair Value, Assets and Liabilities Measured on Nonrecurring Basis, Valuation Techniques [Table Text Block]

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Impaired Loans			Other Real Estate Owned			Total
	(dollars in thousands)
Balance at December 31, 2012	$	2,930		$	1,160		$	4,090
Gains included in earnings		-			-			-
Gross reductions		(135	)		(1,496	)		(1,631	)
Transfers into (out of) Level 3		(1,794	)		3,902			2,108
Balance at December 31, 2013	$	1,001		$	3,566		$	4,567

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Impaired Loans			Other Real Estate Owned			Total
	(dollars in thousands)
Balance at December 31, 2011	$	4,816		$	1,038		$	5,854
Gains (losses) included in earnings		-			103			103
Gross additions (reductions)		(1,886	)		(1,980	)		(3,866	)
Transfers into (out of) Level 3		-			1,999			1,999
Balance at December 31, 2012	$	2,930		$	1,160		$	4,090

Fair Value Inputs, Assets, Quantitative Information [Table Text Block]

	Fair Value		Valuation Technique	Unobservable Inputs	Range				Weighted Average
Impaired loans:
Real estate – construction	$	40	Sales comparison	Management and appraiser adjustment for difference between comparable sales		42.41%	-	94%		42.41	%
Real estate – residential		249	Sales comparison	Management and appraiser adjustment for difference between comparable sales		27.31%	-	94%		16.92	%
Real estate - commercial		701	Sales comparison	Management and appraiser adjustment for difference between comparable sales		3.87%	-	44.85%		13.86	%
			Income approach	Capitalization rate			9.50%			9.50	%
Consumer		11	NADA or third party valuation of underlying collateral	Management adjustment for comparable sales		45.85%	-	100%		45.85	%
Total	$	1,001
Other real estate owned:
Unimproved land	$	471	Sales comparison	Management and appraiser adjustment for difference between comparable sales		0%	-	10%		1.51	%
Real estate - residential		144	Sales comparison	Management and appraiser adjustment for difference between comparable sales		29.73%	-	82.80%		33.99	%
Real estate – commercial		2,951	Sales comparison	Management and appraiser adjustment for difference between comparable sales		10.12%	-	26.54%		17.86	%
			Income approach	Capitalization rate			10.00%			10.00	%
Total	$	3,566

Fair Value, by Balance Sheet Grouping [Table Text Block]

	Fair Value Measurements at December 31, 2013
	Carrying Value		Level 1		Level 2		Level 3		Total
	(dollars in thousands)
Financial assets:
Cash and due from banks	$	16,828	$	16,828	$	-	$	-	$	16,828
Securities available for sale		158,439		-		158,439		-		158,439
Loans, net of allowance		269,390		-		-		271,112		271,112
Loans held for sale		31,298		-		31,298		-		31,298
Federal Home Loan Bank stock		1,606	N/A		N/A		N/A		N/A
Accrued interest receivable, loans		974		-		974		-		974
Accrued interest receivable, securities		880		-		880		-		880
Other derivative assets(1)		823		-		823		-		823
Financial liabilities
Time deposits	$	152,484	$	-	$	153,411	$	-	$	153,411
Other deposits		267,221		267,221		-		-		267,221
Repurchase agreements		12,111		12,111		-		-		12,111
FHLB short-term debt		22,200		22,200				-		22,200
Accrued interest payable, deposits		398		5		393		-		398
Accrued interest payable, borrowings		6		6		-		-		6
Other derivative liabilities(1)		409		-		409		-		409

	Fair Value Measurements at December 31, 2012
	Carrying Value		Level 1		Level 2		Level 3		Total
	(dollars in thousands)
Financial assets:
Cash and due from banks	$	30,279	$	30,279	$	-	$	-	$	30,279
Securities available for sale		132,760		-		132,760		-		132,760
Loans, net of allowance		259,877		-		-		264,159		264,159
Loans held for sale		48,432		-		48,432		-		48,432
Federal Home Loan Bank stock		1,865	N/A		N/A		N/A		N/A
Accrued interest receivable, loans		1,123		-		1,123		-		1,123
Accrued interest receivable, securities		649		-		649		-		649
Other derivative assets(1)		485		-		485		-		485
Financial liabilities
Time deposits	$	169,376	$	-	$	170,707	$	-	$	170,707
Other deposits		247,580		247,580		-		-		247,580
Repurchase agreements		3,333		3,333		-		-		3,333
FHLB short-term debt		25,028		25,028				-		25,028
Accrued interest payable, deposits		458		5		453		-		458
Accrued interest payable, repurchase agreements		3		3		-		-		3
Other derivative liabilities(1)		409		-		409		-		409

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Note 12 - Stock Based Compensation (Details) - Stock Based Compensation-Fair Value of Share based Options and Valuation Assumption (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Stock Based Compensation-Fair Value of Share based Options and Valuation Assumption [Abstract]
Total intrinsic value of options exercised	$ 6,263	$ 318,282
Cash received from option exercise	407,107	252,630
Tax benefit related to option exercises	$ 130,274	$ 85,890

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Note 20 - Quarterly Financial Data (Details) - Selected Quarterly Data (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2013	Dec. 31, 2012
Selected Quarterly Data [Abstract]
Interest income	$ 4,655	$ 4,581	$ 4,576	$ 4,520	$ 4,887	$ 5,200	$ 5,226	$ 5,256	$ 18,332	$ 20,569
Interest expense	489	512	545	569	649	945	1,016	1,072	2,115	3,682
Net interest income	4,166	4,069	4,031	3,951	4,238	4,255	4,210	4,184	16,217	16,887
Provision for loan losses	(242)	15	(1,200)	(602)	(306)	(729)	125	305	(2,029)	(605)
Net interest income after provision for loan losses	4,408	4,054	5,231	4,553	4,544	4,984	4,085	3,879	18,246	17,492
Non-interest income	2,610	2,704	3,723	3,776	3,529	4,824	3,484	2,921	12,904	14,653
Securities gain (loss)			78	13	(116)	11			91	(105)
Less: Non-interest expenses	5,752	5,633	5,868	5,213	6,323	6,507	5,065	4,966	22,466	22,861
Income before income tax expense (benefit)	1,266	1,125	3,164	3,129	1,634	3,312	2,504	1,834	8,684	9,284
Income tax expense (benefit)	331	282	1,045	822	242	1,070	801	550	2,480	2,663
Net income	$ 935	$ 843	$ 2,119	$ 2,307	$ 1,392	$ 2,242	$ 1,703	$ 1,284	$ 6,204	$ 6,621
Basic earnings (loss) per common share (in Dollars per share)	$ 0.26	$ 0.24	$ 0.60	$ 0.65	$ 0.39	$ 0.62	$ 0.47	$ 0.36	$ 1.74	$ 1.84
Diluted earnings (loss) per common share (in Dollars per share)	$ 0.26	$ 0.23	$ 0.59	$ 0.65	$ 0.39	$ 0.62	$ 0.47	$ 0.36	$ 1.73	$ 1.84
Dividends per common share (in Dollars per share)	$ 0.045	$ 0.045	$ 0.045	$ 0.040	$ 0.04	$ 0.04	$ 0.04

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Note 13 - Earnings Per Common Share (Tables)

12 Months Ended

Dec. 31, 2013

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	2013
	Income (Numerator)		Shares (Denominator)		Per Share
	(dollars in thousands, except per share data)
Basic EPS
Net income available to common shareholders	$	6,204		3,558,876	$	1.74
Effect of stock options outstanding		-		31,244		(0.01	)
Diluted EPS
Net income available to common shareholders	$	6,204		3,590,120	$	1.73

	2012
	Income (Numerator)		Shares (Denominator)		Per Share
	(dollars in thousands, except per share data)
Basic EPS
Net income available to common shareholders	$	6,621		3,599,431	$	1.84
Effect of stock options outstanding		-		-		-
Diluted EPS
Net income available to common shareholders	$	6,621		3,599,431	$	1.84

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Note 4 - Loans (Details) - Composition of Loans (USD $)	Dec. 31, 2013	Dec. 31, 2012
Accounts, Notes, Loans and Financing Receivable [Line Items]
Commercial and industrial	$ 18,113,000	$ 19,816,000
Real estate - construction, land and land development	60,476,000	55,926,000
Real estate - residential	55,792,000	55,495,000
Real estate - commercial	136,632,000	130,729,000
Consumer	3,931,000	3,921,000
Total loans	274,747,000	265,831,000
Deferred loan fees	(197,000)	(56,000)
Total loans	274,747,000	265,831,000
Allowance for loan losses	(5,357,000)	(5,954,000)
Loans, net of allowance for loan losses	269,390,000	259,877,000
Total [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	$ 274,944,000	$ 265,887,000

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Note 8 - Deposits (Details) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Disclosure Text Block [Abstract]
Secured Debt, Repurchase Agreements	$ 12,111,000	$ 3,333,000
Interest-bearing Domestic Deposit, Brokered	$ 19,900,000	$ 27,800,000

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Note 4 - Loans (Details) - Executive Officers and Directors Loan Transactions (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Executive Officers and Directors Loan Transactions [Abstract]
Balance at beginning of year	$ 6,376	$ 9,813
Balance at end of year	5,591	6,376
Advances	1,144	4,607
Repayments	$ (1,929)	$ (8,044)

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Note 3 - Investment Securities (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Note 3 - Investment Securities (Details) [Line Items]
Available-for-sale Securities Pledged as Collateral	$ 64,100,000	$ 53,700,000
Proceeds from Sale of Available-for-sale Securities	12,735,000	14,324,000
Available-for-sale Securities, Gross Realized Gains	158,000	161,100
Available-for-sale Securities, Gross Realized Losses	74,400	270,500
Available-for-sale Securities, Gross Realized Gain (Loss)	83,600	109,400
Unrealized Gain (Loss) on Securities	(5,522,000)	305,000
Maximum [Member]
Note 3 - Investment Securities (Details) [Line Items]
Unrealized Gain (Loss) on Securities		$ 1,000

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Note 2 - Cash and Due From Banks

12 Months Ended

Dec. 31, 2013

Cash and Cash Equivalents [Abstract]

Cash and Cash Equivalents Disclosure [Text Block]

Note 2—Cash and due from banks

Cash and due from banks totaled $16.8 million at December 31, 2013, compared to $30.3 million at December 31, 2012. Cash on hand, cash items in the process of collection, and amounts due from correspondent banks and the Federal Reserve Bank are included in cash and due from banks. As of December 31, 2013, interest-bearing cash on deposit with correspondent banks totaled $1.4 million compared to $4.8 million as of December 31, 2012. Interest-bearing cash on deposit in the Federal Reserve Bank was $1.3 million as of December 31, 2013 compared to $14.5 million as of December 31, 2012. Funds not included in interest bearing deposits, but required to be on reserve with the Federal Reserve Bank to meet regulatory and reserve clearing requirements totaled $4.5 million and $3.8 as of December 31, 2013 and 2012, respectively.

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Note 5 - Bank-owaned Life Insurance (BOLI) (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Sep. 30, 2013	Sep. 30, 2007
Note 5 - Bank-owaned Life Insurance (BOLI) (Details) [Line Items]
Life Insurance, Corporate or Bank Owned, Amount			$ 5,000,000	$ 8,000,000
Cash Surrender Value of Life Insurance	14,800,000	10,000,000
Life Insurance, Corporate or Bank Owned, Change in Value	448,000	392,000
Life Insurance, Corporate or Bank Owned, Annualized Net Yield	4.06%	4.01%
Bank Owned Life Insurance Income	1,420,000
Death Insurance Benefit [Member]
Note 5 - Bank-owaned Life Insurance (BOLI) (Details) [Line Items]
Other Income	$ 806,000

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Note 20 - Quarterly Financial Data (Tables)

12 Months Ended

Dec. 31, 2013

Quarterly Financial Information Disclosure [Abstract]

Schedule of Quarterly Financial Information [Table Text Block]

	Selected Quarterly Data
	2013											2012
	4Q			3Q		2Q			1Q			4Q			3Q			2Q		1Q
	(dollars in thousands, except per share data)
Interest income	$	4,655		$	4,581	$	4,576		$	4,520		$	4,887		$	5,200		$	5,226	$	5,256
Interest expense		489			512		545			569			649			945			1,016		1,072
Net interest income		4,166			4,069		4,031			3,951			4,238			4,255			4,210		4,184
Provision for loan losses		(242	)		15		(1,200	)		(602	)		(306	)		(729	)		125		305
Net interest income after provision for loan losses		4,408			4,054		5,231			4,553			4,544			4,984			4,085		3,879
Non-interest income		2,610			2,704		3,723			3,776			3,529			4,824			3,484		2,921
Securities gain (loss)		-			-		78			13			(116	)		11			-		-
Other-than-temporary impairment on securities		-			-		-			-			-			-			-		-
Less: Non-interest expenses		5,752			5,633		5,868			5,213			6,323			6,507			5,065		4,966
Income before income tax expense (benefit)		1,266			1,125		3,164			3,129			1,634			3,312			2,504		1,834
Income tax expense (benefit)		331			282		1,045			822			242			1,070			801		550
Net income	$	935		$	843	$	2,119		$	2,307		$	1,392		$	2,242		$	1,703	$	1,284
Basic earnings (loss) per common share	$	0.26		$	0.24	$	0.60		$	0.65		$	0.39		$	0.62		$	0.47	$	0.36
Diluted earnings (loss) per common share	$	0.26		$	0.23	$	0.59		$	0.65		$	0.39		$	0.62		$	0.47	$	0.36
Dividends per common share	$	0.045		$	0.045	$	0.045		$	0.040		$	0.04		$	0.04		$	0.04	$	-

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Accounting Policies, by Policy (Policies)

12 Months Ended

Dec. 31, 2013

Accounting Policies [Abstract]

Basis of Accounting, Policy [Policy Text Block]

Basis of presentation: The consolidated financial statements include the accounts of the Company and the Bank. Significant intercompany transactions and accounts are eliminated in consolidation. The accounting and reporting policies of the Company and the Bank conform to accounting principles generally accepted in the United States of America and general practices within the banking industry.

Use of Estimates, Policy [Policy Text Block]

Estimates: The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for losses on loans, including valuation allowances for impaired loans, the valuation of other real estate acquired in connection with foreclosures or in satisfaction of loans, recourse liability on mortgage loans previously sold, and the fair value of mortgage loans held for sale and the fair value of the interest rate lock and forward commitment derivatives.  In connection with the determination of the allowances for losses on loans and loss estimates on other real estate owned, management obtains independent appraisals for significant properties.  Management must also make estimates in determining the estimated useful lives and methods for depreciating premises and equipment.

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

Concentration Risk, Credit Risk, Policy [Policy Text Block]

Significant concentrations of credit risk: A substantial portion of the Bank’s loan portfolio is with customers in the Augusta, Georgia MSA market area. The ultimate collectability of a substantial portion of the portfolio is therefore susceptible to changes in the economic and market conditions in and around these areas.

Cash and Cash Equivalents, Policy [Policy Text Block]

Cash and due from banks: For purposes of reporting cash flows, cash and due from banks includes cash on hand and interest-bearing and noninterest-bearing amounts due from banks (including cash items in the process of clearing). The Bank maintains due from accounts with banks primarily located in Georgia and Louisiana. Balances generally exceed insured amounts. Net cash flows are presented for customer loan and deposit transactions and repurchase agreements.

Marketable Securities, Policy [Policy Text Block]

Investment securities: The Bank’s investments in securities are classified and accounted for as follows:

Securities available-for-sale – Securities classified as available-for-sale are identified when acquired as being available-for-sale to meet liquidity needs or other purposes. They are carried at fair value with unrealized gains and losses, net of taxes, reported in other comprehensive income.

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

Realized gains and losses on the sale of securities are determined using the specific-identification method on a trade date basis. Dividends and interest income are recognized when earned. The amortization of premiums and accretion of discounts are recognized in interest income using methods approximating the interest method over the life of the securities.

Management evaluates securities for other-than-temporary impairment (“OTTI”) on at least a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation.  For securities in an unrealized loss position, management considers the extent and duration of the unrealized loss, and the financial condition and near-term prospects of the issuer. Management also assesses whether it intends to sell, or it is more likely than not that it will be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings.  For debt securities that do not meet the aforementioned criteria, the amount of impairment is split into two components as follows: 1) OTTI related to credit loss, which must be recognized in the income statement and 2) other-than-temporary impairment (OTTI) related to other factors, which is recognized in other comprehensive income. 

The credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis. For equity securities, the entire amount of impairment is recognized through earnings.

Finance, Loans and Leases Receivable, Policy [Policy Text Block]

Loans and interest income: Loans are stated at principal amounts outstanding less unearned income, deferred fees and costs, and the allowance for loan losses. Management has the intent and ability to hold for the foreseeable future or until maturity or payoff. Interest income on loans is credited to income based on the principal amount outstanding at the respective rate of interest.

Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield over the life of the loan. Loan origination fees and direct loan origination costs on loans held for sale are deferred and recognized at the time the loan is sold.

Accrual of interest income is discontinued for all classes of loans when a loan becomes 90 days past due as to principal and interest or when, in management’s judgment, the interest will not be collectible in the normal course of business. Accrual of interest on such loans is resumed when, in management’s judgment, the collection of interest and principal becomes probable. When a loan is placed on non-accrual status, all interest previously accrued but not collected is reversed against current interest income. Interest income is subsequently recognized only to the extent cash payments are received.

The accrual of interest on impaired loans is discontinued when, in management’s judgment, the borrower may be unable to meet payments as due. Impairment on loans is measured using either the discounted expected cash flow method or value of collateral method. A loan is impaired when, based on current information and events, it is probable that the Bank will be unable to collect all amounts when due according to the contractual terms of the loan agreement. Impairments on loans are charged to the allowance for loan losses.

Management evaluates the borrower’s ability to pay, the value of any collateral, and other factors in determining when a loan is impaired. Management does not consider a loan to be impaired during a period of delay in payment if it is expected that the Bank will collect all amounts due, including interest accrued at the contractual interest rate for the period of the delay. Any loan classified as a troubled debt restructuring is considered impaired.

Interest payments on impaired loans are applied to the remaining principal balance until the balance is fully recovered. Once principal is recovered, cash payments received are recorded as recoveries to the extent of any principal previously charged-off and then as interest income.

Loans and Leases Receivable, Allowance for Loan Losses Policy [Policy Text Block]

Allowance for loan losses: The allowance for loan losses is a valuation allowance for probable incurred credit losses. Loan losses are charged against the allowance when management believes the loan balance is confirmed as uncollectible. Subsequent recoveries, if any, are credited to the allowance. Management estimates the allowance balance required using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged off.

The allowance consists of specific and general components. The specific component relates to loans that are individually classified as impaired when, based on current information and events, it is probable that the Bank will be unable to collect all amounts due according to the contractual terms of the loan agreement. Loans for which the terms have been modified resulting in a concession, and for which the borrower is experiencing financial difficulties, are considered troubled debt restructurings and classified as impaired.

Factors considered by management in determining impaired loans 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.

All loans included on the management watch list are individually evaluated for impairment. If a loan has an impairment, a portion of the allowance is allocated so that the loan is reported, net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral. Large groups of smaller balance homogeneous loans, such as consumer and residential real estate loans, are collectively evaluated for impairment, and accordingly, they are not separately identified for impairment disclosures.

Troubled debt restructurings are separately identified for impairment disclosures and are measured at the present value of estimated future cash flows using the loan’s effective rate at inception. If a troubled debt restructuring is considered to be a collateral dependent loan, the loan is reported, net, at the fair value of the collateral. For troubled debt restructurings that subsequently default, management determines the amount of reserve in accordance with the accounting policy for the allowance for loan losses.

The general component covers non-impaired loans and is based on historical loss experience adjusted for current economic factors. Management considers the actual loss history experience over the last four quarters, one year, two year, and three year periods by portfolio segment to determine the historical loss experience used in the general component. This actual loss experience is supplemented with other economic factors based on the risks present for each portfolio segment. These economic factors include consideration of the following: levels of and trends in delinquencies and impaired loans; levels of and trends in charge-offs and recoveries for the most recent three years; trends in volume and terms of loans; effects of any changes in risk selection and underwriting standards; other changes in lending policies, procedures, and practices; experience, ability, and depth of lending management and other relevant staff; national and local economic trends and conditions; industry conditions; and effects of changes in credit concentrations.

For further discussion of portfolio segments and associated risks and grades, please see Note 4 to the consolidated financial statements.

Finance, Loan and Lease Receivables, Held-for-sale, Policy [Policy Text Block]

Loans held for sale: Prior to July 1, 2012, mortgage loans originated and intended for sale in the secondary market were carried at the lower of aggregate cost or fair value, as determined by outstanding commitments from investors. Net unrealized losses, if any, were recorded as a valuation allowance and charged to earnings. Mortgage loans held for sale are generally sold with servicing rights released. Gains and losses on sales of mortgage loans are based on the difference between the selling price and the carrying value of the related loan sold. Loans held for sale, for which the fair value option has been elected starting July 1, 2012, are recorded at fair value as of each balance sheet date. The fair value includes the servicing value of the loans as well as any accrued interest.

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

Loans sold under the Bank’s mortgage loans held for sale portfolio contain certain representations and warranties in the loan sale agreements which require that we repurchase or indemnify the investors for losses or costs on loans we sell under certain limited conditions. Any losses related to loans previously sold are charged against the Bank’s recourse liability for mortgage loans previously sold. The recourse liability is based on historical loss experience adjusted for current information and events when it is probable that a loss will be incurred.

Transfers and Servicing of Financial Assets, Policy [Policy Text Block]

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

Life Insurance Corporate Or Bank Owned [Policy Text Block]

Bank-owned life insurance (BOLI) : In order to insure the lives of its key officers, the Bank owns three bank-owned life insurance policies. BOLI is recorded at its cash surrender value, net of surrender charges and/or early termination charges that are probable at settlement. The increase in cash value is recorded as other income.

Property, Plant and Equipment, Policy [Policy Text Block]

Bank premises and equipment: Land is carried at cost. Premises and equipment are stated at cost, less accumulated depreciation. Buildings and related components are depreciated using the straight-line method with useful lives ranging from five to thirty-nine years. Furniture, fixtures and equipment are depreciated using the straight-line method with useful lives ranging from three to fifteen years.

Loans and Leases Receivable, Real Estate Acquired Through Foreclosure, Policy [Policy Text Block]

Other real estate owned: Other real estate owned represents properties acquired through foreclosure or other proceedings. The property is held for sale and is initially recorded at fair value less estimated selling costs at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, the assets are carried at the lower of carrying amount or fair value less estimated selling costs.

Expenses to maintain such assets and subsequent changes in the valuations are included in other noninterest expenses, while gains and losses on disposal are included in noninterest income.

Investment, Policy [Policy Text Block]

Federal Home Loan Bank Stock: Federal Home Loan Bank Stock consists of the cost of the Company’s investment in the stock of the Federal Home Loan Bank (“FHLB”).  The stock has no quoted market value and no ready market exists.  Investment in the Federal Home Loan Bank is a condition of borrowing from the Federal Home Loan Bank, and the stock is pledged to collateralize such borrowings and periodically evaluated for impairment based on ultimate recovery of par value.  Dividends received on this stock are included in other non-interest income.

Loans and Leases Receivable, Mortgage Banking Activities, Policy [Policy Text Block]

Mortgage banking derivatives: Loan commitments, whose underlying mortgage loans at origination will be held for sale upon funding of the loan, are derivative instruments. Loan commitments are recognized on the consolidated statement of financial condition in other assets and other liabilities at fair value, with changes in their fair values recognized in mortgage banking activities. At the inception of a loan commitment, the Bank generally will simultaneously enter into a best efforts forward loan sale commitment to protect the Bank from losses on sales of the loans underlying the loan commitment by securing the ultimate sale price and delivery date of the loan.

Off-Balance-Sheet Credit Exposure, Policy [Policy Text Block]

Loan commitments and related financial instruments: In the ordinary course of business, the Bank has entered into off balance sheet financial instruments consisting of commitments to extend credit, commercial letters of credit and standby letters of credit. The face amount for these items represents the exposure to loss before considering customer collateral or ability to repay. Such financial instruments are recorded in the consolidated financial statements when they become payable.

Income Tax, Policy [Policy Text Block]

Income taxes: Provisions for income taxes are based on amounts reported in the statements of operations after exclusion of nontaxable income, such as interest on state and municipal securities, and BOLI income, and include deferred taxes on temporary differences in the recognition of income and expense for tax and financial statement purposes. Deferred taxes are computed on the liability method. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. It is the Company’s policy to recognize interest and penalties associated with uncertain tax positions as components of income taxes and to disclose the recognized interest and penalties, if material.

Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block]

Stock-based compensation: Compensation cost is recognized for stock options and restricted stock awards issued to employees, based on the fair value of these awards at the date of grant. A Black-Scholes model is utilized to estimate the fair value of stock options when granted and this cost is expensed over the required service period which is usually the vesting period of the options. The fair market value of the Company’s common stock at the date of grant is used for restricted stock awards and this cost is expensed over the required service period which is usually the vesting period of the stock awards.

Compensation cost is recognized over the required service period, generally defined as the vesting period. For awards with graded vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award.

Comprehensive Income, Policy [Policy Text Block]

Comprehensive income: Accounting principles generally require that recognized revenue, expenses, gains, and losses be included in net income, although certain changes in assets and liabilities, such as unrealized gains and losses on available-for-sale securities, are reported as a separate component of the equity section of the statement of financial condition. Such items, along with net income, are components of comprehensive income.

Commitments and Contingencies, Policy [Policy Text Block]

Loss Contingencies: Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management does not believe there are any such matters pending that will have a material effect on the financial statements.

Earnings Per Share, Policy [Policy Text Block]

Earnings per common share: Basic earnings per common share is net income divided by the weighted average number of common shares outstanding during the period. The Company’s outstanding stock options are the primary component of the Company’s diluted earnings per share. All outstanding unvested share-based payment awards that contain rights to non-forfeitable dividends are considered participating securities for this calculation. Diluted earnings per common share include the dilutive effect of additional potential common shares issuable under stock options. Earnings and dividends per share are restated for all stock splits and stock dividends through the date of issuance of the financial statements.

Fair Value of Financial Instruments, Policy [Policy Text Block]

Fair value of financial instruments: Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in a separate note. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or in market conditions could significantly affect these estimates.

Segment Reporting, Policy [Policy Text Block]

Operating Segments: While management monitors the revenue streams of the various products and services, operations are managed and financial performance is evaluated on a Company wide basis. Operating segments are aggregated into one as operating results for all segments are similar. Accordingly, all of the financial service operations are considered by management to be aggregated in one reportable operating segment.

Reclassification, Policy [Policy Text Block]

Reclassifications: Some items in the prior year financial statements were reclassified to conform to the current presentation. Reclassifications had no effect on prior year net income or shareholders’ equity.

New Accounting Pronouncements, Policy [Policy Text Block]

Recently issued accounting standards

In February 2013, the FASB amended existing guidance related to reporting amounts reclassified out of accumulated other comprehensive income. These amendments do not change the current requirements for reporting net income or other comprehensive income in financial statements. These amendments require an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, 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 but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under U.S. GAAP that provide additional details about those amounts. For public companies, these amendments are effective prospectively for interim and annual reporting periods beginning after December 15, 2012. The effect of adopting this standard did not have a material effect on the Company’s operating results or financial condition.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies, but not specifically addressed in this report, are not expected to have a material impact on the Company’s financial condition, results of operations, or liquidity.

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Note 21 - Condensed Financial Information on Georgia-Carolina Bancshares, Inc. (Parent Company Only)

12 Months Ended

Dec. 31, 2013

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

Condensed Financial Information of Parent Company Only Disclosure [Text Block]

Note 21—Condensed financial information on Georgia-Carolina Bancshares, Inc. (Parent Company only)

Condensed Balance Sheets

December 31, 2013 and 2012

(dollars in thousands)

	2013		2012
Assets
Cash	$	431	$	683
Investment in subsidiary		56,089		55,383
Other assets		436		317
Total assets	$	56,956	$	56,383
Liabilities
Deferred tax liability	$	-	$	7
Other liabilities		67		51
Total liabilities		67		58
Shareholders' equity		56,889		56,325
Total liabilities and shareholders' equity	$	56,956	$	56,383

Condensed Statements of Income

Years Ended December 31, 2013 and 2012

(dollars in thousands)

	2013			2012
Income, dividends from subsidiary	$	160		$	1,500
Expenses
Director compensation		71			56
Legal fees		80			73
Audit exam and accounting fees		71			42
Annual report and proxy		25			20
Shareholder services		26			27
Other		16			11
Total expenses		289			229
Income (loss) before income tax benefits and equity in undistributed earnings of subsidiary		(129	)		1,271
Income tax benefits		105			75
Income (loss) before equity in undistributed earnings of subsidiary		(24	)		1,346
Equity in undistributed earnins of subsidiary		6,228			5,275
Net income	$	6,204		$	6,621

Condensed Statements of Cash Flows

Years Ended December 31, 2013 and 2012

(dollars in thousands)

	2013			2012
Cash flows from operating activities
Net income	$	6,204		$	6,621
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Provision for deferred income taxes		(7	)		1
Stock incentive expense		225			143
Stock compensation		205			209
Equity in undistributed earnings of subsidiary		(6,228	)		(5,275	)
Change in other liabilities		16			(32	)
Change in other assets		(119	)		(78	)
Net cash provided by operating activities		296			1,589
Cash flows from financing activities
Proceeds from stock options exercised		75			253
Repurchased Stock		-			(1,219	)
Dividends		(623	)		(432	)
Net cash used in financing activities		(548	)		(1,398	)
Net increase (decrease) in cash and due from backs		(252	)		191
Cash and due from banks at beginning of period		683			492
Cash and due from banks at end of period	$	431		$	683

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Note 21 - Condensed Financial Information on Georgia-Carolina Bancshares, Inc. (Parent Company Only) (Details) - Condensed Statements of Cash Flows (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Condensed Cash Flow Statements, Captions [Line Items]
Net income	$ 6,204,000	$ 6,621,000
Provision for deferred income taxes	(532,000)	(615,000)
Stock incentive expense	225,000	108,000
Stock compensation	93,000	108,000
Change in other liabilities	1,116,000	1,901,000
Change in other assets	1,840,000	(1,513,000)
Net cash provided by operating activities	23,936,000	4,405,000
Proceeds from stock options exercised	75,000	253,000
Repurchased Stock		(1,219,000)
Net cash used in financing activities	8,151,000	3,959,000
Net increase (decrease) in cash and due from backs	(13,451,000)	(4,623,000)
Parent Company [Member]
Condensed Cash Flow Statements, Captions [Line Items]
Net income	6,204,000	6,621,000
Provision for deferred income taxes	(7,000)	1,000
Stock incentive expense	225,000	143,000
Stock compensation	205,000	209,000
Equity in undistributed earnings of subsidiary	(6,228,000)	(5,275,000)
Change in other liabilities	16,000	(32,000)
Change in other assets	(119,000)	(78,000)
Net cash provided by operating activities	296,000	1,589,000
Proceeds from stock options exercised	75,000	253,000
Repurchased Stock		(1,219,000)
Dividends	(623,000)	(432,000)
Net cash used in financing activities	(548,000)	(1,398,000)
Net increase (decrease) in cash and due from backs	(252,000)	191,000
Cash Balance	683,000	492,000
Cash Balance	$ 431,000	$ 683,000

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Note 4 - Loans (Details) - Impaired Loans (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Financing Receivable, Impaired [Line Items]
Related Allowance- with an allowance recorded	$ 358	$ 272
TOTAL
Unpaid Principal Balance	9,082	12,277
Recorded Investment	8,861	9,829
Related Allowance	358	272
Average Recorded Investment	8,998	12,962
Interest Income Recognized	364	488
No Related Allowance [Member]
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance-with no related allowance recorded	7,958	11,003
Recorded Investment-with no related allowance recorded	7,737	8,554
Average Recorded Investment-with no related allowance recorded	8,998	11,655
Interest Income Recognized-with no related allowance recorded	364	405
Commercial and Industrial [Member]
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance-with no related allowance recorded		60
Recorded Investment-with no related allowance recorded		61
Average Recorded Investment-with no related allowance recorded		454
Interest Income Recognized-with no related allowance recorded		25
Unpaid Principal Balance- with an allowance recorded		29
Recorded Investment- with an allowance recorded		29
Related Allowance- with an allowance recorded		29
Average Recorded Investment- with an allowance recorded		32
Interest Income Recognized- with an allowance recorded		2
TOTAL
Unpaid Principal Balance		89
Recorded Investment		90
Related Allowance		29
Average Recorded Investment		486
Interest Income Recognized		27
Acquisition Development & Construction [Member]
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance-with no related allowance recorded		2,457
Recorded Investment-with no related allowance recorded		447
Average Recorded Investment-with no related allowance recorded		2,429
Interest Income Recognized-with no related allowance recorded		21
TOTAL
Unpaid Principal Balance		2,457
Recorded Investment		447
Average Recorded Investment		2,429
Interest Income Recognized		21
Other Real Estate Construction [Member]
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance-with no related allowance recorded	144	197
Recorded Investment-with no related allowance recorded	55	119
Average Recorded Investment-with no related allowance recorded	171	206
Interest Income Recognized-with no related allowance recorded	2	5
Unpaid Principal Balance- with an allowance recorded	37
Recorded Investment- with an allowance recorded	37
Related Allowance- with an allowance recorded	37
TOTAL
Unpaid Principal Balance	181	197
Recorded Investment	92	119
Related Allowance	37
Average Recorded Investment	171	206
Interest Income Recognized	2	5
Home Equity Line [Member]
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance-with no related allowance recorded	162	70
Recorded Investment-with no related allowance recorded	162	70
Average Recorded Investment-with no related allowance recorded	176	74
Interest Income Recognized-with no related allowance recorded	3
Unpaid Principal Balance- with an allowance recorded	14
Recorded Investment- with an allowance recorded	14
Related Allowance- with an allowance recorded	7
TOTAL
Unpaid Principal Balance	176	70
Recorded Investment	176	70
Related Allowance	7
Average Recorded Investment	176	74
Interest Income Recognized	3
Other Real Estate Residential [Member]
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance-with no related allowance recorded	1,342	2,129
Recorded Investment-with no related allowance recorded	1,260	1,964
Average Recorded Investment-with no related allowance recorded	1,546	2,283
Interest Income Recognized-with no related allowance recorded	73	96
Unpaid Principal Balance- with an allowance recorded	259	342
Recorded Investment- with an allowance recorded	259	342
Related Allowance- with an allowance recorded	60	60
Average Recorded Investment- with an allowance recorded		346
Interest Income Recognized- with an allowance recorded		23
TOTAL
Unpaid Principal Balance	1,601	2,471
Recorded Investment	1,519	2,306
Related Allowance	60	60
Average Recorded Investment	1,546	2,629
Interest Income Recognized	73	119
Owner Occupied [Member]
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance-with no related allowance recorded	5,219	6,053
Recorded Investment-with no related allowance recorded	5,184	5,866
Average Recorded Investment-with no related allowance recorded	6,012	6,168
Interest Income Recognized-with no related allowance recorded	249	258
Unpaid Principal Balance- with an allowance recorded	812	143
Recorded Investment- with an allowance recorded	812	143
Related Allowance- with an allowance recorded	252	23
Average Recorded Investment- with an allowance recorded		149
Interest Income Recognized- with an allowance recorded		8
TOTAL
Unpaid Principal Balance	6,031	6,196
Recorded Investment	5,996	6,009
Related Allowance	252	23
Average Recorded Investment	6,012	6,317
Interest Income Recognized	249	266
Non Owner Occupied [Member]
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance-with no related allowance recorded	1,060
Recorded Investment-with no related allowance recorded	1,057
Average Recorded Investment-with no related allowance recorded	1,061
Interest Income Recognized-with no related allowance recorded	37
Unpaid Principal Balance- with an allowance recorded		760
Recorded Investment- with an allowance recorded		761
Related Allowance- with an allowance recorded		160
Average Recorded Investment- with an allowance recorded		780
Interest Income Recognized- with an allowance recorded		50
TOTAL
Unpaid Principal Balance	1,060	760
Recorded Investment	1,057	761
Related Allowance		160
Average Recorded Investment	1,061	780
Interest Income Recognized	37	50
Consumer [Member]
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance-with no related allowance recorded	31	37
Recorded Investment-with no related allowance recorded	19	27
Average Recorded Investment-with no related allowance recorded	32	41
Unpaid Principal Balance- with an allowance recorded	2
Recorded Investment- with an allowance recorded	2
Related Allowance- with an allowance recorded	2
TOTAL
Unpaid Principal Balance	33	37
Recorded Investment	21	27
Related Allowance	2
Average Recorded Investment	32	41
Related Allowance [Member]
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance- with an allowance recorded	1,124	1,274
Recorded Investment- with an allowance recorded	1,124	1,275
Related Allowance- with an allowance recorded	358	272
Average Recorded Investment- with an allowance recorded		1,307
Interest Income Recognized- with an allowance recorded		83
TOTAL
Related Allowance	$ 358	$ 272

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Note 21 - Condensed Financial Information on Georgia-Carolina Bancshares, Inc. (Parent Company Only) (Tables)

12 Months Ended

Dec. 31, 2013

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

Condensed Balance Sheet [Table Text Block]

	2013		2012
Assets
Cash	$	431	$	683
Investment in subsidiary		56,089		55,383
Other assets		436		317
Total assets	$	56,956	$	56,383
Liabilities
Deferred tax liability	$	-	$	7
Other liabilities		67		51
Total liabilities		67		58
Shareholders' equity		56,889		56,325
Total liabilities and shareholders' equity	$	56,956	$	56,383

Condensed Income Statement [Table Text Block]

	2013			2012
Income, dividends from subsidiary	$	160		$	1,500
Expenses
Director compensation		71			56
Legal fees		80			73
Audit exam and accounting fees		71			42
Annual report and proxy		25			20
Shareholder services		26			27
Other		16			11
Total expenses		289			229
Income (loss) before income tax benefits and equity in undistributed earnings of subsidiary		(129	)		1,271
Income tax benefits		105			75
Income (loss) before equity in undistributed earnings of subsidiary		(24	)		1,346
Equity in undistributed earnins of subsidiary		6,228			5,275
Net income	$	6,204		$	6,621

Condensed Cash Flow Statement [Table Text Block]

	2013			2012
Cash flows from operating activities
Net income	$	6,204		$	6,621
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Provision for deferred income taxes		(7	)		1
Stock incentive expense		225			143
Stock compensation		205			209
Equity in undistributed earnings of subsidiary		(6,228	)		(5,275	)
Change in other liabilities		16			(32	)
Change in other assets		(119	)		(78	)
Net cash provided by operating activities		296			1,589
Cash flows from financing activities
Proceeds from stock options exercised		75			253
Repurchased Stock		-			(1,219	)
Dividends		(623	)		(432	)
Net cash used in financing activities		(548	)		(1,398	)
Net increase (decrease) in cash and due from backs		(252	)		191
Cash and due from banks at beginning of period		683			492
Cash and due from banks at end of period	$	431		$	683

XML

Note 3 - Investment Securities (Tables)

12 Months Ended

Dec. 31, 2013

Investments Schedule [Abstract]

Schedule of Available-for-sale Securities Reconciliation [Table Text Block]

	2013
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(dollars in thousands)
Securities available-for-sale:
U.S. Government and agency	$	61,486	$	146	$	(3,351	)	$	58,281
Mortgage-backed		66,095		558		(1,921	)		64,732
State and municipal		32,088		255		(1,592	)		30,751
Corporate		4,749		25		(99	)		4,675
Total	$	164,418	$	984	$	(6,963	)	$	158,439

	2012
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(dollars in thousands)
Securities available-for-sale:
U.S. Government and agency	$	55,404	$	260	$	(99	)	$	55,565
Mortgage-backed		50,074		1,313		(92	)		51,295
State and municipal		21,974		852		(38	)		22,788
Corporate		3,052		68		(8	)		3,112
Total	$	130,504	$	2,493	$	(237	)	$	132,760

Investments Classified by Contractual Maturity Date [Table Text Block]

	Securities Available-for-Sale
	Amortized Cost		Fair Value
	(dollars in thousands)
Less than one year	$	14,850	$	13,178
One to five years		23,669		22,919
Five to ten years		38,266		36,773
Over ten years		21,538		20,837
Mortgage-backed securities		66,095		64,732
Total	$	164,418	$	158,439

Schedule of Unrealized Loss on Investments [Table Text Block]

	2013
	Less than Twelve Months							Over Twelve Months
	Number of Securities		Fair Value		Gross Unrealized Losses			Number of Securities		Fair Value		Gross Unrealized Losses
	(dollars in thousands)
Securities available-for-sale:
U.S. Government and agency		23	$	34,142	$	(1,911	)		7	$	11,759		(1,440	)
Corporate bonds		4		3,487		(99	)		-		-		-
Mortgage-backed		31		40,852		(1,744	)		3		5,294		(177	)
State and municipal		41		19,934		(1,156	)		8		3,028		(436	)
Total		99	$	98,415	$	(4,910	)		18	$	20,081	$	(2,053	)

	2012
	Less than Twelve Months							Over Twelve Months
	Number of Securities		Fair Value		Gross Unrealized Losses			Number of Securities		Fair Value		Gross Unrealized Losses
	(dollars in thousands)
Securities available-for-sale:
U.S. Government and agency		7	$	13,757	$	(99	)		1	$	1,365		*
Corporate bonds		1		992		(8	)		-		-		-
Mortgage-backed		2		4,794		(92	)		-		-		-
State and municipal		5		2,035		(38	)		-		-		-
Total		15	$	21,578	$	(237	)		1	$	1,365	$	-

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Note 4 - Loans (Tables)

12 Months Ended

Dec. 31, 2013

Note 4 - Loans (Tables) [Line Items]

Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block]

	2013			2012
	(dollars in thousands)
Commercial and industrial	$	18,113		$	19,816
Real estate - construction, land and land development		60,476			55,926
Real estate - residential		55,792			55,495
Real estate - commercial		136,632			130,729
Consumer		3,931			3,921
Total loans		274,944			265,887
Deferred loan fees		(197	)		(56	)
Total loans		274,747			265,831
Allowance for loan losses		(5,357	)		(5,954	)
Loans, net of allowance for loan losses	$	269,390		$	259,877

Financing Receivable Credit Quality Indicators [Table Text Block]

	2013
	(dollars in thousands)
	Grades 1 - 4		Grade 5		Grade 6		Total
Commercial and industrial	$	18,010	$	103	$	-	$	18,113
Real estate - construction, land and land development
Acquistion, development, & construction		11,257		49		-		11,306
Other real estate - construction		49,078		-		92		49,170
Real estate - residential
Home equity lines		18,021		-		110		18,131
Other real estate - residential		36,493		612		556		37,661
Real estate - commercial
Owner occupied		54,450		4,845		1,493		60,788
Non-owner occupied		67,989		6,786		1,069		75,844
Consumer		3,910		-		21		3,931
Total loans receivable	$	259,208	$	12,395	$	3,341	$	274,944

	2012
	(dollars in thousands)
	Grades 1 - 4		Grade 5		Grade 6		Total
Commercial and industrial	$	19,723	$	32	$	61	$	19,816
Real estate - construction, land and land development
Acquistion, development, & construction		13,498		774		-		14,272
Other real estate - construction		41,344		192		118		41,654
Real estate - residential
Home equity lines		19,829		104		4		19,937
Other real estate - residential		33,446		81		2,031		35,558
Real estate - commercial
Owner occupied		47,833		5,191		1,804		54,828
Non-owner occupied		72,603		3,103		195		75,901
Consumer		3,872		22		27		3,921
Total loans receivable	$	252,148	$	9,499	$	4,240	$	265,887

Allowance for Credit Losses on Financing Receivables [Table Text Block]

	Commercial and industrial			Real estate - construction, land and land development			Real estate - residential			Real estate - commercial			Consumer			Unallocated			Total
Beginning balance	$	225		$	2,870		$	794		$	1,872		$	77		$	116		$	5,954
Charge offs		(12	)		-			(96	)		(105	)		(93	)		-			(306	)
Recoveries		6			1,467			37			190			38			-			1,738
Provisions		8			(2,711	)		37			501			188			(52	)		(2,029	)
Ending balance	$	227		$	1,626		$	772		$	2,458		$	210		$	64		$	5,357
Ending balances:
Individually evaluated for impairment	$	-		$	37		$	67		$	252		$	2		$	-		$	358
Collectively evaluated for impairment	$	227		$	1,589		$	705		$	2,206		$	208		$	64		$	4,999

	Commercial and industrial			Real estate - construction, land and land development			Real estate - residential			Real estate - commercial			Consumer			Unallocated			Total
Beginning balance	$	185		$	3,219		$	1,141		$	1,706		$	108		$	445		$	6,804
Charge offs		(98	)		(692	)		(242	)		(179	)		(108	)		-			(1,319	)
Recoveries		225			734			43			14			58			-			1,074
Provisions		(87	)		(391	)		(148	)		331			19			(329	)		(605	)
Ending balance	$	225		$	2,870		$	794		$	1,872		$	77		$	116		$	5,954
Ending balances:
Individually evaluated for impairment	$	28		$	-		$	59		$	185		$	-		$	-		$	272
Collectively evaluated for impairment	$	197		$	2,870		$	735		$	1,687		$	77		$	116		$	5,682

Impaired Financing Receivables [Table Text Block]

	Unpaid Principal Balance		Recorded Investment		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial and industrial	$	-	$	-	$	-	$	-	$	-
Real estate - construction, land and land development
Acquistion, development, & construction		-		-		-		-		-
Other real estate - construction		144		55		-		171		2
Real estate - residential
Home equity lines		162		162		-		176		3
Other real estate - residential		1,342		1,260		-		1,546		73
Real estate - comercial
Owner occupied		5,219		5,184		-		6,012		249
Non-owner occupied		1,060		1,057		-		1,061		37
Consumer		31		19		-		32		-
Total	$	7,958	$	7,737	$	-	$	8,998	$	364
With an allowance recorded:
Commercial and industrial	$	-	$	-	$	-	$	-	$	-
Real estate - construction, land and land development
Acquistion, development, & construction		-		-		-		-		-
Other real estate - construction		37		37		37		-		-
Real estate - residential
Home equity lines		14		14		7		-		-
Other real estate - residential		259		259		60		-		-
Real estate - comercial
Owner occupied		812		812		252		-		-
Non-owner occupied		-		-		-		-		-
Consumer		2		2		2		-		-
Total	$	1,124	$	1,124	$	358	$	-	$	-
TOTAL
Commercial and industrial	$	-	$	-	$	-	$	-	$	-
Real estate - construction, land and land development
Acquistion, development, & construction						-		-		-
Other real estate - construction		181		92		37		171		2
Real estate - residential
Home equity lines		176		176		7		176		3
Other real estate - residential		1,601		1,519		60		1,546		73
Real estate - comercial
Owner occupied		6,031		5,996		252		6,012		249
Non-owner occupied		1,060		1,057		-		1,061		37
Consumer		33		21		2		32		-
Total	$	9,082	$	8,861	$	358	$	8,998	$	364

	Unpaid Principal Balance		Recorded Investment		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial and industrial	$	60	$	61	$	-	$	454	$	25
Real estate - construction, land and land development
Acquistion, development, & construction		2,457		447		-		2,429		21
Other real estate - construction		197		119		-		206		5
Real estate - residential
Home equity lines		70		70		-		74		-
Other real estate - residential		2,129		1,964		-		2,283		96
Real estate - comercial
Owner occupied		6,053		5,866		-		6,168		258
Non-owner occupied		-		-		-		-		-
Consumer		37		27		-		41		-
Total	$	11,003	$	8,554	$	-	$	11,655	$	405
With an allowance recorded:
Commercial and industrial	$	29	$	29	$	29	$	32	$	2
Real estate - construction, land and land development
Acquistion, development, & construction		-		-		-		-		-
Other real estate - construction		-		-		-		-		-
Real estate - residential
Home equity lines		-		-		-		-		-
Other real estate - residential		342		342		60		346		23
Real estate - comercial
Owner occupied		143		143		23		149		8
Non-owner occupied		760		761		160		780		50
Consumer		-		-		-		-		-
Total	$	1,274	$	1,275	$	272	$	1,307	$	83
TOTAL
Commercial and industrial	$	89	$	90	$	29	$	486	$	27
Real estate - construction, land and land development
Acquistion, development, & construction		2,457		447		-		2,429		21
Other real estate - construction		197		119		-		206		5
Real estate - residential
Home equity lines		70		70		-		74		-
Other real estate - residential		2,471		2,306		60		2,629		119
Real estate - comercial
Owner occupied		6,196		6,009		23		6,317		266
Non-owner occupied		760		761		160		780		50
Consumer		37		27		-		41		-
Total	$	12,277	$	9,829	$	272	$	12,962	$	488

Past Due Financing Receivables [Table Text Block]

	Accruing
	30-89 Days Past Due		90 Days or more Past Due		Nonaccrual		Total Past Due and Nonaccrual		Current and not Past Due or Nonaccrual		Total Loans Receivable
Commercial and industrial	$	59	$	-	$	-	$	59	$	18,054	$	18,113
Real estate - construction, land and land development
Acquistion, development, & construction		-		-		-		-		11,306		11,306
Other real estate - construction		125		31		52		208		48,962		49,170
Real estate - residential
Home equity lines		132		-		110		242		17,889		18,131
Other real estate - residential		468		-		556		1,024		36,637		37,661
Real estate - comercial
Owner occupied		919		-		744		1,663		59,125		60,788
Non-owner occupied		-		-		441		441		75,403		75,844
Consumer		6		-		21		27		3,904		3,931
Total	$	1,709	$	31	$	1,924	$	3,664	$	271,280	$	274,944

	Accruing
	30-89 Days Past Due		90 Days or more Past Due		Nonaccrual		Total Past Due and Nonaccrual		Current and not Past Due or Nonaccrual		Total Loans Receivable
Commercial and industrial	$	134	$	-	$	61	$	195	$	19,621	$	19,816
Real estate - construction, land and land development
Acquistion, development, & construction		-		-		134		134		14,138		14,272
Other real estate - construction		1,318		-		68		1,386		40,268		41,654
Real estate - residential
Home equity lines		211		-		108		319		19,618		19,937
Other real estate - residential		1,322		-		1,776		3,098		32,460		35,558
Real estate - comercial
Owner occupied		941		-		1,527		2,468		52,360		54,828
Non-owner occupied		772		-		195		967		74,934		75,901
Consumer		27		-		27		54		3,867		3,921
Total	$	4,725	$	-	$	3,896	$	8,621	$	257,266	$	265,887

Troubled Debt Restructurings on Financing Receivables [Table Text Block]

	2013				2012
	Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment
Commercial and industrial		-	$	-		1	$	34
Real estate - construction, land and land development
Other real estate - construction		-		-		-		-
Real estate - residential
Other real estate - residential		-		-		-		-
Real estate - commercial
Owner occupied		1		563		2		1,001
Total		1	$	563		3	$	1,035

Individually or Collectively Evaluated For Impairment [Member]

Note 4 - Loans (Tables) [Line Items]

Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block]

	Commercial and industrial		Real estate - construction, land and land development		Real estate - residential		Real estate - commercial		Consumer		Total
Individually evaluated for impairment	$	-	$	92	$	1,695	$	7,053	$	21	$	8,861
Collectively evaluated for impairment	$	18,177	$	60,670	$	54,367	$	129,896	$	3,926	$	267,036
Ending balance total	$	18,177	$	60,762	$	56,062	$	136,949	$	3,947	$	275,897

	Commercial and industrial		Real estate - construction, land and land development		Real estate - residential		Real estate - commercial		Consumer		Total
Individually evaluated for impairment	$	90	$	566	$	2,376	$	6,770	$	27	$	9,829
Collectively evaluated for impairment	$	19,798	$	55,657	$	53,413	$	124,420	$	3,914	$	257,202
Ending balance total	$	19,888	$	56,223	$	55,789	$	131,190	$	3,941	$	267,031

Financial Receivable From Executive Officers and Directors [Member]

Note 4 - Loans (Tables) [Line Items]

Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block]

	2013			2012
	(dollars in thousands)
Balance at beginning of year	$	6,376		$	9,813
Advances		1,144			4,607
Repayments		(1,929	)		(8,044	)
Balance at end of year	$	5,591		$	6,376

Debt Restructuring [Member]

Note 4 - Loans (Tables) [Line Items]

Troubled Debt Restructurings on Financing Receivables [Table Text Block]

	Number of  Contracts		Accrual		Nonaccrual		Total Restructurings
Commercial and industrial		-	$	-	$	-	$	-
Real estate - construction, land and land development
Acquistion, development, & construction		-		-		-		-
Other real estate - construction		-		-		-		-
Real estate - residential
Home equity lines		1		66		-		66
Other real estate - residential		10		925				925
Real estate - comercial
Owner occupied		13		5,775				5,775
Non-owner occupied		1		563		-		563
Consumer		-		-		-		-
Total		25	$	7,329	$	-	$	7,329

	Number of Contracts		Accrual		Nonaccrual		Total Restructurings
Commercial and industrial		1	$	-	$	34	$	34
Real estate - construction, land and land development
Acquistion, development, & construction		2		310		134		444
Other real estate - construction		-		-		-		-
Real estate - residential
Home equity lines		1		66		-		66
Other real estate - residential		10		583		243		826
Real estate - comercial
Owner occupied		9		4,187		1,177		5,364
Non-owner occupied		-		-		-		-
Consumer		-		-		-		-
Total		23	$	5,146	$	1,588	$	6,734

Less Than 12 Months [Member]

Note 4 - Loans (Tables) [Line Items]

Troubled Debt Restructurings on Financing Receivables [Table Text Block]

	Number of Contracts		Rate Modification		Payment Modification		Transfer of Assets Modification		Combination Modification		Total Modifications
Pre-Modification Outstanding Recorded Investment:
Real-estate - residential
Other real estate - residential		2	$	154	$	-	$	-	$	18	$	172
Real estate - commercial
Owner occupied		4		359		-		-		1,231		1,590
Non-owner occupied		3		72		-		-		570		642
Total		9	$	585	$	-	$	-	$	1,819	$	2,404
Post-Modification Outstanding Recorded Investment:
Real-estate - residential
Other real estate - residential		2	$	148	$	-	$	-	$	18	$	166
Real estate - commercial
Owner occupied		4		340		-		-		1,221		1,561
Non-owner occupied		3		64		-		-		563		627
Total		9	$	552	$	-	$	-	$	1,802	$	2,354

	Number of Contracts		Rate Modification		Payment Modification		Transfer of Assets Modification		Combination Modification		Total Modifications
Pre-Modification Outstanding Recorded Investment:
Real-estate - residential
Other real estate - residential		8	$	243	$	566	$	-	$	-	$	809
Real estate - commercial
Owner occupied		-		-		-		-		-		-
Non-owner occupied		-		-		-		-		-		-
Total		8	$	243	$	566	$	-	$	-	$	809
Post-Modification Outstanding Recorded Investment:
Real-estate - residential
Other real estate - residential		8	$	243	$	557	$	-	$	-	$	800
Real estate - commercial
Owner occupied		-		-		-		-		-		-
Non-owner occupied		-		-		-		-		-		-
Total		8	$	243	$	557	$	-	$	-	$	800

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Note 1 - Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2013

Accounting Policies [Abstract]

Significant Accounting Policies [Text Block]

Note 1—Summary of significant accounting policies

Nature of business

Georgia-Carolina Bancshares, Inc. (the “Company”) is a one-bank holding company. Substantially all of its business is conducted by its wholly-owned subsidiary, First Bank of Georgia (the “Bank”). The Bank is engaged in community banking activities through its locations in Augusta, Thomson, Martinez and Evans, Georgia and the surrounding area. Most of the Bank’s loans and loan commitments have been made to customers in the Columbia, Richmond, and McDuffie County, Georgia areas. Many of the Bank’s loan customers are also depositors of the Bank. The Bank has established a mortgage division that operates as First Bank Mortgage. This division currently has offices in Augusta and Savannah, Georgia. The division originates residential real estate mortgage loans and provides financing to residential construction and development companies. Substantially all residential mortgage loans originated by the division are sold in the secondary market.

The Bank is subject to the regulations of federal and state banking agencies and is periodically examined by them.

Significant accounting policies

Basis of presentation: The consolidated financial statements include the accounts of the Company and the Bank. Significant intercompany transactions and accounts are eliminated in consolidation. The accounting and reporting policies of the Company and the Bank conform to accounting principles generally accepted in the United States of America and general practices within the banking industry.

Estimates: The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for losses on loans, including valuation allowances for impaired loans, the valuation of other real estate acquired in connection with foreclosures or in satisfaction of loans, recourse liability on mortgage loans previously sold, and the fair value of mortgage loans held for sale and the fair value of the interest rate lock and forward commitment derivatives.  In connection with the determination of the allowances for losses on loans and loss estimates on other real estate owned, management obtains independent appraisals for significant properties.  Management must also make estimates in determining the estimated useful lives and methods for depreciating premises and equipment.

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

Significant concentrations of credit risk: A substantial portion of the Bank’s loan portfolio is with customers in the Augusta, Georgia MSA market area. The ultimate collectability of a substantial portion of the portfolio is therefore susceptible to changes in the economic and market conditions in and around these areas.

Cash and due from banks: For purposes of reporting cash flows, cash and due from banks includes cash on hand and interest-bearing and noninterest-bearing amounts due from banks (including cash items in the process of clearing). The Bank maintains due from accounts with banks primarily located in Georgia and Louisiana. Balances generally exceed insured amounts. Net cash flows are presented for customer loan and deposit transactions and repurchase agreements.

Investment securities: The Bank’s investments in securities are classified and accounted for as follows:

Securities available-for-sale – Securities classified as available-for-sale are identified when acquired as being available-for-sale to meet liquidity needs or other purposes. They are carried at fair value with unrealized gains and losses, net of taxes, reported in other comprehensive income.

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

Realized gains and losses on the sale of securities are determined using the specific-identification method on a trade date basis. Dividends and interest income are recognized when earned. The amortization of premiums and accretion of discounts are recognized in interest income using methods approximating the interest method over the life of the securities.

Management evaluates securities for other-than-temporary impairment (“OTTI”) on at least a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation.  For securities in an unrealized loss position, management considers the extent and duration of the unrealized loss, and the financial condition and near-term prospects of the issuer. Management also assesses whether it intends to sell, or it is more likely than not that it will be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings.  For debt securities that do not meet the aforementioned criteria, the amount of impairment is split into two components as follows: 1) OTTI related to credit loss, which must be recognized in the income statement and 2) other-than-temporary impairment (OTTI) related to other factors, which is recognized in other comprehensive income. 

The credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis. For equity securities, the entire amount of impairment is recognized through earnings.

Loans and interest income: Loans are stated at principal amounts outstanding less unearned income, deferred fees and costs, and the allowance for loan losses. Management has the intent and ability to hold for the foreseeable future or until maturity or payoff. Interest income on loans is credited to income based on the principal amount outstanding at the respective rate of interest.

Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield over the life of the loan. Loan origination fees and direct loan origination costs on loans held for sale are deferred and recognized at the time the loan is sold.

Accrual of interest income is discontinued for all classes of loans when a loan becomes 90 days past due as to principal and interest or when, in management’s judgment, the interest will not be collectible in the normal course of business. Accrual of interest on such loans is resumed when, in management’s judgment, the collection of interest and principal becomes probable. When a loan is placed on non-accrual status, all interest previously accrued but not collected is reversed against current interest income. Interest income is subsequently recognized only to the extent cash payments are received.

The accrual of interest on impaired loans is discontinued when, in management’s judgment, the borrower may be unable to meet payments as due. Impairment on loans is measured using either the discounted expected cash flow method or value of collateral method. A loan is impaired when, based on current information and events, it is probable that the Bank will be unable to collect all amounts when due according to the contractual terms of the loan agreement. Impairments on loans are charged to the allowance for loan losses.

Management evaluates the borrower’s ability to pay, the value of any collateral, and other factors in determining when a loan is impaired. Management does not consider a loan to be impaired during a period of delay in payment if it is expected that the Bank will collect all amounts due, including interest accrued at the contractual interest rate for the period of the delay. Any loan classified as a troubled debt restructuring is considered impaired.

Interest payments on impaired loans are applied to the remaining principal balance until the balance is fully recovered. Once principal is recovered, cash payments received are recorded as recoveries to the extent of any principal previously charged-off and then as interest income.

Allowance for loan losses: The allowance for loan losses is a valuation allowance for probable incurred credit losses. Loan losses are charged against the allowance when management believes the loan balance is confirmed as uncollectible. Subsequent recoveries, if any, are credited to the allowance. Management estimates the allowance balance required using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged off.

The allowance consists of specific and general components. The specific component relates to loans that are individually classified as impaired when, based on current information and events, it is probable that the Bank will be unable to collect all amounts due according to the contractual terms of the loan agreement. Loans for which the terms have been modified resulting in a concession, and for which the borrower is experiencing financial difficulties, are considered troubled debt restructurings and classified as impaired.

Factors considered by management in determining impaired loans 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.

All loans included on the management watch list are individually evaluated for impairment. If a loan has an impairment, a portion of the allowance is allocated so that the loan is reported, net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral. Large groups of smaller balance homogeneous loans, such as consumer and residential real estate loans, are collectively evaluated for impairment, and accordingly, they are not separately identified for impairment disclosures.

Troubled debt restructurings are separately identified for impairment disclosures and are measured at the present value of estimated future cash flows using the loan’s effective rate at inception. If a troubled debt restructuring is considered to be a collateral dependent loan, the loan is reported, net, at the fair value of the collateral. For troubled debt restructurings that subsequently default, management determines the amount of reserve in accordance with the accounting policy for the allowance for loan losses.

The general component covers non-impaired loans and is based on historical loss experience adjusted for current economic factors. Management considers the actual loss history experience over the last four quarters, one year, two year, and three year periods by portfolio segment to determine the historical loss experience used in the general component. This actual loss experience is supplemented with other economic factors based on the risks present for each portfolio segment. These economic factors include consideration of the following: levels of and trends in delinquencies and impaired loans; levels of and trends in charge-offs and recoveries for the most recent three years; trends in volume and terms of loans; effects of any changes in risk selection and underwriting standards; other changes in lending policies, procedures, and practices; experience, ability, and depth of lending management and other relevant staff; national and local economic trends and conditions; industry conditions; and effects of changes in credit concentrations.

For further discussion of portfolio segments and associated risks and grades, please see Note 4 to the consolidated financial statements.

Loans held for sale: Prior to July 1, 2012, mortgage loans originated and intended for sale in the secondary market were carried at the lower of aggregate cost or fair value, as determined by outstanding commitments from investors. Net unrealized losses, if any, were recorded as a valuation allowance and charged to earnings. Mortgage loans held for sale are generally sold with servicing rights released. Gains and losses on sales of mortgage loans are based on the difference between the selling price and the carrying value of the related loan sold. Loans held for sale, for which the fair value option has been elected starting July 1, 2012, are recorded at fair value as of each balance sheet date. The fair value includes the servicing value of the loans as well as any accrued interest.

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

Loans sold under the Bank’s mortgage loans held for sale portfolio contain certain representations and warranties in the loan sale agreements which require that we repurchase or indemnify the investors for losses or costs on loans we sell under certain limited conditions. Any losses related to loans previously sold are charged against the Bank’s recourse liability for mortgage loans previously sold. The recourse liability is based on historical loss experience adjusted for current information and events when it is probable that a loss will be incurred.

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

Bank-owned life insurance (BOLI): In order to insure the lives of its key officers, the Bank owns three bank-owned life insurance policies. BOLI is recorded at its cash surrender value, net of surrender charges and/or early termination charges that are probable at settlement. The increase in cash value is recorded as other income.

Bank premises and equipment: Land is carried at cost. Premises and equipment are stated at cost, less accumulated depreciation. Buildings and related components are depreciated using the straight-line method with useful lives ranging from five to thirty-nine years. Furniture, fixtures and equipment are depreciated using the straight-line method with useful lives ranging from three to fifteen years.

Other real estate owned: Other real estate owned represents properties acquired through foreclosure or other proceedings. The property is held for sale and is initially recorded at fair value less estimated selling costs at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, the assets are carried at the lower of carrying amount or fair value less estimated selling costs.

Expenses to maintain such assets and subsequent changes in the valuations are included in other noninterest expenses, while gains and losses on disposal are included in noninterest income.

Federal Home Loan Bank Stock: Federal Home Loan Bank Stock consists of the cost of the Company’s investment in the stock of the Federal Home Loan Bank (“FHLB”).  The stock has no quoted market value and no ready market exists.  Investment in the Federal Home Loan Bank is a condition of borrowing from the Federal Home Loan Bank, and the stock is pledged to collateralize such borrowings and periodically evaluated for impairment based on ultimate recovery of par value.  Dividends received on this stock are included in other non-interest income.

Mortgage banking derivatives: Loan commitments, whose underlying mortgage loans at origination will be held for sale upon funding of the loan, are derivative instruments. Loan commitments are recognized on the consolidated statement of financial condition in other assets and other liabilities at fair value, with changes in their fair values recognized in mortgage banking activities. At the inception of a loan commitment, the Bank generally will simultaneously enter into a best efforts forward loan sale commitment to protect the Bank from losses on sales of the loans underlying the loan commitment by securing the ultimate sale price and delivery date of the loan.

Loan commitments and related financial instruments: In the ordinary course of business, the Bank has entered into off balance sheet financial instruments consisting of commitments to extend credit, commercial letters of credit and standby letters of credit. The face amount for these items represents the exposure to loss before considering customer collateral or ability to repay. Such financial instruments are recorded in the consolidated financial statements when they become payable.

Income taxes: Provisions for income taxes are based on amounts reported in the statements of operations after exclusion of nontaxable income, such as interest on state and municipal securities, and BOLI income, and include deferred taxes on temporary differences in the recognition of income and expense for tax and financial statement purposes. Deferred taxes are computed on the liability method. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. It is the Company’s policy to recognize interest and penalties associated with uncertain tax positions as components of income taxes and to disclose the recognized interest and penalties, if material.

Stock-based compensation: Compensation cost is recognized for stock options and restricted stock awards issued to employees, based on the fair value of these awards at the date of grant. A Black-Scholes model is utilized to estimate the fair value of stock options when granted and this cost is expensed over the required service period which is usually the vesting period of the options. The fair market value of the Company’s common stock at the date of grant is used for restricted stock awards and this cost is expensed over the required service period which is usually the vesting period of the stock awards.

Compensation cost is recognized over the required service period, generally defined as the vesting period. For awards with graded vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award.

Comprehensive income: Accounting principles generally require that recognized revenue, expenses, gains, and losses be included in net income, although certain changes in assets and liabilities, such as unrealized gains and losses on available-for-sale securities, are reported as a separate component of the equity section of the statement of financial condition. Such items, along with net income, are components of comprehensive income.

Loss Contingencies: Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management does not believe there are any such matters pending that will have a material effect on the financial statements.

Earnings per common share: Basic earnings per common share is net income divided by the weighted average number of common shares outstanding during the period. The Company’s outstanding stock options are the primary component of the Company’s diluted earnings per share. All outstanding unvested share-based payment awards that contain rights to non-forfeitable dividends are considered participating securities for this calculation. Diluted earnings per common share include the dilutive effect of additional potential common shares issuable under stock options. Earnings and dividends per share are restated for all stock splits and stock dividends through the date of issuance of the financial statements.

Fair value of financial instruments: Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in a separate note. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or in market conditions could significantly affect these estimates.

Operating Segments: While management monitors the revenue streams of the various products and services, operations are managed and financial performance is evaluated on a Company wide basis. Operating segments are aggregated into one as operating results for all segments are similar. Accordingly, all of the financial service operations are considered by management to be aggregated in one reportable operating segment.

Reclassifications: Some items in the prior year financial statements were reclassified to conform to the current presentation. Reclassifications had no effect on prior year net income or shareholders’ equity.

Recently issued accounting standards

In February 2013, the FASB amended existing guidance related to reporting amounts reclassified out of accumulated other comprehensive income. These amendments do not change the current requirements for reporting net income or other comprehensive income in financial statements. These amendments require an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, 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 but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under U.S. GAAP that provide additional details about those amounts. For public companies, these amendments are effective prospectively for interim and annual reporting periods beginning after December 15, 2012. The effect of adopting this standard did not have a material effect on the Company’s operating results or financial condition.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies, but not specifically addressed in this report, are not expected to have a material impact on the Company’s financial condition, results of operations, or liquidity.

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Note 6 - Bank Premises and Equipment (Tables)

12 Months Ended

Dec. 31, 2013

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment [Table Text Block]

	2013			2012
	(dollars in thousands)
Land and improvements	$	3,855		$	3,839
Building and improvements		7,191			6,445
Equipment, furniture and fixtures		4,885			4,600
Construction in progress		82			80
		16,013			14,964
Less accumulated depreciation		(6,501	)		(6,174	)
Premises and equipment, net	$	9,512		$	8,790

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Note 15 - Income taxes (Details) - Effective Income Tax Rate Reconciliation	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Effective Income Tax Rate Reconciliation [Abstract]
Federal statutory rates	34.00%	34.00%
State taxes, net of federal benefit	3.30%	3.80%
Tax-exempt income	(2.10%)	(1.50%)
State tax credits	(3.00%)	(2.60%)
Bank-owned life insurance	(4.90%)	(1.40%)
State tax credit valuation allowance	0.50%	(4.10%)
Other	0.80%	0.60%
Total	28.60%	28.80%

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Note 16 - Commitments and Contingencies (Tables)

12 Months Ended

Dec. 31, 2013

Note 16 - Commitments and Contingencies (Tables) [Line Items]

Schedule of Fair Value, Off-balance Sheet Risks [Table Text Block]

	2013		2012
	(dollars in thousands)
Commitments to extend credit	$	74,144	$	48,976
Standby letters of credit		472		1,029
Total	$	74,616	$	50,005

Contractual Obligation, Fiscal Year Maturity Schedule [Table Text Block]

	2014		2015		2016		2017		Thereafter		Total
	(dollars in thousands)
Operating leases	$	239	$	236	$	12	$	11	$	-	$	498

Recourse Liability for Mortgage Loans Sold [Member]

Note 16 - Commitments and Contingencies (Tables) [Line Items]

Schedule of Loss Contingencies by Contingency [Table Text Block]

	2013			2012
	(dollars in thousands)
Beginning balance	$	772		$	245
Provision		499			499
Losses		(196	)		(167	)
Recoveries		15			195
Ending balance	$	1,090		$	772

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Note 4 - Loans (Details) - Credit Risk Profile by Risk Grade Category: (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Financing Receivable, Recorded Investment [Line Items]
Loans Receivable	$ 275,897	$ 267,031
Commercial and Industrial [Member] | Grades 1-4 [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans Receivable	18,010	19,723
Commercial and Industrial [Member] | Grade 5 [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans Receivable	103	32
Commercial and Industrial [Member] | Grade 6 [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans Receivable		61
Commercial and Industrial [Member] | Total [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans Receivable	18,113	19,816
Acquisition Development & Construction [Member] | Grades 1-4 [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans Receivable	11,257	13,498
Acquisition Development & Construction [Member] | Grade 5 [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans Receivable	49	774
Acquisition Development & Construction [Member] | Total [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans Receivable	11,306	14,272
Other Real Estate Construction [Member] | Grades 1-4 [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans Receivable	49,078	41,344
Other Real Estate Construction [Member] | Grade 5 [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans Receivable		192
Other Real Estate Construction [Member] | Grade 6 [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans Receivable	92	118
Other Real Estate Construction [Member] | Total [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans Receivable	49,170	41,654
Home Equity Line [Member] | Grades 1-4 [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans Receivable	18,021	19,829
Home Equity Line [Member] | Grade 5 [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans Receivable		104
Home Equity Line [Member] | Grade 6 [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans Receivable	110	4
Home Equity Line [Member] | Total [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans Receivable	18,131	19,937
Other Real Estate Residential [Member] | Grades 1-4 [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans Receivable	36,493	33,446
Other Real Estate Residential [Member] | Grade 5 [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans Receivable	612	81
Other Real Estate Residential [Member] | Grade 6 [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans Receivable	556	2,031
Other Real Estate Residential [Member] | Total [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans Receivable	37,661	35,558
Owner Occupied [Member] | Grades 1-4 [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans Receivable	54,450	47,833
Owner Occupied [Member] | Grade 5 [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans Receivable	4,845	5,191
Owner Occupied [Member] | Grade 6 [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans Receivable	1,493	1,804
Owner Occupied [Member] | Total [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans Receivable	60,788	54,828
Non Owner Occupied [Member] | Grades 1-4 [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans Receivable	67,989	72,603
Non Owner Occupied [Member] | Grade 5 [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans Receivable	6,786	3,103
Non Owner Occupied [Member] | Grade 6 [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans Receivable	1,069	195
Non Owner Occupied [Member] | Total [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans Receivable	75,844	75,901
Consumer [Member] | Grades 1-4 [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans Receivable	3,910	3,872
Consumer [Member] | Grade 5 [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans Receivable		22
Consumer [Member] | Grade 6 [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans Receivable	21	27
Consumer [Member] | Total [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans Receivable	3,931	3,921
Grades 1-4 [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans Receivable	259,208	252,148
Grade 5 [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans Receivable	12,395	9,499
Grade 6 [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans Receivable	3,341	4,240
Total [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans Receivable	$ 274,944	$ 265,887

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Note 11 - Regulatory Capital Matters (Details) - Actual Capital Amounts and Ratios (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Subsidiaries [Member]
Total capital to risk weighted assets
Actual Amount (in Dollars)	$ 64,863	$ 58,321
Actual Ratio	17.25%	16.59%
Required for Capital Adequacy Purposes Amount (in Dollars)	30,087	28,125
Required for Capital Adequacy Purposes Ratio	8.00%	8.00%
Required to be Well-Capitalized Under Prompt Corrective Action Provisions Amount (in Dollars)	37,609	35,156
Required to be Well-Capitalized Under Prompt Corrective Action Provisions Ratio	10.00%	10.00%
Tier 1 capital to risk weighted assets
Actual Amount (in Dollars)	60,154	53,926
Actual Ratio	15.99%	15.34%
Required for Capital Adequacy Purposes Amount (in Dollars)	15,043	14,062
Required for Capital Adequacy Purposes Ratio	4.00%	4.00%
Required to be Well-Capitalized Under Prompt Corrective Action Provisions Amount (in Dollars)	22,565	21,094
Required to be Well-Capitalized Under Prompt Corrective Action Provisions Ratio	6.00%	6.00%
Tier 1 leverage to average assets
Actual Amount (in Dollars)	60,154	53,926
Actual Ratio	11.93%	11.13%
Required for Capital Adequacy Purposes Amount (in Dollars)	20,172	19,382
Required for Capital Adequacy Purposes Ratio	4.00%	4.00%
Required to be Well-Capitalized Under Prompt Corrective Action Provisions Amount (in Dollars)	25,215	24,227
Required to be Well-Capitalized Under Prompt Corrective Action Provisions Ratio	5.00%	5.00%
Consolidated Entities [Member]
Total capital to risk weighted assets
Actual Amount (in Dollars)	65,663	59,262
Actual Ratio	17.44%	16.86%
Required for Capital Adequacy Purposes Amount (in Dollars)	30,116	28,125
Required for Capital Adequacy Purposes Ratio	8.00%	8.00%
Required to be Well-Capitalized Under Prompt Corrective Action Provisions Amount (in Dollars)	37,645	35,156
Required to be Well-Capitalized Under Prompt Corrective Action Provisions Ratio	10.00%	10.00%
Tier 1 capital to risk weighted assets
Actual Amount (in Dollars)	60,954	54,867
Actual Ratio	16.19%	15.61%
Required for Capital Adequacy Purposes Amount (in Dollars)	15,058	14,062
Required for Capital Adequacy Purposes Ratio	4.00%	4.00%
Required to be Well-Capitalized Under Prompt Corrective Action Provisions Amount (in Dollars)	22,587	21,094
Required to be Well-Capitalized Under Prompt Corrective Action Provisions Ratio	6.00%	6.00%
Tier 1 leverage to average assets
Actual Amount (in Dollars)	60,954	54,867
Actual Ratio	12.08%	11.32%
Required for Capital Adequacy Purposes Amount (in Dollars)	20,189	19,383
Required for Capital Adequacy Purposes Ratio	4.00%	4.00%
Required to be Well-Capitalized Under Prompt Corrective Action Provisions Amount (in Dollars)	$ 25,233	$ 24,229
Required to be Well-Capitalized Under Prompt Corrective Action Provisions Ratio	5.00%	5.00%

XML

Consolidated Statements of Financial Condition (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Assets
Cash and due from banks	$ 16,828	$ 30,279
Securities available-for-sale	158,439	132,760
Loans	274,747	265,831
Allowance for loan losses	(5,357)	(5,954)
Loans, net	269,390	259,877
Loans held for sale at fair value	31,298	48,432
Bank-owned life insurance	14,834	10,001
Bank premises and equipment, net	9,512	8,790
Accrued interest receivable	1,854	1,772
Other real estate owned, net	4,897	5,876
Federal Home Loan Bank stock	1,606	1,865
Other assets	7,840	6,523
Total assets	516,498	506,175
Deposits
Non-interest bearing	76,747	70,880
Interest-bearing:
NOW accounts	59,661	57,482
Savings	56,757	64,236
Money market accounts	74,056	54,982
Time deposits of $100,000 or more	97,625	111,537
Other time deposits	54,859	57,839
Total deposits	419,705	416,956
Short-term debt	22,200	25,028
Repurchase agreements	12,111	3,333
Other liabilities	5,593	4,533
Total liabilities	459,609	449,850
Shareholders’ equity
Common stock, par value $.001; 9,000,000 shares authorized; 3,572,204 and 3,528,296 shares issued and outstanding, respectively	4	4
Additional paid-in capital	16,192	15,687
Retained earnings	44,758	39,177
Accumulated other comprehensive income (loss)	(4,065)	1,457
Total shareholders’ equity	56,889	56,325
Total liabilities and shareholders’ equity	$ 516,498	$ 506,175

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Note 1 - Summary of Significant Accounting Policies (Details)	12 Months Ended
	Dec. 31, 2013
Building and Building Improvements [Member] | Minimum [Member]
Note 1 - Summary of Significant Accounting Policies (Details) [Line Items]
Property, Plant and Equipment, Useful Life	5 years
Building and Building Improvements [Member] | Maximum [Member]
Note 1 - Summary of Significant Accounting Policies (Details) [Line Items]
Property, Plant and Equipment, Useful Life	39 years
Furniture and Fixtures [Member] | Minimum [Member]
Note 1 - Summary of Significant Accounting Policies (Details) [Line Items]
Property, Plant and Equipment, Useful Life	3 years
Furniture and Fixtures [Member] | Maximum [Member]
Note 1 - Summary of Significant Accounting Policies (Details) [Line Items]
Property, Plant and Equipment, Useful Life	15 years

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Note 19 - Fair Value of Financial Instruments (Details) - Carrying Amount and Estimated Fair Values of Financial Instruments (USD $)	Dec. 31, 2013		Dec. 31, 2012
Financial assets:
Securities available for sale, carrying value	$ 158,439,000		$ 132,760,000
Securities available for sale, fair value	158,439,000		132,760,000
Loans, net of allowance, carrying value	269,390,000		259,877,000
Loans held for sale, fair value	31,298,000		48,432,000
Federal Home Loan Bank stock, carrying value	1,606,000		1,865,000
Accrued interest receivable, carrying value	1,854,000		1,772,000
Financial liabilities
Time deposits, carrying value	152,484,000
Time deposits, fair value	152,484,000
Other deposits, carrying value	419,705,000		416,956,000
Repurchase agreements, carrying value	12,111,000		3,333,000
Repurchase agreements, fair value	12,111,000		3,333,000
Accrued Interest Receivable, Loans [Member] | Fair Value, Inputs, Level 2 [Member]
Financial assets:
Accrued interest receivable, fair value	974,000		1,123,000
Accrued Interest Receivable, Loans [Member] | Reported Value Measurement [Member]
Financial assets:
Accrued interest receivable, carrying value	974,000		1,123,000
Accrued Interest Receivable, Loans [Member] | Estimate of Fair Value Measurement [Member]
Financial assets:
Accrued interest receivable, fair value	974,000		1,123,000
Accrued Interest Receivable, Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Financial assets:
Accrued interest receivable, fair value	880,000		649,000
Accrued Interest Receivable, Securities [Member] | Reported Value Measurement [Member]
Financial assets:
Accrued interest receivable, carrying value	880,000		649,000
Accrued Interest Receivable, Securities [Member] | Estimate of Fair Value Measurement [Member]
Financial assets:
Accrued interest receivable, fair value	880,000		649,000
Accrued Interest Payable, Deposits [Member] | Fair Value, Inputs, Level 1 [Member]
Financial liabilities
Accrued interest payable, fair value	5,000		5,000
Accrued interest payable, Carrying Value	5,000		5,000
Accrued Interest Payable, Deposits [Member] | Fair Value, Inputs, Level 2 [Member]
Financial liabilities
Accrued interest payable, fair value	393,000		453,000
Accrued interest payable, Carrying Value	393,000		453,000
Accrued Interest Payable, Borrowings [Member] | Fair Value, Inputs, Level 1 [Member]
Financial liabilities
Accrued interest payable, fair value	6,000
Accrued interest payable, Carrying Value	6,000
Accrued Interest Payable, Repurchase Agreements [Member] | Fair Value, Inputs, Level 1 [Member]
Financial liabilities
Accrued interest payable, fair value			3,000
Accrued interest payable, Carrying Value			3,000
Fair Value, Inputs, Level 1 [Member]
Financial assets:
Cash and due from banks, fair value	16,828,000		30,279,000
Securities available for sale, carrying value	158,400,000		132,800,000
Securities available for sale, fair value	158,400,000		132,800,000
Federal Home Loan Bank stock, fair value
Other derivative assets				[1]
Financial liabilities
Other deposits, fair value	267,221,000		247,580,000
Repurchase agreements, carrying value	12,111,000		3,333,000
Repurchase agreements, fair value	12,111,000		3,333,000
FHLB short-term debt, carrying value	22,200,000		25,028,000
FHLB short-term debt, fair value	22,200,000		25,028,000
Other derivative liabilities		[1]
Fair Value, Inputs, Level 2 [Member]
Financial assets:
Securities available for sale, carrying value	158,439,000		132,760,000
Securities available for sale, fair value	158,439,000		132,760,000
Loans held for sale, fair value	31,298,000		48,432,000
Federal Home Loan Bank stock, fair value
Other derivative assets	823,000		485,000	[1]
Financial liabilities
Time deposits, carrying value	153,411,000		170,707,000
Time deposits, fair value	153,411,000		170,707,000
Other derivative liabilities	409,000	[1]	409,000
Fair Value, Inputs, Level 3 [Member]
Financial assets:
Loans, net of allowance, fair value	271,112,000		264,159,000
Federal Home Loan Bank stock, fair value
Other derivative assets				[1]
Financial liabilities
Other derivative liabilities		[1]
Reported Value Measurement [Member] | Accrued Interest Payable, Deposits [Member]
Financial liabilities
Accrued interest payable, fair value	398,000		458,000
Accrued interest payable, Carrying Value	398,000		458,000
Reported Value Measurement [Member] | Accrued Interest Payable, Borrowings [Member]
Financial liabilities
Accrued interest payable, fair value	6,000
Accrued interest payable, Carrying Value	6,000
Reported Value Measurement [Member] | Accrued Interest Payable, Repurchase Agreements [Member]
Financial liabilities
Accrued interest payable, fair value			3,000
Accrued interest payable, Carrying Value			3,000
Reported Value Measurement [Member]
Financial assets:
Cash and due from banks, carrying value	16,828,000		30,279,000
Securities available for sale, carrying value	158,439,000		132,760,000
Securities available for sale, fair value	158,439,000		132,760,000
Loans, net of allowance, carrying value	269,390,000		259,877,000
Loans held for sale, carrying value	31,298,000		48,432,000
Federal Home Loan Bank stock, carrying value	1,606,000		1,865,000
Other derivative assets	823,000		485,000	[1]
Financial liabilities
Time deposits, carrying value	152,484,000		169,376,000
Time deposits, fair value	152,484,000		169,376,000
Other deposits, carrying value	267,221,000		247,580,000
Repurchase agreements, carrying value	12,111,000		3,333,000
Repurchase agreements, fair value	12,111,000		3,333,000
FHLB short-term debt, carrying value	22,200,000		25,028,000
FHLB short-term debt, fair value	22,200,000		25,028,000
Other derivative liabilities	409,000	[1]	409,000
Estimate of Fair Value Measurement [Member] | Accrued Interest Payable, Deposits [Member]
Financial liabilities
Accrued interest payable, fair value	398,000		458,000
Accrued interest payable, Carrying Value	398,000		458,000
Estimate of Fair Value Measurement [Member] | Accrued Interest Payable, Borrowings [Member]
Financial liabilities
Accrued interest payable, fair value	6,000
Accrued interest payable, Carrying Value	6,000
Estimate of Fair Value Measurement [Member] | Accrued Interest Payable, Repurchase Agreements [Member]
Financial liabilities
Accrued interest payable, fair value			3,000
Accrued interest payable, Carrying Value			3,000
Estimate of Fair Value Measurement [Member]
Financial assets:
Cash and due from banks, fair value	16,828,000		30,279,000
Securities available for sale, carrying value	158,439,000		132,760,000
Securities available for sale, fair value	158,439,000		132,760,000
Loans, net of allowance, fair value	271,112,000		264,159,000
Loans held for sale, fair value	31,298,000		48,432,000
Federal Home Loan Bank stock, fair value
Other derivative assets	823,000		485,000	[1]
Financial liabilities
Time deposits, carrying value	153,411,000		170,707,000
Time deposits, fair value	153,411,000		170,707,000
Other deposits, fair value	267,221,000		247,580,000
Repurchase agreements, carrying value	12,111,000		3,333,000
Repurchase agreements, fair value	12,111,000		3,333,000
FHLB short-term debt, carrying value	22,200,000		25,028,000
FHLB short-term debt, fair value	22,200,000		25,028,000
Other derivative liabilities	$ 409,000	[1]	$ 409,000

[1] This amount includes mortgage related interest rate lock commitments and commitments to sell.

XML

Consolidated Statements of Shareholders' Equity (USD $)	Common Stock [Member] Restricted [Member]	Common Stock [Member] Director [Member]	Common Stock [Member] USD ($)	Additional Paid-in Capital [Member] Restricted [Member] USD ($)	Additional Paid-in Capital [Member] Director [Member] USD ($)	Additional Paid-in Capital [Member] USD ($)	Retained Earnings [Member] USD ($)	Accumulated Other Comprehensive Income (Loss) [Member] USD ($)	Restricted [Member] USD ($)	Director [Member] USD ($)	Total USD ($)
Balance at December 31 at Dec. 31, 2011			$ 4,000			$ 16,301,000	$ 32,988,000	$ 1,152,000			$ 50,445,000
Balance at December 31 (in Shares) at Dec. 31, 2011			3,592,100
Net income							6,621,000				6,621,000
Other comprehensive income (loss)								305,000			305,000
Proceeds from exercise of stock options						253,000					253,000
Proceeds from exercise of stock options (in Shares)			45,491								45,491,000
Stock-based compensation expense						108,000					108,000
Issuance of stock for compensation				35,000	209,000				35,000	209,000	244,000
Issuance of stock for compensation (in Shares)	15,988	24,504
Repurchase of common shares						(1,219,000)					(1,219,000)
Repurchase of common shares (in Shares)			(149,787)
Dividends							(432,000)				(431,500)
Balance at December 31 at Dec. 31, 2012			4,000			15,687,000	39,177,000	1,457,000			56,325,000
Balance at December 31 (in Shares) at Dec. 31, 2012			3,528,296
Net income							6,204,000				6,204,000
Other comprehensive income (loss)								(5,522,000)			(5,522,000)
Proceeds from exercise of stock options						407,000					407,000
Proceeds from exercise of stock options (in Shares)			28,469								28,469,000
Net settlement from exercise of stock options						(332,000)					(332,000)
Net settlement from exercise of stock options (in Shares)			(22,638)
Stock-based compensation expense						93,000					93,000
Issuance of stock for compensation				132,000	205,000				132,000	205,000	205,000
Issuance of stock for compensation (in Shares)	24,006	14,071
Dividends							(623,000)				(623,000)
Balance at December 31 at Dec. 31, 2013			$ 4,000			$ 16,192,000	$ 44,758,000	$ (4,065,000)			$ 56,889,000
Balance at December 31 (in Shares) at Dec. 31, 2013			3,572,204

XML

Note 19 - Fair Value of Financial Instruments (Details) - Changes in Nonrecurring Fair Value Recorded (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Impaired Loans [Member]
Note 19 - Fair Value of Financial Instruments (Details) - Changes in Nonrecurring Fair Value Recorded [Line Items]
Balance	$ 2,930	$ 4,816
Gross Additions (Reductions)	(135)	(1,886)
Transfers into (out of) of Level 3	(1,794)
Balance	1,001	2,930
Other Real Estate Owned [Member]
Note 19 - Fair Value of Financial Instruments (Details) - Changes in Nonrecurring Fair Value Recorded [Line Items]
Balance	1,160	1,038
Gain (Loss) Included in Earnings		103
Gross Additions (Reductions)	(1,496)	(1,980)
Transfers into (out of) of Level 3	3,902	1,999
Balance	3,566	1,160
Total [Member]
Note 19 - Fair Value of Financial Instruments (Details) - Changes in Nonrecurring Fair Value Recorded [Line Items]
Balance	4,090	5,854
Gain (Loss) Included in Earnings		103
Gross Additions (Reductions)	(1,631)	(3,866)
Transfers into (out of) of Level 3	2,108	1,999
Balance	$ 4,567	$ 4,090

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Note 4 - Loans (Details) - Newly Restructured Loans Occurred In Current Fiscal Year (Newly Restructured Loans [Member], USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012 Pre-Modification [Member] Rate Modifications [Member]	Dec. 31, 2012 Pre-Modification [Member] Payment Modifications [Member]	Dec. 31, 2012 Pre-Modification [Member]	Dec. 31, 2012 Pre-Modification [Member] Other Real Estate Residential [Member] Rate Modifications [Member]	Dec. 31, 2012 Pre-Modification [Member] Other Real Estate Residential [Member] Payment Modifications [Member]	Dec. 31, 2012 Pre-Modification [Member] Other Real Estate Residential [Member]	Dec. 31, 2012 Post-Modification [Member] Rate Modifications [Member]	Dec. 31, 2012 Post-Modification [Member] Payment Modifications [Member]	Dec. 31, 2012 Post-Modification [Member]	Dec. 31, 2012 Post-Modification [Member] Other Real Estate Residential [Member] Rate Modifications [Member]	Dec. 31, 2012 Post-Modification [Member] Other Real Estate Residential [Member] Payment Modifications [Member]	Dec. 31, 2012 Post-Modification [Member] Other Real Estate Residential [Member]	Dec. 31, 2013 Rate Modifications [Member] Pre-Modification [Member]	Dec. 31, 2013 Rate Modifications [Member] Post-Modification [Member]	Dec. 31, 2013 Combination Modifications [Member] Pre-Modification [Member]	Dec. 31, 2013 Combination Modifications [Member] Post-Modification [Member]	Dec. 31, 2013 Pre-Modification [Member]	Dec. 31, 2013 Post-Modification [Member]	Dec. 31, 2013 Other Real Estate Residential [Member] Rate Modifications [Member] Pre-Modification [Member]	Dec. 31, 2013 Other Real Estate Residential [Member] Rate Modifications [Member] Post-Modification [Member]	Dec. 31, 2013 Other Real Estate Residential [Member] Combination Modifications [Member] Pre-Modification [Member]	Dec. 31, 2013 Other Real Estate Residential [Member] Combination Modifications [Member] Post-Modification [Member]	Dec. 31, 2013 Other Real Estate Residential [Member] Pre-Modification [Member]	Dec. 31, 2013 Other Real Estate Residential [Member] Post-Modification [Member]	Dec. 31, 2013 Owner Occupied [Member] Rate Modifications [Member] Pre-Modification [Member]	Dec. 31, 2013 Owner Occupied [Member] Rate Modifications [Member] Post-Modification [Member]	Dec. 31, 2013 Owner Occupied [Member] Combination Modifications [Member] Pre-Modification [Member]	Dec. 31, 2013 Owner Occupied [Member] Combination Modifications [Member] Post-Modification [Member]	Dec. 31, 2013 Owner Occupied [Member] Pre-Modification [Member]	Dec. 31, 2013 Owner Occupied [Member] Post-Modification [Member]	Dec. 31, 2013 Non Owner Occupied [Member] Rate Modifications [Member] Pre-Modification [Member]	Dec. 31, 2013 Non Owner Occupied [Member] Rate Modifications [Member] Post-Modification [Member]	Dec. 31, 2013 Non Owner Occupied [Member] Combination Modifications [Member] Pre-Modification [Member]	Dec. 31, 2013 Non Owner Occupied [Member] Combination Modifications [Member] Post-Modification [Member]	Dec. 31, 2013 Non Owner Occupied [Member] Pre-Modification [Member]	Dec. 31, 2013 Non Owner Occupied [Member] Post-Modification [Member]
Real-estate - residential
Number of Contracts			8			8			8			8					9	9					2	2					4	4					3	3
Modifications	$ 243	$ 566	$ 809	$ 243	$ 566	$ 809							$ 585		$ 1,819		$ 2,404		$ 154		$ 18		$ 172		$ 359		$ 1,231		$ 1,590		$ 72		$ 570		$ 642
Real-estate - residential
Number of Contracts			8			8			8			8					9	9					2	2					4	4					3	3
Modifications							$ 243	$ 557	$ 800	$ 243	$ 557	$ 800		$ 552		$ 1,802		$ 2,354		$ 148		$ 18		$ 166		$ 340		$ 1,221		$ 1,561		$ 64		$ 563		$ 627

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Note 21 - Condensed Financial Information on Georgia-Carolina Bancshares, Inc. (Parent Company Only) (Details) - Condensed Statements of Income (USD $) In Thousands, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2013	Dec. 31, 2012
Condensed Income Statements, Captions [Line Items]
Income, dividends from subsidiary									$ 160	$ 1,500
Income tax benefits	331	282	1,045	822	242	1,070	801	550	2,480	2,663
Income (loss) before equity in undistributed earnings of subsidiary									(24)	1,346
Net income	935	843	2,119	2,307	1,392	2,242	1,703	1,284	6,204	6,621
Audit exam and accounting fees									713	783
Income (loss) before income tax benefits and equity in undistributed earnings of subsidiary	1,266	1,125	3,164	3,129	1,634	3,312	2,504	1,834	8,684	9,284
Parent Company [Member] | Director [Member]
Condensed Income Statements, Captions [Line Items]
Director compensation									71	56
Parent Company [Member]
Condensed Income Statements, Captions [Line Items]
Income tax benefits									105	75
Equity in undistributed earnins of subsidiary									6,228	5,275
Net income									6,204	6,621
Legal fees									80	73
Audit exam and accounting fees									71	42
Annual report and proxy									25	20
Shareholder services									26	27
Other									16	11
Total expenses									289	229
Income (loss) before income tax benefits and equity in undistributed earnings of subsidiary									$ (129)	$ 1,271

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Note 11 - Regulatory Capital Matters (Tables)

12 Months Ended

Dec. 31, 2013

Disclosure Text Block [Abstract]

Schedule of Compliance with Regulatory Capital Requirements under Banking Regulations [Table Text Block]

	Actual					Required for Capital Adequacy Purposes					Required to be Well-Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of December 31, 2013:
Total capital to risk weighted assets
Bank	$	64,863		17.25	%	$	30,087		8.00	%	$	37,609		10.00	%
Consolidated	$	65,663		17.44	%	$	30,116		8.00	%	$	37,645		10.00	%
Tier 1 capital to risk weighted assets
Bank	$	60,154		15.99	%	$	15,043		4.00	%	$	22,565		6.00	%
Consolidated	$	60,954		16.19	%	$	15,058		4.00	%	$	22,587		6.00	%
Tier 1 leverage to average assets
Bank	$	60,154		11.93	%	$	20,172		4.00	%	$	25,215		5.00	%
Consolidated	$	60,954		12.08	%	$	20,189		4.00	%	$	25,233		5.00	%

	Actual					Required for Capital Adequacy Purposes					Required to be Well-Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of December 31, 2012:
Total capital to risk weighted assets
Bank	$	58,321		16.59	%	$	28,125		8.00	%	$	35,156		10.00	%
Consolidated	$	59,262		16.86	%	$	28,125		8.00	%	$	35,156		10.00	%
Tier 1 capital to risk weighted assets
Bank	$	53,926		15.34	%	$	14,062		4.00	%	$	21,094		6.00	%
Consolidated	$	54,867		15.61	%	$	14,062		4.00	%	$	21,094		6.00	%
Tier 1 leverage to average assets
Bank	$	53,926		11.13	%	$	19,382		4.00	%	$	24,227		5.00	%
Consolidated	$	54,867		11.32	%	$	19,383		4.00	%	$	24,229		5.00	%

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Note 7 - Other Real Estate Owned (Details) - Bank Owned Other Real Estate Activities (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Bank Owned Other Real Estate Activities [Abstract]
Balance at beginning of year	$ 5,876	$ 6,990
Loans transferred to real estate owned	1,968	5,186
Sales of real estate owned	(2,051)	(4,866)
Direct write-downs	(896)	(1,434)
Balance at end of year	$ 4,897	$ 5,876

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Note 15 - Income taxes

12 Months Ended

Dec. 31, 2013

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

Note 15—Income Taxes

Total income taxes in the statements of income for the years ended December 31, 2013 and 2012 are as follows:

	2013			2012
	(dollars in thousands)
Current tax provision	$	3,012		$	3,278
Deferred tax expense (benefit)		(532	)		(615	)
Total income tax expense (benefit)	$	2,480		$	2,663

The Bank’s provision for income taxes differs from the amounts computed by applying the Federal and state income tax statutory rates to income before income taxes. A reconciliation of the differences is as follows:

	2013			2012
Federal statutory rates		34.0	%		34.0	%
State taxes, net of federal benefit		3.3	%		3.8	%
Tax-exempt income		-2.1	%		-1.5	%
State tax credits		-3.0	%		-2.6	%
Bank-owned life insurance		-4.9	%		-1.4	%
State tax credit valuation allowance		0.5	%		-4.1	%
Other		0.8	%		0.6	%
Total		28.6	%		28.8	%

The primary components of deferred income taxes at December 31, 2013 and 2012 are as follows:

	2013			2012
Deferred tax assets
Allowance for loan losses	$	1,713		$	1,689
Unrealized loss on securities available for sale		1,913			-
Executive compensation plans		646			502
Valuation adjustment of other real estate owned		645			437
Recourse liability		414			293
Contingent liability		227			228
Investment in GA low-income housing tax credits		310			270
State tax credits		184			281
Mortgage derivatives IRLC expenses		97			115
Other		44			102
Total deferred income tax assets		6,193			3,917
Deferred tax liabilities
Unrealized gain on securities available for sale		-			(798	)
Qualified prepaids		(26	)		(131	)
Depreciation on bank premises and equipment		(198	)		(174	)
Mortgage derivative change in method		(293	)		(439	)
Total deferred income tax liabilities		(517	)		(1,542	)
Valuation allowance		(310	)		(270	)
Net deferred income tax assets	$	5,366		$	2,105

Deferred tax assets are included in other assets. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amount of existing assets and liabilities and their respective tax bases.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered in income.  Deferred tax assets are reduced by a valuation allowance if it is more likely than not that the tax benefits will not be realized. 

Prior to 2012, the Company had created a full valuation allowance for the Georgia Form 900 tax credits. During 2012, the Company reversed the deferred tax valuation allowance that was recorded against these tax credits since it was determined that, based on the profitability of the Company and other positive evidence, these state tax credits would be utilized before their expiration dates. The Company continues to reflect a full valuation allowance on its investment in a Georgia Low Income Housing Project, to reflect management’s estimate of the temporary deductible differences that may expire prior to their utilization.

Management has evaluated all other tax positions that could have a significant effect on the consolidated financial statements and determined that the Company had no uncertain income tax positions at December 31, 2013.

The Company and its subsidiary are subject to U.S. Federal income tax as well as income tax within the state of Georgia. The Company is no longer subject to examination by taxing authorities for years before 2010.

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Note 12 - Stock Based Compensation (Tables)

12 Months Ended

Dec. 31, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block]

Options	Shares			Weighted Average Exercise Price			Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at January 1, 2013		238,728		$	11.21			4.12	$	583,833
Granted		-		$	-
Exercised		(28,469	)	$	(14.30	)
Forfeited or expired		(28,017	)	$	(9.44	)
Outstanding at December 31, 2013		182,242		$	11.00			4.19	$	710,283
Fully vested and expected to vest		182,242		$	11.00			4.19	$	710,283
Exercisable at December 31, 2013		120,933		$	12.49			3.26	$	314,381

Options	Shares			Weighted Average Exercise Price			Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at January 1, 2012		290,344		$	10.26			4.35	$	67,631
Granted		-		$	-
Exercised		(45,491	)	$	(5.55	)
Forfeited or expired		(6,125	)	$	(7.96	)
Outstanding at December 31, 2012		238,728		$	11.21			4.12	$	583,833
Fully vested and expected to vest		238,728		$	11.21			4.12	$	583,833
Exercisable at December 31, 2012		160,861		$	12.59			2.81	$	251,921

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

	2013		2012
Total intrinsic value of options exercised	$	6,263	$	318,282
Cash received from option exercise	$	407,107	$	252,630
Tax benefit related to option exercises	$	130,274	$	85,890

Schedule of Nonvested Share Activity [Table Text Block]

Nonvested Options	Shares			Weighted Average Grant-Date Fair Value
Nonvested at January 1, 2013		77,867		$	5.55
Granted		-		$	-
Vested		(16,558	)	$	5.71
Forfeited		-		$	-
Nonvested at December 31, 2013		61,309		$	5.50

Nonvested Options	Shares			Weighted Average Grant-Date Fair Value
Nonvested at January 1, 2012		93,516		$	5.57
Granted		-		$	-
Vested		(15,355	)	$	5.71
Forfeited		(294	)	$	5.69
Nonvested at December 31, 2012		77,867		$	5.55

Schedule of Share-based Compensation, Nonemployee Director Stock Award Plan, Activity [Table Text Block]

	2013			2012
Beginning shares authorized and unissued		170,434			21,739
Additional shares authorized and unissued		-			173,199
Shares issued		(14,071	)		(24,504	)
Ending shares authorized and unissued		156,363			170,434

Schedule of Common Stock Outstanding Roll Forward [Table Text Block]

	2013		2012
Net options exercised		5,831		45,491
Issuance of stock for compensation		24,006		15,988
Issuance of stock for directors' fees		14,071		24,504
Net issuance of common stock		43,908		85,983

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Note 21 - Condensed Financial Information on Georgia-Carolina Bancshares, Inc. (Parent Company Only) (Details) - Condensed Balance Sheets (USD $)	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Condensed Balance Sheet Statements, Captions [Line Items]
Other assets	$ 7,840,000	$ 6,523,000
Total assets	516,498,000	506,175,000
Deferred tax liability	517,000	1,542,000
Other liabilities	5,593,000	4,533,000
Total liabilities	459,609,000	449,850,000
Shareholders' equity	56,889,000	56,325,000	50,445,000
Total liabilities and shareholders' equity	516,498,000	506,175,000
Parent Company [Member]
Condensed Balance Sheet Statements, Captions [Line Items]
Cash	431,000	683,000	492,000
Investment in subsidiary	56,089,000	55,383,000
Other assets	436,000	317,000
Total assets	56,956,000	56,383,000
Deferred tax liability		7,000
Other liabilities	67,000	51,000
Total liabilities	67,000	58,000
Shareholders' equity	56,889,000	56,325,000
Total liabilities and shareholders' equity	$ 56,956,000	$ 56,383,000

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Note 17 - Mortgage Banking Derivative

12 Months Ended

Dec. 31, 2013

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities Disclosure [Text Block]

Note 17—Mortgage banking derivatives

Commitments to fund certain mortgage loans (interest rate locks) to be sold into the secondary market and forward commitments for the future delivery of mortgage loans to third party investors are considered derivatives. It is the Bank’s practice to enter into forward commitments for the future delivery of residential mortgage loans when interest rate lock commitments are entered into in order to economically hedge the effect of changes in interest rates resulting from its commitments to fund the loans. These mortgage banking derivatives are not designated in hedge relationships. At December 31, 2013, the Bank had approximately $25.6 million of interest rate lock commitments and $50.6 million of forward commitments for the future delivery of residential mortgage loans. The fair value of these mortgage banking derivatives was reflected by a derivative asset of $823,000 and a derivative liability of $175,000. The net gains related to interest rate lock commitments used for risk management were $166,000 as of December 31, 2013. The net gains for forward contracts related to these mortgage loans was $483,000 as of December 31, 2013. At December 31, 2012, the Company had approximately $35.9 million of interest rate lock commitments and $80.3 million of forward commitments for the future delivery of residential mortgage loans. The fair value of these mortgage banking derivatives was reflected by a derivative asset of $485,000 and a derivative liability of $409,000. The net gains related to interest rate lock commitments used for risk management were $303,000 as of December 31, 2012. The net losses for forward contracts related to these mortgage loans was $227,000 as of December 31, 2012. Fair values were estimated based on changes in mortgage interest rates from the date of the commitments. Changes in the fair values of these mortgage-banking derivatives are included in net gains on sales of loans.

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Note 8 - Deposits (Details) - Scheduled Maturities of Time Deposit Liabilities (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013
Scheduled Maturities of Time Deposit Liabilities [Abstract]
One year or less	$ 91,649
Over one year through two years	32,700
Over two years through three years	10,299
Over three years through four years	8,642
Over four years	9,194
Total	$ 152,484

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Consolidated Statements of Cash Flows (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Cash flows from operating activities
Net income	$ 6,204,000	$ 6,621,000
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	603,000	622,000
Provision for loan losses	(2,029,000)	(605,000)
OREO valuation adjustment	896,000	1,434,000
Gain on sale of other real estate owned	(231,000)	(40,000)
(Gain) loss on sale of equipment	5,000	(5,000)
(Gain) loss on sale of securities	(91,000)	105,000
Gain on bank owned life insurance	(806,000)
Mortgage banking activities	(8,225,000)	(11,376,000)
Proceeds from sale of loans held for sale	384,495,000	438,048,000
Originations of loans held for sale	(359,136,000)	(429,877,000)
Increase in cash value of bank-owned life insurance	(448,000)	(392,000)
Stock-based compensation expense	225,000	108,000
Stock compensation	205,000	244,000
Deferred income tax (benefit) expense	(549,000)	(615,000)
Increase in accrued interest receivable	(82,000)	(40,000)
(Increase) decrease in other assets	1,840,000	(1,513,000)
Decrease in accrued interest payable	(56,000)	(215,000)
Increase in other liabilities	1,116,000	1,901,000
Net cash provided by operating activities	23,936,000	4,405,000
Cash flows from investing activities
Loan originations and collections, net	(9,452,000)	14,352,000
Purchases of available-for-sale securities	(70,248,000)	(76,053,000)
Proceeds from maturities and calls of available-for-sale securities	23,690,000	29,602,000
Proceeds from sales of available-for-sale securities	12,735,000	14,324,000
Proceeds from sale of FHLB stock	259,000	205,000
Purchase of bank-owned life insurance	(5,000,000)
Proceeds from life insurance death benefit	1,421,000
Proceeds from sale of other real estate owned	2,282,000	4,906,000
Net additions to bank premises and equipment	(1,225,000)	(323,000)
Net cash used in investing activities	(45,538,000)	(12,987,000)
Cash flows from financing activities
Increase in deposits	2,749,000	5,561,000
Repayments on FHLB advances and other borrowings	(41,528,000)	(25,000,000)
Proceeds from FHLB advances and other borrowings	38,700,000	25,028,000
Increase (decrease) in repurchase agreements	8,778,000	(232,000)
Proceeds from stock options exercised, net	75,000	253,000
Purchase of stock		(1,219,000)
Cash dividends paid	(623,000)	(432,000)
Net cash provided by financing activities	8,151,000	3,959,000
Net decrease in cash and due from banks	(13,451,000)	(4,623,000)
Cash and due from banks at beginning of the year	30,279,000	34,902,000
Cash and due from banks at end of the year	$ 16,828,000	$ 30,279,000

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Consolidated Statements of Financial Condition (Parentheticals) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Preferred stock par value (in Dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized	1,000,000	1,000,000
Preferred stock, shares issued	0	0
Common stock par value (in Dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized	9,000,000	9,000,000
Common stock, shares issued	3,572,204	3,528,296
Common stock, shares outstanding	3,572,204	3,528,296

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Note 10 - Employee Benefit Plans

12 Months Ended

Dec. 31, 2013

Compensation and Retirement Disclosure [Abstract]

Pension and Other Postretirement Benefits Disclosure [Text Block]

Note 10—Employee benefit plans

The Bank has a 401(k) salary-deferred plan covering substantially all employees. At the discretion of the Bank’s Board of Directors, the Bank may match a percentage of the annual amounts deferred by employees. Matching amounts are funded by the Bank as accrued. Total deferred and matching amounts are limited to amounts that can be deducted for Federal income tax purposes. The Bank’s matching contributions were approximately $206,000 and $200,000 for the years ended December 31, 2013 and 2012, respectively.

The Bank has a Nonqualified Executive Deferred Compensation Plan (“EDCP”) covering a select group of key employees and senior management. The EDCP allows participating employees to elect each year to defer compensation into a participant account. At its discretion, the Bank may also elect to make discretionary contributions to the participant account. The EDCP expense, including employee deferrals and contributions made by the Bank, totaled $22,000 and $23,000 for the years ending December 31, 2013 and 2012, respectively. The accrued liability related to the EDCP was approximately $96,000 and $74,000 at December 31, 2013 and 2012, respectively.

The Bank also has a Supplemental Executive Retirement Plan (“SERP”) for the benefit of certain key officers. The SERP provides selected employees who satisfy specific eligibility requirements with supplemental benefits upon retirement, termination of employment, death, disability or a change of control of the Bank, in certain prescribed circumstances. The Bank recorded expense totaling $273,000 and $294,000 for the SERP for the years ended December 31, 2013 and 2012, respectively. The accrued liability related to the SERP was approximately $1,444,000 and $1,188,000 as of December 31, 2013 and 2012, respectively.

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Note 19 - Fair Value of Financial Instruments (Details) - Assets Measured at Fair Value on a Non-recurring Basis (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Real Estate Construction [Member] | Fair Value, Measurements, Nonrecurring [Member] | Fair Value, Inputs, Level 3 [Member]
Note 19 - Fair Value of Financial Instruments (Details) - Assets Measured at Fair Value on a Non-recurring Basis [Line Items]
Impaired Loans	$ 40	$ 542
Real Estate Construction [Member] | Fair Value, Measurements, Nonrecurring [Member]
Note 19 - Fair Value of Financial Instruments (Details) - Assets Measured at Fair Value on a Non-recurring Basis [Line Items]
Impaired Loans	40	542
Real Estate Residential [Member] | Fair Value, Measurements, Nonrecurring [Member] | Fair Value, Inputs, Level 3 [Member]
Note 19 - Fair Value of Financial Instruments (Details) - Assets Measured at Fair Value on a Non-recurring Basis [Line Items]
Impaired Loans	249	477
Real Estate Residential [Member] | Fair Value, Measurements, Nonrecurring [Member]
Note 19 - Fair Value of Financial Instruments (Details) - Assets Measured at Fair Value on a Non-recurring Basis [Line Items]
Impaired Loans	249	477
Real Estate Commercial [Member] | Fair Value, Measurements, Nonrecurring [Member] | Fair Value, Inputs, Level 3 [Member]
Note 19 - Fair Value of Financial Instruments (Details) - Assets Measured at Fair Value on a Non-recurring Basis [Line Items]
Impaired Loans	701	1,895
Real Estate Commercial [Member] | Fair Value, Measurements, Nonrecurring [Member]
Note 19 - Fair Value of Financial Instruments (Details) - Assets Measured at Fair Value on a Non-recurring Basis [Line Items]
Impaired Loans	701	1,895
Consumer [Member] | Fair Value, Measurements, Nonrecurring [Member] | Fair Value, Inputs, Level 3 [Member]
Note 19 - Fair Value of Financial Instruments (Details) - Assets Measured at Fair Value on a Non-recurring Basis [Line Items]
Impaired Loans	11	16
Consumer [Member] | Fair Value, Measurements, Nonrecurring [Member]
Note 19 - Fair Value of Financial Instruments (Details) - Assets Measured at Fair Value on a Non-recurring Basis [Line Items]
Impaired Loans	11	16
Fair Value, Measurements, Nonrecurring [Member] | Unimproved Land [Member] | Fair Value, Inputs, Level 3 [Member]
Note 19 - Fair Value of Financial Instruments (Details) - Assets Measured at Fair Value on a Non-recurring Basis [Line Items]
Other Real Estate Owned	471	642
Fair Value, Measurements, Nonrecurring [Member] | Unimproved Land [Member]
Note 19 - Fair Value of Financial Instruments (Details) - Assets Measured at Fair Value on a Non-recurring Basis [Line Items]
Other Real Estate Owned	471	642
Fair Value, Measurements, Nonrecurring [Member] | Real Estate Residential [Member] | Fair Value, Inputs, Level 3 [Member]
Note 19 - Fair Value of Financial Instruments (Details) - Assets Measured at Fair Value on a Non-recurring Basis [Line Items]
Other Real Estate Owned	144	346
Fair Value, Measurements, Nonrecurring [Member] | Real Estate Residential [Member]
Note 19 - Fair Value of Financial Instruments (Details) - Assets Measured at Fair Value on a Non-recurring Basis [Line Items]
Other Real Estate Owned	144	346
Fair Value, Measurements, Nonrecurring [Member] | Real Estate Commercial [Member] | Fair Value, Inputs, Level 3 [Member]
Note 19 - Fair Value of Financial Instruments (Details) - Assets Measured at Fair Value on a Non-recurring Basis [Line Items]
Other Real Estate Owned	2,951	172
Fair Value, Measurements, Nonrecurring [Member] | Real Estate Commercial [Member]
Note 19 - Fair Value of Financial Instruments (Details) - Assets Measured at Fair Value on a Non-recurring Basis [Line Items]
Other Real Estate Owned	2,951	172
Fair Value, Measurements, Nonrecurring [Member] | Fair Value, Inputs, Level 3 [Member]
Note 19 - Fair Value of Financial Instruments (Details) - Assets Measured at Fair Value on a Non-recurring Basis [Line Items]
Impaired Loans	1,001	2,930
Other Real Estate Owned	3,566	1,160
Fair Value, Measurements, Nonrecurring [Member]
Note 19 - Fair Value of Financial Instruments (Details) - Assets Measured at Fair Value on a Non-recurring Basis [Line Items]
Impaired Loans	1,001	2,930
Other Real Estate Owned	3,566	1,160
Fair Value, Inputs, Level 3 [Member]
Note 19 - Fair Value of Financial Instruments (Details) - Assets Measured at Fair Value on a Non-recurring Basis [Line Items]
Impaired Loans	$ 271,112	$ 264,159

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Note 19 - Fair Value of Financial Instruments (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Note 19 - Fair Value of Financial Instruments (Details) [Line Items]
Securities available-for-sale	$ 158,439,000	$ 132,760,000
Loans and Leases Receivable, Allowance	5,357,000	5,954,000
Impaired Financing Receivable, Recorded Investment	8,861,000	9,829,000
Loans and Leases Receivable, Nonperforming, Nonaccrual of Interest	0	0
Loans Held-for-sale, Fair Value Disclosure	31,298,000	48,432,000
Loans Receivable Held-for-sale, Amount	30,900,000	48,300,000
Increase (Decrease) in Loans Held-for-sale	372,000	179,000
Other Assets	7,840,000	6,523,000
Other Liabilities	5,593,000	4,533,000
Real Estate Investments, Other	3,600,000	1,200,000
Collateral Dependent Impaired Loans [Member] | Fair Value, Inputs, Level 3 [Member]
Note 19 - Fair Value of Financial Instruments (Details) [Line Items]
Loans Receivable, Fair Value Disclosure	1,400,000	3,200,000
Loans and Leases Receivable, Allowance	358,000	272,000
Interest Rate Lock Commitments [Member]
Note 19 - Fair Value of Financial Instruments (Details) [Line Items]
Other Assets	39,000	97,000
Other Liabilities	118,000	49,000
Forward Contracts [Member]
Note 19 - Fair Value of Financial Instruments (Details) [Line Items]
Other Assets	118,000	49,000
Other Liabilities	39,000	97,000
Sales During Period [Member]
Note 19 - Fair Value of Financial Instruments (Details) [Line Items]
Other Real Estate, Period Increase (Decrease)	1,026,000	1,752,000
Write Downs DuringPeriodMember
Note 19 - Fair Value of Financial Instruments (Details) [Line Items]
Other Real Estate, Period Increase (Decrease)	470,000	228,000
Fair Value, Inputs, Level 1 [Member]
Note 19 - Fair Value of Financial Instruments (Details) [Line Items]
Securities available-for-sale	158,400,000	132,800,000
Fair Value, Inputs, Level 3 [Member]
Note 19 - Fair Value of Financial Instruments (Details) [Line Items]
Loans Receivable, Fair Value Disclosure	271,112,000	264,159,000
Impaired Financing Receivable, Recorded Investment	$ 1,000,000	$ 2,900,000

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Document And Entity Information (USD $)	12 Months Ended
	Dec. 31, 2013	Mar. 07, 2014	Jun. 30, 2013
Document and Entity Information [Abstract]
Entity Registrant Name	Georgia-Carolina Bancshares, Inc
Document Type	10-K
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		3,594,973
Entity Public Float			$ 39,190,868
Amendment Flag	false
Entity Central Index Key	0001044082
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Smaller Reporting Company
Entity Well-known Seasoned Issuer	No
Document Period End Date	Dec. 31, 2013
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	FY

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Note 11 - Regulatory Capital Matters

12 Months Ended

Dec. 31, 2013

Disclosure Text Block [Abstract]

Regulatory Capital Requirements under Banking Regulations [Text Block]

Note 11—Regulatory capital matters

The primary source of funds available to the Company is the payment of dividends by its subsidiary bank. Banking regulations limit the amount of dividends that may be paid by the Bank without prior approval of certain regulatory agencies. The amount of dividends allowable without prior approval was $13.9 million at December 31, 2013.

In 2012, the Company began paying cash dividends to shareholders. Three quarterly dividends of $0.04 per share were paid for a total of $431,500 for the year ended December 31, 2012. One quarterly dividend of $0.04 per share and three quarterly dividends of $0.045 per share were paid for a total of $623,000 for the year ended December 31, 2013.

On January 27, 2014, the Company declared another cash dividend of $0.045 per share to all shareholders of record as of February 11, 2014.

The Bank is subject to various regulatory capital requirements administered by state and Federal banking agencies. Failure to meet minimum capital requirements can trigger certain mandatory, and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements.

Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities, and certain off-balance-sheet items, as calculated under regulatory accounting practices. The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Prompt corrective action provisions are not applicable to bank holding companies.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier I capital (as defined) to average assets (as defined). Management believes that, as of December 31, 2013, the Bank met all capital adequacy requirements to which it is subject.

As of December 31, 2013, the most recent notification from the regulatory agencies categorized the Bank as well-capitalized under the regulatory framework for prompt corrective action. To be categorized as well-capitalized, the Bank must maintain minimum total risk-based, Tier I risk-based, and Tier I leverage ratios, as set forth in the table below. There are no conditions or events since that notification that management believes have changed the Bank’s category.

The Bank’s actual capital amounts (in thousands) and ratios as of December 31, 2013 and 2012 are presented in the following tables:

	Actual					Required for Capital Adequacy Purposes					Required to be Well-Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of December 31, 2013:
Total capital to risk weighted assets
Bank	$	64,863		17.25	%	$	30,087		8.00	%	$	37,609		10.00	%
Consolidated	$	65,663		17.44	%	$	30,116		8.00	%	$	37,645		10.00	%
Tier 1 capital to risk weighted assets
Bank	$	60,154		15.99	%	$	15,043		4.00	%	$	22,565		6.00	%
Consolidated	$	60,954		16.19	%	$	15,058		4.00	%	$	22,587		6.00	%
Tier 1 leverage to average assets
Bank	$	60,154		11.93	%	$	20,172		4.00	%	$	25,215		5.00	%
Consolidated	$	60,954		12.08	%	$	20,189		4.00	%	$	25,233		5.00	%

	Actual					Required for Capital Adequacy Purposes					Required to be Well-Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of December 31, 2012:
Total capital to risk weighted assets
Bank	$	58,321		16.59	%	$	28,125		8.00	%	$	35,156		10.00	%
Consolidated	$	59,262		16.86	%	$	28,125		8.00	%	$	35,156		10.00	%
Tier 1 capital to risk weighted assets
Bank	$	53,926		15.34	%	$	14,062		4.00	%	$	21,094		6.00	%
Consolidated	$	54,867		15.61	%	$	14,062		4.00	%	$	21,094		6.00	%
Tier 1 leverage to average assets
Bank	$	53,926		11.13	%	$	19,382		4.00	%	$	24,227		5.00	%
Consolidated	$	54,867		11.32	%	$	19,383		4.00	%	$	24,229		5.00	%

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Note 13 - Earnings Per Common Share (Details) - Reconciliation of Income Amounts and Common Stock Amounts in Computing Earnings Per Share (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2013	Dec. 31, 2012
Basic EPS
Income (Numerator) (in Dollars)									$ 6,204	$ 6,621
Shares (Denominator)									3,558,876	3,599,431
Earnings Per Share (in Dollars per share)	$ 0.26	$ 0.24	$ 0.60	$ 0.65	$ 0.39	$ 0.62	$ 0.47	$ 0.36	$ 1.74	$ 1.84
Effect of stock options outstanding									31,244
Effect of stock options outstanding (in Dollars per share)									$ (0.01)
Diluted EPS
Income (Numerator) (in Dollars)									$ 6,204	$ 6,621
Shares (Denominator)									3,590,120	3,599,431
Earnings Per Share (in Dollars per share)	$ 0.26	$ 0.23	$ 0.59	$ 0.65	$ 0.39	$ 0.62	$ 0.47	$ 0.36	$ 1.73	$ 1.84

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Note 18 - Supplemental Consolidated Cash Flow Information (Details) - Supplemental Consolidated Cash Flow Information (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Supplemental Consolidated Cash Flow Information [Abstract]
Income taxes paid	$ 2,750	$ 3,225
Interest paid	2,171	3,897
Interest received	18,250	20,529
Transfers from loans to real estate owned	1,968	5,186
Unrealized gain(loss) on securities, net	$ (5,522)	$ 305

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Consolidated Statements of Operations (USD $) In Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Interest income
Interest and fees on loans	$ 15,277	$ 18,019
Interest on taxable securities	2,472	2,046
Interest on nontaxable securities	536	439
Other interest income	47	65
Total interest income	18,332	20,569
Interest expense
Interest on time deposits of $100,000 or more	1,029	1,600
Interest on other deposits	1,059	1,403
Interest on funds purchased and other borrowings	27	679
Total interest expense	2,115	3,682
Net interest income	16,217	16,887
Provision for loan losses	(2,029)	(605)
Net interest income after provision for loan losses	18,246	17,492
Non-interest income
Service charges on deposits	1,567	1,524
Mortgage banking activities	8,225	11,376
Gain (loss) on sale of securities	91	(105)
Other	3,021	1,858
Total non-interest income	12,904	14,653
Non-interest expense
Salaries and employee benefits	12,853	12,329
Occupancy expenses	1,505	1,556
Other real estate owned expenses	1,654	2,284
Other	6,454	6,692
Total non-interest expense	22,466	22,861
Income before income taxes	8,684	9,284
Income tax expense	2,480	2,663
Net income	$ 6,204	$ 6,621
Earnings per common share
Basic (in Dollars per share)	$ 1.74	$ 1.84
Diluted (in Dollars per share)	$ 1.73	$ 1.84
Dividends per common share (in Dollars per share)	$ 0.175	$ 0.120

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Note 5 - Bank-owaned Life Insurance (BOLI)

12 Months Ended

Dec. 31, 2013

Investments, All Other Investments [Abstract]

Life Insurance, Corporate or Bank Owned [Text Block]

Note 5—Bank-owned life insurance (BOLI)

In September 2007, $8.0 million in bank-owned life insurance (BOLI) was acquired through two policies in order to insure certain key officers of the Bank. In September 2013, an additional $5.0 million bank-owned life insurance policy (BOLI) was acquired in order to insure certain key officers of the Bank. As of December 31, 2013, the total BOLI cash surrender value was $14.8 million resulting in other income for 2013 of $448,000 and an annualized net yield of 4.06%. As of December 31, 2012, the BOLI cash surrender value was $10.0 million resulting in other income for 2012 of $392,000 and an annualized net yield of 4.01%. During 2013, the Bank received death insurance benefits from the two original Bank owned life insurance policies totaling $1.42 million. These benefits resulted in $806,000 of other income.

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Note 4 - Loans

12 Months Ended

Dec. 31, 2013

Receivables [Abstract]

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

Note 4—Loans

The Bank engages in a full complement of lending activities, including commercial, consumer and real estate loans. The composition of loans for the years ended December 31, 2013 and 2012 is summarized as follows:

	2013			2012
	(dollars in thousands)
Commercial and industrial	$	18,113		$	19,816
Real estate - construction, land and land development		60,476			55,926
Real estate - residential		55,792			55,495
Real estate - commercial		136,632			130,729
Consumer		3,931			3,921
Total loans		274,944			265,887
Deferred loan fees		(197	)		(56	)
Total loans		274,747			265,831
Allowance for loan losses		(5,357	)		(5,954	)
Loans, net of allowance for loan losses	$	269,390		$	259,877

Loan segments

Commercial and industrial loans are directed principally towards individual, partnership or corporate borrowers, for a variety of business purposes.  These loans include short-term lines of credit, short-term to medium-term plant and equipment loans, and loans for general working capital.  Risks associated with this type of lending arise from the impact of economic stresses on the business operations of borrowers. The Bank mitigates such risks to the loan portfolio by diversifying lending across North American Industry Classification System (“NAICS”) codes and has experienced very low levels of loss for this loan type for the past three years.  

Real estate – construction, land and land development loans consist of residential and commercial construction loans as well as land and land development loans.  Land development loans are primarily construction and development loans to builders in the Augusta and Savannah, Georgia markets.  These loan portfolios possess an increased level of risk compared to other types. The Bank’s approach to financing the development, financing the construction and providing the ultimate residential mortgage loans to the residential property purchasers has resulted in less exposure to the effects of declines in property values. These loans include certain real estate – construction loans classified as acquisition, development & construction. The loans are managed by the Bank’s construction division.

Real estate – residential loans include residential mortgage lending and are primarily single-family residential loans secured by the residential property.  Residential property values have stabilized over the past year, and this loan type has experienced decreases in historical losses over the past three years. Home equity lines are also included in real estate – residential loans.

Real estate – commercial loans include commercial mortgage loans that are generally secured by office buildings, retail establishments and other types of real property, both owner occupied and non-owner occupied. A significant component of this type of lending is to owner occupied borrowers, including churches.

Consumer loans consist primarily of installment loans to individuals for personal, family or household purposes, including automobile loans to individuals and pre-approved lines of credit.  The Bank has experienced low levels of loss for this loan type for the past three years compared to the other loan types.

Loan risk grades

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

Grade 1: Highest quality - Alternate sources of cash exist, such as the commercial paper market, capital market, internal liquidity or other bank lines. These are national or regional companies with excellent cash flow which covers all debt service requirements and a significant portion of capital expenditures. Balance sheet strength and liquidity are excellent and exceed the industry norms. Financial trends are positive. Corporate borrowers are market leaders within the industry and the industry performance is excellent. This grade includes loans which are fully secured by cash or equivalents. This grade includes loans secured by marketable securities with no less than 25% margin. Borrowers are of unquestionable financial strength. Financial standing of borrower is known and borrower exhibits superior liquidity, net worth, cash flow and leverage.

Grade 2: Above average quality - There is minimal risk. Borrowers have strong, stable financial trends. There is strong cash flow covering debt service requirements and some portion of capital expenditures. Alternate sources of repayment are evident and financial ratios are comparable to or exceed the industry norms. Financial trends are positive. Borrower has prominent position within the industry or the local economy and the industry performance is above average. Management is strong in most areas and management depth is good. This grade includes loans secured by marketable securities with a margin less than 25%, and includes borrowers who have stable and reliable cash flow and above average liquidity and cash flow. There is modest risk from exposure to contingent liabilities.

Grade 3: Average quality - Cash flow is adequate to cover all debt service requirements but not capital expenditures. Balance sheet may be leveraged but still comparable to industry norms. Financial trends are stable to mixed over the long term but no significant concerns presently exist. Generally there is a stable industry outlook, although there may be some cyclical characteristics. Borrowers are of average position in the industry or the local economy. The management team is considered capable and stable. This grade includes borrowers with reliable cash flow and alternate sources of repayment which may require the sale of assets. Financial position has been leveraged to a modest degree. However, the borrower has a relatively strong net worth considering income and debt.

Grade 4: Below average quality - Loan conditions require more frequent monitoring. Stability is lacking in the primary repayment source, cash flow, credit history or liquidity; however, the instability is manageable and considered temporary. Overall trends are not yet adverse. These loans exhibit Grade 3 financial characteristics but lack proper and complete documentation. Sources of income or cash flow have become unstable or may possibly decline given current business or economic conditions. The borrower has a highly leveraged financial position or limited capital. Speculative construction loans originated by third parties are included in this grade.

Grade 5: Other Assets Especially Mentioned - These loans have potential weaknesses which may inadequately protect the Bank’s position at some future date. Unlike a Grade 4 credit, adverse trends in the borrower’s operations and/or financial position are evident, but have not yet developed into well-defined credit weaknesses. Specific negative events within the borrower or the industry have occurred, which may jeopardize cash flow. Borrower’s operations are highly cyclical or vulnerable to economic or market conditions. Management has potential weaknesses and management depth is lacking. Borrower is taking positive steps to alleviate potential weaknesses and has the potential for improvement and upgrade. Corrective strategy to protect the Bank may be required and active management attention is warranted. Some minor delinquencies may exist from time to time. Borrowers exhibit some degree of weakness in financial condition. This may manifest itself in a reduction of net worth and liquidity.

Grade 6: Substandard - A substandard loan has a well-defined weakness or weaknesses in the primary repayment source and undue reliance is placed on secondary repayment sources (collateral or guarantors). No loss beyond the specific reserves of the allowance for loan losses allocated to these loans is presently expected based on a current assessment of collateral values and guarantor cash flow. However, there is the distinct possibility that the Bank will sustain some future loss if the credit weaknesses are not corrected. Management is inadequate to the extent that the business’s ability to continue operations is in question. Intensive effort to correct the weaknesses and ensure protection against loss of principal (i.e. additional collateral) is mandatory. Delinquency of principal or interest may exist. Net worth, repayment ability, management and collateral protection, all exhibit weakness. In the case of consumer credit, closed end consumer installment loans delinquent between 90 and 119 days (4 monthly payments) will be minimally classified Substandard. Open end consumer credits will be minimally classified substandard if delinquent 90 to 179 days (4 to 6 billing cycles).

Grade 7: Doubtful - A doubtful loan has well-defined weaknesses as in Grade 6 with the added characteristic that collection or liquidation in full, on the basis of currently existing facts, conditions and values, is highly questionable and improbable. The possibility of loss is very high, but because of certain important and reasonably specific pending factors which may work to strengthen the credit, its classification as a loss is deferred until a more exact status can be determined. Pending factors include proposed merger, acquisition, liquidation procedures, capital injection, perfecting liens on additional collateral, and refinancing plans. Borrower is facing extreme financial distress, bankruptcy or liquidation, and prospects for recovery are limited. Loans are seriously in default and should be on non-accrual status. Collateral and guarantor protection are insufficient. Efforts are directed solely at retirement of debt, e.g., asset liquidation. Due to their highly questionable collectability, loans rated doubtful should not remain in this category for an extended period of time.

Grade 8: Loss - Loans classified loss are considered uncollectable and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value but rather it is not practical or desirable to defer writing off the asset while pursuing recovery. In the case of consumer credit, closed end consumer installment loans delinquent 120 days or more (5 monthly payments) will be classified Loss. Open end consumer credits will be classified Loss if delinquent 180 days or more (7 or more billing cycles).

As of December 31, 2013 and December 31, 2012, the Bank had no loans classified as Grade 7 or 8. It is the Bank’s practice, in most cases, to take a charge-off when a loan or portion of a loan is deemed doubtful or loss. Consequently, the remaining principal balance, if applicable, which has been evaluated as collectible, is graded accordingly.

As of December 31, 2013 and 2012, the credit risk grades of loans by loan class were as follows:

Credit Risk Profile by Risk Grade Category:

	2013
	(dollars in thousands)
	Grades 1 - 4		Grade 5		Grade 6		Total
Commercial and industrial	$	18,010	$	103	$	-	$	18,113
Real estate - construction, land and land development
Acquistion, development, & construction		11,257		49		-		11,306
Other real estate - construction		49,078		-		92		49,170
Real estate - residential
Home equity lines		18,021		-		110		18,131
Other real estate - residential		36,493		612		556		37,661
Real estate - commercial
Owner occupied		54,450		4,845		1,493		60,788
Non-owner occupied		67,989		6,786		1,069		75,844
Consumer		3,910		-		21		3,931
Total loans receivable	$	259,208	$	12,395	$	3,341	$	274,944

	2012
	(dollars in thousands)
	Grades 1 - 4		Grade 5		Grade 6		Total
Commercial and industrial	$	19,723	$	32	$	61	$	19,816
Real estate - construction, land and land development
Acquistion, development, & construction		13,498		774		-		14,272
Other real estate - construction		41,344		192		118		41,654
Real estate - residential
Home equity lines		19,829		104		4		19,937
Other real estate - residential		33,446		81		2,031		35,558
Real estate - commercial
Owner occupied		47,833		5,191		1,804		54,828
Non-owner occupied		72,603		3,103		195		75,901
Consumer		3,872		22		27		3,921
Total loans receivable	$	252,148	$	9,499	$	4,240	$	265,887

The credit risk profile by risk grade category excludes accrued interest receivables of approximately $953,000 and $1,057,000 as of December 31, 2013 and December 31, 2012, respectively.

The following tables present the activity in the allowance for loan losses by loan segment for the years ended December 31, 2013 and 2012:

Allowance for Loan Losses Activity

For the Year Ended December 31, 2013

(dollars in thousands)

	Commercial and industrial			Real estate - construction, land and land development			Real estate - residential			Real estate - commercial			Consumer			Unallocated			Total
Beginning balance	$	225		$	2,870		$	794		$	1,872		$	77		$	116		$	5,954
Charge offs		(12	)		-			(96	)		(105	)		(93	)		-			(306	)
Recoveries		6			1,467			37			190			38			-			1,738
Provisions		8			(2,711	)		37			501			188			(52	)		(2,029	)
Ending balance	$	227		$	1,626		$	772		$	2,458		$	210		$	64		$	5,357
Ending balances:
Individually evaluated for impairment	$	-		$	37		$	67		$	252		$	2		$	-		$	358
Collectively evaluated for impairment	$	227		$	1,589		$	705		$	2,206		$	208		$	64		$	4,999

Allowance for Loan Losses Activity

For the Year Ended December 31, 2012

(dollars in thousands)

	Commercial and industrial			Real estate - construction, land and land development			Real estate - residential			Real estate - commercial			Consumer			Unallocated			Total
Beginning balance	$	185		$	3,219		$	1,141		$	1,706		$	108		$	445		$	6,804
Charge offs		(98	)		(692	)		(242	)		(179	)		(108	)		-			(1,319	)
Recoveries		225			734			43			14			58			-			1,074
Provisions		(87	)		(391	)		(148	)		331			19			(329	)		(605	)
Ending balance	$	225		$	2,870		$	794		$	1,872		$	77		$	116		$	5,954
Ending balances:
Individually evaluated for impairment	$	28		$	-		$	59		$	185		$	-		$	-		$	272
Collectively evaluated for impairment	$	197		$	2,870		$	735		$	1,687		$	77		$	116		$	5,682

The following tables present the recorded investment in loans receivable by loan segment as of December 31, 2013 and December 31, 2012:

Recorded Investment in Loans Receivable

As of December 31, 2013

(dollars in thousands)

	Commercial and industrial		Real estate - construction, land and land development		Real estate - residential		Real estate - commercial		Consumer		Total
Individually evaluated for impairment	$	-	$	92	$	1,695	$	7,053	$	21	$	8,861
Collectively evaluated for impairment	$	18,177	$	60,670	$	54,367	$	129,896	$	3,926	$	267,036
Ending balance total	$	18,177	$	60,762	$	56,062	$	136,949	$	3,947	$	275,897

Recorded Investment in Loans Receivable

As of December 31, 2012

(dollars in thousands)

	Commercial and industrial		Real estate - construction, land and land development		Real estate - residential		Real estate - commercial		Consumer		Total
Individually evaluated for impairment	$	90	$	566	$	2,376	$	6,770	$	27	$	9,829
Collectively evaluated for impairment	$	19,798	$	55,657	$	53,413	$	124,420	$	3,914	$	257,202
Ending balance total	$	19,888	$	56,223	$	55,789	$	131,190	$	3,941	$	267,031

Loans for which it is probable that the payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired, and are individually evaluated for impairment. Impaired loans for which interest is recorded on a cash basis is immaterial for disclosure. The following tables present loans individually evaluated for impairment and related allowance by loan class for the years ended December 31, 2013 and 2012:

Impaired Loans

As of and for the Year Ended December 31, 2013

(dollars in thousands)

	Unpaid Principal Balance		Recorded Investment		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial and industrial	$	-	$	-	$	-	$	-	$	-
Real estate - construction, land and land development
Acquistion, development, & construction		-		-		-		-		-
Other real estate - construction		144		55		-		171		2
Real estate - residential
Home equity lines		162		162		-		176		3
Other real estate - residential		1,342		1,260		-		1,546		73
Real estate - comercial
Owner occupied		5,219		5,184		-		6,012		249
Non-owner occupied		1,060		1,057		-		1,061		37
Consumer		31		19		-		32		-
Total	$	7,958	$	7,737	$	-	$	8,998	$	364
With an allowance recorded:
Commercial and industrial	$	-	$	-	$	-	$	-	$	-
Real estate - construction, land and land development
Acquistion, development, & construction		-		-		-		-		-
Other real estate - construction		37		37		37		-		-
Real estate - residential
Home equity lines		14		14		7		-		-
Other real estate - residential		259		259		60		-		-
Real estate - comercial
Owner occupied		812		812		252		-		-
Non-owner occupied		-		-		-		-		-
Consumer		2		2		2		-		-
Total	$	1,124	$	1,124	$	358	$	-	$	-
TOTAL
Commercial and industrial	$	-	$	-	$	-	$	-	$	-
Real estate - construction, land and land development
Acquistion, development, & construction						-		-		-
Other real estate - construction		181		92		37		171		2
Real estate - residential
Home equity lines		176		176		7		176		3
Other real estate - residential		1,601		1,519		60		1,546		73
Real estate - comercial
Owner occupied		6,031		5,996		252		6,012		249
Non-owner occupied		1,060		1,057		-		1,061		37
Consumer		33		21		2		32		-
Total	$	9,082	$	8,861	$	358	$	8,998	$	364

Impaired Loans

As of and for the Year Ended December 31, 2012

(dollars in thousands)

	Unpaid Principal Balance		Recorded Investment		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial and industrial	$	60	$	61	$	-	$	454	$	25
Real estate - construction, land and land development
Acquistion, development, & construction		2,457		447		-		2,429		21
Other real estate - construction		197		119		-		206		5
Real estate - residential
Home equity lines		70		70		-		74		-
Other real estate - residential		2,129		1,964		-		2,283		96
Real estate - comercial
Owner occupied		6,053		5,866		-		6,168		258
Non-owner occupied		-		-		-		-		-
Consumer		37		27		-		41		-
Total	$	11,003	$	8,554	$	-	$	11,655	$	405
With an allowance recorded:
Commercial and industrial	$	29	$	29	$	29	$	32	$	2
Real estate - construction, land and land development
Acquistion, development, & construction		-		-		-		-		-
Other real estate - construction		-		-		-		-		-
Real estate - residential
Home equity lines		-		-		-		-		-
Other real estate - residential		342		342		60		346		23
Real estate - comercial
Owner occupied		143		143		23		149		8
Non-owner occupied		760		761		160		780		50
Consumer		-		-		-		-		-
Total	$	1,274	$	1,275	$	272	$	1,307	$	83
TOTAL
Commercial and industrial	$	89	$	90	$	29	$	486	$	27
Real estate - construction, land and land development
Acquistion, development, & construction		2,457		447		-		2,429		21
Other real estate - construction		197		119		-		206		5
Real estate - residential
Home equity lines		70		70		-		74		-
Other real estate - residential		2,471		2,306		60		2,629		119
Real estate - comercial
Owner occupied		6,196		6,009		23		6,317		266
Non-owner occupied		760		761		160		780		50
Consumer		37		27		-		41		-
Total	$	12,277	$	9,829	$	272	$	12,962	$	488

The following tables present a summary of current, past due and nonaccrual loans as of December 31, 2013 and 2012 by loan class:

Analysis of Current, Past Due and Nonaccrual Loans

As of December 31, 2013

(dollars in thousands)

	Accruing
	30-89 Days Past Due		90 Days or more Past Due		Nonaccrual		Total Past Due and Nonaccrual		Current and not Past Due or Nonaccrual		Total Loans Receivable
Commercial and industrial	$	59	$	-	$	-	$	59	$	18,054	$	18,113
Real estate - construction, land and land development
Acquistion, development, & construction		-		-		-		-		11,306		11,306
Other real estate - construction		125		31		52		208		48,962		49,170
Real estate - residential
Home equity lines		132		-		110		242		17,889		18,131
Other real estate - residential		468		-		556		1,024		36,637		37,661
Real estate - comercial
Owner occupied		919		-		744		1,663		59,125		60,788
Non-owner occupied		-		-		441		441		75,403		75,844
Consumer		6		-		21		27		3,904		3,931
Total	$	1,709	$	31	$	1,924	$	3,664	$	271,280	$	274,944

Analysis of Current, Past Due and Nonaccrual Loans

As of December 31, 2012

(dollars in thousands)

	Accruing
	30-89 Days Past Due		90 Days or more Past Due		Nonaccrual		Total Past Due and Nonaccrual		Current and not Past Due or Nonaccrual		Total Loans Receivable
Commercial and industrial	$	134	$	-	$	61	$	195	$	19,621	$	19,816
Real estate - construction, land and land development
Acquistion, development, & construction		-		-		134		134		14,138		14,272
Other real estate - construction		1,318		-		68		1,386		40,268		41,654
Real estate - residential
Home equity lines		211		-		108		319		19,618		19,937
Other real estate - residential		1,322		-		1,776		3,098		32,460		35,558
Real estate - comercial
Owner occupied		941		-		1,527		2,468		52,360		54,828
Non-owner occupied		772		-		195		967		74,934		75,901
Consumer		27		-		27		54		3,867		3,921
Total	$	4,725	$	-	$	3,896	$	8,621	$	257,266	$	265,887

The Bank’s policy is that loans placed on nonaccrual will typically remain on nonaccrual status until all principal and interest payments are brought current and the prospect for future payments in accordance with the loan agreement appear relatively certain. The Bank’s policy generally refers to six months of payment performance as sufficient to warrant a return to accrual status.

Troubled debt restructurings

Troubled debt restructurings are defined as debt modifications, for economic or legal reasons related to the borrower’s financial difficulties, in which the Bank grants a concession that it would not otherwise consider.

Such a concession may stem from an agreement between the Bank and the borrower, or may be imposed by law or a court. Some examples of modifications are as follows:

Rate Modification - A modification in which the interest rate is changed.

Term Modification - A modification in which the maturity date, timing of payments, or frequency of payments is changed.

Interest Only Modification – A modification in which the loan is converted to interest only payments for a period of time.

Payment Modification – A modification in which the dollar amount of the payment is changed, other than an interest only modification described above.

Transfer of Assets Modification – A modification in which a transfer of assets has occurred to partially satisfy debt, including foreclosure and repossession.

Combination Modification – Any other type of modification which includes the use of multiple categories above.

The following tables present the Bank’s loans classified as troubled debt restructurings by loan class as of December 31, 2013 and 2012:

As of December 31, 2013

(dollars in thousands)

	Number of  Contracts		Accrual		Nonaccrual		Total Restructurings
Commercial and industrial		-	$	-	$	-	$	-
Real estate - construction, land and land development
Acquistion, development, & construction		-		-		-		-
Other real estate - construction		-		-		-		-
Real estate - residential
Home equity lines		1		66		-		66
Other real estate - residential		10		925				925
Real estate - comercial
Owner occupied		13		5,775				5,775
Non-owner occupied		1		563		-		563
Consumer		-		-		-		-
Total		25	$	7,329	$	-	$	7,329

As of December 31, 2012

(dollars in thousands)

	Number of Contracts		Accrual		Nonaccrual		Total Restructurings
Commercial and industrial		1	$	-	$	34	$	34
Real estate - construction, land and land development
Acquistion, development, & construction		2		310		134		444
Other real estate - construction		-		-		-		-
Real estate - residential
Home equity lines		1		66		-		66
Other real estate - residential		10		583		243		826
Real estate - comercial
Owner occupied		9		4,187		1,177		5,364
Non-owner occupied		-		-		-		-
Consumer		-		-		-		-
Total		23	$	5,146	$	1,588	$	6,734

At December 31, 2013 and 2012, commitments to advance additional funds outstanding on troubled debt restructurings totaled $0.

The following tables present newly restructured loans that occurred during the years ended December 31, 2013 and 2012, respectively:

Year Ended December 31, 2013

(dollars in thousands)

	Number of Contracts		Rate Modification		Payment Modification		Transfer of Assets Modification		Combination Modification		Total Modifications
Pre-Modification Outstanding Recorded Investment:
Real-estate - residential
Other real estate - residential		2	$	154	$	-	$	-	$	18	$	172
Real estate - commercial
Owner occupied		4		359		-		-		1,231		1,590
Non-owner occupied		3		72		-		-		570		642
Total		9	$	585	$	-	$	-	$	1,819	$	2,404
Post-Modification Outstanding Recorded Investment:
Real-estate - residential
Other real estate - residential		2	$	148	$	-	$	-	$	18	$	166
Real estate - commercial
Owner occupied		4		340		-		-		1,221		1,561
Non-owner occupied		3		64		-		-		563		627
Total		9	$	552	$	-	$	-	$	1,802	$	2,354

Year Ended December 31, 2012

(dollars in thousands)

	Number of Contracts		Rate Modification		Payment Modification		Transfer of Assets Modification		Combination Modification		Total Modifications
Pre-Modification Outstanding Recorded Investment:
Real-estate - residential
Other real estate - residential		8	$	243	$	566	$	-	$	-	$	809
Real estate - commercial
Owner occupied		-		-		-		-		-		-
Non-owner occupied		-		-		-		-		-		-
Total		8	$	243	$	566	$	-	$	-	$	809
Post-Modification Outstanding Recorded Investment:
Real-estate - residential
Other real estate - residential		8	$	243	$	557	$	-	$	-	$	800
Real estate - commercial
Owner occupied		-		-		-		-		-		-
Non-owner occupied		-		-		-		-		-		-
Total		8	$	243	$	557	$	-	$	-	$	800

The following tables represent loans receivable modified as troubled debt restructurings and with a payment default, with the payment default occurring within 12 months of the restructure date, and the payment default occurring during the years ended December 31, 2013 and 2012 (dollars in thousands):

	2013				2012
	Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment
Commercial and industrial		-	$	-		1	$	34
Real estate - construction, land and land development
Other real estate - construction		-		-		-		-
Real estate - residential
Other real estate - residential		-		-		-		-
Real estate - commercial
Owner occupied		1		563		2		1,001
Total		1	$	563		3	$	1,035

At December 31, 2013, executive officers and directors were indebted to the Bank in the aggregate amount of approximately $5,591,000. Following is a summary of transactions for the years ended December 31, 2013 and 2012:

	2013			2012
	(dollars in thousands)
Balance at beginning of year	$	6,376		$	9,813
Advances		1,144			4,607
Repayments		(1,929	)		(8,044	)
Balance at end of year	$	5,591		$	6,376

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Note 16 - Commitments and Contingencies

12 Months Ended

Dec. 31, 2013

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure [Text Block]

Note 16—Commitments and contingencies

In the ordinary course of business, the Bank may enter into off-balance-sheet financial instruments that are not reflected in the consolidated financial statements. These instruments include commitments to extend credit and standby letters of credit. Such financial instruments are recorded in the consolidated financial statements when funds are disbursed or the instruments become payable.

The Bank uses the same credit policies for these off-balance-sheet financial instruments as it does for other instruments that are recorded in the consolidated financial statements.

Following is an analysis of significant off-balance-sheet financial instruments for the years ended December 31, 2013 and 2012:

	2013		2012
	(dollars in thousands)
Commitments to extend credit	$	74,144	$	48,976
Standby letters of credit		472		1,029
Total	$	74,616	$	50,005

Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitment amounts expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. In managing the Bank’s credit and market risk exposure, the Bank may participate with other institutions when these commitments are funded. The credit risk involved in issuing these financial instruments is essentially the same as that involved in making loans to customers. The amount of collateral obtained, if deemed necessary by the Bank, upon extension of credit is based on management’s credit evaluation of the customer. Collateral held varies, but may include real estate and improvements, marketable securities, accounts receivable, inventory, equipment, and personal property.

Loans sold under the mortgage loans held for sale portfolio contain certain representations and warranties in the loan sale agreements which require that we repurchase or indemnify the investors for losses or costs on loans we sell under certain limited conditions. Some of these conditions include underwriting errors or omissions, fraud or material misstatements by the borrower in the loan application or invalid market value on the collateral property due to deficiencies in the appraisal. In addition to these representations and warranties, our loan sale contracts define a condition in which the borrower defaults during a short period of time, typically 120 days to one year, as an Early Payment Default (“EPD”). In the event of an EPD, we are required to return the premium paid by the investor for the loan as well as certain administrative fees, and in some cases repurchase the loan or indemnify the investor. Based on these recourse provisions, the Bank established a recourse liability for mortgage loans sold. The following table demonstrates the activity for the years ended December 31, 2013 and 2012:

	2013			2012
	(dollars in thousands)
Beginning balance	$	772		$	245
Provision		499			499
Losses		(196	)		(167	)
Recoveries		15			195
Ending balance	$	1,090		$	772

The nature of the business of the Bank is such that it ordinarily results in a certain amount of litigation. In the opinion of management, at December 31, 2013, there were no pending litigation matters in which the anticipated outcome would have a material adverse effect on the consolidated financial statements.

In August 2011, the Bank was sued in State Court by a subcontractor related to a residential development project foreclosed upon by the Bank. The suit alleged various claims against the Bank, all of which the Bank denied. Following a mistrial in November 2012 where the jury failed to reach a verdict, a second trial in January 2013 resulted in a verdict against the Bank in the amount of $597,500. The Bank is in the process of appealing this verdict and believes it has meritorious defenses against the verdict. The entire judgment amount was recorded as a contingent liability as of December 31, 2012; therefore, management does not expect that there will be any material adverse effects on the Company’s future consolidated financial position, results of operations or cash flows related to this litigation.

The Bank has various contractual obligations that it must fund as part of normal operations. The following is a summary of future minimum lease obligations as of December 31, 2013. 

	2014		2015		2016		2017		Thereafter		Total
	(dollars in thousands)
Operating leases	$	239	$	236	$	12	$	11	$	-	$	498

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Note 12 - Stock Based Compensation

12 Months Ended

Dec. 31, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

Note 12— Stock based compensation

During 1997, the Company adopted the 1997 Stock Option Plan (the “1997 Plan”) for eligible directors, officers, and key employees of the Company and the Bank. The 1997 Plan expired in 2007 and no more grants may be made pursuant to this plan. Options were granted to purchase common shares at prices not less than the fair market value of the stock at the date of grant. Fair market value is defined to mean the average closing price for the ten business days prior to the date of board approval and grant. The maximum number of shares reserved under the 1997 Plan was 345,000 shares, as adjusted for the Company’s stock splits and stock dividends.

In early 2005, the Company adopted the 2004 Incentive Plan (the “2004 Plan”) for eligible directors, officers, and key employees of the Company and the Bank. The 2004 Plan allows awards of stock, performance units, stock appreciation rights, incentive stock options, non-qualified stock options and phantom stock. Options are granted to purchase common shares at prices not less than the fair market value of the stock at the date of grant. Fair market value is defined to mean the average closing price for the ten business days prior to the date of board approval and grant. The maximum number of shares reserved and available for issuance under the 2004 Plan is 330,125 shares, as adjusted for the Company’s stock split in 2005.

The Stock Incentive Committee of the Board of Directors of the Company administers both plans and establishes to whom awards shall be made and determines option exercise prices, methods of exercise, vesting requirements, the number of shares covered by each option, the terms and restrictions applicable to restricted stock awards, all subject to the approval of the Company’s Board of Directors.

The Company recorded compensation expense of approximately $93,000 and $108,000 for the years ended December 31, 2013 and 2012, respectively, related to employee stock options. No stock options were issued during the years ended December 31, 2013 and 2012.

The estimated fair value of options is amortized to expense over the option’s vesting period. Option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. Changes in the subjective input assumptions can materially affect the fair value estimate. In management’s opinion, the model does not necessarily provide a reliable single measure of the fair value of options.

Vesting requirements are determined by the Board of Directors at the time options are granted and generally provide for vesting over a seven-year period. The plans provide that vesting periods may not exceed ten years.

During the years ending December 31, 2013 and 2012, the Company made restricted stock awards totaling 24,006 and 15,988 shares, respectively. The shares granted in 2012 vest fully at the end of three years. During 2013, there were 16,406 shares granted which vest fully at the end of three years and 7,600 shares granted which vest fully at the end of five years. The grants resulted in expense of $132,456 and $35,210 for the years ended December 31, 2013 and 2012, respectively.

A summary of the Company’s stock option activity under the plans as of December 31, 2013 and 2012, and changes and related information for the years then ended, is presented below:

Options	Shares			Weighted Average Exercise Price			Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at January 1, 2013		238,728		$	11.21			4.12	$	583,833
Granted		-		$	-
Exercised		(28,469	)	$	(14.30	)
Forfeited or expired		(28,017	)	$	(9.44	)
Outstanding at December 31, 2013		182,242		$	11.00			4.19	$	710,283
Fully vested and expected to vest		182,242		$	11.00			4.19	$	710,283
Exercisable at December 31, 2013		120,933		$	12.49			3.26	$	314,381

Options	Shares			Weighted Average Exercise Price			Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at January 1, 2012		290,344		$	10.26			4.35	$	67,631
Granted		-		$	-
Exercised		(45,491	)	$	(5.55	)
Forfeited or expired		(6,125	)	$	(7.96	)
Outstanding at December 31, 2012		238,728		$	11.21			4.12	$	583,833
Fully vested and expected to vest		238,728		$	11.21			4.12	$	583,833
Exercisable at December 31, 2012		160,861		$	12.59			2.81	$	251,921

At December 31, 2013, options both outstanding and exercisable under both plans have exercise prices that range from $7.00 per share to $20.41 per share.

The fair value of these options was estimated on the date of grant using a Black-Scholes option valuation model that used the following range of assumptions for each of the years presented:

	2013		2012
Total intrinsic value of options exercised	$	6,263	$	318,282
Cash received from option exercise	$	407,107	$	252,630
Tax benefit related to option exercises	$	130,274	$	85,890

In addition, the model assumed that each option grant was exercised in the initial year of full vesting.

A summary of the status of the Company’s nonvested options as of December 31, 2013 and 2012, and changes during the years then ended, is presented below:

Nonvested Options	Shares			Weighted Average Grant-Date Fair Value
Nonvested at January 1, 2013		77,867		$	5.55
Granted		-		$	-
Vested		(16,558	)	$	5.71
Forfeited		-		$	-
Nonvested at December 31, 2013		61,309		$	5.50

Nonvested Options	Shares			Weighted Average Grant-Date Fair Value
Nonvested at January 1, 2012		93,516		$	5.57
Granted		-		$	-
Vested		(15,355	)	$	5.71
Forfeited		(294	)	$	5.69
Nonvested at December 31, 2012		77,867		$	5.55

As of December 31, 2013, there was $243,195 of total unrecognized compensation cost related to the Company’s nonvested options granted under the plans. This cost is expected to be recognized over a weighted-average period of 1.61 years. The total fair value of shares vested during the years ended December 31, 2013 and 2012, was $94,494 and $87,638, respectively.

For the years ended December 31, 2013 and 2012, the Company issued a total of 14,071 and 24,504 shares of common stock, respectively, to non-employee directors as compensation for services rendered under the Company’s Directors Equity Incentive Plan.  The Company recorded $205,000 and $209,000 in stock compensation expense related to the issuance of these shares for the years ended December 31, 2013 and 2012, respectively.

For shares issued as retainer stock, the shares are issued at fair value and the expense recognized was equal to the fair value of the shares on the date of grant. The Company issued 7,646 and 11,350 of retainer shares included above during the years ended December 31, 2013 and 2012, respectively.

In addition, directors may choose to purchase stock under this plan in lieu of directors fees paid for meeting attendance.  The shares under the plan were purchased at 85% of the fair value of the shares on the date of the grant. The Company has defined fair value under the plan to be the average closing market price of the Company’s common stock for the last ten trading days of each quarter as reported on the Over-the-Counter Bulletin Board. The Company records the expense related to the purchases at fair value of the shares on the date of the grant.   The following table represents activity in the Directors’ Equity Incentive Plan in 2013 and 2012:

	2013			2012
Beginning shares authorized and unissued		170,434			21,739
Additional shares authorized and unissued		-			173,199
Shares issued		(14,071	)		(24,504	)
Ending shares authorized and unissued		156,363			170,434

A summary of common stock issued through the exercise of employee stock options and employee/director compensation and expense is as follows:

	2013		2012
Net options exercised		5,831		45,491
Issuance of stock for compensation		24,006		15,988
Issuance of stock for directors' fees		14,071		24,504
Net issuance of common stock		43,908		85,983

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Note 15 - Income taxes (Details) - Deferred Income Taxes (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Deferred tax assets
Allowance for loan losses	$ 1,713	$ 1,689
Unrealized loss on securities available for sale	1,913
Executive compensation plans	646	502
Valuation adjustment of other real estate owned	645	437
Investment in GA low-income housing tax credits	310	270
State tax credits	184	281
Mortgage derivatives IRLC expenses	97	115
Other	44	102
Total deferred income tax assets	6,193	3,917
Deferred tax liabilities
Unrealized gain on securities available for sale		(798)
Qualified prepaids	(26)	(131)
Depreciation on bank premises and equipment	(198)	(174)
Mortgage derivative change in method	(293)	(439)
Total deferred income tax liabilities	(517)	(1,542)
Valuation allowance	(310)	(270)
Net deferred income tax assets	5,366	2,105
Recourse Liability for Mortgage Loans Sold [Member]
Deferred tax assets
Contingency liability	414	293
Contingent Liability [Member]
Deferred tax assets
Contingency liability	$ 227	$ 228

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Note 8 - Deposits

12 Months Ended

Dec. 31, 2013

Disclosure Text Block [Abstract]

Deposit Liabilities Disclosures [Text Block]

Note 8—Deposits

At December 31, 2013, the scheduled maturities of time deposit liabilities were as follows:

	2013
	(dollars in thousands)
One year or less	$	91,649
Over one year through two years		32,700
Over two years through three years		10,299
Over three years through four years		8,642
Over four years		9,194
Total	$	152,484

The Bank may also enter into repurchase agreements with customers and may obtain short-term funding from other institutions through brokered and internet deposits in order to manage the Bank’s funding capabilities. Repurchase agreements with customers are generally secured by investment securities owned by the Bank and are established at prevailing market rates. Total repurchase agreements with customers were approximately $12.1 million and $3.3 million at December 31, 2013 and 2012, respectively. Total brokered and internet deposits were $19.9 million and $27.8 million at December 31, 2013 and 2012, respectively.

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Note 4 - Loans (Details) - Loans Receivable Modified as Troubled Debt Restructurings with a Payment Default During Current Fiscal Year (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Financing Receivable, Modifications [Line Items]
Number of Contracts	1	3
Recorded Investment (in Dollars)	$ 563	$ 1,035
Commercial and Industrial [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts		1
Recorded Investment (in Dollars)		34
Owner Occupied [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts	1	2
Recorded Investment (in Dollars)	$ 563	$ 1,001

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Note 6 - Bank Premises and Equipment

12 Months Ended

Dec. 31, 2013

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment Disclosure [Text Block]

Note 6—Bank premises and equipment

Bank premises and equipment consist of the following as of December 31, 2013 and 2012:

	2013			2012
	(dollars in thousands)
Land and improvements	$	3,855		$	3,839
Building and improvements		7,191			6,445
Equipment, furniture and fixtures		4,885			4,600
Construction in progress		82			80
		16,013			14,964
Less accumulated depreciation		(6,501	)		(6,174	)
Premises and equipment, net	$	9,512		$	8,790

Depreciation expense for the years ended December 31, 2013 and 2012 was approximately $498,000 and $517,000, respectively. Rental expense of office premises and equipment was approximately $267,000 and $265,000 for the years ended December 31, 2013 and 2012, respectively.

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Note 7 - Other Real Estate Owned

12 Months Ended

Dec. 31, 2013

Disclosure Text Block [Abstract]

Real Estate Owned [Text Block]

Note 7—Other real estate owned

At December 31, 2013 and 2012, the Bank had other real estate owned activities as follows:

	2013			2012
	(dollars in thousands)
Balance at beginning of year	$	5,876		$	6,990
Loans transferred to real estate owned		1,968			5,186
Sales of real estate owned		(2,051	)		(4,866	)
Direct write-downs		(896	)		(1,434	)
Balance at end of year	$	4,897		$	5,876

Income and expenses related to other real estate owned for the years ending December 31, 2013 and 2012 were as follows:

	2013		2012
	(dollars in thousands)
Net gains on sales	$	231	$	40
Rental income	$	567	$	686
Operating expenses	$	758	$	850

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Note 9 - Federal Home Loan Bank Advances and Borrowings

12 Months Ended

Dec. 31, 2013

Disclosure Text Block [Abstract]

Federal Home Loan Bank Advances, Disclosure [Text Block]

Note 9—Federal Home Loan Bank advances and borrowings

As of December 31, 2013 and 2012, the Bank had credit availability, or potential borrowing capacity, of 25% of total assets, subject to the Bank’s financial condition and collateral balances with the FHLB. One of the advance products established is the “Loans Held for Sale” (LHFS) program. The line is collateralized by the Bank’s mortgage loans held for sale. Advances under this line are due 90 days from the date of the advance. As of December 31, 2013 and 2012, the Bank did not have a balance outstanding under the LHFS program. As of December 31, 2013, the Bank had $10.1 million in loans held for sale pledged as collateral under this line.

The Bank also maintains a line of credit with the FHLB which is secured by 1-4 family and commercial real estate loans held in the Bank’s loan portfolio. The balance at December 31, 2012 was $25,000,000 with a variable interest rate of 0.42% and a maturity date of September 30, 2013. The balance at December 31, 2013 was $22,200,000 with a variable interest rate of 0.355% and a maturity date of October 29, 2014. At December 31, 2013, the Bank had $68.5 million in 1-4 family and commercial real estate loans pledged as collateral to the FHLB.

In 2007, a long-term convertible advance was established. During the year ended December 31, 2012, the Bank paid off the outstanding balance on this advance of $10.0 million with a weighted average interest rate of 3.83%. An additional but similar long-term convertible advance was established during 2008. During the year ended December 31, 2012, the Bank paid off the outstanding balance on this advance of $15.0 million with a weighted average interest rate of 3.33%. The Bank paid a penalty of $392,000 for pre-payment of the advances which is included in other non-interest expense for 2012.

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Note 6 - Bank Premises and Equipment (Details) - Bank Premises and Equipment (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Property, Plant and Equipment [Line Items]
Premises and equipment, gross	$ 16,013	$ 14,964
Less accumulated depreciation	(6,501)	(6,174)
Premises and equipment, net	9,512	8,790
Land and Land Improvements [Member]
Property, Plant and Equipment [Line Items]
Premises and equipment, gross	3,855	3,839
Building and Building Improvements [Member]
Property, Plant and Equipment [Line Items]
Premises and equipment, gross	7,191	6,445
Furniture and Fixtures [Member]
Property, Plant and Equipment [Line Items]
Premises and equipment, gross	4,885	4,600
Construction in Progress [Member]
Property, Plant and Equipment [Line Items]
Premises and equipment, gross	$ 82	$ 80

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Note 16 - Commitments and Contingencies (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Note 16 - Commitments and Contingencies (Details) [Line Items]
Litigation Settlement, Amount (in Dollars)	$ 597,500	$ 598,000
Minimum [Member]
Note 16 - Commitments and Contingencies (Details) [Line Items]
Early Payment Default Term in Days	120 days
Maximum [Member]
Note 16 - Commitments and Contingencies (Details) [Line Items]
Early Payment Default Term in Years	1 year

XML

Note 7 - Other Real Estate Owned (Details) - Income and Expense Related to Other Real Estate Owned (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Income and Expense Related to Other Real Estate Owned [Abstract]
Net gains on sales	$ 231	$ 40
Rental income	567	686
Operating expenses	$ 758	$ 850

XML

Note 6 - Bank Premises and Equipment (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Property, Plant and Equipment [Abstract]
Depreciation	$ 498,000	$ 517,000
Operating Leases, Rent Expense	$ 267,000	$ 265,000

XML

Note 19 - Fair Value of Financial Instruments (Details) - Assets and Liabilities Measured at Fair Value on a Recurring Basis (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013		Dec. 31, 2012
Note 19 - Fair Value of Financial Instruments (Details) - Assets and Liabilities Measured at Fair Value on a Recurring Basis [Line Items]
Available for Sale Securities Measured at Fair Value	$ 158,439		$ 132,760
Loans held for sale	31,298		48,432
US Government Agencies Debt Securities [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Note 19 - Fair Value of Financial Instruments (Details) - Assets and Liabilities Measured at Fair Value on a Recurring Basis [Line Items]
Available for Sale Securities Measured at Fair Value	58,281		55,565
US Government Agencies Debt Securities [Member] | Fair Value, Measurements, Recurring [Member]
Note 19 - Fair Value of Financial Instruments (Details) - Assets and Liabilities Measured at Fair Value on a Recurring Basis [Line Items]
Available for Sale Securities Measured at Fair Value	58,281		55,565
US Government Agencies Debt Securities [Member]
Note 19 - Fair Value of Financial Instruments (Details) - Assets and Liabilities Measured at Fair Value on a Recurring Basis [Line Items]
Available for Sale Securities Measured at Fair Value	58,281		55,565
Residential Mortgage Backed Securities [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Note 19 - Fair Value of Financial Instruments (Details) - Assets and Liabilities Measured at Fair Value on a Recurring Basis [Line Items]
Available for Sale Securities Measured at Fair Value	64,732		3,112
Residential Mortgage Backed Securities [Member] | Fair Value, Measurements, Recurring [Member]
Note 19 - Fair Value of Financial Instruments (Details) - Assets and Liabilities Measured at Fair Value on a Recurring Basis [Line Items]
Available for Sale Securities Measured at Fair Value	64,732		3,112
US States and Political Subdivisions Debt Securities [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Note 19 - Fair Value of Financial Instruments (Details) - Assets and Liabilities Measured at Fair Value on a Recurring Basis [Line Items]
Available for Sale Securities Measured at Fair Value	30,751		51,295
US States and Political Subdivisions Debt Securities [Member] | Fair Value, Measurements, Recurring [Member]
Note 19 - Fair Value of Financial Instruments (Details) - Assets and Liabilities Measured at Fair Value on a Recurring Basis [Line Items]
Available for Sale Securities Measured at Fair Value	30,751		51,295
US States and Political Subdivisions Debt Securities [Member]
Note 19 - Fair Value of Financial Instruments (Details) - Assets and Liabilities Measured at Fair Value on a Recurring Basis [Line Items]
Available for Sale Securities Measured at Fair Value	30,751		22,788
Corporate Debt Securities [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Note 19 - Fair Value of Financial Instruments (Details) - Assets and Liabilities Measured at Fair Value on a Recurring Basis [Line Items]
Available for Sale Securities Measured at Fair Value	4,675		22,788
Corporate Debt Securities [Member] | Fair Value, Measurements, Recurring [Member]
Note 19 - Fair Value of Financial Instruments (Details) - Assets and Liabilities Measured at Fair Value on a Recurring Basis [Line Items]
Available for Sale Securities Measured at Fair Value	4,675		22,788
Corporate Debt Securities [Member]
Note 19 - Fair Value of Financial Instruments (Details) - Assets and Liabilities Measured at Fair Value on a Recurring Basis [Line Items]
Available for Sale Securities Measured at Fair Value	4,675		3,112
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Note 19 - Fair Value of Financial Instruments (Details) - Assets and Liabilities Measured at Fair Value on a Recurring Basis [Line Items]
Derivative assets (1)		[1]		[1]
Derivative liabilities(1)		[1]		[1]
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Note 19 - Fair Value of Financial Instruments (Details) - Assets and Liabilities Measured at Fair Value on a Recurring Basis [Line Items]
Available for Sale Securities Measured at Fair Value	158,439		132,760
Loans held for sale	31,298		48,432
Derivative assets (1)	823	[1]	485	[1]
Derivative liabilities(1)	175	[1]	409	[1]
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Note 19 - Fair Value of Financial Instruments (Details) - Assets and Liabilities Measured at Fair Value on a Recurring Basis [Line Items]
Derivative assets (1)		[1]		[1]
Derivative liabilities(1)		[1]		[1]
Fair Value, Measurements, Recurring [Member]
Note 19 - Fair Value of Financial Instruments (Details) - Assets and Liabilities Measured at Fair Value on a Recurring Basis [Line Items]
Available for Sale Securities Measured at Fair Value	158,439		132,760
Loans held for sale	31,298		48,432
Derivative assets (1)	823	[1]	485	[1]
Derivative liabilities(1)	175	[1]	409	[1]
Fair Value, Inputs, Level 1 [Member]
Note 19 - Fair Value of Financial Instruments (Details) - Assets and Liabilities Measured at Fair Value on a Recurring Basis [Line Items]
Available for Sale Securities Measured at Fair Value	158,400		132,800
Derivative assets (1)				[1]
Derivative liabilities(1)		[1]
Fair Value, Inputs, Level 2 [Member]
Note 19 - Fair Value of Financial Instruments (Details) - Assets and Liabilities Measured at Fair Value on a Recurring Basis [Line Items]
Available for Sale Securities Measured at Fair Value	158,439		132,760
Loans held for sale	31,298		48,432
Derivative assets (1)	823		485	[1]
Derivative liabilities(1)	409	[1]	409
Fair Value, Inputs, Level 3 [Member]
Note 19 - Fair Value of Financial Instruments (Details) - Assets and Liabilities Measured at Fair Value on a Recurring Basis [Line Items]
Derivative assets (1)				[1]
Derivative liabilities(1)		[1]

[1] This amount includes mortgage related interest rate lock commitments and commitments to sell.

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Note 8 - Deposits (Tables)

12 Months Ended

Dec. 31, 2013

Disclosure Text Block [Abstract]

Schedule of Debt [Table Text Block]

	2013
	(dollars in thousands)
One year or less	$	91,649
Over one year through two years		32,700
Over two years through three years		10,299
Over three years through four years		8,642
Over four years		9,194
Total	$	152,484

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Note 4 - Loans (Details) (USD $)	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Note 4 - Loans (Details) [Line Items]
Interest Receivable	$ 1,854,000	$ 1,772,000
Financing Receivable, Modifications, Recorded Investment	0	0
Loans and Leases Receivable, Related Parties	5,591,000	6,376,000	9,813,000
Excluded From Credit Quality Ratings [Member]
Note 4 - Loans (Details) [Line Items]
Interest Receivable	953,000	1,057,000
Loans Due from Executive Officers and Directors [Member]
Note 4 - Loans (Details) [Line Items]
Loans and Leases Receivable, Related Parties	$ 5,591,000

XML

Note 14 - Other expenses

12 Months Ended

Dec. 31, 2013

Other Income and Expenses [Abstract]

Other Income and Other Expense Disclosure [Text Block]

Note 14—Other expenses

Other non-interest expenses for the years ended December 31, 2013 and 2012 are as follows:

	2013		2012
	(dollars in thousands)
Data processing	$	1,346	$	1,050
FDIC assessment		254		403
Legal and accounting		713		783
Printing and supplies		307		290
Advertising		203		177
Business development		158		144
Telecommunications		222		194
Outside services		255		240
Courier and postage		204		178
Software license fees		85		92
City and county taxes		181		149
Directors fees		288		275
Travel and employee meals and entertainment		162		180
Provision for mortgage recourse liability		499		499
Legal settlement payable		-		598
FHLB early payoff penalty		-		392
Other		1,577		1,048
Total	$	6,454	$	6,692

XML

Note 19 - Fair Value of Financial Instruments

12 Months Ended

Dec. 31, 2013

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

Note 19—Fair value of financial instruments

The Company utilizes fair value measurement to record fair value adjustments to certain other assets and liabilities and to determine fair value measurements where required. For these assets and liabilities recorded at fair value, it is the Company’s policy to maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair value measurements.

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 as follows:

Level 1 – Valuations for assets and liabilities traded in active exchange markets, such as the New York Stock Exchange. At December 31, 2013, the Company’s Level 1 assets include U.S. Government agency obligations.

Level 2 – Valuations for assets and liabilities that are obtained from readily available pricing sources via independent providers for market transactions involving similar assets or liabilities. The Company’s principal markets for these securities are the secondary institutional markets and valuations are based on observable market data in those markets. At December 31, 2013, the Company’s Level 2 assets include U.S. Government agency obligations, state and municipal bonds, and mortgage-backed securities.

Level 3 – Valuations for assets and liabilities that are derived from other valuation methodologies, including option pricing models, discounted cash flow models and similar techniques, and not based on market exchange, dealer, or broker traded transactions. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities. Level 3 assets include impaired loans and other real estate owned as discussed below.

Following is a description of valuation methodologies used for determining fair value for assets and liabilities:

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 present value of future cash flows, adjusted for the securities’ credit rating, prepayment assumptions, and other factors such as credit loss assumptions. At December 31, 2013, the Company classified $158.4 million of investment securities available-for-sale subject to recurring fair value adjustments as Level 2. At December 31, 2012, the Company classified $132.8 million of investment securities available-for-sale subject to recurring fair value adjustments as Level 2.

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 with respect to 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 an individual loan is identified as impaired, management measures the impairment in accordance with ASC 310-10-35, “Receivables-Subsequent Measurements.” The fair value of impaired loans is estimated primarily using the collateral value. However, in some cases other methods are used, such as market value of similar debt, enterprise value, liquidation value, and discounted cash flows. Those impaired loans not requiring an allowance represent loans with respect to which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. At December 31, 2013, substantially all of the total impaired loans were evaluated based on the fair value of the collateral less estimated selling costs. In accordance with ASC 820-10, impaired loans where an allowance is established based on the fair value of collateral require classification in the fair value hierarchy. Most fair values of the collateral are based on an observable market price or a current appraised value by a third party appraiser, tax valuation, or broker price opinion; however, in some cases 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.

As such, the Company records these collateral dependent impaired loans at fair value as nonrecurring Level 3. Collateral dependent impaired loans recorded at fair value totaled $1.4 million and $3.2 million at December 31, 2013 and December 31, 2012, respectively. Specific loan loss allowances for these impaired loans totaled $358,000 and $272,000 at December 31, 2013 and December 31, 2012, respectively. At December 31, 2013 and December 31, 2012, $1.0 million and $2.9 million of impaired loans, net of allowance for loan losses, respectively, were classified as Level 3.

Loans Held for Sale

Loans held for sale are carried at fair value, as determined by outstanding commitments, from third party investors (Level 2). The Company elected the fair value option for loans held for sale on July 1, 2012. These loans are intended for sale and the Company believes that the fair value is the best indicator of the resolution of these loans. Interest income is recorded based on the contractual terms of the loan and in accordance with the Company’s policy on loans held for investment. None of these loans are 90 days or more past due nor on nonaccrual as of December 31, 2013 and 2012.

As of December 31, 2013, the aggregate fair value was $31.3 million, the contractual balance including accrued interest was $30.9 million and the gain recorded from the change in fair value included in earnings for the year ended December 31, 2013 was $372,000. As of December 31, 2012, the aggregate fair value was $48.4 million, the contractual balance including accrued interest was $48.3 million and the gain recorded from the change in fair value included in earnings for the year ended December 31, 2012 was $179,000.

Interest Rate Lock and Forward Commitments

Commitments to fund mortgage loans (interest rate locks) to be sold into the secondary market and forward commitments for the future delivery of these mortgage loans are accounted for as free standing derivatives. Fair values of these mortgage derivatives are estimated based on changes in mortgage interest rates from the date the interest on the loan is locked (Level 2). Changes in the fair values of these derivatives are included in net gains

on sales of loans. The interest rate lock commitments with a positive fair value totaled $39,000 and $97,000 at December 31, 2013 and 2012, respectively, and were recorded in other assets. The interest rate lock commitments with a negative fair value totaled $118,000 and $49,000 at December 31, 2013 and 2012, respectively, and were recorded in other liabilities.

The Company enters into forward commitments for the future delivery of mortgage loans when interest rate locks are entered into, in order to hedge the change in interest rates resulting from its commitments to fund the loans. Changes in the fair values of these derivatives are included in net gains on sales of loans. The interest rate lock commitments with a positive fair value totaled $118,000 and $49,000 at December 31, 2013 and 2012, respectively, and were recorded in other assets. The interest rate lock commitments with a negative fair value totaled $39,000 and $97,000 at December 31, 2013 and 2012, respectively, and were recorded in other liabilities.

Other Real Estate Owned

Foreclosed assets are adjusted to fair value upon transfer of the loans to other real estate owned. Subsequently, other real estate owned is carried at the lower of carrying value or fair value less estimated selling costs. Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral. Most fair values of the collateral are based on an observable market price or a current appraised value; however, in some cases 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. Management may apply discount adjustments to the appraised value for estimated selling costs, information from comparable sales, and marketability of the property.

As such, the Company records other real estate owned with subsequent write downs after transfer as nonrecurring Level 3. Other real estate owned that has had subsequent write-downs after transfer from loans to other real estate totaled $3.6 million and $1.2 million at December 31, 2013 and December 31, 2012, respectively.

The tables below present information about assets and liabilities which are measured at fair value on a recurring basis:

	Fair Value Measurements at December 31, 2013, Using,
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)			Total
	(dollars in thousands)
U.S. Government and agency	$	-	$	58,281	$	-	$	58,281
Mortgage-backed - residential GSEs		-		64,732		-		64,732
State and municipal		-		30,751		-		30,751
Corporate bonds		-		4,675		-		4,675
Total	$	-	$	158,439	$	-	$	158,439
Loans held for sale	$	-	$	31,298	$	-	$	31,298
Derivative assets (1)	$	-	$	823	$	-	$	823
Derivative liabilities(1)	$	-	$	175	$	-	$	175

(1) This amount includes mortgage related interest rate lock commitments and commitments to sell.

	Fair Value Measurements at December 31, 2012, Using,
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)		Total
	(dollars in thousands)
U.S. Government and agency	$	-	$	55,565	$	-	$	55,565
Mortgage-backed - residential GSEs		-		3,112		-		3,112
State and municipal		-		51,295		-		51,295
Corporate bonds		-		22,788		-		22,788
Total	$	-	$	132,760	$	-	$	132,760
Loans held for sale	$	-	$	48,432	$	-	$	48,432
Derivative assets (1)	$	-	$	485	$	-	$	485
Derivative liabilities(1)	$	-	$	409	$	-	$	409

(1) This amount includes mortgage related interest rate lock commitments and commitments to sell.

There were no transfers between Level 1 and Level 2 during 2013 or 2012.

Assets measured at fair value on a non-recurring basis are summarized below:

	Fair Value Measurements at December 31, 2013, Using,
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)		Total
	(dollars in thousands)
Impaired loans, net of allowance
Commercial and industrial	$	-	$	-	$	-	$	-
Real estate - construction		-		-		40		40
Real estate - residential		-		-		249		249
Real estate - commercial		-		-		701		701
Consumer		-		-		11		11
Total impaired loans	$	-	$	-	$	1,001	$	1,001
Other real estate owned
Unimproved land	$	-	$	-	$	471	$	471
Real estate - residential		-		-		144		144
Real estate - commercial		-		-		2,951		2,951
Total other real estate owned	$	-	$	-	$	3,566	$	3,566

	Fair Value Measurements at December 31, 2012, Using,
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)		Total
	(dollars in thousands)
Impaired loans, net of allowance
Commercial and industrial	$	-	$	-	$	-	$	-
Real estate - construction		-		-		542		542
Real estate - residential		-		-		477		477
Real estate - commercial		-		-		1,895		1,895
Consumer		-		-		16		16
Total impaired loans	$	-	$	-	$	2,930	$	2,930
Other real estate owned
Unimproved land	$	-	$	-	$	642	$	642
Real estate - residential		-		-		346		346
Real estate - commercial		-		-		172		172
Total other real estate owned	$	-	$	-	$	1,160	$	1,160

The following tables represent changes in non-recurring fair value recorded during the years ended December 31, 2013 and 2012:

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Impaired Loans			Other Real Estate Owned			Total
	(dollars in thousands)
Balance at December 31, 2012	$	2,930		$	1,160		$	4,090
Gains included in earnings		-			-			-
Gross reductions		(135	)		(1,496	)		(1,631	)
Transfers into (out of) Level 3		(1,794	)		3,902			2,108
Balance at December 31, 2013	$	1,001		$	3,566		$	4,567

Gross reductions in other real estate owned included $1,026,000 in sales and $470,000 in write downs.

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Impaired Loans			Other Real Estate Owned			Total
	(dollars in thousands)
Balance at December 31, 2011	$	4,816		$	1,038		$	5,854
Gains (losses) included in earnings		-			103			103
Gross additions (reductions)		(1,886	)		(1,980	)		(3,866	)
Transfers into (out of) Level 3		-			1,999			1,999
Balance at December 31, 2012	$	2,930		$	1,160		$	4,090

Gross reductions in other real estate owned included $1,752,000 in sales and $228,000 in write downs.

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at December 31, 2013 for collateral dependent impaired loans and other real estate owned:

	Fair Value		Valuation Technique	Unobservable Inputs	Range				Weighted Average
Impaired loans:
Real estate – construction	$	40	Sales comparison	Management and appraiser adjustment for difference between comparable sales		42.41%	-	94%		42.41	%
Real estate – residential		249	Sales comparison	Management and appraiser adjustment for difference between comparable sales		27.31%	-	94%		16.92	%
Real estate - commercial		701	Sales comparison	Management and appraiser adjustment for difference between comparable sales		3.87%	-	44.85%		13.86	%
			Income approach	Capitalization rate			9.50%			9.50	%
Consumer		11	NADA or third party valuation of underlying collateral	Management adjustment for comparable sales		45.85%	-	100%		45.85	%
Total	$	1,001
Other real estate owned:
Unimproved land	$	471	Sales comparison	Management and appraiser adjustment for difference between comparable sales		0%	-	10%		1.51	%
Real estate - residential		144	Sales comparison	Management and appraiser adjustment for difference between comparable sales		29.73%	-	82.80%		33.99	%
Real estate – commercial		2,951	Sales comparison	Management and appraiser adjustment for difference between comparable sales		10.12%	-	26.54%		17.86	%
			Income approach	Capitalization rate			10.00%			10.00	%
Total	$	3,566

Financial Instruments

Fair value measurements for assets and liabilities where there exists limited or no observable market data and, therefore, are based primarily upon estimates, are often calculated based on the economic and competitive environment, the characteristics of the asset or liability, and other factors. Therefore, the fair value cannot be determined with precision and may not be realized in an actual sale or immediate settlement of the asset or liability. Additionally, there may be inherent weaknesses in any calculation technique, and changes in the underlying assumptions used, including discount rates and estimates of future cash flows, could significantly affect current or future values.

The methods and assumptions, not previously presented, used to estimate the fair value of significant financial instruments are as follows:

Cash and due from banks - The carrying value of cash and due from banks approximates the fair value and is classified as Level 1.

Loans held for sale – Loans held for sale are carried at fair value, as determined by outstanding commitments from third party investors. Loans held for sale are classified as Level 2.

Federal Home Loan Bank stock - The fair value of Federal Home Loan Bank (“FHLB”) stock is not practicable since no ready market exists for the stock.

Deposits - The fair value of time deposits is estimated using a discounted cash flow calculation that applies current interest rates to a schedule of aggregated expected maturities and is classified as Level 2. The carrying value of other deposits approximates the fair value and they are classified as Level 1.

Repurchase agreements - The carrying value of repurchase agreements approximates fair value due to their short-term nature and they are classified as Level 1.

Short-term debt and other borrowings - Fair value approximates the carrying value of other borrowings due to their short-term nature and they are classified as

Level 1.

Long-term debt - The fair value of long-term debt is calculated by discounting contractual cash flows using an estimated interest rate based on the current rates available for debt of similar remaining maturities and collateral terms, resulting in a Level 2 classification.

The carrying amount and estimated fair values of financial instruments at December 31, 2013 and December 31, 2012 are as follows:

	Fair Value Measurements at December 31, 2013
	Carrying Value		Level 1		Level 2		Level 3		Total
	(dollars in thousands)
Financial assets:
Cash and due from banks	$	16,828	$	16,828	$	-	$	-	$	16,828
Securities available for sale		158,439		-		158,439		-		158,439
Loans, net of allowance		269,390		-		-		271,112		271,112
Loans held for sale		31,298		-		31,298		-		31,298
Federal Home Loan Bank stock		1,606	N/A		N/A		N/A		N/A
Accrued interest receivable, loans		974		-		974		-		974
Accrued interest receivable, securities		880		-		880		-		880
Other derivative assets(1)		823		-		823		-		823
Financial liabilities
Time deposits	$	152,484	$	-	$	153,411	$	-	$	153,411
Other deposits		267,221		267,221		-		-		267,221
Repurchase agreements		12,111		12,111		-		-		12,111
FHLB short-term debt		22,200		22,200				-		22,200
Accrued interest payable, deposits		398		5		393		-		398
Accrued interest payable, borrowings		6		6		-		-		6
Other derivative liabilities(1)		409		-		409		-		409

(1) This amount includes mortgage related interest rate lock commitments and commitments to sell.

	Fair Value Measurements at December 31, 2012
	Carrying Value		Level 1		Level 2		Level 3		Total
	(dollars in thousands)
Financial assets:
Cash and due from banks	$	30,279	$	30,279	$	-	$	-	$	30,279
Securities available for sale		132,760		-		132,760		-		132,760
Loans, net of allowance		259,877		-		-		264,159		264,159
Loans held for sale		48,432		-		48,432		-		48,432
Federal Home Loan Bank stock		1,865	N/A		N/A		N/A		N/A
Accrued interest receivable, loans		1,123		-		1,123		-		1,123
Accrued interest receivable, securities		649		-		649		-		649
Other derivative assets(1)		485		-		485		-		485
Financial liabilities
Time deposits	$	169,376	$	-	$	170,707	$	-	$	170,707
Other deposits		247,580		247,580		-		-		247,580
Repurchase agreements		3,333		3,333		-		-		3,333
FHLB short-term debt		25,028		25,028				-		25,028
Accrued interest payable, deposits		458		5		453		-		458
Accrued interest payable, repurchase agreements		3		3		-		-		3
Other derivative liabilities(1)		409		-		409		-		409

(1) This amount includes mortgage related interest rate lock commitments and commitments to sell.

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Note 19 - Fair Value of Financial Instruments (Details) - Quantitative Information About Level 3 Fair Value Measurements for Finanical Instruments, Non-recurring Basis (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013
Income Approach Valuation Technique [Member] | Real Estate Commercial [Member]
Impaired loans:
Valuation Technique	Income approach
Unobservable Inputs	Income approach
Range	9.50%
Income Approach Valuation Technique [Member] | Real Estate Commercial [Member] | Weighted Average [Member]
Impaired loans:
Range	9.50%
Income Approach Valuation Technique [Member] | Real Estate Commercial [Member]
Impaired loans:
Valuation Technique	Income approach
Unobservable Inputs	Income approach
Range	10.00%
Income Approach Valuation Technique [Member] | Weighted Average [Member] | Real Estate Commercial [Member]
Impaired loans:
Range	10.00%
Income Approach Valuation Technique [Member] | Unobservable Inputs [Member] | Real Estate Commercial [Member]
Impaired loans:
Valuation Technique	Capitalization rate
Unobservable Inputs	Capitalization rate
Income Approach Valuation Technique [Member] | Unobservable Inputs [Member] | Real Estate Commercial [Member]
Impaired loans:
Valuation Technique	Capitalization rate
Unobservable Inputs	Capitalization rate
Real Estate Construction [Member]
Impaired loans:
Fair Value (in Dollars)	$ 40
Valuation Technique	Sales comparison
Unobservable Inputs	Sales comparison
Real Estate Construction [Member] | Minimum [Member]
Impaired loans:
Range	42.41%
Real Estate Construction [Member] | Maximum [Member]
Impaired loans:
Range	94.00%
Real Estate Construction [Member] | Weighted Average [Member]
Impaired loans:
Range	42.41%
Real Estate Residential [Member]
Impaired loans:
Fair Value (in Dollars)	249
Valuation Technique	Sales comparison
Unobservable Inputs	Sales comparison
Real Estate Residential [Member] | Minimum [Member]
Impaired loans:
Range	27.31%
Real Estate Residential [Member] | Maximum [Member]
Impaired loans:
Range	94.00%
Real Estate Residential [Member] | Weighted Average [Member]
Impaired loans:
Range	16.92%
Real Estate Commercial [Member]
Impaired loans:
Fair Value (in Dollars)	701
Valuation Technique	Sales comparison
Unobservable Inputs	Sales comparison
Real Estate Commercial [Member] | Minimum [Member]
Impaired loans:
Range	3.87%
Real Estate Commercial [Member] | Maximum [Member]
Impaired loans:
Range	44.85%
Real Estate Commercial [Member] | Weighted Average [Member]
Impaired loans:
Range	13.86%
Consumer [Member]
Impaired loans:
Fair Value (in Dollars)	11
Valuation Technique	NADA or third party valuation of underlying collateral
Unobservable Inputs	NADA or third party valuation of underlying collateral
Consumer [Member] | Minimum [Member]
Impaired loans:
Range	45.85%
Consumer [Member] | Maximum [Member]
Impaired loans:
Range	100.00%
Consumer [Member] | Weighted Average [Member]
Impaired loans:
Range	45.85%
Unimproved Land [Member]
Impaired loans:
Fair Value (in Dollars)	471
Valuation Technique	Sales comparison
Unobservable Inputs	Sales comparison
Real Estate Residential [Member]
Impaired loans:
Fair Value (in Dollars)	144
Valuation Technique	Sales comparison
Unobservable Inputs	Sales comparison
Real Estate Commercial [Member]
Impaired loans:
Fair Value (in Dollars)	2,951
Valuation Technique	Sales comparison
Unobservable Inputs	Sales comparison
Impaired Loans [Member]
Impaired loans:
Fair Value (in Dollars)	1,001
Other Real Estate Owned [Member]
Impaired loans:
Fair Value (in Dollars)	$ 3,566
Minimum [Member] | Unimproved Land [Member]
Impaired loans:
Range	0.00%
Minimum [Member] | Real Estate Residential [Member]
Impaired loans:
Range	29.73%
Minimum [Member] | Real Estate Commercial [Member]
Impaired loans:
Range	10.12%
Maximum [Member] | Unimproved Land [Member]
Impaired loans:
Range	10.00%
Maximum [Member] | Real Estate Residential [Member]
Impaired loans:
Range	82.80%
Maximum [Member] | Real Estate Commercial [Member]
Impaired loans:
Range	26.54%
Weighted Average [Member] | Unimproved Land [Member]
Impaired loans:
Range	1.51%
Weighted Average [Member] | Real Estate Residential [Member]
Impaired loans:
Range	33.99%
Weighted Average [Member] | Real Estate Commercial [Member]
Impaired loans:
Range	17.86%
Unobservable Inputs [Member] | Real Estate Construction [Member]
Impaired loans:
Valuation Technique	Management and appraiser adjustment for difference between comparable sales
Unobservable Inputs	Management and appraiser adjustment for difference between comparable sales
Unobservable Inputs [Member] | Real Estate Residential [Member]
Impaired loans:
Valuation Technique	Management and appraiser adjustment for difference between comparable sales
Unobservable Inputs	Management and appraiser adjustment for difference between comparable sales
Unobservable Inputs [Member] | Real Estate Commercial [Member]
Impaired loans:
Valuation Technique	Management and appraiser adjustment for difference between comparable sales
Unobservable Inputs	Management and appraiser adjustment for difference between comparable sales
Unobservable Inputs [Member] | Consumer [Member]
Impaired loans:
Valuation Technique	Management adjustment for comparable sales
Unobservable Inputs	Management adjustment for comparable sales
Unobservable Inputs [Member] | Unimproved Land [Member]
Impaired loans:
Valuation Technique	Management and appraiser adjustment for difference between comparable sales
Unobservable Inputs	Management and appraiser adjustment for difference between comparable sales
Unobservable Inputs [Member] | Real Estate Residential [Member]
Impaired loans:
Valuation Technique	Management and appraiser adjustment for difference between comparable sales
Unobservable Inputs	Management and appraiser adjustment for difference between comparable sales
Unobservable Inputs [Member] | Real Estate Commercial [Member]
Impaired loans:
Valuation Technique	Management and appraiser adjustment for difference between comparable sales
Unobservable Inputs	Management and appraiser adjustment for difference between comparable sales

XML

Note 3 - Investment Securities (Details) - Amortized Cost and Fair Value by Contractual Maturity (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Note 3 - Investment Securities (Details) - Amortized Cost and Fair Value by Contractual Maturity [Line Items]
Less than one year	$ 14,850
Less than one year	13,178
One to five years	23,669
One to five years	22,919
Five to ten years	38,266
Five to ten years	36,773
Over ten years	21,538
Over ten years	20,837
Available For Sale Securities	164,418	130,504
Available For Sale Securities	158,439	132,760
Mortgage Backed [Member]
Note 3 - Investment Securities (Details) - Amortized Cost and Fair Value by Contractual Maturity [Line Items]
Available For Sale Securities	66,095	50,074
Available For Sale Securities	$ 64,732	$ 51,295

XML

Note 18 - Supplemental Consolidated Cash Flow Information (Tables)

12 Months Ended

Dec. 31, 2013

Supplemental Cash Flow Elements [Abstract]

Schedule of Cash Flow, Supplemental Disclosures [Table Text Block]

	2013			2012
	(dollars in thousands)
Income taxes paid	$	2,750		$	3,225
Interest paid	$	2,171		$	3,897
Interest received	$	18,250		$	20,529
Transfers from loans to real estate owned	$	1,968		$	5,186
Unrealized gain(loss) on securities, net	$	(5,522	)	$	305

XML

Consolidated Statements of Comprehensive Income (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Net income	$ 6,204	$ 6,621
Other comprehensive income (loss):
Unrealized holding gain (loss) arising during the period	(8,144)	350
Tax effect of unrealized holding gain (loss)	2,682	(114)
Reclassification for (gain) loss included in net income	(91)	105
Tax effect of gain/ loss included in net income	31	(36)
Total other comprehensive income (loss)	(5,522)	305
Comprehensive income	$ 682	$ 6,926

XML

Note 16 - Commitments and Contingencies (Details) - Contractual Obligations For Data Processing, Operating Leases and Service Contracts (Operating Lease Obligations [Member], USD $) In Thousands, unless otherwise specified	Dec. 31, 2013
Operating Lease Obligations [Member]
Note 16 - Commitments and Contingencies (Details) - Contractual Obligations For Data Processing, Operating Leases and Service Contracts [Line Items]
Operating leases	$ 239
Operating leases	236
Operating leases	12
Operating leases	11
Operating leases	$ 498

XML

Note 3 - Investment Securities

12 Months Ended

Dec. 31, 2013

Investments Schedule [Abstract]

Investment [Text Block]

Note 3—Investment securities

The amortized cost and fair value amounts of securities owned as of December 31, 2013 and 2012 are shown below:

	2013
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(dollars in thousands)
Securities available-for-sale:
U.S. Government and agency	$	61,486	$	146	$	(3,351	)	$	58,281
Mortgage-backed		66,095		558		(1,921	)		64,732
State and municipal		32,088		255		(1,592	)		30,751
Corporate		4,749		25		(99	)		4,675
Total	$	164,418	$	984	$	(6,963	)	$	158,439

	2012
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(dollars in thousands)
Securities available-for-sale:
U.S. Government and agency	$	55,404	$	260	$	(99	)	$	55,565
Mortgage-backed		50,074		1,313		(92	)		51,295
State and municipal		21,974		852		(38	)		22,788
Corporate		3,052		68		(8	)		3,112
Total	$	130,504	$	2,493	$	(237	)	$	132,760

The amortized cost and fair value of securities as of December 31, 2013 by contractual maturity are as follows. Actual maturities may differ from contractual maturities in mortgage-backed securities, as the mortgages underlying the securities may be called or prepaid without penalty; therefore, these securities are not included in the maturity categories in the following maturity summary.

	Securities Available-for-Sale
	Amortized Cost		Fair Value
	(dollars in thousands)
Less than one year	$	14,850	$	13,178
One to five years		23,669		22,919
Five to ten years		38,266		36,773
Over ten years		21,538		20,837
Mortgage-backed securities		66,095		64,732
Total	$	164,418	$	158,439

Securities with a carrying amount of approximately $64.1 million at December 31, 2013 and $53.7 million at December 31, 2012 were pledged to secure public deposits and for other purposes.

In 2013, the Bank sold $12.7 million in securities available-for-sale, realizing gains of $158,000 and losses of $74,400 for an overall net gain of $83,600. In 2012, the Bank sold $14.3 million in securities available-for-sale, realizing gains of $161,100 and losses of $270,500, for an overall loss of $109,400.

Information pertaining to securities with gross unrealized losses at December 31, 2013 and December 31, 2012, aggregated by investment category and length of time that individual securities have been in a continuous loss position, follows:          

	2013
	Less than Twelve Months							Over Twelve Months
	Number of Securities		Fair Value		Gross Unrealized Losses			Number of Securities		Fair Value		Gross Unrealized Losses
	(dollars in thousands)
Securities available-for-sale:
U.S. Government and agency		23	$	34,142	$	(1,911	)		7	$	11,759		(1,440	)
Corporate bonds		4		3,487		(99	)		-		-		-
Mortgage-backed		31		40,852		(1,744	)		3		5,294		(177	)
State and municipal		41		19,934		(1,156	)		8		3,028		(436	)
Total		99	$	98,415	$	(4,910	)		18	$	20,081	$	(2,053	)

	2012
	Less than Twelve Months							Over Twelve Months
	Number of Securities		Fair Value		Gross Unrealized Losses			Number of Securities		Fair Value		Gross Unrealized Losses
	(dollars in thousands)
Securities available-for-sale:
U.S. Government and agency		7	$	13,757	$	(99	)		1	$	1,365		*
Corporate bonds		1		992		(8	)		-		-		-
Mortgage-backed		2		4,794		(92	)		-		-		-
State and municipal		5		2,035		(38	)		-		-		-
Total		15	$	21,578	$	(237	)		1	$	1,365	$	-

* Gross unrealized loss is less than $1,000.

Management evaluates investment securities for other-than-temporary impairment on a periodic basis, and more frequently when economic or market conditions warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuers, and (3) the intent and ability of the Bank to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

At December 31, 2013 and 2012, the gross unrealized losses in securities available-for-sale are primarily the result of changes in market interest rates and not related to the credit quality of the underlying issuer. All of the securities are U.S. agency debt securities, corporate bonds, mortgage-backed securities, and municipal securities. Management has determined that no declines in market value are deemed to be other than temporary at December 31, 2013 and 2012. Securities rated below Moody’s (Baa) or Standard & Poor’s (BBB-) are not purchased. Non-rated municipal securities are limited to those bonds in the state of Georgia, and possess no greater risk that (Baa) or (BBB) bonds. Corporate bonds will have a minimum rating at purchase of Moody’s (A3), S&P (A-), or Fitch (A-). The Bank does not intend to sell these securities and it is likely that it will not be required to sell the securities before their anticipated recovery.

XML

Note 4 - Loans (Details) - Troubled Debt Restructurings (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Financing Receivable, Modifications [Line Items]
Accrual	$ 271,280,000	$ 257,266,000
Nonaccrual	1,924,000	3,896,000
Total Restructurings	0	0
Commercial and Industrial [Member]
Financing Receivable, Modifications [Line Items]
Total Number of Contracts		1
Nonaccrual		34,000
Total Restructurings		34,000
Acquisition Development & Construction [Member]
Financing Receivable, Modifications [Line Items]
Total Number of Contracts		2
Accrual		310,000
Nonaccrual		134,000
Total Restructurings		444,000
Home Equity Line [Member]
Financing Receivable, Modifications [Line Items]
Total Number of Contracts	1	1
Accrual	66,000	66,000
Total Restructurings	66,000	66,000
Other Real Estate Residential [Member]
Financing Receivable, Modifications [Line Items]
Total Number of Contracts	10	10
Accrual	925,000	583,000
Nonaccrual		243,000
Total Restructurings	925,000	826,000
Owner Occupied [Member]
Financing Receivable, Modifications [Line Items]
Total Number of Contracts	13	9
Accrual	5,775,000	4,187,000
Nonaccrual		1,177,000
Total Restructurings	5,775,000	5,364,000
Non Owner Occupied [Member]
Financing Receivable, Modifications [Line Items]
Total Number of Contracts	1
Accrual	563,000
Total Restructurings	563,000
Total [Member]
Financing Receivable, Modifications [Line Items]
Total Number of Contracts	25	23
Accrual	7,329,000	5,146,000
Nonaccrual		1,588,000
Total Restructurings	$ 7,329,000	$ 6,734,000

XML

Note 15 - Income taxes (Details) - Total Income Taxes as in the Statements of Income (USD $) In Thousands, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2013	Dec. 31, 2012
Total Income Taxes as in the Statements of Income [Abstract]
Current tax provision									$ 3,012	$ 3,278
Deferred tax expense (benefit)									(532)	(615)
Total income tax expense (benefit)	$ 331	$ 282	$ 1,045	$ 822	$ 242	$ 1,070	$ 801	$ 550	$ 2,480	$ 2,663

XML

Note 9 - Federal Home Loan Bank Advances and Borrowings (Details) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2013
Note 9 - Federal Home Loan Bank Advances and Borrowings (Details) [Line Items]
Federal Home Loan Bank Advances General Debt Obligations Disclosures Collateral Pledged, Percentage Of Assets	25.00%	25.00%
Federal Home Loan Bank, Advances, General Debt Obligations, Disclosures, Repayment and Penalties	$ 392,000
Loans Held For Sale [Member]
Note 9 - Federal Home Loan Bank Advances and Borrowings (Details) [Line Items]
Advances from Federal Home Loan Banks	0	0
Federal Home Loan Bank, Advances, General Debt Obligations, Disclosures, Collateral Pledged		10,100,000
One To Four Family and Commercial Real Estate Loans [Member]
Note 9 - Federal Home Loan Bank Advances and Borrowings (Details) [Line Items]
Advances from Federal Home Loan Banks	25,000,000	22,200,000
Federal Home Loan Bank, Advances, General Debt Obligations, Disclosures, Collateral Pledged		68,500,000
Federal Home Loan Bank, Advances, Branch of FHLB Bank, Interest Rate	0.42%	0.355%
Long Term Convertible Advance 2007 [Member]
Note 9 - Federal Home Loan Bank Advances and Borrowings (Details) [Line Items]
Repayments of Federal Home Loan Bank Borrowings	10,000,000
Federal Home Loan Bank, Advances, Branch of FHLB Bank, Weighted Average Interest Rate	3.83%
Long Term Convertible Advance 2008 [Member]
Note 9 - Federal Home Loan Bank Advances and Borrowings (Details) [Line Items]
Repayments of Federal Home Loan Bank Borrowings	15,000,000
Federal Home Loan Bank, Advances, Branch of FHLB Bank, Weighted Average Interest Rate	3.33%
Federal Home Loan Bank, Advances, General Debt Obligations, Disclosures, Repayment and Penalties	$ 392,000

XML

Note 20 - Quarterly Financial Data

12 Months Ended

Dec. 31, 2013

Quarterly Financial Information Disclosure [Abstract]

Quarterly Financial Information [Text Block]

Note 20 – Quarterly Financial Data (Unaudited)

The following table represents summarized data for each of the quarters in 2013 and 2012:

	Selected Quarterly Data
	2013											2012
	4Q			3Q		2Q			1Q			4Q			3Q			2Q		1Q
	(dollars in thousands, except per share data)
Interest income	$	4,655		$	4,581	$	4,576		$	4,520		$	4,887		$	5,200		$	5,226	$	5,256
Interest expense		489			512		545			569			649			945			1,016		1,072
Net interest income		4,166			4,069		4,031			3,951			4,238			4,255			4,210		4,184
Provision for loan losses		(242	)		15		(1,200	)		(602	)		(306	)		(729	)		125		305
Net interest income after provision for loan losses		4,408			4,054		5,231			4,553			4,544			4,984			4,085		3,879
Non-interest income		2,610			2,704		3,723			3,776			3,529			4,824			3,484		2,921
Securities gain (loss)		-			-		78			13			(116	)		11			-		-
Other-than-temporary impairment on securities		-			-		-			-			-			-			-		-
Less: Non-interest expenses		5,752			5,633		5,868			5,213			6,323			6,507			5,065		4,966
Income before income tax expense (benefit)		1,266			1,125		3,164			3,129			1,634			3,312			2,504		1,834
Income tax expense (benefit)		331			282		1,045			822			242			1,070			801		550
Net income	$	935		$	843	$	2,119		$	2,307		$	1,392		$	2,242		$	1,703	$	1,284
Basic earnings (loss) per common share	$	0.26		$	0.24	$	0.60		$	0.65		$	0.39		$	0.62		$	0.47	$	0.36
Diluted earnings (loss) per common share	$	0.26		$	0.23	$	0.59		$	0.65		$	0.39		$	0.62		$	0.47	$	0.36
Dividends per common share	$	0.045		$	0.045	$	0.045		$	0.040		$	0.04		$	0.04		$	0.04	$	-

XML

Note 12 - Stock Based Compensation (Details) - Stock Option Activity and Changes (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Note 12 - Stock Based Compensation (Details) - Stock Option Activity and Changes [Line Items]
Outstanding at (in Dollars)	$ 710,283	$ 583,833
Fully vested and expected to vest	182,242,000	238,728,000
Fully vested and expected to vest (in Dollars per share)	$ 11,000	$ 11,210
Fully vested and expected to vest	4 years 69 days	4 years 43 days
Fully vested and expected to vest (in Dollars)	710,283	583,833
Exercisable at December 31	120,933,000	160,861,000
Exercisable at December 31 (in Dollars per share)	$ 12.49	$ 12.59
Exercisable at December 31	3 years 94 days	2 years 295 days
Exercisable at December 31 (in Dollars)	314,381,000	251,921,000
Exercised	(28,469,000)	(45,491,000)
Exercised (in Dollars per share)	$ (14.30)	$ (5.55)
Forfeited or expired	(28,017,000)	(6,125,000)
Forfeited or expired (in Dollars per share)	$ (9.44)	$ (7.96)
Beginning Period [Member]
Note 12 - Stock Based Compensation (Details) - Stock Option Activity and Changes [Line Items]
Outstanding at	238,728,000	290,344,000
Outstanding at (in Dollars per share)	$ 11.21	$ 10.26
Outstanding at	4 years 43 days	4 years 127 days
Outstanding at (in Dollars)	583,833,000	67,631,000
Fully vested and expected to vest (in Dollars)	583,833,000	67,631,000
Ending Period [Member]
Note 12 - Stock Based Compensation (Details) - Stock Option Activity and Changes [Line Items]
Outstanding at	182,242,000	238,728,000
Outstanding at (in Dollars per share)	$ 11.00	$ 11.21
Outstanding at	4 years 69 days	4 years 43 days
Outstanding at (in Dollars)	710,283,000	583,833,000
Fully vested and expected to vest (in Dollars)	$ 710,283,000	$ 583,833,000

XML

Note 14 - Other expenses (Tables)

12 Months Ended

Dec. 31, 2013

Other Income and Expenses [Abstract]

Schedule of Other Nonoperating Expense, by Component [Table Text Block]

	2013		2012
	(dollars in thousands)
Data processing	$	1,346	$	1,050
FDIC assessment		254		403
Legal and accounting		713		783
Printing and supplies		307		290
Advertising		203		177
Business development		158		144
Telecommunications		222		194
Outside services		255		240
Courier and postage		204		178
Software license fees		85		92
City and county taxes		181		149
Directors fees		288		275
Travel and employee meals and entertainment		162		180
Provision for mortgage recourse liability		499		499
Legal settlement payable		-		598
FHLB early payoff penalty		-		392
Other		1,577		1,048
Total	$	6,454	$	6,692

XML

Note 13 - Earnings Per Common Share

12 Months Ended

Dec. 31, 2013

Earnings Per Share [Abstract]

Earnings Per Share [Text Block]

Note 13— Earnings per common share

Following is a reconciliation of the income amounts and common stock amounts utilized in computing the Company’s earnings per share for each of the years ended December 31, 2013 and 2012:

	2013
	Income (Numerator)		Shares (Denominator)		Per Share
	(dollars in thousands, except per share data)
Basic EPS
Net income available to common shareholders	$	6,204		3,558,876	$	1.74
Effect of stock options outstanding		-		31,244		(0.01	)
Diluted EPS
Net income available to common shareholders	$	6,204		3,590,120	$	1.73

	2012
	Income (Numerator)		Shares (Denominator)		Per Share
	(dollars in thousands, except per share data)
Basic EPS
Net income available to common shareholders	$	6,621		3,599,431	$	1.84
Effect of stock options outstanding		-		-		-
Diluted EPS
Net income available to common shareholders	$	6,621		3,599,431	$	1.84

For the years ended December 31, 2013 and 2012, there were 47,365 and 129,417 options, respectively, that were antidilutive since the exercise price exceeded the average market price for the year.